equityletter.com 9/07/09
Note: Event Calendar is located at bottom of page
I. General Commentary
The major market averages under our coverage that we currently rate with a positive weekly technical indications are the SPDR- S&P 500 (SPY-102.06), NASDAQ Composite (COMP-2018.78), Powershares QQQQ Trust (QQQQ-40.36), and the I-share 7-10 year Treasury bond (IEF-91.20) We currently have a negative view on the U.S. $ Index (UUP-23.25), IShares Russell 2000 Index Fund (IWM-57.05), and the Diamonds Trust (DIA-94.45). Take note that the IWM and DIA are negative changes of opinion from the prior week.
Sectors within our coverage universe that remain in favor according to our weekly oriented technical analysis include Managed Healthcare, Retailers (RTH), Gold (GLD), Semiconductors (SMH), Agriculture (MOO), Oil Service (OIH), Real Estate (IYR), Transportation (IYT), and Steel (SLX). Take note that the GLD is a change of opinion from the previous letter. Use price weakness to increase long exposure or to initiate long trades.
Sectors that we currently have neutral opinions on include Coal (KOL) and the Large Integrated Oil companies (XOI). Take note that both the KOL and the XOI have been downgraded from the weekly “buy” list.
Sectors that we believe to be currently vulnerable to downside pricing pressure are the Natural Gas (UNG), Crude Oil (USO), Homebuilding (XHB), Pharmaceutical (PPH), Internet Related (HHH) and Financials (XLF). Take note that the XLF, XHB, HHH, and PPH are all negative opinion changes from the previous letter.
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-91.20 (I-share 7-10 year Treasury bond) advanced 0.14% for the week as the yield on the 10- year treasury decreased from 3.45% to 3.44%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF is entering week four of a “buy” signal. The weekly closing price support level in order to maintain our current “buy” signal shall be raised to 90.98. Any weekly closing price below 90.98 will negate our current “buy” signal for the IEF. The IEF stalled last week at the 92.00 price resistance area. Any weekly closing price above the 92.00 level will indicate further potential upside to the 94.00 – 95.00 area. We shall maintain our bullish stance until our price level is violated on a weekly closing price basis.
A. Financials
The Financial Select Sector Index (XLF-14.22) finished the trading week with a 3.59% decline. The XLF is now positive by 13.57% to date for the 2009 trading year. After spending the past twenty-five on our “buy” list the XLF has violated our closing weekly price support level. A change of weekly trend has been generated from positive to negative. Our weekly closing price resistance shall be set at 14.75. Any weekly closing price above 14.75 will negate our fresh “sell” signal for the XLF. Concurrent fresh weekly “sell” signals have been generated in XLF components J.P. Morgan (JPM-42.34), Bank of
B. Builders
The Homebuilder exchange traded fund (XHB-15.08) declined 4.86% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 25.87%. After spending the past seven on our “buy” list the XHB has violated our weekly closing price support. A weekly change of trend has been signaled from positive to negative. Our weekly closing price resistance level in order to maintain our fresh “sell” signal for XHB shall be set at 15.89. Any weekly closing price above the 15.89 resistance level will negate our fresh “sell” signal in the XHB. Concurrent weekly “sell” signals have been generated in XHB components D R Horton (DHI-12.45), Pulte Homes (PHM-12.34), and Ryland Group (RYL-22.16). XHB components that continue to reside in weekly “buy” mode include, Toll Brothers (TOL-21.94), KB Homes (KBH-17.70), and Lennar (LEN-15.10). It appears that the seven-week advance for the XHB has come to a conclusion, at the very least long positions should be hedged against further declines from current price levels. A change of weekly trend has been generated; time to use extended price strength to reduce long exposure and or to initiate short trades.
