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Outstanding Close to Week

By Harry Boxer, The Technical Trader

The stock market indices closed the week with a bang to the upside, closing at the highs for the day going away as an afternoon rally brought them back to new highs for the session, for the week, and for the last several weeks, in fact.

Net on the day, the Dow was up 166.36 at 11,644.36, the S&P 500 up 20.92 at 1224.58, and the Nasdaq 100 up 45.06 at 2371.94, the high for the day.

Advance-declines were 2530 up and 493 down, or 5 to 1 positive, on the New York Stock Exchange. Nasdaq advance-declines were 3 to 1 positive. Up/down volume was 775,000 up and 100 million down, or 7 1/2 to 1 positive on New York, with total volume of a light 838,000 million shares traded today. Nasdaq traded 1.66 billion shares and had a 3 to 1 positive volume ratio.

TheTechTrader.com board was mostly higher. Leading the way by far was Apple Inc. (AAPL), up 13.57 to 422.00 even, just short of an all-time new high. Amazon.com Inc. (AMZN) gained 10.56 to 246.71, International Business Machines Corp. (IBM) 3.71 to 190.53, which is an all-time new high, and Chipotle Mexican Grill, Inc. (CMG) 3.49 to 320.80.

Universal Display Corp. (PANL) was up 3.19 to 51.36, Molycorp, Inc. (MCP) 1.92 to 39.09, MAKO Surgical Corp. (MAKO) 2.35 to 41.50, Brigham Exploration Co. (BEXP) 1.70 to 30.36 in a strong oil group, and Aruba Networks, Inc. (ARUN) 1.19 to 24.53. .

In addition, Mitek Systems Inc. (MITK) had a big day today, up 87 cents to 11.55, or 8%, on the biggest volume in nearly a month.

Also, low-priced USEC Inc. (USU) was up 71 cents to 2.04, or 53.3%, on 6.77 million shares traded. Oxigene Inc. (OXGN) gained 28 cents to 1.32, or 37%, on over 3 million shares. GTX Inc. (GTXI) jumped 68 cents to 4.02, or 20.36%, on 672,000 shares, while China Shen Zhou Mining & Resources, Inc. (SHZ) rose 34 cents to 1.88, or 22%, on 880,000 shares. ATP Oil & Gas Corp. (ATPG) added 1.48 to 10.65, or 16%, on over 3 million shares, and Flotek Industries Inc. (FTK) 50 cents to 6.14, or 9%, on 1.34 million shares. .

Harman International Industries Inc. (HAR) was up 3.27 to 37.46, or nearly 10%; W&T Offshore Inc. (WTI) 1.54 to 17.77, or 9.5%; and Riverbed Technology, Inc. (RVBD) 1.93 to 23.41, or 9%.

The Direxion Daily Small Cap Bull 3X Shares (TNA) was up 2.44 to 43.23.

The ultra-shorts got hammered today. VelocityShares Daily 2x VIX ST ETN (TVIX) was down 6.38 to 49.89, from 109 two weeks ago. The Direxion Daily Small Cap Bear 3X Shares (TZA) lost 2.32 to 36.48, the iPath S&P 500 VIX Short-Term Futures ETN (VXX) 2.42 to 40.46 and the Direxion Daily Large Cap Bear 3X Shares (BGZ) 1.95 to 35.50.

Stepping back and reviewing the hourly chart patterns, the indices had a huge gap up, pulled back and did about a .38 Fibonacci retracement, held 2345 NDX and 1212 S&P 500. It slowly began to rise, and then accelerated into the close.

That was an excellent way to close the week today.

Good Trading!

Harry

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Evening Market Update

Stocks End the Week on a High Note  

Equity markets moved solidly to the upside today, closing out the second-straight week of gains. The advance came despite more negative news stemming from the European debt crisis as Standard & Poor's lowered its rating on the sovereign debt of Spain and Fitch downgraded Swiss banking giant UBS. However, domestic news was more kind to sentiment, highlighted by a strong earnings report from Google and a rise in retail sales. In other equity news, J.B. Hunt Transport Services posted better-than-expected results, while Mattel matched EPS expectations, but with disappointing margins. Treasuries were mixed as an unexpected downturn in consumer sentiment detracted from an otherwise solid day of economic releases.

