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us stock market, trade stock
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7/13/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: FCS; IBM; LPHI; MR; MSFT; TYC; WFR
Trailing stops: EDU
Stop alerts: None issued
SUMMARY:
- Goldman upgrade excites financials, SP500
- Financials finally ready to make a move after a left-handed upgrade?
- Consumer stocks (at least some of them) also rally ahead of Tuesday retail sales
- Dell declares demand stabilization! And, oh yeah, weaker gross margins.
- How the market treats GS earnings will tell the next part of the tale.
'Nothing else works' upgrade of GS triggers some upside.
There was no pullback to start the week. Futures were down modestly but nothing major early on. On CNBC Meredith Whitney, an influential financial fund manager, upgraded GS, throwing in the towel on that one financial. It was not because GS was leading a charge higher by the financials. To the contrary, Whitney remained negative on practically all financials as well as the economy in general. It was GS' unique position as the primary facilitator for government contracts, bonds, and related activities needed to get the government stimulus into the economy that made Whitney give it the nod.
As for the rest of the economy Whitney said she saw 13% unemployment for years to come (read 2 to 3) and thus anything relating to the consumer was dead money. In short the Goldman upgrade was a 'Goldman because nothing else works' upgrade. That now leaves the last holdout against GS. Now all the analysts are positive. GS rallied after the news and into earnings. That makes how its earnings are treated, on the news and in the aftermath, very important. With everyone hanging their hat and hopes on GS and its results, if it does not blow them out even good earnings could get chucked back in the analysts' faces.
TECHNICAL
INTRADAY. Those futures were negative then the Whitney comments re GS hit the floor and futures bounced positive. Interestingly, the market sold after the open with SP500 turning negative. SP500 hit 875 on the low, however, and that bounced it sharply. It held that key level and stocks rallied at a 45 degree angle through morning. Then the angle of attack leveled off but stocks still drifted higher, picking up the pace in the last half hour ahead of the close.
INTERNALS. Impressive breadth at 4.4:1 NYSE, 2.7:1 NASDAQ. Pretty much everything was trying to move higher. Volume was up but still below average; it is after all high summer and trade flows like molasses in the winter. Indeed trade was tracking lower than Friday until the market on close orders hit and drove volume, as well as prices, higher late in the session. Some better trade on the upside is better trade on the upside. It dovetails to a certain extent with the stronger volume on last Wednesday's intraday reversal.
CHARTS. SP500 made yet another test of 875 and this time it found legs off that level and the gains were solid. Thus, there was a test lower to start the week, but it wasn't anything seen on last week's lows. Now SP500 is rallying off that level and indeed it is already at the start of the next resistance range at 900 to 930ish. We were putting odds in favor of a test up to this level (or not) and then some further selling. The move was solid Monday, and now we have to see how the market reacts to the GS earnings (and INTC, GOOG, as well as DELL's after hours warning) and any further move up into this resistance. You have to respect this kind of move though volume was pretty pathetic even though it was higher on the session.
NASDAQ recovered the May and then the November peaks, the range of support it popped last week. Volume was up on the session though as with SP500 it was still quite low. Held where it had to and now it has to sort out DELL, INTC, GOOG and their earnings take.
LEADERSHIP: Most stocks were up but that does not mean a flood of new leaders showed up at the gate to lead higher. Financials were up, though as leaders they are not really there. They have spent 10 weeks moving laterally and then jumped; they have put in the time and could become leaders. If they do then SP500 is going to enjoy its best gains since April. After all, it hung in its range ever since the financials stopped their rise in early May, as much stymied by the financials at moving higher as it was helped by them on Monday. Chips were solid. Some big name techs (AAPL, GOOG) enjoyed a good day. Some retailers performed well in good patterns (AMZN, COST). Commodities, energy, metals, industrials - all roughed up hard the past month - were up, but hardly resuming leadership performance.
Indeed, action within even good sectors was very selective. Leadership has been on a case by case basis and it has not changed yet. Perhaps the financials are signaling a new day in America's stock market, but they will have to prove it. There are some great movers for sure, and we will see if they continue to forge ahead and thus drag other stocks with them.
THE ECONOMY
Retail sales trying to support stock moves. Odds are they won't.
