Archive for December, 2006|Monthly archive page

Familiar Tunes

Traders,

fate comes a-knockin‘, doors start lockin
your old time connection, change your direction
ain’t gonna change it, can’t rearrange it
can’t stand the pain when it’s all the same to you, my friend
Aerosmith “Same Old Song and Dance”

Market Bias:

BUYERS’ 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:

Stocks ending their last trading week of the year sing familiar tunes with little change in trend from the last few months.

The Dow Industrials topped 12,500 for the first time to punctuate a classic year-end rally.

Like everyone else, we’re looking for the action to top-out somewhere. We won’t dare declare where. But when we see the signs we’ll act accordingly.

The New Year could just as easily attract a new crop of buyers as it could sellers.

The Dow rally that began in 2002 is the fourth longest since 1900. But of the 20 or so rallies occurring the last 100 years it is below average in magnitude.

This market favors big-caps as the Dow and S&P 500 attracts higher bids than their Nasdaq and Russell 2K counterparts.

Consumer stocks hit new highs as Cyclicals hesitate to break out of year long bases.

We see two key areas of concern as we head into the new year:

Transportation stocks crumbled from a bullish cup-and-handle pattern in an undeniable show of failure that could take the juice away from the bulls. But Airlines have held up well, and remain poised to break out of a lower base.

Semiconductor stocks struggle amidst tangled moving averages in a show of indecisiveness.

And standing out as bright spots for bulls:

Telecoms hit new highs.

Banking stocks hit a new high before pulling back sharply.

Other trend-forming action comes from:

Gold Mining stocks are showing bullish traits counter to the struggling Dollar Index.

Energy stocks were little changed for the week, and remain in bullish form as they test the support of a recent key breakout.

Technically speaking:

The Dow Industrial Average

($INDU), +1%, inched above the psychological 12,500 mark, an all-time high.

The S&P 500

($SPX), +0.5%, is trend up, well above its major moving averages.

Nasdaq

($COMPQ), +0.6%, is struggling relative to the broader market as it trades just above its 50-day moving average.

Russell 2000

($RUT), +0.9%, consolidates above its 50-day moving average.

Volume indications remain favorable to buyers despite modest distribution in the last week of the trading year.

Key chart action for the week:

Charts courtesy of Stockcharts.com

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

What Was Important About Last Week

STOCKS:

There were no significant earnings releases for the week.

ECONOMY:

  • The Commerce Department reported November new-home sales climbed 3.4%, rising for the third time in six months and beating economists’ expectations for a 1.6% increase.
  • Existing home sales increased 0.6% in November to an annual rate of 6.28 million, better than the 0.8% drop expected by the consensus.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: none
  • WEDNESDAY: Sonic Corp. (SONC)
  • THURSDAY: Constellation Brands, Inc. (STZ), Monsanto Company (MON)
  • FRIDAY: Global Payments Inc. (GPN)

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: ISM Index, FOMC Minutes
  • WEDNESDAY: Construction Spending, Auto Sales, Truck Sales
  • THURSDAY: Factory Orders, ISM Services,
  • FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The first and the best victory is to conquer self.” – Plato

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