Who Woulda Thunk It?

Traders,

we’ve all got wheels to take ourselves away

we’ve got telephones to say what we can’t say

we’ve all got higher and higher every day

come on wheels take this boy away

we’re not afraid to ride

we’re not afraid to die

The Flying Burrito Brothers, Wheels

Our current position:

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 can now be found on our home site:

Where We Are:

Taking a look at the overall markets:

As the market ticked higher, top dog Transportation issues provided leadership – Who woulda thunk it?

While Transportation stocks are not making the grade with exceptional earnings growth, they are considered a key component in broad market weighting, and are significant to Dow Theory practitioners. This is a major plus for the market.

The S&P 500 and the Nasdaq hit levels not seen for more than four years

Continued leadership in Broker Dealers and Biotech has provided attractive buying opportunities for us.

Add in a follow through in Tech stocks in breaking out of a two-year base, and continued strength in Banking – we’re looking good.

So what are going to be afraid of now?

The market has a habit of falling a part just when everything is looking sweet.

We would not be the least bit surprised to see some shake out occur – but just when and where is not for us to predict – or anything we pretend to control.

What we can control is our stop losses and buy entries.

Is the market rallying because it’s the end of the year? – sure why not.

Is technology going to usher us in to an unprecedented era of economic expansion? – maybe or maybe not they say.

Is the American consumer going to continue increasing debt while buying like there’s no tomorrow? – the retailers say so.

We have no answers to these questions because we know smarter folks than ourselves disagree here – our opinions are just opinions.

What we’re concerned with is making money when we’re right – and putting a limit on when we’re wrong.

We won’t be right all the time, but adopting a bias due to some opinion that sounds appealing is a sure fire way for us to start arguing with prices when we’re wrong.

When we argue with the market we get stubborn and insist things will turn around to our liking. That’s when small losses turn into big losses – and we end up losers.

We don’t care what the experts say, we don’t even care what the market will do.

We don’t think, we trade.

Technically speaking:

The Dow Industrial Average ($INDU), +0.75%, continued to make progress above its major moving averages and is around 200 points from the year’s high.

The S&P 500 ($SPX), +1.10%, cruised to a four-year high.

Nasdaq ($COMPQ), +1.12%, also cruised to a four-year high as it pierced a triple top.

Russell 2000 ($RUT), +0.83%, is above its major moving averages, though around 10 points from the year’s high.

Volume indications over the past three weeks continue to portray an institutionally supported long bias for the market.

New Highs – New Lows have been trend up over the past three weeks – though the technical picture continues to show a line on the cusp of breaking a bearish channel. If the market continues to move higher we expect to see the channel broken – if not the indicator will in retrospect be dubbed a leading indicator of a market not strong enough to sustain recent highs.

Investors Intelligence for the fourth week in a row reported an increase in bulls over bears with the ratio now at 2.32.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 20+-year Note Holdr (TLT) came higher off recent lows, though remains under its major moving averages.

The U.S. Dollar Index ($USD) made another high since breaking out of a two-year base, though ended the week little changed.

The Gold Miners Index ($XAU) broke out of a two-year base.

The Dow Jones AIG Commodity Index ($DJAIG) posted a loss on the week and is parked under between its major moving averages with the 50-day above the 200-day.

Consumer Staples ($CMR) failed to follow through on its breakout from a year long base. Consumer Cyclicals ($CYC) cruised further above its major moving averages though is just shy of August’s high and further short of the year’s high.

Technology ($DJUSTC) continued to make progress since breaking out of a two-year base.

The Semiconductor Index ($SOX) is now solidly above its major moving averages, though will face a significant technical level at between the year’s high and the 500 level where a bearish trend line is in place.

Banks ($BKX) gave a modest follow through to last week’s strong rally.

Broker Dealers ($XBD) edged to another new high.

Retail ($RLX) made a modest gain on the week, and remains roughly half way between recent lows and the year’s high.

Internet ($IIX) poked out to a new high.

Healthcare ($HCX) poked above its 50-day average, though is still a relative strength loser from the past three months.

Biotech ($BTK) moved to another new high.

REIT’s ($DJR) posted a gain on the week and is roughly half way between recent lows and the year’s high.

Homebuilders ($DJUSHB) regained ground lost a week ago as it attempts to make a stand at its major moving averages.

Transportation ($TRAN) blazed to another new high.

Airlines ($XAL) took out last week’s high after falling back for a slight loss on the week.

Defense ($DFX) continues to consolidate – in what some may argue to be a bearish rounding top.

Energy ($IXE) gained for the week, and is sandwiched between its major moving averages with the 50-day above the 200-day.

Utilities ($UTY) continue to consolidate in what is now a five-week range.

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

What Was Important About Last Week

STOCKS:

  • The world’s biggest retailer Wal-Mart (WMT) said profits were up 3.8% from a year ago.
  • The No. 2 U.S. home-improvement retailer, Lowes (LOW, said
    it earned $649 million in the quarter, up 26% from a year ago.
  • Conglomerate Tyco International (TYC) reported profits more than doubled from a year ago.
  • Homebuilder D.R. Horton (DHI) said earnings were up 61% from a year ago.
  • Hewlett-Packard said it earned said third-quarter profits were down 62% from a year ago – excluding a one-time restructuring charge, sales were up 7%.
  • Walt Disney (DIS) said earnings were down 27% from a year ago, due largely to losses in its home-video business.
  • Vivendi reported a 35% drop in quarterly earnings – due largely to one-time charges – though beat Wall Street forecasts.
  • Gap (GPS) said earnings were down 20% from a year ago.

ECONOMY:

  • The “core” producer price index fell for its biggest decline since April 2003. A decline in motor vehicle prices weighed in heavily.
  • Retail sales slipped in October due to auto sales, other sectors were healthier.
  • The consumer price index rose 0.2% in October month – higher than economists expected.
  • New-home construction in the U.S. fell 5.6% last in October – the biggest one-month drop since March.
  • Building permits fell 6.7% for the sharpest decline in more than six years. The number is a leading indicator of construction activity.
  • Industrial production surged 0.9% in October for its biggest gain in 17 months.

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Albertson’s (ABS), Deere & Company (DE), Michaels Stores (MIK).
  • WEDNESDAY: none
  • THURSDAY: none
  • FRIDAY: none

On the economic front we have potential market movers with::

  • MONDAY: Leading Indicators
  • TUESDAY: FOMC Minutes
  • WEDNESDAY: Initial Claims, Mich Sentiment-Rev., Help-Wanted Index, Crude Inventories
  • THURSDAY: none
  • FRIDAY: none

The Following Sections Are Now On Our Home Site:

This Week’s Word On Discipline:

“ Beware of endeavoring to become a great man in a hurry. One such attempt in ten thousand may succeed. These are fearful odds ” — Benjamin Disraeli

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