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money investment, financial investment
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7/15/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: BIDU
Buy alerts: None issued
Trailing stops: None issued
Stop alerts: GS; SNY
SUMMARY:
- Same factors from April and May send stocks flying.
- New York PMI posts a strong comeback.
- FOMC upgrades its economic outlook for 2009 to 2011.
- Market, stocks already up ahead of the surge so now looking for tests for new buys, potential rollovers.
Confluence of 'old' factors send stocks surging.
As in April and into May, the factors all fell into place and the result sent stocks sharply higher. The dollar was weaker again with the dollar index breaking sharply downside and through the 80 level. Commodities and oil surged on the dollar decline. The economic data was not bad. Earnings are starting the season much better than expected. As in April when the economic data and earnings improved from those Great Depression II worry levels, heartening investors, some better economic data (New York PMI, FOMC upgrading its economic outlook) and stronger earnings (INTC, GS) delivered investors a shot in the arm Wednesday as well. Chips and techs took to leadership as in March to May. Commodities stocks and industrials improved. Financials continued their recent rebound.
Stocks gapped out of the gate and never looked back, logging 3% and better gains. They traded in a tight range for three hours midday, but when the FOMC minutes came out and upgraded the US economy, saying the recession would end in 2009 and growth would move to 2.1% to 3.3% in 2010, stocks kicked it home, rallying again in the last hour to new session highs.
The dollar closed lower at 1.4109 euros, a significant one-day drop from 1.3940 Tuesday. Oil jumped to close back over $60 (61.82, +2.30), aided by the weaker dollar and crude oil inventories that fell 2.8M bbl versus the -1.5M expected. Bond yields jumped as investors dumped the safety of US treasuries and the dollar in favor of equities (1.02% 2 yr versus 0.94% Tuesday; 3.62% 10 year versus 3.45% Tuesday). Gold is back in the game as well, rising to 939 (+16.20). Indeed all of the factors (and then some) that drove stocks higher in April and May, are at it again.
TECHNICAL
INTERNALS. Extremely lop-sided to the upside with 7.2:1 NYSE breadth, 4.7:1 on NASDAQ. Volume surged to 2.4B NASDAQ, 1.37B NYSE. NASDAQ trade easily topped average. NYSE trade, while above average, was not as impressive, clearing that bright line by a hair. Nonetheless it was up nicely for a hot (in more ways than one) summer day as the internals were very strong.
CHARTS. SP500, fresh from bouncing up off of 875 support and visiting 900 on Tuesday, blew past that level and onto 930, closing just over that next resistance at the May and late June peaks. Clearing that level does not mean a whole lot in itself; it is in the range and will have to make a more decisive move because as we know, a cracking of support or resistance is not definitive. It is how the index trades around that level that proves or disproves the move. Definitely on a tear up to this level. NASDAQ cleared the June closing peak, putting in a new closing high sine March. Same as SP500 it is not definitive at this stage, but a very strong move breaking resistance along the way. Even DJ30 got in on the move, clearing all but its June peak.
What about the head and shoulders pattern on every financial station? It got blown apart. As I noted these patterns form and often don't pan out. It was THE most watched pattern in the market, and you know what they say about a watched pattern . . . This does not mean the negatives are finished, but the upside action is quite strong.
LEADERSHIP. The leaderboard looks like a trip back to April and May. Sort of. Commodities are bouncing nicely off of their corrections. Tech is breaking upside. Chips, the leaders off the prior low and clearly leading ahead of the Wednesday action, are clearly in the lead here. INTC was almost a sideshow. Other sectors were up but not necessarily in the lead,, at least yet. Energy is rebounding nicely from their corrections. Financials are bouncing sharply; could this finally be their resurgence after going dormant in April? Industrials are recovering well from their pullback as well. Energy, industrials, and financials are bouncing but they have not proved themselves. A test that makes a higher low will tell the tale.
