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Comtex SmarTrend(R) Morning Call -- November 17, 2009
Nov 17, 2009 (SmarTrend via COMTEX) --
Stocks jumped up Monday, mainly in response to a weak dollar, which resulted from the Fed Chairman confirming interest rates will remain low. The DJIA and S&P500 both climbed about 1.4%, above resistance levels, before giving back some gains to close at 10,407 and 1,109, respectively. The SmarTrend(R) indicators point to a pause in the rally today as the market indices try to consolidate bases, turning what were resistance levels to supports.
As expected, the third time was the charm. Market indices climbed well above their resistance levels early on yesterday and held on to close above DJIA 10,300 and S&P500 1,100 - levels identified here last week as being obstacles that needed to be surpassed if the market rally were to continue. After a momentary pause today, the DJIA is expected to climb to 10,600 before Thanksgiving and 11,000 by Christmas. In between those milestones, a 2.5% correction downward is anticipated, ending in early December. Today a pullback of about 0.5% is expected because the market indices became temporarily overheated yesterday. This was reflected in the daily SmarTrend(R) uptrends to downtrends, which registered an overheated bias to the upside at 176:18. This performance boosted the Trend Ratio well above the critical threshold discussed here for the past two days; but the IBDI tailed off slightly. The intermediate-term uptrend remains in gear, but signaled a need for a day of rest. Even so, the investing environment remains favorable to long stock positions because the long-term uptrend momentum has not been slowed.
The trading environment was the principal overheated element in the rally yesterday. The near-term trend indicators are starting to bounce around, indicative of a near-term top close at hand. The NBDX and NBDI both became overbought yesterday and the SmarTrend Ratio and NBDV appear ready to join the other two. These near-term trend mixed signals are healthy in that they provide an opportunity for a pause in the multi-day uptrend, rather than a substantial profit- eroding correction; it is likely that the expected dip will provide long stock buying opportunities at reduced entry prices today.
The trade-term uptrend wasted no time kicking into action from the open yesterday. The scramble to buy stocks was stimulated by the weak dollar, correlated to continuing low interest rates forecasted by the Fed Chairman. Later in the day, investors' optimism began to wane when they considered the Fed Chairman's reason for advocating low interest rates: to promote growth to counter weaker-than-expected economic recovery and persisting high unemployment. If that weren't enough, a prominent Wall Street banking analyst weighed in with her bearish view. Traders began immediate profit taking, and the market indices gave back some of the morning gains. More of that is likely this morning, but the big test will be whether the market indices fall back below what had been their resistance levels. There are on the horizon several potential news catalysts which could change the trade-term trend direction, and these are discussed below. However, the SmarTrend(R) indicators overall continue to point to more gold to be found in the stock market hills, even though a few valleys will be encountered along the path up. To review the complete list of stock changing trends in the last week, please click on http://www.mysmartrend.com.
A Harvard study revealed what equity investors know all too well: uninsured patients are 80% more apt to perish during trauma unit stays than the insured, or, in the language of the Street, economies with growth paid for by government stimuli are most apt to survive life-threatening financial crises. And so, when Fed Chairman Bernanke reiterated the central bank's intentions to maintain interest rates low for an extended period and the APEC promised to keep supportive policy measures in place to support their economies' growth, investors sought areas of greater risk, selling the US dollar to fund purchases in higher-yielding assets. The three major US indices climbed to 2009 intraday highs; the S&P500 pierced its key 1100 level and held; crude prices increased the most in six weeks; the price of gold rose 2% to fresh record highs; and the price of silver jumped 5.9%.
Equity price gains initially followed strength in Asian markets yesterday as the greenback's fall followed the Australian dollar's rise to fresh 2009 highs. The Japanese economy grew at its fastest pace in over two years, up 1.2% during the third quarter. And the leaders of the Asia Pacific Economic Cooperation forum promised to maintain accommodative stimulus policies until such time as "durable growth" is achieved.
Next, Fed Chairman Bernanke added comments supportive of continued stimulus at home, as he warned of threatening headwinds from rising unemployment and tight bank lending. Yields on US Treasuries fell, and the yield on the 2-years touched their lowest since last January. In a nod to the Administration's policy of dollar-supportive talk, Mr. Bernanke mentioned the Fed's dollar watch, but the market's reaction proved short-lived, as investors continued their speculative interest in the currency as a funding tool, discounting the odds of inflationary risk over the short-term, and entranced by the global recovery's speculative appeal.
At session's end, Meredith Whitney questioned the fundamental ballast of the current stock market rally, and projected a double-dip recession next year. Nonetheless, the harder stuff of retail growth, analyst upgrades and upside corporate guidance had made their marks, and the DJIA closed up 136 points for a 1.3% rise to 10,407; the NASDAQ climbed 1.4% to finish at 2198; and the S&P500 advanced 1.5% for an 1109 close.
Retail sales for October seemed to promise strengthened consumer spending as sales surged 7.4% from the prior month at auto dealerships, helping generate the 1.4% gain in sales, which sharply bested an anticipated 0.9% increase. Excluding autos, sales still rose 0.5%. Meanwhile, business inventories fell 0.4% in September, leading to downward revisions to third quarter GDP expansion from the initial 3.5% reported. A regional manufacturing barometer, the Empire State Manufacturing Index fell to 29.0 in November from 23.5 the previous month, but was largely ignored.
