Tuesday, June 23, 2015

The Golden Cross Myth:

I happened upon an entertaining item – The Globe And Mail Wednesday June 17, 2015 Jennifer Dowty – CAN STANTEC’S ‘GOLDEN CROSS’ LEAD TO MORE GAINS? Dowty who is a CFA takes the time to explain the technical term “Golden Cross” to us less informed readers. Downty quotes from some unnamed source;

Definition: A ‘Golden Cross’ is a bullish technical indicator for a stock. It occurs when the stock’s 50-day moving average crosses above the 200-day moving average. When a Golden Cross occurs, it indicates that the short term price trend is rising.

So here is the problem – Dowty is just blowing smoke because the so-called Golden Cross is just another urban myth which has been promoted by the business media.I remind Dowty that CFA means Chartered Financial Analyst – not Charting Financial Analyst.

Any technical analyst who has back tested and/or traded on the Golden Cross knows – it generates a 50 per cent outcome – at best. That is because the 50 and 200 day crossover occurs about half-way through the price move. A back test on Stantec from November 2005 to date issued 7 signals with 3 winning trades and 4 losing trades. A back test on Suncor over the same period = 8 total signals with 4 winning trades and 4 losing trades. BlackBerry over the same period = 5 total signals with all five losing trades.

Our chart – daily of Stantac and the Golden Cross clearly displaying the late signals..

Tuesday, June 16, 2015

Apple and the New Dow Component Jinx:

I see Apple Inc as built a triple top on a point & figure chart. I love P&F charts because most of the squiggly line guys never use them.

Apple Inc was added to the DJII March 2015 suggesting that Apple is in transition from a growth stock to a value stock. In other words – the great 2001 – 2015 growth period may be over. Some past DJII growth to value stocks - Cisco Systems added in June 2009. Bank of America and Chevron added in February 2008, Intel and Microsoft were added in November 1999

Honeywell was dropped from the Dow in February 2008 and has doubled in price – now a true growth winner – Alcoa also doubled in price after being dropped in September 2013

Our chart – monthly of Apple Inc displays the progressively shorter growth periods – this may cause some momentum loss in the broader technology sector


Wednesday, June 10, 2015

Falling bonds and urban myths:

I note the iShares Barclays 20+ Yr Treas.Bond ETF (TLT) at $115.73 is down about 20 per cent from the January 2015 price peak of $138.50 and the yield on the 10-yr T-Note has jumped from 1.65% to 2.47%. Remember rising bond yields mean falling bond prices – and that according to an urban myth – is bad for stocks.

Q: So how come over the same time period the S&P500 is up about 3 per cent?

A: The equity market is telling us that interest rates are rising because the global economy is improving – and we are past the deflation fear.

To repeat – I think we have the Sell-of-a-Generation on bonds – the last time this happened was back in late 1941 – the stock market bottomed a few months later and ran non-stop through to the mid 1960’s. A look at the NYSE new 52-week high list at the close June 5, 2015 displayed about 60 names – over half being components of the financial sector and we all know that the financial sector always leads bull and bear cycles
Our chart – displays a bullish message two financial ETFs – the SPDR (KRE) Regional  Banking sector and the TSX listed BMO equal weight US bank ETF (ZUB) – both printing new 52-week highs. Note both are still trading above a rising 50-day MA – so I still don’t think we sell in May and run away.