Archive for March, 2006|Monthly archive page

Some kind of message

Traders,

There must be some kind of message

Simple plot somehow impressive.

Anyone who can think of something

Come on now, just express it.

Dandy Warhols, “Plan A”

Our current position:

BUYERS BEWARE

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:

As the Dow Industrial Average and S&P 500 crept to new highs the market has the look of a bull.

Continued support of new highs from the Banking and Transportation indexes gives this market the feel of a bull.

We would be foolish to call this market anything but a bull – but with a Fed policy statement scheduled for Tuesday this picture is prone to change.

The general consensus is for the Fed to raise rates. However, the more important issue to be discerned is guidance on when rates will stop rising.

If the market is showing any warning signs of price action about to tumble it’s in the weakness of the Nasdaq 100.

The Nasdaq 100 is comprised of the 100 biggest tech names and is well off its yearly highs – and has been unable to establish any trend at all.

The market will eventually trend where technology stocks lead it.

As evidence of weakness in Technology, the Semiconductors have been trend-down for the majority of the year.

We are also seeing weakness in numbers of new highs from individual stocks.

On a positive note, we are not seeing an increase in the numbers of new lows made – and what doesn’t sell-off will move higher.

For Growth Stock players there continues to be a lack of opportunity – but that is always subject to change.

Perhaps a healthy sell-off in the broader market will shake-out weakness and set us up for decent trades.

To maintain a bullish stance we want to see selling volume dry up in down moves.

We liken our strategy to that of a tiger in the jungle that patiently stalks its prey and refuses to pounce until we absolutely know we’re going to get it.

Right now we have our eyes and ears tuned in to how the market responds to the Fed.

Technically speaking:

The Dow Industrial Average
($INDU), 0.00%, sneaked to a new high before retreating to close neutral.

The S&P 500
($SPX), -0.33%, hit a new high.

Nasdaq
($COMPQ), +0.27%, poked out into new high territory before selling off the same day on high volume.

Russell 2000
($RUT), +1.04%, hit a new high and closed the week strong.

Volume indications tilted to the bears for the week with the S&P 500 scoring two distribution days.

Hi/Lo Ratio The number of new highs dropped off the year’s low range after posting strong numbers a week ago. This indicator continues to show bearish divergence against the broad market indexes, though the number of new lows made is not increasing.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) declined for the second week in a row as it retreats to the level of its year-long base breakout.

The U.S. Dollar Index
($USD) rallied to above its 50-day average though remains in a range for the year.

The Gold Miners Index
($XAU) rallied, though remains below its 50-day average.

The Dow Jones AIG Commodity Index
($DJAIG) rallied though is trading below its major averages as it comes off a multi-year trend line.

Consumer Staples
($CMR) hit a new high for the week.

Consumer Cyclicals
($CYC) hit a new high for the week and has pulled back creating a cup-and-handle price pattern.

Technology
($DJUSTC) continues to trade on its 50-day average as it lags the broad market in setting new highs.

The Semiconductor Index
($SOX) came off last week’s low point though is trading below its 50-day average.

Banks
($BKX) hit a new high for the week.

Broker Dealers
($XBD) is consolidating above its major moving averages.

Retail
($RLX) hit a new high for the year as it approaches last year’s July high.

Healthcare
($HCX) came just shy of a new high as it forms a month-long cup-and-handle pattern.

Biotech
($BTK) sold off to below its 50-day average.

REIT’s
($DJR) sold off after two consecutive weeks of rallying.

Homebuilders
($DJUSHB) remains below its major moving averages as it struggle to come off lows made two weeks ago.

Transportation
($TRAN) hit a new high for the year.

Airlines
($XAL) put in a rally as it shot north of a multi-year downward trend line.

Defense
($DFX) hit a new high for the year.

Energy
($IXE) continues to trade sideways as it struggles with its 50-day average.

Utilities
($UTY) continues to trade sideways in a for the year.

