equityletter.com 11/30/09
Note: Event Calendar is located at bottom of page
I. General Commentary
The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-109.57), Diamonds Trust (DIA-103.18), NASDAQ Composite (COMP-2138.44), and the Powershares QQQQ Trust (QQQQ-43.51). We currently have a negative view on the IShares Russell 2000 Index Fund (IWM-57.58) and the
Sectors within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Gold (GLD), Transportation (IYT), Natural Gas (UNG), Retailers (RTH), Agriculture (MOO), Pharmaceuticals (PPH), Semiconductors (SMH), Coal (KOL), and Internet Related (HHH). *The UNG is an upgrade from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.
Sectors that we currently rate as neutral include the Steel (SLX), Large Integrated Oil (XOI), and Managed Healthcare. * There are no additions to the neutral list at this time.*
Sectors that we believe to be currently vulnerable to downside pricing pressure are the Oil Service (OIH), Crude Oil (USO), Financials (XLF), Homebuilding (XHB), and Real Estate (IYR). *There are no additions to the negative list from the prior letter.*
Sector analysis below will provide information as to where to best allocate funds at this time.
For access to Equity Letter individual trading positions and ideas contact
Please frequent http://www.equityletter.com/
II. Sector Analysis
The IEF-92.91 (I-share 7-10 year Treasury bond) advanced 1.17% for the week as the yield on the 10- year treasury decreased from 3.35% to 3.23%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF is entering week two of a “buy” signal. The weekly closing price resistance level in order to maintain our current “buy” signal shall be raised to 91.46. Any weekly closing price below 91.46 will negate our current “buy” signal for the IEF. Week two of a “buy” signal but strong price resistance looms near the 93.50 price level. Any upside price action through the 93.50 key price resistance area will mean an equity market in correction mode.
A. Financials
The Financial Select Sector Index (XLF-14.28) finished the trading week with a 2.19% decline. The XLF is now positive by 14.05% to date for the 2009 trading year. The XLF is entering week nine of a “sell” signal. Our weekly closing price resistance shall be lowered to 14.46. Any weekly closing price above 14.46 will negate our current “sell” signal for the XLF. American Express (AXP-40.84) and Bank of
B. Builders
The Homebuilder exchange traded fund (XHB-14.44) declined 0.96% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 20.53%. The XHB is entering week ten of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal for XHB shall be lowered to 14.75. Any weekly closing price above the 14.75 resistance level will negate our current “sell” signal in the XHB. A weekly “buy” signal remains in place for XHB component Toll Brothers (TOL-19.28). We would look to buy weakness in TOL as it appears to be a sector outlier. Weekly “sell” signals remain in place for XHB components Pulte Homes (PHM-9.11), D R Horton (DHI-10.54), Ryland Group (RYL-18.04), KB Homes (KBH-13.62), and Lennar (LEN-12.86). Take note that a quarterly earnings report is due from TOL in the coming week. The weekly trend remains one of distribution; use price strength in negatively mentioned names to reduce long exposure and or to initiate short trades.
B. Semiconductor
The Semiconductor group (SMH-25.40) advanced 1.28% for the week. The SMH performance for 2009 to date stands at a positive 44.23%. The SMH is entering week three of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 24.90. Any weekly closing price below 24.90 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain in place for SMH components Analog Devices (ADI-29.75), Novellus (NVLS-20.72),
D. Retailers
The Retail sector (RTH-94.26) finished the trading week with a 0.36% advance. The 2009 performance of the RTH currently stands at a positive 25.42%. The RTH is entering week three of a “buy” signal. Our weekly closing price support level for the RTH in order to maintain the current “buy” signal shall remain at 92.75. Any weekly closing price below 92.75 will negate our current “buy” signal for the RTH. A fresh weekly “sell” signal has been generated in Sears Holding’s (SHLD-71.94). Weekly “buy” signals remain prevalent for RTH components WalMart (WMT-54.63), BestBuy (BBY-42.83), and Home Depot (HD-27.61). Weekly “sell” signals remain in place for RTH components Kohl’s (KSS-54.45), Walgreen’s (WAG-39.01), and Target (TGT-47.70). Mixed internal component signals continue to exist making individual stock selection an important factor. Continue to use price weakness in the RTH and select favorably mentioned component to increase long exposure and or to initiate long trades.
