Archive for March, 2007|Monthly archive page

Not Ready To Be A Bear

Traders,

Using all the devices under the sun
And He never give up ’til the battle’s lost or won.
— Bob Dylan “Solid Rock”

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:

Heavy distribution for the month leaves a bearish undertone for the market. But with a Follow Through Day in the books, and Telecoms hitting a new high, we can’t give in.

Keeping the bigger picture in mind, the first quarter ends with the S&P nearly flat for the year.

Looking out to April, the month tends to be the second strongest for the Dow.

Energy is poised to launch from a five-year base.

Lurking as a potential new leader, the Software Index trades above its major MA’s as it threatens to launch from a five month base.

Technically speaking:

The Dow Industrial Average

($INDU), -1%, shys from its 50-day MA.

The S&P 500

($SPX), -1.1%, consolidates below its 50-day MA.

Nasdaq

($COMPQ), -1.4%, consolidates below its 50-day MA.

Russell 2000

($RUT), -0.9%, shows relative strenght as it closes above its 50-day MA.

Volume indications tilt to the Bulls with a Follow Through Day in the books from two weeks ago. The Dow is mixed with one day apiece of accumulation and distribution. The S&P 500 posted one day of distribution. And the showed one day of distribution with two days of accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index consolidates near three-month lows.

The Gold and Silver Miners Index consolidates on its 50-day and 200-day MA’s.

The Dow Jones Commodity Index threatens to launch from a nin-month base.

The Cyclical Index shows modest relative strength over the Consumer Index.

The Technology Index struggles below its major moving averages.

The Semiconductor Index closes below its 50-day MA and above its 200-day MA.

The Banking Index finds support at its 200-day MA, though trades below its 50-day MA.

The Retail Index trades below its 50-day MA and above its 200-day MA.

The Pharmaceutical Index struggles below their major MA’s.

The Homebuilder Index trades just off none-month lows.

The Transportation Index trades below its 50-day MA and above its 200-day MA.

What Was Important About Last Week

STOCKS:

  • Red Hat (RHT) reported Q4 (Feb) earnings of $0.15 per share, ex items, in line with the Reuters Estimates consensus of $0.15. Revenues rose 41.2% year/year to $111.1 mln vs the $112.6 mln consensus.
  • Solectron (SLR) reported Q2 (Feb) earnings of $0.05 per share, in line with the Reuters Estimates consensus of $0.05. Revenues rose 16.1% year/year to $2.9 bln vs the $2.91 bln consensus.
  • Cognos (COGN) reported Q4 (Feb) earnings of $0.74 per share, excluding non-recurring items, $0.09 better than the Reuters Estimates consensus of $0.65. Revenues rose 12.4% year/year to $284.5 mln vs the $278.1 mln consensus.
  • Paychex (PAYX) reported Q3 (Feb) earnings of $0.35 per share, in-line with the Reuters Estimates consensus of $0.35. Revenues rose 12.7% year/year to $485.3 mln vs the $488.3 mln consensus.
  • Accenture (ACN) reported Q2 (Feb) earnings of $0.47 per share, $0.05 better than the Reuters Estimates consensus of $0.42. Revenues rose 15.8% year/year to $4.75 bln vs the $4.68 bln consensus.

ECONOMY:

  • Fed Chairman Bernanke said that rate cuts are unlikely any time soon, and that inflation remains the predominant concern. He also suggested that the impact from the problems in the subprime mortgage market would be contained.
  • Real GDP growth for the fourth quarter was revised upward to a 2.5% annualized growth rate from a previously estimated 2.2%. The upward revision is attributable to a smaller decline in inventories and fewer imports than originally estimated. Excluding housing, real GDP growth expanded at a 3.7% annual rate.
  • New orders for durable goods increased 2.5% in February, less than the consensus expected rise of 3.4%. New orders excluding transportation lost 0.1% versus a consensus expected gain of 1.8%. New orders are flat versus a year ago, up 0.8% excluding transportation.
  • New single-family home sales declined 3.9% in February to an annual rate of 848,000, the lowest level in almost seven years. This was much weaker than the 990,000 rate expected by the consensus. Meanwhile, sales were revised down for November, December, and January.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: none
  • WEDNESDAY: Circuit City Stores Inc. (CC), Immucor (BLUD)
  • THURSDAY: Constellation Brands, Inc. (STZ)
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: ISM Index
  • TUESDAY: Auto Sales, Truck Sales
  • WEDNESDAY: Factory Orders, ISM Services, Crude Inventories
  • THURSDAY: Initial Claims,
  • FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, Wholesale Inventories, Consumer Credit

