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world stock market, us stock market
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7/30/08 Stock Split Report Update
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Full report issues Thursday
MARKET ALERTS
Targets hit alerts: None issued. Let some plays surge further
Buy alerts: BAX; SNHY; WFC
Trailing stops: None issued
Stop alerts: BUCY; NLC; RCII; STZ; XOM
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the SSR alert service you can sign up at the following link:
http://www.investmenthouse.com/alertssr.html
SUMMARY:
- Market hesitates as oil surges $4.58, but then continues the rebound.
- Fed formalizes the obvious: extends emergency lending facility through 2009
- ADP employment survey swings positive. There was much rejoicing. Yea.
- Rallying well off the higher low, but NASDAQ and the 50 day EMA continue to nag.
Market survives an oil spike, surging once it realized it was not mortally wounded.
After the Tuesday rebound stocks were ready to move higher once more despite the looming oil inventory data. Oil was trading lower again and so it was still safe to go into the water. Moreover the always accurate and trustworthy ADP jobs survey swung to the positive side (9K, be still my heart) versus the -60K expected. The Fed extended the emergency lending facility from the end of September to the end of 2009. That begs the question 'at what time is it no longer an emergency but status quo if it is strung out more than a year?' That is for academics to argue over and they surely will because they don't have to worry with real world problems. But as you know, I digress.
Oil inventories fell much less than expected (-100K versus -1.3M) but gasoline inventories plummeted by 3.5M, just a measly 3M more than expected. That was the rub. Oil was down a point heading into the number, then moved to flat. It didn't change much for an hour, but then it started the inevitable: the relief bounce. Oil was mugged for 17% over the prior two weeks and was at support at 122. It begged for a relief bounce. It finally got it, rising $4.58/bbl to 126.77 by its close. Here we go again.
The market did the honorable thing: it sold. NASDAQ turned negative. DJ30 shed 150 points, less than 15 points above the flat line. Oil up, stocks down. All was right in the economic world. In the last hour, however, someone threw a switch and stocks surged. DJ30 rallied 130 points in the last 45 minutes, regaining all it gave up and moving to a session high. Same action on SP500. NASDAQ rallied as well, but it was the laggard Wednesday after leading Tuesday. It did return to positive territory, however.
Yes the market stared rising oil prices in the face and chuckled. Was it madcap, we are in a new bull market rallying? Floor traders said it was short covering once shorts realized the market was not folding up the lawn chairs with the higher oil. That midsession decline was quickly erased as they zipped their shorts. A new rally? Nah. A continuation of the recent oversold rebound? Yes. Were stocks up all the same? Yes.
TECHNICAL. Intraday the market was up, fought off some oil related selling, and surged into the close with new session highs on the NYSE indices. Not bad at all, but the last surge was short covering. That doesn't mean you discount the move as you would a team scoring 14 points in the fourth quarter when the winning team's third string was in the game, however. All rallies have significant short covering at the beginning. It does tell us, however, that the shorts were being careful ahead of the Thursday GDP report that could be stronger than the 2.3% expected and ahead of the Friday jobs report that could be stronger . . . IF you believe ADP has some tangential relationship to what the overall jobs picture is. Some would debate that. Indeed, most would debate that.
INTERNALS. Not bad at least on the NYSE that saw 2:1 breadth and rising, above average volume after the failure to post above average trade Tuesday. That speaks somewhat against a short covering rally, but remember that much of the NYSE is influenced by the financials, and they were bouncing again from their massive downtrends. Maybe there is a bottom in that sector just as in the housing market, but that doesn't mean recovery is at hand. It does mean it will get here, but not at hand.
CHARTS. SP500, DJ30, and SP600 all rallied back up close to last week's July peak. Good, but that still leaves them having to deal with that level that leaves DJ30 and SP500 below the early January lows. The interesting chart is NASDAQ. Last week it rallied up to the 50 day EMA and that took it close to the 50% retracement level as well. It tapped it, recoiled, and then the market sold off. Wednesday NASDAQ tapped the 50 day EMA and recoiled. Will the same fate ensue? Unlike last week the NYSE indices did not fade with it; they closed at session highs. A bit more strength here than last week, particularly with oil on the rise. Then again, NASDAQ at the 50 day EMA . . . .
LEADERSHIP. Transports were just fine Wednesday despite surging oil; the action in these stocks and the market overall tells that investors in general believe the oil jump is simply an oversold bounce. Medical and health services had good days as well. Some had great days. Financials were up; we bought some WFC. Industrials were strong. Energy, commodities, and agriculture all enjoyed strong sessions. Many are just bouncing off of nasty selloffs for now, however, and not necessarily coming out of good bases. That said, some techs, despite their laggard status Wednesday, are setting up some pretty decent patterns, e.g. RIMM.
THE MARKET
MARKET SENTIMENT
VIX: 21.21; -0.82
VXN: 25.54; -0.61
VXO: 22.63; -0.57
Put/Call Ratio (CBOE): 0.87; +0.03
Bulls versus Bears:
For the second time this year bears are crossing above bulls, doing so basically where they did in March on their way to much more extreme readings just about the time the market made the March low and started the last rally. Positive for the market and if SP500 is going to hold the long term trendline is the place to do it.
