Market Performance Review: 8/20/08

U.S. Market Summary

DJ-30 Industrials +68.88 @ 11417.43;  SP-500 +7.85 @ 1274.54; Nasdaq +4.72 @ 2389.08; Russell 2000 +1.57 @ 731.60

ETF Sector Patrol

Consumer Discretionary -1.23%; Consumer Staples +0.04%; Energy +2.89%; Financials +2.06%; Health Care -0.63%; Industrial -0.80%; Basic Materials +1.75%; Technology +0.22%; Telecom +0.17%; Utilities +0.38%.

Bullish Events for U.S. Stocks

Economic Indicators: EIA Petroleum Status report indicated crude oil supplies unexpectedly increased 9.39mm barrels vs. 400k barrel drawdown from the previous report.

Companies with positive price performance in reaction to news events: 1) DVN (Goldman Sachs sees fundamentals of supply and demand supporting $147 per barrel oil prices; 2) FCX (stands to benefit from dwindling copper supplies); 3) DELL (trades in sympathy with positive earnings report from Hewlett Packard); AAPL; 4) XLF, BAC, & LEH (Fed policy makers want more time to decide on bailout of GSEs). 5) SLM (will provide $20bn in government backed student loans during 2008-2009)

Companies with positive price performance after earnings or guidance: HPQ; AMWD; MENT; RTLX; STP.

Industries within 5% of 52 week highs: Auto Parts Stores; Biotechnology; Cleaning Products; Discount Variety Stores; Industrial Equipment Wholesale; Long Distance Carriers; Medical Appliances & Equipment; Medical Instruments & Supplies; Personal Products; Personal Service.

Biggest point gainers: RTP (375.05 +16.96), BIDU (323.89 +15.05), FSLR (270.89 +12.15), ALX (390.98 +8.98), CEO (140.00 +7.92), NWLIA (238.84 +6.24), ENER (76.27 +5.87), STP (42.85 +5.72), GMXR (65.48 +5.69), SNP (101.34 +4.82), DVN (102.27 +4.78), CF (139.60 +4.68), FCX (89.29 +4.59), RIMM (130.33 +4.38), MON (117.1 +4.24), PTR (128.01 +4.23), EOG (104.01 +4.13), CNQ (81.55 +4.10), ESI (87.41 +4.09), PAY (18.72 +3.99), PKX (114.34 +3.87), BPT (87.03 +3.62).

Technical Analysis Highlights: Consumer Staples (XLP) downtrend intact but formed a bullish candlestick hammer; Energy ETF (XLE) breakout pattern makes 6 day new high… Basic Materials (XLB) daily downtrend halted by consolidation… Utilities (XLU) downtrend changing to  consolidation pattern…

Misc: N/A.

Bearish Events for U.S. Stocks

Economic Indicators: 1) MBA Purchase Applications index for the week of August 15th dropped -0.4% to 314 to confirm continued weakness in housing; and the refinance index also contracted -3.7% to 1,034.5. Mortgage rates average 6.47% for 30 year fixed loans vs. 5.76% only 3 months ago. 2) EIA’s Petroleum Status report indicated gasoline stocks unexpectedly decreased 6.2mm barrels vs. consensus estimates for a 3mm barrel drawdown.

Companies with negative price performance in reaction to news events: 1) FNM & FRE declined on prospects of further credit losses and high probability of a government bailout that would wipe out common shareholders.2) M; & KSS (Goldman Sachs downgrades retailers based on slowdown in consumer spending). 3) OMX (CFO resigns to take position at Allstate).

Companies with negative price performance after earnings or guidance: ADI; BJ; EV; EJ; ROST.

Industries within 5% of 52 week lows: Telecommunications; Utilities; Accident & Health Insurance; Air Delivery & Freight; Aluminum; Broadcasting-Radio; Computer Peripherals; Diversified Utilities; Electric Utilities; Electronic Equipment; Farm Products; Gas Utilities; Internet Info Providers; Internet Service Providers; Major Integrated Oil & Gas; Photographic Equip & Supplies; Telecom Services-Domestic; Telecom Services-Foreign; Tobacco Products; Wireless Communications.

