EquityLetter.com

equityletter.com 02/15/10

2010-02-14T15:33:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, 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 U.S. $ Index (UUP-23.63) and the I-share 7-10 year Treasury bond (IEF-90.12). We currently have negative views on SPDR- S&P 500 (SPY-108.04), Diamonds Trust (DIA-100.16), NASDAQ Composite (COMP-2183.53), IShares Russell 2000 Index Fund (IWM-61.02) and the Powershares QQQQ Trust (QQQQ-43.76) *Take note that there are no changes from the previous 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

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 U.S. Bancorp (USB-23.26). A weekly “buy” signal remains current for XLF component Wells Fargo (WFC-26.88). Weekly “sell” signals continue to exist for XLF components Citigroup (C- 3.18), Morgan Stanley (MS-27.16) Goldman Sachs (GS-153.93), American Express (AXP-38.42), Bank of New York (BK-27.05), Bank of America (BAC-14.45), J.P. Morgan (JPM-38.95), Chicago Mercantile Exchange (CME-291.07) and MetLife (MET-34.64). The XLF squeaked out a gain for the week but the relative under performance versus the major market indices stands out as noteworthy. Any weekly closing price below 13.78 will indicate further weakness down to the 11.00 price support area. Continue to use any extended upside strength in the XLF or above negatively mentioned components to reduce long exposure and or to initiate short trades.

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 Texas Instruments (TXN-24.03). Weekly “sell” signals continue to exist for, Analog Devices (ADI-27.99), Micron Technology (MU-8.44), SanDisk (SNDK-26.98), Applied Materials (AMAT-12.47) and Novellus (NVLS-22.47). Take note that AMAT and ADI are scheduled to report quarterly earnings in the coming week. Internal component strength from influential SMH components INTC and TXN gives cause for notice that the early year retreat of the SMH may be close to drawing to a conclusion. We shall watch the SMH 24.80 price support level intently for further evidence of a possible change of weekly trend.

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 U.S. Steel (X-47.98), Arcelor Mittal (MT-37.43), and Nucor (NUE-41.13). Steel Dynamics (STLD- 15.96) is in the fiftth week of a “sell” signal. We shall remain neutral at this time as we see near term price support for the SLX at the 51.00 area. Any failure for the SLX to hold above said price support will be a prelude to a much deeper slide.

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

08:30 Empire Manufacturing (Feb.): 18.00 cons.

09:00 Net Long Term TIC Flows (Dec.): $50.0B cons.

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
FED: Fed's Lockhart
$25 bln 3-month and $28 bln 6-month Treasury Bill Auctions

Wednesday, February 17

Economic

08:30 Housing Starts (Jan.): 580K cons.

08:30 Building Permits (Jan.): 615K cons.

08:30 Export Prices Ex.-Ag. (Jan.): 0.5% prior

08:30 Import Prices Ex.-Oil (Jan.): 0.4% cons.

09:15 Capacity Utilization (Jan.): 72.6% cons.

14:00 Treasury Budget (Jan.): -$46.0B cons.

14:00 FOMC Minutes (1/28)

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

08:30 Continuing Claims: 4500K cons.

08:30 Initial Claims: 430K cons.

08:30 PPI (Jan.): 0.8% cons.

08:30 Core PPI (Jan.): 0.1% cons.

10:00 Leading Indicators (Jan.): 0.5% cons.

10:00 Philadelphia Fed (Feb.): 17.0 cons.

11:00 Crude Inventories: 2.42M prior

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 Summit
FED: Fed's Duke

Friday, February 19

Economic

08:30 CPI (Jan.): 0.3% cons.

08:30 Core CPI (Jan.): 0.2% cons.

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 02/08/10

2010-02-07T11:10:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

02/08/10

Note: Event Calendar is located at bottom of page

I. General Commentary

It is hard to imagine that the state of the global economy is such that the U.S. Dollar has become the favored currency for those seeking shelter. The first debt crisis cockroach appeared in Dubai, and then came Greece, and now there are worries regarding Portugal. Spain and Italy are now in the potential crosshairs of despair. Is the state of the global economy currently so dire that currency speculators now favor the U.S. economy as the least dangerous place on the planet? Last week U.S. government officials projected a $1.6 trillion (YES TRILLION) budget deficit for the year 2010. Ratings agency Moody’s responded to this news by stating that the U.S triple AAA debt rating may be in jeopardy unless action is taken to reign in the black hole of debt. Despite these alarming debt figures the U.S. Dollar continued to appreciate against the majority of other world currencies as fears of sovereign debt contagion spread across the globe. The recent strength of the U.S. Dollar is responsible for the unwinding of the “dollar carry trade” which in turn has fueled selling pressure on equity prices across the board. As we have heard infinitum from U.S. government officials almost to the point of nausea, “a strong Dollar is in the best interests of the United States”. A strong Dollar currently is not in the best interest of equity investments.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the U.S. $ Index (UUP-23.65) and the I-share 7-10 year Treasury bond (IEF-90.84). We currently have negative views on SPDR- S&P 500 (SPY-106.66), Diamonds Trust (DIA-100.16), NASDAQ Composite (COMP-2141.12), IShares Russell 2000 Index Fund (IWM-59.27) and the Powershares QQQQ Trust (QQQQ-42.98) *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis are not present at this time. *Take note that there are no upgrades from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Homebuilding (XHB), Gold (GLD), Managed Care sector, Oil Service (OIH), Agriculture (MOO), Coal (KOL), Steel (SLX), Pharmaceuticals (PPH), Real Estate (IYR), Semiconductors (SMH), and Crude Oil (USO).

* Take note that the Managed Care sector is a downgrade to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to further downside pricing pressure are the Financials (XLF), Transportation (IYT), Integrated Oil (XOI), Natural Gas (UNG), and Retailers (RTH). *Take note that the XOI and IYT are new additions to downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.84 (I-share 7-10 year Treasury bond) advanced 0.49% for the week as the yield on the 10- year treasury decreased from 3.61% to 3.55%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. 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 remain at 90.09. Any weekly closing price below 90.09 will negate our current “buy” signal for the IEF. The IEF continues to benefit from equity market weakness. This being stated we see strong near term price resistance at the 91.00 area. The weekly trend remains favorable but the risk/reward of entering long trades at current price levels remains questionable at best.

A. Financials

The Financial Select Sector Index (XLF-13.94) finished the trading week 1.69% decline. The 2010 trading year return of the XLF is a negative 3.19%. The XLF is entering week three 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 Bank of New York (BK-27.14). Weekly “buy” signals remain current for XLF components Wells Fargo (WFC-27.42) and U.S. Bancorp (USB-23.97). Weekly “sell” signals continue to exist for XLF components Citigroup (C- 3.22), Morgan Stanley (MS-27.26) Goldman Sachs (GS-154.16), American Express (AXP-37.85), Bank of America (BAC-15.00), J.P. Morgan (JPM-38.30), Chicago Mercantile Exchange (CME-280.80) and MetLife (MET-34.68). Still under continued selling pressure the XLF managed to close above the last bastion of price support at the 13.78 price level. Any weekly closing price below 13.78 will indicate further weakness down to the 11.00 price support area. Continue to use any extended upside strength in the XLF or above negatively mentioned components to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-15.02) declined 0.60% for the week. The 2010 year-to-date performance of the XHB currently rests at a negative 0.59%. The XHB is entering week eight of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall remain at 14.92. Any weekly closing price below the 14.92 support level will negate our current “buy” signal in the XHB. Weekly “buy” signals remain in place for XHB components D R Horton (DHI-12.67) and Ryland Group (RYL-22.17). Weekly “sell” signals remain prevalent for XHB components Toll Brothers (TOL-18.65), Pulte Homes (PHM-10.88), Lennar (LEN-14.71), and KB Home (KBH-14.92). Take note that XHB component PHM is scheduled to report earnings in the coming week. Week eight of a “buy” signal; internal component weakness remains a concern. We shall remain neutral at this time.

B. Semiconductor

The Semiconductor group (SMH-25.11) advanced 1.60% for the week. The current SMH performance for the 2010 trading year is a negative 10.06%. The SMH is entering week four 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. Weekly “sell” signals continue to exist for Intel (INTC-19.47), Analog Devices (ADI-26.90), Texas Instruments (TXN-22.97), Micron Technology (MU-8.70), SanDisk (SNDK-26.09), Applied Materials (AMAT-12.23) and Novellus (NVLS-21.60). The SMH has the current distinction as being one of the worst sector performers for the 2010 trading year to date. We shall keep our neutral rating at this time as the sharp three-week price correction has left the SMH very near a strong price support level, the 24.30 area. The risk/reward for a long trade from current levels appears attractive.

D. Retailers

The Retail sector (RTH-90.56) finished the trading week with a 1.64% decline. The current 2010 return of the RTH stands at a negative 3.50%. The RTH is entering week eight of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the current “sell” signal shall remain at 93.45. Any weekly closing price above 93.45 will negate our current “sell” signal for the RTH. A fresh weekly “sell” signal has been triggered in Target (TGT-49.30). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-33.31), Sears Holding’s (SHLD-91.32), Home Depot (HD-27.98), Kohl’s (KSS-49.32), WalMart (WMT-53.45) and BestBuy (BBY-35.82). Week eight 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-54.37) finished the week with a 0.26% decline. The current 2010 trading year return for the SLX measures in at a negative 11.62%. The SLX is in the third week of a “sell” signal. Our weekly closing price resistance level for the SLX shall be lowered to 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 U.S. Steel (X-44.78), Arcelor Mittal (MT-38.06), and Nucor (NUE-40.46). Steel Dynamics (STLD- 14.99) is in the fourth week of a “sell” signal. Take note that a quarterly earnings report is due in the coming week from SLX component MT. We shall remain neutral at this time as we see near term price support for the SLX at the 51.00 area. Any failure for the SLX to hold above said price support will be a prelude to a much deeper slide.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-64.46) decreased by 1.57% last week. The PPH 2010 trading year return stands at a negative 2.33%. The PPH is entering week three 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-36.73), Pfizer (PFE-17.96), Johnson & Johnson (JNJ-62.64), Abbott Lab’s (ABT-53.97), Eli Lilly (LLY-34.52) and GlaxoSmithKline (GSK-38.06) all continue to remain on our “sell” list at this time. Week three of correction mode, we shall maintain our neutral stance at this time.

III. Gold

GLD (streetTracks gold index) – The GLD (104.68) declined 1.21% on the week. The GLD current return for the 2010 trading year is a negative 2.45%. The GLD is entering week three 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. Continued price weakness for the GLD this past week but a late Friday rally enabled the GLD to hold above the weekly trend line support around the 103.00 price level. Any downside penetration of the 103.00 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-998.28) closed out the trading week with a 1.82% decline. The current XOI 2010 trading year return is a negative 6.55%. The XOI is entering the third 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-71.18), Conoco-Phillips (COP-47.98), British Petroleum (BP-53.18), Suncor Energy (SU-29.80) and Exxon-Mobil (XOM-64.80). The XOI weekly close below the 1000.00 level is an indication of further weakness to come. We shall downgrade the XOI to “sell” at this time with the first downside target being the 910.00 level.

The Oil Service Index (OIH-116.07) declined 1.54% this past trading week. The 2010 year to date return for the OIH stands at a negative 1.79%. The OIH is in week three of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 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-28.29), Schlumberger (SLB-62.06), Baker Hughes (BHI-44.73), Ensco (ESV-38.94) and Transocean (RIG-83.99). It is week three of a “sell” signal; the good news is the OIH was able to find buying support near the previously stated 111.50 price support level. The low last week for the OIH was 112.43. We shall keep our “neutral” rating at this time.

Natural Gas (UNG-10.00) advanced 7.41% this past week. The UNG current 2010 trading year return is a negative 0.79%. The UNG is entering week two 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-31.83) declined by 3.11% this past week. The KOL 2010 trading year performance stands at a negative 11.87%. The KOL is entering the third week of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 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 monitor the quickly approaching 29.50 support level for possible long entry.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at -24, a slight increase from the previous week reading of -26. Currently 10.0% of the thirty Dow Jones Industrial components have favorable weekly chart technical indications; this is an increase from 6.0% in the prior week. The Dow Jones Industrial average declined 0.55% for the week to 10012.23. The return for the 2010 trading year stands at a negative 3.99%.

The S&P 500, as measured by the SPY (106.66), declined 0.68% for the week. The current 2010 trading year return for the SPY is a negative 4.29%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 59.27), declined 1.40% for the week. The IWM current 2010 trading year return is a negative 5.08%.

The DIA (100.16) closed out the week with a 0.39% decline and is entering week three 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. It is week three of “correction mode” therefore we would continue to use any extended price strength that approaches our above mentioned price resistance level to reduce long exposure and or to initiate short trades. Our first downside target for the DIA remains the 95.00 price support area.

Fresh weekly buy signals generated: CSCO

Fresh negative weekly signals generated:

Readers should take note that Dow Jones Industrial components KO and DIS are scheduled to report quarterly earnings in the coming week.

Dow 30 stocks with positive weekly signals:

BA, CSCO, TRV

Dow 30 stocks with negative weekly signals:

AA, AXP, BAC, CAT, CVX, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, 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 8

Economic

N/A

Earnings

Before: AMRI, AGNC, BWP, CGA, CHDX, CAN, CPIX, CVS, GWR, HAS, HS, LFUS, L, LO, MCY, NDAQ, NVE, SIRO, VTNC

After: ADCT, ANDE, ATML, AXS, BWY, CPT, CRL, CIM, CMP, CRK, CUZ, CUTR, ERTS, ECPG, ESLR, FWRD, HAR, HIG, HIMX, LNCR, LNC, NUAN, OTTR, OMI, PKY, PIKE, PPS, PPDI, PFG, QGEN, RENT, SKH, SWI, SRX, TMRK, TWTC, VECO, VSAT, VMC, WRB, WCN, ZOLT

Events

WAG, HUM, UAM, WLP at UBS Global Healthcare Services Conf.
LINC, FFIV, PENN, RAX at Deutsche Bank Securities Small and Mid Cap Conf.

FED: $24 bln 3-month and $27 bln 6-month Treasury Bills Auctions

Tuesday, February 9

Economic

10:00 Wholesale Inventories (Dec.): 0.6% cons.

Earnings

Before: ACM, AGCO, AGU, AHCI, ALLT, ANR, ACLI, ATRO, BIIB, BJS, CAM, FUN, CE, CNC, CHD, KO, CTSH, CVH, CUB, CYNO, DHT, ENER, IT, GET, IACI, IFF, KVHI, LCAV, MLM, TAP, NOOF, NYX, OSTK, PCH, PHM, RTIX, RBCN, TIN, GTS, VSH, WMG, ZBRA

After: ATAC, AGAM, AFG, ASEI, AHL, BIDU, BOBE, CFN, CERN, EXBD, CXW, DIOD, DNEX, DSCM, EOG, GIL, GCOM, HCSG, HNI, PODD, KFRC, LTRE, LGF, MAXY, NTGR, OPEN, PEET, PSEC, QLTY, RNR, RUE, RUSHA, SB, TCO, TMH, UDR, ULTI, USNA, DIS, WWWW, XL

Events

ODSY, MHS, AET, SUNH at UBS Global Healthcare Services Conf.
RHT, SAP, ADBE, ENTR at Thomas Weisel Technology & Telecom Conf.
FED: $40 bln 3-yr Treasury Notes Auction

Wednesday, February 10

Economic

08:30 Trade Balance (Dec.): -$35.0B cons.

10:30 Crude Inventories: 2.32M prior

14:00 Treasury Budget (Jan.): -$60.0B cons.

Earnings

Before: ABD, MT, CAE, CCE, CSC, DF, DISCA, ELN, FORR, ICE, JNY, ID, LNCE, LVLT, LPX, MMC, MXGL, MTOX, NURO, NYT, NWPX, OMC, PFCB, SNI, SIAL, SON, S, TLM, TGH, TDG, WXS, WYN

After: ATVI, ALL, AMKR, ATR, ARRS, BMR, BSX, CBM, STV, SCOR, CPA, CLB, CPII, CRAY, DVA, PROJ, XRAY, EGP, ELON, EDMC, WIRE, EQIX, RE, GLUU, GSIC, HGR, HIW, NSIT, KONA, LPSN, LFT, LOOP, MAS, MDSO, NSR, OSUR, PRE, PVA, PAA, PL, PRU, O, SWIR, TLEO, TMK, WATG

Events

AMTD, BAC, COF, WFC at Credit Suisse Financial Services Conf.
AMSC, FLO, FMC, POWI at Deutsche Bank Securities Small and Mid Cap Conf.
FED: Fed's Tarullo

Thursday, February 11

Economic

08:30 Initial Claims: N/A

08:30 Continuing Claims: N/A

08:30 Retail Sales (Jan.): 0.4% cons.

08:30 Retail Sales Ex.-Auto (Jan.): 0.4% cons.

10:00 Business Inventories (Dec.): 0.4% cons.

Earnings

Before: ASF, AKNS, ALU, ARE, ALXN, ARIA, AN, BWA, CATM, CAAS, CBB, ECL, EMS, ECA, NPO, EXPE, FLIR, GLT, GPI, HEP, HOS, RX, IPCC, IRC, JASO, JRN, KBW, LH, LF, LUFK, MAC, CLI, MAR, MNTA, NOVA, NRG, OZM, OHI, PMTI, PTI, PTEN, PEP, PGN, PLD, QCCO, QUIX, REV, SCG, SKYW, SNN, SF, STRA, ELOS, SYNT, TKLC, TDC, TOT, TRAD, THS, VFC, VIA/B, WWE

After: ACL, AB, AWH, BEC, BJRI, NILE, BWLD, CEC, CEPH, CAKE, CPC, CMG, CHH, CGNX, CSTR, CML, DCT, DFG, EHTH, ENOC, EPIC, FARO, FFG, GDI, BGC, HNSN, HE, XXIA, LVS, MFE, MOH, NRP, PNRA, PTC, PNSN, PRAA, PRO, QDEL, RNWK, RSG, ROVI, SQNM, SNWL, SONO, STMP, SHO, SMMX, SVR, KNOT, USTR, VARI, XNPT, ZGEN

Events

ZION Analyst Meeting
AMP, LNC, MET, NYX at Credit Suisse Financial Services Conf.
FED: $16 bln 30-yr Treasury Bond Auction

Friday, February 12

Economic

09:55 Michigan Sentiment (Feb.): 74.8 cons.

Earnings

Before: A, ALE, HCP, IR, MFA, PAS, UPL

After: DUK

Events

AXAS at NAPE Expo 2010

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 02/10/10

2010-01-31T14:37:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

02/01/10

Note: Event Calendar is located at bottom of page

I. General Commentary

The first month of the 2010 trading year ended on a sour note as the major U.S. equity averages suffered declines for the third consecutive week. The Dow Jones Industrial average (INDU) declined by 1.04%, the NASDAQ Composite (COMP) was lower by 2.63%, the S&P 500 (SPY) dropped 1.67%, and the Small Cap Russell 2000 (IWM) fell by 2.62%. All four major market averages are now in the red for the current trading year. Why the sudden rush for the exit door? The main contributor to the recent market pressure is China. The latest efforts by the Chinese government to reign in a “hot economy” have installed fear as the current trading emotion of choice. Last week Chinese officials raised reserve requirements for some banks. They also instructed banks to suspend all lending for the duration of the month. Most commodity and energy related equities have seen sharp three-week price corrections since the Chinese have shifted efforts to cool down their economy.

Another troubling trend is the selling of “good news”. Last week strong earnings reports from Apple Computer and Microsoft were greeted with sellers rather than euphoric buyers. This trend has been present since the beginning of the earnings reporting season. The market appears to have already priced in a strong quarter that benefited from inventory restocking and is now looking ahead at the same familiar problems. Unemployment remains elevated with no significant job creation in sight, banks remain reluctant to extend credit due to more stringent standards. (Consumer Credit Statistics are due out in the coming week and will continue to show contraction) The U.S. Dollar continues to appreciate as skeletons from the global closet become more apparent. (Greece and Dubai come immediately to mind)

As we have stated in the past, beware of “good news” becoming “bad news” for the equity markets. “Good” U.S. economic news means we are that much closer to the removal of the training wheels of emergency government liquidity measures. This weeks January unemployment report will be another test of this thesis.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the U.S. $ Index (UUP-23.45) and the I-share 7-10 year Treasury bond (IEF-90.70). We currently have negative views on SPDR- S&P 500 (SPY-107.39), Diamonds Trust (DIA-100.55), NASDAQ Composite (COMP-2147.35), IShares Russell 2000 Index Fund (IWM-60.11) and the Powershares QQQQ Trust (QQQQ-42.79) *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Managed Care sector. *Take note that there are no upgrades from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.

* Take note that there are no additions to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to further downside pricing pressure are the Financials (XLF), Natural Gas (UNG), and Retailers (RTH). *Take note that the UNG is a new addition to downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.70 (I-share 7-10 year Treasury bond) advanced 0.10% for the week as the yield on the 10- year treasury increased from 3.60% to 3.61%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. The IEF is entering week three of a “buy” signal. The weekly closing price support level in order to maintain our current “buy” signal shall be raised to 90.09. Any weekly closing price below 90.09 will negate our current “buy” signal for the IEF. The IEF continues to benefit from equity market weakness. This being stated we see strong near term price resistance at the 91.00 area. The weekly trend remains favorable but the risk/reward of entering long trades at current price levels is questionable at best.

