Gentlemen we can rebuild him
We have the technology
We have the capability to make the worlds first bionic man
Steve Austin will be that man
Better than he was before
Better, Stronger, Faster
— Theme from TV show The Six million Dollar Man
- 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:
Evidence continues to support a bullish bias for the broader market.
Biotechnology was the flavor of the week as new highs from key names made headlines.
We see biotech trading opportunity – though by no means expect anything.
We never expect anything – but instead take high probability trades that have a good chance of making us money.
Biotech stocks are notorious for their skittish behavior. There is much unproven technology in the field, and one FDA announcement is all it takes to spoil the party.
Leadership in Broker/Dealers and Transportation continues to gather steam.
A dramatic turn around from the Banking sector is impressive – and essential if we’re going to move higher.
A breakout in Technology led by Disk Drives is another significant event weighing in for the Bulls.
We want to see Semiconductors stay strong. Without the support of the chip makers, we lose faith in the durability of this buying environment.
The Cyclcal Index is not displaying a strong trend as its 50-day moving averages is below its 200-day average. This tells us that as strong as the market has been, we’re a ways from calling the move part of a significant leg up. These things take time.
Our analysis is rooted in the technical structure of the market.
We are not pure technicians in the sense that we believe past price action is all we need to tell us the future.
We listen to technical analysis as if it were a language telling us what the innards of the market are doing. The message we get isn’t always the truth, but when lied to, that’s a message in and of itself.
Breakouts don’t always turn into trends higher, but we buy them because they hold an edge for us.
We will not be right all the time, but as long as we’re cutting our losses short, letting our winners run, and staying out when there is no edge in place – we believe we’re going to continue to profit.
This is Zen.
The Dow Industrial Average ($INDU), +1.47%, continues to trade above all its major moving averages and faces important resistance from this past summers highs.
The S&P 500 ($SPX), +1.19%, continues to trade above all its major moving averages and is approaching the resistance of this year’s highs.
Nasdaq ($COMPQ), +1.52%, continues to trade above all its major moving averages and is approaching the resistance of this year’s highs.
Russell 2000 ($RUT), +1.29%, continues to trade above all its major moving averages.
Volume indications continue to collect evidence of institutional sponsorship for the long side of this market.
New Highs – New Lows dipped back into negative territory for the week with an increased number of lows and a decreased number of highs. We’re not giving this bearishness a whole lot of weight at this juncture.
Investors Intelligence more than half of money managers surveyed are now bullish. We never like to see this when taking a long position, though keep it in perspective that this contrarians indicator is more like a thermometer, and not a signal to trigger action.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The 20+-year Note Holdr (TLT) came off of last week’s lows, though continues to hold trend down character.
The U.S. Dollar Index ($USD) pushed higher out of its two year base.
The Gold Miners Index ($XAU) rallied for the week, and is set to challenge the highs of a two year base. Should gold breakout, we want to watch the dollar closely as the two seldom trend together.
The Dow Jones AIG Commodity Index ($DJAIG) slipped below last week’s low, and is caught beneath its 50day average and above its 200-day average.
Technology ($DJUSTC) broke out of a year long base.
The Semiconductor Index ($SOX) moved above its major moving averages, though remain below the year’s high.
Banks ($BKX) had a huge week and are now just shy of the year’s highs.
Broker Dealers ($XBD) hit another new high.
Retail ($RLX) is above its major moving averages and now roughly half way between the year’s high and recent lows.
Internet ($IIX) inched higher, though are below the years highs.
Healthcare ($HCX) continued to move off its recent low and is now trading on its 50-day moving average.
Biotech ($BTK) notched in another new high.
REIT’s ($DJR) are trading above the major moving averages, though down significantly from the year’s high.
Homebuilders ($DJUSHB) are below the major moving averages after posting a loss on the week.
Transportation ($TRAN) made another new high.
Airlines ($XAL) moved further north of a key trend line which may serve as a cyclical low for the sector.
Defense ($DFX) was relatively unchanged for the week as the sector is now just below its 50-day moving average, though above its 200-day average.
Energy ($IXE) was a loser for the week, and is currently sandwiched between its major moving averages.
Utilities ($UTY) traded lower and are caught between its major moving averages.
The top 10 industry groups from the 6 month RS screen are:
- SEMICONDUCTR-MEMORY CH
- OIL GAS DRILLING EXPLO
- INVESTMNT BROKERAGE-RE
- STAFFING OUTSOURCING S
- OIL GAS EQUIPMENT SVCS
- OIL GAS REFINING MRKTN
- DRUGS – GENERIC
- INVESTMNT BROKERAGE-NA
- HEAVY CONSTRUCTION
- INDEPENDENT OIL GAS
What Was Important About Last Week
- The world’s No. 1 computer maker, Dell (DELL), said revenue rose 11% to $13.9 billion, though came short of Wall Street forecasts.
- Homebuilder Toll Brothers (TOL) warned of decreasing demand for homes.
- Cablevision (CVC) reported a third quarter loss of $62.9 million.
- Satellite provider EchoStar (DISH) reported third quarter profits up more than two-fold from a year ago, though fell short of Wall Street forecasts.
- Video-rental chain Blockbuster (BBI)posted a $491.4 million quarterly loss.
- Networker Cisco (CSCO) announced quarterly profits down 10% from a year ago.
- The No. 2 U.S. discount retailer, Target (TGT), said it earned $435 million in the third quarter, down 18% from
a year ago.
Key earnings releases:
- MONDAY: Lowe’s Companies (LOW), Tyson Foods (TSN), Wal-Mart Stores Inc. (WMT).
- TUESDAY: Abercrombie & Fitch Co. (ANF), Staples, Inc. (SPLS).
- WEDNESDAY: Big Lots, Inc. (BLI), PetsMart (PETM), Network Appliance (NTAP).
- THURSDAY: Gap Inc. (GPS), H&R Block, Inc. (HRB), Hewlett-Packard (HPQ), Limited Brands (LTD), Nordstrom (JWN), Starbucks (SBUX), Walt Disney (DIS).
- FRIDAY: AnnTaylor Stores (ANN).
On the economic front we have potential market movers with:
- MONDAY: none
- TUESDAY: Core PPI, NY Empire State Index, PPI, Retail Sales, Retail Sales ex-auto.
- WEDNESDAY: Business Inventories, Core CPI, CPI, Net Foreign Purchases, Crude Inventories
- THURSDAY: Building Permits, Housing Starts, Initial Claims, Capacity Utilization, Industrial Production, Philadelphia Fed.
- FRIDAY: none
- 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:
“ Success isn’t measured by money or power or social rank. Success is measured by your discipline and inner peace. ” –Mike Ditka