Archive for May, 2007|Monthly archive page

More Juice For Bull

Traders,

Contrary, she contrary, she won’t do nothing she say

— Lightnin’ Hopkins “Contrary Mary”

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 two weeks ago balances last week’s accumulation.

The market is in a confirmed uptrend. No matter how bad the record amount of short sellers try to see otherwise, there’s no getting around this.

It’s a no-brainer stocks will pullback, but where that happens is anyone’s guess.

We have our Yellow Flag out based on heavy distribution from two weeks ago.

It is common for rallies to occur at the end and beginnings of the months, so we might expect a cool-off this week.

Relative weakness in Bank and Semiconductor stocks is a vote against the durability of the bull.

Bearish divergence in the number of new highs from stocks against new highs in the indexes also represents weakness.

Add in the summer being a time of stagnation for equities, the picture for Bulls to stay on course becomes less likely.

Perhaps of most interest is the fact that a record-high in the S&P 500 has gone piratically unnoticed by the general public.

There’s nothing like a big fat picture of a Bull on the cover of a magazine like Newsweek to confirm the market’s contrarian tendency with the public.

Technically speaking:

The Dow Industrial Average

($INDU), +1.2%, hit a record high.

The S&P 500

($SPX), +1.4%, hit a record high.

Nasdaq

($COMPQ), +2.2%, spiked above a 4-week trading range.

Russell 2000

($RUT), +2.8%, also spiked above a 4week trading range.

Volume indications tilt to the Bulls for the week as each major index notched in two days of accumulation. This is a week after the major indexes showed two days of distribution, so in the broader picture the bias is less clear.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) consolidated for the second week in a row on its downward-trending 50-day SMA.

The Gold & Silver Miners Index ($XAU) rallied north of its major MA’s.

The Consumer Index ($CMR) hit a record high.

The Cyclical Index ($CYC) hit a record high.

The Technology Index ($DJUSTC) hit a new high.

The Semiconductor ($SOX) closed above its 50-day SMA, though shows relative weakness to the Tech sector and broader market.

The Software Index ($GSO) hit a new high.

Telecom Index ($XTC) hit a new high as it cruises north of an upward trending channel – a move that will either be seen some day as a point of acceleration or the beginning of an impending correction.

The Banking Index ($BKX) trades in a two-month range as it shows relative weakness against the market.

The Broker Dealer Index ($XBD) broke out of a cup-and-handle pattern.

The Retail Index ($RLX) rallies to just shy of a new high for the year.

The Healthcare Index ($HCX) consolidates in a 5-week long high-level base.

Biotechnology Index ($BKX) attempts to pull-out f a 4-week long pullback.

Pharmaceutical Index ($DRG) trade off the lower end of a 7-week range.

The REIT Index ($DJR) take a break from a downtrend, closing on the 50-day SMA.

The Transportation Index ($TRAN) hits a new high.

The Airline Index ($XAL) consolidates under its major MA’s.

The Defense Index ($DFX) hits a new high.

The Energy Index ($IXE) hits a new high.

What Was Important About Last Week

STOCKS:

  • TiVo(TIVO) reported Q1 (Apr) earnings of $0.01 per share, $0.03 better than the Reuters Estimates consensus of ($0.02); service & tech revenues rose 5.5% year/year to $58.1 mln vs the $58.7 mln consensus. Co issues downside guidance for Q2, sees Q2 service & tech revs of $57-59 mln vs. $60.19 mln consensus. In the next two months, TiVo expects to introduce a number of additional differentiated features, which will further set the TiVo service apart from the competition.
  • Chico’s FAS (CHS) reported Q1 (Apr) earnings of $0.28 per share, $0.02 better than the Reuters Estimates consensus of $0.26. Revenues rose 52.8% year/year to $453.1 mln, as co previously pre-announced.
  • BMC Software (BMC) reported Q4 (Mar) earnings of $0.40 per share, in-line with the Reuters Estimates consensus of $0.40. Revenues rose 2.7% year/year to $419 mln vs. the $427.2 mln consensus.
  • Dell (DELL) reported Q1 (Apr) earnings of $0.34 per share $0.08 better than the Reuters Estimates consensus of $0.26. Revenues rose 2.7% year/year to $14.6 bln vs. the $13.93 bln consensus.