A. Financials

The Financial Select Sector Index (XLF-14.18) finished the trading week unchanged. The 2010 trading year return of the XLF is a negative 1.53%. The XLF is entering week two of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 14.57. Any weekly closing price above 14.57 will negate our current “sell” signal for the XLF. Weekly “buy” signals remain current for XLF components Wells Fargo (WFC-28.43), Bank of New York (BK-29.09), and U.S. Bancorp (USB-25.08). Weekly “sell” signals continue to exist for XLF components Citigroup (C- 3.32), Morgan Stanley (MS-26.78) Goldman Sachs (GS-148.72), American Express (AXP-37.66), Bank of America (BAC-15.18), J.P. Morgan (JPM-38.94), Chicago Mercantile Exchange (CME-286.82) and MetLife (MET-35.32). Take note that quarterly earnings reports are due in the coming week from XLF components CME and MET. Despite the fact that the XLF held above the near term 14.00 price support level we shall remain with our negative opinion at this time. Use any extended upside strength in the XLF or above negatively mentioned components to reduce long exposure and or to initiate short trades

B. Builders

The Homebuilder exchange traded fund (XHB-15.11) advanced 1.07% for the week. The 2010 year-to-date performance of the XHB currently rests at unchanged. The XHB is entering week seven of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall remain at 14.92. Any weekly closing price below the 14.92 support level will negate our current “buy” signal in the XHB. Weekly “buy” signals remain in place for XHB components D R Horton (DHI-11.79) and Ryland Group (RYL-22.26). Weekly “sell” signals remain prevalent for XHB components Toll Brothers (TOL-18.47), Pulte Homes (PHM-10.52), Lennar (LEN-15.36), and KB Home (KBH-15.28). Take note that XHB component DHI is scheduled to report earnings in the coming week. Week seven of a “buy” signal; internal component weakness gives cause for concern. We shall remain neutral at this time.

B. Semiconductor

The Semiconductor group (SMH-24.76) declined 3.45% for the week. The current SMH performance for the 2010 trading year is a negative 11.32%. The SMH is entering week three of a “sell” signal. Our weekly price resistance level in order to maintain our current “sell” signal shall be lowered to 26.28. Any weekly closing price above 26.28 will negate our current “sell” signal for the SMH. Weekly “sell” signals continue to exist for Intel (INTC-19.40), Analog Devices (ADI-26.96), Texas Instruments (TXN-22.50), Micron Technology (MU-8.72), SanDisk (SNDK-25.42), Applied Materials (AMAT-12.16) and Novellus (NVLS-20.90). Take note that SMH component NVLS is scheduled to report quarterly earnings in the coming week. The SMH has the current distinction as being one of the worst sector performers for the 2010 trading year to date. We shall keep our neutral rating at this time as the sharp three-week price correction has left the SMH very near a strong price support level, the 24.30 area.

D. Retailers

The Retail sector (RTH-92.07) finished the trading week with a 0.71% advance. The current 2010 return of the RTH stands at a negative 1.89%. The RTH is entering week seven 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 93.45. Any weekly closing price above 93.45 will negate our current “sell” signal for the RTH. A fresh weekly “sell” signal has been triggered in Sears Holding’s (SHLD-93.28). A weekly “buy” signal continues to remain in place for RTH component and Target (TGT-51.27). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-36.05), Home Depot (HD-28.01), Kohl’s (KSS-50.37), WalMart (WMT-53.43) and BestBuy (BBY-36.65). Week seven 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-54.51) finished the week with a 7.45% decline. The current 2010 trading year return for the SLX measures in at a negative 11.39%. The SLX is in the second week of a “sell” signal. Our weekly closing price resistance level for the SLX shall be lowered to 60.66. Any weekly closing price above 60.66 will negate our current “sell” signal for the SLX. Weekly “sell” signals remain in place for SLX components U.S. Steel (X-44.43), Arcelor Mittal (MT-38.68), and Nucor (NUE-40.80). Steel Dynamics (STLD- 15.18) is in the third week of a “sell” signal. Take note that a quarterly earnings report is due in the coming week from SLX component STLD. The combination of Chinese efforts to cool their economy and U.S. Dollar strength have proved lethal for the highly volatile steel sector over the past two weeks. We shall remain neutral at this time as we see near term price support for the SLX at the 51.00 area. Any failure for the SLX to hold above said price support will be a prelude to a much deeper slide.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-65.61) decreased by 1.41% last week. The PPH 2010 trading year return stands at a negative 0.59%. The PPH is entering week two of a “sell” signal. Our weekly price resistance level in order to maintain the current weekly “sell” signal shall be lowered to 67.34. Any weekly closing price above 67.34 will negate our current “sell” signal for the PPH. Fresh weekly “sell” signals have been triggered in PPH components Merck (MRK-38.18) and Pfizer (PFE-18.66). Johnson & Johnson (JNJ-62.86), Abbott Lab’s (ABT-52.94), Eli Lilly (LLY-35.20) and GlaxoSmithKline (GSK-39.01) all continue to remain on our “sell” list at this time. Take note that a quarterly earnings report is due in the coming week from PPH component PFE. Week two of correction mode, we shall maintain our neutral stance at this time.

III. Gold

GLD (streetTracks gold index) – The GLD (105.96) declined 1.13% on the week. The GLD current return for the 2010 trading year is a negative 1.26%. The GLD is entering week two of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 108.80. Any weekly closing price above 108.80 will negate our current “sell” signal for the GLD. Continued price weakness for the GLD this past week is indicating a downside test of the weekly trend line price support around the 103.00 area. Any downside penetration of the 103.00 price support level 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-1016.78) closed out the trading week with a 2.02% decline. The current XOI 2010 trading year return is a negative 4.81%. The XOI is entering the second week of unfavorable technical conditions. Our weekly price resistance level in order to maintain our current “sell” signal shall be lowered to 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-72.12), Conoco-Phillips (COP-48.00), British Petroleum (BP-56.12), Suncor Energy (SU-31.65) and Exxon-Mobil (XOM-64.43). Take note that quarterly earnings reports are due in the coming week from XOI components BP, SU, and XOM. We remain concerned regarding weaker pricing for crude oil. If the XOI closes out the coming week below the 1000.00 price support level we will downgrade from neutral to “sell”.

The Oil Service Index (OIH-117.88) declined 3.03% this past trading week. The 2010 year to date return for the OIH stands at a negative 0.89%. The OIH is in week two of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 130.00. Any weekly closing price above 130.00 will negate our current “sell” signal for the OIH. Weekly “sell” signals remain present across the board for OIH components Halliburton (HAL-29.21), Schlumberger (SLB-63.46), Baker Hughes (BHI-45.28), Ensco (ESV-39.03) and Transocean (RIG-84.74). A change of weekly trend has been signaled. A second week of selling pressure has left the OIH very near a critical price support level, 111.50. Any weekly closing price below 111.50 will indicate further weakness to come. We shall keep our “neutral” rating at this time.

Natural Gas (UNG-9.31) declined 10.05% this past week. The UNG current 2010 trading year return is a negative 7.64%. The UNG has closed below our weekly price support level therefore indicating a change of trend from positive to negative. Our weekly price resistance level in order to maintain our fresh “sell” signal shall be set at 10.48. Any weekly closing price above 10.48 will negate our fresh “sell” signal for the UNG. We shall downgrade the UNG from neutral to sell at this time as it appears that new low prices are forthcoming.

The Coal Sector (KOL-32.85) declined by 5.95% this past week. The KOL 2010 trading year performance stands at a negative 8.86%. The KOL is entering the second week of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to the 36.35 price level. Any weekly closing price above 36.35 will negate our current “sell” signal for the KOL. We shall remain “neutral” at this time and shall monitor the quickly approaching 29.50 support level for possible long entry.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at -26, a decrease from the previous week reading of -24. Currently 6.0% of the thirty Dow Jones Industrial components have favorable weekly chart technical indications; this is a decrease from 10.0% in the prior week. The Dow Jones Industrial average declined 1.04% for the week to 10067.33. The return for the 2010 trading year stands at a negative 3.46%.

The S&P 500, as measured by the SPY (107.39), declined 1.67% for the week. The current 2010 trading year return for the SPY is a negative 3.63%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 60.11), declined 2.62% for the week. The IWM current 2010 trading year return is a negative 3.73%.

The DIA (100.55) closed out the week with a 1.06% decline and is entering week two of a “sell” signal. Our weekly closing price resistance level in order to maintain the current “sell” signal shall be lowered to 103.06. Any weekly closing price above 103.06 will negate our current “sell” signal for the DIA. It is week two of “correction mode” therefore we would continue to use any extended price strength that approaches our above mentioned price resistance level to reduce long exposure and or to initiate short trades. Our first downside target for the DIA remains the 94.30 price support area.

Fresh weekly buy signals generated: TRV

Fresh negative weekly signals generated: MRK, PFE

Readers should take note that Dow Jones Industrial components CSCO, KFT, PFE, and XOM are scheduled to report quarterly earnings in the coming week.

Dow 30 stocks with positive weekly signals:

BA, TRV

Dow 30 stocks with negative weekly signals:

AA, AXP, BAC, CAT, CSCO, CVX, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, 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 1

Economic

08:30 Personal Income (Dec.): 0.3% cons.

08:30 Personal Spending (Dec.): 0.3% cons.

10:00 Construction Spending (Dec.): -0.5% cons.

10:00 ISM Index (Jan.): 55.2 cons.

Earnings

Before: AMG, ACV, CRNT, CYOU, DEP, EPD, XOM, GCI, HAE, HEW, HUM, MDU, MOG/A, NI, ONB, SOHU, SYY

After: ADVS, APC, ARRY, CCK, DST, EXTR, HOLX, ICUI, LOCM, MNKD, NOA, OCLR, PMT, PCL, RGA, RCII, RTEC, SIMO, TUP, UNCA

Events

SD at Credit Suisse Group Energy Summit
FED: Treasury's Geithner Testifies Before Senate on FY11 Budget
$23 bln 3-month and $26 bln 6-month Treasury Bill Auctions

Tuesday, February 2

Economic

10:00 Pending Home Sales (Dec.): 1.1% cons.

14:00 Auto Sales (Jan.): 4.14M prior

14:00 Truck Sales (Jan.): 4.49M prior

Earnings

Before: AMSC, AMB, AXE, ADM, ARTG, ARM, ADP, BEAV, BP, COCO, CPO, CMI, DHX, DOW, DHI, EMR, ETR, EVR, HHS, HSY, NRGY, KFT, LDR, LXK, MAN, MRO, HZO, MPEL, OSTK, PTRY, PCX, PNR, PBG, PRGO, RDWR, RRST, SMG, STEL, STE, SU, TECH, TNB, TDW, TKR, UTI, UPS, WHR, WEC

After: ACE, APKT, ACTU, AFL, AGAM, ADS, AJG, ATO, BRE, CHRW, CTRP, EXM, FISV, SOLR, IVAC, IRF, JKHY, JDSU, JLL, KNXA, LCRD, MANH, MTW, MEE, MMSI, MET, MIL, MYGN, NLC, NETL, NWSA, PXD, QSFT, RSYS, RVBD, SLGN, SSD, TSO, TRMB, UNM, VASC, VRSN, VOCS, WBSN

Events

AEP, FE, NS, MWE at Credit Suisse Group Energy Summit
MS, WFC, COF, HBAN at Morgan Stanley U.S. Financials Conf.

Wednesday, February 3

Economic

07:30 Challenger Job Cuts (Jan.): -79.9% prior

08:15 ADP Employment Change (Jan.): -40K cons.

10:00 ISM Services (Jan.): 50.9 cons.

10:30 Crude Inventories: -3.89M prior

Earnings

Before: ALVR, ASCA, ARW, ATMI, AUDC, BECN, BDK, BCO, CSL, CMCSA, CVLT, DWSN, DBD, ENB, HW, HNT, IP, IVR, ITG, ITT, LAZ, MHO, MMP, MKTX, NOV, NSTC, OIIM, PFE, RL, POWL, RVSN, ROP, R, SVVS, SGP, SLAB, TMO, TWX, TZOO, UMC, WU, WWW

After: AFFX, AKAM, AMP, NLY, AIZ, ATW, AVB, BBBB, CELL, BRS, BRCM, CDNS, CBG, CBL, CENT, CPC, CSCO, CNQR, CVTI, DLB, DBTK, DCP, ENTR, EFX, EQR, FEIC, FNF, FBN, GHDX, HAIN, HSTX, HRC, HMN, IEX, INSP, KIM, MKL, MEAS, WFR, MWW, NBIX, NEWP, NVLS, ONNN, OTEX, OPNT, OHB, PSEM, RBC, REG, RNOW, SGMO, SIGI, SSTI, SPTN, SFN, SPF, STLY, STLD, SYMM, THQI, TGI, TBI, URI, UFPI, VIRL, V, WLT, WGL, WSH, YUM

Events

BK, TD, BMO, MI at Morgan Stanley U.S. Financials Conference
RIG, HAL, APC, WES at Credit Suisse Group Energy Summit
FED: Fed's Warsh

Thursday, February 4

Economic

08:30 Initial Claims: 454K cons.

08:30 Continuing Claims: 4600K cons.

08:30 Productivity-Prel. (Q4): 6.0% cons.

08:30 Unit Labor Costs-Prel. (Q4): -2.5% cons.

10:00 Factory Orders (Dec.): 0.6% cons.

Earnings

Before: ABMD, AGN, LNT, ATK, AHII, ARJ, STST, AVP, BCE, BDC, BLC, BHE, BCRX, BG, BKC, CRR, CI, CINF, CLX, CME, CNMD, DTPI, DO, UFS, ELNK, ENTG, FLO, HGG, HI, HSP, ITWO, IVC, K, KNL, KLIC, LII, LZ, MA, MTRX, MMS, MDCI, MF, MSTR, MEND, MKSI, MGI, MCO, MPS, MWIV, NCR, NOC, NUS, CHUX, OHI, OMTR, PTIE, PMTI, PENN, PAS, POL, POWI, QUIX, RAI, RSTI, RDS/A, RGLD, RTI, SBH, SLE, SNA, SNE, SE, SPR, HOT, SPH, TEN, TBL, UTEK, WBC, WW

After: ARAY, ACTL, ATVI, AATI, ABCO, ALKS, ASEI, BMI, BEZ, BEBE, BBND, BFRM, BLKB, COGO, CNW, CYS, DNEX, DNB, EW, ESE, ESS, XIDE, FALC, FIS, FMC, HLIT, HA, ILMN, IN, XXIA, LQDT, LMNX, MTD, MCHP, MCRS, MAA, MTX, MPWR, MTSC, MFLX, NFG, N, EGOV, OPWV, OPXT, PCCC, PKI, PMC, PFWD, PTEC, PBI, PWAV, RAH, RMD, SFLY, SIMG, SLH, SRCL, SFSF, SUN, SNCR, TWLL, TSYS, TTMI, VARI, VRTX

Events

SKYW, LUV, ALGT at Raymond James Growth Airline Conference
COP, OXY, VLO ME at Credit Suisse Group Energy Summit
WFR Capital Markets Day

Friday, February 5

Economic

08:30 Nonfarm Payrolls (Jan.): 13K cons.

08:30 Unemployment Rate (Jan.): 10.0% cons.

08:30 Average Workweek (Jan.): 33.2 cons.

08:30 Hourly Earnings (Jan.): 0.2% cons.

15:00 Consumer Credit: -$9.5B cons.

Earnings

Before: AET, AYE, AXL, AIV, BZH, BPO, BRKS, SUR, IPSU, LRN, KELYA, MAG, MDC, MD, NNN, PPL, PBH, SXT, SPG, SEP, TE, TSN, VVI, WY, YRCW

After: BPL

Events

STJ Analyst Meeting
GLW Investor Meeting

FED: Treasury's Geithner at G7 Meeting

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 01/25/10

2010-01-24T13:48:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

01/25/10

Note: Event Calendar is located at bottom of page

I. General Commentary

Last week we expressed our concerns regarding the weakness developing in the high beta issues. In particular we pointed out that price weakness in the shares of AAPL and GOOG were potential indications of “aggressive” money leaving the equity market. In my over twenty-five years of gauging the equity markets I can state one certainty. Someone always knows something before the majority of market participants do. Technical analysis is the only method of informing us who are “not in the know” of potential market impacting forthcoming news events that are already known by the select privileged few who are “in the know”. This being stated I believe it would be quite interesting if one had the ability to subpoena the recent trading records of our distinguished politicians in Washington, D.C.. Unfortunately that type of transparency would be too much to ask from the cess pool that exists in our nation’s capitol.

Last week the equity markets took a tumble after a variety of negative news events. The upset win by Republican Scott Brown in the Massachusetts Senatorial election was a direct message to the Democratic majority that the U.S. electorate is increasingly dismayed by the increase of government intervention. I would view the Democratic defeat in Massachusetts as a longer term positive as the majority is neutralized in Washington. Neutrality equals gridlock, gridlock reduces the ability for the current administration to further pursue “socialistic” tendencies. In a purely politically motivated response to the Senatorial defeat the Obama administration rolled out a fresh attack on the nations big banks. Their proposal to legislate new rules to limit the size of financial institutions and reign in bank’s proprietary trading operations aim to reduce excessive risk-taking. These measures will result in decreased liquidity and in effect reduce lending at a time when increased lending is needed. Politically motivated responses are never well thought out, but then again we have come to expect nothing less from our nation’s leaders.

The next item of market concern is the re-appointment of current Federal Reserve Chairman Ben Bernanke. Since Mr. Bernanke is the architect of the majority of the emergency measures taken at the height of the credit crisis, it would be in the best interest of this country that he remains in place to oversee the gradual removal of said measures. Overall Mr. Bernanke has done a very good job under extremely difficult circumstances. Political grandstanding should be set aside in the best interest of the country. Is this too much to ask from our nation’s representatives?

The final news item of concern is China. The world’s most voracious consumer of raw materials announced plans to limit lending and restrict credit growth in an effort to cool down their economy. This issue is one to watch intently as the Chinese have expressed restrictive rhetoric in the past. The problem is rhetoric is not action. The uncertainty of Chinese intention was enough to spark a sharp sell-off in the volatile energy and materials related sectors.

As detailed below the trading action of the past week warrants increased attention as initial technical price support levels have been violated. Further declines from current levels could spark a torrent of selling. This being stated the sharp three-day decline has left equities in a very near term oversold state. We see a potential tradeable bounce in the coming week but would use said bounce to reduce long exposure as an intermediate top appears to be in place.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the U.S. $ Index (UUP-23.08) and the I-share 7-10 year Treasury bond (IEF-90.61). We currently have negative views on SPDR- S&P 500 (SPY-109.21), Diamonds Trust (DIA-101.63), NASDAQ Composite (COMP-2205.29), IShares Russell 2000 Index Fund (IWM-61.73) and the Powershares QQQQ Trust (QQQQ-44.16) *Take note that the SPY, DIA, COMP, IWM and QQQQ are downgrades from the previous letter.*

Sector ETF’s that we currently rate as neutral include the Homebuilding (XHB), Gold (GLD), Oil Service (OIH), Agriculture (MOO), Coal (KOL), Steel (SLX), and Pharmaceuticals (PPH), Real Estate (IYR), Financials (XLF), Semiconductors (SMH), Large Integrated Oil (XOI), Transportation (IYT), Crude Oil (USO), and Natural Gas (UNG). * Take note that the XHB, GLD, OIH, MOO, KOL, SLX, and PPH are downgrades to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to further downside pricing pressure are the Financials (XLF) and Retailers (RTH). *Take note that there are no new additions to downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.61 (I-share 7-10 year Treasury bond) advanced 0.62% for the week as the yield on the 10- year treasury decreased from 3.76% to 3.60%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. The IEF is entering week two of a “buy” signal. The weekly closing price support level in order to maintain our current “buy” signal shall be raised to 89.71. Any weekly closing price below 89.71 will negate our current “buy” signal for the IEF. The road to a 4.00% ten-year Treasury yield appears to have taken a short term detour. Strength in the IEF continues to indicate a near term retreat in the 10-year Treasury yield to the 3.50% area.

A. Financials

The Financial Select Sector Index (XLF-14.18) finished the trading week with a 5.07% decline. The 2010 trading year return of the XLF is a negative 1.53%. The XLF has closed below our weekly closing price support level and has therefore generated a fresh “sell” signal. Our weekly closing price resistance level in order to maintain our fresh “sell” signal shall be set at 15.19. Any weekly closing price above 15.19 will negate our fresh “sell” signal for the XLF. Fresh weekly “sell” signals have been triggered in American Express (AXP-38.59), Bank of America (BAC-14.90), J.P. Morgan (JPM-39.16), Chicago Mercantile Exchange (CME-312.13) and MetLife (MET-36.12). Weekly “buy” signals remain current for XLF components Wells Fargo (WFC-27.26), Bank of New York (BK-29.27), and U.S. Bancorp (USB-24.67). Weekly “sell” signals continue to exist for XLF components Citigroup (C- 3.25), Morgan Stanley (MS-27.80) and Goldman Sachs (GS-154.12). What appears to be a politically motivated attack on large banking institutions from the current administration in Washington, D.C. spawned a broad sell-off this past week. The uncertainty of potentially restrictive legislation elicited a sell first; ask questions later response from market participants. We shall downgrade the sector from neutral to “sell” at this time. Any downside breach of the critical 13.80 price support level for the XLF will not be a welcome sight for the bulls. We would not panic and sell at current market prices rather we believe it is now time to use any extended upside market moves approaching above noted price resistance levels to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-14.95) declined 4.35% for the week. The 2010 year-to-date performance of the XHB currently rests at a negative 1.27%. The XHB is entering week six of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall readjusted to 14.92. Any weekly closing price below the 14.92 support level will negate our current “buy” signal in the XHB. Fresh weekly “sell” signals have been generated in XHB components Toll Brothers (TOL-18.28), Pulte Homes (PHM-10.22), Lennar (LEN-14.78), and KB Home (KBH-14.35). Weekly “buy” signals remain in place for XHB components D R Horton (DHI-11.20) and Ryland Group (RYL-20.48). Week six of a “buy” signal; internal component weakness gives cause for concern. We shall downgrade the XHB from “buy” to neutral at this time.

B. Semiconductor

The Semiconductor group (SMH-25.67) declined 4.68% for the week. The current SMH performance for the 2010 trading year is a negative 8.06%. The SMH is entering week two of a “sell” signal. Our weekly price resistance level in order to maintain our current “sell” signal shall be lowered to 27.58. Any weekly closing price above 27.58 will negate our current “sell” signal for the SMH. A fresh weekly “sell” signal has been triggered in SMH component Intel (INTC-19.91). Weekly “sell” signals continue to exist for Analog Devices (ADI-27.76), Texas Instruments (TXN-23.11), Micron Technology (MU-9.13), SanDisk (SNDK-28.39), Applied Materials (AMAT-12.63) and Novellus (NVLS-20.97). Take note that SMH component SNDK is scheduled to report quarterly earnings in the coming week. The SMH, a top performer in 2009, has experienced early turbulence to date in 2010. We shall keep our neutral rating at this time as the sharp price correction has left the SMH very near a strong price support level, the 25.00 area.