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“No padlocks, bolts, or bars can secure a maiden better than her own reserve.” – Miguel de Cervantes

CANSLIM SETUPS

No Reason To Buy

Traders,

Give me one reason to stay here
And I’ll turn right back around
— Tracy Chapman “Give Me One Reason”

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:

CANSLIM investors take note of the high-volume rally off recent lows to confirm a Follow Through Day – but it’s no reason to buy.

Not all FTD’s turn into significant rallies, though all significant rallies do begin with FTD’s.

We love corrections for their shuffling of industry groups.

Where categories such as Energy and Telecoms show areas of emerging relative strength, Financial groups attempt to recover from severe hemorrhaging.

The overall picture could be summed up as a wounded Bull looking for new footing.

Moving averages will be key measuring marks in the coming weeks.

Volatility could be high in coming sessions. We want to be careful before placing any heavy bets on stocks.

Technically speaking:

The Dow Industrial Average

($INDU), +3.1%, roars back to its 50-day MA, holding its uptrend form in the two-year time frame.

The S&P 500

($SPX), +3.5%, reclaims its 50-day MA, holding its uptrend form in the two-year time frame.

Nasdaq

($COMPQ), +3.5%, finds support at the gap formed three weeks ago, though managed to close above its 50-day MA. The index holds its uptrend form in the two-year time frame.

Russell 2000

($RUT), +3.8%, charges above its 50-day MA, maintaining its relative strength against the other major indexes.

Volume indications give Follow Through Days for the major indexes, increasing the chances of a near-term low put in.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index slides further below its 50-day MA to a new three-month low.

The Gold and Silver Miners Index rallies to close just above its 50-day MA.

The Consumer Index and Cylicals Index close above their 50-day MA’s, still below yearly highs.

The Technology Index struggles with its 50-day MA as it attempts to work off the month’s sharp decline.

Telecoms hold on to relative strength, firmly above its 50-day MA, and just under a new high.

The Semiconductor Index remains range bound for the year, with its 40-week MA serving as support.

The Banking Index failed to close above its 50-day MA, as it attempts to turn around off last week’s low.

Retail flirts with its 50-day MA, holding the uptrend shape of the last two years.

Healthcare finds support at its 50-day MA as it bounces from recent lows.

Biotechnology finds resistance at its 50-day MA, bouncing off the support if its 40-week MA. Overall pattern holds a bearish failed breakout scenario for the year.

Transportation clears above its 50-day MA after undercutting its 40-week MA last week.

Energy holds relative strength as it trades above its major MA’s and just under new highs.

What Was Important About Last Week

STOCKS:

  • Oracle Corp (ORCL) reported Q3 (Feb) earnings of $0.25 per share, $0.03 better than the Reuters Estimates consensus of $0.22
  • Motorola (MOT) sees Q1 EPS of $0.00-0.02, ex items, vs. the Reuters Estimates consensus of $0.17, on lower than anticipated revenues of $9.2-9.3 bln (consensus $10.44 bln).
  • Nike (NKE) reported Q3 (Feb) earnings of $1.37 per share, $0.04 better than the Reuters Estimates consensus of $1.33. Revenues rose 8.7% year/year to $3.93 bln vs. the $3.93 bln consensus.
  • Jabil Circuit (JBL) reported Q2 revenues up 27% yr/yr to $2.9 bln, vs. $2.83 bln Reuters consensus.
  • Palm Inc. (PALM) reported Q3 (Feb) earnings of $0.16 per share, $0.04 better than the Reuters Estimates consensus of $0.12.
  • 3Com Corp. (COMS) reported Q3 (Feb) earnings of $0.04 per share, excluding restructuring, amortization, in-process R&D and stock-based compensation expense, $0.02 better than the Reuters Estimates consensus of $0.02.

