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Monday, November 8, 2010

Weekly Market Newsletter 11-8-2010

The Week Ahead: The unemployment rate remained unchanged while pending home sales fell 1.8% after expectations were for it to rise 3%. Still, markets were undeterred and rose 3% or more last week. A quiet reporting week relative to last week starts Tuesday with the ICSC Index which will track the major retail chain store sales followed by the Wholesale Trade numbers. Wednesday, markets get a look at the International Trade figures and Jobless Claims. Thursday is Veteran's Day but stock markets are open. Friday, Consumer Sentiment and Money Supply reports are released.

Stocks to Watch: Earnings from the financial sector beat all other sectors with a 95% increase in Q3 as the lagging KBW Bank ETF (KBE) rose to its highest level since early August. Conversely, telecom sector earnings fell by 9%. Sprint Nextel (S ) sank to its August lows on fears that mobile provider Clearwire (CLWR) which provides a 4th generation mobile network to Sprint could fail as its cash will last only to the middle of next year unless further credit is secured. Massey Energy (MEE), 6 months after its mining disaster, is the subject of takeover rumors with at least 3 mining companies interested.

Special Note: U.S. stock indexes broke above their April highs with the exception of the S&P 100 (OEX) and Russell 2000. Confirmation from all averages would imply a new cycle breakout starting from the July low that may carry into next year with the bullish seasonal bias from November to January. A note of caution though is the Daily Sentiment Index (trade-futures.com) for S&P traders which at 94% bulls nears a 4 year extreme, and the percentage of bulls minus bears near 30% is the highest since the bear market began in 2007 (American Association of Individual Investors). Also, company insiders are selling at a pace not seen since 1990.

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Monday, October 18, 2010

Weekly Market Newsletter October 18, 2010

The Week Ahead: With the second quantitative easing program by the Fed on the way, currency markets have seen many imbalances as most foreign currencies rise against the falling dollar. This situation may be addressed on Friday as G20 finance ministers and bank governors meet in Seoul, South Korea. The first two notable reports on Monday are the Industrial Production number and the Housing Market Index. The Housing Starts figures get attention on Tuesday and the Fed's Beige Book on Wednesday. Two additional reports on Thursday include Jobless Claims and Leading Indicators for the economy.

Stocks to Watch: Bank stocks continued to slide against the market's trend. Bank of America (BAC) had its rating cut by S&P do to foreclosure concerns and J.P. Morgan (JPM) is reviewing its foreclosure procedures. Capital One (COF) nosedived 7.6% as it increased the amount of credit balances it does not expect to collect on. Technology stocks continued to soar with Google's (GOOG) better than expected earnings and Apple Computer (AAPL) due to report after Monday's close. Seagate Technology (STX) was approached to go private by a potential buyer and the stock shot up 22%.

Special Note: The number of S&P 500 stocks now above their 50 day moving average is just under 93% about where this percentage was at the April high. Also keep in mind that the Daily Sentiment Index (trade-futures.com) has also reached the same levels as the April high for both the S&P 500 and Nasdaq at a bullish 92% and 90% respectively. Being bullish near term is a crowded trade. Another noteworthy point is that despites technology's rapid ascent some of the generals have been noticeably lagging such as Cisco Systems, Intel, and Microsoft among others which are all down for the year.

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Monday, October 11, 2010

Weekly Market Newsletter 10-11-2010

The Week Ahead: Job losses continued to mount after September showed an additional 95,000 people lost employment net of the private sector's small gain. A couple of retail sales reports including the Redbook numbers will be out by Tuesday after the Columbus Holiday on Monday. The MBA Purchase Applications figures on Wednesday will provide a peak at coming home sales. The International Trade report and the Producer Price Index are released Thursday. Multiple reports arriving on Friday include: the Consumer Price Index, Retail Sales, Consumer Sentiment, and Business Inventories.

Stocks to Watch: With grain prices on the rise, agricultural related companies have been some of the best performers including Agrium (AGU) and CF Industries (CF) both hitting 52 week highs. On the other hand companies that buy loads of grains and meat are on the decline such as Tyson Foods (TSN) which was down 8% on big volume and Smithfield Foods (SFD) which was down 7%. The hedge fund Pershing Square now holds close to a 17% stake in JC Penney (JCP) and 11% in Fortune Brands (FO) as both companies reached 2010 highs.

Special Note: The major indexes have now surged up 5 of the last 6 weeks despite a declining 5 day moving average of the advanced decline line and a sliding relative strength indicator. Most of the technical and sentiment extremes noted over the past month are still in effect. The disparity between the weak fundamentals the economy is exhibiting and market performance is expanding. This behavior typically pre-stages a period of high volatility for share prices.

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Monday, October 4, 2010

Weekly Market Newsletter, 10-04-2010

The Week Ahead: Manufacturing activity grew at a slower pace in September versus August confirming other reports that economic growth is slowing. Reports to watch on Monday are Factory Orders and Pending Home Sales. Tuesday, the service sector will be tracked by the ISM Non-Manufacturing Index. Chain Store Sales will give a peak at the health of the retail consumer on Thursday, and the Consumer Credit figures will show if outstanding credit is still contracting. The Employment Report on Friday a month ahead of elections will take on added importance to the market.

