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money investment, investment help
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8/20/08 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: ENER; OSG
Trailing stops: MASI
Stop alerts issued: KNSY; TMO
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 Daily alert service you can sign up at the following link:
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SUMMARY:
- Surging oil inventories help spark up stocks, turn them from negative to positive.
- Financials, not oil, becoming the market focal point once more.
- Still looking for the most economically sensitive indices to resume the move higher . . . or not.
Stocks close positive but not much movement.
HPQ's earnings helped it out along with a few other large cap techs, but early on it could not offset more upside moves by the rebounding commodities, higher oil prices, a lower dollar, and more important once more, the angst of the financials. FRE and FNM were again on the front burner as speculation about a government buyout renewed.
Stocks bounced early but gave it up with all indices again negative. Then oil inventories doubled up expectations, growing 9.39M bbl. Gasoline inventories fell more than expected (6.2M versus 3M), but the initial focus was on oil and that decline sent stocks positive. The rest of the session was up and down with a midday slump, but managed a modestly positive close with NASDAQ, SP600, and NASDAQ 100 again holding the 18 day EMA as they needed to do. Nothing spectacular, but they did hold the support despite the financial worries, and even SP500 bounced in the midst of financial issues.
TECHNICAL. Intraday there was more back and forth trade but the indices ended well off the session lows with SP500 moving close to session highs by the bell. Good to see a recovery in the intraday action.
INTERNALS. Bland breadth at near flat on both NASDAQ and NYSE though NASDAQ was fractionally negative on the session despite its gain. A large cap day for the techs. Volume edged higher again, this time on a rebound to the upside, and that is more of a positive, but trade was still well off average. More buyers on the session showed up and allowed the indices to hold the line, but there was nothing definitive.
CHARTS. NASDAQ, NASDAQ 100, SP600 held at the 18 day EMA, showing another candlestick doji at that important support level. SP500 moved back above its July up trendline though DJ30, the market laggard, could not match that move. Another day of doing what they had to do, i.e. stemming the selling and holding support, but that is about all they did. Now they are at the point where they need to make a new move higher.
LEADERSHIP. Healthcare and drugs are still holding up along with other market leaders in tech and elsewhere, but they are milling around similar to the indices. They are in position but will need to make the move higher from here. Oil and gas is bouncing off its selloff and looks good for a rebound along with some alternative energy plays (e.g. ENER). If they can move with the current leadership that would put some pop back into the upside rally. Financials? They are trying to set up a bounce as well but they need more longer term work. GS may give a nice bounce play here, but that is about all at this point. The market has to have the financials, but they are not ready . . . yet. They are trying to start basing so if the rest of the market continues this move they will continue to base and that is where the real strength of any rally emerges.
SUMMARY. As noted the indices did basically what we said they needed to do on Tuesday as the minimum, i.e. hold the near support. They can continue to hold for another session, but it is getting time for the hold at support to translate into a renewed bounce for NASDAQ and SP600 to take on the next resistance. The action the past few sessions has been trying and indeed boring, but the economically sensitive indices are holding a test, and that is a positive.
THE MARKET
MARKET SENTIMENT
VIX: 20.42; -0.86
VXN: 23.53; -0.68
VXO: 21.7; -1.52
Put/Call Ratio (CBOE): 0.97; -0.16
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%. Looks as if it held even for the week, but we will have to verify this data further. If so it is still below the 35% level and thus bullish though moving up well off the lows. 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%. Holding flat as well, making the new data suspicious given the market rise. A steep drop the prior week from the 50.0% peak on this move 2 weeks back. 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: +4.72 points (+0.61%) to close at 2389.08
Volume: 1.782B (+1.91%)
Up Volume: 924.02M (+597.357M)
Down Volume: 822.332M (-584.451M)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Decliners led 2.65 to 1
New Highs: 31 (+2)
New Lows: 102 (-8)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +7.85 points (+0.62%) to close at 1274.54
NYSE Volume: 1.068B (+5.5%)
Up Volume: 633.12M (+380.55M)
Down Volume: 414.105M (-330.939M)
A/D and Hi/Lo: Advancers led 1.17 to 1
Previous Session: Decliners led 2.57 to 1
New Highs: 12 (-2)
New Lows: 118 (-58)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Stats: +68.88 points (+0.61%) to close at 11417.43
VOLUME: 144M shares Wednesday versus 171M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The relationship between oil and the indices now that oil is well off 140 and indeed even 130 has changed. Oil just isn't the same as it was at 140. At those levels any significant move in oil impacted stocks. At these lower prices it has lost its punch or at least part of it. Stocks have performed better as oil fell off, but now when oil is up the market can be up as well.
The key for the market now that the oil/stock relationship is looser is the performance of financials. They are trying to base but they need more work; a lot more work. The have to overcome downtrends and get well into new bases, and they are just in the initial stages. The market cannot survive to the upside without financials, and thus how they pitch in over the next month is key. They don't have to explode higher, they just need to stem the tide and work on their bases. That will give the rest of the market the support it needs to hold its rally and indeed extend it.
That leaves us looking at some financials that are ready to bounce and thus a bounce by the market, particularly NASDAQ and SP600 given their hold at the 18 day EMA near support. Many fine stocks have matched their pullback and are in position to rebound and continue their rally. The stage is getting set and we will see if they can continue the move, aided, more or less, by the financials that ultimately have to get back into the game in a positive manner. If not, it will be tough going for all stocks and another test lower.
Support and Resistance
NASDAQ: Closed at 2389.08
Resistance:
2388 is the June 2008 low
The 90 day SMA at 2392
2392 is the April 2008 peak
2419 is the January 2008 peak and the early February peak
The 200 day SMA at 2424
2451 is the August closing low
2483 is the mid-June interim peak
2500 from interim August 2007 lows and early May 2008 interim peak
2551.50 is the May peak; 2550 is the June peak
2603 is the early January gap down point
Support:
2386 is the August 2007 intraday low
The 18 day EMA is 2382
2378 is the mid-February peak; 2379 from the October 2006 peak
2370 from the April 2006 peak
The 50 day EMA at 2365
2347 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 1274.54
Resistance:
1285 is the recent July peak
The 50 day EMA at 1291
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
1350 is an ancient trendline
The 200 day SMA at 1365
1370 is the August 2007 intraday low
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:
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 11,417.43
Resistance:
11,438 is the up trendline off the July low
11,634 is the January intraday low
11,644 is the 2004/2005 up trendline
The 50 day EMA at 11,649
11,670 is the May 2006 intraday high; 11,642 closing
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
The 90 day SMA at 12,065
12,070 from the early February 2008 lows
12,250 from late March 2007 lows
The 200 day SMA at 12,425
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:
11,388 is the prior August 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 19 - Tuesday
Building Permits, July (8:30): 937K actual versus 959K expected, 1.138 prior (revised from 1.091M)
Housing starts, July (8:30): 965K actual versus 960K expected, 1.084 prior (revised from 1.066M)
PPI, July (8:30): 1.2% actual versus 0.6% expected, 1.8% prior
Core PPI (8:30): 0.7% actual versus 0.2% expected, 0.2% prior
August 20 - Wednesday
Crude oil inventories (10:35): +9.39M bbl versus -316K prior
August 21 - Thursday
Initial jobless claims (8:30): 438K actual, 450K prior
Leading Economic Indicators, July (10:00): -0.3% expected, -0.1% prior
Philly Fed, August (10:00): -13.4 expected, -16.3 prior
End part 1 of 3
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