BUYER’S EDGE INTACT
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:
Whata ya know? It’s a bull.
We don’t want to look too hard at this market. It’s been very friendly to us.
Analysts across the Internet are laying it down as to how the market is right or wrong – but we here at the Growth Stock Report just sit back and laugh.
The market does whatever it wants, whenever it wants.
We don’t think it’s conceptually correct to believe the market “needs” or “should” do anything.
A perfect example is this week’s Barron’s where Michael Kahn writes “Technically Speaking, This Market Needs A Break”.
Kahn illustrates many fine tools for understanding technical analysis – but how do you make money with that?
Successful trading means positioning yourself to take advantage of good conditions for as long as they last, and exiting when things turn bad.
We never want to think we understand the market. But we must always know what we’re going to do. “Gain a dollar, lose a quarter” is the trader’s mantra.
Obviously some sort of pullback will be put in at some juncture. Where and when is beyond us.
Typically, price action finds a way to screw over the most amount of people, so we keep a close ear to what the common folk are up to.
Since the year 1900, this Dow rally ranks number four for duration, though is below average in magnitude.
As earnings season hums along, we expect more of the same. Mostly good news with an occasional disaster.
Thompson Financial estimates this earnings period will mark a 7% gain, which is double what Wall Street expected.
The Dow Industrial Average
($INDU), +1.23%, ticks further into all time high territory.
The S&P 500
($SPX), +0.65%, hits a new high before pulling back modestly at the end of the week.
($COMPQ), +1.22%, picks up steam into new high territory.
($RUT), +0.10%, ends the week unchanged after hitting a new high.
Volume indications remain bullish as the Dow and Nasdaq peg two days of accumulation, and the S&P 500 one day of accumulation.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) hits another low as its four-month slide continues.
The Gold & Silver Miners Index ($XAU) shies away from breaking out of basing formation. The commodity Gold pulls back from a double top pattern that teases as a cup-and-handle pattern.
The Consumer Index ($CMR) and The Cyclical Index ($CYC) register a new highs.
The Technology Index ($DJUSTC) breaks out to a new high.
The Semiconductor Index ($SOX) hits highs not seen since last spring.
The Banking Index ($BKX) consolidates for the week, still well below its February high.
The Retail Index ($RLX) also consolidates for the week below its February high.
The Software Index ($GSO) and Telecom Index ($XTC) continue to lead the Tech sector to new highs.
Disk Drives ($DDX) buck the trend with a new low for the year.
The Healthcare Index ($HCX) remains a market leader with a new high, as the Pharmaceutical Index ($DRG) and Biotechnology Index ($BKX) cool off with consolidation.
The REIT Index ($DJR) consolidates for ninth week in a row as it hangs below its 50-day MA.
The Transportation Index ($TRAN) trades in a bullish cup-and-handle formation.
The Airline Index ($XAL) airlines sink to a new low for the year.
The Defense Index ($DFX) hits another new high.
The Energy Index ($IXE) posts positive gains for the sixth week in a row as it hits a new high.
What Was Important About Last Week
- Amazon.com (AMZN) reported Q1 earnings of $0.26 per share, first quarter 2007 effective tax rate was 23% compared with an effective tax rate of 47% in first quarter 2006. Reuters Estimates said the reported actual of $0.26 was comparable to consensus of $0.15. Revenues rose 32.3% year over year to $3.02 billion versus consensus of $2.92 billion. The company issued upside guidance for Q2, saying it expects Q2 revenues of $2.7billion to $2.85 billion versus consensus of $2.69 billion.
- Apple (AAPL) reported second quarter earnings of $0.87 per share, $0.23 better than consensus of $0.64. Revenues rose 20.8% year over year to $5.26 billion versus consensus of $5.17 billion. The company guided below consensus for the third quarter, saying it expects earnings per share of $0.66 versus consensus of $0.67.
- Microsoft (MSFT) reported third quarter earnings $0.49 per share, $0.03 better than consensus. Revenues rose 32.1% year over year to $14.4 billion versus consensus of $13.89 billion. The company issued mixed guidance for the fourth quarter, saying it expects earnings per share of $0.37 to $0.39 versus consensus of $0.40.
- Qualcomm (QCOM) reported second quarter earnings of $0.50 per share, excluding non-recurring items, $0.02 better than consensus. Revenues rose 21.0% year over year to $2.22 billion versus consensus of $2.19 billion. The company issued upside guidance for the third quarter, seeing earnings per share of $0.50 to $0.52 versus consensus of $0.46.
