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world stock market, us stock market
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11/24/08 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: GLD; PCLN
Buy alerts: ADM; PETS; PETS
Trailing stops: None issued
Stop alerts: FDO; CASY; SRCL
SUMMARY:
- Citi bailout, deeply oversold market team up to continue the bounce.
- Another day, another threatened insolvency, another bailout.
- Existing home sale prices fall at record rates.
- Once more the indices are back at near resistance following huge price moves.
Rebound from November selling continues with aid of Citi news.
Futures were up sharply, ready to continue the Friday oversold recovery bounce. The Citi bailout deal no doubt added a big catalyst as it is to receive another $20B from the tarp (in addition to the $25B originally received) and obtain a Treasury/FDIC guarantee on $306B in assets. What ginned up investors is that they don't get the total shaft with this deal as did the investors on other bailouts. That is one of the problems with Treasury's approach: no one is willing to commit serious money to these potential TARP's if they risk losing it all when the government swoops in.
President-elect Obama officially named some of his economic team and at the same time continued implying current conditions would require backtracking on some of his campaign promises regarding raising taxes on the so-called rich. The latter more centrist views dove-tail with the more centrist cabinet appointments he is making, and that as much as anything else with respect to Obama's comments and actions is generating some market enthusiasm.
Even a drop in existing home sales (-3.1%) following a 4.7% September jump did not dampen the upside enthusiasm. It may be the median price falling 11.3%, a record drop, that helped. Sure it is ugly news but it is also what the housing market needs, i.e. affordable prices. Problem is, with credit as tight as it is and the extra scrutiny placed upon each potential borrower, low prices are just half the equation. Inventories fell fractionally to 4.23M and that is also a positive as the foreclosures and slow sales are not pushing the number higher. A bit more cheer for the market on Monday.
It didn't even matter that the dollar fell sharply (1.2905 Euros) and helped oil (54.47, +4.53) and gold (821.70, +29.90) surge. LIBOR continued to hold the line and bump higher, not what world economies need. Overnight rose to 0.81% from 0.70%; 1-month 1.41% versus 1.40%; 3-month 2.17% from 2.16%. Not big moves on the 1 and 3-month, but they are no longer falling and they need to fall a lot further.
Stocks started higher, rallied, and held the move, surging into the last hour with the Dow up almost 550 points. No attempts to sell it; we were watching for those early. No, the indices rallied steadily into lunch, moved laterally and modestly higher in the afternoon, and then surged higher once more in the last hour. In the last 15 minutes, however, the weakness showed up. It was not enough time to wipe away the gains but it shaved 155 points off the Dow in a finger snap. The Dow and SP500 moved through the 10 day EMA and looked to challenge the 18 day EMA, but never made it that far before backsliding into the close, fading to just above the 10 day EMA. NASDAQ rallied through the 10 day EMA but it could not hold, sliding back to close right at that level. This is the first big test of this oversold bounce, and you saw some of the fight still in the market at the near resistance what with that late, quick dip.
TECHNICAL. High start to higher close. Strong all day until a bit of a late dip. That was interesting as the indices hit resistance and struggled a bit. That is the key issue in the next couple of sessions.
INTERNALS. Unlike Friday, breadth really surged Monday with a 6:1 reading on NYSE and 3:1 on NASDAQ. Volume was lower than expiration but still strong with an average showing on NASDAQ but an above average session on SP500. That is unusual for a holiday shortened week and it holds out some promise that this upside may be more than just another bounce higher in an ongoing downtrend.
CHARTS. A sharp rally Friday and Monday. In two days the market posts a huge move with SP500 rising 14.5% on its Tuesday high. From massively oversold after three weeks of selling to recovering nearly one-half the losses in two sessions. That could be a reversal, or it could be just another bounce higher in the bear market after another harsh selloff. The move pushed the indices up to the 10 and 18 day EMA, the near resistance that acts to stall weak markets. NASDAQ made it to the 10 day EMA and beyond but faded to close at that level. SP500 and DJ30 moved through but stalled below the 18 day EMA and backslid some. The indices looked strong when they got there, but they still slipped once more. This is a key test once more and the action on the indices at these levels even with a strong move shows this is no done deal just yet.
LEADERSHIP. With this kind of surge there were lots of recoveries Monday. Financials were strong given the Citi news but their patterns are just rebounds in nasty downtrends. They just sold off to new 2008 lows and that means they will need to rebuild their patterns. That was most of the action Monday, i.e. rebounds from harsh selling. On the other hand there are those stocks that held up admirably during the selling and are in good position. They are scattered throughout the market, however, with no major group taking the lead. A sharp selloff will do that, but there are stocks hanging in there and we have most of them on the report.
