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Price Headley, CFA
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Price Headley was inducted into the Traders' Hall of Fame in 2007 and is the founder of BigTrends.com, which provides investors with specific real-time stock and options strategies and investment education to profit from significant market trends. Price appears regularly on CNBC, Fox News, and... More
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  • Unemployment, Earnings & Sector Outlook

    Despite Friday’s rebound, the move didn’t pull the market that deep into the black for that day, and certainly didn’t undo the damage for the week. The S&P 500, for instance, gained 0.3% for the week, but ended the week in the hole by 0.7%.

    The question is, was Friday’s strength a glimpse of what’s to come, or just a dead-cat bounce following Thursday’s and part of Friday’s action…. a 4.9% swing from the high to low of those two days. The volatility was no real surprise though, considering Thursday’s disappointing jobless claims data, and then Friday’s better-than expected unemployment rate.

    Let’s just begin there.

    Economic Calendar:

    This week shouldn’t be as busy as last week on the economic front, with less than half the number of economic announcements slated. The big ones to watch are the claims data on Thursday, and the retail sales data – also on Thursday.

    As for last week, check out the economic calendar below… it was quite the mixed bag.

    020710-econ-calendar

    Noteworthy items include the fact consumer credit didn’t shrink nearly as much as thought. In fact, it barely shrunk at all. That’s something to keep on the radar. Pending home sales were actually up for the month, for the first time in ever. Also something to keep an eye on.

    The big enchilada, however (and we have a chart of it below), was the way the media has handled new and ongoing jobless claims. Both were higher than expected, as they pretty much have been the last five weeks. The basic media interpretation was gloom and doom – there’s no way the economy can be getting better unless the jobless claims are sinking, right?

    Yeah, well, the long-term chart of both ongoing claims and continuing claims is a real eye-opener. Say what you want, but both are trending lower. Over the last five weeks, they haven’t. Over the last five months though, they have.

    Were either chart below a stock or index or any other data set, any casual onlooker would say they’re trending lower. Since the story is so much more sensational when the employment glass is seen as half-empty though, the bigger trend took a back seat.

    Not that the move in the unemployment rate from 10.0% to 9.7% on Friday is evidence of anything spectacularly optimistic, but it certainly flies right in the face of last Thursday’s hysteria. The point is, this is why we use charts, and this is why we ignore much of what the media says. They’re just selling ad space; they don’t have to be right.

    Anyway, here’s the chart of new claims, ongoing claims, and the unemployment rate.

    020710-claims

    S&P 500:

    This may be the shortest look we’ve taken at the S&P 500’s chart all year. Why? After Friday’s strong reversal, there’s no real clear picture about what the coming week holds.

    On the bullish side of the equation, the strong reversal action after such a drastic pullback suggests the selling is over. We saw hammer formations from the major indices, and we saw an upside-down hammer from the VIX right as it touched the upper Bollinger band. All are hints of significant reversals.

    On the bearish side, after falling a whopping 4.9% between Thursday’s high and Friday’s low, what did you expect? If you drop anything from high enough, it’ll bounce…. at least for a while. What remains to be seen is whether or not the bulls will give us any follow-through.

    So, before making any rash decisions in the shadow of what is – frankly – a price shock, we suggest letting the dust settle. Just for the record, our Trader’s Edge outlook remains slightly bearish overall, somewhat anticipatory that Friday’s confidence can’t actually be delivered on by stocks in the foreseeable future. It may take a few days, however, for the market and confidence to find its appropriate balance again.

    That’s our long way of saying now’s not the time to be making any big bets.

    Sector Outlook:

    Believe it or not, some groups actually did manage to end the week in the black… technology and basic materials. While basic materials stocks are still likely being pushed around by speculation surrounding inflation and whether or not we’re actually in an economic recovery, tech stock have been resilient, as their underlying companies has been impressive in terms of earnings. The technology sector may well be in their own, true cyclical bull market.

    On the losing side of the table you’ll find utilities and financials. Despite the loss, the former represents a long-term opportunity from an undervalued group. The latter – the financials – are likely losing simply because of an excessive runup in 2009 that can’t be justified now. There are solid individual opportunities in the financial sector right now, but there are too many individual problems in the group to like the group as a whole.

    020710-sector-rank

    Earnings Calendar:

    The number of earnings reports is starting to slow down, but there are still plenty enough to shake the market up. Here are the biggies on tap for this week.

