Bull Marches Firmly

Traders,

The road is too narrow, And your footing could fail
— Willie Nelson, “Somebody pick up my pieces”

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:

The markets roar back with heavy buying volume.

As mentioned last week, a rally seemed plausible due to mass belief a sell-off was iminent. Markets always find a way to screw over the most amount of people.

But it’s the magnitude of buying interest that has us changing our bias from bearish to unsure.
Strong bulls see up days backed by higher volume than their down days.

New highs for sectors appears more likely than tests of 50-day moving averages.

Tops are usually a process that can take weeks to play out as leadership begins to lose footing and volatility increases.

We maintain No Bias primarily because of mixed signals.

Technically speaking:

The Dow Industrial Average

($INDU), 1.6%, rallies to just below a new high.

The S&P 500

($SPX), 1.7%, also rallies to just below a new high.

Nasdaq

($COMPQ), 2.1%, gaps up t a new high.

Russell 2000

($RUT), 1.5%, remains relatively weaker than the other major indexes, though rallied to just shy of a new high.

Volume indications swings back to the Bulls as the Dow, S&P 500 and Nasdaq posted two days of heavy accumulation with one less significant day of distribution.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) maintains its rally from lows as it trades under its 200-day SMA.

The Gold & Silver Miners Index ($XAU) holds a trading range with its major MA’s trending sideways.

The Consumer Index ($CMR) inches up, though under last week’s high.

The Cyclical Index ($CYC) moves to just shy of a new high.

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

The Semiconductor ($SOX) pushes above its major moving averages, though shows relative weakness against the broader market as it trades under last year’s high.

The Software Index ($GSO) holds above its major moving averages, though under last week’s high.

Telecom Index ($XTC) holds just under its highs.

The Banking Index ($BKX) holds a trading range with its major moving averages trending sideways.

The Broker Dealer Index ($XBD) holds just under its highs.

The Retail Index ($RLX) holds a trading range with its major moving averages trending sideways.

The Healthcare Index ($HCX) inches higher to close on its 50-day MA.

Biotechnology Index ($BKX) inches higher to close on its 50-day MA.

Pharmaceutical Index ($DRG) struggles as it consolidates on its 200-day MA.

The REIT Index ($DJR) consolidates on its 200-day MA, threatening to break a multi-year trend line.

The Transportation Index ($TRAN) inches higher to close on its 50-day MA.

The Airline Index ($XAL) consolidates under its major moving averages.

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

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

What Was Important About Last Week

STOCKS:

  • Adobe Systems (ADBE) reported Q2 (May) earnings of $0.37 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.36. Revenues rose 17.3% year/year to $745.6 mln vs the $730.1 mln consensus.
  • Computer Sciences (CSC) excluding restructuring charges of $0.14, a $0.04 adverse impact of expenses for a stock option investigation and a $0.05 impact of interest expense accruals, CSC reported Q4 (Mar) EPS of $1.65 (consensus $1.54). Revenues checked in at $4.05 bln, just shy of the Reuters Estimates consensus of $4.1 bln.
  • Texas Instruments (TXN) narrowed its Q2 guidance, now sees EPS of $0.40-0.44, vs. prior guidance of $0.39-0.45 (consensus $0.42), on revenues of $3.36-3.51 bln, vs. prior guidance of $3.32-3.60 (consensus $3.46 bln).

ECONOMY:

  • The Consumer Price Index (CPI) increased 0.7% in May, slightly more than the consensus expected. The CPI is up 2.7% versus a year ago.
  • Energy prices increased 5.4% in May. Excluding food and energy, the core CPI was up 0.1% (0.149% un-rounded), slightly less than the consensus expected. The core CPI is up 2.2% versus a year ago.
  • The Producer Price Index (PPI) increased 0.9% in May versus a consensus expected gain of 0.6%. The PPI is up 3.9% in the past twelve months (seasonally adjusted) and has climbed at an annual rate of 11.0% in the past three months.
  • Industrial production was unchanged in May versus a consensus expected gain of 0.2%. In the past twelve months, industrial production is up 1.6%.
  • Manufacturing production increased 0.1% in May, although it was revised down for April. The largest contributions to the increase in May were from primary metals as well as petroleum and coal products. Manufacturing production is up 1.9% versus last year and up at a 3.9% annual rate in the past three months.The production of high-tech equipment grew 0.3% in May and is up 17.1% versus a year ago.
  • Capacity utilization declined to 81.3% versus a consensus forecast of 81.6%. In the manufacturing sector, capacity utilization declined to 79.9%.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: none
  • TUESDAY: Best Buy Co., Inc. (BBY)
  • WEDNESDAY: CarMax, Inc (KMX), Circuit City Stores Inc. (CC), FedEx (FDX), Morgan Stanley (MS), Sonic Corp. (SONC)
  • THURSDAY: H&R Block, Inc. (HRB), Jabil Circuit, Inc. (JBL), Pier 1 Imports, Inc. (PIR)
  • 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:

“He that cannot obey, cannot command.” – Benjamin Franklin

CANSLIM SETUPS

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