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us stock market, trade stock
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8/13/08 Stock Split Report Update
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Full report issues Thursday
MARKET ALERTS
Targets hit alerts: AUXL; EEV; MASI
Buy alerts: ILMN
Trailing stops: None issued
Stop alerts: MZZ
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:
- DJ30 flounders around as rest of the market puts in another good consolidation session.
- Retail sales sluggish as one-time stimulus runs its course, but retail stocks are perky.
- July import prices show impact of lower priced oil, but still up a staggering amount year/year.
- Tame consolidation likely to get a bit hairier before it is over, but looking for some rebounds nonetheless.
Leadership indices put in another solid session.
Retail sales were no powerhouse, becoming rather flaccid as the stimulus fails to excite further buying. Import prices were up yet again though weaker oil prices mitigated the move a bit. Earnings were mixed and oil was trying to bounce off support again, although early on prices were just modestly higher. Stocks were unimpressed by it all. Softer futures led to a modestly weaker open. At least there was no cascade lower after NASDAQ hit the 200 day SMA, stalling while the large cap NYSE indices plunked lower.
NASDAQ tried to lead back up after the weaker open, but when the petroleum inventories saw big gasoline and distillate declines (-6.3M bbl and -2.1M bbl respectively) the recovery rolled over. Oil rallied, using the trigger of the inventory report to start an oversold bounce, and held its gains nicely into the close. That bounce post-inventories sent the indices lower across the board.
Once again, no heavy selling. The market adjusted to the higher oil prices, surprisingly, and the same leading indices it rallied back: NASDAQ 100, SP600, and NASDAQ itself. They rallied back to flat and then positive in the afternoon session. NASDAQ couldn't hang onto positive, but that was no problem: lower volume on the decline, still holding most of its gains. Along with NASDAQ 100 and SP600, the action is very nice. Indeed, we can even throw in SP600 and its action as it tested the 18 day EMA and rebounded to hold near support.
TECHNICAL. The internal action was good enough, all things considered. Weaker open, some selling into lunch, then a recovery to top the starting prices before a modest fade back to the close. For a consolidation session, quite good.
INTERNALS. Flat breadth at -1.3:1 on the NYSE thanks to another day of weak financials, and +1.1:1 on NASDAQ. Volume was up on NYSE and that could be viewed as a negative (i.e. distribution), but as SP500 tested lower down to the 18 day EMA and then snapped back, rising trade is not a bad thing. NASDAQ volume was lower as it continued to consolidate, perfectly fine, just what you want it to do. Thus far expiration volume has been quiet. Cannot last all week, but there are only two sessions left. For one thing the sellers are not asserting themselves, and that is indeed a positive.
CHARTS. Some excellent patterns on NASDAQ 100, SP600 and even the overall NASDAQ. For that matter we can through in SP500, though it is a laggard thanks to the financials. NASDAQ 100 broke over the 200 day SMA Friday and Monday and is making a great, lateral, low volume move to form a handle to its 7 week cup base. Very nice. NASDAQ is doing the same thing though it is just below its 200 day SMA. SP600 is fading back modestly as well after coming close to its June peak. Like to see the orderly pullback after encountering that level: last time it rolled over hard, this time it is consolidating. SP500 fell back through its 50 day EMA, and it could not recapture it Wednesday, but it tapped support at the 18 day EMA on the low and rebounded to hold the 10 day and the July peak. Nice test and rebound, a good shakeout. Not bad.
LEADERSHIP. Not a lot of surging going on Wednesday, but a lot of leaders are enjoying good pullbacks to test, e.g. SYNA. Even the rails, victims of some sharper selling Tuesday, rebounded into better shape Wednesday. With this pullback we are starting to look for some solid stocks that have tested and start to bounce off that test. Still might take another session or two to finish the deal, but thus far they are setting up again.
THE ECONOMY
Retail sales get a bit mushy.
Sales were positive if you strip out autos, bringing sales up 0.4% in July, down from 0.8%. Overall sales fell 0.1% as expected, swinging down from a 0.1% June rise. While sales have never hit what you would call recession levels, the impact of the stimulus checks that bumped sales up March to June has faded.
Now the economy has to make ends meet without the stimulus checks. Were they enough to kick off more manufacturing, create more jobs, and thus reassure consumers that their jobs were safe so they can consume massive amounts of more goods and services? Not from what we can see. The other sectors have not changed much one way or the other, and again, the activity is not classic recession activity, just well off pace and stagnant.
Even without additional stimulus it may be enough to muddle on through . . . IF energy prices continue to fall, i.e. after this relief bounce in oil we need to see it fall through 110 and on down to the 100 level. A rising dollar also fits into that equation so we have more buying power. That would trigger confidence in more than just the consumer and get some activity perking up in the US and that would push us out of recession ahead of Europe as it is now sliding that direction. First in, first out; been there before and it is not a bad position to be in.
