U.S. equity markets have been trading essentially flat this morning, suggesting that some of the negative sentiment that had driven shares lower on Friday may be dissipating. Moves by the U.S. Government to shore up confidence in the banking and mortgage sectors may help to drive away fears of a financial market collapse. The limited rebound suggests that, unlike in March when markets bounced significantly after the Fed helped JP Morgan (NYSE: JPM, Stock Forum) to bail out Bear Stearns, investors seem to be more concerned this time that economic conditions which seem to have driven major financial institutions to the brink of bankruptcy may have become so difficult that corporate earnings may be impacted across the U.S. economy for some time to come.   

Key support levels to note for the U.S. markets appear near 11,000 and 10,650 for the Dow Industrials (US30 CFD) and 1,225 for the S&P 500 (SPX500 CFD), which coincides with a test of its 2006 low.   

Canadian markets, meanwhile, have rallied this morning with the energy sector leading the way higher, seemingly on the back of takeover news and other significant corporate developments. This action suggests that while some commodities have been consolidating their gains in mixed trading today, investors and some corporations seem to expect energy prices to remain at a generally higher level going forward. Key initial resistance levels for Canadian indices appear near 14,000 for the S&P/TSX Composite and 840 for the S&P/TSX 60 (Toronto60 CFD).

Commodities have seen mixed trading this morning. Grains have been under some pressure with corn dropping 3% and breaking down below $7/bushel, while wheat has fallen 1.1% and soybeans have declined 1.8%. Energy and precious metal commodities, on the other hand, appear to be attracting increased support, with natural gas moving back above $12/mcf, gold climbing through $970/oz, and crude oil holding well above $145/bbl.  

Canadian share update: energy producers soar on takeover developments, Cardiome and Bombardier catch tailwinds

It appears that a new round of takeovers may now be underway in the oilpatch. Just before market open Shell Canada launched a $5.9 billion, or $83 per share friendly all-cash takeover bid for Duvernay Oil (TSX: T.DDV, Stock Forum). Earlier in the morning, Barrick Gold (TSX: T.ABX, Stock Forum) launched a $354 million, $6 per share bid for Cadence Energy (TSX: T.CDS, Stock Forum) as part of a plan to hedge its energy costs. Cadence had previously agreed to be acquired by Daylight Resources Trust (TSX: T.DAY.UN, Stock Forum). A number of energy producers have jumped on this news including Birchcliff Energy (TSX: T.BIR, Stock Forum), up 14.2%, Crew Energy (TSX: T.CR, Stock Forum), up 12.9%, Daylight, up 10.8%, Pro-Ex (TSX: T.PXE, Stock Forum), up 7.3%, and others. Daylight, for example, broke through $12.25 to a new high. A measured move from a recent $10.75 to $12.25 trading channel suggests Daylight could trend toward $13.75 in the near term.  

Cardiome Pharma (TSX: T.COM, Stock Forum), meanwhile, jumped 20.7% today as investors responded favourably to results from the Phase IIb clinical trial of its vernakalent oral product for the treatment of atrial fillibration. Investors appear to have focused on the 500 mg dosing group, which showed a statistically significant response over placebo over results from the 150 mg and 300 mg groups, which were not statistically significant. Currently, Cardiome appears to be testing $10.50, a key resistance level, but on a breakout, a measured move from the $9.00 to $10.50 trading range suggests $12.00 could be attainable over time.

Bombardier (TSX: T.BBD.B, Stock Forum) has climbed 3.6% this morning after announcing Sunday that it intends to proceed with the development of the CSeries jet, a $3 billion project, which is expected to enter service in 2013. The CSeries is expected to hold 110-130 passengers and compete directly against industry giants Boeing (NYSE: BA, Stock Forum) and Airbus. If delivered on schedule, the CSeries could get a jump on the competition as Boeing has suggested its next single-aisle aircraft may not be ready until 2017 or 2018. Lufthansa has placed an initial order for 60 CSeries aircraft. Pratt and Whitney, a division of United Technologies (NYSE: UTX, Stock Forum) is expected to supply engines, with Rockwell Collins (NYSE: COL, Stock Forum) set to supply avionics. Note that other announcements could come out of the commercial aviation sector this week with the major Farnborough Air Show underway.

Sentiment toward non-standard auto insurer Kingsway Financial (TSX: T.KFS, Stock Forum) may be starting to improve. Kingsway has advanced 3.5% in early trading today after announcing that it plans to retire most of its short-term debt by the end of this month, reducing its debt-to-capital ratio to 24.2% from 30.3% last March. Kingsway noted that it also continues to work to exit unprofitable business lines. Initial resistance for Kingsway appears to be in place near the $9 level.

Upcoming educational webinars

In the coming months, Colin Cieszynski will be presenting a series of free webinars on trading for accredited investors from coast to coast. 

Date                Time                Topic                                      

July 22             7:30 pm ET      Developing a Trading Strategy 1:
                                                What Kind of Trader Are You?

For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at http://www.cmcmarkets.ca/en/content/education/free_seminars.do

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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