World spinning round
To the next revolution
Sun going down
Gonna rise up again
— Paul McCartney, “Spinning on an Axis”
- 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:
Price action on the major exchanges consisting of high volatility that ultimately led to little change in values left us with just one thing to go on.
We have a bullish Follow Through Day in the books, which gives us an indication that institutional support for this market is present.
But with little corporate or economic news over the week, much of market player psychology is fixated on the Fed’s rate decision due Thursday.
As most charts show holding patterns for the week, there is little to discuss.
The 10-year Note yield continued to move north of a multi-year trend line, which posses major threat to equities. But if a widely anticipated rate hike comes through it may alter the course here.
The Dow Industrial Average
($INDU), -0.2%, is consolidating beneath its 50-day moving average.
The S&P 500
($SPX), -0.6%, is consolidating beneath its 200-day average.
($COMPQ), -0.4%, is consolidating considerably below its 200-day moving average.
($RUT), -0.4%, is also consolidating beneath its 200-day average.
Volume indications gave us a bullish Follow Through Day Thursday.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The 10-year Note Yield
($tnx) hit a new high. This move puts decisively above a major trendline, which is a bearish sign for equities.
The U.S. Dollar Index
($USD) moved convincingly above its 50-day average, though remains beneath its 200-day average.
The Gold Miners Index
($XAU) is consolidating at its 200-day average after rebounding from last week’s lows.
The Dow Jones AIG Commodity Index
($DJAIG) is consolidating beneath its 200-day average.
($CMR) is consolidating beneath its 50-day average and above its 200-day average.
($CYC) is also consolidating beneath its 50-day average and above its 200-day average, though holds a weaker relative strength position than the staples.
($DJUSTC) is consolidating considerably below its 200-day moving average.
The Semiconductor Index
($SOX) >) is also consolidating considerably below its 200-day moving average.
($BKX) >) is consolidating considerably below its 50-day moving average.
($XBD) is trading just above its 200-day moving average.
($RLX) >) is consolidating considerably below its 200-day moving average.
($HCX) >) is consolidating below its major moving averages.
($BTK) is consolidating below its major moving averages.
($DJR) is consolidating below its 50-day moving average.
($DJUSHB) is consolidating below its major moving averages.
($TRAN) closed above its major moving averages.
($XAL) closed above its major moving averages.
($DFX) closed above its major moving averages.
($IXE) closed above its 200-day moving average.
($UTY) is consolidating along its 50-day and 200-day moving averages.
The top 10 industry groups from the 6 month RS screen are:
- STEEL IRON
- DRUG RELATED PRODUCTS
- INTERNET SERVICE PROVI
- AIR DELIVERY FREIGHT S
- MACHINE TOOLS ACCSORIE
- SPECIALTY RETAIL OTHER
- AUTO PARTS
- ADVERTISING AGENCIES
- MOVIE PRODUCTION THEAT
What Was Important About Last Week
- Oracle Corp (ORCL) reported Q4 (May) earnings of $0.29 per share, $0.01 better than the Reuters Estimates consensus of $0.28; non-GAAP revenues rose 21.7% year/year to $4.94 bln vs. the $4.76 bln consensus.
- Morgan Stanley (MWD) said its net income more than doubled in the quarter ended May 31 to $1.96 billion, or $1.86 a share, from $928 million, or 86 cents a share, last year. Revenue rose 48% to $8.94 billion from $6.03 billion.
- FedEx (FDX) reported that earnings in its fiscal fourth quarter jumped 27% from the same period a year ago, rising to $568 million, or $1.82 a
share, from $448 million, or $1.46 a share. Revenue rose 10%.
- Bed Bath & Beyond (BBBY) reported Q1 (May) earnings of $0.35 per share, in line with the Reuters Estimates consensus of $0.35. Total revenues rose 12.2% year/year to $1.4 bln vs the $1.39 bln consensus. Comparable store sales in Q1 increased by approx 4.9%, compared with an increase of approx 4.4% in 1Q05.
- Jabil Circuit (JBL) reported Q3 (May) earnings of $0.36 per share, a penny better than the Reuters Estimates consensus of $0.35 but a penny shy of the First Call consensus of $0.37. Co issued mixed guidance for Q4, sees EPS of $0.30-0.35 (consensus $0.41) on revenues of $2.75-2.95 mln (consensus $2.69 bln). For FY06, co sees EPS of $1.47-1.52 (consensus $1.57) on revenues of $10.1-10.3 mln (consensus $9.98 bln).
- UTStarcom (UTSI) reported a Q1 (Mar) GAAP loss of $0.09 per share, $0.60 better than the Reuters Estimates consensus of ($0.69). Revenues fell 33.9% year/year to $596.6 mln vs. the $520 mln consensus. Co issued upside guidance for Q2 (Jun), sees a loss of $0.45 to a loss of $0.55 vs. an expected loss of $0.43, and sees Q2 (Jun) revenues of $545-575 mln (consensus $584.23 mln).
- Housing starts jumped 5% in May to a
seasonally adjusted annual rate of 1.957 million, reversing a three month slide.
- First-time claims for unemployment benefits increased by 11,000 to a seasonally adjusted 308,000 in the week ending June 17. The four-week moving average of new claims decreased last week by 5,000 to 311,250.
- The Conference Board said its index of leading economic indicators declined 0.6% in May.
- Japan’s economy minister, Kaoru Yosano, said in an interview with The
Wall Street Journal that the Bank of Japan would likely abolish its
zero-interest rate policy before the end of the summer.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Lennar Corporation (LEN), Walgreen (WAG).
- TUESDAY: Nike (NKE).
- WEDNESDAY: 3Com Corp (COMS), Biomet, Inc. (BMET), Micron Technology (MU), Paychex (PAYX), Red Hat, Inc. (RHAT).
- THURSDAY: Constellation Brands, Inc. (STZ).
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: New Home Sales,
- TUESDAY: Consumer Confidence, Existing Home Sales
- WEDNESDAY: Crude Inventories,
- THURSDAY: Chain Deflator-Final, GDP-Final, Initial Claims, Help-Wanted Index, FOMC policy statement
- FRIDAY: Personal Income, Personal Spending, Mich Sentiment-Rev., Chicago PMI
- 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:
“Every serious-minded person knows that a large part of the effort required in moral discipline consists in the courage needed to acknowledge the unpleasant consequences of one’s past and present acts.” – John Dewey