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world stock market, us stock market
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8/11/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: MR
Buy alerts: None issued
Trailing stops: IDTI; LM
Stop alerts: SINA; SNDA; SWY; VMW
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VIDEO MARKET SUMMARY
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View the 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:
- Sellers pressure the market, manage to thwart a late rebound attempt.
- SP500 gives up the November peak after a quick visit.
- Productivity surges as the recession deepened.
- Wholesale inventories tumble in a sweet and sour report.
- AMAT produces some good earnings and guidance.
- Stocks may rise into FOMC meeting but then the sellers will likely take another shot.
Sellers find some traction.
The market was under some pressure on Tuesday. There has been a lot of talk lately that the market is overbought, and after that big run in July that is understandable. Many are looking for a correction, but as with the well-publicized head and shoulders and shoulders in June that never consummated and the old watched that pot never boils, a correction everyone expects often is not much of a correction. Nonetheless, the market is a little bit overbought. Futures were under pressure and then Productivity came out much better than expected. That helped boost the futures, though it could not quite bring them back to positive. When the market opened, it tried to move up, but could not hold the move and tumbled down mid-morning. SP500 gave up 1,006 as well as the 1, 000 level.
The market did get some help after lunch with a 3 year bond auction that was much better than expected. The stock market moved up, and it looked like those buyers were coming back in with all the liquidity and would try to send the market back to positive. Something happened in the last half hour, however. The market turned back down, and what looked like a pretty decent rebound attempt ended up unable to make the turn positive and the indices closed with roughly 1.3% losses. It was not a terrible day, but we did not get that boost of buying back in on this dip that has been holding the market up for many sessions during this rally from July.
There was news other than productivity. China's July economic numbers came out, and they were not that great. Exports were down 23% and imports fell almost 15%. Production levels were up a mere 10.8% which is not that great for China. The new loans were very interesting; they were -$52B, but during the first half of the year they were a positive $1.1T. Quite a slowdown in the Chinese loan market. It is a hard call as to whether or not you can put much faith in these numbers. They are somewhere in the ballpark, but as with our numbers in the US, it is a pretty big ballpark. In any event, these numbers cast a bit of a pall over the market in the morning, and there was basically no upside catalyst to get things started off. That bond auction really helped get things going when it scored a much better bid than anticipated. There is another one tomorrow - an important 10 year auction - and that will tell a lot of the story, along with the FOMC announcement with respect to interest rates.
The one thing that Tuesday did show was that the sellers are still lurking out on the edges of the playing field. Over the past couple of weeks, the sellers have tried to come in and sell the market when they felt the moment was opportune. They have been unsuccessful because all of the liquidity in the world is helping to boost stock prices back up. At the end of the day on Tuesday, the sellers had control; they were able to take the market down and rip apart more than half of the afternoon gains as the market had come off of its lows. That did not change the character of the uptrends but the sellers are still there. The one thing that we can take from today is that the sellers are out there and are getting bolder.
The dollar was basically flat, closing at 1.4150 Euros - not much change there, but oil was down nonetheless. Oil closed at $69.45, down $1.15. It is up near the top of that range - remember it was trading in the $58 up to $70 range, and now it has run into trouble around $72 and is coming back some. If the dollar remains strong, it will remain under pressure, but if the dollar were to tumble again then the oil would possibly start to pick up and might break through that range. The dollar is interesting. It sold down to its June levels, which was a low for 2009, but that bounced it right back up. It has not exploded higher - it is still hanging around that area but rather than rolling back over and diving, it is showing some stickiness. The economic data is helping, such as the jobs report last Friday. It was not as atrocious as feared, but still there is not enough to break it higher yet. It is hanging around at that low end of the range where it hit the low for 2009.
After that bond yield auction, people were buying bonds again. It was not a huge move, but the yields dropped thanks to people moving back into treasuries. The 2 year closed at 1.17% and the 10 year closed at 3.67% after it bumped up to 3.75% on the session. That is a pretty good move in bonds, and if there is another decent auction tomorrow we could see those yields come down once more as people move into bonds. What also helped them (other than the auction) was that stocks were down. There is that little concern that the market may be toppy right now, so people are moving into some treasury bonds as a safety move.
TECHNICAL.
INTERNALS.
The internals were pretty negative. Breadth was -2.7:1 on both NYSE and NASDAQ and volume was mixed. The volume on NASDAQ was up while NYSE's volume was down. NASDAQ's volume was still below average, but NYSE's volume was average. There was some higher-volume selling on NASDAQ in tech stocks, but it was not just dumping. The volume was still below average, so it was not just throwing all of the techs out. It was more of what we have seen of late: a little more aggressive selling with respect to the technology names.