E. Steels
The Steel sector (SLX-55.72) finished the week with a 4.21% decline. The current 2009 trading year return for the SLX is a positive 89.71%. The SLX is entering week five of a “sell” signal. Our weekly closing price resistance level for the SLX shall remain at 58.20. Any weekly closing price above 58.20 will negate our current “sell” signal for the SLX. Weekly “buy” signals remain in place for
F. Pharmaceuticals and Healthcare
The Pharmaceutical group (PPH-65.41) increased by 0.65% last week. The current 2009 return for the PPH stands at a positive 6.65%. The PPH is entering week two of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall be raised to 64.50. Any weekly closing price below 64.50 will negate our current “buy” signal for the PPH. Weekly “buy” signals remain in place across the board for PPH components Johnson & Johnson (JNJ-62.89), Pfizer (PFE-18.25), and Merck (MRK-36.29), Abbott Lab’s (ABT-54.08), GlaxoSmithKline (GSK-42.26), and Eli Lilly (LLY-36.90). The weekly trends remain favorable; use extended price weakness to increase exposure and or to initiate long trades.
III. Gold
GLD (streetTracks gold index) – The GLD (115.06) advanced 1.88% on the week. For the 2009 trading year the GLD currently rests with a positive return of 32.98%. The GLD is entering week eight of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 110.65. Any weekly closing price below 110.65 will negate our current “buy” signal for the GLD. Once again slightly overdone to the upside but the GLD is a favorite of the upside momentum crowd; continue to use extended price weakness to increase exposure and or to initiate long trades.
IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)
The Large-Cap Integrated Oil space (XOI-1075.20) closed out the trading week with a 0.20% advance. The XOI is now positive by 9.75% for the 2009 trading year. The XOI is in the fifth week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall remain at 1094.43. Any weekly closing price above 1094.43 will negate our current “sell” signal for the XOI. Weekly “buy” signals remain prevalent for XOI components Exxon-Mobil (XOM-74.87), British Petroleum (BP-58.11) and Suncor Energy (SU-35.99). Weekly “sell” signals remain in place for XOI components Conoco-Phillips (COP-51.92) and Chevron-Texaco (CVX-78.17). We shall reiterate our stance from last week, overweight XOM versus underweighting CVX.
The Oil Service Index (OIH-117.35) advanced 0.21% this past trading week. The 2009 year to date return for the OIH stands at a positive 59.11%. The OIH is entering week five of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 122.97. Any weekly closing price above 122.97 will negate our current weekly “sell” signal for the OIH. Weekly “sell” signals continue to remain in place across the board for OIH components Halliburton (HAL-29.09), Schlumberger (SLB-63.14), Baker Hughes (BHI-40.36), Ensco (ESV-44.50) and Transocean (RIG-84.91). No changes from the prior week; use any extended price strength to reduce long exposure and or to initiate short positions.
Natural Gas (UNG-9.83) advanced 9.34% this past week. The current 2009 performance of the UNG is a negative 57.57%. The UNG has closed above our weekly price resistance level therefore generating a fresh weekly “buy” signal. Our weekly price support in order to maintain our fresh “buy” signal shall be set at 8.88. Any weekly closing price below 8.88 will negate our fresh “buy” signal for the UNG. After trading at new lows for the 2009 trading year in the prior week the UNG has rebounded and is indicating near term price strength. We would use price weakness to increase long exposure at this time with a near term upside target of 11.50.
The Coal Sector (KOL-33.90) declined by 1.94% this past week. Year-to-date the KOL is positive by 127.66%. The KOL is entering week three of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be adjusted to the 33.90 price level. Any weekly closing price below 33.90 will negate our current “buy” signal for the KOL. A poor close to the week for the KOL but the weekly trend was maintained by the thinnest of margins. Watch the 33.90 support level intently this coming week.
V. Dow 30 Analysis
Our Weekly Trend Indicator (WTI) measures in at +14, a decrease from the previous week reading of +18. Currently 73.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is a decrease from 80.0% in the prior week. The Dow Jones Industrial average declined 0.08% for the week to 10309.02. The current return for the 2009 trading year stands at a positive 17.46%.
The S&P 500, as measured by the SPY (109.57), advanced 0.13% for the week. The 2009 trading year return for the SPY is positive by 21.42%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 57.58), declined 1.72% for the week. The IWM year to date return is currently a positive 16.93%.
