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world stock market, us stock market
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6/22/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: AAP; BWLD; CERN; FAST
Trailing stops: AKS; CME; FCX; SCHN; SOHU; TQNT; UCO
Stop alerts: AKS; BHI; CE; CHK; DRYS; HAL; IR; KSU; MOS; OPLK; SY; XTO; UCO
SUMMARY:
- Pre-Expiration trends resume with a vengeance.
- NASDAQ gives up its breakout.
- World Bank cuts its global growth expectations to -2.9%.
- Obama administration adjusts unemployment forecasts to 10%. Will it adjust its plans based on poorer economic performance?
- Insiders selling at fastest rate in 2 years.
- SP500 heading for 875 in what looks to be just for starters.
Modest bounce into expiration gets trashed.
After SP500 rebounded off 900 and NASDAQ off the November peak starting last Wednesday, bouncing into expiration Friday, the test, pullback, correction whatever you want to call it took a decidedly uglier tone Monday. The reason cited was the World Bank cutting its outlook for the global economy to -2.9% from -1.9%. That means lower oil demand, lower copper, etc. Sounds good but when does anything the WB say hold water with the stock market? Not often.
Oil was down hard as well (66.93 (-2.62), giving some credence to the idea the WB call affected price. There was another theory that the turmoil in Iran may lead to an overthrow of the government and thus a sharp increase in oil supplies held artificially lower by the current government. That is getting out pretty far on the limb. Oil was already struggling some, and the news for the day was enough to tilt it to the downside.
That and the dollar. It strengthened again, closing at 1.3858, up from 1.3948 Friday. Treasury yields fell as well (3.70% 10 yr, 3.78% Friday). Investors were moving into the safety of the US currency and bonds in light of the WB news. The dollar index held its support at 80 and bounced, and that took even more air out of commodities and precious metals. Indeed, all of the materials and industrial metals were lower as well. Gold (927.30, -13.90), copper, steel and their associated stocks all were hammered.
Stocks were beaten up as well pretty much across the board with only areas of healthcare looking more or less solid. SP500 broke below 900, NASDAQ broke below its November peak. Some themes that had started ahead of expiration resumed and did so with some serious intensity with 3+% losses dominating the indices.
TECHNICAL
INTRADAY. As you would expect the intraday action was extremely weak. A gap lower, further selling, then flattening out from lunch to mid-afternoon. Then there was an afternoon bounce; you had to get out the precision measuring instruments to see it, but it was there. In the last 20 minutes, however, the market on close orders were to the sell side and the indices dove to close at or near session lows.
INTERNALS. Bad breadth at -5:1 NASDAQ, -6.2:1 NYSE. That is weak. Volume was down from expiration Friday, coming in close to average on both NASDAQ and NYSE. Down volume impressively trumped upside volume at over 10:1 on NYSE and approaching that on NASDAQ. The sellers were letting off some pent up steam.
CHARTS. As expected SP500 continued its selling. It simply did so in a very impressive fashion, falling through 900, the 200 day SMA, and the 50 day EMA all at once. Hello 875 at least. NASDAQ is also key this week and after that lower high on the Wednesday to Friday bounce it could not hold the November peak. It did manage to hold the May high; that is a key level as well and definitely worth watching starting Tuesday. SOX was blasted down through its 50 day EMA back into a support range around 250.
LEADERSHIP. The former leadership was split wide open Monday. Already under pressure, the stronger dollar and WB outlook gave more reason to sell. Techs took it hard as well. AAPL sold over 1M new generation iPhones and gapped higher, but it was burger flipped to negative. MRVL announced an improved Q2 outlook as sales were strong; its head and shoulders over heels move was a bit more dramatic though there was no breakdown. The point: even tech strongholds with good news were in the gun sights. The strength, or relative strength more precisely, was found in the drugs and medical equipment areas. If you strayed too far out of those narrow areas there was selling as biotechs were down hard. There were not many safe havens Monday and it is going to take some time for the recent leaders in the dollar trade to recover. On the other hand while tech and chips were lower, they can still right the ship and continue higher. While healthcare and drugs can provide some good leadership, it is extremely narrow even in that group. Thus we will have to see what group(s) step up as this runs its course.
THE ECONOMY
Same mistakes of the past.
