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world stock market, us stock market
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7/06/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: SPY; SU; SY; XTO
Buy alerts: HLTH; QCOM
Trailing stops: SIGM
Stop alerts: BLKB; HITT; HWCC; WFR
SUMMARY:
- Selling continues but the June lows hold again, bounce SP500 positive at the close.
- Dollar receives some kinder, gentler words from China, Russia
- ISM Services are up but still contracting.
- Jobs not about to recover with declining hours worked.
- SP500 trying to bounce off June support though defensive issues are starting to lead.
Day of the improbable: Armstrong jumps from 10th to 3rd, SP500 bounces to positive after initial sharp selling.
The winds were blowing in the south of France, buffeting the participants in the third stage of Le Tour de France. Despite the adversity Lance Armstrong, showing at least his race wits are still intact, seized upon opportunity and vaulted from tenth to third place. The market was down and out again, continuing lower from the Thursday selling, but it too seized upon opportunity, finding support at the June lows and bouncing to close positive on SP500 and DJ30. While NASDAQ and the growth indices did not find their way back to green they did cut their losses by more than half. The theme was clear, however: defensive issues such as utilities, consumer staples, drugs, and financials (0% interest rates still allow them to print money in the back room) were in; growth was out.
The main morning story was the dollar. Both China and Russia acknowledged that the dollar was the reserve currency for the foreseeable future. They both want something other than the dollar, but the reality is in the weak world economy is that nothing is going to be trusted for now. That pushed the dollar down to 1.3905 pre-market, and though it could not hold all of the gains it did a decent job on into the close (1.3975). That pushed oil lower (64.17, -2.56) along with most all commodities. Bond yields held basically flat (0.94% 2 yr, 3.50% 10 year) after gains last week on worries re the world economy. Commodity stocks were down, but they were not alone; just about everything was down except those very defensive sectors noted above.
TECHNICAL.
INTRADAY. Stocks gapped lower, continuing the Thursday trade. A quick bounce failed as the ISM Services report, while better than expected was still below 50. More contraction in services led to more contraction in stock prices. Stocks fell to new session lows, but as our midmorning alert stated, the indices were approaching their June lows that bounced them higher, and if something was going to happen it would do so then. Stocks started a slow, steady, and again slow recovery that lasted to the close. Indeed there was a spurt upside late in the session that took SP500 and DJ30 positive.
INTERNALS. Breadth recovered decently to -1.5:1 NYSE, -1.7:1 NASDAQ, well off the intraday lows near -3:1. Volume bounced on both NASDAQ and NYSE, climbing back above 1B on NYSE. That still left it well, well below average. NASDAQ trade pretty much matched last week's low trade. Just not many out there in the market, but of late, those involved have been the sellers.
CHARTS. SP500 touched down just below the June low at 888, touching the 200 day SMA on the low, and then rebounded to positive. Rising volume though that doesn't say much because of the low Wednesday and Thursday trade. Not bad trade compared to the past month, however. Held the same support and bounced though it did not recover the 50 day EMA or the 900 level. Nice to see the bounce at the prior lows but still nothing special just yet. NASDAQ showed the same action with a tap at the June closing low (held well above the intraday low) and recovered two-thirds of the session losses. This put it right over the early May high again as well as the 50 day EMA, and that bounced NASDAQ back decently. A bottom for either? Not likely. It is part of the process and SP500 is likely to head lower for a deeper test before this is over.
LEADERSHIP. As noted above the buying focused on the defense with drugs, utilities, consumer staples and financials bouncing. Energy and commodities continued to get beaten like dogs. Techs were mixed; some down hard, some not so hard. Not a lot of great choices. Not a lot of breakdowns either, and the rebound helped set some up at support. NASDAQ could thus try to lead a new move. Not holding out for that just yet, however.
THE ECONOMY
ISM Services are like everything else: worsening at a slower rate.
The service sector improved meaning in this economy that it worsened at a lessening pace. For June it turned in at 47.0 reading versus the 46.0 expected and 44.0 prior.
