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:
Selling reigns the first three day trading days of the year as action suggests a near-term top.
CANSLIM traders are best off avoiding new entries.
First quarter earnings reports start up next week, and will hit full-swing the week of January 15. Will it be double digit growth for the 19th quarter in a row?
Looking at key chart action:
Charts courtesy of Stockcharts.com
The Dow Industrial Average ($INDU), -0.5%, hit another new high on high volume before pulling back.
The S&P 500 ($SPX), -0.6%, failed to hit a new high with The Dow as distribution left a bearish mark on the charts.
The Nasdaq ($COMPQ), 0.8%, showed promise with accumulation, yet remains in an eight-week trading range.
Russell 2000 ($RUT), -1.5%, stumbles as it breaks an uptrend by hitting a monthly low.
Technology gains an edge in popularity, which is typical of January action. But overall the sector is a far cry from leadership status.
Semiconductors ended the week unchanged, as the index struggles amidst its sideways trending averages.
Energy stocks collapse below the 50-day average as they find support at the 200-day mark.
On the Consumer vs. Cyclical front, we see both indexes hesitating, leaving Consumers vulnerable to a correction with the Cyclicals yet break out with the rest of the market.
Banking stocks pulled back sharply in fashion typical of a correction.
Retail is locked in what will either become a consolidation to launch from, or a rounding top to break down from.
Healthcare shows promise as it inches above its major moving averages, just off new highs.
REITs trade on the 50-day average, close to breaking down from an uptrend.
Homebuilders begin to breakdown from a technically bearish Gartley pattern.
Transportation showed relative strength, though struggles below its 50-day moving average.
Airlines continue to hold promise in a lower-base formation.
As the Dollar Index continues to rally off December’s lows, Gold has reversed course sharply as it falls below its major moving averages.
The Commodity Index is also in bearish form with a year-long head-and-shoulders in place. A fulfillment of this text-book pattern would indicate a new trend in place for the year.
Volume indications showing three days of distribution on the Nasdaq and Russell 2K for the last two weeks gives evidence of a correction.
What Was Important About Last Week
- Best Buy reported a 7% increase in same-store sales and said annual earnings would be in line in line with Wall St. estimates.
Homebuilder Lennar said fourth-quarter earnings will come below previous estimates.
The Labor Department said employers added 167,000 new jobs to payrolls last month and that job creation in October and November was even better than had been reported, higher by a net 29,000 jobs.
- The unemployment rate held at 4.5%
- December 12 FOMC minutes noted “downside risks to economic growth.”
- The December ISM manufacturing index moved up to 51.4 from 49.5 in November.
- The ISM service index came in at 57.1 in December from 58.9 in November.
- November construction spending fell 0.2% and November factory orders were up less than expected.
- Oil fell to $56.31 a barrel.
- 10-year note yield was left little changed at 4.65%.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Schnitzer Steel Industries, Inc. (SCHN)
- TUESDAY: ALCOA Inc (AA), Ruby Tuesday (RI)
- WEDNESDAY: California Pizza Kitchen (CPKI), Infosys Technologies LTD (INFY)
- THURSDAY: none
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: Consumer Credit
- TUESDAY: none
- WEDNESDAY: Trade Balance, Wholesale Inventories, Crude Inventories
- THURSDAY: Initial Claims
- FRIDAY: Treasury Budget, Export Prices ex-ag., Import Prices ex-oil, Retail Sales, Retail Sales ex-auto, Business Inventories
- 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:
“Take the pains required to become what you want to become, or you might end up becoming something you’d rather not be. That is also a daily discipline and worth considering.” –