CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Shorts feel the pressure as the major indexes move off their lows.

But we can’t say it’s over for heavy selling.

The broad market rally suggests buyers may be drying up as volume decreases.

Major indexes remain under their 50-day averages.

Though we had one day of accumulation, the price moves on the indexes were not big enough to suggest strong institutional support.

We’ll be on the watch again this week.

Leadership from Tech with new highs from BSCI and RIMM are exactly what the Bulls need.

As the market digests and anticipates Subprime carnage, Technology is distant from the problem.

We are also seeing Big Caps favored over Small Caps, leaving names like INTC and IBM in good positions.

We leave the Red Flag until price and volume indications lead us to do otherwise.

Technically speaking:

The Dow Industrial Average

($INDU), 2.3%, makes its move north of its 200-day average, just shy of its 50-day average.

The S&P 500

($SPX), 2.3%, closes above its 200-day average, still below its 50-day average.

Nasdaq

($COMPQ), 2.9%, also closes above its 200-day average and below its 50-day average.

Russell 2000

($RUT), 1.6%, rallies, thogh closes below its major moving averages.

Volume indications remain in the Bears favor as decreasing volume supports the market’s rally.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) holds its downtrend and closes below its 50-day average.

The Gold & Silver Miners Index ($XAU) rallies to close just under its major moving averages.

The Consumer Index ($CMR) rallies to close above its 200-day average, though below its 50day average.

The Cyclical Index ($CYC) also rallies to close above its 200-day average, though below its 50-day average.

The Technology Index ($DJUSTC) extends its rally above its 200-day average and closes just under its 50-day average.

The Semiconductor ($SOX) posts a modest rally to close between its major averages.

The Software Index ($GSO) rallies to close just above its 200-day average.

Telecom Index ($XTC) extends its rally above its 200-day average and closes below its 50-day average.

The Banking Index ($BKX) consolidates below its 50-day average.

The Broker Dealer Index ($XBD) rallies, though remains below its major moving averages.

The Retail Index ($RLX) also rallies, though remains below its major moving averages.

The Healthcare Index ($HCX) also rallies, though remains below its major moving averages.

Biotechnology Index ($BKX) also rallies, though remains below its major moving averages.

Pharmaceutical Index ($DRG) also rallies, though remains below its major moving averages.

The REIT Index ($DJR) rallied to close just under its 50-day average which is trending below its 50-day average.

The Transportation Index ($TRAN) rallied to close just under its 200-day average.

The Airline Index ($XAL) rallies to close just below its 50-day average.

The Defense Index ($DFX) rallies to close just above its 50-day average.

The Energy Index ($IXE) extends its rally off its 200-day average though closes below its 50-day average.

What Was Important About Last Week

STOCKS:

• Aeropostale (ARO) reported Q2 (Jul) earnings of $0.19 per share, $0.01 better than the Reuters Estimates consensus of $0.18. Revenues rose 13.3% year/year to $311.2 mln vs the $326.2 mln consensus.
• Brocade Communications Systems (BRCD) reported Q3 (Jul) earnings of $0.13 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.11. Revenues rose 73.4% year/year to $327.5 mln vs the $326.3 mln consensus.
• Gap (GPS) reported Q2 (Jul) earnings of $0.21 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.19. Revenues fell 0.6% year/year to $3.69 bln vs the $3.71 bln consensus.
• Marvell Technology Group (MRVL) reported Q2 (Jul) earnings of $0.06 per share, excluding non-recurring items, in line with the Reuters Estimates consensus of $0.06. Revenues rose 14.4% year/year to $656.7 mln vs the $645.5 mln consensus.
• Abercrombie & Fitch (ANF) reported Q2 (Jul) earnings of $0.88 per share, compared to 08/09 guidance of $0.87-0.88 which includes $0.03 related to the favorable settlement of a state tax audit, may not be comparable to the Reuters Estimates consensus of $0.87.
• Hot Topic (HOTT) reported Q2 (Jul) loss of $0.04 per share, $0.01 worse than the Reuters Estimates consensus of ($0.03). Revenues rose 0.9% year/year to $161.7 mln vs the $160.2 mln consensus.
• Men’s Wearhouse (MW) reported Q2 (Jul) earnings of $1.00 per share, $0.07 better than the Reuters Estimates consensus of $0.93. Revenues rose 23.6% year/year to $569.3 mln vs the $580 mln consensus.
• Medtronic (MDT) reported Q1 (Jul) earnings of $0.62 per share, excluding non-recurring items, in line with the Reuters Estimates consensus of $0.62.
• Analog Devices (ADI) reported Q3 (Jul) earnings of $0.37 per share, including charges, at least $0.01 better the Reuters Estimates consensus of $0.36. Revenues rose 2.5% year/year to $680.3 mln vs the $672.9 mln consensus.

ECONOMY:

• New orders for durable goods rose 5.9% in July versus a consensus expected gain of 1.0%. Excluding transportation, orders rose 3.7% versus a consensus expected gain of 0.6%. Over the past three months, new orders excluding transportation are up 9.1% at an annual rate.
• New single-family home sales increased 2.8% in July to an annual rate of 870,000. The consensus expected an annual rate of 820,000. By region, sales in the West accounted for almost all the increase nationwide. Sales fell in the Northeast and were roughly unchanged in the Midwest and South.
• The median price of new homes sold was $239,500 in July, up 0.6% versus a year ago. The average price of new homes sold declined to $300,800, down 3.4% versus last year.

What We’re Looking For This Week

Key earnings releases:

• MONDAY: Harmony Gold Mining (HMY)
• TUESDAY: China Medical Technologies, Inc. (CMED)
• WEDNESDAY: Dollar Tree Stores (DLTR), Layne Christensen (LAYN), Williams-Sonoma (WSM)
• THURSDAY: Dell, Inc. (DELL), H&R Block, Inc. (HRB), Wind River Systems (WIND)
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: Existing Home Sales
• TUESDAY: Consumer Confidence, FOMC Minutes
• WEDNESDAY: Crude Inventories
• THURSDAY: GDP-Prel., Chain Deflator–Prel., Initial Claims, Help-Wanted Index
• FRIDAY: Personal Income, Personal Spending, Core PCE Inflation, Chicago PMI, Factory Orders, Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

• 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:

“Ali was a guy that had a lot of discipline. If you hung around him, you’d be able to get some of that discipline that he had. And I learned from that. He was a sweet man. ” – Larry Holmes

CANSLIM SETUPS