ECONOMY:

  • The government revised first quarter real GDP growth to 0.6% at an annual rate, versus the 1.3% rate originally reported last month. The revised 0.6% rate is the weakest growth rate since 2002. The consensus expected 0.8%.Inventories and trade accounted for all the downward revision to GDP growth.
  • Inventory reductions lopped 1.0 percentage point off GDP growth, versus an originally reported 0.3 points.
  • The trade deficit also exerted a 1.0 point drag on GDP growth, versus an originally reported 0.5 points. Housing was a drag of 0.9 points, less than the full point originally estimated.Personal consumption was revised up to a 4.4% growth rate from an originally reported 3.8%.
  • Business investment in equipment, software, and structures was revised up to 2.9% from 2.0%.The GDP price index rose at a 4.0% rate, the fastest increase since 1991. Nominal GDP growth – real GDP plus inflation – grew at a 4.7% rate.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Bob Evans Farms (BOBE), Krispy Kreme Doughnut (KKD)
  • TUESDAY: FuelCell Energy, Inc. (FCEL), Guess (GES), New Frontier Media, Inc. (NOOF)
  • WEDNESDAY: ADC (ADCT), Shuffle Master, Inc. (SHFL)
  • THURSDAY: Quiksilver (ZQK),
  • FRIDAY: Vail Resorts (MTN)

On the economic front we have potential market movers with:

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“ It is not the mountain we conquer, but ourselves.” – Sir Edmund Hillary

CANSLIM SETUPS

Heavy Selling Warns Bull

Traders,
Oh oh-oh-oh-oh you wanna get it right sometimes
— Cold Play “How You See The World”

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:

The Major Indexes inch further into new high territory.

Heavy selling volume in recent weeks, most notably on the Nasdaq, serves as a warning to our Bull.

Leadership stays intact as the majority of stocks are near 52-week highs.

Volume usually leads price, so should leadership begin to crumble, we’ll hoist our Red Flag.

In this holiday shortened week we may see end-of-the-month portfolio dressing push things higher. But this is also the month of May when stocks are supposed to perform their worst.

A record number of shorts piling on has contrarians bullish.

An excess amount of shorts may very well lead to a bearish capitulation scenario where excess buying marks a top.

We never like to be positioned where its popular, but even a large amount of short-sellers can be right sometimes.

Taking a look at the broader market:

Technically speaking:

The Dow Industrial Average

($INDU), %, posted a loss as it retreated from an all-time high.

The S&P 500

($SPX), %, also posted a loss as it retreated from an all-time high.

Nasdaq

($COMPQ), %, ended the week with a slight lost after breaking out to a new high.

Russell 2000

($RUT), %, posted a gain for the week, though pulled back sharply from a new high.

Volume indications lean further into bearishness. Dow and S&P 500 tacked on two distribution days last week. The Nasdaq has had six distribution days in recent weeks.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) inched higher, though remains below its major MA’s.

The Gold & Silver Miners Index ($XAU) inched lower below its major MA’s.

The Consumer Index ($CMR) inched to a new high.

The Cyclical Index ($CYC) inched to a new high.

The Technology Index ($DJUSTC) hit a new high before pulling back sharply.

The Semiconductor ($SOX) declined sharply for the second week in a row.

The Software Index ($GSO) declined sharply after hitting a new high.

Telecom Index ($XTC) inched to a new high.

The Banking Index ($BKX) posted a modest loss as it holds a tight month-long price range.

The Broker Dealer Index ($XBD) remain poised in a bullish cup-and-handle pattern.

The Retail Index ($RLX) stays trapped in a two-month range, just under new highs, but not quite an ideal cup-and-handle pattern.

The Healthcare Index ($HCX) inched to a new high.

Biotechnology Index ($BKX) holds a month-long pullback formation.

Pharmaceutical Index ($DRG) hold a six-week trading range.

The REIT Index ($DJR) declined further below their major MA’s as they hit the support of a major trend line.

The Transportation Index ($TRAN) consolidates for the sixth week in a row.

The Airline Index ($XAL) consolidates below its major MA’s.

The Defense Index ($DFX) inched to a new high.

The Energy Index ($IXE) inched to a new high.

What Was Important About Last Week

STOCKS:

  • Gap (GPS) reported Q1 (Apr) earnings of $0.25 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.24. Revenues rose 3.4% year/year to $3.56 bln vs the $3.47 bln consensus.
  • Network Appliance (NTAP) reported Q4 (Apr) non-GAAP earnings of $0.30 per share, in line with the First Call consensus of $0.30. Revenues rose 34.0% year/year to $801.2 mln vs the $798.1 mln consensus.

