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Weekly Market Update - on the brink of earnings season

Weekly Market Call

A recurring theme for the last five weeks or so has been the fact that the economic news has ranged from fair to bad and yet the market continues to rise. This week was no different.

Fed meeting minutes were released and confirmed that those who said the Fed remains hawkish on inflation were right. New claims for unemployment jumped for the week ended April 7 to 342,000 from 323,000 the week before. This might reflect a softening in the labor market, but the weekly numbers can be very volatile. The March core PPI was weaker than expected at unchanged, but the total PPI surged 1.0%. The flat core was good news, but also may not reflect a trend. Expectations for first quarter real GDP have dropped to 2%. Interest rate forecasts were raised to reflect the lower probability of Fed easing. Inflation forecasts inched higher. And home price forecasts were lowered.

As the week ends we are on the brink of the first quarter earnings season. Will earnings reflect the somewhat bearish trends evident in recent economic news or will they surprise to the upside and reward what has, in my opinion, been an overly optimistic market? We'll find out over the course of the next few weeks.

ETF Comments

Indexes - all of them (and their associated ETFs: DIA, SPY, QQQQ, IWM) were up again this week. As reported last week, they are all clawing their way out of the TradeRadar SELL zone where they have been stuck for the last month or so. IWM and SPY have now moved strongly out of the SELL zone, DIA and QQQQ are above the line but not by much. All of these ETFs as well as those discussed below will see near term performance affected by earnings reports on the horizon.

Commodities - Oil didn't do much this week, closing at $63.60 a barrel, pretty much where it was last week. The US Oil ETF (USO) continues to flash a short-term SELL signal but on a longer term chart, it still seems to be in an up-trend. The Energy SPDR (XLE) remains in a solid up-trend and surged to a new 52-week high last week. It probably has a bit further to go before hitting its usual over-sold point. There will probably be another buying opportunity for those who have made a practice of buying whenever XLE gets down around its 200-day moving average.

Technology - Unlike the similarly tech-heavy QQQQ, the SPDR Tech ETF (XLK) has moved strongly out of the TradeRadar SELL zone.

Housing - the SPDR Home Builders ETF (XHB) barely budged this week. It may be trying to establish a bottom but there is resistance at $33 that may prove difficult to overcome. The iShares REIT ETF (IYR) had a couple of bad days this week but managed to finish a tiny bit up from the previous week. IYR is still deeply in the TradeRadar SELL zone. SRS still looks like it could be another short idea here.

Biotech - XBI, the Biotech SPDR, had another strong week and I was incorrect when I said last week that it was probably over-bought on a short-term basis. XBI has reversed the intermediate down-trend that has been in place since last November.

Financials - the SPDR Financial ETF (XLF) gained a bit this week but not nearly as much as the rest of the market. As I have said for the last couple of weeks, XLF continues to display one of the strongest TradeRadar SELL signals though it manages to stay above its 200-day MA. SKF still looks like a good short idea.

TradeRadar Stock Picks

Generex Biotechnology (GNBT) is pretty much doing nothing so we continue to hold. This week it drooped a few cents to $1.66 for a 1.8% loss.

The NASDAQ 100 was up again this past week so the ProShares UltraShort QQQ (QID) lost a bit more and closed the week down at $51.45. We are hanging in with a 2.3% loss. As painful as it is, we will continue to hold QID a little longer as a hedge against a poorly received earnings season.

Cisco Systems (CSCO) was up again and closed the week at $26.68 for a 3.5% gain. Cisco's chart is looking pretty good here.

BigBand Networks (BBND) struggled this week and dropped from $18.51 to close the week at $17.89. Our gain has been reduced to 2.5%.

SanDisk (SNDK) resumed its weak ways and fell from last week's $44.50 down to $43.35. I was surprised that it couldn't capitalize on the news it was in a partnership with Yahoo to produce a wireless MP3 player that would be integrated with Yahoo's music service. Our gain has been wiped out but it remains solidly in the TradeRadar BUY zone so we will continue to hold.

Millicom International (MICC) tacked on a few more cents and finished the week at $83.73 for a 5.6% gain.


Marubozo said…
The market is now totally incomprehensible. Nothing makes any sense at all. I am aware of the old axiom that the market can stay irrational longer than I can stay solvent- but this is ridiculous.

It seems that the entire world market- from commodities to derivatives to "blue chip" stocks- is teetering on the head of a pin. Any bad news would send it crashing down by any- dare I say it- "rational" measure. Over the past few weeks, we have seen that this is indeed not the case when bad news has been compounded with worse news on top of truly scary statistics.

My theory is that the major payers and market makers are a lot like junkies, in that even losing their car, their apartment- anything- can be rationalised, as long as they get their fix. The drug, in this case, is foreign credit and as long as the Chinese are pumping our own money back into our system, then everything is going to be okay. I wonder when it is they will pull the plug.

Their massive, government-controlled "hedge fund" with well over half a trillion dollars ($USD, btw...)in assets goes online this coming week, if I am not mistaken.
It will be interesting to see whether the Wall Street junkies stay satisfied with this smack, or whether there will be a frenzy of late-night phone calls and the pawning of valuable assets for them to stay flush with this buzz.
The smart druggie will probably bail, leaving the home-gamer to pick up the tab, as usual. Then, the Chinese and Japanese can swoop in and pick up pieces of America on the cheap, as they did in the late 1980's.

I don't know. It seems that until Wall Street is told that no one is going to pay for their constant partying any more will there be any sense of panic or doom. Send them to rehab with Britney.

We all know that the coming numbers are just horrible- maybe the worst ever, taken altogether as a "perfect storm" of sorts. It is just a question of when these boys will wake up and smell the looming disaster coming down the pike. Unfortunately, I don't have the answer to this question and I am afraid that neither does anyone else.
I do know that when it does come, it is going to come like a ton of bricks raining down on their parade.

It is going to get ugly.

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