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us stock market, trade stock
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6/15/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: None issued
Trailing stops: ASIA; BTU; CTRP; SU
Stop alerts: BTU; CMI
SUMMARY:
- Last week's dollar bounce continues, takes its toll on dollar/inflation trades.
- Commodities and energy suffer, but lots of very solid action in other sectors.
- From Russia with love: senior official provides more dollar support than the Administration
- New York PMI follows other regional reports and backslides
- Foreign investment falls far short of expectations.
- SP500 at the December peaks but sure looks as if some more near term downside is ahead.
Dollar rebound continues.
The collar bounced to start June. At first that did not stop the rally in the sectors and stocks tied to the dollar's weakness; it was just another bounce. Then it broke the April to early June downtrend. Still no big deal as it faded back. It never fell back below the trendline, making a higher low last week as it bounced Friday. Monday it added to the move (closed at 1.3791, up from the 1.4007 Friday close). It more than added; that is a huge short-term move.
DOLLAR INDEX CHART: http://investmenthouse.com/ihmedia/DXY0.jpeg
A technical relief bounce in the dollar as it held at 78 back in December and it held again this month. If you look at December on the attached chart you see the same rebound and higher low. Still a more significant down trendline at 82.50, but a good initial break, test, and bounce.
Technical move yes, but it got some love from Russia as a more senior government official countered the comments last week regarding Russia looking for currency investments in alternative places to the dollar. This more senior official commented the dollar would remain the reserve currency for the foreseeable future.
A rising dollar is typically good for the stock market, but in this case a good chunk of the market leadership has tied its gains to a weaker dollar. Thus stronger dollar, weaker leadership. While breadth was terrible as most stocks were down, outside of anything tied to energy and commodities stocks showed fairly excellent relative strength. So, the indices may have all pitched to the downside well over 2%, but the main contributors represented a fairly small cross-section. Just a lot of gains in those sections that were given back and that hurt the indices.
TECHNICAL
INTRADAY. The selling started long before the bell with futures well down. Not just a soft start this one. Stocks gapped lower and sold hard and fast. They hit bottom midmorning, a typical point of inflection and reversal of a sharp morning move. This time, however, it was no reversal, just a 5 hour and change lateral move. The buyers tried some bottom fishing in the last hour and the indices bounced over the peaks in the midday lateral grind, but they had no kick to the close. They held the modest bounce but could not drive it home.
INTERNALS. Pretty weak breadth at -5:1 NYSE, -3.7:1 NASDAQ. Definite negative taste to the action. Volume was up as well on both exchanges though it did not top average as it did on the rise higher in June, at least as it did on NASDAQ. NYSE trade was up but it was also still below the highest levels last week. This is expiration week, however, so there will be some volume. Of late expiration volume has kicked up on Tuesdays and Wednesdays. That can make it appear as if there is significant distribution so you have to keep your head; are leadership stocks giving up their support and uptrends? That has to be your guide on expiration week when some selling arises.
CHARTS. NASDAQ gapped and sold, but it bounced off 1800 and the 18 day EMA, still well above its breakout over the November peak. Not bad at all, just the normal testing after a good run higher. SP500 broke through the bottom of its June range and the May peak. It is still over the December peaks, tapping at them on the low. Doesn't look as if it is going to hold the line there, and that makes 875 more interesting. SOX was pretty interesting. It was in all out retreat intraday and then rebounded to hold nicely at the 18 day EMA as chips ended up showing relative strength. Too soon to say they are sold out but you have to like the action here. All in all NASDAQ and SOX are decent, but they are feeling pressure from SP500. If, however, they complete their selling and hold up above support, however, they then act as governors on SP500's decline and help limit that index' losses.
LEADERSHIP. Energy, metals, gold and related stocks were all down, contributing the most to the session's losses. The majority were down sharply though some of the upside gains were so solid that all this did was put them closer to near support. There were some breakdowns but there are many quality stocks from many sectors that held up very well. So, when you see the losses in the indices you assume breakdowns across the board. That was not Monday. May still happen, and may see the inflation and dollar trades break down through support. That is why we were taking some more off the table today as they struggled with near support levels. In other sectors, however, you have stocks such as RIMM, ICE, MRVL and others holding easily at near support, basically matching NASDAQ's test, you see that the weakness in the dollar/inflation trades was not only story for the leadership.
