Archive for January, 2007|Monthly archive page

Reason to believe a correction is near

Traders,

Maybe I’m amazed at the way you pulled me out of time
And hung me on a line
— Paul McCartney “Maybe I’m Amazed”

Market Bias:

NO BIAS

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 Bull’s resilience amazes its worshippers while frustrating the disbelievers. Markets tend to do that.

Our warning signs of distribution and a lagging Technology sector remain in place.

While timing a correction is beyond us, we know history tells us there is always some sort of reversion to the mean.

As soon as we see the mass media quacking over new highs we’ll have more reason to believe a correction is nearer.

With 25% of the S&P 500 companies reporting earnings last week, nothing stood out.

But as far as price action, the Transportation Index breaking out of a nearly year-long base adds weight to the Bull’s position.

Technically speaking:

The Dow Industrial Average

($INDU), +1.3%, climbs to another new high.

The S&P 500

($SPX), +1.8%, climbs to another new high.

Nasdaq

($COMPQ), +1.7%, shows relative weakness while mostly consolidating above its 50-day MA, below its high of two weeks ago.

Russell 2000

($RUT), +2.7%, broke out of a three-month consolidation pattern.

Volume indications favored the bulls for the week as all major indexes posted accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index and the Gold Miners Index changed little for the week. A move in the Miners index above 150 would signal a bearish reversal.

The Cylcical Index climbed easily to new highs as the Consumer Index closed just below its high of a week ago. No clear dominance of either index is clear for the last month.

Semiconductors tick higher, though remain below the 50-day MA.

Telecom cruises to a new high.

Hardware and Disk Drives represent Technology’s weakest sectors as they struggle beneath their 50-day MA’s.

Banks, Broker Dealers and Retail hold a strong up-trends.

Healthcare regained its high made two weeks ago.

REITs look almost too happy with what might look like the beginning of a parabolic move up.

Energy reclaims its 50-day MA, roughly half way from its high made two months ago to its low made three weeks ago.

What Was Important About Last Week

STOCKS:

  • Google (GOOG) reported Q4 earnings of $3.18 per share, $0.27 better than the Reuters Estimates consensus of $2.91. Revenues including Traffic Acquisition Costs rose 67.0% year/year to $3.21 bln vs. the $3.14 bln consensus.
  • Amazon.com (AMZN) reported Q4 earnings of $0.23 per share, $0.02 better than the Reuters Estimates consensus of $0.21. Revenues rose 33.9% year/year to $3.99 bln vs. the $3.78 bln consensus. Gross margins were 21.3% vs. 22.1% street expectation. Co issued upside guidance for Q1, sees revenues of $2.85-3.00 bln (consensus $2.77 bln).
  • Starbucks(SBUX) reported Q1 earnings of $0.26 per share, in-line with the Reuters Estimates consensus of $0.26. Revenues rose 21.8% year/year to $2.36 bln vs. the $2.35 bln consensus.
  • Gilead Sciences(GILD) reported Q4 earnings of $0.78 per share, $0.10 better than the Reuters Estimates consensus of $0.68. Revenues rose 47.6% year/year to $899.2 mln vs. the $847.7 mln consensus.
  • Plum Creek Timber (PCL) reports Q4 earnings of $0.32 per share, excluding $0.07 gain, $0.02 worse than the Reuters Estimates consensus of $0.34; revenues fell 3.1% year/year to $379 mln vs the $374.3 mln consensus.

ECONOMY:

  • Real GDP increased at an annual rate of 3.5% in Q4, beating the consensus forecast of 3.0%. Real GDP was up 3.4% versus a year ago.
  • Non-farm payrolls rose 111,000 in January vs. expectations of a gain of 150,000. November and December were revised up a total of 81,000.
  • The unemployment rose to 4.6%. A extreme weather in January kept 153,000 more people out of work this January versus January 2006. Removing the weather effect, the unemployment rate would have been 4.5%, the same as November and December.
  • The ISM Manufacturing index declined to 49.3 in January from 51.4 in December (the consensus expected 51.7).

