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us stock market, trade stock
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7/14/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: AKS; FWLT; NEU; PLCE; VWO
Trailing stops: None issued
Stop alerts: IOC
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VIDEO MARKET SUMMARY
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We are offering a video market summary featuring Jon Johnson talking about the market, the economy, and what is next for investors. We hope you enjoy this added feature to your subscription! We still include the normal Market Summary format so you have both a video to listen to while commuting or multitasking as well as the written report for review.
TO VIEW THE VIDEO MARKET SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/marketsummary.wmv
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SUMMARY:
- Market doesn't do much and after Monday that if not bad.
- No surprise: House healthcare plan is a new tax
- PPI highest since late 2007 as energy costs climb again.
- Retail sales stronger but not.
- INTC set to send the market higher and the key is how they handle next resistance and hold the gains.
Market shakes off Dell results, post-GS let-down, holds its gains.
I am wearing a bit of black today - this is my Steve jobs black look for Apple. I do not know why since AAPL is not announcing earnings, but I guess it is now using Intel chips so I thought I would throw on the old black the shirt and see if it gave the market some good mojo.
Tuesday the market did not do very much. After a big run like Monday, however, that is not necessarily a bad thing. One of the things I was worried about Monday evening was whether or not the euphoria after the GS upgrade would hold over into Tuesday. Specifically there was concern whether the market would reverse after rallying ahead of the numbers. Goldman blew away the estimates on both the bottom line and the top line. Nonetheless, after such a big run into the numbers and since Goldman was basically the reason for the Monday rally, we had to be concerned that the market may run out of gas and roll back over. It did not, and that was a start - it was the first step the market had to take.
There was plenty of news out in the morning and not all of it was great (although not all of it was terrible either). The PPI was hotter than expected thanks to gasoline prices. Retail sales were okay, though not as good as expected. They were not terrible, and at least they did not backslide into negative territory, giving us the second monthly gain in sales. Germany hiccupped again as its investor confidence failed. Germany is having some of the same backsliding issues we have in the US. That prompted comments with respect to whether or not the Germany and the European Union (EU) recovery was still on track. You have to ask, what recovery? As with the United States, there is not a recovery, but more like relief that we are not going into another depression. That relief leads to stabilization, but people are confusing stabilizing with recovering. Huge difference.
The big news was earnings season. GS blew away its earnings and it helped boost things early. There was nothing runaway at all. Futures were up modestly; in fact, some of the indices were down. Goldman was down on the session. JNJ beat its earnings as well, earning $1.15 versus $1.11 expected. CSX Railroad Company beat its estimates, but as will be the case for most stocks in this earning season, it beat estimates based on costing cutting. Its metals shipments were down 53%. Chemical shipments are down 29% - it is not moving as much product, but it is able to save money through cost reductions and that is helping it beat massively lowered expectations. Earnings have been reduced significantly in anticipation of a really crummy quarter. When companies are able to cut costs more than expected and beat them, we have these "Gee whiz!" rallies because earnings are not as bad as expected, but companies are not getting anywhere. That is basically what we have seen with the economy: we are no longer falling off the cliff, but we are not recovering. It is up to each company to cut its cost and thus improve its bottom line and help preserve some shareholder value. That is a big difference from actually improving earnings and revenues through growth in sales.
There was no surge on these earnings - that was the Monday play. Frankly, after Dell pre-warned Monday evening, I thought things would be worse than they were. Indeed for the tech stocks, they were down most of the morning thanks to Dell, and they were kind of a wet blanket on the trade over all. Even so, NASDAQ and NASDAQ 100 finished the day positive as tech stocks recovered and rallied in anticipation of Intel's post-close earnings.
No big surge but overall that was not a bad thing. SP500 tested the 875 support level on Monday and it bounced nicely. The fact that it did not give those gains up after all of the excitement was out is a decent sign. First things first - the first step is accomplished and it did not give up the gain immediately after posting it.
TECHNICAL
INTRADAY.
The market started soft. Futures were down thanks to Dell, but they recovered and the stocks actually opened mixed to a bit higher. They gave up the gains, went negative during the session but then turned around and came back nicely to close positive and at session highs. It was not any big surge, the gains were not much - NASDAQ gained almost 0.4%, the Dow gained 0.33%, SP500 0.5%.
