Money manager cat fight

It's like a cat fight between Peter Schiff's adversaries and beleaguered Mr. Schiff. Last week there was the fire bomb. Now Schiff sends his lobby back. His gold message rings true with Stock Trends.

Open Text reads well

Hitting a new high today on the TSX is Open Text Corp. (TSX:OTC, NASDAQ:OTEX). The move takes out the previous resistance level and should allow the stock to build on existing price momentum. Although OTC is Stock Trends Bullish, OTEX is still in a Weak Bearish category. Today's advance of the NASDAQ-listed stock back to $35 puts OTEX back to the level it was at before stock's precipitous drop in October.

TSX Group

Financial stocks had a good day. Many of the big banks have advanced over 5% today - a welcome relief echoing the jump in financials south of the border. Still, this is a sector investors should stand clear. One exception may be the exchange stocks, though. TSX Group (TSX:X) was one of the few financials stocks that fizzled today. The company announced improved profits in its Q4 performance - something the market clearly has already discounted. The stock fell 2% to close at $31.36. But X is Stock Trends Weak Bearish with a good chance to build upon the relative price performance of recent weeks. Today's poor showing in a positive day for financials should be seen as more opportunity than warning. South of the border both the NYSE Euronext (NYSE:NYX) and the CME Group (NASDAQ:CME) logged healthy gains today.

Gold pullback

Gold stocks are off today, dropping over 3%. Perhaps a good time to pick up more iShares S&P/TSX Global Gold Index Fund (TSX:XGD). The ETF is now trading at $18.54, but has a good chance to rally off support here.

Maple Leaf Foods (TSX:MFI)

Traditionally, investors flock to the consumer staples stocks in a recession, and among this group are food processing companies. Not surprisingly, many of these food product stocks are showing positive price trends in the midst of an economic slowdown. Stock Trends alerts for these improving trends with a Weak Bearish indicator – a sign that the short-term price trend is improving against the long-term bearish price trend. On the NYSE many familiar food product stocks are now Weak Bearish, including Chiquita Brands International (NYSE:CQB), Dean Foods (NYSE:DF), Del Monte Foods (NYSE:DLM), Kraft Foods (NYSE:KFT), and Smuckers (NYSE:SJM).

Canadian names are also hitting Stock Trend alerts. Maple Leaf Foods Inc. (TSX:MFI) suffered more than most last year – the listeriosis outbreak in one of its plants was nothing less than devastating for the company. But there is mounting evidence that the stock has started to respond to the company’s repaired image. A recent report on insider buying by corporate officers of Maple Leaf gives added fuel to the improving bullish picture for MFI. The stock is projected to be a Stock Trends Bullish Crossover next week – signifying the start of a new long-term bull trend. This is a good buy signal for investors looking for exposure in this relatively strong sector.



The important trend line for MFI at this moment is the short-term (13-week) moving average. It should offer investors key support signals moving forward. The trend line support is at the $9.90 level, also a price support level framed by the stock’s price pattern last September and its breakout to the plus-$10 region in early December. Shareholders of MFI should be expecting a bounce off this level and valuations above $12 as the sector continues to attract capital. Trading volume in MFI has been weak recently, but will have to improve to fuel this bullish scenario. Every bullish trend needs strong and improving trading activity.

Barring another unexpected announcement about listeriosis, MFI should perform in a predictable pattern. If the stock fails to rally off the support level, the premises of the trade fail. In that result this could be a position of short duration. A stop-loss order at $9.70 would limit losses, and also force the trade to perform quickly. The Bullish Crossover is a helpful entry signal, but the crucial trend element guiding this trade is the support level isolated by the short-term trend line (13-week moving average) and the previous price pattern. Investors should learn to establish these specific types of parameters to a trade before buying. Doing so will limit losses and foster specific expectations of the way the stock will perform. No trade has certainty on its side. But traders can develop certainty of their actions – that is, when they buy and when they sell.

IBM

International Business Machines (NYSE:IBM) opened above $91.60 and hit a high of $91.95 this morning before dropping to $90.50. Will be watching to see if the stock can regain the morning losses. IBM is categorized as Stock Trends Weak Bearish and has a chance at a triple digit share price on tech strength. Looking for $95+ before entry.

