Year-End Rally? Not Out of the Question
Could it possibly be? At a time when headlines are dire, are major averages on the verge of a rally into the end of the year?
It's too early to say at this point, but deviant markets tend to rally when it's least expected so be open to the possibility.
Monday marked the second day of a rally attempt for the indices after a bullish session Friday that saw major averages finish near session highs. Volume came in higher than Thursday but was skewed somewhat by options expiration. Still, it was a solid session all around. A big percentage gain for the major averages in higher volume on the fourth day or later of the rally attempt would be a legitimate buy signal and confirmation of a new uptrend.
Don't forget it's a shortened week of trading this week. The market will be closed Thursday for Thanksgiving, with a half day of trading on Friday. It'll most likely be a quiet week volume-wise, but three high-quality names with outstanding fundamentals report earnings this week. Strong results could result in renewed buying demand.
Headed into Monday, Chico's FAS (NYSE: CHS) was only nine percent off its recent high. The women's retailer reports earnings Tuesday before the open. Its weekly chart shows some erratic price swings recently which has weakened its technical picture, but there's still a chance for a solid quarter because it's a well-run company with a consistent track record of execution.
In August, the company reported profit of $0.28 a share, up 32 percent from a year ago. Sales rose 16 percent to $641.7 million. Sales at its Chico's/Soma Intimates rose 11 percent to $415 million. White House/Black Market increased 10 percent to $194 million.
This time around, quarterly profit is expected to rise 22 percent to $0.22 a share with sales up 18 percent to $644 million.
Meanwhile, cloud computing and customer relationship management bellwether Salesforce.com (NYSE: CRM) reports Tuesday after the close. It's expected to earn $0.32 a share, down six percent from a year ago but look for another strong quarter of top-line growth with sales up 33 percent to $776.5 million. Salesforce.com has always sold at a premium valuation but it's deserved because of blistering growth. Annual earnings growth is expected to slow a bit this year, up seven percent from 2011, but accelerate in 2013, up 33 percent from 2012.
The stock's recent pullback has been fairly well contained. Headed into today, it was only 12 percent off its recent high. It could start building the right side its base soon if new money starts to come in from the sidelines.
Finally, agricultural equipment maker Deere & Company (NYSE: DE) has climbed to within five percent of its 52-week high and continues to hold gains nicely ahead of its earnings report Wednesday before the open. Most of its recent gains have come in average or below-average volume which means that institutional investors have not been the fuel behind the buying.
Still, its relative price strength lately says the market's expecting a strong quarter. The consensus estimate calls for profit of $1.88, up 16 percent from a year ago. Sales are seen rising 12 percent to $8.8 billion.
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