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money investment, financial investment
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6/29/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: AKAM; GR; INT; JOYG
Trailing stops: None issued
Stop alerts: None issued
SUMMARY:
- Market advance continues and once again, no change in the status quo
- Oil demand estimates fall but price jumps on China hoarding, Nigeria unrest.
- Dollar index struggling to hold 80.
- Inadequate lending continues to hamper any serious economic recovery.
- More quarter end shuffling, world liquidity keep the bid in the market ahead of quarter end.
- Market heads into the two slow independence weeks holding its range.
Price gains once more but a veritable dustbowl of volume.
Another very hot, very slow summer day in terms of volume. The market moved higher, but it was slow going as trade dragged all session. It was a slow news day to what should be a pretty brisk tape for the headlines as the week progresses with the jobs report wrapping things up on Thursday (not Friday as the market will be closed).
About the only financial news on the session dealt with oil. Prices jumped (71.46, +2.30) as reports that China is boosting its oil reserves by 160% and more Nigerian violence offset an EIA report lower oil demand projections by 3M bbl/day into 2013. The dollar was off slightly (1.4078) and the dollar index closed just below 80 again; it is sagging at that key level after it broke sharply lower last Tuesday and closed below 80. Nonetheless the oil price jump was much stronger than any dollar slide on the session. More of the China effect on commodities prices.
The gains were solid through lunch, but then they started to whittle back in the afternoon session, and with just under an hour left there was a real effort to take stocks lower. Gains were cut as NASDAQ barely held positive while SOX and SP600 actually flipped negative. Even with this selling, however, the market bounced back in the last 15 minutes. There remains, despite some wear and tear after the G8 musings on withdrawing stimulus, trillions in liquidity searching for a home as yet more evidence of a fear of lending grips financial institutions. In addition, there was more quarter end window dressing at work according to our friends on the floor that track order flows and who is buying what. Look at the gains on the session: large caps, financials the kind of stuff to populate your prospectus ahead of the quarter end. Light volume, yes, but still some shuffling ahead of the new quarter.
TECHNICAL.
INTRADAY. Flat open and then a pretty brisk selloff through the first half hour. The market bottomed and rallied sharply to positive through lunch. Then the sellers took their shots not once but two times. A mid-afternoon bounce was sold 15 minutes into the last hour. It looked as if it would be successful in taking NASDAQ and SP500 negative, but once more that underlying bid buoyed the indices, at least the large cap ones, to positive.
INTERNALS. Breadth was as boring as the session though interesting as well. NYSE advancers led 1.7:1; not bad given the small caps managed to close overall lower. NASDAQ breadth was actually negative at -1.2:1. Sure there were modest NASDAQ gains, but the few there were concentrated in the large caps. Volume was pathetic; the weeks bracketing Independence Day are typically the slowest, lowest of the year. Many traders get out of Dodge those two weeks and thus painfully low and slow trade. It took a major effort to scrape together 1B NYSE shares.
CHARTS. SP500 moved higher, clearing some recent resistance at 920. Made it up to the May peak (930). Still that upside bid on the market, and Monday it was the financials leading SP500. That, however, has a lot to do with end of the month action pushing them up off their low from two weeks back. SP500 is still posting gains but it is also still in its range . . . making a higher low, however. NASDAQ continued its breakout test bounce though Monday was no great shakes of a move with a gap higher to a doj that tried to give up the goods before rebounding midmorning on. NASDAQ was hardly powerful but it too continues its recent trend and bias, and indeed, NASDAQ is the strongest of the indices at this juncture.
LEADERSHIP. Restaurants were one of the tickets Monday. Financials were up, bouncing back from their break lower two weeks back; are they going to lead now or is this just an end of quarter bounce that it suspiciously appears to be. Steel gave up an early advance. AAPL and some big techs did the same. Not in serious trouble, not in the best of positions to surge higher. As we have stated of late, leadership is undergoing a transition just as is the market, and indeed if the leaders are in transition so is the market. We are seeing real leadership in healthcare (e.g. biotech, healthcare management) while the rest of the leaders of late try to set up once more.
