The trend roadmap

When to be in a market, when to be out? This is the basic evaluation trend analysis attempts to deliver to investors and traders. The underlying assumption of this approach is that stocks trend as market sentiment builds in one of three possible directions – up, down, or flat. In the case of bullish or bearish trends, investors are best to harness these forces and allow the market to deliver profits. For that reason investors should gravitate toward Stock Trends Bullish (if holding long positions), or Stock Trends Bearish (if holding short positions, with qualifications).

Although there is no certainty to price action, trend followers must determine if the prevailing trend is waning and be alert for moments when sentiment is shifting. In Stock Trends parlance these moments of weakening trend are signalled by a Weak Bearish or Weak Bullish indicator. Investors should be watchful of these stocks and ETFs. The triggers for buying and selling are often being hit.

Quick reference Guide to the Stock Trends symbols

Extra bases for ONY, TUN

Stock Trends Portfolio is overdue for an outlier winner. Infield hits and quick out innings hardly make for a profitable trading system. You need a home run every so often.

Perhaps one of the current holdings will deliver. Both Oncothyreon (TSX:ONY), up 26%, and Tundra Semiconductor (TSX:TUN), up 15%, had a great session today.

Technically speaking

Tech stocks have been among the leading sectors in the rally since the market low. Currently, the S&P Technology Index is outperforming the S&P/500 by 14% over the past three months. Among these performing stocks are the likes of Corning (NYSE:GLW), Research in Motion (NASDAQ:RIMM), Cisco Systems (NASDAQ:CSCO), and Motorola (NYSE:MOT). Many of these holdings have been recent Stock Trends Picks of the Week.

An exchange traded fund heavily weighted in these stocks is iShares North American Technology - Multimedia Networking Fund (NYSE:IGN). It has traded actively in the past month as weekly share volume is now 5-times it’s previous average. IGN has been Stock Trends Weak Bearish since the end of March and has advanced from $17.35 to its current $21 level since that time. It has had a nice string of weekly higher highs and higher lows. Look for continued price momentum in IGN.

Food stocks shopping bag

Although the market’s attention is oft in other sectors, consumer staples and related services are providing investors with a good trend trading opportunity. In the the current economic context this is an expected rotation, although the S&P Consumer Non-Cyclical Index remains in a bearish trend. A select group of food products and food retailers stocks outperformed the market in the last quarter and are showing up in the Stock Trends trend filters. Some stocks that are currently Stock Trends Weak Bearish and worth watching include Delmonte Foods (NYSE:DLM), Tyson Foods (NYSE:TSN), Food Technology Services (NASDAQ:VIFL), Whole Foods Markets (NASDAQ:WFMI), Cracker Barrel Old Country (NASDAQ:CBRL), and Diamond Foods (NASDAQ:DMND).

Canadian financials

Canadian financial stocks are due to join any market revival. The sector flushing has left no country unaffected, but Canadian institutions should be poised for some relative performance gains if the current market rally has legs. The iShares S&P/TSX Financials ETF (TSX:XFN) is Stock Trends Weak Bearish and is in our watch. The share price ($15.47) is rapping the resistance overhead that dates back to mid-February.

An important component of the S&P/TSX Financials Index is Manulife Financial (TSX:MFC) – it has shown some prospect of battling out of its bearish trend in recent weeks, although the stock is still Stock Trends Bearish. MF will be an significant signal toward a qualified turn in the TSX’s financial sector. Clearance through the 13-week moving average trend line should allow the stock to regain the $20 level. Look for MF to turn Stock Trends Weak Bearish soon.

Encouraging trend signals

The March rally has moved many stocks into areas above downside resistance, an encouraging prospect for the bottoming out process. Stock Trends monitors for price movements above the secondary trend and categorizes these as Weak Bearish. Currently, 47% of trending stocks on the NYSE are Weak Bearish – See the Stock Trends NYSE Trend Distribution table and graph. The Stock Trends Picks of the Week filter focuses on these breakout opportunities, where price momentum pulls the stock out of a long-term bearish trend. If the market continues to rally, these stocks will be primary drivers.

Nvidia chipper

Thinking about the potential for Nvidia’s Ion and inexpensive Nettops and Netbooks? Nvidia Corp. (NASDAQ:NVDA) is a current Stock Trends Pick of the Wick selection. It has rallied with the rest of the tech stable, and is primed to move past $12. Trading volume has been consistently strong over the past month. The coming trading sessions will tell us a lot about the prospect of NVDA and a developing bullish trend. Support along the trend lines suggests continued price momentum. Stock Trends Bullish Crossover approaching.