The gains were not huge. SOX had the big move at 1.63% in anticipation of Intel. Stocks were on the run ahead of that just as Goldman was on the run ahead of its earnings Monday. It was not a big day and in the last four or five hours, stocks barely moved at all. Again, they held onto their gains, a plus in this market given the resistance overhead and the head and shoulders pattern everyone is talking about on the financial stations. Those head and shoulders patterns often form, set and up and look like they will break down, only to move right back up. For now, the pattern is still intact, but we are getting a bounce off of that initial break lower.
INTERNALS.
There was not much pizzazz here either, which is what you would expect. The breadth was 2.2: 1 on the NYSE. That was not bad because a lot of energy and commodity stocks continue their rebound recovery and most of them populate the NYSE and the small cap indices so we saw good breadth on the NYSE. It was not great like we see on upside days, but given that it was a modest gain overall, that is not bad at all. NASDAQ breadth was 1.3: 1, which is pretty much what one would expect. It is in line with the modest gains that it showed on the session.
Volume was lower on both NASDAQ and the NYSE, coming back well below average again. Indeed, the NYSE did not even make $1B shares on the session - very low trade. Again, that is not bad because it was just a slow, sluggish session after a big rush higher on Monday.
CHARTS.
There was no real technical change. There was a modest gain on the indices but that did not change the picture. NASDAQ has cleared the November high and now it is right at 1800 where there is some resistance as well. It still has a problem - after that June peak, it has a lower high and it is threatening to make a lower high yet again. Intel may be a game changer for it. Its results were very good. The QQQQ was up 0.5 after hours. That is a big move for the Q's. That bodes well for NASDAQ and we will have to look to see if it can punch out a higher high, topping that recent peak.
SP500 added to the gains on Monday as it tested 875 that day and reversed. It did not add a whole lot, putting in just 4.79 points. That is not a whopping day, but compared to NASDAQ and the Dow it was a more substantial move. It is still getting help from some financials although they held back on the session. There was also a lot of help from energy stocks. It still has its December high, its May peaks and the late June peak that all cluster in the 925-930 range. That is right overhead for SP500 that closed roughly at 906. There is still quite a bit of resistance, but still room for it to run higher before bumping its head on those levels. Whereas NASDAQ is right up at the 1800 level and has quite a ways to go itself before it is able to clear the recent peaks that it has shown.
Overall, there were not that many great moves, but then again, holding the gains after a somewhat euphoric session on Monday is not bad action. The market had something of a hangover and the charts indicate that. They moved up a little bit, but there was not much desire to get out there and pedal hard to the finish line.
LEADERSHIP.
The chips remain solid. Intel's earnings were out after the close and they were moving up ahead of those earnings - they were expected to be good and they were. Intel is surging after hours and it is dragging a lot of technology with it. The interesting thing is Intel is increasing its capital expenditures beyond what was expected. Last quarter, Intel reduced its capital expenditures more than was expected, and it has now reversed that and that will have a coattail effect on the chip equipment makers tomorrow; indeed, it will help all of the stocks such as AAPL that use Intel chips. You might wonder why that would be the case since they have to buy Intel chips. If business is better and gross margins are so good (with Intel at 51% which beat the 46.5% expected) one would think that that would hurt companies that are using their chips because they have to pay more for them. The bigger point is that Intel is selling more of them, selling them at a better price and getting its gross margins at a better level, and therefore that implies that those using Intel chips are buying more of them and willing to pay up for them. That means their business is good enough to do so. That is how you get the coattail effect and even the incongruous situation where the users of the chips gain in price as well. It is the old story of a rising tide lifting all boats. That is what could be happening with Intel's news after hours.
It is interesting also because consumer stocks still continue to perform pretty decently. Not overall, but there are stocks within sectors that are doing well. Restaurant stocks are a case in point. There are some retailers also, although they tend to be more of the discounters because we are still in a nasty recession. Nonetheless, we are seeing areas as restaurants that should not be doing well (restaurants are one of the first discretionary expenditures that people drop when they have issues regarding paychecks) still going higher. Maybe the market knows something, or maybe we are getting a false signal from the market, since sometimes it provides false signals in bear markets and recessions. The market rallies, it tests the waters to see if buyers are there. When you look at the big picture of the indices, they are still not out of the woods by any stretch. Therefore you have to keep in the back of your mind this realization that over the years in bad recessions and bear markets you get false starts.