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

  1. DRUG DELIVERY
  2. GOLD
  3. SEMICONDUCTOR-INTGRTD
  4. PRINTED CIRCUIT BOARDS
  5. CATALOG MAIL ORDER HOU
  6. DIAGNOSTIC SUBSTANCES
  7. INVESTMNT BROKERAGE-NA
  8. GAMING ACTIVITIES
  9. INTERNET SERVICE PROVI
  10. NETWORKING COMMUN DVCS

What Was Important About Last Week

STOCKS:

  • Adobe Systems (ADBE) disappointed the Street with softer than expected guidance for the current period.
  • Oracle (ORCL) beat EPS estimates by a penny, but license revenue was at low end of company view.
  • KB Homes (KBH) registered Q1 (Feb) earnings of $2.02 per share, six cents above the Reuters Estimates consensus.
  • Morgan Stanley (MS) blew by the Q1 consensus EPS estimate.
  • Nike (NKE) reported Q3 (Feb) earnings of $1.24 per share beating estimates by $0.14.
  • Shuffle Master (SHFL) checked in two cents ahead of the Reuters Estimates consensus with an EPS of $0.23.
  • Google (GOOG) will replace Burlington Resources (BR) in the S&P 500 after the close of trading on Friday, March 31.
  • 3Com Corp (COMS) reported Q3 (Feb) loss of $0.04 per share, excluding $0.04 in non-recurring charges, three cents better than the Reuters Estimates consensus of ($0.07).
  • Palm Inc (PALM) beat analysts’ expectations by two cents with Q3 (Feb) earnings of $0.19 per share, excluding non-recurring items.

ECONOMY:

  • Existing home sales unexpectedly rose 5.2% in February to 6.91 million units at an annual rate. This was significantly higher than consensus forecasts of 6.50 million. Existing home sales are down 0.3% in the past 12 months.
  • New single-family home sales fell a whopping 10.5% in February, while January was revised to show a 5.3% decline instead of the originally reported 5.0% drop. New home sales are down 13.4% in the past 12 months.
  • The producer price index for finished goods (PPI) fell 1.4% in February after a 0.2% gain in January. Finished good prices are up 3.7% from a year ago. Excluding food and energy, the “core” PPI increased 0.3% following a 0.4% gain in January. The “core” PPI is up 3.1% at an annual rate in the last three months and 1.7% in the past year.
  • New orders for durable goods increased by a greater-than-expected 2.6% in February. Durable goods orders are up 8.1% in the past year.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Walgreen (WAG).
  • TUESDAY: Lennar Corporation (LEN), Paychex (PAYX), Red Hat, Inc. (RHAT), Tiffany & Co. (TIF).
  • WEDNESDAY: Ruby Tuesday (RI).
  • THURSDAY: Accenture (CAN), Best Buy Co., Inc. (BBY), CarMax, Inc (KMX), Cognos (COGN).
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Consumer Confidence, FOMC policy statement,
  • WEDNESDAY: Crude Inventories
  • THURSDAY: Chain Deflator-Final, GDP-Final, Initial Claims, Help-Wanted Index
  • FRIDAY: Personal Income, Mich Sentiment-Rev., Chicago PMI, Factory Orders

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“If you will discipline yourself to make your mind self-sufficient you will thereby be least vulnerable to injury from the outside.” – Plato

Keep On Chooglin’

Traders,

Maybe you don’t understand it.

But if you’re a natural man,

You got to ball and have a good time

And that’s what I call chooglin’.

Creedence Clearwater Revival, “Keep On Chooglin’”

Our current position:

BUYERS BEWARE

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:

Buyers hit the exchanges with heavy volume to send the Dow Industrials Average and S&P 500 to new four-year highs.

Relatively low numbers of new highs and lack of enthusiasm for Technology issues continue to demonstrate weakness in the broader market.

Price action over the past few weeks has refused to break down – so what doesn’t go down goes up.

Action in industry sectors remains favorable to defensive issues such as Consumer Durables.

In hand with defensive posturing, Drugs squeezed out a new high for the year, and is testing the upper portion of a multi-year price base.

Relative strength for the week was found in commodity and real estate issues which were rebounding from recent losses.

Relative weakness was found in Internet and Semiconductors.

As Growth Stock players we are not seeing great candidates in this environment.

Ideal Growth Stock buys come from more speculative industries such as Technology that are simply not attracting much interest.

The market will unlikely maintain an environment where defensive issues lead the way.

Either the Technology laden Nasdaq resolves current consolidation to the upside, or it crumbles and sets the stage for a broad market decline.