Stock Trends TSX Portfolio out of hibernation

A sign of the improving trend picture for the TSX is renewed activity in the Stock Trends TSX Portfolio. There are two new buys currently, the first since February. The bear market put the lid on trades for this trend following system. There have only been 20 trades from the summer of 2007 until these most recent buys.

Big Blue due

Two elder statesmen of computing technology are lead performers of the Dow Jones Industrial Index in 2009. International Business Machines (NYSE:IBM) and Intel (NASDAQ:INTC) show the most aggressive price momentum going into Q2. IBM has outperformed the S&P 500 by 29% in the past 13-weeks, as it closed above $100 for the first time since early October. Look for this favourite tech blue chip to continue its move through to $110, as the price momentum is sustained.

Signs of spring - RONA, Canadian Tire, Home Depot, Lowes

Investors can be encouraged by the movement of home improvement retail stocks. A key to economic recovery is the housing sector, and certainly the performance of stocks like Home Depot (NYSE:HD) and Lowes Cos. (NYSE:LOW) reflects the sentiment that consumers have regarding their primary assets. Both HD and LOW have rallied nicely off their March bottom along with the rest of the market. They are Stock Trends Weak Bearish and now serve investors a key trigger for a bullish trade as they challenge overhead resistance. Should these stocks advance through resistance in the coming weeks look for a continued rally in these important retail stocks.

Canadians can also look to Canadian Tire (TSX:CTC.A) and RONA Inc. (TSX:RON), also Stock Trends Weak Bearish. RON is a current Stock Trends Picks of the Week.

Mining stocks pulling a load

The top two performing TSX blue chip stocks in the past three months are First Quantum Minerals (TSX:FM) and Inmet Mining (TSX:IMN). The mining sector is up 45% over the period, and is helping lift the TSX into a promising technical area. The S&P/TSX Composite Index is now Stock Trends Weak Bearish and challenging the channel resistance area of 9,200.

Money management trading application

Too often investors come to the market table without proper money management training. They are keen to score, in hockey parlance, but not willing to backcheck. They are anxious to prove how smart they are, to bask in winning trades.  Not surprisingly, these unrealistic expectations set investors up for a rude awakening. How many times have investors misunderstood the probabilities that are stacked against them. Good traders know these odds and manage their trades to minimize losses. Always.

There is no shame in acknowledging the truth: no trader will be right all the time. In fact, even the best traders will be wrong more than they are right. More sobering is another truth: every active trader will have extended periods of crippling losses. These drawdowns on capital are the true test of a trading plan. How does your trading deal with inevitable drawdowns? Would your capital be wiped out if you suffered 10 consecutive losses? Would your trading tendencies change? What does your trading plan direct to minimize the dangers of extended drawdowns?

These questions should be on the mind of every self-directed investor. Before entering a trade know your probabilities – probability of success, probability of meeting profit targets, and the probability of variable losses. Indeed, if a trader learns how to work with these probabilities and devises a money management plan, trading can become a manageable business. And a successful one.

A good starting point is your own trading record. Keep track of your trades. Learn about the basic metrics of your trading strategy and find tools to help turn these metrics into a systematic trading plan. Stock Trends followers should be versed in this kind of systematic trading, but an even more rigorous methodology will be advanced by Stock Trends colleague Brian Ault, whose Fulcrum Shift Trading venture will lend a powerful introduction to his M3 Money Management Modeler – a powerful application the guides traders through the risk/reward analysis of position sizing.

Visit the Stock Trends Traders Network and follow some of Brian’s informative tutorials on the M3 Money Management Modeler. Stock Trends would like to direct our trading audience to this extremely helpful and powerful money management tool.

Riding FAS Bull popular

The hot potato in this market is the Direxion Financial Bull 3X ETF (NYSE:FAS). Last week it logged 1.788-million transactions, while weekly trading volume was 1.6-billion shares. Investors want to be bullish about the financial sector, and are willing to roll the dice - leveraged for winning big.  The extreme volatility of this beast goes without saying, but the potential for a big move in FAS must be enticing for quite a few traders. Another 303-million shares traded today as FAS advanced to close at $5.50.

Spare change

A current Stock Trends Pick of the Week selection is Coinstar Inc. (NASDAQ:CSTR). The stock’s secondary (13-week moving average) trend line has been trending positively since mid-December, advancing from the $16 level to its high today at $33 in solid fashion. It has been Weak Bearish since January 16, and has been in the Stock Trends sights since. If the current recession drags on expect CSTR to continue its run as hard-hit consumers dig deeper in their couches for lost change. It’s all good for Coinstar and its self-service coin-counting machines.

