Archive for February, 2007|Monthly archive page

The wreck of '07

Traders,

Headaches and heartaches and all kinds of pain all the part of a railroad train
— “Casey Jones”, as performed by Johnny Cash

Market Bias:

SELLERS’ 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

CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Severely beaten, but not dead, the Bull succumbs to a bout of heavy selling.

Some say it was the thrashing of China’s stock market that influenced the worst week on the Dow in more than four years. But a day prior, former Fed head Alan Greenspan suggested a recession for 2007.

The U.S. market serves as lead engine for the global economy. What’s bad for us would be worse for China.

As far as news and reactions are concerned, it’s not that volatility in China’s market spells trouble, it’s that the U.S. market appears to have wanted an excuse to sell off.

With major U.S. indexes hitting record highs for months we’ve been long due for heavy selling.

The technical picture of the market has been transformed from Bullish beauty to Bearish uncertainty. Markets hate uncertainty, and we suspect it will be some time until new highs are reclaimed,

How long and deep a correction might run is anyones guess. The last thing the average market player would expect at this juncture is a sharp rally. More than often after a heavy sell-off we get a rally to screw over newly taken short positions.

We’re on the watch for volume patterns. Signs of downside volume drying up will indicate a correction less severe. Continued heavy selling will pave the way for short setups.

With the majority of sectors cratering through their 50-day averages, we are now looking at 200-day averages as support.

The S&P 500’s P&F chart represents a climax turned pullback. Price-action for the week ended at the support of the upper trend-line of a channel breakout. In English this means we’re still alive above a key price level.

Technically speaking:

The Dow Industrial Average

($INDU), -4.2%, tears through its 50-day MA, next support at the 200-day MA.

The S&P 500

($SPX), -4.4%, tears through its 50-day MA, next support at the 200-day MA.

Nasdaq

($COMPQ), -5.8%, tears through its 50-day MA, next support at the 200-day MA.

Russell 2000

($RUT), -6.2%, tears through its 50-day MA, next support at the 200-day MA.

Volume indications flash bright red after massive distribution spreads across the broader market Tuesday.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index slipped further below its major moving averages, though railed softly in the aftermath of Tuesday’s sell-off.

The Gold and Silver Miners Index took it on the chin with the rest of the market. Given the relative weakness of this sector we’re not surprised to see money leave. The bearish head-and-shoulder pattern remains ripe for a reversal. Should the Dollar continue to fall we suspect a rally will eventually happen, though should the Dollar gain upside footing – all bets are off.

The Consumer Index falls below its 50-day MA while the Cyclical Index finds support at its 50-day MA. If the Cyclical Index can hold above its 50-day it will bode well for the Bulls of the broader market.

The Semiconductor Index gets slammed after breaking north of a key trend line. The sudden reversal leaves a strong bearish statement.

Banks and Broker Dealers fall south of the 50-day MA and find support at the 40-week MA.

Retail slips below its 50-day MA.

In the tech sector, Internet, Software, Computer Tech and Hardware drop below their 50-day MA’s. Disk Drives fall further below this mark.

Telecoms show relative strength in finding support at the 50-day MA.

Healthcare, Pharmacetuticals and Biotechnology fall below their 50-day MA’s.

REITs close just below their 50-day average.

Transportation and Defense also finish the week just under their 50-day MAs.

Airlines find support at the 40-week average, and show bearishness as they sink into its two-year lower base.

Energy shows relative strength for the week, though declines to its 200-day MA. Like Gold and Silver Miners, the index traces out a bearish head-and-shoulders pattern. We love to see these technical patterns do the opposite of what they’re said to do.