Stocks to Watch: Citigroup (C) jumped 4.6% on a huge 770 million shares as the U.S. Treasury has now sold half the shares it received from the bailout. Energy and Material Sectors outperformed with Consol Energy (CNX) rising 3.7% as the mining company will close its Utah mine and layoff 231 workers. Freeport Mcmoran (FCX) reached a multi-month high as gold prices hit record highs. The Wall Street Journal reported that Gymboree Corp. (GYMB) is seeking private equity buyers that may have an interest in the company. Fidelity National Financial (FNF) and First American (FAF) came under pressure as questions arose over paperwork that may put millions of real estate titles into question.

Special Note: Markets are starting to show waning upside momentum as the S&P 500 is up a net 3.5 points over the last 9 trading days. Daily Sentiment readings from trade-futures.com are once again at extreme bullish levels typically found near peaks for many markets such as stocks 87%, gold 90%, silver 95%, bonds 93%, Euro 90% and many other commodities. Talk of a second quantitative easing or QE2 by the Federal Reserve no doubt has sparked much of the enthusiasm for the different asset classes, but the market seems to have discounted much of the upside from this potential action already.

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Monday, September 20, 2010

Weekly Market Newsletter, September 20, 2010

The Week Ahead: Gold and Silver price breakouts are helping to fuel speculation of higher prices in all markets even as the CPI was flat at its core rate, and household net worth fell 3% in the second quarter. Significant reports to watch will be: the Housing Market Index on Monday, the Housing Starts figures on Tuesday followed later by the Federal Reserve's announcement of interest rate policy, the Existing Home Sales and Leading Indicators on Thursday, and Durable Goods Orders preceding the New Home Sales numbers on Friday.

Stocks to Watch: Oracle Corp. (ORCL) beat the street estimates in its most recent quarterly report sending the stock up 8% on 5 times normal volume and reaching levels not seen since 2001. Micron Technology (MU) and Sandisk Corp. (SNDK) both sank as falling chip prices worldwide and weaker demand for consumer electronics are expected to squeeze profits. NetSuite ( N) reached a 52 week high as the business software firm will add 150 new workers for its 'cloud computing' services. Finally, Arena Pharmaceutical (ARNA) continued to collapse after the FDA rejected its obesity medicine.

Special Note: The Nasdaq 100 technology index (NDX) has done something beyond what it last did in January 1991 and that is 12 consecutive days without its prices touching the 5 day moving average. There are a number of extreme overbought readings the market is flashing now including a new 60 year low in the cash holdings of mutual funds now at 3.4% which is below the levels of the market peaks of 2000 and 2007. Another is the American Association of Individual Investors (AAII) whose sentiment poll shows more bulls now than at the recent April peak and less bears than the all time peak in the DOW and S&P 500 in 2007..

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Monday, September 13, 2010

Weekly Market Newsletter, September 13 2010

The Week Ahead: Slow growth continues to plague the U.S. economy. An additional 4 million jobs have been lost since the beginning of the Obama Administration. Retail Sales which makes up 2/3 of GDP will be released on Tuesday and afterwards Business Inventories will be announced. The MBA Purchase Applications will measure the health of the housing market on Wednesday with the Industrial Production report to follow. By Thursday, markets will focus on the Producer Price Index (PPI) then on Friday the Consumer Price Index (CPI) followed by Consumer Sentiment.

Stocks to Watch: PG&E Corp. (PCG) fell 8.35% on ten times normal volume after a gas line explosion in California. The stock was near its 2007 high before the incident happened. Nokia (NOK) has a new CEO aboard and a new N8 Smart Phone coming out later this week pushing the stock up nearly 2%. The company has the largest phone software business worldwide. Watson Pharmaceutical (WPI) dropped 4% after a competitor's potassium drug was approved by the FDA for return to the market.

Special Note: An upward wedge pattern or triangle on the DOW and S&P 500 in recent days is similar to a larger wedge that occurred from July 13 to August 9 that concluded at the most recent peak last month. Look for the completion of this very short term pattern this week with a stab above the 200 day moving average followed by a protracted sell off. Are stock analysts bullish or bearish? Bloomberg recently reported that 29% of brokerage firm ratings of stocks were buys while over 54% were holds and only 5% were sells.

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Tuesday, September 7, 2010

Stock Market Weekly Update, Sep 07, 2010

The Week Ahead: Unemployment inched up a notch on the U-3 measurement to 9.6%, but U-6 unemployment pushed to 16.7%. The private sector did add jobs for the eighth consecutive month. Two retail reports on Wednesday, the ICSC-Goldman Store Sales and the Redbook will give clues to consumer retail purchases. The Fed Beige Book and Consumer Credit will also be released. Thursday brings the International Trade figures as well as the Jobless Claims. Friday ends a short week with the Wholesale Trade numbers.

Stocks to Watch: After hitting new 52 week lows last Tuesday, the Select Sector Financial ETF (XLF) was one of the best performers last week as bank, insurance, and real estate stocks led the way. Campbell Soup (CPB) fell 3% on two times normal volume even after beating year ago numbers and estimates possibly indicating a trend change. Agricultural stocks charged higher as corn prices are now higher than a year ago: Caterpillar (CAT) rose 2.2%, Deere & Co. climbed 1.3%, and an exchange traded note that tracks corn prices and other grains (JJG) was up 3.3% reaching a 52 week high just 3 months after hitting a 52 week low.

Special Note: The stock markets surge from oversold levels early last week was either a flash in the pan due to seasonal factors surrounding the Labor Day holiday or the start of another advance in what appears to be a sideways trading range since May. One indication in support of the latter is the push through the 50 day moving average which in recent months has acted as a magnet to the 200 day moving average. Another is that some foreign indexes like the London FTSE index and the India Fund (IFN) have pushed through their August highs. An argument for the former is that September is historically the weakest month of the year.

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