Semi-True

Traders,

It’s a semi-true story
Believe it or not
I made up a few things
And there’s some I forgot.
— Jimmy Buffett, “Semi-True Stories”

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:

With earnings season up and running, few warnings and mostly upside surprises aid the Bull’s progress.

Almost everything about this market suggests the Bull’s potential is intact, but participation from key sectors is drawing some concern.

Semiconductors turned down sharply from its 200-day moving average as the index struggles to reverse a bear trend. Without participation from the semis to the upside, this market will never be strong.

Disk Drives end a three-month uptrend goes out of whack after attacked with heavy selling.

Bulls need to see the semis and drives catch up with its parent Technology sector, which has regained ground near new highs on the year.

Banking has also lost its upward pace and threatens to decline into ominous ‘failed breakout’ territory.

Meanwhile, firm leadership remains in Big Caps, Telecom and REITs.

New highs were also made in Healthcare and Pharmaceuticals. Utilities is the newest sector to join the breakout club.

Poised for new highs, Broker/Dealers, Internet and Hardware are cup-and-handled. Biotech is almost there, as are Airlines which are poised to breakout of a lower base.

Energy stocks hold a neutral technical picture as the makings of what will one day be considered a bearish rounding top, or bullish consolidation, work itself out. Oil Services threaten to lead the pack down.

Technically speaking:

The Dow Industrial Average
($INDU), 0.5 %, clawed it way into new high territory for its third consecutive week of gains.

The S&P 500
($SPX), 0.4 %, ticked to new highs, though mostly consolidate for the week.

Nasdaq
($COMPQ), -0.2 %, inched closer to the year’s high.

Russell 2000
($RUT), 0.7 %, remains a lager, with some work to put into regaining the year’s high.

Volume indications remain bullish, though heavy volume on the Dow Friday is indicative of a reversal.

Key chart action for the week:

Charts courtesy of Stockcharts.com

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

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

What Was Important About Last Week

STOCKS:

  • Google (GOOG) reported Q3 (Sep) earnings of $2.62 per share, excluding non-recurring items, $0.21 better than the Reuters Estimates consensus of $2.41. Revenues including Traffic Acquisition Costs rose 70.4% year/year to $2.69 bln vs the $2.62 bln consensus.
  • Motorola (MOT) reported Q3 (Sep) earnings of $0.32 per share, which excludes $0.05 in charges and a $0.02 gain but includes $0.02 in stock based comp expense, $0.01 worse than the Reuters Estimates consensus of $0.33. Co. reported EPS excluding charges, gains and comp expense of $0.34, in line with $0.34 First Call consensus. Revenues rose 17.2% year/year to $10.6 bln vs the $11.06 bln consensus.
  • Intel Corp. (INTC) reported Q3 (Sep) earnings of $0.21 per share, excluding 1.5 cent gain, $0.04 better than the Reuters Estimates consensus of $0.17. Revenues fell 12.3% year/year to $8.74 bln vs the $8.61 bln consensus.
  • IBM (IBM) reported Q3 (Sep) earnings of $1.45 per share, excluding non-recurring items, $0.10 better than the Reuters Estimates consensus of $1.35. Revenues rose 5.1% year/year to $22.62 bln vs the $22.06 bln consensus.
  • Yahoo! (YHOO) reported Q3 (Sep) earnings of $0.11 per share, in-line with the Reuters Estimates consensus of $0.11. Revenues excluding traffic acquisition costs rose 20.3% year/year to $1.12 bln vs the $1.14 bln consensus.
  • Xilinx(XLNX) reported Q2 (Sep) earnings of $0.27 per share, $0.04 better than the Reuters Estimates consensus of $0.23. Revenues rose 17.1% year/year to $467.2 mln vs the $455.9 mln consensus.
  • eBay (EBAY) reported Q3 (Sep) earnings of $0.26 per share, excluding option exp, $0.02 better than the Reuters Estimates consensus of $0.24. revenues rose 31.0% year/year to $1.45 bln vs the $1.43 bln consensus.
  • Apple Computer (AAPL) reported Q4 (Sep) earnings of $0.62 per share, $0.11 better than the Reuters Estimates consensus of $0.51. Revenues rose 31.6% year/year to $4.84 bln vs the $4.67 bln consensus.
  • Advanced Micro Devices(AMD) reported Q3 (Sep) earnings of $0.27 per share, $0.04 better than the Reuters Estimates consensus of $0.23. Revenues rose 31.5% year/year to $1.33 bln vs the $1.31 bln consensus.
  • Ryland Group(RYL) reported Q3 (Sep) earnings of $1.85 per share, excluding a $0.12 tax benefit, $0.08 better than the Reuters Estimates consensus of $1.77. Revenues fell 9.9% year/year to $1.13 bln vs the $1.11 bln consensus.

