Archive for July, 2006|Monthly archive page

Stumbling Bear or Bull?

Traders,

We’ll stumble through the yard
We’ll stumble through the yard
We’ll stumble through the A-P-T
We’ll stumble through the yard
REM “Stumble”

Our current position:

SELLERS’ 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:

Everything is all a matter of perspective,

With the major indexes a mixed bag for the week, Bulls can look at recent action as stumbling before trending higher, and Bears could say we’re stumbling before heading lower.

Comments from the Fed, as well as earnings reports from key companies did little to suggest a dominant direction taking form.

The hard evidence of price and volume suggests down will be the path of least resistance.

With indexes trading below their major moving averages, and heavy selling soaking the charts red, our analysis is firm.

The S&P 500 point & figure chart illustrates a break below the 1220 area would be a significant mark. These charts are used to filter the noise by allowing a trader to focus on the most significant moves, and are a good tool for volatile markets.

In looking at the sectors:

Technology and Homebuilders continue to lead to the downside.

Consumer Index ($CMR) continues to hold up in a year-long trading range, but the Cyclical Index ($CYC) cruised to another new low.

Transportation continues to sputter as it tested below its 200-day moving average.

Drugs are poised to break north of a year long base.

On the commodities front, the Gold and Silver Index ($XAU) and Oil Services Index ($OSX) have formed bearish head-and-shoulder patterns. These patterns have historical tendencies to mark tops, but they are also known to fail.

Technically speaking:

The Dow Industrial Average
($INDU), +1.20%, hit a new low for the year as it traded below its 50-day average for the week.

The S&P 500
($SPX), +0.33%, tested the resistance of its 50-day moving average, though was little changed for the week.

Nasdaq
($COMPQ), -0.83%, hit a new low for the year as its trend down remains intact.

Russell 2000
($RUT), -1.37%, tested the resistance of its 50-day moving average, as its trend remains down.

Volume indications continue to be bearish.

Key chart action for the week:

Charts courtesy of Stockcharts.com

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

  1. MOVIE PRODUCTION THEAT
  2. FOOD – MAJOR DIVERSIFI
  3. BEVERAGES-SOFT DRINKS
  4. DRUG RELATED PRODUCTS
  5. SPECIALTY RETAIL OTHER
  6. MACHINE TOOLS ACCSORIE
  7. FOOD WHOLESALE
  8. LODGING
  9. TOYS GAMES
  10. AUTO PARTS

What Was Important About Last Week

STOCKS:

  • Intel Corp (INTC) reported Q2 (Jun) earnings of $0.15 per share, two cents better than the Reuters Estimates consensus of $0.13. Total revenues fell 13.2% year/year to $8.01 bln vs. the $8.22 bln consensus.
  • Qualcomm(QCOM) reported Q3 (Jun) earnings of $0.42 per share, excluding option expense, in line with the Reuters Estimates consensus. Total revenues rose 43.6% year/year to $1.95 bln vs. the $1.95 bln consensus.
  • Motorola (MOT) reported Q2 (Jun) earnings from continuing ops of $0.31 per share, two cents better than the Reuters Estimates consensus of $0.29. Revenues rose 29.4% year/year to $10.88 bln vs. the $10.13 bln consensus.
  • Apple Computer (AAPL) reported Q3 (Jun) earnings of $0.54 per share, $0.10 better than the Reuters Estimates consensus. Revenues rose 24.1% year/year to $4.37 bln vs. the $4.39 bln consensus. AAPL reports iPod shipments of 8.1 mln, which was below the 8.23 mln street expectation, but reported Mac shipments of 1.33 mln, above the 1.2 mln street expectation. Co issued downside guidance for Q4, sees EPS of $0.46-0.48 (consensus $0.51) on revenues of $4.5-4.6 bln (consensus $4.9 bln).
  • eBay (EBAY)reported Q2 (Jun) earnings of $0.24 per share, in line with the Reuters Estimates consensus. Revenues rose 29.9% year/year to $1.41 bln vs. the $1.41 bln consensus. Co issued downside guidance for Q3, sees non-GAAP EPS of $0.22-0.23 (consensus $0.24) on revenues of $1.355-1.430 bln (consensus $1.44 bln).
  • International Business Machines (IBM) reported Q2 (Jun) earnings of $1.30 per share, a penny better than the Reuters Estimates consensus. Total revenues fell 1.7% year/year to $21.89 bln vs. the $21.93 bln consensus.
  • Yahoo! (YHOO) reported Q2 (Jun) GAAP earnings of $0.11 per share, in line with the Reuters Estimates consensus. Revenues fell 28.7% year/year to $1.12 bln vs. the $1.14 bln consensus.

