equityletter.com 8/03/09
Note: Event Calendar is located at bottom of page
I. General Commentary
Last week the Commodity Futures Trading Commission (CFTC) indicated that in the coming weeks they would be releasing a report that suggests that speculators played a major role in causing the price of crude oil to spike to nearly $150.00 a barrel in 2008. This report contradicts a previous CFTC study that claimed the oil price run up was strictly due to supply/demand issues. It is nice to see that our government tackles important issues in a timely manner. As usual, a governmental agency is a day late and in this case, many dollars short when it comes to the American public. Those of us who follow the markets intently, are quite familiar with the rampant manipulation of various markets by large hedge funds and well-known, unnamed Wall Street trading firms. Position limits and full disclosure, hallelujah, it is about time. To the American public, don’t even think about reparation, the thieves have escaped punishment once again.
“Cash for Clunkers”, finally a practical idea from our nation’s capitol. The Government program which provides monetary incentives for Americans to trade in their gas-guzzling cars and trucks for more fuel efficient vehicles has been a raging success. The program is eco-friendly and energy friendly all in the same stroke. Auto manufacturers and dealers have seen sales increase dramatically in a very short period of time. The program might even cause a ramp up of production which would benefit the beleaguered auto parts supply chain. Well done
The Case/Schiller housing price report released last week show the fourth consecutive month over month improvement. Granted, the report revealed another slowing in price depreciation, with appreciation still a pipe dream, but for now the markets are once again content with “less bad”.
The major market averages under our coverage that we currently rate with a positive weekly technical indications the SPDR- S&P 500 (SPY-98.81), IShares Russell 2000 Index Fund (IWM-55.57), NASDAQ Composite (COMP-1978.50), Powershares QQQQ Trust (QQQQ-39.45), Diamonds Trust (DIA-91.67). We currently have negative views on the I-share 7-10 year Treasury bond (IEF-91.17) and U.S. $ Index (UUP-23.32). There are no changes of opinion from the prior week.
Sectors within our coverage universe that remain in favor according to our weekly oriented technical analysis include Financials (XLF), Managed Healthcare, Internet Related (HHH), Gold (GLD), Homebuilding (XHB), Retailers (RTH), Natural Gas (UNG), Large Integrated Oil companies (XOI), Pharmaceutical (PPH), Semiconductors (SMH), Agriculture (MOO), Coal (KOL), Oil Service (OIH), Real Estate (IYR), Transportation (IYT), Steel (SLX), and Crude Oil (USO). There are no changes of opinion from the prior week. Use price weakness to increase long exposure or to initiate long trades.
Sectors that we believe to be vulnerable to a downside correction are currently non-existent, very strange indeed. There are no new negative changes of opinion this week. Use price strength to reduce long exposure or to initiate short trades.
Sector analysis below will provide information as to where to best allocate funds at this time.
Please frequent http://www.equityletter.com/ and http://stkinfo.com/.
II. Sector Analysis
The IEF-91.17 (I-share 7-10 year Treasury bond) advanced 1.21% for the week as the yield on the 10- year treasury decreased from 3.67% to 3.50%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF is entering the third week of a “sell” signal. The weekly closing price resistance in order to maintain our current “sell” signal shall remain at 91.37. Any weekly closing price above 91.37 will negate our current “sell” signal for the IEF. Despite the upward move of the past week the weekly trend remains a negative one. There is no change to current opinion, use price strength approaching above mentioned price resistance to reduce long exposure and or to initiate short trades.
