Comtex SmarTrend(R) Morning Call -- March 19, 2010
An expected uptrend pause Thursday morning gave way to a rally, spurred on by some big cap stocks after lunchtime. The DJIA gained 45 points for the day to close at 10,779. The SmarTrend(R) indicators moved mainly sideways across plateaus near the bottoms of their overbought zone, getting ready to rally the DJIA up further.
The DJIA gains occurred on a lower volume day in terms of trading, one day before the expiration of quarterly futures and options; the quadruple witching day which traders are expecting to increase volatility in stock prices, which has been diminished recently. The result has been a grind-it-out multi-day rally, and yesterday's SmarTrend(R) uptrends to downtrends reflected the continuing buying force, reporting at 43:11. This had the effect of boosting the IBDI and Trend Ratio slightly. Both signal a continuing intermediate-term uptrend, but both indicators are moving sideways in their overbought zones. This condition can persist for weeks but also signals that the lifting power of the intermediate-term uptrend is not as robust as it was before its indicators climbed to their lofty heights. Nevertheless, the long-term uptrend soldiers on, pretty much unfazed by dips and surges, and with the intermediate-term uptrend perpetuates an attractive investing environment.
The critical issue, whether the DJIA can climb to 11,000 during this 7-week old uptrend cycle, is in large measure tied to the actions of the trading environment. With the DJIA only 220 points below its next ceiling of resistance, the near-term trend is building a base from which to rally. Three of four near-term trend indicators have now declined to or just below the lower boundaries of their overbought zones. This shallow retreat was not accompanied by a concomitant decline by the market indices, a remarkably bullish occurrence. In short, the distance upward that needs to be traversed by the DJIA to reach 11,000 is reachable in a near-term uptrend as its indicators climb back up in their overbought zones.
Usually the trade-term trend provides the intra and two day price swings that add drama to stock movements, although of late these price swings have been smaller than traders had become accustomed to before the current rally. Some investors believe the lower-than-usual volume that is behind the lower-than-usual volatility reflects the absence of the public in the stock marketplace, and assert that price volatility will not reoccur until the public starts buying stocks again. This theory may get a test on this quadruple witching day. Discussed below are the key issues that may cause the trade-term trend to turn and rekindle volatility in stock prices. The fact remains that during this two month old uptrend the normal dips and surges have been shallow. Even the prospects of a go-for-broke health care overhaul appears to be now viewed as sufficiently watered down with concessions to all affected to make the legislation into a bona fide, future dollar borrowed, economic stimulus plan, which is likely to provide some further impetus to the current rally, if the bill becomes law next week. To review the list of stocks changing trends in the last week and/or hear a podcast of this report, please go to http://www.mysmartrend.com.
While industrial firms assisted the DJIA to fresh 17-month highs in its eight-day run, the S&P500 was weighed down by weakness in its oil and gas and basic material shares, trimming the index by a slight 0.03%. On the NYSE volume was light, with only 0.925 billion shares traded as decliners outgunned gainers by a margin of four to three. US dollar gains drove commodity prices lower, as the greenback eased 0.7% against a basket of currencies, sending the broad based DJ-UBS commodities index down 0.5%.
Today's absence of market-moving catalysts may be supplemented by the day's quadruple witching, contributing to volatility and volume, which the session might otherwise lack. Many market strategists have called for a consolidating market pullback lately, which the market has stubbornly refused to provide in its current upward grind. However, even should a March madness of volatility be avoided, bulls and bears may duke it out as traders may prove hesitant before the weekend's expected healthcare vote, as they try to anticipate its likely passage as well as its potential impact.
Yesterday's market action was driven by a generally positive mix of economic reports. The Conference Board's leading economic indicators advanced in February for the eleventh straight month with an inline gain of 0.1% following January's 0.3% increase.
The Philly Fed index revealed a better-than-anticipated increase in March manufacturing activity to 18.9 from January's 17.6, and up from economists' expected 17.8. The gauge has increased for seven straight months.
Most significantly to current investor sentiment, pricing pressures remained mild, supporting continued low interest rate maintenance, and jobless claims fell, supportive of claims the jobs market may be stabilizing. Consumer prices held steady in February, in line with estimates, while core prices increased 0.1%, also matching expectations. Weekly jobless claims fell 5K to a seasonally adjusted 457K last week, equaling projections; continuing claims, however, moved higher, up 12K to a seasonally adjusted 4.58 million.
