Big week for macro data

Hope you all had a great long weekend, but its time to get back to work, and what a week this is going to be; 3 jam packed days of macro data that could throw markets anywhere.

Lets look at what has happened so far in the last couple weeks:

We saw the starting of a downward trend at 1,360; since then we have lost nearly 60 handles, and the pattern looks to continue for some time. We had a big explosion to the upside to start off 2012 and in my opinion that plethora of buying will probably continue after a slight pause, I’m just not sure when or how much we can regain.

Looking at Earnings reports from last week, Home Depot reported a surprisingly good quarter; margins looked pretty solid, with operating income at its highest since Q2 last year. Same with Deere, which doubled its net income from last quarter, but the rally was stalled by the overall market. Going forward after this report, DE could be well into the 90’s the fundamentals are getting cheap now and surprised me.

On the other hand, AAP reported what I thought would happen. This quarter was great, but their comments on the second quarter were very bleak. Shares plunged over $20, but have since recovered about $7 of that back. I would look to buying AZO instead.

As I previously stated, this is going to be a huge week, here is what is going on, all EST:

      Tuesday:

·        9:00AM Case Shiller 20-City Index   Prev: -3.5% Exp: -2.8%

·        10:30AM Dallas Fed Manufacturing Prev: -3.4 Consensus: 3.0

      Wednesday:

·        7:00AM MBA Mortgage Index  Prev: 3.8%

·        10:00AM Pending Home Sales   Prev: 4.1% Exp: -1.0%

      Thursday:

·        7:30AM Challenger Job Cuts Exp: 11.2%

·        8:15AM ADP Unemployment Report  Prev: 119K Exp: 145K Forecast: 165K

·        8:30AM Jobless Claims  Exp: 370K  Forecast: 365K

·        8:30AM Continuing Claims Exp: 3.265M  Forecast 3.25M

·        8:30AM GDP 2^nd estimate Q1  Prev: 2.2% Exp: 1.9% Forecast: 1.9%

·        8:30AM GDP Deflator 2^nd estimate Q1 Prev: 1.5% Exp: 1.5% Forecast: 1.5%

·        9:45AM Chicago PMI Prev: 56.2 Exp: 57.5 Forecast: 55.0

·        11:00AM Crude Oil inventories Prev: .883M barrels

      Friday

·         8:30AM Non-Farm Payrolls Prev: 115K Exp:155K Forecast: 175K

·         8:30AM Non-Farm Private Payrolls Prev: 130K Exp:172K Forecast: 185K

·         8:30AM Unemployment Rate Prev: 8.1% Exp: 8.1% Forecast 8.0%

·         8:30AM Hourly Earnings Prev: 0.0% Exp: 0.2% Forecast 0.1%

·        8:30AM Average Workweek Prev: 34.5 Exp: 34.5 Forecast 34.5

·        8:30AM Personal Income Prev: 0.4% Exp: 0.3% Forecast: 0.2%

·        8:30AM Personal Spending Prev: 0.3% Exp: 0.3% Forecast: 0.2%

·        8:30AM PCE Prices-Core Prev: 0.2% Exp: 0.2% Forecast: 0.2%

·        10:00AM ISM Index Prev: 54.8 Exp: 54.0 Forecast: 53.0

·        10:00AM Construction Spending Prev: 0.1% Exp: 0.5% Forecast 0.0%

·        2:00PM Auto Sales Exp: 5.0M

·        2:00PM Truck Sales Exp: 6.0

Here is how the week will shape up with earnings reports, not much going on:

Tuedsay: DryShips (Which I still own and will go into detail on)

Thrsday: Canadian Imperial Bank

               Ciena

               Joy Global

               Vera Bradley

   

DryShips is one of the names I have been long now for about 6 months basically on a bargin hunt at 2.00. After announcing the backlog of orders from their substantial stake in OceanRig the stock has done rather nicely, but pulled back. I still believe that the growth is there, they are back to making money, while increasing their cash and accounts receivables to respectable levels.

Last quarter, they reported a small loss, after a very nice net income of 25M. I am expecting another beat here, but could just break even or be a smaller than anticipated loss. I will continue to hold this as a long position for now. Trading at 3x sales, this is a bargin to me. I am a big believer in dry bulk shipping to be the 1^st thing to rebound when we do get a substantial recovery, and while I wait, as I have said above, they have a sizable stake in an oil driller.

Solely based on technical analysis, I will possibly put on a trade for Coldwater Creek $CWTR this week ahead of its earnings report. Looking at 200 shares if I can get them under .85 that would be my target. I know it is a very small position, but I have had luck with this name in the past; last August buying before the move up above a dollar in September, made about $40. Right now, I am eyeing the .84-1.12 level for a very short term trading range.

Above CWTR

Next name I want to look at on a fundamental/technical basis is Vera Bradley. They are a designer, producer, marketer, and retailer of functional accessories for women. Their products include handbags, accessories, and travel and leisure items. As of January 28, 2012, they have Vera Bradley products through its 48 full-price stores, its eight outlet stores in the United States, seven stores in Japan, the website verabradley.com They also sell their products to 3,300 specialty retail stores.

I used to be bearish on these high end retail names, especially VRA when they went public in to ’10 moving in to the mid 40’s price range for the stock. They were trading at a huge premium compared to their sales and earnings, and after a couple bleak quarters, their stock has dropped more than 50% from its peak. In reviewing their last 2 quarters, they were very good and we could be in for a surprise to the upside here. In one year they have doubled their net income, which is one of the main things I look at, another is revenue increase by 30%, always good to see more sales=growth.

They have also cut their long-term borrowings by more than 50% in one year, liabilities are down substantially, so it is always good to see a company that can pay off debt. Cash/receivables are also increasing, another good sign.

Technical analysis shows a breakout above top level of resistance, along with trends and MACD. I have 0 on MACD around 31.5 so we could potentially see a pop toward there in the near term.

I will also be looking at Frontline (FRO) for a potential trade next week or before their report, also Teekay Tankers under 4.00 looks attractive for a trade. I will also be watching, not for a trade but a probable move up in Joy Global. Doing a quick chart comparison to their largest competitor Caterpillar, they are down 30% compared to CAT down 10%. Joy is also trading below October 3^rd 2011 lows right at a key support level of 60.00. Follow @peter_eller10 on twitter for updates I should be on all week.