Stocks & Equities

The Bottom Line: Entry Point Fast Approaching

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Posted by Don Valiloux - Timing the Market

on Wednesday, 17 October 2012 07:28

The entry point for the seasonal trade in North American equity markets (on average during the past 61 years: October 28th) is rapidly approaching. The expected short term correction from mid-September has happened, but has yet to show signs of bottoming. Watch short term technical indicators for signs of an intermediate bottom. Sectors to consider include due to their favourable seasonality starting by the end of October include technology, agriculture, forest products, transportation, industrials, steel, consumer discretionary and China.

Interesting Charts

Short term momentum indicators for broadly based equity indices are recovering from oversold levels (notably a move by Stochastics above the 20% level). Typical of technical action at the start of the period of seasonal strength for equity markets!

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The recovery is happening at an interesting time, just before the U.S. Presidential election when equity markets typically start an intermediate upside move lasting until at least Inauguration Day in the third week in January.

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A word of caution about individual equities! Responses to third quarter reports released yesterday were exceptional, particularly by stocks reporting after the close. Most companies are reporting slightly higher than consensus earnings. However, many are missing consensus revenue estimates. Of companies that reported before the close yesterday, State Street gained 2.0% and Johnson & Johnson improved 1.4%. However, Goldman Sachs fell 1.3% and UnitedHealth Group slipped 0.6%. Responses to reports released after the close were downright scary. CSX added 1.7%. However, IBM plunged 3.5%, Intel dropped 2.2%, Linear Technology fell 4.0%, Apollo plunged 7.6% and Intuitive Surgical gave up 4.8%. Today and tomorrow are the days when the most S&P 500 companies are reporting third quarter results. Look for lots of volatility.

About the Great Author of this Daily ReportDon Vialoux

Don Vialoux has 37 years of experience in the Investment Industry. He is a past president of the Canadian Society of Technical Analysts (www.csta.org) and a former technical analyst at RBC Investments. Don earned his Chartered Market Technician (CMT) designation from the Market Technician Association in 1995. His CMT paper entitled "Seasonality in Canadian Equity Markets" was published in the Spring-Summer 1996 edition of the MTA Journal. Don also has extensive experience with Exchange Traded Funds (also know as Index Participation Units) as well as conservative option strategies. In 1990 he wrote a report that was released in the International Federation of Technical Analyst Journal entitled "Profiting from a Combination of Technical and Fundamental Analysis". The report introduced " The Eight Phases of the Stock Market Cycle", an investment concept that continues to identify profitable entry and exit points for North American equity markets.   He is currently a member of the Toronto Society of Fundamental Analyst’s Derivatives Committee.   Now he is the author of a daily letter on equity markets available free on the internet. The reports can be accessed daily right here at www.dvtechtalk.com.




Stocks & Equities

Boom Bust Cycles - Hot Sectors & Easy Money

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Posted by Tyler Bollhorn: StockScores

on Tuesday, 16 October 2012 07:29

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perspectives commentary


You can analyze any stock with a ruler, learn this lesson plus get my weekly market analysis in the Market Minutes video. You can watch this week's video on Youtube by clicking here. To receive email alerts any time I upload a new video, subscribe to the Stockscores channel at www.youtube.com/stockscoresdotcom.

Here is an excerpt from my upcoming book, The Mindless Investor, How to Make Money in the Market by Overcoming Your Common Sense. This piece is from the chapter, Avoid Being Yourself.

Trading can be a bit boring. You'll spend a lot of time waiting for a new trading opportunity to come along or for an existing trade to develop. I'm not complaining-trading can be very exciting as well-but it's nice to get out from behind my screens once in a while. Speaking about trading the markets at investor conferences is a good change of pace for me and something I do a few times a year.

While I'm at these conferences to teach the audience about trading, I also learn a lot by talking to investors. Since I do presentations in many different places, I have started to see patterns in how people approach the markets. These patterns shed light on some of the reasons why many investors have trouble beating the market.

People Buy What They Know

People tend to buy what they and their social network know. The main industries of a region are often the focus for investors in that area. Vancouver, Canada, is a centre for mining exploration companies, a focus that evolved out of the Vancouver Stock Exchange's function as a hub for raising money for speculative mining deals. Some of the world's biggest mining investment shows are held in Vancouver, so it's not surprising that when I do a presentation in Vancouver the questions I'm asked are almost entirely about mining stocks.

