Online Trading Blog

The Week Ahead: A large downward revision to GDP from 2.4% to 1.6% for the second quarter and a lower revision to Consumer sentiment is more evidence that the economy is accelerating lower. Time will tell if the Fed's monetary tools which it stands ready to use can head off the current nosedive. Personal Income and Spending numbers are released Monday. A Consumer Confidence Report is due Tuesday. Auto Sales, the ISM Manufacturing Index, and Construction Spending make for a busy Wednesday. Productivity, Factory Orders, and Pending Home Sales will make Thursday equally busy. By Friday, all eyes will focus on the Employment Report for August followed by the ISM Non-Manufacturing Index.

Stocks to Watch: Although the Board at 3 Par (PAR) has endorsed Dell Computer's offer to buy it for $27 a share, it is Hewlett-Packard that is in a better position to buy 3 Par with its $30 per share offer and larger enterprise hardware and services business. Other data storage stocks rose strongly as well such as Compellent Technologies (CML) up 15% and Netezza Corp. (NZ) up 33% on better than expected quarterly profits and record revenues. Speculation has pushed Arc Sight (ARST) up 40% the last two sessions on takeover rumors especially since the buyout of McAfee by Intel Corp.

Special Note: With many economic reports due this week, the stock market sports an upward seasonal bias ahead of the Labor Day weekend. Near term the three major indexes are coming out of oversold conditions, but if economic data proves to be lopsidedly weak then any bounce could be short lived. Technical traders will be interested to know that the CBOE US Equity Put/Call Ratio reached .39 last Monday the lowest it has been since nearing a 10 year extreme of .33 on April 14 just 12 days before this years market top on April 26.

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The Week Ahead: Evidence continues to mount that the economic recovery is slowing as nearly all retailers reported lower sales and consumer sentiment still sits at depressed levels. With earnings now uncertain, investors will place more emphasis on future economic reports starting with Tuesday's Housing Starts, Producer Price Index, and Industrial Production numbers. By Thursday, markets will focus on the Jobless Claims report which has been trending higher and finally the Leading Indicators.

Stocks to Watch: The Blackstone Group (BX) announced its intention to buy Dynegy Inc. (DYN) for $572 million as the ladder jumped 63% on the news. IBM will pay $488 million in cash or $21 a share to buy Unica (UNCA) which more than doubled on the news. After a profitable 2nd quarter, J.C. Penney (JCP) cut its earnings goal for the year. The stock has now reached a 16 month low. Dillard's (DDS) reached a 6 month low dropping 5% after reporting lower revenues.

Special Note: The technical backdrop shows another outside down week formed similar to late in June where higher highs, lower lows, and a lower close developed compared to the previous week raising the possibility of a sharper decline to follow near term. Also, the NYSE had an unusual occurrence on Friday the 13th where at least 2.2% of equities hit 52 week highs and 2.2% hit 52 week lows triggering the Hindenburg Omen. Four other technical requirements were also met. If one or more signals occur in the next 36 days it will confirm and indicate a higher than usual probability of a severe stock market decline to follow in the next four months.

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The Week Ahead: For the second straight month the economy lost jobs this time shedding 131,000 in July and hinting that the economy may be rolling over again. Some experts site less regulation and lower taxes as what is really needed to grow the economy. The Productivity and Costs report is revealed Tuesday, but the Federal Reserve Policy announcement later in the day is what traders will focus on. International Trade data is released on Wednesday but by Friday a whole host of reports including: the CPI, Retail Sales, Consumer Sentiment, and Business inventories will give markets much more insight into the economy.

Stocks to Watch: Goldman Sachs outlook for US Treasury yields to drop to 2.5% had corporate bond fund ETF's on the move like ishares iboxx Investop (LQD), but strong resistance lies just overhead. Boeing Co. (BA) had 25 plane cancellations and more than half were for the large Dreamliner fleet by a Middle Eastern leasing company. Investors dumped shares of the Washington Post Co. (WPO) having sited federal investigators looking into recruitment and student loan application issues pertaining to its Kaplan unit. Other career college companies were down hard as well such as: CECO (6%), APEI (32%), and DV (6%).

Special Note: The S&P 500 and Dow Industrials have formed a wedge shaped pattern since early July. The resolution to this many times is a spike in prices followed by a dramatic reversal so look for this volatile action possibly this week. It is worth noting that according to the Investment Company Institute the mutual fund cash-to-asset ratio was just 3.5% and 3.6% in April and May respectively. Once again these low cash percentages matched record lows amidst a 50 year history of data at levels last seen near the all time peak in 2007. Less extreme readings of 4% were recorded near the 1973 peak and 2000 peak.

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The Week Ahead: Economic growth since the 4th quarter of 2009 continues to slow with the initial GDP coming in at 2.4% for the 2nd quarter. Consumer sentiment also reached its lowest point in 6 months. Several more economic reports to watch include: Monday's ISM Manufacturing Index and Construction Spending. Tuesday's Auto Sales, Personal Income & Spending, and Factory Orders. Wednesday's ISM Non-Manufacturing Index. Thursday's Chain Store Sales and Friday's all important Employment Report.

