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Comtex SmarTrend(R) Morning Call -- November 9, 2009Nov 09, 2009 (SmarTrend via COMTEX) -- Friday the stock market shrugged off an unemployment rate of 10.2% and stocks edged higher for the day. The DJIA climbed 17 points to close at 10,023. The multi-day rally which commenced last Thursday is expected to resume today and drive the DJIA on up to 10,300 by the end of this week. The double-digit unemployment report, despite being foreseen here in March of this year, might have been expected to cause the market indices to reverse course and return to a downward correction. Only a brief retreat at open was observed in the market indices because investors were quick to note that the unemployment report showed that payroll losses continued to decline and job losses in earlier months were revised lower. This reversal in expectations was reflected in the daily SmarTrend(R) uptrends to downtrends, which became more positive for the day at 61:17. The resultant IBDI remained level but the Trend Ratio climbed a notch. This means the intermediate-term uptrend has returned to action and is helping the continuing long-term uptrend create a favorable environment for long stock positions. Mid-week we informed readers of this column that the trading environment has synched up with the investing environment to create the two conditions desirable for opening new long stock positions. This posture was achieved when three of four near-term trend indicators departed their oversold zones and headed north. All four of these indicators continued to move north on Friday, and all four are now in mid-zones with ample room to the upside to continue to drive the market indices northward this week. The DJIA is expected to rise to resistance at 10,300, and the S&P500 index to reach its resistance at 1,100. The multi-day rally expected this week is not likely to travel in a straight slope up as there will be a variety of potentially-impacting news reports, which could precipitate twists and turns by the trade-term trend. These items are discussed below. Saturday night the U.S. House of Representatives narrowly passed a 2,000 page bill with broad impact potential on the health care sector. The vote was partisan and divided liberals and conservatives. If it were to become law it would have a profound impact on various subsectors of the health care industry, which represents 16% of the U.S. economy, and is growing. Sunday morning, key Senators announced the House bill Dead on Arrival, setting the stage for more weeks and months of wrangling over this issue. Today and this week, the stock market is expected to take the view that the economic recovery will not be retarded by any health care legislation, an important consideration which will impact trillions of dollars sitting on the sidelines in low yielding investment funds; the SmarTrend(R) measurements discussed above indicate this multi-day rally locomotive is on the tracks and will continue to chug northward, creating more impetus for essentially idle investment capital to enter the market in the days/weeks ahead. To review the complete list of stocks changing trends in the last week please click on http://www.mysmartrend.com. In a week chock full of economic reports, stock prices managed higher closes every day, rising the most on Thursday on news of stronger than expected third quarter productivity gains. However, the outlier day was Friday when the week's high event risk, nonfarm payrolls for October, shocked investors with a 10.2% post on unemployment, its first reach above 10% in 26 years. Even so, stocks closed 0.3% higher, reversing selling pressure that had sent the S&P500 into negative territory fifteen times during the session. The result: S&P500 industry sector gains across the board for the week, generating its first weekly increase in three weeks, and sending the S&P500 up 3.2%, or 18.4% year-to-date, and 60% from its 12-year lows reached last March. The sister benchmarks also notched gains with the DJIA up 310 points for a 3.2% rise over the week, or 14.2% year-to-date, and the NASDAQ up 3.3%, or 34.0% so far this year. Surprisingly, given investors' apprehension in front of the key economic and earnings data, the CBOE volatility index declined over 20%, closing at 24.19 on Friday. Setting the fire to the latest uptick in stocks was the estimate-topping earnings numbers from 80% of the S&P500 firms reported to date. According to Thomson Reuters, the 440 S&P500 firms so far reported have exceeded estimates by 14.9% on aggregate. On the other hand, only 58% of the firms topped revenue estimates. The earnings/revenue gulf remains a worry for investors concerned that earnings improvements still remain dependant on cost-cutting measures, lacking end-user demand stimulus, and as the increased joblessness diminishes consumer appetites further, with government stimulus perhaps waning, firms may face a perfect storm of negative demand. However, the stars seem aligned for a confluence of