THE ECONOMY
Not good news from the regions.
The national PMI was improved but Chicago was not. Now New York is showing the same kind of backsliding, coming in at -9.41 versus the -4.6 expected and -4.55 in May. Not -25 as it has been but not the kind of steady improvement you like to see. One month is never definitive so by itself the lower reading was not the end of any improvement. Couple it with Chicago and the typical course of events where the regionals lead the national by a month or two and there are indications of backsliding.
That is what we were concerned about a month and more back, i.e. a double dip of sorts. It is ironic as really poor, poor numbers come out of Europe and the US numbers fade that the G8 continues talk of removing stimulus. Indeed, the reiteration of that position helped the dollar again to start the week.
Of course the central banks are in a difficult position as they know they have to inflate to try and get out of this situation (inflate or deflate is all central banks can do versus governments that can create tax-based stimulus and avoid inflationary pressures) yet are already seeing inflation indications.
Thus the pickle (tired of 'conundrum'), but while the EU worries about inflation the US Fed worries more about reigniting growth. Unfortunately, massive money printing due to massive government spending that is passed off as stimulus historically only leads to slow times, high unemployment, and high inflation. We have the former two and are brewing the latter.
Foreigners buying less long-term debt.
I used to write about how our deficit was no big deal given its size as a percent of our GDP. Indeed even as the deficit rose under Bush it was still lower than historical averages, though with all of the 'off-budget' items could anyone really be sure?
It did not appear to bother foreign investors, however, as they kept on buying our debt and underwriting our deficits. That now seems to be changing as our debt rises to 60+% of our GDP and is scheduled to rise close to 100% of GDP in 2010.
The results show up in the monthly buys of our debt and other securities. In April foreign interests bought just $11B of our long-term debt versus the $60B expected and the $55.4B in March. Again, you don't want to put too much weight on one month, but these changes in buying patterns following significant changes in executive and congressional policy is definitely worth noting.
If you look at purchases of all assets including short-term, purchases fell $53.2B. Not only are countries saying they want to reduce dollar holdings, they are already starting to reduce what they buy. In other words, foreign countries may not be reducing their holdings by selling but they are cutting way down on what they are buying in the first place. When you need foreign buyers to fund your massive policy reorganizations you better have some sound underpinnings to keep attracting the funds. A country that has turned hostile to the sanctity of contract and secured debt is slashing its own throat when it so desperately needs foreign capital to pay for its plans. Makes you think that the foreign governments believe our efforts are a boondoggle that won't succeed. As I have said before, they rely on us to do the heavy economic lifting with our long workweeks and work ethic so they can cruise a bit with month-long shutdowns of industry for holiday. That is why we are hearing so much flak from our friends in Europe, wondering why we want to turn into a second 'continent.' Who is going to do the work?
THE MARKET
MARKET SENTIMENT
VIX: 30.81; +2.66
VXN: 32.54; +3.33
VXO: 29.49; +2.39
Put/Call Ratio (CBOE): 0.81; -0.05
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: 47.7%. Bulls are running on Wall Street, spiking from 42.5%. Broke free from the 40.9% where it hung around for three weeks. Steady rise from 36.0% just 6 weeks back. Has passed 43.2% hit mid-April before anticipation of stress tests. Over the 35% threshold, below which is considered bullish, but this is not a bearish indication yet. Has to get up to the 60% to 65% level to be bearish. Dramatic rise from 21.3% in November 2008, the bottom on this leg. This last leg 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: 23.3%. Bears are scarcer, falling from, well off the 37.2% and the 37.1% in mid-April as the rally continued higher. As with bulls, below the 35% threshold considered bullish and starting to approach bearish levels (for the overall market). Now far from off the high on this run at 47.2%. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: 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). That was a huge turn, unlike any seen in recent history.
NASDAQ
Stats: -42.42 points (-2.28%) to close at 1816.38
Volume: 2.116B (+5.5%)
Up Volume: 469.041M (-411.633M)
Down Volume: 1.678B (+514.467M)
A/D and Hi/Lo: Decliners led 3.74 to 1
Previous Session: Decliners led 1.15 to 1
New Highs: 14 (-20)
New Lows: 12 (+7)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped lower but held 1800 and bounced to hold over the 18 day EMA (1808). That keeps NASDAQ above the November peak (1786) and in a very typical pullback after a breakout and run to test toward though not actually hit the next resistance at the October gap down point. This action is consistent with what techs in general showed Monday: they sold but easily held near support.