B. Semiconductor
The Semiconductor group (SMH-25.49) declined 0.78% for the week. The SMH performance for 2009 to date stands at a positive 44.74%. The SMH is entering week eight of “buy” mode. Our weekly price support level shall remain at the 24.66 level. Any weekly closing price below 24.66 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain prevalent in SMH components Intel (INTC-19.64),
D. Retailers
The Retail sector (RTH-87.13) finished the trading week with a 0.49% advance. The 2009 performance of the RTH currently stands at a positive 15.95%. The RTH is entering the eighth week of a “buy” signal. Our weekly closing price support level for the RTH shall remain at 84.46. Any weekly closing price below 84.46 will negate our current “buy” signal for the RTH. A fresh weekly “buy” signal has been generated in RTH component BestBuy (BBY-39.41). RTH components that continue to enjoy favorable weekly status include Target (TGT-47.12), Home Depot (HD-27.03), Walgreen’s (WAG-33.84), WalMart (WMT-51.68), and Kohl’s (KSS-54.58). RTH component Sears Holding’s (SHLD-64.44) shall remain on our “sell” list at this time. Although the trend remains favorable the risk/reward equation does not appear quite as favorable from current price levels; caution is urged as proper long trade entry is critical at this juncture.
E. Steels
The Steel sector (SLX-47.66) finished the week with a 1.51% decline. The current 2009 trading year return for the SLX is a positive 62.27%. The SLX is entering the eighth week of a “buy” signal. Our weekly closing price support level for the SLX shall remain at 47.21. Any weekly closing price below 47.21 will negate our current “buy” signal for the SLX. A fresh weekly “sell” signal has been generated in SLX component Nucor (NUE-44.17). A weekly “buy” signal remains in place for SLX component
F. Pharmaceuticals and Healthcare
The Pharmaceutical group (PPH-63.62) declined 1.28% last week. The current 2009 return for the PPH stands at a positive 3.73%. The PPH has violated our weekly price support level. After spending the past seven weeks on our weekly “buy” list a change of trend has been generated. Our weekly price resistance level shall be set at 64.66. Any weekly closing price above 64.66 will negate our fresh weekly “sell” signal for the PPH. Fresh weekly “sell” signals have been generated in influential PPH components Merck (MRK-30.70) and Pfizer (PFE-16.39). Weekly “buy” signals remain in place for Johnson & Johnson (JNJ-60.32), Abbott Lab’s (ABT-45.63), and GlaxoSmithKline (GSK-39.04). Eli Lilly (LLY-33.00) is entering week four on our “sell” list. A weekly change of trend has been generated; it is time to switch gears and use extended price strength in the PPH and above mentioned negative components to reduce long exposure and or to initiate short trades.
III. Gold
GLD (streetTracks gold index) – The GLD (97.53) advanced 3.90% on the week. For the 2009 trading year the GLD currently rests with a positive return of 12.71%. After spending the past three weeks on our “sell’ list the GLD has closed above our weekly price resistance level therefore indicating a change of weekly trend from negative to positive. Our weekly closing price support level in order to maintain our fresh “buy” signal shall be set at 92.92. Any weekly closing price below 92.92 will negate our fresh “buy” signal for the GLD. A sharp advance coupled with strong trading volume is indicating another upside attempt at the 99.00 – 100.00 price resistance area for the GLD.
IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)
The Large-Cap Integrated Oil space (XOI-981.88) closed out the trading week with a 1.19% decline. The XOI is now positive by 0.22% for the 2009 trading year. The XOI is entering week two of a “buy” signal. Our weekly price support in order to maintain our current weekly “buy” signal shall remain at 975.66. Any weekly closing price below 975.66 will negate our current “buy” signal for the XOI. Our “buy” signal issued last week for Chevron-Texaco (CVX-68.96) has been aborted. Weekly “buy” signals remain in place for XOI components British Petroleum (BP-53.19) and Conoco-Phillips (COP-44.97). Weekly “sell” signals remain in place for XOI components Exxon-Mobil (XOM-69.18) and Suncor Energy (SU-31.23). There are too many divergent cross currents in this sector at this time. We shall take a neutral stance for now until a more discernable trend develops.