It’s wait and see. Until then, who are we to say this market won’t keep on chooglin’?

Technically speaking:

The Dow Industrial Average
($INDU), +1.84%, hit a four-year high.

The S&P 500
($SPX), +2.00%, hit a four-year high.

Nasdaq
($COMPQ), 1.96%%, pushed to the upper portion of a two month trading range, though did not break to new highs.

Russell 2000
($RUT), 2.72%%, hit an all time high.

Volume indications went positive as the Dow and S&P 500 packed in three accumulation days a piece. The Nasdaq and Russell had two accumulation days and one distribution day a piece.

Hi-Lo Ratio marked significant improvement, though continues to show bearish divergence for the year.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) slid to take out last week’s low as it hesitates moving higher from a multi-year base.

The U.S. Dollar Index
($USD) hit a two-month low and closed below its major moving averages.

The Gold Miners Index
($XAU) staged a rally after last week’s big fall. The index maintains a dominant trend up.

The Dow Jones AIG Commodity Index
($DJAIG) put in a modest rally as it struggles below its major averages.

Consumer Staples
($CMR) hit another new high as it maintains the relative strength winner over Cyclicals.

Consumer Cyclicals
($CYC) rallied to just shy of a new high for the year as it trades comfortably above its major moving averages.

Technology
($DJUSTC) continues to hold a tight trading range for the week, unable to follow the broader market to new highs.

The Semiconductor Index
($SOX) slid further below its 50-day moving average as it hit a new two-month low.

Banks
($BKX) hit a new high for the year as it continues a strong trend up for the past two months.

Broker Dealers
($XBD) came just shy of a new high for the year, though maintain a strong trend up from last May’s low.

Retail
($RLX) broke north of a two-month base to hit a new high for the year.

Healthcare
($HCX) edged higher to just shy of a new high for the year.

Biotech
($BTK) held a tight range as it continues to consolidate just above its 50-day moving average.

REIT’s
($DJR) soared to a new high for the year.

Homebuilders
($DJUSHB) rallied higher to find resistance at the 50-day moving average.

Transportation
($TRAN) hit anew high for the year.

Airlines
($XAL) rallied to close above its 50-day moving average while continuing to flirt with a multi-year triangle pattern.

Defense
($DFX) hit a new high for the year.

Energy
($IXE) rallied to close on its 50-day moving average.

Utilities
($UTY) rallied to close on its 50-day moving average, as it remains mostly range bound for the year.

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

  1. DRUG DELIVERY
  2. GOLD
  3. PRINTED CIRCUIT BOARDS
  4. SEMICONDUCTOR-INTGRTD
  5. INTERNET SERVICE PROVI
  6. DIAGNOSTIC SUBSTANCES
  7. INVESTMNT BROKERAGE-NA
  8. NETWORKING COMMUN DVCS
  9. INDICES DOW TRANSPORTA
  10. ADVERTISING AGENCIES

What Was Important About Last Week

STOCKS:

Union Pacific (UNP) raised their expectations for Q1, sees EPS of $1.00-$1.10 (consensus $0.89).

Wireless Facilities (WFII) reported Q4 (Dec) earnings of $0.03 per share, two cents worse than the Reuters Estimates consensus.

Gymboree (GYMB) reported Q4 (Jan.) earnings of $0.56 per share, excluding non-recurring items, two cents ahead of the Reuters Estimates consensus.

Hot Topic (HOTT) booked $0.23 in Q4 (Jan.) earnings per share.

True Religion (TRLG) delivered Q4 (Dec.) EPS of $0.22. In-line with the consensus estimate.

American International Group (AIG) reported Q4 (Dec) earnings of $0.17 per share, $0.14 worse than the Reuters Estimates consensus of $0.31.

Petco Animal Supplies (PETC) reported Q4 (Jan) earnings of $0.46 per share, a penny better than the Reuters Estimates consensus.

BioMarin Pharmaceuticals (BMRN) and Serono (SRA) reported positive Phase III double-blind, placebo-controlled clinical study of Phenoptin, an investigational oral small molecule for the treatment of phenylketonuria (P.K.U.).

Cost Plus (CPWM) missed consensus Q4 estimates by a penny and forecasted a loss for its first quarter.

Bear Stearns (BSC) reported record quarterly earnings results.

