The Growth Stock Report

The commentary here is for active traders. Our analysis uses a combination of fundamental and technical properties used by hedge funds and institutional money managers.

Saturday, March 04, 2006

Price Rules

Traders,

Top breaks in the neighbourhood

A hard case who's up to no good

Living like trash, a society rash

Ready to brain, ready to gash

A bad deal and a real rough ride

You're doing time on the other side

No rebellion, not today

I get my kicks in my own way

Right, ok

-- ACDC, “Breaking the Rules”

Our current position:

BUYERS BEWARE

In this week's edition you will find:

  • Where We Are
  • What Was Important About Last Week
  • What We Are Watching For This Week
  • A Word On Discipline
The following sections are on our home site:

Where We Are:

Taking a look at the broader market:

Price rules.

The major averages didn’t move much for the week, though action in the sectors gave us much to cheer.

Broker Dealers, Biotechnology, Transportation and Defense all hit new highs.

But not all is rosy.

The Technology thick Nasdaq showed strength, though is trailing the Dow Industrial Average and S&P 500.

Consumer Cyclicals continue to play second fiddle to borring Consumer Staples.

Sector action in tech related areas was marked by decent rallies in Semiconductors, Internet, Telecoms and Disk Drives - but in order for the Nasdaq to establish firm footing we need a few repeat performances.

Heavy distribution for the week is a major concern.

While actual price provides our most valuable measure of the market, volume often precludes moves.

If last week’s volume were to tell us something it’s that this market is in trouble.

Our game plan is the same as it has been for the past few weeks. We want to see tech stocks turn into leaders, and should they lead the way down, we’re going to hoist the red flag and hunker down.

Technically speaking:

The Dow Industrial Average ($INDU), -0.36%, bounced off its 20-day moving average four times during the week as it fights to hold a recent breakout from a year-long base.

The S&P 500 ($SPX), -0.17%, hit a new high for the week though closed in an indecisive doji. The deadly doji has been the precursor to many a change in directions.

Nasdaq ($COMPQ), 0.68%, edged higher for the week and is trading above all its major moving averages though has been unable to retrace to highs made earlier in the year.

Russell 2000 ($RUT), 0.25%, hit a new high for the week as it maintains a solid uptrend.

Volume indications the bears are packing in the heavy volume traffic as the Dow, Nasdaq and Russell 2k had three distribution day a piece. This is a very bad sign when markets churn on heavy volume with little price change. Bottom line is price rules, but this action goes had in hand with tops.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Yield ($tnx) shot up for the week as it continues to trade above its major moving averages.

The U.S. Dollar Index ($USD) closed above its 200-day average and below its 50-day average as it puts in what might be the start of a bearish right shoulder pattern.

The Gold Miners Index ($XAU) pulled back to below its 50-day moving average as it continues to cool from roaring to a new high a month ago.

The Dow Jones AIG Commodity Index ($DJAIG) is attempting to reverse on a multi-year trend line as it finds resistance at its 200-day moving average.

Consumer Staples ($CMR) hit a new high before pulling back to close in a doji candlestick bar.

Consumer Cyclicals ($CYC) drifted lower for the second week in a row as it flirts with its 50-day average.

Technology ($DJUSTC) edged above its 50-day average as it lags the major indexes.

The Semiconductor Index ($SOX) gave an impressive rally as it fights to maintain an uptrend.

Banks ($BKX) pulled back for the week as it tries to hold ground after breaking out to a new high last week.

Broker Dealers ($XBD) retained their dominance in the RS category while hitting a new high.

Retail ($RLX) pushed to a new high on the year, though have yes to establish a solid trend for the year.

Healthcare ($HCX) hit a new high before pulling back to its 50-day moving average.

Biotech ($BTK) continues to be a relative strength winner as it hit a new high.

REIT's ($DJR) pulled back modestly after hitting a new high last week.

Homebuilders ($DJUSHB) have been dropping off after finding resistance at its 50-day average.

Transportation ($TRAN) hit another new high in a show of relative strength dominance.

Airlines ($XAL) traded sideways as it continues o hold a triangle formation.

Defense ($DFX) hit another new high.

Energy ($IXE) edged above its 50-day average as it traded mostly sideways in its fight to retain its uptrend.

Utilities ($UTY) flirted with its 50-day average as it holds a sideways range for the year.

