With the Fed announcement as the center piece, the market gyrated this way and that once again while the market attempted to price in the Fed cut and an array of economic data which to the surprise of many was quite bullish – strong GDP, tame inflation and a robust jobs number but tempered by weakening manufacturing. OK well not too surprising I suppose. It seems that the government is going to continue to push out bullish economic data regardless, but time will be the ultimate bearer of truth. I can’t imagine where this market would be if that Friday jobs number came in much weaker than expected. The word precipitous comes to mind. At any rate, as I always do I turn to the leading indicators of where this market is headed and that’s right in the technicals. What emerges? What emerges is a divergence between price and volume in that the overall price action in the indices is leaning bullish with what could be considered a cup with handle or even inverse head and shoulders pattern in the Dow and S&P. The problem is that volume levels indicate these patterns are in danger of failing so the best course of action is to just wait with a significant portion of cash on the sidelines. I’m going to let the patterns develop and give the market time to reveal just where it’s going. With key support levels near by and some breakout resistance areas in place above, we need confirmation of a move one way or the other before getting more aggressive on either side. The lines in the sand have been drawn. Let the tug-o-war begin.
The tech heavy Nasdaq continues to lead the way and well above the first level of support around 2700.
Notice the inverse head and shoulders and even what could be construed as a cup with high handle formation. Either way, the price action alone is considered bullish. What isn’t bullish is the amount of sell volume we’ve been seeing which sets us up for potential failure up here. The area between 13200 – 13400 is key support for the Dow. I won’t be getting bullish unless buy volume begins to overshadow sell volume AND the Dow breaks through the downward trend off that October high.
The S&P has carved out a similar pattern so I’m looking for similar action. It needs to hold up at support around 1480 – 1490 and ultimately breakout with volume above the short downward trend from the October high. The lines in the sand ou
::: Model Portfolio Update :::
The overall market dipped a bit last week but the Self Investors Model Portfolio continues to surge higher tacking on another 3.2% for the week, bringing the year to date performance to 27.6% (exactly where it closed 2006). I’m continuing to tread lightly in this volatile, unpredictable trading environment. As I’ve mentioned before, it really is one of the most difficult markets to read I’ve seen in quite awhile so I’m not willing to make large bets on either side (currently sitting on 55% in cash). During the week I did close out my long trade in RICK for a 54% gain, but still holding the other "adult club" stock PTT for more. On the losing side, the Fed rally forced me out of my QID position for a small 5% loss. Honestly, I’m not sure what I was thinking with this particular trade. Why I didn’t initiate a trade in the Dow Ultrashort (DXD) or S&P UltraShort (SDS) I don’t know. I liked the resistance that the Q’s were bumping up against and felt that tech was ready for some profit taking, but the S&P and Dow are far weaker indices right now. I’ll be the first to admit it wasn’t the my best trade of the year. I also dumped my NGA position later in the week. It still looks quite bullish but I wanted to move more to cash following the market meltdown on Thursday. I’ll continue to trade with extreme caution over at least the next couple weeks.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Nonmetallic Mineral & Mining: 5.65%
2. Internet Service Providers: 5.30%
3. Silver: 4.90%
4. Semiconductor – Memory Chips: 4.30%
5. Gaming Activities: 3.80%
6. Application Software: 3.55%
7. Drugs Wholesale: 3.50%
8. Data Storage Devices: 3.10%
9. Independent Oil & Gas: 2.85%
10. Medical Equipment Wholesale: 2.85%
– Top 10 Worst Performing Industries For the Week –
1. Surety & Title Insurance: -21.45%
2. Long Distance Carriers: -13.00%
3. Medical Practitioners: -11.75%
4. Mortgage Investment: -10.60%
5. Residential Construction: -9.75%
6. Savings & Loans: -9.70%
7. Apparel Footwear: -8.10%
8. Regional Banks – SE: -7.90%
9. Manufactured Housing: -7.70%
10. Sporting Activities: -7.15%
– Top 5 Best Performing ETFs For the Week –
1. India Fund (IFN) 9.60%
2. US Natural Gas (UNG) 7.40%
3. Ishares Commodies (GSG) 5.00%
4. Market Vectors Gold MIners (GDX) 4.75%
5. US Oil (USO) 4.50%
– Worst 5 Performing ETF’s –
1. Herzfeld Cuba (CUBA) -17.15%
2. KBW Banking (KRE) -9.05%
3. Ishares Home Construction (ITB) -8.40%
4. SPDR Homebuilders (XHB) -7.35%
5. HLDRS Regional Banks (RKH) -6.10%
::: IPO’s Worth Watching for This Week :::
There are few great looking IPO’s coming this week with China IPO’s leading the way once again along with a few energy IPO’s
1. China Nepstar Drugstore (NPD): The rapidly expanding company operates China’s largest retail drugstore chain, with some 1,800 stores in more than 60 coastal cities and adjoining provinces. Besides pharmacy services, China Nepstar stores carry up to 2,600 items, including over-the-counter drugs; nutritional supplements; and herbal, personal care, and family care products. They also offer consumable, seasonal, and promotional items, as well as about 1,100 private label products. The company distributes to stores through a national distribution center in Shenzhen and 11 regional distribution centers throughout China. Trading set to begin on Friday.
