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money investment, financial investment
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6/24/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: SDS (this alert was not received by all; see continuing plays); XXIA
Trailing stops: DBC
Stop alerts: MU
SUMMARY:
- Market rallies ahead of FOMC, falters some to close with gains but also just below some resistance.
- Durable goods double up expectations . . . to the positive side.
- Fed appears less worried about deflation and not worried about inflation.
- SP500 set up to continue on the test of 875.
Market rallies, gives up much of the gain, doesn't change its near-term character.
The big news on the session was of course the FOMC decision and the market acted as it often does ahead of the meeting.
The other news on the session was fine. Durable orders were solid at +1.8% versus the -0.9% expected. Oil inventories fell (-3.8M) but gasoline inventories jumped (3.9M), offsetting the bearish oil figure. With the dollar stronger oil was heading lower (68.57, -0.73). Bonds rallied ahead of the FOMC decision, sending the 10 year yield down to 3.59% just before the announcement. By the close it was back up to 3.69%, closing above the Tuesday close (3.64%).
The action was pretty much in line with expectations for an FOMC day. Stocks rose ahead of the afternoon announcement but they had more gusto than usual with the indices scoring 2% gains. Then there was the announcement and the response was usual: choppy then giving up some gains. That left SP500 in the same position, i.e. still in the broad topping pattern, and NASDAQ looking at another lower high on this pullback.
TECHNICAL
INTERNALS. Breadth was decent on NYSE at 2.5:1, so-so on NASDAQ (1.4:1), particularly given the 1.5% gain on the day. Volume was still low, flat on NASDAQ and really low on NYSE. Not much volume was driving the upside action and thus prices tailed off when the FOMC decision hit.
CHARTS. NASDAQ gapped and rallied over the November and May peaks. Not bad. It stalled, however, at 1800 and give up 15 points from high to close, one-third of the move. It stalled at 1800 and the 18 day EMA. Another lower high on this test looks to be in the works after NASDAQ gapped and broke out to start June. NASDAQ is not in bad shape but it was unable to really put the ORCL earnings to good use and power higher.
SP500 showed similar action. It rallied through 900 resistance on up to the 10 day EMA but then gave up two-thirds of its session gains (10 points lost). That left a big doji on the candlestick chart, and though it closed on the 900 level and the 50 and 200 day MA it is not in great shape.
LEADERSHIP. Commodities, energy and industrials rebounded in the early move higher. They ran out of steam at near resistance. Techs of course were up, led by ORCL. Financials tried to move higher but they stalled and came back some as well. Healthcare showed more strength but again it was not runaway strength. China was showing some more strength, but it was scattered with some up nicely and others down sharply. Exchange stocks (e.g. ICE) showed strength, but that is a narrow group. That is basically the story of leadership right now: not a lot of stocks ready to stand in and take charge just yet as the market continues in its transition phase.
THE ECONOMY
Durable goods report shows some solid buying.
Durables surprised upside at +1.8% versus the -0.9% expected. That is like a three touchdown swing in football. It also matched the April level at 1.8%. Durables orders are now up three of the last four months and are up 5.3% in the last three months.
Business spending is what we always look at in durable goods orders as that is the real underpinnings of any recovery. The financial stations always talk about the consumer leading a recovery, but in ALL recessions, including the one before this one, if businesses do not spend the recovery does not come. In May business expenditures rose 4.7%, the second gain in four months. That is a start, but there is a long way to go. Business investment/expenditures is down 21% year over year. Yes it has to turn at some point; crawl before you walk as I said on Tuesday, but the year over year underscores just how bad things turned in the fall of 2008 when the entire world panicked and buying turned off.
Federal Reserve leaves deflation fears behind but makes no mention of raising rates.
As expected the Fed left rates and its statement virtually unchanged. Rates are still at the 0% to 0.25% level; no change there. The Fed altered its statement slightly, however, in two respects. First, it lost the language worrying about declines in asset prices, code for deflation. Second, the Fed added language about 'substantial resource slack' that, despite the easy money (our words, not the Fed's), the Fed believes will keep prices low.
Losing the deflation language is actually a pretty big step, and indeed the first step in the ultimate move toward hiking rates. It is a long process if you look at it that way, but the Fed always moves in baby steps when it moves to change its path. The path to raising rates is going to be a long one as nothing in the statement indicated the Fed is anywhere close to changing its direction.
As discussed Tuesday that means the actual discussion of when to start edging ranges higher will occur outside the statement. We will hear FOMC members discussing the need to back off on the stimulus then see it in the minutes. Indeed, it may show up in these minutes in a couple of weeks.
As it turned out the statement did not really impact the market. Stocks rallied into the announcement as usual and then faltered, setting up a continuation of the pattern already in place.
THE MARKET
MARKET SENTIMENT
VIX: 29.05; -1.53
VXN: 29.03; -1.66
VXO: 28.5; -0.82
Put/Call Ratio (CBOE): 0.85; -0.15
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: +27.42 points (+1.55%) to close at 1792.34
Volume: 2.112B (-0.09%). Pip-squeak volume shows that even with the upside there were not a lot of buyers.
