equityletter.com 02/15/10
Note: Event Calendar is located at bottom of page
I. General Commentary
There is no market commentary this week.
The major market averages under our coverage that we currently rate with positive weekly technical indications are the
Sector analysis below will provide information as to where to best allocate funds at this time.
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II. Sector Analysis
The IEF-90.12 (I-share 7-10 year Treasury bond) declined 0.79% for the week as the yield on the 10- year treasury increased from 3.55% to 3.69%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. The IEF is entering week five of a “buy” signal. The weekly closing price support level in order to maintain our current “buy” signal shall remain at 90.09. Any weekly closing price below 90.09 will negate our current “buy” signal for the IEF. The IEF has well defined over head price resistance residing at the 91.00 area. The weekly price support level appears around the 89.00-89.30 area. With a “buy” signal currently in place we would continue to accumulate upon weakness but would also trim back long positions at the above mentioned 91.00 area.
A. Financials
The Financial Select Sector Index (XLF-13.95) finished the trading week 0.07% advance. The 2010 trading year return of the XLF is a negative 3.12%. The XLF is entering week four of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 14.57. Any weekly closing price above 14.57 will negate our current “sell” signal for the XLF. A fresh “sell” signal has been generated in
B. Builders
The Homebuilder exchange traded fund (XHB-15.88) advanced 5.73% for the week. The 2010 year-to-date performance of the XHB currently rests at a positive 5.09%. The XHB is entering week nine of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall be raised to 14.99. Any weekly closing price below the 14.99 support level will negate our current “buy” signal in the XHB. Weekly “buy” signals have been generated for XHB components Toll Brothers (TOL-19.87), Pulte Homes (PHM-11.74), Lennar (LEN-16.96), and KB Home (KBH-16.62). Weekly “buy” signals remain in place for XHB components D R Horton (DHI-12.67) and Ryland Group (RYL-22.17). Week nine of a “buy” signal; we remain skeptical as to the fundamentals for the building sector we do not want to fight a favorable technical picture. We shall remain neutral at this time.
B. Semiconductor
The Semiconductor group (SMH-26.06) advanced 3.89% for the week. The current SMH performance for the 2010 trading year is a negative 6.59%. The SMH is entering week five of a “sell” signal. Our weekly price resistance level in order to maintain our current “sell” signal shall remain at 26.28. Any weekly closing price above 26.28 will negate our current “sell” signal for the SMH. Fresh weekly “buy” signals have been generated in SMH components Intel (INTC-20.43) and
D. Retailers
The Retail sector (RTH-91.54) finished the trading week with a 1.13% advance. The current 2010 return of the RTH stands at a negative 2.45%. The RTH is entering week nine of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the current “sell” signal shall be lowered to 93.23. Any weekly closing price above 93.23 will negate our current “sell” signal for the RTH. A fresh weekly “buy” signal has been triggered in Home Depot (HD-29.00). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-33.49), Sears Holding’s (SHLD-90.47), Target (TGT-48.64), Kohl’s (KSS-49.83), WalMart (WMT-52.90) and BestBuy (BBY-35.76). Take note that WMT is scheduled to report quarterly earnings in the coming week. Week nine of a sell signal; continue to use extended price strength in the RTH and above negatively mentioned names to reduce long exposure and or to initiate short trades.
E. Steels
The Steel sector (SLX-57.31) finished the week with a 5.41% advance. The current 2010 trading year return for the SLX measures in at a negative 6.84%. The SLX is in the fourth week of a “sell” signal. Our weekly closing price resistance level for the SLX shall remain at 59.00. Any weekly closing price above 59.00 will negate our current “sell” signal for the SLX. Weekly “sell” signals remain in place for SLX components
F. Pharmaceuticals and Healthcare
The Pharmaceutical group (PPH-64.80) increased by 0.60% last week. The PPH 2010 trading year return stands at a negative 1.81%. The PPH is entering week four of a “sell” signal. Our weekly price resistance level in order to maintain the current weekly “sell” signal shall remain at 67.34. Any weekly closing price above 67.34 will negate our current “sell” signal for the PPH. PPH components Merck (MRK-36.92), Pfizer (PFE-17.80), Johnson & Johnson (JNJ-62.72), Abbott Lab’s (ABT-53.93), Eli Lilly (LLY-33.95) and GlaxoSmithKline (GSK-38.75) all continue to remain on our “sell” list at this time. Take note that MRK is scheduled to report quarterly earnings in the coming week. Week four of correction mode, we shall maintain our neutral stance at this time.
