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money investment, financial investment
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8/26/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: PNRA; THC; TITN
Trailing stops: None issued
Stop alerts: ANR
SUMMARY:
- Tight, flat lateral move continues for third session.
- Transportation skews durables orders, but revisions are heading in the right direction.
- July New Home sales rise again as inventories finally come back to earth.
- Competing trends: market refuses to give up gains but September rapidly approaches.
Decent economic news again, little upside reaction again.
Durable goods orders topped expectations but the market was not too impressed as it was driven by a big jump in aircraft. Never mind some really good revisions to the prior month. Earnings were still coming, and the retail area showed good beats with WSM, DLTR, and DSW all beating expectations but mostly on those lower revenues (DLTR bucked the trend but it is a big discounter so we know people are shopping more there). Mortgage applications rose 7.5% and a German business survey came in, again, better than expected.
Didn't impress investors much as futures were lower heading into the open. Nothing major, just softer. Stocks opened down then rebounded to positive, aided by a much better than expected new home sales report (+9.6%). Nice surge off that data well into positive territory. Once again, however, the good news could not push the market higher. After the breakout last week the indices have held their gains but cannot to date continue the run higher. The indices slid back to flat and then negative through lunch. An afternoon rebound brought them back, but they spent the rest of the session bouncing in a narrow range. A late bounce took the indices positive. Just barely.
TECHNICAL
INTERNALS. Breadth was, as you would expect from the price action, flat as a board. Volume edged up 5% on NASDAQ (but was still below average for the twelfth time in 13 sessions) but fell 10% on NYSE, its first below average session in four. As with Tuesday, no real churn, just pausing after that breakout last week.
CHARTS. Not much change, but that in itself is interesting. The indices chopped around again on the session but they also held a tight range, showing a third straight doji on the candlestick as they refused to give up any ground. Story of the market. Makes an impressive move, everyone expects some selling, the sellers even come out and try to sell things down. Hasn't sold thus far, however. The sellers are not flooding the market; still a bit pensive and with just cause given all of the liquidity floating around. Still somewhat in no man's land after the July run, a half-hearted test, and then a rally to a new post-March high.
September is ahead and that makes investors a bit sweaty-palmed after such a big run, but the trend is very much in place and then there is all of that liquidity. The market has slowed this week but it has shown no inclination to roll over, at least not from the perspective of the big index charts. SOX is problematical as it has not broken to a new post-March high on this move, and many large techs are dragging, bringing up the rear of this last move higher. Tired after that July run but not giving in just yet.
LEADERSHIP. The big techs are still up but are lagging. Energy was mixed, still struggling a bit even with high oil prices. Commodities are holding their own but they also have to deal with a dollar trying to put in a bottom and bounce a bit. Retail remains hot, one of the hottest sectors. Again there are scattered excellent positions across many sectors. Most stocks, however, are sluggish after a run higher, not in really great shape to spurt higher. That does not mean they are not leaders, just not good buys right now. Energy is trying to set up and others are going to do the same as the market tests. Plenty of leadership, just a lot of it is extended.
THE ECONOMY
Durable goods orders ride aircraft orders higher.
4.9% on the headline was impressive but led by a 107.2% gain in private sector aircraft orders. Take that out and you get a paltry 0.8% gain, but at least it was a gain.
A key negative is the decline in non-defense capital goods ex-aircraft. After rising a couple of months it fell 0.3%. Disappointing but not the end of the rope. Back in 2000 and 2001 this measure of business investment was at these levels and bottomed. As you may recall that was one of the sharpest business investment decline cycles in memory; it is fitting this one is as sharp. It is a positive if this downturn can hold at those prior levels. There is a rise in the regional manufacturing data (it is more recent), and that holds a positive out for the business side of the equation.
Finally, a key component that many overlooked are the upward revisions. Ex-trans, the key factor, was revised to +2.5% from 1.1%. That more than made up for any disappointment in the 0.8% not reaching the 0.9% expected. Upward revisions truly suggest a turn for two reasons. First, the experts making the predictions are shown to be too pessimistic in the midst of change. They are loathe to give up their trends. Second, the revisions reflect much harder data without the guesswork. The hard data shows improvement. Excellent.
