Morning Call [8:00am ET] Fundamental analysts – remember them – will looking more closely today at DuPont (DD); there has been another positive earnings surprise and the stock is likely to be re-rated higher by Wall Street. That ought to help the major market indexes today as DD is a large cap in the Dow 30 and S&P 500.
This took me (and Value Line) by surprise. The stock price was $34.05 back on July 5, the date VL prepared their July 16 published report, and $35.98 on the report date.
http://www3.valueline.com/dow30/f2834.pdf
Yesterday DD closed at $42.39, an increase of +24.5% following July 5. You could have bought this stock under $37 for a couple days following July 16, but then the price began to lift. Today, several analysts will re-rate the stock and the price will move even higher. Kudos to those Growth & Income investors who appreciated DuPont’s 4.9% yield in early July. It’s been quite a ride.
Here’s what I wrote about DuPont in WIR#29 (July 18):
Here are the charts for DD ($35.98 7/16 close; down -6.9% over 3 months and up +5.0% YTD):
http://billcara2.com/tkchart/tkchart.asp?stkname=DD&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=DD&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=DD&ind=rsi&wt=0DuPont (DD) has the highest six-month technical rating of these four stocks. A week ago, this rating was upgraded to a ‘2’ (above average).
There are many things I like about DD: dividend yield; industry and industry prospects; the Q/Q revenue growth over the next couple years; a powerful balance sheet that’s getting stronger; high quality CEO; and more.
The problem is that the stock hasn’t hit $55 since the year 2000 and we’re closing in on 2011 at a price of $36, midway between the 2010 hi/lo of 41.4/31.9. Besides earnings, while improving and may hit $2.70 this year and $2.95 in 2011, were as high as $3.24 and $3.61 in 1995 and 1996, and $3.28 in 2007.
So, these things considered, I don’t see how DD is likely to break-out until maybe 2013, whereas the other three stocks here have much better prospects by sometime 12 to 18 months out.
Now, if you are the risk averse type, an effective options put writing program would likely earn you a good income. Or, just buy the stock on major sell-offs and look for the high dividend yield.
The negativity from Wall Street arose from consensus earnings of $2.70/share for 2010. The highest recorded earnings from 1997 had been $3.28 in 2007, so the company was believed by many to be slow on the rebound, and mildly interesting in a period of economic recession. For the June quarter, consensus earnings had been just $0.74, and on June 8 management reaffirmed guidance through FY 2012 with a range of $2.50-$2.70 for 2010, with the Street anticipating $0.64 for the June quarter.
Now those quarterly earnings have been reported at $1.17, which is almost double what analysts had been expecting. Ergo the upgrades to come.
As for the market today, I’m not as enthusiastic as the early morning players in Europe this morning (up +0.9% on the FTSE), or at the Asia-Pacific close, or in our equity, commodity and precious metals futures. But let’s leave that for now.
I think the market needs to re-test the S&P 1085 one more time before advancing to 1115. Call it a gut feel.
Have a good day.
CTA Trading Desk Post-Close Report
Weekly initial claims came in at 451,000 versus a consensus view of 470,000, providing a big upside catalyst for equity futures early Thursday morning. At their peak, the September S&P futures traded at 1112 on Globex – very close to our first resistance zone of 1115.
Once the market opened traders began scaling out of longs as prices neared the 200-day average (very close to 1115) content to book some profits, while reassessing the odds for a continuation of the September rally. Selling accelerated after Bloomberg reported Deutsche Bank (DB -3.18%) was preparing a 9 billion euro stock offering to bolster its balance sheet in order to meet more stringent reserve requirements.
Also adding pressure to the fledgling rally was the underwhelming demand for US 30-year Bonds (ZBZ0-1.92%) at the latest Treasury auction. The $13 billion auction resulted in yields of 3.82% versus expectation for 3.806%, meaning investors are becoming reluctant to accept ridiculously low coupon rates – safety be damned.
This could be a very important development; rising interest rates could wreak havoc on the already out-of-control budget deficits run by the US government. Since World War II the US has been able to finance its expansion at rates well below those at which other countries could borrow money.
Remember at ALL times the perfect storm for the largest debtor country in the history of civilization. Falling currency + rising interest rates = soaring budget deficits = plummeting equity prices and civil unrest.
