WEEKLY COMMENTARY - AUGUST 25th-29th

MARKET COMMENTS -- INDU 11,628.06, COMP 2,414.71, SPX 1,292.20, RUT 737.60

The major indices continue to move in a secondary reaction rally. The major difference is that the volume for last week is weaker than the past two weeks’ volume. Notice the down slope in volume as the rally progresses as down days possess more volume activity than the up days in most indices. In addition, the INDU and SPX rallies have both weakened over the past week as they continue to test the 50-day MA. Both indices are in a wedge pattern, which is considered bearish. Friday has marked the 3rd rally attempt for both indices and both most penetrate their short-term recent highs for a continuation. The COMP has tested and failed the 200-day MA in addition to upper resistance around the 2475 level. Notice the tapering of volume is even greater than the previous 2 weeks. Friday’s gap up shows very little enthusiasm and we expect the COMP to test the 200-day MA one or two more times.

(click on chart to enlarge)


All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

The RUT formed a double Adam-and-Adam bottom, entered into a congestion zone mid-July to mid- August, made a new short-term high, met resistance at the 765 area and is now testing the 200-day MA. The RUT must penetrate the June and August highs for the trend to continue in strength. The RUT may trade in a range if resistance levels once again pose a problem. Nonetheless, the RUT is the best performing index shown.

We are now neutral in the short-term of whether or not the rallies will continue in the same initial strength as they did in last month. The reasoning is that volume for the past 3 weeks remain weak and has gotten weaker each week, hitting new short-term lows in volume. This level of “inactivity” is a graphical representation of weak institutional inflow, which is much needed to sustain rallies. We expect a mixed, neutral movement for all four indices for this week. Expect the INDU and the SPX to continue to test the 50-day MA and the COMP to retest the 200-day MA. Again, Volume confirms price action.

ADVANCE-DECLINE (A-D) & NEW HIGHS-NEW LOWS (NH-NL) LINES

The Advance-Decline lines and the New Highs-New Lows lines for the NYSE, NASDAQ (COMP), and AMEX are shown below. The best clues come from any divergences from the indices. The NH-NL line divergence with all indices vs. their respective exchanges continues to widen. Note the continuation of the lines in a neutral or downward trend while the rallies for the indices (and their respective exchanges) continue upward. Also note the A-D lines for each exchange and how the AMEX A-D issues are divergent with the other exchanges.

(click on chart to enlarge)

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The US Dollar did make a pullback as expected last week; however, we would expect continued consolidation or a deeper pullback at least to the 75 support area. The Euro has also pulled back as expected and we believe the Euro will either trade in a range or resume its downtrend for the short-term. Note 50-day/200-day MA crossovers for both currencies.

THE US DOLLAR/EURO, GOLD/SILVER, OIL/NATURAL GAS

(click on chart to enlarge)

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Also expected last week, Gold (AMEX: IAU) has pulled back to the 83 resistance area. Silver (AMEX: SLV) has pulled back as well, but did not fill the previous gap. We expect both commodities to trade in a range for the short-term. Also note the imminent 50-day/200-day MA crossovers.

Oil (AMEX: USO) spiked on Thursday due to a decline in the US Dollar as well as Russia’s presence near Georgia’s two main pipelines. We expect the USO to trade in a range bound by the 50-day MA and the 200-day MA. Natural Gas (AMEX: UNG) continues to slide in a downtrend, and we expect that to continue, but also expect a sharp spike away from extremely oversold levels.

AFTER EARNINGS REVIEW

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

ADI – Reported earnings of $0.44 per share from continuing operations, missing analysts’ expectations of $0.45 per share. Q3 income rose to 4138.6 million vs. 120.4 million a year ago. Revenue rose 7% to $659 million, practically in-line with analysts’ expectations of $658.9 million. Shares opened at $31.14 and drifted down throughout the day to close at $29.29, down 9% on 11 million shares traded.

FMD – Reported a loss of $0.53 per share due to a continued weakening in the student loan market and a decline in the value of receivables vs. positive earnings of $0.83 per share a year ago. Analysts expected an average loss of $0.53 per share, missing expectations. Revenue dropped to a loss of $40.4 million vs. a gain of $197.1 million a year ago. Shares closed Friday at $3.67, up $0.06.

BJ – Reported $0.61 per share on $2.65 billion in revenue vs. $0.55 per share on $2.25 billion in revenue a year ago. Analysts expected $0.57 per share on $2.67 billion in revenue, beating earnings estimates but missing revenue targets. Shares dropped 7% to close at $37.71.

