Archive for May, 2006|Monthly archive page

Down pogo, up pogo

Traders,

Oh I like to spread you out
Touching whoevers behind
Jump pogo…..bounce pogo
Down pogo, up pogo
System of a Down, “Bounce”

Our current position:

SELLER’S EDGE INTACT

In this week’s edition you will find:

  • Where We Are
  • What Was Important About Last Week
  • What We Are Watching For This Week
  • A Word On Discipline

The following sections are on our home site:

Where We Are:

Taking a look at the broader market:

There’s no reason to complicate stock market speculation.

The purpose of this blog is not show you how smart we are, nor lay down propaganda – but to carefully and thoroughly gather evidence for lucid decisions.

It has been said by many wise traders before us that successful speculation is about observing, not thinking.

A chart of the S&P 500 over the past several years shows significant corrections occur every six months or so.

After two weeks of “overdue” selling, the S&P 500 has reversed on a trend-line established in August of 2004.

From a technical standpoint, the recent low is crucial. Should the market hold above it, there’s no hard evidence to suggest we’re in a new phase down.

Should the market break south of the trend-line, we’ll deem the market as experiencing more than just a normal correction.

We’re waving the Red Seller’s Bias Flag because the bellwether Technology sector remains technically vulnerable.

The major moving averages (the 50 and 200 dailies) that once served as support are now marking resistance.

Heavy selling volume from institutional grade accounts has left an “air of the bear” across nearly every sector.

News wise, second- quarter earnings season is two months away, and the next Fed meeting is about five weeks away.

Due to lack of stimulus, we might not see a whole lot of action in the coming weeks.

Technically speaking:

The Dow Industrial Average
($INDU), +1.2 %, regained its 50-day moving average after two weeks of heavy selling.

The S&P 500
($SPX), +1.0 %, dipped below its 200-day moving average before posting a gain on the week as it continues to trade below its 50-day average. The index is trying to reverse on a key upward trend line.

Nasdaq
($COMPQ), 0.8%, rallied after two losing weeks, though is trading well below its major moving averages. The index is trying to reverse on a key upward trend line.

Russell 2000
($RUT), 1.0%, closed below its 50-day and above its 200-day averages.

Volume indications are dominated by heavy bearish distribution over the past three weeks..

Hi/Lo Ratio is off yearly lows, though remains in bearish territory.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) is consolidating above its 50-day average as it maintains a solid uptrend.

The U.S. Dollar Index
($USD) has been ticking upward for the past two weeks after a month of heavy selling.

The Gold Miners Index
($XAU) rallied after two straight weeks of loses. The index is trading below its 50-day average and above its 200-day average.

The Dow Jones AIG Commodity Index
($DJAIG) is consolidating above its major moving averages.

Consumer Staples
($CMR) regained its 50-day average after tow weeks of loses.

Consumer Cyclicals
($CYC) also regained its 50-day average after two weeks of losses.

Technology
($DJUSTC) continued its role as a relative strength loser while rallying well below its major moving averages.

The Semiconductor Index
($SOX) continued its slide south to post its third weekly loss.

Banks
($BKX) consolidated on its 50-day average as it holds onto an uptrend.

Broker Dealers
($XBD) reversed above its 200-day average as it trades below its 50-day average.

Retail
($RLX) posted its third straight weekly loss as it found resistance at its 200-day average.

Healthcare
($HCX) rebounded after four weeks of losses, though remains below its major moving averages.

Biotech
($BTK) also rebounded after four weeks of losses, though remains below its major moving averages.

REIT’s
($DJR) reversed after undercutting its 200-day average, as it now looks to the 50-day average as resistance.

Homebuilders
($DJUSHB) closed the week little changed as it consolidates below its major moving averages.

Transportation
($TRAN) consolidated just below its 50-day average as it holds on to an uptrend.

Airlines
($XAL) consolidated just below its 2000 day average after hitting anew low for the year.

Defense
($DFX) was little changed for the week as it trades below its 200-day average and above its 50-day average.

Energy
($IXE) closed little changed for the week as it trades above its 200-day average and below its 50-day average.

Utilities
($UTY) posted a modest gain to close between its major moving averages as it continues to consolidate for the year.

