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Comtex SmarTrend(R) Morning Call -- November 23, 2009Nov 23, 2009 (SmarTrend via COMTEX) -- The market indices struggled Friday to avoid breaking below support levels as weak reports from computer maker Dell (NASDAQ:DELL) and homebuilder D.R. Horton (NYSE:DHI) heightened concerns over a smoldering economic recovery. The DJIA dropped 14 points to close at 10,318. A rebound is expected this morning; but this holiday-shortened week may be volatile for the market indices as they try to build a base to launch the next leg up in a multi-day rally. The DJIA held its ground just above its support level at 10,300, faring better than the S&P500 index, which dropped just below its support at 1,100 because wariness about the economy's prospects fostered investors' buying of large defensive stocks such as Coca-Cola (NYSE:KO) and Merck (NYSE:MRK), heavy influencers of the DJIA, which were viewed as better prepared to withstand economic uncertainty. A mild intraday rally commenced after lunch on Friday, but was not enough to halt the support-testing process, which is likely to continue this week and continue support testing in a gyrating manner due to a host of upcoming economic reports, likely to be mixed, crammed into a trading week shortened to three-and-a half days. Nevertheless, the daily SmarTrend(R) uptrends to downtrends improved slightly on Friday, coming in at 24:48, still biased to the downside, but not so much as was the case on Thursday. This performance enabled the IBDI and Trend Ratio both to show early signs of slowing their descents, a process that will need to evolve further if the DJIA is going to find a bottom above 10,300 from which to rally on up to its next expected level of 10,600. The DJIA had appeared to be on course to achieve that goal before Thanksgiving, but topped out intraday at 10,438 last Tuesday. The rally expected this morning could cause the DJIA to move up to 10,600 over the next three days; but if it does, it will most likely be due to intraday fluctuations as the real resumption of a multi-day rally is unlikely to occur until several important SmarTrend(R) indicators establish firm bottoms after the market dip of the last three trading days. If firm bottoms are established at the support levels for the market indices it will in no small part be due to under support being provided by the intermediate-term uptrend, now paused, and the long-term uptrend, which still has upward momentum and shows no signs of exhaustion yet. Thus, through recurring dips and surges, the investing environment continues to signal solid footing for long stock buying. The trading environment has been the major trend driving the dip in the market that has occurred since last Wednesday. All four near-term trend indicators had been falling sharply until late in Friday's trading day. Very early signs of slowing their descents are present, but more decelerating downward will be necessary to pinpoint when the near-term trend indicators will reverse course and start up again. With continuing under-support from the investing environment, the near-term trend indicators are likely to stop their descents before reaching their oversold zones. If this prediction materializes this week, it will be a strong signal that the DJIA will climb in December and has a good chance of reaching 11,000 by the end of this year. First things first, the DJIA and S&P500 both need to finish their dips and find support near current levels. The rally expected this morning is likely to be robust, but unlikely to have enough carry-through to catalyze a V-shaped reversal of the declining near-term trend indicators. In other words, the base-building process is just beginning and is likely to take most of this week to provide enough consolidation for a multi-day rally in December. The trade-term trend is expected to add bounce to what otherwise should be a gradual up slope for both the DJIA and S&P500 index for the remainder of 2009. The bounces and dips along the way will be in response to a bevy of potentially impacting reports due out this week, starting today. They are discussed below and for a look at the list of stocks changing trends recently, please click on http://www.mysmartrend.com. Last week saw a see-saw of early strength and 13-month highs, followed by less risky business late week accompanied by record gold prices and temporarily-negative Treasury yields. This week may see more of the same as trading grows volatile in a holiday-busy week, laden with economic posts offering significant event risk. At the center of it all is a rally-fatigued equity market seeking reasons to resume its climb still further, as banks and institutions do their year-end, balance sheet dress-ups to pretty balance sheets for investors and regulators alike. Last week's final tally resulted in a 1% decline in NASDAQ shares to 2146 after disappointing guidance from two software firms, Autodesk (NASDAQ:ADSK) and Salesforce.com (NYSE:CRM) was compounded by disappointing interims at Dell (NASDAQ:DELL). So far in November, the NASDAQ has advanced 5%, for a 36.1% year-to-date increase, the steepest rise of the benchmark indices. Up 53.3% year-to-date, the tech sector, a driving component within NASDAQ, appeared to have priced in assumptions of recovery strength, perhaps making it ripe for a decline as risk appetites waned. The S&P500, by far the largest and most representative index, lost 0.2% last week, butting against a technical ceiling at 1100, as declines in oil and gas (-1.4%) and tech (-1.3%) sector shares offset gains in health care issues (+1.5%) and basic materials (+1.2%). Meanwhile, the DJIA-30, the