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world stock market, us stock market
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8/06/08 Stock Split Report Update
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MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ATVID; BIDU; MR; STJ
Trailing stops: COV
Stop alerts: None issued
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:
- Slow session after the Tuesday updraft, but market overcomes the hangover to post a gain.
- Dollar makes a breakout after gold makes a breakdown.
- Hydrogen power indeed less than 10 years away.
- Earnings still coming in, but at this point it is up to the market and how it handles this next resistance.
Market struggles following the party, finds some aspirin and pulls out a gain.
After the Tuesday upside party you could expect a bit of a hangover, and there was. Futures were lower as oil rebounded along with gold. Pretty much everything started the day in the opposite direction of Tuesday, retrenching some to gains. Typical action. There was not much news to drive things one way or the other, at least not higher. Earnings again were decent, but the big news for the opening bell was FRE's dividend cut. No surprise, but it was a reminder that the credit and mortgage issues linger even after the housing market has hit bottom (by the way, you heard it here first a week or so ago; guess I should mark my calendar for the 'I told you so' tour on Bloomberg and CNBC). There were some bright spots such as RL (Polo), but it was not moving the overall market.
The market started weak as the futures indicated, and as oil climbed stocks fell. An hour into the session oil inventories came out and oil gained 1.6M bbl versus the modest 200K loss expected. Gasoline, however, fell 4.3M bbl, much worse than expected. The market initially fell on this news but then found bottom midmorning as oil started to fall. Indeed everything reversed somewhat from its pre-market stance. Oil fell as low as the 117's on the session, and as it weakened stocks recovered. Oil closed off modestly (118.49, -0.68), but it stayed below the key 122 to 120 range. Stocks rose not spectacularly but steadily, closing out the day near session highs, moving from negative to positive on the close. Not a great and powerful move, but it scratched out a gain with no positive catalyst, showing a big of renewed vigor, a bit of a spine developing. Didn't see any empty bottles of Viagra laying around so this was something positive.
TECHNICAL. Started lower, moved to positive, closed near session highs. As noted, showed some character on the session. There was no issue with the Tuesday blast higher; all the action was upside as shorts covered and some longer term buyers bought strong stocks ready to breakout. The test of character was Wednesday when the market has some adversity. It overcame. Of course Thursday will be a character test as well given the indices are approaching key resistance levels . . .
INTERNALS. Quite lackluster, matching the session. Modestly higher breadth (1.2:1 NYSE, 1.4:1 NASDAQ), lower volume after the Tuesday upside binge. Pretty much what you would expect.
CHARTS. The market is moving to key levels. NASDAQ moved through the 50% retracement level, but as noted Tuesday, that is not a bright line point, more of an area to start watching to see how strong the move is. Given this was on the heels of a strong Tuesday move you cannot read much into it, but the price gains were strong as NASDAQ was the clear market leader. It made it to the 90 day SMA and stalled; now THAT is more of a bright line area. The NYSE indices lagged, but they too made it to positive. SP500 closed in on the 50 day EMA while DJ30 hit that level. The NYSE stocks are moving on lower volume as they hit these resistance points, and that is the potential Achilles heel of their move. Key test coming up; as noted above, a character builder.
LEADERSHIP: China stocks are looking good as the Olympic torch nears Bejing. Medical is still holding solid and moving higher. Financials continue the attempt to base. Overall the market is trying to build some more leadership, building bases as time goes by. The more of this up and down yet trending laterally and slightly higher action, the better for the market. More importantly, that action ACCOMPANIED BY GOOD PRICE/VOLUME ACTION AS IN EARLY 2003 is the market's ally. Am I saying this is early 2003 where the market tested the move off of the double bottom, setting up breakouts by solid stocks across the market?? No. It is just showing better price/volume action and more bases setting up. That is the first step to invigorating the market and keeping this move alive. It is not there. It is still more on the iffy side than the positive side. Still a lot of work to do. It is simply going about the task of doing the work.
THE ECONOMY
Dollar making its move for 2008
Tuesday I talked about the dollar's move spurred by the drop in other currencies in anticipation of foreign central banks lower rates in the future. How could that be with the ECB and its tough talk on inflation necessitated by its single mandate to combat rising prices. Australia, however, has to promote growth similar to the US. It is going to have to cut. That will lead to other banks following, and ultimately the ECB will do the same if the sudden slowdown in economic activity continues. Higher energy and commodities prices reached the tipping point and tipped their economies. The market is simply building this action in ahead of time.
Thus the dollar made new highs versus the yen, the euro, the pound and many other currencies. That boosted the dollar to a post-March high where the dollar hit its all-time low since the dollar index was created. Wednesday it broke through the 200 day SMA, and in doing so made that new post-March high. This despite the Fed basically announcing to the world it was going to keep rates steady forever.
