Market Analysis

Despite November choppy waters and listless trading, stocks managed to finish at their session high with a gain of nearly 1%. Much of the Obama cabinet selections have helped to contribute to this 12% gain for the week. Stocks still shed 7.5% for November of last year. Still positive gains considering the environments. 

Trade volume was light Friday, thanks partly to shortened holiday session. Less than 1 billion shares traded hands on the NYSE.

The session’s choppy action had stocks trading in mixed for much of the session. A late rally helped 8/10 economic sectors finish in the black. Some analyst were even fearing the gloom of the stock market crash of 1929 proportions.

Financial stocks (+2.9%) outperformed on a relative basis. Bank of America (BAC 16.25, +0.82) made gains despite having trouble with getting its target price cut by analysts at UBS. Meanwhile, more foreign influence as the British government took a majority stake in Royal Bank of Scotland (RBS 17.58, +0.85) after investors snubbed a state-backed capital raising plan for the bank.

Economic headwinds are expected to have retailers expecting a slow holiday shopping season. But early indications per Black Friday only 1.6% lower than 2007. These are numbers we hope to see consistent through the remainder of the holiday shopping periods. 

On the technical analysis front, global handset maker Nokia (NOK 14.17, -0.45) said it will no longer sell mobile phones in Japan, except for certain high-end models. According to Nokia’s latest press release stated that it expected global volume to slow amid weaker consumer spending.

Auto makers have also been contending with a challenging environment, but their performance this session was impressive. Awaiting the final Federal Bailout decision, which is poised to pass, Auto makers surged 19.0% as a group.

Industrial stocks (+2.7%) also made strong gains during the past weeks, led by General Electric (GE 17.17, +0.98). GE gained despite word that Korea-based LG Electronics will not acquire GE’s home appliance unit, ending months of speculation. Looks like these bets were hedged accurately. 

Energy (-1.5%) was the worst performing economic sector. The rush is catching up to the energy sector as it dropped as a result of sliding oil prices. Oil was most recently down 4.0% to $50.25 per barrel, or down almost 65% from its record high. The drop in oil prices has many expecting OPEC to order a cut in production during its meeting this weekend.

With the uncertainty of the markets, investors have been seeking out the relative safety of US Treasury bills, which has pushed the yield of the 10-year Note to historical lows near 2.95%. Rating poor.

Large-cap tech names like Microsoft (MSFT 20.21, -0.28), Apple (AAPL 92.31, -2.69), and RIM (Research in Motion 42.10, -2.60) are all weighing on the Nasdaq, causing it to under perform its peers. 

With uncertainty and Obama administration transition we continue to see uncertainty surrounding the markets. The safety position is too surrounding Treasuries but mortgage lender yields still offering save alternative gains.

Market Analysis

• MSFT hangover is able to cool techs, however the SP500 can clear resistance
• Oil blitzes back up toward 120 after an appearance of a crack in the oil pan
• Bonds carry on their flight, and so did the dollar
• Most of our earnings season is over, however the economic calendar is filled
• Techs and the Big 3 – will the lead again?

The market has problems, but it will make it through. Microsoft defended its current quarter performance in a state of mind, which shows that ‘what is good for Apple, which is beating us about the head and shoulders is good enough for us’ stand. Contrary to the performance of Apple that rebounded smartly and posted a gain of almost 4% after its somewhat disappointing earnings, MSFT failed to rebound, unless you consider finishing $0.23 off its session low during a 6.19% loss as a rebound. Unlike Thursday’s occurrence, when NASDAQ bounced back and broke its February high level in a notable breakout, NASDAQ had to drag MSFT around all through the session since it was behind.

It was not helpful either that RIMM has reported that it acquired problems with its 3-G BlackBerry for AT&T and that it may be the cause of a delay. RIMM plunged earlier in the session, but rebounded to end at a loss of 3%. In addition, oil surged back up even as the dollar climbed, tapping at $119 once more (118.93, +2.87). Interest rates rose again for the second time in the last two weeks.

This session was solid. Breadth was mushy and volume backed off, but the market overcame disappointing news, held near support at the 10 day EMA, and rebounded with leaders bouncing back, and as noted, a new breakout by SP500. The volume was very large on the breakout, but the breakouts were piling up and that was an extra-ordinary development for the health of the market.

SP500 joined NASDAQ and DJ30 in their breakouts during the peak in early February, makes it ‘official’ for an up trend at the present time for all the three of the large cap indices. Basically, they have all made new highs since bottoming on the sell off, surpassing the prior highs in the 3.5-month base. The technical move is important enabling to focus on overall market and individual indices. As mentioned above that actually makes it disappointing, is the low volume move on the SP500′s. However, you take what you can when you can when recovering from a serious correction.

It surprised us this week after they broke lower to adjust given the dollar’s sudden popularity, but DESPITE a stronger peso the Big 3 (energy, ag, and metals) came right back on Friday . . .or, excuse me, . . . the US dollar. Extra. This was even better than it sounds keeping in mind the fact that the technology sector was soft due to the MSFT and RIMM issues. Even then, however, RIMM rebounded to hold near support and thus remains in great shape. However, even with those, the RIMM has rebounded and held support, and still remains stable. Furthermore, while others are testing or starting to bounce back up after testing near support following a breakout move, plenty of leaders continue to form up good bases and are set to breakout.

Excellent. Others moved higher, and showed no symptoms of use, like the transports sector, including trucking, rails, and shipping. Money keeps on moving into new areas as well as mature areas when the occasion arises. Positive activity.

Market Analysis

Stocks surged as the mortgage crisis appears to be subsiding.  Investors even liked Citigroup’s loss as it was not as bad as originally predicted.

• Bond yields jump, dollar firms, gold plunges: what the markets outside stocks are telling you.
• Price surges to come: how the government tied food prices to energy prices and how we are all going to pay the price.
• NASDAQ, SP500 breakout will confirm a continued rally near term.

Earnings provided the trigger for a breakout in many sectors. 

After a weak start that led to a deeper pullback from the rally, a pullback that left investors uncomfortable enough to wonder if the rally could continue, earnings started to come through this past week.  IBM, JPM, GOOG, INTC, CAT and HON all posted earnings and guidance that showed a stronger future than the general mood of the market was giving the economy credit for. Even misses by SLB and C were viewed in favorable light, indicating that the build off the lows with leadership and good price/volume action underpinning the move, as well as other factors at work as discussed below, are driving prices higher despite the concern about the US economy. This could very well be just a relief move in a larger bear market, but for now there are a lot of good stocks in good patterns making solid advances. Hard to argue with that regardless of what is driving it.

Stocks gapped higher on the earnings, fought off an early selling attempt, and rallied to new session highs in the afternoon. It was expiration and in the afternoon the market sagged as some expiration reshuffling occurred given the strong market recovery in the second half of the week. That pullback kept NASDAQ and SP500 from taking out their early February highs, but they did clear some important resistance milestones on the Friday move. DJ30, following the breakout Wednesday by the Dow Transports (DJ20), broke out as well, as it broke a hole in that ceiling at 12,750, doing so on stronger, above average volume. NASDAQ showed solid above average trade on its break higher as well, the first above average trade in a month.

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