What Was Important About Last Week

STOCKS:

  • Dell (DELL) reported Q4 (Jan) GAAP EPS of $0.30 (EPS ex-items is $0.26), vs the Reuters Estimates consensus of $0.28. Revenues fell 5.1% year/year to $14.4 bln vs the $14.72 bln consensus.
  • Marvell Technology (MRVL) reported Q4 (Jan) revs of $622.0 mln vs $624.3 mln consensus.
  • Gap (GPS) reported Q4 (Jan) earnings of $0.27 per share, reflecting Forth & Towne’s expected net loss of $0.04 per diluted share through closure, $0.03 better than the Reuters Estimates consensus of $0.24.
  • Nordstrom (JWN) reported Q4 (Jan) earnings of $0.89 per share, $0.01 worse than the Reuters Estimates consensus of $0.90. Revenues rose 14.6% year/year to $2.63 bln vs the $2.63 bln consensus.
  • American International Group (AIG) reported Q4 (Dec) earnings of $1.50 per share, excluding non-recurring items, in-line with the Reuters Estimates consensus of $1.50.
  • Wynn Resorts (WYNN) reported Q4 (Dec) earnings of $0.53 per share, $0.06 better than the Reuters Estimates consensus of $0.47. Revenues rose 109.2% year/year to $563.6 mln vs the $488.1 mln consensus.
  • Kohl’s (KSS) reported Q4 (Jan) earnings of $1.48 per share, $0.05 better than the Reuters Estimates consensus of $1.43. Revenues rose 16.7% year/year to $5.43 bln vs the $5.4 bln consensus.
  • Dress Barn (DBRN) reported Q2 (Jan) earnings of $0.24 per share, in-line with the Reuters Estimates consensus of $0.24. Revenues rose 9.5% year/year to $340.3 mln vs the $336.2 mln consensus.
  • Petsmart (PETM) reported Q4 (Jan) earnings of $0.54 per share, excluding non-recurring items, $0.02 worse than the Reuters Estimates consensus of $0.56. Revenues rose 11.1% year/year to $1.17 bln vs the $1.17 bln consensus.

ECONOMY:

  • Real GDP was revised to show a 2.2% growth rate in Q4 versus the originally reported 3.5% and the consensus forecast of 2.3%. The GDP chain-weighted price index was revised up to 1.7% from an original estimate of 1.5%. Nominal GDP (or aggregate demand) rose 3.9% at an annual rate in Q4 (originally +5.0%).
  • New orders for durable goods declined 7.8% in January, a much larger drop than the consensus expected. New orders excluding transportation lost 3.1%, also a larger drop than the consensus forecast. New orders are up 2.1% versus a year ago, 0.2% excluding transportation.
  • New single-family home sales declined 16.6% in January to an annual rate of 937,000, the lowest since February 2003. This was much weaker than the 1.08 million rate expected by the consensus and could be due to bad weather in January. The drop in home sales occurred across all four major regions but was most substantial in the West.
  • The median price of a new home was $239,800 in January, a slight increase from December but down 2.1% versus a year ago.
  • Existing home sales increased 3.0% in January to an annual rate of 6.46 million, much better than the consensus expected level of 6.24 million.
  • The median price of an existing home fell to $210,600 in January, down 2.8% versus a year ago and the lowest level since April 2005.
  • The ISM Manufacturing index rose to 52.3 in February from 49.3 in January. The consensus expected a smaller gain to 50.0.
  • Personal income increased 1.0% in January, beating the consensus expectation of a 0.3% gain. Personal income is up 5.3% versus a year ago. Disposable income, which is income after taxes, increased 0.8% and is up 4.8% versus a year ago.
  • Personal spending increased 0.5% in January, slightly more than the consensus expected. Spending was strong for both durable goods and services.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Interstate Hotels & Resorts, Inc. (IHR)
  • TUESDAY: CEC Entertainment (CEC), Chico’s FAS, Inc. (CHS),
  • WEDNESDAY: American Eagle Outfitters Inc (AEOS), Ashford Hospitality Trust, Inc. (AHT), BJ’s Wholesale Club (BJ), Men’s Wearhouse (MW)
  • THURSDAY: Big 5 Sporting Goods Corporation (BGFV), Blue Coat Systems (BCSI), Goldcorp (GG), National Semiconductor (NSM), Urban Outfitters (URBN), Wind River Systems (WIND)
  • FRIDAY: Big Lots, Inc. (BIG)