RuggedCom sends a message

Another notable stock on the TSX making new 52-week highs is RuggedCom Inc. (TSX:RCM).  This communications networking provider has been trending nicely, opening at a high of $26.89 this morning before tapering off to $25. The stock was a Stock Trends Pick of the Week on January 30 at $17.74.

China internet

Technorati Tags: NASDAQ:ASIA

Big cap tech stocks have been among the better performers year-to-date. The Nasdaq 100 Index is in positive territory with a 5.6% gain over the last three months, thanks in good part to last week’s respectable move. However, the secondary trend line (13-week moving average) remains flat and uninspiring.

A more compelling industry segment of the tech sector, though, is internet infrastructure. Exchange traded funds weighted in this area are moving. The HOLDRs Internet Infrastructure Fund (NYSE:IIH) and HOLDRs Broadband Fund (NYSE:BDH) are examples of ETFs investors can trade. Alternatively, trading AsiaInfo Holdings (NASDAQ:ASIA) would be a more aggressive China play on internet infrastructure. The stock has broken out in the past month and now trades at $17.17, up considerably from its March low of $11.03 after a 25% lift last week. ASIA is a Stock Trends Bullish Crossover, and a worthy trade in this space.

Semiconductors conducting

Tech stocks have delivered for investors in the recent rally (if we can call it that). Notable in this group are semiconductor stocks. The Philadelphia Semiconductor Index (SOXX) has outperformed the S&P 500 by 27% year-to-date. Comparatively, the broader sector index – the S&P Technology Index – has outpaced the S&P 500 by 15%. Among the better achieving exchange traded funds (ETF) in this space are the Proshares Ultra Semiconductor Fund (NYSE:USD) and the SPDR Semiconductor Fund (NYSE:XSD) and the iShares N.A. Semiconductor Fund (NYSE:IGW) – all besting the broad market by over 30% YTD. Lagging the performance of these ETFs is the HOLDRs Semiconductor Fund (NYSE:SMH) and the Powershares Dynamic Semiconductor Fund (NYSE:PSI). Investors can compare the trend and momentum of these exchange traded funds in the weekly Stock Trends Online listings.

Smith & Wesson gun play

Technorati Tags: NASDAQ:SWHC

When the economy goes south and the government gets big the people know its time to hunker down. And they load up for bear. Not surprisingly, a stock like Smith & Wesson (NASDAQ:SWHC) is a big winner. It is up 170% in 2009. Indeed, from its low of $1.53 at the end of October (not coincidentally on the eve of Barrack Obama’s electoral victory) SWHC now finds its way to last week’s high of $6.89. Trading in the stock was especially robust in recent weeks. The stock has been a Stock Trends Pick of the Week selection and is a Bullish Crossover Prediction.

Pharma meds working

Pharma stocks are finding traction in the current market. Some are hitting 52-week highs, including Immunogen Inc. (NASDAQ:IMGN). The stock advanced to $7.19 this morning before dropping back to $7. IMGN was a Stock Trends Pick of the Week selection February 6 after its breakout to $5.06. Another pharma stock hitting a high today is SXC Health Solutions (NASDAQ:SXCI). It was a Stock Trends Bullish Crossover on January 9 at $17.50 as its secondary trend line started to improve. The stock hit $22 in early trading this morning. Meanwhile, Myriad Genetics (NASDAQ:MYGN) also hit a new high ($46.74) today, a day in which the stock was split 2:1.  The stock has been Stock Trends Bullish since its Bullish Crossover last summer. It was a Stock Trends Pick at $26.44 (post-split).

Aurizon horizon

Gold stocks making some headway today.  Among those hitting a new 52-week high on the TSX is Aurizon Mines (TSX:ARZ). It tapped above $6 today. ARZ is among a number of gold stocks that were highlighted in January and early February as Stock Trends Picks of the Week. It first hit our buy signals at $4.33 on January 23. It is also a new member of the S&P/TSX Composite Index effective March 23.

Promising Osisko

Technorati Tags: TSX:OSK

Osisko Mining (TSX:OSK) continued last week’s press through resistance to make a new 52-week high today, the stock’s first day trading as a member of the S&P/TSX Composite Index. OSK is a current Stock Trends TSX Portfolio holding. It closed at $5.61 today, off from the afternoon high of $5.74.

