Blow off their heads

Traders,

The chessboard’s filling up with red
We make more profits when we blow off their heads
— Dead Kennedy’s “Kill the Poor”

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:

The word is out. The Dow hit an all time high.

On the heels of better than expected economic news, everything is nearly picture perfect.

And as the general public seems to have taken little notice in the Bull’s steady climb, we’re wondering when the masses might be pulled in for something like a blow-off top to occur.

And when we say things are nearly perfect, we should emphasize the one flaw we see in price-action could prove to be the loose thread that unravels it all.

The Semiconductor Index struggles, just barely above its major moving averages. This area of weakness, until corrected, holds an ominous spell over the market.

We firmly believe that the market ultimately goes wherever Tech takes us. And Semis are the heavy-weight of the sector.

But our Yellow Caution Flag won’t come out until we see heavy selling volume.

All other Technology groups hold firm with the exception of Disk Drives parked in a dodgy cup-and-handle pattern.

We are also witnessing what may be the beginning of sector rotation.

Energy charges higher, attracting capital inflows that green-light individual CAN SLIM type setups for our subscribers.

Banks also breakout to new highs as Broker Dealers hesitate to rally out of a tight, month-long consolidation pattern.

Retail quietly ticked to a new high despite economic data depicting a strong November for consumer spending.

The Dollar rallies off a key low, though is vulnerable to further selling as it trades below its major moving averages.

With Gold poised to take out the right side of a bearish head-and-shoulders pattern, we suspect it will do so as it trends counter to the Dollar.

Utilities hit new highs.

Consumer Staples hold a dominant edge over a Consumer Cyclical Index on the cusp of breaking out of more than a year-long cup-and-handle pattern.

Healthcare and Biotechnology want to trend higher in apparent stability after consolidating for weeks, as Pharmaceuticals slop around between major moving averages.

Transportation, Airlines and Defense pull back quietly, a common action before breakout acceleration occurs.

Technically speaking:

The Dow Industrial Average
($INDU), +1.12%, rallied to an all-time high.

The S&P 500
($SPX), +1.22%, rallied to a multi-year high.

Nasdaq
($COMPQ), +0.81%, finished the week at the top of a month-long trading range, poised to break out.

Russell 2000
($RUT), +0.02%, also finished the week at the top of a month-long trading range, poised to break out.

Volume indications over the past month favors buyers, though topping patterns are usually accompanied by heavy volume, like Friday’s action.

Key chart action for the week:

Charts courtesy of Stockcharts.com

What Was Important About Last Week

STOCKS:

  • Adobe Systems (ADBE) reported Q4 earnings of 0.33 per share, in line with estimates.
  • Quicksilver (ZQK) reported earnings of 0.51 per share, in line with estimates.
  • ADC Telecom (ADCT) reported earnings of 0.38 per share, and guided lower for 07.
  • CKE Restaurants (CKR) reported earnings of 0.17 per share, on cent above estimates.

ECONOMY:

  • The Consumer Price Index was unchanged in November, compared to a 0.2% expected increase.
  • Industrial production increased 0.2% for November, beating the “no change” estimate.
  • Manufacturing also increased 0.2% for November, as the growth rate trends upward,
  • Retail sales rose 1% for November, better than the expected 0.2% increase.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: FuelCell Energy, Inc. (FCEL), Hovnanian Enterprises, Inc. (HOV), Oracle (ORCL)
  • TUESDAY: Circuit City Stores Inc. (CC), Darden Restaurants (DRI), Morgan Stanley (MS), Palm, Inc. (PALM)
  • WEDNESDAY: Bed Bath & Beyond Inc. (BBBY), Biomet, Inc. (BMET), CarMax, Inc (KMX), FedEx (FDX), Jabil Circuit, Inc. (JBL), Nike (NKE), Paychex (PAYX)
  • THURSDAY: General Mills, Inc. (GIS), Red Hat, Inc. (RHT)
  • FRIDAY: Walgreen (WAG)

On the economic front we have potential market movers with:

  • MONDAY: Current Account
  • TUESDAY: Housing Starts, Building Permits, PPI, Core PPI
  • WEDNESDAY: Crude Inventories,
  • THURSDAY: Chain Deflator-Final, GDP-Final, Initial Claims, Leading Indicators, Philadelphia Fed
  • FRIDAY: Durable Orders, Personal Income, Personal Spending, Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The first and the best victory is to conquer self.” — Plato

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