WALL STREET 20 Oct 2012 >>> Dow Swallows Huge Losses On Bleak Blue-Chip Earnings

Parabolic SAR follows price and can be considered a trend
 following indicator. SAR can act like a trailing stop.
Once an uptrend reverses and starts down, stops
continuously falls as long as the downtrend remains
 in place. The SAR dots have yet to appear at the
Extreme Point (Top) of the above chart.
 

DOW SLAMMED BY WEAK EARNINGS
The Dow Jones Industrial Average (DJIA)  spent the session wallowing in the red, suffering a triple-digit slide and erasing nearly all of its weekly surplus by the close. The (DJIA – 13,343.51)  blazed a steady trail lower today, surrendering 205.43 points, or 1.52%, to pare its weekly gain to just 0.1%. As a result of its worst single-session drop in four months, the blue-chip barometer ended beneath its 50-day moving average for the first time since July 12. Of the Dow's 30 components, only Home Depot (NYSE:HD) bucked the trend, tacking on 0.2%. Of the 29 declining equities, McDonald's (NYSE:MCD) suffered the worst, giving up 4.5% in the wake of disappointing earnings. DJIA had it's weekly surplus shaved to 0.1%.

Likewise, the S&P 500 Index (SPX – 1,433.19) steepened its losses as the session progressed, falling 24.15 points, or 1.66%, before finding a foothold in the 1,430 region. For the week, the SPX edged 0.3% higher. Meanwhile, a batch of lackluster earnings in the tech sector weighed on the Nasdaq Composite (COMP – 3,005.62), which plunged 66.78 points, or 2.17%, to finish at its lowest point since Aug. 6. However, the index maintained its perch atop the round-number 3,000 marker. For the week, the COMP gave up 1.3%.

 

ANALYSTS' QUOTES

 

“And once you get one quarter of negative earnings, it’s a precursor. It’s the cockroach theory: If you find one, there’s probably many more.”

"Today was all about earnings. The reality is we're in the second inning and earnings have stunk. We'd better put our 'rally caps' on and hope earnings come in a lot better next week, or the recent weakness could very well continue."

“We’ve had some household names disappointing on revenue, earnings or guidance. We had about 80 companies reporting this week: financials that did better and technology that did worse. Since this is the worst day we’ve had in months, it reminds us that we haven’t had much volatility or downward pressure since the bottom in June.

“The earnings season is not great right now, but the fundamentals haven’t changed; the U.S. economy is still improving, and it hasn’t gotten worse in Asia or Europe. The market is taking a pause.”

"Poor corporate earnings reports pounded the market today, in a sour end to an otherwise strong week of trading. Disappointing results from three giants of the Dow _ Microsoft, General Electric and McDonald’s _ were to blame. But the broader market fell, too, and the Standard & Poor’s 500 index fared even worse in percentage terms."

HAPPY WEEKEND

WALL STREET 19/10/2012 >>> Weak Tech, Soild Housing; Stocks End Day On Sour Note

Google & Microsoft Miscued;
Tech Sector Drags Down DJIA
The Dow traded in positive territory several times today, but headed south after lunchtime, finding its first loss in the past five sessions.

The Dow Jones Industrial Average (DJIA – 13,548.94) spent time on both sides of breakeven today, seeing an intraday high of 13,588.73, and a session low of 13,510.93. But by the time the dust settled, the Dow found itself down 8.06 points, or 0.06%. American Express Company's (NYSE:AXP) earnings-related deficit of nearly 3% headed the index's 11 underperforming issues, while The Travelers Companies, Inc. (NYSE:TRV) gained 3.6% on a better-than-expected quarterly report, pacing the 18 winning blue chips. The Procter & Gamble Company (NYSE:PG) remained unchanged.

Both the S&P 500 Index (SPX – 1,457.34) and Nasdaq Composite (COMP – 3,072.87)turned lower today, ending a their three-session uptrend. The SPX slipped 3.57 points, or 0.24%, while the COMP retreated 31.10 points, or 1%. This worst performance of three benchmarks was highlighted by Google Inc's (NASDAQ:GOOG) & Microsoft Corps (MSFT) "premature" earnings release.

 

The CBOE Market Volatility Index (VIX – 15.03) aka Fear Index edged south by 0.3%, but bounced from its session low of 14.68.