The Oil Service Index (OIH-106.03) declined 1.73% this past trading week. The 2009 year to date return for the OIH stands at a positive 43.76%. The OIH is entering week eight of a “buy” signal. Our weekly closing price support level shall remain at 105.01. Any weekly closing price below 105.01 will negate our current weekly “buy” signal for the OIH. OIH components currently in “sell” mode and remaining so are Schlumberger (SLB-55.87), Baker Hughes (BHI-35.62), Ensco (ESV-37.29), and Transocean (RIG-76.94). Weekly “buy” signals remain in place for OIH components Halliburton (HAL-24.54) and B.J. Services (BJS-16.49). BJS has received a merger proposal from BHI and will be dropped from coverage in our next letter. While the OIH has maintained favorable weekly status we continue to remain concerned in regards to the relative weakness displayed by the individual internal components.
Natural Gas (UNG-9.54) declined 14.29% this past week. The current 2009 performance of the UNG is a negative 58.82%. The UNG is entering week four of a “sell” signal. Our weekly price resistance level shall be lowered to 11.01. Any weekly closing price above 11.01 will negate our current “sell” signal for the UNG. The UNG continues to maintain the distinction as the most underperforming commodity in the marketplace. Bottom picking is a very difficult task, we shall continue to resist this temptation; use extended price strength to reduce long exposure and or to initiate short positions.
The Coal Sector (KOL-27.87) declined by 0.64% this past week. Year-to-date the KOL is positive by 87.17%. The KOL closed out the week marginally below our weekly price support level. This indecisive closing price shall cause us to move to a neutral stance. Any weekly closing price below 27.32 in the coming week will officially signal a weekly change of trend and cause us to move from neutral to negative on the extremely volatile sector.
V. Dow 30 Analysis
Our Weekly Trend Indicator (WTI) measures in at +8, a decrease from the previous week reading of +24. Currently 63.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is a decrease from 90.0% in the prior week. The Dow Jones Industrial average declined 1.08% for the week to 9441.27. The current return for the 2009 trading year stands at a positive 7.57%.
The S&P 500, as measured by the SPY (102.06), declined 1.28% for the week. The 2009 trading year return for the SPY is positive by 13.09%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 57.05), declined 1.72% for the week. The IWM year to date return is currently a positive 15.86%.
The DIA (94.45) closed out the week with a 1.18% decline and despite a strong advance this past Friday, has closed below our weekly price support level. After spending the past seven weeks on our “buy” list the DIA has generated a weekly “sell” signal. Our weekly closing price resistance level in order to maintain said weekly “sell” signal shall be set at 95.66. Any weekly closing price above 95.66 will negate our fresh “sell” signal for the DIA. A change of weekly trend has been signaled for the DIA, it is now time to use any extended price advance approaching the stated price resistance level to reduce long exposure and or to initiate “short” trades. We see at minimum a price retreat to the 90.00 area for the DIA.
Fresh weekly buy signals generated: NONE
Fresh negative weekly signals generated: AA, BAC, CVX, DIS, IBM, JPM, MRK, PFE
Readers should take note that there are no Dow Jones Industrial components scheduled to report quarterly earnings in the coming week.
Dow 30 stocks with positive weekly signals:
AXP, BA, CAT, DD, GE, HD, HPQ, INTC, JNJ, KFT, KO, MCD, MMM, MSFT, T, TRV, UTX, VZ, WMT
Dow 30 stocks with negative weekly signals:
AA, BAC, CSCO, CVX, DIS, IBM, JPM, MRK, PFE, PG, XOM
· 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, September 7
Economic
Earnings
Before:
After:
Events
Equity & Bond Markets Closed for Labor Day
Tuesday, September 8
Economic
Earnings
Before: CHP, RAIL, GIGM, SFD
After: AVAV, CASY, FLOW, FCEL, MIND, PBY, SB
Events
| CSX, BNI, CNI, NSC at RBC Capital Markets Transportation Conf. CRM @ RBC Capital Markets Virtual Investor Bus Tour ALB Mid-Quarter Update FED: $38 bln 3-yr Treasury Note Auction; $29 bln 6-month Treasury Bill Auction; $29 bln 3-month Treasury Bill Auction |
Wednesday, September 9
Economic
Earnings
Before: HITK, LRN, KFY, OHB, TLB, TITN, UNFI, ZLC
After: GCOM, MW, NAV, NCS, SHFL, SWHC, STEI
Events
TXN Mid-Quarter Update
GOOG Investor Webcast - Search and Monetization
IBM '09 Corporate Responsibility - Financial Analyst Webcast
BCON at Cleantech Forum
KFT, TAP, KO, TSN, SJM at Barclays Capital Back-To-School Conf.
