Follow the leader

Traders,

Atom secrets, secret leaflet

Have the boys found the leak yet?

The molehill sets the wheel in motion

His downfall picks up locomotion

The Clash, The Leader

Our current position:

BUYER’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:

A vote of confidence for chairman Bernanke?

The broader market made an encouraging move for the bulls.

With the Dow Industrial Average popping out of a year-long base and the market appearing to have heard what it wanted from our new fed boss, there’s much to be bullish about.

Accumulation of buyers ratcheted on the major indexes proves there is serious commitment, but heavy selling punctuating the move is a concern.

New highs were made in Biotech, Broker Dealers, Defense, REITs and Transportation.

The Technology sector was sluggish, and will be a major concern if it fails to find traction and head higher from the support levels it continues to rub on.

Heavy distribution from AAPL and GOOG over the past month seems to have put a damper on optimism.

Despite this, there is no evident weakness from action in the sectors.

The Semiconductor and Computer Hardware sectors are cocked in bullish cup-and-handles, and the Disk Drives remain in a solid trend.

The overall market looks good, but vulnerable if tech won’t follow the Dow.

If the market were to turn trend-down it would need a leader.

The only real weakness qualifying right now is Homebuilders, which needs to consolidate or rally at these levels before becoming more of a concern with a continued slide.

Now more than ever is the time to follow the leaders.

Technically speaking:

The Dow Industrial Average
($INDU), +1.80%, broke out of a year-long base. Bulls would prefer to see heavier volume on the move.

The S&P 500
($SPX), +1.60%, put in a nice rally and is above all its major moving averages.

Nasdaq
($COMPQ), +0.91%, was sluggish, though closed above all its major moving averages.

Russell 2000
($RUT), +1.93%, put in an attractive move as it remains trend up above all its major moving averages.

Volume indications gave us two accumulation days followed by one distribution day on the Dow and Nasdaq 100. The scale is tipped to the bulls, but we wanted to see declines on light volume.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) was little changed as it trades in a three-week consolidation.

The U.S. Dollar Index
($USD) edged higher, and is trading above its major moving averages, though is no-bias territory with a lack of trend in place.

The Gold Miners Index
($XAU) declined to its 50-day average which now serves as support. The index remains in a technical uptrend.

The Dow Jones AIG Commodity Index
($DJAIG) declined with conviction to below its 200-day moving average. The index found support at a multi-year channel line.

Consumer Staples
($CMR) broke out to a new high.

Consumer Cyclicals
($CYC) rallied for the week, though is showing weakness vs. the staples.

Technology
($DJUSTC) edged past last week’s high, though was a relative strength loser.

The Semiconductor Index
($SOX) were sluggish, though are set in a two-year cup-and-handle position.

Banks
($BKX) put in a nice move higher and is now above its major moving averages, despite struggling for the past few months.

Broker Dealers
($XBD) hit a new high.

Retail
($RLX) rallied to close above its major moving averages.

Healthcare
($HCX) shot higher and is just shy of a new high.

Biotech
($BTK) hit a new high.

REIT’s
($DJR) hit a new high.

Homebuilders
($DJUSHB) continues to struggle below its major moving averages.

Transportation
($TRAN) hit a new high.

Airlines
($XAL) pressed higher along the upper line of its triangle.

Defense
($DFX) hit a new high.

Energy
($IXE) is attempting to rebound as it trades below its 50-dy average and above its 200-day average.

Oil Services
($OSX)

Utilities
($UTY) spiked below its multi-year trend-line before reversing to close with a decent gain on the session.

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

  1. GOLD
  2. DRUG DELIVERY
  3. INVESTMNT BROKERAGE-NA
  4. PRINTED CIRCUIT BOARDS
  5. INVESTMNT BROKERAGE-RE
  6. NETWORKING COMMUN DVCS
  7. SEMICONDUCTOR EQUIP MA
  8. FARM CONSTRUCTION MACH
  9. ASSET MANAGEMENT
  10. RAILROADS

What Was Important About Last Week

STOCKS:

  • Dell Computer (DELL) topped Q4 estimates but issued disappointing guidance
  • Hewlett-Packard (HPQ), Deere (DE), and Target (TGT) posted good reports.

ECONOMY:

  • January retail sales surged 2.3%.
  • January housing starts jumped 14.5%.
  • January PPI was reported up 0.3%.
  • Core PPI was up 0.4%. This was the largest gain in a year.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: PrePaid Legal (PPD), Baidu (BIDU), Clear Channel Communications (CCU), Federated Department Stores Inc. (FD), Fossil, Inc. (FOSL), Home Depot Inc (HD), LAMAR ADVERTISING Co, LoJack (LOJN), Option Care, Inc. (OPTN), Wal-Mart Stores Inc. (WMT),.
  • WEDNESDAY: Barrick Gold (ABX), Cell Genesys (CEGE), Ctrip.com International, Ltd. (CTRP), Dollar Tree Stores (DLTR), Express Scripts, Inc. (ESRX), Garmin Ltd. (GRMN), Harrah’s Entertainment (HET), OfficeMax (OMX), Taser International, Inc. (TASR).
  • THURSDAY: BioMarin Pharmaceutical Inc. (BMRN), Gap Inc. (GPS), Kohl’s (KSS), Kos Pharmaceuticals (KOSP), Limited Brands (LTD), Marvell Semiconductor, Inc (MRVL), Midway Games (MDY), Netease.com Inc (NTES), Pan American Silver (PAAS), Patterson Dental (PDCO), Quanex (NX), Safeway, Inc. (SWY), Toll Brothers (TOL), Tuesday Morning Corporation (TUES), WebMD Health (WBMD),
  • FRIDAY: Westwood One (WON).

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Leading Indicators, FOMC Minutes.
  • WEDNESDAY: Core CPI, CPI, Crude Inventories
  • THURSDAY: Initial Claims, Help-Wanted Index
  • FRIDAY: Durable Orders

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Discipline is not a nasty word. ” – Pat Riley

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