 

ANALYSTS' QUOTES:

 

"Say what you want about technology lagging today. The reality is, tech has performed poorly for nearly a month now. What stood out to me is that housing once again bucked the trend and had a good day. Some wise advice that is easier said than done is to play the trends until they don't work anymore."

 

 

 

 

 

 

 

 

 

 

 

 

"My friends, tech is going down and housing is going up. I have no clue how that will end, but it's reality. And as traders, it's our job to trade the major trends." 

 

 

 

 

“As we saw in Google’s report, there are lots of high expectations in some of these widely held names, and when they don’t deliver, they can get hit pretty hard.” 

 

“The PC market was challenged this quarter. In addition to a tough economic environment and competitive pressures, OEMs [original equipment manufacturers] drew down their Windows 7 inventory as they began to transition to Windows 8.”

 

”The clear driver on the quarter was PCs, shipments of which declined between 8% and 9%. This hurt Windows as well as Microsoft business division revenue.”

 

 

GOODLUCK & HAPPY TRADING

Alcoa surprises Wall Street with first-quarter profit

Alcoa Surges Past Estimates
After the bell on Tuesday, Alcoa (AA) released operational results for its first quarter of fiscal year 2012 that surpassed the Street's estimates on both the top and bottom lines. Management indicated that rebounds in the automotive and airplane manufacturing helped boost the results. Alcoa reported a record revenue figure of $6.0 billion (above the Street's $5.77 billion forecast) and earnings, excluding items, of $0.10 per share (above the Street's forecast of a $0.04 loss per share). Last year during the first quarter Alcoa reported earnings of $0.27 per share.

Growth at the company was driven by a surge in its Engineered Products and Solutions unit, which jumped 11%. Process improvements contributed to that gain, and Alcoa is expected to see further market share gains in the second quarter. However, in what could be construed as a negative, the company reaffirmed its demand projections for 2012, seeing aluminum growth of 7%, even as it said growth in the aerospace industry would outpace previous estimates. Elsewhere around the world, Alcoa projects China consumption to gain 11% after surging 15% during 2011. Management indicated it projects mid-single digit consumption growth in both Russia and Brazil, while Europe contracts 0.3%. I expected growth in China to slow as well as Europe to show more of a contraction.

The beat has a bittersweet feeling to it as the Street's forecasts have been in free-fall mode since November of 2011. According to Thomson/Reuters, estimates were for earnings of $0.20 per share in November, then $0.12 per share in December before falling to a loss of $0.04 per share by January. The Company capped its alumina production earlier this year, and there continues to be an oversupply in the marketplace, something that slightly higher demand from the auto and air business is not going to replace. Additionally, pricing power continues to be a problem as management indicated that the Company realized a 9% drop in aluminum prices during the quarter.

I had modeled for revenues to rise to $5.81 billion with a loss of $0.06 per share. Alcoa reported a much stronger rebound in the Engineered Products segment, which helped to offset the higher cost of goods and lower aluminum prices. The stock is up approximately 5% in the aftermarket, but is still down dramatically from this time last year (almost $18). I am not taking the bait; I would still avoid the stock, but if you are stuck in the stock, this looks like a great opportunity to take advantage of the positive news and sell while you can.

A Peek Into The Week Ahead >>> On A Canter

Wall Street Week Ahead :

Key Jobs Report, Earnings & Data

ANALYSTS QUOTES

“The big news the last couple of weeks is the program they launched over in Europe, the lending facility to the banking system, seems to be working. The market seems unrattled.”

“This earnings season hasn’t been nearly as robust as the last couple; there’s a bias toward companies beating versus missing, which is reflecting a slow-growing economy.”

“We’ve had such a good run, one of the strongest we’ve had in a long time from the start of the year, so we’re overdue.”

“There are a lot of bullish surveys, which is usually a clear sign that things are going to correct.” 

“The program they launched over in Europe, the lending facility to the banking system, seems to be working, with yields on Spain and Italy’s sovereign debt making substantial moves in the right direction.” 

“We all know it’s just a matter of getting everyone lined up in terms of getting private investors to take a haircut, and here domestically, things have been headed in the right direction.” 