That, however, is a story for another day. For now, the question before traders surrounds the downside reversal from just beneath S&P 1115. Is the initial surge from the August 31 lows over? Is a pullback back to 1080-ish needed for a pause that refreshes?
At this point short-term traders should have taken a few chips off the table, targets make for good conversation but don’t pay the bills. The behavior of the pullback (if it materializes over the next few days) will probably give us clues about the next big impulse wave. If volume shrivels up as prices fall towards support and leading stocks weather the storm well, equity prices should resume their upward path.
If, however, volume significantly expands while key stocks begin knifing through major support levels, the weight of evidence will quickly shift to the Bear case. Regardless of your point of view, using well placed stops takes the emotion out of the trade and limits trading losses when your expected scenario doesn’t play out.
Still in the trading range… so it goes.
Have a great evening.
– Patrick Veech
Comments
US equities futures are creeping up afterhours but
it could be head fake as the dollar is flat and yen is rising at the same time. I will try to reload shorts on the open for a day trade only. I guess I'm on the same page with Bill.
FD: still bullish LT and will look for a good entry back.
new jobless claims below consensus
prior 472k consensus 470k actual 451k.
http://fidweek.econoday.com/byshoweventfull.asp?fi...
needs to be confirmed next week given short week this week. small pump to the market.
Cara 100 Ratings Changes
Good morning.
BBY - PT Lowered from $47 to $44 @ RBC. Outperform
CELG - Celgene initiated with a Buy at Stifel Nicolaus. Stifel is positive on Celgene's superior growth prospects and sees significant upside from greater ex-U.S. adoption of Revlimid in front-line multiple myeloma. Target $71
GILD - Gilead initiated with a Hold at Stifel Nicolaus.
NE - Noble Corporation upgraded to Outperform from Underperform at CLSA based on valuation. Target $39
RIMM - Research in Motion initiated with a Sell at BGC Financial. BGC believes Research in Motion's core smartphone strengths are having diminishing appeal in a highly competitive and rapidly evolving smart phone market. The firm set a Sell rating on shares with a $38 price target.
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Mining Stocks:
AU - Anglogold downgraded to Neutral from Overweight at JP Morgan.
HMY - Harmony Gold upgraded to Overweight from Neutral at JP Morgan.
Re: new jobless claims below consensus
also
The impact of today's report on the market will be limited by uncertainty over the impact of the holiday shortened week, yet the improvement, if confirmed or even extended in next week's report, would begin to raise expectations for payroll expansion. Stock futures are moving slightly higher.
Trade:
Highlights
The trade gap shrank sharply in July on both a rebound in exports and dip in imports. The overall U.S. trade deficit narrowed to $42.8 billion from $49.8 billion in June. The latest shortfall was much smaller the consensus forecast for a $46.8 billion deficit. Exports rebounded 1.8 percent, following a 1.3 percent decline in June. Overall imports declined 2.1 percent after increasing 3.1 percent the prior month. Nonoil imports fell 3.0 percent, following a 4.6 percent jump in June.
The improvement in the trade gap was largely seen in the nonpetroleum deficit which shrank to $33.2 billion in July from $39.7 billion the prior month. The petroleum goods gap also improved, narrowing to $20.9 billion from $21.3 billion in June.
By end-use categories, the boost in goods exports was led by a $2.3 billion jump in capital goods excluding autos. A large part of this--$1.4 billion-was civilian aircraft. This still left a moderate $0.9 billion outside of aircraft. Also gaining were industrial supplies, up $0.5 billion. Automotive exports were down $0.4 billion. The feeds & beverages and consumer goods ex autos components were essentially unchanged though down negligibly.
The drop in imports was broad based though following a large overall increase in June. Consumer goods fell $1.9 billion; autos were down $0.7 billion; capital goods ex autos declined $0.6 billion; and industrial supplies-which include oil-slipped $0.4 billion. Foods, feeds & beverages edged down $0.1 billion.
Today's report is good news for adding a little lift to third quarter GDP growth. And manufacturers certainly will be happy about the resumption of export growth. But it appears that businesses may be tapping down their expectations for consumer spending with imports of consumer goods down. But that dip did follow a strong gain in consumer goods imports in June.
On the news, equity futures rose. Also, initial jobless claims fell sharply and more than expected, further adding to lift in equities.
stronger opening than I anticipated
jobless claims helped, but Euro has been lifting too. Volumes today should be weak.
