Monday, March 17, 2008

Canadian Banks

I took another look at a few of the Canadian Banks stocks today and it is now clear that at least some of them now have the potential to go a great deal lower. A bear low of $10 to $15 is possible for stocks like the Bank of Montreal (BMO.TO)and the Canadian Bank of Commerce (CM.TO).

Were probably only now getting to the point where many stock holders are starting to pay attention and getting worried about what other unknown things have been going on. The US government is already in the panic mode...reducing interest rates on the weekend.

Saturday, March 15, 2008

Dow Index Breaks Below 25 Year Trendline

Not a good sign.

Friday, March 14, 2008

This is why its called a Bear Market

"Triggering a sell-off throughout the financial sector, Bear shares slumped 47% to $30, their biggest one-day drop in at least two decades. "

Just another milestone on the way down.

Canadian Banks are being effected as well.

Monday, March 10, 2008

Margin Calls

First it was the subprime mortgages in the US. Now the latest news is margin calls in the US. Margin calls occur when people borrow money and put up stock as security for the loan. I could do this through my broker account but I never have to date. It sounds like the Bank of Montreal is being hit by the margin call problem. I wonder about the other Canadian Banks.

The thing is-when a margin call is made people have to come up with more cash or sell some of their holdings. This can translate into a wide stock market sell off taking the good companies down with the bad. And, I guess...if it is large enough - the sales reduce the values of the equities even more, the ones being used for collateral and this in turn can lead to additional more margin calls...and the cycle feeds on it self.

I wonder...could the reduction in equity values lead to margin calls or something equivalent for those doing the Smith Manoeuvre?

I see the sell off today has brought some Canadian Banks to the brink of making new lows...TD, RY and BNS.

Saturday, March 8, 2008

Canadian Bank Stocks...continued weakness?

Bank of Montreal stock continues to be in free fall with a decline of about $30 per share to date. This is 40% price reduction from the peak of $73 down to $43. The TD Bank, Royal Bank and Bank of Nova Scotia are all very close to breaking below previous January lows.

Friday, March 7, 2008

Canada and US Stock Market Comparison

In case you were wondering...the Canadian stock market continues to keep pretty much in step with the US stock market.

Today the Nasdaq broke below the low made in January. This is an important technical move.

The other two US indexes, S&P 500 and the DJIA look like they will do the same in the near future. The TSX Composite index has farther to fall before this happens but it is not much of a stretch to envision it will also eventually fall below its January low.

Sunday, March 2, 2008

Extreme Bear Market Warning?

I have noticed something important in a few US Stocks.

The million dollar questions with respect to any large Bear Market is where will it end? How low will it go? Is it over yet?

Three US stocks are coming close to dropping below their lowest lows during the Bear Market that began in 2000 and ended about 5 years ago. There may be others.

Home Depot (HD) and Dell Inc. (DELL) and Citigroup (C) have all experienced large price decreases. The interesting thing at this time is that these stocks are all getting very close to breaking below their lows of 5 years ago. Citigroup is almost there....perhaps Citigroup is the canary in the coal mine.

From a technical standpoint this would be very important. If they do drop below their lows of 5 years ago (2002) this may be an early signal that the indexes will do the same.

In could be an early warning that this Bear Market has the potential to retrace all of the US index gains of the last 5 years.

Click on the links above to see the charts.