This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.
Bulls: 29.2%. The rally bumped up the bulls from 27.8% as they look for an end to the selling. Still very low and a lot of hope stirred from the bounce. A sharp plunge from 31.9% three weeks back, blowing past the 30.9% low hit in March and well below the 35% level considered bullish for stocks (gets so low there is plenty of money lying around to fund a rally if things turn). Steep drop from a rebound high at close to 50% on the run through May. In March the indicator did its job with the dive below 35% and the crossover with the bears. Now it is going above and beyond. Bulls and bears have crossed over again, doing so even before the prior lows are hit. The bulls and bears were eye to eye in mid-February and have crossed. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.
Bears: 49.4%. Bears, despite what the bulls are doing, continue to increase, up from 48.9% that was up from 47.3%, 44.7% and 39.3% before that. A steady, strong rise. Well above the bullish level and the highest since 1995. Again, that is one of the best indications that sentiment is getting extreme on the negative side. It is again past 35%, the level that historically indicates too much pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March that was up from an already freakishly strong 43.3% the week before. Up sharply from a low of 19.6% on the last rally. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). This is a huge turn, unlike any seen in recent history.
NASDAQ
Stats: +10.1 points (+0.44%) to close at 2329.72
Volume: 2.281B (-2.95%). Lower trade but still above average as NASDAQ rallied, but it had no power.
Up Volume: 1.307B (-425.254M)
Down Volume: 878.209M (+866.437M)
A/D and Hi/Lo: Advancers led 1.27 to 1
Previous Session: Advancers led 2.38 to 1
New Highs: 68 (+17)
New Lows: 111 (+10)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped higher, continued the Tuesday rebound. Nice action. Then it met the 50 day EMA (2341) and it was d j vu all over again. It tapped it; didn't move through, just tapped it and then faded back. It did recover to close positive, but same action as last Wednesday. Techs are trying to set up even as this action is ongoing, but it is narrow for now. Making a higher low still and using some support at 2300 on the lows. Very important for the rest of the market as to whether it makes the move through the old trendline and the 50 day EMA that are basically coincident.
NASDAQ 100 (+0.39%) posted a gain, and while it was all over the map it held a gain and continued working out its rounded bottom, still getting into position to make its move. With stocks such as RIMM setting things up, you can understand why.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +21.06 points (+1.67%) to close at 1284.36
NYSE Volume: 1.476B (+4.98%). Rising, above average volume on the gain, beating the lower volume rise Tuesday and a much better support for the large cap gains.
Up Volume: 1.049B (-103.223M)
Down Volume: 418.796M (+176.136M)
A/D and Hi/Lo: Advancers led 2.09 to 1. Not bad once more.
Previous Session: Advancers led 3.31 to 1
New Highs: 52 (+23)
New Lows: 114 (-18)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Rallying up to last week's highs that are just above the March 2008 lows. Stronger, above average volume on the move, giving the gains some more credence. Higher low, stronger volume. Looks ready to bounce to the 50 day EMA at 1300. The 50% retracement is at 1320. Looks ready to give it a try as long as the financials continue higher, and some of the large cap banks look solid. Many do not, meaning they have more work to do and that ultimately limits this move at least requiring a bit more basing.
SP600 (+0.44%) closed with a gain but was all over the map, testing to negative intraday and then rebounding late. It again hit the 90 day SMA as it did last week and it stalled. It is just below key resistance at 380 (closed at 374.67) and it is struggling here. We will see if it fails, but the pattern is not great.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Same action as the SP500 large caps, putting in a second solid upside session but . . . lacking any volume. It is playing tag along, following the SP500. That means the SP500 is pretty much on its own, and that means the financials are the key for the move higher. MER put its garbage at the curb and that gave the sector new life. Approaching the old trendline and still below the key 11,750 resistance.
Stats: +186.13 points (+1.63%) to close at 11583.69
VOLUME: 208M shares Wednesday versus 206M shares Tuesday. Massive increase of 2M shares. And below average as well. Not a lot of strength here.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The first run at Q2 GDP is out before the open and that was one of the reasons stocks surged in the last 45 minutes of the session. Expectations have climbed higher and higher, sitting at 2.3% now, and the worry is that it could top those levels and get everyone gaga. After all the housing market has bottomed and there are views that financials marked a turning point with MER. Hmmm. The indices have made a higher low, and that typically means more upside, so this belief has a bit more upside to it.
There is also the Chicago PMI; manufacturing has not turned back up yet, and it is typically a leading indicator. It starts to firm up about the same time the market starts to bottom. Again, the indices made a higher low and are moving higher; some promise there as well.
Not all of the planets have aligned. We are in a bear market and regardless of what the textbooks say about what a recession is, the economy slowed so sharply and quickly that it is a recession to those working in it every day. During bear markets you have rallies that retrace losses. Maybe this is a bottom but the power is not there yet and not all of the traditional indicators are there. Many are, but it typically takes all of them. Every time you start saying 'close enough for horse shoes' you end up being wrong.
