One drop of water

Traders,

Another turning point;
a fork stuck in the road.

Time grabs you by the wrist;
directs you where to go.

So make the best of this test
and don’t ask why.

It’s not a question
but a lesson learned in time.

Green Day, “Time of Your Life”

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:

It’s the drop of water that makes the vase overflow.

A visual scan of the broad market indexes tells us the bull is alive with new highs pegged in.

Strength in Technology and Small Caps is providing a crucial bullish confirmation for the broader market.

Friday’s intraday turnaround from new highs would be considered bearish violence if it weren’t for the low volume.

Things on the surface appear to be going the way of the bull, but the weak spots must be examined.

The Dow Industrial Average is flashing a warning sign with five days of distribution over the past two weeks.

The Hi/Lo Ratio has been sending weak vital signs all year.

We want declines to occur on light volume and advances to occur on heavy volume.

To recognize better odds in individual stock opportunities we want to see the numbers of new highs firm up to support highs on the indexes.

Calling tops is not an easy nor wise thing to do.

We have short-term and near term tops that historically have different characteristics.

Longer-term tops tend to occur on heavy volume and often come on the heels of positive news.

Friday’s positive Employment Report inspired a negative reaction from the market.

How the market reacts to news is important. Strong markets will ignore negative news and rally, weak markets will sell off on positive news.

It’s not our call to say whether or not Friday’s reaction is the final drop to make the vase overflow, but watching the water will give us good indications over what may be on the horizon.

Technically speaking:

The Dow Industrial Average
($INDU), +0.10 %, ended the week little changed above its major moving averages.

The S&P 500
($SPX), +0.05%, also ended the week little changed above its major moving averages.

Nasdaq
($COMPQ), -0.03%%, hit another multi year high before turning around on an intraday reversal Friday.

Russell 2000
($RUT), -1.18%, also hit another multi year high before turning around on an intraday reversal Friday.

Volume indications tilt slightly to the bulls for the week with the Nasdaq 100 scoring three accumulation days. Countering the accumulation, five distribution days have been recorded for the Dow Industrials over the past two weeks.

The Hi/Lo Ratio continues to illustrate bearish divergence.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield
($tnx) shot up to a three-year high.

The U.S. Dollar Index
($USD) slid to a two-month low before rebounding to resistance at its 50 and 200 day averages.

The Gold Miners Index
($XAU) rallied ofr the fourth week in a row as it attempts to regain the year’s high set in January.

The Dow Jones AIG Commodity Index
($DJAIG) continues to flirt with its major moving averages while posting mosdest gains for the fourth week in a row.

Consumer Staples
($CMR) declined for the second week in a row as it holds on to a still intact uptrend.

Consumer Cyclicals
($CYC) shot up to a new high.

Technology
($DJUSTC) posted a strong rally before turning around sharply in Friday’s action the index has yet to post a new high with the broader market over the past months.

The Semiconductor Index
($SOX) rallied to find resistance at its 50-day moving average.

Banks
($BKX) were little changed for the week as they hold ground above the major moving averages.

Broker Dealers
($XBD) hit another new high.

Retail
($RLX) hit a new high for the year.

Healthcare
($HCX) posted a second straight week of heavy selling to close below the 200-day moving average.

Biotech
($BTK) fell below a year-long upward channel line.

REIT’s
($DJR) lost ground, though maintain an uptrend above the major moving averages.

Homebuilders
($DJUSHB) tested the upper portion of a two-month trading range, maintaining relative weakness over the market for the past few months.

Transportation
($TRAN) hit another new high in a solid uptrend.

Airlines
($XAL) continued its consolidation pattern above a multi-year trend line.

Defense
($DFX) continued to consolidate at multi-year highs

Energy
($IXE) posted a rally as it attempts to regain new highs set in the beginning of the year.

Utilities
($UTY) slid for the second straight week to new lows for the year.

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

  1. GOLD
  2. SEMICONDUCTOR-INTGRTD
  3. DRUG DELIVERY
  4. INTERNET SERVICE PROVI
  5. STEEL IRON
  6. PRINTED CIRCUIT BOARDS
  7. CATALOG MAIL ORDER HOU
  8. FARM CONSTRUCTION MACH
  9. INDUSTRIAL METALS MINE
  10. INVESTMNT BROKERAGE-NA

What Was Important About Last Week

STOCKS:

  • Wal-Mart (WMT) March same-store sales will be up just 1.3% – at low end of Wal-Mart’s forecast.
  • Gymboree (GYMB) posted a better than expected same-store sales report, the retailer raised its EPS guidance.
  • Gap (GPS) reported a 13% decline in March same-store sales.
  • Bed Bath & Beyond (BBBY) delivered fiscal Q4 (Feb.) earnings of $0.67 per share. Revenues rose 14.8% year/year to $1.69 bln vs. the $1.64 bln consensus. Comparable store sales for Q4 increased by approx. 6.3%.
  • Immucor (BLUD) announced $0.25 in fiscal Q3 (Feb.) profit per share. Its result surpassed the Reuters Estimates consensus by two cents. Sales increased 24.3% year/year to $47.1 mln vs. the $46.9 mln consensus.
  • Aeropostale (ARO) posted a 9.3% decline in March comparable store sales, vs. the -2.8% Briefing.com consensus estimate.
  • Hot Topic (HOTT) reported that same-store sales decreased 12.7% in March (vs. the -11% Briefing.com consensus). The co. also announced that it expects to post a Q1 loss of $0.01-0.04 per share; at this point, the consensus estimate is pegged at a profit of $0.03.
  • American Eagle (AEOS) announced that its comparable store sales rose 3.0% (vs. the +3.7% Briefing.com consensus) in March.
  • Check Point (CHKP) lowered its Q1 outlook due in part to slower industry growth.

ECONOMY:

  • As expected, non-farm payrolls increased by 211,000 jobs in March. Payrolls were revised down by a total of 34,000 in January and February.
  • The household survey reported that employment increased by 384,000 last month, while the labor force increased 203,000. As a result,
  • The unemployment rate fell to a 4 1/2-year low of 4.7%.
  • Average hourly earnings increased 0.2% in March after an upwardly revised 0.4% gain in February (originally +0.3%). Average hourly earnings are up 3.4% in the past year.
  • The ISM non-manufacturing business barometer rose to 60.5 in March versus 60.1 in February. This was above consensus estimates of 59.0. The ISM non-manufacturing index continues to signal a booming U.S service sector.
  • The ISM manufacturing index pulled back to 55.2 in March versus 56.7 in February. The consensus expected a slight increase to 57.5. According to the ISM, the March level is historically consistent with 4.5% growth in real GDP.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: ALCOA Inc (AA), Schnitzer Steel Industries, Inc. (SCHN),.
  • TUESDAY: Genentech, Inc. (DNA),
  • WEDNESDAY: Circuit City Stores Inc. (CC), Harley-Davidson (HDI), Lam Research (LRCX).
  • THURSDAY: Infosys Technologies LTD (INFY), Jos. A. Bank Clothiers (JOSB), The New York Times Company (NYT), Tribune (TRB).
  • FRIDAY: Knight Ridder (KRI).

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: none
  • WEDNESDAY: Trade Balance, Crude Inventories, Treasury Budget
  • THURSDAY: Business Inventories, Export Prices ex-ag., Import Prices ex-oil, Initial Claims, Retail Sales, Retail Sales ex-auto, Mich Sentiment-Prel.
  • FRIDAY: none

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Genius at first is little more than a great capacity for receiving discipline.” – George Eliot

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