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FOR THIS WEEK'S POSITION TRADE NEWSLETTER
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Daily
Editorial: |
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Market Ascends on Strong Earnings
Good morning! The
market had a spectacular morning on Friday as it capped off a week of
choppy, yet active trading. With strong earnings reports from the likes
of Microsoft Corp. (MSFT), Procter & Gamble Co. (PG) and
Caterpillar Inc. (CAT), the indices were able to hold onto that 2B
reversal pattern we saw on the 60 minute S&P500 charts on Wednesday
and gap higher into the end of the week.
The NASDAQ had the strongest open, but within 30 minutes all three of
the major indices were making new intraday highs. The NASDAQ continued
to lead at this point, pulling up into prior week's congestion zone.
Shooting star candlestick patterns on the 5 minute charts show a
slowdown in the buying going into the 10:15 ET reversal period. At that
point the leaders began to change. The NASDAQ, in large part due to its
greater extension on the upside, began to take a back seat and its
early morning highs would end up holding throughout the remainder of
the session.
The Dow Jones Ind. Ave., which began the
slowest, took over the NASDAQ's leadership role, showing the most
relative strength throughout the remainder of the session. After it
pivoted off the morning highs it simply fell into a small triangle
trading range near those highs. This was able to break going into noon,
taking the Dow back to the highs of the prior week. At the same time
the S&P 500 was able to follow along to some extent, but was unable
to surpass the morning resistance zone.
While the Dow and S&P were moving up over
lunch, the NASDAQ had fallen into a range along support. It formed a
strong Avalanche pattern on the 15 minute charts, giving way to further
selling with the onset of the 13:00 ET reversal period. If you look at
the 5 minute charts, you can see that the index began to hug the lower
trend channel from the base ahead of the breakdown while volume
declined substantially. These were two of the key indicators for a
break lower. The Dow and S&P could do little but follow suit.
The decline on Friday afternoon found support from prior lows intraday
in the Dow and the opening prices in the NASDAQ. The Dow also hit its
15 minute 20 sma at about the same time. It looked like we would see
another continuation move lower initially because the indices all began
to base along support as volume was once again lighter. The pace within
the range was not able to hold onto that lower end of the afternoon
range well though. The market kept trying to pop higher. For a bear
flag to have been ideal, it would have triggered between 15:00 and
15:30 ET. I think a lot of the anticipation for next week and the
strong data we have been seeing lately really had a lot of players
wanting to hold onto things more than they would have otherwise so we
saw less of this type of covering on Friday.
With earning season continuing at full steam this week and Tuesday's
FOMC meeting, it should be an active week for the market. Out of the 241 S&P500 companies
reporting earnings, 64% have come in above analyst estimates with 17%
matching them and 18% falling short. Some of the stocks
to watch out for with earnings due out this week include Google (GOOG)
and Merck (MRK) on Tuesday with Time Warner (TWX) and Boeing (BA)
reporting on Wednesday.
On Tuesday, the Fed is expected to increase its rates by another 25
basis points, making it the 14th time in a row it has opted for this
course. What's a bit unique this time around, however, is that it seems
likely to refrain from its recent habit of forward-looking language
that has helped guide the market's future rate change
expectations. This meeting also marks a change in leadership as
Ben Bernanke takes over the reins from Fed Chairman Alan Greenspan.
News Stocks to Watch: Pfizer (PFE) started to break out of a nice daily
triangle pattern slowly on Thursday. This strong technical setup is
looking to continue well into this week following reports Friday
afternoon that the FDA has approved its inhalable drug, Exubera, for
the treatment of diabetes.
Franklin Electric Co. (FELE) also holds interest for me over the next
couple of weeks. While not a company I'd typically look at for simply
trading, FELE has been forming a nice cup with handle on the monthly
charts since early last year. It just reported nice fourth-quarter net
earnings of $13.4 million (58 cents/share) and is something I'll be
keeping an eye on for an upside breakout as a longer term hold. I am
concerned about the rapid decline into the end of Dec. though, so a
base along highs within the range would help out.
ITT Industries Inc. (ITT) had a rough time on Friday following its
fourth-quarter earnings report. This stock has been dealing with a
number of strong downside gaps in recent months, creating a descending
triangle on the weekly charts. It seems likely that this corrective
action will continue in coming week, offering potential for shorting
opportunities.
Remember: As this earnings season progresses, be sure to pay closer
attention to when earnings are due for any open positions you may have.
While there are exceptions, it can be quite dangerous holding a shorter
term position into an earnings announcement.