Thinking about nationalizing?

Yesterday’s news that Suncor Energy Inc. (TSX:SU) will merge with Petro-Canada (TSX:PCA) to create a $43.3-billion integrated energy giant brings Canada closer to the final chapter of the country’s unseemly dalliance with energy socialism. Petro-Canada’s origin dates back to the oil crisis of the 1970s and Pierre Trudeau’s nationalistic energy policy. The hands of government still remain on the enterprise, as the Petro-Canada Public Participation Act still regulates the control of Petro-Canada.

Given the considerable challenges the energy business must overcome, this merger reflects the expanded need for rationalization and integration to finance and produce energy resources like the oil sands. Suncor has picked an opportune time to buy PCA, and investors can expect more oil patch M&A activity. However, as a reminder of how invasive and controlling the hands of government are on nationalized enterprise free-market participants would do well to view the contents of the act that governs Petro-Canada. This is the language of control, this is the language of socialism. Beware “the Minister”.

Petro-Canada Public Participation Act

Alcoa spark

The surge in commodity stocks last week following the Fed’s move to monetize U.S. Treasury debt was pronounced. Gold and silver stocks were the big winners, but industrial commodities also lit up. Alcoa (NYSE:AA) advanced 14% on unusually high volume of trading. Over 1.1 million transactions last week turned over 552-million shares. The stock remains Stock Trends Bearish, but the level of trading in AA was a positive signal for a breakout from the prevailing baseline.

Technorati Tags: NYSE:AA

Commodity markets take the helm

Investors can expect renewed pressure on U.S. dollar assets as the U.S. administration monetizes its growing debt.  A primary driver of emerging and commodity markets is the growth trajectory of the global economy. Has globalization been derailed by the financial crisis? Will it recover soon? The uncertainty surrounding the ability of the global economy to unhinge from the troubled fiscal and monetary predicament burdening the United States recovery is acute. Although deflation remains a primary immediate concern, the seeds for re-inflation are planted. Expect capital flows to reflect the dismal prospect for the U.S. dollar. Investors should keep an eye on performing international markets. Currently, commodity markets like Norway, Chile, Brazil, Canada and Australia are ascending. The Stock Trends ranking of Relative Strength for international markets helps sort the winners and losers.

 

 

Biovail fails

Biovail (TSX:BVF) pressed above the key $15 resistance level last week but failed to hold, dropping 5% on Friday to close at $13.84. The stock drew our attention in January when it was a Bullish Crossover. But last week's failed move signals an exit from this trade.

Financial mustard seeds

Up among the swelling gold stocks on the TSX is National Bank of Canada (TSX:NA). The stock has out-performed the S&P/TSX Composite Index by 43% over the past 13-weeks - an impressive standard amid the crippled financial sector. The big Canadian banks lag NA's bouyancy, but investors can consider this a mustard seed for the sector. Include in that hopeful spin the improved trend picture of TMX Group (TSX:X) and Canaccord Capital (TSX:CCI).

Silver slipper

As the market turns increasingly to commodities and precious metals investors can look for some leverage in silver. The price of silver has risen 23% since the beginning of the year, closing Friday at $13.65. Silver stocks have enjoyed an even better ride. Silver Wheaton (TSX:SLW) is up almost 50% in the past three months thanks to a big pop last week. The stock is one of several precious metal stocks on this week's Stock Trends Picks of the Week.

Bearish sentiment will not easily dissipate

Don't be suckered into another bear rally yet. Hungry bottom feeders have got a lot of buying ahead to make yesterday's move sustainable. The foundation is far too weak to put all your marbles down. No need to look further than the Stock Trends distribution of trending stocks: it remains highly bearish. Stick with the winning sectors: precious metals, long bonds, and technology. Investors eager to call this a bottom for financial stocks are brave risk-takers.

The Big Board gets a Bell Curve

Not surprisingly, the NYSE had to change its market capitalization listing rules in the current bear market. With stocks like Citigroup (NYSE:C), General Motors (NYSE:GM) and Ford (NYSE:F) all flirting with a share price level that would trigger delisting - a $1 minimum - the exchange temporarily suspended its minimum rule late last year and lowered the minimum market cap to $15-million last month. Now the lower standard is being floated as a more permanent fix. This is a sign of the time, but surely raises some questions about standards going forward. The Big Board ain't so Big anymore.