A. Financials
The Financial Select Sector Index (XLF-13.01) finished the trading week with a 4.75% advance. The XLF is now positive by 3.91% to date for the 2009 trading year. The XLF is entering week twenty-one of a weekly “buy” signal. Our weekly price support for the XLF shall be raised to the 12.41 level. Any weekly closing price below 12.41 will negate our current “buy” signal for the XLF. XLF components that remain in “buy the dip” mode include Goldman Sachs (GS-163.30), Bank of America (BAC-14.79), Bank of New York (BK-27.34), MetLife (MET-33.95), J.P. Morgan (JPM-38.65), Citigroup (C- 3.17), U.S. Bancorp (USB-20.41), American Express (AXP-28.33), and Morgan Stanley (MS-28.50). XLF components that currently remain on our “sell” list include
B. Builders
The Homebuilder exchange traded fund (XHB-14.29) advanced 5.38% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 19.28%. The XHB is entering week three of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall be raised to 13.33. Any weekly closing price below the 13.33 support level will negate our current “buy” signal in the XHB. XHB components that currently reside in weekly “buy” mode include Centex (CTX-10.91), Pulte Homes (PHM-11.37), Toll Brothers (TOL-19.56), KB Homes (KBH-16.69), Ryland Group (RYL-19.97), and Lennar (LEN-11.84). Take note that a quarterly earnings report is due in the coming week from XHB component CTX. Last week we were concerned that the XHB had advanced up to a significant weekly price resistance level, the 14.00 area. The weekly closing price above 14.00 is indicating that this price advance has further to go on the upside. We now see further upside to the 16.00 area forthcoming. Continue to use price weakness to accumulate long positions and or to initiate long trades.
B. Semiconductor
The Semiconductor group (SMH-24.95) advanced 0.70% for the week. The SMH performance for 2009 to date stands at a positive 41.68%. The SMH is entering week three of “buy” mode. Our weekly price support level shall be raised to the 24.33 level. Any weekly closing price below 24.33 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain prevalent in SMH components Intel (INTC-19.25),
D. Retailers
The Retail sector (RTH-82.79) finished the trading week with a 1.19% advance. The 2009 performance of the RTH currently stands at a positive 10.18%. The RTH is entering the third week of a “buy” signal. Our weekly closing price support level for the RTH shall be raised to 80.39. Any weekly closing price below 80.39 will negate our current “buy” signal for the RTH. RTH components that continue to enjoy favorable weekly status include Home Depot (HD-25.94), Target (TGT-43.62), BestBuy (BBY-37.37), Walgreen’s (WAG-31.05), WalMart (WMT-49.88), Sears Holding’s (SHLD-66.34) and Kohl’s (KSS-48.55). The RTH almost reached the critical 84.00 resistance level last week; the high of the week was 83.75. Any weekly closing price above the 84.00 level will indicate a potential upside move to the low 90.00’s for the RTH. Although somewhat extended to the upside, the trend remains favorable; use price weakness in the RTH and positively mentioned components to increase long exposure and or to initiate long trades.
E. Steels
The Steel sector (SLX-45.98) finished the week with a 0.22% advance. The current 2009 trading year return for the SLX is a positive 56.55%. The SLX is entering the third week of a “buy” signal. Our weekly closing price support level for the SLX shall remain at 43.96. Any weekly closing price below 43.96 will negate our current “buy” signal for the SLX. Weekly “buy” signals remain in place for SLX components
F. Pharmaceuticals and Healthcare
The Pharmaceutical group (PPH-62.72) declined 1.09% last week. The current 2009 return for the PPH stands at a positive 2.26%. The PPH is entering the third week of a “buy” signal. Our weekly price support level shall be raised to 62.40. Any weekly closing price below 62.40 will negate our current weekly “buy” signal for the PPH. Weekly “buy” signals remain in place for Johnson & Johnson (JNJ-60.89), Eli Lilly (LLY-34.89), Abbott Lab’s (ABT-44.99), GlaxoSmithKline (GSK-38.29), Merck (MRK-30.01), and Pfizer (PFE-15.93). Although the weekly trend remains a favorable one, the charts point to a potential near term exhaustion of the recent advance. It is time to tighten up the protective sell-stops to protect profits from long positions.
III. Gold
GLD (streetTracks gold index) – The GLD (93.35) declined 0.06% on the week. For the 2009 trading year the GLD currently rests with a positive return of 7.89%. The GLD is entering week three of a “buy” signal. Our weekly closing price support in order to maintain said “buy” signal shall remain at 92.69. Any weekly closing price below 92.69 will negate our current “buy” signal for the GLD. A strong Friday upside move enabled the GLD to maintain positive weekly status. At minimum we see a continuation of upside to the 96.00 area. The push and pull of re-flation versus deflation once again favors the re-flation crowd; use price weakness to increase long exposure and or to initiate long trades.
IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)
The Large-Cap Integrated Oil space (XOI-961.20) closed out the trading week with a 0.81% decline. The XOI is now negative by 1.88% for the 2009 trading year. The XOI is entering week three of a “buy” signal. Our weekly closing price support shall be raised to 934.48. Any weekly closing price below 934.48 will negate our current “buy” signal for the XOI. Weekly “buy” signals remain in place for XOI components Exxon-Mobil (XOM-70.39), Chevron-Texaco (CVX-69.47), British Petroleum (BP-50.04), Suncor Energy (SU-32.48), and Conoco-Phillips (COP-43.71). The XOI trend remains favorable but is once again approaching a significant price resistance zone at 1050.00. Another attempt at the 1050.00 resistance area appears to be in the cards. Use price weakness to increase long exposure and or to initiate long trades.
The Oil Service Index (OIH-103.52) declined 3.55% this past trading week. The 2009 year to date return for the OIH stands at a positive 40.36%. The OIH is entering week three of a “buy” signal. Our weekly closing price support level shall remain at 99.48. Any weekly closing price below 99.48 will negate our current weekly “buy” signal for the OIH. Weekly “buy” signals remain in place across the board in OIH components Schlumberger (SLB-53.50), Baker Hughes (BHI-40.50), Transocean (RIG-79.69), Halliburton (HAL-22.09), Ensco (ESV-37.89) and B.J. Services (BJS-14.18). Take note that quarterly earnings reports are due in the coming week from OIH components BHI and RIG. Last week was a down week for the OIH but the trends continue to remain favorable; continue to use price weakness to increase long exposure and or to initiate long trades.
Natural Gas (UNG-12.87) declined 3.45% this past week. The current 2009 performance of the UNG is a negative 44.45%. The UNG is entering the third week of a “buy” signal. Our weekly price support level shall remain at 12.73. Any weekly closing price below 12.73 will negate our current “buy” signal for the UNG. Indications now point to a near term bottom being in place for the underperforming UNG; time to use price weakness to increase long exposure and or to initiate long trades.
The Coal Sector (KOL-27.57) advanced by 3.65% this past week. Year-to-date the KOL is positive by 85.15%. The KOL is entering the third week of a “buy” signal. Our weekly closing price support shall be raised to 25.59. Any weekly closing price below 25.59 will negate our current “buy” signal for the KOL. Week three of a “buy” signal, the momentum favors the upside with the 32.00 level in our sights; use price weakness to increase long exposure and or to initiate long trades.
V. Dow 30 Analysis
Our Weekly Trend Indicator (WTI) measures in at +28, unchanged from the previous week reading of +28. Currently 96.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is unchanged from 96.0% in the prior week. The Dow Jones Industrial average advanced 0.86% for the week to 9171.61. The current return for the 2009 trading year stands at a positive 4.50%.
The S&P 500, as measured by the SPY (98.81), advanced 0.76% for the week. The 2009 trading year return for the SPY is positive by 9.49%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 55.57), advanced 1.39% for the week. The IWM year to date return is currently a positive 12.85%.
The DIA (91.67) closed out the week with a 0.77% advance and is entering the third week of a “buy” signal. Our weekly closing price support level shall be raised to 90.08. Any weekly closing price below 90.08 will negate our current “buy” signal for the DIA. A three-week bull run has left the DIA at the highest price level of the 2009 trading year. The 95.00 level appears to be the near term upside target with possible potential to the 100.00 area. No one ever said it had to make fundamental sense.
Fresh weekly buy signals generated: NONE
Fresh negative weekly signals generated: NONE
Readers should take note that Dow Jones Industrial components CSCO, KFT, and PG are scheduled to report quarterly earnings in the coming week.
