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
Where We Are:
Taking a look at the broader market:
The indexes change little ahead of the typically slow Fourth of July holiday week.
Tough distribution weighed in with sellers outpacing buyers, we want to be careful not to look too much into the week’s action.
We may very well see some new trends develop over the next few weeks.
While Energy continues to be our leadership, we are suspicious over its inability to keep step with crude oil as it moves higher.
Technology attracts some decent bidding after being an under performer.
Should the Bull pull itself together and give us another up leg, we might expect Technology to lead. The key is Semiconductors.
If Semiconductors break out it will be a strong sign for the Bull.
Banks slip over fears of deep subprime problems.
Questions over the valuations of bond portfolios with subprime exposure.
The fact that Bear Stearns lost a couple of hedge funds is one thing. The fact that these bond portfolios may soon be judged under new valuation criteria could cause a panic.
Financial stocks are already falling from highs. So far the charts are telling us matters will not get out of hand.
While we may see Financials put in a correction, we are not seeing any panic selling.
Next week could be a sleeper. Best bet is to have some fun over the holiday.
The Dow Industrial Average
($INDU), 0.4%, hugs its 50-day average ahead of the holiday week.
The S&P 500
($SPX), 0.1%, also hugs its 50-day average ahead of the holiday week.
($COMPQ), 0.6%, leads the market for the week in relative strength, though failed to make a new high.
($RUT), -0.1%, was little changed for the week as it joins the other indexes with a trading range.
Volume indications the Dow and S&P 500 had two days of distribution a piece while the Nasdaq had one day of distribution.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) slides to back below its 50-day moving average.
The Gold & Silver Miners Index ($XAU) drifts below its major moving averages.
The Consumer Index ($CMR) consolidates below its 50-day average.
The Cyclical Index ($CYC) holds above its 50-day average.
The Technology Index ($DJUSTC) pokes out to a new high.
The Semiconductor ($SOX) pulls back in a handle on a two-month base.
The Software Index ($GSO) pulls back to below its 50-day average.
Telecom Index ($XTC) closes above its 50-day average.
The Banking Index ($BKX) drift below the major moving averages.
The Broker Dealer Index ($XBD) consolidates below the 50-day and above the 200-day average.
The Retail Index ($RLX) also consolidates below the 50-day and above the 200-day average.
The Healthcare Index ($HCX) drifts below its 50-day average, though remains above its 200-day average.
Biotechnology Index ($BKX) bounces off its 200-day average.
Pharmaceutical Index ($DRG) drifts below its major moving averages.
The REIT Index ($DJR) falls further below its major moving averages.
The Transportation Index ($TRAN) consolidates below its 50-day moving average.
The Airline Index ($XAL) consolidates below its 50-day moving average, which is trending below the 200-day average.
The Defense Index ($DFX) holds an uptrend above its major averages.
The Energy Index ($IXE) also holds an uptrend above its major averages.
What Was Important About Last Week
- Research in Motion (RIMM) reported Q1 (May) earnings of $1.17 per share, $0.11 better than the Reuters Estimates consensus of $1.06; revenues rose 76.5% year/year to $1.08 bln (consensus $1.05 bln). RIMM reported 1.2 mln new subs vs. 1.12-1.17 mln guidance. Co issued upside guidance for Q2, sees EPS of $1.37-1.49 (consensus $1.12) on revenues of $1.3-1.365 bln (consensus $1.12 bln).
- Palm Inc. (PALM) reported Q4 (May) earnings of $0.17 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.15. Revenues flat YoY at $401.3 mln vs $406.58 mln Reuters consensus.
- Bed Bath & Beyond (BBBY) reported Q1 (May) earnings of $0.38 per share, $0.01 better than the Reuters Estimates consensus of $0.37; Revenues rose 11.2% year/year to $1.55 bln vs. the $1.54 bln consensus.
- Personal income increased 0.4% in May versus a consensus expected increase of 0.6%.
- Personal consumption increased 0.5% compared to a consensus expected 0.7%.
- Disposable income (income after taxes) increased 0.4% in May and was up 5.8% versus a year ago.
- Consumption (PCE) prices rose 0.5% in May and are up 2.3% versus last year. Core consumption prices, which exclude food and energy, were up 0.1% in May and up 1.9% versus a year ago.
- After adjusting for inflation, real consumption was up 0.1% in May but was revised down for March and April. Real consumption is up 3.1% versus May 2006.
- Federal Reserve left the target federal funds rate unchanged at 5.25% today, it made some important adjustments to the wording of its statement on the stance of monetary policy. The changes in language suggest an improved forecast for real GDP growth and a tougher standard for assessing inflation risk.
- The government revised first quarter real GDP growth to 0.7% at an annual rate, versus the 0.6% growth rate reported last month. The consensus expected 0.8%. Almost all of the upward revision to real GDP growth was due to higher net exports than previously estimated. Most other major components of GDP were revised downward, although very slightly, including consumption, business investment, and residential construction.
- The GDP price index rose at a 4.2% rate, the fastest increase since 1991. Nominal GDP growth (real GDP plus inflation) grew at a 4.9% rate.
- New orders for durable goods declined 2.8% in May, a larger drop than the consensus expected. New orders excluding transportation declined 1.0% versus a consensus expected gain of 0.2%.
- New single-family home sales declined 1.6% in May to an annual rate of 915,000. The consensus expected an annual rate of 924,000. New home sales were revised down for February, March, and April.
- Existing home sales declined 0.3% in May to an annual rate of 5.99 million, the lowest since June 2003. The consensus expected level of sales was 5.97 million.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: none
- TUESDAY: none
- WEDNESDAY: HOLIDAY
- THURSDAY: none
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: ISM Index
- TUESDAY: Factory Orders, Pending Home Sales, Auto Sales, Truck Sales,
- WEDNESDAY: HOLIDAY
- THURSDAY: Initial Claims, ISM Services, Crude Inventories
- FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek
- 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:
“With self-discipline most anything is possible.”– Theodore Roosevelt