On the economic front we have potential market movers with:

  • MONDAY: ISM Services
  • TUESDAY: Productivity-Rev., Factory Orders
  • WEDNESDAY: Crude Inventories, Fed’s Beige Book, Consumer Credit
  • THURSDAY: Initial Claims
  • FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Trade Balance, Unemployment Rate

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“It’s easy to have faith in yourself and have discipline when you’re a winner, when you’re number one. What you’ve got to have is faith and discipline when you’re not yet a winner.” – Vince Lombardi

CANSLIM SETUPS

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Nasdaq charges broad market

Traders,

Can’t see nothin‘ in front of me
Can’t see nothin‘ coming up behind
— Bruce Springsteen “The Rising”

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

CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Te Nasdaq livens up the short week by hitting a six-year high.

With the Nasdaq 100 poised to breakout of a bullish cup-and-handle pattern, and the Semiconductor Index coming closer to a ten-month high, the broader market gets even hotter.

For most of the past two-months we’ve been concerned the Tech sector’s relative weakness would pull the major indexes lower. Ideally we’ll have Tech lead us higher.

As the Dow and S&P 500 pull back gently, we have no indications of vulnerability to this Bull.

Pullbacks are natural, but we want to keep an eye on volume to monitor institutional dumping. So far we only have modest distribution on the Dow and S&P.

We also want to use pullbacks as a litmus test for strength. Industry groups and individual names that weather broad market pullbacks show us durability. Durable stocks are usually the ones bid up well when the market is rising.

Technically speaking:

The Dow Industrial Average

($INDU), -0.9%, staged a modest and orderly decline as it maintains position above its 50-day MA.

The S&P 500

($SPX), -0.3%, sold off slightly, holding position comfortably above its 50-day average.

Nasdaq

($COMPQ), +0.8%, inched to a sis-year high.

Russell 2000

($RUT), +1.0%, was the strongest index for the week, moving gently to a new high.

Volume indications for the week show the Dow and S&P 500 with two days of distribution, the Nasdaq with tow days of accumulation and the Russell 2K with one day of accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The US Dollar Index holds steady below its 50-day MA.

The Gold and Silver Miners Index moves to a two-month high, and closer to negating a bearish head-and-shoulders pattern on the weekly chart.

The Consumer Index sold off in pullback fashion as the Cyclicals Index treads near its highs.

Banks turn sharply down in Friday’s action, the index is comfortably above its major moving average.

Broker Dealers halt a sell-off at the 50-day MA, as the index mostly consolidates for the year.

Retail hit a new high.

In the Tech sector, Internet, Software, and Telecoms hit new highs.

Healthcare sold-off to the 50-day average which serves as the lower edge of a trading range for the year.

Pharmaceuticals closed below the 50-day MA for the first time in nearly two months.

Biotechnology consolidates above the 50-day MA.

REITs pull back, with the next area of support at the 50-MA.

Transportation hit a new high.

Airlines struggle below their 50-day MA.

Defense hit a new high.

Energy stocks staged a modest rally and is poised to hit new highs for the year.

What Was Important About Last Week

STOCKS:

