|
|
world stock market, us stock market
* * * *
9/02/08 Investment House Daily
* * *
Investment House Daily Subscribers:
*******
NEW: To view this report in HTML format, click the following link:
http://investmenthouse.com/ihmedia/Daily9-02-08.htm
*******
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: EEV; AMZN; APD
Trailing stops: RIMM
Stop alerts issued: Rallied but then started to fold and sold them as they were lagging: ADBE; NSC; PWR; RIMM; SXE; SOHU
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:
http://www.investmenthouse.com/alertdly.html
SUMMARY:
- Stuck in a range: new month money, oil slick spike stocks higher only to reverse and cough up the gains.
- ISM bleeds back into modest contraction with mixed internals.
- Indices try to hold their consolidations as techs weaken, financial issues surface once more.
Stocks on a roll: up then down.
Gustav blustered a lot but it moved very fast unlike its 2005 predecessors, and that lessened its impact, not allowing it to linger over the oil facilities or to re-strengthen before landfall. That added to Monday's losses for oil while the US markets were closed, opening oil here down near $8 (closed at 110.21, -5.25/bbl). Gold was down (closed at 809.30, -25.90) along with just about every other commodity. The dollar rose again. New money for September flowed. The confluence of positives started futures higher and stocks as well with DJ30 posting a 200+ point gain in the first half hour.
Then reality set in. Why are oil, commodities, and precious metals selling off? Yes the aberrant spike in late spring and early summer had to be given back to some extent, but there is also a slowing world economy as chronicled here the past three months, and over the weekend the UK had more sallow things to say about the economic outlook and its pound fell yet again. The morning move was strong but once the new money ran dry in the first hour (stretching a bit there) so did the morning bounce. The strong jump was used to sell and though the market held onto its gains well into the afternoon, it was a steady process of giving them back.
The snowball was rolling, and it rolled on into the close on some rising trade, sending all indices negative to varying degrees. After hours we got some insight as to why commodities were so weak (albeit in addition to a stronger and stronger dollar): a big hedge fund (Ospraie), owned 20% by LEH and part of what it wants to sell, said it was liquidating and giving its money back to investors. Ospraie is down 38% for the year, nothing uncommon in the hedge fund world right now. Multiply this liquidation over hundreds, even thousands of hedge funds and you see why commodities are under such pressure and in particular why they were Tuesday.
TECHNICAL. Intraday this was the least pleasant type of session for the bulls, the old gap happy, rollover to session lows. When a market or index moves toward a breakout, makes the move, but is then hammered, that shows the work is not done, that the buyers and sellers are still sorting things out. Certainly was the case Tuesday after the new money was used up.
INTERNALS. Breadth was weak, basically flat. Given NASDAQ's losses, the narrow breadth shows the large cap techs were the issue as techs lost their drive. At least the clear selling that hit NASDAQ 100 was not widespread. Volume jumped well in excess of the prior three weeks and their low trade. Was that a higher volume reversal? Yes and no. The new money helped drive the initial rally and the volume as well and you can use that to explain the higher volume, but the market also reversed. In other words, the sellers asserted themselves. Maybe it was just a push, but it also shows there is more work to be done as the volume rises and the volatility REMAINS.
CHARTS. As noted, high to low reversals on the session are never a bull's best friend, particularly when indices are near the top of a range and try the breakout just to get pushed back. SP500 rapped at the early August peak and DJ30 did the same. NASDAQ didn't get that high, running to the 200 day SMA once again and then failing once again. They are all still in their ranges though NASDAQ is now in the lower part after the Tuesday move. NYSE indices still look solid, but they have to worry about the weight of NASDAQ if it breaks out of its range to the downside. We expect SP500 and DJ30 to test the July low but it looked as if they would wait given their ascension last week. Again, if NASDAQ breaks to the downside they will likely make that test sooner than later. Not necessarily that bad: it gets it over with nearer term and then it will either hold and make the recovery or not.
LEADERHIP. The leaders did a pretty solid job of holding their positions. Many jumped early off of their tests but then faded with the market, ending up basically where they ended last week. As noted, that means they held their positions pretty well and thus there is still a group of medical/healthcare in good position along with small to large cap stocks in different sectors across the market. A group that continues to perform and was up again Tuesday is retail. ARO and URBN are examples of some great stocks posting solid Tuesday moves. Leadership held up, and if NASDAQ 100 can hold its range then they will continue to set up new bases for new leaders. Indeed, even if they break lower and SP500 and DJ30 test the July lows that will help as it will help flush out the financials that need to finish their bases and start to pitch in with leadership.
THE ECONOMY
ISM beats expectations but fades back below 50.
Fifty is key. It is half way to 100, making it a psychological milestone for us humans. It is half a dollar. It is half way to scoring a touchdown (if you back a good team; otherwise it may as well be a mile). With respect to the ISM it marks the threshold for contraction and expansion and thus it is again quite important.
