Comtex SmarTrend(R) Morning Call -- November 19, 2009

Nov 19, 2009 (SmarTrend via COMTEX) --
PHM | Quote | Chart | News | PowerRating -- Lower new housing starts and weak technology outlooks held stocks back in trading yesterday until a rally by financial stocks reversed the erosion, and a mild rally commenced in the last hour of trading. Earlier the DJIA had given back the 30 points gained the day before, but rallied to close down only 11 points at 10,426. A second day of consolidating a base from which to rally was the message sent by the movements of the SmarTrend(R) indicators yesterday. More base consolidating, with prices declining to test supports by the market indices is expected this morning before leading economic indicators are reported.

After the massive Senate health reform bill stalls, a new stimulus package is likely to be proposed. This one will be aimed at job creation, which, despite knowledge that the unemployment rate is a lagging economic indicator, is viewed as the major factor now holding back economic growth. The unemployment problem, underscoring squeals of lament from D.C. about choked off credit to small businesses, will cause the new stimulus efforts to be oriented toward infusing capital into those entities in the private sector which create most new jobs. It is reported that the matter is as plain as the inability of otherwise prosperous merchants to borrow enough capital to finance hiring of sales personnel for the holidays. With half of annual retail sales tied to Christmas holiday selling, it seems a no-brainer that the first road out of Dodge for the consumer-spending-dependent economy is to make capital available to small businesses. It is this prospect that is likely to be the catalyst that causes the market to rally from its current base-consolidating process. After more drifting along this morning, see-sawing down and up in a narrow range, the DJIA will be ready to rally when a catalyst is provided. Such a catalytic proposition is probable at any time, one strong enough to cause the DJIA to surge to 10,600 by Thanksgiving. Yesterday the daily SmarTrend(R) uptrends to downtrends continued to show strength, coming in at 50:17, even though the market struggled to hold even all day. The IBDI moved down a notch, but the Trend Ratio continued its upward trek, still showing ample room to the upside during this uptrend pause to confirm the intermediate-term uptrend is alive and ready to further strengthen the investing environment in tandem with the unfazed long-term uptrend.

Consistent with the sideways movement of the market indices, as they consolidate bases from which to rally, are the mixed movements of the near-term trend indicators. For the third day in a row, two are up and two are down, as all four dance above and below their overbought boundary lines. The NBDI and SmarTrend(R) Ratio both climbed back up into their overbought zones, while the NBDX and NBDV fell below theirs. Three out of four need to be in synch before a definite trend direction can be confirmed, one that has enough momentum to move the market indices meaningfully in one direction or the other. So, at the moment, the near-term uptrend has paused, is churning in place, has room to the upside and awaits a reason to commence a rally for several days; one expected to push the DJIA up to 10,600 by the end of next week.

In the meantime the trade-term trend, with its usual reactivity to potentially-impacting business news, is likely to react downward before leading indicator news is out this morning. The fundamentals behind the likely early stock price erosion are discussed below; these may make the DJIA and S&P500 test support at 10,200 and 1,100 respectively before reacting to a new catalyst that propels these market indices to new highs. If persistently high unemployment is what truly ails the economy, then the catalyst for the next leg up in the market will come from a proposed solution to that problem, with capital infusion into businesses that do the majority of new hiring. To look at the complete list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.

Against a worrying wall built on housing recovery concerns and fears that tech's Teflon coating may be chipping, equities stepped back from 13-month highs set the prior session, as the US dollar traded lower against a basket of currencies and gold rose for the fourth straight session. The DJIA and S&P500 retreated 0.1% to 10,426 and 1110, respectively, while the NASDAQ dropped 0.5% to 2193. Less benign than anticipated consumer price numbers pushed gold prices higher, up $1.80 to $1141, as Treasuries fell in price, with the 10-year off 12/32 as its yield rose to 3.366%. Financials helped stem the market retreat as Paulson wrote of expectations that Bank of America (NYSE: BAC | Quote | Chart | News | PowerRating) shares will reach $29.81 by December, 2011, and Ambac Financial (NYSE: ABK | Quote | Chart | News | PowerRating) calmed concerns over its balance sheet. Volume remained light, with NYSE trading 1.063 billion shares, and decliners ahead of advancers by an 8 to 7 margin.