Barnes & Noble (BKS) reported a 6% rise in Q4 profits on higher book sales and cost controls.

Winnebago (WGO) reported lower than expected sales and earnings for the RV maker.

DuPont (DD) boosted its Q1 and full-year earnings view and announced a new restructuring plan.

Blackboard (BBBB lowered its earnings forecast.

ECONOMY:

Housing starts fell 7.9% in February to 2.120 million units at an annual rate. This follows a 15.8% gain in January. Single family starts slid 2.3% in February after a 14.3% jump in January. Housing starts have fallen 4.8% in the past year, while single family starts are down 0.4%.

New building permits declined 3.2% in February to an annualized 2.145 million units. Building permits have been above the two million mark for two years.

The Consumer Price Index (CPI) rose a modest 0.1% in February versus a 0.7% increase in January. The small gain was in-line with consensus expectations. The 12-month change in the CPI decelerated to 3.6% last month from 4.0% in January.

Energy prices fell 1.2% in February after increasing 5.0% in January. Food and beverage prices rose 0.2%. Excluding food and energy, the “core” CPI was up 0.1% last month, slightly less than consensus estimates of a 0.2% gain. “Core” consumer prices are up 2.1% in the past year.

Industrial production increased 0.7% in February after a 0.3% decline in January. Industrial production is up 3.3% in the past 12 months and 5.6% at an annualized rate in the past three months.

Import prices fell 0.5% in February after surging 1.4% in January. Excluding a 0.7% decline in petroleum prices, import prices still declined 0.5%. Excluding all fuels (which includes natural gas) import prices rose 0.2% in February.

Export prices were flat in February versus a 0.7% increase in January. A 1.1% decline in agriculture prices offset a 0.1% increase in non-agricultural prices. A 0.3% increase in industrial supplies and materials accounted for much of the increase in non-ag prices. In the past year, imported industrial supply and material prices have risen 8.3%.

Retail sales fell 1.3% in February, a slightly more dramatic decline than forecasters expected (consensus -0.8%, FT Economics -1.0%). This follows an upwardly revised 2.9% gain in January (originally +2.3%), the largest one-month gain since October 2001 – after 9/11. Retail sales are up 6.7% in the past year.

Auto sales fell 4.6% in February versus a 4.2% gain in January. Excluding autos, retail sales slid 0.4% last month but remain 8.9% above year ago levels.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: PetroChina Company Limited (PTR), Shuffle Master, Inc. (SHFL).
  • TUESDAY: Biomet, Inc. (BMET), Nike (NKE).
  • WEDNESDAY: Adobe Systems (ADBE), FedEx (FDX), Jabil Circuit, Inc. (JBL), KB Home (KBH), Morgan Stanley (MS).
  • THURSDAY: 3Com Corp (COMS), ConAgra Foods (CAG), General Mills, Inc. (GIS), Palm, Inc. (PALM).
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: Leading Indicators
  • TUESDAY: Core PPI, PPI
  • WEDNESDAY: Crude Inventories
  • THURSDAY: Initial Claims, Existing Home Sales
  • FRIDAY: Durable Orders, New Home Sales

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The hope of a secure and livable world lies with disciplined nonconformists who are dedicated to justice, peace and brotherhood.” – Martin Luther King, Jr. <a href=”http://en.wikipedia.org/wiki/John_Locke

Exactly

Traders,

Let’s begin

With the past in front

And all the things

You really don’t care about now

It’d be exactly where I’m at

And to think

You got a grip

Look at yourself

Your lips are like two flaps of fat

They go front and back and flappity flap

Ween, Exactly Where I’m At

Our current position:

BUYER BEWARE

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:

Price action on the major indexes and sectors continues to send the same message.

Preference for defensive sectors such as Consumer Products over the more speculative Technology sectors remains intact.

The Dow Industrial Average gained ground while the Nasdaq posted a small loss.

The Internal indications of Volume and Hi Lo Ratios continue to portray weakness.

We never attempt to call tops or bottoms, but what we are seeing is a considerable lack of evidence to feel comfortable in the market’s ability to gather steam and head higher.

But as bull markets go (and we’re still calling this general uptrend a bull market), gradual pressure to the upside can easily negate the bearish signals and send us to a place where we look back at this weakness and see it as period of the weak hands being shaken out.