ECONOMY:

  • Housing starts rose 5.9% in September to 1.772 million units at an annual rate. This was significantly above consensus estimates of 1.640M. Single family starts rose 4.3% while multi-unit starts jumped 12.7%.
  • New building permits declined 6.3% in September to an annualized 1.619 million units – the lowest level in over four years.
  • Housing completions rose 11.2% to 2.084 million units in September – the fastest one-month change since 1999.
  • The Consumer Price Index (CPI) declined 0.5% in September after a 0.2% increase in August. The CPI has increased 2.1% in the past year.
  • Energy prices plummeted 7.2% in September following a 0.3% gain in August. Food and beverage prices increased 0.4% last month. Excluding food and energy, the “core” CPI was up 0.2% in September. The “core” CPI is up an annualized 2.7% in the past three months and 2.9% in the past year – the fastest YOY gain since January 1996.
  • Industrial production decreased by a more than-expected 0.6% in September after showing no growth in August (upwardly revised from the original 0.1% decline in August). Over the past three months industrial production has declined an annualized 1.1%, yet it remains 5.5% higher than one year ago.
  • Manufacturing production decreased 0.3% in September, but after excluding motor vehicles dropped only 0.1%. In the past year, manufacturing production is up 6.0% and 7.3% when motor vehicle output is removed. Mining output rose 0.7% and utility output decreased 4.4%.
  • Capacity utilization fell to 81.9% in September, after reaching a six-year the high of 82.5%.
  • The Producer Price index for finished goods (PPI) fell a more-than-expected 1.3% in September after a 0.1% gain in August. Finished goods prices are up 0.9% in the past year – the lowest YOY gain since 2002. Excluding food and energy, the “core” PPI rose 0.6% last month and the YOY gain accelerated to 1.2%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: AT&T (T), Ford Motor Company (F), Halliburton Company (HAL), Kraft Foods (K), Texas Instruments (TXN), Xerox Corporation (XRX)
  • TUESDAY: Ameriprise Financial, Inc. (AMZN), Ameritrade Holding Corp. (AMTD), BellSouth Corporation (BLS), Buffalo Wild Wings, Inc. (BWLD), Glamis Gold Ltd (GLG), Phelps Dodge (PD), XTO Energy Inc. (XTO).
  • WEDNESDAY: Applebee’s International (APPB), ImClone Systems Incorporated (IMCL), P.F. Chang’s China Bistro, Inc. (PFCB), The Boeing Company (BA)
  • THURSDAY: Boyd Gaming (BYD), ExxonMobil Corporation (XOM), Starwood Hotels & Resorts (HOT), TheStreet.com (TSCM), Wendy’s International (WEN),
  • FRIDAY: Chevron (CVX).

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: none
  • WEDNESDAY: Existing Home Sales, Crude Inventories, FOMC policy statement
  • THURSDAY: Durable Orders, Initial Claims, Help-Wanted Index, New Home Sales
  • FRIDAY: Chain Deflator-Adv., GDP-Adv., Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“What it lies in our power to do, it lies in our power not to do.” – Aristotle

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