"Last week, I explained the three stages of a typical bear market. First, we go through the non-belief stage when investors buy declines on dips and ignore outside noise such as falling housing prices and the subtle money shift from small caps to large caps. This is the early stage of a flight to safety.
The second stage is worry as surprising disappointments in the financial sector cause investors to shift money from equities into Treasury bonds, marking the latter stage of a flight to safely.
The third stage is the recognition of a crisis. Normal sector rotation ends and global fundamentals are meaningless as a bearish stampede blows away assets at any price. Fears of another depression mount and eventually a global rescue plan unfolds.
Finally the crisis passes, and the dawn of a new bull market shines light on the debris left behind by the passing bear. The clean-up gets underway and the healing or basing process begins."
Stock mayhem takes cue from Pulp Fiction
October 17, 2008 Bill Carrigan
Last week, while visiting a branch of Union Securities at the height of the stock market selling spree, I was confronted by the branch manager who asked: "Are you scared yet?"
I paused and searched for an answer. I then recalled a line from the restaurant scene in the film Pulp Fiction when Jules (Samuel L. Jackson) was confronted by Pumpkin, a robber who points a gun at his face.
Without blinking, Jules replies: "Hate to shatter your ego, but this ain't the first time I've had a gun pointed at me."
Without blinking, I replied, "I am concerned, but this ain't the first time I've been mauled by a bear market."
Last week, I explained the three stages of a typical bear market. First, we go through the non-belief stage when investors buy declines on dips and ignore outside noise such as falling housing prices and the subtle money shift from small caps to large caps. This is the early stage of a flight to safety.
The second stage is worry as surprising disappointments in the financial sector cause investors to shift money from equities into Treasury bonds, marking the latter stage of a flight to safely.
The third stage is the recognition of a crisis. Normal sector rotation ends and global fundamentals are meaningless as a bearish stampede blows away assets at any price. Fears of another depression mount and eventually a global rescue plan unfolds.
Finally the crisis passes, and the dawn of a new bull market shines light on the debris left behind by the passing bear.
The clean-up gets underway and the healing or basing process begins.
This clean-up or basing period can last for several months – the 9/11 crisis took about nine months to repair. The bottom is first built by the market leaders – financial, technology and telecom, which bottomed in mid 2002. The market laggards – materials and energy – built bases through mid-2003.
We are now probably in that basing period. The broad indexes look to be forming a bottom, though commodity-related stocks could continue to deflate as commodities continue to weaken.
Two important tests loom.
The first test is for the major stock indexes and sub-indexes not to violate the panic lows posted last Friday.
The second test would be the return to natural market rotation – like the lows of 2002-2003 – a condition caused by investors moving in and out of various stock groups.
If over the next few weeks the lows of October 10 hold then a return to sector rotation is likely as investors focus on the economy.
You can see examples of sector rotation by looking at weekly or monthly charts of the various TSX sectors such as the financial, consumer, technology or materials sectors. In the normal course of the business cycle the financial and consumer sectors will lead the broader market indexes and the materials and commodity sensitive stocks will lag the broader market indexes.
Investors should incorporate sector rotation studies into their investment decision process by doing a quick scan of the TSX sub-groups or stock sectors.
One example is to compare the monthly closes of the TSX information technology index to the monthly closes of the TSX energy index in order to spot a lead and lag relationship.
Our two plots extend back to 2002 and clearly illustrate that the technology sector leads the energy sector to the upside and to the downside. Note the price peaks of the tech index in 2004 and again in 2007, well ahead of the energy price peaks of 2005 and 2008.
Note also the tech index is down to long-term support at the 2002-2003 base, giving us a compelling reason to own the TSX technology index and to avoid the TSX energy index.
Bill Carrigan is an independent stock-market analyst. His Getting Technical column appears Friday.
Friday, October 17, 2008
Carrigan:three stages of a typical bear market
Thursday, October 16, 2008
Gurus speak, investors buy late in the day
The close: Gurus speak, investors buyRTGAMA global recession has not been averted and the financial system is not humming again. But after yet another deep stock market rout early on Thursday, investors couldn't sit on the sidelines any longer: They stepped back into the market, sending U.S. stocks up and erasing most of the losses in Canada.It only helped that prominent voices from the professional investment community - some of them notoriously bearish until recently - are suggesting that the low markets are a gift to long-term investors.Jeremy Grantham, chairman of GMO, told Reuters: "The early purchases will be painful.
But if you could slice in and do some buying before and after the low, seven years from now you will not regret it."Chris Orndorff, managing principal at Payden & Rygel Investment Management, told Reuters: "Things have just gotten a bit silly. We are very, very close to a bottom in equities."John Hussman, Hussman Funds, in a note to investors: "On nearly every measure - sentiment, valuation, volatility, oversold conditions, and others, we are observing extremes associated with strong expected return/risk profiles, on average. My impression is that investors underestimate the potential for a very rapid 20 to 25 per cent market advance as risk aversion collapses."Somebody listened.