- Ryland Group (RYL) reported first quarter earnings of $0.70 per share, excluding inventory valuation adjustments and write-offs, the goodwill impairment charge and a related change in effective tax rate, that may not be comparable to consensus of ($0.52). Revenues fell 34.3% year over year to $706.4 million versus consensus of $703.9 million. The company said that as a result of the uncertainty of current market conditions, it does not expect to achieve prior earnings guidance and is not able to provide new guidance at this time.
- Wendy’s(WEN) reported first quarter earnings of $0.15 per share, $0.02 better than consensus. Revenues rose 2.0% year over year to $590.2 million versus consensus of $591.5 million. The company issued in-line guidance for the fiscal year of 2007.
- Texas Instruments (TXN) reported Q1 (Mar) earnings of $0.35 per share, $0.04 better than the Reuters Estimates consensus of $0.31. Revenues fell 4.3% year/year to $3.19 bln (consensus $3.15 bln); gross margins were 51.3% vs. the street expectation of 49.7%. Co issued in-line guidance for Q2.
- Altera Corp (ALTR) reported Q1 (Mar) earnings of $0.21 per share, a penny better than the Reuters Estimates consensus of $0.20. Revenues fell 3.9% year/year to $304.9 mln (consensus $310.2 mln). Co issued downside guidance for Q2.
- The original estimate for first quarter real GDP growth is 1.3% at an annual rate, the weakest growth rate since early 2003. The consensus expected 1.8%. Housing lopped off 1.0 percentage point from the real GDP growth rate. Inventories and net exports exerted a combined -0.8 point drag on real GDP growth. A temporary drop in national defense spending subtracted an additional 0.3 points.Personal consumption plus business investment in equipment, software, and structures increased at a 3.6% annual rate.The GDP price index rose at a 4.0% rate in the first quarter, the fastest increase since 1991. Nominal GDP growth – real GDP plus inflation – grew at a 5.3% rate versus a consensus expected 4.8% rate.
- New single-family home sales increased 2.6% in March to an annual rate of 858,000 from a downwardly revised 836,000 rate in February. The consensus expectation was a bounce to 890,000. At the current sales pace, the supply of unsold new homes dropped to 7.8 months. The decline was all due to the increased pace of sales, not falling inventories. As recently as mid-2005 the months’ supply was 4.3.
- The median price of a new home was $254,000 in March, the second highest level ever and up 6.4% versus a year ago. The average price of a new home rose to $330,900, the highest ever and up 10.7% versus last year.
- Existing home sales declined 8.4% in March to an annual rate of 6.12 million, the lowest since mid-2003 and substantially lower than the consensus expected level of 6.40 million. Sales dropped in all four major regions. The decline in sales was attributable to single-family homes as condo/coop sales were unchanged.
- New orders for durable goods increased 3.4% in March, more than the consensus expected rise of 2.5%.
- New orders excluding transportation gained 1.5% versus a consensus expected gain of 1.1%. Orders in February were revised up to a 2.4% increase from a previous estimate of 1.7%.The strength in new orders was mostly in transportation equipment, with civilian aircraft and parts up 37.6% and motor vehicles and parts up 3.3%. Orders for industrial machinery also contributed a large part of the gain, increasing 4.2%.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: American Home Mortgage Investment Corp. (AHM), RadioShack Corporation (RSH), Verizon (VZ)
- TUESDAY: Atmel Corporation (ATML), Buffalo Wild Wings, Inc. (BWLD), DreamWorks Animation SKG, Inc. (DWA),
DreamWorks Animation SKG, Inc (DWA), Eagle Materials Inc. (EXP), Marathon Oil Corporation (MRO), MetLife Inc. (MET), Procter & Gamble Company (PG), Qwest Communications (PG), Wyndham Worldwide (WYN), Yum! Brands, Inc. (YUM), Zoom Technologies Inc. (ZOOM)
- WEDNESDAY: Applebee’s International (APPB), Barrick Gold (ABX), Garmin Ltd. (GRMN), Teva Pharmaceutical (TEVA), Time Warner Inc. (TWX)
- THURSDAY: Bebe Stores (BEBE), Dean Foods (DF), QLogic (QLGC), Starbucks (SBUX), ValueClick, Inc. (VCLK), Williams Companies Inc. (WMB)
- FRIDAY: Anglogold Ashanti Limited (AU)
On the economic front we have potential market movers with:
- MONDAY: Personal Income, Personal Spending, Core PCE Inflation, Chicago PMI, Construction Spending
- TUESDAY: ISM Index, Pending Home Sales, Auto Sales, Truck Sales
- WEDNESDAY: Factory Orders, Crude Inventories
- THURSDAY: Initial Claims, Productivity-Prel, ISM Services
- FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate, Unemployment Rate, Hourly Earnings, Average Workweek
- 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:
“The ability to concentrate and to use time well is everything.” – Lee Iacocca