    020710-earnings

    Trade Well,

    Price Headley
    BigTrends.com
    1-800-244-8736



    Disclosure: No positions.
    Feb 08 1:04 PM | Link | Comment!
  • BigTrends Super Bowl Picks & Analysis
    It's that time of year again ... Super Sunday.  This year the perennial contenders Indianapolis Colts face the somewhat "Cinderella" New Orleans Saints.  The Saints are certainly the sentimental favorite for many, given that this is the long-suffering franchise's first Super Bowl appearance and the struggles the city recently faced with Hurricane Katrina.

    sb

    Our take on the game:

    Price Headley:

    Saints 34, Colts 31  OT

    I think the Colts are the better team, but something tells me the Saints can pull out another Miracle in Miami to cap off a tremendous season. And given that the Saints managed to win an overtime thriller that by all accounts they could have easily lost, I’m angling for another OT thriller in Super Bowl XLIV.

    It’s hard to believe that in 43 past Super Bowls, there’s never been an overtime game. There’s been three games that were tied in the final minute, but this game strikes me as the ultimate match-up of two high powered offenses, yet both teams also possess solid defenses. Both teams were undefeated at 13-0 which is very unusual (the undefeated 1973 Dolphins had to wait longer than ever this year before they could pop their champagne corks as the NFL’s only undefeated season), and the Colts had a legitimate case to potentially have been undefeated if they hadn’t rested starters after getting down to the Jets.

    So yes, the Colts should be favored, I was thinking by 3-4 points. I think 5-1/2 points is too much, so if the Saints were to lose,  I still like them to cover the spread. Yes, they could have lost to the Vikings, but when a team survives a scare, that often makes them feel even more like a team of destiny. And who can’t root for New Orleans to get a taste of the glory after all that city has been through in recent years.

    So look for the former “Aints” to truly perform like Saints, with a magical finishing drive to send it to sudden death, and an overtime victory to cap it off. It might be too much to ask for this perfect of an ending, but the Saints and New Orleans sure do deserve it.

    Bob Lang:

    Saints 37, Colts 31

    The cinderella story culminates with a Super Bowl win for New Orleans as they capture their first title since arriving on the scene over 40 years ago.  The heartbreak, struggles and tragedy for this team/city come to an end with a thrilling victory over the favored Colts.  The big receivers for the Saints (Henderson, Colston) will be the difference along with a solid offensive line that gives Drew Brees time to make plays.  The other wildcard being Reggie Bush, who is used to playing big in these kinds of games.  There is really nobody on the Colts defense to stop his vertical attack.  Peyton Manning is one of the alltime greats but their running attack is secondary here.  The speed and experience on defense for the Saints is underrated and unassuming.  The Colts receivers are good but I doubt will come up big as they did against the undersized Jets.  Injuries for the Colts (Freeney) may be a bonus for the Saints.  It'll be a shootout, don't leave the room for too long!

    Colts 31, Saints 20 (and it might not even be this close).

    Sentimental hopes will be dashed as Peyton Manning and the most professional team in football (surpassing the Patriots) will take care of business easily on Sunday.  The game will probably also be lower scoring than many expect.  The main thing here is that the Colts have been here before and expect to win the game, while the Saints are kind of just happy to be here and have no idea what they are facing.  Expect Saints receivers to drop unexpected passes, and Peyton Manning to burn the Saints defense with his trademark line audibles for a few big passes.  The AFC in general has proven to be a stronger conference in recent years, winning 5 of the last 6 Super Bowls (the only exception being the memorable upset by the Giants over the Patriots).  The last time the Colts were in the big game in 2007, they won 29-17 over the Bears, despite playing a fairly mediocre game.  Expect a similar easy win this time around, as well.  There is a reason why all the "early money" pushed this betting line from Colts -4 to Colts -5.5.

    Scott Downing:

    Colts 34, Saints 24

    For Super Bowl XLIV, the Colts are favored by roughly 5 point, with an total points over/under set at 57.  The Colts have won every game that they have tried to win this season, but almost just as important, they are 5-0 against the spread in their last 5 games when favored.  From a practical standpoint, Peyton Manning is in a bid to become arguably the greatest Quarterback of All Time if he can win his second Super Bowl ring.  The Saints were fortunate to make it this far as Bret Favre and the Vikings handed them the NFC Championship game.  I feel great for New Orleans, as the people of that city deserved to make it to their first Super Bowl, but unfortunately, I think their run stops here.  The Colts were able to beat the Ravens (#1 Defense in the NFL) twice, the Patriots (#4 Defense) once, and the Jets (#8 Defense) in their magical run this season, then there is no reason to believe they can't cap it off with a win against the Saints and their #9 ranked defense.  Colts will win by enough to cover the spread and take the over on Total Points.

