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MLR - Premarket Pulse January 30, 2013

The major market indexes General markets were mostly up on higher volume yesterday as the rally continues.

In economic news, markets sold off somewhat yesterday when reports on consumer confidence and home prices both missed expectation, then quickly recovered, expressing underlying strength in the market. Indeed, homebuilding stock D.R. Horton (DHI) gapped up then continued higher to finish the day up 12% on its strong earnings report. Other homebuilding stocks rallied with it. The following stocks had pocket pivots (https://www.virtueofselfishinvesting.com/pocket-pivot): Fortune Brands (FBHS), Pulte Group (PHM) (closed mid-bar but in context with overall chart, qualifies), Louisiana Pacific (LPX), and Ryland Group (RYL). All are showing strong earnings acceleration and increasing institutional sponsorship over a number of quarters.

This morning futures are down after GDP was shown to have contracted -0.1%, the first decline since 2009. With the market in an extended position, it will be interesting to see how this negative economic news plays out throughout the rest of the day.

Amazon (AMZN) shares shot up more than 5% in aftermarket trading after an earnings report that missed earnings and sales projections but showed strong operating income and better margins, sending NASDAQ futures mildly higher. While earnings were down -45% compared to the same quarter a year ago, and revenues have also been decelerating over the last 6 quarters, institutional sponsorship has slowly climbed over the last 4 quarters. “We have expanded dramatically and rapidly increased our footprint,” Amazon's CFO said. “As a result of that, we’re able to carry a much broader selections closer to customers.” Daniel Kurnos, an analyst with Benchmark Company, Amazon's operating income “helped highlight Amazon’s eventual [profit] margin potential.” AMZN's sharp price movements both before and after announcing earnings illustrate the difficulty in figuring out what to do with a stock going into earnings. In the past, a high-volume breakdown such as we saw in AMZN over the prior two days might indicate a poor earnings report and trouble for the stock, but in AMZN's case the stock turns right around and moves back up to its highs.

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