The DIA (103.18) closed out the week with a 0.07% decline and is entering week three of a “buy” signal. Our weekly closing price support level in order to maintain the current “buy” signal shall remain at 102.72. Any weekly closing price below 102.72 will negate our current “buy” signal for the DIA. The DIA stalled once again at the weekly trend line price resistance area of 104.50 as the high trade last week was 104.98. Our thoughts remain unchanged from our previous letter; we see a weekly trend line trading range developing with the upper end resistance area around 105.00 and the lower end price support area at 96.50. We would look to trade this range until either parameter is violated.
Fresh weekly buy signals generated: N/A
Fresh negative weekly signals generated: KFT, MSFT, TRV
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, DIS, GE, HD, HPQ, IBM, INTC, JNJ, KO, MCD, MRK, PFE, PG, T, UTX, VZ, WMT, XOM
Dow 30 stocks with negative weekly signals:
AA, BAC, CSCO, CVX, JPM, KFT, MMM, MSFT, TRV
· Underline names have changed from previous week*
VI. KEY EVENTS IN THE WEEK AHEAD:
Monday, November 30
Economic
Earnings
Before: NRGY
After: GES, OVTI, SNS, ZOLT
Events
ANR at Macquarie Global Metals & Mining Conference
APD, MOS at Citi Global Chemical Conference
FED: $30 bln 3 month and $31 bln 6 month Treasury Bill Auctions
Tuesday, December 1
Economic
Earnings
Before: BECN, GIGM, ISLE, LDR, SPLS, UTI
After: CPRT, GAME, SNDA
Events
| MSFT, BMRN, CPHD, INTU at Nasdaq OMX Investor Conference |
Wednesday, December 2
Economic
Earnings
Before: CHRS, GIII, PTRY, SYNO
After: ARO, PSS, DDMX, JAS, SEAC, SIGM, SNPS
Events
MOS, MON at Citigroup Global Markets Basic Materials Conference
IBM, SYNA, BRCD, DELL at Credit Suisse Group Technology Conf.
FED: Fed's Lacker speaks on economic outlook
Thursday, December 3
Economic
Earnings
Before: APWR, STST, CUB, DLM, FLOW, TUTR, TOL, UTIW
After: AVAV, ARST, AVGO, CRI, CMTL, DMND, LQDT, MRVL, MENT, NOVL, OHB, ULTA
Events
PFG Investors and Analysts Conference
EMC, LXK, BRCM, BHE at Credit Suisse Group Technology Conf.
FED: Fed Chairman Bernanke Confirmation Hearing
Friday, December 4
Economic
Earnings
Before: BIG, SIRO
After: FMCN
Events
SON Analyst Meeting
CW, BNE, FLS, SCG at Gabelli & Co. Best Ideas Conference
FED: Fed's Plosser to speak on lessons from the financial crisis
Current Technical Analysis Coverage Universe
ETF’s & Indices: SPY, IWM, UUP, IEF, QQQQ, DIA, COMPQ, XLF, IYR, XHB, XOI, OIH, UNG, USO, PPH, IYT, SMH, MOO, HHH, RTH, SLX, GLD
DOW JONES INDUSTRIAL AVERAGE & 30 COMPONENTS
Financial (XLF): JPM, BAC, WFC, C, USB, GS, MS, AXP, CME, MET, BK
Homebuilders (XHB): DHI, PHM, LEN, TOL, RYL, KBH
Semiconductors (SMH): INTC, TXN, AMAT, MU, SNDK, NVLS, ADI
Retailers (RTH): WMT, HD, TGT, WAG, SHLD, BBY, KSS
Steel (SLX): X,
Pharmaceuticals (PPH): PFE, MRK, JNJ, GSK, ABT, LLY
Oil (XOI): XOM, CVX, COP, BP, SU, PXP
Oil Service (OIH): SLB, HAL, BI, RIG, ESV, SII
Natural Gas (UNG): EP, APA, CHK, APC, XTO
Coal (KOL): ACI, BTU, MEE, CNX
Transportation (IYT): FDX, UPS, CHRW, BNI, CSX, NSC
Managed Care: UNH, WLP, HUM, AET
Gold: GLD, NEM, AU
Agriculture (MOO): MOS, MON, POT, DE
High Beta: AAPL, GOOG,
<< Home