2. Agria Corp (GRO): Agria supplies corn seeds, sheep breeding products, and seedlings to a variety of customers throughout China. Corn seed products include four proprietary strains of corn seed (sold under the Primalights III brand) offering characteristics that allow them to thrive in various climate zones. The company also produces, sells, and distributes generic corn seed strains. Sheep breeding products consist of frozen sheep semen, sheep embryos, and breeder sheep. Agria also sells blackberry, raspberry, date, and white bark pine seedlings to end users such as plantation nurseries. Trading set to begin on Thursday.
3. AirMedia Group (AMCN): specializes in advertising to air travelers in China. It operates more than 2,000 digital TV screens in airports and places ads on more than 16,000 TVs on airplanes. To help attract an audience to its ads, AirMedia Group also runs news, weather, sports, travel, comedy, and documentary clips provided by China Central Television (CCTV). Selling time slots to both domestic and international advertisers accounts for half of AirMedia Group’s revenues. Some of its top customers include Lexus, Hitachi, and Nokia. Trading set to begin Wednesday.
4. OSG America (OSP): transports crude oil and refined petroleum products for oil companies and independent refiners, including key clients Chevron, Sunoco, and Marathon Oil. Its fleet consists of 10 product carriers, seven articulated tug barges (ATBs), and one conventional tug barge (CTB) which transport from refineries on the Gulf Coast to Florida; from refineries on the East Coast to New England; and from refineries on the West Coast to California and Oregon. The boats’ aggregate carrying capacity is about 5 million barrels. OSG America also owns nearly 40% of Alaska Tanker which carries crude oil from Alaska to the continental US. Trading set to begin on Friday
5. The Ensign Group (ENSG): offers both short-term rehabilitative and long-term assisted living services. Its owned and leased facilities have a collective capacity of 7,300 beds and are primarily located in California, Arizona, and Texas. Each property is operated by a separate subsidiary with independent management; Ensign Group’s Service Center provides centralized administration, finance, and clinical consulting services. The company derives three-fourths of its revenues from Medicaid and Medicare programs. Trading set to begin on Friday.
6. SandRidge Energy (SD): explores for and produces oil and natural gas, mainly in West Texas. The company also owns and operates drilling rigs and a related oilfield services business. In addition it operates gas gathering, marketing, and processing subsidiaries. Its 87%-owned PetroSource subsidiary operates CO2-treating and transportation facilities and has tertiary oil recovery operations. SandRidge Energy also has oil and gas acreage in Oklahoma’s Anadarko and Arkoma Basins, and in Colorado’s Piceance Basin. Trading set to begin on Tuesday.
7. Approach Resources (AREX): Specializing in finding and exploiting unconventional reservoirs, the company operates primarily in West Texas’ Ozona Northeast field, while developing its operations in Western Kentucky, and Northern New Mexico. The company’s unconventional designation results from a focus on developing natural gas reserves in tight gas sands and shale areas, necessitating a reliance on advanced completion, fracturing and drilling techniques. Trading set to begin on Thursday.
::: Upcoming Economic Reports (11/5/07 – 11/9/07) :::
Monday: ISM Services
Tuesday: None
Wednesday: Productivity, Wholesale Inventories, Crude Inventories
Thursday: Initial Claims
Friday: Export/Import Prices, Trade Balance, Mich. Sentiment
::: Upcoming Notable Earnings Reports :::
Monday: Sun Hydraulics (SNHY), T-3 Energy Services (TTES), Simcere Pharmaceutical Group (SCR), LSB Industries (LXU), American Oriental Biosciences (AOB), Quintana Maritime (QMAR), Balchem (BCPC)
Tuesday: Jacobs Engineering (JEC), Herbal Life (HLF), Banco Bredesco (BBD), Hologic (HOLX)
Wednesday: Cisco Systems (CSCO), ICF International (ICFI), J2 Global Communications (JCOM), US Global Investors (GROW), Ctrip.com (CTRP), InnerWorkings (INWK)
Thursday: Nvidia (NVDA), Dolby Labs (DLB), Gulfport Energy (GPOR), Credicorp (BAP), KHD Humboldt (KHD), Comtech (COGO), Hansen Natural (HANS), Perficient (PRFT), Gmarket.com (GMKT)
Friday: JA Solar (JASO)
::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::
1. Barry on Trading Options: All About Delta
2. Atheros Communications (ATHR) & BE Aerospace (BEAV) Breakout On Earnings
3. Pericom (PSEM), Mastercard (MA) & Partner Communications (PTNR) Breakout on Earnings
4. Will Market Wobble With Fed Wheels Off?; Stock of Day – Mastercard (MA)
5. Crocs (CROX) Crushed, Bankrate (RATE) On Verge of Breakout After Earnings
6. Watch Bulls/Bears Battle From Sidelines; Stock of Day – Cynosure (CYNO)
I too hate to think of what would have happened to the stock market if the jobs number on Friday would have been a very weak one. The volume has certainly been higher on the downside than it has on the upside of late which is concerning.