Debt and Cash flow

Overnight the US Dollar has continued to sell off, pushing the Canadian Dollar above $.90 US.  In addition, the Euro, GBP, and CHF also continue to rise.  This morning US GDP and the Canadian Current Account Balance are being reported.   The Canadian Current Account Balance came in better than expected however this particular metric does not seem to be particularly market moving.   US GDP is also expected to improve over last quarter.  The US Dollar weakness is also driving up hard commodities such as gold, silver, and oil, which have all been rising for the last few weeks.

In our last discussion, we looked at company earnings and earnings estimates as an important fundamental criterion to consider.  Along with increasing earnings, we also like to see a proportional growth in sales or revenues for the company.  We also like to look at the other side of the balance sheet and evaluate the amount of debt a company has and whether the company is generating positive cash flow.   Common sense tells us that any company that is not generating enough cash flow to meet its short term and long term obligations is going to have difficulty in sustaining growth.  Just as if we continuously spend more than we earn, we will eventually get into trouble.  So in addition to wanting to see growing revenues and earnings, we also want to see manageable debt levels and positive cash flow.

Futures this morning are positive and the DAX is positive, indicating a positive open.  The market condition scans are still mixed, but still slightly skewed to the positive side.   The market bias indicators remain neutral, giving no bias for short term market direction.  As frustrating as it may be, we remain in a sideways trend, with the choppy whipsaw price action as markets approach their key 200 day moving average.  Will the indexes break above this key barrier or breakdown?  We have to wait and see.

Index	Change	%Change	Level	Phase
TSX	+250.21	+2.47%	10392.37	Accumulation
DJIA	+103.78	+1.25%	8403.80	Recovery
Nasdaq	+20.71	+1.20%	1751.79	Accumulation
SP 500	+13.77	+1.54%	906.83	Recovery
Russell 2000	+2.35	+0.48%	492.21	Recovery
NYSE	+93.50	+1.61%	5917.06	Recovery

Source: Telechart

Short Term market outlook:

Bias: Scans showing a neutral bias

Energy: moderate to weak

 Primary Trend: Remains down to sideways

Sector	Phase
Consumer Staples	Recovery
Healthcare	Recovery
Technology	Accumulation
Utilities	Recovery
Energy	Recovery
Financials	Recovery
Industrials	Recovery
Materials	Recovery
Consumer Discretionary	Recovery

Source: Telechart