There is nothing like a strong dollar to help us out in bad times such as this. The Fed is rightly worried about some inflation, but it is at manageable levels but for the weak dollar and our importation of inflation via oil and foreign goods. While we can curtail our purchase of foreign goods that are discretionary, we have to import oil and other commodities. A weaker dollar only makes goods priced in dollars more and more expensive.
Thus a reversal and rally in the dollar starts dropping import price and thus inflation. It stops eating away at our earnings and savings. Our standard of living automatically improves. Our exports rise in price, but if the other countries in the world are going into recession they are going to buy less anyway. Benefits all around and we can only applaud the change and wish the administration would use this opportunity to drive the point home and really step up and support our currency.
Cheap hydrogen fuel less than a decade away, and so is an economic boom.
Earlier in the year as oil was starting its spike higher I wrote some commentary on our ability to convert to hydrogen fuel in 10 years if we put our assets to work. Seems I was right. May have been a bit too generous with the time even.
Seems some Massachusetts scientists have discovered an inexpensive catalyst that very efficiently and cheaply splits water into it component hydrogen and oxygen molecules using solar power. While the hydrogen can be used as fuel in a liquid form, the scientists say an even better way is to store the two separately in tanks and then combine them in fuel cells for safe, efficient power to run businesses, households, and vehicles. It is just a matter of working out the engineering now to put them into use.
Finally a way to split water cheaply to get more power out than we put in. We are much, much closer to the day that we don't have to send $750B per year to OPEC, keeping that money at home to invest in our economy and people. Cleaner air, cleaner water. I read the article just an hour after it was posted on the web Monday (as I scrambled to get ready for Edouard where I lost a total of one branch); guess I never really do leave my computers, always carrying a Panasonic fully ruggedized laptop with me that is connected to the web via EVDO and REV A where applicable.
But I digress. The article was posted by the scientists and seemed too good to be true. Then here they are on the financial stations Wednesday discussing the procedure and how private funding versus the government is making the difference, and that US scientists were 'rocking and rolling' in coming up with alternative energy solutions. The notion is the US government has no idea how close they are to these breakthroughs, and it just goes to show if they got a bit more tax incentive the discoveries would come pouring in as in the 1980's and 1990's, exploding our economy to a new and massive boom. Wake up Washington and smell the hydrogen.
THE MARKET
MARKET SENTIMENT
VIX: 20.23; -0.91
VXN: 24.35; -1.3
VXO: 20.96; -1.09
Put/Call Ratio (CBOE): 0.95; +0.19. Tracking steadily below 1.0 on the close the past week but that is what you would expect with a fledgling rally trying to really grow some wings.
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: 30.0%. Up modestly from 29.2%. On a rise, but still below the 35% level, below which is considered bullish. Up from 27.8% on the low this round, moving back up toward the 31.9% a month back and the 30.9% low hit in March. 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: 50.0%. Still rising as bears remain worried, up from 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 and still going. 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: +28.54 points (+1.21%) to close at 2378.37
Volume: 2.263B (-6.8%)
Up Volume: 1.591B (-423.281M)
Down Volume: 656.43M (+308.809M)
A/D and Hi/Lo: Advancers led 1.42 to 1
Previous Session: Advancers led 2.15 to 1
New Highs: 66 (+5)
New Lows: 105 (-10)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ broke through the 50 day EMA Tuesday and continued on higher Wednesday, moving through the 50% retracement level (2358) and onto the 90 day SMA (2385), tapping that level on the Wednesday high. Lower trade but still just above average; not a terrible move. It is at resistance and that resistance runs up to 2400 and 2420. Another day or two of upside and it will be ready for another test. What it is trying to do is build up toward the May and June twin peaks near 2550, form a handle, then break on through for a double bottom breakout. That would truly be an impressive move. It is not there. It is not near being there. It has moved 200 points the past three weeks as it came off the July low. It has another 150 to go, and it is not going to get there in a straight line. It may not even get there at all; it has a lot of proving to do here as it tests this resistance after recapturing just over 50% of the losses from June to that July low. It is improving, trying to show some leadership. It is going to have its ups and downs even if it does make it there. For now it is trying to hold its gains, put in a few more upside moves, then test and start over once more.
NASDAQ 100 (1.36%) posted a similar move, rallying to tap the 90 day SMA on the high. At some resistance here and indeed on up to 1950 and even 2000. Not an easy road to run on, but it has a nice little bottom in place and is breaking higher. It will be due for a test pretty soon similar to NASDAQ.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +4.31 points (+0.34%) to close at 1289.19
NYSE Volume: 1.2B (-15.24%). If the Tuesday volume was disappointing this was downright disastrous. Very low trade as the NYSE indices faked a rally.
