Trading Earnings: Lack of ManPower

ManPower, Inc (MAN) is set to report earnings after the market closes Monday, February 2nd. Manpower, Inc. provides employment services in the United States, France, Europe, the Middle East, Africa, Italy, Australia, Japan, Mexico, Argentina, Canada, and Asia..

MAN is expected to earn a profit of 81 cents for its 2nd quarter. We expect the employment agency announce earnings that will miss investors’ and analysts’ expectations as we believe all know the employment situation is bad and possibly worsening.pic 1

In a preview of what investors can expect to hear Monday afternoon, ManPower’s president of corporate and government affairs, David Arkless, told the jet-setters in Davos, Switzerland, “job losses will mount worldwide for nearly two years” and “The trend is still increasing (towards) unemployment, for sure.” He went on to add that we shouldn’t expect any improvement before the end of 2010, ouch.

This makes sense because employment is a lagging indicator, meaning the economy will start to recover long before the employment picture brightens. In fact, the economy could be on the upswing while unemployment continues to climb.

According to our technical analysis, this stock could trade down to $25-$26 fairly easily. Despite the company’s attractive valuations, we are hard-pressed to believe MAN’s quarterly check up will leave Wall Street feeling revved up. We see a value trap here.

Suggested Stop: $34.47

Trading Earnings: Info on an Upside Surprise

InfoSpace (INSP) is set to report earnings after the market closes Wednesday, February 11th. InfoSpace, Inc. provides private-label online search services to distribution partners primarily in the United States. It develops search tools and technologies that assist consumers with finding content, information, merchants, individuals, and products on the Internet.pic2

INSP is expected to lose a nickel per share for its 4th quarter. We expect the internet company to announce earnings that will beat investors’ and analysts’ expectations.

InfoSpace has a wild history of earnings surprises, either hitting or missing in a big way. The average earnings surprise for the last 4 quarters has been plus or minus 800%. We don’t expect that trend to end tomorrow.
The stock also has a history of jumping around a lot post earnings. It’s not uncommon to see the stock move in the 15 to 20% range following its quarterly check up. According to our technical analysis, this stock is poised to move to the $9-$9.50 range following muscular earnings.

Reader Mailbag: MSFT miss Penny Wise $2 Foolish

Our reader Jack asks us if Microsoft trading down almost $2 after missing estimates by just a penny is an overreaction?

We don’t believe it’s the penny that has Wall Street upset. Management guided expectations down by about 3 cents for its next quarter. Microsoft used to be the master of managing expectations and beating the number. It seems that mastery has ended. In our view, that’s what has the market in a foul mood regarding MSFT. Their earnings have become less predictable meaning the risk of owning MSFT has gone up.

So to answer Jack’s question, the answer is no.pic3

Speaking of earnings, our subscribers have had a good run of it of late with our Trading Earnings picks. Every week we highlight a select group of companies slated to release their numbers in the days ahead that we feel will pop or drop with their quarterly checkup.

This week we advised our premium content readers to short International Game Technologies (IGT). We thought they would miss expectations and revise down, they did and the stock promptly fell 10% in a day.

As we mentioned in a previous post, we wrote IBM would top estimates and revise up, they did and Big Blue is up nearly $2 while the market is down. We expect IBM to set a new 52 week high in the days ahead.

To catch next week’s Trading Earnings Picks subscribe now.

Don’t forget to email us your questions for next week’s Reader Mailbag.

Stock Market Trends: Back on the Bad Wagon

Last week we wrote to expect the markets to follow the right side of a triangle downwards. We said it was kind of obvious that the markets would test the November lows where the bottom of the triangle and an inverted “T” crossed paths. To start the week, we were dead wrong. By the end of the week, the markets resumed the selling pressure and finished the week pretty much where they were Monday morning.

We don’t expect the market to be as kind this week. Our Momentum Indicators continued to lose steam and our Market Leadership Model is an eyelash away from being in sell territory. The charts are, like we mentioned above, right where we stood last Monday; pointing the way down.

We still expect to see the indexes test their November lows sometime in the next week or two. A test and a bounce would actually be a good thing. A test and a failure, look out.

Sector Performance: Upside-Down you are Turning Me

Well- there goes all of our buy signals confirming one another. The one thing we did get right is that the market is looking to Washington, D.C. for direction. Yesterday investors didn’t like what they heard from Tim Geithner. We agree with Larry Kudlow that the Treasury Chief is going to have a difficult time establishing any credibility because of his failure to pay taxes and his lame excuses. It’s critical for the markets that everybody from Main Street to Wall Street has confidence in the nation’s economic team. Clearly Geithner has a long way to go to earn our trust. This administrations bumbling start hasn’t provided the backdrop for much confidence either. We hope that it changes.

It’s not surprising to us that this week industry chart analysis revealed more sell signals than buy signals. We are starting to feel a little Bipolar. One day it’s all signals point to up. The next day it’s the indexes are tracking towards testing the November lows and the cycle repeats. It’s dizzying.

The sectors we would avoid right now include:pic 5

  • Airlines
  • Beverages
  • Fixed Telecom
  • Food Retail & Wholesale
  • Reinsurance
  • US Waste & Disposal
  • Home Improvement Stores

A couple stocks look especially dangerous to us right now. Based on our Technical Analysis, theses stocks could be headed much lower in the near future. But… since up has really meant down and down up these days, who knows?

The Coca-Cola Company (KO)
Pepsico, Inc. (PEP)
Waste Management, Inc. (WMI)
Waste Connections Inc. (WCN)
Posted: February 11th, 2009 under Sector Performance, Stock Market Trends, technical analysis.

ETF Screener- Small Caps jump onboard!

In this week’s technical analysis of more than 400 sector and ETF charts, we came away with another capitalization theme: Small Cap Stocks.