The top 10 industry groups from the 6 month RS screen are:

  1. GOLD
  2. INTERNET SERVICE PROVI
  3. STEEL IRON
  4. INDUSTRIAL METALS MINE
  5. MACHINE TOOLS ACCSORIE
  6. CATALOG MAIL ORDER HOU
  7. ADVERTISING AGENCIES
  8. GENERAL CONTRACTORS
  9. PRINTED CIRCUIT BOARDS
  10. BEVERAGES-SOFT DRINKS

What Was Important About Last Week

STOCKS:

  • Computer Sciences (CSC) reported Q4 (Mar) earnings of $1.16 per share, $0.03 better than the Reuters Estimates consensus. Total revenues were unchanged from the year-ago period at $3.88 bln. Co issued downside guidance for Q1, sees EPS in the mid $0.60 range (consensus $0.68) and revenues of $3.4-3.5 bln (consensus $3.72 bln).
  • Chico’s FAS(CHS) reported Q1 (Apr) earnings of $0.29 per share, in line with the Reuters Estimates consensus. Total revenues rose 94.0% year/year to $392 mln (consensus $399.6 mln).
  • Nordson Corp(NDSN) reported Q2 EPS of $0.64. Total revenues rose 12% year/year to a record $231.8 mln vs. $229.27 mln Reuters Estimates consensus.
  • Network Appliance (NTAP) reported Q4 (Apr) earnings of $0.23 per share, in line with the Reuters Estimates consensus of $0.23. Revenues rose 32.4% year/year to $598 mln vs. the $585.4 mln consensus.
  • TiVo (TIVO) reported a Q1 (Apr) loss of $0.13 per share, $0.09 better than the Reuters Estimates consensus of ($0.22). Revenues rose 450% year/year to $55.1 mln vs. the $50.5 mln consensus.
  • Blue Coat Systems (BCSI) reported Q4 (Apr) earnings of $0.07 per share, two cents worse than the Reuters Estimates consensus of $0.09; revenues rose 26.4% year/year to $35.9 mln vs the $35.2 mln consensus.
  • Medtronic (MDT) reported Q4 (Apr) earnings of $0.62 per share, in line with the Reuters Estimates consensus. Revenues rose 10.8% year/year to $3.08 bln vs. the $3.07 bln consensus.

ECONOMY:

  • New single-family home sales unexpectedly jumped 4.9% in April to a 1.198 million unit level, the second consecutive monthly increase. While March new home sales were downwardly revised to 1.142 million units, they were still 12% higher than in February.
  • Existing home sales fell 2.0% in April to 6.76 million units at an annual rate. This was lower than consensus forecasts of 6.79 million. Existing home sales are down 5.7% in the past 12 months.
  • The median price of a new home rose to a non-seasonally adjusted $238,500 in April, up 0.9% in the past year.
  • The median sales price of an existing home was $223,000 in April, 4.2% higher than a year ago. This is the slowest YOY gain in the median price of an existing home in over five years.
  • New orders for durable goods fell by a more-than-expected 4.8% in April. But this decline follows a 6.6% increase in March and a 3.6% gain in February. Durable goods new orders are up a strong 11.3% in the past year.
  • Transportation orders slid 12.7% in April. Excluding transportation, new orders fell 1.1% after a 3.5% gain in March, and are up 10.3% in the past year. Excluding defense, orders declined 3.8% in April versus a 6.3% surge in March.
  • Shipments of durable goods fell 0.9% last month. Shipments of non-defense capital goods, ex aircraft (a proxy for capital investment) rose 0.9% in April, and are an annualized 10.5% higher than the Q1 average.
  • Personal income increased 0.5% in April, after an identical increase in March. Personal income is up 5.4% in the past year. Wages and salaries jumped 0.9% and are up annualized 7.7% in the last three months and 5.3% in the past year.
  • Personal consumption increased 0.6% last month after a 0.5% gain in March. Consumption is up 6.2% in the past year.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Albertson’s (ABS)
  • WEDNESDAY: Dress Barn (DRBN), Tiffany & Co. (TIF)
  • THURSDAY: : Ciena Corporation (CIEN), Dollar General Corp. (DG), H.J. Heinz Company (HNZ), Wind River Systems (WIND).
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Consumer Confidence
  • WEDNESDAY: Chicago PMI, Crude Inventories, FOMC Minutes
  • THURSDAY: Auto Sales, Truck Sales, Initial Claims, Productivity-Rev., Construction Spending, ISM Index
  • FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate, Factory Orders

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Practice yourself, for heaven’s sake in little things, and then proceed to greater.” – Epictetus

Advertisements