Klein Market Summary-June 10th, 2013

Klein Market Summary

June 10th, 2013

Current Market Facts: 

Technical Status

 Confirmed Uptrend Beginning Week 7

Other Observations

Friday’s quiet volume leaves the trend uncertain

Leading stocks continue to act well

Feel of the Market

The short-term correction continues, while the major uptrend remains intact

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3400

3469

3532

Nasdaq 100

2900

2991

3053

S&P 500

1600

1643

1687

 DJIA

15000

15248

15542

Market Interpretation:

The uptrend continues, as last week’s unemployment number could allow the Fed’s stimulus program to continue.  While the Fed has said that their current easing campaign is tied to the unemployment rate, it is likely that they would tightened their policy sooner if economic growth improves.

While economic growth has been tepid, there are many stocks that have consistently high earnings growth.  Many of them are extended, but a few are not.

Joel’s Take:

As we begin to look towards the second half of the year, the current correction becomes more important.  If it were to extrapolate into an intermediate market correction, we might look for a fourth quarter rally.  However, leading stocks are generally only showing consolidation, and are not overrun with Distribution.  This suggests that the smart money is holding, by and large.  Still, it would be good to see some index accumulation to clarify the current action.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.

 

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About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

5 responses to “Klein Market Summary-June 10th, 2013”

  1. Hetal Patel says :

    Hi Joel Klein, I’m regularly reading your weekly summary as it is very insightful. The question I have is for LNKD…. Is LNKD current pattern showing head and shoulder pattern ? I know it’s very brerish pattern. I wanted to get your take on it. Could you get back to me at your earliest convenience please.

    Thanks and regards
    Hetal

    • kleinmarketforum says :

      Thanks for your question, Hetal.

      LNKD is an interesting pattern. When we look at chart patterns of individual stocks, it is important to evaluate patterns with regards to probability. Nothing is certain in the market, and chart analysis is not a precise science. Having said that, let’s look at the broad picture for LNKD. LNKD is in a new group of stocks – social networking. It’s earnings growth is among the very best in the stock market, with regards to current earnings, current sales, annual earnings, and profit margins. The ROE is just O.K., but should not be construed as a weakness, given the other growth metrics.

      Other fundamentals are impeccable, including business model, competitive threats, growth opportunities, and the management’s ability to execute and develop profit centers. LNKD has relatively few subscribers at 225 million, leaving the potential for much more growth.

      LNKD broke out of a cup with handle on January 10th. I construe this breakout as a first stage, though it could be argued that the lower structure may have been an earlier base. This leaves the stock at a possible second stage basing period, or otherwise a top.

      I would not interpret LNKD as a H&S top because the top of the right shoulder should be below the top of the left. In this case, the top of the right shoulder (192.56 on 5/15) is higher than the (186.06 on 4/12) left shoulder. The left shoulder here is the period from early March up through about 4/20. Because the right shoulder is higher, it is not a sound H&S top.

      The significance of this pattern is that the left shoulder becomes over head supply in a head and shoulders top. As the stock tries to rally back through this level on the right, it cannot get through due to abundant selling. In the case of LNKD, it rose 17 of 19 weeks in the first part of this year. Many of these weeks occurred on big volume. Then LNKD experienced big volume at the top, leading to the current base.

      The stock is currently in its second stage. This base may or may not work. However, if it does not, it could rebase as prior leaders, CROX, GOOG, and MA. A second stage base on base can set up a big move.

      The massive volume at the beginning of the base is a cause for concern. Yet, in recent weeks, as the stock has drifted under the 10 week MA, there is little volume. This suggests that institutions are not big sellers here. With white hot fundamentals, and a second stage, the stock must be watched for clear signs of constructive basing. Also, the base undercut the prior low at 165, showing support. I hope this helps. Great question.

      • Hetal Patel says :

        Thanks Joel. I appreciate your detailed response on this.
        Yes, I see selling is subsiding below 1o week MA

        Hetal

  2. Deepali Saswade says :

    Hi Joel,
    thanks for your input on LNKD. I also believe that it is true market leader and TML I usually sell with two sell rules ignoring market sell rules. Climax top or 50dma break. And I usually have price target based on PE expansion. Do you also calculate price target?
    Thanks,
    Deepali

    • kleinmarketforum says :

      Deepali,

      I do calculate price targets, but I use them very loosely. It is difficult to estimate what a company will actually earn two years out, especially when analyst consensus is chronically wrong. When I bought GOOG in 2004, they ended up with earnings more than twice the analysts’ consensus estimate.

      Also, I would be prepared for the possibility that the current base may not be sound because of the overwhelming volume on the left side. It is normal for powerful stocks to rebase during their second stage, if they become too obvious, e.g. GOOG ’05 and CROX ’07.

      Best,

      Joel

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