The Growth Stock Report

The commentary here is for active traders. Our analysis uses a combination of fundamental and technical properties used by hedge funds and institutional money managers.

Saturday, July 15, 2006

Looking Down

Traders,

Looking down the barrel of a gun
Son of a gun son of a bitch
Getting paid getting rich
-- Beastie Boys “Looking Down The Barrel of a Gun”

Our current position:

SELLERS' EDGE INTACT

In this week's edition you will find:

  • Where We Are
  • What Was Important About Last Week
  • What We Are Watching For This Week
  • A Word On Discipline
The following sections can now be found on our home site:

Where We Are:

Taking a look at the overall markets:

Tension in the Middle East.

Uncertainty over it, ad what it could mean to the global economy made for heavy selling on Wall Street this week. Markets hate uncertainty.

With an apparent lack of concern over earnings and economic fundamentals, the media attention is on Hezbollah, the Lebanese Islamic group that was founded in 1982 to fight the Israeli occupation in southern Lebanon.

Fear of escalation in the region – perhaps Iran sending ships to block oil in the gulf - is enough for market players to take cover.

Though the U.S. would promptly erase Iran’s military should any aggression occur, anything can happen in war, and how far violent sentiment will go is anybody’s guess.

We don’t guess at the Growth Stock Report. We wait for conditions to line up to our favor.

There’s plenty of reason to be bearish on this market.

Economic data continues to point to a slow down.

Major earnings reports are around the corner, but the most important insight will be in companies’ forward looking statements.

With all of the major indexes below their major moving averages, we are in a convincingly weak market. If you wanta be a bull, you wanta see the moving averages serve as support not resistance. It’s that simple.

Technology and Homebuilders are our leaders to the downside.

Energy stocks are challenging highs for the year, but are lagging behind Crude Oil prices. Typically the stocks will lead the commodity, but tension in the Middle East is the likely driver for crude, with the stocks telling us it’s not a new cyclical move – yet.

Technically speaking:

The Dow Industrial Average ($INDU), -3.17%, crumbled to just off its June lows, and is below its major moving averages.

The S&P 500 ($SPX), -2.31%, sunk below its major moving averages.

Nasdaq ($COMPQ), -4.35%, hit a new low for the year.

Russell 2000 ($RUT), -3.96%, also sunk below its major moving averages.

Volume indications three clear distribution days on the S&P 500 tells us institutional selling is at hand.

New Highs - New Lows is treading in bearish territory.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The top 10 industry groups from the 6 month RS screen are:

  1. STEEL IRON
  2. MOVIE PRODUCTION THEAT
  3. MACHINE TOOLS ACCSORIE
  4. DRUG RELATED PRODUCTS
  5. AIR DELIVERY FREIGHT S
  6. SPECIALTY RETAIL OTHER
  7. BEVERAGES-SOFT DRINKS
  8. FOOD - MAJOR DIVERSIFI
  9. TRUCKING
  10. TOYS GAMES

What Was Important About Last Week

STOCKS:

  • Genentech (DNA) reported Q2 (Jun) earnings of $0.56 per share (excluding non-recurring items), $0.12 better than the Reuters Estimates consensus. Revenues rose 44.0% year/year to $2.2 bln vs. the $2.12 bln consensus.
  • Ruby Tuesday(RI) beat expectations by two cents, with earnings of $0.53 per share. Total revenues rose 23.3% year/year to $364.3 mln vs. the $361.1 mln consensus.
  • Alcoa (AA) reported Q2 (Jun) earnings of $0.90 per share, four cents better than the Reuters Estimates consensus. Revenues rose 18.9% year/year to $7.96 bln, which was below the $8.14 bln consensus.

ECONOMY:

  • Import prices rose 0.1% in June after jumping 1.4% in May. Excluding a 1.4% decline in petroleum prices, import prices increased 0.4% last month. Excluding all fuels (which includes natural gas), import prices rose 0.7% in June.
  • Export prices increased 0.8% in June and a 0.6% increase in May. Non-agricultural prices increased 0.6% last month. In the past year, non-agricultural export prices have risen 4.6%.
  • Retail sales unexpectedly fell 0.1% in June, below consensus estimates of a 0.4% gain. Retail sales are up 7.4% at an annual rate in the past six months and 5.9% in the past year.
  • Auto sales fell 1.4% in June after a 2.1% drop in May. Excluding autos, retail sales rose 0.3% last month and are up 8.5% in the past year.
  • Gasoline service station sales jumped 1.1% in June and 20.4% in the past year. Sales excluding autos and gas rose 0.1% in June and 7.0% in the past year.

What We're Looking For This Week

Key earnings releases:

  • MONDAY: Citigroup Inc. (C), Harley-Davidson (HDI).
  • TUESDAY: Johnson & Johnson (JNJ), Merrill Lynch (MER), The Coca-Cola Company (KO), Wells Fargo & Company (WFC), Yahoo, Inc. (YHOO).
  • WEDNESDAY: Abbott Laboratories (ABT), E*TRADE Financial Corp. (ET), General Dynamics (GD), Intel Corporation (INTC), J.P. Morgan Chase & Co (JPM), Motorola Inc. (MOT), Rambus Inc. (RMBS), Washington Mutual (WM), Yum! Brands, Inc. (YUM).
  • THURSDAY: Amgen (AMGN), D.R. Horton (DHI), Google (GOOG), Microsoft (MSFT), Pfizer (PFE), Wyeth (WYE).
  • FRIDAY: Halliburton Company (HAL), Schlumberger (SLB).

On the economic front we have potential market movers with:

  • MONDAY: NY Empire State Index, Capacity Utilization, Industrial Production
  • TUESDAY: Core PPI, PPI, Net Foreign Purchases
  • WEDNESDAY: Building Permits, Core CPI, CPI, Housing Starts, Crude Inventories
  • THURSDAY: Initial Claims, Leading Indicators, Philadelphia Fed, FOMC Minutes
  • FRIDAY: none

The Following Sections Are Now On Our Home Site:

This Week's Word On Discipline:

“Take the pains required to become what you want to become, or you might end up becoming something you’d rather not be. That is also a daily discipline and worth considering. ” -- Donald Trump

posted by The Growth Stock Report @ 10:27 AM