Stocks to Watch: Intel Corp. (INTC) shares fell as it may be close to buying Germany's Infineon Technologies according to the Wall Street Journal which would give them a bigger play in smart phone semi-conductors. Geron Corp. (GERN) lost less money than a year ago but shot up 17% as the FDA is allowing early stage testing on experimental stem cell therapies such as the companies new spinal cord injury treatment. Orexigen Therapeutics (OREX) leaped over 9% as patients using its experimental weight-loss drug were shown to be more likely to lose weight than a placebo. An FDA Advisory Panel will review the medicine later this year.

Special Note: July's 7% gain in the major indexes was led by Material stocks which climbed 12.2% and Industrials gaining 10.3%. Healthcare was the laggard at 1.3%, but 80% of its companies reported better than expected earnings. Watch the formation of the head and shoulders pattern that started at the January high to the April top to the present juncture on the DOW, S&P 500, and NASDAQ. Thus far all the characteristics pertinent to this technical formation appear to be in place. A break below the July low would confirm the pattern, but a move above the January high would weaken it.

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The Week Ahead: The claimed success of the European Bank Stress Test has markets around the world relieved and rallying despite the details of how the tests were conducted to be somewhat secretive. Nonetheless, watch for more uncertainty not less going forward. New Home Sales will be announced on Monday. The S&P Case Shiller Home Price Index and Consumer Confidence are released Tuesday. Durable Goods Orders are due by Wednesday. The week will end with 2 more significant reports: The GDP figure for Q2 and Consumer Sentiment. All these reports are of course are lagging or coincident by their nature.

Stocks to Watch: General Electric (GE) raised their dividend after the historic cut a year ago and also announced a stock buyback as the stock rose 3%. Ford (F ) climbed 5.71% as it handily beat estimates and year ago earnings. The company will continue to pay down debt and sees 2011 results to be even better. Auto parts maker Johnson Controls (JCI) missed on its quarterly numbers and fell 4.5% as did bio medical firm Beckman Coulter (BEC), but it lost 21% of its value. Great Atlantic & Pacific Tea Company (GAP), the old A&P collapsed 33.6% on its earnings miss and management shake-up.

Special Note: Two important technical measures to be watchful for are: 1.) The Volatility Index (VIX) which is approaching oversold levels on a short and intermediate term basis and could be setting up for another round of downside volatility late this month or early August. 2.) An 8 to 9 day pattern of market turns has been in effect since mid May on the Dow Industrials and S&P 500. It is due to turn down early this week. Look for a continuation of this sequence or a move that carries prices higher into early August.

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The Week Ahead: The economic outlook dimmed on revenue declines by some large cap companies such as General Electric, Citigroup, and Bank of America. Volume swelled on a sharp market reversal in stocks, and consumer sentiment dropped to March '09 levels. The housing market will be in focus starting with the Housing Market Index on Monday, Housing Starts on Tuesday, and Existing Home Sales on Thursday. Look for possible surprises in the Jobless Claims figures and Leading Indicators on Thursday.

Stocks to Watch: The impact of financial reform on earnings has investors concerned that Bank of America (BAC) could be hurt to the tune of $10 billion going forward. General Electric (GE) fell 4.59% on heavy volume as 1/3 of its business is in Finance. Charles Schwab Corp. (SCHW) rose 4.05% on flat earnings, but some analysts believe that the company's decision to waive fewer fees will be a positive for profits later. Earnings from International Business Machines (IBM) on Monday, and McDonalds (MCD), and Verizon (VZ) on Friday will be key in that these 3 companies are the best performing DOW stocks since the April high.

Special Note: It appears stock indexes are entering another volatile downside phase based on there down sloping choppy nature since the "flash crash" low in early May. Consider this in light of a recent Wall Street Journal article on July 12 explaining how in sync stocks are to the S&P 500. According to a measure of correlation that calculates the percentage of stocks moving in the same direction as the index, stocks in the S&P 500 have been tracking the index to the highest degree since the 1987 crash creating dramatic moves both up and down in stocks when they seemingly move together in the same direction.

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The Week Ahead: Another countertrend rally in stocks gave the major indexes there best week in a year as markets gear up for second quarter earnings reports starting with Alcoa (AA) on Monday. Markets will also be looking at the International Trade numbers on Tuesday as well as Retail Sales and Business Inventories on Wednesday. By Thursday, the focus will shift to the Producer Price Index and Industrial Production. Friday ends the week with the Consumer Price Index and Consumer Sentiment.

Stocks to Watch: Google's (GOOG) license renewal in China after the censorship battle preserves its presence in the world's most populace internet market, but the stocks trend has been down since day 1 of 2010. Research In Motion (RIMM) bolted higher by 7.8% on twice its normal volume as it tries to reverse a slide that started last September after announcing an on-line applications store and consumer internet service in China. Commercial Insurer ACE Limited (ACE) vaulted higher by 4.7% as it will be added to the S&P 500 on Wednesday replacing Millipore Corp. which was acquired.

Special Note: Despite the markets downtrend the major indexes have managed to rise in 3 of the past 5 weeks with minimal or no net progress. More immediately the rise of the past 3 days has seen the number of issues advancing more each day but on lesser volume as seen for instance by the Russell 3000 where almost two-thirds of the index moved up. This may be indicating that traders are not confident in the underlying strength propelling the rally and are nervously backing away. Strong resistance lies directly overhead on near term charts.

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