Analysts, meanwhile, offered upside opinions on a number of covered firms. Goldman Sachs (NYSE:GS) raised its rating on Nordstrom (NYSE:JWN) from "neutral" to "buy," recommending the firm as a "key beneficiary of a recovery in high-end consumer" demand. According to the analyst, "Higher-end retailers are well positioned to recover now that we are past the trough. Past recovery spending downturns illustrate that the high end falls further but then rebounds sharply to drive greater [earnings per share] upside. This coupled with greater global growth should propel further multiple expansion." Goldman's analysts also started Dell (NASDAQ:DELL) at a "buy," viewing it a "key beneficiary of the PC upgrade cycle." US Steel (NYSE:X) and AK Steel (NYSE:AKS) were added to JP Morgan's (NYSE:JPM) focus list
As analysts upgraded shares, corporations appeared increasingly confident, and news more bullish. Intel (NASDAQ:INTC) noted fourth quarter activity was outpacing expectations and lifted its dividend 12.75%. Lowe's (NYSE:LOW) posted inline interims, but offered optimistic fourth quarter guidance. In a regulatory filing American Express (NYSE:AXP) advised write-offs for uncollectible loans fell to 7.8% last month from an 8.4% annual pace in September. And Boeing (NYSE:BA), besides suggesting a Dreamliner flight likely by yearend, received orders for 11 737-800 jetliners.
Dollar congestion at the euro $150 level, financials' hit by Whitney comments, and general market fatigue appears to have driven overseas markets lower this morning. Investors are awaiting news on producer prices, generally expected to show core prices (estimated +0.1%) remained in check, but headline numbers are estimated up 0.5% in October, versus September's 0.6% drop. Industrial production is expected to report a 0.4% October gain, versus a 0.7% September increase.
A number of key retailer results are slated for today's release, looked to for guidance on current consumer demand. Among companies reporting today are: Home Depot (NYSE:HD), Target (NYSE:TGT), TJ Maxx (NYSE:TJX), Saks (NYSE:SKS), Autodesk (NASDAQ:ADSK), and Salesforce.com (NYSE:CRM).
According to our analytics team, SmarTrend(R) indicators point to a pause in the rally today as the market indices try to consolidate bases, turning previous resistance levels into supports, for a climb to 10,600 on the DJIA by Thanksgiving, and 11,000 by Christmas. To review the complete list of stock changing trends in the last week, please click on http://www.mysmartrend.com.
In the corporate corner, Home Depot (NYSE:HD) topped estimates by a nickel as earnings for the third quarter reached 41 cents, on inline revenues of $16.36 billion, down 8%. Comparable sales fell 6.9%. The company issued 2010 guidance of $1.55, slightly ahead of $1.53 projections. According to the firm, "There is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization."
ExxonMobil (NYSE:XOM) shares were upgraded to "overweight" at Barclays Capital (NYSE:BCS).
A regulatory filing showed Berkshire Hathaway (NYSE:BRK.A) nearly doubled its Wal-Mart (NYSE:WMT) holdings; added almost 112 million Wells Fargo (NYSE:WFC) shares; indicated a 1.28 million holding of ExxonMobil (NYSE:XOM) shares; and a 3.2 million SunTrust Banks (NYSE:STI) holding.
UBS (NYSE:UBS) CEO Grubel outlined an ambitious goal of annual pre-tax profits of $14.89 billion over the next 3-5 years.
Dillard's (NYSE:DDS) reported a smaller than expected third quarter loss, with a non-GAAP loss of 3 cents, versus estimates of a 51 cent loss on revenues of $1.36 billion, off estimates of $1.38 billion. Same-store-sales fell 9%.
By Chip Brian, Editor-in-Chief, Comtex news Network
www.Comtex.com -- editor@mysmartrend.com
The following equities mentioned above include:
Comtex SmarTrend Alert
----------------------------------------------
Ticker Last Close Trend Direction Trend Price Trend Date
----------------------------------------------------------------------
DELL 15.96 Uptrend 15.83 11/16/2009
GS 177.25 Uptrend 179.40 11/11/2009
JWN 35.05 Uptrend 34.90 11/9/2009
WMT 53.16 Uptrend 50.47 8/12/2009
X 41.37 Uptrend 39.27 11/11/2009
INX -- S&P 500: 1,109
Lo: 1,094 Hi: 1,114
Change: +15.82
http://www.mysmartrend.com/images/INX20091117.jpg
INDU -- DOW JONES: 10,407
Lo: 10,267 Hi: 10,434
Change: +136.49
http://www.mysmartrend.com/images/INDU20091117.jpg
QQQQ -- NASDAQ: 2,198
Lo: 2,177 Hi: 2,205
Change: +29.97
http://www.mysmartrend.com/images/QQQQ20091117.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. 2008
Comtex News Network, Inc. ("Comtex") obtains information from sources deemed to be reliable; however, Comtex does not guarantee the accuracy of any of the information or commentary provided. Comtex makes no warranties, expressed or implied, as to the fitness of the information for any purpose, or to results obtained by individuals using the information. In no event shall Comtex be liable for direct, indirect, or incidental damages resulting from the use of the information. Comtex shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to the information and its use. Comtex does not make specific trading recommendations or provide individualized market advice. The information contained in the Morning Call product is provided as an information service only.
To subscribe to this newsletter, please visit http://www.mysmartrend.com/newsletter . To learn more about SmarTrend, go to http://www.mysmartrend.com or call Comtex sales at (212) 688-6240.
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