Eldorado

It's always telling to see a stock hit a new 52-week high while the rest of the market suffers. Eldorado Gold (TSX:ELD) scaled to $11.60 this morning. The stock was a Stock Trends Pick of the Week on January 9 at $9.25. It turned Stock Trends Bullish a month ago.

Nova's Middle East saviour

Maybe we need a lot more foreign vultures at the table. Abu Dhabi's state owned IPIC has swooped in to offer $6 share for downtrodden Nova Chemicals Corp. (TSX:NCX, NYSE:NCX). Trading in NCX was notably slim last week as the stock stabilized after several weeks of heavy trading and gruesome losses. This offer was likely very swift in the making.

Tech relative strength

Most investors are running for cover. The question they should ask, though: what cover? most of our trend signals point toward precious metals - and for good reason. But technology stocks are also garnering a stalwart reputation in the market downdraft. The Nasdaq 100 index has outperformed the S&P 500 over the last three months by 12%. The Powershares Nasdaq 100 ETF (NASDAQ:QQQQ) is currently Stock Trends Bearish, but its relative strength has been on an upward trend since November. Investors should feel reasonably comfortable weighting some of their holdings in tech.

Out with the plastic, in with the cheese

First it was doughnuts, now it's cheese - Canada's blue chip club is slowly becoming a food emporium instead of an industrial complex. Replacing the beleaguered plastics and chemicals firm Nova Chemicals Corp (TSX:NCX) in the S&P/TSX 60 Index is Canada's largest cheese maker, Saputo Inc. (TSX:SAP). SAP now joins Tim Horton's (TSX:THI) as the latest consumer stock added to the blue chip index. Oh, I may be forgetting about the addition of T-shirt maker Gildan Activewear (TSX:GIL), but the message remains the same: Canada's economy is exceedingly lightweight when it comes to the consumer sector. The TSX will remain the domain of the resource and financial sectors.

A healthy advance

Bright spots on the TSX are few and far between, but the performance of SXC Health Solutions (TSX:SXC) is notable one. It reached an new 52-week high today, climbing to $25.40 in the morning session. SXC has been Stock Trends Bullish since June of last year, but made its significant move in November. The 13-week moving average trend line offered support last week, giving investors reason to stick with this bullish trend. Today's move rewards the trend traders.

Investors coming out of hibernation

Relative market stability is starting to bring back anxious investors. January was the first month since August to have net inflows into Canadian mutual funds. Much of that went to fixed income funds, but stocks also benefited from this gradual renewal. This is another sign of hope.

Mega Brands scores

Mega Brands (TSX:MB) spiked 182% today after its deal with Microsoft was announced. Mega Brands will be producing construction toy sets for the Halo Wars video game franchise. Trading in the stock had been unusually light in recent weeks, so this deal was kept under wraps. Still, MB remains in a bearish trend and has more to prove before it deserves Stock Trends attention.

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.

More embarrassment for the TSX

The Mickey Mouse operation of the TSX defies belief sometimes. Yes, the impressive trading volume that passes through a modern exchange like the TSX goes without much heralding. Performance, no matter how active the market, is expected. Failure is not. When a market is unable to function properly, even for a short period, it is not acceptable. When it is halted for a whole day - well, that is absolute failure. Gone are the days when you can blankly blame the technology and the people behind it. This is a management problem. After today's failure, heads should fall.

A little sweetener in your portfolio

According to a recent Businessweek table there are some commodity prices that have actually risen in the past year. While wheat prices have fallen almost 30%, the prices of refined sugar are up over 20% over the past year. Some may take this as proper incentive to cut down on fattening sweets and sweeteners, but investors like to follow the pricing power. Not surprisingly, Rogers Sugar Income Fund (TSX:RSI.UN) is showing signs of a change in trend. It is now a Stock Trends Weak Bearish stock and is one of a few encouraging trading opportunities in the consumer staples sector.

S&P/TSX Composite drops below 8,000

It's been 5-years since the S&P/TSX Composite Index scaled the 8,000 level. Today it dipped to sub-8,000, a mark that tells us a bottom has not been found yet. We may be at risk for another 20% slide to the 2002 low. Worse, bullish stocks on the TSX now only number about 5% of trending stocks. This brings us back to the bearish depths of the previous commodity stock bottom in 1998.

NT, meet GM

It cannot be a surprise to investors to wake up to reports of impending bankruptcy. It has been a predominant theme in the last quarter. Adding Nortel Networks (TSX:NT, NYSE:NT) to the list is hardly newsworthy...but here it is: a fresh report.

