Technical action by S&P 500 stocks was bullish yesterday

Submitted By Don Vialoux

Technical action by S&P 500 stocks was bullish yesterday. Fifteen S&P 500 stocks broke resistance and two stocks broke support.

S&P 500 stocks breaking resistance

Stock Symbol Previous New News

Trend Trend

Applera Biosystems ABI Down Neutral

Bank of New York BK Up Up

Cognizant Tech CTSH Down Up

Coventry Health CVH Up Up

CSX Corp CSX Up Up

Fedex FDX Neutral Up Rumors of an LBO

Hasbro HAS Down Neutral

ITT Industries ITT Up Up

Hess HES Neutral Up

KLA Tencor TLAB Neutral Up

Murphy Oil MUR Neutral Up

Tellabs TLAB Neutral Up

Terex TEX Up Up

TJX TJX Down Neutral

UPS UPS Up Up

S&P 500 stocks breaking support

Stock Symbol Previous New

Trend Trend

Huntington Banc HBAN Up Neutral

Marshall & Ilsley MI Up Down

Technical action by TSX stocks also was bullish. Three TSX stocks broke resistance and one stock broke support.

TSX stocks breaking resistance

Stock Symbol Previous New

Trend Trend

CAE CAE Up Up

Jean Coutu PJC.A Up Up

Northbridge Financial NB Up Up

TSX stocks breaking support

Stock Symbol Previous New

Trend Trend

Cardiome Pharma COM Down Down

Inter-day Comments of Monday July 9^th

9:25 AM EDT: Focus this morning is on gold and gold stocks. Gold is up another $7.80 to $662.60 U.S. per ounce in overnight trading to a three week high. Gold stocks are expected to respond accordingly. Several gold stock indices broke short term resistance levels on Friday including the AMEX Gold Bug Index, the Philadelphia Gold and Silver Index and the TSX Gold Index.

Chart courtesy of StockCharts.com www.stockcharts.com

Monday has become known as Merger and Acquisition (M&A) Day. Today, the rumor of a leveraged buyout (LBO) comes from Barron’s. The target is Fedex. The stock is up about 3% in overnight trading. Look for the stock to open above resistance at $113.25.

Chart courtesy of StockCharts.com www.stockcharts.com

Base metal stocks could strengthen in early trading after JP Morgan raised estimates for base metal prices for 2008 and 2009 and increased earnings estimates for major stocks in the sector. Base metal stocks in Europe were stronger overnight. The TSX Metals and Mining Index broke to an all time high last week and is expected to reach another all time high today. Takeovers in the industry also are contributing to strength. In Canada, First Quantum likely will open higher following favourable comments by Desjardin this morning.

Chart courtesy of StockCharts.com www.stockcharts.com

Desjardin has boosted its target on Cogeco Cable from $56 to $59. The stock remains a “Top Pick”. The stock is expected to reach another all time high today.

Chart courtesy of StockCharts.com www.stockcharts.com

Tech Talk’s Weekly Financial Post Column

(Published yesterday at www.nationalpost.com )

Editor’s note: This column is an updated version of a report released two weeks ago. Next Tech Talk column in the Financial Post is scheduled for release on Monday August 27^th.

Leveraged ETFs

Leveraged Exchange Traded Funds (ETFs) have taken U.S. and Canadian equity markets by storm during the past year. What is available and how do they work?

ProShares launched its first leveraged ETFs in July 2006. Funds offer double returns, inverse returns and double inverse returns on broadly based U.S. equity indices such as the Dow Jones Industrial Average and the NASDAQ Composite Index. Funds subsequently were launched on a wide variety of U.S. sector indices as well as growth and value indices. Currently, twenty three double return ETFs, six inverse return ETFs and twenty three double inverse ETFs trade on U.S. equity markets.

Leveraged ETFs came to Canadian markets six months later. Horizon BetaPro launched its first bull and bear leveraged Canadian ETFs in January 2007 on the S&P/TSX 60 Index. Subsequently, Horizon BetaPro launched leveraged bull and bear ETFs on the S&P/TSX Financial Services Index, S&P/TSX Energy Index and S&P/TSX Gold Index. Total number of Canadian leveraged ETFs rose to eight two weeks ago when leveraged gold share ETFs were launched. All leveraged ETFs offer leverage on a two for one basis based on daily trades.

Interest in these products has grown exponentially since their launch. The most actively traded leveraged ETF in the U.S. is the Ultra Short QQQ (Symbol: QID). Daily volume reached a record high at 33.6 million units two weeks ago when U.S. equity markets moved lower. QID already is one of the most actively traded ETFs in the U.S.

