Market Outlook for Week Beginning
April 19, 2010
Key Events for the WeekNote: - All earnings dates listed below are tentative and subject to change.
This Week’s Economic Reports
Monday – March's leading indicators report.Tuesday – No economic data today. Wednesday - Weekly U.S. petroleum supplies. Thursday – Weekly initial jobless claims, the March producer price index (PPI), the core PPI, and March's existing home sales. Friday - March's durable goods orders and new home reports.
This Week’s Earnings Reports
Monday –Amylin Pharmaceuticals Inc. (AMLN), Citigroup Inc. (C), Eli Lilly & Co. (LLY), Halliburton Company (HAL), Hasbro Inc. (HAS), IBM Corp. (IBM), and Zions Bancorporation (ZION) will release their earnings reports.Tuesday –AK Steel Holding Corp. (AKS), Coach Inc. (COH), The Coca-Cola Co. (KO), Delta Air Lines Inc. (DAL), Goldman Sachs Group Inc. (GS), Harley-Davidson Inc. (HOG), Johnson & Johnson (JNJ), TD Ameritrade Holding Corp. (AMTD), UnitedHealth Group Inc. (UNH), Apple Inc. (AAPL), Cree Inc. (CREE), Juniper Networks Inc. (JNPR), Seagate Technology (STX), VMware Inc. (VMW), and Yahoo! Inc. (YHOO). Wednesday - AT&T Inc. (T), The Boeing Co. (BA), EMC Corp. (EMC), Wells Fargo & Co. (WFC), Chipotle Mexican Grill Inc. (CMG), E TRADE Financial Corp. (ETFC), eBay Inc. (EBAY), Netflix Inc. (NFLX), QUALCOMM Inc. (QCOM), SanDisk Corp. (SNDK), and Starbucks Corp. (SBUX). Thursday –AutoNation Inc. (AN), Continental Airlines Inc. (CAL), Cypress Semiconductor Corp. (CY), Fifth Third Bancorp (FITB), The Hershey Co. (HSY), Nokia Corp. (NOK), PepsiCo Inc. (PEP), PNC Financial Services (PNC), Southwest Airlines Co. (LUV), Amazon.com Inc. (AMZN), American Express Co. (AXP), Capital One Financial Corp. (COF), Microsoft Corp. (MSFT), and Verizon Communications Inc. (VZ). Friday - Honeywell International Inc. (HON), Patriot Coal Corp. (PCX), and Xerox Corp. (XRX).
Outlook for the Week
Last week was certainly travelling well for the Bulls until a brick wall was placed in front of them, on Friday, in the form of the Securities and Exchange Commission charging Wall Street great Goldman Sachs (GS) with defrauding investors. By the close of the day the SPX and the COMP had moved back below their respective technical landmarks, although the Dow managed to hold on to its perch above 11,000.The general investor sentiment seems to be now one of “relief”. (Refer to section on investor sentiment, in Bull and Bear Markets which will explain all phases mentioned). Once the rally has been sufficiently lengthy and has come sufficiently far in price, and evidence of an improving economy becomes incontrovertible, it is finally accepted that we are in a bull market…the “relief stage”.Evidence to support this statement is listed below:- 1. Equity option buyer’s optimism is quite extreme. In early March option investors were buying calls of 1.5 to one (1) put contract. The rate now is nearly 2.5 call contracts to one (1) put contract. The chart below, shows the 10-day all-equity, customer-only buy (to open) call/put volume ratio on the International Securities Exchange (ISE) reaching "off-the-chart" levels.  2. Recent headline stories, below, also support the phase of the bull-market rally. We are definitely seeing a growing optimism within the context of a sharply rising market.
• BusinessWeek April 19, 2010 cover story: "The Hot Hand – Obamanomics Is Working Better Than You Think" • Newsweek April 19, 2010 cover story: "America's Back! The Remarkable Tale of Our Economic Rebound" • The Economist April 3, 2010 cover story: "Hope at Last" • The New York Times April 8, 2010 article: "Why So Glum? Numbers Point to a Recovery" • The Wall Street Journal April 15, 2010 article: "Evidence Mounts of Strong Recovery" 3. Also, the latest American Association of Individual Investors' weekly poll revealed that the percentage of bullish investors grew to 48% from 32% as of late March. 4. The Dow Jones Industrial Average (DJIA) has not closed below its 10-day moving average for 42 straight trading days.
Other Factors to Consider
• On Monday, we begin a new expiration cycle, and May expiration is five weeks away. Since 2006, the first week of a five-week expiration cycle has had a historical tendency to coincide with market weakness. Therefore, usually bullish market tendencies give way to bearish mechanics.This is obvious by the chart below.