CHARTS.
SP500 was not able to close over 1,006 (the November 2008 high), and it was not able to hold the psychological level of 1,000, closing a little below that. The point is that it was not quite ready to make that move over the November high. It made a good break, and often you will see an index come back and test. It does not mean the rally is over or that a rollover the imminent. What it does tell us is that there are some sellers at that level and, given the rise to this point (15% in July alone), you have to take note of that and know that there could be some selling ahead. It would not be anything abnormal, but it is what the market is showing us and is historically how the market acts.
SP500 did manage to hold its 10 day EMA, and that is good near support that still keeps it in its uptrend. There is a lot of talk about how the market needs it to roll over, but the trend is in place and you have to respect a trend. As soon as you stop respecting the trend in June and July, when it had that head and shoulders pattern that was going to take SP500 down, what happened? It broke right back up and had the best July in decades.
NASDAQ sold as well, but it held its 18 day EMA and that did keep it in its lateral range. It made a new low for its recent lateral range over the last two weeks. That is not necessarily a breakdown and rollover. It is trying to consolidate in a more or less lateral range, and that is pretty decent action. You have a lot of the big names in techs having to come back and take a breath after a good run to the end of July. That is exactly what they are doing, and as they do that, the NASDAQ does the same. There is no major damage, but we have to watch it just as we have to watch SP500 because it has run a long way and people are talking of correction.
Another key index was the SOX. On Monday it broke its near term uptrend and it sold some more on Tuesday. It was unable to hold its 18 day EMA and the SOX was one of the early leaders in the rally off of the March low. It looked like it was in trouble in June, but it pulled it out of the hat and moved it back up to a new post-March high. Chips are struggling again and financials struggled as well on Tuesday after a good run themselves. As I noted several weeks ago, as the financials go, so goes SP500. Thus, with the financials in trouble, SP500 is falling back; with the chips in trouble, NASDAQ was falling back. Those are two very important leadership groups that are in a pullback mode right now. How they fare will tell the tape with respect to the other indices as well.
LEADERSHIP.
Financials and chips were the groups on Tuesday that had a most influence on the market. Since they are under pressure, NASDAQ and the NYSE (SP500 in particular) were lower. They are not necessarily breaking down, however. There are individuals in each of these groups that are in trouble, but overall they are in good position. We might get another chance to play to the downside near term, but that does not mean they will roll over, crash, and test the prior low down in March.
Other groups were hanging in there, and leadership overall is still hanging in there, though it is just not moving higher right now. It had a huge run in July, so now they are taking a breather. There are still stocks in great shape to move higher if the market gets the catalyst. Energy still looks super and is in a pullback already. It is just setting up and trying to get ready to move higher once more. After the techs, chips, and financials have a pullback, they may be in the same position.
We are going into that tough month of September, and everyone likes to think that things are going to happen in September - especially when you have had such a good run up to this point. Traders have a way of finding the worst in any situation, and as I talked about last night, there are self-fulfilling prophecies. You do have big funds that have made good gains and maybe they want to take them off the table. That could tip the rock at the top of the hill and start a rock slide that takes the market lower. It may happen or it may not; right now there is nothing nefarious in the market. It is just showing some wear and tear with some higher volume selling and sellers moving in and winning some battles. It was not too long ago that the sellers did not win ANY battles, but were always pushed away. Tuesday was the day they won the battle, which is another indication that the market is somewhat tired and we could get that pullback. The big question is whether or not it is a big correction or just a pullback. I am in the camp of it being a pullback, and not a major correction.
In summary, leadership still looks good, and it is testing back just as the market is testing back. There is somewhat higher volume - most of them on very decent, orderly volume as they make a good test of near support.
THE ECONOMY
Productivity surges as part of the tough healing process.
I want to touch on some of the numbers that came out because they were pretty stellar. Productivity for Q2 showed its largest gain in six years. It rose 6.4%, which is much better than the 5.5% expected and the revised 0.3%. Originally, productivity was reported at 1.6% - that is a pretty massive downside, so that does cast doubt on this number that so easily beat expectations. When you start seeing the revisions to the positive that is always a good sign. We are not there yet on productivity, but it is hard to argue with a 6.4% gain - the largest gain since the 3.6% gain in 2001. In 2001, we were going through that recession and we had 9/11, so there were all kinds of issues in that respect.
