Quiet consolidation ahead of the long weekend

Equity markets in North America have been retreating this morning. Considering the strength of the rally over the previous two sessions, and the failure to respond to the better-than-expected Chicago PMI and University of Michigan Consumer Confidence reports, it appears that this decline may be primarily due to profit-taking and a general lack of interest in taking on new positions ahead of the long weekend rather than a bearish turn in sentiment. Potential support levels appear near 11,550 for the Dow Industrials (US30 CFD), 1,285 for the S&P500 (SPX500 CFD), and 805 for the S&P/TSX 60 (Toronto60 CFD), with resistance in place near 11,700, 1,300, and 825, respectively.

Similarly, commodity price action has been fairly quiet for the most part. Energy commodities have rebounded from yesterday’s correction and it appears that crude oil may be stabilizing in a $114/bbl to $120-$122/bbl trading range while natural gas appears to have entered a $8.00-$8.75/mmbtu trading channel. Precious metals have been trading essentially flat today just below key resistance levels near $850/oz for gold and $14.00/oz for silver. Grains also appear to be fairly quiet today with corn trading near $6.00/bushel, wheat stabilizing near $8.00/bushel, and soybeans hovering near $13.50/bushel.

With a number of investors away this week and a long weekend approaching, the rest of the day today may be fairly quiet, although there is the potential for some action in the last hour with investors facing decisions of whether to hold positions through the weekend or to possibly go bargain hunting. Next week, however, could see increased trading action as investors returning from holidays may start to think about the next round of quarterly results and may start to review their economic and corporate outlook for the rest of the year.

Canadian share update: Remembering the rest of the market

While trading in the energy, materials, and financial sectors seem to have dominated trading in Canada in recent weeks, today, technical action in other areas appears to be taking centre stage.

Auto parts producer MartinRea (TSX: T.MRE, Stock Forum) has gained 4.2% today and has broken through $7.50, a key support/resistance level. With this hurdle having been cleared, MartinRea may continue to trend toward the $9.50 to $10.00 area where a measured objective and previous resistance appear.

Plane and train maker Bombardier (TSX: T.BBD.B, Stock Forum) has broken out of an ascending triangle today, overcoming resistance at the $8.00 level. A measured move from the triangle suggests continued advances toward a retest of $9.00 or $9.25 may be possible on trend.

Having completed a double bottom a month ago, CanWest Global (TSX: T.CGS, Stock Forum) has been steadily climbing. Today, CanWest broke through resistance at $2.75 and out of an ascending triangle, suggesting that its base-building period may have ended and a new recovery trend may be underway. A measured move from the triangle suggests CanWest could trend toward a test of $3.50, a former support level.

On the other hand, sentiment appears to have turned against the cable sector today. Rogers Communications (TSX: T.RCI.A, Stock Forum) has declined 3.1%, while Quebecor (TSX: T.QBR.A, Stock Forum), parent of Videotron, has fallen 2.3%, Shaw Communications (TSX: T.SJR.B, Stock Forum) has dropped 0.8%, and Cogeco Cable (TSX: T.CCA, Stock Forum) has dipped 0.6%.

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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ABOUT THE AUTHOR

Colin Cieszynski, CMC Markets

Colin Cieszynski,CFA, CMT is a Market Analyst and Manager of Education with CMC Markets Canada. Currently, Colin provides daily technical commentary on North American equity markets and selected commodities. Colin joined CMC Markets from Canaccord Capital, where he provided market commentary to individual investors for the last ten years and daily technical notes since 2001.

Colin has completed both the Chartered Financial Analyst and Chartered Market Technician programs. He is a member of the Market Technicians Association, the Canadian Society of Technical Analysts, the CFA Institute, the Toronto CFA Society and the Prospectors and Developers Association of Canada.

About CMC Markets

CMC Markets is Canada’s only online CFD provider and its affiliate, CMC Markets UK plc, was the first company in the world to offer online FX trading. CMC Markets UK plc has been offering CFDs and FX to Canadian traders through the services of CMC Markets since 2005.

Founded in 1989, CMC Group has 22 offices worldwide, including Toronto and Vancouver, employs in excess of 1,000 staff and represents clients in over 70 countries. Between November 2006 and October 2007, CMC Group handled over 16.2 million trades with a total value of over US $1.1 trillion, across the full product range. In December 2007, Goldman Sachs acquired a 10% stake in the CMC Group.

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