On negotiations of the Greece debt fiasco ..... "Important understandings were reached on legal and technical issues."

BSKL To Maintain Strong Risk Appetite 

Market expected to trend higher next week along with other regional markets

VIEWS & OPINIONS

"We view the dovish statement from the US Federal Reserve (that interest rates would remain exceptionally low until at least late 2014) was a positive surprise for investors."

 "Trading volume at the local bourse over the week was fairly heavy considering it being a holiday-shortened week, with many investors expected to return on Monday, the market is expected to be buoyant."

"The water dragon may rear it's head next week."

"We expect the Europeans to open the possibility of huge asset purchases to boost the global economy. Going forward, we believe the local equity market will maintain strong risk appetite, with commodities and emerging market currencies seeing strong demand."

"The local market would continue to be influenced by external events significantly despite local fundamentals remaining strong and speculative play ahead of the 13th general election." 

HAPPY WEEKEND & GONG XI FA CAI 

WALL STREET >>> DJIA Takes Back 12,700

Bulls Charge : Dow Soars 1.2% as Greek Plan, Earnings Fuel Optimism

Stocks blazed a steady path into the black today, as Wall Street celebrated encouraging earnings and economic reports, and some debt-related headway across the pond. Specifically, European Union (EU) leaders detailed plans to prevent the contagion of Greek debt, which helped overshadow the lingering debt-ceiling gridlock on Capitol Hill. Meanwhile, Morgan Stanley (MS) led the earnings festivities, as investors applauded the financial concern's narrower-than-expected quarterly loss. Furthermore, the Philly Fed index's stronger-than-anticipated rebound, as well as upbeat data from the Conference Board, helped keep a jump in weekly jobless claims on the proverbial backburner. Against this bullish backdrop, the Dow Jones Industrial Average (DJIA) ended at its loftiest settlement price since May 10.

The Dow Jones Industrial Average (DJIA – 12,724.41) finished near a session high, advancing 152.5 points, or 1.2%, to end atop the 12,700 level for the first time in two weeks. Only Intel Corp. (INTC) bucked the trend higher, shedding 0.8%, while Bank of America (BAC) paced the advancers with a 3.9% gain.

In similar fashion, the S&P 500 Index (SPX – 1,343.80) rallied almost 18 points, or 1.4%, conquering the 1,340 level for the first time since July 8. Finally, the Nasdaq Composite (COMP – 2,834.43) pared its surplus to 20.2 points, or 0.7%, after earlier soaring as high as 2,847.41.

TECHNICAL ANALYSIS
Dow Jones Industrial Average

The Dow closed sharply higher on Thursday as it extends this week's rally. The high-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are diverging and are turning bullish signaling that sideways to higher prices are possible near-term. Closes below the 20-day moving average crossing at 12,434 would confirm that short-term top has been posted. If the Dow extends the rally off June's low, May's high crossing at 12,876 is the next upside target.

First resistance is the 87% retracement level of the May-June decline crossing at 12,752.

Second resistance is May's high crossing at 12,876.

First support is the 20-day moving average crossing at 12,434.

Second support is Monday's low crossing at 12,296.

Crude Closing In On $100

Crude futures extended their winning streak to three straight sessions today, and even made a brief foray north of $100 for the first time in more than a month. Progress on the Greek debt situation bolstered hopes for improving demand, while the International Energy Agency's (IEA) decision against a second release of oil reserves also boosted black gold. Against this backdrop, September-dated crude oil futures tacked on 73 cents, or 0.7%, to end at $99.13 per barrel.

HAPPY TRADING & GOODLUCK2ALL

Random Ztocks Charts MUHIBBAH KNM

KNM Group Berhad (RM0.36) >>> BUY >>> Target PriceRM0.56 (55.6%)
􀂃 Subsequent to KNM’s analyst briefing yesterday, we have cut our FY09 and FY10 profit forecasts further by 22% after lowering our orderbook assumption to RM1.8bn and RM1.5bn respectively. We have also increased our effective tax rate to 18% for both years after the company indicated that approval for its tax incentive following the acquisition of Borsig still pending. Management also have indicated average selling prices have gone
down by 10% to 15% but expects profit margin to remain stable.