HPQ – Reported $0.80 per share or $2 billion on $28 billion in revenue. Excluding one-time items, HPQ would have earned $0.86 per share, beating estimates of $0.83 per share. The company also raised its Q4 outlook by announcing that it expects to earn between $0.95 - $0.97 per share. Shares rose 6% to $46.16 on 33.1 million shares.

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

CTRN – Reported earnings of $0.20 per share, beating estimates of $0.17 per share by analysts. Revenue rose 16% to $338 million. The company also reiterated its guidance for the fiscal year. Shares rose $1.81 or 10% to close at $20.26. Shares the previous day dropped 11%.

PERY – Reported a loss of $0.36 per share or negative $5.4 million vs. net income of $267,000 or $0.02 per share a year ago. Analysts expected PERY to report a loss of $0.02 per share, widely missing expectations. Shares got crushed, dropping 25% or $5.77 to close at $17.23.

JDSU – Reported a loss of $29.8 million or $0.13 per share vs. a loss of $17.9 million or $0.08 per share a year ago. The loss was due to heavy acquisition-related charges. Shares fell 12% to $10.42, down $1.55 on 22 million shares traded.

NVTL – Reported preliminary results and expected to earn $0.03 per share for Q2 or $25,000 vs. $8 million or $0.25 per share a year ago. Analysts were expecting $0.14 per share, entirely missing expectations. NVTL expects a loss for Q3 of $0.03 per share while analysts were expecting earnings of $0.18 per share causing analysts to revise all estimates for the remainder of the fiscal year. Due to a delay, NVTL received notice from NASDAQ for failure to file its 10-Q and may be delisted if unable to meet listing requirements. Shares fell $2.11 or 25% to close at $6.29 on 7.2 million shares.

SELECTED INDUSTRY GROUPS

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

This Week’s Watch:

• The DJIA and SPX will continue to test the 50-day MA, the COMP will continue to test the 200-day MA. The RUT may re-test its June high. Note any increases in volume (if any) on positive days during the current rally.
• Several COMP industries are bound between the 50-day and 200-day MA’s. Note any breakouts or breakdowns.
• Numerous retails will report earnings this week as well. Last week, retailers mostly reported negative earnings. Make note of both positive and negative reports.

Economic Reports of interest: Mon. (Existing Home Sales), Tues. (S&P/Case Shiller Home Price Index, Consumer Confidence, New Home Sales, House Price Index, Richmond Fed Manufacturing Index, Weekly Retail Sales), Wed. (Weekly MBA Mortgage Applications, Durable Goods Orders), Thurs. Prelim Q2 GDP, Prelim Q2 Personal Consumption, Prelim Q2 GDP Price Index, Initial Jobless Claims), Fri. (Personal Income, Personal Spending, PCE Core, University of Michigan Consumer Confidence).

Noteworthy Earnings Reports: Tues. (COCO, SFD, BGP, CHS, JCG, AEO, BIG), Wed. (BWS, MW, DLTR, TLB), Thurs. (WSM, SHLD, ENER, ZLC, NOVL, MCRS, PETM, OVTI, GCO, DELL, TIF, DLM, FRED).

Contact: John C. Lee // E-mail: JCLee84@hotmail.com // Website: www.WeeklyTA.blogspot.com

*For fundamental-related articles, please visit: http://seekingalpha.com/author/john-c-lee

WEEKLY COMMENTARY - AUGUST 18th-22nd

MARKET COMMENTS -- INDU 11,659.90, COMP 2,452.52, SPX 1,298.20, RUT 753.37

The major indices are still moving in a secondary reaction rally. The volume is even weaker than the previous week for all indices. Notice should be made that the volume on down days is either greater than or equal to the volume on up days. The price-volume divergence confirms that the rally is due to end. Unless there is greater volume on the up days vs. the down days, the trend will continue to weaken. The volume in the INDU and the SPX both continue to sink, while volume for the COMP has tapered off considerably last week. The INDU and SPX are both consolidating at the 50-day MA, while the COMP is consolidating at the 200-day MA and any breakouts should be noted. The RUT is testing its June high.

The stochastics indicates a divergence with the INDU. The rally continues, yet the stochastics trend indicates waning momentum. The stochastics remain at the 80 level for the COMP and the RUT. (click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

We ultimately expect the rally to continue, but not for long. The INDU and the SPX should be able to test the 200-day MA again, while the COMP and RUT test their previous highs. The overall volume during these rallies remains unconvincing and poses as a threat to buyers. When new short-term highs are made in an established uptrend (rally), the volume must support the price action. Therefore, if weaker volume is present, the trend is close to a reversal. As the divergence becomes more and more aware, buyers will start to question the rally, and the resulting fear and supply will fuel the reversal. Volume always confirms price action.