Chart courtesy of StockCharts.com www.stockcharts.com

Other actively traded leveraged ETFs in the U.S. include Ultra QQQ (Symbol: QLD), Ultra Short S&P 500 (Symbol: SDS), Ultra Short Dow 30 (Symbol: DXD) and Ultra Short Russell 2000 (Symbol: TWM). In Canada the most actively traded leveraged ETF is the Horizon BetaPro Ultra Short TSX 60 (Symbol: HXD). Record daily volume was set in early June when volume exceeded 1.2 million units.

One of ProShares’ ETFs has been given an appropriate symbol. Symbol for inverse returns on the Dow Jones 30 Index is DOG.

Leveraged ETFs are constructed by combining short term money market instruments with derivative contracts in the underlying index.

Leveraged ETFs are not for everybody. By definition, leverage is a two-edged sword: It works well when a trader correctly predicts the short and intermediate trend for an equity index. On the other hand, traders, who incorrectly call the trend, will lose invested capital (particularly if they are invested in leveraged products). In addition, costs are higher for leveraged ETFs. Management Expense Ratio (MER) is 0.95% for ProShares ETFs and 1.15% for Horizon BetaPro ETFs.

Leveraged ETFs also can be used as a form of portfolio insurance. Investors holding a portfolio of stocks or ETFs, that track “the market” or a sector, may want to protect profits during a period of uncertainty. However, taking profits could have significant tax implications. Protection can be purchased without selling the stocks or ETFs by purchasing inverse leveraged ETF that partially or wholly cover the profitable position.

Volume in the more actively traded leveraged ETFs is a good technical indicator of investor sentiment. A spike in volume indicates that investor sentiment is turning bullish or (as recently indicated) bearish.

Not all leveraged ETFs in the U.S. have been launched successfully. High profile leveraged ETFs such as QID have grabbed most of the attention. Trading activity in most of the sector and Russell products has been thin to date. Most have average daily volume of less than 10,000 units. Caution is advised.

The Bottom Line

Interesting investment products! They are best used when an investor has a strong conviction on an expected market or sector trend.

Adrienne Toghraie’s “Trader Coach” Column

Crippling Feelings

By Adrienne Toghraie, Trader’s Coach

www.tradingontarget.com

As we move through life, we will experience injustice, family issues and environmental setbacks. These events each have the potential to introduce crippling feelings that can interfere with trading performance. Simply saying, “The show must go on!” is not good for a trader when he is emotionally crippled. When traders try to push themselves through a major problem in their lives, they often find that it is their “Waterloo” in trading.

Tragedy Striking Life And Performance

Ben had been a professional trader for ten years. He had learned to be consistent and was rewarded with profits that afforded his family a very affluent life. He was active in the lives of his three children as a coach for their sports and a cheerleader for all of their other activities. One dreadful afternoon, a drunk driver ran a red light, lost control of his car and struck his little boy down as he played on the sidewalk. After the tragic loss, Ben could no longer trade.

Family Investment

Lynette was a consistent trader for many years, but chose to trade a few hours a day while raising her family. She was able to average fifteen to twenty percent on her one hundred and fifty thousand dollar account. One day at a family dinner, her husband started bragging about his wife and her returns to his family. Suddenly, his family members started throwing money with their mouths in her direction.

Before she could tell them that she was uncomfortable taking their money, Jerry had committed her to managing their money in the market. Lynette became anxious when family members called to express their opinions and concerns about her trading performance. The situation created a fear of performance in her so intense that she lost half of their investments in one day. She said that she felt like a deer in the headlights. Lynette returned the remainder of their money but found that she could not perform knowing that she had disappointed the family and lost their money. Compounding the problem was her husband who could not deal with the fact that his family had lost their money and insisted that he and his wife take responsibility for the losses and pay them back.

Flooded Out

Robert had been a professional investor for thirty-five years. When Hurricane Katrina swept through, his home was wiped out and a fear was created in him that would not allow him to sleep for months. He could not consider any risk in his life and was in a zombie-like state.

There are endless possible scenarios for bad things to happen in the life of a trader. The important thing is to be as prepared as possible, so when life presents dramatic challenges they can be handled before additional pain and loss occurs. In the case of these three scenarios, the only preparation is to plan to seek help. While all three did not initially seek help, our paths crossed and I was able to help each of them. I am happy to report that they are all successfully trading again.

Perhaps your problems are not as devastating as those experienced by these individuals, but you feel crippling emotions nonetheless. This is not the time to trade; this is the time to do whatever is necessary to overcome the feelings before they take a toll on your trading capital. Perhaps, you merely need to take a vacation or to let go of a toxic person that is in your life. Or, maybe it is time to get some help.

Disclosure: Mr. Vialoux owns units in an Exchange Traded Fund that tracks the TSX Gold Index. He does not own other securities mentioned in this report.

July 10,2007

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