Biggest point losers: FSYS (55.01 -4.58), PMFG (26.20 -3.70), KTII (148.51 -3.50), Y (308.50 -3.50), ATRI (109.38 -3.11), SIRO (25.40 -3.09), BJ (37.82 -2.86), DEG (60.25 -2.83), CALM (44.26 -2.75), LVS (42.78 -2.75), WYNN (93.32 -2.73), ABII (71.03 -2.67), LMT (113.10 -2.64), CTRN (18.17 -2.50), TRIN (158.50 -2.49).

Technical Analysis Highlights: SP-500 trades below 50 day m.a. for 3 consecutive days… DJ-30 trades below 50 day m.a. for 3 consecutive days… Nasdaq trades below 200 day m.a. for 3 consecutive days… Russell 2000 daily uptrend intact and approaching 200 day m.a. … VIX building support as it consolidates… Gold may be putting in a bottom and starting a retracement pattern…  Oil finds support @ its 200 day moving average & could signal more pressure on the economy if prices start to rise… Commodities (DBA) likely to challenge 200 day m.a. which would pressure consumer stocks… U.S. Dollar may be topping out with resistance @ 77-76 levels… Consumer Discretionary (XLY) downtrending and approaching 50 day m.a. … Financials (XLF) downtrend intact… Health Care (XLV) starts downtrend & sitting @ 200 day m.a. … Industrials (XLI) closes below 50 day m.a. 2nd day in a row with downtrend intact… Technology (XLK) downtrend intact… Telecom ETF (IYZ) downtrend intact…

Misc: N/A.

Bond Market Summary

Comments: A flight to safety and speculation that the government will bail out GSE’s Fannie Mae and Freddie Mac supported a rise in bond prices. 2-year note up 0.09 to yield 2.25%; 10-year note 0.31 to yield 3.79%; and 30-year bond up 0.34 to yield 4.44%. 2-10 year spread @ 154 bps. Market expectations are currently pricing an 11% chance of a 25bp hike by the next meeting on Sept. 16; a 30% chance of a 25bp hike by year-end; and a 100% chance of a 50bp hike and a 1% chance of a 75bp hike by June 24, 2009.

Commodities Market Summary

Energy: 1) EIA reported crude oil supplies up a surprising 9.4mm barrels last week to 305.9 million barrels; gasoline supplies down 6.2mm barrels; and heating oil supplies up 600k barrels. Strategic Petroleum Reserve [SPR] unchanged at 707.2mm barrels and refinery capacity down to 85.7% from last week’s 85.9%. Over the past 4 weeks, gasoline demand down 1.6% from last year and distillate demand 3.3% from last year. 2) Crude Oil up$0.94 to $115.47; Natural Gas up $0.096 to $8.074; Heating Oil up $0.0433 to $3.1670; and RBOB Gasoline up $0.0446 to $2.9085. 3) Crude up $1.52 to $114.39; Natural Gas up $0.096 to $7.984; Heating Oil up $0.412 to $3.126; and RBOB Gasoline up $0.0448 to $16.942 (all Sept contracts).

Agriculture: 1) Corn and Soybeans rise on speculation that floods may delay plantings in Midwest and reduce crops. Wheat demand may increase as importers and commercial buyers accumulate spot grain $2 a bushel cheaper than futures traded on CBOT. 2) Sept Corn up $0.105 to $5.7525 per bushel; Sept Soybeans up $0.2675 to $12.9375 per bushel; Sept Wheat up $0.295 to $8.7475 per bushel; and Sept Ethanol up $0.080 to $2.278 per gallon.

Metals: Oct Gold down $2.50 to $810.50; Sept Silver down $0.11 to $12.995; and Sept Copper down $0.03 to $3.3985.

Disclosure: Author may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.