This has the feeling and characteristics of the 1970's. Sure I have detailed at length, at too much length for more than a few, how this economic setback is very similar to the 1970's. The 1970's recession and subsequent malaise was triggered by the oil shock that triggered the cascade lower that had built up with all of the over-regulation, dollar gutting, and deficit spending that set up the recession.
This recession started with that oil shock in 2008, at least that is the domino that tipped and helped send a shaky housing market and then credit market into deep freeze. Now we are piling on the same kind of mistakes in monetary policy and fiscal policy that were made thirty years back.
Administration acknowledges more joblessness to come.
The Obama administration Monday changed its outlook with respect to unemployment, revising it to 10% from its original 8.4% estimate, one of the forecasts it based its economic policies upon. It is, at least, not in denial as to what is happening.
The worry is that it won't matter one iota to the Administration. In other words, it will still promulgate the same massive spending programs and stimulus plans even with the worsening economic projections. After all, with higher unemployment there will be fewer tax revenues and even greater deficits than the $1.8T already on taxpayers' backs. Unfortunately the agenda is driven by changes that the left has wanted to put in place for years but were unable to do so. The economic crisis and the immediate post-inauguration honeymoon are allowing a window to pass previously unwanted legislation and the Administration is trying to cram all it can through the window.
Case in point is healthcare. There is suddenly a manufactured sense of urgency. With such a massive undertaking the last thing we need is another quickly slapped together tax dollar vacuum that will suck up ten times the projected (or more accurately, guessed) costs. The McCain/Dodd exchange from last Friday told it all and it is worth telling again: McCain railed about passing legislation without any idea of the costs while Dodd said we would get a good structure in place and then figure out the costs. Is that upholding and defending the Constitution where the rights of taxpayers are protected? You have to KNOW the costs as best you can before you put the yoke around their necks. This also does not even address what happens to our world-leading healthcare system if we go nationalized. The President said he knew of 'several' single provider plans that were excellent, but he could not name any. I know of three that they have talked of in the past as being what they want but that are in fact terrible: Canada, UK, and Australia.
In any event, it takes intelligence to know when you are wrong and adjust. They made step number one in changing their projections. I would be most of the farm, however, against the Administration changing the plans on the type of stimulus or the amount of spending. What the Administration WILL CHANGE is how much we will be taxed. The President will have to tax everyone that currently pays taxes much more. You simply cannot have almost 60% of the population paying 5% of the taxes and then pile more of the burden on the remaining 40% (and as we know it is the last 5% that pay the bulk of the taxes). As with Social Security, the numbers simply do not add up, at least if you want a viable economy, a solid currency, and hope for a better life and standard of living for our children and grand children.
THE MARKET
MARKET SENTIMENT
VIX: 31.17; +3.18
VXN: 31.41; +3.11
VXO: 30.01; +3.47
Put/Call Ratio (CBOE): 0.93; +0.07
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: 44.8%. Fading from 47.7%. The pullback has culled the herd a bit after the rally spiked the reading 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: 26.4%. Bears growled a bit more, up from 23.3%. Still 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: -61.28 points (-3.35%) to close at 1766.19
Volume: 2.257B (-17.39%). Not gut-busting volume, but on par with the early June upside trade. In a relative sense pretty strong volume showing the sellers were back in the game.
Up Volume: 248.17M (-1.485B)
Down Volume: 2.066B (+894.847M)
A/D and Hi/Lo: Decliners led 5.14 to 1
Previous Session: Advancers led 1.44 to 1
New Highs: 16 (-17)
New Lows: 15 (+9)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gave up the November breakout at 1786 but did hold right at the May peaks on its Monday close. Not a complete rollover but it is influenced by the rest of the market. This May peak on to the 50 day EMA (1738) will tell if NASDAQ is going to hold up or breakdown toward its January high at 1665 that is also roughly the bottom of the May consolidation range.
NASDAQ 100 (-2%) was the relative strength leader. It is still over its November peak though below the May high. 1400 looks like the key test point for large cap NASDAQ.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -28.19 points (-3.06%) to close at 893.04
NYSE Volume: 1.403B (-34.05%)
Up Volume: 93.317M (-1.26B)
Down Volume: 1.306B (+547.393M). Extremely negative volume at almost 14:1. To state the obvious, that is an extreme level, but the selling just stated in reality.