Up Volume: 689.622M (-461.464M)
Down Volume: 506.055M (+246.068M)
A/D and Hi/Lo: Advancers led 1.25 to 1
Previous Session: Advancers led 2.93 to 1
New Highs: 43 (-13)
New Lows: 82 (-32)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 waved at the 50 day EMA (1302) but never made it there Wednesday. Volume was pitiful. There is upside movement, but there is no conviction as the financials bounce, no volume pushing them. Thus while NASDAQ is trying to make some serious inroads into its downside, SP500 is not impressing many. Thing is, it is still 30 points off of the 50% retracement level at 1320 and it is struggling with the March lows. Needs to get with the program.
SP600 (+0.54%) was no surging lion Wednesday but it did continue higher and made it to the 200 day SMA on the close. This is the start of the next resistance on up to 283. Seems all of the indices are running into resistance after this move and will have to prove themselves all over again. That is what recoveries are all about.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Similar to SP500, the Dow moved up to the 50 day EMA and actually tapped it on the high (11,685). No volume, also similar to the SP500. Back to the January lows but still well off the March lows. DJ30 still has a lot of work to do and on this move it is a follower.
Stats: +40.3 points (+0.35%) to close at 11656.07
VOLUME: 180M shares Wednesday versus 234M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Back to the economic data with jobless claims, pending home sales and consumer credit. Jobless claims are primary given the surge last week and the dubious view of the July employment report after weekly claims jumped significantly the past month. After hours there were earnings as well with AIG missing and disappointing. How ordinary as stated in 'Blazing Saddles.' Yes that is rather ordinary for financials right now.
Oil will remain an issue for the market. It is key that it stay below 120/bbl on the close and bolster confidence it is going to head lower toward the next support level near 110. After this last drop this week oil is resting on some interim support and could bounce near term. There is a gap higher from early May that has not been filled. There is also one down in early April that has not been filled. If oil gets there it will be near $105/bbl. That would be very good for consumers and the market, and we anticipate oil will fill that gap at some point on this decline.
Nearer term the indices have bumped resistance, and with low volume on NYSE they will find the going a bit tougher than Tuesday's rush, more like the Wednesday scratch session as it clawed out the gains.
We will continue looking for stocks that are coming out of bases or making first tests of breakouts, both favorite upside buy points with the latter being our most favored. There are still strong stocks in position to move higher, but after this big move higher and with the indices close to next resistance we don't want to move into new upside positions as the move grows longer in the tooth. Again, looking for a test of this overall move by the market will be the next most opportune time to move into the upside. There will still be, as there always are, more stocks moving to the upside and making their own wake. We will be watching for those as they can still provide us nice upside gains despite the overall market.
Support and Resistance
NASDAQ: Closed at 2378.37
Resistance:
2378 is the mid-February peak; 2379 from the October 2006 peak
The 90 day SMA at 2385
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
The 200 day SMA at 2443
2451 is the August closing low
2500 from interim August lows.
Support:
2370 from the April 2006 peak
2342 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2340 from the March 2007 low
The 50 day EMA at 2339
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 1289.19
Resistance:
The 50 day EMA at 1295
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
1348 is an ancient trendline
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 200 day SMA at 1377
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
Support:
1285 is the recent July peak
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
1234 is the late July 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 11,656.07
Resistance:
11,670 is the May 2006 intraday high; 11,642 closing
The 50 day EMA at 11,696
11,731 is the March 2008 low
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 12,181
12,250 from late March 2007 lows
12,518 is the August intraday low
The 200 day SMA at 12,542
12,573 is the mid-February high
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:
11,639 is the 2004/2005 up trendline
11,634 is the January intraday low
11,317 from March 2006
11,131 is the late July 2008 low
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.
August 4 - Monday
Personal income, June (8:30): 0.1% actual -0.1% expected, 1.8% prior (revised from 1.9%)
Personal spending, June (8:30): 0.6% actual versus 0.5% expected, 0.8% prior
Factory orders, June (10:00): 1.7% actual 0.7% expected, 0.9% prior (revised from 0.6%)
August 5 - Tuesday
ISM Services, July, (10:00): 49.5 actual versus 48.7 expected, 48.2 prior
FOMC policy statement (2:15): Left Fed Funds rate at 2.00%, weighted inflation more than last statement, still just 1 dissenter
August 6 - Wednesday
Crude oil inventories (10:35): +1.6M actual versus -200K expected, -81K prior
August 7 - Thursday
Initial jobless claims (8:30): 420K expected, 448K prior
Pending home sales, June (10:00): -1.0% expected, -4.7% prior
Consumer credit, June (3:00): $6.4B expected, $7.8B prior
August 8 - Friday
Q2 Productivity, preliminary (8:30): 2.5% expected
Wholesale inventories, June (10:00): 0.6% expected, 0.8% prior
End part 1 of 3
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world stock market
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