Take a one-hour flight east to Calgary, Canada, and the questions now focus on oil and gas stocks. Calgary is Canada's epicentre of the energy industry; the tall glass towers that make this city's skyline so dramatic are home to many energy company head offices.

You won't find the people in Vancouver and Calgary to be a whole lot different: they speak with the same Canadian accent and are as polite as Canadians are reputed to be. Both cities are wealthy by global standards, and the population of each tends to be more educated than most. Both cities love their respective hockey teams and have hosted successful Winter Olympics: Calgary in 1988 and Vancouver in 2010.

But despite so many similarities, they have a very different focus in their investment approaches. I have met countless Vancouverites and Calgarians who have shown me their portfolios, and it's not uncommon to find that they're 100% invested in the native industry of their city. Most portfolio managers would be shocked to see a person's entire retirement portfolio invested in speculative mining or energy stocks, yet this is not uncommon in these cities. I once met a guy in Vancouver who had shares in over 100 mining stocks and not a single stock outside of that sector.

This lack of diversity can create great fortunes when there's a boom in that industry. I've seen it happen many times. The mining industry enjoyed great success over a number of years as the prices of gold and silver surged to record highs from 2006-2011. I expect that the Mercedes and BMW dealerships enjoyed a lucrative business in Vancouver during those years, funded by penny stock profits.

Mining and energy tend to run in boom-bust cycles making long-term success fleeting. When a sector is hot, it's easy to make money. When it ceases to be the trendy place to invest, these stocks can languish for years with negative returns. During these times, sector-weighted investors struggle through financial and emotional turmoil, watching seven- and eight-figure portfolios shrink to five- or six-figure amounts. I know people who have gone from a net worth of over $20 million to under $1 million in the span of a year when the sector they were invested in went from hot to not. These sorts of trend reversals flood the market with slightly used Mercedeses and BMWs.

In a hot market, everyone's an expert. A person who knows a little bit about oil and gas, enough to pick a few stocks with some decent potential, can make a lot of money. These people don't make money because they have exceptional analytical prowess, but simply because they rode a hot market. When the trend reverses, they go back to looking like neophytes. Even the most knowledgeable of sector investors look dumb when the trend is down. Profits in these markets are just short-term loans for the person who fails to realize that you have to sell and move on to the next hot market.

perspectives strategy

This week, I thought I would share a few stocks that Stockscores users have highlighted for me. These are from emails that I received today.

perspectives stocksthatmeet

1. T.PMT
A very nice Bottom Fishing chart set up, the stock broke its downward trend early this year and has been building a rising bottom over the past few months. It is now starting to break through resistance from an optimistic ascending triangle chart pattern. Support at $1.22.

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TTWO is building optimism and starting to move through resistance. The recent price volatility makes it more likely that the stock will pull back as it is a sign that investors are somewhat uncertain about the stock but also eager to buy. Support at $10.30.

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I hope those of you near Vancouver or Calgary will join Michael Campbell, host of MoneyTalks, and I for an evening discussion of the market and how I approach it. For those who are not familiar with MoneyTalks, it is an excellent financial radio show that is broadcast in most markets in Canada. If it is not broadcast in your city it is available for free download from iTunes as a podcast.

I plan to highlight some of the lessons from my new book, The Mindless Investor. This book is not yet available (it is being printed right now) and those who attend this event will be the first to receive one of the first 1000 copies of the book. Attendees will also receive:

- Attendance at the event
- Two months of my daily newsletter (value $118, new subscribers only)
- One month access to Stockscores.com (value $29, new subscribers only)

Some of the important lessons from my book:

- You must think like a trader to invest in the stock market today
- Diversification is a dangerous way to manage risk
- The stock market is not fair
- You can analyze any stock or market in 10 seconds (I will show you how)

Past MoneyTalks events have been sell outs and we expect this one to be no different, don't wait too long to purchase tickets.

For more information, click on the appropriate link below:

Evening with Michael Campbell and Tyler Bollhorn, Calgary Oct 29 and Vancouver Oct 30

To get 20% off of the ticket price, use the special offer code SSTB2013 at checkout.