ECONOMY:

  • Existing home sales increased 3.9% in February to an annual rate of 6.69 million, substantially better than the consensus expected level of 6.30 million. Sales increased in the Northeast, Midwest, and South, but were flat in the West. Both single-family home sales and condo/coop sales made gains.
  • The median price of an existing home rose to $212,800 in February, but is still down 1.3% versus a year ago.
  • Housing starts increased 9.0% in February to 1.525 million units at an annual rate. The consensus had expected a smaller gain of 3.0%. Starts were revised down slightly for both December and January.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Dollar General Corp. (DG), Rubios Restaurants (RUBO), Tiffany & Co. (TIF)
  • TUESDAY: Lennar Corporation (LEN)
  • WEDNESDAY: Paychex (PAYX), Sonic Corp. (SONC)
  • THURSDAY: CarMax, Inc (KMX), CKE Restaurants (CKR), Family Dollar (FDO), Red Hat, Inc. (RHT)
  • FRIDAY: Global Payments Inc. (GPN)

On the economic front we have potential market movers with:

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“First master the fundamentals.” – Larry Bird

CANSLIM SETUPS

The next Growth Stock Report will be the weekend of March 24th.

The next Growth Stock Report will be the weekend of March 24th.

New Lows Are Likely

Traders,

Yes the wild wild west that’s the place
Suckers take a bite and don’t even taste
–Too $hort “Wild Wild West”

Market Bias:

SELLER’S 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 broader market drifts higher on lighter volume as sectors sort out new pockets of strength and weakness.

The big picture suggests we’re in a corrective environment, though we’re not ready to call it quits on the Bull’s cyclical ascent.

The general media is doing its best to look to Asian stocks for clues of where we head next, but the real clues for U.S. direction will be found in price and volume analysis.

Until we see heavy buying volume indicate institutions are willing to sponsor this market, we’re going to place our bets that we’ll see new lows before we do highs.

And as the classic adage goes, It is dangerous to catch a falling knife

We are encouraged to see Small caps hold up well.

But the technical breakdown of Banks and Broker Dealers is a stronger indication that things are not well.

Technically speaking:

The Dow Industrial Average

($INDU), +1.3%, bounces off four-month lows to close between its major moving averages.

The S&P 500

($SPX), +1.1%, bounces off four-month lows to close between its major moving averages.

Nasdaq

($COMPQ), 0.8%, bounces off four-month lows to close between its major moving averages.

Russell 2000

($RUT), 1.2%, bounces off four-month lows to close between its major moving averages.

Volume indications remain bearish with declining buying on the indexes’ rallies.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index and Gold and Silver Miners Index consolidate below their 50-day MA’s. Their inverse relationship will result with one rallying and the other sinking.

The Consumer Index, trading below its 50-day MA, shows relative weakness to the Cyclical Index which closed above its 50-day MA.

The Semiconductor Index begins to show relative strength while closing above its 50-day MA.

The Banking and Broker Dealer Indexes fail to show any interest from buyers as the hover above their 200-day MA’s.

The Retail Index closed just below its 50-day MA.

In Tech-land, Internet and Software Indexes trade below their 50-day MA’s and above their 200-day MA’s. while Telecoms exhibit relative strength with a close above the 50-day MA.

Healthcare trades below its 50-day MA and above its 200-day MA while Drugs and Biotech show relative weakness as they fight their 200-day averages.

REITs try to pull it together though remain south of their 50-day MA.

Transportation fights to stay above a recent base breakout, closing just below its 50-day MA.

The Airline Index consolidates in bearish mode on its 200-day MA.

Energy shows relative strength with a close just above its 50-day and 200-day MA’s.

