Archive for July, 2007|Monthly archive page

Bull’s Litmus Test

Traders,

Demands a rhetoric of fear to be
The litmus test for viable heirs
–Propagandhi “War Is Peace”

Market Bias:

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

CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Heavy selling forces the Bull out of its groove.

Our price and volume analysis gives us the Red Flag warning.

This is not an environment to test your account with new breakout buys.

On the downside, the S&P 500’s 200-day SMA is the next support level.

Indication of a reversal could come with a high volume turnaround at the 200 SMA, as it has in the past.

But never count on the market to do anything you expect.

What we love about sell-offs is their tendency to serve as a litmus test for weeding out strong sectors from weak.

What holds up well will likely be the new areas of leadership “if” the Bull swings back.

Techs issues are holding up well. This could be the new area of leadership for the second half of the year.

Technically speaking:

The Dow Industrial Average

($INDU), -4.2%, crashes and closes below its 50-day SMA.

The S&P 500

($SPX), -4.9%, also crashes and closes below its 50-day SMA.

Nasdaq

($COMPQ), -4.7%, also crashes and closes below its 50-day SMA.

Russell 2000

($RUT), -7.0%, crashes and closes below its 200-day SMA.

Volume indications flash a bearish red with all the major indexes posting multiple distributions days over the past two weeks.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) bounces after hitting a low.

The Gold & Silver Miners Index ($XAU) sells off sharply for the week, though remains above its major moving averages.

The Consumer Index ($CMR) closes just below its 200-day SMA.

The Cyclical Index ($CYC) sells off below its 50-day SMA.

The Technology Index ($DJUSTC) closes on its 50-day SMA.

The Semiconductor ($SOX) also closes on its 50-day SMA.

The Software Index ($GSO) cosolidates on its 50-day SMA.

Telecom Index ($XTC) sells off and closes below its 50-day SMA.

The Banking Index ($BKX) sells off to last year’s low, well below its major SMA’s.

The Broker Dealer Index ($XBD) also sells off to well below its major SMA’s.

The Retail Index ($RLX) sells of to lows not seen since last year.

The Healthcare Index ($HCX) sells off below its 200-day SMA.

Biotechnology Index ($BKX) consolidates on its 200-day SMA, which is positoned below the 50-day SMA.

Pharmaceutical Index ($DRG) sells off to well below its 200-day SMA.

The REIT Index ($DJR) drops to a new low for the year, well below its major SMA’s.

The Transportation Index ($TRAN) sells off to below its 50-day SMA.

The Airline Index ($XAL) hits a new low for the year.

The Defense Index ($DFX) closes just below its 50-day SMA.

The Energy Index ($IXE) also closes just below its 50-day SMA.

What Was Important About Last Week

STOCKS:

Amgen (AMGN) reported Q2 (Jun) earnings of $1.12 per share, $0.05 better than the Reuters Estimates consensus of $1.07. Revenues rose 3.4% year/year to $3.73 bln vs the $3.7 bln consensus.

Apple (AAPL) reported Q3 (Jun) earnings of $0.92 per share, $0.20 better than the Reuters Estimates consensus of $0.72. Revenues rose 23.8% year/year to $5.41 bln vs the $5.29 bln consensus.

Qualcomm (QCOM) reported Q3 (Jun) earnings of $0.55 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.51.

Amazon.com (AMZN) reported Q2 (Jun) earnings of $0.19 per share, $0.03 better than the Reuters Estimates consensus of $0.16.

Texas Instruments (TXN) Co reported Q2 (Jun) earnings of $0.42 per share, in line with the Reuters Estimates consensus of $0.42.

ECONOMY:

The first estimate for Q2 GDP growth is 3.4% at an annual rate, slightly more than the consensus expected and the strongest since early 2006.

New single-family home sales declined 6.6% in June to an annual rate of 834,000. The consensus expected an annual rate of 923,000. New home sales were revised down for April and May.

The median price of new homes sold was $237,900 in June, down 2.2% versus a year ago. The average price of new homes sold rose to $316,200, up 3.7% versus last year.

New orders for durable goods rose 1.4% in June versus a consensus expected 1.9%. New orders excluding transportation declined 0.5% versus a consensus expected gain of 0.2%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Eagle Materials Inc. (EXP), Tyson Foods (TSN)
  • TUESDAY: Anglogold Ashanti Limited (AU), Buffalo Wild Wings, Inc. (BWLD), Cephalon, Inc. (CEPH), Marathon Oil Corporation (MRO), Valero Energy Corp. (VLO)
  • WEDNESDAY: Agnico-Eagle Mines Limited (AEM), Applebee’s International (APPB), Barrick Gold (ABX), Boyd Gaming (BYD), Chicago Bridge & Iron (CBI), Kraft Foods (KFT), LoJack (LOJN), Wyndham Worldwide (WYN)
  • THURSDAY: Activision (ATVI), MGM MIRAGE (MGM)
  • FRIDAY: Procter & Gamble Company (PG), Tenaris, S A (TS)

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Personal Income, Personal Spending, Core PCE Inflation, Employment Cost Index, Chicago PMI, Construction Spending, Consumer Confidence
  • WEDNESDAY: ISM Index, Pending Home Sales, Crude Inventories, Auto Sales, Truck Sales
  • THURSDAY: Initial Claims, Factory Orders
  • FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, ISM Services

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The discipline of writing something down is the first step toward making it happen.” – Lee Iacocca

CANSLIM SETUPS