The market has not had a false start yet and this could be it. There has been a selloff and then this recovery. There has not been a recovery that failed yet. Often in bad recessions and bear markets, you get that failed recovery attempt, driving everyone insane and also out of the market so it can finally rise. Rarely do you get a selloff and recovery, case closed. We have to beware that the market could still, despite these better than expected earnings, get another selloff. The reason is that even though they are better than expected, you have to go back to what was expected. In anticipation of earnings estimates were sharply lowered- they are beating those sharply lower expectations on the ability to cut costs better that thought. In Intel's case, it is having some better buying, so maybe I am wrong - maybe we will go straight up from here . We have to watch the resistance levels and how the leaders react when the market gets there.
Energy and commodities continued their bounce higher, but there is not a renewed leadership in all of them. They sold off aggressively and some of them are just now bouncing back up to resistance. Although there are some very good patterns that have set up - stair-step patterns that are looking back up, and ABCD patterns that have set up buys. AKS - the steel stock - is one example of one that is trying to turn back up off of one of these patterns. So we could see the commodities and some energy continue higher. They are coming up to important resistance and we will find out soon although some of them are trying to resume leadership mode.
Techs and financials were basically steady. Financials had a decent move on Monday, but they backed off of Tuesday after all of the euphoria about GS was out. That is okay for now - they can hold onto their gains and that is fine. Tomorrow we want to see the techs step out, and not only that, but we want to see them hold nice gains. We will see what happens when NASDAQ gets back up to the July peak and then the June peak. We want to see the technology stocks show good buying and then be able to hang onto them.
In summation: Leadership is a work in progress, but an improving work in progress. Many stocks in consumer discretionary or chip stocks - the leaders off of the original low - are moving into strong leadership positions. We are also seeing technology and some commodities and some energy improving and potentially setting up good moves higher. There is a melt in the leadership freeze over the last few weeks, and we will see if that can continue with these earnings that are coming in and helping to bust up the ice.
THE ECONOMY
House passes a 'tax the rich' healthcare plan.
There was huge news today in not only the anticipated reports but also in the House democrats agreeing to its version of a healthcare bill. How are they going to pay for it is the question on everyone's list. We were told up until yesterday or the day before that there would be no surtax, no taxing of any benefits, or any additional taxes in order to pay for it, but hat is not going to be the case. There are going to be new taxes and, of course, it will not go to the people who do not pay taxes because if you do not pay taxes I guess you cannot pay any more. It will fall on what are called the rich. They are going to put a 1% surtax on anyone making $350K-$500K, a 1.5% surtax on anyone making 500K-$1M. If you make over $1M, you get socked with 5.4%. The mentality of the country right now is about taxing the people who have the money. It is unfortunate that these lower categories fall into people who run small businesses, because they are not going to let you deduct their health benefits anymore. That is not part of the plan, so you will not be able to deduct that and you will not be able to adjust your gross income down in order to avoid the tax. It is going to gut punch a lot of small businesses, but the administration has no problem with that because it thinks that you can tax the rich as they apparently do not earn the money, but receive it as manna from heaven. Therefore, it is easy to tax them because they do not really earn it. That is a social choice that we are making, and we have made that choice because we elected this administration. A lot of people are having second thoughts about this with all of the spending, and if they understand what the Administration wants to do with their healthcare their views may change.
They will wake up, but it will be after all of this passes and they will be spending more than 55% of their income on federal and state income taxes (or property taxes for those states that do not have state income taxes). Of course, that does not count the federal, state and local excise taxes on your gasoline, cell phones, long distance calls, and just about anything you buy. You can easily see your effective tax rate move to 60-65%. They also have not counted out throwing in the VAT tax on top of that as an extra revenue kicker to try to raise additional money for the shortfalls that are invariably going to happen. They do not know how much this is going to cost, and what has the last 40-50 years of government programs taught us? Every government program costs at least twice as much as anticipated. Taxes will hit more than just the 'rich' at that point.