ECONOMY:

  • Existing home sales declined 2.6% in April to an annual rate of 5.99 million, lower than the consensus expected level of 6.12 million and the lowest level since June 2003.Sales dropped in all four major regions, but in the Northeast more than anywhere else. Sales slowed for both single-family homes and condos/coops.
  • The median price of an existing home rose to $220,900 in April, but is still down 0.8% versus a year ago.
  • The months’ supply of existing homes (how many months it will take to clear the inventory of unsold homes at the current sales rate) rose to 8.4, mostly due to rising inventories although also partially due to the slower rate of sales.
  • New orders for durable goods increased 0.6% in April, less than the consensus expected increase of 1.0%. However, the March gain was revised up to 5.0% from 4.3%, putting the April level of orders above expectations. New orders excluding transportation gained 1.5% versus a consensus expected gain of 0.6%.The strength in new orders was spread among fabricated metals, primary metals, and electrical equipment/appliances/parts. After large gains last month, orders for industrial machinery and transportation equipment (particularly aircraft) pulled back some. When calculating business investment for the GDP accounts, the Commerce Department uses non-defense capital goods shipments excluding aircraft. That indicator increased 0.7% in April while the figure for March was revised up to 1.5% from a previous estimate of 0.8%.
  • Unfilled orders increased 1.8% in April and are up 19.8% versus a year ago, larger than any year-to-year increase from 1980 to 2005. Unfilled orders for non-defense capital goods excluding aircraft increased for the 30th straight month and are up 17.0% versus a year ago.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: BMC Software (BMC), Vodafone Group PLC (VOD)
  • WEDNESDAY: Chico’s FAS, Inc. (CHS), Joy Global Inc. (JOYG), Polo Ralph Lauren Corporation (RL), TIVO INC (TIVO), Williams-Sonoma (WSM)
  • THURSDAY: Big Lots, Inc. (BIG), Ciena Corporation (CIEN), Dell, Inc. (DELL), Frontline Ltd. (FRO), H.J. Heinz Company (HNZ), Hovnanian Enterprises, Inc. (HOV), Sears Holdings Corp (SHLD), Tiffany & Co. (TIF), Wind River Systems (WIND)
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: none
  • TUESDAY: Consumer Confidence
  • WEDNESDAY: Crude Inventories, FOMC Minutes
  • THURSDAY: GDP-Prel., Chain DeflatorPrel., Initial Claims, Chicago PMI, Construction Spending, Help-Wanted Index
  • FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, Personal Income, Personal Spending, Core PCE Inflation, ISM Index, Mich Sentiment-Rev., Pending Home Sales, Auto Sales, Truck Sales

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“The secret of success is constancy of purpose.” – Benjamin Disraeli

CANSLIM SETUPS

Bears Overshadowed

Traders,

Think (think) think (think) think (think)
think (think) think (think) think (think)
— Aretha Franklin “Think”

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:

This week’s commentary will be short.

Successful speculation has more to do with observing than it does thinking.

It seems all bloggers want to talk about is why the market will sell off soon.

It will happen when it happens.

Recent distribution lends well to the Bears cause, but strong leadership keeps the Bull on pace.

The fact that the Nasdaq and Russell 2K are under performing the Dow is only a real concern if it carries over into the monthly rather than daily picture.

Technically speaking:

The Dow Industrial Average

($INDU), %, pegged another new high on its seven-week charge.

The S&P 500

($SPX), %, broke north of last week’s consolidation to hit a new high.

Nasdaq

($COMPQ), %, pulled back for the second week in a row.

Russell 2000

($RUT), %, also pulled back for the second week in a row.

Volume indications lean to the Bears favor, but their lack of severity is not enough to raise a Red Flag over. Dow with two days of accumulation, S&P 500 with four days of distribution in the last two weeks, and the Nasdaq with three days of distribution in the last tow weeks.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) moves off its lows, still under its 50-day MA.

The Gold & Silver Miners Index ($XAU) slipped below its major moving averages.

The Consumer Index ($CMR) and The Cyclical Index ($CYC) indexes hit new highs.

The Technology Index ($DJUSTC) finished the week unchanged after poking to a new high.

The Semiconductor ($SOX) sold off to just above its 50-day MA.

