Key Earnings to Guide Dow for the Next Few Weeks

Includes: AA, DIA, DUG, GLD, INTC, TLT
by: Richard Suttmeier
For US Treasury yields its one auction down, two to go. Gold stability needs a close above my semiannual pivot at $1218.7. Crude oil remains below my annual pivot at $77.05. The euro is below monthly resistance at 1.2670. Dow strength targets my annual pivot at 10,379 if earnings from Intel, JP Morgan (NYSE:JPM), Bank of America (NYSE:BAC) and General Electric (NYSE:GE) follows Alcoa’s lead. Earning’s results masks brewing below the surface at many US companies, particularly those in the IT business. I handicap Alcoa (NYSE:AA) and Intel (NASDAQ:INTC).
10-Year Note – Semiannual and quarterly supports are 3.479 and 3.486 with daily and annual pivots at 3.026 and 2.999, and weekly, annual, quarterly and semiannual resistances at 2.858, 2.813, 2.495 and 2.249. The low yield for the move was 2.879 set on July 1st, and was a failed test of my 2.999 and 2.813 annual risky levels. The $35 billion in 3-Year notes had a relatively strong bid at 1.055%. The bid to cover was 3.20 and the Indirect Bid was a strong 41%. Today the US Treasury sells $21 billion 10-Year notes, and then $13 billion 30-Year bonds on Wednesday.
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Comex Gold – Daily and quarterly supports are $1170.0 and $1140.9 with annual support at $1115.2. My weekly and semiannual pivots are $1210.3 and $1218.7 with semiannual and monthly resistances at $1260.8 and $1279.3. The all time high of $1266.5 set on June 21st was a test of June’s monthly resistance, as a significant top for gold. Gold is below its 50-day and 21-day simple moving averages at $1217.4 and $1228.0.
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Nymex Crude Oil Daily and quarterly supports are $71.05 and $56.63 with weekly and annual pivots at $76.93 and $77.05, and monthly and semiannual resistances at $79.36 and $83.94. The 200-day simple moving average provides a resistance at $77.27.
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The Euro – Weekly support is 1.2422 with monthly pivot at 1.2670, daily resistance at 1.2939, and the 200-day simple moving average at 1.3720. Monthly and quarterly supports are 1.2035 and 1.1424.
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Daily Dow: Daily and weekly supports are 10,068, 9,635 with the 21-day, 50-day and 200-day simple moving averages at 10,140, 10,285 and 10,368, and my annual pivot at 10,379. MOJO is rising so the daily chart is positive with closes above the 21-day. Semiannual and monthly resistances are 10,558 and 10,891 after my annual resistance at 11,235 was tested at the April 26th high at 11,258, which marked the end of the bear market rally that began in March 2009. We are in the second leg of the multi-year bear market that began in October 2007 targeting 8,500 before 11,500.
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Handicapping Earnings from the Dow - My overall opinion is that the Dow’s 512 point run-up last week raises the bar for earnings for the second quarter of 2010. We know that the economy has hit a soft patch and in a speech on Monday Fed Chairman Ben Bernanke is worried about bank lending to businesses, especially small businesses. Most companies regardless of size are becoming more cautious with expansion plans, which will be a drag on economic growth in the quarters ahead. The big companies are hoarding cash, they are not spending on capital improvements and they are not hiring. Small businesses who want a loan cannot get loans from more than 50% of the community banks due to their overexposures to commercial real estate loans.
I exchanged instant messages from a friend who is in the global IT business. He estimates that around the globe there are 25 million IT projects that are on hold, or companies are having planning meetings this month to decide to put projects on hold. A slowdown in IT spending will likely hurt earnings from the likes of Cisco Systems (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT). Companies are reluctant to shift from Windows XP, but ordering a new PC with XP is becoming more difficult as Microsoft holds off support in an attempt to shift users to Vista or Windows 7. Even upgrades for bandwidth are not coming through from AT&T (NYSE:T), Verizon (NYSE:VZ) or the smaller wireless providers. Even Internet advertising is beginning to slow down, which could be seen in earnings reports from Google (NASDAQ:GOOG) and Yahoo! (YHOO).
Handicapping This Week’s Key Earnings Reports
Alcoa (AA) is rated a HOLD with fair value at $17.22, which makes the stock 36.9% undervalued. The daily chart for Alcoa shows rising MOJO with the stock below its 21-day, 50-day and 200-day simple moving averages at $10.95, $11.47 and $13.35. My weekly value level is $9.73 with semiannual risky level at $12.20. Alcoa shares rallied in after hours trading and holding the 21-day at $10.95 targets the 50-day at $11.47.
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Intel Inc (INTC) is rated a BUY with fair value at $27.17, which makes the stock 24.3% undervalued. The daily chart for Intel shows rising MOJO with the stock above its 21-day simple moving average at $20.44, which targets the 200-day and 50-day simple moving averages at $20.77 and $21.08. My weekly value level is $19.23 with semiannual risky level at $21.59.
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