Beat the odds, standing still

Are you a deer caught in the headlights? Maybe its not such a bad idea in a bear market to embrace your inactivity. Here's an article that reviews the results of a study of the action bias of elite soccer goalkeepers. There is something to be said for standing still when everyone else is running about in a panic.

GM a lost cause

Trend traders should have bailed on General Motors (NYSE:GM) long ago. Stock Trends dropped this stock with its Bearish Crossover at the end of 2007. With today's announced 3rd quarter loss of $2.5-billion the future of GM is as dark as ever.

The energy lunacy cycle begins

Investors and energy consumers should take full notice of this in the new Obama/Biden plan for "revitalizing the economy":

Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families:Barack Obama and Joe Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.

A tax of this proportion practically wipes out three quarters of the total profits of the U.S. energy sector - profits that go back into developing new energy reserves. The end result of this lunacy is higher energy prices and a crippled economy.

The more things change...

...the more things stay the same. Just another 5% drop in U.S. stocks - but the biggest post-election day dip in history.

The markets await ...

There are many core principles of economics that escape the understanding of the electorate. In part, we can be forgiven for the lack of economic literacy - human nature is a fickle and powerful force. Even economists have trouble dealing with it. But the birth of an administration with left-leaning impulses and a Congress that fuels social change through the heavy-handed modus of big government makes it imperative that investors be alert for the destructive potential of unintended consequences.

"The road to hell is paved with good intentions."

Gird yourself, investor.

Trend cuffs

The stock market has been in dire straits for months now. Stock Trends gave investors a Bearish marker over a year ago when the Stock Trends Bull/Bear Ratio turned sour for North American stocks. Since then the stock picking vitality of Stock Trends has been sedated. The growing number of bearish stocks has been the prevailing current. Presently, 82% of North American stocks are categorized as Stock Trends (strong) Bearish. Until the market bottoms and starts to generate a shift in intermediate-term trends, there will be a bias in the Stock Trends analysis to stand clear of the volatility and wait for for improved sentiment. This approach keeps investors from benefiting from gains achieved by successful bottom-pickers, but minimizes the risk in making such a call. Trend followers cannot take aggressive stances against a prevailing trend - it is antithetical. Still, technical traders make money and names for themselves when they can pick a market bottom. The pattern showing in recent weeks shows stratospheric volatility slowly giving way to a more shapely consolidating figure. If the SPDR (AMEX:SPY) maintains the $84 support level over an extended period there is hope for a rally for short-term traders. For the bulk of investors, though, SPY will have to scale past $115 before they come out of hibernation.

Black Tuesday's anniversary

The unwieldy gyrations of the market is making investors evermore uncertain. Perhaps it is time to cue up this quaint historical picture of the great stock market catastrophe of 1929. Today marks the 79th anniversary of Black Tuesday. Sit back, relax, and enjoy:

Gratuitous income redistribution

A story making the rounds as found on Donald Luskin's blog:

Today on my way to lunch I passed a homeless guy with a sign that read "Vote Obama, I need the money." I laughed.
Once in the restaurant my server had on an "Obama 08" tie, again I laughed as he had given away his political preference--just imagine the coincidence.

When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I told him that I was going to redistribute his tip to someone who I deemed more in need--the homeless guy outside. The server angrily stormed from my sight.

I went outside, gave the homeless guy $10 and told him to thank the server inside as I've decided he could use the money more. The homeless guy was grateful.

At the end of my rather unscientific redistribution experiment I realized the homeless guy was grateful for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn, even though the actual recipient deserved money more.

I guess redistribution of wealth is an easier thing to swallow in concept than in practical application.

Somebody wants to spread our wealth, traders. In the markets profits are NOT a dirty word. It is the result of hard work - something that is especially true in a tough bear market.

UnBearable

The breadth of the bearish sentiment on the TSX now matches that of October 1998 - precisely 10-years ago. The Stock Trends TSX Bull/Bear Ratio has been published since 1993 and is represented in the graph below:

Leftovers for TUP

Markets are plainly volatile, so its hard to get truly excited about the movement of stocks. The dark cloud of recession hangs heavy - always a signal to investors to take cover. Perhaps some are putting their cold hard cash in Tupperware containers - Tupperware Brands(NYSE:TUP) is up a tidy 14% today. Is this a place to keep your investments fresh in a bear market? The current Stock Trends Bearish indicator suggests TUP is not such an air-tight place to put your money.

Sign of the times

Today's Wall Street Journal features an article about an investment club, showing how this tough market has affected typical small retail investors. The inertia that has gripped many investors reflects the fear that has mounted the prevailing sentiment. Record high volatility comes with this terrain.