The Software Index ($GSO) broke north of a two-week consolidation pattern.

Telecom Index ($XTC) hit another new high as it begins to bust north of an upward-trending channel. You don’t see this happen much with indexes. At some point it may be recognized by technicians as either very bullish or an extreme that tips off a meltdown.

The Banking Index ($BKX) inch higher while forming the right side of a base.

The Broker Dealer Index ($XBD) pulled back for the second week in a row within a cup-and-handle pattern.

The Retail Index ($RLX) attempts to resume an uptrend after dipping below its 50-day MA.

The Healthcare Index ($HCX) holds strong near highs after last week’s pullback.

Biotechnology Index ($BKX) pulls back for the third week in a row.

Pharmaceutical Index ($DRG) attempts to regain highs after pulling back last week.

The REIT Index ($DJR) plunges below its 50-day MA.

The Transportation Index ($TRAN) holds near highs as it flirts with breaking out of a 12-week base.

The Airline Index ($XAL) struggles below its major moving averages.

The Defense Index ($DFX) inches higher.

The Energy Index ($IXE) puts in a solid week to the upside.

What Was Important About Last Week

STOCKS:

  • Hewlett-Packard (HPQ) reported second quarter earnings of $0.70 per share, excluding non-recurring items, in line with consensus, and versus preannounced earnings per share of $0.69 to $0.70. Revenues rose 12.8% year over year to $25.5 billion versus consensus of $25.52 billion, and versus preannounced revenues of $25.5 billion to $25.55 billion. The company reaffirmed guidance for the third quarter, saying it sees earnings per share of $0.64 to $0.65 versus consensus of $0.65.
  • Applied Materials (AMAT) reported Q2 (Apr) earnings of $0.34 per share, $0.06 better than the Reuters Estimates consensus of $0.28 (Excluding charges and including stock based compensation expense). Revenues rose 12.5% year/year to $2.53 bln (consensus $2.35 bln); gross margin rose 44.9%.
  • Marvel (MRVL) reported Q1 revenues $635.1 mln vs $645.36 mln Reuters consensus. The co did not report EPS due to ongoing options investigation. “The growth in our Q1 revenues was limited due to an overall weaker demand environment across some of our markets.
  • Nordstrom (JWN) reported Q1 (Apr) earnings of $0.60 per share, $0.03 better than the Reuters Estimates consensus of $0.57. Revenues rose 9.3% year/year to $1.95 bln vs. the $1.94 bln consensus. Co issued downside guidance for Q2, sees EPS of $0.70-0.73, excluding an $0.08 charge, vs. $0.76 consensus.

ECONOMY:

  • Industrial production increased 0.7% in April versus a consensus expectation of 0.3%. In the past twelve months, industrial production is up 1.9%.
  • Manufacturing production increased 0.5% in April, although it was revised down slightly in both February and March. A large part of the increase was due to a 3.3% gain in motor vehicles and parts. Excluding motor vehicles and parts, manufacturing output increased 0.3%.
  • The production of high-tech equipment grew 2.6% in April and is up 21.6% versus a year ago.
  • Capacity utilization rose to 81.6% versus a consensus forecast of 81.5%. In the manufacturing sector, capacity utilization increased to 80.2%.
  • Housing starts increased 2.5% in April to 1.528 million units at an annual rate. The consensus had expected a slower 1.480 million rate. Starts are down 16.1% versus a year ago.
  • Nationwide, single-family starts rose 1.6% and multiple-unit starts increased 6.3%. By region, the rise in starts was due to activity in the Northeast and West. Starts were essentially unchanged in the South and down in the Midwest.
  • New building permits declined 8.9% in April to 1.429 million units at an annual rate, much slower than the consensus expected 1.520 million rate. Permits declined for both single-family and multiple-unit homes and are down 28.1% versus April 2006.
  • The Consumer Price Index (CPI) increased 0.4% in April, slightly less than the consensus expected. The CPI is up 2.6% versus a year ago.
  • Energy prices increased 2.4% in April. Excluding food and energy, the core CPI was up 0.2% in April, as the consensus expected, and up 2.3% versus a year ago.
  • The rise in the core CPI was mostly due to lodging away from home (hotels), which increased 1.9%, and owners’ equivalent rent (what we theoretically pay ourselves to live in our own homes), which rose 0.2%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Lowe’s Companies (LOW)
  • TUESDAY: American Eagle Outfitters Inc (AEO), AutoZone Inc. (AZO), BJ’s Wholesale Club (BJ), Computer Sciences Corporation (CSC), Men’s Wearhouse (MW)
  • WEDNESDAY: Abercrombie & Fitch Co. (ANF), Dick’s Sporting Goods, Inc. (DKS), Target Corporation (TGT), ZUMIEZ INC (ZUMZ)
  • THURSDAY: Aeropostale, Inc. (ARO), AnnTaylor Stores (ANN), Barnes&Noble (BKS), Gap Inc. (GPS), Mylan Laboratories (MYL), Toll Brothers (TOL)
  • 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:

“Try not to become a man of success, but rather try to become a man of value.” – Albert Einstein

CANSLIM SETUPS

No News For Bull

Traders,

Good Times, Bad Times, you know I had my share
— Led Zeppelin “Good Times Bad Times”

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:

Major indexes moved little for the week, indicating the distribution we had on the S&P 500 and Nasdaq is minor.

The markets speak to us every day. It’s our job to listen.

Price and volume dominate our analysis.

Simply put, heavy selling volume coupled with big downside moves spells trouble. Smaller moves are less significant.

Everywhere we look analysts and writers are putting their complicated theories up for examination. Speculation on how private equity and interest rates will ultimately prove their forecasts right, whether they’re Bulls or Bears.

The laws of chance make geniuses for some, and suckers of others.

But when you’re trading professionally you need to learn to rely on your own analysis.

From our experience nothing has proven more consistent in trading stocks than analyzing price and volume. It let’s us know when conditions are good or bad.

Our strategy involves picking only the best stocks when things are good.

Things have been good for weeks. As trades appreciate to our profit targets we exit them.

Exactly where the market corrects is not for us to say.

We will continue to wave our Green Flag until price and volume tell us otherwise.

Technically speaking:

The Dow Industrial Average

($INDU), 0.5%, inches higher into new territory.

The S&P 500

($SPX), 0%, finishes the week unchanged after Thursday’s drop.

Nasdaq

($COMPQ), -0.4%, posts a modest loss on the heel’s of Thursday’s distribution after inching to a new high.

Russell 2000

($RUT), (out) %, also posts a loss after inching to a new high.

Volume indications lean to the Bears advantage this week. The Dow put in light-volume with no major indications. The S&P 500 made two distribution days and one accumulation day. The Nasdaq notched in a heavy distribution day with a couple modest accumulation days.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) rallies for the second week in a row yet remains below its 50-day MA.

The Gold & Silver Miners Index ($XAU) slips back to its 50 and 200-day averages which are flat-lined.

The Consumer Index ($CMR) hesitates to move higher.

The Cyclical Index ($CYC) inches to a new high.

The Technology Index ($DJUSTC) closes at its high.

The Semiconductor ($SOX) puts in a neutral performance, closing unchanged after poking out to a year-high.

The Software Index ($GSO) consolidates near its high.

Telecom Index ($XTC) closes at a new high.

The Banking Index ($BKX) declines modestly, still above its major averages, though well of its highs.

The Broker Dealer Index ($XBD) forms a cup-and-handle pattern.

The Retail Index ($RLX) consolidates on its 50-day MA.

The Healthcare Index ($HCX) declines sharply after hitting a new high.

Biotechnology Index ($BKX) pulls back modestly for the second week in a row,

Pharmaceutical Index ($DRG) declines sharply after hitting a new high.

The REIT Index ($DJR) consolidates under its 50-day MA.

The Transportation Index ($TRAN) forms a cup-and-handle pattern.

The Airline Index ($XAL) struggles in a downward trend below the major moving averages.

The Defense Index ($DFX) makes a new high.

The Energy Index ($IXE) posts a modest gain just under a new high.