Up Volume: 1.889B (+824.01M)
Down Volume: 265.033M (-761.69M)
A/D and Hi/Lo: Advancers led 1.44 to 1
Previous Session: Decliners led 1.46 to 1
New Highs: 36 (+23)
New Lows: 16 (-2)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped higher and rallied over the November peak (1786) and held that into the close despite giving up a third of its gains. It moved over 1800, the point where it gapped up to as June started. That is a natural resistance point and it stalled the techs on the session. This leaves NASDAQ over its breakout point, but also with a potential second lower high on this test. It is over some good support at 1765, but with SP500 still testing it can test again and even down to the 50 day EMA (1742).
SOX (+1.74%) bounced as well but stalled and closed at the 50 day EMA. There is some resistance at 260 where it peaked on the session. Bounced off the 250 support and back down from the 260ish resistance. Still has some more work to do.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +5.84 points (+0.65%) to close at 900.94
NYSE Volume: 1.102B (-8.99%). Low, low volume as the NYSE indices tried to rally but gave most back. Not much trade to hold the gains after a strong early move.
Up Volume: 787.384M (+72.067M)
Down Volume: 294.793M (-184.662M)
A/D and Hi/Lo: Advancers led 2.48 to 1
Previous Session: Decliners led 1.06 to 1
New Highs: 17 (+8)
New Lows: 47 (+2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps started higher and moved through the 50 day EMA and 200 day SMA early. Rallied through 900 and on up to 910 (918 is resistance). The 10 day EMA and 18 day EMA stalled the move out and sent it back down 10 points off the high. Managed to hold the 200 day and 50 day, but that is about all. After the continuation doji on Tuesday this looks a lot like a signal to continue the downside test toward 875.
SP600 (+0.80%) also posted a gain on the session, but it also gave up the lion's share of its gains and closed below the 200 day SMA and the 50 day EMA. Also showed the same kind of gravestone doji on the candlestick chart and still the same overall pattern setting up more downside.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Gave back all of its gain and more, but it also held support at 8250 yet again. That is the level it held in May and bounced and it is looking pretty solid here as well. SP500 can still test 875 and DJ30 can still hold around this level while SP500 does test.
Stats: -23.05 points (-0.28%) to close at 8299.86
Volume: 189M shares Wednesday versus 237M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
FOMC is out of the way and Thursday brings initial jobless claims that have improved nicely along with the next iteration on Q1 GDP. Jobless claims helped buck the market up last week and a reading in the 500's (600K expected) would be a help.
That aside, SP500 still looks top-heavy here with that broad top the past two months, the struggle at 900, and the open door to 875 on the downside. That remains our near term outlook for the market with SP500's test being the key move before market can make any serious progress anywhere else. By the way, 850 still looks like a logical point to test anyway, and 825ish is still the 38% Fibonacci retracement level. First things first: SP500 875 and then we evaluate once more.
With that in mind we are looking at some downside on stocks that left that door open Wednesday given their rebounds from selling, rebounds that took them back up to resistance, and the rollovers that show those gravestone or evening star dojis on the candlestick chart. SDS is one we are looking at further in the morning, preferably with a modest early bounce.
At the same time we are continuing our look at upside positions setting up in the midst of the weakness. We spotted several on Tuesday and they continue to set up as the market tests back. As noted before, the next leaders will set up at support without blowing up and then lead the bounce upside. Imagine that; leaders leading.
Anyway, we look for the upside at the same time we play the downside because one thing still holds at this juncture: the market remains in an uptrend and it has shown no inclination for a major selloff given the world central banks are still in the money printing business. The market has had some time to digest the G8 talking about removing stimulus, and it knows after the FOMC decision that it is not going to remove the monetary stimulus at all. Indeed, the Fed told us today it is going to continue on with its plan of selling $300B in US Treasuries 'by autumn', purchasing $1.25T of mortgage backed securities, and also buying $200B of agency debt.
Support and Resistance
NASDAQ: Closed at 1792.34
Resistance:
The 18 day EMA at 1800
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:
1786 is the November intraday high
1780 is the November 2008 closing peak
1773 is the May intraday peak
1770 is the mid-October interim peak
The 50 day EMA at 1742
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 1649
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 900.94
Resistance:
919 is the early December peak is bending
The 10 day EMA at 912
930 is the May peak
935 is the January closing high
944 is the January 2009 high
1000
1050
Support:
899 is the early October closing low
The 200 day SMA at 897
The 50 day EMA at 897
896 is the late November 2008 peak
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 8299.86
Resistance:
8307 is the April 2009 intraday high
8315 is the February 2009 peak
8375 is the late January 2009 interim peak
The 50 day EMA at 8376
8419 is the late December closing low in that consolidation
8451 is the early October closing low
The 10 day EMA at 8474
8521 is an interim high in March 2003 after the March 2003 low
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:
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): 4.77M actual versus 4.82M expected, 4.66M prior (revised from 4.68M)
Jun 24 - Wednesday
Durable Orders, May (08:30): 1.8% actual versus -0.9% expected, 1.8% prior
Durable Orders, Ex-T, May (08:30): 1.1% actual -0.5% expected, 0.4% prior (revised from 0.8%)
New Home Sales, May (10:00): 342K actual versus 360K expected, 344K prior (revised from 352K)
Crude Inventories, 06/19 (10:30): -3.8M bbl, -3.87M prior
FOMC Rate Decision, (2:15)
Jun 25 - Thursday
Initial Claims, 06/20 (08:30): 600K 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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money investment
financial investment
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