With the underwater steam
Fish on the side
He’s a looking for a dream
— Beta Band, She’s The One
- 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 overall markets:
The broader market has cooled off after an impressive run.
We have enough confirmed leadership and institutional support to deem this environment one for the bulls.
As we look as the bigger technical picture, the Nasdaq is leading the way for breakouts from multi-year bases.
Small Caps and Growth Stocks are the drivers.
Biotech, Broker Dealers, and Transportation has been the hot money.
We are now watching the Semiconductor Index around a key inflection point at the 500 level, which serves as resistance for an almost four-year downward trend-line.
We are also seeing strength in Oil Services, but not Energy.
Material based issues are also gathering momentum, and in particular Gold Miners.
The market tends to go where Technology and the Semis go – so a clear break here is what we want – but it could take months for this kind of clarity to be discerned.
Whether we look at this current environment three months form now as an incredible buying opportunity, or just a symptom of the year coming to a close, is not for us to decide.
We continue to hit our 20% profit targets, and in some cases much more – which is all we want.
We know what we know, and more importantly know what we don’t know.
The Dow Industrial Average ($INDU), -0.49%, ticked within kissing distance to the year’s high before retreating for a loss on the week.
The S&P 500 ($SPX), -0.25%, failed to take out last week’s high, thogh remains solidly above its major moving averages.
Nasdaq ($COMPQ), +0.46%, hit a new high for the year.
Russell 2000 ($RUT), +1.02%, hit a new high for the year.
Volume indications weigh in for the bulls over the past three weeks as institutions step in to support the long side.
New Highs – New Lows Ratio continues to trend higher, though is significantly off the year’s high.
Investors Intelligence shows bullish money managers over bearish money managers by a ratio of 2.64. This contrarians indicator is bearish.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The The 10-year T-Note Yield ($TNX) came off of recent lows and is poised to come out of a three year downward trend-line.
The U.S. Dollar Index ($USD) has been consolidating for three weeks above its major moving averages.
The Gold Miners Index ($XAU) hit a new high before retreating for a loss on the week. The index is above its major moving averages as it holds a recent breakout.
The Dow Jones AIG Commodity Index ($DJAIG) had a strong week as it rebounded after hitting a three-month low.
Technology ($DJUSTC) is behaving like a leader as it approaches a two -year high.
The Semiconductor Index ($SOX) broke out to a new high on the year.
Banks ($BKX) hit a new high before retreating for a loss on the week.
Broker Dealers ($XBD) posted a slight loss on the week though hold a solid uptrend.
Retail ($RLX) lost ground as it trades roughly half way between the year’s high and recent lows.
Internet ($IIX) was little changed on the week as it holds a solid uptrend.
Healthcare ($HCX) has been consolidating for three weeks just off recent lows and well of the year’s high.
Biotech ($BTK) pulled back after a solid month of rallying.
REIT’s ($DJR) were little changed as the trade with a neutral technical bias.
Homebuilders ($DJUSHB) were negative for the week as they struggle with down trending major moving averages.
Transportation ($TRAN) pulled back after a solid month of rallying.
Airlines ($XAL) remains poised to come out of a multi-year triangle pattern.
Defense ($DFX) continued a six month consolidation.
Energy ($IXE) was slightly higher with the Oil Service Index hitting a new high.
Utilities ($UTY) were little changed as they struggle to stay above major moving averages.
The top 10 industry groups from the 6 month RS screen are:
- DRUGS – GENERIC
- DRUG DELIVERY
- SEMICONDUCTR-MEMORY CH
- STAFFING OUTSOURCING S
- INVESTMNT BROKERAGE-RE
- INVESTMNT BROKERAGE-NA
- ELECTRONICS WHOLESALE
- INDUSTRIAL ELECTRICAL
- NETWORKING COMMUN DVCS
What Was Important About Last Week
- Tivo (TIVO_ said revenue was up 30% to $49.6 million, with subscribers now numbering four million.
- Tiffany (TIF) said it earned $23.8 million in the quarter, up 37% from a year ago. But revenue rose only 8% to $500.1 million – short of the $505 million analysts expected.
- Wal-Mart (WMT) gave a disappointing outlook for December sales.
- Nonfarm payrolls grew by 215,000 jobs in November. The growth was the best since July, and topped the year’s average monthly rate of about 167,000.
- The unemployment rate held unchanged at 5%. President Bush.
- Gross domestic product grew at a 4.3% annualized rate in the quarter. Previous estimates were for a 3.8% growth rate, following 3.3% in the second quarter.
- The economy has now grown at a 3.3% annualized pace or better for 10 straight quarters, the longest such streak since 1983-84.
- The National Association of Realtors reported sales of existing homes fell 2.7% in October to a seasonally adjusted annual rate of 7.09 million.
- New home sales jumped 13% in October to a seasonally adjusted annual rate of 1.42 million units, a new record. Economists expected home sales to fall.
- National Retail Federation that said Thanksgiving weekend sales were 22% higher than a year ago.
- Consumer confidence bounced to 98.9 in November from 85.2 last month, beating Wall Street forecasts.
- An American Research Group poll last month found that just 13% of Americans believe the economy is improving and 61% believe it will be worse a year from now.
- Durable goods orders rose 3.4% in October, beating expectations.
- Gold settled at $502.50 an ounce, the highest price since February 21, 1983.
Key earnings releases:
- MONDAY: Jos. A. Bank Clothiers (JOSB), CMGI (CMGI).
- TUESDAY: America’s Car-Mart, Inc. (CMRT), The Kroger Co. (KR), UTi Worldwide (UTIW).
- WEDNESDAY: Hovnanian Enterprises, Inc. (HOV), Veritas DGC Inc. (VTS).
- THURSDAY: Costco Wholesale Corporation (COST), Korn Ferry International (KFY), National Semiconductor (NSM), Shuffle Master, Toll Brothers (TOL).
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: ISM Services
- TUESDAY: Productivity-Rev., Factory Orders
- WEDNESDAY: Crude Inventories, Consumer Credit
- THURSDAY: Initial Claims
- FRIDAY: Mich Sentiment-Prel., Wholesale 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:
“Slow and steady wins the race.
” — Aesop