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.
Labels:

Comments

Post a Comment

Popular posts from this blog

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...
7 comments
Read more

The Trouble with Trend Reversal Indicators

Many of us use various trend reversal indicators to time our trades. Our desire is to determine when prices have changed direction so that we can ride the new trend. Why doesn't it always work out? The first reason, of course, is that unforeseen events often drive prices in unexpected directions. That is something we can't change and it often makes all of us technical traders crazy. On the other hand, sometimes an unforeseen event is a prelude to a new trend. A stock spikes up on a what seems to be a one-time piece of good fortune and soon falls back. Does it start making its way back up or does it resume a previous down trend? The conflict within trend reversal indicators is that, though they can definitely tell when prices change direction, they suffer from two problems. One, they often can't determine how significant that move in prices actually will be. Two, they are often lagging indicators. As such, they can be late in providing a signal, sometimes leading the investo...
1 comment
Read more

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...
6 comments
Read more