The Dow Jones Industrial Average gained 166 points (1.4%) to 11,644, the S&P 500 Index picked up 21 points (1.7%) to 1,225, and the Nasdaq Composite added 48 points (1.8%) to 2,668. In light volume, 845 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil picked up $2.96 to $87.19 per barrel, wholesale gasoline added $0.08 to $2.84 per gallon, and the Bloomberg gold spot price increased by $12.60 to $1,680.65 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was down 0.5% to 76.75. For the week, including dividends, the DJIA was up 4.9%, the S&P 500 Index rose 6.0%, and the Nasdaq Composite gained 7.6%.

Google Inc . (GOOG $592) reported 3Q EPS ex-items of $9.72, above the $8.74 consensus estimate of analysts surveyed by Reuters, with revenues increasing 3% year-over-year (y/y) to $7.5 billion, exceeding the $7.2 billion that the Street had forecasted. The world’s largest internet search engine said its Google sites revenues—which account for 69% of the total—rose 39% y/y, while Google network revenues increased 18% y/y. The company’s “paid clicks” increased 28% y/y, while its cost-per-click rose 5% compared to the same period a year ago. Shares finished nicely higher.

Mattel Inc . (MAT $28) posted 3Q earnings of $0.86 per share, inline with the Street’s forecast, while revenues rose 9% y/y to $2.0 billion, also roughly matching analysts’ forecasts. The toy company said it continued to benefit from the strength of its core brands—Barbie, Hot Wheels, Fisher-Price, and American Girl—but this year’s Cars 2 entertainment property also fueled momentum, and domestic gross sales rose 6%, while international sales gained 13%. MAT also announced that it plans to increase its share repurchase program by $500 million. Shares were under pressure as the company’s margins missed analysts’ forecasts, declining 330 basis points (bps), due to the “rapid appreciation of the US dollar in late September,” and higher product costs.

J.B. Hunt Transport Services Inc. (JBHT $42) reported 3Q EPS of $0.57, one penny above the expectations of analysts, while revenue grew 19% y/y to $1.17 billion, which was inline with forecasts. The company’s intermodal division, which involves the movement of freight using multiple modes of transportation, saw a 24% jump in revenue on a 15% increase in volume, and revenue in the dedicated contract services segment grew 16%. Shares traded higher.

Fitch Ratings cut the rating of UBS AG (UBS $12) to A from A+ saying, “Fitch's rating action on UBS reflects Fitch's view that the one-notch uplift for close affiliation with the Swiss state is no longer warranted.” Additionally, the ratings service warned of potential future downgrades of several other global banking giants including, Goldman Sachs (GS $97), Morgan Stanley (MS $15), Barclays PLC (BCS $11), BNP Paribas (BNPQY $22), Credit Suisse Group (CS $28), and Deutsche Bank (DB $38).

Retail sales rise solidly, sentiment falls, while import prices and inventories gain

Advance retail sales for September rose 1.1% month-over-month (m/m), the most since February, compared to the 0.7% growth that was forecasted by economists surveyed by Bloomberg, and August’s flat reading was revised to a gain of 0.3%. September sales ex-autos were higher by 0.6% m/m, above the 0.3% increase that was anticipated, and August’s 0.1% gain was revised to a 0.5% rise. Sales ex-autos and gas increased 0.5% m/m in September, versus the 0.4% growth that was anticipated, and its August figure was revised from a 0.1% increase to a gain of 0.5%. Purchases excluding autos, gasoline and building materials, the figure used to calculate gross domestic product, rose 0.6%, the most since March, after August was revised higher to 0.4%. Ten of the thirteen categories showed increases, led by auto and parts dealers and clothing stores.

Meanwhile, the preliminary University of Michigan’s Consumer Sentiment Index showed consumers’ psyches unexpectedly deteriorated in October, declining from 59.4 in September to 57.5, and compared to the modest increase to 60.2 that economists had projected. The surprising decline in the index came as the economic outlook and the current economic conditions components of the survey both fell. However, on inflation, the 1-year expectation dipped to 3.2% from 3.3%, and the 5-year inflation outlook decreased to 2.7% from 2.9%.