    Have a great weekend and enjoy the Big Game!

    BigTrends.com

    1-800-244-8736


    Disclosure: No positions.
    Feb 04 7:10 PM | Link | Comment!
  • Weekly Outlook - Earnings, Dollar, S&P 500 and More

    It wasn’t as bad as the week before, but it was still pretty nasty. The major indices fell anywhere from 1.0% (the Dow) to 2.6% (the NASDAQ) last week, in a move that’s become much more than just a little volatility. Too many of the key support levels are now broken, and more corrective action is expected now that the bears have the ball rolling.

    And, there’s plenty of economic data/fodder to spur that action. As busy as last week was on the economic mews front, the coming week will be even busier. Let’s start there before proceeding to the market’s analysis.

    Economic Calendar

    013010-econ-calendar

    The best GDP growth since 2003 (+5.7%), and stocks still can’t get anything going. Actually, it shouldn’t be a real surprise – the data nugget is looking at information that is not only 1 to 4 months old, it’s also figured to be a little artificially-stimulated. The longevity of that strength is still in question. Sentiment, in the form of the Univ. of Michigan Sentiment Index or Consumer Confidence, was up for the month, but clearly wasn’t a bullish catalyst either.

    Perhaps it was the shortfall home sales (new and existing) or the lower home prices, or rising unemployment claims (new and existing).

    As for the coming week, we kick things off with a couple of big ones…. personal income and personal spending. We’ll end things with the unemployment rate, and we’ll squeeze pending homes sales in between the two. Coming in short for any or all of the estimates could fuel the bearish fire.

    S&P 500 Index:


    013010-spx-vix

    In a normal environment it’s easiest to make predictions about the market based on what it’s doing. This isn’t a normal environment though; it may be more effective to explain the bearish outlook based on what the market’s not doing. So…

    Not finding support at the lower Bollinger band – All the short-term dips since September were all stopped and reversed thanks to support found at the lower 20-day Bollinger band (2 SDs), which are the green lines on our chart. Now, however, the lower Bollinger band and the S&P 500 are easily walking hand-in-hand to multi-week lows.

    The VIX is not at an extreme high suggestive of a peak in fear – Most significant bottoms end with a spike in the CBOE Volatility Index, or VIX. We saw this fear a week ago when the VIX reached a high of 28.01. As the SPX has reached new multi-week lows though, the VIX hasn’t. Despite the market’s tumble, fear isn’t yet pressing into unsustainable (i.e. reversal) levels.

    The 1086 level did not act as support – We saw the S&P 500 held up at the 1086 level in November and December, and for a while late last week. That floor cracked this week though.

    The rising support line (red) also didn’t hold the SPX up. This is the line that has traced all the major lows gong back to August, and consists of three nodes. The fourth node should have been made last week, but the S&P 500 just fell under it.

    As we mentioned a few weeks ago, the more likely downside target for the SPX remains around 1025/1030, which was approximate support for both of October’s lows. That would also represent a much more complete ‘correction’ level for the overall market.

    U.S. Dollar

    013010-us-dollar

    Normally we’d add the sector results here. Not that there weren’t any industries to make gains last week, most lost – badly – in the market’s greater bearish tide. So, to highlight winners and losers would be a tad pointless. So, to make better use of the space and time, we’ll revisit a chart we first examined a few weeks ago (December 20th)… the U.S. Dollar Index.

    http://www.bigtrends.com/articles/weeklyoutlook/2179-weekly-market-outlook-december-20-2009.html

    At the time, the U.S. Dollar Index (UDX) had just moved sharply higher, breaking a long-standing downtrend, and closing at 77.69 for that week. Our basis expectation was the obvious one – bullish based on the breakout. Since then, the sawbuck’s index has reached 78.90 (which is quite a big move, for a currency).

    And how much more upside can the greenback muster? Using Fibonacci lines as our guidelines (Fib lines are particularly adept when it comes to spotting Forex reversals), the U.S. Dollar Index should reasonably be able to reach 79.81 before a major headwind is hit. That area was also a little turbulence last August.

    Don’t dismiss the possibility that the index could break through 79.81 – that level is simply a fork in the road. You just need to be aware that a major turn could be happening around there... a turn that is less likely to happen in the one point between here and there.

    Earnings Calendar

    Last week was a busy one on terms of earnings, but this week should be just as wild. Here’s what’s on tap:

    013110-earnings

    Trade Well,

    Price Headley
    BigTrends.com

    1-800-244-8736



    Disclosure: No positions.
    Feb 01 9:30 AM | Link | Comment!
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