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Comtex SmarTrend(R) Morning Call -- November 16, 2009
Nov 16, 2009 (SmarTrend via COMTEX) --
Stocks climbed a little on Friday, spurred upward on hopes for improving consumer spending from J. C. Penney (NYSE:JCP), and ignoring mainly a pessimistic consumer sentiment report. The DJIA ended the see-saw day up 73 points to close at 10,270. The SmarTrend(R) indicators point to the market indices' third attempt to rise and stay above resistance levels this week, starting today.
There was more interest Friday in brighter retail outlooks from corporate entities than the University of Michigan's pessimistic consumer confidence report, which was based mainly on dim outlooks for jobs and personal incomes. There was additional buying force injected into stocks as the dollar values eroded again, also boosting commodities. Investors are focusing on the October retail sales report out this morning in gauging how consumer spending is faring ahead of the holiday shopping season about to start. The daily SmarTrend(R) uptrends to downtrends, for the first time in eight days, turned slightly biased to the downside at 16:32. This was not enough to halt the upward trek of the IBDI, but did induce a pause by the Trend Ratio; however, this was not enough to drop it below the key threshold it surmounted last Thursday. The intermediate-term uptrend is present and accounted for in helping to push the market indices upward. Along with the long-term uptrend, a favorable investing environment continues to provide a platform from which the DJIA can rise above 10,300 and the S&P500 index above 1,100 today and by the end the week stay above these levels.
The near-term trend indicators had pulled back from being overbought on Thursday, and two, the NBDV and NBDI, both surged back up Friday. All four indicators are expected to rise back into overbought territories this week as the multi-day rally rejuvenates itself and the trading environment again becomes favorable, along with the investing environment, to long stock positions. In short, the slight retreats by the near-term trend indicators resulted in a momentary uptrend pause late last week that is expected to be replaced by a new surge in stock buying this week that will provide sufficient upward momentum to cause the market indices to rise and stay above their resistance levels.
Last week, trade-term trend surges caused the DJIA and S&P500 to climb above 10,300 and 1,100 twice, intraday on two days, before falling back. This is the typical pattern of a market trying to establish new highs. It is important that the near-term trend indicators did not top out in overbought zones, and that the intermediate-term uptrend was reconfirmed by the crossing by the Trend Ratio above a critical threshold. This means that even if the trade-term trend should rotate down again this week in response to economic news discussed below, it is unlikely that any trade-term downtrend can be of sufficient force to stop the upward momentum being demonstrated now by the other three longer and stronger trends discussed in this report. To examine the constantly updated complete report of stocks changing trends in the last week, please click on http://www.mysmartrend.com.
November has so far proven its billing as a strong one for equities; to-date the S&P500 has risen 5.5%. Last week's 2.3% advance appeared out of a dearth of hard data, with most of the S&P500 earnings reports out of the way and few economic statistics to be considered. Instead, a larger landscape took form as investors considered the appeal of riskier assets, such as equities, and of physical assets, such as gold. US corporations, nearly at the end of earnings season, proved their upside earnings might after cost-cutting measures were taken and despite still-anemic revenue streams.
Last week's impact of the dollar on stock prices remained crystal clear as the dollar maintained its status as a major funding currency. A two-day rebound from its 15-month cellar low sent stock prices lower as official language out of China suggested the possible removal of the dollar/renminbi peg. However, such indications appeared premature, and the dollar resumed its downward trek, off 0.4% on Friday.
Nevertheless, the greenback's weakened status remains a foreign policy sore point, and threatens the tone of President Obama's China trip. Even as many warned of the potential asset bubble build in China, the Chairman of the China Banking Regulatory Commission turned the tables, and cautioned the weak dollar "is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets."
Treasury Secretary Geithner last week repeated the Administration's mantra of strong dollar support, and the President is most likely to do so as well; nevertheless, the impact of a weak dollar on improving American products' competitive stance abroad is widely expected to help the sustainability of a fragile recovery in the US as well as contribute to further in-sourcing of new plants and so jobs, which previously would have been cheaper overseas.
At present, 80% of the firms, which have reported to date, exceeded analyst estimates, the highest quarterly proportion since 1993, according to Bloomberg data. The impetus came mainly from companies' cost-cutting measures, however, disappointing some who had hoped for signs of an upturn in top-line results. Nevertheless, the improved results were sufficient to allure investors into equities in hopes of improved results from a time of easy money, and, less assuredly, from a time when the government stimulus is supplanted by broader consumer demand.
This week will bring the focus more firmly on the consumer sector. Friday's better-than-expected results from Disney (NYSE:DIS) as well as J.C. Penney (NYSE:JCP), and Abercrombie & Fitch (NYSE:ANF) offset a lower-than-projected consumer sentiment post from the University of Michigan, setting up this week with high hopes that the holiday season might prove better than feared.
