Strange isn't fashionable

Traders,

Always a stranger when strange isn’t fashionable
And fashion is rich people waving at the door
Or it’s a dealer in drugs or in passion
Lies of a nature we’ve heard before
— Paul Simon, “The Rhythm of the Saints”
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 are on our home site:

Where We Are:

Taking a look at the broader market:

Good earnings news, good economic news.

And still no major media hype. We prefer to be on the other side of the trade when it comes to the mass media’s take on the market.

Lack of hoopla from the press may be giving us some indication that this bull may have further to go before people start beating their chests and the last buyers get sucked in.

But in the meantime, a little Bear is lurking somewhere in this bigger Bull.

In other words, this market is due for a pull back.

Telcoms and REITs continue to be driving forces for this market. .

Consumer Staples remain dominant over Consumer Cyclicals in a show of investor defensiveness.

Banking shares consolidated for the week after breaking new highs last week.

The Dow Technology Index is at an inflection point of matching a high on the year.

Semiconductors continue to mark concern as the index trades below its major moving average. The overhead resistance of sellers looking to get out after suffering losses from the summer’s sharp decline will be a strong headwind for upward momentum.

Energy shares have rebounded, and with their negative correlation to the major averages, any serious upward momentum should be interpreted as cautionary for the sustainability a broader rally.

Technically speaking:

The Dow Industrial Average
($INDU), 0.8 %, pushed higher into all time high territory for the third week in a row.

The S&P 500
($SPX), 1.0 %, pushed higher into multi-year high territory.

Nasdaq
($COMPQ), 2.0 %, came closer to this year’s highs.

Russell 2000
($RUT), 2.3 %, came closer to year highs, though lags the broader market.

Volume indications favor the bulls.

Key chart action for the week:

Charts courtesy of Stockcharts.com

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

  1. LONG-TERM CARE FACILIT
  2. REIT HEALTHCARE FACILI
  3. DRUG RELATED PRODUCTS
  4. DISCOUNT VARIETY STORE
  5. PACKAGING CONTAINERS
  6. REIT – RESIDENTIAL
  7. PERSONAL SERVICES
  8. MEAT PRODUCTS
  9. DEPARTMENT STORES
  10. REIT – DIVERSIFIED

What Was Important About Last Week

STOCKS:

  • Alcoa (AA) reported Q3 (Sep) earnings of $0.60 per share, excluding an $18 mln tax benefit, $0.17 worse than the Reuters Estimates consensus of $0.77. Revenues rose 19.2% year/year to $7.63 bln vs. the $7.68 bln consensus.
  • Genentech (DNA) reported Q3 (Sep) earnings of $0.55 per share, $0.08 better than the Reuters Estimates consensus of $0.47.
  • Yum! Brands (YUM) reported Q3 (Sep) earnings of $0.83 per share, $0.08 better than the Reuters Estimates consensus of $0.75. Total revenues rose 1.6% year/year to $2.28 bln vs. the $2.27 bln consensus.
  • Ruby Tuesday (RI) reported Q1 (Aug) earnings of $0.37 per share, $0.01 better than the Reuters Estimates consensus of $0.36. Revenues rose 9.9% year/year to $338.7 mln vs. the $337.9 mln consensus.

ECONOMY:

  • Import prices fell 2.1% in September after a 0.8% gain in August. Excluding a 10.3% drop in petroleum prices, import prices rose 0.1% last month. Excluding all fuels, import prices increased 0.3%.
  • Export prices unexpectedly fell 0.5% in September after a 0.4% increase in August. Non-agricultural prices also slid 0.5% last month. However, in the past year, non-agricultural export prices have risen 3.7%.
  • Retail sales unexpectedly fell 0.4% in September, versus consensus estimates of a 0.2% gain. Sales are up 5.5% from year-ago levels.
  • Despite reports from manufacturers of an increase in auto and truck sales during September, motor vehicle and parts dealers’ reported sales were unchanged in September. Excluding autos, retail sales fell 0.5% in September but are up 5.5% in the past year.
  • Gasoline service station sales plunged 9.3% in September, the largest decline on record (data goes back to 1992). Excluding autos and gas, sales rose 0.7% last month and 7.3% in the past year.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: CBOT HLDGS INC (CBOT), Intel Corporation (INTC), International Business Machines (IBM), Johnson & Johnson (JNJ), Merrill Lynch (MER), Motorola Inc. (MOT), United Technologies (UTX), Wells Fargo & Company (WFC), Yahoo, Inc. (YHOO)
  • WEDNESDAY: Abbott Laboratories (ABT), Apple Computer, Inc. (AAPL), E*TRADE Financial Corp. (ET), General Dynamics (GD), J.P. Morgan Chase & Co (JPM), LaSalle Hotel Properties (LHO), Washington Mutual (WM)
  • THURSDAY: Citigroup Inc. (C ), Google (GOOG), Honeywell (HON), McDonalds Corporation (MCD), Southwest Airlines (LUV), The Coca-Cola Company (KO), The Nasdaq Stock Market, Inc. (NDAQ), The New York Times Company (NYT), TradeStation Group, Inc. (TRAD)
  • FRIDAY: 3M Company (MMM), Merck & Co., Inc. (MRK), Schlumberger (SLB)

On the economic front we have potential market movers with:

  • MONDAY: NY Empire State Index
  • TUESDAY: Core PPI, PPI, Net Foreign Purchases, Capacity Utilization, Industrial Production, Capacity Utilization
  • WEDNESDAY: Building Permits, Core CPI, CPI, Housing Starts, Building Permits, Crude Inventories
  • THURSDAY: Initial Claims, Leading Indicators, Philadelphia Fed
  • FRIDAY: none

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The discipline of desire is the background of character.” – John Locke

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