|
 |
|
|
 |
 Securities Operations Forum has a special arrangement with Wall Street Strategies to provide access to this daily market commentary for free to SOF users. WSS provides independent investment advice and is not affiliated with any broker or underwriter. To receive a free personal email with the daily commentary, subscribe here.
|
 |
 |
 |
 |
| 2010-07-27 09:37 |
A NEW KIND OF FEAR (FINAL EDITION)
|
There's a different type of tension in the air all of a sudden. A kind of feeling that one has to be long rather than short or
flat. In a market where it seems like most professionals have their minds made up, and most individuals sway with the wind, gaining traction is hard,
but changing course is an even more arduous task. Without a doubt, however, there was a sea change last week that carried over into Monday. Once it
was automatic that stocks sold off into the last hour of trading, yesterday they picked up momentum. Caution is still thick enough you could cut it
with a knife. Still, enough investors have stopped mourning long enough to whistle as they walk across the graveyard.
Volume was impressive in
several individual names like Kenneth Cole (KCP) and Alberto Culver (ACV), as consumer oriented stocks act great Talk about contrarian action. There
were no takeovers to greet investors but serious hot scuttlebutt in the biotech sector with perennial takeover candidate Genzyme (GENZ) thought to be
in the scope of several large drug companies. I'd love to see a bidding war over GENZ, if Terrell Owens can have a couple teams vying for his services
then it's not unreasonable for a couple of drug companies with thin product pipelines and aging patents to try and bolster their line of products. On
that note, it's conceivable we could see major acquisition action in numerous industry groups as the market begins to rebound.
Everyone is so
snake bit it's hard to say (or write) out loud when the market looks to be on the cusp of taking off. Volumes were impressive, the close was
encouraging, and there is still a ton of skepticism out there...all the pieces I like when a market is breaking out. The notion of a market rally is
counterintuitive to be sure. Hell, what has changed? It's all there...
* Heart-wrenching unemployment
* Real estate in a sinkhole
* Lack
of confidence
* An avalanche of regulations, higher taxes, and discouragement
Admittedly, it's the contrarian in me that feels most
confident simply because commonsense suggests we should all be cowering in a bunker somewhere. But, how long are we going to cower? That's not what we
are all about.
Technically, the market looks like a screaming buy. Closing at a very pivotal resistance point on okay volume and stretching
above those key moving averages (exponential). Dare I say 10,900 is possible with the next leg higher on the Dow.
Presidents present budgets, but they must be approved and amended by Congress. I
bring this up because of the campaign to suggest the Mount Everest of debt being compiled by the current Administration belongs to the last guy. Not
true. In fact, after the Bush tax cuts, the deficit began to decrease until the Democrats took over Congress in 2007. Massive omnibus spending was
snuck into the budget by Pelosi and Reid, and this calamity has only gotten worse. I'm just saying.
Tidbits
The U.S. is on the verge of closing hundreds of caves
and thousands of abandoned mines to protect bats from man. As it turns out, hikers and others may carry spores that cause White Nose Syndrome in
bats. It is estimated that one million bats have already died from this syndrome. Not only are bats cuddly, cute creatures but they eat 2/3 their
body weight each night and happen to eat insects that like to eat cotton, corn, and soybean crops.
Earnings & Guidance More Convincing
* DuPont (DD): $1.17 per share versus consensus of $0.93 per share; revenue +26%, also beating the Street.
* Lockheed Martin (LMT): Mixed
report here. Company was light on revenue, but beat consensus earnings by $0.18. Earnings guidance, in light of the strong earnings beat, was soft.
The company increased its earnings per share outlook for 2010 to a range of $7.15 to $7.35 from April guidance of $7.00 to $7.20, saying it reflected
a reduction in average shares outstanding due to higher than expected share repurchases during the second quarter. The big profit beat appears to
stem from a tax benefit and the increased share repurchase activity.
* US Steel (X): Hard to decipher whether the company missed mightily or
missed to a lesser degree. Either way, the company looks to have missed on earnings, and suggested shipments and production are planned lower in
current quarter. Emerging markets cooling?
* Lexmark (LXK): The standout earnings report for the morning as the company beat by a whopping $0.30.
Management called out new product lines and positive industry trends (shift to inkjet) as the drivers of the better than planned bottom line. Revenue
also meaningfully surpassed consensus.
Economic Data
Case-Shiller Index
The Case Shiller index for May increased
by 1.3% from April, and was 4.6% higher year over year. Considering May was the first month without the federal tax credit for home purchases, it
would not have been surprising to see a decrease, so it's good to see home prices are still able to show some stability. That being said, the people
who make the report noted that there is likely a residual effect from the tax credit for homes that were ordered but not closed yet. In addition, May
is a seasonally a strong month. Nevertheless, the market takes price increases whenever it can get them; we are glad to see anything but a plunge
(take for instance the positive market reaction to yesterday's new home sales report which increased from the lowest level on record to the second
lowest).
| Delivery, and or timely delivery of Internet mail is not guaranteed. Wall Street Strategies
therefore recommends that you do not rely on email as your sole method of communication with us. We recommend using your company email address or one
issued to you by your Internet Service Provider. Free web-based email accounts like Hotmail and Yahoo are not advised as they are subject to quotas,
filters and frequent delays.
Disclaimer: All investment entails inherent risk. Wall Street Strategies' research seeks to assist investors in
determining when to buy and when to sell to attempt to maximize profits or minimize losses. All final investment decisions are yours and as a result
you could make or lose money. Wall Street Strategies, its employees and/or its affiliates and family members may from time to time take positions in
the open market or otherwise with respect to the securities discussed. Wall Street Strategies, its employees and/or affiliates do not have stock
ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Wall Street Strategies sit on the Board
of Directors of any covered company. Wall Street Strategies is not a broker/dealer, and the firm does not underwrite securities, manage assets or
perform investment banking activities. The statements made herein include information obtained from sources believed to be reliable, but no
independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information
and do not constitute an offer to buy or sell any security.
61 BROADWAY SUITE 1425, NEW YORK, NY 10006 Tel: 212-514-9500 Fax:
212-514-9582
|
 |
Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security. |