III. Gold
GLD (streetTracks gold index) – The GLD (107.04) advanced 2.25% on the week. The GLD current return for the 2010 trading year is a negative 0.25%. The GLD is entering week four of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 108.80. Any weekly closing price above 108.80 will negate our current “sell” signal for the GLD. It was an up week for the GLD this past week as it continues to hold above the rising weekly trend line support around that is now up to the 104.00 price level. Any downside penetration of the 104.00 price support level on a weekly closing price basis will foreshadow further downside to the 96.00 area of strong support. We shall maintain our neutral stance for the GLD at this time as the longer term bull trend remains intact despite the current corrective near term phase.
IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)
The Large-Cap Integrated Oil space (XOI-1014.02) closed out the trading week with a 1.58% advance. The current XOI 2010 trading year return is a negative 5.07%. The XOI is entering the fourth week of unfavorable technical conditions. Our weekly price resistance level in order to maintain our current “sell” signal shall remain at 1056.72. Any weekly closing price above 1056.72 will negate our current “sell” signal for the XOI. At this time weekly “sell” signals shall remain in place for XOI components Chevron-Texaco (CVX-71.01), Conoco-Phillips (COP-48.67), British Petroleum (BP-54.67), Suncor Energy (SU-29.20) and Exxon-Mobil (XOM-64.80). The price rebound of the XOI this past week was not very impressive. We shall maintain our “sell” for the XOI at this time with the first downside target being the 910.00 level.
The Oil Service Index (OIH-119.23) advanced 2.95% this past trading week. The 2010 year to date return for the OIH stands at a positive 0.88%. The OIH is in week four of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 124.71. Any weekly closing price above 124.71 will negate our current “sell” signal for the OIH. Weekly “sell” signals remain present across the board for OIH components Halliburton (HAL-30.02), Schlumberger (SLB-64.30), Baker Hughes (BHI-46.50), Ensco (ESV-40.48) and Transocean (RIG-83.38). The appreciation in the OIH last week was not enough to warrant a change in opinion. It is week four of a “sell” signal; we continue to view the 111.50 price support level as a must-hold price floor for the OIH. Any failure for the OIH to maintain said price support would foreshadow a swift downward move to the 90.00 area. We should note that last week’s price strength in the OIH failed to generate any internal component “buy” signals. We shall keep our “neutral” rating at this time.
Natural Gas (UNG-9.86) declined 1.40% this past week. The UNG current 2010 trading year return is a negative 2.18%. The UNG is entering week three of a “sell” signal. Our weekly price resistance level in order to maintain our current “sell” signal shall remain at 10.48. Any weekly closing price above 10.48 will negate our fresh “sell” signal for the UNG. We shall maintain our “sell” rating for the UNG at this time as distribution remains the dominant technical theme.
The Coal Sector (KOL-33.84) advanced by 6.31% this past week. The KOL 2010 trading year performance stands at a negative 6.31%. The KOL is entering the fourth week of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at the 34.87 price level. Any weekly closing price above 34.87 will negate our current “sell” signal for the KOL. We shall remain “neutral” at this time and shall continue to monitor the 29.50 support level for possible long entry.
V. Dow 30 Analysis
Our Weekly Trend Indicator (WTI) measures in at -18, a slight increase from the previous week reading of -24. Currently 20.0% of the thirty Dow Jones Industrial components have favorable weekly chart technical indications; this is an increase from 10.0% in the prior week. The Dow Jones Industrial average advanced 0.87% for the week to 10099.14. The return for the 2010 trading year stands at a negative 3.15%.
The S&P 500, as measured by the SPY (108.04), advanced 1.29% for the week. The current 2010 trading year return for the SPY is a negative 3.05%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 61.02), advanced 2.95% for the week. The IWM current 2010 trading year return is a negative 2.27%.
The DIA (101.27) closed out the week with a 1.11% advance and is entering week four of a “sell” signal. Our weekly closing price resistance level in order to maintain the current “sell” signal shall remain at 103.06. Any weekly closing price above 103.06 will negate our current “sell” signal for the DIA. We view the strength last week in the DIA as nothing more than a short term over-sold relief rally within a market that is clearly in “correction” mode. We would use any further price appreciation that approaches the above mentioned 103.00 price resistance area to reduce long exposure or to initiate short trades.
Fresh weekly buy signals generated: HD, INTC, KFT
Fresh negative weekly signals generated:
Readers should take note that Dow Jones Industrial components HPQ, KFT, MRK and WMT are scheduled to report quarterly earnings in the coming week.