What Was Important About Last Week

STOCKS:

  • Nvidia (NVDA) reported Q1 (Apr) GAAP EPS of $0.33 per share, $0.03 better than the Reuters Estimates consensus of $0.30. Co reported non-GAAP EPS of $0.42 vs $0.39 First Call consensus. Revenues rose 23.8% year/year to $844.3 mln vs the $835.1 mln consensus.
  • THQ Inc. (THQI) reported Q4 (Mar) earnings of $0.15 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.14. Revenues rose 16.2% year/year to $172.1 mln vs the $149.9 mln consensus.
  • American International Group (AIG) reported Q1 (Mar) earnings of $1.68 per share, excluding non-recurring items, $0.13 better than the Reuters Estimates consensus of $1.55. Revenues rose 12.3% year/year to $30.64 bln.
  • California Pizza Kitchen (CPKI) reported Q1 (Mar) earnings of $0.18 per share, in line with the Reuters Estimates consensus of $0.18. Revenues rose 15.2% year/year to $149.4 mln vs the $148.6 mln consensus.
  • Whole Foods Market (WFMI) reported Q2 (Mar) earnings of $0.32 per share, $0.04 worse than the Reuters Estimates consensus of $0.36. Revenues rose 11.6% year/year to $1.46 bln vs the $1.49 bln consensus. For FY07, Whole Foods expects 13-17% revenue growth which computes to $6.34-6.56 bln vs. $6.56 bln consensus.
  • Walt Disney Co. (DIS) reported Q2 (Mar) earnings of $0.44 per share, $0.07 better than the Reuters Estimates consensus of $0.37. Revenues rose 0.6% year/year to $8.07 bln vs the $8.11 bln consensus.
  • Wynn Resorts (WYNN) reported Q1 (Mar) earnings of $0.67 per share, excluding non-recurring items, $0.13 better than the Reuters Estimates consensus of $0.54. Revenues rose 129.2% year/year to $635.3 mln vs the $553.7 mln consensus.
  • Fluor (FLR) reported Q1 (Mar) earnings of $0.94 per share, $0.07 better than the Reuters Estimates consensus of $0.87. Revenues rose 0.5% year/year to $3.64 bln vs the $3.57 bln consensus. Co reaffirmed guidance for FY07, sees EPS of $3.50-3.80 vs. $3.90 consensus.

ECONOMY:

  • The Producer Price Index (PPI) increased 0.7% in April versus a consensus expected gain of 0.6%. The PPI is up 3.2% in the past twelve months and has climbed at an annual rate of 12.8% in the past three months. All of the PPI increase in April was due to food and energy prices, which rose 0.4% and 3.4%, respectively.
  • The core PPI was unchanged versus a consensus expected 0.2% gain. The core PPI is up 1.6% in the past year and up at an annual rate of 1.5% in the past three months.
  • Consumer goods prices increased 0.9% in April and are up at an annual rate of 16.6% in the past three months.
  • Capital equipment prices rose 0.1% and are up 1.8% in the past year.Core intermediate goods prices (ex-food and energy) increased 0.8% in March and are up 3.6% versus last year.
  • Core crude prices increased 0.4%, are up at a 51.9% annual rate the past three months, and are up 19.0% versus a year ago.
  • April retail sales declined 0.2% and were unchanged excluding autos, both worse than the consensus expected. However, retail sales were revised up noticeably for both February and March, putting the level of sales in April about where expected. Retail sales are up 3.2% from a year ago, 3.7% excluding autos.
  • The largest gains in retail sales were at gas stations and grocery stores. Activity was weak for autos, building materials, clothing stores, and general merchandise stores (which includes department stores).Excluding autos, building materials, and gas, sales were unchanged in April but revised up for February (to 0.5% from 0.3%) and March (to 0.8% from 0.3%).
  • The trade deficit in goods and services increased to $63.9 billion in March from a downwardly revised $57.9 billion in February. The consensus had expected a smaller increase to $60.0 billion.
  • Exports increased $2.2 billion in March and are up 9.2% versus a year ago.Imports increased $8.2 billion in March and are up 6.9% versus a year ago. The increase in March was the largest on record, in dollar terms. Petroleum accounted for about half the increase in imports, mostly due to higher volume. By region, the change in the trade deficit was fairly widespread, with Europe, OPEC, Mexico, Africa, and Canada all widening their trade gaps with the US by at least $1 billion. The trade deficit with China shrunk by $1.2 billion.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Agilent Technologies Inc.
  • TUESDAY: (A), Applied Materials (AMAT), DaimlerChrysler (DCX), Home Depot Inc (HD), The TJX Companies, Inc. (TJX)
  • WEDNESDAY: Deere & Company (DE), Federated Department Stores Inc. (FD)
  • THURSDAY: Intuit (INTU), Kohl’s (KSS), Marvell Technology Group Ltd. (MRVL), Nordstrom (JWN), Pioneer Drilling Company (PDC)
  • 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:

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” – Thomas A. Edison

CANSLIM SETUPS

A Bull Until Otherwise

Traders,

i’m just a spook in the wheel
just a part of the puzzle
— Circle Jerks “Deny Everything”

Market Bias:

BUYER’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 Bull makes progress as an increasing number of pundits denounce its strength.

