After getting within three points of Dow 12,000 a day earlier, an added sense that stocks are overbought on a short-term basis and ripe for some profit taking left sellers in control Tuesday, snapping a three-day winning streak. As a reminder, the Dow had hit a record high in seven of the last 10 sessions; all three major indices are up 3.3% on average just two weeks into October.
Given the more optimistic view on inflation that has been priced into stocks of late, investors also erred to the side of caution after a disappointing read on inflation at the producer level cast a cloud of uncertainty over Wednesday's more influential CPI report. Total PPI fell 1.3%, the biggest drop in three years due to a record 22.2% drop in gas prices. However, the more closely watched core PPI rose a surprising 0.6% (consensus 0.2%), ruffling the inflation hawks' feathers even though the PPI data are much more volatile than CPI and the increase in auto and truck prices responsible for the jump in core PPI may prove temporary.
The biggest thorn in the market's side was a 3.0% sell-off in Intel (INTC 20.96 -0.65). The Dow component, which is also the sixth most heavily weighted component on the Nasdaq, tumbled after Goldman Sachs downgraded the stock on valuation concerns and noted that expectations heading into its Q3 report after the bell are too aggressive. Worries that tech companies won't come through with decent enough profit growth to justify current valuations overshadowed a plethora of better than expected earnings reports, some M&A activity and a 1.7% sell-off in oil prices.
Dow component Johnson & Johnson (JNJ 66.07 +1.14) was the biggest blue chip out with strong quarterly results, but its 1.7% surge struggled to offset declines in 18 of the Dow's 30 components. To wit, United Technologies (UTX 65.92 -0.87), the Dow's second worst performer Tuesday (-2.4%), also topped forecasts and went a step further by raising its FY06 EPS outlook. However, after opening very close to an all-time high, shareholders opted to consolidate recent gains, which removed some leadership from the influential Industrials sector.
Merrill Lynch (MER 84.60 +0.49) was another notable name exceeding Wall Street's expectations. The investment bank more than doubled Q3 net income, providing further evidence the S&P 500 will enjoy a 13th straight quarter of double-digit profit growth. Nonetheless, the rate-sensitive financial sector still ended lower on the day in spite falling bond yields and Chicago Mercantile Exchange's (CME 516.01 +12.76) $8 bln bid for CBOT Holdings (BOT 152.10 +17.59).
Trade system guidelines only available to newsletter subscribers
1.
WYE - WYETH
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-18-06 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 52.94
|
2.
ETR - ENTERGY CORP
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-18-06 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 84.29
|
3.
CHRW - C H ROBINSON WORLDWIDE
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-18-06 |
|
Short |
Below 15 low |
Cover 1/2 once risk covered |
Above HOD at time of setup |
|
|
* Please Note: If the stock gaps up at the open do not enter the trade unless it trades below 41.66
|
FDX - FEDEX CORP
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
|
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* did not setup
|
EXPD - EXPEDITORS
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
|
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* did not setup
|
ICE - INTERCONTINENTAL EXCHANGE
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-17-06 |
|
Long |
82.66 |
84.00 |
Below 79.75 |
up to + 46 cents per share (83.12) |
|
|
RTN - RAYTHEON CO
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-16-06 |
10-17-06 |
Long |
50.82 |
51.15 |
Closed Below 50.37 |
up to - 51 cents per share (50.95 HOT) |
|
* 10-16-06 - Stock gapped down
|
EQR - EQUITY RESIDENTIAL
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-16-06 |
10-17-06 |
Long |
53.41 |
Reached (53.56) |
Closed below 53.41 |
up to + 18 cents per share (53.59) |
|
|
==============================
EOD = End of day.
LOD = Low of day.
PDC = Previous Day's Close.
S/R = Support/Resistance.
==============================
DISCLAIMER: Trading in securities may not be suitable for all individuals.
Consult your broker or other professional to determine your suitability.
The discussions provided by Day Trading It are for educational purposes
only and should not be taken as a recommendation to buy or sell the
referenced security. Past performance is not indicative of future results.
Please keep in mind that these picks are chosen up to 12 hours before the markets open. During this time conditions, which will effect entry and exit on the above listed ideas, may change.
