 Submitted By Don Vialoux
9:10 AM EDT: FP Trading Desk reads, “Research in Motion price target raised to U.S. $210 at UBS”. Following is a link to the report:
Research in Motion has a positive technical profile. Intermediate trend is up. The stock trades above its 50 and 200 day moving average. Strength relative to the S&P 500 Index and TSX Composite Index is positive. On balance volume data shows that the stock is being accumulated. Short term momentum data (RSI, MACD) is overbought and showing early signs of rolling over. Preferred strategy is to buy on weakness to a recent breakout level at $150 U.S. or to its 50 day moving average at $152.60 U.S. Short term resistance exists at its all time high at $177.40 U.S. Following is a link to its U.S. chart:
http://communities.canada.com/nationalpost/blogs/tradingdesk/archive/2007/06/25/research-in-motion-price-target-raised-to-us-210-at-ubs.aspx
http://stockcharts.com/h-sc/ui?s=RIMM&p=D&yr=1&mn=0&dy=0&id=p69136446093
Outlook this week
The economic focus this week is on the FOMC meeting on Thursday.
Economic report ReportRelease Date Consensus Previous
New home sales May June 25 930,000 981,000
10:00 AM
Consumer confidence June June 25 105.0 108.0
10:00 AM
Durable goods orders May June 26 0.0% 0.8%
8:30 AM
Gross domestic product Q1 June 27 0.7% 0.6%
(second revision) 8:30 AM
FOMC meeting minutes June 28 5.25% 5.25%
2:15 PM
Personal income May June 29 0.6% (0.1) %
8:30 AM
Consumer spending May June 29 0.7% 0.5%
8:30 AM
Chicago PMI June June 29 59.9 61.7
9:45 AM
Construction spending May June 29 1.0% 0.1%
10:00 AM
Consumer sentiment May June 29 85.9 83.7
10:00 AM
Source: www.marketwatch.com
The earnings focuses this week are on Oracle, Nike, Monsanto and Research in Motion.
Company Qtr. Consensus Report
Last Year
Monday June 25th
Walgreen 3 $0.53 $0.46
Tuesday June 26th
Lennar 2 0.05 2.00
Nike 4 0.86 0.70
Oracle 4 0.35 0.29
Wednesday June 27th
AGF 2 0.46 0.24
Bed, Bath & Beyond 1 0.37 0.35
Conagra 4 0.31 0.32
Thursday June 28th
KB Homes 2 0.07 2.46
Micron 3 (0.23) 0.12
Monsanto 3 0.98 0.61
Research in Motion 1 1.06 0.68
Source: www.cnbc.com
Trends
S&P 500 stocks remain in the Break Down/Further Distribution phase. The ratio of S&P 500 stocks in an uptrend to a downtrend (i.e. the up/down ratio) continued a downtrend started eight weeks ago at 2.73. Last week the ratio fell from 2.02 to (275/151=) 1.82. Eighteen S&P 500 stocks broke resistance last week (including Ford and Unisys on Friday) and thirty four stocks broke support (including Lockheed, CR Bard, Clorox, Procter & Gamble, Jones, American Electric Power, Synovus Financial and BankAmerica on Friday).
Bullish Percent Index for S&P 500 stocks eased slightly last week and remains below its 15 day moving average. It remains overbought and in an intermediate downtrend.
Chart courtesy of StockCharts.com www.stockcharts.com
TSX stocks also remain in the Break Down/Continued Distribution phase. The up/down ratio for TSX stocks was adjusted from 1.52 to 1.69 at the close on June 15th when content of the TSX Composite Index was changed. Last week, the up/down ratio fell from 1.69 to (107/71=) 1.51. Seven TSX stocks broke resistance last week and fourteen stocks broke support (including First Calgary, NuVista, Cognos, Thomson, Bank of Montreal and TSX Group on Friday).
