Nothing ever change, oh no
Nothing ever change
— The Specials, Do Nothing
- 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 overall markets:
The broader market remains poised to bounce.
Whether a bounce marks the start of a new leg up, or fizzles out, is to be determined.
We like what volume indications are telling us.
We like the fact that Broker Dealers are holding up.
We like the fact that Technology as a group has refused to break down.
We don’t like the technical condition of Growth Stocks as a group.
We don’t like the fact that Semiconductors have fallen a part.
We don’t like the fact that we are rotating out of leadership from Energy. Markets led by Energy are prone to be in the last stage of a cycle before turning bad.
Our mode of operation continues to be, for the most part, wait and see.
Doing nothing is as much a decision as buying and selling.
Doing nothing at this stage of the game is in our best interest. There is no reason to step into an uncertain market to risk healthy profits made on the year.
The Dow Industrial Average ($INDU), +1.84%, is trading under its major moving averages as it attempts to negate a bearish head and shoulders pattern.
The S&P 500 ($SPX), +1.60%, is trading under its major moving averages as it looks to make the third low in an upward trending channel.
Nasdaq ($COMPQ), +0.37%, is trading above its 200-day average and below its 50-day average as it maintains a neutral triangle pattern for the year.
Russell 2000 ($RUT), +0.41%, is trading onits 200-day moving average as it remains triangled for the year.
Volume indications with a follow through day in the books and a strong accumulation day Friday, we have evidence to suggest institutions are defending the buy side.
New Highs – New Lows is leaning to the Bears. The ratio has moved off lows for the year.
Investors Intelligence is showing a ratio of 1.53 to the Bulls. Markets tend to turn sour with a dominance of bullish money managers.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The 20+-year Note Holdr (TLT) is trading trend down below its major moving averages.
The U.S. Dollar Index ($USD) continues to consolidate in month long pattern.
The Gold Miners Index ($XAU) is trading above its major moving averages after pulling back from an all time high made six weeks ago.
The Dow Jones AIG Commodity Index ($DJAIG) is pulling back from new highs made a month ago.
Technology ($DJUSTC) was little changed for the week as it trades above its 200-day average and below its 50-day average.
The Semiconductor Index ($SOX) broke down below to a new low for the year, well below its major moving averages.
Banks ($BKX) had a strong week as they closed above its major moving averages.
Broker Dealers ($XBD) maintain relative strength, trued up above its major moving averages.
Retail ($RLX) continues to consolidate below its major moving averages.
Internet ($IIX) continue to consolidate above its major moving averages.
Healthcare ($HCX) hit a new low for the year, well below its major moving averages.
Biotech ($BTK) are consolidating just below its 50-day moving average. Theindex possesses relative strength.
REIT’s ($DJR) are trying to turn around after trending down for two months.
Homebuilders ($DJUSHB) are trading under the major moving averages.
Transportation ($TRAN) is poised to breakout after consolidating for the year.
Airlines ($XAL) remain under a key trend line, sandwiched between the major moving averages.
Defense ($DFX) hit anew low for the year, and is trading between its major moving averages.
Energy ($IXE) had a strong week while rebounding from threeweeks of declines.
Utilities ($UTY) are trading between their major moving averages.
The top 10 industry groups from the 6 month RS screen are:
- SEMICONDUCTR-MEMORY CH
- STAFFING OUTSOURCING S
- DRUGS – GENERIC
- INVESTMNT BROKERAGE-NA
- DRUG DELIVERY
- DRUG MANUFACTURERS OTH
- HEAVY CONSTRUCTION
- OIL GAS DRILLING EXPLO
- INVESTMNT BROKERAGE-RE
- INSURANCE BROKERS
What Was Important About Last Week
- Microsoft (MSFT) announced earnings of $3.14 billion for its fiscal first quarter, up 24% from a year ago.
- The world’s biggest oil company Exxon Mobil (XOM), reported a third-quarter profit of $9.92 billion, this is up 75% from a year ago, and a record for a U.S. company.
- American Express (AXP) reported a 17% jump in earnings.
- Merck (MRK) reported a 7.2% gain in earnings.
- Amazon (AMZN) said it expects fourth quarter sales to be between $2.86 billion and $3.16 billion, up from $2.54 billion a year ago, and in line with analysts’ predictions for $3.08 billion. The stock dropped over 5% on the news.
- DaimlerChrysler (DCX) said earnings fell 21%
- Oil producer BP (BP) reported a 34% rise in earnings.
- Lockheed Martin (LMT) posted a 39% increase in earnings and raised its outlook for the year.
- Boeing (BA) announced earnings of $1.01 billion for the quarter, twice what it earned a year ago. However, excluding one time sales the company’s earnings disappointed Wall Street.
- ConocoPhillips (COP) said its third-quarter profit was 89% higher from a year ago to $3.8 billion as it beat forecasts.
- Sony (SNE) announced profits almost half of what they were a year ago due to weak electronics sales, a Hollywood slump and one-time charges.
- Bristol-Myers (BMY) reported earnings of $964 million in the third quarter, up 27%
from a year ago, though just missed Wall Street forecasts.
- President Bush named Ben Bernanke to succeed Alan Greenspan as chairman of the Federal Reserve.
- Existing home sales held steady at a seasonally adjusted annual rate of 7.28 million in September, this is the same rate as August, and the second highest on record.
- New home sales rose in September after a slump in August.
- Gross domestic product grew 3.8% in the third quarter, up from a 3.3% in the second
quarter. This is the 15th-straight quarter of positive growth and the ninth-straight quarter of a GDP growth rate of 3% or more – the longest stretch since the mid-1980s.
Key earnings releases:
- MONDAY: Cognizant Technology Solutions (CTSH), Valero Energy Corp. (VLO
- TUESDAY: ), BJ SVCS CO (BJS), CB RICHARD ELLIS GROUP INC (CBG), Eagle Materials Inc. (EXP), Electronic Arts (ERTS), Electronic Data Systems (EDS), Entergy (ETR), Qwest Communications (Q), Steel Technologies (STTX), UBS (UBS).
- WEDNESDAY: Activision (ATVI), Cell Genesys (CEGE), CIGNA (CI), Dean Foods (DF), Duke Energy Corporation (DUK), Pan American Silver (PAAS), Peet’s Coffee & Tea (PEET), Time Warner Inc. (TWX).
- THURSDAY: Boyd Gaming (BYD), Cimarex Energy Co. (XEC), Clorox (CLX), Expedia, Inc. (EXPE), LoJack (LOJN).
- FRIDAY: Checkpoint Systems (CKP), Noble Energy, Inc. (NBL), Wild Oats Markets (OATS).
On the economic front we have potential market movers with:
- MONDAY: Personal Income, Personal Spending, Chicago PMI
- TUESDAY: Auto Sales, Truck Sales, Construction Spending, ISM Index, FOMC policy announcement
- WEDNESDAY: Crude Inventories
- THURSDAY: , Initial Claims, Productivity-Prel, Factory Orders, ISM Services
- FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate
- 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:
“A colt is worth little if it does not break its halter. ” — proverb