SOX (-1.56%) performed quite admirably. It gapped lower and was stepping in it pretty seriously when it reversed and closed just over the 18 day EMA. Yes it gave up the October peak but it was a nice reversal off of last week's intraday low at the same level. Not out of the woods at all, but some decent recovery action in a weak market.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -22.49 points (-2.38%) to close at 923.72
NYSE Volume: 1.15B (+34.05%)
Up Volume: 71.868M (-316.795M)
Down Volume: 1.077B (+618.016M)
A/D and Hi/Lo: Decliners led 5.17 to 1
Previous Session: Decliners led 1.25 to 1
New Highs: 21 (-30)
New Lows: 46 (-42)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 managed to hold, by a gnat's butt, the December peaks at 918 (low Monday was 919.65). Friday we said it may have trouble making the break and would come back and test further. No 'may' about it as SP500 fell to the first rung of support in one session. If it cracks this level, and the momentum makes it look as if it will, then 900 and really 875 are the real possibilities. Would love to see a quick relief bounce Tuesday up to the 18 day EMA (927) to set up a turn back downside toward those levels. We could use that to close some positions and take some downside ones.
SP600 (-2.75%) was kicked around pretty good as well as it gave up its June breakout over the January peak. It also gave up the early May peak but that was something of a given as it could not really get motivated after making the initial breakout move in early June. It is still over the 200 day SMA and we are not ready to write this pattern off.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
What did the SP500 do? That is what the Dow says every day when it wakes up and then runs to follow the large cap index. DJ30 broke lower from its tight consolidation as well and closed at the May peaks. Not in bad shape, but whatever the Dow does it is going to do. It is in the 'Microsoft mode': anything you can make we can steal and make a bit crappier that maybe we can sell to less discerning consumers. Yes I have been having 'Microsoft moments' over the past week with our computers. If Apple would only make a fully rugged computer . . .
Stats: -187.13 points (-2.13%) to close at 8612.13
Volume: 230M shares Monday versus a measly 164M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Housing starts (expected to be crappy to poor although forecast higher than April), PPI, industrial production, and capacity utilization. The latter are the key for the economic news though they are not going to be the last word on the drivers for the session. The dollar will be a major, if not the key, force Tuesday as the recent league leading commodity and energy stocks try to regain their form at near support. The dollar's bounce is a good one, and it has cleared the prior June closing high and the late May bump higher. That means a higher high after the trend break and that is a good indication of a further move higher. Serious resistance at 82 and then really serious at 83. It is going to be a tough recovery, but they always seem that way, don't they?
At the same time a stronger dollar is not bad for the economy and thus not bad for stocks overall. It is more of the short term trade impacting the commodity and energy stocks. Nonetheless that still means we have to protect positions if they cannot hold support as we were doing Monday. At the same time we are watching the other sectors that are holding up with very nice pullbacks (e.g. tech and chips) as they could pull out and become market leaders once more after what are turning out to be pretty nice tests after a breakout.
Don't want to be too impatient on more upside, however, as there are some serious issues for SP500 to work through. Best to let it get them out of the system, and a good way to gauge this is to let stocks that have pulled back to support show a close higher following the test. If they can maintain that close into the next session and hold it, then you can move in with your buy. Of course sometimes we see a play that looks great without the bounce and we venture a few shares; never a full position, but a few shares and if we turn out to be right we add more at the 'usual' point and have some great early positions in our back pocket as well.
As noted in the SP500 discussion, we would love to see a bounce upside in the morning. Still feel SP500 has some selling to do and not just to 900. A bounce upside would allow us to get into some downside plays that the Monday gap made difficult. Just did not want to chase the gap lower because, as we saw happen, this market tends to rise or fall quickly and then do nothing the rest of the session. Thus a quick pop higher to the 18 day EMA on SP500 makes some downside plays very interesting and potentially very good short term money makers for us.
Support and Resistance
NASDAQ: Closed at 1816.38
Resistance:
The 10 day EMA at 1833
1897 is the October post gap intraday high.