  • H&R Block (HRB) reported Q3 (Jan) earnings of $0.08 per share, $0.04 worse than the Reuters Estimates consensus of $0.12. Revenues rose 11.0% year/year to $955.1 mln vs. the $1126.5 mln consensus.
  • Intuit (INTU) reported Q2 (Jan) earnings of $0.45 per share, $0.03 better than the Reuters Estimates consensus of $0.42. Revenues rose 2.8% year/year to $763.3 mln vs. the $763 mln consensus.
  • Abercrombie & Fitch (ANF) reported Q4 (Jan) earnings of $2.14 per share, in line with the Reuters Estimates consensus of $2.14. Revenues rose 18.5% year/year to $1.14 bln vs. the $1.13 bln consensus.
  • Whole Foods Market (WFMI) reported Q1 (Dec) earnings of $0.38 per share, $0.02 worse than the Reuters Estimates consensus of $0.40. Revenues rose 12.2% year/year to $1.87 bln (consensus $1.89 bln); gross profit decreased 24 basis points to 34.3% of sales.
  • ADI (ADI) reported Q1 (Jan) non-GAAP earnings of $0.40 per share, $0.01 worse than the $0.41 non-GAAP First Call consensus, which is not comparable to the Reuters Estimates consensus of $0.38. Revenues rose 11.4% year/year to $692 mln.
  • Salesforce.com (CRM) reported Q4 (Jan) GAAP EPS of $0.00 (roughly $0.10 ex-items) vs. the Reuters Estimates consensus of $0.07. Revenues rose 58.3% year/year to $144.2 mln vs. the $142.8 mln consensus.
  • Hewlett-Packard (HPQ) reported Q1 (Jan) earnings of $0.65 per share, $0.03 better than the Reuters Estimates consensus of $0.62. Revenues rose 10.7% year/year to $25.08 bln vs. the $24.3 bln consensus.
  • Medtronic (MDT) reported Q3 (Jan) earnings of $0.61 per share, $0.03 better than the Reuters Estimates consensus of $0.58. Revenues rose 10.0% year/year to $3.05 bln vs. the $3.07 bln consensus.

ECONOMY:

  • The Consumer Price Index (CPI) increased 0.2% in January, more than the consensus expectation of 0.1%. The CPI is up 2.1% versus a year ago.
  • Energy prices fell 1.5% in January. Excluding energy, the CPI was up 0.3%.
  • The “core” CPI, which excludes both food and energy, was also up 0.3%, the largest increase in seven months. The consensus expected an increase of 0.2%. The “core” CPI is 2.7% above its level of one year ago.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: GlobalSantaFe Corp. (GSF), Grey Wolf, Inc. (GW), Guitar Center (GTRC), Nordstrom (JWN), Orient-Express Hotels (OEH), XM Satellite Radio (XMSR)
  • TUESDAY: Audible Inc. (ADBL), Autodesk, Inc. (ADSK), AutoZone Inc. (AZO), Blockbuster Inc. (BBI), Deckers Outdoor (DECK), DreamWorks Animation SKG, Inc. (DWA), Frontier Oil (FTO), H.J. Heinz Company (HNZ), Harrah’s Entertainment (HET), Papa John’s International, Inc. (PZZA), Target Corporation (TGT)
  • WEDNESDAY: Barr Pharmaceuticals, Inc. (BRL), Chicago Bridge & Iron (CBI), Compania de Minas Buenaventura (BVN), Dollar Tree Stores (DLTR), Dress Barn (DBRN), Joy Global Inc. (JOYG), King Pharmaceuticals (KG), Strategic Hotels and Resorts (BEE), Tenaris, S A (TS)
  • THURSDAY: Dell, Inc. (DELL), Gap Inc. (GPS), Kohl’s (KSS)
  • FRIDAY: American International Group (AIG)

On the economic front we have potential market movers with:

  • MONDAY: Existing Home Sales
  • TUESDAY: Durable Orders, Consumer Confidence, Existing Home Sales
  • WEDNESDAY: GDP-Prel., Chain DeflatorPrel., Chicago PMI, New Home Sales, Crude Inventories
  • THURSDAY: Initial Claims, Personal Income, Personal Spending, Construction Spending, ISM Index, Auto Sales, Truck Sales
  • FRIDAY: Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“Something in human nature causes us to start slacking off at our moment of greatest accomplishment. As you become successful, you will need a great deal of self-discipline not to lose your sense of balance, humility, and commitment.” – H. Ross Perot

CANSLIM SETUPS

Conducive Environment For Growth Stocks

Traders,

They got to asking what if they had to scratch-n-sniff
To find out what it is they are after
— Stevie Ray Vaughan “Scratch-n-Sniff”

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

CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

The Bull gathers institutional support while scratching out new highs on the Dow and S&P 500.