Poof! More smurf than stone

Smurfit-Stone Container (NASDAQ:SSCC) filed for Chapter 11 today. A sad ending that completes a precipitous decline, but a good reminder of how far corporations can fall. SCCC stock and bonds traded feverishly in the past couple of weeks - the writing clearly on the wall. Bond holders will be ready hat-in-hand. Last week the Smurfit-Stone Conatiner junk bonds yielded 61% and advanced on active trading. The stock, meanwhile, evaporated. Whatever. Stock Trends said goodbye to this dog back in September of 2007 when it turned Stock Trends Bearish.

Gold/Oil Ratio spikes

Milton Friedman underscored that "inflation is always and everywhere a monetary phenomenon." The current economic recession has made deflation the primary concern of central bankers, and rightfully so. The risk of systemic failure of the international financial system weighs heavily on the best and brightest bankers and economists. They may lead us out of the current financial crisis, but investors should be forewarned about the ugly consequences of the current fiscal and monetary plans in place. Look no further than the shifting crude oil and gold pendulum for a glimpse of the future.



The Gold/Oil Ratio has started a steep climb that is starting to look ominously similar to the the period leading up to the great stagflation of the 1970s. Alternatively, it could be the more benign shift to a period of weak crude oil prices, as in 1986 when the Gold/Oil Ratio also skyrocketed. Investors are hoping for the latter scenario, but there has to be considerable concern about the busy U.S. printing press. Inflation is obviously not an immediate concern, but the sudden shift in the relationship of gold and oil commodity values tells us that an unwelcome monetary storm may be brewing ahead. If the gold/oil ratio rallies further it will be concerning.

Below are graphs of the growth of U.S. monetary base and U.S. core-CPI (excluding food and energy). The grey bars represent recessions.

Golden opportunity

Gold stocks advanced again last week, finishing with a 10% gain after a strong trading session on Friday. The gold sector has outperformed the S&P/TSX Composite Index by 96% since the sector’s October low. Investors are clearly gravitating toward the portfolio insurance afforded by precious metals. Poor broad market performance – both the Toronto market (down 7%) and the S&P 500 Index (down 5%) have lost ground in the last quarter – has investors turning to gold as an anchor in the market downdraft. With the price of bullion tipping $900 again there will be even more buying presence lifting the sector. The S&P/TSX Global Gold Index has been categorized as Stock Trends Weak Bearish since early December, signalling the sector’s move above the short-term trend. In the absence of any competing strength in another sector, momentum traders will extend the current rally.




Investors can either trade gold stocks or use a number of bullion commodity funds. The iShares COMEX Gold Fund (TSX:IGT) has been categorized as Stock Trends Bullish since early December, and shows the quality of the asset even in the face of a weakened Canadian dollar. The bullion fund, denominated in Canadian dollars, is up 19% over the past three months – well below the 81% return gold stocks have generated over the same period - but solid ballast in the stormy waters. However, if the loonie has bottomed, or at least stabilized, Canadian investors can expect to get more traction out of their bullion fund investments as we move further into the first quarter of 2009. Another fund that gives investors heavy exposure to bullion is Central Fund of Canada (TSX:CEF.A). It currently sports a Stock Trends Bullish Crossover indicator, a signal that the short-term (13-week) average price has moved above the long-term (40-week) average price. This intersection of trend lines is a primary buy signal for trend traders with an investment time horizon of two-months and beyond.


The iShares S&P/TSX Global Gold Index Fund (TSX:XGD) joins a growing list of TSX gold stocks that are triggering Stock Trends buy signals. Among these are Iamgold Corp. (TSX:IMG), Eldorado Gold (TSX:ELD), Kinross Gold (TSX:K), Barrick Gold (TSX:ABX), and Agnico-Eagle Mines (TSX:AEM). Kinross failed to advance last week, in contrast to the rest of the big cap gold stocks, but it is the first of this group to have a Bullish Crossover. Only 3% of TSX stocks are currently categorized as Stock Trends Bullish, so the addition of every new one should not go unnoticed.


Risk tolerant investors should consider the leveraged gold funds listed on the TSX: the Horizons BetaPro Global Gold Bull Plus Fund (TSX:HGU) and the Horizons BetaPro COMEX Gold Bull Plus Fund (TSX:HBU). These funds deliver 200% of the daily return of the respective underlying bullion and stock funds. More active investors betting on continued short-term performance of the sector can take a more aggressive gold position with these funds.

More education

Two other education stocks are Bullish Crossovers: Career Education (NASDAQ:CECO), and Capella Education Company (NASDAQ:CPLA). Trade on industry strength.