On chart after chart of small caps ETFS and Indexes, we saw the same patterns emerge: Short term moving averages about to cross over longer term averages and a pretty good bet that the MACD will move above zero.

This chart of IJR is nearly a carbon copy of what we saw with the following ETFS; IJS, IJT, JKJ, JKL and the Dow Jones low caps and the Dow Jones Small Cap indexes

Industry Chart Analysis 3-19-2008

Yesterday we highlighted those industries that were performing well and poorly on a momentum basis relative to the S&P 500. Today we will review the sectors that look like they are ready to breakout or breakdown technically.

On the upside:

  • Aluminum
  • Containers & Packaging
  • Computer Servicespic5
  • Waste Management
  • Broadline Retail
  • Drug Retail
  • Trucking

In the Containers & Packaging sector, The Correct Call. especially likes Rock-Tenn Company (RKT)

The company makes packaging for everything from frozen food to cardboard boxes.
Rock-Tenn’s management team has had a keen eye for acquisitions that benefit shareholders. RKT recently acquired Southern Container and immediately said the acquisition will add .28 cents to the bottom line. Their last acquisition in 2005 was considered a “home run” by some analysts.

Acquisitions will not be the only catalyst for the bottom line in ’08 as Rock-Tenn is in a strong enough position to be raising their prices across many business segments. In this market, how many companies have that kind of pricing power?

(please see our investment calendar for more hot sector stocks)

On the Downside, we would be leery of the following industries:

  • Aerospace
  • Gambling
  • Fixed Telecom
  • Computer Hardware

No one company in any of these sectors really jumps out at us with a Danger, Danger, Warning, Warning trouble ahead signal. Although many of these stocks are coughing and wheezing, they are not terminal just yet. While the rest are already so battered and bruised, we are not quite sure it makes sense to try and drain every last drop out of them; too much risk for too little upside.

ETF Screener: The Grains of a Collapse

The Dow Jones, S&P 500 and NASDAQ all closed a little below the support levels we wrote about Monday. The futures are pointing more losses today, YEAH!. Anybody who acted on the 6 short Ideas we posted yesterday should be feeling pretty good so far. Too much downward pressure and we will be destined to test the market lows achieved in November.

In today’s ETF Screener we will highlight some ETFs that we can short or go up as the markets fall and some off the radar funds that might trade higher.

Of all the indexes, the Dow Jones is standing closest to the edge of the cliff. UltraShort Dow30 ProShares (DXD) will deliver double handsome profits if the index does make a return trip to 7500 in the near future.

On the currency front, Market Vectors Double Short Euro ETN (DRR) delivers twice the punch when the EURO falls, and the charts say the EURO could fall more. The news that Mexico could collapse cannot be good for the Mexican Peso; shorting or buying put options on CurrencyShares Mexican Peso Trust (FXM) might make sense.

Add regional banks to the list of possible collapses. Chart after chart for these ETFs looked disastrous:

  • iShares Dow Jones US Regional Banks (IAT)pic 55
  • SPDR KBW Regional Banking (KRE)
  • PowerShares Dynamic Banking (PJB)
  • Regional Bank HOLDRs (RKH)

Buying Puts or shorting any of the above Bank ETFs could add some interest to your portfolio’s bottom line.

Agriculture and grain ETFs actually posted some buy signals. iPath DJ AIG Grains TR Sub-Idx ETN (JJG) and the AG ETFs PowerShares DB Agriculture (DBA) and iPath DJ AIG Agriculture TR Sub-Idx ETN (JJA)all squeezed out gains yesterday despite the market’s fall. Oddly PowerShares DB Agriculture Dble Shrt ETN (AGA), which rises when the underlying index falls, also was up?

Finally, it looks like gas prices might be headed a little higher. Investing in United States Gasoline (UGA) could offset any pain at the pump if the chart’s forecast proves to be correct.

Economic Trends: Easy Come, Easy Go

Crude oil soared almost $6 yesterday due to a weak dollar and continuing tensions between Russia and Georgia. Fast forward to today and at this moment, the whole move has been reversed and then some. The life of a futures trader is never easy and that goes double these days with crude oil. In our opinion, this means that lower prices are ahead for crude. One day reversals with such big moves like this aren’t very common, and are bearish for the price.

ETF Screener: Pop, Pop goes Oil and the Oil goes Pop!

In the middle of all this bailout and will they or won’t they pass it hoopla, another bubble might have quietly popped: OIL. When oil was running rampant it was covered 24/7 by our concerned press. Today there is hardly a peep.

During our weekly ETF Screener analysis, we noticed one oil related ETF chart after another displaying a major sell signal, the short-term moving averages crossing under the longer-term averages. We realize oil is down nearly $50 from its highs, but the stocks in these sectors are acting like they expect much lower prices to come. When a bubble pops, as we have seen twice this decade with tech and housing, things can get real ugly. It’s not ugly for oil yet.

Aggressive investors looking to profit from a further deterioration in black gold’s price should invest in ProShares Short Oil & Gas (DDG) orpic 7 for twice the fun ProShares Ultra Short Oil & Gas (DUG) as it returns 2 times the opposite of the Dow Jones Oil & Gas index; meaning both of these ETFs rise when oil goes down.

If the bailout passes in the house today, as we expect it will, oil could recover a bit on hopes the credit problems are behind us and the economy will slingshot. We are not so confident the intended consequences will be the final outcome.

We haven’t read the bill, but from we have read and heard there is nothing directly acting to stem the genesis of this problem, falling home prices. If real estate values continue to decline, more and more American’s will find their loan balance to be greater than their home’s price. The more folks that find themselves upside down in their loans, the lower, we are afraid, prices are going to go. If prime borrowers start to become a major problem too, we ain’t seen nothing yet.