THE US DOLLAR/EURO, GOLD/SILVER, OIL/NATURAL GAS

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

The US Dollar continues its powerful rally without resistance. I expect a pullback, soon, due to the fact that the pattern’s spike demonstrates a parabolic run happening too fast in too short of a time period. For the Euro, I expect a pullback close to the high of the breakaway gap down. The 2-year chart is in focus to show the island reversal and the ensuing, precipitous decline in relation to the long-term trend. It is obvious that the trend is completely broken and that a long-term downtrend is most probable.

Gold (AMEX: IAU) is sitting at the 77.5 support level; however the uptrend is completely broken on a technical level for the short and intermediate term. Silver (AMEX: SLV) also resembles the same pattern, both commodities ETFs having gapped down three times. We expect a pullback soon for both commodities as they have reached excessive oversold levels.

The important technical aspect of oil (AMEX: USO) is to pay attention to its response to the 200-day MA. The last time the USO found support at the 200-day MA was in August 2007, one year ago. We expect either a bounce from oversold levels to around $97 or a major one-day drop in oil cutting through the 200-day MA past $87 very soon. Natural Gas’ (AMEX: UNG) steep trajectory shows the initial stages of leveling off. The UNG is still in a parabolic downtrend having broken numerous support levels.

AFTER EARNINGS REVIEW

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

FLR - Reported $0.87 per share beating analyst expectations of $0.80 per share. They also lifted their full-year forecast to $3.65-$3.80 per share up from $3.30-$3.45 per share. FLR gapped up and sold off throughout the day, hitting an intra-day low near $67.50. Even as earnings expectations were exceeded, FLR remains in a downtrend and has failed the 200-day MA. Consider this: Alan Boeckmann, Chairman & CEO of Fluor Corp., has been selling his shares all year. In August alone, he sold over 1.5 million shares.

SYY – Reported $0.55 per share beating analyst expectations of $0.52 per share. Total sales rose 5.4%, gross profit rose 5.6%, and operating income rose 10%. SYY gapped up, fill the gap intra-day while finding support at the 200-day MA and lifted higher past $31. The following day demonstrated buying leadership as SYY continued its momentum higher.

CPN – Reported $0.41 per share beating analyst expectations of $0.10 per share. Operating revenue rose 37% to $2.8 billion. CPN gapped up about 6% and sold off throughout the day, forming a bearish gap up. Bearish gap ups have a very high likelihood of declining the next day. CPN did so, but is supported at around the $15.75 level forming what may be a short-term double bottom.

BOBE – Reported $0.45 per share beating analyst expectations of $0.44 per share. However, BOBE missed analysts’ revenue target of $443.2 million by reporting $440.3 million. The Mimi’s Café chain is mostly to blame. BOBE dropped close to $28 before recovering near the open, forming a long-legged doji.

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

MDR – Reported $0.77 per share on $1.79 billion, missing analyst expectations of $0.78. The miss was due to coming short of analysts’ sales target of $1.85 billion. MDR fell as low as 15.5% to $35.37 before rising just above $36. MDR continues its sharp downtrend into oversold territory. We expect a bounce in the near future as capitulatory volume has already been hit.

NUAN – Reported $0.22 per share, excluding items, beating analyst expectations of $0.23 per share. Including charges, however, NUAN actually reported a loss of $0.05 per share. NUAN also gave Q4 guidance and expected a loss of around $0.02 - $0.03. NUAN gapped down and lost 9%, but found support at the 50-day MA. The one-day reversal, resistance at the 200-day MA, and the rally on weaker volume after the reporting day should signal caution.

EL – Reported $0.61 per share beating analyst expectations of $0.56. Sales grew 14%, but 5% of the growth was attributed to the favorable foreign exchange rate. EL gapped up to $48 on heavy volume and buyers maintained momentum by bringing EL to close near its intra-day high around $51. This is a perfect example of a power spike and the follow-through day confirms that buyers are still coming into EL. The only possible resistance level for EL is April 2007’s high (not shown).

ADSK – Reported $0.39 per share, and excluding charges, would have earned $0.56 per share, beating expectations. Analysts were expecting $0.52 per share. ADSK also upped revenue guidance as they expect revenue to come in between $625 - $635 million, up from $623.1 expected by analysts. The stock gapped up nearly 12% and maintained buying throughout the day. ADSK hit an intra-day high at the 200-day MA before giving back some gains. This is a breakaway gap and I expect ADSK to either consolidate or trend higher in the short-term.

