Wednesday, March 25, 2009

Wednesday's Econ & Earnings Data; All Electrical Currents will be Focused on Paychex Inc. (PAYX); Earnings & Outlook Released After Mkt Close

Wednesday, March 25th at 8:30ET brings Durable Goods Orders for February: Prior reading was minus (5.2%), now consensus calls for minus (2.0%). For many quarters durable goods orders held up well, but lately that has changed. Last quarter's strength in the U.S. dollar probably hurt sales of U.S. goods, yet the recent dollar weakness could see traders looking forward after this report and buy the dip. POTC does not see a favorable open Wednesday, so traders looking for a market/S&P trend take note. We are also bearish Wednesday due to our belief GS shares will sell-off and drag mud through most of the financial sector. 10ET brings the New Home Sales data: Prior new home sales were 309K, now the economists are calling for 300K. Not much positive can be said here either, except for the fact we feel that number could be beat due to weather related/cyclical reasons alone. Please open the link provided and understand detailed commentary on this falling knife of new home sales would be pointless. The only intelligence we can provide is this: whenever an asset is in such free-fall, it is irresponsible to ever use the word "bottom". Because forward-thinkers know, bottoms never do 180's, and IF they do, they usually retest at least once before eventually going sideways. Sideways movement is when smarter long-term type money begins to build positions. So we urge you to respect the fact shattered psychology takes longer to cure than fundamental capital damage. POTC believes consumers and investors will only begin to heal after the talking heads stop debating whether the market has bottomed. Please trust us here, the market has NOT bottomed, and that S&P 666 mark will be tested fairly soon. Before market earnings from Petrochina Ltd.. (PTR), Q4 '08, revenue estimates of $44.45B, no eps estimates as only 1 analyst offers coverage. With crude crawling back from the low $30/barrel to the $50/barrel level, PTR does look tempting. Although as forward-thinking traders, we understand everyone is aware of that fact, so perhaps we would only establish part of a long position in PTR if it were to sell-off 5%+ after earnings. After all, the entire world is in such bad economic and psychological shape, China's human rights issues related to slave labor have been given a pass. Therefore if you are optimistic of an eventual recovery by 2011, the Exxon Mobile of China must be monitored closely. POTC considers PTR a general, and generals are good leading indicators of the market. In the U.S., POTC considers CME, GOOG, and XOM as generals. After market earnings from Citi Trends Inc. (CTRN) Q4 '09, revenues pegged at $146.6M and a fat $.53 in eps. Since we're so bearish on commercial real estate, it's difficult to make an argument to buy a retailer, yet you must do extra due diligence and you may find some are decent buys and will survive. What has us semi-excited about CTRN is the estimates for revenues look to be up year over year (y/y) in this quarterly report. IF we had to guess, CTRN will probably pop higher after the report, yet it could be short lived. A VERY important report comes from Paychex Inc. (PAYX), Q3 '09, revenues estimated at $536.9M, and that would be up y/y from $532.17M, and $.36 of eps, which is slightly below last year's $.39. PAYX is a VERY important earnings report that will be highlighted on Dylan Ratigan's Fast Money as well as the Kudlow Report. Paychex provides payroll, human resource, as well as employee benefit programs, thus it is regarded as a leading indicator of employment. And employment, or lack there of is the single most important element to monitor as related to economic growth and or contraction. If PAYX's revenues do come in above $537M, we believe the market will blip higher Thursday. Yet the opposite is true if PAYX's revenues come in light (under $525M). We recommend more aggressive traders position long late Wednesday, as we feel PAYX will offer a rosier outlook than most today believe.
Thursday's weekly unemployment report should come in tamer simply based on cyclical reasons. Lastly, the massive spending bills will have a short-term effect that smooths the employment number, and bear markets have a way of rallying on any hopeful news. We call for a retest of S&P 823 on Thursday, after Tuesday's and Wednesday's sell-offs.
IF any of the above analysis helped you even a little bit, please spread our blog email address to family and friends: Our team puts in approximately 18 hours a day to bring a more scientific approach to investment finance.


Anonymous said...

Excellent update fellas.
I am going long into tomorrow's job report for a blip, got it !

Anonymous said...