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Cognizant Technology Solutions (CTSH), Randgold Resources Limited (GOLD), Ryanair Holdings (RYAAY),
  • TUESDAY: InterActiveCorp (IACI), The Cheesecake Factory (CAKE), Tyco International (TYC)
  • WEDNESDAY: Dean Foods (DF), Sara Lee (SLE), Sunstone Hotel Investors Inc. (SHO), Walt Disney (DIS)
  • THURSDAY: Aetna Inc. (AET), Palomar Medical Technologies, Inc. (PMTI), Panera Bread (PNRA), Qwest Communications (Q), Tribune (TRB), Waste Management (WMI)
  • FRIDAY: Coventry Health Care, Inc (CVH)

On the economic front we have potential market movers with:

  • MONDAY: ISM Services
  • TUESDAY: none
  • WEDNESDAY: Productivity-Prel, Crude Inventories, Consumer Credit
  • THURSDAY: Initial Claims, Wholesale Inventories
  • FRIDAY: none

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Keep away from people who belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.” — Mark Twain

Cloudy Forecasts

Traders,

We lie on a cloud – we lie
— U2 “Another Time, Another Place”

Market Bias:

NO BIAS

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 price-action cooling on the major indexes, forecasts for lower earnings cloud the Bull’s outlook.

Wherever earnings go, the market eventually follows.

S&P 500 earnings are on track for a 10% increase for Q4. About two-thirds of the companies are still due to report. So far the trend is “things are good, but not what they were for the preceding periods.”

We anticipate month-end window dressing to give the indexes a boost early this week, but in the big picture new trends taking form suggest our so called “confirmed rally” is seriously challenged.

The Nasdaq 100 closed the week below its 50-day moving average. Technology as a group crumbles despite the Semiconductors’ modest rally off a three-month low.

We see key shifts in sentiment taking place.

The U.S. 10-year Note Rate closed above its 50-day moving average for the first time in about six-months.

Commodity Stocks regain territory above major MA’s, poised to break out of a nearly year-long base.

We suspect The Gold & Silver Miners Index will win out over the struggling U.S. Dollar Index.

CANSLIM opportunities have been few, but we’re ready to surf the next wave whether it be Long or Short.

Technically speaking:

The Dow Industrial Average

($INDU), -0.6%, on the the verge of breaking its uptrend, remains above its major MA’s.

The S&P 500

($SPX), -0.6%, reversed course sharply after hitting a new high. Support of 50-day MA will be first downside test.

Nasdaq

($COMPQ), -0.6%, clings to its 50-day MA, on the cusp of a failed breakout situation.

Russell 2000

($RUT), -0.4%, traces out a two month consolidation pattern, poised to break out or down from its 50-day MA.

Volume indications weighs to the bears as the Dow posts two days of distribution and the S&P 500, Nasdaq and Russell 2K each post one day of distribution. The S&P 500 and Nasdaq each gave us two days of accumulation for the week, but their distribution days out shined them.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index inched higher as it fights the major resistance mark of its 40-week MA.

Gold miners pushed higher, closing just under its major MA’s.

The Consumer and Cyclical stock indexes both pulled back gently.

Light pullbacks in Banks, Broker Dealers and Retail demonstrate potential areas of resilience in the face of a market correction.

Hardware and Disk Drives’ struggle with major MA’s make them strong candidates for further selling.

Healthcare pulls back somewhat swiftly, though a strong uptrend keeps its form.

REIT‘s show no signs of significant selling pressure.

Transportation finds support at its 50-day MA as a nearly year-long base has formed.

Airlines retreated back into their lower base where it faces a critical support test.

Energy stocks as a group attempt to rally while technically neutral between major MA’s. Oil Service stocks weigh the sector’s bulls down, unable to regain ground above its major MA’s.

What Was Important About Last Week

STOCKS:

  • Microsoft (MSFT) reported Q2 earnings of $0.26 per share, $0.03 better than the Reuters Estimates consensus of $0.23. Revenues rose 6.0% year/year to $12.5B vs. the $12B consensus.
  • Texas Instruments(TXN) reported Q4 earnings of $0.39 per share, $0.01 better than the Reuters Estimates consensus of $0.38. Revenues fell 7.9% for the year to $3.46B vs. the $3.43B consensus.
  • ConocoPhillips posted a 13% drop in earnings as its refining and marketing margins tightened. Revenue fell 19% to $41.5B.
  • Yahoo (YHOO) reported Q4 earnings of $0.16 per share, $0.03 better than the Reuters Estimates consensus. Revenues rose 15.0% for the year to $1.23B vs. the $1.22B consensus.
  • eBay (EBAY) reported Q4 earnings of $0.31 per share, $0.03 better than the Reuters Estimates consensus of $0.28. Revenues rose 29.4% for the year to $1.72B vs. the $1.67B consensus.
  • Advanced Micro Devices (AMD) reported Q4loss of $0.04 per share, $0.12 worse than the Reuters Estimates consensus of $0.08. Revenues rose 31.2% for the year to $1.77B vs. the $1.74B consensus..
  • Qualcomm (QCOM) reported Q1 earnings of $0.43 per share, $0.01 better than the Reuters Estimates consensus of $0.42; revenues rose 16.0% for the year to $2.02B vs the $2.07B consensus.
  • Amgen (AMGN) reported Q4 earnings of $0.93 per share, $0.01 worse than the Reuters Estimates consensus of $0.94. Revenues rose 17.2% for the year to $3.84B vs the $3.76B cnsensus.

ECONOMY:

  • New single-family home sales increased 4.8% in December to an annual rate of 1.120M. This was stronger than the 1.052M consensus and the fastest rate of sales since April 2006. The growth in new home sales was mainly due to strength in the Northeast and Midwest.
  • Existing home sales declined 0.8% in December to an annual rate of 6.22M, a slightly worse than the 0.5% decrease consensus.
  • New orders for durable goods increased 3.1% in December, slightly better than the consensus. New orders excluding transportation increased 2.3%, which was much better than expectations of a 0.5% gain.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Phelps Dodge (PD), Schering-Plough (SGP), Tyson Foods (TSN), Verizon (VZ)
  • TUESDAY: 3M Company (MMM), Burger King (BKC), General Motors Corp. (GM), Jones Lang LaSalle (JLL), Merck & Co., Inc. (MRK), Sony Corporation (SNE), United States Steel Corp. (X), Wyeth (WYW)
  • WEDNESDAY: CBOT HLDGS INC (BOT), Google (GOOG), Kraft Foods (KFT), Pulte Homes Inc. (PHM), Starbucks (SBUX)
  • THURSDAY: Electronic Arts (ERTS), ExxonMobil Corporation (XOM), Investment Technology Group (ITG), Starwood Hotels & Resorts (HOT), Valero Energy Corp. (VLO)
  • FRIDAY: Harmony Gold Mining (HMY), Wendy’s International

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Consumer Confidence
  • WEDNESDAY: Employment Cost Index, GDP-Adv., Chain Deflator-Adv., Employment Cost Index, Chicago PMI, Construction Spending, Crude Inventories, FOMC policy statement,
  • THURSDAY: Personal Income, Personal Spending, Initial Claims, ISM Index, Auto Sales, Truck Sales
  • FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, Factory Orders, Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The secret of discipline is motivation. When a man is sufficiently motivated, discipline will take care of itself.” –Sir Alexander Paterson

This Year's Fashion

Traders,

Fashion! Turn to the left
Fashion! Turn to the right
Oooh, fashion!
— David Bowie “Fashion”

Market Bias:

NO BIAS

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 Technology sector falls out of fashion with traders aggressively selling on earnings news. Their disaproval leaves bearish distribution marks on the charts.

The market is in a confirmed rally, but back-to-back distribution days in the major indexes shows hesitation.

Bad reactions to good news translates to clear weakness. Despite better than expected earnings from tech companies Apple and IBM, the market found reason to sell them.

The Semiconductor Index collapsed below its major moving averages.

Healthcare, Drugs and Biotechnology emerge as popular areas to bid for.

Transportation reclaimins distance lost from its yearly high of two months ago.

Airlines in particular hold a solid up-trend from its low put in last summer. The index launches from a two-year base.

On the economic front, inflation remains a threat. Expect further turbulence in the housing market. The Fed has its hands full as speculation runs rampant for its next interest rate move.

Technically speaking:

The Dow Industrial Average

($INDU), +0.1%, traded indecisively with three days of little movement, two of which were distribution days.

The S&P 500

($SPX), 0%, showed gradual pullback action in price, though also registered two days of distribution

Nasdaq

($COMPQ), -2.1%, took a violent spill with two distribution days.

