SELLER’S EDGE INTACT
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 broader market drifts higher on lighter volume as sectors sort out new pockets of strength and weakness.
The big picture suggests we’re in a corrective environment, though we’re not ready to call it quits on the Bull’s cyclical ascent.
The general media is doing its best to look to Asian stocks for clues of where we head next, but the real clues for U.S. direction will be found in price and volume analysis.
Until we see heavy buying volume indicate institutions are willing to sponsor this market, we’re going to place our bets that we’ll see new lows before we do highs.
And as the classic adage goes, It is dangerous to catch a falling knife
We are encouraged to see Small caps hold up well.
But the technical breakdown of Banks and Broker Dealers is a stronger indication that things are not well.
The Dow Industrial Average
($INDU), +1.3%, bounces off four-month lows to close between its major moving averages.
The S&P 500
($SPX), +1.1%, bounces off four-month lows to close between its major moving averages.
($COMPQ), 0.8%, bounces off four-month lows to close between its major moving averages.
($RUT), 1.2%, bounces off four-month lows to close between its major moving averages.
Volume indications remain bearish with declining buying on the indexes’ rallies.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dollar Index and Gold and Silver Miners Index consolidate below their 50-day MA’s. Their inverse relationship will result with one rallying and the other sinking.
The Consumer Index, trading below its 50-day MA, shows relative weakness to the Cyclical Index which closed above its 50-day MA.
The Semiconductor Index begins to show relative strength while closing above its 50-day MA.
The Banking and Broker Dealer Indexes fail to show any interest from buyers as the hover above their 200-day MA’s.
The Retail Index closed just below its 50-day MA.
In Tech-land, Internet and Software Indexes trade below their 50-day MA’s and above their 200-day MA’s. while Telecoms exhibit relative strength with a close above the 50-day MA.
Healthcare trades below its 50-day MA and above its 200-day MA while Drugs and Biotech show relative weakness as they fight their 200-day averages.
REITs try to pull it together though remain south of their 50-day MA.
Transportation fights to stay above a recent base breakout, closing just below its 50-day MA.
The Airline Index consolidates in bearish mode on its 200-day MA.
Energy shows relative strength with a close just above its 50-day and 200-day MA’s.
What Was Important About Last Week
- National Semiconductor (NSM) reported Q3 (Feb) earnings of $0.22 per share, $0.02 better than the Reuters Estimates consensus of $0.20; revenues fell 21.3% year/year to $431 mln vs the $432.9 mln consensus.
- Quicksilver (ZQK) reported Q1 (Jan) earnings of $0.02 per share, $0.02 worse than the Reuters Estimates consensus of $0.04. Revenues rose 2.1% year/year to $552.5 mln (consensus $540.4 mln). Co lowered guidance for FY07, sees EPS of $0.53, down from previous of $0.88-0.92 (consensus $0.76).
- Zumiez (ZUMZ) said that Feb comparable store sales rose 12.4%,versus a comparable store sales increase of 28.0% in the year ago period.
- Chico’s FAS(CHS) reported Q4 (Jan) earnings of $0.13 per share, in line with the Reuters Estimates consensus of $0.13. Revenues rose 18.8% year/year to $446.3 mln vs. the $441.1 mln consensus.
- Microchip Technology(MCHP) sees Q4 EPS of $0.36 ex items, vs. $0.33 Reuters consensus. Co expects Q4 sales to be flat to slightly up from Q3 sales of $251 mln, vs. $253.01 mln Reuters consensus.
- ADC Telecom (ADCT) reported Q1 (Jan) earnings of $0.14 per share vs. the Reuters Estimates consensus of $0.06. Co issued in-line guidance for FY07
- Non-farm payrolls increased 97,000 in February, meeting consensus expectations. Payroll gains in December and January were revised up a total of 55,000, putting the level of payrolls 152,000 above what was reported a month ago.
- The unemployment rate ticked down to 4.5%, reversing last month’s slight increase.
- Average hourly earnings increased 0.4% and are up 4.1% versus a year ago. The consensus expectation was for increases of 0.3% and 3.9%, respectively.
- The ISM non-manufacturing business barometer (a measure of production growth in the services sector) declined to 54.3 in February from 59.0 in January. The consensus expected a drop to 57.1.
- The new orders index dropped to 54.8 in February from 55.4. The backlog of orders index dropped to 47.0 from 49.0.
- Non-farm productivity (output per hour) increased at a 1.6% annual rate in the fourth quarter, a downward revision from the original estimate of 3.0% but slightly better than the consensus expected gain of 1.5%. Non-farm productivity increased 1.4% in 2006 (Q4/Q4).
- Real (inflation-adjusted) compensation per hour increased at a 10.5% annual rate, a combination of a nominal gain of 8.2% and falling energy prices that made inflation negative for the quarter.
- Unit labor costs – the gap between increases in compensation and output – increased at a 6.6% rate in the fourth quarter and were up 3.4% in 2006 (Q4/Q4).
- In the manufacturing sector, productivity growth was stronger (2.2%) and compensation gains less robust (7.1%), resulting in more moderate increases in unit labor costs (4.7%).
- The trade deficit in goods and services contracted to $59.1 billion in January from an upwardly revised $61.5 billion in December. The consensus had expected a smaller decline to $59.8 billion.
- Exports increased $1.4 billion in January and are up 10.7% versus a year-ago. Capital goods exports were up $1.0 billion, half of which was attributable to civilian aircraft.
- Imports declined $1.0 billion in January and are up only 2.7% versus a year-ago. Combined, imports of consumer goods and automotive vehicles and parts fell $2.8 billion. Petroleum imports increased $1.2 billion on higher volume.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Four Seasons Hotels Inc. (FS)
- TUESDAY: Goldman Sachs (GS)
- WEDNESDAY: Hot Topic (HOTT)
- THURSDAY: Aeropostale, Inc. (ARO), Bear Stearns (BSC), Biovail Corporation (BVF)
- FRIDAY: AnnTaylor Stores (ANN)
On the economic front we have potential market movers with:
- MONDAY: Treasury Budget
- TUESDAY: Retail Sales, Business Inventories
- WEDNESDAY: Current Account, Export Prices, Import Prices, Crude Inventories
- THURSDAY: PPI, Core PPI, Initial Claims, NY Empire State Index, Net Foreign Purchases, Philadelphia Fed
- FRIDAY: CPI, Core CPI, Industrial Production, Capacity Utilization, Mich Sentiment-Prel.
- 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:
“My success, part of it certainly, is that I have focused in on a few things.” – Bill Gates