􀂃 In arriving at the sales forecast for both years, we have assumed that the Group will recognize about 70% of its current orderbook of RM3.9bn in FY09 while the balance 30% in FY10. New orders in each year are expected to contribute 30% to sales while the balance 70% will be carried forward into next year.

􀂃 The management reiterated that it has not seen any cancellation in orders for the current orderbook and whatever that needs to be cancelled has already been done with (such as the C$70mn Canadian contract). This is so as orders cannot be cancelled once the work has started and at the worst case it could be delayed.

Borsig Acquisition Is Not Bad After All
􀂃 Management still hopes to benefit from cross selling Borsig’s products in other countries while offloading some high-end contracts to Malaysia as Borsig’s capacity is fully booked for the next 12 months. Borsig’s orderbook and tenderbook stand at RM1.2bn and RM1.8bn compared to total figure of RM3.9bn and RM18bn respectively.

􀂃 For instance, Borsig’s products that can be sold in other markets are membranes products, compressors and ball valves. Its membrane technology has already been accepted in China market and it is currently looking for partners to produce ball valves either in China or Malaysia.

􀂃 Besides, as Borsig outsource about 30% of its requirements, KNM intends to retain this business within the group by beefing up the capability of its Malaysian operation in the next six months. By doing this it can fully utilize current facilities where the group utilization stood at 80% in FY08 and management expects it to fall to 76% in FY09.

􀂃 Management indicated that receivables shot up 236% to RM705mn due to consolidation of Borsig’s earnings and the latter’s receivables accounted for 24% as it gave advances to suppliers but its receivable days was healthy at 36 days.

New Orders Are Expected to Slowdown
􀂃 We believe the inflow of fresh orders will taper off in FY09 as the Group only secured RM300mn worth of orders in the last two months. These orders are high-end in nature and were secured by its Italian and German operations.

􀂃 Apparently the Middle-East and North Africa are the two regions that are still experiencing strong growth and management expects this trend to continue. Canada and the US have seen slowdown while activities in Asia are deemed to be stable.

􀂃 It is rebidding for some LNG contract in Australia and the results will be known in 2Q. Besides, it is also sees strong activities in gold mining operation and expects new opportunities in Alaska when one of its customers develops a gold mine there. It already has expertise in producing processing equipments for such projects like the autoclave for the gold refinery projecting Dominican Republic. Valuation

􀂃 Maintain Buy with a target price of RM0.56 as we have lowered the PER discount to 10% on FY09 target PER of 6x after imputing a lower orderbook in the next two FYs.

HAPPY TRADING & GOODLUCK2U

How is technical analysis different from fundamental analysis?

While fundamental analysis may tell you when you’ve found a solid company, its weakness is getting you into that stock on a timely basis as far as when to enter and exit the stock. This is where technical analysis comes in. Its great asset is that it’s a better timing tool. So the fundamentals tell you “what” to buy and technical analysis tells you “when” it might be a higher probable time to buy and sell that stock. As you can see from this, they both can be complimentary to one another. After all, if you can trade a stock with horrible earnings or a stock with favorable earnings projections, of course you should trade the one that’s more fundamentally sound. Someone who strictly uses fundamental analysis may need to hold on to that stock for 3-10 years for the true valuations to be reflected in the stock. These tend to be long term investors. The trader, on the other hand, tends to lean more heavily on technical analysis because the trader has to be right within hours to weeks, not 3 to 10 years. To the technician, timing is of the essence.

What is Technical Analysis?

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future.

Technical analysts believe that the historical performance of stocks and markets are indications of future performance.

In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, his or her decision would be based on the patterns or activity of people going into each store.

What is Fundamental Analysis?

A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies).

The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).

This method of security analysis is considered to be the opposite of technical analysis.

Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security.

For example, an investor can perform fundamental analysis on a bond's value by looking at economic factors, such as interest rates and the overall state of the economy, and information about the bond issuer, such as potential changes in credit ratings. For assessing stocks, this method uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company's underlying value and potential for future growth. In terms of stocks, fundamental analysis focuses on the financial statements of a the company being evaluated.

One of the most famous and successful users of fundamental analysis is the Oracle of Omaha, Warren Buffett, who has been well known for successfully employing fundamental analysis to pick securities. His abilities have turned him into a billionaire.