Russell 2000

($RUT), -1.1%, battles with the 50-day moving average.

Volume indications portray bearishness with multiple distribution days had across the major indexes.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index remains vulnerable to further downside as it fights its 40-week MA. Gold Miners hold a bearish head-and-shoulders on the weekly chart, though expect conditions to reverse with a Dollar slide.

The Consumer Index and Cyclical Index tick higher as the race for dominance in the new year goes unresolved.

Banking, Broker Dealers, REITs, Defense and Retail maintain technical up-trends.

Energy attempts to build upward momentum from below its major moving averages. The index posted a failed breakout this year.

Commodity Equities prepare to launch from a nine-month bullish cup-and-handle pattern.

What Was Important About Last Week

STOCKS:

  • Apple (APPL) reported Q1 earnings of $1.14 per share, $0.36 better than the Reuters Estimates consensus of $0.78. Revenues rose 23.8% year/year to $7.12B vs. the $6.43B consensus.
  • IBM (IBM) reported Q4 earnings of $2.20 per share, $0.01 better than the Reuters Estimates consensus of $2.19. Revenues rose 7.5% year/year to $26.26B vs. the $25.67B consensus.
  • Intel (INTC) reported Q4 earnings of $0.26 per share. Revenues fell 5.0% year/year to $9.69B vs. the $9.43B consensus. The company issued in-line guidance for Q1, sees revenues of $8.7-9.3B vs. the $8.93B consensus.
  • Xilinx (XLNX) reported Q3 earnings of $0.24 per share, excluding $0.02 gain, $0.01 better than the Reuters Estimates consensus of $0.23. Revenues rose 0.2% year/year to $450.7M vs. the $451.2M consensus. Co issued downside guidance for Q4, sees revenues flat to down 5%.
  • E*Trade (ET) reported Q4 earnings of $0.40 per share, $0.01 better than the Reuters Estimates consensus of $0.39. Revenues rose 31.3% year/year to $628.8M vs. the $626.8M consensus.

ECONOMY:

  • The Producer Price Index (PPI) was up 0.9% in December vs. a consensus of a 0.5%.increase. This i on the heels of a 2.0% increase in November. The The PPI is up 1.2% versus a year ago but up at a 5.1% annual rate in the past three months.
  • The Consumer Price Index (CPI) was up 0.5% in December vs. the expectation of 0.4%. The CPI is up 2.5% versus a year ago.
  • Energy prices were up 4.6% in December, accounting for most of the increase in the CPI. Excluding energy, the CPI was up 0.1%. The “core” CPI, which excludes both food and energy, was up 0.2%, the largest increase in three months.
  • The “core” CPI is up 2.6% versus a year ago.
  • Housing starts increased 4.5% in December to 1.642 million units at an annual rate vs. the 1.565 million unit rate consensus. Starts fell for the tenth straight month to 1.564 million. Starts are down 18% versus a year ago. All of the increase in starts was for multiple-unit structures, not single-family homes. Single-unit starts dropped 4.1% while multiple-unit starts increased 42.1%.
  • New building permits increased 5.5% in December to 1.596 million units at an annual rate, which was slightly above the consensus. The rise in permits was the first since January 2006, but more than 80% of the increase was in multiple-unit structures, not single-family homes. Permits are down 24.3% versus a year ago.
  • Industrial production increased 0.4% in December, vs. the consensus of a 0.1% gain. Production was revised downward for both October and November. Production is up 3.0% over the last year.
  • High-tech equipment production rose 2.2% in December and up 27.3% versus a year ago. Manufacturing production was up 0.7% in December. Motor vehicle production was up 2.6% in December. Manufacturing production is up 3.3% versus a year ago.
  • Capacity utilization increased to 81.8% vs. a consensus of 81.7%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Texas Instruments (TXN)
  • TUESDAY: Bank of America Corporation (BAC), Brinker International (EAT), Coach, Inc. (COH), Johnson & Johnson (JNJ), QLogic (QLGC), United Technologies (UTX), Yahoo, Inc. (YHOO)
  • WEDNESDAY: Abbott Laboratories (ABT), ConocoPhillips (COP), eBay (EBAY), General Dynamics (GD), Netflix (NFLX), Rambus Inc. (RMBS)
  • THURSDAY: AT&T (T), Beazer Homes USA Inc. (BZH), Cash America International (CSH), Ford Motor Company (F), ImClone Systems Incorporated (IMCL)
  • FRIDAY: Caterpillar Inc. (CAT)

