Things To Note
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Not that I
blame them, but have you noticed that the markets are wary even as we
receive positive economic news and indicators pointing to recovery?
For example the NYSE Advance/Decline line has been showing some very bullish
signs, but the markets continue to discount this. According to some research by
Bank Credit Analyst, there are other signs that show the markets are not as bad
off as people think. In the BCA study it has shown that the number of NYSE
stocks making new 52 week lows have not increased as in a typical bear market.
With that said,
BCA
feels that large caps may be hitting cyclical lows, while the small and mid
caps, particularly value stocks,
will continue to show strength.Â
Turning to the NAPM non-manufacturing
numbers which were released this morning:
the
numbers are exhibiting some positive notes as they
are
indicating that the inventory draw-down process is nearing an
end. Why is this positive? Well for one,
last week‘s
NAPM Orders number rose,
which show that the economy is turning around,
and
with inventories declining we should see a continuous up–tick
in the NAPM orders numbers. The thing I like most about
the
NAPM manufacturing numbers is they usually lead the economy by approximately three
months.Â
Still,
we will remain cautious and continue to monitor Europe, Japan and the U.S to
ensure we are all going in the same direction. It was nice to see U.S. Treasury
secretary Paul O’Neill asking Japan to take action in helping the country’s
economy. Now we watch to see if the Finance Minister will act. As I said before,
we will need help from overseas for this recovery to happen.
Looking at some stocks with some
promise,
I came up with Caremark RX (CMX).
It looks interesting because
it is forming a high–level
symmetrical triangle. The prescription services company is showing some nice
quarterly growth (57%, 40%, 67% and 78%). Sales have increase on a quarterly
basis also (34%, 32% 31% and 27%).
Food retailer Performance Group (PFGC)
looks poised to testing it high as it ascends up the right side of a 4+ week
base.
Not many Exchange Traded Funds ended
in the green, the Oil Service HOLDRs (OIH)
gained 1.9%.
The iShares DJ US Energy Sector Index
Fund (IYE)
moved up fractionally 0.3%. The fund is forming a low–level
symmetrical triangle right at its moving averages. Note the positive slope in
the Relative Strength line.
And the WEBS-Canada Benchmark (EWC)
ended in the plus column,
with a gain of 0.1%.
The Internet Infrastructure HOLDRs (IIH)
lost 7.7%,
while
the Broadband HOLDRs (BDH)
slipped 6.7% and the B2B HOLDRs (BHH)
fell 6.0%.
Remember that all securities are
risky. In any trade, you should always reduce your risk by adjusting position
size and placing open protective stops where you will sell your long or
cover your short in case the market turns against you. For an introduction to
combining price stops with position sizing, see Loren’s lesson, Risky
Business.
Greg
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