The Dow Jones industrial average closed at 8979.26, up 401.35 points or 4.7 per cent. From its low point earlier in the day, the index rallied 780 points. Of the 30 stocks in the index, 27 rose. The broader S&P 500 closed at 946.43, up 38.59 points or 4.3 per cent.Exxon Mobil Corp. rose 11.4 per cent, Wal-Mart Stores Inc. rose 9.1 per cent, Microsoft Corp. rose 6.8 per cent and General Electric Co. rose 3.3 per cent. Citigroup Inc. missed out on the rally, falling 2 per cent.In Canada, the S&P/TSX composite closed at 9269.97, down 53.88 points or 0.6 per cent.
But this is a case where down looks up: The index rallied more than 500 points from its low. The winners included Royal Bank of Canada, up 1.5 per cent, and Research In Motion Ltd., up 4 per cent.Even though the price of crude oil fell below $70 (U.S.) a barrel, closing in New York at $69.85, a number of energy producers performed well. Canadian Oil Sands Trust rose 10.6 per cent and EnCana Corp. rose 5 per cent. Gold producers, however, were hit hard by a low reading of U.S. inflation in September, which sent the price of gold down to $804.50 an ounce. Barrick Gold Corp. fell 12.5 per cent and Goldcorp Inc. fell 10.9 per cent.Copyright 2001 The Globe and Mail
TSX Drops 310 Points
he TSX Venture Exchange was off 43.23 points to 947.98.
The Dow Jones industrial average, down well over 300 points late in the morning, but was off just 36.8 points to 8,541.11 at mid-afternoon Thursday after tumbling 733 points the previous day in its worst one-day plunge since 1987.
The Nasdaq composite index was ahead 6.12 points to 1,634.45 following a 151-point loss Wednesday while the S&P 500 index declined 8.3 points to 899.54 after losing 90 points in the prior session.
"There is some good news and a lot of bad news and I think if there is any type of bad news in anything that comes out, that's really what people are focusing on – which is indicative of a bear market really," said Jennifer Radman, associate portfolio manager at Caldwell Securities.
"You still have a lot of deleveraging going on, which means there are people out there that just have to sell regardless of what the value of their stock is worth."
The latest dive in the price of oil helped send the Canadian dollar down 0.15 of a cent to 84.03 cents U.S., while the latest snapshot on manufacturing showed a sharp deterioration in sales.
Statistics Canada reported that manufacturing sales declined 3.7 per cent to $52 billion in August. The slide was led by the petroleum and coal sectors, but declines were widespread as the transportation equipment industry fell 4.3 per cent.
The Philadelphia Federal Reserve said Wednesday that regional manufacturing conditions weakened in October. The bank's regional index came in at a negative 37.5 compared with a positive 3.8 for September.
In other U.S. economic news, industrial production plunged 2.8 per cent last month, on top of a one per cent drop in August.
The Federal Reserve estimated that disruptions related to the hurricanes accounted for about 2.25 percentage points of the total drop in industrial production in September.
Also, consumer prices were flat last month rather than increasing as forecast. And claims for unemployment benefits fell by 16,000 last week to a seasonally adjusted level of 475,000 – a greater decline than anticipated.
While the credit markets are performing better than they were last week given unprecedented support by governments, they are hardly operating normally.
The ultra-safe three-month U.S. Treasury bill was yielding 0.44 per cent, higher than the 0.20 per cent reading on Wednesday.
The Toronto stock market's energy sector was down just over three per cent after plunging 12 per cent Wednesday. The November crude contract on the New York Mercantile Exchange was down $4.21 at US$70.33 – after earlier slipping below US$70 for the first time since August 2007 – as new data showed much higher oil inventories in the U.S. last week.
EnCana Corp. (TSX: ECA) eased five cents to $44.25 as RCMP are investigate a second explosion targeting a gas pipeline near Dawson Creek, on the B.C.-Alberta border, belonging to the energy giant.
Suncor Energy (TSX: SU) lost $1.78 to $23.21.
Oil has lost more than half its value in three months from its July peak of US$147.27.
Other commodities were lower with the December copper contract on the Nymex down 12.5 cents to US$2.0855 a pound after Rio Tinto PLC, one of the world's biggest mining giants, warned of slowing demand from China, the world's biggest growth engine over the last few years.
"The Chinese economy is pausing for breath after spectacular GDP growth," the company's chief executive Tom Albanese said.
Teck Cominco Ltd. (TSX: TCK.B) retreated 86 cents to $14.60.
Gold declined $34.50 to US$804.50 an ounce, sending the sector down more than 10 per cent.
Goldcorp Inc. (TSX: G) fell back $3.97 to $23.81.