ECONOMY:

  • Ben Bernanke, as he delivered part two of his semiannual report on monetary policy to the House Financial Services Committee. The Fed is still in the “data dependency” mode, though suggested past tightening is beginning to slow the economy.
  • Housing starts fell 5.3% in June to 1.850 million units at an annual rate. Single family starts declined 6.5%, while multi-unit starts rose 0.3%.
  • New building permits declined 4.3% in June to an annualized 1.862 million units – the lowest level in over three years.
  • Housing completions jumped 6.4% to 2.017 million units in June.
  • The Consumer Price Index (CPI) rose 0.2% in June after a 0.4% increase in May. The CPI has increased 5.1% at an annualized rate in the past three months and 4.3% in the past year.
  • Energy prices fell 0.9% in June but are up 23.3% in the past year. Food and beverage prices increased 0.3% last month. Excluding food and energy, the “core” CPI was up 0.3% in June – the fourth consecutive month that “core” inflation has increased at a 0.3% rate. The 12-month change in the “core” CPI was 2.6% in June – the fastest YOY gain since 2001.
  • The producer price index for finished goods (PPI) rose 0.5% in June after a 0.2% gain in May. Finished good prices are up 4.9% in the past year. Excluding food and energy, the “core” PPI increased 0.2% last month, while the YOY gain remained at 1.9%.
  • Intermediate goods prices increased 0.7%, while “core” intermediate prices jumped 0.8%. Crude prices fell 1.7% last month but “core” crude prices surged 1.7%. Pipeline price pressures remain elevated. In the past year, “core” intermediate prices have increased 7.2% and “core” crude prices have risen 33.7%.
  • Industrial production increased 0.8% in June after an upwardly revised 0.1% gain in May (originally -0.1%). Industrial production is up 7.4% at an annual rate in the past three months and 4.5% in the past year.
  • Manufacturing production also increased 0.8% in June, while manufacturing production excluding motor vehicles rose 0.5%. In the past year, manufacturing production is up 5.7%; or 5.9% when motor vehicle output is removed. Mining output rose 1.2% and utility output increased 0.7%.
  • Capacity utilization jumped to 82.4% in June, the highest in six years.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: American Express Company (AXP), Kraft Foods (KFT), Merck & Co., Inc. (MRK), Netflix (NFLX), Texas Instruments (TXN).
  • TUESDAY: 3M Company (MMM), Amazon.com, Inc. (AMZN), AT&T (T), Boyd Gaming (BYD), DuPont (DD), McDonalds Corporation (MCD), Panera Bread (PNRA), XTO Energy Inc. (XTO).
  • WEDNESDAY: Applebee’s International (APPB), General Motors Corp. (GM), P.F. Chang’s China Bistro, Inc. (PFCB), Phelps Dodge (PD), Pulte Homes Inc. (PHM), Taser International, Inc. (TASR), The Boeing Company (BA).
  • THURSDAY: Aetna Inc. (AET), Blockbuster Inc. (BBI), Bristol-Myers Squibb (BMY), ExxonMobil Corporation (XOM), Newmont Mining Corporation (NEM), Pixelworks (PXLW), Sony Corporation (SNE), XM Satellite Radio (XMSR).
  • FRIDAY: Chevron (CVX), Coventry Health Care, Inc (CVH), Waste Management (WMI).

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Consumer Confidence, Existing Home Sales
  • WEDNESDAY: Crude Inventories, Fed’s Beige Book
  • THURSDAY: Durable Orders, Initial Claims, Help-Wanted Index, New Home Sales
  • FRIDAY: Chain Deflator-Adv., Employment Cost Index, GDP-Adv., Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Self-discipline, as a virtue or an acquired asset, can be invaluable to anyone.”– Duke Ellington