ISM topped 50 in July and August, the first back to back closes over that level since the first half of 2007. We all know what happened after that as things started to come apart once more financially. It looked as if things were gelling in early 2007 after the ISM fell below 50 to end 2006, but never really cracked hard as in the 2000 recession where it broke below 40. It bounced but rolled over. After a dip below 50 it came up for air this summer.
That made the August slip somewhat disappointing, but at 49.9 it was a coin flip between contraction and expansion. Indeed, fractional changes on either side of the line mean little when you factor in it is government data and subject to, well, you know the story there. Thus 49.9 was no big deal. You want to see it well above 50 to show it is improving nicely. Before you get there, however, you need to change the trend, and once more the ISM is trying to do that with three months right at 50, and indeed four when you throw in May's 49.6 as the index was making its run at 50. Thus we view this as a positive building of some upside momentum.
As for the internals there was the good and bad. New orders bounced nicely to 48.3 from 45.0. Production was lower (52.1 versus 52.9) but both easily over 50 as has been the case for four months. Employment slipped below 50 (49.7) but again, still close to 50 and July's sharp jump to 51.9. Prices paid were better 77.0 versus 88.5 in July and 91.5 in June.
On the downside, inventories jumped to 54.5 from 45.0 and 51.2 in June. Inventories are that good sometimes, bad at other times reading. When the economy is slow and slowing, rising inventories suggests slowing demand versus when the economy is picking up and inventories rise briefly in anticipation of sales. What is this one? Still looks like a lack of demand pushing them, but it is not a burden at this level given inventories in general during this expansion were lean.
All in all it was a decent report, slipping but still showing some building momentum that falling fuel prices will only help. It takes a trend to mean anything, and a trend is starting to develop here. With Chicago surging last week close to 59 we will see if the national ISM, usually lagging by 2 months, makes a similar jump as well. That would be eye opening.
THE MARKET
MARKET SENTIMENT
VIX: 21.99; +1.34. Not bad action with the stock reversal, coming off the recent low. That is about all you can say about it right now, however, i.e. starting a move off a low.
VXN: 26.15; +2.13
VXO: 23.84; +1.25
Put/Call Ratio (CBOE): 0.96; -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: 39.3%. Bullish sentiment dissipated some with the fall to start the week, down from 40.7%, the high on this upside cycle since the July low. Last week it moved over the 35% level considered the demarcation between bullish and bearish indications. Above 35% is not as bullish. A long way up from the 27.8% on the low this round. Hit 31.9% two months 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: 39.3%. Moving in sync with the bulls, gaining ground as pessimism rises, up from 38.4% the prior week. That is still well off the 43.6% the week before, and down from 50.0% a month back, the high on this move. Still above the 35% threshold so still a bearish indication. 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: -18.28 points (-0.77%) to close at 2349.24
Volume: 2.045B (+28.93%). First 2B share session since early August but still below average. Volume is up on the new money but still below average.
Up Volume: 668.061M (+389.819M)
Down Volume: 1.303B (+12.437M)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Decliners led 1.72 to 1
New Highs: 78 (+35)
New Lows: 90 (+11)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
A third try and failure at the 200 day SMA (2411) as NASDAQ swung 63 points from high to close. An 'impressive' 3 tries and 3 failures at the 200 day then barely hanging on Tuesday to last week's intraday low on the session close. NASDAQ is struggling thanks to its large cap tech contingent and they dragged NASDAQ to its 50 day SMA on the low and closed it just below its long term trendline. Struggling but can still hold here and keep the base moving forward.
NASDAQ 100 (-1.20%) was the clear laggard, breaking to a new low after trying to form a handle the past three weeks. That obviously did not take. It managed to hold some pretty solid support at 1850, but it is now in the process of trying to recover and set up a move versus having it set up and making the breakout. Big difference of course.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -5.25 points (-0.41%) to close at 1277.58
NYSE Volume: 1.146B (+19.59%). Volume was up here as well but still well below average.
Up Volume: 630.25M (+383.392M)
Down Volume: 508.225M (-191.614M)
A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Decliners led 1.73 to 1
New Highs: 59 (+37)
New Lows: 78 (+30)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Another shot at redemption Tuesday but still no cigar as the SP500 rallied over 1300 and then faded. Held the 50 day SMA on the low (1303), keeping SP500 still comfortably in its range carved out the past three weeks. As noted over the weekend, Thursday tried to change the character, and while it could not make the break Friday or Tuesday SP500 shows renewed life and remains in a pretty nice building pattern. It has that July low to contend with, and added to that now it has NASDAQ 100 dragging on it. 1200, the July low, is a long way down, but rarely does an index start a new sustained and significant rally without testing a prior low. Of course that means it can rally from here and come back later; it is certainly showing the renewed strength to give that a try.