Vocational schools looking smarter

Educational stocks again faired well in a down market. Devry (NYSE:DV), Apollo Group (NASDAQ:APOL), Corinthian Colleges Inc. (NASDAQ:COCO) and ITT Educational (NYSE:ESI) hit new highs today. It's not a bad idea to go with strong swimmers in the face of stormy waters.

Small caps showing better

Small cap stocks will likely be the most promising segment of the market over the next quarter. Big cap stocks withstood the bear slide of last year better than the vast majority of stocks. Stock Trends Relative Strength Indicator for the Dow Jones Industrial Index, for example, ran positive through Q3 and Q4 of 2008. The RSI of the Russell 2000 Index, though, underperformed the S&P 500 Index for most of that same period. Now things are changing. Blue Chips are starting to lose ground to the recent performance of small cap stocks. The Russell 2000 RSI is trending up. The Dow Jones Industrial Index RSI is trending down.

Biovail Corp. (TSX:BVF)

Although the stock market has yet to deliver convincing evidence of a bottom, there are opportunities for brave investors to once again enter the water. Gold stocks attract most of the trend and momentum crowd, but another sector has shown relative strength gains in recent weeks: health care. Among the growing number of stocks that have signaled short-term trend improvement are pharmaceuticals. A leading Canadian name in this space is Biovail Corp. (TSX:BVF). The stock’s recent strength has triggered a Stock Trends Bullish Crossover indicator – signalling a crossover of the 13-week moving averge above the 40-week moving average. Intermediate to long-term traders and investors can use this crossover as a buy signal.

One of the most important measures of a stock’s performance is how it is doing relative to the benchmark market index. Regardless of the market direction, a stock should be performing better than the market as a whole. The Stock Trends Relative Strength Indicator (RSI) helps identify these performers. The ajacent graph shows how the Stock Trends indicators categorized the trend and price momentum of BVF over the past two years. The Relative Strength Indicator revealed the building market support for BVF dating from last September when the Stock Trends RSI started trending positively. This rising RSI pattern reveals the stocks stalwart appeal in the face of a tough bear market. The share price of Biovail held fairly steady in the autumn while the market floundered.

The Stock Trends trend indicator shifted to Weak Bearish in December, alerting investors of the stock’s modest move above the intermediate-term trend line (13-week moving average). However, it was the price breakout to $13.50 in the first full trading week of 2009 that moved the trend line upward. This price advance through resistance at $11.75 was a crucial move that opens up the stock’s bullish trade potential.

If BVF’s breakout is to be sustained, improved trading volume will lend a helping hand. Look for increased trading activity in BVF as we move further into this quarter. The bullish prospects of BVF improve with the market, and especially with expanded leadership potential from other names in the sector. On the blue chip end, Pfizer Inc. (NYSE:PFE) has outperformed the S&P 500 by 14% over the past three months and is one of only two Dow Jones Industrial stocks currently in a Stock Trends Weak Bearish trend. While continued relative performance gains for PFE will help push stocks like BVF, it is the small cap resurgance of biotech stocks that will attract additional money flows to the sector. Investors now holding BVF can hope to book a 30% gain if the stock achieves a sustained rally to the $18 level.

As much as the breakout past $11.75 opened the lid on a BVF trade, resistance at the $14.75 level could be a tough ceiling to move past. The stock may simply extend its trading range of the past year. Only a strong advance through $15 will diminish this concern. Nevertheless, BVF’s chart gives investors key price points to monitor. Failure to move above $15 should signal an exit.

Pharma stocks attractive

The predominant theme emanating from the trend and momentum constellation points investors toward gold and biotechnology stocks. A good number of the current Stock Trends Picks of the Week report are pharmaceutical stocks, some of which traded quite actively last week. On the large cap side of the ledger stands Pfizer (NYSE:PFE), a Dow Jones Industrial entry that ranks number 6 amid the Blue Chip’s 13-week momentum ranking. It has outperformed the S&P 500 by 4% in the past three months and until this week’s entry of Kraft Foods (NYSE:KFT) was the only Dow Industrial stock to have achieved a Stock Trends Weak Bearish indicator. PFE also held steady in last week’s market drop. However, traders are turning hot on junior stocks in the space. Among the NASDAQ Picks of the Week report are a number of biotechs.