We’d be more concerned if the crowd were confident about new highs ticking in daily.

However, recent distribution in the major indexes raises some caution. Should the Nasdaq put in a heavy downside day this week it will be bear some significance.

Despite the Russell 2K demonstrating relative weakness, it’s uptrend not technically corrupted.

Though May tends to be a poor month for equities, we’d never trade off that unless it we’re backed by our indicators.

This is a Bull until proven otherwise.

Technically speaking:

The Dow Industrial Average

($INDU), +2.3%, tip-toed to a new high.

The S&P 500

($SPX), +1.4%, also eased higher.

Nasdaq

($COMPQ), +1.8%, proved itself to be as popular as the Dow and S&P 500.

Russell 2000

($RUT), +0.5%, shows relative weakness in failing to make a new high.

Volume indications for the week exhibited bearishness. The Dow notched in a day of distribution and showed the Bulls loosing steam as new highs were backed with lower volume. The S&P 500 posted a solid day of distribution, and the Nasdqaq posted one heavy day of distribution with two modest days of accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) rallied modestly off recent lows.

The Gold & Silver Miners Index ($XAU) rallied sharply above its major moving averages.

The Consumer Index ($CMR) and The Cyclical Index ($CYC) easily hit new highs.

The Technology Index ($DJUSTC) hit a new high.

The Semiconductor ($SOX) just about matched last week’s high.

The Software Index ($GSO) shows relative weakness in failing to make a new high.

Telecom Index ($XTC) maintains dominance with another high.

The Banking Index ($BKX) mostly consolidated for the week as its industry groups scored poorly in the 52-week relative strength rankings.

The Broker Dealer Index ($XBD) charged to last winter’s high. No technically sound base poses a warning to buyers.

The Retail Index ($RLX) failed to make a new highs as it struggles above its 50-day MA.

The Healthcare Index ($HCX) eased to a new high.

Biotechnology Index ($BKX) pulled back modestly. No new high.

Pharmaceutical Index ($DRG) pulled back modestly before resuming an uptrend late week.

The REIT Index ($DJR) consolidated for another week below the 50-day MA.

The Transportation Index ($TRAN) put in a rally toward the end of the week, but no new high.

The Airline Index ($XAL) rallies modestly off recent lows.

The Defense Index ($DFX) hit a new high.

The Energy Index ($IXE) hit a new high.

What Was Important About Last Week

STOCKS:

  • Applebee’s (APPB) reported Q1 (Mar) earnings of $0.36 per share, excluding non-recurring items, $0.03 better than the Reuters Estimates consensus of $0.33. Revenues fell 0.3% year/year to $337.6 mln (consensus $351.6 mln). March comparable sales fell 2.7%, compared to street estimates for -1.3%; April comparable sales fell 0.7%, compared to street estimates for -1.1%.
  • Yum! Brands(YUM) reported Q1 (Mar) earnings of $0.70 per share, $0.06 better than the Reuters Estimates consensus of $0.64. Revenues rose 6.6% year/year to $2.22 bln vs. the $2.15 bln consensus; Q1 blended same store sales fell 3.0%. Co issued in-line guidance for FY07, sees EPS of $3.23 up from prior guidance of $3.21 (consensus $3.23).
  • Chipotle Mexican Grill (CMG) reported Q1 (Mar) earnings of $0.38 per share, $0.06 better than the Reuters Estimates consensus of $0.32. Revenues rose 26.3% year/year to $236.1 mln vs. the $227.9 mln consensus. Comparable restaurant sales increased 8.3%, compared to 19.7% in the prior year period. Co sees FY07 comparable restaurant sales increases in the mid- to high-single digits.
  • Starbucks (SBUX) posted an 18% year/year rise in Q2 (Mar) earnings of $0.19 per share, in line with the Reuters Estimates consensus of $0.19. Revenues rose 19.6% year/year to $2.25 bln (consensus $2.3 bln); same-store sales rose 4.0% vs. Briefing.com Benchmark consensus of +4.3%. Co reaffirmed guidance for FY07, sees EPS of $0.87-0.89 (consensus $0.89), and reiterated 20% revenue growth.