Bullish Percent Index for TSX stocks was virtually unchanged last week. It remains overbought and in an intermediate downtrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for the S&P 500 Index deteriorated significantly last week. The Index fell 2.00% and broke below its 50 day moving average on Friday. Weakness on Friday occurred on higher than average volume. Intermediate resistance has been established at its all time high at 1,540.56. RSI and MACD continue to trend lower from a short term overbought level. Short term support is at 1,487. A break below support will complete a short term double top pattern. Next downside technical target is its 200 day moving average at 1,425. The stock closed on Friday below the closing level on May 4th
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of S&P 500 stocks trading above their 50 day moving average deteriorated significantly last week to below the 50% level. Intermediate trend remains down.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of S&P 500 stocks trading above their 200 day moving average also deteriorated significantly last week. It remains overbought and in a downtrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for the Dow Jones Industrial Average also deteriorated. The Average fell 2.05% last week. Weakness on Friday occurred on higher than average volume. Intermediate resistance has been established at its all time high at 13,692.00. Short term support is indicated at 13,260. A break below short term support will complete a short term double top pattern. The Average managed to stay above its 50 day moving average at 13,320. Short term momentum indicators (RSI, MACD, Stochastics) continue to trend lower from an overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Index for Dow Jones Industrial Average stocks remains stuck at 96.67%. The Index remains overbought.
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for the NASDAQ Composite Index also deteriorated. The Index fell 1.44% last week. Weakness on Friday occurred on higher than average volume. The Index managed to stay above its 50 day moving average at 2,564. Short term support is indicated at 2,541. RSI, MACD and Stochastics are overbought and have rolled over.
Bullish Percent Index for NASDAQ Composite stocks was virtually unchanged last week. It remains below its 15 day moving average and continues in an intermediate downtrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for the TSX Composite Index also deteriorated. The Index lost 1.07% last week. The Index established intermediate resistance on May 23rd at an inter-day all time high at 14,216.21. Short term support is indicated at 13,701. The Index managed to stay above its 50 day moving average at 13,872. Short term momentum data (RSI, MACD, Stochastics) is overbought and trending lower. Strength relative to the S&P 500 Index remains positive.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of TSX Composite stocks trading above their 50 day moving average fell below the 50% level last week. Data continues to trend lower.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of TSX stocks trading above their 200 day moving average also fell last week. It continues to trend lower from an intermediate overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for the Australia All Ordinaries were mixed last week. The Index tried but failed to break intermediate resistance at 6435.7 set on June 4th. Short term support is indicated at 6,200. The Index managed to hold above its 50 day moving average at 6,286. Short term momentum data (RSI, MACD, Stochastics) is trending lower from an overbought level. Strength relative to the S&P 500 Index remains neutral
Chart courtesy of StockCharts.com www.stockcharts.com
Technicals for international indices also were mixed last week. The Nikkei Index added 0.67% and tested resistance at 18,300. European equity indices weakened and are testing their 50 day moving averages. The London FT Index fell 2.45% and the French CAC Index lost 1.34%.
All charts courtesy of StockCharts.com
The Canadian Dollar was virtually unchanged last week, but strengthened on Friday when the U.S. Dollar weakened. Short term momentum indicators (RSI, MACD) suggest that the Canadian Dollar is overbought and trying to roll over. Resistance is indicated at 94.65 cents U.S.
Chart courtesy of StockCharts.com www.stockcharts.com
A flat Canadian Dollar combined with weak performance by U.S. equity indices spells greater losses for U.S. equity securities in Canadian Dollar terms. Since February 7th, the Dow Jones Industrial Average in Canadian Dollars is down 5.1%, the S&P 500 Index is off 6.7% and the NASDAQ Composite Index has fallen 6.4%.
Even the Nikkei Index, the strongest world index last week continues to record losses in Canadian Dollar terms. It is down 4.7% since February 26th.
All charts courtesy of StockCharts.com
The U.S. Dollar showed technical signs of rolling over from a short term overbought level late last week. Also, it found resistance at its intermediate downtrend line.
