Comtex SmarTrend(R) Morning Call -- November 20, 2009

Nov 20, 2009 (SmarTrend via COMTEX) --
TXN | Quote | Chart | News | PowerRating -- Flames of fear regarding fragility of economic recovery were fanned yesterday as investors worried over disappointing economic indicators. The DJIA dropped like a rock in early going, and sorely tested its support at 10,300. The SmarTrend(R) indicators point to a continuation of this support testing through today, even though Thursday's sharp break created a momentary oversold condition that began to correct in the last hour of trading.

The selloff yesterday was sharper than expected due in part to price movements of stocks to adjust for upcoming options expirations today. This added market volatility does not discount the deleterious stock price effect of the weaker-than-expected improvement in the leading economic indicators as well as a brokerage firm downgrade of the entire semiconductor sector of the economy. Unfortunately, weak results last evening from Dell will add fuel to that fire today, and stocks are likely to struggle to rise, even carrying through from having been acutely oversold yesterday. So the looming question is whether yesterday's market index declines were a dip in the rally or a reversal of longer-term uptrends. In a word, the character was that of a dip. The daily SmarTrend(R) uptrends registered biased to the downside at 12:29, much narrower in scope than might have been expected from the sharp decline of the market indices. Moreover, the impact on the IBDI and Trend Ratio, while negative, did not drive the Trend Ratio down below its critical threshold surpassed last week. This adds up to an intermediate-term uptrend that is taking a hit in the current uptrend pause, but not enough to drag down the long-term uptrend, which continues. Thus the investing environment remains favorable to long stocks.

However, the trading environment is driving stocks down and testing support levels for the DJIA at 10,300 and 1,100 for the S&P500 index. Now all four near-term trend indicators are in retreat and are yet to show any signs of stopping and forming bases. This means that pressure on the market indices will continue, although much of the correction likely to occur in the current dip has already occurred; so, while the market indices might find themselves on the underside of their support lines, it appears that support will be sufficiently bolstered by the longer-term trends to limit the current uptrend pause to a dip to test supports, not a reversal of uptrends sufficient to sour the investing environment toward long stock positions.

Weathering the current dip storm can be a trying experience, particularly when volatility is heightened by trade-term trend downdrafts that are accentuated by marketplace mechanics related to massive amounts of capital moving stock prices to compensate for gaps between strike prices of expiring options and current stock prices. There wasn't a great increase in selling pressure yesterday, the dip was more the result of dried-up buying force. This malaise is likely to continue to next week, until a catalyst to rekindle a rally after this dip is forthcoming, and drives the DJIA on up to 10,600, as expected. Such possible events are discussed below. All of this is happening, and made worse, during an era that has brought a betrayal of trust previously granted by investors to major financial institutions, at its core brought on by banks' selling to pension funds CMOs while at the same time they were shorting the same instruments or derivatives attached to them. Thus persisting doubts about the possibility of a double-dip recession are not surprising or irrational; still investors will seek bargains wherever and whenever they occur. Success in buying and selling stocks depends on being able to identify those times and places. For the brave at heart, such a time and place likely will coincide with a bottoming out of the trading environment in the next few days. For a look at the complete list of stocks changing trends recently please click on http://www.mysmartrend.com.

The S&P500 1100 level appeared too strong to resist, sending all but 31 of its components lower on Thursday, down 1.3% to 1095. The DJIA shed 94 points, or 0.9%, for a 10,332 close, and the NASDAQ dropped 1.7% for a 2157 finish. A semiconductor industry downgrade from BofA/Merrill's (NYSE: BAC | Quote | Chart | News | PowerRating) analyst, mixed economic data and general-rally-fatigue were blamed for the market's second down day. However, the interplay of weakness in riskier asset classes and strength in safe-haven asset plays suggested investors are growing less tolerant of the year's "green shoot" promises, those glimmers of demand gains not yet reflected in revenue increases.

Now lower for a second straight session, benchmark equities responded to decidedly diminished risk appetites across the asset spectrum, a phenomenon fueled as much by technical considerations, perhaps, as actual threats to global recovery prospects. Indeed, the OECD increased its growth projections for its 30-country members to 1.9% in 2010 from June's estimate of 0.7% growth, and to 2.5% GDP expansion in 2011. Nevertheless, trading volume has recently slowed to levels of only about 1 billion daily on the NYSE, suggesting both a lack of conviction in the market's ability to push much beyond the current rally's steep, 64% rise from March lows, and sidelined institutional investors eager to lock in already-impressive profits before yearend.

