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 market’s solid rally tells us a rate cut is being factored in for the FOMC meeting Tuesday.
The question is how big will the cut be? This may very well be a “sell the news situation.
Bulls fear that a mere 25 point basis cut and comments over inflation concerns would trigger a sell-off.
And what would happen if there is no cut?
Anything could happen from the meeting, and with recent high volatility, up or down, a move could be big.
It likely won’t be until Wednesday that we get a grip of the true outcome.
For these reasons, we want to avoid having too much market exposure before the meeting.
So far, the Follow Through Day in the Nasdaq from a couple of weeks ago appears to mark a rallying point.
If the environment stays bullish for this fall we know there will be opportunities, so no reason bet heavy right now.
Breakout selections in Biotech have been behaving nicely.
The Dow Industrial Average
($INDU), 2.5%, pushes higher for the week, closing on its 50-day MA.
The S&P 500
($SPX), 2.1%, also pushes higher for the week, closing on its 50-day MA.
($COMPQ), 1.4%, consolidates on hits 50-day MA.
($RUT), 1.0%, consolidates under its 50-day MA.
Volume indications were mixed for the week, though remain bearish over the past several weeks.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) slips to a new low.
The Gold & Silver Miners Index ($XAU) pushes the top of a year-long trading range.
The Consumer Index ($CMR) inches up to close on its 50-day MA, which is trending below its 200-day MA.
The Cyclical Index ($CYC) consolidates just above its 200-day MA.
The Technology Index ($DJUSTC) consolidates on its 50-day MA.
The Semiconductor ($SOX) falls from its 50-day MA and finds support at its 200-day MA.
The Software Index ($GSO) inches above its 50-day MA.
Telecom Index ($XTC) conosolidates under its 50-day MA and above its 200-day MA.
The Banking Index ($BKX) rally off lows, though remain below the 50-day MA.
The Broker Dealer Index ($XBD) also rallies off lows, though remains below the 50-day MA.
The Retail Index ($RLX) also rallies off lows, though remains below the 50-day MA.
The Healthcare Index ($HCX) pokes above its major MA’s.
Biotechnology Index ($BKX) makes its way up the right side of a base.
Pharmaceutical Index ($DRG) rallies to the resistance of its 50-day MA, which is trending below its 200-day MA.
The REIT Index ($DJR) inches higher as it finds resistance at its 50-day MA, which is below its 200-day MA.
The Transportation Index ($TRAN) is consolidating below its 200-day MA.
The Airline Index ($XAL) consolidates below its 50-day MA.
The Defense Index ($DFX) pokes out to a new high.
The Energy Index ($IXE) makes its way up the right side of a base.
What Was Important About Last Week
- Texas Instruments (TXN) released an update stating it sees Q3 EPS $0.47 to 0.51, excluding $0.02 gain, compared to previous guidance of $0.46 to 0.52, vs. $0.49 consensus estimate. Revenues are forecasted at $3.56 to 3.72 billion, compared to previous guidance of $3.49 to 3.79 billion, compared to $3.66 billion consensus estimate.
- Take-Two Interactive Software Inc. (TTWO) reported Q3 (Jul) loss of $0.64 per share, excluding non-recurring items, $0.03 better than the consensus estimate of ($0.67). Revenues fell 14.4% year over year to $206.4 million vs. the $200.8 million consensus estimate.
- Last week, new claims for unemployment insurance increased 4,000 to a seasonally-adjusted level of 319,000. The four-week average of initial claims fell 1,000 to 324,000. If claims come in at this 324,000 level for the next three weeks they will average 318,000 for Q3 as a whole, versus an average of 317,000 in Q2.
- Industrial production increased 0.2% in August, slightly less than the consensus expected 0.3%. In the past three months, industrial production is up at a strong 5.0% annual rate.
- Manufacturing production declined 0.3% in August, but was revised upwardly for both June and July. Manufacturing production is up at a 5.0% annual rate in the past three months. The production of high-tech equipment grew 0.8% in August and is up 19.4% versus a year ago.
- Capacity utilization was unchanged from an upwardly revised level of 82.2%. The consensus expected 82.0%. In the manufacturing sector, capacity utilization declined to 80.7%. However, 80.7% was the original estimate for July (which has now been revised up to 81.0%).
- Retail sales increased 0.3% in August versus a consensus expected gain of 0.5%. Excluding autos, sales declined 0.4% versus a consensus expected gain of 0.2%. Sales are up 3.7% versus a year ago, 3.9% ex-autos.
- The trade deficit in goods and services declined to $59.2 billion in July from an upwardly revised $59.4 billion in June. The consensus expected a trade gap of $59.0 billion.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Adobe Systems (ADBE)
- TUESDAY: AutoZone Inc. (AZO), Best Buy Co., Inc. (BBY), Darden Restaurants (DRI), The Kroger Co. (KR), Lehman Brothers Holdings Inc. (LEH)
- WEDNESDAY: CarMax, Inc (KMX), Dress Barn (DBRN)
- THURSDAY: Bear Stearns (BSC), Circuit City Stores Inc. (CC), Goldman Sachs (GS), Nike (NKE), Oracle (ORCL)
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: NY Empire State Index
- TUESDAY: PPI, Core PPI, Net Foreign Purchases, FOMC policy statement
- WEDNESDAY: CPI, Core CPI, Housing Starts, Building Permits, Crude Inventories
- THURSDAY: Initial Claims, Leading Indicators, Philadelphia Fed
- FRIDAY: none
- 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:
“Right discipline consists, not in external compulsion, but in the habits of mind which lead spontaneously to desirable rather than undesirable activities.” – Bertrand Russell