Where do we go from here?

So ladies and gentlemen, after a scintillating 2012 Q1, where are we headed?

The stock market continues to be in a bull market. Every analyst from every bank is changing his/her year end target of S&P500. Some claim improving job market, some site housing market is turning around and some are just catching up. According to me don’t pay any heed to these people.  Just follow the market and it seems to be doing good -forecasting doesn’t help. In fact any kind of anticipation will bring ego and emotion in your trade.

 

But there are few things that concern me – lack of participation by public, oversold energy sector and the laggard Russel 2000.

The things that can impact the markets this week

Apr 02
ISM Index – Mar
Apr 02
Construction Spending – Feb
Apr 03
Auto Sales – Mar
Apr 03
Factory Orders – Feb
Apr 04
ADP Employment Change – Mar
Apr 06
Unemployment Rate – Mar

 

 

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Back from the dead?

Last night I pointed out that the poster stock of 2009 bull,BIDU, might be in for a rally. So I looked around, there are quite a few 2009 stalwarts that are coming back from dead e.g GS. Latest to join the band wagon might be AMZN.

Even though the revenue continued to grow at brisk pace, AMZN was hit by margin contraction in last quarter of 2011. The company has raised its capital expenditure – it is adding Distribution centers and is working on a gaint head quarter in downtown Seattle.

Another Stock that might be up for rally – BJRI.

The uptrend continues!

Adding to their six week winnning streak, the Dow gained 160 points +1.23% in today’s session.  The S&P 500 which gained +1.40% closed at its highest level since May of 2008.  The NASDAQ closed at its highest level since November of 2000. All this happenened after Federal Reserve Chariman Ben Bernanke reassured the market that the horizon holds nothing but low interest rates till 2014.

Advancing stocks led by 3 to 1 on both the NYSE and NASDAQ. Volume increased on NASDAQ by 14% and on NYSE by 2%.

The trend is up and even the laggard small cap index is showing signs of life. But it still needs to take out the highs of 2011, which is just 2% away, before it advances further.

Chart of S & P 500.

To add to all the fireworks we saw some good breakouts –

BIDU, a famous pre crisis name, might be making a comeback. It can easily reach 168$. Set a stop loss at 139$.

One more stock that I have been eyeing for some time – SWI

With a 3 year grwoth rate of 62%, this might be good breakout. I agree that TTM P/E=37 is on the higher side but the revenue and earnings growth lend good support to it.

Year EPS High ($) Low ($)
2007 0.21
2008 0.43
2009 0.66 24 12
2010 0.78 24 12
2011 1.04 33 18
2012 1.15
2013 1.37
Last 4 Quarters EPS % Change Sales (million) %Change Fund Owners
Q4 0.21 31% 43 25% 284
Q3 0.22 29% 45 29% 347
Q2 0.31 48% 54 31% 390
Q1 0.29 21% 55 34% 419

SolarWinds has created a highly profitable business by developing high quality, low-cost software products to serve the needs of small and medium-size business users of network, storage and virtualization management tools. However, the firm faces tough competition from larger, well-entrenched rivals. SolarWinds provides network management solutions to more than 95,000 customers, ranging from small- and medium-size businesses to Fortune 500 companies. Revenue is highly concentrated in the U.S., which accounted for 72% of total company sales in 2010.

This trade has good reward to risk ratio. I set a stop loss at 36.7$.

Another good name that popped up today that I missed altogether – TSCO (Tractor Supply Company).

 

Year EPS High ($) Low ($)
2007 1.2 28 17
2008 1.1 23 13
2009 1.63 27 14
2010 2.25 49 24
2011 3.01 78 45
2012 3.51
2013 4.12
Last 4   Quarters EPS % Change Sales (million) %Change Fund Owners
Q4 0.24 71% 836 18% 491
Q3 1.23 18% 1178 11% 527
Q2 0.58 45% 977 18% 589
Q1 0.96 43% 1240 20% 641

Tractor Supply is the largest operator of retail farm and ranch stores in the United States. The company targets recreational farmers and ranchers, and has very little exposure to commercial and industrial farm operations. As of June 2010, the company owned and operated 967 stores in 44 states, which includes 27 Del’s Farm Supply stores. Stores are typically located in towns outside of metropolitan areas and in rural communities.   

Also keep an eye out for two possible break outs –

 

 

Some good reads –

Hedge funds drop bearish bets (BL)

Are Euro concerns over (REU)

Intel, Qualcomm get more pie (IBD)

Hunger Games rakes in $155 million (MW)

FaceOff – China data vs US data

And the winner is China PMI. The Dow ended lower for a third consecutive session dropping 78 points as concerns mount over China’s manufacturing index being down for the 5th month in a row.  The S&P 500 lost 10 points today and the NASDAQ lost 12 points. This was despite the fact that new jobless claims fell more than expected last week, while an index of leading economic indicators for February rose more than forecast.

China’s manufacturing activity shrank in March for the fifth straight month, while manufacturing in the 17-member euro zone contracted more than expected, led by declines in France and Germany. This took toll on sectors such as energy, materials and industrial.

But despite all this we are still in bull as long as we hang onto 1370 in S&P 500. This current mild weakness in the averages is not unexpected given the magnitude of the market move from October of last year.  It would not surprise me to see continued short term sideways action over the near term or even a drop of 2% points.

So if you look at charts above 1370 will act as pivot point. The reasons are – you have previous high support, 50 DMA and the trend line support. Moreover the breakouts did not disappoint today – look at LNKD, WDC, ALLT and GNC. Surprisingly LULU reversed even after not so weak guidance. LULU might have lost it’s momo status.

Good Reads. Tons of them today –

China & Eurozone factories shrink (REU)

Another day of Copper beating (BL)

Keystone XL – Again! (BL)

US Economy and Sentiment (BL)

Hunger Games (MW)

Oil lower amid talk of tapping reserves (FIN)

Gold in tandem with China as well! (REU)