On the economic front we have potential market movers with:

  • MONDAY: Leading Indicators
  • TUESDAY: none
  • WEDNESDAY: Crude Inventories
  • THURSDAY: Initial Claims, Existing Home Sales, Help-Wanted Index,
  • FRIDAY: Durable Orders, New Home Sales

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“If it turns out that my best wasn’t good enough, at least I won’t look back and say that I was afraid to try; failure makes me work even harder.” – Michael Jordon

Topsy-Turvy

Traders,

Shake your pockets out
Pass it on, pass it down
Topsy turvy town, topsy turvy town
Radiohead “Down Is The New Up”

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:

A topsy-turvy start to the new year marked by heavy distribution gave us doubts over this bull.

But with institutional buying slamming bids this week, we’ve once again hoisted our Green Flag.

In this business it pays to be flexible. We simply let the market dictate our actions and leave any stubborn desire to be right aside.

The Dow hit all-time closing high, the Nasdaq a 6-year high, and the S&P 500 a 5-year high. If this is the prelude to a climax, there’s nothing to be seen of yet.

Bellwether Technology stocks are leading the way. Its key Semiconductor component begins to inch out of a technically bearish trading pattern it held for nearly all last year.

Broker Dealers busted out of a bullish cup-and-handle pattern, a major positive for the broader market.

Airlines and Defense rally out of base patterns, a strong vote of confidence for the Transportation Index which is newly poised to follow suit.

CANSLIM stock new highs also pick up.

A Critical fight between the Dollar and Gold will likely set a new tone once resolved. A collapsing dollar will have consequences for U.S. equities.

Economic data comes in strong. Employment, unemployment claims, car and truck production, construction, and the ISM indexes for both manufacturing and services all posted above expectations.

Weakness in housing has so far not spilled over to other areas of the economy.

The Fed’s next move will likely be a biggie.

Technically speaking:

The Dow Industrial Average

($INDU), +1.27%, hit an all-time closing high.

The S&P 500

($SPX), +1.49%, hit a 5-year high.

Nasdaq

($COMPQ), 2.82%, hit a 6-year high.

Russell 2000

($RUT), 2.37%, lags the major indexes.

Volume indications show institutional buying for the new year.

Key chart action for the week:

Charts courtesy of Stockcharts.com

Consumer Staples and Cyclical stocks both achieved new highs with no clear bias for either apparent in the New Year.

Banking stocks maintain their uptrend.

Health Care stocks hit new highs.

Biotechnology rallies convincingly from a key technical low.

REITs hold on to a strong uptrend.

Home Builders inch higher from the key resistance zone of a 50-day and 200-day crossing.

Energy holds a bearish bias after faltering from a base breakout.

What Was Important About Last Week

STOCKS:

  • Alcoa (AA) said Q406 earnings rose 60% revenue surged to $7.84 billion from $6.54 billion a year ago.
  • Genentech (DNA) reported Q406 earnings up 75% to 55 cents a share from 31 cents a share a year earlier as revenue rose 43%.

ECONOMY:

  • December retail sales rose 0.9% versus a consensus expected 0.7%.
  • Retail sales are up 5.4% versus December 2005. Gas stations, restaurants, and bars posted strong increases. Gas station sales increased 3.8% in December. Electronics and appliance sales were also strong, up 3% in December after a 5.8% gain in November due to sales of flat screen TV’s.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Ameritrade Holding Corp. (AMTD), Forest Laboratories, Inc. (FRX), FreeportMcMoRan Copper & Gold (FCX), Intel Corporation (INTC), Wells Fargo & Company (WFC)
  • WEDNESDAY: Apple Inc. (AAPL), J.P. Morgan Chase & Co (JPM), Lennar Corporation (LEN), Southwest Airlines (LUV), Washington Mutual (WM)
  • THURSDAY: Capital One Financial Corp. (COF), Harley-Davidson (HOG), Merrill Lynch (MER), The Bank of New York (BK), UnitedHealth Group Inc. (UNH), Xilinx, Inc. (XLNX)
  • FRIDAY: Citigroup Inc. (C), General Electric (GE), Motorola Inc. (MOT), Schlumberger (SLB)