• Friday's pullback took us near the SPX's 20-day moving average, where there has been a rally of 42 days in a row. In a failure to remain above this trend line does not necessarily mean that the rally is nearing an end, but it warrants keeping an eye on matters as they pan out. Look at the graph below showing that the SPX has stayed above its 20-day moving average for 42 consecutive days. The fact that the current rally has lasted so long may indicate that the market is overbought, but indications from the graph show that we are not as overbought as similar rallies.
• Caution would be apparent for the short-term as outlined in factors above. This growth of optimism could mean that the market is overbought but could relate more to a mild correction or range-bound behavior in the weeks ahead. A marked pullback should be viewed as a buying opportunity, as stated in previous updates, and there are obviously investors in the market, at this present time, that are less prone to panic because of disappointing news. All things considered, profit-making in the week ahead should be good!
Companies to Keep an Eye On
Companies that are looking promising for the short-to-mid-term future. Consider buying shares in these companies after checking them out thoroughly.
United States Steel Cp (X)The Company is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. Analysts are certainly positive on this company!
Tractor Supply Co. (TSCO) Tractor Supply Co. operates over 900 farm and ranch stores across 44 states. The company caters to rural lifestyles and needs with everything from home decor and clothing to truck and equine products. They reported a first quarter update that showed more than a 9% increase in sales to $711. The company estimates net income for the period will be between $8 million and $9 million.
Career Education Corp. (CECO)Career Education Corporation is a provider of private, for-profit post-secondary education with campuses throughout the United States and Canada, the United Kingdom and the United Arab Emirates. Their schools enjoy long operating histories and offer a variety of master's degree, bachelor's degree, associate degree, and diploma programs in career-oriented disciplines. They offer educational programs principally in the following four career-related fields of study, Visual Communication and Design Technologies, Information Technology, Business Studies, and Culinary Arts. Analysts are certainly positive on this company! They continue to raise their outlook particularly in their full-year estimates. Career Education Corporation continues to please investors by topping expectations and setting new highs. With rising estimates flowing in, shares of CECO are maintaining solid valuations.
Plum Creek Timber Co. (NYSE: PCL)Plum Creek Timber Co. (PCL) is a real estate investment trust, which owns and manages timberlands in the United States. Its products include lumber products, plywood, medium density fiberboard, and related by-products, such as wood chips. It is an American company, sitting on American timberland, which should benefit from higher lumber prices – but can literally “grow” in value if prices get too low. Plum Creek Timber Co. pays a 4.1% dividend and looks to be a fairly safe investment. If you want to add some exposure to lumber, and collect a modest dividend, look for opportunities to build a position slowly in this company in dips over the next few months.
Imax Corp. (IMAX)  Imax Corp. (IMAX) is an entertainment technology company, specializing in motion picture technologies and large-format film presentations. It operates giant screened movie theatres throughout the world. IMAX is a motion picture film standard developed by the Canadian IMAX Corporation. The Company’s activities include building, leasing, marketing, maintenance and operation of IMAX film and digital theatre systems along with the production and distribution of IMAX motion pictures. IMAX specializes in immersive motion picture technologies.
In April 2009, the stock was trading at $3/share and is now over $18 per share. Earnings came in at $.20 per share easily topping the analysts' view of 6 cents. This has been attributed to releases such as Avatar, Alice in Wonderland and How to Train Your Dragon. IMAX intends to release Iron Man 2, Shrek Forever After and Toy Story 3, which should see the company reach new heights.
SKECHERS USA, Inc (SKX)  The Company designs, develops, markets and distributes footwear. It also operates retail stores and an e-commerce business. Full-year projections are up 16 cents, now averaging $2.66. Compare these figures to 18 cents reported for the quarter 1 year ago and $1.16 for all of 2009. As retail is a segment of growth at the moment, combine this with consumer confidence, Skechers USA seems to be a good bargain.
Alaska Air Group (ALK)  Alaska Air Group serves more than 90 cities across North America through its 2 subsidiaries, Alaska Airlines and Horizon Air. Due to the economic downturn Alaska Air Group has suffered, but with the recovery of confidence they should improve, in price, drastically. They had a loss of 70 cents in last year’s report, but should have improved when reporting on 22nd April.
Apple (AAPL)
Apple is reporting in on 20th April and the release of iPad has certainly given movement to more upward trends.
If you are not already a member of Stock Options Made Easy, then you may wish to become one so that you can benefit from the profits that are being generated!
Take control of your future prosperity the Easy way. Become a member of Stock Options Made Easy today!
Back to Stock Options Made Easy from Market Outlook April 19, 2010
|
