In last week’s report I mentioned it would be a difficult tight rope for the market to walk in the coming months as traders look for "goldilocks" numbers. Traders want indication of a slowing economy, but not too slow… all while keeping inflation in check so the Fed will ease up on rate hikes. Before the jobs report was released, fed funds futures were pricing in a 44% chance of an August 8th rate hike. That number dropped to just 19% after the number was released and the market surged as a result, taking out key resistance points in both the Dow and S&P (the Nasdaq hit resistance of its 50 day moving average) . However, it took just a few hours for traders to hit the sell button ahead of the weekend, leaving both the Dow and S&P with failed breakouts. Clearly, there is still a considerable amount of skittishness. Should the Fed pause on Tuesday, I would be very surprised to see this market catapult for a breakout move. I think the move we’ve seen off the bottom over the past several weeks is a pricing in of the pause in rate hikes. From now on, it will be all about the economy and inflation numbers. These numbers will be the drivers of the market, not the Fed decision.
It was a busy week in the Model Portfolio as I began to place short term bets on the short side. At the beginning of the week I closed a long position in my lone oil play Veritas (VTS) for a quick 6% gain due to a lack of buy volume at the breakout and in days following. Over the course of the week, premium members were alerted to a flurry of small short positions (currently 6 in all) which now represent around 35% of the portfolio. The rest of the portfolio is 10% on the long side and 55% cash. Considering the market continues to meander higher, the shorts are in solid shape and are up 1% collectively for the week. With the market a bit overbought up here and a lack of volume behind recent moves higher, playing the short side with a few small positions currently makes more sense.
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** Best/Worst Performers **
– Top 10 Performing Industries For the Week –
1. Silver 7.00%
2. Jewelry Stores 6.85%
3. Internet Service Providers 6.30%
4. Residential Construction 6.00%
5. General Contractors 5.75%
6. Farm Products 5.30%
7. Multimedia & Graphics Software 4.20%
8. Electronic Stores 3.95%
9. Cleaning Products 3.60%
10. General Building Materials 3.55%
– Top 10 Worst Performing Industries For the Week –
1. Education & Training Services -8.60%
2. Specialty Eateries -6.50%
3. Drug Delivery -6.00%
4. Medical Appliances & Equip -5.40%
5. Semis – Memory -4.65%
6. Gaming Activities -4.25%
7. Oil/Gas Drilling & Exploration -4.05%
8. Aerospace/Defense -3.15%
9. Diversified Communications -2.80%
10. Metal Fabrication -2.80%
– Top 5 Best Performing ETFs For the Week –
1. Ishares Silver (SLV) 8.50%
2.Central Fund Canada (CEF) 5.20%
3. SPDR HomeBuilders (XHB) 4.30%
4. ASA Gold (ASA) 2.50%
5. Powershares Water (PHO) 2.30%
– Worst 5 Performing ETF’s –
1. India Fund (IFN) -6.30%
2. HLDRS Oil Service (OIH) -3.55%
3. PowerShares Oil (PXJ) -3.20%
4. HLDRS Internet (IIH) -2.25%
5. Morgan Stanley (IIF) -2.05%
** IPO’s worth watching for the coming week **
1. Aircastle Limited (AYR): acquires and leases comercial jet aircraft to passenger and cargo airlines. Sales and earnings are Trading is set to start Tuesday.
2. Evercore Partners (EVR): NY financial firm providing advisory services corporations on mergers, acquisitions, divestitures and restructurings. The company also offers investment management to institutional investors. Sales and earnings are surging as the company reported profit and revenue that were more than double from the year ago period. Trading starts on Friday.
3. GNC (GNC): specialty retailer of nutritional products, including vitamins, herbs, minerals and supplements with over 5800 locations worldwide. Earnings and sales are growing quickly. Trading set to start on Friday
4. Intermetro Communications (MTRO): provider of VOIP network infrastructure is fast becoming profitable. Trading set to start sometime this week.
5. Qimonda (QI): Spinoff of Infineon. Munich based supplier of semiconductor products designing semi memory technologies and developing a variety of semi memory products on a chip. For the year ending September 30, Qimonda reported net income of $22 million on net sales of $3.41 billion. For the six months ending March 31, Qimonda reported a net loss of $144 million on net sales of $1.95 billion. Formed in 1952, Qimonda has about 10,469 employees. Trading set to start on Wednesday.
** Upcoming Economic Reports (8/7/06- 8/12/06) **
Monday: Consumer Credit
Tuesday: FOMC Rate Decision, Productivity & Costs, Economic Optimism, Retail Sales
Wednesday: Wholesale Trade, Petroleum Status, Mortgage Apps, Job Vacancies
Thursday: Money Supply, Treasury Budget, Trade Balance, Jobless Claims
Friday: Import Price Index, Business Inventories, Retail Sales
** Latest Blog Entries – In Case You Missed Them!**
– SelfInvestors Blog –
1. Today’s Notable Earnings Movers (GES, SBUX) (Aug 3rd)
http://investing.typepad.com/tradingstocks/2006/08/todays_notable__2.html
2. Breakout Highlights – Bancorp (TBBK) & Gilead Sciences (GILD) (Aug 2nd)
http://investing.typepad.com/tradingstocks/2006/08/breakout_highli.html
3. Today’s Notable Earnings Movers (AQNT, KEYS) (Aug 1st)
http://investing.typepad.com/tradingstocks/2006/08/todays_notable__1.html
4. Today’s Notable Earnings Mover’s (CFK, ZVXI) (June 31st)
http://investing.typepad.com/tradingstocks/2006/08/todays_notable_.html