Notes for the Trading Week

The outlook for the coming week is one of a defining moment for the broad markets. Following a week of ups and downs for the broad indexes investors are ready for definitive decisions on direction. The latest polls out over the weekend show that Americans are more pessimistic about the economy, big shock! This isn’t really a surprise when you consider the data over the last six weeks hasn’t been exactly encouraging relative to growth and jobs. Thus, we are cautious as we start the week as investor focus has shifted to specific opportunities versus broad generalities about the markets overall. Breaking the data down for the upcoming week there is plenty on tap relative to earnings, economic data and politics. The goal is to sort through all the news and gossip to find the best opportunities… short or long.

Technology has been a laggard for the broad market indexes and it holds some mixed signals as you dig into the stocks making up the sector. This promises to be a week of definitive direction as the technology sector takes center stage for earnings. The reports from Yahoo, Intel, IBM and others last week were a mixed start to what looks to be the decisive votes coming from Qualcomm  Amazon, Netflix, Apple, Texas Instruments… and others. The semiconductors have been struggling as computer sales lag, but the other areas of the chip sector are looking better. The SOX index tested support again and managed to bounce on Friday. Watch for SOXX to make a move back towards the top end of the current trading range. Tech will play a key role in how the week unfolds.

Apple, fro my view, will be one of the primary earnings reports of the week. What are the expectations? That question will be answered on Tuesday, but from my view it will be the fourth consecutive disappointment from Apple. In fact, $350 ish on the stocks looks realistic as the next test on the downside. iPhones sales have been positive, but due to the fact they have had no new products launched nor a serious upgrade to the existing line doesn’t bode well for the outcome. Verizon’s news Friday lifted the stock in early trading, but that failed to hold as the stock closed lower on Friday. Are there hints in the reports from both Cirrus and Verizon about the report coming from Apple this week? Lower iPhone 5 sales seem to be the challenge and could be a big negative for the quarter. Apple is still paying a 2.5% dividend at these levels, but the downside risk makes even a value play unattractive. With the sentiment in negative territory, even positive news is likely to be twisted to a negative. The play remains on the downside barring any surprise on Tuesday… none expected.

Intel is starting to gain some attention from analyst and investors. What is the attraction? The 4% dividend yield paid to shareholders to hold the stock as it figures out the semiconductor market transition to alternative devices for computing. The stock is trading at 11 times current earnings and technically the break from the consolidation range on  Friday is a positive. The move above $22.50 on Friday was the first sign of a move higher and worth our attention. See the Watch List for more details.

There are plenty of issues facing investors this week as we gain a glimpse into some key sectors earnings. Ford will announce on Wednesday and show how the bottom line is shaping up relative to the automotive industry. Caterpillar is on Monday for the industrials. Haliburton, ExxonMobil and ConocoPhillips will impact the energy sector. Eli Lilly, Glaxo, J&J and Pfizer for the drug sector. Technology as mentioned above will also provide insight. Throw in the economic data of existing home sales, PMI manufacturing, durable goods orders, energy inventories, jobless claims, GDP for Q1 and consumer sentiment, all will be watched as this will prove to be a make or break week for the markets.