This is a pretty significant number which tells us that businesses are doing what we thought they were doing. They have laid off a lot of people and they are squeezing the remaining workers as much as they can to get as much product or service out of them as possible. They are also using technology as much as possible. This is a typical thing when you look at all recessions. Productivity surges because companies cannot keep the same number of people on (and we know that is the case because of the 1.6M jobs lost). There are people who have to pull more of the work, but there is not the same amount of work, so they are not getting squeezed that hard yet. This is where the average hours worked comes into play. If you start seeing the average hourly rates rise - maybe in the 34 hours range as opposed to the 33.1 that we have now - you start to see the squeezing of the workers. They are expected to do more because the others are gone, and then when business picks up, they have to work more and more. Those are all pieces of the puzzle that tell you the economy is at a recovery. We are not there yet. We are seeing some of the pieces show up and maybe some turns, but we are not seeing the same position we were in during the second half of 2002 and early 2003 when the economy truly was turning.
I do not think we are having a true turn. We are having a relief move from fears of the Great Depression II and the total shut down of the economy in the fall of 2008. The pieces are coming together, but they are not there yet, though it is nice to see productivity pick up to that level.
Wholesale inventories down, but that means more future production.
June wholesale numbers were another interesting report. They fell 1.7%, almost doubling expectations of 0.9%. Prior, they were -0.8%. That shows that inventories are down, and that means no one is producing anything. That is true, but it also means that they are going to have to produce something because we are using up what is there. This is another piece to the puzzle that we have to have for recovery. We have to have the inventories to climb to the point where we have people needing to produce more and more. When that is the case, we are in much better shape.
THE MARKET
MARKET SENTIMENT
VIX: 25.99; +1
VXN: 26.11; +0.45
VXO: 24.85; +1
Put/Call Ratio (CBOE): 0.77; +0.02
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: 42.2% versus 36.7%. More sharp rebounding as the market continues to improve. After falling to 35.6% the market bounce caught up with sentiment. Hit a high of 47.7% mid-June on the run from the March lows. Steady rise from 36.0% in late April. Barely over the 35% threshold, below which is considered bullish. Of course it will jump after this past week. 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: 31.1% versus 35.6%. Big drop after holding for two weeks at 35.6%. Surging from from 30.3% in early July and 23.3% in mid-June. Still well off the 37.2% and the 37.1% in mid-April as the rally continued higher. Cracking above the 35% threshold considered bullish. Still 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: -22.51 points (-1.13%) to close at 1969.73
Volume: 1.871B (+2.93%)
Up Volume: 449.864M (-468.322M)
Down Volume: 1.506B (+668.134M)
A/D and Hi/Lo: Decliners led 2.72 to 1
Previous Session: Decliners led 1.07 to 1
New Highs: 22 (-31)
New Lows: 8 (0)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -12.75 points (-1.27%) to close at 994.35
NYSE Volume: 1.271B (-28.62%)
Up Volume: 219.935M (-318.937M)
Down Volume: 964.01M (+433.955M)
A/D and Hi/Lo: Decliners led 2.71 to 1
Previous Session: Decliners led 1.17 to 1
New Highs: 70 (-28)
New Lows: 36 (-1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -96.5 points (-1.03%) to close at 9241.45
Volume: 171M volume Tuesday versus 161M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
There are two major events on Wednesday. First we have AMAT, which released earnings after hours that were much better than expected, both on the revenue side and on the earnings side. Not only that, but their guidance was higher, and that gave chip stocks a boost after hours. Maybe techs and all the related indices will get a boost on these numbers. After all, they were trading higher after hours. That is very good, but the question is whether AMAT can boost the rest of the chip sectors and technology up such that SOX can recover its trendline. I will be watching that.
The second key for Wednesday is the FOMC meeting. The Federal Open Market Committee will come out will its decision on interest rates. It will not change the quantitative easing, but people will be watching what the Fed says with respect to when it will withdraw or start to pull back on some of its facilities and all of the stimulus put into the money supply.
What does it matter? What typically happens, and what has happened on the last several FOMC meeting, is a modest rise on the day of the meeting when they give the announcement. Sometimes it takes off and other times it does not. This is interesting because we have AMAT with its earnings that could give additional catalyst to move higher into the FOMC meeting - that in addition to the general tendency to drift higher into the announcement. What happens afterward? I am not too sure that the semiconductor index is going to be able to break back through the uptrend line that it just broke. It may bounce back up to that trendline thanks to AMAT and the general rise of the market up into the FOMC meeting, but will it be able to sustain the move? I anticipate that there will be a move up. It may not be much of a move, but then it could turn back over and the selling could resume at that point and we go further down in what could be a short-term correction.