Among retailers reporting during the week are: Lowe's (NYSE:LOW) and Pacific Sunwear of California (NASDAQ:PSUN) today; Home Depot (NYSE:HD), Target (NYSE:TGT) and TJ Maxx (NYSE:TJX) on Tuesday; BJ's Wholesale (NYSE:BJ) and the Limited (NYSE:LTD) on Wednesday; Sears Holding (NYSE:SHLD), Gap (NYSE:GPS) on Thursday. Among consumer-sensitive economic posts are retail sales results for October today, expected to shadow the general economic improvement with a 0.9% increase from the month prior, which showed a 1.5% drop after August's 2.7% cash-for-clunkers surge.
On the manufacturing side of things, the Empire Manufacturing post today is estimated to show a November drop to 30.0 from 34.57 prior. Industrial production is expected to indicate an October rise of 0.4% from the 0.7% prior gain. And on Thursday a post on leading economic indicators is expected to reveal an October rise of 0.4%, slowing from the prior month's 1.0% advance. Meanwhile, the Philly Fed's manufacturing data is projected to demonstrate a slight November improvement to 12.0 from 11.5 on Thursday.
Housing and pricing data are also on the busy schedule. On Tuesday wholesale prices for October are estimated to show a 0.5% rise, while consumer prices on Wednesday are expected to hold steady with a 0.2% October gain. The NAHB housing index is due for a Tuesday release, with housing starts and permits slated for Wednesday. Starts may hold around September's 590K pace, with analysts in disagreement over whether a slight increase or decrease is more likely.
Thursday's weekly jobless report, expected at 504K versus 502K the prior week will be supplemented by Friday's state-by-state rundown of employment activity. Among a busy Fed-speak calendar are today's comments from Bernanke; Tuesday's from Lacker, and Pianalto; Thursday's from Plosser, Fisher, Ghosn and Rattner; and Friday's from Plosser. Treasury Secretary Geithner speaks on Tuesday and Thursday.
At the heart of the market's rise are analysts' expectations for a sustainable recovery, one in which the jobless recovery to date is metamorphosed into a demand-driven, revenue-run upturn calling for inventory rebuilding and employee additions. In the meanwhile, equity price gains seem well-accustomed to support from government stimuli, corporate cost-cutting measures, and a weak dollar.
According to our analytics team, the SmarTrend(R) indicators point to a resurgence in stock purchasing this week, as the market benchmark indices stage their third attempt to rise and stay above resistance levels, starting today. To examine the constantly updated complete report of stocks changing trends in the last week, please click on http://www.mysmartrend.com.
Within the corporate corner, Boeing's (NYSE:BA) new head of its commercial aircraft division, Jim Albaugh, said its Dreamliner will take to the skies for its long-awaited test by yearend.
Citigroup (NYSE:C) plans to sell Bellsystem 24, a Japanese telemarketing company, to Bain Capital for $1 billion, bringing to $10.8 billion the dollar amount Citi has raised from sales of Japanese assets.
Hedge fund Paulson & Co reported in a September 30 filing Citigroup (NYSE:C) holdings of 300 million shares, valued at $1.45 billion.
Cisco (NASDAQ:CSCO) upped its bid for Tandberg ASA to $3.4 billion, or about an 11% increase, and extended its offer to December 1.
According to Bloomberg, Mitsubishi UFJ has hired JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) to manage an $11 billion secondary offering, Japan's largest ever. The company plans to sell about 2.5 billion common shares.
Bristol-Myers Squibb (NYSE:BMY) plans to spin off its 83% stake in Mead Johnson Nutrition Company.
JP Morgan (NYSE:JPM) is offering to purchase the remaining 50% of stockbroker Cazenove, placing a valuation on the firm of $3.32 billion.
General Motors (NYSE:GM) plans to start repaying its Treasury loan early, beginning by yearend with $1 billion quarterly installments to the US and $200 million quarterly to Canada.
General Motors' (NYSE:GM) third quarter revenues bested estimates at $28 billion versus $22.9 billion expected, rising $4.9 billion from the second quarter. Inventories dropped 158K to 424K as its market share held steady.
Noting, "We are beginning to see signs of improved performance in some of the hardest-hit housing markets including California, Florida and areas of the desert Southwest," Lowe's (NYSE:LOW) reported inline third quarter earnings of 24 cents on inline revenues of $11.38 billion.
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
----------------------------------------------------------------------
ANF 40.68 Uptrend 37.40 11/9/2009
DIS 30.44 Uptrend 18.33 3/23/2009
JCP 31.21 Downtrend 32.59 11/4/2009
LOW 21.85 Uptrend 21.47 11/12/2009
PSUN 4.79 Downtrend 5.61 11/4/2009
INX -- S&P 500: 1,093
Lo: 1,085 Hi: 1,098
Change: +6.24
http://www.mysmartrend.com/images/INX20091116.jpg
INDU -- DOW JONES: 10,270
Lo: 10,192 Hi: 10,306
Change: +73.00
http://www.mysmartrend.com/images/INDU20091116.jpg
QQQQ -- NASDAQ: 2,168
Lo: 2,146 Hi: 2,172
Change: +18.86
http://www.mysmartrend.com/images/QQQQ20091116.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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