Odds Off The Don't Pass Line
BAC/CSCO/WFC/XOM off into opening strength.
Still holding AMAT/INTC/OAKBX.
Playing the 6 and 8
The 6- AA @ 11.19
The 8- Adding to AMAT @ 11.69
FTNT taking
over from NZ now for move to new highs.
After seeing a lot of mixed signals
After seeing a lot of mixed signals last night on my charts I had planned to close out the still profitable short trades and tighten up the stops on the non profitable one then stand aside. But Mr Cara gut feeling has me thinking maybe wait just a tad longer. Anyhoooo I just may ride it out to the EOD and see what kind of divergences my charts are showing then. As for my gold short trade I am almost green by 0.27% but I am thinking about just closing this out. The risk just doesn't seem to be worth it any more.
2nd: Congrats on your long trade from yesterday.
knifecatcher [from last night]: I haven't read McHugh in a long time. Any more I just use EW in a general sense to get an idea of what possible wave action we maybe looking at. I agree with your comment about the EW followers with all their various possible counts. They just always seem to be arguing about what the count is on some sub atomic level. I am just interested if it is corrective or impulsive and of course always looking for that 3rd wave to ride either up or down.
1st time unemployment claims
"For the latest reporting week, nine states didn’t file claims data to the Labor Department in Washington because of the Labor Day holiday earlier this week, a department official told reporters. California and Virginia estimated their figures and the U.S. government estimated the other seven."
http://tinyurl.com/3y8ogpy
Government workers with defined benefit pension plans in action.
Unemployment
A friend of mine just post this interesting comment from his web site.
"NINE states, did not report their numbers because of the Labor Day Holiday, which allowed California, one of the biggest economies in the world, to estimate their claims as well as Virginia. As for the other 7 states, well guess who had the honor of guessing what their numbers were? The Federal Government were allowed to make the guesses for those states. I don't know about you, but for me, that's like letting the fox count the eggs in the hen house.
Also in this report, people on unemployment was little changed, the number of people receiving UE benefits fell by 2,000 to 4.48 million the forecast was a drop to 4.45 million. People on extended unemployment actually increased by 29,300 to 5.47 million. Something tells me in are in for a big revision next week."
Re: 1st time unemployment claims
Learner2.... you beat me by 1 min LOL
FCX...metals
At 10:35 AM I was looking at FCX, it was down, and thought to look at metals. At first they looked up, but then I had to question this as TCK, BVN, and others are sucking wind. Vale, BHP are up though.
Then I was looking at Utilities and all are generally up but AES and CCJ.
Re: US equities futures are creeping up afterhours but
LOL! My reasoning was sound and the markets sold off after opening. The irony is I used FAS put as my instrument and FAS and is not selling as much as the rest of the markets. This is not the first time the idea was sound but execution poor. I will wait a bit for FAS to move especially with dollar rising.
AU
Shorting gold at 1,256.16 buy stop 1,257.53: mought
be a tad early
two dojis and break in the rising trendline.
FYI
Holding gold shorts. Look at this negative divergence.
http://www.screencast.com/t/MzYwZjQyM
We could be heading down [in time]....
Also from his site he is showing a strong positive divergence [accumulation ]for TZA on the 5 min
http://3.bp.blogspot.com/_gGhyx-JKKA8/TIjykqTW5VI/...
And the 1 min went from positive divergence yesterday to being in lock step with price now.
http://3.bp.blogspot.com/_gGhyx-JKKA8/TIjyfvXqpSI/...
EDIT: Corrected the 5 min link sorry.
AU
adding to shorts at 1252 lower buy stop to 1255.
think I'll go to 3/10ths of trading stash at 1245
Big rally coming
Big banks on fire, Golds getting a beating. Might be rally later.
Re: Playing the 6 and 8
AMAT off @ 10.81.
Pressing the 8 @ 11.29...
AU last call
All (3/10ths) in at 1245. Adjusting buystop. Won't bore y'all with further notes from my diary.
Re: FYI
You'll be feeling pretty clever about now, Bev. Good on ya'!!
Going Down
http://2.bp.blogspot.com/_gGhyx-JKKA8/TIkDb-lv49I/...