Back to school

Swelling jobless rates are never a pleasant figure to face. But unemployment does put educational providers in a sweet spot. Some of these stocks have been performing quite well in the hovering recession. A Stock Trends Bullish Crossover last week, Devry Inc. (NYSE:DV) has been a bit of a yoyo around the 40-week moving average for a while. The secondary trend line, despite the crossover signal, is not showing an attractive uptrend. However, there is some supporting evidence in the educational services group that makes DV and its peers attractive trades. Others in the group include Apollo Group (NASDAQ:APOL), Corinthian Colleges (NASDAQ:COCO), Strayer Education (NASDAQ:STRA), and ITT Educational Services (NYSE:ESI). The volatility of these stocks is hazardous, but their potential makes them interesting trades. ESI stretched for a 52-week high today, while the others all enjoyed a nice rebound after Wednesday's stumble.

PIMCO Muni Income Fund

Another fixed income fund that has performed well in the early days of 2009 is PIMCO Municipal Income Fund (NYSE:PMF). It turned Weak Bearish in last week's Stock Trends reports after its 35% pop - aided by the renewal of a suspended dividend payment. On the theme of US Treasuries losing their appeal, PMF and its ilk offer investors handsome yields as a hedge against market weakness. The stock is off 5.75% to $10.30 amid the stock market's fumble today. Perhaps a good opportunity to enter PMF.

Grocery shopping on a bad day

The market has dropped 3% today, but no matter for Loblaw Cos. (TSX:L): it hit a new 52-week high. The solid move to plus-$37 leaves behind resistance and spells a good chance for $40 on the next leg.

Biovail teases

The bear trend of Biovail Corp. (TSX:BVF) dates back 74 weeks, but there seems to be some hope that the stock is breaking out of its rut. A move above $14 would be a good signal that the trading range that has shackled BVF over many months has been breached. The stock reached a high of $13.77 today and is a current Stock Trends TSX Pick of the Week selection.

Some bond funds beckon

Last week's NYSE Picks of the Week report included several fixed income funds. Included in the group were: iShares Investment Grade Corporate Bond Fund (NYSE:LQD), iShares Aggregate Bond Fund (NYSE:AGG), iShares 1-3 year Credit Bond Fund (NYSE:CSJ), iShares Government Credit Bond Fund (NYSE:GBF), iShares Inter-Government Credit Bond Fund (NYSE:GVI). The US Treasury market is in a precariously overbought position, with yields likely to rise in the current monetary and fiscal constellation launched by Washington. The spread on corporate yields have risen to attract investors in this tight credit market, so some of the funds that focus on these areas have attracted a yield-hungry crowd.

Little chirps from Bird Construction Income Fund

Another contractor is starting to wake up, as Bird Construction Income Fund (TSX:BDT.UN) has advanced in healthy fashion in recent weeks. Today's lift back above $21 shows that BDT.UN will hold on to the gains of the previous week. This is another issue highlighted in last week's Newly Weak Bearish report - a filter report investors can use to help identify stocks breaking out of a long-term down trend.

Paladin Labs hits new high

A Bullish Crossover stock in last week's TSX reports, Paladin Labs Inc. (TSX:PLB) soared to a new 52-week high in early trading today before settling back to $12.65. The Bullish Crossover (13-week moving average moves above the 40-week moving average), although a lagging indicator, is often a good timing signal for entry into a stock and is the core trend indicator used by the Stock Trends TSX Portfolio trading strategy. However, PLB had insufficient trading volume and underperformed the S&P/TSX Composite last week - important sets of criteria in this mechanical trading system. Still, PLB is an interesting play in the pharmaceutical space.

Gold stocks dip

Gold stocks dropped today, but traders might want to take this opportunity to buy the S&P/TSX Global Gold Index Fund (TSX:XGD). The retreat to $16.50 should find support over the short-term. Gold stocks lead the market presently, so we can expect periods where the sector pulls back. The weakness in crude oil and commodities in general weighs heavily on gold, and today's draw on crude prices factored in the drop in gold stocks. However, investors can reckon on monetary factors keeping the ball in gold's court. Gold is a bet against the US Dollar, a bet that many will be willing to make.