Experience has taught us that seeking deeper reasons other than what we see in the charts is almost futile.

When looking to the minds of economists and gurus we get the same old mixed picture.

Reasons to be bullish:

  • P/E ratios
  • Technical trends
  • High earnings from companies

Reasons to be bearish:

  • Four-year political cycle
  • A flat yield curve
  • Too much complacency evident in the VIX

Inevitably, some notions will be proven right while others wrong. In the end perhaps it’s all just chance.

Our approach to chart reading, or Technical Analysis (TA), is not as technical as opponents of the practice tend to believe.

Our take on TA is that it provides a language the markets move in, and not a system that gives specific buy and sell signals. The market is not a math problem to be figured out. It’s a battle ground.

What we do at The Growth Stock Report is trade Growth Stocks.

Some market environments offer great opportunity, while others don’t.

Given the lack of performance in the speculative sectors such as technology that signify ripe conditions for 20% Growth Stock gains, our best bet is to do nothing.

To feel comfortable as bulls we want to see Technology turn iaround and post stronger volume on the rallies.

Until then this market is suspect.

Homebuilders continue to represent weakness in the market. As mentioned before, should this market top out it will look for a sector to lead the way down.

Technically speaking:

The Dow Industrial Average
($INDU), +2.01%, is trying to make a stand at its 50-day moving average to remain trend up.

The S&P 500
($SPX), +1.26%, is also attempting to rally from its 50-day moving average.

Nasdaq
($COMPQ), -0.22%, is trading under its 50-day moving average and above its200-day average as it represents the weakest of the major indexes.

Russell 2000
($RUT), +0.27%, is trying to turn around on its 50-day moving average.

Volume indications gave use one day of accumulation a piece on the major indexes. For the past three weeks bears have tilted the scale to their favor with the Dow and S&P 500 making three days of distribution a piece, and the Russell 2000 making five distribution days.

Hi Lo Ratio has shown bearish divergence for the past month.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) is popping north of a year-and-a-half long base.

The U.S. Dollar Index
($USD) made a strong rally off its 50-day moving average as it notched in a new high for the year.

The Gold Miners Index
($XAU) hit a new low for the year as it trades well below its 50-day average.

The Dow Jones AIG Commodity Index
($DJAIG) hit a new low for the year as it trades below its major moving averages.

Consumer Staples
($CMR) hit a new high for the year.

Consumer Cyclicals
($CYC) hit a two month low.

Technology
($DJUSTC) continued its slide as it trades below its 50-day average and above its 200-day average.

The Semiconductor Index
($SOX) cruised to beow its 50-day average as it erases the majority of the year’s gains.

Banks
($BKX) put in a modest rally for the week as they hold ground above the 50-day average.

Broker Dealers
($XBD) pulled back for the week continue to hold form in an uptrend.

Retail
($RLX) is attempting to reverse on its 50-day average.

Healthcare
($HCX) is flirting with its 50-day average as it suffers from a slide after hitting a new high last week.

Biotech
($BTK) drifted lower for the week to find support at its 50-day average while maintaining an uptrend.

REIT’s
($DJR) hit a new high for the week.

Homebuilders
($DJUSHB) continued to slide as it trades well below its major averages.

Transportation
($TRAN) posted a modest loss as it remains in an uptrend.

Airlines
($XAL) lost slight ground as it continues to trade in a triangle.

Defense
($DFX) posted a slight loss as it maintains its uptrend.

Energy
($IXE) drifted lower for the week as it trades below its 50-day average and above its 200-day average.

Utilities
($UTY) hit a new low for the year as it trades below its major moving averages.

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

  1. GOLD
  2. DRUG DELIVERY
  3. INTERNET SERVICE PROVI
  4. INDICES DOW TRANSPORTA
  5. PRINTED CIRCUIT BOARDS
  6. INVESTMNT BROKERAGE-NA
  7. INVESTMNT BROKERAGE-RE
  8. SEMICONDUCTOR-INTGRTD
  9. NETWORKING COMMUN DVCS
  10. DIAGNOSTIC SUBSTANCES

What Was Important About Last Week

STOCKS:

  • Texas Instruments (TXN) issued in-line guidance for Q1, foreseeing EPS of $0.31-0.33.
  • Xilinx (XLNX) reiterated its Q4 (Mar.) rev guidance of +1-5% sequentially.
  • Altera (ALTR) reaffirmed that Q1 sales will be in-line with its prior guidance, which indicated 4-7% sequential growth.
  • Nortel (NT) telecom equipment provider reported a big Q4 loss and said it will restate prior earnings.
  • Hansen (HANS) energy drink maker topped Q4 EPS estimates by $0.13, with its operating income surging 150%.
  • Albertson’s (ABS) : The grocer said earnings from continuing operations fell 12% year-over-year.
  • AnnTaylor (ANN) beat Q4 estimates and issued upside guidance.
  • Aeropostale (ARO) posted Q4 EPS of $0.76 that topped the consensus estimate by two cents.
  • Micahels Stores’ (MIK) posted an in-line Q4 report, but its guidance is below expectations.
  • Wind River (WIND) announced Q4 earnings of $0.11 per share, excluding non-recurring items, a penny below the Reuters Estimates consensus.
  • Sykes (SYKE) reported Q4 earnings of $0.22 per share, $0.08 better than the Reuters Estimates consensus.
  • McDonald’s (MCD) : posted positive global comparable sales For the 34th consecutive month.
  • Biogen (BIIB): An FDA advisory panel unanimously recommended the return of Biogen Idec’s MS drug to the market.
  • Pixar (PIXR) reported Q4 (Dec) earnings of $0.25 per share, seven cents better than the Reuters Estimates consensus.
  • The Dress Barn (DBRN) reported Q2 earnings of $0.47, beating the Reuters Estimates consensus by seven cents.
  • Qualcomm (QCOM) raised its second fiscal quarter estimates.
  • Myogen (MYOG) reported an FY05 loss of $1.68 vs. the $1.71 Reuters Estimates consensus, on revs of $6.96 mln vs. the $9.92 mln consensus.

ECONOMY:

  • Non-farm payrolls increased by 243,000 jobs in February. Payrolls were revised down by a total of 18,000 in December and January.
  • The household survey reported 183,000 new jobs and a jump of 335,000 in the labor force, pushing the unemployment rate to 4.8% versus 4.7% in January.
  • Average hourly earnings increased 0.3% in February after a 0.4% gain in January.
  • The U.S. trade deficit widened to a record $68.5 billion in January, higher than consensus estimates of a $67.0 billion gap. The December deficit was revised lower to $65.1 billion from the original estimate $65.7 billion.
  • Exports jumped 2.5% to $114.4 billion in January. Total exports of goods and services have risen 28.7% at an annual rate in the last three months and are now at the highest level ever recorded. The U.S. has never exported more.
  • Imports rose 3.5% to $182.9 billion last month. Imports of crude oil declined to 302.8 million barrels in January from 311.5 billion in December. However, the average price of a barrel rose to $51.9 billion from $49.8 billion.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Sonus Networks (SONS)
  • TUESDAY: Goldman Sachs (GS), Wireless Facilities (WFII)
  • WEDNESDAY: Charming Shoppes (CHRS), Comverse Technology (CMVT), Goodrich Petroleum (GDP), Hot Topic (HOTT), Ross Stores, Inc. (ROST), True Religion Apparel Inc. (TRLG).
  • THURSDAY: Barnes&Noble (BKS), Bear Stearns (BSC), Winnebago (WGO).
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Retail Sales, Retail Sales ex-auto, Business Inventories
  • WEDNESDAY: Export Prices ex-ag., Import Prices ex-oil, NY Empire State Index, Net Foreign Purchases, Crude Inventories, Fed’s Beige Book
  • THURSDAY: Building Permits, Core CPI, CPI, Housing Starts, Initial Claims, Philadelphia Fed
  • FRIDAY: Capacity Utilization, Industrial Production, Mich Sentiment-Prel.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“”Warriors take chances. Like everyone else, they fear failing, but they refuse to let fear control them.” – Ancient Samurai saying <a href=”http://en.wikipedia.org/wiki/John_Locke

Price Rules

Traders,

Top breaks in the neighbourhood

A hard case who’s up to no good

Living like trash, a society rash

Ready to brain, ready to gash

A bad deal and a real rough ride

You’re doing time on the other side

No rebellion, not today

I get my kicks in my own way

Right, ok

ACDC, “Breaking the Rules”

Our current position:

BUYERS BEWARE

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:

Price rules.

