For Immediate Release
Chicago, IL – January 27, 2012 – Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include Caterpillar (CAT),
Carbo Ceramics (CRR),
Kodiak Oil & Gas (KOG),
Flotek (FTK) and EOG
Resources (EOG).
Get the most recent insight from Zacks Equity Research with the
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Here are highlights from Thursday’s Analyst
Blog:
S&P Trading Range ‘Til April
The market has staged a remarkable recovery from the depths of
recession fears and European worries in the second half of 2011.
Ever since the reversal bottom in October, I have been trading the
swings higher calling for S&P 1,350 in the first quarter. And
the question I have kept asking is this...
"As long as earnings are meeting expectations in the aggregate,
and the European problem is stable, why can't the market keep going
higher?"
Look at a few of the positive forces...
Exceptionally low interest rates
Global growth moderating, but not recessionary
Valuations and market multiples attractive in the low teens
Europe apparently able and willing to prevent financial
collapse
China ready to re-stimulate their economy after slowing the pace
a bit
Fund managers deploying cash and afraid to miss the upside
Plenty of bears (and bulls) doubt the rally right now, and that
is fuel for upside
"Bulldozing the Recession, Excavating the
Boom"
Need proof that the global economy is humming along? Look no
further than Caterpillar (CAT)
earnings. In 2009 and 2010, I followed the conference calls with
CEO Jim Owens and the current chief Doug Oberhelman religiously.
Why?
Because they were so tied to emerging markets growth, and their
development of manufacturing and sales facilities in China gave
them as clear a read as anyone what was going on. Thus the title in
quotes above that I used more than once to describe CAT's
resurgence from the 2008 recession.
After CAT's blow-out earnings in 3Q2011, Oberhelman talked about
why the China slowdown was such a good thing because it was
preventing a bubble (and subsequent burst) that would hurt the slow
and steady 10-20% growth they were seeing in revenue and
earnings.
In short, if you want to know about China's economy, listen to
CAT. Sure, there are good arguments about how they are merely
building "ghost cities" and "bridges to nowhere." But, Chinese
leaders and economic planners know they've got to keep more than a
few hundred million people happily employed. They will likely
maintain 8+% growth and CAT is a big part of that.
One last point about CAT before we look at the S&P chart. I
did not listen to today's conference call yet so I don't know how
good their outlook is for the States. But, with the recent strong
housing data confirming a healthy bottoming process, CAT will
likely be growing again here.
Plus, look at the machinery and power equipment needed for
America's exploding oil and gas exploration projects. This is
another domestic growth area for CAT.
We will get hiccups there in the 30% growth of "fracking,"
especially after the earnings miss story we got from Carbo
Ceramics (CRR) today. But it looks like
their problems are company-specific since they were overly focused
on dry gas extraction and not the high-demand areas with natural
gas liquids (NGLs).
Since I own and trade many stocks in this field, including
Kodiak Oil & Gas (KOG),
Flotek (FTK), and EOG
Resources (EOG), I have some more
homework to do here.
The View from the S&P Weekly Chart
Okay, let's talk about why all this still doesn't mean the
market should go higher, and why or why not.
Yes, the market may be "over-extended" by many technical
measures. But I believe that those calling for a correction (10% or
more downside) are likely to be as disappointed as those who think
we will surge through S&P 1,350 soon. Unless the global economy
suddenly starts growing at greater than 4%, getting through there
will take many tries.
And the likely support down below at 1,250 is formed by lots of
healthy price action that happened in the fourth quarter to get us
through there. This is a weekly chart where I converted your
standard 50 and 200-day moving averages to their 10 and 40-week
equivalents. There will be support where they just crossed positive
around 1,255.
I am looking for one more surge higher in the next week to
really test 1,340-50. I would lighten up some of my longs there and
then look for better bargains on the ensuing sell-off.
Maybe it won't be this easy and the selling will start sooner,
say after Friday's GDP data. Either way, I think we can confidently
trade the range between here and there till April.
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CATERPILLAR INC (CAT): Free Stock Analysis Report
CARBO CERAMICS (CRR): Free Stock Analysis Report
EOG RES INC (EOG): Free Stock Analysis Report
FLOTEK INDU INC (FTK): Free Stock Analysis Report
KODIAK OIL&GAS (KOG): Free Stock Analysis Report
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