Morning Call: Wednesday, June 24, 2009
Good morning.
Looking back to Monday, we would view it as a counter trend market move. Huge moves usually are. The rebound was subdued as the demons of doubt had been unleashed again. We like Cramer's rhetorical question of whether stocks are in decline or at a discount?
The action in Canada was classic commodity with Suncor, Potash and Teck the big gainers. However our Index is between it’s 50 day moving average and it’s 200 day moving average and there's one fear that it stays trapped between 9970 and 9440. Not so in the US where the S&P 50 day is about to do the "Golden Cross" and move above the 200 day moving average. There are few more bullish technical patterns.
When the FED talks about its meetings today, we can only hope that Bernanke speaks clearly. Rates will stay down for a long period of time. We believe they have to. If the market believes him and completes the "Cross". History has shown that on average there is more of a move after that event than before, with the average being in the low 20% range.
Japan’s trade numbers show a decline of 12% year over year. We don't believe that we are in for a similar lost decade. The massive and coordinated policy response is different this time. However, though we don't see inflation in the numbers any time soon, it will eventually return. The Reflation trade will come back. (Short the US$ and long commodities) it’s the new "Carry Trade" and will prove lucrative again. Hard to predict when, but we would bet sooner than generally expected.
If you look at what rebounded or did well, the clues to market action are there. Potash, Suncor, Teck and Power. The hardest thing to do is trade when there's no trend. We are hoping today’s FEDspeak will re-invigorate the Recovery Trend in world stock Markets. There goes our Western Impatience again. It’s different this time. ("Those very expensive words").
The action in Canada was classic commodity with Suncor, Potash and Teck the big gainers. However our Index is between it’s 50 day moving average and it’s 200 day moving average and there's one fear that it stays trapped between 9970 and 9440. Not so in the US where the S&P 50 day is about to do the "Golden Cross" and move above the 200 day moving average. There are few more bullish technical patterns.
When the FED talks about its meetings today, we can only hope that Bernanke speaks clearly. Rates will stay down for a long period of time. We believe they have to. If the market believes him and completes the "Cross". History has shown that on average there is more of a move after that event than before, with the average being in the low 20% range.
Japan’s trade numbers show a decline of 12% year over year. We don't believe that we are in for a similar lost decade. The massive and coordinated policy response is different this time. However, though we don't see inflation in the numbers any time soon, it will eventually return. The Reflation trade will come back. (Short the US$ and long commodities) it’s the new "Carry Trade" and will prove lucrative again. Hard to predict when, but we would bet sooner than generally expected.
If you look at what rebounded or did well, the clues to market action are there. Potash, Suncor, Teck and Power. The hardest thing to do is trade when there's no trend. We are hoping today’s FEDspeak will re-invigorate the Recovery Trend in world stock Markets. There goes our Western Impatience again. It’s different this time. ("Those very expensive words").
There is a Flag in the market this morning and it’s the European overnight Libor rate. At this point we are not sure as to the cause of the spike and will be checking during the day. Stay tuned.
We would advise………………… Invest the money.
We would advise………………… 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:
Isn't it interesting that the same people who laugh at science fiction listen to weather forecasts and economists? --Kelvin Throop III
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Graham Farrell, Institutional Equity Trading
416-369-4208, gfarrell@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.