  • Get the Stockscore on any of over 20,000 North American stocks.
  • Background on the theories used by Stockscores.
  • Strategies that can help you find new opportunities.
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  • Build a portfolio of stocks and view a slide show of their charts.
  • See which sectors are leading the market, and their components.

    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.





Stocks & Equities

Market Buzz: Enhancing Your Portfolio

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Posted by Ryan Irvine: Keystocks

on Sunday, 14 October 2012 15:11

Market Buzz – ETFs 101 - Using Exchange Traded Funds (ETFs) to Enhance Your Portfolio

Exchange Traded Funds or ETFs are a highly versatile investment product that every active investor should make themselves fully aware of. They operate much like mutual funds in that they pool capital together to build a portfolio that is invested with specific objectives. Each investor owns a share of the fund and can redeem or sell units when they request. As a relatively new investment product, ETFs are designed to track (generate an identical return) to specific market sectors and indexes. You can buy an ETF that tracks the overall market in Canada, the market in a foreign country like China or India, a specific sector like technology or mining, or a commodity like gold or oil. Unlike mutual funds, ETFs trade like stocks, so instead of buying and redeeming a unit at its net asset value (as with mutual funds), you buy units at a price based on supply and demand, which can be above or below net asset value (but is usually fairly close).

So say you decide that you want to gain exposure to the investment returns in an emerging market like China. First of all, foreigners are forbidden to purchase a company trading on the Shanghai Stock Exchange (SEE), and even if they weren’t, where would you start? No problem, just purchase one of the several ETFs that track the index. What if you want to gain exposure to gold? You’re not naïve enough buy bullion that is stored in the Cayman Islands and you don’t have the time or the industry knowledge to start researching a bunch of gold miners. Just buy the ETF.

Passive Investing versus Active Investing

One of the most important decisions that a portfolio manager must make (whether it be a professional portfolio manager or a private individual managing their own portfolio) is whether to invest actively or passively. Active investors spend time researching investments in order to outperform the market, whereas passive investors either don’t believe it is possible to outperform the market or just don’t want to spend the required time. The passive investor simply wishes to generate a return that mimics the overall market return. One of the key differences between mutual funds and ETFs is that the vast majority of mutual funds are actively managed while nearly all ETFs (with only a few exceptions) are passively managed.

The main argument for passive investing over active investing is that over 80% of actively managed mutual funds do not outperform the market over time. Even though you are paying professional managers a hefty fee (averaging about 2% of invested assets) to generate superior returns to the market, statistically most will be unsuccessful in doing. This does not mean that you should only invest passively; there are numerous examples of skilled money managers who have generated superior returns for clients in up and down markets. However, if you are simply relying on some cookie cutter, Large-Cap mutual fund to do the job, you will probably end up disappointed; and you will be even more disappointed to find out that you paid your manager 2% + of your total invested assets to underperform a passive fund that only charges 0.5%.

The good news is you don’t necessarily have to choose between active and passive investing. There is a third choice, the hybrid approach, where you allocate a portion of your portfolio to passive investing and a portion to active investing. The hybrid investor recognizes that opportunities do exist to find undervalued investments that offer the potential for higher returns. But this investor also recognizes that investing actively also carries additional risk, requires an investment of time, and that good undervalued opportunities are not always plentiful. The exact allocation would depend on the characteristics of the investor. An investor that makes the 20%/80% between passive and active investing has a high level of confidence in either themselves or their manager to outperform the market. The investor that makes the 80%/20% allocation has substantially less confidence in the active strategy, but does not want to miss out on rare opportunity to make a great investment.

Passive Mutual Funds (Index Funds) versus ETFs

Although the majority of mutual funds are actively managed, there are also some passively managed vehicles which are referred to as index funds. Much like ETFs, index funds attempt to mimic the return of the overall market index, specific sectors or even commodities. We are not averse to investing in index funds; in fact we adamantly support them as an alternative to investing in actively managed mutual funds. In trust, there are several pros and cons with regard to investing in ETFs as opposed to index funds. One favourable characteristic that is unique to ETFs is the ‘in kind’ redemption which provides tax deferral for unit holders. When an index fund sells stock to fulfill redemption requests, the capital gain tax liability is spread amongst the unit holders, regardless of whether or not they are redeeming. Investors in ETFs can realize return by either selling their units on the open market or by exercising the ‘in kind’ redemption, whereby they would receive a basket of securities proportional to the units they are redeeming. In either instance, no tax liability is incurred by investors who are not redeeming units. For the investor that redeemed ‘in kind’, tax liability would only be incurred if they sell from the basket of securities they received (assuming there is a capital gain of course).

