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us stock market, stock watch
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8/27/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: LPX
Buy alerts: ASF; PG; SY
Trailing stops: None issued
Stop alerts: ANR
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TO VIEW THE VIDEO MARKET SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/marketsummary.wmv
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SUMMARY:
- A fourth session of a tight closing range, but this time there is a difference.
- Dollar reversal leads a market reversal from some pretty serious selling.
- GDP holds steady at -1.0%.
- Non-current loans spike to a record.
- Intraday reversal from lows leaves energy, commodities looking enticing.
- Techs set to gap higher on DELL, MRVL outlooks but can they hold the moves?
Same old same old with a twist.
Thursday showed us the same action we have seen all week. The market is holding its gains, moving in a very narrow closing range, and showing doji after doji on the candlestick chart. There was a twist on Thursday. The week started with the market running higher early in the session but then whittling away the gains into the close. It held gains for sure, but it was hardly impressive. You hate to see the market move higher with good moves and then give it back. Thursday was a little bit different - things started down and got worse. Indeed, the indices were showing their worst losses of the week and the worst they have seen since that gap down two Mondays back. Instead of finishing down, however, with all of the liquidity out there looking for a chance to move in, it was out there buying American today - at least buying American stocks. The market moved back up; the indices when from impressively negative to modestly positive on the close. We saw positive, more bullish action move in toward the end of the week after somewhat negative action early in the week. Not bad action.
This happened because the dollar reversed midday. It was not some otherwise decent economic data once again, as the GDP came in at -1%, which was better than the -1.5 expected but in line with the first iteration of Q2. That did not have any effect; indeed, the market sold after that. What did have the impact on stocks was the dollar. It seems we are bound by the dollar, and it had been pretty strong - it was showing strength above the June low and trying to bounce, but it reversed almost one cent on the day, closing at 1.4358, and that is over one cent off from Wednesday's 1.4248.
The dollar reversal swung oil as well. Oil went from negative to close at $72.76, up $1.33. That had a ripple effect across the market as well, and gold moved up. It was no big move, closing at $950.68, up $4.80 - it is having a hard time with that 9 50-9 55 level to break through toward 1000, but it recovered as well. Indeed, we saw commodities across the board reverse nicely and close either flat or slightly higher. It was not just the commodities themselves, but the stocks related to them. Energy, metals, and industrials all turned as well. Techs turned also, but were not as strong. They were lagging again, which is something we have seen in the last two weeks as the leadership in semiconductors and technology has taken a back seat, but nothing has stepped up yet. There have been a few areas here and there like software (which I guess is considered tech) trying to step up, but there has been no broad group come to the fore because energy and commodities have been testing back. We may see a change in that given this nice test lower and then solid reversal.
At the end of the day, there were no major gains. The NASDAQ closed up at 0.16%. The Dow was up 0.39%. SP500 was up a whopping 0.28%, and to round it out SOX closed up about 0.25%. There were no big gains, but the story was the intraday reversal. I will discuss in more detail whether or not this will mean anything, but when the market sold down and was sporting some heavy losses, it was a positive to see the bulls come in again with all of the liquidity backing them and pop the market back up to positive. Small gains, yes, but positive nonetheless.
TECHNICAL
INTERNALS.
The internals were not too exciting. The breadth, the advance/decline line, was right in line with flat days. Roughly 1.1:1 -1.2:1 on the NASDAQ, so really nothing exciting there. The more interesting aspect had to do with the reversal. What you like to see on a reversal - if you are on the side of the reversal, that is - is higher volume. It was nice to see NYSE volume bounce back up to average. NASDAQ did not make average, but it was not bad at 2.1B shares. NYSE put in 1.3B shares on Thursday. Those are good to see when a market reverses. The buyers were waiting for an opportunity with their money stuffed in their pockets or briefcases, and they ran to the market, driving stocks back with more volume. We see buyers coming back in and overrunning the sellers with more volume, and that is an upside positive. It is not the answer in and of itself, but it was quite positive and somewhat refreshing for the day. It was not a dominating day, but the sellers had their shot again, and they could not take the market down - at least they could not hold it down. That is the key: whether we are up at these highs trying to move higher and break higher or if the market sells off, does the move stick? The sellers could not make the move stick yet again on Thursday. They had the ball in their court but they fumbled it away.
CHARTS.
We had more of that lateral move that we have seen all week. If you look at your charts, you see they are doji after doji with tight closing ranges. They are not going anywhere. It is like the investors are saying to themselves that September is coming (usually a bad month for stocks), but they have all this money and stocks in pretty good shape along with some better economic data as we have seen from the regional manufacturing, from the existing home sales to the new home sales. There is better economic data so it is like investors are wondering if we are going to price in better times ahead, or is this it? There is no definitive move yet. They are at post-March highs now, but have not had a catalyst to break higher. Good economic news has not been able to move them higher, and that highly suggests to you that it is priced in and the market needs some other catalyst to send it higher. We went through earnings season and had a run on that because they were better than expected, but revenues were light. We have had better economic news, and that was somewhat built in as well because we went up at first, but have now plateaued. Could the catalyst be actual earnings and guidance that says things are better as opposed to this light revenue, cost-cutting earnings that we saw this past season? I am foreshadowing, but Dell and MRVL tend to indicate that that was the case. What does that leave us? After Thursday there was really no change, but there was that twist - the recovery off of the lows. They are in the same place they were and are looking for the catalyst. With that picture, maybe we will get something out of this new info that came out. It was supposed to come out right after the bell, but in Dell's case, it came out just before the bell rang.
