Tuesday, July 10, 2007

The bulls got beaten up today. The Dow is starting to look like a triple top with each peak slightly below the other. The S&P broke below its 50 day moving average and also looks like a triple top with each successive peak below the other. The Nasdaq has by far been the strongest index though there was some heavy selling today. Gold, Silver, oil , the Euro and natural gas were all very strong. Thus I had some big gains in GLD SLV UNG FXE and equities like NYX JSDA LLNW BBND BIDU RACK as well as my inverse indices QID SDS DXD MZZ . Overall I was up quite nicely for the day despite taking it on the chin in positions like LVS UXG PRAI OXPS HANS NTRI FFIV GE .

Volume today was on the heavy side and decliners outpacers advancers 6-1 on the NYSE. Homebuilders and banks all got killed. Electronic office equipement actually finished higher as a group. Internets didn't do too badly either. On a side note, Bernanke was unable to rally the markets like he usually does. Not good for the bulls.

One of the reasons for todays market decline was some poor earnings starting with Alcoa yesterday evening and continuing on to companies such as Home Depot and Sears this morning. Lets take a look at the factors mentioned that caused Sears to miss.

"We are disappointed with our recent performance," Chief Executive Aylwin Lewis said in a statement. "Although we believe our business has suffered from many of the same factors that have led other retailers to announce disappointing results and lowered expectations, our recent performance underscores our ongoing need to become more relevant to consumers while improving our discipline around expense management."

SAME factors that caused other retailers to miss. In other words the housing slowdown. So housing is affecting the broader economy, a scenario which the bulls are denying.

"While investors have sought to value Sears as something other than a retailer, its recent results demonstrate that it is not immune to the current challenging sales environment impacting retailers with big-ticket home exposure," Goldman Sachs analyst Adrianne Shapira wrote in a research note.

Current challenging sales environment impacting retailers with big ticket home exposure. So consumers are not spending on home appliances as much because

a)They cannot tap into their Home equity due to declining or stagnant home prices

b)They are not buying new homes like they were a year ago.

c)They are suffering the effects of inflation via higher food and gas prices.

d) All of the above.

I would say d) All of the above, fits the bill.

"It looks like it's going to be a pretty rough quarter, particularly with the home appliance category," said Morningstar analyst Kim Picciola. "There are a lot of retailers vying for the same share of consumers' wallets and it doesn't seem as though they're changing their competitive position in the market place. They're continuing to lag to tough competitors like Wal-Mart and Target."

It will be interesting to see when Target and Walmart report.

No comments: