Will the Market Break Out This Week?

Includes: EBIX, FFG, ODSY, WLB
by: David Brown

Is the market hitting a wall of resistance…or just refueling before takeoff? Yesterday, the SPY (an ETF that tracks the S&P 500) was up for the twelfth consecutive day. So the question is, can it continue without a pullback to shake out the weaker holders? Let’s look at the numbers.

The news has been steadily positive since our last issue, although not exactly exciting. Yesterday, Industrial production came in at +0.1% versus the expected 0.0%, and capacity utilization was a tad higher than expected, at 72.7%. Last week gave us two consecutive reductions in initial jobless claims and a better-than-expected trade balance.

Of course, it is better to be even slightly up than to see a stream of negative numbers, and the market has reacted accordingly, with the S&P 500 clawing its way back to the 1150 wall of resistance. Between early January and now, the S&P has spent a total of 17 days hovering between 1138 and 1150, and since September has been trading in a fairly tight pattern between 1040 and its 52-week high of 1150.

Looking Ahead. The large number of economic indicators due to report this week could jolt the market out of that tight pattern and get it moving again in one direction or the other. On Tuesday we have building permits and housing starts, along with export and import pricing, and on Wednesday, the PPI. Thursday could be a bonanza for the market — or a minefield — with reports on the consumer price index (CPI), initial jobless claims, and leading indicators.

It continues to be a stock picker’s market, and it looks like the best place to be is small caps, particularly Small-cap Growth, which led the cap/styles last week. Large caps are the worst place to be right now, but even that group had positive returns last week. As for sectors, Energy appears to have the best values of all, so I would suggest concentrating on that sector, along with Financials, Healthcare and Technology.

Click here to see the Market Stats.

4 Stock Ideas for This Market

This week, I started with the Small Wonders preset search on MyStockFinder. Then, I adjusted the parameters to include both Small and Micro Caps, asked for both Buys and Strong Buys, and up-weighted Technicals and Momentum a bit, along with Insider Buying. Here are 4 intriguing stock ideas from 4 different sectors:

FBL Financial Group (NYSE: FFG) – Financials
Odyssey Healthcare (Nasdaq: ODSY) – Healthcare
Ebix, Inc. (Nasdaq: EBIX) – InfoTech
Westmoreland Coal (Amex: WLB) – Energy