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 Technology sector falls out of fashion with traders aggressively selling on earnings news. Their disaproval leaves bearish distribution marks on the charts.
The market is in a confirmed rally, but back-to-back distribution days in the major indexes shows hesitation.
Bad reactions to good news translates to clear weakness. Despite better than expected earnings from tech companies Apple and IBM, the market found reason to sell them.
The Semiconductor Index collapsed below its major moving averages.
Healthcare, Drugs and Biotechnology emerge as popular areas to bid for.
Transportation reclaimins distance lost from its yearly high of two months ago.
Airlines in particular hold a solid up-trend from its low put in last summer. The index launches from a two-year base.
On the economic front, inflation remains a threat. Expect further turbulence in the housing market. The Fed has its hands full as speculation runs rampant for its next interest rate move.
The Dow Industrial Average
($INDU), +0.1%, traded indecisively with three days of little movement, two of which were distribution days.
The S&P 500
($SPX), 0%, showed gradual pullback action in price, though also registered two days of distribution
($COMPQ), -2.1%, took a violent spill with two distribution days.
($RUT), -1.1%, battles with the 50-day moving average.
Volume indications portray bearishness with multiple distribution days had across the major indexes.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dollar Index remains vulnerable to further downside as it fights its 40-week MA. Gold Miners hold a bearish head-and-shoulders on the weekly chart, though expect conditions to reverse with a Dollar slide.
The Consumer Index and Cyclical Index tick higher as the race for dominance in the new year goes unresolved.
Banking, Broker Dealers, REITs, Defense and Retail maintain technical up-trends.
Energy attempts to build upward momentum from below its major moving averages. The index posted a failed breakout this year.
Commodity Equities prepare to launch from a nine-month bullish cup-and-handle pattern.
What Was Important About Last Week
- Apple (APPL) reported Q1 earnings of $1.14 per share, $0.36 better than the Reuters Estimates consensus of $0.78. Revenues rose 23.8% year/year to $7.12B vs. the $6.43B consensus.
- IBM (IBM) reported Q4 earnings of $2.20 per share, $0.01 better than the Reuters Estimates consensus of $2.19. Revenues rose 7.5% year/year to $26.26B vs. the $25.67B consensus.
- Intel (INTC) reported Q4 earnings of $0.26 per share. Revenues fell 5.0% year/year to $9.69B vs. the $9.43B consensus. The company issued in-line guidance for Q1, sees revenues of $8.7-9.3B vs. the $8.93B consensus.
- Xilinx (XLNX) reported Q3 earnings of $0.24 per share, excluding $0.02 gain, $0.01 better than the Reuters Estimates consensus of $0.23. Revenues rose 0.2% year/year to $450.7M vs. the $451.2M consensus. Co issued downside guidance for Q4, sees revenues flat to down 5%.
- E*Trade (ET) reported Q4 earnings of $0.40 per share, $0.01 better than the Reuters Estimates consensus of $0.39. Revenues rose 31.3% year/year to $628.8M vs. the $626.8M consensus.
- The Producer Price Index (PPI) was up 0.9% in December vs. a consensus of a 0.5%.increase. This i on the heels of a 2.0% increase in November. The The PPI is up 1.2% versus a year ago but up at a 5.1% annual rate in the past three months.
- The Consumer Price Index (CPI) was up 0.5% in December vs. the expectation of 0.4%. The CPI is up 2.5% versus a year ago.
- Energy prices were up 4.6% in December, accounting for most of the increase in the CPI. Excluding energy, the CPI was up 0.1%. The “core” CPI, which excludes both food and energy, was up 0.2%, the largest increase in three months.
- The “core” CPI is up 2.6% versus a year ago.
- Housing starts increased 4.5% in December to 1.642 million units at an annual rate vs. the 1.565 million unit rate consensus. Starts fell for the tenth straight month to 1.564 million. Starts are down 18% versus a year ago. All of the increase in starts was for multiple-unit structures, not single-family homes. Single-unit starts dropped 4.1% while multiple-unit starts increased 42.1%.
- New building permits increased 5.5% in December to 1.596 million units at an annual rate, which was slightly above the consensus. The rise in permits was the first since January 2006, but more than 80% of the increase was in multiple-unit structures, not single-family homes. Permits are down 24.3% versus a year ago.
- Industrial production increased 0.4% in December, vs. the consensus of a 0.1% gain. Production was revised downward for both October and November. Production is up 3.0% over the last year.
- High-tech equipment production rose 2.2% in December and up 27.3% versus a year ago. Manufacturing production was up 0.7% in December. Motor vehicle production was up 2.6% in December. Manufacturing production is up 3.3% versus a year ago.
- Capacity utilization increased to 81.8% vs. a consensus of 81.7%.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: Texas Instruments (TXN)
- TUESDAY: Bank of America Corporation (BAC), Brinker International (EAT), Coach, Inc. (COH), Johnson & Johnson (JNJ), QLogic (QLGC), United Technologies (UTX), Yahoo, Inc. (YHOO)
- WEDNESDAY: Abbott Laboratories (ABT), ConocoPhillips (COP), eBay (EBAY), General Dynamics (GD), Netflix (NFLX), Rambus Inc. (RMBS)
- THURSDAY: AT&T (T), Beazer Homes USA Inc. (BZH), Cash America International (CSH), Ford Motor Company (F), ImClone Systems Incorporated (IMCL)
- FRIDAY: Caterpillar Inc. (CAT)
On the economic front we have potential market movers with:
- MONDAY: Leading Indicators
- TUESDAY: none
- WEDNESDAY: Crude Inventories
- THURSDAY: Initial Claims, Existing Home Sales, Help-Wanted Index,
- FRIDAY: Durable Orders, New Home Sales
- 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:
“If it turns out that my best wasn’t good enough, at least I won’t look back and say that I was afraid to try; failure makes me work even harder.” – Michael Jordon