Seeking Alpha
Growth at reasonable price, research analyst, newsletter provider, long/short equity
Profile| Send Message|
( followers)  

Weekly Outlook

The market had another nice week this past week on the back of some solid economic data and good earnings reports from a handful of companies. The housing market data, Retail Sales, and Michigan Consumer Sentiment Index led the way last week on the back of very light market volume for a slow churn upwards this past week. Earnings were also strong from Target (NYSE:TGT), Home Depot (NYSE:HD), and Cisco (NASDAQ:CSCO). The market, though, continues to have light volume along with a lot of waiting on the moves from the Fed and ECB. Those moves are still not expected until the end of the month, so expect movement to be light overall with certain stocks leading the way. This coming week should continue more light volume as this week is fairly dry for data, earnings, and expectations.

The market has a very light calendar this week and should see reduced volume again this week due to vacations, lack of institutions trading, and less retail investors playing the market until the Jackson Hole meeting. We do get some interesting economic data points that will move the market as well as tech earnings, but its fairly light overall.

Economic data is not abundant this week but it is pretty important. Wednesday will lead the way with the FOMC Minutes as well as Existing Home Sales report. While we all know the minutes will not show QE3, the minutes always give perspective as to what we may expect next as different heads give different opinions as time goes by. More housing data should also be important, especially if it's positive. Thursday also gives us New Homes Sales and Jobless Claims, which will be parsed fairly thoroughly. Finally, we end the week on durable orders. As you can see, it is a light week for the market, but it should still be important on light news and volume. Look for housing and FOMC to lead the way.

Overseas, we have some important reports to watch for, but it's low in abundance for overseas markets as well. Japan gives us an interesting economic activity report on Tuesday, which should bode large for Asian markets as well as Thursday's HSBC Flash Manufacturing PMI, which has been weak as of late. A third weak report could spell trouble. In Europe, we do not see much until Thursday's German GDP and Euro-Zone Consumer Confidence report. On Friday, we get British GDP and economic data that should also be pretty crucial to the markets. All in all, though, it's a light headline week here as well. We do not expect much from the ECB, so it may just be another light week that is pretty flat overseas.

Earnings were fairly crucial to the market last week, but they will probably turn a bit quieter this week again. We do have some important tech reports from HP (NYSE:HPQ), Dell (NASDAQ:DELL), and Salesforce (NYSE:CRM) that will all provide definite market movement in the Nasdaq. Additionally, we have some key reports from Lowe's (NYSE:LOW) to see if they can continue the HD success from last week. Housing gets Toll Brothers (NYSE:TOL) this week, and it will be interesting to see if any major announcement occurs in tandem with Best Buy (NYSE:BBY) earnings this week as well.

The Federal Reserve continues to remain quiet into Jackson Hole. The minutes are key this week, but other than that it's another quiet week for the Fed. Other than minutes, we get a couple of speeches. People will be parsing the minutes for Jackson Hole direction, but all in all, it's another quiet week of anticipation.

So, where are we headed this week?

The market has been pretty tepid these past couple weeks overall with some larger movement in specific areas, but we have had no volume. That situation should continue to persist this coming week with another week of lighter headlines that is probably even more light than last week. At the same time, the FOMC minutes will give this market a pretty strong bit of movement this week even if what appears is already known as it will draw more attention to QE, which sparks interest. We would not expect a great deal of upside or downside. The trend is up currently, but that trend could easily be reversed this week with the light volume. All in all, this movement is really pointless until we get to Jackson Hole.

Stocks To Trade

The two trades we like right now for the market are long on Travelers (NYSE:TRV) and short Kroger (NYSE:KR). TRV looks very solid right now after a Friday breakout of a multiple top at $64. Insurance companies have been performing well as the "risk-on" trading market has become more attractive as of late, but TRV complements that with great fundamentals. The stock had not been able to get over $64 all year, and Friday's breakout signals some support below the stock now. We believe that TRV can continue higher with its 10 future PE value. KR, on the other hand, appears to be on the verge of breaking down. The stock trended lower last week despite a nice market last week as grocery stores continue to struggle with margin control and the Supervalu (NYSE:SVU) aftermath. KR is in a strong downward channel, broke its 50-day MA, and we do not see a lot of near-term catalysts for the company.

Position #1: TRV, Long

Position #2: KR, Short

(click to enlarge)(click to enlarge)

Oxen Group Holdings

We have the following positions

In our Short-Term Equity Portfolio we are long eBay (NASDAQ:EBAY), Dr. Pepper Snapple (NYSE:DPS), PPG (NYSE:PPG), Pepsico (NYSE:PEP), American Tower (NYSE:AMT). We are short Kroger, Omnicare (NYSE:OCR).

In our Options Portfolio, we are long (NASDAQ:PCLN), Google (NASDAQ:GOOG), Yum! Brands (NYSE:YUM). We are short Eli Lilly (NYSE:LLY).

In our Earnings Alpha Portfolio, we are long Ulta (NASDAQ:ULTA), Francesca's (NASDAQ:FRAN), and American Eagle Outfitters (NYSE:AEO). We are short Dell. We have a reverse iron condor in Abercrombie & Fitch (NYSE:ANF).

In our Goldman Sachs Up/Down Paper Portfolio, we are long Coca-Cola (NYSE:KO). We are short Walter Energy (NYSE:WLT).

Chart courtesy of

Source: What's Next For The Market: Weekly Outlook