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
Where We Are:
Taking a look at the broader market:
Record highs in the major indexes are followed by heavy selling.
This summer promises to turn even more exciting. Mixed analytical signals coupled with a real fear of business disease brought on by subprime will likely keep the volatility high.
Our price and volume analysis gves us a Yellow Flag of no bias – as traders it’s important to maintain flexibility of bias.
The S&P 500 closed at the new support level of its most recent breakout.
As we enter the second half of the year we’re likely to see sector rotation.
If the Bull stays alive, we’re likely to see tech issues and large-cap global companies well bid.
A major threat to market is the weak condition of the Financials.
After last week’s heavy sell-off in investment banks, we suspect key support levels will be hit before any turnaround.
Because financials hold a lot of weight in setting the tone of the market, Bulls hope a sustained downward trend in the sector doesn’t derail its course.
The Dow Industrial Average
($INDU), -0.4%, hits another new high but closes the week with a loss.
The S&P 500
($SPX), -1.2%, failed to pick up momentum to the upside, but instead sold off.
($COMPQ), -0.7%, hit a new high before closing for a loss on the week.
($RUT), -2.3%, holds a two month trading range as it closed on its 50-day SMA.
Volume indications gives a clear bias to the bears with two heavy days of distribution settling in.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) hit another new low.
The Gold & Silver Miners Index ($XAU) continues to rally out of its base.
The Consumer Index ($CMR) shows relative weakness as it closes below its 50-day SMA.
The Cyclical Index ($CYC) pulls back after hitting a new high.
The Technology Index ($DJUSTC) posts a mosdest gain for the weak as it pulls back after making a high.
The Semiconductor ($SOX) also posts a mosdest gain for the weak as it pulls back after making a high.
The Software Index ($GSO) rallies to a new high.
Telecom Index ($XTC) consolidates under its highs.
The Banking Index ($BKX) slides to a new low while trading under their major SMA’s.
The Broker Dealer Index ($XBD) finds support at their 200-day SMA after falling below the 50-day SMA.
The Retail Index ($RLX) consolidates on its 50-day SMA in a multi-month pattern.
The Healthcare Index ($HCX) trades below its 50-day SMA and above its 200-day SMA.
Biotechnology Index ($BKX) also trades below its 50-day SMA and above its 200-day SMA.
Pharmaceutical Index ($DRG) closes below its 200-day SMA.
The REIT Index ($DJR) consolidate below its major SMA’s.
The Transportation Index ($TRAN) posts a loss after hitting a new high.
The Airline Index ($XAL) consolidates off its lows in a three-month pattern.
The Defense Index ($DFX) pulls back to unchanged for the week after hitting a new high.
The Energy Index ($IXE) also pulls back to unchanged for the week after hitting a new high.
What Was Important About Last Week
- Microsoft (MSFT) reported Q4 (Jun) earnings of $0.31 per share, including $0.08 Xbox charge that analysts were including in their estimates, in line with the Reuters Estimates consensus of $0.31. Revenues rose 13.3% year/year to $13.37 bln vs. the $13.27 bln consensus. Co issued in-line guidance for Q1, sees EPS of $0.38-0.40 (consensus $0.38) on revenues of $12.4-12.6 bln (consensus $12.57 bln). For FY08, co sees EPS of $1.69-1.73 (consensus $1.71) on revenues of $56.8-57.8 bln (consensus $57.03 bln).
- Google (GOOG) reported Q2 (Jun) earnings of $3.56 per share, $0.03 worse than the Reuters Estimates consensus of $3.59. Revenues rose 57.6% year/year to $3.87 bln (consensus $3.87 bln). Co revenues, ex traffic acquisition cost revenue, were $2.72 bln vs. the First Call consensus of $2.68 bln.
- IBM (IBM) reported Q2 (Jun) earnings of $1.50 per share, $0.03 better than the Reuters Estimates consensus of $1.47. Revenues rose 8.6% year/year to $23.77 bln (consensus $23.06 bln).