July New Home Sales jump.
9.6% was better than expected and added nicely to June's 9.1% rise. That puts new home sales up 4 consecutive months. Sales prices are still falling ($210K versus $237K in July 2008), but that only helps more units move.
And moving units is key. The inventory glut has kept the market underwater for several quarters. Wednesday we learned that new home inventories fell to 7.5 months from 8.5 months. When you get into the 6 month range it is considered a healthy market with a good supply of homes that satisfy buyers but support prices. It makes a big difference when the builders finally stopped building and the market bumped higher and is now able to absorb those excess homes.
Combined with the 'wow' from the Case/Shiller pricing report on Tuesday, there are some solid indications that housing is trying to find a bottom now. About time most would say. No issues from those that have held onto their homes during this debacle.
THE MARKET
MARKET SENTIMENT
VIX: 24.95; +0.03
VXN: 25.6; +0.47
VXO: 23.4; +0.01
Put/Call Ratio (CBOE): 1.05; +0.24
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: 48.3% down from 49.4%. This follows a steady rise past the 35% level that is the threshold for what is considered a bullish climate. It does not mean things are bearish; that takes a reading in the 60% range. Hit a high of 47.7% mid-June on the run from the March lows. Again, to be seriously bearish it needs to get up to the 60% to 65% level. 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.
Bears: 23.1% up from 21.3%. Rebounding some from the big drop two weeks back from 31.1% and 35.6% the prior week. Still a massive exodus from the ranks of bears. For reference, cracking above the 35% threshold considered bullish. Hit a 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: +0.2 points (+0.01%) to close at 2024.43
Volume: 1.991B (+5.74%)
Up Volume: 1.066B (+58.877M)
Down Volume: 947.14M (+88.17M)
A/D and Hi/Lo: Advancers led 1.1 to 1
Previous Session: Advancers led 1.16 to 1
New Highs: 65 (-11)
New Lows: 8 (-1)
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: +0.12 points (+0.01%) to close at 1028.12
NYSE Volume: 1.169B (-10.26%)
Up Volume: 537.294M (-267.83M)
Down Volume: 594.207M (+108.025M)
A/D and Hi/Lo: Decliners led 1.17 to 1
Previous Session: Advancers led 1.57 to 1
New Highs: 108 (-34)
New Lows: 37 (-26)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +4.23 points (+0.04%) to close at 9543.52
Volume DJ30: 154M shares Wednesday versus 173M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Initial claims, second iteration of Q2 GDP. Investors want to see the initial claims, the 'leading' part of the jobs picture, to show improvement. Of course improvement is a matter of degree when the economy shuts down for a quarter or two. Thus the 565K expected is not too bad considering the 700K+ losses at the turn of the year. Of course 565K won't be good enough to satisfy investors hungry for economic improvement in order to play catch up with Germany and the rest of the EU.
Probably won't get it. Things are better as the massive amounts of money from the Fed is having an impact, but not nearly the impact you would anticipate from so much money. Typically the financial system is in better shape and the money gets into the system faster and more efficiently. As usual the banks are performing their scripted role: after free-lending and free-spending policies (encouraged if not, as in the case of Senator Schumer, required under threat of sanction) they are loathe to lend money when small businesses and consumers need it the most. Thus any recovery attempt is stunted due to lack of funds. It is similar to the old seaman's lament: water, water everywhere but none fit to drink. Here there is plenty of money but you cannot get to it. Maybe it is more akin to the Tantalus from Greek mythology condemned to stand in water that receded every time he tried to drink.
So the market cannot make any further headway on some pretty good economic data and it is likely not to get any great news Thursday. So does it sell as a result? With this market you would almost expect a rally. Tried to sell off, a recovery and new breakout, and then three easy pullback days; not even really pullback days. It could trigger right back up from here.
There are stocks at the ready to do so but we note that many of the leaders of the move, particularly the big techs and chips, are not in that same position. If they fall they could have collateral damage in the other indices. SOX has matched the lower high it made in early August after the July new post-March high. These early leaders are lagging and they are having their influence on NASDAQ.