Dow 30 stocks with positive weekly signals:
AA, AXP, BA, BAC, CAT, CSCO, CVX, DD, DIS, GE, HD, HPQ, IBM, INTC, JPM, JNJ, KFT, KO, MMM, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM
Dow 30 stocks with negative weekly signals:
MCD
· Underline names have changed from previous week*
For access to Equity Letter individual trading positions and ideas contact
VI. KEY EVENTS IN THE WEEK AHEAD:
Monday, August 3
Economic
Earnings
Before: ASF, ALD, B, CLX, CAN, DCO, FE, GEO, HAE, HUM, JRCC, L, MMP, MRO, MDU, MCY, MGM, TAP, NTE, NNN, NS, ORBK, POR, RRI, RRST, TSTY, TSN, WATG
After: TDSC, PAR, ACTS, AIMC, APC, ARNA, AGII, ARRY, ATML, AXS, TAST, CTX, CHK, CRK, EXBD, CRAY, CUTR, DXCM, DUF, ETM, RE, EXR, FST, HLF, HOLX, IPHS, KND, LF, MNKD, MTXX, MIG, MDAS, OTTR, PMC, PPS, PFG, PRA, PHM, RBC, RUBO, SENO, SMSI, SM, STEC, SNHY, SYKE, TXRH, UDRL, VMC, WMS, WMGI, ZGEN
Events
CAT Analyst Event
AEP, CEP, LNT at Marcus Evans Outage Management for Power Plants Conf.
Tuesday, August 4
Economic
Earnings
Before: ACOR, AMRI, AYE, AHCI, ADM, ARM, ATRC, BRY, BBG, CAM, FUN, CHD, CBB, CTSH, CFX, CVS, DNR, DBD, DISCA, DTG, DHI, DUK, EMS, EMR, NPO, ETR, ENZN, EXPD, RAIL, FTR, FCN, FNDT, IT, GET, HCP, HW, HNT, HS, HPY, HSIC, HEW, ICON, IIVI, NRGY, ICE, IPGP, KNOL, LDR, LPX, MAC, MLM, MVL, MTRX, MXGL, MCGC, LABL, NI, NWN, OZM, GLT, PTRY, PRX, PER, PNW, PLA, POWL, PPL, PGN, RIGL, RMG, RDC, RTI, SPG, SKH, SE, JOE, TECH, THC, TDG, TRW, UPL, UNT, UTI, VRX, VNO, WTI, WST, WLK, GB, ZBRA
After: ABCO, ACAS, AEL, AMMD, APEI, ATO, CAR, BGCP, BGFV, BBND, BIO, BMC, SAM, BRE, BKI, CAP, CAMD, CBM, CBOU, CHSI, CBL, CEDC, CEPH, CRL, COGT, COHR, CSTR, CVLT, CTRP, DVA, DENN, DIVX, DM, DFT, ERTS, EAC, ESE, XCO, FRT, FR, FVE, GHDX, GCA, LOPE, SOLR, GUID, HNSN, HE, HLS, HT, HIL, IDSY, PODD, JACK, JLL, KNXA, KFRC, KFT, LHCG, LQDT, LPSN, MASI, MRCY, MOLX, MOH, NATL, NWS/A, NOA, ODSY, OKE, OKS, ONXX, OPEN, PZZA, PXD, PLXT, PL, RACK, SONE, SIRF, BID, SPSS, SXE, SUMT, TX, TSRA, TNS, TRLG, UDR, UNM, VCLK, VOLC, WWWW, WFMI, AUY, ZIPR
Events
CAT Analyst Event
NATI Annual Investor Conf.
SY, MV, ACIW at Global Concepts Cash Management Forum
CATY, SSBI, PFBC, EWBC at B. Riley & Company California Bank Conf.
FED: Fed's Tarullo
| |
Wednesday, August 5
Economic
Earnings
Before: AGU, ALE, AFAM, ABK, AXL, ASCA, WTR, AAWW, AVA, AVT, BHI, BLT, BYD, CCC, LSE, CATM, CNP, CWEI, CGX, DWSN, DF, DVN, RRD, EBIX, EE, EXM, FIG, FWLT, FSIN, GRMN, HEES, IPSU, IRC, IFF, KELYA, LINC, LOJN, LL, MMC, MINI, NURO, NEWS, OWW, OSG, OC, PRFT, HK, PQ, PCG, RL, PBH, PG, PWR, RDN, ROLL, SHPGY, SCR, SBGI, SEP, SUSS, TTES, TKLC, TWGP, RIG, GTS, TNP, WNS, XTO
After: NDN, ATVI, ALL, ALJ, ARII, ACF, AMSF, ANDE, ATHN, ATN, ATPG, ATW, AUDC, BBBB, EPAY, BEXP, BWY, BEAT, CECO, CBEY, CRA, CENT, CSCO, CNL, CGNX, CNQR, CPA, CXW, CCRN, DCP, EGLE, ESS, FEIC, FCH, FBN, BGC, ROCK, GIVN, GLBL, GDP, GXP, HVT, HCN, HIMX, HMIN, INSP, INWK, NSIT, TEG, INAP, IO, ISTA, JCOM, KNDL, KEG, MCHX, MKL, MMLP, MBI, MSSR, MEAS, MEDX, MDTH, MRX, MELI, MOVE, MSCS, MUR, NHP, NCIT, NEWP, NHWK, NTLS, ASGN, ONNN, OSUR, OEH, ORA, VITA, PACR, MALL, PVA, PSEM, PAA, PPO, PRU, PSB, QLTY, REG, RHB, SSW, SCI, STAN, SUNH, SUN, SHO, SVR, TBSI, TS, THOR, TIE, UNTD, VRTX, VSAT, VTAL, WGL, XNPT
Events
AXP Financial Community Meeting
OSIP, CELG, AET, COV, UNH, UTHR at BMO Capital Markets Focus on Healthcare Conf.