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: NY Empire State Index
  • WEDNESDAY: Core PPI, PPI, Net Foreign Purchases, Capacity Utilization, Industrial Production, Crude Inventories, Fed’s Beige Book
  • THURSDAY: Building Permits, Core CPI, CPI, Housing Starts, Initial Claims, Core CPI, Housing Starts, Building Permits, Initial Claims, Leading Indicators, Philadelphia Fed
  • FRIDAY: Mich Sentiment-Prel.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Concentration can be cultivated. One can learn to exercise will power, discipline one’s body and train one’s mind.” – Anil Ambani

Get On Top

Traders,

Complications of a mastermind
Last temptation of my kind
Extra planetary sign
When do we align
All in time Right on
— Red Hot Chili Peppers “Get On Top”

Market Bias:

NO BIAS

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:

Selling reigns the first three day trading days of the year as action suggests a near-term top.

CANSLIM traders are best off avoiding new entries.

First quarter earnings reports start up next week, and will hit full-swing the week of January 15. Will it be double digit growth for the 19th quarter in a row?

Looking at key chart action:


Charts courtesy of Stockcharts.com

The Dow Industrial Average ($INDU), -0.5%, hit another new high on high volume before pulling back.

The S&P 500 ($SPX), -0.6%, failed to hit a new high with The Dow as distribution left a bearish mark on the charts.

The Nasdaq ($COMPQ), 0.8%, showed promise with accumulation, yet remains in an eight-week trading range.

Russell 2000 ($RUT), -1.5%, stumbles as it breaks an uptrend by hitting a monthly low.

Technology gains an edge in popularity, which is typical of January action. But overall the sector is a far cry from leadership status.

Semiconductors ended the week unchanged, as the index struggles amidst its sideways trending averages.

Energy stocks collapse below the 50-day average as they find support at the 200-day mark.

On the Consumer vs. Cyclical front, we see both indexes hesitating, leaving Consumers vulnerable to a correction with the Cyclicals yet break out with the rest of the market.

Banking stocks pulled back sharply in fashion typical of a correction.

Retail is locked in what will either become a consolidation to launch from, or a rounding top to break down from.

Healthcare shows promise as it inches above its major moving averages, just off new highs.

REITs trade on the 50-day average, close to breaking down from an uptrend.

Homebuilders begin to breakdown from a technically bearish Gartley pattern.

Transportation showed relative strength, though struggles below its 50-day moving average.

Airlines continue to hold promise in a lower-base formation.

As the Dollar Index continues to rally off December’s lows, Gold has reversed course sharply as it falls below its major moving averages.

The Commodity Index is also in bearish form with a year-long head-and-shoulders in place. A fulfillment of this text-book pattern would indicate a new trend in place for the year.

Volume indications showing three days of distribution on the Nasdaq and Russell 2K for the last two weeks gives evidence of a correction.

What Was Important About Last Week

STOCKS:

  • Best Buy reported a 7% increase in same-store sales and said annual earnings would be in line in line with Wall St. estimates.
  • Homebuilder Lennar said fourth-quarter earnings will come below previous estimates.

ECONOMY

  • The Labor Department said employers added 167,000 new jobs to payrolls last month and that job creation in October and November was even better than had been reported, higher by a net 29,000 jobs.
  • The unemployment rate held at 4.5%
  • December 12 FOMC minutes noted “downside risks to economic growth.”
  • The December ISM manufacturing index moved up to 51.4 from 49.5 in November.
  • The ISM service index came in at 57.1 in December from 58.9 in November.
  • November construction spending fell 0.2% and November factory orders were up less than expected.
  • Oil fell to $56.31 a barrel.
  • 10-year note yield was left little changed at 4.65%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Schnitzer Steel Industries, Inc. (SCHN)
  • TUESDAY: ALCOA Inc (AA), Ruby Tuesday (RI)
  • WEDNESDAY: California Pizza Kitchen (CPKI), Infosys Technologies LTD (INFY)
  • THURSDAY: none
  • FRIDAY: none

On the economic front we have potential market movers with:

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Take the pains required to become what you want to become, or you might end up becoming something you’d rather not be. That is also a daily discipline and worth considering.” –

Donald Trump