Early morning news of a surprising, 10.6% fall in housing starts to their lowest level in six months raised fears of a relapse in housing's recovery. Nevertheless, housing stocks moved higher on a Citigroup (NYSE: C | Quote | Chart | News | PowerRating) upgrade of Pulte Homes (NYSE:PHM) to "buy," raising the price target to $12 from $11, advising the shares are "undeservedly out of favor." Yet, also heading higher were DR Horton (NYSE: DHI | Quote | Chart | News | PowerRating), up 1.9%, and Ryland (NYSE:RYL) up 0.8%, while Toll Brothers (NYSE:TOL) fell 0.9%. The news appeared less than a straightforward, backward step for housing, as investors explained that a reduction of inventory is needed to permit industry health; hesitation was to be expected as the fate of the homebuyers' tax credit was still up in the air; seasonal weakness is normal now till spring; and single-family housing permits were, as anticipated, flat.

A 1.5% jump in energy prices warmed headline consumer price results, generating a 0.3% rise in October, after September's 0.2% increase, and ahead of the 0.2% gain anticipated. Core prices, excluding volatile food and fuel prices, also topped anticipations, up 0.2%, exceeding estimates of a 0.1% gain. Benign inflation expectations and results have provided Fed breathing room to maintain low interest rates, flushing liquidity into the system, and helping inflate equity prices. Inflation concerns, while still far from heated, still added to gold's recent rally, sending prices to another record close and a fresh intraday high.

Meanwhile, the dollar responded to a Fed official's remarks, which suggested a longer-than-expected lag-time before a lowering of interest rates is likely. During a speech, St Louis Fed President Bullard said that in the past two recessions, "the FOMC waited two and a half to three years before we started our tightening campaign. If we took that as a benchmark, that would put us in the first half of 2012." As Fed fund futures priced in an even lower likelihood of higher rates in mid-2010, the dollar dropped against a basket of currencies, down 0.3%.

The S&P500 sector scorecard was mixed Wednesday, with seven of the ten trading lower. Tech shares fell 0.6%, followed by 0.5% declines in basic materials, industrials, and utilities, 0.4% drops in oil and gas, 0.2% in consumer services, and a 0.01% easing in consumer goods. On the upside, financials rose 0.8%, and telecommunications gained 0.2%. In a quarterly post to shareholders, hedge fund operator John Paulson said he expects Bank of America (NYSE:BAC) shares to double over the next few years. Meanwhile, Sprint (NYSE:S) continued its own sprint, racing 6.7% higher after the previous session's 13% gain on news it had paid off $1 billion in debt.

Discouraging news from two software companies was enough to generate profit-taking in the tech group, already up 57% year to date. Autodesk (NASDAQ:ADSK) provided a disappointing fourth quarter outlook, and Salesforce.com (NYSE:CRM) warned of a slowdown in new business.

Today's calendar covers employment and manufacturing data. Weekly jobless claims (8:30 AM ET) are expected to hit 504K, up from 502K a week prior. The data carries little event risk, however, as most investors have already swallowed the bitter pill of extended job losses. Within the DC corridor, however, its relentless persistence is causing talk of further stimulus measures, likely to help equity prices.

The Philadelphia Fed Survey of regional manufacturing activity (10:00 AM ET) is expected to increase to 12.0 in November from 11.5 the prior month. The figure will be examined as it supplements or disproves Monday's poor showing from the Empire State manufacturing gauge, which surprised with a drop to 23.51 from 34.57.

Also slated for release this morning is the Conference Board's October Leading Indicators (10:00 ET), a measurement of economic activity based on current jobless ad claims, stock prices, consumer expectations, building permits for private homes, the money supply and other data. Economists anticipate a rise of 0.4% in October, slowing from September's 1.0% increase, but still marking a seventh straight monthly gain.

According to our analytics team, equities are expected to drift within a narrow trading range this morning, awaiting a catalyst, which could propel the DJIA to 10,600 by Thanksgiving. To look at the complete list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.

In the corporate corner, Bank of America/Merrill (NYSE:BAC) has downgraded semiconductor industry prospects, anticipating a modest inventory correction, even as economies improve and electronic demand rises. Four shares were downgraded to neutral, including Intel (NASDAQ:INTC), Texas Instruments (NYSE:TXN), Marvel Technology Group (NASDAQ:MRVL) and LSI Corp (NYSE:LSI). Lowered to underperform were Maxim Integrated Products (NASDAQ:MXIM), National Semiconductor (NYSE:NSM), Power Integrations (NASDAQ:POWI) and Microchip Technology (NASDAQ:MCHP).