The irony here, indeed the interesting point here, is that retail stocks are starting to get perky. We have seen URBN, COST and ARO form up nicely, and while they are in a short pullback right now, they are still in solid shape. The wealth has not spread out yet, however, but the fact that some key leaders in the sector formed good bases and made initial breakouts is very positive for the economy as we know that the market leads the actual economy in any recovery.
Import prices fade modestly, riding oil lower, but they are still advancing at an alarming rate.
Thanks to some lower prices in oil during July, import prices slowed their advance to just 1.7%, down from the March 3.1% surge that matched the November 2007 gains. Great news they are falling; those oil prices were killing us, but so is just about everything else given that the dollar was so weak. Petroleum imports were up in price just 4% after a strong of 8% to 10% monthly gains.
Year over year prices are even more dramatic. They were still scorching, up 21.6% year over year versus the mere 20.4% expected. Those are incredible gains given we import so many of our goods that are made using cheaper labor markets elsewhere on the globe.
The irony of that is, while we are enjoying those export advances discussed Tuesday night, we are exporting something else as well: $750B to OPEC to pay for our oil. Not exactly an equitable trade even though we do need the oil. If there was ever an impetus to get us to perfect alternate transportation fuel that is it. Just think if we would spend the money in the US or not spend it at all, letting the economy enjoy the extra stimulus?
It is worth it if we spend some of that money to develop that new hydrogen catalyst that one of the developers says could be viably implemented in the economy in 10 years. That is a far cry from the 20 years we heard today from Toyota with its hydrogen fuel cell vehicles (all two of them here in the US) due to a lack of filling stations for hydrogen. As discussed last week, this new method allows individuals to generate their own hydrogen for use in their fuel cell powered cars and that would take less time to develop given individual adjustments versus massive shifts in the overall fuel system infrastructure.
THE MARKET
MARKET SENTIMENT
VIX: 21.55; +0.38
VXN: 24.57; +0.06
VXO: 23.93; +0.93
Put/Call Ratio (CBOE): 1.04; -0.01. A second session close above 1.0. There was continued selling, but it was really light selling volume. As noted, that shows continued nervousness or lack of faith just under the surface of the rally, but it is also expiration week and that also tends to push the ratio.
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: 34.0%. Jumped up from 30.0% closing in on that 35% level, below which is bullish. Still bullish though a long way up from the 27.8% on the low this round. Hit 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: 43.6%. Steep drop from the 50.0% peak on this move hit last week. Still well above the 35% threshold so still a LOT of bearishness out there. This bounce off the July lows is instilling some confidence, however. A steady rise to 50% on this move: 48.9%, 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: -1.99 points (-0.08%) to close at 2428.62
Volume: 2.071B (-0.74%)
Up Volume: 879.246M (-119.157M)
Down Volume: 1.134B (+72.513M)
A/D and Hi/Lo: Advancers led 1.14 to 1
Previous Session: Decliners led 1.35 to 1
New Highs: 81 (+8)
New Lows: 89 (-14)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
For the third session NASDAQ moved over the 200 day SMA (2434) intraday but then faded back to close just below this key level. NASDAQ needed a test and it is getting it. It is also a very good looking test thus far with modest losses and below average volume, using support at 2400 to hold the line. That is important because you don't want to see NASDAQ falling back into a potential right shoulder to what was a 7 month head and shoulders trying to trace its way into the pattern. A good hold here over the next couple of sessions and then we want to see a renewed break higher.
NASDAQ 100 (+0.05%) didn't light up the gains, but that was not the point of the session. In July we talked often of its 'rounded bottom' it was showing off. It broke higher this month, clearing the 200 day SMA with some vigor this week. It is now forming a handle, using the 200 day SMA as support on the intraday lows. It is setting up a nice cup with handle base, and that is going to set it up well for a classic breakout from a classic pattern. It is a pretty picture; of course all pretty pictures need to actually show the breakout.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -3.76 points (-0.29%) to close at 1285.83
NYSE Volume: 1.21B (+7.42%)
Up Volume: 513.747M (+206.043M)
Down Volume: 688.789M (-124.854M)
A/D and Hi/Lo: Decliners led 1.32 to 1
Previous Session: Decliners led 2.02 to 1
New Highs: 36 (-8)
New Lows: 108 (+11)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Rising volume on the modest loss on SP500, but it was up after a test lower to the 18 day EMA and a rebound, and that shows some buyers stepping in. Now volume was still well below average on the move so it was not a watershed event, just some improved price/volume action. It gave up the 50 day EMA (1294) Tuesday and while it did not recapture that level Wednesday it is showing very good action with a higher low here and holding over the July peaks. That puts it in position once more to make a higher low and continue the move.
