::: Today’s Market Action :::
The bulls can claim a small victory today – at least in the Nasdaq which carved out a reversal to close back above first level of support around 2400 with volume higher than yesterday. That’s positive market action and indicates that we could see more of a retracement of Tuesday’s sell off before we head lower. I don’t think we’ve seen the worse of it yet and any retracement of that sell off just offers more opportunity to lock in gains and/or get into short positions. Looking at the bigger picture, another 5 – 10% down in the market would not be unusual and technically the bull would still be intact. It’s going to remain wild and volatile over the next several weeks. If you can’t stomach it, get out until the dust settles.
Here’s a look at today’s Nasdaq action. You can see the big push off the lows this morning with volume coming in higher than yesterday.. I’m calling this a day of accumulation and good day for the bulls. After Tuesday’s big drop and today’s amazing reversal it’s been a wild couple of days. I’ve definitely been on my toes this week and ready for some much needed R&R this weekend.
I also wanted to post a longer term "bigger picture" view of the S&P.. I don’t feel my last analysis of the market action provided a great big picture look. You see the acceleration of the upward trend of the past few years in October, indicating the market got a bit ahead of itself. The selling this week wasn’t ordinary but it certainly wasn’t extraordinary. In fact we’re just seeing a drop to the top of the long, lumbering uptrend of the past few years where it’s attempting to find support right now. Given the magnitude of Tuesday’s selling I don’t think we’re going to hold there but rather drop closer to the middle of that channel somewhere around the 200 day moving average. Even then, the action could be characterized as a healthy wringing of the excesses.
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day March 1st 2007
Nasdaq saw some accumulation day despite a down day.
Nasdaq: DOWN .49% today with volume 32% ABOVE average
Nasdaq ETF (QQQQ) DOWN .46%, volume 98% ABOVE average
Dow: DOWN .28%, volume 48% ABOVE the average
Dow ETF (DIA): DOWN .18%, volume 215% ABOVE the average
S&P ETF (SPY): DOWN .3%, volume 225% ABOVE the average
Russell Small Cap ETF (IWM): DOWN .76%, volume 798% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks were hit fairly hard again today, about in line with what the Russel Small Cap Index did
Summary:
* Decliners led Advancers 294 to 141
* Advancers were up an average of 1.28% today, with volume 61% ABOVE average
* Decliners were down an average of 1.56% with volume 46% ABOVE average
* The total SI Leading Stocks Index was DOWN .64% today with volume 51% ABOVE the average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for guaging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Utilities, REIT, Materials, Bonds, Commodities (bonds make first appearance)
* Current Lagging Sectors/Industries (over last 30 trading days):
Biotech, Home Construction, Oil Services
* Today’s Market Moving Industries/Sectors (UP):
Homebuilders and Utilities
* Today’s Market Moving Industries/Sectors (DOWN):
Internet Infrastructure, Biotech, Clean Energy, Nanotech, Retail
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. Today’s stock is LHC Group (LHCG), the highest rated home health care stock in the Self Investors database. It broke out to a new all time high today following an excellent earnings report.
ABOUT: LHC Group, Inc. (LHC Group) provides post-acute healthcare services primarily to Medicare beneficiaries in rural markets in the southern United States. The Company provides home-based services, primarily through home nursing agencies and hospices, and facility-based services, primarily through long-term acute care hospitals and outpatient rehabilitation clinics. LHC Group operates in Louisiana, Mississippi, Arkansas, Alabama, Texas, and West Virginia. As of December 31, 2005, the Company owned and operated 81 home nursing locations and four hospices. LHC Group also managed three home nursing agencies and one hospice as of December 31, 2005, in which it has no ownership interest. As of December 31, 2005, the Company also owned and operated five long-term acute care hospitals with a total of eight locations and four outpatient rehabilitation clinics, as well as managed the operations of one inpatient rehabilitation facility.
FUNDAMENTALS: A bit erratic at times, but LHC Group is a company that grows every year, often exceptionally. In 2006 proftis grew 50% which follows a tripling of profits the year before. Growth is expected to moderate a bit in the next several quarters but remain solid in the 20% range. Margins aren’t great, but solid and trending higher. Return on equity is excellent at around 18%. Management owns a significant portion of the company (35%) and more institutions are initiating positions for the first time. It all adds up to a very bullish fundamental picture. Home health care in general will continue to do well for many years to come as the boomers begin to age and require greater medical assistance. LHCG is one of the best in this space in my opinion
TECHNICAL: The technical picture is equally as bullish after the stock broke out today with big volume to a new all time high after reporting outstanding earnings and sales.
SELFINVESTORS RATING: With a total score of 52/60 (25/30 for fundamentals, 27/30 for technical), LHCG is top rated SelfInvestors.com break out stock in a growing industry.
Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently do not own a position in LHC Group (LHCG).