Contrary, she contrary, she won’t do nothing she say
— Lightnin’ Hopkins “Contrary Mary”
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:
Heavy distribution two weeks ago balances last week’s accumulation.
The market is in a confirmed uptrend. No matter how bad the record amount of short sellers try to see otherwise, there’s no getting around this.
It’s a no-brainer stocks will pullback, but where that happens is anyone’s guess.
We have our Yellow Flag out based on heavy distribution from two weeks ago.
It is common for rallies to occur at the end and beginnings of the months, so we might expect a cool-off this week.
Relative weakness in Bank and Semiconductor stocks is a vote against the durability of the bull.
Bearish divergence in the number of new highs from stocks against new highs in the indexes also represents weakness.
Add in the summer being a time of stagnation for equities, the picture for Bulls to stay on course becomes less likely.
Perhaps of most interest is the fact that a record-high in the S&P 500 has gone piratically unnoticed by the general public.
There’s nothing like a big fat picture of a Bull on the cover of a magazine like Newsweek to confirm the market’s contrarian tendency with the public.
The Dow Industrial Average
($INDU), +1.2%, hit a record high.
The S&P 500
($SPX), +1.4%, hit a record high.
($COMPQ), +2.2%, spiked above a 4-week trading range.
($RUT), +2.8%, also spiked above a 4week trading range.
Volume indications tilt to the Bulls for the week as each major index notched in two days of accumulation. This is a week after the major indexes showed two days of distribution, so in the broader picture the bias is less clear.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) consolidated for the second week in a row on its downward-trending 50-day SMA.
The Gold & Silver Miners Index ($XAU) rallied north of its major MA’s.
The Consumer Index ($CMR) hit a record high.
The Cyclical Index ($CYC) hit a record high.
The Technology Index ($DJUSTC) hit a new high.
The Semiconductor ($SOX) closed above its 50-day SMA, though shows relative weakness to the Tech sector and broader market.
The Software Index ($GSO) hit a new high.
Telecom Index ($XTC) hit a new high as it cruises north of an upward trending channel – a move that will either be seen some day as a point of acceleration or the beginning of an impending correction.
The Banking Index ($BKX) trades in a two-month range as it shows relative weakness against the market.
The Broker Dealer Index ($XBD) broke out of a cup-and-handle pattern.
The Retail Index ($RLX) rallies to just shy of a new high for the year.
The Healthcare Index ($HCX) consolidates in a 5-week long high-level base.
Biotechnology Index ($BKX) attempts to pull-out f a 4-week long pullback.
Pharmaceutical Index ($DRG) trade off the lower end of a 7-week range.
The REIT Index ($DJR) take a break from a downtrend, closing on the 50-day SMA.
The Transportation Index ($TRAN) hits a new high.
The Airline Index ($XAL) consolidates under its major MA’s.
The Defense Index ($DFX) hits a new high.
The Energy Index ($IXE) hits a new high.
What Was Important About Last Week
- TiVo(TIVO) reported Q1 (Apr) earnings of $0.01 per share, $0.03 better than the Reuters Estimates consensus of ($0.02); service & tech revenues rose 5.5% year/year to $58.1 mln vs the $58.7 mln consensus. Co issues downside guidance for Q2, sees Q2 service & tech revs of $57-59 mln vs. $60.19 mln consensus. In the next two months, TiVo expects to introduce a number of additional differentiated features, which will further set the TiVo service apart from the competition.
- Chico’s FAS (CHS) reported Q1 (Apr) earnings of $0.28 per share, $0.02 better than the Reuters Estimates consensus of $0.26. Revenues rose 52.8% year/year to $453.1 mln, as co previously pre-announced.
- BMC Software (BMC) reported Q4 (Mar) earnings of $0.40 per share, in-line with the Reuters Estimates consensus of $0.40. Revenues rose 2.7% year/year to $419 mln vs. the $427.2 mln consensus.
- Dell (DELL) reported Q1 (Apr) earnings of $0.34 per share $0.08 better than the Reuters Estimates consensus of $0.26. Revenues rose 2.7% year/year to $14.6 bln vs. the $13.93 bln consensus.
- The government revised first quarter real GDP growth to 0.6% at an annual rate, versus the 1.3% rate originally reported last month. The revised 0.6% rate is the weakest growth rate since 2002. The consensus expected 0.8%.Inventories and trade accounted for all the downward revision to GDP growth.
- Inventory reductions lopped 1.0 percentage point off GDP growth, versus an originally reported 0.3 points.
- The trade deficit also exerted a 1.0 point drag on GDP growth, versus an originally reported 0.5 points. Housing was a drag of 0.9 points, less than the full point originally estimated.Personal consumption was revised up to a 4.4% growth rate from an originally reported 3.8%.
- Business investment in equipment, software, and structures was revised up to 2.9% from 2.0%.The GDP price index rose at a 4.0% rate, the fastest increase since 1991. Nominal GDP growth – real GDP plus inflation – grew at a 4.7% rate.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Bob Evans Farms (BOBE), Krispy Kreme Doughnut (KKD)
- TUESDAY: FuelCell Energy, Inc. (FCEL), Guess (GES), New Frontier Media, Inc. (NOOF)
- WEDNESDAY: ADC (ADCT), Shuffle Master, Inc. (SHFL)
- THURSDAY: Quiksilver (ZQK),
- FRIDAY: Vail Resorts (MTN)
On the economic front we have potential market movers with:
- MONDAY: Factory Orders
- TUESDAY: ISM Services
- WEDNESDAY: Productivity-Rev., Crude Inventories
- THURSDAY: Initial Claims, Wholesale Inventories, Consumer Credit
- FRIDAY: Trade Balance
- 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:
“ It is not the mountain we conquer, but ourselves.” – Sir Edmund Hillary