Bought some INTC and RIMM
partial only. I know they can go lower and I hope they do. JMO
Re: Bought some INTC and RIMM
I couldn't resist RIM yesterday, so I'm in with a plan to either make 10% in a couple weeks or quickly lose 5% and try again some other time. (Sounds stupid when I write it, but the same plan worked pretty well a few weeks ago at higher levels.)
Cara 100 Update (Final)
INTC - Standpoint Initiates with a Buy. Target $22
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One for our Lone Star State readers:
http://www.youtube.com/watch?v=tWLw7nozO_U
Re: Bought some INTC and RIMM
I also bought me some WAG and sold puts along with buying some CSCO(last week)...I have watched WAG and CSCO strengthen all day. You know they may take it down from here, but its a low risk entry.
edit:
This crackpot to be nice on (FENK) or Financial entertainment news kaleidoscope said that INTC was a steel below $24 last week or so and I reasoned using what God gave me that well surely it has a while to fall, OK well the crying times may be over cause the smart money is saying most likely I will shake you like a rattle until you scream for mama or something like that.
Re: FTNT taking
new highs now.
CREE
http://www.businessweek.com/investor/content/sep20...
FD:
Long stock at $51.8
Long Oct $50 calls at $3.4
Positions are small but this is being wrongly grouped in with the LCD TV inventory glut which makes up a fraction of their biz.
Re: US equities futures are creeping up afterhours but
FAS started to move down in quite a rapid pace. Rising dollar was certainly a leading indicator today. Patience is a virtue I guess. How many are voting for a red close for today?
Re: CREE
Thanks for bringing this up. I'm monitoring CREE but not going to catch this falling knife yet, especially as I expect some easing in stocks in the next couple of days.
Re: AU last call
I'm not bored with your comments. Support line for gold at 1244-1246, if it breaks that could move a lot lower. Bought FCX Sept 75 puts yesterday, they're green right now, but very fractionally.
What gives with RIG?
It has been strong all day along with MS and CCL. PBR and BP are not.
Silver Suppression Charted
It seems the not-for-profit seller has been busy over the past few days...
http://tinyurl.com/2bmxlj3
Re: Going Down
Here you can see the negative divergence [distribution] on a long time frame 60min chart. I agree more and more we will visit 1085 before going up again. Holding shorts including gold shorts [tight stop].
http://2.bp.blogspot.com/_gGhyx-JKKA8/TIkToJJeeVI/...
This will have to be my last post of the day.
DB expected news
FT reported last week that Deutsche Bank and Commerzbank were considering
equity sales.
TLT
Crazy action in TLT at 1pm ET. Money rushing out of bonds but equities just hovering above flat now and gold/miners getting hit. IWM is modestly red. Should be one heck of an afternoon.....
Re: CREE
Jack - I think scaling in at these prices will pay off in 6 months big time. GE's LED lighting solutions will be coming out soon (they licensed CREE's technology back in April) and the business equipment writeoff proposal could play into CREE's business in a big way. I think a drop from $80 to $48 more than prices in a slowdown in the LCD TV market, which makes up only 10% of CREE's revenues.
Re: TLT
BillySundance...lack of direct bidders in today's bond auction....it was 8.3% vs. an average of 17.9% .
Sounds like an excuse for a sell off to me. The lower channel on TMF held during the sell off. So if it starts it way back up soon to the upper channel then we should see SPX drop.
http://stockcharts.com/h-sc/ui?s=TMF&p=D&yr=0&mn=6...
Re: TLT
Thanks for the chart, Bev. Glad that you stayed re your 1:16 post.
Re: TLT
Why is TLT acting so wildly today? Where is all that money flow going to?
Re: TLT
"Why is TLT acting so wildly today? Where is all that money flow going to?" - joseph23
Treasury auction not going so well today.
http://tinyurl.com/35vl2pn
Chinese officals have switched to Japanese debt this week.
Who's gonna buy those shoooes; who's gonna buy those shoooooooes.
Cheers.
Re: TLT
Maybe its money heaven; just kidding.
edit:
Were is money heaven anyway? Kaimu knows I bet.
Re: TLT
Bev.....thanks for the chart. I like to stick to non-levered equities when doing charting (I.E. I would personally infer movement in TBT or TMF based on the charts of TLT because they aren't affected by decay) but the channel you noted on TMF does look interesting.
