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Raised Earnings Bar Gives Bears an Edge

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Dow continuing to move higher, an extention of 2009.

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Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.


Alcoa
(AA) traded to a 52-week high at $17.60 on Monday before getting hit after the earnings report in after-hours trading. On Monday I said, "It appears that a positive earnings report is built into this chart pattern." My annual pivot is $15.97 with a monthly pivot at $16.46. Wall Street Hype was wrong -- Alcoa reported that it didn't see any improvement in the demand for its products.

KB Home (KBH) should stay below my monthly risky level at $17.86. ValuEngine has a one-year price target at $13.73. Remember when the home builders were trading below book value? Not today as the stock trades at 2.29 times book, which isn't cheap enough given housing market uncertainties.

Intel (INTC) traded as high as $21.27 in reaction to its third-quarter earnings three months ago, then faded to $18.31 into November 3. The stock is back up near that 52-week high for Thursday's fourth-quarter earnings report. Intel rates a Buy according to ValuEngine and is 11.4% undervalued, but the forecasting model shows risk to $19.69 over the next 12 months. My annual value level is $16.47 with monthly risky level at $22.11.

JP Morgan (JPM) is the first of the Big Four Banks to report and it does so Friday morning. The stock is rated a Buy according to ValuEngine but is 12.7% overvalued. My semiannual value level is $41.57 with monthly risky level at $48.01. Earnings should be solid due to the 0% funds rate. This will camouflage continued rising credit card defaults and bad mortgage loans, and the risks hidden in their industry-high generation of derivative contracts. Toxic assets remain off balance sheet.

Treasury supply faces a $74 billion supply test over the next three days: $40 billion 3-Year notes today, $21 billion in 10-Year notes tomorrow, and $13 billion in 30-Year bonds on Thursday.

The yield on the 10-Year should continue to trade between my monthly support at 3.868 and my semiannual resistance at 3.675 as a weekly pivot at 3.769 should be a magnet this week. Risk aversion remains a factor balancing inflation concerns, increasing supply, and reduced overseas demand.


Source: Thomson / Reuters

Comex gold and Nymex crude oil firm up on the weak dollar continuing the Carry Trade.

Gold trades among a wall of pivots at $1115 annual, 1140 semiannual, $1147 for this week. My monthly resistance hasn't yet been tested at $1167.


Source: Thomson / Reuters

Crude oil is overbought after reaching $83.95 on Monday with today's resistance at $84.79. If oil runs out of gas the risk is to weekly and annual supports at $77.99 and $77.05. Gasoline is higher than it was throughout 2009, which is a direct tax on consumers.


Source: Thomson / Reuters

The dollar index trades between its 50-day simple moving average at $76.41 and its 200-day at $79.02, which is well below my quarterly resistance at 80.23, which keeps the "Dollar Carry Trade" alive.


Source: Thomson / Reuters

The Dow continues to move higher in a continuation of 2009. The bull won round six of the Title Fight after reaching a new high for the move at 10,676. My annual support is 10,379 with a weekly pivot at 10,619 and monthly and annual resistances at 10,997 and 11,235.


Source: Thomson / Reuters

The Emerging Markets Fund (EEM) reached a new high for the move at $43.47 on overbought MOJO. My weekly support is $41.94 with annual resistance at $44.99.

The China 25 Fund (FXI) isn't yet overbought after testing my annual risky level at $44.53 last week. My weekly support is $41.46.

Send me your comments and questions to Rsuttmeier@Gmail.com.
No positions in stocks mentioned.

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