Earnings Season Begins; Stocks Fall

Tuesday, January 12, 2010
Market Commentary:

All the major averages fell for the first time this year after a disappointing start to earnings season. Volume, an important indicator of institutional sponsorship, was reported higher than Monday’s totals on the NYSE and on the Nasdaq exchange which marked a distribution day and suggested large institutions were aggressively selling stocks. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and Nasdaq exchange. There were only 12 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the total of 55 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange, and new lows were near single digits which is a healthy sign.
China Raises Reserve Limits:

Stocks slid across the globe as concern spread that the economic recovery may slow down as governments begin to withdraw their massive stimulus packages. Overnight, China raised its reserve limits for banks which is designed to curb their explosive economic growth. Since the March bottom, China has played a pivotal role in leading the global economy out of the worst recession since WWII and has emerged as a strong economic engine. The threat of an economic slowdown in China spooked many investors which helped send shares lower on Tuesday.

Earnings Season Begins!

Over the next few weeks, earnings news will likely set the tone for the near term action in the major averages. At this point, analysts believe that combined profit for the average company in the benchmark S&P 500 surged +62% during the fourth quarter. If that occurs that will snap the longest earnings losing streak in history and will be the first quarterly increase in earnings since 2007. Remember, that it is extremely important to digest each companies results but it is equally important to see how each company’s shares react to earnings.

Market Action- Short Term Pullback, Market Consolidating Recent Gains

On Monday, we penned, “After three strong weeks of gains, the market appears to be showing signs that a near-term pullback might be in the cards. A slew of stocks negatively reversed (opened higher and closed lower) on Monday, which suggests a change in trend may unfold.” Therefore, Tuesday’s pullback was somewhat expected as the major averages (and leading stocks) pause to consolidate their recent gains. Is the rally over? No, but all we have to do is be cognizant of the fact that a near term pullback may occur and then trade accordingly. From our point of view, the current, 45-week rally, remains intact as long as the major averages continue trading above their respective 50 DMA lines. Until those levels are breached, the bulls deserve the benefit of the doubt.

Professional Money Management Services – A Winning System – Inquire today!
Our skilled team of portfolio managers knows how to follow the rules of this fact-based investment system. We do not follow opinion or the “conviction list” of some large Wall Street institution which would have us fully invested even during horrific bear markets. Instead, we remain fluid and only buy the best stocks when they are triggering proper technical buy signals. If you are not completely satisfied with the way your portfolio is being managed, Click here to submit your inquiry. *Accounts over $250,000 please.  ** Serious inquires only, please.

Similar Posts

  • Stocks Fall As Economy Weakens

    The technical action in the major averages continues to weaken. Currently, resistance for the Dow Jones Industrial Average and the benchmark S&P 500 index is their respective 200 DMA lines, while the Nasdaq Composite faces resistance at its 50 DMA line. It is also disconcerting to see the action in several leading stocks remain questionable as evidenced by the dearth of high-ranked leaders breaking out of sound bases. Thursday’s action wiped out the gains enjoyed earlier in the week for the major averages which emphasizes the importance of remaining cautious until the rally is back in a confirmed uptrend. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support (recent chart lows). The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.

  • Stocks Pullback To Consolidate Monday's Move

    At this point, the Dow Jones Industrial Average, S&P 500, and the NYSE Composite indexes have all traded above resistance at their long term 200-day moving average (DMA) lines and recent chart highs. The tech-heavy Nasdaq Composite and small-cap Russell 2000 index remain slightly below their recent chart highs. However, the fact that all of the major averages are trading above their respective 2-month downward trendlines bodes well for this five week rally. In order for a new leg higher to begin, all the major averages must close and remain above their respective resistance levels. Remember that the window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.

  • Stocks Edge Higher As Dollar Falls

    Overall, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) remains healthy. Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases in recent weeks. All the major averages rallied above their respective 200-day moving average (DMA) lines this week, which is another encouraging sign. The next important resistance level the major averages are facing is their respective summer highs.

  • Stocks Mixed After Long Weekend

    Market Action- Market In A Confirmed Rally
    From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and are flirting with, or at, fresh 2011 highs! In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April. If you are looking for specific help navigating this market, please contact us for more information.
    Want Better Results?
    You Need Better Ideas!
    We Know Markets!
    Learn How We Can Help You!

  • Week-In-Review: Stocks End Mixed As Earnings Continue In Droves

    Stocks End Mixed As Earnings Continue In Droves The market ended higher last week as investors digested a slew of mostly positive earnings and economic data. The big economic news came on Friday when the government reported a stronger-than-expected jobs report. So far, earnings are mixed to mostly higher. Apple (AAPL), Netflix (NFLX), Facebook (FB),…

  • Selling Resumes!

    Market Outlook- Market In A Correction
    The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

Leave a Reply

Your email address will not be published. Required fields are marked *