The critical components of our analysis uses price and volume to measure market conditions.

In fear of being steam-rolled, we never want to take the other side of institutional trades. Wherever the big guys are buying, we want to be buying.

We’ve been cautious over the past few weeks due to heavy selling, as well as a lagging Tech sector.

While the trend is undeniably up, there is no timing a correction perfect. With all of Wall St. looking for some sort of pullback, the market refuses to give it. Markets have a knack for finding the way to burn the most amount of people, and this is another example.

At this rate we continue to look for some indication of a climax top. High volume and a media supported celebration of new highs would give evidence of this. But it’s just not there.

In lieu of recent accumulation, we’re putting the Green Flag back up.

The Transportation Index’s new high is another strong vote of confidence.

But on a slight bearish note, the number of New Highs on the exchanges slacked a touch against new highs made on the Dow and S&P 500. This bearish divergence as been an early warning of price decline in the past, but as always, there’s no use in trying to time it right.

In looking at key news events, Federal Reserve Chairman Bernanke this past week said, “some indications that inflation pressures are beginning to diminish.” Hopes of a soft-landing for a cooling economy are widespread.

The environment for Growth Stocks is optimistic. Studies have shown soft-landings are conducive for our strategy. With attractive CANSLIM setups taking shape, this is of course great to hear.

It should also be noted that analysts continue to cut U.S. earnings estimates. If this is the case, the market doesn’t seem to care.

Technically speaking:

The Dow Industrial Average

($INDU), +1.5%, extends a solid uptrend as it cruises to a new high.

The S&P 500

($SPX), +1.2%, extends a solid uptrend as it cruises to a new high.

Nasdaq

($COMPQ), +1.5%, barely edges out last week high as it lags the other indexes.

Russell 2000

($RUT), +1.4%, just about matches last week’s high as it holds a solid uptrend.

Volume indications weigh to the Bulls as multiple accumulation days are has across the major indexes.

Key stock chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index drops to close below its 50-day MA for the first time in almost two months.

The Gold & Silver Miners Index moves further above its major MA’s, closer to negating a bearish head-and-shoulders pattern on the weekly chart.

The consumer Staples and Cyclicals indexes hit new highs.

Semiconductors rally and close above the 50-day MA, as they show significant relative-weakness against the broader market.

Banks hit a new high.

Retail hits a new high.

Healthcare consolidates for the fifth consecutive week.

Biotechnology consolidates in bullish base formation.

REITs pullback after five weeks of strong gains.

Transportation hits a new high.

Airlines consolidate at the 50-day MA, flirting with a potential technical breakdown.

Defense hits a new high.

Energy consolidates at the 50-day MA.

What Was Important About Last Week

STOCKS:

  • Network Appliance (NTAP) reported third quarter non-GAAP earnings per share of $0.29. That was $0.01 better than $0.28 First Call non-GAAP consensus. Revenues rose 35.8% year over year to $729.3 mln versus consensus of $703.4 mln.
  • Nutrisystem (NTRI) reported fourth quarter earnings of $0.53 per share on revenues of $133.6 mln, up 92% year over year. The company had preannounced earnings per share of $0.50 to $0.53 on revenues of $131 mln to $133 mln.
  • Baidu (BIDU) reported fourth quarter non-GAAP earnings of $0.48 per share, excluding non-recurring items, $0.12 better than consensus. Revenues rose 143.4% year over year to $34.8 mln versus consensus of $34.6 mln.
  • MetLife Inc. (MET) reported fourth quarter earnings of $1.36 per share, excluding non-recurring items, $0.18 better than consensus. Revenues rose 11.9% year over year to $12.89 bln versus consensus of $12.65 bln.
  • NVIDIA Corp. (NVDA) Reported fourth quarter earnings of $0.22 per share, excluding a $0.05 tax benefit, versus a $0.24 consensus. Revenues rose 12.6% year over year to $317.4 mln versus the $320.3 mln consensus.
  • Applied Materials (AMAT) reported first quarter earnings of $0.27 per share, excluding a non-recurring gain, but including option expense that analysts were including in their estimates. That was in line with consensus of $0.27. Revenues rose 22.6% year over year to $2.28 bln versus consensus of $2.35 bln.
  • Priceline.com Inc. (PCLN) reported fourth quarter earnings of $0.58 per share, excluding non-recurring items, $0.18 better than consensus. Revenues rose 27.6% year over year to $260.1 mln versus $235.9 mln consensus.
  • Cephalon Inc.(CEPH) reported fourth quarter earnings of $1.06 per share, $0.26 better than consensus of $0.80. Revenues rose 50.1% year over year to $484.7 mln versus consensus of $431.1 mln.
  • Bob Evans (BOBE) reported third quarter earnings of $0.49 per share, excluding non-recurring items, $0.10 better than consensus. Revenues rose 5.1% year over year to $419.9 mln versus consensus of $427.2 mln. The company issued in-line guidance for the full year of 2007.
  • California Pizza (CPKI) reported fourth quarter earnings of $0.19 per share, $0.03 better than consensus. Revenues rose 16.4% year over year to $146 mln versus consensus of $144.8 mln. The company issued downside guidance for the first quarter.
  • Denny’s (DENN) reported fourth quarter earnings of $0.02 per share, $0.01 better than consensus. Revenues rose 0.4% year over year to $244.4 mln versus consensus of $246.6 mln. The company issued downside guidance for the full year of 2007

ECONOMY:

  • Housing starts slid 14.3% in January to 1.408 million units, the lowest level since August 1997. Expectations called for a decline of 2.6% to 1.6 million. The decline in starts occurred across almost all regions and for both single-family and multiple-unit structures.
  • New building permits fell 2.8% in January to 1.568 million units, slightly worse than expectations. Single-family units accounted for all of the drop. Building permits were down 28.6% versus January 2006.
  • Industrial production declined 0.5% in January, the largest drop since September 2005. In the past twelve months, industrial production is up 2.6%.
  • Manufacturing production fell 0.7% following an upwardly revised gain of 0.8% in December. Manufacturing is up 1.8% versus a year ago.
  • Within manufacturing, motor vehicle production fell 6.0%, the steepest one-month decline since 1998. The production of high-tech equipment continues to stand out, rising 1.7% in January and 26.1% versus a year ago.
  • Capacity utilization declined to 81.2%. The consensus forecast was 81.7%. In the manufacturing sector, capacity utilization dropped to 79.6%.
  • January retail sales were unchanged versus a consensus expected gain of 0.3%. Retail sales were up 2.3% versus January 2006.
  • December retail sales were revised up to a gain of 1.2% from an originally estimated increase of 0.9%. The upward revision was due to much stronger sales of autos and building materials than originally estimated.
  • The largest gains in January sales were in general merchandise stores (department stores and warehouse clubs), building materials, and grocery stores. The largest declines were in motor vehicles and gas station sales, which fell 1.3% and 0.7% respectively.
  • Producer Price Index (PPI) fell 0.6% in January. The PPI is up only 0.2% versus a year ago but has climbed 8.7% at an annual rate in the past three months.
  • Consumer goods prices, excluding energy, increased 0.5% in January and are up 4.1% at an annual rate in the past six months. Capital equipment prices increased 0.2% in January and are up at an annual rate of 3.2% in the past six months.
  • “Core”intermediate goods prices were unchanged in January, are down at a 1.4% rate in the past three months, but up 3.8% versus a year ago. “Core”crude prices increased 1.6% in January, are up at a 10.5% rate the past three months, and are up 17.9% versus a year ago.
  • The trade deficit in goods and services expanded to $61.2 billion in December from $58.1 billion in November. The consensus had expected a smaller increase to $59.7 billion.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Boyd Gaming (BYD), Century Aluminum (CENX), Fossil, Inc. (FOSL), Home Depot Inc (HD), InterContinental Hotels Group (IHG.L), United Natural Foods (UNFI), Wal-Mart Stores Inc. (WMT)
  • WEDNESDAY: Agnico-Eagle Mines Limited (AEM), Analog Devices Inc. (ADI), FelCor Lodging Trust Incorporated (FCH), Group 1 Automotive (GPI), Host Hotels & Resorts Inc. (HST), Jack in the Box (JBX), LoJack (LOJN), The TJX Companies, Inc. (TJX), Whole Foods Market (WFMI)
  • THURSDAY: Barrick Gold (ABX), DiamondRock Hospitality Company (DRH), Dynamic Materials (BOOM), H&R Block, Inc. (HRB), LaSalle Hotel Properties (LHO), Nanophase Technology (NANX), Newmont Mining Corporation NEM), Noble Energy, Inc. (NBL), Patterson Dental (PDCO),
  • FRIDAY: Clear Channel Communications (CCU)