THE ECONOMY
Locking the barn after the cows are gone: strict lending policies leading to no lending.
We discussed this before, and not just in this recession and recovery attempt. It is the 'puritan' stage, the one where the bankers swear, with the Fed watching over them, on a stack of mortgage documents and $10,000 money bundles that they will never, ever, ever make a risky loan again.
It happens every recession. In 2001 the Fed was pumping liquidity back into the market but at the same time the Fed had almost 100% of the banks on restrictive status, i.e. limiting their ability to put that liquidity into the system. That is why they said the Fed was pushing on a string, a limp noodle in large part of its own making. The effect: it limits the ability to pull out of the tailspin. It took a second round of tax cuts, that time the right kind of tax cuts, to jumpstart the economy out of that recession.
New data and reports are coming out now and of course it is sticking true to form, i.e. lending requirements are puritanically strict. In California there are entrepreneurs that buy up homes and renovate them to rent or sell. Lots of homes out there that could be fixed up and put back on the market. Yet, lenders are loathe to lend to buyers that are not going to live in the properties. That is keeping new mortgage lending at a 13 year low and a lot of properties vacant.
Historically housing starts improve 7 months ahead of GDP improvement, and sales gain ground roughly 4 months in advance. Then the momentum of furniture, mowers, renovations, etc. keep the momentum going.
According to the economists that compiled the data, the 2.4% gain in existing sales, lower than forecast, is not enough, and indeed they are not anticipating enough turnover in housing this year, to start the end of the housing recession. With 1M EXTRA homes on the market as part of the overall 3.8M as of May and a 9.6 month inventory based on the current sales pace (compared with the 4.5 month average from 2000 to 2005) the math says something else needs to happen or it is estimated the housing market won't bottom before mid-2010.
Worse yet, some are predicting that foreclosures have not peaked and could hit a record 2.5M. A staggering 20.4M of the 93M houses, condos and co-ops are worth less than their loans.
Thus if you are looking at history as a guide for when we can expect a recovery to germinate, we have to still wait for housing to find the bottom. As the numbers show above, housing may not put in the kind of improvement necessary to spark a recovery until after the end of 2009. Then you have 4 to 7 months before you get any solid GDP movement. Troubling.
THE MARKET
MARKET SENTIMENT
VIX: 25.35; -0.58
VXN: 26.47; -0.06
VXO: 23.75; -1.6
Put/Call Ratio (CBOE): 0.78; -0.03
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: 43.6%. Down from 44.8% as the choppy market is still culling the herd some. Fading from 47.7% it spiked to up from a low of 42.5%. Broke free from the 40.9% where it hung around for three weeks. Steady rise from 36.0% just 8 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: 28.7%. Up from 26.4% and 23.3% the week before. 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: +5.84 points (+0.32%) to close at 1844.06
Volume: 1.988B (-42.08%)
Up Volume: 1.245B (-708.293M)
Down Volume: 742.88M (-921.947M)
A/D and Hi/Lo: Decliners led 1.23 to 1
Previous Session: Advancers led 1.81 to 1
New Highs: 61 (-32)
New Lows: 16 (+4)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher, sold it off but held above the 10 day EMA on the low. Snapped back up to hold a gain, continuing its bounce off the May peaks and thus holding its breakout, but not a lot of power right now. Not that you can complain about the action; it is a period of underachieving for the market as is usual. Thus NASDAQ moving up is not a bad day at all given its leadership is in need of and is taking a bit of a consolidation move itself. Below the October gap down point, above the November and May peaks support range, likely not to do much moving upside near term, at least not with breakouts or breakdowns for that matter.
