Welcome to this week’s edition of The Growth Stock Report!
Traders,
This past week we saw the markets kick up dust around key technical zones, but when all was said and done there wasn’t a whole lot of progress.
We don’t like this market. We see no reason to buy, and are not ready to lay on the shorts just yet.
Our only bright spot is in our energy positions which continue to appear healthy.
Our current position:
WARNING! MARKET VULNERABLE TO FURTHER SELLING!
In this week’s edition you will find:
- Where We Are
- What We Like
- What Was Important About Last Week
- What We Are Watching For This Week
- This Week’s Scans
- A Word On Discipline
Taking a look at the overall markets:
We’re oversold and are in a likely zone for a bounce. We continue to keep in mind that the market often has the damnedest way of doing what we ultimately believe it will do.
We don’t like this market. Don’t like it long, don’t like it short. We will continue to do nothing until we get the signal otherwise.
If things do turn around we want to see a follow through day (FTD) on the books before we buy. A FTD occurs when a major index closes up 2% or more for the day with an increase in volume from the day before. A follow through day can only occur between four and seven days from a potential bottom.
If things get uglier we will patiently stalk out shorts.
Technically speaking,
The Dow Industrial Average ($INDU) and S&P 500 ($SPX) and Nasdaq ($COMPQ) continue to flirt with a trendlines that began over two years ago.
Key chart action:
Charts courtesy of Stockcharts.com.
The Semiconductor Index ($SOX) is suspiciously lackluster. Never short a dull market!
The Banking Sector ($BKX) has broken down technically, and is evidence that the overall market may be in trouble. Looking forward we see these possible scenarios: a trading range forms, a right shoulder to a head-and-shoulder is put in, or a possible a decline to the 88 price area where a key technical area will come in play.
The Internet Sector ($IIX) remains vulnerable under a longer-term trendline.
Energy ($IXE) came charging back for the week. Wahooo!
Volume indications continue to illustrate an environment of institutional selling.
Leadership: The top 10 industry groups from the 6 month RS screen are:
- DEPARTMENT STORES
- HOSPITALS
- INTERNET INFO PROVIDER
- HEALTH CARE PLANS
- RESIDENTIAL CONSTRUCTI
- LONG-TERM CARE FACILIT
- APPAREL STORES
- GROCERY STORES
- TEXTILE MANUFACTURING
- INDICES DOW UTILITIES
New Highs: New Lows continue their edge over New Highs.
We continue to see nothing worth buying at this time.
Energy continues to be our only favorable sector at present.
Healthcare and Drug stocks continue to hold up. We see potential here, but we are by no means ready to pull the trigger.
Biotech ($BTX) on the other hand looks ripe for more selling.
Action from our open positions:
STO – Statoil came back with the rest of the energy sector. We’re still holding.
XTO – XTO gave us a huge upside surprise after raising its production growth target after making a deal to buy producing properties from Plains Exploration (PXP).
MUSA – Metals U.S.A. gave us a spook for the week though remained above our stop loss point by 6 cents. We’re holding, but will cut our losses if appropriate. Technically this is not an attractive chart, and will consider pulling out if we feel their is better opportunity elsewhere.
PMTI – Palomar Medical technologies remains vulnerable to further selling. This is now considered by us an aggressive long. We’re outa this one.
What Was Important About Last Week:
- Consumer confidence fell for the second straight month.
- Agricultural giant Monsato (MON) raised its earnings outlook to $1.37 a share, much higher than the $1.17 analysts are expecting.
- American International Group (AIG) admitted to improper book keeping over a deal with General Re. The stock has fallen over 20% for the year.
- After tax profits in the U.S. rose 12.% for Q4 2004, the highest rate in three years.
- Goldman Sachs energy analysts said he believed oil could rise over $100 a barrel in a “super spike”.
- Personal income rose 0.03% for February, after a 2.5% drop in January.
- Freddie Mac (FRE) said its earnings for 2004 came in at $3.78 a share for 2004, a 40% drop from its 2003 earnings. The company said losses were largely due to derivatives it uses to hedge against inflation.
- Payrolls were down for the month as only 110,000 jobs were added compared to 243,000 the previous month.
- The Institute for Supply Management announced that its service sector activity jumped,and its factory index dropped. This added to inflationary fears of economists.
What We Are Watching For This Week:
Key earnings releases:
- MONDAY: none
- TUESDAY: Circuit City (CC).
- WEDNESDAY: Bed Bath & Beyond (BBBY), Monsato Co. (MON).
- THURSDAY: Constellation Brands (STZ).
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: none
- TUESDAY: none
- WEDNESDAY: none
- THURSDAY: Jobless Claims
- FRIDAY: none
Soon To be Updated!
SETUPS:
BASES:
This Week’s Word On Discipline:
“Without discipline, no matter how good you are, you are nothing! One day, and I might not be around, you’re going to meet a tough guy who takes your best shot. He’ll keep coming because he’s tough. Don’t get discouraged. That’s when the discipline comes in.” — Mike Tyson
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