SP600 (+0.18%) performed as well, posting a gain after an early test lower, rebounding and holding in the range of the mid-May and mid-June peaks. Important area to hold as it tests and sets up to take on the June high (402) from a good vantage point. Looking good but it also looks as if it could take another 2 to 3 days to get just right for the move.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
DJ30 was lagging once more, sinking further below the 50 day EMA. While it did rebound off the lows to hold the 18 day EMA, a decent move, it was not the same showing as with the other indices. As with all of its moves of late, DJ30 is just a laggard. Even so, it too is still trying to make a higher low yet again. Held some modest support at 11,500. Now it needs to hold on here until the rest of the market is ready to move and drag it higher once more.
Stats: -109.51 points (-0.94%) to close at 11532.96
VOLUME: 182M shares Wednesday versus 173M shares Tuesday. You could view this as some distribution, but the trade was so low below average and the gain so modest it is really not an issue.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
CPI and jobless claims are all that is on tap, but they are important reports. The CPI is always watched given the inflation issues that impact what the Fed does and thus what the dollar does. Some mitigation is welcomed but it is not really expected. Jobless claims are expected to improve but still turn in a 400K+ read. In short, no real changes are expected.
Oil is thus in the spotlight again. We anticipated oil would bounce and Wednesday it got its legs under it off of support. We anticipate some more upside there, but the surprising aspect Wednesday was that the market rebounded and recouped most of its losses despite oil holding some solid gains. For now the market sees this as the relief bounce it is. After it adds to its gains and does not fall right back down the market may get a bit nervous and test a bit deeper. There is still an inverse relationship there when oil gets serious.
It is also still expiration week, and thus far no fireworks in terms of volume or volatility. That keeps us looking for the action to pick up, but it may be as it was in June when expiration all occurred on Friday versus July when it was spread across the week.
Overall we are watching still how NASDAQ and SP600 continue to test and react to the bump near resistance. This test has been great; it has been too good to be true. Typically we see some initial light selling and then a deeper thump to put some fear into the test and draw some sellers out into the open and get them out of the market. If it holds as it is now, that indicates a lot more underlying strength than we are giving it credit for and that would indicate another big move in the works.
Right now with the action on NASDAQ 100, we are starting to look at those strong stocks that are testing and holding near support. They come back and because they are leaders, they tend to take off first. Thus we want to be ready even though we are likely a bit early on this move.
Support and Resistance
NASDAQ: Closed at 2428.62
Resistance:
The 200 day SMA at 2434
2451 is the August closing low
2500 from interim August lows
2551.50 is the May peak; 2550 is the June peak
2603 is the early January gap down point
Support:
2419 is the January 2008 peak and the early February peak
2392 is the April 2008 peak
2388 is the June 2008 low
The 90 day SMA at 2388
2386 is the August 2007 intraday low
2378 is the mid-February peak; 2379 from the October 2006 peak
2370 from the April 2006 peak
The 50 day EMA at 2353
2346 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2340 from the March 2007 low
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 1285.83
Resistance:
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
1349 is an ancient trendline
1370 is the August 2007 intraday low
The 200 day SMA at 1371.50
1374 is the March 2007 closing low
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
Support:
The 50 day EMA at 1294
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 11,532.96
Resistance:
11,670 is the May 2006 intraday high; 11,642 closing
The 50 day EMA at 11,682
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 12,119
12,250 from late March 2007 lows
The 200 day SMA at 12,482
12,518 is the August intraday low
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:
11,640 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 12 - Tuesday
Trade Balance, June (8:30): -$56.8B actual versus -$61.9B expected, -$59.2B prior (revised from -$59.8B)
Treasury budget, July (2:00): -102.8B actual versus -$86.8B expected, -36.4B prior
August 13 - Wednesday
Import prices ex-oil, July (8:30): 0.8% actual versus 0.9% prior.
Retail sales, July (8:30): -0.1% actual versus -0.1% expected, 0.1% prior
Retail sales ex-auto (8:30): 0.4% actual versus 0.5% expected, 0.8% prior
Business inventories, June (10:00): 0.7% actual versus 0.6% expected, 0.3% prior (revised from 0.4)
Crude oil inventories (10:35): +1.6M prior
August 14 - Thursday
CPI, July (8:30): 0.4% expected, 1.1% prior
Core CPI (8:30): 0.2% expected, 0.3% prior
Initial jobless claims (8:30): 436K expected, 455K prior
August 15 - Friday
New York Empire State PMI, August (8:30): -5.0 expected, -4.9 prior
Net foreign purchases, June (9:00): $57.5B expected, $67.0B prior
Capacity utilization, July (9:15): 79.8% expected, 79.9% prior
Industrial Production, July (9:15): 0.0% expected, 0.5% prior
Michigan sentiment, August preliminary (10:00): 62.0 expected, 61.2 prior
End part 1 of 3
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