D. Retailers

The Retail sector (RTH-91.42) finished the trading week with a 1.90% decline. The current 2010 return of the RTH stands at a negative 2.58%. The RTH is entering week six 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 94.31. Any weekly closing price above 94.31 will negate our current “sell” signal for the RTH. Weekly “buy” signals continue to remain in place for RTH components Sears Holding’s (SHLD-98.30) and Target (TGT-50.38). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-35.99), Home Depot (HD-27.72), Kohl’s (KSS-50.45), WalMart (WMT-52.94) and BestBuy (BBY-37.15). Week six 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-58.90) finished the week with a 9.38% decline. The current 2010 trading year return for the SLX measures in at a negative 4.26%. The SLX has closed below our weekly price support level and therefore generated a fresh “sell” signal. Our weekly closing price resistance level for the SLX shall be set at 66.69. Any weekly closing price above 66.69 will negate our fresh “sell” signal for the SLX. Fresh weekly “sell” signals have been generated in U.S. Steel (X-55.00, Arcelor Mittal (MT-41.59), and Nucor (NUE-44.19). Steel Dynamics (STLD- 16.40) is in the second week of a “sell” signal. Take note that quarterly earnings reports are due in the coming week from SLX components NUE, X, and STLD. Last week we forecast a price retreat for the SLX from an apparent over bought condition. Little did we know that China would announce efforts to cool down their “hot” economy. The verbiage from China sent the volatile steel sector in to a free fall. We shall downgrade the SLX from “buy” to neutral at this time. We see near term price support for the SLX at 56.90. Any failure for the 56.90 to provide meaningful price support will indicate further decline to the 50.50 level.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.55) decreased by 2.36% last week. The PPH 2010 trading year return stands at a positive 0.83%. The PPH has negated our “buy” signal by closing out the week below our price support level. A fresh weekly “sell” signal has been generated. Our weekly price resistance level in order to maintain the fresh weekly “sell” signal shall be set at 68.85. Any weekly closing price above 68.85 will negate our fresh “sell” signal for the PPH. Fresh weekly “sell” signals have been triggered in PPH components Johnson & Johnson (JNJ-63.20) and Abbott Lab’s (ABT-54.51). Weekly “buy” signals remain in place for PPH components Merck (MRK-38.87) and Pfizer (PFE-18.96). Eli Lilly (LLY-35.52) and GlaxoSmithKline (GSK-40.76) continue to remain on our “sell” list at this time. Take note that quarterly earnings reports are due in the coming week from PPH components JNJ, ABT, and LLY. A change of trend has been signaled for the PPH. At this time we shall downgrade the PPH from “buy” to neutral as less favorable trends indicate a pause in positive momentum.

III. Gold

GLD (streetTracks gold index) – The GLD (107.17) declined 3.33% on the week. The GLD current return for the 2010 trading year is a negative 0.13%. The GLD has closed below our weekly price support level therefore indicating a change of trend from positive to negative. Our weekly closing price resistance level in order to maintain our fresh “sell” signal shall be set at 111.75. Any weekly closing price above 111.75 will negate our fresh “sell” signal for the GLD. Price weakness for the GLD this past week is indicating a return to correction mode. Any downside penetration of the 105.94 price support level will foreshadow further downside to the 100.65 area of strong support. We shall downgrade the GLD from “buy” to neutral as the favorable trend of the past two weeks has been reversed. The optimal entry area for interested buyers appears to be around the 100.65 support area.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1037.78) closed out the trading week with a 4.95% decline. The current XOI 2010 trading year return is a negative 2.85%. The XOI has closed below our weekly price support level therefore indicating a change of trend from positive to negative. Our weekly price resistance level in order to maintain our fresh “sell” signal shall be set at 1104.50. Any weekly closing price above 1104.50 will negate our fresh “sell” signal for the XOI. Fresh weekly “sell” signals have been generated in XOI components Chevron-Texaco (CVX-74.59), Conoco-Phillips (COP-50.60), British Petroleum (BP-57.87) and Suncor Energy (SU-33.31). A weekly “sell” signal shall remain in place for XOI component Exxon-Mobil (XOM-66.10) at this time. Take note that quarterly earnings reports are due in the coming week from XOI components CVX and COP. We remain concerned regarding weaker pricing for crude oil. If the XOI closes out the coming week below the 1000.00 price support level we will downgrade from neutral to “sell”.

The Oil Service Index (OIH-121.59) declined 6.61% this past trading week. The 2010 year to date return for the OIH stands at a positive 2.89%. The OIH has negated our “buy” signal by closing out the week below our price support level. A change of trend has been signaled from positive to negative. Our weekly closing price resistance level in order to maintain our fresh “sell” signal shall be set at 131.73. Any weekly closing price above 131.73 will negate our fresh “sell” signal for the OIH. Fresh weekly “sell” signals have been generated across the board for OIH components Halliburton (HAL-31.15), Schlumberger (SLB-65.24), Baker Hughes (BHI-44.27), Ensco (ESV-40.98) and Transocean (RIG-85.72). The coming week will bring earnings reports from OIH components HAL and BHI. A change of weekly trend has been signaled. We see initial price support at the 119.40 level for the OIH. If the 119.40 support level fails to provide need relief the next level of price support comes in around the 110.87 level. Across the board selling pressure this past week gives cause for concern; we shall downgrade the OIH from “buy” to neutral at this time.

Natural Gas (UNG-10.35) advanced 1.07% this past week. The UNG current 2010 trading year return is a positive 2.68%. The UNG is entering week seven of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 9.98. Any weekly closing price below 9.98 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for the time being the seven-week advance can only be categorized as nothing more than an over sold bounce.

The Coal Sector (KOL-34.933) declined by 10.04% this past week. The KOL 2010 trading year performance stands at a negative 3.29%. The KOL has closed below our key price support level therefore negating our “buy” signal that lasted ten weeks in duration. Our weekly closing price resistance level in order to maintain our fresh “sell” signal shall be set at the 39.56 price level. Any weekly closing price above 39.56 will negate our fresh “sell” signal for the KOL. A downgrade from “buy” to neutral is our call at this time. Any failure for the KOL to remain above the 33.40 initial price support will indicate further weakness down to the 29.06 area.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at -24, a sharp decrease from the previous week reading of +8. Currently 10.0% of the thirty Dow Jones Industrial components have favorable weekly chart technical indications; this is a decrease from 63.0% in the prior week. The Dow Jones Industrial average declined 4.12% for the week to 10172.98. The return for the 2010 trading year stands at a negative 2.45%.

The S&P 500, as measured by the SPY (109.21), declined 3.90% for the week. The current 2010 trading year return for the SPY is a negative 2.00%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 61.73), declined 3.06% for the week. The IWM current 2010 trading year return is a negative 1.07%.

The DIA (101.63) closed out the week with a 4.13% decline and has negated our ten-week “buy” signal by closing out the week below our key price support level. Our weekly closing price resistance level in order to maintain the fresh “sell” signal shall be set at 107.23. Any weekly closing price above 107.23 will negate our fresh “sell” signal for the DIA. After ten weeks of favorable technical condition a three-day price slide has thrust the DIA in to “sell” mode. We would now use any extended price strength to reduce long exposure and or to initiate short trades. Any downside penetration of the initial 100.98 support level will foretell further downside to the next level of price support, the 94.50 area.

Fresh weekly buy signals generated: N/A

Fresh negative weekly signals generated: AXP, BAC, CAT, CSCO, CVX, DD, GE, HPQ, IBM, INTC, JNJ, JPM, KFT, MMM, MSFT, UTX

Readers should take note that Dow Jones Industrial components BA, CAT, CVX, DD, JNJ, MMM, MSFT, PG, T, TRV, UTX and VZ are scheduled to report quarterly earnings in the coming week.

Dow 30 stocks with positive weekly signals:

BA, MRK, PFE

Dow 30 stocks with negative weekly signals:

AA, AXP, BAC, CAT, CSCO, CVX, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, KO, MCD, MMM, MSFT, PG, T, TRV, UTX, VZ, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, January 25

Economic

10:00 Existing Home Sales (Dec.): 5.90M cons.

Earnings

Before: AKS, BOH, CNH, ETN, HAL, ERIC, PVTB, DGX, SEE

After: ALB, ALGT, AMGN, AAPL, ATHR, CLDN, CR, ELS, GGG, HTLF, JEC, JDAS, KRC, MTXX,MSPD, NARA, OLN, PKG, PRXL, PLXT, RLRN, RLI, SLG, TXN, VMW, VLTR, ZION, ZRAN

Events

MHS, GXDX, PSYS, BIOS at Jefferies Global Healthcare Services Conf

FED: $23 bln 3-month and $25 bln 6-month Treasury Bill Auctions

Tuesday, January 26

Economic

09:00 Case Schiller 20 City Index (Nov.): -5.00% cons.

10:00 Consumer Confidence (Jan.): 53.5 cons.

10:00 FHFA Home Price Index (Nov.): 0.1% cons.

Earnings

Before: AOS, ABC, AME, ASH, BHI, CRS, CVG, CBE, GLW, DAL, DD, EMC, ENR, FMER, FPL, GKSR, JNJ, KCI, MHP, MTG, NVS, NUE, BTU, RYN, RF, SHW, STE, TLAB, TRV, TUES, X, VZ, WAT, WFT, WTNY, GWW

After: ALTR, BBOX, BXP, BKI, CLMS, ELY, CNI, CNS, CSGS, DV, GILD, HTCH, INFN, IDTI, KEYN, MRTN, MCK, MRCY, MTH, MOLX, NATI, NAL, PTV, PMTC, PLT, QLGC, RFMD, RKT, SANM, TSFG, STLD, STM, SYK, SXL, TPX, TWPG, TRMK, WMS, YHOO

Events

NXG at TD Mining Conf.
CHDX, ESRX, NOVA, MDRX at Jefferies Global Healthcare Services Conf

FED: $44 bln 2-yr Treasury Note Auction

Wednesday, January 27

Economic

10:00 New Home Sales (Dec.): 370K cons.

10:30 Crude Inventories: -0.471M prior

14:15 FOMC Rate Decision: 0.25% cons.

Earnings

Before: ABT, AMG, AAI, ATI, ARLP, APU, BLK, BA, CAT, GIB, COP, CFR, DSPG, EXP, FCFS, GD, HSY, HES, ITW, LCRY, MNI, MWV, MOG/A, NWPX, NYB, OSIS, PTEC, PJC, PX, RGS, ROK, RES, SAP, SEIC, SII, SO, STJ, SWK, TEL, UAUA, UGI, UTX, USAP, USG, VLO, WLP, WTFC

After: ALGN, ACF, AMLN, AF, BYI, BMC, CBT, CTXS, CLD, COHU, CVD, CCI, CTS, DRE, ETFC, EWBC, ESIO, RDEN, ETH, FLEX, FTNT, GMCR, HBI, HRS, HXL, HOKU, IBKC, ISIL, KEX, KNX, LRCX, LSTR, LOGM, LSI, MLNX, MEOH, MUR, NFLX, NE, NSC, OMER, OHB, OI, PSSI, QCOM, RYL, SHOR, JAVA, SRDX, SYMC, TER, TTEK, TCBI, TLGD, TSCO, VAR, VIRL, WERN

Event

PRXL, LCAV, ATHN, PFWD at Jefferies Global Healthcare Services Conf.

FED: FOMC Policy Statement
$42 bln 5-yr Treasury Note Auction

Thursday, January 28

Economic

08:30 Initial Claims: 450K cons

08:30 Continuing Claims: 4600K cons.

08:30 Durable Orders (Dec.): 2.0% cons.

Earnings

Before: FLWS, MMM, ACXM, ALK, MO, AMFI, AEP, ACAT, ABFS, AZN, T, AUO, AVT, BLL, BAX, BDX, BMS, BMY, BC, CCMP, CP, CAH, CSH, CELG, CEVA, CHTT, CHKP, CRUS, CXG, CL, CLP, CMCO, CNX, CY, DHR, DLX, D, EK, LLY, EQT, EL, FCF, F, BEN, GNTX, GR, HSC, HHS, HP, HUB/B, ISCA, IVZ, JNS, JBHT, JBLU, KSU, KMT, KNSY, KSP, FSTR, LLL, LB, LANC, LIFE, LMT, MKC, MJN, MEG, MPW, MNRO, MOT, LABL, NOK, NVR, OXY, ODFL, ORI, OXPS, OSK, OSTK, PII, POT, PG, QUIX, RTN, COL, RCL, SBNY, SNE, SY, TROW, TSM, TDY, TXT, TWC, TRCR, TYC, UMPQ, UA, LCC, USAK, WDR, WCC, WRLD, XEL, ZMH, ZOLL

After: PAR , ABAX, ADPT, ARG, AMZN, ANEN, AMCC, ARBA, ASIA, AVID, AVCT, BKH, EPAY, BCR, CA, CALD, CAVM, CPHD, CHRT, CHRD, CB, CYN, COBZ, COHR, COLM, CPSI, CPWR, CYBS, CYMI, CYT, DRIV, DLLR, DNB, EMN, EXAR, FII, FFIN, FORM, GNW, GHL, HUBG, INFA, ININ, ICO, JNPR, KLAC, LCRD, LSCC, LEG, MXIM, MCRL, MSFT, MIPS, NTY, OCLR, OMCL, OPLK, OFG, PKI, PMCS, PLCM, QSII, QTM, RMBS, RHI, SNDK, SCSC,SBCF, SMTL, SWI, SXE, SPWRA, SNV, TLEO, TSRA, VSEA, VPRT, ZNT

Events

CBRX Analyst and Investor Day
CHDN, MNTG, FLL at Bank of America Merrill Lynch Gaming Conf.

FED: $32 bln 7-yr Treasury Note Auction

Friday, January 29

Economic

N08:30 GDP- Adv. (Q4): 4.6% cons.

08:30 Chain Deflator-Adv. (Q4): 1.3% cons.

08:30 Employment Cost Index (Q4): 0.4% cons.

09:45 Chicago PMI (Jan.): 57.4 cons.

09:55 Univ. of Michigan Sentiment (Jan.): 73.0 cons.

Earnings

Before: ACI, ALV, AVY, CVX, DOV, FO, GHM, HON, HRZ, IDXX, MAT, NWL, NS, PCAR, PFS, SAIA, WL

After: EEP

Events

DMND Analyst Meeting
FED: Fed's Kohn

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 01/18/10

2010-01-17T18:12:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

01/18/10

Note: Event Calendar is located at bottom of page

I. General Commentary

The second week of the trading year started well but finished poorly. The January option expiration week which featured generally positive earnings reports from J.P.Morgan (JPM-43.68), Alcoa (AA-15.63), and Intel (INTC-20.80), suffered sharp Friday declines which erased any gains incurred earlier in the week. In somewhat disconcerting fashion all three companies mentioned above experienced price declines after issuing positive releases. “Good news” that is met with increased selling is never a positive sign. Also somewhat troubling is the recent weakness in high beta issues, Apple Computer (AAPL-205.93) and Google (GOOG-580.00) in particular. (GOOG is scheduled to report earnings this week) We shall continue to monitor the high-beta issues with increased scrutiny as they may be an indication of “aggressive” money leaving the equity market. These concerns being stated the vast majority of our technical indicators have not yet weakened to the point where we are flashing major “sell” signals. We remain in the bullish camp but are mildly concerned. Stay tuned.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-113.64), Diamonds Trust (DIA-106.01), U.S. $ Index (UUP-22.77), I-share 7-10 year Treasury bond (IEF-90.05), NASDAQ Composite (COMP-2287.99), IShares Russell 2000 Index Fund (IWM-63.68) and the Powershares QQQQ Trust (QQQQ-45.85). We currently have negative views on major U.S. market indices at this time. *Take note that the IEF is an upgrade from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Homebuilding (XHB), Gold (GLD), Managed Care, Oil Service (OIH), Agriculture (MOO), Coal (KOL), Steel (SLX), and Pharmaceuticals (PPH). *Take note that there are no upgrades from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Real Estate (IYR), Financials (XLF), Semiconductors (SMH), Large Integrated Oil (XOI), Transportation (IYT), Crude Oil (USO), and Natural Gas (UNG). * Take note that the IYR and SMH are downgrades to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Retailers (RTH). *Take note that there are no new additions to downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.05 (I-share 7-10 year Treasury bond) advanced 1.23% for the week as the yield on the 10- year treasury decreased from 3.80% to 3.76%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. The IEF has closed above our weekly price resistance level and is therefore indicating a weekly change of trend from negative to positive. The weekly closing price support level in order to maintain our fresh “buy” signal shall be set at 88.93. Any weekly closing price below 88.93 will negate our fresh “buy” signal for the IEF. The road to a 4.00% ten-year Treasury yield appears to have taken a short term detour. Strength in the IEF is indicating a near term retreat in the 10-year Treasury yield to the 3.50% area.

A. Financials

The Financial Select Sector Index (XLF-14.94) finished the trading week with a 1.84% decline. The 2010 trading year return of the XLF is a positive 3.75%. The XLF is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at 14.49. Any weekly closing price below 14.49 will negate our current “buy” signal for the XLF. A fresh weekly “buy” signal has been triggered in American Express (AXP-42.39). Fresh weekly “sell” signals have been generated in XLF components Morgan Stanley (MS-30.38) and Goldman Sachs (GS-165.21). Weekly “buy” signals remain current for XLF components J.P. Morgan (JPM-43.68), Wells Fargo (WFC-28.08), U.S. Bancorp (USB-24.62), Bank of America (BAC-16.26), Chicago Mercantile Exchange (CME-337.24) and MetLife (MET-37.85). A weekly “sell” signal continues to remain in place for XLF component Citigroup (C- 3.42). An earnings report this past week from JPM received a “sell the fact” response from the marketplace. This being noted we are more concerned with the troublesome weakness developing in GS and MS. Numerous earnings reports are due in the coming week from XLF constituents BAC, WFC, C, USB, GS, MS, AXP, and BK. Pending earnings reports coupled with negative short term technical cross currents equal no change in opinion, we remain neutral on the XLF.

B. Builders

The Homebuilder exchange traded fund (XHB-15.63) declined 3.64% for the week. The 2010 year-to-date performance of the XHB currently rests at a positive 3.50%. The XHB is entering week five of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall remain at 14.99. Any weekly closing price below the 14.99 support level will negate our current “buy” signal in the XHB. Weekly “buy” signals remain in place for XHB components Toll Brothers (TOL-19.34), D R Horton (DHI-12.14), Pulte Homes (PHM-11.00), KB Homes (KBH-15.30), Lennar (LEN-15.96) and Ryland Group (RYL-20.82). Week five of a “buy” signal; we would continue to use extended price weakness in the XHB and above positively mentioned names to increase long exposure and or to initiate long trades.

B. Semiconductor

The Semiconductor group (SMH-26.93) declined 5.58% for the week. The current SMH performance for the 2010 trading year is a negative 3.54%. The SMH has closed below our weekly support level therefore generating a fresh weekly “sell” signal. Our weekly price resistance level in order to maintain our fresh “sell” signal shall be set at 28.52. Any weekly closing price above 28.52 will negate our fresh “sell” signal for the SMH. Fresh weekly “sell” signals have been triggered in SMH components Analog Devices (ADI-28.96), Texas Instruments (TXN-24.50), Micron Technology (MU-10.13), SanDisk (SNDK-27.98), and Applied Materials (AMAT-13.73). A weekly “buy” signal remains in place for SMH component Intel (INTC-20.83). Novellus (NVLS-22.13) has been and shall remain on our avoid list at this time. The SMH, a recent top performer, is indicating time for a pause. A generally upbeat earnings report from SMH bell weather INTC was greeted with sellers. This response is indicative of a crowded trade on the long side. A near term price retreat for the SMH down to the 24.00 area may be just the cure to alleviate an over bought condition. We shall downgrade the SMH from positive to neutral as a decrease in bullish momentum indicates a near term price retreat.

D. Retailers

The Retail sector (RTH-93.20) finished the trading week with a 1.23% decline. The current 2010 return of the RTH stands at a negative 0.68%. The RTH is entering week five of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the current “sell” signal shall remain at 95.09. Any weekly closing price above 95.09 will negate our current “sell” signal for the RTH. A fresh weekly “sell” signal has been generated in RTH component Home Depot (HD-28.57). Weekly “buy” signals continue to remain in place for RTH components Sears Holding’s (SHLD-102.37) and Target (TGT-50.17). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-36.60), Kohl’s (KSS-51.51), WalMart (WMT-53.68) and BestBuy (BBY-38.93). Week five 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-65.00) finished the week with a 3.77% decline. The current 2010 trading year return for the SLX measures in at a positive 5.65%. The SLX is entering the fourth week of a “buy” signal. Our weekly closing price support level for the SLX shall be raised to 64.84. Any weekly closing price below 64.84 will negate our current “buy” signal for the SLX. A fresh weekly “sell” signal has been generated in Steel Dynamics (STLD- 18.01). Weekly “buy” signals remain in place for U.S. Steel (X-62.04, Arcelor Mittal (MT-46.29), and Nucor (NUE-47.43). Based on the closing prices of the past week the SLX shall maintain favorable status but a near term price retreat to alleviate an over bought condition appears highly likely. Continue to use extended price weakness to increase exposure and or to initiate long trades.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-68.16) increased by 2.31% last week. The PPH 2010 trading year return stands at a positive 3.27%. The PPH is entering week nine of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall be raised to 66.64. Any weekly closing price below 66.64 will negate our current “buy” signal for the PPH. Weekly “buy” signals remain in place for PPH components Merck (MRK-39.47), Johnson & Johnson (JNJ-64.56), Pfizer (PFE-19.49), and Abbott Lab’s (ABT-55.49). Eli Lilly (LLY-35.82) and GlaxoSmithKline (GSK-40.91) shall remain on our “sell” list at this time. The weekly trends remain favorable; use extended price weakness in the PPH and above positively mentioned components to increase exposure and or to initiate long trades.