Half empty or half full? The economic data lets you take your pick. It is still falling. It is falling at a slower pace. It has to slow before it can turn, but the problem is when it actually turns. The slowing data is a start, but it is starting and stopping as the data shifts back and forth between improvement and backsliding while always underwater. At the rate of slowing and turning it is going to take well into 2010 before the economy makes the move toward solid growth.
A second stimulus?
There is more and more talk (demand?) for another round of stimulus because the first round, shock of shocks, has not worked. Problem is, the powers that be think that the stimulus IS working. Obama said last week that there was no need for a second round because the first was working, citing the fictitious 'jobs saved' number. Gee, and only $50B of the $780B 'stimulus' has hit the economy. If he would hurry up and get the rest dispersed we could have literally millions of saved jobs by Halloween. But why stop there? Spend another $800B and create twice as many jobs as planned. If you can spend money and create jobs, why have we not been doing that for years? Is it just that the communists were right and our forefathers wrong and the government only goes along with us because it is good-natured? Utter nonsense and everyone knows it.
What the President doesn't want is another stimulus package that many are suggesting, i.e. tax incentives (e.g. credits) and tax cuts for small businesses, to actually work and reveal his stimulus package as a spending wish list for all the social programs everyone knows it to be. Moreover, the people might just demand that the original 'stimulus' be canned when a real stimulus package hits and the economy jumps. Even though the President likes to say one thing and do another, that just might be too much for the centrists that swung the election his way to stomach. More already disapprove of his profligate spending given the recent polling.
Jobless claims and hours worked.
Over the weekend we discussed how the jobs report, thanks to record numbers unemployed, is now at coincident to leading indicator given that so many are worried about their jobs future. The enormity of the worry about jobs is impacting expenditures across the entire economy. The economy stabilized after the initial panic over a second Great Depression, but now there is the fear of a double dip in what is a nasty recession, a double dip that I wrote about over a month back when so many were so excited about so little economic activity. That worry was voiced again Monday, as it was all weekend and last week as well.
There is another element we discussed in the May report but did not touch upon over the weekend and the June report. The average hours worked, after holding steady at 30.2 for several months, started to fall again in May, dropping to 30.1. We noted at the time that hours worked must RISE before there is a jobs recovery. Employers wring every bit of productivity out of current workers before any new hires are made. The clearest indicator of employers ready to hire is a RISING average hours worked number.
In June hours worked fell to 30.0, down for the second straight month after holding at that 30.2 level for several months. The renewed decline shows no indication whatsoever that employers are ready to ramp up and start hiring more workers.
THE MARKET
MARKET SENTIMENT
VIX: 29; +1.05
VXN: 29.25; +1.18
VXO: 27.81; +0.36
Put/Call Ratio (CBOE): 0.87; -0.18
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: 41.47%, continuing the decline. 43.6% last week, down from 44.8% as the choppy market is still culling the herd some. Hit a high of 47.7% on the run from the March lows. Steady rise from 36.0% just 10 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: 29.9%. Bears continue their recovery after falling as the market rallied. Up from 23.3% just over a month back. 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: -9.12 points (-0.51%) to close at 1787.4
Volume: 2.022B (+7.8%)
Up Volume: 576.893M (+307.176M)
Down Volume: 1.401B (-247.333M)
A/D and Hi/Lo: Decliners led 1.69 to 1
Previous Session: Decliners led 4.87 to 1
New Highs: 18 (+3)
New Lows: 25 (+11)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
A touch down toward the 50 day EMA (1762) as well as the June closing low (1765) and the early May peak (1763 closing), then a bounce back up. Not to positive, but cutting two-thirds of the session losses. Techs were picked up late but they are still out of favor compared to the new love for the defensive sectors. That said, there was no breakdown in NASDAQ. It made a lower high to end June, but it is still holding its breakout, indeed closing just over the November peak, and working on a lateral consolidation.
SOX (-1.35%) is trying to hold the 50 day EMA, rebounding to hold that level on the close. If it holds the chips make a higher low and look solid for a new move higher. Maybe not in the next few days, but looking decent overall.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +2.3 points (+0.26%) to close at 898.72
NYSE Volume: 1.141B (+82.18%). Huge jump in volume . . . from virtually no volume. So not that much from an increase in volume, but it was a decent volume session for NYSE given the chronically low trade the past 1.5 months basically since summer started.