THE ECONOMY
THE MARKET
MARKET SENTIMENT
VIX: 25.89; +0.87
VXN: 25.28; -0.75
VXO: 26.07; -0.25
Put/Call Ratio (CBOE): 0.78; -0.05
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: +63.17 points (+3.51%) to close at 1862.9
Volume: 2.483B (+36.56%)
Up Volume: 2.397B (+1.181B)
Down Volume: 165.997M (-454.884M)
A/D and Hi/Lo: Advancers led 4.7 to 1
Previous Session: Advancers led 1.33 to 1
New Highs: 38 (+13)
New Lows: 7 (-6)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ hit on all fours Wednesday as Intel's results crossed both chip and tech lines. As noted last night, even the companies paying more for the Intel chips are doing so because business purportedly supports it. Good INTC margins are good for everything tech it seems. It is over the November peak and is again taking a hard look at the October gap down point at 1895.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
NASDAQ 100 (3.31%) interestingly did not top its June peak though it did gap over the October gap down point. A bit different from April and May, NASDAQ 100 is not clearly in the lead, but it is not hurting for that matter.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +26.84 points (+2.96%) to close at 932.68
NYSE Volume: 1.374B (+40.39%)
Up Volume: 1.324B (+650.206M)
Down Volume: 47.025M (-254.335M)
A/D and Hi/Lo: Advancers led 7.25 to 1
Previous Session: Advancers led 2.32 to 1
New Highs: 49 (+18)
New Lows: 57 (+18)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Okay this is where it gets interesting for the large caps. Held 875 support and took out 900. Jumped again Wednesday, clearing the 925 to 930 range. A close at 932 is good, just not definitive. The real fun starts at 944, the January intraday high. Remember (it has been awhile after all) that SP500 did not take out its January peak, much more its November peak during the March to May rally. The financials went turtle after May and that pretty much stymied SP500 (along with the other indices). Thus there is a lot to prove on this move . . . starting with 944. The financials will be THE determinative factor.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The Dow, of course, is not even threatening its January peak yet; it still has 400 points to accomplish that. Good start, however.
Stats: +256.72 points (+3.07%) to close at 8616.21
Volume: 305M shares Wednesday versus 189M shares Tuesday. Hey, back above average.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
We were not chasing Thursday. No point. Stocks have already rallied 3, 4 and in some cases 5 sessions to this point and they won't be having too much more upside on this leg. Doesn't mean the move/rally is dead. Hardly. The character has changed.
Now we look for how the gappers treat their gaps, i.e. whether they hold them and thus show great strength or fill them and then continue higher. That takes time. It takes some patience, but it is profitable. Much more so than chasing gaps higher. Remember AMZN and its gap after earnings. We waited a few weeks, picked it up when it showed it was holding its gap, and rode it to big gains.
So now it is a game of not chasing each earnings report or gap. If they hold they will give us good opportunities. It is also a matter of watching how earnings season plays out. The initial response speaks for itself. Now we find out if the selloff ahead of earnings and then the jump on those better than expected results (of course expectations were in the cellar) has legs in the summer heat. Of course there will be opportunities here and there; not all stocks setting up good patterns rallied Tuesday; moves higher come in waves and they will provide us opportunity while the others that led the move with massive gaps and runs test them.
We will see how the downside develops. Sectors in downtrends are trying to break them, but as with the indices clearing resistance by a point or two, breaking or bumping a downtrend line is not definitive as they have run a bit as well. Of course you don't turn in and jump in on the downside at the first sign of weakness. These moves were serious, and as noted above there is a character change. These stocks have run and a bit of testing is normal; jumping in too quickly and then they rebound on you.
We let our existing plays run and continue their trends, knowing this current jump is a bit extended, but with the character change we give them some room to work upside. For the downside we see how the bounces hold. Again, a bit of weakness after a run higher may just be a test before another try to break the trend or extend the move. If the downside is an easy test then we will look for that to give us better exit points after the upside gaps.
In sum the move hanged the market's character but it also has come after a 3 and 4 day move higher. Sure it can give more; if it is a really strong move it should have more in the tank. If that is the case then those downside positions are going to need closing without a comeback because it may not come back. As the indices are at resistance we may get an opportunity on those. Will have to see.
Support and Resistance
NASDAQ: Closed at 1862.90
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 1767
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 1622
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 932.68
Resistance:
930 is the May peak. Bending.
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:
919 is the early December peak is bending
The 50 day EMA at 900
899 is the early October closing low
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 876
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 8616.21
Resistance:
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:
8588 is the May high
8581 is the July peak
8521 is an interim high in March 2003 after the March 2003 low
8451 is the early October closing low
8419 is the late December closing low in that consolidation
8375 is the late January 2009 interim peak
The 50 day EMA at 8365
The 18 day EMA at 8360
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): 0.2% actual versus 0.1% expected, 0.1% prior (no revisions)
CPI, June (08:30): 0.7% actual versus 0.6% expected, 0.1% prior (no revisions)
Empire Manufacturing, Jul7 (08:30): -0.55 actual versus -5.00 expected, -9.41 prior (no revisions)
Capacity Utilization, June (09:15): 68.0% actual versus 67.9% expected, 68.2% prior (revised from 68.3%)
Industrial Production, June (09:15): -0.4% actual versus -0.6% expected, -1.2% prior (revised from -1.1%)
Crude Inventories, 07/10 (10:30): -2.81M actual versus -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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money investment
financial investment
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