The major averages didn’t move much for the week, though action in the sectors gave us much to cheer.

Broker Dealers, Biotechnology, Transportation and Defense all hit new highs.

But not all is rosy.

The Technology thick Nasdaq showed strength, though is trailing the Dow Industrial Average and S&P 500.

Consumer Cyclicals continue to play second fiddle to borring Consumer Staples.

Sector action in tech related areas was marked by decent rallies in Semiconductors, Internet, Telecoms and Disk Drives – but in order for the Nasdaq to establish firm footing we need a few repeat performances.

Heavy distribution for the week is a major concern.

While actual price provides our most valuable measure of the market, volume often precludes moves.

If last week’s volume were to tell us something it’s that this market is in trouble.

Our game plan is the same as it has been for the past few weeks. We want to see tech stocks turn into leaders, and should they lead the way down, we’re going to hoist the red flag and hunker down.

Technically speaking:

The Dow Industrial Average
($INDU), -0.36%, bounced off its 20-day moving average four times during the week as it fights to hold a recent breakout from a year-long base.

The S&P 500
($SPX), -0.17%, hit a new high for the week though closed in an indecisive doji. The deadly doji has been the precursor to many a change in directions.

Nasdaq
($COMPQ), 0.68%, edged higher for the week and is trading above all its major moving averages though has been unable to retrace to highs made earlier in the year.

Russell 2000
($RUT), 0.25%, hit a new high for the week as it maintains a solid uptrend.

Volume indications the bears are packing in the heavy volume traffic as the Dow, Nasdaq and Russell 2k had three distribution day a piece. This is a very bad sign when markets churn on heavy volume with little price change. Bottom line is price rules, but this action goes had in hand with tops.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) shot up for the week as it continues to trade above its major moving averages.

The U.S. Dollar Index
($USD) closed above its 200-day average and below its 50-day average as it puts in what might be the start of a bearish right shoulder pattern.

The Gold Miners Index
($XAU) pulled back to below its 50-day moving average as it continues to cool from roaring to a new high a month ago.

The Dow Jones AIG Commodity Index
($DJAIG) is attempting to reverse on a multi-year trend line as it finds resistance at its 200-day moving average.

Consumer Staples
($CMR) hit a new high before pulling back to close in a doji candlestick bar.

Consumer Cyclicals
($CYC) drifted lower for the second week in a row as it flirts with its 50-day average.

Technology
($DJUSTC) edged above its 50-day average as it lags the major indexes.

The Semiconductor Index
($SOX) gave an impressive rally as it fights to maintain an uptrend.

Banks
($BKX) pulled back for the week as it tries to hold ground after breaking out to a new high last week.

Broker Dealers
($XBD) retained their dominance in the RS category while hitting a new high.

Retail
($RLX) pushed to a new high on the year, though have yes to establish a solid trend for the year.

Healthcare
($HCX) hit a new high before pulling back to its 50-day moving average.

Biotech
($BTK) continues to be a relative strength winner as it hit a new high.

REIT’s
($DJR) pulled back modestly after hitting a new high last week.

Homebuilders
($DJUSHB) have been dropping off after finding resistance at its 50-day average.

Transportation
($TRAN) hit another new high in a show of relative strength dominance.

Airlines
($XAL) traded sideways as it continues o hold a triangle formation.

Defense
($DFX) hit another new high.

Energy
($IXE) edged above its 50-day average as it traded mostly sideways in its fight to retain its uptrend.

Utilities
($UTY) flirted with its 50-day average as it holds a sideways range for the year.