III. Gold

GLD (streetTracks gold index) – The GLD (110.86) declined 0.46% on the week. The GLD current return for the 2010 trading year is a positive 3.30%. The GLD is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at 109.26. Any weekly closing price below 109.26 will negate our current “buy” signal for the GLD. The GLD is again indicating the resumption of an upward path but in order to maintain our assumption the 109.26 level must continue to provide bullish price support. Week two of a favorable technical signal; use 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-1091.80) closed out the trading week with a 2.19% decline. The current XOI 2010 trading year return is a positive 2.21%. The XOI is entering the second week of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 1068.21. Any weekly closing price below 1068.21 will negate our current “buy” signal for the XOI. Favorable weekly “buy” conditions remain in place for XOI components Chevron-Texaco (CVX-79.23), Conoco-Phillips (COP-53.02), British Petroleum (BP-61.64) and Suncor Energy (SU-35.82). A weekly “sell” signal shall remain in place for XOI component Exxon-Mobil (XOM-69.11) at this time. Last week we moved to a neutral opinion on the XOI as indications of near term price strength became apparent. We shall remain neutral at this time as we fear near term weakness in the price of crude oil may prevent further upside from current price levels.

The Oil Service Index (OIH-130.19) declined 1.98% this past trading week. The 2010 year to date return for the OIH stands at a positive 9.51%. The OIH is entering week five of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 127.11. Any weekly closing price below 127.11 will negate our current “buy” signal for the OIH. Weekly “buy” signals remain in place for OIH components Halliburton (HAL-34.03), Schlumberger (SLB-70.83), Baker Hughes (BHI-47.28), Ensco (ESV-44.58) and Transocean (RIG-91.85). The coming week will bring increased volatility for the OIH as influential component SLB is scheduled to release quarterly earnings. Any weekly close above the 132.39 price resistance level for the OIH will foretell increased price strength possibly to the 150.00 area. Week five of a buy signal; continue to use extended price weakness in the OIH and above positively mentioned components to increase exposure and or to initiate long trades.

Natural Gas (UNG-10.24) declined 1.63% this past week. The UNG current 2010 trading year return is a positive 1.58%. The UNG is entering week six of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 9.98. Any weekly closing price below 9.98 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for the time being the six-week advance can be categorized as nothing more than an over sold bounce.

The Coal Sector (KOL-38.83) declined by 4.12% this past week. The KOL 2010 trading year performance stands at a positive 7.50%. The KOL is entering week ten of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to the 38.49 price level. Any weekly closing price below 38.49 will negate our current “buy” signal for the KOL. The KOL remains favorable but long entry at current price levels does not appear attractive from a risk/reward standpoint.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +8, a decrease from the previous week reading of +12. Currently 63.0% of the thirty Dow Jones Industrial components have favorable weekly chart technical indications; this is a decrease from 70.0% in the prior week. The Dow Jones Industrial average declined 0.08% for the week to 10609.65. The return for the 2010 trading year stands at a positive 1.74%.

The S&P 500, as measured by the SPY (113.64), declined 0.81% for the week. The current 2010 trading year return for the SPY is a positive 1.97%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 63.68), declined 1.30% for the week. The IWM current 2010 trading year return is a positive 1.98%.

The DIA (106.01) closed out the week with a 0.08% decline and is entering week ten of a “buy” signal. Our weekly closing price support level in order to maintain the current “buy” signal shall remain at 104.76. Any weekly closing price below 104.76 will negate our current “buy” signal for the DIA. A 1.00% Friday decline served to extinguish the gains achieved earlier in the week. Regardless of the poor late week performance the current DIA trend remains a favorable one. Our indications continue to point northward with an eventual upside test of the 110.00 – 115.00 major price resistance area still in play. If the DIA rises to the above mentioned price resistance zone we would begin to reduce long exposure as we feel that the risk/reward equation will become much less favorable. Any weekly close below 104.76 would negate our short term bullish case.

Fresh weekly buy signals generated: AXP

Fresh negative weekly signals generated: AA, DIS, HD

Readers should take note that Dow Jones Industrial components AXP, BAC, GE, IBM and MCD are scheduled to report quarterly earnings in the coming week.

Dow 30 stocks with positive weekly signals:

AXP, BA, BAC, CAT, CSCO, CVX, DD, GE, HPQ, IBM, INTC, JNJ, JPM, KFT, MMM, MRK, MSFT, PFE, UTX

Dow 30 stocks with negative weekly signals:

AA, DIS, HD, KO, MCD, PG, T, TRV, VZ, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, January 18

Economic

Earnings

Before:

After:

Events

Equity & Bond Markets are closed for Martin Luther King, Jr. Day

Tuesday, January 19

Economic

09:00 Net Long Term TIC Flows (Nov.): $27.5B cons.

Earnings

Before: C, FAST, FHN, FRX, IIVI, MMR, EDU, PH, PETS, AMTD

After: ADTN, CREE, CSX, FULT, HBHC, IBM, PNFP, SUPX,WIT

Events

NAV Analyst Day
PHX, DVN, LGCY, SFY at IPAA Oil & Gas Investment Symposium Florida
FED: $23 bln 3-month and $25 bln 6-month Treasury Bill Auctions

Wednesday, January 20

Economic

08:30 Building Permits (Dec.): 580K cons.

08:30 Housing Starts (Dec.): 575K cons.

08:30 PPI (Dec.): 0.0% cons.

08:30 Core PPI (Dec.): 0.1% cons.

Earnings

Before: AIT, ASML, BAC, BK, EAT, COH, COV, HCBK, IGTE, JEF, LAB, MTB, MI, MS, NTRS, PGR, STT, USB, WFC

After: DOX, EBAY, FFIV, KMP, LOGI, NVEC, OHB, PLXS, PLCM, RJF, STX, SWKS, SLM, SBUX, TSS, WGOV, XLNX

Events

PRXI Analyst Meeting
BTE, KOG, EXXI, GTE at IPAA Oil & Gas Investment Symposium Florida
EXR at UBS Self Storage Real Estate Summit

Thursday, January 21

Economic

08:30 Initial Claims: 440K cons.

08:30 Continuing Claims: 4600K cons.

10:00 Leading Indicators (Dec.): 0.7% cons.

10:00 Philadelphia Fed (Jan.): 18.8 cons.

11:00 Crude Inventories: 3.70M prior

Earnings

Before: AMFI, APH, AMR, AUO, SCHW, CMA, CAL, CVBF, FCS, FITB, FNFG, GMT, GS, HOMB, IMN, IIIN, ESI, KEY, NITE, LM, LYTS, MDZ, MDP, VIVO, MTG, PNC, BPOP, PPG, PCP, SMTS, LUV, SBIB, TSM, TCB, TDY, UNP, UNH, WNS, XRX, ZOLL

After: AMD, AXP, BXS, EPAY, BNI, COF, CBST, CYS, DGII, EFII, ELX, EZPW, GOOG, HTLD, IBKR, IGT, ISRG, JJSF, MATW, MSCC, NTCT, OCLR, PBCT, SIVB, SYNA, WDC

Events

WGL Analyst Meeting
SGMS Analyst Day
WGL Analyst Meeting

Friday, January 22

Economic

N/A

Earnings

Before: APD, ACO, AVX, BBT, EXC, GE, HOG, HBAN, JCI, KMB, MBFI, MCD, PRSP, SLB, STI, WBS

After:

Events

CCJ at CIBC World Markets Whistler Institutional Investor Conf.

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 01/11/10

2010-01-10T15:35:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

01/11/10

Note: Event Calendar is located at bottom of page

I. General Commentary

The new trading year has begun with a positive bias as the major U.S. equity averages surged on average of 2.00%-3.00% last week. Are the markets reflecting improving business conditions? Is the U.S. economy really doing that well? Are U.S. consumers finished de-levering and poised to spend, spend, and spend, once again? From a fundamental perspective we continue to stare in amazement as the equity markets creep higher. Our technical insight on equities continues to prevent losses from fundamental analysis short trades as for the most part the technical trends remain constructive. Current technical analysis of equity markets reveal that it is certainly not time to “fight the tape”, yet.

There were three news items of interest last week that we deem worthy of comment.

The first item was a special report issued by a respected research firm named TrimTabs. TrimTabs is well followed by institutional investors as well as by the hedge fund community. The firm brings in to question the sources of capital behind the roughly $6.0 trillion increase in market capitalization of U.S. equities since March of 2009. The report stated that “traditional sources of capital did not create the recent boom in equities”. Corporate America has been a net seller, U.S. equity funds saw minimal net inflows of only $20.0 billion, foreign inflows were only $109.0 billion, Hedge Funds had negative outflow of roughly $9.0 billion (April 2009 thru November 2009), and pension funds displayed no evidence of asset allocation out of bonds and in to equities. Who is buying and driving the market higher? TrimTabs intimates that the U.S. Federal Reserve in concert with the U.S. Government could possibly be the influential force in the equity surge through the active purchase of S&P 500 futures contracts. If this is truly the case it is no coincidence that Fed Chairman Bernanke has resisted increased transparency of Fed operations. Drastic times call for drastic measures but the manipulation of supposedly “free markets” questions the integrity of free market capitalism as a whole. Does the Fed really believe in the term, “bid it and they will buy”? All that can be stated is there better be one hell of an exit strategy.

The second item of interest is the Consumer Credit report issued late Friday afternoon. Analysts had estimated a further contraction of credit of $5.0 billion. In November Consumer Credit contracted by an alarming $17.50 billion. This is the largest one-month decline in credit since the index was created in 1943. Consumers are still de-leveraging and bank lending standards remain stringent due to poor employment and an unstable housing market. With interest rates currently in an upward trend the credit figures will continue to contract. As we have stated in the past, the U.S. derives approximately 60.0% of GDP from consumer activity. This cannot be fundamentally bullish for the U.S. economy.

Our third news item of interest comes courtesy of the world’s most voracious consumer of energy and materials, China. When in doubt China will consume it has been the story for some time now. Last week the Chinese raised a key inter-bank interest rate for the first time in five months. This action reflects a shift in policy for the Chinese authorities from pure economic growth to one that balances the management of inflation risks with economic growth. Will the voracious Chinese appetite for energy and materials begin to decline?

All three news items covered above are certainly not bullish developments yet the U.S. equity markets continue to creep higher. Fundamentally we remain very cautious but technically the amazing market levitation remains intact. Don’t fight the tape, yet.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-114.57), Diamonds Trust (DIA-106.11), U.S. $ Index (UUP-22.84), NASDAQ Composite (COMP-2317.17), IShares Russell 2000 Index Fund (IWM-64.52) and the Powershares QQQQ Trust (QQQQ-46.55). We currently retain a negative view on the I-share 7-10 year Treasury bond (IEF-88.96). *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Homebuilding (XHB), Gold (GLD), Managed Care, Oil Service (OIH), Agriculture (MOO), Real Estate (IYR), Coal (KOL), Steel (SLX), Pharmaceuticals (PPH), and Semiconductors (SMH). *Take note that the GLD and Managed Care sectors are upgrades from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Financials (XLF), Large Integrated Oil (XOI), Transportation (IYT), Crude Oil (USO), and Natural Gas (UNG). * Take note that the XLF, IYT, and XOI are upgrades to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Retailers (RTH). *Take note that there are no new additions to downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-88.96 (I-share 7-10 year Treasury bond) advanced 0.41% for the week as the yield on the 10- year treasury decreased from 3.84% to 3.80%. For comparative reference the yield on the 10-year Treasury began the 2010 trading year at 3.84%. The IEF is entering week six of a “sell” signal. The weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 89.06. Any weekly closing price above 89.06 will negate our current “sell” signal for the IEF. In the past six weeks the yield on the 10-year Treasury has increased roughly 58 basis points, going from 3.22% to the current 3.80%. The bond market is discounting the pending expiration of some of the emergency liquidity measures instituted by the Federal Reserve. The 4.00% level appears to be price resistance for the 10-year yield; this would translate in to price support for the IEF at the 86.25 price level. The weekly trend remains a negative one but we are now approaching major price support levels.

A. Financials

The Financial Select Sector Index (XLF-15.22) finished the trading week with a 5.69% advance. The 2010 trading year return of the XLF is a positive 5.69%. The XLF has closed above our weekly price resistance level therefore generating a fresh “buy” signal. Our weekly closing price support level in order to maintain our fresh “buy” signal shall be set at 14.49. Any weekly closing price below 14.49 will negate our fresh “buy” signal for the XLF. Fresh weekly “buy” signals have been generated in XLF components J.P. Morgan (JPM-44.68), Wells Fargo (WFC-28.86), U.S. Bancorp (USB-24.21), Bank of America (BAC-16.78) and Morgan Stanley (MS-32.25). Weekly “buy” signals remain current for XLF components Goldman Sachs (GS-174.31), Chicago Mercantile Exchange (CME-349.32) and MetLife (MET-38.25). Weekly “sell” signals continue to remain in place for XLF components American Express (AXP-41.95) and Citigroup (C- 3.59). The new trading year has commenced with notable sector rotation benefiting the financial sector. An earnings report due from JPM in the coming week will be a determinant factor in whether the positive momentum of the financials can be maintained. We would not “pay up” for the sector at current market prices but shall respect the current strength and upgrade the XLF from negative to neutral. A potential change of trend from negative to positive gives us reason to temper our bearish stance at this time, we shall move from negative to neutral.

B. Builders

The Homebuilder exchange traded fund (XHB-16.22) advanced 7.35% for the week. The 2010 year-to-date performance of the XHB currently rests at a positive 7.35%. The XHB is entering week four 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 remain in place for XHB components Toll Brothers (TOL-20.03), D R Horton (DHI-12.17), Pulte Homes (PHM-11.03), KB Homes (KBH-15.97), Lennar (LEN-15.95) and Ryland Group (RYL-21.71). Take note that XHB component KBH is scheduled to report quarterly earnings in the coming week. Week four of a “buy” signal; we would continue to use extended price weakness in the XHB and above positively mentioned names to increase long exposure and or to initiate long trades.

B. Semiconductor

The Semiconductor group (SMH-28.522) advanced 2.15% for the week. The current SMH performance for the 2010 trading year is a positive 2.15%. The SMH is entering week nine of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 27.76. Any weekly closing price below 27.76 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain in place for SMH components Analog Devices (ADI-31.49), Texas Instruments (TXN-26.34), Micron Technology (MU-11.10), SanDisk (SNDK-31.13), Applied Materials (AMAT-14.55) and Intel (INTC-20.83). The only SMH component that we would currently avoid is Novellus (NVLS-24.06). The SMH, a top performer in 2009 has begun the 2010 trading year in similar strong fashion. The early strength displayed by the SMH closing price above the 28.00 resistance level indicates further upside to the 30.00-32.00 area. Take note that influential SMH component INTC is scheduled to report quarterly earnings in the coming week. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-94.39) finished the trading week with a 0.60% advance. The current 2010 return of the RTH stands at a positive 0.60%. The RTH is entering week four of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the current “sell” signal shall remain at 95.09. Any weekly closing price above 95.09 will negate our current “sell” signal for the RTH. A fresh weekly “sell” signal has been generated in RTH component Kohl’s (KSS-52.83). Weekly “buy” signals continue to remain in place for RTH components Sears Holding’s (SHLD-99.17), Target (TGT-50.07), and Home Depot (HD-28.98). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-36.99), WalMart (WMT-53.33) and BestBuy (BBY-39.91). Week four 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-67.55) finished the week with a 9.80% advance. The current 2010 trading year return for the SLX measures in at a positive 9.80%. The SLX is entering the third week of a “buy” signal. Our weekly closing price support level for the SLX shall be raised to 63.06. Any weekly closing price below 63.06 will negate our current “buy” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-65.34), Arcelor Mittal (MT-48.96), Nucor (NUE-49.93), and Steel Dynamics (STLD- 20.19). The highly volatile SLX started the 2010 trading year on a very strong note benefiting from an approximate 20.0% one-week upside move from U.S. Steel (X-65.34). While the trend remains positive the SLX and related components now appear extended to the upside which drastically alters the risk/reward equation of entering long trades at current price levels. The story of this sector continues to revolve around Chinese demand and a weaker U.S. Dollar. We shall remain fundamentally cautious but shall concede that momentum currently trumps fundamentals. Continue to use price weakness to increase exposure and or to initiate long trades.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.68) increased by 1.03% last week. The PPH 2010 trading year return stands at a positive 1.03%. The PPH is entering week eight of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall remain at 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. A fresh weekly “sell” signal has been generated in GlaxoSmithKline (GSK-41.10). A fresh weekly “buy” signal has been generated in PPH component Merck (MRK-37.70). This signal for MRK reverses a “sell” signal issued in our prior letter. Weekly “buy” signals remain in place for PPH components Johnson & Johnson (JNJ-64.21), Pfizer (PFE-18.68), and Abbott Lab’s (ABT-55.05). Eli Lilly (LLY-35.00) shall remain on our “sell” list at this time. The weekly trends remain favorable; use extended price weakness in the PPH and above positively mentioned components to increase exposure and or to initiate long trades.

III. Gold

GLD (streetTracks gold index) – The GLD (111.37) advanced 3.78% on the week. The GLD current return for the 2010 trading year is a positive 3.78%. The GLD has closed above our weekly price resistance level and has therefore generated a fresh weekly “buy” signal. Our weekly closing price support level in order to maintain our fresh “buy” signal shall be set at 109.26. Any weekly closing price below 109.26 will negate our fresh “buy” signal for the GLD. After a five week price retreat which served to temper bullish euphoria the GLD is once again indicating a resumption of an upward path. A change of trend has been signaled; the price correction appears to have concluded, time to once again use 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-1116.19) closed out the trading week with a 4.49% advance. The XOI 2010 trading year return is a positive 4.49%. After spending the past ten weeks on our “sell” list the XOI has closed above our weekly price resistance level, therefore indicating a change of trend from negative to positive. Our weekly price support level in order to maintain our fresh “buy” signal shall be set at 1068.21. Any weekly closing price below 1068.21 will negate our fresh “buy” signal for the XOI. Concurrent weekly “buy” signals have been generated in XOI components Chevron-Texaco (CVX-79.47), Conoco-Phillips (COP-53.26), British Petroleum (BP-60.00) and Suncor Energy (SU-37.55). A weekly “sell” signal shall remain in place for XOI component Exxon-Mobil (XOM-69.52) at this time. The price strength of the past week shall give us cause to upgrade the XOI and above favorably mentioned components to neutral from negative. We see near term upside potential for the XOI to the next area of price resistance, the 1200.00 area.

The Oil Service Index (OIH-132.82) advanced 11.73% this past trading week. The 2010 year to date return for the OIH stands at a positive 11.73%. The OIH is entering week four of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 121.15. Any weekly closing price below 121.15 will negate our current “buy” signal for the OIH. Fresh weekly “buy” signals have been generated in OIH laggards Ensco (ESV-44.92) and Transocean (RIG-93.00). Weekly “buy” signals remain in place for OIH components Halliburton (HAL-34.12), Schlumberger (SLB-70.65) and Baker Hughes (BHI-47.10). The OIH surged out of the gates to start the New Year with a near term upside target now being the 140.00 resistance area. Week four of a buy signal; continue to use extended price weakness in the OIH and above positively mentioned components to increase exposure and or to initiate long trades.

Natural Gas (UNG-10.41) advanced 3.27% this past week. The UNG current 2010 trading year return is a positive 3.27%. The UNG is entering week five of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 9.98. Any weekly closing price below 9.98 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for the time being the five-week advance can be categorized as nothing more than an over sold bounce.

The Coal Sector (KOL-40.50) advanced by 12.13% this past week. The KOL 2010 trading year performance stands at a positive 12.13%. The KOL is entering week nine of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to the 36.72 price level. Any weekly closing price below 36.72 will negate our current “buy” signal for the KOL. The KOL starts the New Year full steam ahead with near term upside being the next level of price resistance, the 45.00 area.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +12, an increase from the previous week reading of +6. Currently 70.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is an increase from 60.0% in the prior week. The Dow Jones Industrial average advanced 1.82% for the week to 10618.19. The return for the 2010 trading year stands at a positive 1.82%.

The S&P 500, as measured by the SPY (114.57), advanced 2.81% for the week. The current 2010 trading year return for the SPY is a positive 2.81%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 64.52), advanced 3.33% for the week. The IWM current 2010 trading year return is a positive 3.33%.

The DIA (104.07) closed out the week with a 1.96% advance and is entering week nine of a “buy” signal. Our weekly closing price support level in order to maintain the current “buy” signal shall be raised to 104.07. Any weekly closing price below 104.07 will negate our current “buy” signal for the DIA. The new trading year started out with a positive bias as the DIA gained roughly 2.00% and closed achieved a close above the 105.00 trend resistance area. The strength of the DIA now projects upward to the next level of price resistance, the 110.00 area. Any negative reversal of fortune for the DIA that results in a weekly close below 104.07 would negate our near term bullish stance.

Fresh weekly buy signals generated: BA, BAC, CVX, GE, JPM, KFT, MRK

Fresh negative weekly signals generated: KO, MCD, T, VZ

Readers should take note that Dow Jones Industrial components AA, INTC, and JPM are scheduled to report quarterly earnings in the coming week.

Dow 30 stocks with positive weekly signals:

AA, BA, BAC, CAT, CSCO, CVX, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, MMM, MRK, MSFT, PFE, UTX

Dow 30 stocks with negative weekly signals:

AXP, KO, MCD, PG, T, TRV, VZ, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, January 11

Economic

Earnings

Before: MDRX, HELE

After: AA, WDFC

Events

BWLD, BKE, FOSL, FUQI at Cowen and Company Consumer Conf.

FED: Fed's Lockhart to speak on U.S. economic outlook in Atlanta
$24 bln 3-month and $25 bln 6-month Treasury Bill Auctions

Tuesday, January 12

Economic

08:30 Trade Balance (Nov.): -$34.5B cons.