The top 10 industry groups from the 6 month RS screen are:

  1. GOLD
  2. DRUG DELIVERY
  3. INVESTMNT BROKERAGE-NA
  4. PRINTED CIRCUIT BOARDS
  5. RAILROADS
  6. NETWORKING COMMUN DVCS
  7. INDICES DOW TRANSPORTA
  8. INTERNET SERVICE PROVI
  9. SEMICONDUCTOR-INTGRTD
  10. INVESTMNT BROKERAGE-RE

What Was Important About Last Week

STOCKS:

  • Google (GOOG) warned that growth is slowing.
  • Intel (INTC) lowered its first quarter revenue guidance.
  • ValueClick (VCLK) announced Q4 earnings of $0.13 per share, in-line with the Reuters Estimates consensus.
  • Excluding non-recurring items, Autodesk (ADSK) reported Q4 (Jan) earnings of $0.37 per share, which was two cents better than the Reuters Estimates consensus.
  • Pacific Sunwear (PSUN) reported Q4 (Jan) earnings of $0.63 per share, in line with the Reuters Estimates consensus.
  • THQ Inc. (THQI) reaffirmed its outlook for fiscal 2006 and 2007. Co
  • ADC Telecommunications (ADCT) reported fiscal Q1 (Jan.) earnings of $0.09 per share, a penny below the Reuters Estimates consensus.
  • With Q4 EPS of $0.24, Chico's (CHS) checked in a penny below the Reuters Estimates consensus.
  • PETsMART (PETM) posted Q4 earnings of $0.47 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus.
  • Men's Wearhouse (MW) booked $0.67 in Q4 EPS, excluding non-recurring items. That figure surpassed the Reuters Estimates consensus by $0.15.
  • Starbucks (SBUX) reported an increase in comps of 8.0% for the month of February, beating the consensus of +6.5%.
  • Lowe's (LOW) impressed with its Q4 results and upbeat forecast.
  • Hormel Packages (HRL) topped Q1 estimates and raised its full-year outlook.
  • Heinz (HNZ) third quarter net income dropped 23% from the year-ago period.
  • Payless (PSS) topped Q4 estimates.
  • Foot Locker (FL) reported an 8% increase in Q4 profits and met analysts' earnings expectations.
  • Cal Dive (CDIS) reported Q4 (Dec) earnings of $0.69 per share, $0.17 better than the Reuters Estimates consensus of $0.52.

ECONOMY:

  • Real GDP was revised to show a 1.6% growth rate in Q4 versus the originally reported 1.1%. Despite the upward revision, Q4 was the slowest quarterly growth rate in three years.
  • January new home sales fell 5.0% to a 1.233 million annual rate.
  • Existing home sales fell 2.8% in January to 6.560 million units at an annual rate. However, December data was upwardly revised by 2.3%.
  • The Chicago Purchasing Managers' Index (PMI) pulled back to 54.9 in February versus 58.5 in January. The index has been above 50 for three consecutive years.
  • Crude oil inventory report from the Dept. of Energy was largely as expected.
  • The Institute for Supply Management (ISM) manufacturing index increased to 56.7 in February versus 54.8 in January. This was higher than consensus estimates of 55.5. The ISM suggested that February's level correlates with 5.1% annualized real GDP growth. Additionally, they note that the average ISM index for January and February (55.8) correlates with 4.7% real growth at an annual rate.
  • The ISM non-manufacturing business barometer rose to 60.1 in February versus 56.8 in January. Ten of the 17 industry groups surveyed reported growth in February compared to just eight in January. The new orders component inched higher to 56.2 last month versus 56.0 in January.
  • Personal income increased 0.7% in January and was upwardly revised to a gain of 0.5% in December (originally +0.4%). Personal consumption jumped 0.9% last month after a 0.7% gain in December (originally +0.9%). With consumption rising faster than income, the savings rate moved further into negative territory in January.

What We’re Looking For This Week

Key earnings releases:

  • MONDAY: Goldcorp (GG).
  • TUESDAY: Albertson's (ABS), Dress Barn (DBRN), Korn Ferry International (KFY), Pixar Animation Studios (PIXR), The Kroger Co. (KR).
  • WEDNESDAY: Michaels Stores (MIK).
  • THURSDAY: Aeropostale, Inc. (ARO), Blockbuster Inc. (BBI), Hansen Natural (HANS), Nanophase Technology (NANX), National Semiconductor (NSM), Urban Outfitters (URBN).
  • FRIDAY: AnnTaylor Stores (ANN), Edge Petroleum (EPEX).

On the economic front we have potential market movers with:

  • MONDAY: Factory Orders
  • TUESDAY: Productivity-Rev., Consumer Credit
  • WEDNESDAY: none
  • THURSDAY: Initial Claims, Trade Balance
  • FRIDAY: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories, Treasury Budget

The Following Sections Are On Our Home Site:

This Week's Word On Discipline:

“All religions, arts and sciences are branches of the same tree. All these aspirations are directed toward ennobling man's life, lifting it from the sphere of mere physical existence and leading the individual towards freedom.” – Albert Einstein

posted by The Growth Stock Report @ 3:44 PM