Up Volume: 471.928M (+429.227M)
Down Volume: 664.749M (+85.358M)
A/D and Hi/Lo: Decliners led 1.55 to 1
Previous Session: Decliners led 3.83 to 1
New Highs: 16 (-2)
New Lows: 50 (+7)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 gapped lower, sold to the 200 day SMA (886) and the June low (889), and then rebounded for a modest gain. Good test and recovery, but it did not change the game too much. SP500 closed just below the 50 day EMA (901), some resistance. It has extended its recent range lower to that 885ish level, but there is still likely a test to 875 in this pullback, and that is likely the minimum test.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Same action as SP500, i.e. the test lower and then a rebound to positive. It undercut the June low and then rebounded; extended its downside a bit more but the sellers could not keep it down.
Stats: +44.13 points (+0.53%) to close at 8324.87
Volume: 206M shares Monday versus 157M shares Thursday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
No scheduled economic data for Tuesday but with earnings starting up and warnings season in full tilt that does not mean a lack of catalysts. This is still, however, historically one of the slowest weeks of the year. Volume did pick up on Monday, good to see.
The action continues for now very much as range-trading action. The indices have peaked out for now and are testing. The question is how far they test and what the range will be. For now 875 is holding SP500 and the May/November peaks on NASDAQ are acting as its support. Outside of that you can only look to what are logical support and resistance levels and look for plays inside those ranges, either upside or downside, as they present themselves.
Thus last week we picked up some downside plays such as XTO and SU and they were blasted lower quickly. Of course a quick fall in this market often begets a rebound and vice versa. Thus we started looking for some potential bounce plays over the weekend, and after the Monday trade we could see them start their moves. That is the nature of a trading range as the indices work out their issues and try to set up for the next breakout or breakdown move.
That means we are going to have both kinds of plays still on the report, taking what the market gives us. There will be stocks that fall by the wayside or bounce when we don't want them to; that is the life of trading in a range. What you continue to do in those situations is look for plays in good risk/reward position so that if they move our way we make some great scratch and if they don't we get out in decent shape. That way we can make some good money while the market figures out what it wants to do.
As for Tuesday, the market looks as if it wants to try a bounce off that Monday rebound, but you have to take that with a chunk of salt. Yes they held the June lows, but those were lows out of nowhere and there is key support still just below; it is likely they test those levels and try some hold there versus bouncing off of these doji that could simply be continuation doji, i.e. just a pause in a move to test those lower support levels.
If there is a further bounce upside we will look at that three ways. One is to let some downside plays set up a bit more after this recent selling. Two is to buy into some really good stocks that have tested and held key support levels and are ready to roll back up in their ranges. Three is to use a bounce to close some upside that is not performing that well.
Support and Resistance
NASDAQ: Closed at 1787.40
Resistance:
The 18 day EMA at 1812
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 1762
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 1636
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 898.72
Resistance:
899 is the early October closing low
The 50 day EMA at 902
The 10 day EMA at 912
919 is the early December peak is bending
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:
896 is the late November 2008 peak
The 200 day SMA at 888
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 8324.87
Resistance:
8375 is the late January 2009 interim peak
The 50 day EMA at 8390
8419 is the late December closing low in that consolidation
8451 is the early October closing low
The 18 day EMA at 8460
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:
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.
July 06 - Monday
ISM Services, Jun (10:00): 47.0 actual versus 46.0 expected, 44.0 prior (no revisions)
July 08 - Wednesday
Crude Inventories, 07/03 (10:30): -3.66M prior
Consumer Credit, May (15:00): -$8.3B expected, -$15.7B prior
July 09 - Friday
Initial Claims, 07/04 (08:30): 607K expected, 614K prior
Wholesale Inventories, May (10:00): -1.0% expected, -1.4% prior
Jul 10 - Saturday
Export Prices ex-ag., June (08:30): 0.3% prior
Import Prices ex-oil, June (08:30): 0.2% prior
Trade Balance, May (08:30): -$30.0B expected, -$29.2B prior
Michigan Sentiment-Prelim, July (09:55): 70.3 expected, 70.8 prior
End part 1 of 3
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world stock market
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