Earnings

Before: GAP, INFY, KBH, SVU

After: EXFO, FUL, LLTC, XRTX

Events

PCS Analyst Day
FED:$40 bln 3-year Treasury Notes Auction and $26 bln 1-year Notes Auction
Fed's Fisher and Plosser speak on U.S. economy

Wednesday, January 13

Economic

10:30 Crude Inventories: 1.33M prior

14:00 Treasury Budget (Dec.): -$92.0B cons.

14:00 Fed’s Beige Book

Earnings

Before: NWPX

After: CLC, OHB, ZZ

Events

CVS, MYGN, GRPO, THOR at JPMorgan Healthcare Conf.
FED: $21 bln 10-year Treasury Notes Auction
Fed's Beige Book

Thursday, January 14

Economic

08:30 Initial Claims: 433K cons.

08:30 Continuing Claims: 4800K cons.

08:30 Retail Sales (Dec.): 0.5% cons.

08:30 Retail Sales Ex.-Auto (Dec.): 0.3% cons.

08:30 Export Prices Ex.-Ag. (Dec.): 0.7% prior

08:30 Import Prices Ex-Oil (Dec.): 0.4% prior

10:00 Business Inventories (Nov.): 0.2% cons.

Earnings

Before: BGG, SCHW, CRAI, SEED

After: INTC, SHFL

Events

BLUD, JAZZ, TSON, BCRX at JPMorgan Healthcare Conference
TRLG, ZUMZ, FUQI, FOSL at ICR XChange

FED: $13 bln 30-year Treasury Bonds Auction

Friday, January 15

Economic

08:30 CPI (Dec.): 0.2% cons.

08:30 Core CPI (Dec.): 0.1% cons.

08:30 Empire Manufacturing Survey (Jan.): 11.25 cons.

09:15 Capacity Utilization (Dec.): 71.8% cons.

09:15 industrial Production (Dec.): 0.6% cons.

09:55 Michigan Sentiment (Jan): 73.8 cons.

Earnings

Before: JPM

After:

Events

GRMN at Needham & Company 12th Annual Growth Conference

FED: Fed's Lacker speaks on economic outlook in Richmond

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 01/04/10

2010-01-03T15:43:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

01/04/10

Note: Event Calendar is located at bottom of page

I. General Commentary

At this point in time a year ago there were very few market pundits who boldly dared to predict positive market returns for the 2009 trading year. After a crisis filled, at times horrific, and historical 2008, a majority of forecasts were for further market declines. Equity market declines for the 2009 trading year were decidedly probable were it not for the cavalry of extraordinary emergency liquidity measures taken by the U.S. Treasury and the Federal Reserve. By our own admission our fundamental views failed to discount the enormity of Fed action and resulting beneficial equity market impact. In early March of last year after the Fed opened the monetary spigots full bore, the headwinds of fear quickly turned in to tailwinds of emergency liquidity provision. The resulting asset inflation enabled the S&P 500 and NASDAQ to rebound sharply and close out the trading year with impressive gains of 23.49% and 43.89% respectively. While the Fed actions succeeded in restoring a semblance of sanity to the average investors retirement account the jury shall remain out regarding the effects on the restoration of U.S. economic growth. The stabilization of a declining housing market and the decline in the pace of job destruction do not necessarily precede a healthy growing economy. The disappearance of the securitization market has drastically altered bank lending standards. Lend and extend is no longer fashionable as banks again must exercise due diligence and consider the ability of a borrower to repay a loan. Those who believe that unemployment is a lagging indicator may want to question their logic. The U.S. is, without doubt a consumer driven economy. Debt burdened consumers need employment in order to consume. Without a securitization market to off load questionable credit risks lenders must now require employment before extending credit. Ask the simple question, which comes first, a loan or a job? Simply put, a consumer based economy NEEDS job creation.

As the 2010 trading year commences the equity markets are clearly beginning from drastically different price levels of a year ago. The market mood feels more like one of amazement rather than pessimism or ebullience. The Federal Reserve has recently stated that some of the emergency liquidity measures instituted during the height of the financial crisis will be allowed to expire. The recent rise in interest rates reflects the bond market concern of lack of Fed participation on the buy-side. The rise in interest rates has injected life in to the U.S. Dollar. If 2010 will be a year of less Fed liquidity and a stronger dollar, the equity markets will demand sustainable corporate profit growth. In other words the New Year will bring much less room for error when it comes to stock-picking.

We would like to wish a very healthy, safe and prosperous 2010 to all!

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-111.44), Diamonds Trust (DIA-104.07), U.S. $ Index (UUP-23.08), NASDAQ Composite (COMP-2269.15), IShares Russell 2000 Index Fund (IWM-62.44) and the Powershares QQQQ Trust (QQQQ-45.75). We currently retain a negative view on the I-share 7-10 year Treasury bond (IEF-88.60). *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Homebuilding (XHB), Oil Service (OIH), Agriculture (MOO), Real Estate (IYR), Coal (KOL), Steel (SLX), Pharmaceuticals (PPH), and Semiconductors (SMH). *Take note that the SLX is an upgrade from the prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Gold (GLD), Steel (SLX), Crude Oil (USO), and Natural Gas (UNG). * Take note that the USO is a new upgrade to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Large Integrated Oil (XOI), Transportation (IYT), Financials (XLF), and Retailers (RTH). *Take note that the IYT is a new downgrade 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 Richard Reilly at rreilly123-2@comcast.net

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II. Sector Analysis

The IEF-88.60 (I-share 7-10 year Treasury bond) declined 0.31% for the week as the yield on the 10- year treasury increased from 3.80% to 3.84%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF is entering week five of a “sell” signal. The weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 89.06. Any weekly closing price above 89.06 will negate our current “sell” signal for the IEF. In the past five weeks the yield on the 10-year Treasury has increased roughly 62 basis points, going from 3.22% to the current 3.84%. The bond market is discounting the coming expiration of some of the emergency liquidity measures instituted by the Federal Reserve. The 4.00% level appears to be price resistance for the 10-year yield; this would translate in to price support for the IEF at the 86.25 price level. The weekly trend remains a negative one but we are now approaching major price support levels.

A. Financials

The Financial Select Sector Index (XLF-14.40) finished the trading week with a 0.89% decline. The XLF concluded the 2009 trading year with a positive return of 15.01%. The XLF is entering week three of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall remain at 14.53. Any weekly closing price above 14.53 will negate our current “sell” signal for the XLF. A fresh weekly “buy” signal has been generated in XLF component Goldman Sachs (GS-168.84). Weekly “buy” signals currently exist for XLF components Chicago Mercantile Exchange (CME-335.96) and MetLife (MET-35.35). Weekly “sell” signals continue to remain in place for XLF components Bank of America (BAC-15.06), American Express (AXP-40.52), Morgan Stanley (MS-29.60), Citigroup (C- 3.31), J.P. Morgan (JPM-41.67), Wells Fargo (WFC-26.99), and U.S. Bancorp (USB-22.51). An indication of positive momentum from GS warrants attention as a potential upside move to the 180.00 area may be in store over the near term. We would look to get long GS upon price weakness with a protective sell-stop under 160.00. We would continue to use extended price strength in the XLF and above negatively mentioned components to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-15.11) declined 2.77% for the week. The 2009 year-to-date performance of the XHB concluded at a positive 26.13%. 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 remain 14.85. Any weekly closing price below the 14.85 support level will negate our current “buy” signal in the XHB. Weekly “buy” signals remain in place for XHB components Toll Brothers (TOL-18.81), D R Horton (DHI-10.87), Pulte Homes (PHM-10.00), KB Homes (KBH-13.68), Lennar (LEN-12.77) and Ryland Group (RYL-19.70). Take note that XHB component LEN is scheduled to report quarterly earnings in the coming week. Week three of a “buy” signal; we would continue to use extended price weakness in the XHB and above positively mentioned names to increase long exposure and or to initiate long trades.

B. Semiconductor

The Semiconductor group (SMH-27.92) declined 0.53% for the week. The SMH performance for the 2009 trading year finished at a positive 58.54%. The SMH is entering week eight of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 27.54. Any weekly closing price below 27.54 will negate our current “buy” signal for the SMH. A fresh weekly “sell” signal has been generated in SMH component Novellus (NVLS-23.34). Weekly “buy” signals remain in place for SMH components Analog Devices (ADI-31.58), Texas Instruments (TXN-26.06), Micron Technology (MU-10.56), SanDisk (SNDK-28.99), Applied Materials (AMAT-13.94) and Intel (INTC-20.40). We continue to view the SMH as slightly over bought and now at the 28.00 weekly price resistance area. Trade initiation price entry is very important so we would look for lower price levels to initiate long trades. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-93.84) finished the trading week with a 1.11% decline. The final 2009 return of the RTH ended at a positive 24.87%. The RTH is entering week three of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the current “sell” signal shall remain at 95.09. Any weekly closing price above 95.09 will negate our current “sell” signal for the RTH. Weekly “buy” signals remain in place for RTH components Kohl’s (KSS-53.93), Sears Holding’s (SHLD-83.45), Target (TGT-48.37), and Home Depot (HD-28.93). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-36.72), WalMart (WMT-53.45) and BestBuy (BBY-39.46). Week three 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-61.52) finished the week with a 1.30% decline. The final 2009 trading year return for the SLX was a sparkling 109.46%. The SLX is entering the second week of a “buy” signal. Our weekly closing price support level for the SLX shall remain at 60.24. Any weekly closing price below 60.24 will negate our current “buy” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-55.12), Arcelor Mittal (MT-45.75), Nucor (NUE-46.65), and Steel Dynamics (STLD- 17.72). The highly volatile SLX finished a very strong 2009 trading year on a slightly sour note. While we shall continue to question the fundamental demand equation for this sector the charts continue to indicate strength. Continue to use price weakness to increase exposure and or to initiate long trades.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.00) decreased by 0.99% last week. The PPH finished the 2009 trading year with a positive return of 7.61%. The PPH is entering week seven of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall remain at 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. A fresh weekly “sell” signal has been generated in PPH component Merck (MRK-36.54). Weekly “buy” signals remain in place for PPH components Johnson & Johnson (JNJ-64.41), Pfizer (PFE-18.19), Abbott Lab’s (ABT-53.99), and GlaxoSmithKline (GSK-42.25). Eli Lilly (LLY-35.71) shall remain on our “sell” list at this time. The weekly trends remain favorable; use extended price weakness in the PPH and above positively mentioned components to increase exposure and or to initiate long trades.

III. Gold

GLD (streetTracks gold index) – The GLD (107.31) declined 0.97% on the week. The GLD finished the 2009 trading year with a positive return of 24.02%. 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 109.30. Any weekly closing price above 109.30 will negate our current “sell” signal for the GLD. The GLD price retreat is now five weeks in duration but the 107.00 trend line support level has yet to be violated on a weekly closing price basis. Any weekly closing price below 107.00 will indicate further downside for the GLD. We shall remain neutral at this time for we are negative in the short term but remain positive over the longer term.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1068.21) closed out the trading week with a 0.83% decline. The XOI completed the 2009 trading year with a positive return of 9.03%. The XOI is in the tenth week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall remain at 1077.95. Any weekly closing price above 1077.95 will negate our current “sell” signal for the XOI. Weekly “sell” signals remain in place for XOI components Exxon-Mobil (XOM-68.19), British Petroleum (BP-57.97), Suncor Energy (SU-35.31), Conoco-Phillips (COP-51.07) and Chevron-Texaco (CVX-76.99). Crude oil had an up week but the XOI neglected to confirm a change of weekly trend. We would continue to underweight the XOI and related components at this time.

The Oil Service Index (OIH-118.88) declined 1.50% this past trading week. The 2009 year to date return for the OIH finished at a positive 61.19%. The OIH is entering week three of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at 118.30. Any weekly closing price below 118.30 will negate our current “buy” signal for the OIH. Weekly “buy” signals remain in place for OIH components Halliburton (HAL-30.09), Schlumberger (SLB-65.09) and Baker Hughes (BHI-40.48). Weekly “sell” signals continue to remain in place for Ensco (ESV-39.94) and Transocean (RIG-82.80). Week three of a buy signal; continue to use extended price weakness in the OIH and above positively mentioned components to increase exposure and or to initiate long trades.

Natural Gas (UNG-10.08) declined 2.33% this past week. The UNG ended the 2009 trading year with a negative return of 56.49%. The UNG is entering week four of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 9.64. Any weekly closing price below 9.64 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for now the four-week advance can only be categorized as an over sold bounce.

The Coal Sector (KOL-36.12) declined by 0.66% this past week. The KOL ended the 2009 trading year with a positive return of 142.57%. The KOL 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 the 35.85 price level. Any weekly closing price below 35.85 will negate our current “buy” signal for the KOL. The KOL, the top sector performer of 2009 under our coverage, continues to display positive technical characteristics at this time. This being stated, the outstanding performance of the 2009 trading year will be much more difficult to replicate.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +6, a decrease from the previous week reading of +8. Currently 60.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is a decrease from 63.0% in the prior week. The Dow Jones Industrial average declined 0.87% for the week to 10428.05. The return for the 2009 trading year finished at a positive 18.81%.

The S&P 500, as measured by the SPY (111.44), declined 0.92% for the week. The final 2009 trading year return for the SPY ended at a positive 23.49%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 62.44), declined 1.45% for the week. The IWM concluded the 2009 trading year at a positive 26.80%.

The DIA (104.07) closed out the week with a 0.89% decline and is entering week eight 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. After achieving new high price levels for the 2009 trading year early in the week the DIA succumbed to end of year profit taking once again failing to close above what we would categorize price trend resistance. The DIA continues to struggle with a weekly close above the 105.00 trend resistance level. Any weekly close above significantly above 105.00 for the DIA would indicate further upside to the 110.00 area. From a price support perspective we continue to view the 102.72 support level as weekly “buy” signal price support. Any downside violation of this key level will indicate a troublesome beginning for the 2010 trading year.

Fresh weekly buy signals generated: N/A

Fresh negative weekly signals generated: MRK

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:

AA, CAT, CSCO, DD, DIS, HD, HPQ, IBM, INTC, JNJ, KO, MCD, MMM, MSFT, PFE, T, UTX, VZ

Dow 30 stocks with negative weekly signals:

AXP, BA, BAC, CVX, GE, JPM, KFT, MRK, PG, TRV, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, January 4

Economic

10:00 Construction Spending (Nov.): -0.5% cons.

10:00 ISM Index (Dec.): 54.0 cons.

Earnings

Before:

After: ANGO, LNDC, MG, MOS, SONC, SNX, TISI

Events

FED: Fed's Lockhart moderates financial crisis panel in Atlanta
$25 bln 3-month and $26 bln 6-month Treasury Bill Auctions
Fed's Duke speaks on economic outlook in North Carolina

Tuesday, January 5

Economic

10:00 Factory Orders (Nov.): 0.5% cons.

10:00 Pending Home Sales (Nov.): -3.0% cons.

14:00 Auto Sales (Dec.): 3.8M prior

14:00 Truck Sales (Dec.): 4.6M prior

Earnings

Before:

After:

Events

TIVO, EXPE, DTV, TRI at Citi Global Entertainment, Media, and Telecom Conf.

FED: Fed's Hoenig to speak on ending government bailouts

Wednesday, January 6

Economic

07:30 Challenger Job Cuts (Dec.): -72.3% prior

08:15 ADP Employment Report (Dec.): -75K cons.

10:00 ISM Services (Dec.): 50.5 cons.

10:30 Crude Inventories: -1.54M prior

Earnings

Before: AYI, FDO, MON, NWPX, RBN, RPM, UNF, WOR

After: BBBY, CBK, BLUD, OHB, RECN, RT, SMSC

Events

S, VZ, CMCSA, DISCA at Citi Global Entertainment, Media, and Telecom Conf.
POWR, ADES, MTZ, GOK at Pritchard Capital Partners Energize Conf.
FED: Fed's Minutes from December FOMC Meeting

Thursday, January 7

Economic

08:30 Initial Claims: 445K cons.

08:30 Continuing Claims: 5040K cons.

Earnings

Before: STZ, LEN, MSM, TXI

After: APOL, CRI, DMAN, DRWI, GPN, HIS, LWSN, NUHC, SCHN

Events

SNIC, MSFT at CEA International Consumer Electronics Show
XLNX, TECD, NVDA, MSFT at JPMorgan Technology Forum
EHTH, LEAP, IMAX, DSCM at Citi Global Entertainment, Media, and Telecommunications

Friday, January 8

Economic

08:30 Nonfarm Payrolls (Dec.): 0K cons.

08:30 Unemployment Rate (Dec.): 10.1% cons.

08:30 Average Workweek (Dec.): 33.2 cons.

08:30 Hourly Earnings (Dec.): 0.2% cons.

10:00 Wholesale Inventories (Nov.): -0.3% cons.

15:00 Consumer Credit (Nov.): -$5.0B cons.

Earnings

Before: AZZ, GBX, PSMT

After:

Events

TGE, PKD, UNT at Pritchard Capital Partners Energize Conf.
SIMG, SNIC at CEA International Consumer Electronics Show

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 12/28/09

2009-12-27T14:49:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

12/28/09

Note: Event Calendar is located at bottom of page

I. General Commentary

As the year 2009 draws to a conclusion we look in the rear view mirror and see what a truly historical market year it was. The first few months of the year were filled with chaos and fear as the future of the U.S. financial system was in doubt due to the unraveling of the black hole called the securitization market. The securitization market with it’s various ingenious inventions such as Collateralized Debt Obligations (CDO’s) and so forth proved to be nothing more than a giant Ponzi scheme which eventually would leave the U.S. taxpayer holding the hot potato. The infamous Bernie Madoff, convicted swindler, must chuckle in his prison cell when comparing the magnitude of the securitization scam versus his own indiscretion. In the midst of all the chaos the Treasury Chief, Tim Geithner and the Federal Reserve Chairman Ben Bernanke used everything in their arsenal and more to prevent the impending financial Armageddon. Their actions were not taken because of want; they were taken because of need. The response to the panic was a familiar bureaucratic response, print more money. The various emergency FED bail out programs were lavished upon the troubled financial institutions that spent the most money on lobbyists in Washington,D.C.. Banks whose executives also served on Federal Boards were also treated receptively. Why? Because that is business as usual in our nation’s capitol. I’m sure these facts are received well by the multitude of small regional bank employees who are now out of a job due to the record number of regional bank failures. The extreme measures taken by the FED have succeeded in terms of asset inflation. Retirement accounts which were cut in half by the panic sell-off have recouped approximately 60.0% of there losses. Despite this success we get the feeling that the FED is pumping air in to a leaky balloon. The unemployment rate remains stubbornly high at a generously reported 10.0% and the housing market remains on shaky ground as late payments on prime mortgages were recently reported to have doubled from a year ago. We understand the fact that these extreme measures by the FED were taken out of need but pumping massive amounts of liquidity in to the system does nothing more than extend this country’s problems in to the future. Sound familiar, business as usual in our nation’s capitol.

We would like to wish a very safe and Happy Holidays to all!!

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-110.21), Diamonds Trust (DIA-103.14), U.S. $ Index (UUP-23.01), NASDAQ Composite (COMP-2211.69), IShares Russell 2000 Index Fund (IWM-61.18) and the Powershares QQQQ Trust (QQQQ-44.46). We currently retain a negative view on the I-share 7-10 year Treasury bond (IEF-90.73). *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Transportation (IYT), Homebuilding (XHB) , Oil Service (OIH), Agriculture (MOO), Real Estate (IYR), Coal (KOL), Pharmaceuticals (PPH), and Semiconductors (SMH). *Take note that there are no changes from prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Gold (GLD), Steel (SLX), Internet Related (HHH), Natural Gas (UNG), and Managed Healthcare. * Take note that there are no additions to the neutral list from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Large Integrated Oil (XOI), Crude Oil (USO), and Financials (XLF), and Retailers (RTH). *Take note that there are no changes 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-89.04 (I-share 7-10 year Treasury bond) declined 1.86% for the week as the yield on the 10- year treasury increased from 3.54% to 3.80%. 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 “sell” signal. The weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 90.33. Any weekly closing price above 90.33 will negate our current “sell” signal for the IEF. It is the fourth week of a “sell” signal with interest rates climbing higher as the trading year draws to a close. The weekly closing price below the key 90.00 support level indicates a forthcoming test of 87.50 price support level.

A. Financials

The Financial Select Sector Index (XLF-14.53) finished the trading week with a 2.18% advance. The XLF is now positive by 16.05% to date for the 2009 trading year. The XLF has closed five cents above our weekly price resistance level after generating a fresh “sell” signal a week ago. Regardless of this occurrence we shall maintain our negative opinion at this time. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be readjusted to 14.53. Any weekly closing price above 14.53 will negate our current “sell” signal for the XLF. Weekly “buy” signals currently exist for XLF components Chicago Mercantile Exchange (CME-331.17) and MetLife (MET-35.39). Weekly “sell” signals continue to remain in place for XLF components Bank of America (BAC-15.25), American Express (AXP-41.68), Goldman Sachs (GS-163.97), Morgan Stanley (MS-29.60), Citigroup (C- 3.35), J.P. Morgan (JPM-41.89), Wells Fargo (WFC-27.09), and U.S. Bancorp (USB-22.58). A hint of strength from the XLF is not enough to warrant a change of opinion as the internal components continue to reflect a distribution trend. We would continue to use extended price strength to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-15.54) advanced 4.30% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 29.71%. The XHB is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal for XHB shall be raised to 14.85. Any weekly closing price below the 14.85 support level will negate our current “buy” signal in the XHB. Fresh weekly “buy” signals have been generated in XHB components KB Homes (KBH-14.08) and Lennar (LEN-13.36). Weekly “buy” signals remain in place for XHB components Toll Brothers (TOL-19.16), D R Horton (DHI-11.12), Pulte Homes (PHM-10.15), and Ryland Group (RYL-20.66). Week two of a “buy” signal; we would continue to use extended price weakness in the XHB and above positively mentioned names to increase long exposure and or to initiate long trades.

