Equity markets in North America have turned sharply lower this morning, particularly in the U.S., and have started to break down through key support levels. In particular, the Dow Industrials (US30 CFD) fell through both the 12,000 and 11,900 levels this morning, while the S&P 500 (SPX500 CFD) took out its previous low near 1,335. The next significant technical support levels for these indices appear near 1,305 and 1,275 for the SPX500 and 11,700 then 11,500 for the US30. Meanwhile, the NASDAQ 100 (NDAQ100 CFD) continues to consolidate between 1,900 and 2,000.

Investors should note that the last hour of trading today could be particularly volatile. In addition to being a usual measure of investor sentiment heading into the weekend, note that today is a triple witching day and that with equity and index options and index futures all expiring today, there could be significant trading activity later in the day. 

Canadian markets, meanwhile, have declined slightly today, and appear to be trying to stabilize after yesterday’s sell-off. Current trading ranges remain 14,650 to 15,100 for the S&P/TSX Composite and 860-905 for the S&P/TSX 60 (Toronto60 CFD).

Although the crude oil price seems to be moving up, having advanced 2.7% this morning, technical indicators suggest that upward momentum may be slowing. In particular, note that each surge so far this week has peaked at a lower high, a sign that suggests increasing profit taking and growing upside resistance. Support remains in place near $131.50 for now. Similarly, recent advances in natural gas appear to have stalled near $13/mcf and in gold just above $900/oz. Similarly, silver, appears to have stabilized near $17.50, well short of its $18 resistance level.  

Canadian share update: mixed trading in energy, BCE’s big day 

Trading in the Canadian energy sector has been quite mixed, suggesting indecisiveness has started to seep into the group. Although some energy companies have been among the leading advancers, such as First Calgary (TSX: T.FCP, Stock Forum), up 9.5%, and Paramount (TSX: T.POU, Stock Forum), up 5.3%, a number of energy producers have also declined significantly, including Nexen (TSX: T.NXY, Stock Forum), down 5.0%, and Connacher (TSX: T.CLL, Stock Forum), down 4.0%. Despite the oil price rebound, the Canadian energy sector index has declined by 4.0%, suggesting that investors see limited upside for energy commodities in the short term and that continued consolidation appears likely.

BCE (TSX: T.BCE, Stock Forum) has been trading very quietly today as investors wait on pins and needles for a big court decision. After the close of markets this evening, around 4:30 pm Eastern time, the Supreme Court of Canada is expected to rule on whether the Teachers’-led takeover of BCE will be able to proceed or if bondholders will be able to block the deal. Should the court rule on the side of proceeding, however, there is still no guarantee that the deal will close. If successful in court, the parties to the deal may still need to negotiate with their proposed lenders who had indicated earlier this spring that they may want to have some of the deal’s terms changed, which could include the price or covenants.

Based on how the decision goes, it is possible that BCE may stage a significant move on Monday, but at this point the direction remains uncertain. Note that prior to the deal’s announcement last year, BCE traded in the $29 to $32 area, while following the announcement, it traded in the $38 to $42 for most of 2007.

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. 

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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