Dow wow!

The market has been nothing short of violent this week. The Dow Jones Industrial Index has ridden wild gyrations of 20% - from a high of 9924 on Tuesday to today's low of 8197 - measured against the index opening on Monday. That range was 25% last week! The last time it had that kind of movement was the week of Black Monday in October of 1987. Prior to that the great moments of market volatility were in mid-July 1933 (after the Dow had rallied famously off its July 1932 bottom, recording a record 154% annual return, before stagnating for years with the consequences of the National Industrial Recovery Act of June 16, 1933) and the October 1929 crash. Indeed, this is another epic moment for the stock market, which is again teetering on the powerful whims of government intervention.

Ode to Joe

Markets are about freedom and wealth creation. In a world where the political landscape often threatens the sanctity of exchange with creeping socialist ideals of redistribution, it is refreshing to hear a vote of commitment to the American Dream come from the aspiring working class. Investors should hail the dreamer!

Last night's U.S. Presidential debate brought one to the foreground, where he belongs. Meet Joe the Plumber - a man that strives to be successful and loathes the thought of a society that will punish him for his success. Joe has a lot in common with traders and investors alike. The spectre of big government, of higher taxes, of wealth redistribution, kills the spirit of budding wealth creators like Joe as much as it drives the markets into the ground. God Bless Joe!

In crude oil's HOD

Crude oil is now 50% off its peak level, falling to $71 in trading today. Traders who took the short side of oil over the past quarter played their cards right. Traders in the Horizons BetaPro NYMEX Crude Oil Bear Plus Fund (TSX:HOD) took an aggressive stance in Q2 when trading volume in the Bear play accelerated as crude hit new highs above $140. This leveraged instrument gives aggressive investors a chance to score big on crude oil's downward slide. Today's move adds another 13% gain for HOD traders.

Pizza and beer capitulation

When markets are gripped by fear the rendering of men and women to headless chickens is a painful sight to behold. As the stock market reels the inevitable capitulation spawns a new day. From those ashes a new bull market grows.

After the market's slide toward 5-year lows and perhaps threatening negative returns on the decade before all is said and done, investors are left looking for signs of complete capitulation. A broker friend tells me a key signal is post-work day alcohol consumption by brokers at their local watering hole. When the days are at their darkest expect the libations to flow freely. An even more telling signal is when branch managers start bringing in pizza and beer to the offices. In any case, according to this grizzled veteran, if either of these signals is flaring in your parts, it's time to check your gonads and buy, buy, buy.

Safety on the sidelines

Trend trading implies waiting for the market to signal entry. When a trend is identified and supporting technical triggers are met the investor exposes capital to the market. When the market turns south this strategy sends the investor to the sidelines. Stock Trends TSX Portfolio has been on the sideline for much of the past year. The number of trades over the past 12-months is about a half of its annual average - its recent dormancy an indictment of the weak foundation of the market. During the period the TSX at times outperformed the return on investment of the ST TSX Portfolio. But now that the bear has a stranglehold on the market the divergence of returns falls in ST Portfolio's favour. The S&P/TSX Composite is now down almost 30% over the past 12-months: the Stock Trends TSX Portfolio one-year return on investment is -14.5%

Turning the bear upside down with HXD

Stock markets around the globe are tumbling again today. Investors have lost confidence in the global economy and are heading for the exits. The Toronto Stock Exchange has been hit hard - dropping 11% last week and suffering another 6% shaving today. The Horizons BetaPro TSX 60 Bear Plus Fund (TSX:HXD) is up 11% in early trading. Nimble traders looking for relief from the downpour can turn to these leveraged shorting instruments.

"Rolling the dice"

Today's Wall Street Journal serves up a few juicy quotes from Congressional speeches regarding oversight of Fannie Mae and Freddie Mac, like this one:

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Barney Frank (D., Mass.): I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

Seems Congress rolled snake eyes.

POT prices drop

The pullback in shares of agchem stocks extended today, dropping Potash Corp (TSX:POT, NYSE:POT) 20% in early morning trading. The market reaction to Mosaic Co. (NYSE:MOS) first quarter profits - which were up almost 300% - showed just how high expections were, and how the market views the global economy going forward. MOS dropped over 33% in morning trading. MOS is a current Stock Trends Bearish Crossover stock, while POT is most defintitely on the verge of the same. No mystery here - these stocks are in a bear trend, no matter how "undervalued" global boom bulls would have us believe.