Elsewhere, the Import Price Index unexpectedly rose, increasing 0.3% m/m for September, compared to the expectation of economists, which projected a 0.4% decline for the index. The drop follows a 0.2% decline seen in August, which was revised from a 0.4% decrease. Year-over-year, import prices are higher by 13.4%, versus the 12.4% forecast of economists, and the unrevised 13.0% gain that was posted in August.

Finally, business inventories rose 0.5% m/m in August, compared to the 0.4% gain that was expected, and July’s 0.4% growth was revised to a 0.5% advance. Also, sales rose 0.3% m/m, and the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at 1.28 months.

Treasuries were mixed today, with the yield on the 2-year note 2 bps lower at 0.26%, the yield on the 10-year note gaining 6 bps to 2.24%, and the 30-year bond rate advancing 8 bps to 3.23%. 

G-20 debates possible eurozone solutions, while Chinese inflation concerns heat up

The G-20 group of finance ministers and central bank heads of the world’s leading economies met in Paris today, policymakers are reported to have discussed expanding the IMF’s firepower ahead of an EU summit on October 23 The argument for expansion was strengthened today as Spain had its credit rating downgraded by Standard & Poor’s, due to slowing growth and the threat that has emerged for the banking sector and Fitch Ratings downgraded  UBS’ (UBS $12) while placing several European and US banks on watch. In other news from across the pond, Italy’s Prime Minister Burlusconi won enough votes in the lower house of parliament, surviving a confidence vote, which lifted Italian stocks.

On the European economic front, eurozone core consumer prices came in slightly hotter than expected for September, while the headline figure matched expectations, and the eurozone’s trade balance swung to a smaller-than-forecasted deficit for August.

China reported that consumer prices decelerated from 6.2% y/y in August to 6.1% in September, as expected, but inflationary pressures remained well above the government’s target of 4%, exacerbating concerns that the government will continue to aggressively fight inflation to the detriment of economic growth. However, China’s producer prices cooled more than anticipated, falling from a 7.3% y/y rate in August to 6.5% for September, versus the 6.9% rate that economists had expected. China’s new yuan loans unexpectedly declined m/m, gaining by 470 billion in September versus 548.5 billion in August, compared to the increase of 550 billion that was projected.

Eurozone optimism and US economic data help rally continue

The upward bias for the US equity markets continued, with the major markets posting steep gains amid growing optimism that a plan to combat the European debt crisis was in the offing, while some US economic data helped soothe concerns about a return to a recession. Germany and France pledged to deliver a plan to contain the eurozone crisis and Slovakia’s parliament became the final member of the coalition to approve the expanded scope of the region’s bailout fund known as the European Financial Stability Facility (EFSF). Meanwhile, weekly initial jobless claims came in below expectations, small business optimism improved modestly, and the Federal Reserve’s minutes from the Central Bank’s September policy meeting, although showing continued disagreement among policymakers, noted real business spending “appeared to expand further,” and that information received during the intermeeting period indicated that economic growth remained slow but did not suggest a contraction in activity. The data complimented Friday’s solid read on retail sales.

However, 3Q earnings season got off to a shaky start, as Google Inc’s positive report was met by disappointing releases from Dow members Alcoa Inc. (AA $10) and JPMorgan Chase & Co. (JPM $32). AA severely missed analysts’ earnings expectations, while JPM’s better-than-forecasted results were offset by the financial firm noting that investment banking revenues were down substantially and it expects mortgage credit losses to remain elevated.

US economic data to heat up

The US economic calendar will be active next week, beginning with Monday’s industrial production report, expected to show growth of 0.2% m/m in September after gaining 0.2% in August, while capacity utilization is forecasted to tick up slightly to 77.5% from 77.4%. Meanwhile, inflation readings will be monitored due to the impact on consumer spending and corporate profits, starting with Tuesday’s Producer Price Index (PPI), expected to show a 0.2% m/m gain in prices at the wholesale level in September, while the core rate, which excludes food and energy, is anticipated to have continued to grow at a 0.1% pace. The release precedes Wednesday’s Consumer Price Index (CPI) report, forecasted to show a 0.3% m/m increase, while ex-food and energy it is expected to remain at a 0.2% rate.