Advanced Micro Devices (NYSE:AMD) rose 10.6% yesterday. The firm announced a private debt offering of $500 million of senior notes. This morning's news saw FBR Research raising its price target to $9 from $8, while maintaining a "market perform" opinion.

Goldman Sachs (NYSE:GS) reiterated its "buy" for CVS Caremark (NYSE:CVS) on valuation measures, noting the shares are cheap at $30, where it is selling at just 10.6 times 2010 estimates, below a two year, 14x average, with long-term growth of 13% anticipated.

Blackstone (NYSE:BX) plans to acquire Birds Eye Foods, the largest US frozen-vegetable company, for over $1.3 billion in an all-cash deal.

Tenneco (NYSE:TEN) priced a 12 million share offering at $16.50 per share for $187 million.

Sears Holding (NASDAQ:SHLD) reported a third quarter loss of 81 cents, less than the $1.09 loss expected, on better-than-expected revenues of $10.19 billion.

Dick's Sporting Goods (NYSE:DKS) third quarter results of 16 cents topped estimates by 7 cents as revenues of $990 million topped expectations of $961 million. Prospects for the fourth quarter missed, coming in at 41-46 cents, under Street estimates of 57 cents.

Children's Place (NASDAQ:PLCE) reported in-line earnings of $1.38 on in-line revenues of $463 million. Comparable sales fell 2%.

Williams-Sonoma (NYSE:WSM) third quarter beat by 11 cents as earnings posted at 16 cents and revenues exceeded estimates at $729 million.

By Chip Brian, Editor-in-Chief, Comtex news Network

www.Comtex.com -- editor@mysmartrend.com

The following equities mentioned above include:

                                    Comtex SmarTrend Alert
                        ----------------------------------------------
Ticker    Last Close    Trend Direction    Trend Price      Trend Date
----------------------------------------------------------------------
ABK        1.01          Downtrend           0.93           11/10/2009
BAC        16.35         Uptrend             16.41          11/11/2009
C          4.29          Downtrend           4.13           10/28/2009
DHI        12.37         Uptrend             12.46          10/22/2009
PHM        10.04         Downtrend           11.37          9/25/2009

INX -- S&P 500: 1,110
Lo: 1,103 Hi: 1,111
Change: -0.52

http://www.mysmartrend.com/images/INX20091119.jpg

INDU -- DOW JONES: 10,426
Lo: 10,360 Hi: 10,433
Change: -11.11

http://www.mysmartrend.com/images/INDU20091119.jpg

QQQQ -- NASDAQ: 2,193
Lo: 2,180 Hi: 2,200
Change: -10.64

http://www.mysmartrend.com/images/QQQQ20091119.jpg

This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.

Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2008

Comtex News Network, Inc. ("Comtex") obtains information from sources deemed to be reliable; however, Comtex does not guarantee the accuracy of any of the information or commentary provided. Comtex makes no warranties, expressed or implied, as to the fitness of the information for any purpose, or to results obtained by individuals using the information. In no event shall Comtex be liable for direct, indirect, or incidental damages resulting from the use of the information. Comtex shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to the information and its use. Comtex does not make specific trading recommendations or provide individualized market advice. The information contained in the Morning Call product is provided as an information service only.

To subscribe to this newsletter, please visit http://www.mysmartrend.com/newsletter . To learn more about SmarTrend, go to http://www.mysmartrend.com or call Comtex sales at (212) 688-6240.

For full details on Citigroup (C) C. Citigroup (C) has Short Term PowerRatings at TradingMarkets. Details on Citigroup (C) Short Term PowerRatings is available at This Link.

For full details on Bank Of America Corp (BAC) BAC. Bank Of America Corp (BAC) has Short Term PowerRatings at TradingMarkets. Details on Bank Of America Corp (BAC) Short Term PowerRatings is available at This Link.

For full details on Ambac Financial Group (ABK) ABK. Ambac Financial Group (ABK) has Short Term PowerRatings at TradingMarkets. Details on Ambac Financial Group (ABK) Short Term PowerRatings is available at This Link.

For full details on D.R. Horton Inc (DHI) DHI. D.R. Horton Inc (DHI) has Short Term PowerRatings at TradingMarkets. Details on D.R. Horton Inc (DHI) Short Term PowerRatings is available at This Link.

For full details on Pulte Homes Inc (PHM) PHM. Pulte Homes Inc (PHM) has Short Term PowerRatings at TradingMarkets. Details on Pulte Homes Inc (PHM) Short Term PowerRatings is available at This Link.