Charts courtesy of StockCharts.com www.stockcharts.com
Conversely, the Euro continues to bounce from support just below 133. MACD and RSI are recovering from a short term oversold level. Resistance is at 136.79.
The Japanese Yen continues to move lower relative to all major world currencies.
Chart courtesy of StockCharts.com www.stockcharts.com
The CRB Index eased slightly last week. It remains above its 50 and 200 day moving. averages.
Chart courtesy of StockCharts.com www.stockcharts.com
Gold continues to show early signs of building a base prior to its period of seasonal strength. Support is indicated just above its 200 day moving average at $642.07 U.S. per ounce. Resistance is at $698.00. Its period of seasonal strength is from the end of July to the end of September. RSI, MACD and Stochastics are trying to recover from a short term oversold level. Weakness in the U.S. Dollar late last week contributed to short term strength.
Chart courtesy of StockCharts.com www.stockcharts.com
Gold stocks are outperforming the price of gold, an encouraging technical sign for both gold and gold stocks. The Gold Bug Index remains in an intermediate uptrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Copper was virtually unchanged last week. It found support above its 200 day moving average. Short term momentum data is neutral.
Charts courtesy of StockCharts.com www.stockcharts.com
Crude oil strengthened slightly last week. Intermediate technicals remain positive. Short term momentum indicators are overbought, but continue to trend higher.
U.S. interest rates continue to show technical evidence of stalling near current levels. Ten year treasury note rates found resistance just above 5.25%, the current Fed Fund rate. MACD, RSI and Stochastics have rolled over from short term overbought levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Other factors
Euphoria by the U.S. investment industry media was dampened significantly last week. Attempts by the Dow Industrials and S&P 500 Index to break to all time highs set three weeks ago failed.
Takeover fever remains a theme on both sides of the border. BCE is a focus in Canada this week.
The Fed’s statement on Thursday afternoon is key to stock and bond market action this week. The Fed is caught between a rock and a hard place. On one hand, guidance toward higher interest rates later this year will further aggravate the already shaky sub-prime mortgage market. On the other hand, guidance toward lower interest rates will add to inflationary concerns (particular labour inflation pressures) and will trigger additional weakness in the U.S. Dollar. Net result: The Fed likely will be careful to do nothing.
Seasonal influences turn positive temporarily. According to Brooke Thackray’s book entitled Thackray’s 2007 Investor Calendar, “The beginning of July is a time for celebration and the market tends to agree”. Headline in this book read, “Independence Day – The full trade profit before and after fireworks: Two market days before June month end to five market days after Independence Day “. Since 1950 the trade has been profitable in 41 of 56 periods. Average trade period was 1.0%.
The “Fear Index” spiked last week. VIX spiked about 3 points. Continuing volatility suggests that VIX has farther to go on the upside.
Chart courtesy of StockCharts.com www.stockcharts.com
‘Tis the season for earnings warnings! The earnings warning season during the current quarter is the last two weeks in June and the first week in July. The warnings tend to have little influence on major equity indices, but have a significant influence on individual stocks. The frequency of earnings warnings last week was higher than recent quarters.
The Bottom Line
Upside potential remains limited. Downside risk remains significant. ‘Tis the season to preserve capital.
Bullish Percent Indices for Canadian Sectors
Data was adjusted last week to include changes in content in the TSX Composite Index
Bullish Percent Index
Sector June 1 June 8 June 15 June 15 June 22
Adjusted
Energy 67.2 67.2 68.0 70.8 70.8
Gold 50.0 44.8 44.8 40.0 40.0
Materials 62.7 61.0 64.4 64.5 64.5
Financials 72.0 64.0 64.0 71.4 64.3
TSX 60 80.0 75.0 75.0 75.0 75.0
Disclosure: Mr. Vialoux does not own securities mentioned in this report.
june 25,2007
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