- eBay (EBAY) reported Q2 (Jun) earnings of $0.34 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.32. Revenues rose 30.0% year/year to $1.83 bln (consensus $1.78 bln).
- Intel (INTC) reported Q2 (Jun) earnings of $0.19 per share, in line with the Reuters Estimates consensus of $0.19. Revenues rose 8.4% year/year to $8.68 bln vs. the $8.55 bln consensus.
- Yahoo! (YHOO) reported Q2 (Jun) GAAP earnings of $0.11 per share, in line with the Reuters Estimates consensus of $0.11. Revenues rose 10.8% year/year to $1.24 bln vs. the $1.24 bln consensus.
- Housing starts increased 2.3% in June to 1.467 million units at an annual rate, slightly beating consensus expectations. However, starts were revised down for April and May. Starts are down 19.4% versus a year ago.The rise in starts in June was all due to multi-family units, which increased 12.5%.
- Single-family units dropped 0.2%. By region, starts rose in the South and West, fell in the Midwest, and were basically unchanged in the Northeast.
- New building permits declined 7.5% in June to 1.406 million units at an annual rate, slower than the consensus expected 1.480 million rate. Permits are down 25.2% versus last year, 27.5% for single-family units.
- The Consumer Price Index (CPI) increased 0.2% in June, slightly more than the consensus expected. The CPI is up 2.7% versus a year ago.
- Energy prices declined 0.5% in June. Excluding food and energy, the core CPI was up 0.2%, as the consensus expected. The core CPI is up 2.2% versus a year ago.
- Industrial production was up 0.5% in June, as the consensus expected. In the past three months, industrial production is up at a 3.6% annual rate.
Manufacturing production increased 0.5% in June and is up at a 3.2% annual rate in the past three months.
- The production of high-tech equipment grew 1.5% in June and is up 16.9% versus a year ago.
- Capacity utilization increased to 81.7% versus a consensus forecast of 81.6%. In the manufacturing sector, capacity utilization rose to 80.3%.
- The Producer Price Index (PPI) declined 0.2% in June versus a consensus expected gain of 0.2%. The PPI is up 3.2% in the past twelve months (seasonally adjusted) and has climbed at an annual rate of 5.7% in the past three months.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Halliburton Company (HAL), Steel Dynamics (STLD), Texas Instruments (TXN)
- TUESDAY: AT&T (T), Centex Corporation (CTX), Chicago Mercantile Exchange Holdings Inc. (CME), Choice Hotels International, Inc. (CHH), Countrywide Financial Corporation (CFC), Jones Lang LaSalle (JLL), Lockheed Martin (LMT), XTO Energy Inc. (XTO)
- WEDNESDAY: Apple Inc. (APPL), Baidu (BIDU), ConocoPhillips (COP), DiamondRock Hospitality Company (DRH), General Dynamics (GD), Genzyme Corporation (GENZ), Immucor (BLUD), QUALCOMM Inc. (QCOM), The Boeing Company (BA), The New York Times Company (NYT),
- THURSDAY: 3M Company (MMM), Beazer Homes USA Inc. (BZH), ExxonMobil Corporation (XOM), Ford Motor Company (F), Office Depot Inc. (ODP), Potash Corporation of Saskatchewan Inc. (POT), Wendy’s International (WEN)
- FRIDAY: Chevron (CVX), Fortune Brands (FO), Ingersoll-Rand Co. Ltd. (IR)
On the economic front we have potential market movers with:
- MONDAY: none
- TUESDAY: none
- WEDNESDAY: Existing Home Sales, Crude Inventories, Fed’s Beige Book
- THURSDAY: Durable Orders, Initial Claims, Help-Wanted Index, New Home Sales
- FRIDAY: GDP-Adv., Chain Deflator-Adv., Mich Sentiment-Rev.
- The Growth Stock Landscape
- What We Like – What We Have
- This Week’s Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS
This Week’s Word On Discipline:
“ Either you think, or else others have to think for you and take power from you, pervert and discipline your natural tastes, civilize and sterilize you.” – F. Scott Fitzgerald