Bear Feigns Attack

Traders,

well it goes like this the fourth, the fifth
the minor fall and the major lift
— Jeff Buckley “Hallelujah”

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:

It’s almost hard to believe the major indexes were higher for the week with all the dismal headlines and heavy selling.

More often than not, the news is just noise.

Bears are hot on the idea that bad loans made to people with poor credit histories will continue to cause funds to fail, putting the breaks on other areas of business as Banks tighten their lending.

Bulls look to the strength of the booming global economy, unshakable and unlikely to stumble over the growing problems of Banks.

Both arguments are good, and the outcome may fall somewhere in the middle. It’s very possible that the Financial sector will suffer for another 18 months as more bad loans and future lawsuits pile in.

Should Banks remain weak, areas such as Technology and Healthcare could attract money.

But trading for us is not an economic argument we’re trying to resolve. All we need to know is anything is possible.

Our reality is based on the analysis of the market’s price and volume, which over the long run has not failed us.

The 200-day moving average is in-play as support for the S&P 500. We are not going to raise the Yellow or Green flag until we see more accumulation from institutional buyers.

Big-cap Tech names like Cisco, Intel and IBM have held up just fine. It’s hard to see the broader market fall apart with their uptrends solidly intact.

As beat-up as the Financials have been over the past three weeks, there are signs that the selling volume is drying up.

Of course we have no idea what kind of market we’ll see next week, but from where we stand now, this market has a real shot at heading higher.

We keep the Red Flag until it’s safe for breakout buying.

Technically speaking:

The Dow Industrial Average

($INDU), 0.4%, hit a new low while treading below its 50-day moving average.

The S&P 500

($SPX), 1.4%, hovers on its 200-day moving average.

Nasdaq

($COMPQ), 1.3%, consolidates below its 50-day average and above its 200-day average.

Russell 2000

($RUT), 4.4%, bounced to the resistance of its 200-day average.

Volume indications are mixed for the week, yet ultimately bearish over the past three weeks.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) consolidates below its major moving averages.

The Gold & Silver Miners Index ($XAU) chops on its major moving averages.

The Consumer Index ($CMR) holds the support of its 200-day average.

The Cyclical Index ($CYC) slides further below its 50-day average, yet still above its 200-day average.

The Technology Index ($DJUSTC) consolidates just below its 50-day average.

The Semiconductor ($SOX) also consolidates just below its 50-day average.

The Software Index ($GSO) trades on its 200-day average.

Telecom Index ($XTC) slid to its 200-day average.

The Banking Index ($BKX) bounced off its lows, still below its major moving averages.

The Broker Dealer Index ($XBD) also bounced off its lows, still below its major moving averages.

The Retail Index ($RLX) hit a new low as it falls further south of its moving averages.

The Healthcare Index ($HCX) consolidates below its 200-day average.

Biotechnology Index ($BKX) also consolidates below its 200-day average.

Pharmaceutical Index ($DRG) trades just off the lows of the year, below its major moving averages.

The REIT Index ($DJR) bounced off the lows of the year, still below its major moving averages.

The Transportation Index ($TRAN) trades at the support of its 200-day moving average.

The Airline Index ($XAL) bounced off the low of the year, still below its major moving averages.

The Defense Index ($DFX) consolidates on its 50-day average.

The Energy Index ($IXE) consolidates below its 50-day average.

What Was Important About Last Week

STOCKS:

  • NVIDIA (NVDA) reported Q2 (Jul) GAAP earnings of $0.43 per share, $0.09 better than the GAAP Reuters Estimates consensus of $0.34. Excluding stock based compensation and the associated tax impact, non-GAAP earnings were $0.51 per share, $0.08 better than the non-GAAP First Call consensus of $0.43.
  • AIG (AIG) reported Q2 (Jun) earnings of $1.64 per share, $0.02 better than the Reuters Estimate of $1.62. Revenues were unchanged from the year-ago period at $1 mln.
  • Cisco Systems (CSCO) reported Q4 (Jul) earnings of $0.36 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.35. Revenues rose 18.1% year/year to $9.43 bln vs. the $9.27 bln consensus.
  • Fluor Corp (FLR) reported Q2 (Jun) earnings of $1.05 per share, $0.10 better than the Reuters Estimates consensus of $0.95. Revenues rose 22.1% year/year to $4.22 bln vs. the $3.79 bln consensus.

ECONOMY:

  • Non-farm productivity (output per hour) increased at a 1.8% annual rate in the second quarter, slightly less than the 2% rate the consensus expected. Non-farm productivity is up 0.6% versus a year ago.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Bob Evans Farms (BOBE), Petrobras (PBR)
  • TUESDAY: Agilent Technologies Inc. (A), Applied Materials (AMAT), Home Depot Inc (HD), UBS (UBS), Wal-Mart Stores Inc. (WMT)
  • WEDNESDAY: Deere & Company (DE)
  • THURSDAY: Autodesk, Inc. (ADSK), Hewlett-Packard (HPQ), Kohl’s (KSS), Nordstrom (JWN)
  • FRIDAY: none

On the economic front we have potential market movers with:

  • MONDAY: Retail Sales, Business Inventories
  • TUESDAY: PPI, Trade Balance
  • WEDNESDAY: CPI, NY Empire State Index, Net Foreign Purchases, Industrial Production, Capacity Utilization, Crude Inventories
  • THURSDAY: Housing Starts, Building Permits, Initial Claims, Philadelphia Fed
  • FRIDAY: Mich Sentiment-Prel.

The Following Sections Are On Our Home Site:

This Week’s Word On Discipline:

“ It is one thing to praise discipline, and another to submit to it.” – Benjamin Disraeli

CANSLIM SETUPS

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