All indications were pointing to profit taking of some kind, with the big unknown being the severity of the decline. With the action of last week and today, it seems we’re getting the answer. Any correction won’t be severe. Over the weekend I mentioned the following to registered members in the Weekly Market Review:
"Technical forecasts have been calling for some sort of correction (me included), but the big unkown is by how much and how severe. If the action continues anything like last week, we won’t be down for long. Despite a round of economic numbers last week that indicate an economy slowing a bit more than expected (who really knows what the heck is going on with the number of jobs?!), the major indices managed to hold their upward trends throughout the week. I’d call it a big victory for the bulls. The weekly pull back occurred on light volume.. just the kind of digestion you want to see. The longer the bulls hold their ground and keep the market in the upward trend, the greater the chance we’ll be off to the races again. However, with the elections on Tuesday and the deteriorating action in leading stocks last week, it pays to be very cautious at this point. The action next week will be pivotal. Stay tuned for the After Market reports during week!"
I certainly didn’t expect the bulls to come charging out of the gate Monday morning ahead of tomorrow’s election, but that’s what the market does best. Move when you least expect it. Today’s action was not out and out, frenzied buying by any stretch, but technically there was indication of accumulation in the Nasdaq as it reclaimed support of its upward trend line. Both the S&P and Dow bounced off their respective trend lines. Yes, today’s action was mighty positive and we should be preparing for the Nasdaq to take out its 52 week highs. If not, the upward trend line on all indices are shaping up to be strong support levels. Now bring on the elections!
In addition to the free Weekly Reviews, registered members of SelfInvestors.com receive After Market reports on days when the market makes a significant move. In addition to commentary, I highlight any accumulation or distribution in the major indices, the action of leading stocks, industries/sectors leading and lagging the market and last, but not least a Stock of the Day. If you’d like to receive these reports, all it takes is a name and an email address on the homepage at SelfInvestors.com. Yes, you can use phony names as some people do. I think one of these days I’ll post some of the names people put in that form.. somewhat entertaining. Anyway, today’s Stock of the Day was Charles Schwab (SCHW), which broke out to a new multi year high with good volume. Ever since Charles moved to slash commission prices a couple years ago, the company has been on a tear.
ABOUT: Charles Schwab engages, through its subsidiaries, in securities brokerage, banking and related financial services. The Company provides financial services to individuals and institutional clients through three segments: Schwab Investor Services, Schwab Institutional and U.S. Trust. The Schwab Investor Services segment includes the Company’s retail brokerage and banking operations, as well as the division that serves company 401(k) plan sponsors and third-party administrators and supports company stock option plans. The Schwab Institutional segment provides custodial, trading and support services to independent investment advisors (IAs). The U.S. Trust segment provides investment, wealth management, custody, fiduciary, and private banking services to individual and institutional clients.
FUNDAMENTAL: A company that was a bit slow to offer discounted trading, but once it did the earnings and sales began to pick up again. Earnings growth has surged to about 40 – 50% in the last couple years with strong sales growth around 20%. Margins and ROE continue to rise just as they have for a couple years and are excellent. Once again a premier company.
TECHNICAL: Broke out with good volume today to a new multi year high. The construction of the base isn’t exceptional but it’s good enough for a great company in a strong industry and strong market. The way I’d play this one is to let the breakout ride, then look for a light volume pull back to a buyable range.. just to make the stock prove itself.
SELFINVESTORS RATING: With a total score of 50/60 (27/30 for fundamentals, 23/30 for technical), SCHW is a top SelfInvestors breakout stock.