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

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