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$ Keystone Morning Quickie

Keystone Morning Quickie     November 17th 2009

Market Commentary

 
Futures are backing of this morning after advancing 9 of the last 11 sessions. The S & P Index closed above the 1100 level for the first time this year. The U.S dollar is on the rise this morning, which means some profit taking should take place in the Gold sector, as well as the overall market.
 
 
Yesterday afternoon, Meredith Whitney was interviewed on CNBC and said “I haven”t been this bearish in a year”. “look for a double dip recession next year”. Whitney had called the downturn in the financials before the worst of the financial crisis took place.
 
The 110  level in the $SPY will be the level today to watch. If we trade below, we will be looking for some support at the $109.47. Below this level, $107.98. We expect a bit of selling pressure at the open, to be met with some buying, as that strategy has worked for some time now. However, we believe that, traders will sell into that rally.
 

 

   
 
 
 
 

Technical Levels
                                                            200                   50

 
 

S&P                                                                      1065                 932
DOW                                                                     9857                8701
NASDAQ                                                               2118                1822

Research Round Up
 

  Goldman Sachs (GS 177.25), long considered the market bellwether, has been underperforming the S&P for a few weeks now. Should we be alarmed? Yet the market seems to be strong enough without Goldman because other sectors are taking the lead.

 

Goldman upgraded Coach (COH 35.99) and Nordstrom (JWN 35.05) to Buy. There are expectations of a strong holiday season for Wal-Mart (WMT 53.16) and it will be a stock that investors will focus on. The market had a lift from strong retail sales (up 1.4%). Consumer credit (AXP 41.44, COF 39.89) has been reported as improving in quality. Affluent consumers and some pent up demand are driving the credit cards.  It is noteworthy that these stocks and the Market continued to rise even though bank analyst Meredith Whitney had some bearish comments.

 

 
Keystone’s Trades

 

 
 Bristol Myers Squibb(BMY) Long Trade- BMY soared yesterday   + 1.16  (+5%)   on news that it is planning
 to split off its nutrition unit Mead Johnson [MJN  43.23    -2.02  (-4.46%)   ] into a separate company.
It traded above and held the 200 EMA on the Weekly chart at $24.04. Technically, this stock could make another big move up, as we do not see any resistance until $26.  Our only concern is that the markets may be ripe for a short term pullback. We will see how the volume looks at it pulls back to the 200 before entering.

 

Closing Price:$24.30

 

Target: $26.04

 
Stop: $23.77
 
20 EMA:$22.83
 
50 EMA: $21.48
 
200 EMA: $24.07 (Weekly chart)


Research in Motion(RIMM) Short Trade –  RIMM has been on our radar for some time now as it has been  relatively weak compared to the major indices. In the month of November, we have seen it bounce from $55 to $65. We see this as nothing more than a bit of a short squeeze as some rumors arose that MSFT might buy them.. On the bounce, it never traded above the 200 EMA. If the markets pull back, as many expect, including us, RIMM should have a hard time holding the $55 level. 


 Closing Price: $61.27
 

Target: $50

 
Stop: $66.10

   
20 EMA: $62.81
 
50 EMA: $69.17
 
200 EMA: $65.98

Tuesdays Economic Calendar 

5:30 Fed’s Yellen: Lessons from the Crisis
7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
9:00 International Capital Flow
9:15 Industrial Production
10:00 Results of $75B, 28-Day TAF Auction
10:00 Hearing: BofA-Merrill Lynch Merger
10:00 Markup: Investor Protection Act
10:15 Fed’s Lacker: Economic Outlook
11:00 Hearing: Financial Stability Improvement Act
12:30 PM Fed’s Pinalto speaks
1:00 PM NAHB Housing Market Index
3:00 PM Hearing: U.S. and the G-20
5:00 PM ABC Consumer Confidence Index
 
 
Notable premarket earnings: CSIQ, COV, DDS, HD , JEC, MPEL, SKS, TGT, TJX
Notable postmarket earnings: ADSK, CRM, LZB