PXP, VLO, COP, XOM at Barclays Capital 2009 CEO Energy Conf.
DAN, TEN, CHRW, TRW at Credit Suisse Group Automotive & Transportation Conf.
A, CELG, ISIS, ALKS at Thomas Weisel Partners Healthcare Conf.
GNW, MET, ALL, UNM at Keefe, Bruyette & Woods Insurance Conf.
CBR, EQIX, SDXC, NETL at Kaufman Brothers Investor Conf.
TDW, GNK, GMR at Jefferies & Co. Shipping & Offshore Services Conf.
GTXI, EMAN, LCAV, CRIS at Robert W. Baird & Co., Inc. Health Care Conf.
AMD, QCOM, HPQ, CSCO at Citi Annual Global Technology Conf.
SBUX, JCP, SWY, TRLG at Goldman Sachs Retailing Conf.
VIP at Deutsche Bank Global Emerging Markets One-on-One Conf.
BNI, UNP, NSC, CSX at Dahlman Rose & Co Global Transportation Conf.
HUM Citi On-Site Visit with Investment Clients
OFC, AVB, HME at BMO Capital Markets North American Real Estate Conf.
TOMO at Citi Radiation Oncology Seminar
FAST, DMND at BB&T Capital Markets
CMCSA, T, DIS, TWX at Bank of
FED: $20 bln 10-yr Treasury Bond Auction; Fed's Evans; Fed's Fisher; Fed's Beige Book
Thursday, September 10
Economic
Earnings
Before: LULU, MDZ, SCMR
After: FMCN, NSM, PSEM, TSCM
Events
COMV, CSCO, IBM, BP @ Cowen and Company Clean Energy Conf.
CSCO, MON, CSX, URBN @ UBS Best of
GR, PH, CW, BA @ Gabelli & Company Aircraft Supplier Conf.
NSC, BNI, CP, KSU @ Credit Suisse Group Automotive & Transportation Conf.
HERO, DUK, RIG, SO @ Barclays Capital 2009 CEO Energy Conf.
EPH, GPRO, MASI, BMRN @ Thomas Weisel Partners Healthcare Conf.
OYOG, ACTG, GHM, ACU @ Singular Research Uncovereds Conf.
JOYG, OSK, KMT, MTW @ Longbow Research Industrial Machinery & Equipment Investor Conf.
FMR, SFG, HIG, AFL @ Keefe, Bruyette & Woods Insurance Conf.
INAP, SMSC, DTSI, OPTV @ Kaufman Brothers Investor Conf.
HD, TIF, JCG, WMT @ Goldman Sachs Retailing Conf.
GLW, MRVL, CREE, CRM @ Citi Annual Global Technology Conf.
GIS, PEP, ACV, RAI @ Barclays Capital Back-To-School Conf.
IMGN, AMGN, CELG, HGSI @ Robert W. Baird & Co., Inc. Health Care Conf.
WERN, CNW, ABFS, YRCW @ Dahlman Rose & Co Global Transportation Conf.
GERN, XOMA, SUPG, ALNY @ Rodman & Renshaw Annual Global Investment Conf.
TWC, VZ, IMAX, CBS, LEAP @ Bank of
FPO, PKY, PSB, HCP @ BMO Capital Markets North American Real Estate Conf.
FED: $12 bln 30-yr Treasury Bond Auction; Fed's Lockhart Geithner Testifies Before TARP Oversight Panel; Fed's Kohn
Friday, September 11
Economic
Earnings
Before: ACET, BRC, CPB
After:
Events
HBC Analyst Meeting
RCNI, PSEM, DLR, ACN at Kaufman Brothers Investor Conf.
ICUI, SUPX, ABAX, FSYS at Sidoti Institutional Investor Forum
CERN, AMGN, MCK, CVS at Thomas Weisel Partners Healthcare Conf.
CDR, EPR, IRC, CLP at BMO Capital Markets North American Real Estate Conf.
AKNS, FCEL, ENS,
<< Home