Learn To Listen, Listen To Learn

Posted onAuthorGSRTrades

Traders,

Learn to listen, listen to learn
You gotta learn to listen, before you get burned

— The Ramones

Our current position:

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

The following sections can now be found on our home site:

Where We Are:

Taking a look at the overall markets:

The Bull remains intact and healthy.

As the market shook off bad news coming from the economy, we’re encouraged to see a strong number of buyers out in force for the week.

But what we talk about here is mostly in the past.

We see no indication that this market is in presently in trouble, but our collection of evidence is a never ending process.

Sure we have a handful of bearish macro trends in place such as the VIX, Investors Intelligence, and higher energy prices; but going into next week the bullish flag is out.

Technology shares have been consolidating nicely, and we see some of the big names paving the way north.

Broker Dealers remain trend up as new highs continue to be pegged in.

We still see a troubled technical condition for Banks, but technical conditions can change like fashions – we don’t assume bearish head-and-shoulders patterns will be fulfilled as often as some technicians want to believe.

Growth Stocks are happening. While new highs are mostly coming from energy, there are also good setups from Basic Materials and Health.

Going forward, we want to see leadership from Technology oriented stocks.

The Semiconductors have been acting promising of late, though should they break out to new highs on the year, they will face a key technical zone.

Historically, Semiconductor strength goes hand in hand with the broader market strength. What we’re concerned with here is trends, and whether or not Semis can trend up is a question that remains to be answered.

We will continue to listen to the market for further instructions.

Technically speaking:

The Dow Industrial Average ($INDU), +0.86%, is challenging the upper portion of a four month trading range.

The S&P 500 ($SPX), +1.45%, traded within last week’s range, and is poised to breakout to new highs.

Nasdaq ($COMPQ), +0.71%, continues to hug its 50-day moving average while poised for new highs.

Russell 2000 ($RUT), +2.62%, is trading in step with the Nasdaq as it too is holding its 50-day average.

Volume indications continue to point up with accumulation dominating over the past two weeks.

New Highs – New Lows weren’t as strong as the week prior, and continue to represent mild weakness.

The Advance/Decline Line drifted higher for the week in step with the broader market.

Investors Intelligence maintains a bearish signal with a dominance of bullish money managers. This is a contrarian’s indicator.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 20+-year Note Holdr (TLT) fell and is parked on a upward, weekly trendline.

The U.S. Dollar Index ($USD) edged higher for the week as it closed just below its 50-day moving average.

The Gold Miners Index ($XAU) roared higher and is just shy of a new multi-year high.

The Dow Jones AIG Commodity Index ($DJAIG) lost ground, though continues to hold a bullish bias above its major averages.

Consumer Staples ($CMR). continue to consolidate in a year long range as they hold an edge in relative strength over Consumer Cyclicals ($CYC).

Technology ($DJUSTC) traded within last weeks range while poised to launch from a multi-year base.

The Semiconductor Index ($SOX) is holding a bullish cup-and-handle pattern, though will face a significant resistance level at 500, should it break out.

Banks ($BKX) are consolidating under its 50-day moving average, while trading in a bearish head-and-shoulder. Just because the pattern is bearish, it does not mean it will play out that way. Understand this.

Broker Dealers ($XBD) pushed into new high territory for the week as it remains a relative strength winner.

Retail ($RLX) continues to lag as it sunk to its 200-day average.

Internet ($IIX) edged higher for the week as it holds ground above its major moving averages.

Healthcare ($HCX) pulled back for the week, though its dominat trend remains up.

Biotech ($BTK) hit a new high.

REIT’s ($DJR) had lackluster action as it continues to cool after hitting new highs two months ago.

Homebuilders ($DJUSHB) lost ground, though remain above a base breakout mark.

Transportation ($TRAN) slid below its 200-day moving average.

Airlines ($XAL) had a dramatic week as they broke below a key trendline that market a multiyear lower base.

Defense ($DFX) consolidated in what is now a 8-week range.

Energy ($IXE) remains trend up above all its moving average, and is just shy of a new high.

Utilities ($UTY) hit a fresh high in their charge north.

The top 10 industry groups from the 6 month RS screen are:

What Was Important About Last Week

STOCKS:

  • Airline companies Delta (DAL) and Northwest (NWAC) filed for bankruptcy.
  • No. 1 U.S. electronics retailer Best Buy (BBY) reported second-quarter earnings up 25% from a year ago, though fell short of Wall Street forecasts.
  • Nokia (NOK) raised its third-quarter outlook, with increased demand for cellphones and better-than-expected pricing power.
  • Lehman Brothers (LEH) said it earned $879 million in the quarter ended Aug. 31, an increase of 74% from a year ago. The results were far better than Wall Street anticipated.
  • Bear Stearns (BSC) said earnings for its third quarter, which ended were up 34% from a year ago, beating Wall Street estimates.

ECONOMY:

  • U.S. retail sales fell sharply last in August, do largely to a fall in automobile sales.
  • The consumer price index rose 0.5% in August, less than economists expected.
  • The University of Michigan’s consumer sentiment index fell to 76.9 in September from 89.1 last month. This a bigger decline than after the Sept. 11, 2001, terror attacks.
  • The U.S. current account deficit, shrunk to $195.7 billion, though was still near the first quarter’s record deficit. The U.S. borrows $2 billion a day from foreigners.

What We Are Watching For This Week:

Key earnings releases:

  • MONDAY: Carnival Corporation & Carnival plc (CCL), Nike (NKE)
  • TUESDAY: Circuit City Stores Inc. (CC), Goldman Sachs (GS)
  • WEDNESDAY: Bed Bath & Beyond Inc. (BBBY), Biomet, Inc. (BMET), CarMax, Inc (KMX), FedEx (FDX), Morgan Stanley (MWD),
  • THURSDAY: General Mills, Inc. (GIS), KB Home (KBH), Oracle (ORCL)
  • FRIDAY: none

On the economic front we have potential market movers with:

The Following Sections Are Now On Our Home Site:

This Week’s Word On Discipline:

“Do not consider painful what is good for you.” —Euripedes