B. Semiconductor

The Semiconductor group (SMH-28.07) advanced 3.69% for the week. The SMH performance for 2009 to date stands at a positive 59.39%. The SMH is entering week seven of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 27.22. Any weekly closing price below 27.22 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain in place across the board for SMH components Analog Devices (ADI-31.69), Novellus (NVLS-23.60), Texas Instruments (TXN-25.83), Micron Technology (MU-10.16), SanDisk (SNDK-30.13), Applied Materials (AMAT-14.00) and Intel (INTC-20.33). We continue to view the SMH as slightly over bought and now at the 28.00 weekly price resistance area. Trade initiation price entry is very important so we would look for lower price levels to initiate long trades. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-94.91) finished the trading week with a 2.31% advance. The 2009 performance of the RTH currently stands at a positive 26.29%. The RTH is entering week two of a “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the fresh “sell” signal shall remain at 95.09. Any weekly closing price above 95.09 will negate our current “sell” signal for the RTH. Weekly “buy” signals remain in place for RTH components Kohl’s (KSS-54.65), Sears Holding’s (SHLD-83.86), Target (TGT-48.65), and Home Depot (HD-29.17). Weekly “sell” signals continue to remain in place for RTH components Walgreen’s (WAG-37.48), WalMart (WMT-53.60) and BestBuy (BBY-40.70). Week two 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-62.33) finished the week with a 5.75% advance. The current 2009 trading year return for the SLX is a positive 112.22%. The SLX has closed the week above our price resistance level and is therefore indicating a change of weekly trend from negative to positive. Our weekly closing price support level for the SLX shall be set at 60.24. Any weekly closing price below 60.24 will negate our fresh “buy” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-56.86), Arcelor Mittal (MT-45.55), Nucor (NUE-47.10), and Steel Dynamics (STLD- 18.22). The SLX, one of the top year-to-date upside performers, is attempting to close out the trading year in grand fashion. Although appearing somewhat over bought and ahead of fundamentals at this point in time, the SLX and related components are poised to move higher.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.72) increased by 0.54% last week. The current 2009 return for the PPH stands at a positive 8.78%. The PPH is entering week six of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall remain at 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. Weekly “buy” signals remain in place for PPH components Johnson & Johnson (JNJ-64.70), Pfizer (PFE-18.60), Merck (MRK-36.99), Abbott Lab’s (ABT-54.15), and GlaxoSmithKline (GSK-42.29). Eli Lilly (LLY-36.08) is the only PPH component that we would avoid at this time. The weekly trends remain favorable; use extended price weakness in the PPH and above positively mentioned components to increase exposure and or to initiate long trades.

III. Gold

GLD (streetTracks gold index) – The GLD (108.36) declined 0.54% on the week. For the 2009 trading year the GLD currently rests with a positive return of 25.24%. The GLD is entering week three of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 109.30. Any weekly closing price above 109.30 will negate our current “sell” signal for the GLD. Another slight down week for the GLD as it continues to correct from an over-bought condition. The GLD traded as low as 105.31 last week but managed to recover and close above the 107.00 weekly trend line price support level. In the coming week we shall watch the 107.00 support level intently for if held may signal an end to the three-week price correction. We shall remain neutral at this time for we are negative in the short term but remain positive over the longer term.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1077.20) closed out the trading week with a 3.18% advance. The XOI is now positive by 9.95% for the 2009 trading year. The XOI is in the ninth week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall be recalibrated to 1077.95. Any weekly closing price above 1077.95 will negate our current “sell” signal for the XOI. Weekly “sell” signals remain in place for XOI components Exxon-Mobil (XOM-68.66), British Petroleum (BP-58.24), Suncor Energy (SU-35.84), Conoco-Phillips (COP-50.87) and Chevron-Texaco (CVX-77.43). An up week for the XOI but we remain of the opinion that a test of the 1000.00 area price support level is in the near future.

The Oil Service Index (OIH-120.69) advanced 2.52% this past trading week. The 2009 year to date return for the OIH stands at a positive 63.64%. The OIH is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 118.30. Any weekly closing price below 118.30 will negate our current “buy” signal for the OIH. Weekly “buy” signals remain in place for OIH components Halliburton (HAL-30.27), Schlumberger (SLB-65.35) and Baker Hughes (BHI-41.02). Weekly “sell” signals continue to remain in place for Ensco (ESV-42.24) and Transocean (RIG-84.31). Week two of a buy signal; continue to use extended price weakness in the OIH and above positively mentioned components to increase exposure and or to initiate long trades.

Natural Gas (UNG-10.32) declined 2.82% this past week. The current 2009 performance of the UNG is a negative 57.74%. The UNG is entering week three of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 9.64. Any weekly closing price below 9.64 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for now the three-week advance can only be categorized as an over sold bounce.

The Coal Sector (KOL-36.36) advanced by 5.55% this past week. Year-to-date the KOL is positive by 144.19%. The KOL is entering week seven of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to the 34.56 price level. Any weekly closing price below 34.56 will negate our current “buy” signal for the KOL. The strong get stronger as the KOL and related equities look to finish 2009 as the top performers of our research universe.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +8, an increase from the previous week reading of +4. Currently 63.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is an increase from 56.0% in the prior week. The Dow Jones Industrial average advanced 1.85% for the week to 10520.10. The current return for the 2009 trading year stands at a positive 19.86%.

The S&P 500, as measured by the SPY (112.48), advanced 2.06% for the week. The 2009 trading year return for the SPY is positive by 24.64%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 63.36), advanced 3.98% for the week. The IWM year to date return is currently a positive 28.67%.

The DIA (105.00) closed out the week with a 1.80% advance and is entering week seven 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 closed right on the 105.00 trend price resistance level, the best close of the 2009 trading year. Despite our six-week buy signal we continue to remain somewhat cautious and view the 101.75 price level as a critical intra-week price support level as it is the low end of the six-week trading range. Weekly up trend and down trend lines are now converging which is an indication that a sharp move in either direction is coming soon. Any downside penetration of the 101.75 price support level will indicate a sharp downside move to the 99.00 area.

Fresh weekly buy signals generated: DD, MCD

Fresh negative weekly signals generated: N/A

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:

AA, CAT, CSCO, DD, DIS, HD, HPQ, IBM, INTC, JNJ, KO, MCD, MRK, MMM, MSFT, PFE, T, UTX, VZ

Dow 30 stocks with negative weekly signals:

AXP, BA, BAC, CVX, GE, JPM, KFT, PG, TRV, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, December 28

Economic

Earnings

Before: NWPX

After:

Events

FED: $44 bln 2-year Treasury Notes Auction
$28 bln 3-month Treasury Notes Auction
$29 bln 6-month Treasury Notes Auction

Tuesday, December 29

Economic

08:30 Case/Schiller 20 City (Oct.): -7.30% cons.

10:00 Consumer Confidence (Dec.): 53.0 cons.

Earnings

Before:

After:

Events

FED: $46 bln 5-year Treasury Notes Auction

Wednesday, December 30

Economic

09:45 Chicago PMI (Dec.): 55.1 cons.

10:30 Crude Inventories: -4.84M prior

Earnings

Before:

After: OHB

Events

FED: $32 bln 7-year Treasury Notes Auction

Thursday, December 31

Economic

08:30 Initial Claims: 465K cons.

08:30 Continuing Claims: 5076K cons.

Earnings

Before: PNY

After: CRI

Events

No notable events are scheduled

Friday, January 1

Economic

Earnings

Before:

After:

Events

Equity & Bond Markets closed for New Year's Day

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 12/21/09

2009-12-20T14:22:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

12/21/09

Note: Event Calendar is located at bottom of page

I. General Commentary

It was a mixed week for the major U.S. equity market averages as the amazing 2009 trading year draws to a close. The Dow Jones Industrial average declined by 1.36%, the S&P 500 was lower by 0.28% while the small-cap Russell 2000 and NASDAQ composite sported gains of 1.68% and 0.98% respectively.

As detailed below the Financial sector was a drag on the equity market last week as the massive amount of secondary equity issuance from the likes of Bank America, Wells Fargo, and Citigroup finally took it’s toll on buyers. Credit card companies also contributed to selling pressure after Capital One Financial (COF-39.50) disclosed a month over month increase in delinquencies from October to November, from 9.04% to 9.60%.

The Federal Open Market Committee (FOMC) left interest rates unchanged as expected from current levels and indicated that they would remain in place for the “foreseeable future”. The only change in language was that the FOMC indicated that some of the “emergency lending facilities” would be allowed to expire on February 1^st of 2010. This statement is an indication of the potential removal of the “training wheels” of liquidity that have been a major contributor to the levitation of the U.S. equity market since the panic lows reached in March earlier this year. The FOMC is once again walking on the proverbial high wire by weighing minor general economic improvement versus concern over the ballooning Federal deficit and a potential future sharp increase of price inflation. The architect of the emergency measures, Fed Chairman Ben Bernanke was approved by the Senate for another term as more work needs to be done to clean up the excesses from his predecessor, Alan Greenspan.

As detailed in the subsections below, regardless of the relatively benign trading action last week the equity markets appear to be in flux. As the Fed has indicated the removal of the back-stop of emergency liquidity programs the financial sector appears to be coming under increased selling pressure. We are beginning to see signs of sector rotation out of Financials and Retailers in favor of Oil Service, Home Builders, and small-cap names via the Russell 2000.

We would like to wish a very safe and Happy Holidays to all!!

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Transportation (IYT), Homebuilding (XHB) , Oil Service (OIH), Agriculture (MOO), Real Estate (IYR), Coal (KOL), Pharmaceuticals (PPH), and Semiconductors (SMH). *Take note that the XHB, OIH, and KOL are upgrades from prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Large Integrated Oil (XOI), Crude Oil (USO), and Financials (XLF), and Retailers (RTH). *The XLF and RTH are downgrades 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.73 (I-share 7-10 year Treasury bond) advanced 0.07% for the week as the yield on the 10- year treasury remained unchanged at 3.54%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF is entering week threeof a “sell” signal. The weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 91.18. Any weekly closing price above 91.18 will negate our current “sell” signal for the IEF. It is the third week of a “sell” signal with the 90.00 price level acting as a key price support level. Any failure for the IEF to maintain the 90.00 support level will indicate a further downside move to the 88.00 area.

A. Financials

The Financial Select Sector Index (XLF-14.22) finished the trading week with a 0.81% decline. The XLF is now positive by 13.57% to date for the 2009 trading year. The XLF has closed below our weekly price support level therefore generating a fresh “sell” signal. Our weekly closing price resistance level in order to maintain said “sell” signal shall be set at 14.48. Any weekly closing price above 14.48 will negate our fresh “sell” signal for the XLF. A fresh weekly “sell” signal has been generated in Bank of America (BAC-15.03). Weekly “buy” signals currently exist for XLF components Chicago Mercantile Exchange (CME-324.48) and MetLife (MET-35.42). Weekly “sell” signals continue to remain in place for XLF components American Express (AXP-40.51), Goldman Sachs (GS-163.19), Morgan Stanley (MS-29.21), Citigroup (C- 3.40), J.P. Morgan (JPM-40.95), Wells Fargo (WFC-26.78), and U.S. Bancorp (USB-22.30). Supply has finally caught up with demand as a recent slew of secondary equity offerings from BAC, WFC, and C, has satiated demand. We would now use any extended price strength in the XLF and above negatively mentioned names to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-14.90) advanced 2.25% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 24.37%. The XHB has closed above our weekly price resistance level and has therefore generated a fresh “buy” signal. Our weekly closing price support level in order to maintain our fresh “buy” signal for XHB shall be set at 14.50. Any weekly closing price below the 14.50 support level will negate our fresh “buy” signal in the XHB. Fresh weekly “buy” signals have been generated in XHB components D R Horton (DHI-10.53), Pulte Homes (PHM-9.28), and Ryland Group (RYL-18.97). A weekly “buy” signal remains in place for XHB component Toll Brothers (TOL-18.18). Weekly “sell” signals remain in place for XHB components KB Homes (KBH-13.09) and Lennar (LEN-12.45). A change of weekly trend has been signaled; we would now use extended price weakness in the XHB and above positively mentioned names to increase long exposure and or to initiate long trades.

B. Semiconductor

The Semiconductor group (SMH-27.07) advanced 1.21% for the week. The SMH performance for 2009 to date stands at a positive 53.71%. The SMH is entering week six of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 25.10. Any weekly closing price below 25.10 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain in place across the board for SMH components Analog Devices (ADI-30.88), Novellus (NVLS-23.94), Texas Instruments (TXN-25.46), Micron Technology (MU-8.78), SanDisk (SNDK-25.08), Applied Materials (AMAT-13.62) and Intel (INTC-19.63). The SMH recaptured the price decline of the prior week. We view the SMH as slightly over bought and near the 28.00 weekly price resistance area. Trade initiation price entry is very important so we would look for lower price levels to initiate long trades. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-92.78) finished the trading week with a 2.32% decline. The 2009 performance of the RTH currently stands at a positive 23.45%. The RTH has closed below our weekly price support level and has therefore generated a fresh “sell” signal. Our weekly closing price resistance level for the RTH in order to maintain the fresh “sell” signal shall be set at 95.09. Any weekly closing price above 95.09 will negate our fresh “sell” signal for the RTH. Fresh weekly “sell” signals have been generated in RTH components WalMart (WMT-52.85) and BestBuy (BBY-39.50). A fresh weekly “buy” signal has been generated in Target (TGT-48.24). Weekly “buy” signals remain in place for RTH components Kohl’s (KSS-53.39), Sears Holding’s (SHLD-76.27) and Home Depot (HD-28.65). A weekly “sell” signal continues to remain in place for RTH component Walgreen’s (WAG-36.64). A change of weekly trend has been generated; it is now time 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-59.90) finished the week with a 0.18% decline. The current 2009 trading year return for the SLX is a positive 103.94%. The SLX is entering week eight of a “sell” signal. Our weekly closing price resistance level for the SLX shall remain at 60.21. Any weekly closing price above 60.21 will negate our current “sell” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-49.23), Arcelor Mittal (MT-43.10), Nucor (NUE-43.83), and Steel Dynamics (STLD- 17.37). The divergence of price signals remains in place, but we get the feeling that any further $U.S. Dollar appreciation may adversely impact this highly volatile sector. At this time we shall maintain our neutral stance for the steel sector as internal component strength continues to contradict our “sell” signal for the SLX.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.36) increased by 0.02% last week. The current 2009 return for the PPH stands at a positive 8.20%. The PPH is entering week five of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall remain at 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. Weekly “buy” signals remain in place for PPH components Johnson & Johnson (JNJ-64.37), Pfizer (PFE-18.30), Merck (MRK-37.40), Abbott Lab’s (ABT-53.34), and GlaxoSmithKline (GSK-41.80). Eli Lilly (LLY-35.72) is the only PPH component that we would avoid at this time. The weekly trends remain favorable; use extended price weakness in the PPH and above positively mentioned components to increase exposure and or to initiate long trades.

III. Gold

GLD (streetTracks gold index) – The GLD (108.95) declined 0.34% on the week. For the 2009 trading year the GLD currently rests with a positive return of 25.92%. The GLD is entering week two of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 111.91. Any weekly closing price above 111.91 will negate our current “sell” signal for the GLD. A slight down week for the GLD as it continues to correct from an over-bought condition. The low trade of last week at 107.04 is now viewed as key price support as any downside violation of the price level will indicate further weakness down to the 100.00 area. On the flip side any weekly closing price above 111.91 will indicate a resumption of another “bullish” phase for the GLD. We shall remain neutral at this time until either of our key price levels indicates future direction.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1043.97) closed out the trading week with a 0.43% decline. The XOI is now positive by 6.56% for the 2009 trading year. The XOI is in the eighth week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall remain at 1074.87. Any weekly closing price above 1074.87 will negate our current “sell” signal for the XOI. Weekly “sell” signals remain in place for XOI components Exxon-Mobil (XOM-68.21), British Petroleum (BP-56.18), Suncor Energy (SU-33.70), Conoco-Phillips (COP-49.80) and Chevron-Texaco (CVX-76.90). A test of the 1000.00 area price support level continues to be our near term forecast.

The Oil Service Index (OIH-117.72) advanced 3.01% this past trading week. The 2009 year to date return for the OIH stands at a positive 59.62%. After seven weeks on our “sell” list the OIH has closed above our weekly price resistance therefore generating a fresh weekly “buy” signal. Our weekly closing price support level in order to maintain our fresh “buy” signal shall be set at 115.12. Any weekly closing price below 115.12 will negate our fresh weekly “buy” signal for the OIH. Concurrent “buy” signals have been generated in OIH components Halliburton (HAL-29.62), Schlumberger (SLB-62.95) and Baker Hughes (BHI-40.51). Weekly “sell” signals continue to remain in place for Ensco (ESV-41.82) and Transocean (RIG-82.59). A change of weekly trend has been signaled; it is time to switch course and use extended price weakness in the OIH and above positively mentioned components to increase exposure and or to initiate long trades.

Natural Gas (UNG-10.62) advanced 10.97% this past week. The current 2009 performance of the UNG is a negative 54.16%. The UNG is entering week two of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 9.64. Any weekly closing price below 9.64 will negate our current “buy” signal for the UNG. We shall maintain our neutral stance for the UNG at this time but any weekly closing price above the 10.84 price level will further enhance bullish momentum; for now the two-week advance can only be categorized as an over sold bounce.

The Coal Sector (KOL-34.75) advanced by 0.40% this past week. Year-to-date the KOL is positive by 133.37%. The KOL is entering week six of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at the 33.90 price level. Any weekly closing price below 33.90 will negate our current “buy” signal for the KOL. Improved technicals in coal equities BTU, MEE, and CNX, indicate that this sector is poised to move higher from current price levels.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +4, a decrease from the previous week reading of +12. Currently 56.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is a decrease from 70.0% in the prior week. The Dow Jones Industrial average declined 1.36% for the week to 10328.89. The current return for the 2009 trading year stands at a positive 17.68%.

The S&P 500, as measured by the SPY (110.21), declined 0.28% for the week. The 2009 trading year return for the SPY is positive by 22.12%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 61.18), advanced 1.68% for the week. The IWM year to date return is currently a positive 24.24%.

The DIA (103.14) closed out the week with a 1.31% decline and is entering week six 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 once again flirted with the 105.00 trend price resistance level only to be denied as sellers gained the upper hand in late week trade. Despite our five-week buy signal we remain somewhat cautious and now view the 101.75 price level as a critical intra-week price support level as it is the low end of the five-week trading range. Weekly up trend and down trend lines are now converging which is an indication that a sharp move in either direction is coming soon. Any downside penetration of the 101.75 price support level will indicate a sharp downside move to the 99.00 area.

Fresh weekly buy signals generated: MSFT

Fresh negative weekly signals generated: BA, BAC, GE, PG, WMT

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:

AA, CAT, CSCO, DIS, HD, HPQ, IBM, INTC, JNJ, KO, MRK, MMM, MSFT, PFE, T, UTX, VZ

Dow 30 stocks with negative weekly signals:

AXP, BA, BAC, CVX, DD, GE, JPM, KFT, MCD, PG, TRV, WMT, XOM

· Underlined names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, December 21

Economic

Earnings

Before: CAG

After: JBL

Events

FED: $30 bln 3-month and $31 bln 6-month Treasury Bill Auctions

Tuesday, December 22

Economic

08:30 GDP-Third Est. (Q3): 2.8% cons.

08:30 GDP Prices-Third Est. (Q3): 0.5% cons.

10:00 Existing Home Sales (Nov.): 6.25M cons.

Earnings

Before: CMC, LNN, PRGS

After: CTAS, FINL, MU, RHT, TIBX

Events

No notable events scheduled

Wednesday, December 23

Economic

08:30 Personal Income (Nov.): 0.5% cons.

08:30 Personal Spending (Nov.): 0.7% cons.

08:30 PCE Prices (Nov.): 1.6% cons.

08:30 PCE Prices-Core (Nov.): 0.1% cons.

09:55 Michigan Sentiment-Rev. (Dec.): 73.7 cons.

10:00 New Home Sales (Nov.): 439K cons.

10:30 Crude Inventories: -3.69M prior

Earnings

Before: AM

After: OHB

Events

No notable events scheduled

Thursday, December 24

Economic

08:30 Initial Claims: 470K cons.

08:30 Continuing Claims: 5175K cons.

08:30 Durable Goods (Nov.): 0.5% cons.

08:30 Durable Goods Ex.-Auto (Nov.): 1.0% cons.

Earnings

Before:

After: COMS, CRI

Events

Equity Markets close early for Christmas Eve (13:00)
Bond Markets close early for Christmas Eve (14:00)

Friday, December 25

Economic

08:30

Earnings

Before:

After:

Events

Equity & Bond Markets closed for Christmas

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 12/14/09

2009-12-13T16:31:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

12/14/09

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-111.11), Diamonds Trust (DIA-104.92), U.S. $ Index (UUP-22.68), NASDAQ Composite (COMP-2190.31), and the Powershares QQQQ Trust (QQQQ-44.13). We currently retain a negative view on the IShares Russell 2000 Index Fund (IWM-60.17) and the I-share 7-10 year Treasury bond (IEF-90.67). *Take note that there are no changes from the previous letter.*

Sector ETF’s within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Transportation (IYT), Financials (XLF) , Retailers (RTH), Agriculture (MOO), Real Estate (IYR), Pharmaceuticals (PPH), and Semiconductors (SMH). *There are no upgrades from prior letter.* Use price weakness to increase long exposure or to initiate long trades.

Sector ETF’s that we currently rate as neutral include the Gold (GLD), Steel (SLX), Coal (KOL), Internet Related (HHH), Natural Gas (UNG), and Managed Healthcare. * The GLD and HHH are downgrades and the UNG is an upgrade from the previous letter.*

Sector ETF’s that we believe to be currently vulnerable to downside pricing pressure are the Large Integrated Oil (XOI), Oil Service (OIH), Crude Oil (USO), and Homebuilding (XHB). *The XOI is a downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-90.67 (I-share 7-10 year Treasury bond) declined 0.41% for the week as the yield on the 10- year treasury increased from 3.48% to 3.54%. 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 “sell” signal. The weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 91.88. Any weekly closing price above 91.88 will negate our current “sell” signal for the IEF. It is the second week of a “sell” signal with the 90.00 price level acting as a key price support level. Any failure for the IEF to maintain the 90.00 support level will indicate a further downside move to the 88.00 area.