 
Top News Stories

  • AIG bailout was muffed. TARP Special Inspector Neil Barofsky said in a report Monday that the New York Fed mishandled the AIG (AIG) bailout by paying its trading partners in full, where it would have been possible to negotiate partial payments. The Fed didn’t use its leverage in negotiations, Barofsky complained, including failing to stress that its participation in the process was purely voluntary. In a response letter, the Fed said the terms of the $85B AIG bailout were appropriate given the severity of the crisis, and that leaning on domestic institutions would have been a “misuse of our supervisory authority” and provided an advantage to foreign institutions.
  • Bernanke gives mixed signals. The recent pickup in the economy “reflects more than purely temporary factors” and continued moderate growth is likely, Fed Chairman Ben Bernanke said in a speech Monday, though constrained lending and weak labor market remain headwinds to robust growth. Inflation expectations haven’t responded to upward or downward pressures, he said, noting plenty of resource slack. Bernanke pledged that low-interest, loose monetary policies would continue for an extended period. In a follow-up Q&A, Bernanke said it’s “not obvious” that asset prices are out of line, at least inside the U.S., and that “we can never say never” on using interest rates to deflate bubbles, adding we won’t have a “real market-based financial system until it’s safe to let a financial firm fail.”
  • Smelling danger, banks respond. The Financial Services Forum, a lobbying group for 18 of the world’s largest financial firms, urged House Financial Services Committee Chairman Barney Frank not to pursue big bank break-up legislation, an idea attracting interest in Congress and causing alarm on Wall Street. In a letter a day before Frank’s panel resumes debate on financial reform legislation, the group stressed that size alone does not make firms risky: “The problem is not that some institutions are too large. It’s that there is currently no legal authority to unwind, in an orderly way, a failing financial conglomerate.”
  • UBS urges patience. UBS (UBS) CEO Oswald Gruebel asked investors to be patient, assuring them the bank was on the come-back track. “We have stabilized UBS’s financial condition but we still have some serious topics to address,” Gruebel insisted. The bank has fixed a goal for pretax profit at around 15 billion Swiss francs ($14.89B) in the next 3-5 years. In a reference to the bank’s history of helping rich foreigners evade taxes, which led to a damaging legal tussle with the U.S. government, Gruebel said he was building “a new UBS: one that performs to the highest standards and behaves with integrity and honesty.”
  • Obama and Hu set different priorities. At a press conference in Beijing Tuesday, President Obama and Chinese President Hu Jintao had different priorities for economic action. Obama stressed the need for economic balance: “[We need] a strategy where America saves more, spends less, that reduces our long-term debt, and where China makes adjustments… to rebalance its economy and spur domestic demand,” Obama said. Hu, on the other hand, thought protectionism was a priority. “I stressed to President Obama that under the current circumstances our two countries need to oppose all kinds of trade protectionism even more strongly.”
  • Japan, eyeing bond sales, plans new budget. The Japanese government announced plans for a new budget, seeking to maintain economic stimulus measures to support the economy. But the government may have to cut back on some election spending promises if it seeks to keep bond issuance below ¥44T yen ($494B) in the coming year. There is already pressure on government bond yields as declining tax revenues suggest more extended issuance may be necessary.
  • GMAC chief ousted by board. GMAC CEO Alvaro de Molina was asked to resign by the board after only 19 months at the helm. GMAC had been preparing a request for additional bailout funds from the Treasury. GMAC director Michael A. Carpenter, who will replace de Molina, has said that he will review the need for that request.
  • GM loses $1.5B, but repays loans. General Motors posted a $1.5B loss for Q3, but announced it would repay $6.7B of its $50B government bailout, at the rate of $1B per quarter. Analysts said GM’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand.
  • BOE director says better keep stimulus. Bank of England director Andrew Sentance, a member of the rate setting committee, said on Tuesday that emergency stimulus measures for the U.K. economy had better remain in place for an undetermined period. “We have to be open-minded” about more quantitative easing, Sentance added, even though he thought that the recession in the U.K. had come to an end.
  • Fed’s Kohn sees no asset bubbles. Fed Vice Chairman Donald Kohn said in a speech Monday that there was no sign of an asset bubble being caused by the low interest-rate policies the central bank was pursuing. Kohn pointed out that the central bank’s loose monetary policies were intended to help investors move into riskier assets.
  • U.K. inflation rises. The U.K. Consumer Price Index jumped to 1.5% from a five-year low of 1.1%, the Office of National Statistics said on Tuesday. Food prices pushed the index higher; economists say it’s likely only a temporary spike.

   news provided by seeking alpha

 

 
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