A key ingredient for bull market

GSRTrades Weekly Market Report

Market Bias
Seller’s Edge

Where We Are

Friday’s heavy selling confirms our bearish bias.

The major indexes sold off after testing their 50-day moving averages to the upside.

Modest gains for the week show some improvement for the Bulls after the “flash crash.”

But for us to become Bulls, we’d have to see the averages regain footing above their 50-day moving averages. It would also be encouraging to see it happen with the endorsement of a 2% rally on strong volume for a Follow Through Day.

Volume over the last month has clearly favored the sellers, as multiple Distribution Days, where volume on a down day exceeds the previous day, indicates institutions have been unloading.

It’s the selling volume, not price trend, which kept us bearish of late.

In the bigger picture, the trend is still clearly up as the major indexes travel above their long-term 40-week moving averages.

Any test below these averages would likely start with a breakdown of a sector to lead that action. Sectors already below this mark include Commodities, Broker Dealers, Drugs and Energy.

The Broker Dealers are especially important to keep an eye on for their tight relationship to consumer sentiment and the health of the economy. Last week the ($XBD) tested the bottom of a yearlong trading range. Any breakdown would be significant.

Another pace setter, the Semiconductors ($SOX), would also disrupt a strong upward trend that has formed over the last year.

News wise, next week many key retailers are set to announce earnings, which will likely set a tone for trading.

Last week, the market saw a handful of breakouts from Consumer Goods stocks like Hasbro (HAS), Altria (MO), Pepsico (PEP) and Sara Lee (SLE).

Should the breakouts hold, they may become market leaders, a key ingredient for a sustainable bull market.

It would be even more encouraging to see technology names follow suit, as IBM (IBM) appears poised to do so.

Growth stocks launching from technical bases included Affymax (AFFY) and Maidenform Brands (MFB.)

The success of these stocks will be telling of similar ones ready to do the same.

Technically Speaking

MAJOR INDEX BIAS & PERFORMANCE FOR WEEK
BIAS
Index
Chg.

% Action
+ DJIA +240 +2.31% Sells off after hitting 50-day MA
+

Nasdaq

+81 +3.58% Sells off after hitting 50-day MA

+

S&P 500 +25 +2.23% Sells off after hitting 50-day MA
+ Russ 2K +41 +6.28% Closes just under 50-day MA
or = Above or Below 40-week exponential moving average. + = 50-day SMA is above the 200-day MA

FOUR-WEEK VOLUME INDICATOR


Accumulation

Distribution


BIAS Index Major
Minor
Major Minor

DJIA 2 0 5
0

Nasdaq 3 0 4 0

S&P 500 1 0 6 0

Russ 2K 2 0 4 1
Accumulation: index up with more volume than previous day. Distribution: index down with more volume than previous day. Major: > 60-day average, Minor: <.

SECTOR TREND BIAS & PERFORMANCE FOR WEEK
BIAS Sector % Action
+ U.S. Dollar, $USD +1.94% New 52-wk High
+ Gold & Silver Miners, $XAU +3.99% Breaks out of 5-month base
+
Commodities, $DJAIG -0.64% Sells under major MAs

+

Consumers, $CMR +1.79% Sells off after hitting 50-day MA
+ Cyclicals, $CYC +4.38% Sells off after hitting 50-day MA
+ Technology, $DJUSTC +3.47% Sells off after hitting 50-day MA
+ Semiconductors, $SOX +2.05% Sells off after hitting 50-day MA
+ Software, $GSO +7.97% Closes on 50-day MA
+

Telecoms, $XTC +4.09% Sells off after hitting 50-day MA
+ Banks, $BKX +3.06% Closes just under 50-day MA
+ Broker Dealers, $XBD +1.52% Sells off after hitting 200-day MA
+ Retail, $RLX +2.61% Closes just under 50-day MA
+
Healthcare, $HCX +0.68% Sells off after hitting 200-day MA

+

Biotechnology, $BKX +3.65% Waivers between major MAs
+
Pharmaceutical, $DRG -0.20% Little changed under major MAs
+ REITs, $DJR +3.57% Holds above major MAs
+ Homebuilders, $DJUSHB +1.67% Holds above 200-day MA
+ Transportation, $TRAN +4.41% Holds above 50-day MA
+ Airlines, $XAL +8.23% Closes just under 50-day MA
+ Defense, $DFX +3.03% Closes just under 50-day MA
+
Energy Index, $IXE +2.03% Closes just under 200-day MA
or = Above or Below 40-week exponential moving average. + = 50-day MA is above the 200-day MA

News To Watch This Week

Earnings:

  • MONDAY – Agilent Technologies Inc. (A), Lowe’s Companies (LOW), Sears Holdings Corp (SHLD)
  • TUESDAY – Abercrombie & Fitch Co. (ANF), Dick’s Sporting Goods, Inc. (DKS), Hewlett-Packard (HPQ), Home Depot Inc (HD), The TJX Companies, Inc. (TJX), Wal-Mart Stores, Inc. (WMT)
  • WEDNESDAY – Applied Materials (AMAT), Autodesk, Inc. (ADSK), BJ’s Wholesale Club (BJ), Deere & Company (DE), Gymboree (GYMB), Hormel Foods Corporation (HRL), Hot Topic (HOTT), Limited Brands (LTD), PetSmart (PETM), Target Corporation (TGT)
  • THURSDAY – Dell, Inc. (DELL), Dollar Tree Stores (DLTR), Ross Stores, Inc. (ROST), Staples, Inc. (SPLS), Stein Mart, Inc. (SMRT), The Buckle (BKE), Williams-Sonoma (WSM), Zumiez Inc. (ZUMZ)
  • FRIDAY – AnnTaylor Stores (ANN), Gap Inc. (GPS)

Economic:

  • MONDAY – Net Long-Term TIC Flows
  • TUESDAY – Building Permits, PPI, Housing Starts,
  • WEDNESDAY – CPI, Crude Inventories
  • THURSDAY – Continuing Claims, Initial Claims, Leading Indicators, Philadelphia Fed
  • FRIDAY – none


This Week’s Word On Discipline

“What it lies in our power to do, it lies in our power not do.” — Aristotle

This Market Report is our broad analysis that is the foundation for our Growth Stock Report that highlights opportunities in individual stocks.

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