Understanding Discounts and Premiums

Because ETFs trade like stocks, their prices often hover above or below the net asset value contained within the fund. If the ETF is selling for more than its net asset value, it is trading at a premium, if it is selling for less, it is trading at a discount. There are a number justifiable reasons that if the premium or discount is small, then its impact should be minimal, but in some cases the difference could be significant and it can affect the return on your investment. A good example would be an ETF that tracks the return of a foreign country that restricts foreign investment. This ETF will typically trade at a premium to net asset value because it is one of the few methods that can be used to access this market. If however, the government of this foreign entity decides to loosen the restrictions on foreign investment, then the premium is likely to decline significantly and so is the value of your investment. This is a single example of how premiums and discounts on ETFs work. While I don’t suggest you try to speculate on the movement of the premium (which defeats the purpose of ETFs), it is important that you understand how it can affect your return.

How to Buy ETFs

A great thing about ETFs is that they are extremely easy to buy and sell. They trade on an exchange and like any stock, they can be purchased through a discount brokerage. You simply need to decide what ETFs you want to buy, get the trading symbol, and enter your limit order with your discount broker. Two institutions that offer ETFs in Canada are iShares (www.ishares.com) and Claymore Investments (www.claymoreinvestments.ca). You can also find additional information on ETFs at Yahoo Finance Canada (www.ca.yahoo.finance.com/etf) and Globeinvestor (www.globeinvestor.com/v5/content/etf_hub/).

 Contact KeyStocks: By Email | By Phone: 1-888-27-STOCK or 604-273-1118

KeyStone’s Latest Reports Section








Stocks & Equities

Cheap Gold Stocks

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Posted by Adam Hamilton: Zeal Speculation & Investment

on Friday, 12 October 2012 11:44

After surging sharply in August and early September, gold stocks have been consolidating sideways ever since.  Naturally this loss of momentum has sapped the nascent trader enthusiasm for this sector.  But stalling out temporarily certainly doesn’t negate gold stocks’ dazzling fundamentals.  They remain deeply undervalued relative to gold, the metal that drives their profits and hence ultimately their stock prices.

While sentiment (greed and fear) dominates short-term stock-price swings, over the long run stock prices are nearly exclusively determined by fundamentals.  Investors buy stocks to own fractional stakes in the underlying companies’ profit streams.  The bigger those profits grow, the higher the stocks are bid of the companies earning them.  And for gold stocks, the gold price controls the vast majority of profitability.

Unlike most other companies, gold miners effectively have infinite demand for their product.  They can easily sell every single ounce of gold they manage to produce.  They never have to discount, the market price is what they get.  And with mining costs largely fixed, higher gold prices flow directly into bottom-line profits.  And because of these fixed costs, profits rise much faster than the underlying gains in gold.

This profits leverage is easy to understand.  Imagine a miner selling gold today for $1700 that it produced for $700.  Its profit is $1000 per ounce.  But if gold rises 25% to $2125, profits would surge to $1425 since production costs are essentially fixed as mines are planned and built.  That’s a 43% increase in profits driven by a 25% gold rally!  This profits-leverage growth is more exponential than linear as gold climbs.

.....read much more beginning 4 paragraphs above this this chart HERE




Stocks & Equities

Faber vs Rogers: Stock Market Crash, Surviving Money Printing & Commodities

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Posted by Marc Faber & Jim Rogers

on Thursday, 11 October 2012 16:29

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FABER BIGGEST WARNING YET - Global Crash Coming! Dr. Doom, Marc Faber, warns of a global crash. He discusses China, as well as gold's next move.  "Unfortunately I have a lot of dollars," he said. "I just want to have a lot of cash because I think that within the next six to nine months we can buy just about anything 20 percent lower than it is now." ....more on Marc's personal website HERE

 Key Points on the video below: Marc Faber vs Jim Rogers @ the 4:30 minute mark. Faber vs Rogers on Surviving in The Money Printing Environment @ the 9:10 minute mark. 


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