THE MARKET
MARKET SENTIMENT
VIX: 64.7; -7.97
VXN: 62.92; -8.28
VXO: 67.64; -8.53
Put/Call Ratio (CBOE): 0.74; -0.38. Back below 1.0 for the first time in a week. Seems the high levels had their affect.
Bulls versus Bears:
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: 30.9%. Modest decline from 31.9% after bullish sentiment rose steadily off the 5 year low of 21.3% hit to start November. Remains below the 35% considered bullish for the market. It was at this level in early October just as the market started to dive lower. This move down showed us the largest single week drop we have ever seen, falling from 33.7% to 25.3%. Hit 40.7% on the high during the rally off the July 2008 lows. 30.9% was the March low. In March the indicator did its job with the dive below 35% and the crossover with the bears. 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%. Bears continue to decline, dipping from 46.1% last week and 48.3% the week before. Still falling form the 5 year high at 54.4% hit the last week of October. Well above the 35% threshold so still a bullish indication. This move over 50 takes it to the highest since 1995. Extreme negative sentiment. 35% is the level that historically indicates excessive pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March. 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: +87.67 points (+6.33%) to close at 1472.02
Volume: 2.618B (-17.31%)
Up Volume: 2.427B (-58.697M)
Down Volume: 151.784M (-384.98M)
A/D and Hi/Lo: Advancers led 3.05 to 1
Previous Session: Advancers led 1.37 to 1
New Highs: 6 (+3)
New Lows: 273 (-946)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Volume was lower but still average as NASDAQ rallied sharply for a second session. Breadth improved dramatically. These are good indicators. NASDAQ needs help as it tests its 10 day EMA (1471) immediately after breaking to a new 2008 low. A good sharp reversal, but now is the test as the 10 and 18 day EMA have stalled the index since late September.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +51.78 points (+6.47%) to close at 851.81
NYSE Volume: 2.034B (-14.27%). Lower but still quite strong with an above average showing on the continued move higher.
Up Volume: 1.892B (-493K)
Down Volume: 137.706M (-338.788M)
A/D and Hi/Lo: Advancers led 6.67 to 1. Very impressive as all financials rebounded and spread out the move.
Previous Session: Advancers led 1.77 to 1
New Highs: 2 (-40)
New Lows: 153 (-1196)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Another surge off the new 2008 low took SP500 through the 10 day EMA (845) and toward the 18 day EMA (875) on the high. It backed off the 18 day without making it to that level. After three weeks of selling SP500 is back at that near resistance and once more a test of the downtrend.
SP600 (+6.82%) rallied to the 10 day EMA itself, closing right at that near resistance level. It along with the other indices face the same key test.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.JPEG
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Similar story on the Dow as it surged through the 10 day EMA (8317) and reached toward the 18 day EMA (8527) before slipping in the last 15 minutes of trade. Indeed, DJ30 broke through the 18 day EMA in the last hour. Volume was lower but still quite strong. Now the Dow has to try and hold the gains and continue higher immediately or pause for a session or two and run again. That all depends on the strength of this move. Not many believers so maybe it has a chance to make that run higher. The failure of the test of the prior October low puts a big question mark on the ability to turn this into a reversal, but as noted over the weekend, it can still pull off a double bottom from here and drag the other indices higher with it.
Stats: +396.97 points (+4.93%) to close at 8443.39
VOLUME: 492M shares Monday versus 569M shares Friday. Very solid volume even though it was lower. Occurred after expiration so it was still strong indeed.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
After no-man's land following the Friday session, stocks are getting to a point where investors can act, i.e. they are at the 10 and 18 day EMA on the major indices. The next question is which way they move so investors can move.
It is the nature of a bear market where there are downside moves that seem to go lower longer than you would ever expect or can stand. Everything starts to crumble or at least weaken. Then there are massive, sharp rebound surges that quickly recover real estate. As noted earlier, the 14.5% surge on SP500 in two days is not typically an indication the stock market is reversing for a significant recovery, but instead is just a massive oversold bounce. This is particularly true after the market cuts to new lows on all indices; the shorts enjoyed three downside weeks and are covering. When they finish, will buyers come in to take the torch?
The first test of this rebound is here, i.e. the 10 and 18 day EMA that act as first resistance following surges lower. With leadership still thin and the very nature of the move it is hard to have a lot of faith this bounce will turn into something more. Violent selloffs to new lows broke up many patterns and likely there needs more base building.
That does not mean the indices cannot rise further and top this near resistance. They did so to start November as the indices recovered from the very similar October selling. Thus we can see some more recovery and then watch how they come back to test the break over near resistance in the form of the 10 and 18 day EMA as well as the 2002 lows (SP500) and the prior lows before the Thursday selloff.