A/D and Hi/Lo: Decliners led 6.22 to 1
Previous Session: Advancers led 1.67 to 1
New Highs: 18 (-5)
New Lows: 44 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Gapped lower and sold through 900 as well as the 200 and 50 day MA. Heading toward the 875 level at the bottom of the May consolidation range. That is the lick-log for the large caps as it meets the late January and early February peaks at that point. If this March rally is going to hold the line that is where it needs to do its heavy lifting. The financials reversed late in the session after holding up decently most of the day. If they give way then 875 looks tenuous.
SP600 (-3.89%) showed similar action, landing right in the middle of the May trading range. 250 is the key level for the small caps to hold.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips were helped by issues such as SGP, but the index still broke 8500 and the 50 day EMA. 8250 is support for DJ30, but it can head and shoulders down to 7900 with not too much trouble.
Stats: -200.72 points (-2.35%) to close at 8339.01
Volume: 291M shares Monday versus 528M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Some economic news with existing home sales. The Fed also starts a 2-day meeting on monetary policy and the worry is the Fed is going to talk about the need for a higher Fed Funds rate. It has to start the ball rolling at some point and many are looking at this statement to start the process. Lots of worries about a weakening economy once more even as there is talk about a turn. We figure the Fed will not put anything in the statement but we will likely see something in the minutes that come out two weeks later.
As for the market the momentum is definitely downside after the Monday. A big downside move can lead to a quick relief bounce to test the levels broken. That means NASDAQ testing the November peak, SP500 testing 900, etc. Of course with all the downside momentum to end Monday it is easy to see a continuation to the downside as SP500 is less than 20 points from the 875 level where it is likely to try and put together an initial bounce.
We entered some downside Monday and closed some positions as well. There are still downside opportunities even with the big run lower Monday. The sellers returned with some force and if they sustain their pressure the indices can test their next support, bounce a bit, and then head lower once more. Thus while you don't want to start every downside play you can given a potential bounce off next support, we will move into some solid plays.
At the same time we are watching what areas are holding up. Some telecom is solid, some tech, some chips, and some healthcare. We watch what holds up and what sets up during the selling, and if the market holds at support we are ready for them as they bounce.
So we have upside and downside to look at. The market is, as noted last week, in a transition phase, now into the prior trading range and still trying to find the bottom. We have some downside we are letting work for us, some new downside, and watching how the upside sets up. Not getting too hasty on the upside unless it rolls out the red carpet.
Support and Resistance
NASDAQ: Closed at 1766.19
Resistance:
1773 is the May intraday peak
1780 is the November 2008 closing peak
1786 is the November intraday high
1880 is the June peak
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:
1770 is the mid-October interim peak
The 50 day EMA at 1734
1716 is the May closing high
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 200 day SMA at 1654
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 893.04
Resistance:
896 is the late November 2008 peak
The 50 day EMA at 897
899 is the early October closing low
The 200 day SMA at 901
919 is the early December peak is bending
The 10 day EMA at 920
930 is the May peak
935 is the January closing high
944 is the January 2009 high
1000
1050
Support:
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
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 8339.01
Resistance:
8375 is the late January 2009 interim peak
The 50 day EMA at 8382
8419 is the late December closing low in that consolidation
8451 is the early October closing low
8521 is an interim high in March 2003 after the March 2003 low
The 10 day EMA at 8554
8588 is the May high
8626 from December 2002
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:
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.
Jun 23 - Tuesday
Existing Home Sales, May (10:00): 4.82M expected, 4.68M prior
Jun 24 - Wednesday
Durable Orders, May (08:30): -0.9% expected, 1.9% prior
Durable Orders, Ex-T, May (08:30): -0.5% expected, 0.8% prior
New Home Sales, May (10:00): 360K expected, 352K prior
Crude Inventories, 06/19 (10:30): -3.87M prior
FOMC Rate Decision, (2:15)
Jun 25 - Thursday
Initial Claims, 06/20 (08:30): 608K expected, 608K prior
Q1 GDP - Final, Q1 (08:30): -5.7% expected, -5.7% prior
Jun 26 - Friday
Personal Income, May (08:30): 0.2% expected, 0.5% prior
Personal Spending, May (08:30): 0.4% expected, -0.1% prior
PCE Core, May (08:30): 0.2% expected, 0.3% prior
Michigan Sentiment-Rev, June (09:55): 69.0 expected, 69.0 prior
End part 1 of 3
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world stock market
us stock market
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