On the other hand energy and materials have had a modest pullback and there are some decent patterns forming. These groups have led parts of the market rally off the lows, and indeed in the rallies in 2007 as well. No reason the market cannot rally behind them again. Sure there is talk China has hoarded materials and commodities in excess of its needs and the acquisition pace will slow, but there is also the inflation that will show up down the road thanks to the loose money, excessive spending, and lack of saving. And let's not forget that the EU is now positive in manufacturing. That has to count for some demand in commodities, right?
Thursday is more of the same for us. The market is still in something of a no-man's land after that rally and no real test back, particularly given the number of stocks that helped lead the rally are extended. There are stocks in great shape and we will continue to look at them on an individual basis as the market tries to consolidate and pick its next course. The sides are split on opinion. It either continues higher in the trend or it starts to sell off for September, some saying as soon as next week. Both sides of the coin are represented and frankly it could sell off given the run. Problem is, it just has not. The trends remain in place, and every time the market looks ready to sell the money comes in and a new leadership group takes over. Well maybe not new, but a recycled one that was out in front, faded to consolidate, then moved back up. Think energy and some commodities right now. If we do get a sharp day of distribution, however, you can bet we are going to err on the side of caution with September approaching and 50% gains off the lows.
Support and Resistance
NASDAQ: Closed at 2024.43
Resistance:
2070 is the September 2008 intraday low
2099 is the mid-September 2008 closing low
2169 is the March 2008 double bottom low
Support:
2016 is the August peak
The 10 day EMA at 2001
1984 from late September
1962 is the bottom of the August 2009 range.
1947 is the October gap down point
The 50 day EMA at 1917
1897 is the October post gap intraday high.
1880 is the June peak
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 200 day SMA at 1656
The January closing peak at 1653 (intraday)
S&P 500: Closed at 1028.12
Resistance:
1044 is the October 2008 intraday high
1106 is the September 2008 low
1133 from a September 2008 intraday low
1185 from late September 2008
1200 from the July 2008 low
Support:
The August intraday peak at 1018
The November 2008 peak at 1006 closing 1007.53 intraday
The 18 day EMA at 1003
992 is the August 2009 consolidation low
The 50 day EMA at 968
956 is the June intraday peak
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 877
866 is the second October 2008 low
857 is the December consolidation low
Dow: Closed at 9543.52
Resistance:
9625 is the October 2008 closing high
10,365 is the late September low
Support:
9387 is the mid-October peak
The 18 day EMA at 9319
9116 is the August low
9088 is the January 2009 peak
The 50 day EMA at 8996
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
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
The 200 day SMA at 8322
8315 is the February 2009 peak
8307 is the April 2009 intraday high
8221 is the May 2008 low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
August 25 - Tuesday
S&P/Case-Shiller, June (09:00): -15.1% actual versus -16.40% expected, -17.06% prior
Consumer Confidence, August (10:00): 54.1 actual versus 47.9 expected, 47.4 prior (revised from 46.6)
August 26 - Wednesday
Durable Orders, July (08:30): 4.9% actual versus 3.0% expected, -1.3% prior (revised from -2.5%)
Durables, Ex Transportation, July (08:30): 0.8% actual versus 0.9% expected, 2.5% prior (revised from 1.1%)
New Home Sales, July (10:00): 433K actual versus 390K expected, 395K prior (revised from 384K)
Crude Inventories, 08/21 (10:30): +128k actual versus -8.40M prior
August 27 - Thursday
Initial Jobless Claims, 08/22 (08:30): 565K expected, 576K prior
Q2 GDP - Prelim, Q2 (08:30): -1.4% expected, -1.0% prior
GDP Deflator, Q2 (08:30): 0.2% expected, 0.2% prior
Core PCE, Q2 (08:30): 2.0% expected, 2.0% prior
August 28 - Friday
Personal Income, July (08:30): 0.1% expected, -1.3% prior
Personal Spending, July (08:30): 0.2% expected, 0.4% prior
PCE Core, July (08:30): 0.1% expected, 0.2% prior
Michigan Sentiment-Rev, August (09:55): 64.8 expected, 63.2 prior
End part 1 of 3
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money investment
financial investment
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