NovaGold Resources Inc. (TSX: NG) faded 74 cents to $3.99 after it reported a record third-quarter profit of $16.7 million on a $33.5-million pre-tax gain from the sale of its NovaGrernPower unit.
Other materials stocks dragging the TSX lower included Potash Corp., (TSX: POT) down $11.42 to $81.15.
The TSX financial sector was down 2.5 per cent, with Scotiabank (TSX: BNS) $1.26 lower to $42.24.
Losses for Canadian insurers were much steeper with Manulife Financial (TSX: MFC) down $1.95 or 6.5 per cent to $27.10.
In the U.S., Citigroup Inc. posted its fourth straight quarterly loss due to credit-related troubles and cut another 11,000 jobs during the third quarter. The company lost US$2.8 billion in the quarter compared with a year-ago profit of US$2.2 billion. The loss was narrower than analysts had expected but its shares fell 82 cents to US$15.41.
Merrill Lynch & Co., which has agreed to be acquired by Bank of America Corp., posted a quarterly net loss of US$5.1 billion and its shares gave back 86 cents to $17.38.
The FTSE 100 index was down 218.2 points or 5.35 per cent to 3,861.39 in London
despite more action by the Bank of England to free up lending. Germany's DAX was down 4.9 per cent while the French CAC-40 lost 5.9 per cent.
In Asia, Tokyo's Nikkei slid 1,089.02 points to 8,458.45, its biggest drop since the 1987 stock market crash.
South Korea's main index dropped 9.25 per cent and Hong Kong's key index closed down 4.8 per cent.
QEC Flows at 1600+ Barrels Per Day Target=6000+per day
At the 9:00 video mark BNN discusses the successful well drilled in BC.
BUYQuesterre EnergyQEC-T2.340A fabulous story. Shale gas has just recently been able to be accessed because of new technology. Have great partners including Talisman (TLM-T) and Forest Oil (FST-N).
BUYQuesterre EnergyQEC-T2.450Company is waiting to see the next phase of drilling. 2 going on right now by the partners, one by Talisman (TLM-T) and one by Forest Oil (FST-N). As they start getting comfort that they can crack the 3 shales and that they are productive after fracking, it then becomes a manufacturing operation
BUYQuesterre EnergyQEC-T3.200Key for them is the million gross acres in Quebec. Has about 30% and partners are Talisman (TLM-T), which knows shale plays and Forest Oil (FST-N). Forest is drilling right now and starting in the fall Talisman will drill their other 3 plays.
http://watch.bnn.ca/the-business-news/october-2008/the-business-news-october-14-2008/#clip102634
Questerre Energy Corporation ("Questerre" or the "Company") (OSE,TSX:QEC) is pleased to announce that Talisman Energy Canada (“Talisman”) has elected to drill the remaining three option wells under its farm-in agreement with Questerre and its minority partner in the St. Lawrence Lowlands, Quebec. The three wells will complete the work program allowing Talisman to earn about a 75% interest in the original 719,000 acre farm-out block. Questerre also retains about a 4¼% gross overriding royalty on production from Talisman. Michael Binnion, President and Chief Executive Officer of Questerre, commented, “We were one of the first companies to recognize the potential of the Quebec Lowlands for unconventional gas and have worked for almost ten years to get to this point. We are thrilled that Talisman, which also saw the potential early on, has decided to accelerate the exploration and appraisal program. Our joint land lies right in the heart of the Lowlands between the Yamaska growth fault and Logan’s Line and runs from Quebec City to south of Lac Saint Pierre. We continue to believe this land position proximate to the market has significant natural gas potential.” The three-well program is expected to commence in the latter half of 2008. The wells will test multiple horizons including the Trenton Black-River and the Utica and Lorraine shale sequences. Questerre Energy Corporation is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada. This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company’s plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein. For further information, please contact: Questerre Energy Corporation - Jason D’Silva, VP FinanceTel: (403) 777-1185Fax: (403) 777-1578Email: info@questerre.comWeb: http://www.questerre.com/
The St. Lawrence Lowlands area is prospective for natural gas in multiple horizons with targets in the Ordovician Trenton Black-River and the Lorraine and Utica. Its landholdings of over one million gross acres consist of three separate blocks.
The largest block of 711,000 acres is subject to a farm-in and participation agreement with Talisman Energy. The primary zone of interest in the Greater Sierra region is the Devonian Jean Marie.
The region is also prospective for shallower zones, including the Mississippian Debolt and Slave Point formations. In November 2007, it acquired Magnus Energy Inc. In April 2008, the Company acquired Terrenex Ltd.
Issued & Outstanding:
Common Shares:179,127,088 (as at May 14, 2008)Stock Options:16,769,170 (avg exercise price $0.61)Insider Position:17,126,231 (9.57%)