SP600 (-0.04%) gave up a gain as well, but it closed flat and continues work on its 15 week reverse head and shoulders pattern. Long way to the breakout up at 402 so it likely as more work to do before it is ready to make that move. As long as the small caps remain solid and basing they can hold the fort so to speak while the techs sort out their issues.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
The Dow probed the August high as well but gave it all up with a 273 high to low move of its own. Closed at the 50 day EMA and keeping its ascending base alive despite the fall from the high. As with SP500, it still is likely to test that July low at 10,827 but right now it is building a good near term base for another try higher before it does that. Techs are pressuring all indices so we will have to watch how DJ30 responds as NASDAQ tries to hang on.
Stats: -26.63 points (-0.23%) to close at 11516.92
VOLUME: 177M shares Tuesday versus 169M shares Friday. Volume was up but still very low and proportionately much lower than NASDAQ or NYSE.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Never like to see a good rally attempt squandered, but there was no real surprise that the rally had issues given it was a new month and thus that brought in some new money. When it was gone that was it, at least for the day. That was okay for the NYSE indices, but for the NASDAQ it is struggling and has to find some support if this rally is to make it.
There is still plenty of solid leadership set up and you have to go with what the market is showing, but for the longer term you would just as soon see it make the test and get it over with. The market makes its move at its own pace, and so there is no use playing what you want or hope things will be. NASDAQ may try to force the issue anyway.
We are still looking at a split in plays given the solid remaining leadership yet the weakness still pervasive in many areas. As the market works through its base both of these present themselves and we are picking up some here and there while we also cull out some positions that recover but without a lot of power. They may base on out and breakout at some point but we don't want the time to eat away at our option positions or ride them lower when the inevitable (at least from our view) test by SP500 and DJ30 occurs. Thus on bounces we take out some of the laggards.
The split in the market with upside leadership at the same time there is downside weakness is part of the basing process and you get these jerky moves. That is part of the treachery in this kind of market as the buyers and sellers fight it out. We are taking fewer positions as we close some upside on bounces, as we narrow our focus to the strongest patterns in the market for our upside. Our goal there is to catch some on solid short term bounces, take some gain, and also attempt to ride them through the overall market basing process as long as they continue to hold the better patterns in the market. That way we are set up with leaders when the market completes the basing process.
As for the immediate session, the financials have more issues to deal with the hedge fund liquidation and its impact on the LEH deal that helped breathe some life into the market. With large cap techs weaker, if the financials start struggling once more the downside pressure will test this rally yet again. It is seven weeks old and a slow rise the whole way; plenty of upside to set up the test of the prior low. How the rally responds to this double threat will tell us more about how much is left in the tank before that test.
Support and Resistance
NASDAQ: Closed at 2349.24
Resistance:
2353 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
The 50 day EMA at 2369
2370 from the April 2006 peak
2378 is the mid-February peak; 2379 from the October 2006 peak
2386 is the August 2007 intraday low
2388 is the June 2008 low
2392 is the April 2008 peak
The 90 day SMA at 2394
The 200 day SMA at 2411
2419 is the January 2008 peak and the early February peak
2451 is the August closing low
2474 is the July 2008 peak
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:
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 1277.57
Resistance:
1285 is the recent July peak
The 50 day EMA at 1289
1313.15 is the August 2008 peak
1317 from the February low
1320 is a 50% retracement of the May to July selloff
1324 is the April low
The 90 day SMA at 1323
1331 is the June low
1353 is an ancient trendline
The 200 day SMA at 1358
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 11,516.92
Resistance:
11,595 is the up trendline off the July low
The 50 day EMA at 11,614
11,634 is the January intraday low
11,665 is the 2004/2005 up trendline
11,670 is the May 2006 intraday high; 11,642 closing
11,731 is the March 2008 low
11,867 is the August 2008 peak
The 90 day SMA at 11,960
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
12,250 from late March 2007 lows
The 200 day SMA at 12,354
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.
September 2 - Tuesday
Construction spending, July (10:00): -0.6% actual versus -0.4% expected, +0.3% prior (revised from -0.4%)
ISM Index, August (10:00): 49.9 actual versus 49.5 expected, 50.0 prior
September 3 - Wednesday
Factory Orders, July (10:00): 0.4% expected, 1.7% prior
Federal Reserve Beige Book (2:00)
September 4 - Thursday
ADP Employment survey, August (8:15): -30K expected, 9K prior
Initial jobless claims (8:30): 420K expected, 425K prior
Q2 Productivity, revised (8:30): 3.5% expected, 2.2% prior
ISM Services, August (10:00): 49.5 expected, 49.5 prior
Crude oil inventories (10:35): -177K prior
September 5 - Friday
Non-Farm payrolls, August (8:30): -75K expected, -51K prior
Unemployment rate, August (8:30): 5.7% expected, 5.7% prior
Hourly earnings, August (8:30): 0.3% expected, 0.3% prior
Average workweek, August (8:30): 33.6 expected, 33.6 prior
End part 1 of 3
|
world stock market
us stock market
|