ECONOMY:

  • Non-farm payrolls increased 88,000 in April. Revisions to February and March subtracted 26,000 from payroll growth. Combined, payrolls in April were 62,000 higher than reported a month ago. The consensus expected gain was 100,000. Sectors performing well in April included education and health (+53,000), professional and business services (+24,000), leisure and hospitality (+22,000) – particularly restaurants and bars (+25,000) – and government (+25,000). Manufacturing payrolls shrunk by 19,000 in April. Construction payrolls dropped by 11,000 after last month’s surprising 50,000 gain. Residential construction payrolls contracted by 4,000; non-residential by 6,000. Retail payrolls declined by 26,000, with all the drop attributable to general merchandise stores.
  • The unemployment rate ticked up to 4.5%. Un-rounded, the rate was 4.457%.
  • Average hourly earnings increased 0.2% and are up 3.7% versus a year ago, still consistent with nominal wage gains in the late 1990s.
  • The ISM non-manufacturing business barometer (a measure of production growth in the services sector) increased to 56.0 in April from 52.4 in March. The consensus expected a smaller gain to 53.0. (Readings above 50 signal expansion.)
  • The new orders index increased to 55.5 in April, the highest level in three months, from 53.8 in March. The employment component rose to 51.9 from 50.8. The prices paid component ticked up to 63.5, the highest level in eight months.
  • The ISM Manufacturing index increased to 54.7 in April from 50.9 in March. The consensus expected a slight gain to 51.0. (Readings higher than 50 signal expansion.)
    The activity-related components of the index showed widespread strength. The index for production rose to 57.3, the highest in twelve months; the index for new orders jumped to 58.5, the highest in fourteen months; the employment index increased to 53.1, the highest in eight months; the orders backlog index went to 54.5, highest in twelve months; and the new export orders measure rose to 57.0, the highest in six months. The prices paid index increased to 73.0 from 65.5, the fourth consecutive rise, indicating rising inflation in the manufacturing sector.
  • Non-farm productivity (output per hour) increased at a 1.7% annual rate in the first quarter, versus a consensus expectation of 0.7%.
  • Non-farm productivity in the fourth quarter was revised up to 2.1% from 1.7% and is up 1.1% from a year ago. Real (inflation-adjusted) compensation per hour in the non-farm sector declined at a 1.5% annual rate in the first quarter, a combination of a nominal gain of 2.3% and a 3.8% annualized increase in the consumer price index (CPI).
  • Unit labor costs – the gap between compensation and output – increased at a 0.6% rate in Q1, much less than the consensus expected gain of 3.8%.In the manufacturing sector, first quarter growth rates for productivity (2.7%), compensation (5.5%), and unit labor costs (2.7%) were all higher than for the non-farm sector as a whole.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Flamel Technologies (FLML), Fluor Corporation (FLR), Guitar Center (GTRC), j2 Global Communications (JCOM), Kinross Gold (KGC)
  • TUESDAY: Cisco Systems (CSCO), Duke Energy Corporation (DUK), Holly (HOC), Macrovision (MVSN), Priceline.com (PCLN), Randgold Resources Limited (GOLD), Tyco International (TYC), Walt Disney (DIS), Youbet.com (UBET).
  • WEDNESDAY: Barr Pharmaceuticals, Inc. (BRL), Toll Brothers (TOL), Whole Foods Market (WFMI)
  • THURSDAY: Biovail Corporation (BVF), California Pizza Kitchen (CPKI), EchoStar Communications Corp. (DISH), King Pharmaceuticals (KG), THQ Inc (THQI), Urban Outfitters (URBN), webMethods, Inc. (WEBM)
  • FRIDAY: Goldcorp (GG), Petrobras (PBR)

On the economic front we have potential market movers with:

  • MONDAY: Consumer Credit,
  • TUESDAY: Wholesale Inventories,
  • WEDNESDAY: Crude Inventories, FOMC policy statement
  • THURSDAY: Export Prices ex-ag., Import Prices ex-oil, Initial Claims, Trade Balance, Treasury Budget,
  • FRIDAY: Core PPI, PPI, Retail Sales, Retail Sales ex-auto, Core PPI, Business Inventories

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This Week’s Word On Discipline:

“Lack of discipline leads to frustration and self-loathing.” – Marie Chapian

CANSLIM SETUPS