08
Feb
2010

WHAT THE MARKET WANTS: Market Searching for Support

Since the market ditched its typical Monday mania today, maybe we can escape the inevitable depression that has followed in its wake.

For five consecutive weeks, the market has started with an up-day only to tank for the rest of the week. Some have blamed the Monday upsurge on weekend manipulation of the futures market.  If that’s the case, it didn’t work today. Overall, the S&P 500 has fallen from a high of 1150 on 1/19 to a low last week of 1044, losing approximately -9% from its high five weeks ago.

In contrast, I would expect this week to be a rather quiet one, as upcoming economic releases are somewhat muted.  Only the trade balance on Tuesday, retail sales and weekly jobless claims on Thursday, and consumer sentiment on Friday are thought of as potential market movers.

Corporate earnings announcements should also be relatively subdued this week, as the major market movers have either already announced or will do so in future weeks. We do expect reports from Coke (KO), Pepsi (PEP), and Disney (DIS), along with companies such as Sprint (S), Credit Suisse (CS), and Agilent (A).  A number of life insurance companies are also scheduled to report, but the company we’re really looking forward to is WWE – World Wrestling Entertainment! Can the Royal Rumble and Wrestlemania bring in the bacon?  Seriously though, Pulte Homes (PHM) is one to watch this week – especially because it is a Short position in our Sabrient Investor’s (H)Edge absolute return model portfolio.

This week could set the tone for the rest of the first quarter, if there are no further major negative surprises.  With no main event on the horizon (other than Wrestlemania XXVI, of course) and if indeed the market has come to grips with its debt worries about Greece, Italy and Portugal, it might be possible that the 5-week losing streak could be brought to an end this week. The S&P has reached the very bottom of a fairly well defined channel established since last March 6.  A retest of last week’s low of 1044 would be yet another challenge to that channel.

Our forward looking sectors appear much as last week, led by Energy, Financials and Healthcare, with the latter two in a dead heat.  Consumer Discretionary, Industrials and Consumer Staples are at the bottom of the list.

Click here to see the Market Stats.

I think it is best to remain cautious and invest in conservative stocks in the favored groups.

4 Stocks Ideas for this Market

This week, I started with the Rock-Solid Yields preset search on MyStockFinder (http://MyStockFinder.com).  However, I restricted it to Buys & Strong Buys and up-weighted the Value score.  Here are 4 intriguing stock ideas, each offering impressive dividends, and each representing a different sector that is highly ranked in Sabrient’s SectorCast model:

American Capital Agency Corp. (Nasdaq: AGNC) – Financials
Chunghwa Telecom ADR (NYSE: CHT) – Telecom
Universal Corp. (NYSE: UVV) – Consumer Staples
Eli Lilly & Co. (NYSE: LLY) - Healthcare

Until next week,

David Brown
Chief Market Strategist
Sabrient Systems, LLC
Leaders in Investment Research
http://www.sabrient.com
and  http://Twitter.com/ScottMartindale

Full disclosure:  The author does not hold any of the stocks mentioned in this week’s “Stock Ideas.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

What the Market Wants
david / Tag: A, AGNC, CHT, CS, DIS, KO, LLY, PEP, PHM, S, UVV, WWE /