US equity markets appear to have picked up where they left off yesterday. After failing to hold above breakout points such as 11,700 for the Dow Industrials and 1,300 for the S&P 500, selling pressure appears to have increased significantly, suggesting that there remain enough concerns about the health of the global economy to keep equities range-bound and limit potential recovery attempts in the near term. This also suggests that there remains a risk that U.S. markets could retest their July lows near 10,825 for the Dow and 1,200 for the S&P at some point later this quarter.

Initially today, it had appeared that the technology sector may be about to buck the broad market trend but it now appears that with a market downswing apparently underway, the tech sector could be vulnerable as well. For example, the Philadelphia Semiconductor Index encountered resistance at 380 and its 200-day moving average and has since started to retreat. Considering that the NASDAQ 100 Index has recently been trading 15% above its 52-week low while the S&P has been trading 7.3% above its low for the year, there could be additional room for late stage tech groups to decline.

Commodity prices, meanwhile, appear to be attracting significant support today particularly in the grain and energy areas with corn up 4.1%, wheat up 2.9%, soybeans up 2.8%, crude oil up 1.3% and copper rebounding. At this point technically, however, it appears that commodities may have entered a period of consolidation and base building. In order to signal the start of a new upswing, a number of commodities would still need to overcome significant potential resistance hurdles such as $117/bbl for crude oil, $8.50/mmbtu for natural gas, $3.30/lb for copper, $5.50/bushel for corn, $8.30/bushel for wheat and $12.50/bushel for soybeans.

Canadian share update: Mixed reaction to Cigar Lake flooding, banks break down

Cameco (TSX: T.CCO, Stock Forum) has dropped 6.2% today after announcing last night that development at its major Cigar Lake uranium project in Saskatchewan has been suspended once again due to additional flooding. The company plans to allow water to rise from 430 meters below surface to 100 meters below surface to study the inflow problem, which may create some uncertainty as to the length and cost of this delay.

This news, however, appears to have sparked a rally in other companies with uranium exposure. As Cigar Lake is anticipated by the industry to be a major component of global uranium supply in the future, a delay in the project could have a significant impact on the supply/demand profile of the uranium market and may boost the uranium price or put a floor under it until this situation is clarified. Despite releasing disappointing earnings last night, producers Denison Mines (TSX: T.DML, Stock Forum) and Uranium One (TSX: T.UUU, Stock Forum) rose 18.9% and 11.2% respectively, while explorers Fronteer (TSX: T.FRG, Stock Forum) and UEX (TSX: T.UEX, Stock Forum) have rallied 20.9% and 12.4% respectively. Uranium One now appears to have successfully retested support at the $3.00 level and could advance within its current $3.00 to $5.00 trading range.

First Quantum (TSX: T.FM, Stock Forum) has rallied 9.0% today, apparently in response to last night’s earnings report where the copper producer announced EPS of $3.02 for last quarter, above the $2.96 market estimate. First Quantum, however, has had difficulty overcoming resistance at $65.00, a previous support level. This suggests that some investors may be concerned about the company’s outlook considering recent weakness in the copper price and opens the possibility of a retest of support at the $60.00 or $56.00 levels.

In recent weeks, Canadian banks had been recovering, but today, sentiment appears to have turned against the group once again with Bank of Montreal (TSX: T.BMO, Stock Forum) down 3.4%, CIBC (TSX: T.CM, Stock Forum) down 3.0%, ING Canada (TSX: T.IIC, Stock Forum) down 2.6% and Royal Bank (TSX: T.RY, Stock Forum) down 2.1%. While Canadian banks may be following their U.S. counterparts lower on apparent concerns over the health of the global banking system once again, it is also possible that recent press reports suggesting that the restructuring of the Asset Backed Commercial Paper market may be encountering difficulties may also be weighing on sentiment.

This action suggests that the banks could give back some of their recent gains. Bank of Montreal, for example, appears to have encountered significant resistance at the $50.00 level and broke a short-term uptrend today. Potential support levels appear near $45.00, $41.25 and $38.00, near the July low.   

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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. 

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