What Was Important About Last Week

STOCKS:

  • National Semiconductor (NSM) reported Q3 (Feb) earnings of $0.22 per share, $0.02 better than the Reuters Estimates consensus of $0.20; revenues fell 21.3% year/year to $431 mln vs the $432.9 mln consensus.
  • Quicksilver (ZQK) reported Q1 (Jan) earnings of $0.02 per share, $0.02 worse than the Reuters Estimates consensus of $0.04. Revenues rose 2.1% year/year to $552.5 mln (consensus $540.4 mln). Co lowered guidance for FY07, sees EPS of $0.53, down from previous of $0.88-0.92 (consensus $0.76).
  • Zumiez (ZUMZ) said that Feb comparable store sales rose 12.4%,versus a comparable store sales increase of 28.0% in the year ago period.
  • Chico’s FAS(CHS) reported Q4 (Jan) earnings of $0.13 per share, in line with the Reuters Estimates consensus of $0.13. Revenues rose 18.8% year/year to $446.3 mln vs. the $441.1 mln consensus.
  • Microchip Technology(MCHP) sees Q4 EPS of $0.36 ex items, vs. $0.33 Reuters consensus. Co expects Q4 sales to be flat to slightly up from Q3 sales of $251 mln, vs. $253.01 mln Reuters consensus.
  • ADC Telecom (ADCT) reported Q1 (Jan) earnings of $0.14 per share vs. the Reuters Estimates consensus of $0.06. Co issued in-line guidance for FY07

ECONOMY:

  • Non-farm payrolls increased 97,000 in February, meeting consensus expectations. Payroll gains in December and January were revised up a total of 55,000, putting the level of payrolls 152,000 above what was reported a month ago.
  • The unemployment rate ticked down to 4.5%, reversing last month’s slight increase.
  • Average hourly earnings increased 0.4% and are up 4.1% versus a year ago. The consensus expectation was for increases of 0.3% and 3.9%, respectively.
  • The ISM non-manufacturing business barometer (a measure of production growth in the services sector) declined to 54.3 in February from 59.0 in January. The consensus expected a drop to 57.1.
  • The new orders index dropped to 54.8 in February from 55.4. The backlog of orders index dropped to 47.0 from 49.0.
  • Non-farm productivity (output per hour) increased at a 1.6% annual rate in the fourth quarter, a downward revision from the original estimate of 3.0% but slightly better than the consensus expected gain of 1.5%. Non-farm productivity increased 1.4% in 2006 (Q4/Q4).
  • Real (inflation-adjusted) compensation per hour increased at a 10.5% annual rate, a combination of a nominal gain of 8.2% and falling energy prices that made inflation negative for the quarter.
  • Unit labor costs – the gap between increases in compensation and output – increased at a 6.6% rate in the fourth quarter and were up 3.4% in 2006 (Q4/Q4).
  • In the manufacturing sector, productivity growth was stronger (2.2%) and compensation gains less robust (7.1%), resulting in more moderate increases in unit labor costs (4.7%).
  • The trade deficit in goods and services contracted to $59.1 billion in January from an upwardly revised $61.5 billion in December. The consensus had expected a smaller decline to $59.8 billion.
  • Exports increased $1.4 billion in January and are up 10.7% versus a year-ago. Capital goods exports were up $1.0 billion, half of which was attributable to civilian aircraft.
  • Imports declined $1.0 billion in January and are up only 2.7% versus a year-ago. Combined, imports of consumer goods and automotive vehicles and parts fell $2.8 billion. Petroleum imports increased $1.2 billion on higher volume.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Four Seasons Hotels Inc. (FS)
  • TUESDAY: Goldman Sachs (GS)
  • WEDNESDAY: Hot Topic (HOTT)
  • THURSDAY: Aeropostale, Inc. (ARO), Bear Stearns (BSC), Biovail Corporation (BVF)
  • FRIDAY: AnnTaylor Stores (ANN)

On the economic front we have potential market movers with:

  • MONDAY: Treasury Budget
  • TUESDAY: Retail Sales, Business Inventories
  • WEDNESDAY: Current Account, Export Prices, Import Prices, Crude Inventories
  • THURSDAY: PPI, Core PPI, Initial Claims, NY Empire State Index, Net Foreign Purchases, Philadelphia Fed
  • FRIDAY: CPI, Core CPI, Industrial Production, Capacity Utilization, Mich Sentiment-Prel.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“My success, part of it certainly, is that I have focused in on a few things.” – Bill Gates

CANSLIM SETUPS