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Economic
Reports and
Events:
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Jan 30: Personal Income
for Dec (8:30 am), Personal Spending for Dec (8:30 am)
Jan 31: Employment
Cost index for Q4 (8:30 am), Chicago PMI for Jan (10:00 am), Consumer
Confidence for Jan (10:00 am), FOMC policy statement (2:15 pm)
Feb. 01:
Consumer Spending for Dec (10:00 am), ISM Index for Jan (10:00 am),
Crude Inventories 01/27 (10:30 am), Auto Sales for Jan (12:00 am),
Truck sales for Jan (12:00 am)
Feb. 02:
Initial Claims 01/28 (8:30 am), Productivity-Prel for Q4 (8:30 am)
Feb. 03:
Average Workweek for Jan (8:30 am), Hourly Earnings for Jan (8:30 am),
Nonfarm payrolls for Jan (8:30 am), Unemployment Rate for Jan (8:30
am), Mich. Sentiment-Rev. for Jan (9:50 am), Factory Orders for Dec
(10:00 am), ISM Services Jan (10:00 am)
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Earnings
Announcements of Interest: |
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Only stocks with an
average daily volume of 500K+ are
listed. List may not be complete so be sure to always check your
stock's earnings date before holding a position overnight. (A) =
Earnings after the close, (B) = Earnings before the open,
(?) = Earnings time not specified at the time of this writing
Jan 30:
AFL (A), ATHR (4:00 pm ET), CHKP (B), CMI (B), EK (B), XOM (?), FISV
(A), GILD (A), KCI (B), KFT
(A), MAT (B), NDAQ (A), PCL (A), RSAS (A), SGP (B), SII (B), SYY (?),
TSN (B), UNM (A),
ZMH (A), ZRAN (A)
Jan 31: ACE
(A), ADM (B), ADPT (?), ASD (B), ARTG (?), ASYT (B), ATML (4:01 PM ET),
AX (?), CAM (B), CCJ (?), CB (A), CEG (?),
CFC (B), CHIR (A), CIN (?), CME (B), COCO (B), CYMI (A),
ELN (B), ETR (B), FLEX (A), GOOG
(?), HLT (B), ITW (08:00 am ET), RX (B), ISSX (A), JBLU (B), K (B),
MDRX (A), MO (?), MRK
(B), PBG (B), PCAR (?), PD (B), PWAV (A), SEPR (B), SIE (A), SGTL (A),
STN (?), SYMC (?), TE (B), ERICY
(01:30 am ET), ALL (A), X (?), VLO (?), WDR (B), WYE (?), ZHNE (A)
Feb. 01: ADS
(?), AEP (B), BUD (?), BOBJ (?), CBT (A), CDNS (?), CCK (A), CYTC (A),
DVN (B),
DRIV (A), DUK (07:00 am ET), EMKR (A), EQR (?), FDG (?), FORM (A), HCA
(?), HNT (B), ITG
(B), JDSU (A), JLL (?), JKHY (A), KYPH (?), LM (B), MTSN (?), MCRL (A),
MNST (B), MUR (A), NWRE (A), PNW (?), PBI (A), PPL (?), PHM (A), REG
(A), SIRF (A), SFN (A), SUN (A), SBUX (A),
TSRA (A), BA (B), TWX (B), TRB (B), UGI (?), XEL (B)
Feb. 02: AGN (?), AGU (B), ALA
(?), AMZN (?), APA (?), ASN (B), AVP (?), AZN (6:00 AM ET), BKHM (?),
CPKI (A), CTL (B), CERN (?), CLX (?),
CMCSA (B), CVS (B), EFX (B), ERTS (A), EOG (?), EOP (B), GTW (?), GGC
(A), GR
(B), HPC (B), IP (B), ISRG (A), ITWO (B), IMGN (4:01 PM ET), ITMN (?),
KSU (B), MEDI (B), NEW (B), ONNN(A),
PNR (?), PEG (B), RTN (B), ROH (B), RGLD (B), TSG (B), SFNT (?), SCUR
(A), SLE (B), STA (B), SPF
(A), HOT (B), STXN (A), SSP (B), TSO (B), TMO (B), TXU (?), TYC (B),
WCC (B), WEBX (A), WHR (B)
Feb. 03: AXL
(?), BEAV (B), KTC (2:00 AM ET), MCO (B), MYG (?), NLS (?), R (B), THQI
(B), WFT (?), WEN (?), WY (B)
Note: All economic numbers
and earnings reports are in lines with those compiled by Yahoo Finance.
Occasionally changes will occur that are made after the posting of this
column.
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