SELECTED INDUSTRY GROUPS

(click on chart to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmond Washington. All rights reserved.

This Week’s Watch:

• The DJIA and SPX will continue to test the 50-day MA, the COMP will continue to test the 200-day MA. The RUT will test its June high. Note any increases in volume (if any) on positive days during the current rally.
• Numerous retailers will report earnings. Make note of positive/negative surprises.
• The US Dollar may pullback into support and the Euro, Gold, and Silver may pullback into resistance.

Economic Reports of interest: Mon. (NAHB Housing Market Index), Tues. (Building Permits, Weekly Retail Sales, Core PPI, Housing Starts, PPI), Wed. (Crude Inventories, Weekly MBA Applications), Thurs. (Initial Claims, Leading Indicators, Philadelphia Fed), Fri (Cattle on Feed/Cold Storage Stocks)

Noteworthy Earnings Reports: Mon. (LOW, PRGO), Tues. (ADI, FMD, HPQ, HD, LZB, MDT, NVTL, OTEX, RAVN, SKS, TGT), Wed. (BYI, BJ, CTRN, EV, HOTT, JDSU, LTD, PVH, CRM), Thurs. (ARO, BKS, BEBE, BCSI, BKC, PLCE, DKS, DRYS, FL, GME), Fri. (ANN, PERY).

Contact: John C. Lee // E-mail: JCLee84@hotmail.com

*For fundamental-related articles, please visit: http://seekingalpha.com/author/john-c-lee

WEEKLY COMMENTARY - AUGUST 11th-15th

MARKET COMMENTS -- INDU 11,734.32, COMP 2,414.10, SPX 1,296.31

The major indices are currently in a secondary reaction rally, coming off of short-term oversold levels. However, the rallies themselves are moving on weaker volume compared to the capitulatory volume seen during the recent sell off. This is cause for concern since low-to-average volume on a pullback in a downtrend is considered bearish. Other points of warning are the resistance levels indicated at the 50-day MA as well as the January and March lows for the DJIA and SPX. The COMP is performing the best as the index has tested its March lows in addition to penetrating the 50-day MA. However, all three are subject to a test at the upcoming 200-day MA, which has acted as resistance in May.

The MACD does not yet indicate any negative divergence to suggest that the rally may end. The current rally is in a confirmed uptrend. The stochastics, having jumped from a near oversold level of 20 to a near overbought level of 80 in one week suggests that the move has occurred to fast in too short of a timeframe. Traders should especially watch if the rally loses momentum and the stochastics are returning to the median value at 50. Any instrument is deemed to be overbought once the RSI reaches the 70 level. This level has not been breached by the major indices; however, they are all approaching that level. Be aware of these indicators to determine if a divergence has occurred or to confirm a reversal in the current trend. (Click on charts to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmont Washington. All Rights Reserved.

We ultimately expect the rally to exhibit the characteristics of a secondary reaction in a primary leg down. Since the primary trend is down, this is considered a counter-trend move. It is no doubt that the recent SEC announcement on naked short-selling helped provide the fuel to spike a rally. However, due to lower volume on a weak rally, there appears to be less conviction in serious buyers. The VIX indicator shows that the general level of fear has subsided with a minor support level at 18, and a major support level at 16. In addition, the INDU, COMP, and SPX are all facing numerous resistance levels at both the major moving averages as well as previous lows. This may be a difficult rally for the bulls.

For the short-term, both the INDU and the SPX formed ascending triangle patterns, both of which broke out to the upside on weak volume. The COMP continues to breakout, but again, also on weak volume. This indicates that the buyers are still not yet convinced of the rally. Many buyers who incorrectly bought during the last short-lived rally fit into this category. There is still upside potential, however, the risk are greater due to the fact that the rally has reached a later stage near major resistance levels.

Emphasized are the Advance-Decline lines and the New Highs-New Lows lines for the NYSE and the NASDAQ (COMP). The best clues come from any divergences from the indices. The most interesting divergence occurs with the COMP and their respective A-D and H-L lines. Even though the COMP is the best performing index, the individual issues as a whole do not show the same support. What these lines reflect are far significant than what the index is saying and that any buying must be done so cautiously. (Click on charts to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmont Washington. All Rights Reserved.

THE US DOLLAR, GOLD/SILVER, OIL/NATURAL GAS, AGRICULTURE, INTEREST RATES

(Click on charts to enlarge)

All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmont Washington. All Rights Reserved.