What we will do and what we were doing a little bit on Tuesday is trimming up positions. We will close some that are marginal and are kind of struggling, and we will let others that we have good gain built in continue the move up. If they have a great run, we might take some more gain off of the table on the move up.
We are going to move up our stops. We will keep them at decent levels at good points that make sense . If the market comes back and takes us out, so be it. We have already made great money on those positions, and if the market takes us out, that is fine. If it does not, we will let them run higher. I could be wrong because no one knows what the market will do, but we have to look at the signposts and take the safest route. We will protect our positions, take gain when it is presented, and then we will look for some downside opportunity if the market moves up into the FOMC meeting and starts to turn down.
We already have some downside plays and we have others that we are looking to get in. I see others maybe in the financials and a few others; semiconductors come to mind if AMAT pushes them back up and we get a better entry point. We are going to protect our positions and look for new opportunities. That may mean we have to close some of the upside positions that we have taken recently because we do not have a lot of gain built in them. If they start to weaken, we do not want to chance them riding down at the beginning of a new correction in the market. I would rather get out and come back later when we have a better chance. If I am wrong, we can get back in. I do not think we are going to have a lot of huge upsides for the market in general. We can have some great upside in individual areas because there are some great looking patterns to the upside out there, but be patient. Let them come to you, pick them up, and enjoy the ride when it is time. I think we might get a correction right now, so we will play that if it comes. We will play it and we will make money off of them and be ready for more upside.
It is a beautiful day here and I hope it is beautiful where you are. Have a great evening and I will see you tomorrow.
Support and Resistance
NASDAQ: Closed at 1969.73
Resistance:
1984 from late September
2010 from the Thursday peak
2015 is turning out to be near term resistance
2099 is the mid-September low
2169 is the March 2008 double bottom low
Support:
The 18 day EMA at 1955
1947 is the October gap down point
1897 is the October post gap intraday high.
1880 is the June peak
The 50 day EMA at 1874
1862 is the July peak
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
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 1638
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 994.35
Resistance:
The November 2008 peak at 1006
1050
1106 is the September 2008 low
Support:
The 10 day EMA at 994
The 18 day EMA at 981
956 is the June intraday peak
The 50 day EMA at 945
944 is the January 2009 high
935 is the January closing high
932 is the July peak
930 is the May peak
919 is the early December peak is bending
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 prior April peak at 876
The 200 day SMA at 873
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 9241.45
Resistance:
9387 is the mid-October peak
9625 is the October closing high
10,365 is the late September low
Support:
The 10 day EMA at 9227
9088 is the January 2009 peak
The 18 day EMA at 9100
8985 is the closing low in the mid-2003 consolidation
8934 is the December closing high
8878 is the June peak
8829 is the late November 2008 peak
The 50 day EMA at 8778
8626 from December 2002
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
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.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
August 11 - Tuesday
Productivity-Prel, Q2 (08:30): 6.4% versus 5.5% expected, 0.3% prior (revised from 1.6%)
Unit Labor Costs, Q2 (08:30): -5.8% actual versus -2.5% expected, -2.7% prior (revised from +3.0%)
Wholesale Inventories, June (10:00): -1.7% actual versus -0.9% expected, -0.8% prior
August 12 - Wednesday
Trade Balance, June (08:30): -$28.5B expected, -$26.0B prior
Crude Inventories, 08/07 (10:30): +1.67M prior
Treasury Budget, July (14:00): -$180.0B expected,
FOMC Rate Decision, (14:15): 0.00%-0.25% prior
August 13 - Thursday
Export Prices ex-ag., July (08:30): 0.8% prior
Import Prices ex-oil, July (08:30): 0.2% prior
Initial Claims, 08/08 (08:30): 545K expected, 550K prior
Retail Sales, July (08:30): 0.7% expected, 0.6% prior
Retail Sales ex-auto, July (08:30): 0.1% expected, 0.3% prior
Business Inventories, June (10:00): -0.9% expected, -1.0% prior
August 14 - Friday
Core CPI, July (08:30): 0.1% expected, 0.2% prior
CPI, July (08:30): 0.0% expected, 0.7% prior
Capacity Utilization, July (09:15): 68.4% expected, 68.0% prior
Industrial Production, July (09:15): 0.4% expected, -0.4% prior
Michigan Sentiment-Prel, August (09:55): 69.0 expected, 66.0 prior
End part 1 of 3
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