Friday, February 27, 2015

Waiting for the NASDAQ Composite:

Now with all of the major US stock indices making recent all-time highs the big laggard is the NASDAQ Composite which to date has not broken above the manic bubble peak of 5130 back in March 2000. The NASDAQ Composite is an important bellwether because - more than any other stock group – the NASDAQ represents the New Economy.

The First Boom: The origin was the United States and English speaking countries. Back in 1975 the NASDAQ broke to the upside lead by biotechnology then Intel with the first microprocessor, the PC, the Internet and ending with the dot com bubble in 1999-2000.

The second Echo Boom: This time including all global economies - time frame 2009 + Internet rollout in emerging economies, global cell phone expansion, wireless technology, GPS technology, telecom boom, flash memory and nanotechnology just to name a few advances – add in parallel new themes such as aerospace and the broad health sciences space.

A look at about 20+ years of NASDAQ explains the history.
(A) The last advance of the great 1978 – 2000 1st technology boom confined to English speaking countries
(B)The March 2000 dot com technology bubble
(C) & (D) The first and second modern bear market lows
(E) The emergence of the 2nd technology / health care “echo’ boom. 

Thursday, February 19, 2015

The TSX Metal Miners Get No Respect:

These days the business media is hyper-focused on one topic – energy prices and should we buy more energy stocks? Will crude prices hold at $50? If so how long do we wait for the new advance? Will more energy companies cut their spending – and who is next to cut the dividend? Callers to BNN Market Call ask – what do you think about Cresent Point or Cenovus? The sector has a lot of participants – the TSX Energy Index alone has 55 components. Clearly the energy sector was over-owned and when the energy group collapsed in late 2014 many portfolio managers were bag-holders.

I think the most under-owned and overlooked sector in Canada is the TSX Metals & Mining sector. Many experts have given the sector up for dead, after all who will ever need copper and zinc ever again? Callers to BNN Market Call never ask about Hudbay Minerals or Lundin Mining, The TSX Metals & Mining sector has only 9 components and that number many get smaller do to consolidation in the sector. Long term investors who may be nervous about the current yield chase and those risky dividend / growth models may be wise to look at the under loved and under-owned metal miners, Note our Hudbay weekly chart is bullish with the price above the 10 & 40 week MA, a higher low and rising money flow numbers

Thursday, February 12, 2015

The Bombardier Echo Torpedo:

Last week I commented on the exogenous event torpedo-like collapse of stocks and cautioned there is no fundamental or technical defence against your stock being hit by a torpedo. The use of a system stop loss is also a bad idea because your stop sell order may become a marker order during a short panic which is not a good time to bail out of a position. The good news is that you have choices on how to react to the torpedo. In other words, do you react and sell now, or do you not react and hold on to your position? The choice you make depends on the nature of the exogenous event.

We review  the recent Bombardier (BBD.b) torpedo of January 15, 2015 – let us call this the Learjet liquidity crisis - that cut the price by one third in just one day. This was a sudden collapse in price in reaction to a negative event relating to the company’s business model. Now today we get an “echo” torpedo basically a reaction to the same problem – liquidity. So if our torpedo theory is correct the price should not post a weekly close below the prior torpedo low of about $2.50 – unless BBD.b fails as a Canadian transportation business – remember the feds did bail out the auto industry, but the common share holders were bag-holders. Let us see if $2.50 holds