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. RAILROADS
  6. NETWORKING COMMUN DVCS
  7. INDICES DOW TRANSPORTA
  8. INTERNET SERVICE PROVI
  9. SEMICONDUCTOR-INTGRTD
  10. INVESTMNT BROKERAGE-RE

What Was Important About Last Week

STOCKS:

  • Google (GOOG) warned that growth is slowing.
  • Intel (INTC) lowered its first quarter revenue guidance.
  • ValueClick (VCLK) announced Q4 earnings of $0.13 per share, in-line with the Reuters Estimates consensus.
  • Excluding non-recurring items, Autodesk (ADSK) reported Q4 (Jan) earnings of $0.37 per share, which was two cents better than the Reuters Estimates consensus.
  • Pacific Sunwear (PSUN) reported Q4 (Jan) earnings of $0.63 per share, in line with the Reuters Estimates consensus.
  • THQ Inc. (THQI) reaffirmed its outlook for fiscal 2006 and 2007. Co
  • ADC Telecommunications (ADCT) reported fiscal Q1 (Jan.) earnings of $0.09 per share, a penny below the Reuters Estimates consensus.
  • With Q4 EPS of $0.24, Chico’s (CHS) checked in a penny below the Reuters Estimates consensus.
  • PETsMART (PETM) posted Q4 earnings of $0.47 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus.
  • Men’s Wearhouse (MW) booked $0.67 in Q4 EPS, excluding non-recurring items. That figure surpassed the Reuters Estimates consensus by $0.15.
  • Starbucks (SBUX) reported an increase in comps of 8.0% for the month of February, beating the consensus of +6.5%.
  • Lowe’s (LOW) impressed with its Q4 results and upbeat forecast.
  • Hormel Packages (HRL) topped Q1 estimates and raised its full-year outlook.
  • Heinz (HNZ) third quarter net income dropped 23% from the year-ago period.
  • Payless (PSS) topped Q4 estimates.
  • Foot Locker (FL) reported an 8% increase in Q4 profits and met analysts’ earnings expectations.
  • Cal Dive (CDIS) reported Q4 (Dec) earnings of $0.69 per share, $0.17 better than the Reuters Estimates consensus of $0.52.

ECONOMY:

  • Real GDP was revised to show a 1.6% growth rate in Q4 versus the originally reported 1.1%. Despite the upward revision, Q4 was the slowest quarterly growth rate in three years.
  • January new home sales fell 5.0% to a 1.233 million annual rate.
  • Existing home sales fell 2.8% in January to 6.560 million units at an annual rate. However, December data was upwardly revised by 2.3%.
  • The Chicago Purchasing Managers’ Index (PMI) pulled back to 54.9 in February versus 58.5 in January. The index has been above 50 for three consecutive years.
  • Crude oil inventory report from the Dept. of Energy was largely as expected.
  • The Institute for Supply Management (ISM) manufacturing index increased to 56.7 in February versus 54.8 in January. This was higher than consensus estimates of 55.5. The ISM suggested that February’s level correlates with 5.1% annualized real GDP growth. Additionally, they note that the average ISM index for January and February (55.8) correlates with 4.7% real growth at an annual rate.
  • The ISM non-manufacturing business barometer rose to 60.1 in February versus 56.8 in January. Ten of the 17 industry groups surveyed reported growth in February compared to just eight in January. The new orders component inched higher to 56.2 last month versus 56.0 in January.
  • Personal income increased 0.7% in January and was upwardly revised to a gain of 0.5% in December (originally +0.4%). Personal consumption jumped 0.9% last month after a 0.7% gain in December (originally +0.9%). With consumption rising faster than income, the savings rate moved further into negative territory in January.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Goldcorp (GG).
  • TUESDAY: Albertson’s (ABS), Dress Barn (DBRN), Korn Ferry International (KFY), Pixar Animation Studios (PIXR), The Kroger Co. (KR).
  • WEDNESDAY: Michaels Stores (MIK).
  • THURSDAY: Aeropostale, Inc. (ARO), Blockbuster Inc. (BBI), Hansen Natural (HANS), Nanophase Technology (NANX), National Semiconductor (NSM), Urban Outfitters (URBN).
  • FRIDAY: AnnTaylor Stores (ANN), Edge Petroleum (EPEX).

On the economic front we have potential market movers with:

  • MONDAY: Factory Orders
  • TUESDAY: Productivity-Rev., Consumer Credit
  • WEDNESDAY: none
  • THURSDAY: Initial Claims, Trade Balance
  • FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories, Treasury Budget

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This Week’s Word On Discipline:

“All religions, arts and sciences are branches of the same tree. All these aspirations are directed toward ennobling man’s life, lifting it from the sphere of mere physical existence and leading the individual towards freedom.” – Albert Einstein
<a href=”http://en.wikipedia.org/wiki/Albert_Einstein