Investors appeared increasingly mindful of the risks of asset-bubble build-ups from central banks' accommodative monetary policies and governments' stimulus efforts worldwide, turning the recent trading volume pullbacks into a rush into safe-haven assets. A base-building buck traded at the top end of its range, up 0.2% against a basket of currencies. Crude prices dropped $1.93 to $77.46. Gold prices rose to their fifth straight record close, up 70 cents to $1141.90.

Meanwhile, short-term US interest rates turned negative for a time during yesterday's session, as banks dressed up their balance sheets for yearend viewing, stockpiling government securities. The higher prices for government securities came even as the Treasury announced plans to issue $118 billion new notes next week, an auction schedule of $44 billion 2-year notes on Monday, and record Tuesday and Wednesday auctions of $42 billion 5-years and $32 billion 7-years, respectively.

Tech shares, already up 54.3% year-to-date, fell 1.7% Thursday, after Merrill's analyst slashed 2010 global growth targets, and downgraded ten companies in the sector. Intel (NASDAQ: INTC | Quote | Chart | News | PowerRating) shares plunged 4.1%, and Texas Instruments (NYSE:TXN) dropped 3.4%. Dell (NASDAQ:DELL) shares plummeted 6.1% in premarket trading, following its earnings miss reported after yesterday's close.

The economic news was not particularly alarming, nor surprising. Jobless claims actually fared better than projected, as the four-week moving average fell to its lowest in almost a year. Weekly claims were flat, although the prior week's figure was revised upward by 3K. Mortgage delinquencies climbed to 9.64% of loans during the third quarter, as foreclosures, up 4.5%, reached 14.41%. Leading indicators were slightly lower than projected, up 0.3% in October rather than the 0.4% expected rise, but still marking the gauge's seventh monthly gain. And the Philly Fed manufacturing index rose to 16.7 in November from October's 11.5.

According to our analytics team, markets may continue weak under the pressure of last night's disappointing Dell results, even as stocks began to recover by the session's end from acutely oversold levels. Nevertheless, we continue to expect the rally to resume, pushing the DJIA to 10,600 as the next catalytic impetus is uncovered. For a look at the complete list of stocks changing trends recently please click on http://www.mysmartrend.com.

In the corporate corner, DR Horton (NYSE: DHI | Quote | Chart | News | PowerRating) reported a fiscal fourth quarter loss of 73 cents, wider than anticipated on revenues of $1.01 billion, which missed estimates of $1.11 billion. According to Chairman Donald R. Horton, "Our net sales orders in the September quarter reflected a 26% increase compared to the prior year quarter. However, market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence."

Dell (NASDAQ:DELL) reported disappointing third quarter earnings of 23 cents, missing estimates of 28 cents, as a 15% fall in revenues from a year ago generated revenues of $12.9 billion, missing projections of $13.2 billion. Nevertheless, CEO Michael Dell said early Windows 7 demand was proving correct his assumption that firms which had passed over Vista would upgrade with Windows 7, driving the market growth above traditional 10% averages.

JM Smucker (NYSE:SJM) reported record fiscal second quarter results of $1.22, 18 cents better-than-expected, on inline revenues of $1.28 billion. The full-year earnings guidance of $3.95-$4.05 topped Street estimates of $3.83.

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
----------------------------------------------------------------------
BAC        16.08         Uptrend             16.41          11/11/2009
DELL       15.87         Uptrend             15.83          11/16/2009
DHI        12.25         Uptrend             12.46          10/22/2009
INTC       19.30         Uptrend             20.07          11/12/2009
TXN        24.88         Uptrend             24.93          11/10/2009

INX -- S&P 500: 1,095
Lo: 1,088 Hi: 1,106
Change: -14.90

http://www.mysmartrend.com/images/INX20091120.jpg

INDU -- DOW JONES: 10,332
Lo: 10,256 Hi: 10,425
Change: -93.87

http://www.mysmartrend.com/images/INDU20091120.jpg

QQQQ -- NASDAQ: 2,157
Lo: 2,142 Hi: 2,177
Change: -36.32

http://www.mysmartrend.com/images/QQQQ20091120.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

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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 Texas Instruments Inc (TXN) TXN. Texas Instruments Inc (TXN) has Short Term PowerRatings at TradingMarkets. Details on Texas Instruments Inc (TXN) Short Term PowerRatings is available at This Link.

For full details on Intel Corp (INTC) INTC. Intel Corp (INTC) has Short Term PowerRatings at TradingMarkets. Details on Intel Corp (INTC) 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.