The national plan calls for a Director of Health Services who will approve or disapprove of treatments. This was in the stimulus bill that was related to the electronic keeping of health records, but it had to be eliminated in order to obtain an agreement to pass it. There was a clause that required government consultation with physicians. That is the European clause where treatment is weighed not as medically viable, but whether it was cost-effective. In other words, if you are too much of a risk, if it would not really benefit you or if the risk of it being a success would be low, you would not get the treatment. That is what they are setting up here. There is going to be this Director of Health Services that will approve or disapprove treatments. That is exactly what happens in Australia where my brother died, that is exactly what happens in Canada where my sister-in-law almost died before we brought her back - that is what the UK and other European countries do right now. They have rationed healthcare and it takes a long time to get the basic treatments that we get here. MRI's are now as commonplace as x-rays, but in European countries they are not. That is not even to mention the great Star Wars-like medical devices we have now for treating different forms of cancer and other diseases. We are light years ahead, but what this plan does is crowd out innovation in favor of low costs.
The President and the democratic Congress say that this is going to coexist with the private sector, similar to how the US Post Office coexists with Fed Ex and UPS. Maybe it can do that, but the costs of this are unknown, and the costs will likely be huge. What happens when the costs surge is that it crowds out the private plans. You cannot have the rich people able to afford their own healthcare that provides these kinds of procedures without consideration of viability while the federal government limits those procedures for the poor. In other words, it will not be fair to the poor people versus the rich people because they will not be able to get these treatments. What will happen is that the federal government will outlaw certain treatments under private plans saying that the only place you can get them is under the federal plan. If you are a doctor and provide this they will fine you, or if you are a patient who does this, you will be fined and maybe have some jail time attached to that just like they do in Canada and Europe. I am not making this up - this is the law there and what happens. They will say it is only fair if everyone gets the same treatment, but everyone should be able to benefit from the treatments capabilities we have.
There is a great plan out there right now by the republicans that would allow all of this to be done through the private sector, which is much more efficient when it comes to cost management and innovation. Even though Medicare's cost structure is cheaper than private healthcare, the fraud level is also at about 60-70% according to a recent government study. Even though they save a little bit on the administrative cost, the fraud is so huge that it swallows the plan. It is not a joke to those who receive the benefits, but a joke to all of us who fund it and think we are getting a dollar-for-dollar benefit (or anywhere close to that) for the money we spend.
I have been on my soap box long enough, but this is a huge bill and it will affect the market. One of the things that could really help us out of this healthcare plan is if it does not pass. Obama may get lucky - if this does not pass and if cap and trade does not pass, the stock market will rally because the economy will not be saddled with all of these huge expenses that we cannot pay for. It will rally and Obama, even though he would have failed to get his pet legislation passed, would enjoy a rally and maybe even an economic recovery. Does that sound ridiculous? No - Bill Clinton enjoyed the same thing. We came out of the recession in the early 90's. There was just a pause in the 1980's-2000 boom and one of the catalysts was the failure of the proposed national healthcare plan. Clinton then cut capital gains tax rates and that helped surge the market and economy even more. Good things can come out of this for the President if it does not pass whether he realizes it or not.
PPI jumps on energy, food costs.
The PPI was the highest since 2007. Energy costs were the catalyst once more. It rose 1.8% versus the 0.9% expected, and 2% back in May. The core was up 0.5 and that was versus the 0.1 expected. Food was up 1.1%. That was the biggest month-over-month gain since late 2007 which is pretty substantial. Year-over-year, the moves were down 4.5%, so prices are falling, but month-to-month recently they are moving up thanks to gasoline in large part. It rose 18.5% while energy was up 6.6% overall. While the number moved up, it is still lower in the bigger picture.
Retail sales post second straight gain, but not gaining any ground.
We can say the same thing for retail sales, but it is not the same positive as it is with respect to rising prices. Retail sales gained 0.6%, when only 0.6% was expected. That is fine. If you take out autos, they rose 0.3% when 0.5% was expected. If you take out gasoline, that puts it as 0.3%, and if you take out autos on top of that you are basically back to zero. Gasoline sales are part of retail sales even though they do not really add anything. We burn them in our tanks so we can do what we have to do to make the economy work and make our lives work; it is not anything that adds to our economic output. You have to factor that out of the equation and then you realize that we did not have that great of a grain the retail sales. Nonetheless, we are up two months in a row, and up four out of the last six months. That sounds great, but year-over-year, it is down 9%, and from January to March, it is down 0.4%. Every since September, retail sales plunged. They are stabilizing now; they are up modestly off of the bottom for the same reason that we have seen every other economic report stabilize: we are now realizing that we are not going into the Great Depression II. We have stabilized but not recovered, and it is stabilizing at a massively lower level than where they were prior to September 2008 (and they were not that great heading in to September of 2008). During the summer they were basically flat and before that they were at 2-4% year-over-year gains and that is not very good. That is well off of what we have been showing in the years leading up to that. There are not any great gains to be seen in retail sales, and indeed, that summer retail sales were up because of the Bush stimulus package where he gave the rebates. That was really the first stimulus package in this recession. That boosted retail sales, but they were still woefully below what they were during better times. The point is that while we see these are stabilizing, just like we see earnings that are a bit better, it is coming back from panic levels so one would expect them to be better now, but they are not recovery levels. That is a huge difference from a recovery.