No scheduled economic data on Monday as the market prepares for the release of retail sales data. Some retail stocks are moving well even with the dismal outlook for the US economy. Most are tied to deep discounting but not all. BBBY has a decent pattern. JCP, SKS, JWN, ARO are not bad.
The far and away best patterns and moves, however, belong to the discounters. ROST, TJX, NDN have all enjoyed solid moves and are up at their highs. The economy is still in a recession and the recession plays are still leading.
Tuesday we see if some of the improvement in the other retailers, the 'full price' stores, is validated. With unemployment still rising and is much higher than the government numbers, the retail numbers will be hard-pressed to support the gain in the retailers.
Sometimes the market gives a false signal.
Charts often tell the tale ahead of time, but in recessions and bear markets you see a lot of set ups that don't pan out. In other words, there are false starts, sometimes many, as the market and the economy go round and round in ascertaining whether the economy has bottomed and thus the stock market bounce having validation.
This has all the look of a false start here as the economic data is simply not at the levels it typically is when the market sets a real bottom and surges to new highs. We saw several false starts in the 2000 to 2003 recession and bear market. This is the first rally off of the dive to the lows. The odds of it being the bottom are low. This was not a 1998 kind of dive lower and knifepoint turn. There was severe damage done by the credit freeze and the fiscal policies enacted are not fixing the problem but indeed are exacerbating it a la the 1930's and 1970's.
Thus we expect to see a turn lower after the recent bounce plays out. Maybe we are wrong. That is why you have to participate in the moves higher, but you also need to pick your entry points at good levels as we have been doing, thus if it craps out we can get out without much damage, and indeed with playing the downside profit in the overall move.
THE MARKET
MARKET SENTIMENT
VIX: 26.31; -2.71
VXN: 26.61; -2.72
VXO: 26.94; -1.97
Put/Call Ratio (CBOE): 0.83; -0.25
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: 42.7%. Stemming the recent decline a bit, rising from 41.47% though down from 43.6% and 44.8% the prior week. Hit a high of 47.7% on the run from the March lows. Steady rise from 36.0% in late April. 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: 30.3%. Modest gain from 29.9% as the bears grow along with the bulls; not the usual scenario. 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: +37.18 points (+2.12%) to close at 1793.21
Volume: 1.853B (+13.33%)
Up Volume: 1.621B (+627.702M)
Down Volume: 273.781M (-392.502M)
A/D and Hi/Lo: Advancers led 2.69 to 1
Previous Session: Advancers led 1.14 to 1
New Highs: 19 (+13)
New Lows: 27 (-8)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 (1.96%) was the market laggard, but it also is in the best position as it bounced off its November peak test and is homing in on the October interim peak once more. If the large caps step up, blast through that level, that is a start. Of course there is 1500 immediately after that, and that killed off the prior move. Nonetheless still a solid position and moving over the may peak as well.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX (2.41%) continued its bounce off that short three week double bottom pattern. No major move other than it held its ground; that is something in itself. Next test is 275 (closed at 265 and change).
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +21.92 points (+2.49%) to close at 901.05
NYSE Volume: 1.189B (+28.99%). Volume up but still well below average. Still stronger than the recent trade and a good complement to the strong reversal volume last Wednesday.
Up Volume: 1.074B (+779.235M)
Down Volume: 104.878M (-508.265M)
A/D and Hi/Lo: Advancers led 4.42 to 1
Previous Session: Decliners led 1.19 to 1
New Highs: 20 (+3)
New Lows: 49 (-12)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Lots of talk about the head and shoulders on SP500, SP600 and DJ30. All bounced off the May lows Monday. As we said last week these head and shoulders patterns set up all the time but they often do not consummate the entire move.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
A bounce off the head and shoulders neck as well.
Stats: +185.16 points (+2.27%) to close at 8331.68
Volume: 253M shares Monday versus 172M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Retail sales, Dell's warning, GS' pre-market earnings. Now a lot to ponder.
Dell may try to step on large cap tech's toes after they put in a good day. It tried the old slight of hand that never works, i.e. announcing some decent news and then quickly trying to sneak in bad news. The only more pathetic ploy would have been to announce it Friday after the close. No, it waited until the market was up to give it a shot. Ironically it may shoot the bounce in the foot.
