Archive for March, 2006|Monthly archive page
There must be some kind of message
Simple plot somehow impressive.
Anyone who can think of something
Come on now, just express it.
— Dandy Warhols, “Plan A”
- Where We Are
- What Was Important About Last Week
- What We Are Watching For This Week
- A Word On Discipline
Where We Are:
Taking a look at the broader market:
As the Dow Industrial Average and S&P 500 crept to new highs the market has the look of a bull.
Continued support of new highs from the Banking and Transportation indexes gives this market the feel of a bull.
We would be foolish to call this market anything but a bull – but with a Fed policy statement scheduled for Tuesday this picture is prone to change.
The general consensus is for the Fed to raise rates. However, the more important issue to be discerned is guidance on when rates will stop rising.
If the market is showing any warning signs of price action about to tumble it’s in the weakness of the Nasdaq 100.
The Nasdaq 100 is comprised of the 100 biggest tech names and is well off its yearly highs – and has been unable to establish any trend at all.
The market will eventually trend where technology stocks lead it.
As evidence of weakness in Technology, the Semiconductors have been trend-down for the majority of the year.
We are also seeing weakness in numbers of new highs from individual stocks.
On a positive note, we are not seeing an increase in the numbers of new lows made – and what doesn’t sell-off will move higher.
For Growth Stock players there continues to be a lack of opportunity – but that is always subject to change.
Perhaps a healthy sell-off in the broader market will shake-out weakness and set us up for decent trades.
To maintain a bullish stance we want to see selling volume dry up in down moves.
We liken our strategy to that of a tiger in the jungle that patiently stalks its prey and refuses to pounce until we absolutely know we’re going to get it.
Right now we have our eyes and ears tuned in to how the market responds to the Fed.
The Dow Industrial Average
($INDU), 0.00%, sneaked to a new high before retreating to close neutral.
The S&P 500
($SPX), -0.33%, hit a new high.
($COMPQ), +0.27%, poked out into new high territory before selling off the same day on high volume.
($RUT), +1.04%, hit a new high and closed the week strong.
Volume indications tilted to the bears for the week with the S&P 500 scoring two distribution days.
Hi/Lo Ratio The number of new highs dropped off the year’s low range after posting strong numbers a week ago. This indicator continues to show bearish divergence against the broad market indexes, though the number of new lows made is not increasing.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The 10-year Note Yield
($tnx) declined for the second week in a row as it retreats to the level of its year-long base breakout.
The U.S. Dollar Index
($USD) rallied to above its 50-day average though remains in a range for the year.
The Gold Miners Index
($XAU) rallied, though remains below its 50-day average.
The Dow Jones AIG Commodity Index
($DJAIG) rallied though is trading below its major averages as it comes off a multi-year trend line.
($CMR) hit a new high for the week.
($CYC) hit a new high for the week and has pulled back creating a cup-and-handle price pattern.
($DJUSTC) continues to trade on its 50-day average as it lags the broad market in setting new highs.
The Semiconductor Index
($SOX) came off last week’s low point though is trading below its 50-day average.
($BKX) hit a new high for the week.
($XBD) is consolidating above its major moving averages.
($RLX) hit a new high for the year as it approaches last year’s July high.
($HCX) came just shy of a new high as it forms a month-long cup-and-handle pattern.
($BTK) sold off to below its 50-day average.
($DJR) sold off after two consecutive weeks of rallying.
($DJUSHB) remains below its major moving averages as it struggle to come off lows made two weeks ago.
($TRAN) hit a new high for the year.
($XAL) put in a rally as it shot north of a multi-year downward trend line.
($DFX) hit a new high for the year.
($IXE) continues to trade sideways as it struggles with its 50-day average.
($UTY) continues to trade sideways in a for the year.
The top 10 industry groups from the 6 month RS screen are:
- DRUG DELIVERY
- PRINTED CIRCUIT BOARDS
- CATALOG MAIL ORDER HOU
- DIAGNOSTIC SUBSTANCES
- INVESTMNT BROKERAGE-NA
- GAMING ACTIVITIES
- INTERNET SERVICE PROVI
- NETWORKING COMMUN DVCS
What Was Important About Last Week
- Adobe Systems (ADBE) disappointed the Street with softer than expected guidance for the current period.
- Oracle (ORCL) beat EPS estimates by a penny, but license revenue was at low end of company view.
- KB Homes (KBH) registered Q1 (Feb) earnings of $2.02 per share, six cents above the Reuters Estimates consensus.
- Morgan Stanley (MS) blew by the Q1 consensus EPS estimate.
- Nike (NKE) reported Q3 (Feb) earnings of $1.24 per share beating estimates by $0.14.
- Shuffle Master (SHFL) checked in two cents ahead of the Reuters Estimates consensus with an EPS of $0.23.
- Google (GOOG) will replace Burlington Resources (BR) in the S&P 500 after the close of trading on Friday, March 31.
- 3Com Corp (COMS) reported Q3 (Feb) loss of $0.04 per share, excluding $0.04 in non-recurring charges, three cents better than the Reuters Estimates consensus of ($0.07).
- Palm Inc (PALM) beat analysts’ expectations by two cents with Q3 (Feb) earnings of $0.19 per share, excluding non-recurring items.
- Existing home sales unexpectedly rose 5.2% in February to 6.91 million units at an annual rate. This was significantly higher than consensus forecasts of 6.50 million. Existing home sales are down 0.3% in the past 12 months.
- New single-family home sales fell a whopping 10.5% in February, while January was revised to show a 5.3% decline instead of the originally reported 5.0% drop. New home sales are down 13.4% in the past 12 months.
- The producer price index for finished goods (PPI) fell 1.4% in February after a 0.2% gain in January. Finished good prices are up 3.7% from a year ago. Excluding food and energy, the “core” PPI increased 0.3% following a 0.4% gain in January. The “core” PPI is up 3.1% at an annual rate in the last three months and 1.7% in the past year.
- New orders for durable goods increased by a greater-than-expected 2.6% in February. Durable goods orders are up 8.1% in the past year.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Walgreen (WAG).
- TUESDAY: Lennar Corporation (LEN), Paychex (PAYX), Red Hat, Inc. (RHAT), Tiffany & Co. (TIF).
- WEDNESDAY: Ruby Tuesday (RI).
- THURSDAY: Accenture (CAN), Best Buy Co., Inc. (BBY), CarMax, Inc (KMX), Cognos (COGN).
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: none
- TUESDAY: Consumer Confidence, FOMC policy statement,
- WEDNESDAY: Crude Inventories
- THURSDAY: Chain Deflator-Final, GDP-Final, Initial Claims, Help-Wanted Index
- FRIDAY: Personal Income, Mich Sentiment-Rev., Chicago PMI, Factory Orders
- The Growth Stock Landscape
- What We Like – What We Have
- This Week’s Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS
This Week’s Word On Discipline:
“If you will discipline yourself to make your mind self-sufficient you will thereby be least vulnerable to injury from the outside.” – Plato