TSX Bearish breadth grows

The Stock Trends TSX Bull/Bear Ratio is now 0.3, with over 78% of stock in a bearish trend. Things have not been this grim for the TSX since the sad autumn days of 1998, a decade ago. Only 9% of stocks are Stock Trends Bullish. Clearly, the commodity bull market is no more...at least for now. The last quarter was particularly brutal for materials (down 29%) and energy (down 24%) stocks, the bread and butter of the TSX.

U.S. stocks still the place... for now

Global stock markets have been on a skid - some dropping as much as 37% in the third quarter. Emerging markets, resource dependent markets like Australia and Canada, Asia and Europe - all dropping amid a slowdown in the global economy. America caught a chill, and the rest of the world has fallen ill. So much for decoupling theories. Notable in the fallout is the fact that the American stock market, on a U.S. dollar basis sits atop the 13-week performance ranking of global indices. Actually, the Philippines scores higher, outperforming the S&P 500 by 6%, but the relative performance of U.S. stocks is substantially better than all the major markets. The future of the U.S. dollar, though, has to be a concern going forward. The commitment of public finance to shore up the balance sheets of financial institutions is bound to stoke inflationary fears. We'll see how U.S. stocks hold out in the coming months.

Spent piston at SPX

SPX Corp. (NYSE:SPW) is not officially at the end of its Stock Trends Bullish run, but it's days are numbered: two more. SPW has the current distinction of holding on the longest to its Stock Trends Bullish designation - a full 193 weeks - but the psi has really fizzled on the stock of a company formerly known as Piston Ring Co. SPW had dropped 37% in the last quarter - and that was before the $10 drop in the stock so far this week. The Bearish Crossover is baked in here. Hopefully, investors will have pulled out already. The Stock Trends Weak Bullish indicator flagged SPW at the $120 level at the end of July. SPW closed today at $71.88.

JPM hitting $50 ceiling again

If one thing is certain about the fallout from the current credit crisis, it is that there will be a select few institutions coming out on top. We pretty well know which ones those are. Count JP Morgan Chase (NYSE:JPM) as the biggest winner in that group. From a technical viewpoint the picture is starting to gel as the stock verges on an important resistance level. Should JPM manage to drive clear ahead of $50, a stalling point in today's trading, the bullish crowd will saddle up on this horse. The Senate vote this evening will dictate tomorrow's move, but with a "yea" expect a handsome advance.

Buffett's buffet

Warren Buffett is showing value leadership again, making a $3-billion deal with General Electric (NYSE:GE) for preferred stock.

"GE announced that it has reached agreement to sell $3 billion of perpetual preferred stock in a private offering to Berkshire Hathaway, Inc. The perpetual preferred stock has a dividend of 10% and is callable after three years at a 10% premium. In conjunction with this offering, Berkshire Hathaway will also receive warrants to purchase $3 billion of common stock with a strike price of $22.25 per share, which is exercisable at any time for a five-year term.

Berkshire Hathaway Chairman and CEO Warren Buffett said, "GE is the symbol of American business to the world. I have been a friend and admirer of GE and its leaders for decades. They have strong global brands and businesses with which I am quite familiar. I am confident that GE will continue to be successful in the years to come."

This deal, as well as Buffett's earlier deal with Goldman Sachs (NYSE:GS), is dependant on the Treasury bailout of the financial system. Nevertheless, investor confidence in these stocks is buoyed by the Oracle of Omaha's blessings. Trend traders, though, should stand clear. Both GE and GS are Stock Trends Bearish.

VIX-en

Market volatility is obviously heightened. Investors are totally wigged out. A measure of that volatility is the Volatility Index (VIX). It is now trading at 40, a level that approaches other seminal moments in the last 15 years - the market bottom of 2002, post-9/11, the LTCM collapse, and the Asian Currency Crisis. This is either a moment of great opportunity...or tragedy. We will see.

The root of the credit crisis

At last, a voice (WSJ opinion piece - Judy Shelton: Loose money and the roots of the crisis) that clearly states the source of the credit crisis. Instead of vilifying market participants and regulators, Ms. Shelton directs blame on the compromising dual mandate of the Federal Reserve - its monetary fine-tuning of economic output at the expense of its core responsibility of protecting the value of the currency. Such an incompatible mandate is untenable over the long-term. Cheap money is the fertile soil of credit abuse. We should not be surprised that both financial institutions and borrowers abused a fiat money system that makes it so easy to lose sight of fiduciary responsibility and financial discipline.