Traders,
We have a new layout, I hope you like it - seems like we needed a little change for 2010. Let me know what you think.
It seems like we were waiting for more economic data before moving higher or lower yesterday. The ADP private sector jobs did show some improvement, but not as great as expected - will tomorrow's employment numbers show the same result? Also CES (Consumers Electronics Show) in Vegas started last night - if you are not familiar with that - well it is the Disney World of electronic shows. I was fortunate to go a couple of times and it is where you will see the latest and greatest technology and even new ideas and devices that could revolutionize an industry. I remember when I went and it was the first time that MP3 players came out (way before the iPod) - you could see that this was going to be the next wave. A good friend of mine is there right now and I wish I could be there as well. Expect to hear about the new trends which could drive some high-tech stocks.
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| CES
What's New? |
As I mentioned in the opening, CES just started. The two big technologies that are making headlines is the Tablet/eReader (which I discussed in a previous Market Preview this week) and Smart Phones. The Tablet/eReader has a couple of heavy weights - Microsoft/HP introduced their new Tablet http://gadgetwise.blogs.nytimes.com/2010/01/07/microsoft-and-hp-are-slate-mates/ (unfortunately with a power outage and some other issues - the Keynote speech failed to wow - but the product no doubt is going to be a driver in the next wave). Apple is schedule to announce their similar product "iSlate", "iPad", who knows what it will be called. Either way with Microsoft and Apple pushing forth will no doubt help spur sales and if it is any where the success like the iPhone we could see some increase in top line revenue at Microsoft, HP, and Apple. Google announced their new Smartphone and it will be fully unlocked and with Android (their OS) it will also be open to programmers to wow us with new apps. It is a first generation and Apple has already dominated with the iPhone and some of their apps are amazing - this was forwarded to me yesterday http://recombu.com/news/parrot-ardrone-iphone-controlled-helicopter-leaves-us-speechless_M11288.html (clearly showing that there is no limit to what can be designed) There is also a Samsung 3D TV that does NOT require wearing glasses, could this be a new trend. CES is a great place to figure out the trends for the year and get an idea of what is not only in the pipeline, but also which companies will dominate in the space. So far - it seems while Smartphone is yesterday's news there is still big growth with Google and even Dell adding their own to the mix. However, I think the big revenue driver will be these tablet/eReaders and with Apple and Microsoft/HP in the mix - who knows. Where to invest? I would continue to look at smart phone makers - it is getting over crowded, but reports show that the majority of phones currently being used are NOT smart phones and thus the conversion rate is still fairly high. I would also look at Amazon, Barnes & Noble, Apple, Microsoft, HP, and any other company with their eReader / tablet. No doubt the Apple and Microsoft tablets will be more than just an eReader, but Amazon and Barnes & Noble's products also have the pipeline of online content to help drive their products - booth have been wildly successful. There are some other technology in their infancy - like Samsung's 3D TV - it is now the time to figure out what the NEW NEW thing will be for the end of 2010 . Check out more news on CES which will be going on throughout the week and weekend. If you ever get invited - my advice - GO! |
| Jobless Claims!
Slightly Better. |
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Initial Jobless Claims rose less than expected, up 1,000 to 434,000 in the week ending Jan 2nd. The 4 week moving average continued to move lower to 450,250 (down 10,000). Clearly a good sign. 32 states and territories reported a decline, while 21 reported an increase (note that includes states AND territories). Also employers last month announced the fewest job cuts since the recession began to an estimated 84,000. While this is all good news, we are not hearing about job creation, just less job cuts. So we are getting there, but not increasing yet.
We will also be getting the non-farm payrolls on Friday which could give us a better indication, including the revisions for November. The futures were under pressures this morning, but are coming off their lows.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abx4KMxyf1mk&pos=1
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| Retail Sales
An improvement, but... |
| Some of the retailers reporting monthly sales results are doing better than expected - many of them seem to be the bulk and large retailers - which seem to do well (Sears, Costco, etc.) . Although several companies do not report monthly sales results (like Wal-mart and Best Buy), the news is optimistic as all eyes are waiting for those Holiday sales results. Some retailers are seeing upside in the pre-market. However, in Europe they just reported the worst retail sales in 2009 on record and currently no signs of improvement.
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| Futures Pre-market
Where's the action! |
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The futures were under more pressure, but the Jobless claims and better retail sales have seen them come off their low. They are still under pressure - so expect a mix to slightly weak opening.
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| Support / Resistance
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INDU 10,500 (This seems to be a sticky point for now, the futures are pointing lower and we may not get away from 10,500 until tomorrow when the payrolls for December could set the trend)
NDX 1850 / 1900 (Right in the middle, we saw a .5% pull back and futures are mixed this morning. CES could be a driver of this index this week and early next week.)
SPX 1100 / 1150 (Again in the middle of the range with almost no change yesterday - waiting for tomorrow's employment data?)
RUT 600 / 650 (Same story here.)
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| Conclusion
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We had a good rally at the beginning of the year and now it is waiting before moving higher or retracing. The ADP and weekly claims are showing trends of improvement with no surprises and all eyes are on the employment data for December and revisions of November. Friday could inject some volatility into the market. The VIX is below 20 and close to 19 as it seems that fear is leaving the market. I think we could see a little hidden volatility explode on Friday and into next week - either up or down.
We are also waiting to see how the retail sales did for December, the initial reports look promising - but that report out of Europe was rather bleak. I think we will see a continued trend to the Wal-mart and Target - discount stores and specialty stores see mix results. Best Buy however could be a winner, Circuit Citi is now gone and with the new technology trends in CES could help move inventory. Best Buy did cut prices and continue to cut them so I am not sure how the margins look - but without major competition it could help them beat expectations.
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| Author |
| Michael Williams has 20 years experience as a institututional floor broker and options market maker. He is a partner in both Silexx Financial Systems (a trading software company) and Kinetic Strategic Group (a private investment firm). He co-authored the book "Fundamentals of the Options Market" a McGraw-Hill text and has lectured throughout the country on Options, Risk Management, and Volatility. | |
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