1947 is the October gap down point
1984 from late September
2099 is the mid-September low
2169 is the March 2008 double bottom low
Support:
1780 is the November 2008 peak
1773 is the May peak
1770 is the mid-October interim peak
The 50 day EMA at 1725
The 200 day SMA at 1667
1673 is the prior April peak
1666 is the intraday January 2009 peak
1664 is the May 2008 low
1661 is the April 2009 prior peak
The January closing peak at 1653 (intraday)
1623 is the early April peak
1620 from the early 2001 low
1603 is the December peak
1598 is the February 2009 peak, the last peak NASDAQ made
1587 is the March 2009 high is getting put to bed again
1569 is the late January 2009 peak
1542 is the early October 2008 low
1536 is the late November 2008 peak
1521 is the late 2002 peak following the bounce off the bear market low
1505 is the late October 2008 closing low.
1493 is the October 2008 low & late December 2008 consolidation low
S&P 500: Closed at 923.72
Resistance:
930 is the May peak
The 10 day EMA at 935
935 is the January closing high
944 is the January 2009 high
1000
1050
Support:
919 is the early December peak
The 200 day SMA at 910
899 is the early October closing low
896 is the late November 2008 peak
The 50 day EMA at 894
888.70 is the April intraday high.
882 is the early May low
878 is the late January 2009 peak
The prior April peak at 876
866 is the second October 2008 low
857 is the December consolidation low; cracking but not broken
853 is the July 2002 low
848 is the October 2008 closing low
846 is the April peak
842 is the early April peak
839 is the early October 2008 low
The 90 day SMA at 838
833 is the March 2009 peak
818 is the early November 2008 low
815 is the early December 2008 low
805 is the low on the January 2009 selloff. KEY Level
800 is the March 2003 post bottom low
Dow: Closed at 8612.13
Resistance:
8626 from December 2002
The 10 day EMA at 8694
8829 is the late November 2008 peak
8934 is the December closing high
8985 is the closing low in the mid-2003 consolidation
9088 is the January 2009 peak
9387 is the mid-October peak
9625 is the October closing high
Support:
8588 is the May high
8521 is an interim high in March 2003 after the March 2003 low
8451 is the early October closing low
8419 is the late December closing low in that consolidation
8375 is the late January 2009 interim peak
The 50 day EMA at 8358
8315 is the February 2009 peak
8307 is the April 2009 intraday high
8221 is the May 2008 low
8197 was the second October 2008 low
8191 is the prior April peak
8175 is the October 2008 closing low. Key level to watch.
8141 is the early December low
The early April intraday peak at 8113
The early April peak at 8076
7965 is the mid-November 2008 interim intraday low.
7932 is the March 2009 peak
7909 is the early January low
7882 is the early October 2008 intraday low. Key level to watch.
7867 is the early February low
7702 is the July 2002 low
7694 is the February intraday low
7552 is the November closing low. KEY Level.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 15 - Monday
NY Empire Manufacturing, June (08:30): -9.41 actual versus -4.60 expected, -4.55 prior
Net Long-Term TIC Fl, April (9:00): $11.2B actual versus $60.0B expected, $55.4B prior (revised from $55.8B)
June 16 - Tuesday
Housing Starts, May (08:30): 485K expected, 458K prior
Building Permits, May (08:30): 508K expected, 498K prior
PPI, May (08:30): 0.6% expected, 0.3% prior
Core PPI, May (08:30): 0.1% expected, 0.1% prior
Capacity Utilization, May (09:15): 68.4% expected, 69.1% prior
Industrial Production, May (09:15): -1.0% expected, -0.5% prior
June 17 - Wednesday
Core CPI, May (08:30): 0.3% expected, 0.3% prior
CPI, May (08:30): -0.9% expected, -0.7% prior
Current Account Balance, Q1 (08:30): -$85.0B expected, -$132.8B prior
Crude Oil Inventories, 06/12 (10:30): -4.38M prior
June 18 - Thursday
Initial Jobless Claims, 06/13 (08:30): 610K expected, 601K prior
Leading Indicators, May (10:00): 0.9% expected, 1.0% prior
Philadelphia Fed, Jun (10:00): -17.0 expected, -22.6 prior
End part 1 of 3
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