Thus while we see a higher low and the possibility of more upside on this move, we are not going to assume it is the bottom. History says tread with caution and so we will. We will move into upside plays that are predicated upon solid bases; those are getting money and not just short covering rushes that bounce them back up. They have moved well unaffected by oil's ups and downs (well at least not totally, e.g. the transports, though they did set up their bases while oil ran higher) and will survive even if oil bounces further in its rebound. If there are solid stocks that can blow higher like the wind in a rebound, we look at those, e.g. BIDU. We also look for stocks that run higher from a nasty downtrend and then cap out at resistance. We keep those in mind for the downside. Remember, NASDAQ rallied to the 50 day EMA again and recoiled again; it didn't act as if it was ready to run over that resistance.
Thus it is still time to be selective (isn't it always?) and buy judiciously at the right time, then get what we can get out of the move, knowing in this market a turn can come quickly. It is important to remember that leadership remains thin. There are a bunch of stocks that topped earnings after the close and were surging. The Big 3 (energy, Ag, commodities) had a big day and were higher after hours. Industrials exploded. Very solid action, but not many are in leadership position. That is improving; each pullback that makes a higher low works on their bases. There is still work to do, but the beauty is, as they complete their bases and the market still holds up and continues to improve, they break out in groups. That allows us to pick them off as they do, and if they continue expanding in strength that bolsters the market's upside move. Not bad.
Of course that requires things to continue improving. Long way to go, lots of resistance to break, etc., so, to be repetitious, we are selective, picking off the leaders as they break higher with solid moves form solid bases.
Support and Resistance
NASDAQ: Closed at 2329.72
Resistance:
2340 from the March 2007 low
2342 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
The 50 day EMA at 2341
2358 is a 50% retracement of the June to July selloff.
2370 from the April 2006 peak
2378 is the mid-February peak; 2379 from the October 2006 peak
The 90 day SMA at 2383
2386 is the August 2007 intraday low
2388 is the June 2008 low
2392 is the April 2008 peak
2419 is the January 2008 peak and the early February peak
2451 is the August closing low
The 200 day SMA at 2454
2500 from interim August lows.
Support:
The 18 day EMA at 2300
2286 is the first April 2008 gap up point.
2261 is a March 2008 interim low
2202 is the January 2008 low
2155 is the March 2008 low
S&P 500: Closed at 1284.26
Resistance:
The 50 day EMA at 1300
1317 from the February low
1320 is a 50% retracement of the May to July selloff
1324 is the April low
1331 is the June low
1345 is an ancient trendline
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 200 day SMA at 1384
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
Support:
1270 is the January low
1257 is the March low
1244 is an August 2005 peak
1240 to 1221 are September 2005 peaks1234 is the July 2006 low
1224 is the June 2006 low
1176 from the Q4 2005 lows
1167 is the January 2005 low
1154 from the May 2005 lows
1142 is the 2005 closing low
Dow: Closed at 11,583.69
Resistance:
11,634 is the 2004/2005 up trendline
11,634 is the January intraday low
11,670 is the May 2006 intraday high; 11,642 closing
11,731 is the March 2008 low
The 50 day EMA at 11,747
11,982 is a 50% retracement of the May to July selloff
12,050 from the March 2007
12,070 from the early February 2008 lows
The 90 day SMA at 12,224
12,250 from late March 2007 lows
12,518 is the August intraday low
12,573 is the mid-February high
The 200 day SMA at 12,593
12,743 is the November low
12,750 to 12,768 is the February 2008 peak and a series of lows and highs from August 2007
12,786 is the February 2007 peak
12,845 is the August closing low
13,092 is the December 2007 intraday low
13,133 is the May 2008 high
Support:
11,317 from March 2006
11,061 from February 2006
10,912 peak from March 2005
10,854 from December 2004
10,701-10,705 from July 2006, July 2005
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 29 - Tuesday
Consumer confidence, July (10:00): 51.9 actual versus 50.0 expected, 51.0 prior (revised from 50.4)
July 30 - Wednesday
ADP employment, July (8:15): +9K actual versus -60K expected, -79K prior
Crude oil inventories (10:30): -100K actual versus -1.3M expected, -1.5M prior
July 31 - Thursday
GDP, Q2 advanced (8:30): 2.3% expected, 1.0% prior
Deflator, Q2 (8:30): 2.3% expected, 2.7% prior
Employment cost index, Q2 (8:30): 0.7% expected, 0.7% prior
Initial jobless claims (8:30): 395K expected, 406K prior
Chicago PMI, July (9:45): 49.0 expected, 49.6 prior
August 1 - Friday
Non-farm payrolls, July (8:30): -75K expected, -62K prior
Unemployment rate, July (8:30): 5.6% expected, 5.5% prior
Average workweek, July: 33.7 expected, 33.7 prior
Hourly Earnings, July: 0.3% expected, 0.3% prior
Construction spending, June (10:00): -0.3% expected, -0.4% prior
ISM Index, July (10:00): 49.2 prior
End part 1 of 3
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