On the DJIA, 21 of its 30 components moved higher on the session, led by a 2.2% jump in Boeing (NYSE: BA) shares following a Bernstein upgrade, with its analyst noting the firm's 787 program "appears to be making substantial progress." DuPont (NYSE: DD) climbed 1.6% after asserting earnings growth of 20% annually likely from 2009-2012.
An early morning earnings post from industrial bellwether, FedEx (NYSE: FDX) bested analysts' projections, as the shipper's fiscal third quarter profit more than doubled and revenues increased 7%. The firm averred it is witnessing a "broadening" global recovery, and boosted its 2010 projections. As investors focused on prospects for global economic strengthening and the recent improved manufacturing data, industrials gained support, sending 3M (NYSE: MMM) shares up 1.8%.
Financials, however, fell following a Citigroup (NYSE: C) report cautioning the group richly-priced after gains of over 150% since March 9, 2009 market lows and vulnerable to a retreat at current levels. Moreover, unsubstantiated rumors circulated the Fed will raise its discount rate before the next FOMC policy meeting. Bank of America (NYSE: BAC) shares fell 1.1%, Wells Fargo (NYSE: WFC) 0.9%, and Morgan Stanley 0.7%. AIG (NYSE: AIG) and Goldman Sachs (NYSE: GS), however, continued higher, up 0.7% and 0.5%, respectively.
According to our analytics team, the critical issue, whether the DJIA can climb to 11,000 during this 7-week old uptrend cycle, is in large measure tied to the actions of the trading environment. With the DJIA only 220 points below its next ceiling of resistance, the near-term trend is building a base from which to rally. To examine the list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.
In the corporate corner, Perry Ellis (NASDAQ: PERY) posted fiscal fourth quarter results a nickel above estimates at 64 cents versus a loss of $1.58 a year ago, on revenues of $196.4 million, slightly under estimates of $198.91 million. The retailer's fiscal 2011 projection of $1.25-$1.40 compares to a consensus estimate of $1.37.
According to the China Business News, Google (NASDAQ: GOOG) may withdraw from its China internet search operations in April. An announcement by Google on Monday is possible, according to the report.
Piper Jaffray (NYSE: PJC) lifted its price target on GameStop (NYSE: GME) to $18 from $16 while remaining neutral on the shares.
Goldman Sachs (NYSE: GS) upgraded shares of Best Buy (NYSE: BBY) to "buy" from "neutral," increasing the price target from $44 to $47.
Palm (NASDAQ: PALM) shares surged 5.2% in Thursday trade until its fiscal third quarter results and conference call comments caused a 15.2% fall in premarket trade Friday. Third quarter results, a 61 cent loss, proved 19 cents worse than anticipated, and its fourth quarter revenue guidance of under $150 million fell short of the Street's $305.77 million expectations. Target prices for the shares were lowered by several firms, including Piper Jaffray (NYSE: PJC) and Deutsche Bank (NYSE: DB).
SunPower (NASDAQ: SPWRA) posted fiscal fourth quarter earnings of 47 cents ex-items on revenues of $547.9 million, up 38%. Consensus estimates were 49 cents on revenues of $490.9 million. The firm expects a breakeven fiscal first quarter on revenues of $330-$350 million. Projections for 2010 were set at $1.25-$1.65 versus estimates of $1.78. Accounting problems in the Philippines will result in adjustments for past two year results.
By Chip Brian, Editor-in-Chief, Comtex news Network
www.Comtex.com -- editor@mysmartrend.com
The following equities mentioned above include:
Comtex SmarTrend Alert
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Ticker Last Close Trend Direction Trend Price Trend Date
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AIG 34.64 Uptrend 27.34 2/11/2010
BBY 40.45 Uptrend 38.20 3/5/2010
FDX 92.67 Uptrend 83.65 2/26/2010
GOOG 566.40 Uptrend 563.78 3/5/2010
PERY 22.97 Uptrend 15.16 12/31/2009
INX -- S&P 500: 1,166 Lo: 1,161 Hi: 1,168 Change: -0.39
http://www.mysmartrend.com/images/INX20100319.jpg
INDU -- DOW JONES: 10,779 Lo: 10,728 Hi: 10,784 Change: +45.5
http://www.mysmartrend.com/images/INDU20100319.jpg
QQQQ -- NASDAQ: 2,391 Lo: 2,383 Hi: 2,394 Change: +2.19
http://www.mysmartrend.com/images/QQQQ20100319.jpg
This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.
Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2010
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