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: none
  • WEDNESDAY: Core CPI, CPI, Leading Indicators, Crude Inventories, FOMC Minutes
  • THURSDAY: Initial Claims, Help-Wanted Index
  • FRIDAY:

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“If you do what you’ve always done, you’ll get what you’ve always gotten.” – Anthony Robbins

Distribution threatens corrective action

Traders,

Threaten no more
To secure peace is to prepare for war
— Metallica “Don’t Tread On Me”

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

CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Sellers dominate as Friday’s heavy distribution threatens corrective action.

From a technical standpoint, a lagging Technology sector puts the breaks on the broader market. Until we see better sponsorship from the Bulls – we’ll give pause.

Price-action on the Semiconductor Index has been in a slump for more than a year. Any high volume move below the 450 level will mark a significant breakdown on the Point & Figure chart.

Growth stocks show promise with the Russell 2K attracting institutional sponsorship. As CANSLIM traders we couldn’t be happier.

Technically speaking:

Volume indications show no strong bias for the past two weeks.

The Dow Industrial Average

($INDU), -0.6%, sells off on high volume after hitting a new high Wednesday.

The S&P 500

($SPX), -0.7%, sells off on high volume after hitting a new high Wednesday.

Nasdaq

($COMPQ), -0.6%, sells off on high volume as it lags the major indexes under its high hit three weeks ago.

Russell 2000

($RUT), -0.3%, shows relative strength against the other major indexes, though posted distribution after hitting a new high Thursday.

Charts courtesy of Stockcharts.com

The U.S. Dollar Index struggles in a downtrend for the past year as it threatens to turn down from its 40-week MA.

The Gold & Silver Mining Index pushes above its major moving averages as it shows potential to reverse a bearish head-and-shoulder pattern.

The Consumer and Cyclical indexes pull back from new highs for the week.

The Semiconductor Index turns down hard from the resistance of its 50-day MA.

Banks show corrective character in gaping down after posting a new high.

Broker Dealers fail to hit a new high with other major indexes.

Retail hits a new high, though erased two days of modest gains in its Friday sell off.

Computer Tech, Hardware and Disk Drives show weakness in trading below their 50-day MA’s.

Biotechnology holds firm with its potential to launch from a bullish basing pattern.

Transportation pulls back gently after breaking out of its year-long base.

Airlines dangle ominously beneath the 50-day MA with its recent base breakout in jeopardy.

Energy stocks trade on the 50-day MA with no clear bias.