If they indices do rise higher we let them of course, allowing our upside plays to rise with them. We can watch for new upside buys but would like to see a test and follow through before committing a lot of new money after a 14% 2-day move in SP500. We also watch for another possible rollover at this resistance. If the indices don't move much higher and rollover then we are going to venture some downside plays to capture a move off a test of near resistance. Again this move may be the bottom. On the other hand it has most all of the indicia of a massive bear market oversold bounce that could very well have already used up its ammunition with this two-day binge. If that is the case we button up the upside that is lagging or not performing and move to capture some rather quick downside on another rollover.
Support and Resistance
NASDAQ: Closed at 1472.02
Resistance:
The 10 day EMA is 1471
1493 is the October 2008 low. Key low.
1499.21 is the 2008 closing low
1521 is the late 2002 peak following the bounce off the bear market low
The 18 day EMA at 1533
1542 is the early October 2008 low
1565 is the second low in October 2008
1620 from the early 2001 low
1644 from August 2003
The 50 day EMA at 1740
1752 from 2004
1782 from August 2004
1882 from October 2003
1900 is the gap down point in October; from August 2004
1912 from April 2005
1947 is the point where the market gapped down from in October 2008
1984 is the lat September low
2070 from September 2008
Support:
1428 is the November 2008 low
1387 is the 2001 low
1295 is the November 2008 low
1253 is the March 2003 low on the test of the rally off the 2002 bear market low
1108 is the 2002 low
S&P 500: Closed at 851.79
Resistance:
853 is the July 2002 low
866 is the second October 2008 low
The 18 day EMA at 875
889 is an interim 2002 peak
899 is the early October closing low
965 is the 2003 consolidation low
The 50 day EMA at 978
995 from June 2003 consolidation peak
1065 is the Q4 2003 level that SP500 started the run to 2007 after the first run in the recovery.
1075 from August 2004.
1106 is the late September low
The 90 day SMA at 1115
1133.50 is the mid-September 2008 low
1200 is the July 2008 intraday low
1244 is an August 2005 peak
Support:
The 10 day EMA at 845
848 is the October 2008 closing low
839 is the early October 2008 low
818 is the November 2008 low
800 is the March 2003 post bottom low
768 is the 2002 bear market low
741 is the November 2008 low
650 on the top and 625 on the bottom of a 7 month range in 1996
475 from 1994 where the market moved laterally for the entire year.
Dow: Closed at 8443.39
Resistance:
8451 is the early October closing low. Key level to watch.
8521 is an interim high in March 2003 after the March 2003 low
The 18 day EMA at 8527
8626 from December 2002
8985 is the closing low in the mid-2003 consolidation
9200 is the July peak in the 2003 consolidation
The 50 day EMA at 9285
9323 From June 2003 peak
9575 from September 2003, May 2001
9814 from August 2004
9937 from May 2004 low
10,100 to 10,000
10,127 is an April 2005 low
10,215 from Q4 2005
The 90 day SMA at 10,302
10,365 is the new 2008 low
10,459 is a September 2008 low
10,827 is the July 2008 intraday low
Support:
The 10 day EMA at 8317
8197 was the second October 2008 low
8175 is the October 2008 closing low. Key level to watch.
7965 is the November 2008 intraday low.
7882 is the early October 2008 low. Key level to watch.
7702 is the July 2002 low
7524 is the March 2002 low to test the move off the October 2002 low
7449 is the November 2008 low
7282 is the October 2002 low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 24 - Monday
Existing Home Sales, October (10:00): 4.98M (-3.1%) versus 5.05M expected, 5.14M prior (revised from 5.18M)
November 25 - Tuesday
Q3 Chain Deflator-Preliminary (8:30): 4.2% expected, prior 4.2%
GDP - Preliminary, Q3 (8:30): -0.5% expected, -0.3% prior
Consumer Confidence, November (10:00): 39.5 expected, 38.0 prior
November 26 - Wednesday
Durable Orders, October (8:30): -2.5% expected, 0.8% prior
Initial Jobless Claims, 11/22 (8:30): 537K expected, 542K prior
Personal Income, October (8:30): 0.1% expected, 0.2% prior
Personal Spending, October (8:30): -0.7% expected, -0.7% prior
Oil inventories (10:30): +1.6M prior
Chicago PMI, November (9:45): 38.5 expected, 37.8 prior
Michigan Sentiment - Rev., November (10:00): 58.0 expected, 57.9 prior
New Home Sales, October (10:00): 450K expected, 464K prior
End part 1 of 3
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world stock market
us stock market
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