Late last week, equity markets staged a significant rally, with US indices climbing toward key levels such as 12,800 for the Dow industrials (US30 CFD), 1,400 for the S&P 500 (SPX500 CFD), and 1,875 for the NASDAQ 100 (NDAQ100 CFD). In early trading today, this rally appears to have stalled on limited economic news and mixed earnings reports.
Hourly charts, however, suggest that this could be a normal pause before another advance. For the last week, major US indices have been advancing in a step pattern of rallies followed by consolidation at higher levels, a sign that underlying buying interest may be gaining strength. Although US markets have retreated somewhat today, they have remained well above the levels where Friday’s rally started, suggesting continued investor interest. Also note that the NASDAQ 100 has remained above its 1,875 breakout point, which could also be viewed as a positive technical sign.
Meanwhile, Canadian markets continue to test their October highs, with the S&P/TSX 60 Index (Toronto60 CFD) trading just below the key 850 level today. With selected mining and energy companies moving in different directions, it is possible the Index may have difficulty breaking out to new highs in the near term.
Energy commodities seem to be attracting significant new interest today, with crude oil rallying above $117/bbl earlier today and natural gas overcoming resistance at $10.50/mcf. Gold had attempted to rebound earlier this morning, but seems to be backing off a bit after encountering resistance near $925/oz. Agricultural commodities appear to be under pressure this morning with sugar down over 4%, wheat down 3.5%, and corn and soybeans both down over 2%.
Canadian share update: political risk concerns pound mining sector, more changes at Loblaw
Resource companies active in Ecuador have been crushed this morning with Aurelian Resources (TSX: T.ARU, Bullboard) down 33.5% and Iamgold (TSX: T.IMG, Bullboard) down 7.3%. Late Friday, the Ecuadorian Assembly passed a measure revoking some mining concessions and possibly suspending mining and mineral exploration activities for up to 180 days while new mining legislation is prepared.
Considering the difficulties companies attempting to develop projects in other developing countries, such as Mongolia, have faced of late, the uncertainty created by this move may keep sentiment wary at best toward companies active in Ecuador until this situation is resolved. Note that Crystallex (TSX: T.KRY, Bullboard), which has been having difficulty permitting in Venezuela, has declined 2.3% today, which suggests perceptions of political risk may be increasing toward countries, which may have a broader impact on the resource sector.
Loblaw (TSX: T.L, Bullboard) and its parent George Weston (TSX: T.WN, Bullboard) have both declined 3.2% today after the grocer announced another management shakeup. Deputy Chairman Allan Leighton will be taking over as president. Effective today, the company’s President and Chief Merchandising Officer, its CFO, and its Executive VP of Food are all leaving the company. This move suggests that Loblaw may still have been having problems with its turnaround strategy and could create uncertainty for investors until more is known about the direction the new management team intends to take the company.
This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.
This commentary is provided for informational and educational purposes only. Nothing contained in this commentary is intended as investment advice or a recommendation or solicitation to buy or sell. All opinions expressed are current as of the date of publication and subject to change without notice.
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