What Was Important About Last Week

STOCKS:

  • Cisco Systems (CSCO) reported Q2 earnings of $0.33 per share, $0.02 better than the Reuters Estimates consensus of $0.31. Revenues rose 27.3% year/year to $8.44B vs the $8.28B consensus.
  • Computer Sciences Corp. (CSC) reported Q3 earnings of $0.85 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.83. Revenues rose 1.7% year/year to $3.64B vs the $3.64B consensus.
  • Cheesecake Factory (CAKE) reported Q4 earnings of $0.26 per share, $0.02 better than the Reuters Estimates consensus of $0.24. Revenues rose 9.8% year/year to $360M vs the $353M consensus.
  • Las Vegas Sands (LVS) reported Q4 earnings of $0.37 per share, excluding non-recurring items, $0.06 better than the Reuters Estimates consensus of $0.31. Revenues rose 27.1% year/year to $636M vs the $551M consensus.
  • National Semiconductor (NSM) lowered Q3 revenue guidance. It sees revs down 14-15% vs prior guidance for revs to decline 8-11%. The guidance implies revenue of roughly $426-431M vs $454M Reuters consensus.
  • Toyota Motor (TOY) posted the best quarterly performance in its 74-year history, with earnings up 7.3% to $3.55B for the fiscal third quarter. Revenue was up 15% to $51B. Sales in North America rose 19% when compared with a year ago, while European sales leapt 24% on demand for the Yaris compact.
  • IAC/InterActiveCorp’s (IACI) earnings fell 85% due to a $214 million write-down at its discounts business. Its Internet segment, which includes Ask.com, extracted higher revenue per search during the quarter.
  • Broadcom (BRCM) reported Q4 earnings of $0.31 per share, excluding non-recurring items, in-line with the First Call consensus of $0.31. Revenues rose 12.5% year/year to $923M vs the $911M consensus.
  • McAfee (MFE) reported Q4 earnings of $0.36 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.34. Revenues rose 20.5% year/year to $305M vs the $290M consensus. Co issued in-line guidance for Q1.
  • Walt Disney Co. (DIS) reported Q1 earnings of $0.50 per share, excluding non-recurring items, $0.11 better than the Reuters Estimates consensus of $0.39. Revenues rose 9.8% year/year to $9.72B vs the $9.49B consensus.
  • Akamai Technologies (AKAM) reported Q4 earnings of $0.27 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.26. Revenues rose 52.0% year/year to $125.7M vs the $121.5M consensus.

ECONOMY:

  • The Institute for Supply Management said its index of service-sector business rose to 59.0 from December’s 56.7. Any reading above 50 is indicative of growth.
  • Non-farm productivity (output per hour) increased at a 3.0% annual rate in the fourth quarter, better than a consensus expected gain of 2.0%. Non-farm productivity increased 2.1% in 2006 (Q4/Q4).
  • Productivity grew 2.2% while compensation grew at a 7.3% rate (9.8% after adjusting for inflation). Unit labor costs grew at a 5.0% rate.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Banco Santander-Chile (SAN), Yum! Brands, Inc. (YUM)
  • TUESDAY: Anglogold Ashanti Limited (AU), Applied Materials (AMAT), Choice Hotels International, Inc. (CHH), UBS (UBS), Whole Foods Market (WFMI), Wyndham Worldwide (WYN)
  • WEDNESDAY: Garmin Ltd. (GRMN), MGM MIRAGE (MGM), Network Appliance (NTAP), NutriSystem (NTRI), P.F. Chang’s China Bistro, Inc. (PFCB)
  • THURSDAY: Allied Waste Industries, Inc. (AW), Biogen Idec Inc. (BIIB), Bob Evans Farms (BOBE), Buffalo Wild Wings, Inc. (BWLD), California Pizza Kitchen (CPKI), Olympic Steel (ZEUS), Reliance Steel (RS), TheStreet.com (TSCM), Winston Hotels (WXH).
  • FRIDAY: Sierra Pacific Resources (SRP)

On the economic front we have potential market movers with:

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This Week’s Word On Discipline:

“No evil propensity of the human heart is so powerful that it may not be subdued by discipline.” – Seneca

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