Dow 30 stocks with positive weekly signals:
BA, CSCO, HD, INTC, KFT, TRV
Dow 30 stocks with negative weekly signals:
AA, AXP, BAC, CAT, CVX, DD, DIS, GE, HPQ, IBM, JNJ, JPM, KO, MCD, MMM, MRK, MSFT, PFE, PG, T, UTX, VZ, WMT, XOM
· Underlined names have changed from previous week*
VI. KEY EVENTS IN THE WEEK AHEAD:
Monday, February 15
Economic
Earnings
Before:
After:
Events
Equity & Bond Markets closed for Presidents Day
Tuesday, February 16
Economic
Earnings
Before: ANF, AEIS, AGAM, CPLA, CBZZ, CF, CRIC, DGIT, DHT, DW, FOSL, GPC, GTXI, KFT, MRK, TNDM, PTC, PDC, Q, SRI, TEVA, UTHR, VAL
After: AAN, ACC, AMMD, CPC, CRAY, FTI, GIVN, GLBC, HWAY, INWK, JAH, LZB, XPRT, MASI, MIG, MRH, NBR, NFX, PACR, RAX, RGC, RRR, SGK, SDXC, VCLK, WTS, WFMI, WINN
Events
| LF Analyst Day |
Wednesday, February 17
Economic
Earnings
Before: AUXL, BXC, CFL, BW, XEC, DE, DVN, DTG, ENZN, EEFT, FELE, RAIL, FNDT, GENZ, HGRD, HL, HST, IAG, IMA, ITRN, JAKK, KOP, MSO, NEWS, NICE, OMX, OC, PFCB, RIMG, ROC, SBGI, SSYS, MDCO, VSI, WSO, XTO
After: SVN, AEA, AAP, AEM, ADI, AMAT, CAR, BEAT, CECO, CRA, CHK, CLF, CLD, CYH, CITP, CYBX, DENN, DYP, ENH, FARO, FRT, GUID, HVT, HPQ, IPHS, ITMN, IO, IRBT, ITRI, JACK, KEG, KGC, KRG, KONG, LVS, LHO, LOGM, NHP, NCIT, NTAP, NHWK, NVDA, OII, ODSY, OMER, ORLY, OFIX, PEET, PTP, PCLN, STR, CKH, SKX, SNPS, TEX, TRMA, TRN, UNTD, VTAL
Events
DHR, ROK, TYC, JEC at Barclays Capital Industrial Select Conf.
DRI Analyst Meeting
FED: Fed's January FOMC Minutes
Thursday, February 18
Economic
Earnings
Before: AEE, APA, ARB, ARIA, AACC, ATRC, AVA, B, ABX, BBW, CAB, CFX, CRY, DAI, DTV, DRYS, EVVV, FVE, GTIV, GLG, GT, HPY, HRL, ITWO, INCY, IVR, KBW, KNOL, KSWS, LTM, LL, MGM, NCI, NXY, NBL, NRG, OHI, ORB, PDCO, PLA, POOL, PDE, PEG, RS, REV, SCHS, SPAR, SPNC, STFC, GASS, SFY, SCMR, TK, TRA, TTC, ULBI, VDSI, VTR, WMT, WW, WCG, WST, WMB, WPZ, WIN
After: ACTG, ANAD, ANH, AGII, ARUN, AUTH, BFRM, BUCY, BLDR, CPKI, CBS, CEC, DELL, DDR, DBRN, ECLP, ETP, ETE, FFH, FSLR, GPRO, GFIG, LOPE, HGIC, HITT, HME, IM, INET, INTU, XXIA, JCOM, MCHX, MXWL, MAXY, MMSI, MORN, NANO, NM, ASGN, RCRC, RRGB, RCKY, SAPE, SEM, SMTL, SNH, SQNM, SHO, KNOT, UEIC, UAM, WOOF, WRE, WBMD, WMGI
Events
CECO Analyst and Investor Day
MSCC, NETL, TER, TUNE at Oppenheimer Semiconductor
FED: Fed's Duke
Friday, February 19
Economic
Earnings
Before: AMWD, AGP, BRC, BAM, HMSY, HUN, IBI, JCP, LPNT, PAG, PCG, PNW, RUTH, SHPGY, SRT
After:
Events
ENR, DF, AVP, KO at CAGNY Conference
FED: Fed's Dudley
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,
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