A. Financials

The Financial Select Sector Index (XLF-14.39) finished the trading week with a 1.64% decline. The XLF is now positive by 14.93% to date for the 2009 trading year. The XLF is entering the second week of a “buy” signal. Our weekly closing price support level in order to maintain said “buy” signal shall remain at 14.33. Any weekly closing price below 14.33 will negate our current “buy” signal for the XLF. Weekly “buy” signals currently exist for XLF components Chicago Mercantile Exchange (CME-334.13), MetLife (MET-36.06), and Bank of America (BAC-15.63). Weekly “sell” signals continue to remain in place for XLF components American Express (AXP-40.73), Goldman Sachs (GS-166.00), Morgan Stanley (MS-29.78), Citigroup (C- 3.95), J.P. Morgan (JPM-40.96), Wells Fargo (WFC-25.41), and U.S. Bancorp (USB-23.05). Divergent price action in the financial sector remains the theme as the XLF is entering the second week of “buy” mode yet a majority of the internal components have yet to confirm upside potential. We would continue use price weakness in the XLF and above favorably mentioned components to increase long exposure and or to initiate long trades.

B. Builders

The Homebuilder exchange traded fund (XHB-14.60) declined 0.54% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 21.86%. The XHB is entering week twelve of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal for XHB shall remain at 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-17.81). We shall remain favorable on TOL but any weekly closing price below 17.80 would warrant a change of opinion. Weekly “sell” signals remain in place for XHB components Pulte Homes (PHM-8.83), D R Horton (DHI-9.86), Ryland Group (RYL-18.10), KB Homes (KBH-13.27), and Lennar (LEN-11.85). The weekly trend remains one of distribution; continue to use any price strength in the XHB and above negatively mentioned names to reduce long exposure and or to initiate short trades.

B. Semiconductor

The Semiconductor group (SMH-26.75) declined 1.40% for the week. The SMH performance for 2009 to date stands at a positive 51.90%. The SMH is entering week five of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 25.10. Any weekly closing price below 25.10 will negate our current “buy” signal for the SMH. Weekly “buy” signals remain in place across the board for SMH components Analog Devices (ADI-30.49), Novellus (NVLS-23.80), Texas Instruments (TXN-25.64), Micron Technology (MU-8.64), SanDisk (SNDK-22.92), Applied Materials (AMAT-13.38) and Intel (INTC-19.90). A slight decline for semiconductor sector for the week but no weekly trend changes have been generated. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-94.98) finished the trading week with a 1.07% advance. The 2009 performance of the RTH currently stands at a positive 26.38%. The RTH is entering week five of a “buy” signal. Our weekly closing price support level for the RTH in order to maintain the current “buy” signal shall remain at 92.95. Any weekly closing price below 92.95 will negate our current “buy” signal for the RTH. Fresh weekly “buy” signals have been generated in RTH components Kohl’s (KSS-55.60) and Sears Holding’s (SHLD-74.32). Weekly “buy” signals remain prevalent for RTH components WalMart (WMT-54.65), BestBuy (BBY-44.34), and Home Depot (HD-28.49). Weekly “sell” signals remain in place for RTH components Walgreen’s (WAG-38.81) and Target (TGT-46.93). Continue to use price weakness in the RTH and select favorably mentioned components to increase long exposure and or to initiate long trades.

E. Steels

The Steel sector (SLX-60.01) finished the week with a 1.30% advance. The current 2009 trading year return for the SLX is a positive 104.32%. The SLX is entering week seven of a “sell” signal. Our weekly closing price resistance level for the SLX shall remain at 60.21. Any weekly closing price above 60.21 will negate our current “sell” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-47.14), Arcelor Mittal (MT-42.00), Nucor (NUE-42.25), and Steel Dynamics (STLD- 18.22). A quarterly profit warning from STLD last week did little to influence the current bullish tone for SLX internal components. At this time we shall maintain our neutral stance for the steel sector as internal component strength continues to contradict our “sell” signal for the SLX.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.35) increased by 0.57% last week. The current 2009 return for the PPH stands at a positive 8.18%. The PPH is entering week four of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall remain at 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. A fresh weekly “sell” signal has been generated in PPH component Eli Lilly (LLY-34.97). Weekly “buy” signals remain in place for PPH components Johnson & Johnson (JNJ-64.85), Pfizer (PFE-18.30), Merck (MRK-37.07), Abbott Lab’s (ABT-53.77), and GlaxoSmithKline (GSK-42.24). 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 (109.32) declined 3.90% on the week. For the 2009 trading year the GLD currently rests with a positive return of 26.35%. The GLD closed out last week below our key price support level therefore generating a fresh “sell” signal. Our weekly closing price support level in order to maintain our fresh “sell” signal shall be set at 114.22. Any weekly closing price above 114.22 will negate our fresh “sell” signal for the GLD. While we will retain our longer term bullish stance for the GLD it appears that the time has come for an intermediate downside test of the bullish resolve of the gold bugs. We see weekly trend line price support around the 107.00 area. If the 107.00 level fails to provide price support a downside continuation move to the 100.00 could be in the cards. The sharp upside move of the GLD simply became too vertical and the market appears poised to punish those buyers who entered at elevated prices. An intermediate term correction has been signaled, first price support level is around 107.00, then 100.00. For the time being we shall move from a buy to a neutral in the GLD.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1048.50) closed out the trading week with a 1.87% decline. The XOI is now positive by 7.02% for the 2009 trading year. The XOI is in the seventh week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall be readjusted to 1074.87. Any weekly closing price above 1074.87 will negate our current “sell” signal for the XOI. Fresh weekly “sell” signals have been generated for XOI components Exxon-Mobil (XOM-72.83), British Petroleum (BP-56.45) and Suncor Energy (SU-34.27). Weekly “sell” signals remain in place for XOI components Conoco-Phillips (COP-50.92) and Chevron-Texaco (CVX-77.76). A downside test of the 1000.00 price support level appears to be forthcoming..

The Oil Service Index (OIH-114.28) declined 0.21% this past trading week. The 2009 year to date return for the OIH stands at a positive 54.95%. The OIH is entering week seven of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 116.24. Any weekly closing price above 116.24 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-28.11), Schlumberger (SLB-61.38), Baker Hughes (BHI-39.30), Ensco (ESV-41.67) and Transocean (RIG-80.27). No changes from the prior week but at this point appearing somewhat oversold and vulnerable to a near term counter-trend bounce; use any extended price strength to reduce long exposure and or to initiate short positions.

Natural Gas (UNG-9.57) advanced 10.76% this past week. The current 2009 performance of the UNG is a negative 58.69%. The violent price action of the past two weeks for the UNG has whip-sawed our prognostication, down 12.00% one week, up 11.00% the next. The UNG closed above our weekly price resistance level therefore negating our “sell” signal issued in our previous letter. Our weekly price resistance in order to maintain our fresh “buy” signal shall be set at 8.97. Any weekly closing price below 8.97 will negate our fresh “buy” signal for the UNG. Recent violent weekly price action sends us to the sidelines for the UNG, look to trade the two-week trading range, 8.50 price support, 9.83 price resistance.

The Coal Sector (KOL-34.61) advanced by 0.87% this past week. Year-to-date the KOL is positive by 132.43%. The KOL is entering week five of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at the 33.90 price level. Any weekly closing price below 33.90 will negate our current “buy” signal for the KOL. Limited price volatility for the KOL coupled with further weakness in coal equities ACI, MEE, BTU, and CNX gives us cause for caution. We shall continue to remain neutral on the KOL at this time.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +12, an increase from the previous week reading of +10. Currently 70.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is an increase from 66.0% in the prior week. The Dow Jones Industrial average advanced 0.80% for the week to 10471.50. The current return for the 2009 trading year stands at a positive 19.31%.

The S&P 500, as measured by the SPY (111.11), advanced 0.09% for the week. The 2009 trading year return for the SPY is positive by 23.12%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 60.17), declined 0.41% for the week. The IWM year to date return is currently a positive 22.19%.

The DIA (104.92) closed out the week with a 0.90% advance and is entering week five 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. It was another week of similar price action but this time the DIA closed at the upper end of the weekly trend line price resistance area of 104.50 – 105.00 area. 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 on a weekly closing basis.

Fresh weekly buy signals generated: AA

Fresh negative weekly signals generated: XOM

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:

AA, BA, BAC, CAT, CSCO, DIS, GE, HD, HPQ, IBM, INTC, JNJ, KO, MRK, MMM, PFE, PG, T, UTX, VZ, WMT

Dow 30 stocks with negative weekly signals:

AXP, CVX, DD, JPM, KFT, MCD, MSFT, TRV, XOM

· Underline names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, December 14

Economic

Earnings

Before:

After: SNS, PAY

Events

SYY Investor Day
AGLN, BABY, CPTX, VOLC at Roth Capital Partners Medical Device Conference
FED: $30 bln 3-month and $31 bln 6-month Treasury Bill Auctions

Tuesday, December 15

Economic

08:30 PPI (Nov.): 0.8% cons.

08:30 Core PPI (Nov.): 0.2% cons.

08:30 Empire Manufacturing (Dec.): 24.00 cons.

09:00 Net Long Term TIC Flows (Oct.): $42.3B cons.

09:15 Capacity Utilization (Nov.): 71.1% cons.

09:15 Industrial Production (Nov.): 0.5% cons.

Earnings

Before: BBY, FDS, GIGM

After: AIR, ADBE, TTWO

Events

BRCM Analyst Day
GE Annual Outlook Investor Meeting
FED: FOMC Meets

Wednesday, December 16

Economic

08:30 Building Permits (Nov.): 570K cons.

08:30 Housing Starts (Nov.): 578K cons.

08:30 CPI (Nov.): 0.4% cons.

08:30 Core CPI (Nov.): 0.1% cons.

10:30 Crude Inventories: -3.82M prior

14:15 FOMC Rate Decision: 0.25% cons.

Earnings

Before: JOYG

After: APOG, MLHR, HOV, MATK, NDSN, OHB, PAYX

Events

HANS Analyst Meeting
GAS Analyst Meeting
FED: FOMC Policy Release

Thursday, December 17

Economic

08:30 Initial Claims: 465K cons.

08:30 Continuing Claims: 5170K cons.

10:00 Leading Indicators (Nov.): 0.7% cons.

10:00 Philadelphia Fed (Dec.): 16.0 cons.

Earnings

Before: ATU, BRLI, DFS, FDX, GIS, MCS, PIR, RAD, SCHL, WGO

After: COMS, CAN, APSG, CRI, DRI, HEI, NKE, ORCL, PALM, ZQK, RIMM, SCS

Events

ONXX Analyst Meeting
AVT Analyst Meeting
BCR Analyst Meeting

Friday, December 18

Economic

08:30

Earnings

Before: KMX, CCL, NEOG, STEI

After:

Events

U.S. President Barack Obama attends the U.N. Climate Change Conf.

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 12/07/09

2009-12-06T15:48:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

12/07/09

Note: Event Calendar is located at bottom of page

I. General Commentary

As we have stated numerous times in previous letters, “bad news” is “good news” for the equity market. By this statement we mean that continued uninspiring economic news leaves the green light on for the Federal Reserve to maintain the emergency measures of providing liquidity that have been present for the past year and a half or so. Unfriendly economic news has been a constant throughout the incredible approximate 60.0% levitation in the U.S. equity market since the panic lows reached in March earlier this year. This incredible equity market recovery is certainly not a result of an improving fundamental picture. The market advance has been a pure function of liquidity driven asset inflation. This past Friday market participants were greeted with some “good” economic news in the form of an Unemployment Report that exceeded analyst’s expectations. While the markets initially greeted the “good news” with inflated opening prices the euphoria quickly faded as sellers took control of the day. Better economic news means we are that much closer to the removal of the training wheels of excess liquidity. When the training wheels are removed the equity markets will have to justify valuation based on fundamentals. Fundamentally there is no justification for current price levels.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-111.01), Diamonds Trust (DIA-103.98), U.S. $ Index (UUP-22.48), NASDAQ Composite (COMP-2194.35), and the Powershares QQQQ Trust (QQQQ-44.12). We currently have a negative view on the IShares Russell 2000 Index Fund (IWM-60.42) and the I-share 7-10 year Treasury bond (IEF-91.04). *Take note that the UUP is an upside opinion change and the IEF is a downside change from the previous letter.*

Sectors within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Gold (GLD), Transportation (IYT), Financials (XLF) , Retailers (RTH), Agriculture (MOO), Real Estate (IYR), Pharmaceuticals (PPH), Semiconductors (SMH), and Internet Related (HHH). *The XLF and IYR are upgrades 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), Coal (KOL), Large Integrated Oil (XOI), and Managed Healthcare. * The KOL is a downgrade from the previous letter.*

Sectors that we believe to be currently vulnerable to downside pricing pressure are the Oil Service (OIH), Crude Oil (USO), Natural Gas (UNG), and Homebuilding (XHB). *The UNG is a downgrade 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-91.04 (I-share 7-10 year Treasury bond) declined 1.79% for the week as the yield on the 10- year treasury increased from 3.23% to 3.48%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF has closed below our weekly price support level therefore generating a fresh “sell” signal. The weekly closing price resistance level in order to maintain our fresh “sell” signal shall be set at 92.79. Any weekly closing price above 92.79 will negate our fresh “sell” signal for the IEF. The IEF failed up at the price resistance area that we noted in our prior letter. With a fresh weekly “sell” signal now having been generated we would now use any price strength approaching our above noted price resistance level to reduce long exposure and or to initiate short trades. We see an initial near term downside test of the 90.00 area for the IEF.

A. Financials

The Financial Select Sector Index (XLF-14.63) finished the trading week with a 2.45% advance. The XLF is now positive by 16.85% to date for the 2009 trading year. After spending the past nine on our weekly “sell” list the XLF has closed above our price resistance level therefore generating a fresh weekly “buy” signal. Our weekly closing price support shall be set at 14.33. Any weekly closing price below 14.33 will negate our fresh “buy” signal for the XLF. Fresh weekly “buy” signals have been generated in XLF components Chicago Mercantile Exchange (CME-330.63) and MetLife (MET-35.33). XLF component American Express (AXP-39.30) has generated a fresh weekly “sell” signal. Bank of America (BAC-16.28) shall continue to remain on our “buy” list at this time. Weekly “sell” signals continue to remain in place for XLF components Goldman Sachs (GS-167.24), Morgan Stanley (MS-30.97), Citigroup (C- 4.06), J.P. Morgan (JPM-41.74), Wells Fargo (WFC-26.96), and U.S. Bancorp (USB-23.50). Very interesting price action in the financial sector this past week as the XLF is signaling a weekly change of trend yet a majority of the influential components have yet to confirm and follow suit. The ability of BAC to issue 1.30 billion shares at $15.00 within a day of announcing the intentions to do so indicates sufficient pent up demand. We would now use price weakness in the XLF and above favorably mentioned components to increase long exposure and or to initiate long trades.

B. Builders

The Homebuilder exchange traded fund (XHB-14.68) advanced 1.66% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 22.53%. The XHB is entering week eleven of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal for XHB shall remain at 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-18.08). We would look to buy weakness in TOL as it appears as the best looking chart in an overall weak sector. Weekly “sell” signals remain in place for XHB components Pulte Homes (PHM-9.07), D R Horton (DHI-10.10), Ryland Group (RYL-18.54), KB Homes (KBH-13.60), and Lennar (LEN-12.43). The weekly trend remains one of distribution; use any price strength in negatively mentioned names to reduce long exposure and or to initiate short trades.

B. Semiconductor

The Semiconductor group (SMH-27.13) advanced 6.86% for the week. The SMH performance for 2009 to date stands at a positive 54.06%. The SMH is entering week four of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall be raised to 25.10. Any weekly closing price below 25.10 will negate our current “buy” signal for the SMH. SMH components SanDisk (SNDK-21.94) and Applied Materials (AMAT-13.32) have decided to join the sector upswing as they both have generated weekly “buy” signals. Weekly “buy” signals remain in place for SMH components Analog Devices (ADI-30.60), Novellus (NVLS-23.36), Texas Instruments (TXN-26.85), Micron Technology (MU-8.45) and Intel (INTC-20.46). Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-94.08) finished the trading week with a 0.10% decline. The 2009 performance of the RTH currently stands at a positive 25.18%. The RTH is entering week four of a “buy” signal. Our weekly closing price support level for the RTH in order to maintain the current “buy” signal shall be raised to 92.95. Any weekly closing price below 92.95 will negate our current “buy” signal for the RTH. Weekly “buy” signals remain prevalent for RTH components WalMart (WMT-54.24), BestBuy (BBY-43.79), and Home Depot (HD-28.08). Weekly “sell” signals remain in place for RTH components Kohl’s (KSS-53.70), Sears Holding’s (SHLD-72.71), Walgreen’s (WAG-37.86), and Target (TGT-45.64). 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-59.24) finished the week with a 6.32% advance. The current 2009 trading year return for the SLX is a positive 101.70%. The SLX is entering week six of a “sell” signal. Our weekly closing price resistance level for the SLX shall be readjusted to 60.21. Any weekly closing price above 60.21 will negate our current “sell” signal for the SLX. Weekly “buy” signals remain in place for U.S. Steel (X-44.39), Arcelor Mittal (MT-39.96), Nucor (NUE-43.14), and Steel Dynamics (STLD- 17.29). At this time we shall maintain our neutral stance for the steel sector as internal component strength continues to contradict our “sell” signal for the SLX.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-66.09) increased by 1.05% last week. The current 2009 return for the PPH stands at a positive 7.76%. The PPH is entering week three of a “buy” signal. Our weekly price support level in order to maintain the current weekly “buy” signal shall be raised to 65.10. Any weekly closing price below 65.10 will negate our current “buy” signal for the PPH. Weekly “buy” signals remain in place across the board for PPH components Johnson & Johnson (JNJ-64.36), Pfizer (PFE-18.49), and Merck (MRK-36.70), Abbott Lab’s (ABT-53.78), GlaxoSmithKline (GSK-42.75), and Eli Lilly (LLY-37.39). 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 (113.75) declined 1.14% on the week. For the 2009 trading year the GLD currently rests with a positive return of 31.47%. The GLD is entering week nine of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 113.02. Any weekly closing price below 113.02 will negate our current “buy” signal for the GLD. The surprisingly much better unemployment report issued last Friday prompted a 5.00% one day sell off in the GLD. While the move was eye-catching the fact of the matter is that the GLD still maintains favorable technical status. The sharp downside move will test the resolve of the bullish crowd but has done nothing more at this point in time than relieve an extremely over bought condition. Any weekly close under are key 113.00 price support level will indicate further downside to come. For now we shall maintain our bullish stance on the GLD.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1068.43) closed out the trading week with a 0.63% decline. The XOI is now positive by 9.05% for the 2009 trading year. The XOI is in the sixth week of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall be lowered to 1042.03. Any weekly closing price above 1042.03 will negate our current “sell” signal for the XOI. Weekly “buy” signals remain prevalent for XOI components Exxon-Mobil (XOM-74.25), British Petroleum (BP-57.86) and Suncor Energy (SU-35.88). Weekly “sell” signals remain in place for XOI components Conoco-Phillips (COP-50.66) and Chevron-Texaco (CVX-78.07). The XOI remains in consolidation mode, any downside penetration of the key 1050.00 price support level will indicate a swift move down to the 1000.00 area.

The Oil Service Index (OIH-114.55) declined 2.14% this past trading week. The 2009 year to date return for the OIH stands at a positive 55.32%. The OIH is entering week six of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal shall be lowered to 121.23. Any weekly closing price above 121.23 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-27.81), Schlumberger (SLB-61.37), Baker Hughes (BHI-39.09), Ensco (ESV-41.95) and Transocean (RIG-83.00). No changes from the prior week; use any extended price strength to reduce long exposure and or to initiate short positions.

Natural Gas (UNG-8.64) declined 12.11% this past week. The current 2009 performance of the UNG is a negative 62.71%. The UNG has closed below our weekly price support level therefore negating our “buy” signal issued in our previous letter. Our weekly price resistance in order to maintain our fresh “sell” signal shall be set at 9.39. Any weekly closing price above 9.39 will negate our fresh “sell” signal for the UNG. Once again our attempt to call a bottom for the UNG has proved futile. Use extended price appreciation to reduce long exposure and or to initiate short trades.

The Coal Sector (KOL-34.31) advanced by 1.21% this past week. Year-to-date the KOL is positive by 130.42%. The KOL is entering week four of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall remain at the 33.90 price level. Any weekly closing price below 33.90 will negate our current “buy” signal for the KOL. Another poor weekly close for the KOL coupled with weakness in coal equities ACI, MEE, BTU, and CNX gives us cause for caution. We shall downgrade the KOL to neutral from buy.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +10, a decrease from the previous week reading of +14. Currently 66.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is a decrease from 73.0% in the prior week. The Dow Jones Industrial average advanced 0.77% for the week to 10388.90. The current return for the 2009 trading year stands at a positive 18.37%.

The S&P 500, as measured by the SPY (111.01), advanced 1.31% for the week. The 2009 trading year return for the SPY is positive by 23.01%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 60.42), advanced 4.93% for the week. The IWM year to date return is currently a positive 22.70%.

The DIA (103.99) closed out the week with a 0.78% advance and is entering week four 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. It was another week of similar price action with the DIA stalling at the weekly trend line price resistance area of 104.50 – 105.00 area. 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 on a weekly closing basis.

Fresh weekly buy signals generated: CSCO, MMM

Fresh negative weekly signals generated: AXP, DD, MCD

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:

BA, CAT, CSCO, DIS, GE, HD, HPQ, IBM, INTC, JNJ, KO, MRK, MMM, PFE, PG, T, UTX, VZ, WMT, XOM

Dow 30 stocks with negative weekly signals:

AA, AXP, BAC, CVX, DD, JPM, KFT, MCD, MSFT, TRV

· Underline names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, December 7

Economic

14:00 Consumer Credit (Oct.): -$9.3B cons.

Earnings

Before: BTH, GRB, LAYN

After: CASY, FMCN, PBY

Events

EBAY, PCS, VIA, MHP at UBS Media & Communications Conf.

