Skip to main content

Weekly Market Update: Earnings and Interest Rates

Weekly Market Call

Earnings and interest rates dominated the week and made for a volatile stew. Much as we observed last week, most earnings reports are decent but we have seen better news in past quarters. Earnings to date are not driving the market upward in any consistent way. Indeed, all the major averages lost 0.6% this week except for the Russell 2000 which managed a gain of 0.4%.

Tech rallied on Wednesday due to good news from Yahoo and Sun but the rally couldn't last and the NASDAQ finished the week on a sour note. AMD plunged on a loss, Microsoft and eBay rose on strong earnings. Amid the inconsistency and volatility, TradeRadar is now flashing another weak SELL signal on the QQQQ as it did a few weeks ago. The fact that the signal strength is again weak is clearly indicative of a market that is treading water with no clear sense of direction.

On the other hand, TradeRadar continues to indicate that the Dow and S&P 500 remain in their up-trend though perhaps not as firmly as before.

Bad news from the housing market seems to be getting less bad. We have now had two months of rising housing starts and median prices of existing homes fell less than the previous month. Existing homes sales fell only slightly. The feeling among traders is that we may be near the bottom.

Against the backdrop of the housing market improving, December durable goods orders up 3.1% over November and still decent earnings from most companies, the other big driver in the market became a fear of the Fed. Whereas investors have been hoping for a rate cut by June, the feeling now is that we won't be seeing rates cut until December. Indeed, there are those who fear further tightening. This really took the wind out of the sails of the market after Wednesday's big rally. Note that bond yields have been moving steadily upward since the beginning of December, possibly confirming this expectation of higher rates.

Bottom line: uncertainty and caution are the rule of the day.

ETF Comments

As we said lask week, XLK, the tech ETF is mirroring the action on the QQQQ. This trend is continuing and we see the same kind of weak TradeRadar SELL signal for XLK. The decent news in housing didn't do much for XHB, the home builders ETF but IYR, the US Real Estate ETF (with more of a REIT orientation), reacted positively and continues its strong up-trend. Oil was up and down and XLE, the energy ETF, reacted accordingly. It remains above its 20-day and 200-day moving averages but below its 50-day moving average. Tough to make a call here.

TradeRadar Stock Picks

No major news for the three current stock picks that we continue to maintain as open long positions. Tarragon (TARR) drooped this week after recovering last week. Generex (GNBT) didn't budge. PacifiNet (PACT) lost a dime on continued profit taking. Whenever it gets up to the $6.50 to $7 range it seems to run into resistance.

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:


Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:


Results here were actually quite good and, to make things even better, the previous month was revised upward.

N…