The housing sector will also come under view, starting with homebuilder sentiment in Tuesday’s NAHB Housing Market Index, while Wednesday brings housing starts, expected to advance 4.1% m/m in September to an annual rate of 595,000 units, while building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, are forecasted to decline 2.4% m/m to a rate of 610,000 units. Lastly, Thursday brings existing home sales, forecasted to fall 2.6% m/m to an annual rate of 4.9 million units in September.

Other important US releases will be the first regional readings on manufacturing in October, with the Empire Manufacturing Index and the Philly Fed Manufacturing Index, as well as MBA Mortgage Applications, initial jobless claims, and leading indicators. Other reports in the Americas include Canada’s leading indicators, wholesale sales, and CPI, and Mexico’s retail sales and employment.

Other international releases include euro-zone consumer confidence, German PPI, ZEW Survey of Economic Sentiment Index and Ifo Business Climate Index, UK housing prices, CPI, retail price index and retail sales, Japan’s industrial production, department store sales, machine tool orders and leading index, Australia’s vehicle sales, leading index and import prices, and China will release 3Q GDP, retail sales, industrial production and fixed asset investment, which includes housing and infrastructure spending. The Reserve Bank of Australia and Bank of England release minutes from their last meetings, and Norway’s central bank will meet and is expected to keep rates unchanged. 

The Line on Google

By Mike Paulenof

Expecting high-flying Google (GOOG) to make a run at its 2011 resistance line, now at 620-21? Yes, but probably not in a straight line.

My intraday pattern work argues for 608-610, followed by a "pullback" to the 580 area, after which GOOG should resume its climb to test its 10-month resistance line.

Sign up a FREE 15-Day Trial to Mike Paulenoff's ETF Trading Diary!

Morning Market Update

US Data Helps Get the Bulls Running Again   

After a sluggish session yesterday, US stocks are moving higher in early action, aided by a strong earnings report from Google Inc, which was complimented by a better-than-expected read on US retail sales in September. Meanwhile, European equities are gaining ground to help boost sentiment despite a downgrade of Spain by Standard & Poor’s and a ratings cut by Fitch Ratings on UBS, as it also put several US and European banks on watch for a possible downgrade. Treasuries are mostly lower following the data, which also included hotter-than-forecasted import price figures, ahead of reads on consumer sentiment and business inventories. In other equity news, Mattel Inc posted 3Q results that were inline with forecasts, while boosting its share repurchase program. Elsewhere overseas, Asian stocks finished mostly lower on the heels of the aforementioned sluggishness in the US yesterday, and after some inflation data out of China, which remained elevated. 

As of 8:48 a.m. ET, the December S&P 500 Index Globex future is 12 points above fair value, the Nasdaq 100 Index is 28 points above fair value, and the DJIA is 99 points above fair value. WTI crude oil is gaining $2.15 to $86.38 per barrel, and the Bloomberg gold spot price is up $11.45 at $1,679.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 76.85.

Google Inc . (GOOG $559) reported 3Q EPS ex-items of $9.72, above the $8.74 consensus estimate of analysts surveyed by Reuters, with revenues increasing 3% year-over-year (y/y) to $7.5 billion, exceeding the $7.2 billion that the Street had forecasted. The world’s largest internet search engine said its Google sites revenues—which account for 69% of the total—rose 39% y/y, while Google network revenues increased 18% y/y. The company’s “paid clicks” increased 28% y/y, while its cost-per-click rose 5% compared to the same period a year ago.

Mattel Inc . (MAT $28) posted 3Q earnings of $0.86 per share, inline with the Street’s forecast, while revenues rose 9% y/y to $2.0 billion, also roughly matching analysts’ forecasts. The toy company said it continued to benefit from the strength of its core brands—Barbie, Hot Wheels, Fisher-Price, and American Girl—but this year’s Cars 2 entertainment property also fueled momentum, and domestic gross sales rose 6%, while international sales gained 13%. MAT also announced that it plans to increase its share repurchase program by $500 million.

Retail sales rise solidly, while import prices gain, more data on tap

Advance retail sales for September rose 1.1% month-over-month (m/m), compared to the 0.7% growth that was forecasted by economists surveyed by Bloomberg, and August’s flat reading was revised to a gain of 0.3%. September sales ex-autos were higher by 0.6% m/m, above the 0.3% increase that was anticipated, and August’s 0.1% gain was revised to a 0.5% rise. Sales ex-autos and gas increased 0.5% m/m in September, versus the 0.4% growth that was anticipated, and its August figure was revised from a 0.1% increase to a gain of 0.5%.