Thursday, August 6
Economic
Before: ABMD, ACIW, ACM, AER, AES, ARE, LNT, ATK, AEE, ANSS, ARCC, STST, ARQL, AUXL, FLY, BCE, BVF, BX, BXC, EAT, BRS, BRNC, CNQ, CSIQ, CSE, CTL, CKP, CNK, CMCSA, CNSL, CLR, CTB, COWN, CTCM, DK, DPTR, DGIT, DTPI, DSX, DIOD, DTV, DRQ, EP, EPB, ELMG, ELXS, FTK, FRO, GKSR, GEL, GNA, GLG, GPX, GPOR, HWK, HDIX, HPT, HRP, HUN, ITWO, IAG, IDA, IFLO, IMAX, IPCC, IART, VTIV, ISIS, JMP, KG, KOP, KSWS, LAMR, LXP, LINE, MIC, MMS, MDCI, MPW, MPEL, PCS, MF, MITI, MEND, MDS, MNTA, NDAQ, NRP, TNDM, NOVN, CHUX, OMG, ORN, PDC, PXP, POL, PGNX, QCCO, RSTI, SLE, SNI, SIRI, SKYW, SMBL, SJI, SUG, TRK, STXS, SPH, SFY, SXCI, SMA, NGLS, TK, TDS, TDC, TTI, TRI, THI, USPH, USM, WRC, WMG, WEN, WNR, WMB, WPZ, WIN, WWE
During: CUB, OPTR
After: JOBS, ACS, AIRM, ALKS, ALLI, AIG, ARP, ASEI, AHS, ANEN, AGO, AUTH, BZH, NILE, CELL, BRKS, CPKI, CPE, CBS, CHINA, STV, CQB, COGO, CCIX, CSC, COMV, CROX, DAR, DPM, DCT, TRAK, DNEX, ECLP, BAGL, EBS, ELX, ERII, EOG, FSYS, GOK, HANS, HRC, HME, HURN, ICFI, IMMR, ITMN, IPI, IPCM, XXIA, KCP, LEAP, LLNW, LGF, LMIA, LMNX, ME, MXIM, MXWL, MAXY, MCHP, MAA, MIL, MRT, MFLX, NABI, NCMI, NFG, NGS, NAVG, EGOV, NPSP, NVDA, OMPI, OCNW, ORCC, OPLK, PARL, PEGA, POM, POWR, PRO, PSA, RAH, RWT, RENT, RSCR, RMD, ROVI, RTEC, SD, SAPE, SVNT, SQNM, SRSL, SURW, TMRK, KNOT, THS, TRMS, UEIC, YSI, VRSN, WTW, WR, INT
Events
VPRT Special Meeting of Shareholders
THQI Shareholders Meeting
MDRX Oppenheimer & Co. Healthcare Information Technology 1-on-1 Conf.
Friday, August 7
Economic
Earnings
Before: AYR, AOB, AIT, ARD, BECN, BAM, LNG, XEC, CCOI, XTEX, EIX, HGG, LPNT, MGA, MCCC, MIR, NOOF, PPCO, RBA, SNH, SUI, SUP, SWSI, RMIX, WCRX
After: ROSE
Events
SOLR Shareholders Meeting
<< Home