corporate heavyweight index, managed to gain 0.5% last week, bringing its November rise to 6.3%, the sharpest advance of the big three indices, for a year-to-date advance of 17.6%. US dollar weakness has lifted valuation expectations for the major industrial companies, with offshore revenues expected to boost revenues. This week's earnings calendar is highlighted by results from Hewlett-Packard (NYSE:HPQ) after the close of markets today. Last week the computer/printer maker preannounced strong quarterly interims, anticipating record sales results of $30.36 billion, and earnings of $1.13, and raised 2010 guidance. At the center of bull and bear head-butting is the ascending price of such physical assets as gold, which rose to fresh highs of $1146.80 on Friday. Lacking fundamental valuation measures, gold has risen 29.7% so far this year, up 2.7% on the week. Since India's central bank acquired 200 tonnes from IMF, the metal has climbed 11.5% on its value as a dollar-alternative, safe-haven, inflation-resistant holding. This morning the US dollar resumed its weekly pattern of early-week declines, after central bankers continued to maintain their extended-period policy. On Friday a short-covering rally and asset-bubble moans pushed the dollar up 0.4% against a basket of currencies, resulting in gains of 0.99% over the prior five-day span, which had followed Fed Chairman Bernanke's admission to be on a dollar watch and numerous central bankers' comments regarding the negative impact of the weak greenback on building dangerous asset bubbles. Still the greenback has fallen on hard times, down 7.55% year to date, and over the weekend Chicago Fed President Evans stated he expects US interest rates to stay near zero until "late 2010, perhaps later in terms of 2011." St Louis Fed President Bullard also asserted the Fed should extend its mortgage-related asset repurchase program beyond year-end. The comments came in contrast to European central bank head Trichet's expressed plans to remove liquidity to ensure protection against inflation. This week's economic calendar will compress the week-long flurry of key posts into a front-loaded, three-day hustle. Economists anticipate the reports will show rising home sales, personal spending and durable goods orders, all positives for equities. Last week's rocky market found blame in soft housing stories, from D.R. Horton (NYSE:DHI) to rising mortgage delinquencies and foreclosures, with an unexpected drop in housing starts and a fall in permits. Economists expect today's existing home sales for October will demonstrate its sixth rise in the past seven months, with an increase to 5.65 million units from 5.57 million in September, but most continue to believe housing stands on shaky ground. Further housing data will be unveiled on Tuesday with the S&P/Case-Shiller index and the FHFA Home Price Index, with new home sales on Wednesday (estimated at 414K units) along with weekly mortgage applications. Also slated for release are: a second look at GDP (estimated at 3.0%), Conference Board sentiment, and FOMC minutes on Tuesday. On Wednesday come personal income and spending, weekly claims, durable orders and the University of Michigan sentiment gauge. The earnings calendar has slowed to a trickle, but still due to report are: Campbell Soup (NYSE:CPB) on Monday; American Eagle (NYSE:AEO), Barnes and Noble (NYSE:BKS), Dollar Tree (NASDAQ:DLTR) on Tuesday, with Deere (NYSE:DE), J Crew (NYSE:JCG) and Tiffany (NYSE:TIF) on Wednesday. According to our analytics team, the market's base-building process is just beginning, and is likely to take most of this week to provide enough consolidation for a multi-day rally in December. For a look at the list of stocks changing trends recently, please click on http://www.mysmartrend.com. In the corporate corner, Microsoft (NASDAQ:MSFT) may be attempting to climb on the back of a margin squeeze at Google (NASDAQ:GOOG) as it is reportedly in discussions with News Corp. (NASDAQ:NWSA) to "de-index" the firm's news websites from Google. Coca-Cola (NYSE:KO) announced plans to more than double the number of China bottling plants over the next ten years as part of its goal to triple sales to the country. Hershey (NYSE:HSY) trust encouraged the firm to counter Kraft's (NYSE:KFT) hostile, $16.2 billion bid with its own, $17 billion offer. A large run of holiday sales offerings crashed the Ebay (NASDAQ:EBAY) website, causing a major weekend web outage. Reliance bid $12 billion in cash for Lyondell Bassell when it exits bankruptcy. Tyson Foods (NYSE:TSN) reported better-than-expected earnings of 28 cents, topping estimates by 2 cents, on revenues of $7.2 billion, which exceeded Street estimates of $6.9 billion According to S&P most US banks are failing to meet adequacy standards comfortably enough to avoid ratings downgrades. Both HSBC (NYSE:HBC) and Goldman Sachs (NYSE:GS) showed stronger-than-average balance sheets, with UBS (NYSE:UBS) and Citigroup (NYSE:C) well below average. 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 ---------------------------------------------------------------------- DELL 14.29 Uptrend 15.83 11/16/2009 DHI 10.37 Uptrend 12.46 10/22/2009 HPQ 50.04 Uptrend 38.42 6/29/2009 KO 57.48 Uptrend 50.87 9/11/2009 MRK 36.46 Uptrend 33.94 11/16/2009 INX -- S&P 500: 1,091 Lo: 1,087 Hi: 1,095 Change: -3.52 http://www.mysmartrend.com/images/INX20091123.jpg INDU -- DOW JONES: 10,318 Lo: 10,272 Hi: 10,343 Change: -14.28 http://www.mysmartrend.com/images/INDU20091123.jpg QQQQ -- NASDAQ: 2,146 Lo: 2,137 Hi: 2,150 Change: -10.78 http://www.mysmartrend.com/images/QQQQ20091123.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. |