THE MARKET
MARKET SENTIMENT
VIX: 25.02; -1.29
VXN: 26.03; -0.58
VXO: 26.32; -0.62
Put/Call Ratio (CBOE): 0.83; 0
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: +6.52 points (+0.36%) to close at 1799.73
Volume: 1.818B (-1.86%)
Up Volume: 1.216B (-404.412M)
Down Volume: 620.881M (+347.1M)
A/D and Hi/Lo: Advancers led 1.33 to 1
Previous Session: Advancers led 2.69 to 1
New Highs: 25 (+6)
New Lows: 13 (-14)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ is bumping up to 1800 where it has a little bit of resistance. The big story tomorrow will likely be found in the SOX. It rallied for its fourth session, running up ahead of the Intel earnings. It is already up to its next resistance at 270. It was At 260 the other day. Intel will send it up toward 280 and that is where its June peaks were at 283-284. It is going to send it in that direction. It is important to note that semiconductors were the original leader off of the lows, and they dragged the rest of the market with them (including NASDAQ). Even though Dell was down, we are getting some good news out of Intel and Intel makes up a big part of the NASDAQ is well as the SOX. It will help drive things higher. After hours the Q3 was up 1/2 point. We could very well see the chips lead the market higher again and we need them to do that because at this point, the indices have all bounced but they are also still at key resistance. They are at the head and shoulders and have not broken that pattern up yet and NASDAQ has been making a series of lower highs. That is not necessarily good action - it is not a failure by any means because as you know, the market can make a series of lower highs over a constant bottom and it can break up from there. It can break down from there as well, but it is not automatic death if that happens. Since leadership is picking up there is still hope and possibility in these patterns.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +4.79 points (+0.53%) to close at 905.84
NYSE Volume: 978.933M (-17.7%)
Up Volume: 673.45M (-400.593M)
Down Volume: 301.36M (+196.482M)
A/D and Hi/Lo: Advancers led 2.32 to 1
Previous Session: Advancers led 4.42 to 1
New Highs: 31 (+11)
New Lows: 39 (-10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
That leaves us with the SP600 and the Dow. They have not cleared up their head and shoulder patterns either, but on the other hand they are not caving in. Often these patterns set up and they start to break down, but then they never consummate, as you would say. That would be where they lose as much as the pattern height, which is the textbook definition of how much a stock or index should lose when it sets up a head and shoulders pattern.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +27.81 points (+0.33%) to close at 8359.49
Volume: 189M shares Tuesday versus 253M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Intel is setting the stage, and it is going to send the techs jumping higher. It was up over 1 point on its own and it dragged the techs with it overall. That is a very decent after-hours move. The market set itself up well ahead of earnings. I talked about when it was selling that at least it was setting itself up better and taking some of the air out of stocks and moving into earnings. It is panning out pretty well for the market because now stocks are coming in and giving better than expected results. Stocks sold down with worries about the economy, and then - boom - now they are bouncing higher because they are getting better than expected results. I think that some of these are bogus reasons as to why they are getting better numbers and beating these very low expectations, but the market was primed for it and the market is bouncing accordingly. Of course we take what the market gives.
We have taken positions on stocks that were in good patterns and were in good risk/reward positions that could move higher and give us nice gains as the market recovered off of the sells and then rallied into these earnings. Often stocks will rally into earnings after they have lost some ground, and if the earnings beat like they have, they post some nice gains. After awhile that move will play out, and then it is a matter of whether they can hold the gains. That is what I was talking about earlier, and that is the key here because the indices are in a position where there is a lot of overhead resistance - some overhead supply that they need to break through. They are doing the right thing in holding key support levels, and now we see if they can break up these head and shoulders patterns on the NYSE indices and whether NASDAQ can break out of its pattern of lower highs and make a higher high. That would put it in a new uptrend.