The US Dollar has shown many positives as the USD Index has not only broken through major resistance at the 200-day and the Nov/Jan lows, but has broken out to a new 5-month short-term high. As the USD re-enters into congestion, we expect either a false breakout and a return into the 71-74 range OR a pullback to the 74-75 range, where the USD will most likely make a new high. The short-term trend is bullish. The intermediate trend is in a neutral range, and the long-term trend is bearish.

Both gold (AMEX: IAU) and silver (AMEX: SLV) are still in a trading range, consolidating for many months. Currently, both commodities ETFs have penetrated the 200-day MA. Gold is testing major support at 85, while silver has already broken down vis breakaway gap, by violating major support at 16. It is likely that gold will follow suit.

A divergence can be seen between oil (AMEX: USO) and natural gas (AMEX: UNG). It is extremely likely that oil will follow in natural gas’ footsteps due to the definite break in the uptrend in the same period. The USO has broken the 40-day MA (not shown), which it followed religiously, the 50-day MA, and is nearing support at the 200-day MA. We expect a bounce of unknown magnitude due to the oversold indication of oil. However, it is clear that the trend is broken and the primary trend has reversed to the downside. The UNG, in classic bubble fashion, saw a precipitous decline about 70% faster than at the rate at which it climbed. We believe that the UNG will trade in a range following removing the excesses that started at the beginning on 2008. Both oil and natural gas are bearish in the short-term, neutral-to-bearish in the intermediate-term.

Agricultural commodities (AMEX: DBA), as a whole, are in the early stages of a downtrend. After trading in a range, the DBA reached the Feb high level, and broke down back into the range as well as breaking the 200-day MA. We expect to see a pullback rally exiting the oversold area and resuming its downtrend. The next support level is at around 30. At the failure at that level, there are no other major support levels remaining down to the 24 level.

Both the 30-year and the 10-year Treasury yields have been consolidating below resistance and are currently trading in a range. The fact that both yields were unable to break above the June high gives weight to the likelihood that both yields have started a downtrend. We expect continued whipsawing around the 200-day MA for both yields.

SELECTED INTERNATIONAL MARKETS

Brazil (NYSE: EWZ) has been in a long uptrend until the trend broke as it broke through the 200-day MA. In addition, a lack of follow-through in pushing itself back up above the 200-day confirms that a reversal has taken place. We expect the EWZ to enter into a downtrend or trade in a neutral range for several months. The same may be true for Hong Kong (NYSE:EWH) as it is currently in a consolidation phase, testing both support and resistance. A break above 17 indicates a bullish breakout while a break to 15 indicates a bearish breakdown.

(Click on charts to enlarge)


All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmont Washington. All Rights Reserved.

Japan (NYSE: EWJ) has currently broken support between the 11.50-11.75 level. We expect Japan to continue in its downtrend OR pullback and trade in a neutral range. We expect Mexico to breakdown below 52 immediately. The current consolidation pattern highly favors a continuation downward. Any break above 56 indicates a bullish breakout while a break to 51 indicates a bearish breakdown.

SELECTED INDUSTRY GROUPS

(Click on charts to enlarge)




All Charts Courtesy of Stockcharts.com. Copyright ©1999-2008 by StockCharts.com Inc., Redmont Washington. All Rights Reserved.

This Week’s Watch:

• The market and its industry groups will test the 50-day and/or the 200-day MA. Note successful and failed tests.
• Note any increases in volume (if any) on positive days during the current rally.
• Note any additional divergences between the indices and the Advance-Decline and New Highs-New Lows lines.
• Expect the US Dollar to maintain an uptrend.
• Expect agricultural and energy commodities to continue its downtrend.

Economic Reports of interest: Tues. (Trade Deficit, IBD/TIPP Economic Optimism, Monthly Budget Statement, Retail Sales), Wed. (MBA Mortgage Applications, EIA Energy Inventory, Import Price Index, Advance Retail Sales, Business Inventories), Thurs. (CPI, Initial Jobless Claims), Fri. (Empire Manufacturing, Net Long-term TIC Flows, Industrial Production, Capacity Utilization, Univ. of Mich. Consumer Confidence).

Noteworthy Earnings Reports: Mon. (CNO, SYY, CPN, COO, FLR, MDR, CUZ, CKEC, NUAN), Tues. (BE, TJX, BOBE, NVDA, AMAT), Wed. (LIZ, DPS, NTAP, IPI, DE, M), Thurs. (URBN, RRGB, KSS, A, EL, SJM, WMT, JWN, DV, BGG, ADSK), Fri. (ANF, JCP).

To request additional research, please contact the author personally at: JCLee84@hotmail.com.