SOX (-0.05%) again could not make it through the 18 day EMA and turned back, but it was not a rout. It is potentially putting in a lower high though it held support at 250 on the last test lower. More bearish pattern, much more so, than NASDAQ, but it made a higher low and is still in decent shape . . . relatively.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +8.33 points (+0.91%) to close at 927.23
NYSE Volume: 1.065B (-49.94%)
Up Volume: 707.328M (-460.068M)
Down Volume: 350.227M (-729.429M)
A/D and Hi/Lo: Advancers led 1.7 to 1
Previous Session: Advancers led 1.58 to 1
New Highs: 30 (-6)
New Lows: 49 (+9)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Fought to make it to 1B shares in a traditionally slow week. SP500 broke over the December peaks and is right at the early May highs (930). Impressive it can continue higher and still maintain a 50-50 bearish to bullish pattern. It has that immediate resistance ahead yet it made a higher low last week. It keeps getting money thrown its way, and Monday the financials were the beneficiaries of a bit of window dressing and that pushed SP500 to the upside.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The financials gave the Dow a boost as well as it cleared the 8500 level as well as the 200 day SMA (8480). That still has it below the May peak and thus it has two near term highs to topple. Maybe.
Stats: +90.99 points (+1.08%) to close at 8529.38
Volume: 216M shares Monday versus 307M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Last day of the quarter and as the upside bid held up through Monday it may hold up through Tuesday. Maybe; this is notoriously a slow week, one of the slowest of the year. We just have to let it work through and then see if any new money comes in for the first of the next quarter . . . and then we see if the bid under the market remains. What if it doesn't? Even when it sells it has not sold, i.e. it has maintained its trading range. By 'it' I mean SP500 and the NYSE indices; NASDAQ broke out and is making its own wake as liquidity is no problem for the techs either.
We have been picking up some upside positions along the way as they bounce off support or test a breakout. And of course we are picking up some downside along the way as the NYSE indices, SOX as well, continue to look heavy. The bid does not have to totally dry up for those downside positions to make us money while the major indices and the next round of leaders decide who is going to lead and set up to do so.
Likely to be a grinding week similar to Monday. Yes the indices moved up but there were not even a lot of good intraday plays on the day. Got tired of the griping in the office about the lack of movement overall and intraday as well. That raises an important point, i.e. keeping things in perspective when they are a bit slow. Slow times so throttle back some and let the plays come to you. Liked AKAM early to the downside, then when some good stocks were holding moves to the close we liked them as well. Not going out on the limb, not loading the boat, just picking good individual plays here and there as they present themselves.
Support and Resistance
NASDAQ: Closed at 1844.06
Resistance:
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 1752
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 January closing peak at 1653 (intraday)
The 200 day SMA at 1643
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 927.23
Resistance:
930 is the May peak
935 is the January closing high
944 is the January 2009 high
956 is the June intraday peak
1000
1050
Support:
919 is the early December peak is bending
The 10 day EMA at 917
The 50 day EMA at 900
899 is the early October closing low
896 is the late November 2008 peak
The 200 day SMA at 892
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 8529.38
Resistance:
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:
8521 is an interim high in March 2003 after the March 2003 low
The 10 day EMA at 8478
8451 is the early October closing low
8419 is the late December closing low in that consolidation
The 50 day EMA at 8388
8375 is the late January 2009 interim peak
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 30 - Tuesday
Consumer Confidence, June (09:00): 55.3 expected, 54.9 prior
S&P/Case-Shiller, Apr (09:00): -18.63% expected, -18.70% prior
Chicago PMI, June (09:45): 39.0 expected, 34.9 prior
July 01 - Thursday
ADP Employment Change, June (08:15): -363K expected, -532K prior
Construction Spending, May (10:00): -0.5% expected, 0.8% prior
ISM Index, June (10:00): 44.0 expected, 42.8 prior
Pending Home Sales, May (10:00): 1.1% expected, 6.7% prior
Crude Inventories, 06/26 (10:30): -3.87M prior
Auto Sales, June (14:00): 3.3M prior
Truck Sales, June (14:00): 4.1M prior
July 02 - Friday
Nonfarm Payrolls, June (08:30): -370K expected, -345K prior
Unemployment Rate, June (08:30): 9.6% expected, 9.4% prior
Hourly Earnings, June (08:30): 0.2% expected, 0.1% prior
Average Workweek, June (08:30): 33.1 expected, 33.1 prior
Initial Claims, 06/27 (08:30): 627K prior
Factory Orders, May (10:00): 0.2% expected, 0.7% prior
End part 1 of 3
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money investment
financial investment
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