We have taken a few good positions and have had some running all along. Wednesday we may have the opportunity to take some gain in these as I spoke about on Monday. If we get a good rally, we might be able to take some interim gains in these stocks that have put in 3-5 sessions of solid moves. Other stocks that we have upside play positions in that are not moving as well or have not been, if we want to we can close them out on a surge higher. You can bet that the sellers will test this move; they will come in and try to sell some of this move and take some gain. We have planned to do that as well, though we are not trying to short the market, but only trying to log some gains. There will be profit taking and some sellers trying to send it lower. That will make it interesting to see how well the market can hold up.
There was a big Goldman move on Monday, and a pause on Tuesday. There will be an Intel move on Wednesday, and we will have to see how the indices handle their resistance and close out the session. That will tell us more about where the market is going to go in the next few weeks. The whole story will not be told on Wednesday, but we will get an idea. If the sellers come in and reverse a market off of gains and high volume, you know that there is trouble. I do not anticipate seeing that, but we will have to see how it plays out.
Do we chase stocks on this move higher? No, not right now. We can always get in to good moves after the fact. People see a stock gap up and are afraid they missed the gap and it is over. Amazon gapped up earlier in the year, so we bided our time and waited for it to stabilize and for the gap to hold. When it did, AMZN was going to go higher again so we bought it and caught a huge move. The second move was bigger than the first. You do not miss anything by waiting and not chasing stocks higher.
What we will be doing is selling some of the stocks that we have bought into over the past few weeks. We will let them rally up and take some gain off of the table. We will also watch some of the downside plays set up. Energy and commodities are bouncing as are some other sectors and we are going to watch them to see if they break higher and break their downtrends, or if they just bump up and start to sell again or cannot break through resistance. We are still watching stocks for the downside. This is not decided based on the economic conditions not being that great and the market showing a move higher. They seem to be at odds with one another. We will follow the market and take what it gives, but also look down the road because there are many stocks that have rebounded but not broken their downtrends, and those can provide some downside plays. It is all a matter of what the indices do with resistance right now. NASDAQ is not out of the woods with its series of lower highs that it has to break and SP500 has its next resistance at 930 that it has yet to break.
Either way, earnings season is going to continue and we are likely to see more stocks beat lowered expectations. The question is how much mileage can we continue to get out of these beats of lowered expectations? After this happens, often is the market moves up then either sells back down or it goes dormant. That is what happens in the summertime after a good earnings season. While things may look really good after Intel announced is this evening and we will enjoy the gains on it, keep in mind that we do not want to chase the upside because a lot of times after earnings season matures in the middle of the summer, the market goes dormant. We want to take some gains and enjoy the move while it is there and volatility and the options are pumped up higher on the news, and then we can reassess as the market sells back down into the heat of the summer.
We will like the move tomorrow, will not chase a lot of stocks to the upside, we will take gain off the table and we will tidy up positions, using the cover of the upside to do that and see whether or not the market can hold the gains or if it reverses. The market will not answer all the questions tomorrow about what it is going to do unless there is a dramatic reversal off of the high. That is the one signal that you can take to the bank with one session. Likely we are not to see that, and this will play out over the next few weeks of earnings season. We stand to make some good money accordingly. Have a great evening, I will see you tomorrow.
Support and Resistance
NASDAQ: Closed at 1799.73
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:
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 1763
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 1623
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 905.84
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
878 is the late January 2009 peak
The 200 day SMA at 877
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 8359.49
Resistance:
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:
The 50 day EMA at 8354
The 18 day EMA at 8353
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): 0.5% actual versus 0.1% expected, -0.1% prior
PPI, June (08:30): 1.8% actual versus 0.9% expected, 0.2% prior
Retail Sales, June (08:30): 0.6% actual versus 0.4% expected, 0.5% prior
Retail Sales ex-auto, June (08:30): 0.3% actual versus 0.5% expected, 0.4% prior (revised from 0.5%)
Business Inventories, May (10:00): -1.0% actual versus -0.8% expected, -1.3% prior (revised from -1.1%)
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 1 of 3
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