Spin again and roll on

Traders,

Great big wheel is away up High
Carry you way up in the Sky;
Wheel of Life will spin again and roll on.
— Woody Guthrie “Wheel of Life”

Market Bias:
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:

When nothing appears able to break this Bull’s back, there’s not much to complain about these days.

But even the fiercest of bulls eventually get tired, It’s common sense that this market will eventually put in a sizable retreat, though the way that happens may not be that common.

On the heels of a light corporate news week, and a less than shocking Employment report, we take notice that there’s not a whole lot of chatter about the major indexes pegging in highs.

As the Dow inches toward an all-time high, we believe it won’t be until everyone acknowledges it that it will be over. As the last buyers are lured in, sellers will be in control.

The Dollar puts in a relief rally after media pundits scream its all over. Meanwhile The Gold & Silver Index pullback in bullish cup-and-handle mode, threatening to take out a bearish right shoulder on the weekly chart.

Hints of the next market phase will likely come from the Telecom and REIT leadership, which until broken, only confirm this bull’s character.

New money flowing into Energy and Industry Metals could be our next leadership, which has historically been a bearish sign for the broader market as companies paying higher prices for their respective commodities a hindrance to profits.

But as Crude Oil prices have far to go before reversing a downtrend, we recognize new breakouts from CANSLIM type Growth Stocks in the Energy and Industry Metal sectors could be telling of another up leg in Energy. Commodity stocks tend to lead their underlying commodities.

The Homebuilders that lead the market’s decline over the summer attempt to reverse losses, but find massive overhead resistance.

The Consumer Index dominates its Consumer Staples counterpart with another new high for the year.

The Semiconductor Index flirts with breaking to highs not seen since the spring before shying away. This sector continues to stick out like a sore thumb for its inability to rally with the market. We continue to believe that the market will eventually go where the chip makers go.

Banks reverse a bearish rounding top pattern and are now poised to break out of a cup-and-handle.

Broker Dealers, Defense and Transportation, all cocked in cup-and-handle mode, vie to be the next sector to breakout.

Airlines ready to launch from a lower base could be hindered by higher Energy prices, but the environment remains positive for the industry.

Retail inched toward a new high, though backed off as the sector fails to build momentum comparable to the major indexes.

Technically speaking:

The Dow Industrial Average
($INDU), 0.9%, shied away from making all time highs, though closed the week near session highs.

The S&P 500
($SPX), 0.9%, moved to a new multi-year high

Nasdaq
($COMPQ), 1.0%, consolidated near its highs for the week.

Russell 2000
($RUT), 1.5%, poked its way to a new high for the year.

Volume indications show two distribution days for the S&P500 this week, while the environment for the past month illustrates buyer dominance. Further distribution will confirm weakness.

Key chart action for the week:

Charts courtesy of Stockcharts.com

What Was Important About Last Week

STOCKS:

  • National Semiconductor (NSM) reported earnings in line with estimates at 0.27 per share, though revenue was down almost 8% from a year ago.
  • Interdigital Communications (IDCC) expects Q4 revenue about $3-4M vs. previous expectations of under $70M.
  • Henry Schein (HSIC) lowered its earnings guidance to nearly 10 cents below a previous consensus of 0.79 per share.
  • Eli Lilly (LLY) believes its 2007 earnings will rise between 1 and 8% from new treatments involving diabetes and depression.
  • Merck (MRK) believes its 2007 earnings will rise between 5 an 14% from cost cutting and vaccine sales.

ECONOMY:

  • Non-farm payrolls rose to 132,000, beating expectations.
  • The Household survey also beat expectations, reporting 277,000 new jobs for November. The labor force rose to 383,000, with a slight rise to the unemployment rate to 4.5%.
  • ISM non-manufacturing rose to 58.9 for November, the highest level in six month. Expectations for this measure of growth in the services sector were for a drop to 55.5, from October’s reading of 57.1.
  • The European Central Bank raises its key interest rate a quarter point to 3.5%.
  • Initial jobless claims fell 34,000 for the week. Analysts point to Thanksgiving skewing data as the four-week average rises to 328,750.
  • New York City voted to outlaw most trans fats from its restaurants.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Best Buy Co., Inc. (BBY), Dollar General Corp. (DG), Goldman Sachs (GS)
  • WEDNESDAY: none
  • THURSDAY: Adobe Systems (ADBE), Pier 1 Imports, Inc. (PIR), Quiksilver (ZQK)
  • FRIDAY: j2 Global Communications (JCOM)

On the economic front we have potential market movers with:

  • MONDAY: Wholesale Inventories
  • TUESDAY: Trade Balance, Treasury Budget, FOMC policy statement
  • WEDNESDAY: Business Inventories, Retail Sales, Crude Inventories
  • THURSDAY: Export Prices ex-ag., Import Prices ex-oil, Initial Claims
  • FRIDAY: CPI, Core CPI, NY Empire State Index, Net Foreign Purchases, Capacity Utilization, Industrial Production

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“It is better to conquer yourself than to win a thousand battles. Then the victory is yours. It cannot be taken from you, not by angels or by demons, heaven or hell.”– Buddha

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