MLR - Premarket Pulse February 5, 2013
After a reasonably long "quiet" period, European troubles again moved to the forefront yesterday, sending markets on the other side of the "pond" down anywhere from 1-2%. This weakness spilled over into U.S. markets, giving investors enough of an excuse to sell the market down given its steady and steep rise throughout January. Volume was lower compared to last Friday, but still well-above average, and it remains to be seen what sort of follow-through selling might occur following the market's worst down day since mid-November.
Yesterday's action saw a number of leading stocks gap-down or reverse on strong volume, and investors should simply keep an eye on their stops for individual positions if and as the selling continues. The market would be entitled to a short-term correction of 3-5%, and this could be considered normal and healthy as long as leading stocks showed constructive action on any pullbacks. As well, any correction could create some rotational movement that investors should keep a close eye out for as this would also argue for the "healthy" aspects of any short-term pullback or correction. While corrections or pullbacks can create some understandable consternation, it is important that investors keep their heads as and remain alert to potential opportunities that might arise as stocks pull in.
This morning we are seeing some recovery in the U.S. futures as European bourses have since recovered part of their losses as heavy hitting companies report favorable earnings including ARM Holdings PLC (LSS:UK:ARM) (NASDAQ:ARMH) which jumped 4.2% after the chip maker posted a 19% rise in fourth-quarter revenue and said it is off to a good start in the new year. Munich Reinsurance Company (FRA:DE:MUV2) gained 2.4% as it plans to raise dividends to 7 euros ($9.47) per share from €6.25.
In economic news, the Commerce Department reported factory orders rose a less-than-forecast 1.8% in December.
Home supply company American Woodmark (AMWD) had a pocket pivot in Friday's trade. While it was slow prior to the pocket pivot to bounce off its 50-day moving average, Monday's action confirms Friday's pocket pivot. Earnings and sales have both accelerated with earnings turning positive over the last 2 quarters. Institutional sponsorship has increased over the last 5 quarters and the copmany's industry group rank is a strong #8. Keep in mind that AMWD is a thinner, small-cap name trading 111,000 shares a day, but small-caps have led this market, so investors should size positions in thinner stocks accordingly.
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