Morning Call: Tuesday, June 02, 2009
Good morning. “Break out” have not been words overly used in the last 6 months. Yesterday the S&P 50 day moving average broke out above the 200 day moving average. This is the “golden cross" and is about as good a technical indicator as you can get. We are levels we last saw in November and at that time were looking out and saying OMG because it looked so bad.
Now the Coppock Curve, a long term Momentum indicator, shows that we are in a new Bull market (NBM).
We are moving in the classic progression of market stages. Firstly with fear of the markets and owning anything. Then the knowledge that its time to buy but the fear of catching the falling knife. Which brings us to now where the fear is of missing the market rally. On TV yesterday we heard them talk about "performance anxiety" which is what we talked about in Focus. It really looks like the market strength has overwhelmed the seasonal pattern.
The two overriding influences are that any positive from China is a tonic for the markets. The second is the free fall of the US$. That equation is solving into surging oil prices and higher copper. Its parabolic (read dangerous stuff) and those moves do come to an end.
Rosenberg says the technicals are strong. The market should go higher, then pull back to confirm the break out and then move up again. We are beginning to wonder if the sell signal won't come when the economists all agree that the recession's over. Probably just about the time that the jobs and consumer spending that we are all waiting for actually kicks in.
The hedgies are back and May was big, up 20% for many of them. That gets a lot of them up 50% or more for the year. They've still got a long way to go to the high water mark but it does mean that the redemptions are over for now. They will undoubtedly be playing in the small caps again very soon. Stay Tuned.
There's a building global view that Canada is the safe haven. The strength in our Dollar belies that. International Investors won't just try and buy any old stock or commodity story. To put billions in Canada, what they have done in the past, is to buy our Bank stocks. They are safe (sort of) and big, you can buy hundreds of millions worth in a day or two and they pay a dividend that's substantially higher than Treasuries.
Last night we attended the UBC reception for the PMS interns working in Toronto this summer. Dr. Heinkel extolled their investment success and thanked those that provided helpful input to their 1st Quartile performance. We thank him for his kind words about the Morning Call.
Nuclear Tuesday
The UX price is up 50 cents to $49.50. Not really a big deal.
Back to battle in the market…………………………………..Invest the money.
TED Spread: Initially, the TED spread was the difference between the interest rate for the three month U.S. Treasuries contract and three month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped the T-bill futures, the TED spread is now calculated as the difference between the three month T-bill interest rate and three month LIBOR.
Quote of the Day:
“The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed.”
-Henry Ford
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
The above note is prepared by an Institutional Salesperson based on morning meeting comments and general Institutional desk discussion and should not be construed as a research report or a solicitation. For information purposes only. D&D Securities, its clients, and principals may have positions in these securities.