Some life in Ultralife (ULBI)

The Stock Trends Picks of the Week reports are starting to become active again. These filter reports look for stocks that are showing signs of breaking out of a bearish primary trend and give investors a short list of stocks to monitor for buying opportunities. One the stocks in the current NASDAQ Picks of the Week report is Ultralife Corp. (NASDAQ:ULBI). It has surged over the past two months and now trades at $13.44 and tipped the $14 resistance level that dates from Q2 08. The stock still has some work to do, but last week's high volume indicator adds to the interest.

Agra-chem stocks offer opportunity

The change in trend distribution has brought quite a few trading opportunities to our attention. Among the newly Weak Bearish stocks are the agra-chem stocks that had fallen precipitously last year. Potash Corp. (TSX:POT, NYSE:POT), Agrium (TSX:AGU), and Mosaic Co. (NYSE:MOS) all show promise of being in the advanced stages of a bottom, moving in an extended trading range but giving investors a good opportunity to play the upside on limited downside risk. Seasonal factors as well as improved broad market conditions should help these stocks.

And joining the group in a positive move today is Monsanto Co. (NYSE:MON), jumping over 15%.

Loblaw ready to move

Of the 60 stocks in the S&P/TSX 60 Index only George Westin Ltd (TSX:WN) and subsidiary Loblaw Companies (TSX:L) is currently in a bullish Stock Trends category. Loblaw's stock has outperformed the broad market by 39% over the past three months as it has battled with price resistance at the current level since early December. The Bullish Crossover (the secondary trend line has penetrated above the primary trend line) should be a good opportunity to buy L given the strength of the consumer staples sector and the clear signal a move above $36 gives. The stock has been trading in a range for a year, but will attract capital flows as conservative investors move back into stocks cautiously.

Manulife advancing

After lagging Sun Life Finanial (TSX:SLF) in Q4 of 2008, Manulife Financial (TSX:MFC) has logged in a good start in the new year. Although MFC still has a Bearish indicator, if it maintains its current plus-$24 level the stock will be in Stock Trends Weak Bearish territory - a positive alert for Stock Trends followers.

SNC-Lavalin

Among the best performing big cap TSX stocks in the final quarter of 2008 was SNC-Lavalin Group (TSX:SNC). Its strong 13-week price momentum shows the market's interest in this global engineering firm's prospects - not surprising since infrastructure spending is the big element in governments' recession fighting arsenal. Trading volume in SNC should build over the coming weeks, a required element if the stock is going to move past the price resistance at the $40 level. A quick move to $45 will bring SNC further into our spotlight. It hit the Stock Trends Weak Bearish category on December 12, and bas been battling with resistance since. Improved broad market conditions should help.

15-year Trading stats

The Stock Trends TSX Portfolio has been active for 15-years now. Last year was a losing year, with losses totaling about 20% on average investment. Trading activity was low, reflecting the bearish market conditions, and helped avoid the market downturn to some extent. By comparison the S&P/TSX Composite Index dropped 35%. The lifetime annualized return on investment of ST Portfolio, though, remains at 40%.

The following table provides some pertinent trading statistics for the trading strategy:


ST TSX Portfolio Trading Startegy Trade Analysis

Total Gain: $ 240,164 607%
# of weeks: 788
Total # of trades: 419
Winning Trades: 169
Losing Trades: 250
Winning %: 40%
Average # of weeks each position held: 7.5
Average # of positions held each week: 4.0
Average Gain: $ 2,922 29%
Average Loss: $ (1,015) -10%
Average Investment: $ 39,566
Average trade: $ 10,000
Maximum Drawdown (%): -34.2
Largest Gain $: 40,880 409%
Largest Loss $: (3,542) -35%
Maximum losing trades in Succession: 12

Losing Runs Frequency

2 losers in a row: 22
3 losers in a row: 11
4 losers in a row: 9
5 losers in a row: 4
6 losers in a row: 1
7 losers in a row: 2
8 losers in a row: 1
9 losers in a row: 0
10 losers in a row: 3
11 losers in a row: 1
12 losers in a row: 1


Sharpe Ratio: 5.2

Martin Ratio:4.2

Ulcer Index: 9.2

Profit factor: 1.95

Pessimistic Return Ratio: 1.92

Shifting sentiment shown in trend distribution

The market remains in a Bearish long-term trend, but the fact that a full 60% of NYSE stocks are now sporting a Stock Trends Weak Bearish indicator suggests, if the constellations align, we could be in for a more hopeful year ahead. The TSX, too, has its share of stocks now in a more promising trend category, with 35% of trending TSX stocks now categorized as Weak Bearish.