After a few really good weeks of trading for me, I have been thrown for a loop by the cross-currents in the market today. The gap up and subsequent sell-off in equities, all while money was simultaneously fleeing treasuries wasn't in my game plan.
Past experience has taught me that when my crystal ball suddenly goes from clear to cloudy it's best to pare some exposure, take a step back, and reevaluate. It's better to take a bruise than a kick in the chin.............
Re: Odds Off The Don't Pass Line
I ended up (mentally) pacing back and forth for the final hour of trading. At the half-hour mark, I marked positions in OAKBX for transfer (back) into cash. (An additional reason for selecting OAKBX in the buy-and-hold accounts was the lack of any ST trading penalty.)
Still holding AA/INTC.
Evolving Gold - EVG
Hi All - Go figure the market gives it back and the 10 year yield climbs to 2.75 - guess it was a bad auction given the glut of debt coming to market by sovereigns. Nice action for a change on one of my litter (EVG)on 3X usual volume - maybe someone thinks the next release of drill results will be quite favorable. Happy Trading
Vix
will it be up or down tomorrow:
http://online.wsj.com/mdc/public/npage/2_3051.html...
Re: Odds Off The Don't Pass Line>>Back to cash on NSM
Ugly reaction to NSM earnings/guidance-> sweeping INTC/AA off after hours.
Portfolio closes +0.50% for the day. Had I been able to sell OAKBX at the open, I have no doubt gains would have totaled >1%. As it is, OAKBX closed up just a penny. There's really no excuse for limiting transactions on mutual funds to EOD, IMO. The restriction has been 'waived' (legally or not) for large institutional customers often enough that it's clear intraday transactions should have little effect on managers' ability to steer the fund- if anything, it would attract more investors.
Re: Evolving Gold - EVG
Grandich Client Update – Evolving Gold, Has Taken a Licking But It Keeps on Ticking : http://tinyurl.com/2v87tdk
Taking a flier on NSM
Opening NSM @ 12.20. The news doesn't strike me as being that bad. Tight stop, however. For (what is likely to be) a dead bounce only.
Re: Vix
potential positive divergence in the daily macd amid double bottom in price Bears watching(pun intended)
Or a flag since the April low. Aka falling wedge since June high. who knows...
Not.v
Press release after the bell, any opinions? I have a tough time reading between the lines or getting to the "nut" in these.
Seoul's KOSPI breaks above 1800 to a new 52-wk high
If the semi sector shrugs off the after-hours NSM/TXN negativity, then I think the next leg of the bull is ready for take-off. No opinion at this time as to whether SMH gaps up or down Friday morning.
Re: Taking a flier on NSM
Low volume....other then that 50-50 chance of making money if you bought enough shares and a 1 to 5 penny bounce makes a worth while return for you.
Bought C @3.84 wed....looking for 3.94 or boredom which ever comes first.
do over
removed
Re: Taking a flier on NSM
Even odds in the market? I'll take that any day ;)
toby,
you may want to put this on your calendar.. http://finance.yahoo.com/news/Vical-To-Present-Tra....... also, about time to restart ' cldx '... best to ya, baz
futures 2:30am - Asia mixed trading
S&P +0.70 / +0.06%
Level 1,098.30
Fair Value 1,098.71
Difference -0.41
Nasdaq -2.25 / -0.12%
Level 1,881.00
Fair Value 1,884.02
Difference -3.02
Dow +11.00 / +0.11%
Level 10,349.00
Australia pulling back after yesterdays employment news. Shanghai composite flat.
If forex is the dog wagging the market tail, then I get the impression that we're waiting for Fido to make his next move. The Real remains overbought, USD/JPY continues under pressure to new lows, USD muddles along along with USD/EUR. CHF has eased off parity, but they've all swung to one end of the pendulum and I for one am waiting to see the traders to reverse their trades.
Not to say that opportunities aren't there intraday, as can be noted in Vad's log from yesterday. On a larger time frame the TLT gap closure I was looking for occurred. I like Bill's idea in the framework of a substantial move in the market, that of monitoring weakness in the Real and EWZ. One of these days I'll re-fund the IB account to put my money where my mouth is in a longer-than-intraday timeframe.
You Americans have been kind enough to lend us some of the Edward Hopper collection, which is presently on display in Lausanne. I shall enjoy this exhibition this morning - cheers:
http://en.wikipedia.org/wiki/Edward_Hopper