still-supportive federal aid and perhaps increasing consumer appetites. The coming week, though absent of much in the way on economic event risk, does contain a flurry of corporate posts outlining the health of the consumer as markets head into the key holiday season. Disney (NYSE:DIS) posts on Thursday, along with Wal-Mart (NYSE:WMT). Wal-Mart (NYSE:WMT) has been absent from monthly comparable sales reports, and so investors will be watching for how the retailer fared during the third quarter. Results are expected to climb to 81 cents from 77 cents a year ago. Also reporting are Kohl's (NYSE:KSS) on Thursday, Macy's (NYSE:M) Wednesday and JC Penney's (NYSE:JCP) on Friday. Most analysts expect results to favor the discounters, as shoppers remain eager for bargains. Last week's monthly retail sales numbers revealed about half missing revenue expectations, although showing some evidence of improved discretionary spending. Last week's interplay of moves within the key asset classes showed risk appetites restored, with stocks up over 3%, and oil prices up about 1%. But the gold star went to bullion, which jumped 5.3%, to hit a record intraday high of over $1100 per troy ounce. The Fed continued its low interest rate policy, and fed fund futures priced in a lower chance of rate increases until mid-2010, sending the US dollar down 0.9% versus the euro, and lower against a basket of foreign currencies. Bond markets will be closed on Wednesday for Veterans Day; nevertheless, a record $81 billion in Treasury debt is scheduled, and will demonstrate demand minus support from the Federal Reserve's Treasury purchase program, which ended last month. With the calendar of economic events at low ebb, Fed officials will weigh heavily on the outlook for the economy, for interest rates, and regulatory reform. Tuesday will contain a full plate of Fed speak from a dovish Janet Yellen, a centrist Dennis Lockhart, and a hawkish Richard Fisher. Not until Friday will the calendar command much attention, when the US trade balance is expected to show a wider deficit during September, estimated at -$31.8 billion up from -$30.7 billion. The preliminary reading from the University of Michigan's consumer confidence index is estimated to show a slight improvement in November, rising to 71.0 from 70.6. Early morning futures suggest a positive start to a week ending on Friday the 13th. The healthcare package passed the House by the narrowest of margins, with much wrangling still expected before any decision is reached within the Senate. The G-20 meeting of Finance Ministers promised extended government stimulus measures for a struggling global recovery, with worries about a declining dollar notably absent. And Moody's Investor Services (NYSE:MCO) upgraded its rating on China and Hong Kong to positive from stable. According to our analytics team, the multi-day rally which commenced last Thursday is expected to resume today and drive the DJIA up to 10,300 by the end of this week. To review the complete list of stocks changing trends in the last week please click on http://www.mysmartrend.com. In the corporate corner, Kraft (NYSE:KFT) is due to formalize its Cadbury (NYSE:CBY) bid for about $16.7 billion as the deadline for an offer hits. Northrop Grumman (NYSE:NOC) announced it is selling its TASC consulting operations to two private equity firms for $1.65 billion. About $30 billion was the agreed-to valuation which General Electric (NYSE:GE) and Comcast (NASDAQ:CMCSA) placed on the joint venture between NBC Universal and Comcast. Goldman Sachs (NYSE:GS) upgraded Adobe Systems (NASDAQ:ADBE) to "buy," and lifted its price target to $42. Goldman Sachs (NYSE:GS) added Lexmark (NYSE:LXK) to its Conviction Sell list. KBW upgraded Blackstone Group (NYSE:BX) shares to "outperform" with a price target of $18.50. Windstream (NYSE:WIN) reported third quarter earnings of 24 cents, three pennies over estimates, on revenues of $734 million, below estimates of $748 million. DISH Network (NASDAQ:DISH) reported third quarter earnings of 18 cents, 26 cents under projections, on revenues of $2.89 billion, which missed estimates of $2.93 billion. By Chip Brian, Editor-in-Chief, Comtex news Network www.Comtex.com -- [email protected] The following equities mentioned above include: Comtex SmarTrend Alert ---------------------------------------------- Ticker Last Close Trend Direction Trend Price Trend Date ---------------------------------------------------------------------- DIS 28.56 Uptrend 18.33 3/23/2009 JCP 30.52 Downtrend 32.59 11/4/2009 KSS 56.68 Downtrend 56.63 11/3/2009 M 19.18 Downtrend 17.46 11/5/2009 WMT 51.25 Uptrend 50.47 8/12/2009 INX -- S&P 500: 1,069 Lo: 1,059 Hi: 1,071 Change: +2.67 http://www.mysmartrend.com/images/INX20091109.jpg INDU -- DOW JONES: 10,023 Lo: 9,937 Hi: 10,045 Change: +17.46 http://www.mysmartrend.com/images/INDU20091109.jpg QQQQ -- NASDAQ: 2,112 Lo: 2,088 Hi: 2,118 Change: +7.12 http://www.mysmartrend.com/images/QQQQ20091109.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. |
