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October 31, 2005
Market Musings
Friday's sharp advance sure took me by surprise. However, the Nasdaq lagged and this week is big with a Fed meeting on Tuesday and an employment report on Friday.
70% of the S&P 500 companies have reported earnings. Of those, 68% beat estimates. That may sound like a lot, but it is the historical average according to First Call Research. John Butters of First Call goes on to note that companies beat by an average of 2%. However, the long term average is 3.2% and the average over the last 8 quarters to 5%. I think it is clear that third quarter earnings were not that great and forward guidance was even less inspiring.
Look for the cable and media stocks to move this week with Time Warner, Comcast and Viacom reporting.
There sure is a lot of money on the sidelines and a lot of talk of the yearend rally. Maybe there is too much talk and expectation of this event.
The Wall Street Journal reports that presidential scandals are nothing new and usually don’t affect the stock market. I think that scandals make government ineffective and this reduces its influence. Less governmental interference is viewed as bullish.
The Dow Transports is hanging tough with a long white candlestick on Friday. A close above resistance at 3760 would be bullish.
The Nasdaq 100 formed a harami at 1550 support over the last two days. Friday's strong price action was surprising, but follow through is required to turn surprise into real strength.
The S&P 100 closed at its highest level since 4-Oct. Are we seeing some large-cap leadership. Look for a close above broken support at 557 for some confirmation.
The Dow Diamonds (DIA) formed a pennant over the last three weeks. Watch 104.5 up and 102 down.
The Consumer Discretionary SPDR (XLY) formed a harami over the last two days. Watch 32 up.
The B2B Internet HOLDRS (BHH) broke above resistance with a gap.
The Finance SPDR (XLF) broke resistance at 30 and is carrying this market higher.
The Retail HOLDRS (RTH) firmed at support. We have seen this before. Can it break resistance at 95?
PBY is pepping up with good volume in September. A break above 15 opens the door to 19.
MHP, the parent of Standard and Poor's, closed at a 52-week high.
PENN is bouncing off gap (Nov-04) support with three days of good volume the last two weeks.
CTX is finding support near its May breakout and a move above 66 would be bullish.
CBT held support at 31 and broke resistance at 33 with good volume.
CNXT gapped higher and a break above 2 would be bullish.
MKS is holding after the gap down and a break above 19 would be bullish.
JDSU continues to attract good upside volume.
Can SNPS break consolidation resistance at 19.6 and continue higher?
MCRS sure is strong.
CXW needs to break resistance at 40 to get out of jail.
Posted by Arthur B. Hill at October 31, 2005 07:01 AM