FED: Fed's Bernanke
$30 bln 3 month and $31 bln 6 month Treasury Bill Auctions

Tuesday, December 8

Economic

Earnings

Before: AZO, BF/B, GIGM, HRB, IPSU, KR, SAFM, TLB, TTC, MTN

After: AVAV, CHP, CKR, CMTL, COO, MW, MIND, NCS, SAI

Events

CSCO Financial Analyst Conference
RF, JPM, MA, ZION at Goldman Sachs US Financial Services Conf.
FED:$40 bln 3-yr Treasury Note Auction

Wednesday, December 9

Economic

10:00 Wholesale Inventories (Oct.): -0.5% cons.

10:30 Crude Inventories: 2.09M prior

Earnings

Before: HITK, JTX, MOV, POWL

After: ALOG, BWY, FCEL, GEF, LULU, OHB, OXM, PLL

Events

BK, USB, BX, COF at Goldman Sachs US Financial Services Conf.
HPQ, INTU, QCOM, YHOO at Barclays Technology Conference
FED: $21 bln 10-yr Treasury Note Auction

Thursday, December 10

Economic

08:30 Initial Claims: 465K cons.

08:30 Continuing Claims: 5435K cons.

08:30 Trade Balance (Oct.): -$37.0B cons.

14:00 Treasury Budget (Nov.): -$134.1B cons.

Earnings

Before: CIEN, COST, CUB, DG, GIL, MEI, SFD, TITN, UNFI

After: CRI, CPII, ESL, HRLY, LTRE, NSM

Events

UTX Investor and Analyst Meeting
GE, ROK, CKP, WSO at Bank of America Merrill Lynch Global Industries Conf.
FED: $13 bln 30-yr Treasury Bond Auction

Friday, December 11

Economic

08:30 Export Prices Ex.-Ag. (Nov.): 0.3% prior

08:30 Import Prices Ex.-Oil (Nov.): 0.4% prior

08:30 Retail Sales (Nov.): 0.7% cons.

08:30 Retail Sales Ex.-Auto (Nov.): 0.4% cons.

09:55 Michigan Sentiment-Prel. (Dec.): 68.5 cons.

10:00 Business Inventories (Oct.): -0.3% cons.

Earnings

Before:

After:

Events

ITW Investor Day
HSC Annual Analyst Conf.

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 11/30/09

2009-11-29T14:38:00.000-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

11/30/09

Note: Event Calendar is located at bottom of page

I. General Commentary

U.S. stock market participants awoke this past Friday morning after a Thanksgiving holiday, tryptophan induced sleep to an unsettling market development. S&P 500 stock futures were in a free-fall after the largest corporate entity in Dubai, United Arab Emirates, Dubai Worldwide requested that creditors defer interest payments on approximately $60.0 billion of debt coming due over the next eighteen months. It was reported that European banks were the most exposed to a default with an estimated $40.0 billion in liability. The flight to quality trade commenced immediately as U.S. treasuries rallied, the U.S. Dollar spiked higher from recent lows and volatility (VIX-24.74) expanded by 21.00%. While the U.S. equity market weathered the brewing storm relatively well on Friday (S&P 500 – 1.63%) the ripple effects remain an unknown. Will the European bank liability reignite the risk aversion trade causing the U.S. Dollar to reverse course and actually strengthen? If this is the case will the weak Dollar, liquidity driven U.S. stock market recovery now be in jeopardy. Based upon our weekly oriented technical analysis the damage appears to be contained for the time being. This being stated the coming trading week will be a key determinant as to the future direction of the U.S. equity market. Since early March of this year the U.S. equity markets have shown the ability to overcomes negative news events, will this Dubai affair prove to be another bump in the road?

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 U.S. $ Index (UUP-22.26). *Take note that the IWM is a downside opinion change from the previous letter.*

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 Richard Reilly at rreilly123-2@comcast.net

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 America (BAC-15.47) are the only major internal components of the XLF that remain on our “buy” list at this time. Weekly “sell” signals continue to remain in place for XLF components Goldman Sachs (GS-164.16), Morgan Stanley (MS-30.51), Citigroup (C- 4.06), J.P. Morgan (JPM-41.33), Wells Fargo (WFC-27.14), Chicago Mercantile Exchange (CME-322.65), U.S. Bancorp (USB-22.95) and MetLife (MET-33.28). All things being considered the XLF and related internal components weathered the shock of the Dubai debt development fairly well this past Friday. The weakness displayed by GS and MS over the prior two weeks indicates that the Dubai news was not a surprise to the chosen few. The XLF and select related components remain in correction mode, use any extended upside strength approaching above mentioned price resistance to reduce long exposure and or to initiate short trades.

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), Texas Instruments (TXN-25.25), Micron Technology (MU-7.30) and Intel (INTC-19.11). SanDisk (SNDK-19.66) and Applied Materials (AMAT-12.29) shall continue to remain on our “sell” list at this time. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

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 U.S. Steel (X-43.05), Arcelor Mittal (MT-38.60), Nucor (NUE-41.81), and Steel Dynamics (STLD- 16.64). At this time we shall maintain our neutral stance for the steel sector as internal component strength continues to contradict our “sell” signal for the SLX.

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

09:45 Chicago PMI (Nov.): 53.0 cons.

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

10:00 Construction Spending (Oct.): -0.4% cons.

10:00 ISM Index (Nov.): 54.8 cons.

10:00 Pending Home Sales (Oct.): -0.5% cons.

14:00 Auto Sales (Nov.): N/A

14:00 Truck Sales (Nov.): N/A

Earnings

Before: BECN, GIGM, ISLE, LDR, SPLS, UTI

After: CPRT, GAME, SNDA

Events

MSFT, BMRN, CPHD, INTU at Nasdaq OMX Investor Conference
MDT, BSX, MYGN, STJ at Piper Jaffray Healthcare Conference
FED: Fed's Plosser to speak on economic outlook

Wednesday, December 2

Economic

07:30 Challenger Job Cuts (Nov.): -50.7% prior

08:15 ADP Employment Report (Nov.): -148K cons.

10:30 Crude Inventories: 1.02M prior

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

08:30 Initial Claims: 483K cons.

08:30 Continuing Claims: 5517K cons.

08:30 Productivity-Rev. (Q3): 8.5% cons.

08:30 Employment Cost Index (Q3): 0.4% prior

10:00 ISM Services (Nov.): 51.5 cons.

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

08:30 Nonfarm Payrolls (Nov.): -114K cons.

08:30 Unemployment Rate (Nov.): 10.2% cons.

08:30 Average Workweek (Nov.): 33.1 cons.

08:30 Hourly Earnings (Nov.): 0.2% cons.

10:00 Factory Orders (Oct.): 0.1% cons.

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, NUE, MT, STLD

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, RIMM, MA, FSLR

equityletter.com 11/23/09

2009-11-22T13:59:00.001-08:00

Thank you in advance for all comments and criticisms.....regards, equityletter.com

11/23/09

Note: Event Calendar is located at bottom of page

I. General Commentary

The equity markets spent the early part of last week forging higher but succumbed to late week profit taking and closed out the week at or around unchanged price levels. Regardless of the late week retreat we believe that the trends of the major equity market indices continue to remain favorable at this time and would continue to use extended price weakness to increase equity exposure.

As we have stated recently we remain a reluctant bull on the U.S. equity market because the Federal Reserve has stated their intention to continue to provide emergency levels of liquidity as needed. Last week Fed Chairman Bernanke stated that while the economy was showing signs of a moderate growth path, low interest rates and loose monetary policy will continue to be the plan for an “extended period”. In plain English, this means that the green light will remain in the on position for further asset inflation regardless of questionable fundamentals. There was another interesting quote from the Fed Chairman. Bernanke stated that, “the U.S. will not have a real market based financial system until it is safe to let a financial firm fail”. Apparently the numerous small regional bank failures of the past year or so put them in the category of a real market based financial system but the “too big to fail” institutions like Citigroup, AIG, GE Capital, etc., will continue to exist in never, never land. Large financial institutions with influential lobbyists in Washington D.C. will continue to enjoy an unfair advantage over small business be they financial or otherwise. When will the American public finally realize what is going on here?

Also of interest last week was the apology from the ultimate inside trader, Goldman Sachs. Goldman CEO Lloyd Blankfein publicly apologized for the role that Goldman Sachs played in contributing to the financial crisis. Goldman is so sorry for raping and pillaging the American public that they are prepared to pledge $500 million dollars over the next five years to aid in the development of small businesses. Blankfein stated that Goldman participated in things that were “clearly wrong” and “had reason to regret” when apologizing to the American public. Mr. Blankfein, if Goldman’s actions were truly “clearly wrong” and truly “regrettable” how about disgorging all profits related to such activity. As such something tell us that a $500 million, five year capital contribution does not come close to the billions of illegal profits that Goldman procured during the height of the financial crisis. This confession should have opened the doors to a Congressional investigation of the activities of Goldman. The fact of the matter is Goldman has it’s tentacles throughout the U.S. Government preventing such an occurrence. This is a fact that is “truly regrettable”.

The major market averages under our coverage that we currently rate with positive weekly technical indications are the SPDR- S&P 500 (SPY-109.43), Diamonds Trust (DIA-103.25), NASDAQ Composite (COMP-2146.04), Powershares QQQQ Trust (QQQQ-43.44), and the IShares Russell 2000 Index Fund (IWM-58.59). We currently have a negative view on the U.S. $ Index (UUP-22.83). *Take note that the IEF is an upside opinion change from the previous letter.*

Sectors within our coverage universe that remain in favor according to our weekly oriented technical analysis include the Gold (GLD), Transportation (IYT), Retailers (RTH), Agriculture (MOO), Pharmaceuticals (PPH), Semiconductors (SMH), Coal (KOL), and Internet Related (HHH). *The MOO and PPH are upgrades 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 Natural Gas (UNG), 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 Richard Reilly at rreilly123-2@comcast.net

Please frequent http://www.equityletter.com/

II. Sector Analysis

The IEF-91.84 (I-share 7-10 year Treasury bond) advanced 0.61% for the week as the yield on the 10- year treasury decreased from 3.43% to 3.35%. For comparative reference the yield on the 10-year Treasury began the 2009 trading year at 2.24%. The IEF has closed above our weekly price resistance level therefore indicating a change of weekly trend from negative to positive. The weekly closing price resistance level in order to maintain our fresh “buy” signal shall be set at 91.37. Any weekly closing price below 91.37 will negate our fresh “buy” signal for the IEF. After six weeks on our “sell” list the IEF is indicating signs of strength. Any further upside strength through the 92.00 price level will indicate an upside test of the 93.25 price resistance area. We must stress that any weekly closing price below 91.37 would quickly negate this fresh “buy” signal.

A. Financials

The Financial Select Sector Index (XLF-14.60) finished the trading week with a 0.41% decline. The XLF is now positive by 16.61% to date for the 2009 trading year. The XLF is entering week eight of a “sell” signal. Our weekly closing price resistance shall remain at 15.14. Any weekly closing price above 15.14 will negate our current “sell” signal for the XLF. The “buy” signals issued last week for Goldman Sachs (GS-170.03), and Morgan Stanley (MS-32.10) have been rejected, both are now back in “sell” mode. American Express (AXP-40.93) and Bank of America (BAC-16.09) are the only major internal components of the XLF that remain on our “buy” list at this time. Weekly “sell” signals continue to remain in place for XLF components Citigroup (C- 4.20), J.P. Morgan (JPM-42.52), Wells Fargo (WFC-27.92), Chicago Mercantile Exchange (CME-323.02), U.S. Bancorp (USB-23.29) and MetLife (MET-33.90). The prior week price action in GS and MS proved to be a head fake as both have quickly reversed back in to “sell” mode. This type of price action is unsettling and does not bode well for the sector as a whole. The XLF and select related components remain in correction mode, use any extended upside strength approaching above mentioned price resistance to reduce long exposure and or to initiate short trades.

B. Builders

The Homebuilder exchange traded fund (XHB-14.58) declined 2.08% for the week. The 2009 year-to-date performance of the XHB currently stands at a positive 21.70%. The XHB is entering week nine of a “sell” signal. Our weekly closing price resistance level in order to maintain our current “sell” signal for XHB shall be remain at 14.89. Any weekly closing price above the 14.89 resistance level will negate our current “sell” signal in the XHB. A weekly “buy” signal remains in place for XHB component Toll Brothers (TOL-20.02). 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-9.46), D R Horton (DHI-10.37), Ryland Group (RYL-19.02), KB Homes (KBH-14.12), and Lennar (LEN-13.67). 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-25.08) declined 2.37% for the week. The SMH performance for 2009 to date stands at a positive 42.41%. The SMH is entering week two of a “buy” signal. Our weekly price support level in order to maintain our current “buy” signal shall remain at 24.73. Any weekly closing price below 24.73 will negate our current “buy” signal for the SMH. A weekly “sell” signal has been generated in SanDisk (SNDK-20.26). Weekly “buy” signals remain in place for SMH components Analog Devices (ADI-27.48), Novellus (NVLS-20.97), Texas Instruments (TXN-24.74), Micron Technology (MU-7.27) and Intel (INTC-19.23). Applied Materials (AMAT-12.28) shall continue to remain on our “sell” list at this time. Take note that a quarterly earnings report is due in the coming week from SMH component ADI. A mid-week sector downgrade by a Bank America/Merrill analyst shook the foundation of the bulls but was not enough to violate our weekly price support level, therefore our SMH “buy” signal remains intact. Use extended price weakness in the SMH and above mentioned “favorable” names to increase long exposure and or to initiate long trades.

D. Retailers

The Retail sector (RTH-93.94) finished the trading week with a 0.56% decline. The 2009 performance of the RTH currently stands at a positive 25.00%. The RTH is entering week two 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. Weekly “buy” signals remain prevalent for RTH components WalMart (WMT-54.28), Sears Holding’s (SHLD-72.14), BestBuy (BBY-43.30), and Home Depot (HD-27.18). Weekly “sell” signals remain in place for RTH components Kohl’s (KSS-53.96), Walgreen’s (WAG-38.97), and Target (TGT-47.46). The RTH has maintained favorable status despite divergent internal component signals. This is due in fact to the recent strong showing in the shares of retail giant WalMart (WMT). 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-58.17) finished the week with a 2.27% advance. The current 2009 trading year return for the SLX is a positive 98.05%. The SLX is entering week four 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. A fresh weekly “buy” signal has been generated in Nucor (NUE-41.13). Weekly “buy” signals remain in place for U.S. Steel (X-41.32), Arcelor Mittal (MT-37.88), and Steel Dynamics (STLD- 16.13). At this time we shall maintain our neutral stance for the steel sector as internal component strength continues to contradict our “sell” signal for the SLX.

F. Pharmaceuticals and Healthcare

The Pharmaceutical group (PPH-64.99) increased by 3.89% last week. The current 2009 return for the PPH stands at a positive 5.96%. The PPH has closed above our price resistance level therefore generating a fresh “buy” signal. Our weekly price support level in order to maintain the fresh weekly “buy” signal shall be set at 63.18. Any weekly closing price below 63.18 will negate our fresh “buy” signal for the PPH. Weekly “buy” signals remain in place across the board for PPH components Johnson & Johnson (JNJ-62.31), Pfizer (PFE-18.36), and Merck (MRK-36.46), Abbott Lab’s (ABT-53.64), GlaxoSmithKline (GSK-41.53), and Eli Lilly (LLY-36.59). It is full steam ahead for the PPH and related internal components as they appear to be the primary beneficiary of the approaching healthcare reform.

III. Gold

GLD (streetTracks gold index) – The GLD (112.94) advanced 2.92% on the week. For the 2009 trading year the GLD currently rests with a positive return of 30.53%. The GLD is entering week seven of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to 107.70. Any weekly closing price below 107.70 will negate our current “buy” signal for the GLD. Once again slightly overdone to the upside but this train remains northbound one, use any extended price retreats approaching above mentioned support level to increase long exposure or initiate long trades.

IV. Energy- (Oil, Oil Service, Nat’l Gas, Coal)

The Large-Cap Integrated Oil space (XOI-1073.09) closed out the trading week with a 1.11% decline. The XOI is now positive by 9.53% for the 2009 trading year. The XOI is in the fourth 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. A fresh weekly “buy” signal has been generated for Exxon-Mobil (XOM-74.38). A fresh weekly “sell” signal has been generated in Chevron-Texaco (CVX-76.67). Weekly “buy” signals remain prevalent for XOI components, British Petroleum (BP-57.83) and Suncor Energy (SU-35.59). A weekly “sell” signal remains in place for XOI component Conoco-Phillips (COP-52.08). It appears that the time has come for the widely held, underperformer XOM to make a bullish upside move. At this point in time we would overweight XOM versus underweighting CVX.

The Oil Service Index (OIH-117.10) declined 4.25% this past trading week. The 2009 year to date return for the OIH stands at a positive 58.77%. The OIH 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 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-29.88), Schlumberger (SLB-63.34), Baker Hughes (BHI-40.49), Ensco (ESV-44.34) and Transocean (RIG-83.81). No changes from the prior week; use any extended price strength to reduce long exposure and or to initiate short positions.

Natural Gas (UNG-8.99) declined 0.77% this past week. The current 2009 performance of the UNG is a negative 61.19%. The UNG is entering week four of a “sell” signal. Our weekly price resistance in order to maintain our current “sell” signal shall be lowered to 9.48. Any weekly closing price above 9.48 will negate our current “sell” signal for the UNG. The UNG is testing the lows of the 2009 trading year of 8.94. This sets up a potential double bottom or a complete downside washout. Use extended price appreciation approaching our above mentioned price resistance level to reduce long exposure and or to initiate short trades.

The Coal Sector (KOL-34.57) advanced by 1.17% this past week. Year-to-date the KOL is positive by 132.16%. The KOL is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain our current “buy” signal shall be raised to the 33.99 price level. Any weekly closing price below 33.99 will negate our current “buy” signal for the KOL. The KOL appears a little extended to the upside but the “buy the dip” trade remains in force.

V. Dow 30 Analysis

Our Weekly Trend Indicator (WTI) measures in at +18, an increase from the previous week reading of +14. Currently 80.0% of the thirty Dow Jones Industrial components have favorable weekly chart formations; this is an increase from 73.0% in the prior week. The Dow Jones Industrial average advanced 0.46% for the week to 10318.16. The current return for the 2009 trading year stands at a positive 17.56%.

The S&P 500, as measured by the SPY (109.43), declined 0.17% for the week. The 2009 trading year return for the SPY is positive by 21.26%. Small caps issues, as measured by the IWM (IShares Russell 2000 Index Fund- 58.59), declined 0.24% for the week. The IWM year to date return is currently a positive 18.98%.

The DIA (103.25) closed out the week with a 0.66% advance and is entering week two of a “buy” signal. Our weekly closing price support level in order to maintain the current “buy” signal shall be raised to 102.72. Any weekly closing price below 102.72 will negate our current “buy” signal for the DIA. The DIA stalled at the weekly trend line price resistance area of 104.50 as the high trade last week was 104.64. Our thoughts remain unchanged from our previous letter; we see a weekly trend line trading range developing with the upper end resistance area around 104.50 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: KFT, VZ, XOM

Fresh negative weekly signals generated: CVX

Readers should take note that Dow Jones Industrial component HPQ is 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, KFT, MCD, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM

Dow 30 stocks with negative weekly signals:

AA, BAC, CSCO, CVX, JPM, MMM

· Underline names have changed from previous week*

VI. KEY EVENTS IN THE WEEK AHEAD:

Monday, November 23

Economic

10:00 Existing Home Sales (Oct.): 5.70M cons.

Earnings

Before: JOBS, BJS, CPB, LDK, TECD, TSN, VAL

After: ADI, ATW, CTRN, DY, HPQ, NUAN, VIMC

Events

UL Investor Seminar
FED:$44 bln 2-yr Treasury Note Auction
$30 bln 3 month and $31 bln 6 month Treasury Bill Auctions

Tuesday, November 24

Economic

08:30 GDP-Prelim. (Q3): 2.9% cons.

08:30 GDP Deflator Prelim. (Q3): 0.8% cons.

09:00 Case Schiller 20 City Index (Sep.): -9.05% cons.

09:00 Consumer Confidence (Nov.): 47.5 cons.

10:00 FHFA Home Price Index (Sep.): 0.1% cons.

Earnings

Before: AHCI, AEO, AMWD, BKS, BRCD, BWS, CBRL, DAKT, DLTR, DHT, DSW, EV, FRED, GCO, GIGM, HI, HNZ, HRL, MDT, WMG, ZLC

After: BCSI, JRJC, CWTR, JCG, NZ, SNS, TIVO

Events

JEC Analyst Event
FED:$42 bln 5-yr Treasury Note Auction
FOMC Minutes released from Nov 3-4 FOMC Meeting

Wednesday, November 25

Economic

08:30 Personal Income (Oct.): 0.2% cons.

08:30 Personal Spending (Oct.): 0.5% cons.

08:30 PCE Prices (Oct.): 0.1% 0.1% cons.

08:30 PCE Prices – Core (Oct.): 0.1% cons.

08:30 Initial Claims: 500K cons.

08:30 Continuing Claims: 5560K cons.

08:30 Durable Orders (Oct.): 0.5% cons.

08:30 Durable Orders Ex. Transport (Oct.): 0.7% cons.

09:55 Michigan Sentiment – Rev. (Nov.): 67.0 cons.

10:00 New Home Sales (Oct.): 405K cons.

10:30 Crude Inventories: -0.887K prior

Earnings

Before: CONN, DE, TIF, VIP

After: APWR

Events

PBR Analyst Meeting
FED: Bond Markets close early for Thanksgiving Holiday (14:00)

Thursday, November 26

Economic

08:30

Earnings

Before:

After: NCTY

Events

Equity & Bond Markets closed for Thanksgiving Holiday

Friday, November 27

Economic

Earnings

Before: FRO, SFL

After:

Events

Equity Markets close early for Thanksgiving Holiday(13:00)
Bond Markets close early for Thanksgiving Holiday (14:00)

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, NUE, MT, STLD

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, RIMM, MA, FSLR