Retail sales will be important as well. As noted, a lot of retail stocks are moving up and setting up for upside ahead of the results. If they don't live up to standards then the moves may be scuttled. You don't like to discount price patterns as they set up, and indeed we are looking at a few, but that is why we are overall waiting to see how the retail sales play out. If they surge higher they will give us another shot; we just need to be patient and not chase them into a reversal.
GS will provide, at least at first blush, the biggest news, at least to start the day. It was the Monday catalyst for the run higher and its earnings will provide the next direction. Big move into results put it up at the June twin peaks. The news will either make it or break it.
We will take care on any surge higher early on. In short we are concerned about a reversal attempt just as SP500 reversed off 875 last Wednesday. If it holds that is fine; we have some good upside positions as well as some new ones in the likes of AAPL, BIDU and GOOG that can make us a lot of coin. They can make us coin even on a move that reverses; we just have to be ready to bank some gain if there is any big surge Tuesday morning and look to see how the laggards are moving; if they cannot rally well when the market rallies we need to consider closing them and focusing on others moving better.
As usual a lot to consider heading into a new session even with a strong move off of support. And of course that move off support is the key. Once again SP500 held where it had to and finally received assistance from the financials. If GS leads the charge again and does not give up the goods then this market can attempt to pull off the improbable, i.e. a new break higher after a very cursory pullback that did not even make the first Fibonacci retracement level. Whether that leads to a new high on the rally or not is another story, but one that can wait if stocks can pull off another strong move and make it stick.
Do you chase on Tuesday? Only if you get the opportunity, i.e. a stock that has not surged higher Monday or Tuesday. Of course if it has not you have to wonder why not and that influences your decision as well. That is why we have taken some positions in good stocks and patterns as they made their moves even as the market struggled.
What we will do on a strong move higher is watch how the stocks that were hammered down, e.g. energy, commodities, recover the lost ground. Many stemmed the selling over the past week and moved up some. We are watching to see if they form bear flags that we can play to the downside if the move stalls out, preferably below a resistance point.
As usual there are many aspects to consider and many potential plays. After having little to look at some times over the past two weeks they set up again and made a move. Now there are more possibilities depending upon how the move continues to play out.
Support and Resistance
NASDAQ: Closed at 1793.21
Resistance:
1862 is the July peak
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:
The 18 day EMA at 1790
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 1761
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 1625
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 901.05
Resistance:
919 is the early December peak is bending
930 is the May peak
932 is the July peak
935 is the January closing high
944 is the January 2009 high
956 is the June intraday peak
1000
1050
Support:
899 is the early October closing low
The 50 day EMA at 898
896 is the late November 2008 peak
888.70 is the April intraday high.
882 is the early May low
The 200 day SMA at 878
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 8331.68
Resistance:
The 18 day EMA at 8352
The 50 day EMA at 8354
8375 is the late January 2009 interim peak
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
8581 is the July peak
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 14 - Wednesday
Core PPI, June (08:30): 0.1% expected, -0.1% prior
PPI, June (08:30): 1.0% expected, 0.2% prior
Retail Sales, June (08:30): 0.4% expected, 0.5% prior
Retail Sales ex-auto, June (08:30): 0.5% expected, 0.5% prior
Business Inventories, May (10:00): -0.8% expected, -1.1% prior
July 15 - Thursday
Core CPI, June (08:30): 0.1% expected, 0.1% prior
CPI, June (08:30): 0.6% expected, 0.1% prior
Empire Manufacturing, Jul7 (08:30): -5.00 expected, -9.41 prior
Capacity Utilization, June (09:15): 67.9% expected, 68.3% prior
Industrial Production, June (09:15): -0.6% expected, -1.1% prior
Crude Inventories, 07/10 (10:30): -2.90M prior
Minutes of FOMC Meeting, June 24 (2:00)
July 16 - Friday
Initial Claims, 07/11 (08:30): 565K prior
Net Long-Term TIC Fl, May (09:00): $11.2B prior
Philadelphia Fed, July (10:00): -5.0 expected, -2.2 prior
July 17 - Saturday
Building Permits, June (08:30): 523K expected, 518K prior
Housing Starts, June (08:30): 530K expected, 532K prior
End part 2 of 3
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