Elsewhere, the Import Price Index unexpectedly rose, increasing 0.3% m/m for September, compared to the expectation of economists, which projected a 0.4% decline for the index. The drop follows a 0.2% decline seen in August, which was revised from a 0.4% decrease. Year-over-year, import prices are higher by 13.4%, versus the 12.4% forecast of economists, and the unrevised 13.0% gain that was posted in August.

Treasuries are mostly lower in morning action following the data, with the yield on the 2-year note flat at 0.28%, while the yield on the 10-year note is gaining 6 bps to 2.24%, and the 30-year bond rate is advancing 8 bps to 3.23%.

Later this morning, the US economic calendar will yield the releases of the preliminary University of Michigan Consumer Sentiment Index, expected to improve modestly from 59.4 in September to 60.2 for October, as well as business inventories, forecasted to increase 0.4% m/m for August.

Europe gaining ground despite bank and Spain downgrade

The equity markets in Europe are moving higher in afternoon action, led by technology issues on the heels of Google Inc’s better-than-forecasted profit report, while growing optimism about the eurozone’s ability to combat the region’s debt crisis continues to support sentiment. As the G-20 group of finance ministers and central bank heads of the world’s leading economies meet in Paris today, Bloomberg is reporting that policymakers have discussed expanding the IMF’s firepower ahead of an EU summit on October 23, which is boosting confidence regarding the containment of the eurozone’s debt crisis. The advance across the pond comes even as Spain had its credit rating downgraded by Standard & Poor’s, due to slowing growth and the threat that has emerged for the banking sector. Also, stocks are showing some resiliency in the face of Fitch Ratings downgrading UBS’ (UBS $12) credit rating, while placing several European and US banks on watch. Moreover, Italy’s Prime Minister Burlusconi is reported to have won enough votes in the first round of balloting to survive a confidence vote in parliament today, per Bloomberg, which is lifting Italian stocks.

On the economic front, eurozone core consumer prices came in slightly hotter than expected for September, while the headline figure matched expectations, and the eurozone’s trade balance swung to a smaller-than-forecasted deficit for August.

The UK FTSE 100 Index, France’s CAC-40 Index, Germany’s DAX Index, and Switzerland’s Swiss Market Index are rising 1.4%, Italy’s FTSE MIB Index is trading 2.4% higher, and Spain’s IBEX 35 Index is up 0.4%.

Asia mostly lower following recent gains and Chinese data

Stocks in Asia finished mostly to the downside in the final trading session of the week following the recent gains seen in the region, as traders digested some inflation data out of China. Also, a credit downgrade of Spain and Europe’s UBS, as well as yesterday’s lackluster earnings report from US Dow member JPMorgan Chase & Co. (JPM $31), dampened sentiment. Chinese stocks found some pressure, with the Hong Kong Hang Seng Index falling 1.4% and the Shanghai Composite Index declining 0.3%. China reported that consumer prices decelerated from 6.2% y/y in August to 6.1% in September, as expected, but inflationary pressures remained well above the government’s target of 4%, per Bloomberg, exacerbating concerns that the government will continue to aggressively fight inflation, while ignoring economic growth implications. However, China’s producer prices cooled more than anticipated, falling from a 7.3% y/y rate in August to 6.5% for September, versus the 6.9% rate that economists had expected. Moreover, China’s new yuan loans unexpectedly declined m/m, gaining by 470 billion in September versus 548.5 billion in August, compared to the increase of 550 billion that was projected.

Elsewhere, Japan’s Nikkei 225 Index declined 0.9% after reaching a one-month high this week, amid the aforementioned data out of China, as well as the US and Europe, while shares of Olympus Corp. (OCPNY $32) fell sharply after the company announced that it ousted its CEO. Meanwhile, Australia’s S&P/ASX 200 Index decreased 0.9% amid some weakness in materials and resource-related stocks, while South Korea’s Kospi Index showed some resiliency, overcoming early weakness to finish 0.7% higher, led by telecommunications issues.