CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Te Nasdaq livens up the short week by hitting a six-year high.

With the Nasdaq 100 poised to breakout of a bullish cup-and-handle pattern, and the Semiconductor Index coming closer to a ten-month high, the broader market gets even hotter.

For most of the past two-months we’ve been concerned the Tech sector’s relative weakness would pull the major indexes lower. Ideally we’ll have Tech lead us higher.

As the Dow and S&P 500 pull back gently, we have no indications of vulnerability to this Bull.

Pullbacks are natural, but we want to keep an eye on volume to monitor institutional dumping. So far we only have modest distribution on the Dow and S&P.

We also want to use pullbacks as a litmus test for strength. Industry groups and individual names that weather broad market pullbacks show us durability. Durable stocks are usually the ones bid up well when the market is rising.

Technically speaking:

The Dow Industrial Average

($INDU), -0.9%, staged a modest and orderly decline as it maintains position above its 50-day MA.

The S&P 500

($SPX), -0.3%, sold off slightly, holding position comfortably above its 50-day average.

Nasdaq

($COMPQ), +0.8%, inched to a sis-year high.

Russell 2000

($RUT), +1.0%, was the strongest index for the week, moving gently to a new high.

Volume indications for the week show the Dow and S&P 500 with two days of distribution, the Nasdaq with tow days of accumulation and the Russell 2K with one day of accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The US Dollar Index holds steady below its 50-day MA.

The Gold and Silver Miners Index moves to a two-month high, and closer to negating a bearish head-and-shoulders pattern on the weekly chart.

The Consumer Index sold off in pullback fashion as the Cyclicals Index treads near its highs.

Banks turn sharply down in Friday’s action, the index is comfortably above its major moving average.

Broker Dealers halt a sell-off at the 50-day MA, as the index mostly consolidates for the year.

Retail hit a new high.

In the Tech sector, Internet, Software, and Telecoms hit new highs.

Healthcare sold-off to the 50-day average which serves as the lower edge of a trading range for the year.

Pharmaceuticals closed below the 50-day MA for the first time in nearly two months.

Biotechnology consolidates above the 50-day MA.

REITs pull back, with the next area of support at the 50-MA.

Transportation hit a new high.

Airlines struggle below their 50-day MA.

Defense hit a new high.

Energy stocks staged a modest rally and is poised to hit new highs for the year.

What Was Important About Last Week

STOCKS:

• H&R Block (HRB) reported Q3 (Jan) earnings of $0.08 per share, $0.04 worse than the Reuters Estimates consensus of $0.12. Revenues rose 11.0% year/year to $955.1 mln vs. the $1126.5 mln consensus.
• Intuit (INTU) reported Q2 (Jan) earnings of $0.45 per share, $0.03 better than the Reuters Estimates consensus of $0.42. Revenues rose 2.8% year/year to $763.3 mln vs. the $763 mln consensus.
• Abercrombie & Fitch (ANF) reported Q4 (Jan) earnings of $2.14 per share, in line with the Reuters Estimates consensus of $2.14. Revenues rose 18.5% year/year to $1.14 bln vs. the $1.13 bln consensus.
• Whole Foods Market (WFMI) reported Q1 (Dec) earnings of $0.38 per share, $0.02 worse than the Reuters Estimates consensus of $0.40. Revenues rose 12.2% year/year to $1.87 bln (consensus $1.89 bln); gross profit decreased 24 basis points to 34.3% of sales.
• ADI (ADI) reported Q1 (Jan) non-GAAP earnings of $0.40 per share, $0.01 worse than the $0.41 non-GAAP First Call consensus, which is not comparable to the Reuters Estimates consensus of $0.38. Revenues rose 11.4% year/year to $692 mln.
• Salesforce.com (CRM) reported Q4 (Jan) GAAP EPS of $0.00 (roughly $0.10 ex-items) vs. the Reuters Estimates consensus of $0.07. Revenues rose 58.3% year/year to $144.2 mln vs. the $142.8 mln consensus.
• Hewlett-Packard (HPQ) reported Q1 (Jan) earnings of $0.65 per share, $0.03 better than the Reuters Estimates consensus of $0.62. Revenues rose 10.7% year/year to $25.08 bln vs. the $24.3 bln consensus.
• Medtronic (MDT) reported Q3 (Jan) earnings of $0.61 per share, $0.03 better than the Reuters Estimates consensus of $0.58. Revenues rose 10.0% year/year to $3.05 bln vs. the $3.07 bln consensus.

ECONOMY:

• The Consumer Price Index (CPI) increased 0.2% in January, more than the consensus expectation of 0.1%. The CPI is up 2.1% versus a year ago.
• Energy prices fell 1.5% in January. Excluding energy, the CPI was up 0.3%.
• The “core” CPI, which excludes both food and energy, was also up 0.3%, the largest increase in seven months. The consensus expected an increase of 0.2%. The “core” CPI is 2.7% above its level of one year ago.

What We’re Looking For This Week

Key earnings releases:

• MONDAY: GlobalSantaFe Corp. (GSF), Grey Wolf, Inc. (GW), Guitar Center (GTRC), Nordstrom (JWN), Orient-Express Hotels (OEH), XM Satellite Radio (XMSR)
• TUESDAY: Audible Inc. (ADBL), Autodesk, Inc. (ADSK), AutoZone Inc. (AZO), Blockbuster Inc. (BBI), Deckers Outdoor (DECK), DreamWorks Animation SKG, Inc. (DWA), Frontier Oil (FTO), H.J. Heinz Company (HNZ), Harrah’s Entertainment (HET), Papa John’s International, Inc. (PZZA), Target Corporation (TGT)
• WEDNESDAY: Barr Pharmaceuticals, Inc. (BRL), Chicago Bridge & Iron (CBI), Compania de Minas Buenaventura (BVN), Dollar Tree Stores (DLTR), Dress Barn (DBRN), Joy Global Inc. (JOYG), King Pharmaceuticals (KG), Strategic Hotels and Resorts (BEE), Tenaris, S A (TS)
• THURSDAY: Dell, Inc. (DELL), Gap Inc. (GPS), Kohl’s (KSS)
• FRIDAY: American International Group (AIG)

On the economic front we have potential market movers with:

• MONDAY: Existing Home Sales
• TUESDAY: Durable Orders, Consumer Confidence, Existing Home Sales
• WEDNESDAY: GDP-Prel., Chain Deflator–Prel., Chicago PMI, New Home Sales, Crude Inventories
• THURSDAY: Initial Claims, Personal Income, Personal Spending, Construction Spending, ISM Index, Auto Sales, Truck Sales
• FRIDAY: Mich Sentiment-Rev.

The Following Sections Are On Our Home Site:

• 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:

“Something in human nature causes us to start slacking off at our moment of greatest accomplishment. As you become successful, you will need a great deal of self-discipline not to lose your sense of balance, humility, and commitment.” – H. Ross Perot

CANSLIM SETUPS