Again, there are two forces in effect right now. One is calendar, and that is September, the historically worst month for the market. That is not always the case, but on average it is historically the worst. That is sitting on one side and has people thinking it is not good because we are here at new post-March highs on the indices, we have September ahead, and we are 50% off of the bottom. On the other side, you have a lot of mutual funds that missed out on a lot of that 50% run, and they are still looking for opportunities to get into the market with all of that money stuffed in their pockets and briefcases. We saw Thursday how they can drive the market right back to the upside when there is a dip. There are two competing forces, and the market has yet to tip its hand. The buyers show some strength, and the sellers show some strength. Today the buyers won, but it was not a dominating victory.
LEADERSHIP.
Leadership is always the backbone of the market, as the market cannot go anywhere without leading stocks moving higher. We had a pretty decent day for leadership. It was not great because technology is still lagging; after leading a way up, all of a sudden technology has just stopped moving. It has not altogether stopped - we have some tech stocks that are moving up, so it is not a complete abdication of leadership, but they are not providing the driving force behind the market. They did not have a great day. They sold off and reversed with the rest of the market, but it was not as strong. What we really see, what really looks good are energy, commodity, and industrial stocks. The latter are stretched and is hard to chase at this point. Energy and commodities have gone up and they have formed some decent patterns. Some have broken higher and are testing, and others did not quite break out but are set up in good patterns.
This reversal action was really good for them because it gave us a shakeout. A shakeout is when a stock sells down and then gets out the weak holders - the guys who were not really sure if they wanted to hold the stock or not. Who has not been there? It seems like I am there every day. You get shaken out of a stock, and then it rallies back when the new money comes in. That is a good move and a good indication because it works at getting sellers out and leaving the people who really want to hold onto the stock actually holding onto it. They do not want to sell and if there is more good news or good news in general buying in the market, the stock price pops up because there are no ready sellers. Everyone wants to hold their stock and you have to shell out the green backs in order to get them to part with it. That is a positive, and we saw commodities and energy doing this today, so you can bet we are going to be looking at those. They are giving us some good setups while technology, although there are some scattered, good setups there, is not as widespread. When you get good news like we had after hours when the market is looking for something else, it can act as a catalyst to move higher.
The market has the ability to move in great chunks right now. It is stretched out to the upside, but as we saw on Thursday, it can sell off quite a bit and then recover. NASDAQ recovered around 34 points off of its low. SP500 recovered 15 points off of its low. There is the capability to move quite a bit right here at this extreme, and you would say that would be mostly downside. We will find out what kind of gas there is left in the tank for the techs, and generally for NASDAQ and SOX, when we see what happens in the morning on the Dell and MRVL numbers. The SOX has not made a new high, but has just bumped into its prior August peak and has not made any more headway. It was a leader, and NASDAQ was a leader. NASDAQ did make a new post-March high, but SOX is not there. Bear that in mind on any upside tomorrow.
THE ECONOMY
GDP second iteration holds steady at -1.0%.
There is not a lot of news today, or at least not the kind of big news that we have seen all week. There has been good improvement in the data, but that made Thursday not a very big deal. The GDP was in line with the first iteration at -1%, and that is not bad. It is much better man the -4 to -6% that we have seen in the prior quarters.
Non-current loans jump in Q2.
There was really interesting news on the day, and although it was not good economic news, it makes sense in the part of the cycle that we are in now. The FDIC announced that non-current loans rose to $41.4B in Q2. That is a record, of course, and we always seem to be hitting records on these things right now. That is up 14% just in Q2. That is a tremendous number of loans that are non-current. "Non-current" means that the payments are, well, not current. They are not in foreclosure yet, but there are payments missed, and that is a serious issue that we are going to have to deal with. That worries many experts and pundits about another wave to come, whether it is in credit card debt or commercial real estate (places outside of the home mortgage). This is reason to worry, but it also happens at this time of the cycle where we see things turning back up. It makes sense because jobs are one of the last places to turn. People are really struggling. Credit card debt and nonperforming loans are a function of people's jobs and their disposable income. Wages are down along with hours worked, and unemployment is up, so you are going to have this number. The nonperforming loans rise even as the economy is turning, so that is nothing to get really worried about. I could pull out my conspiracy hat again and say it is going to lead to mass destruction, but we do not know that because this happens every time there is a recession. It is the pattern. What matters is how well we are able to pull out of this mess, which is my concern, of course, because there is not the kind of stimulus that the country had in the early 1980's when GDP grew at 7% for 5 quarters in a row to get things started. We do not have that kind of stimulus, so it is not going to be that kind of recovery, and there is a bit of concern that if there is a slow down and a loss of confidence, momentum will tank and we could double dip. That is not set in stone by any means. We could pull some surprises and get some better stimulus - do not count on it though. That has been our motto thus far.
There is going to be some important data tomorrow. The personal income and spending (that is always something to watch) and Michigan Sentiment. We had an upside surprise from the conference board early in the week, and now we are going to get Michigan's revision to its preliminary statement from a couple of weeks back - it also was better than expected. I anticipate that it will be good, because when things start to turn, people get excited and they get more confident about their future. The question is will it bear out over the next few months? Can this momentum that is starting to pick up continue on and churn up enough confidence and get us some kind of recovery? It is not going to be rip-roaring, but we will see if there could be enough to get us back to producing some positive GDP.
THE MARKET
MARKET SENTIMENT
VIX: 24.68; -0.27
VXN: 25.01; -0.59
VXO: 23.39; -0.01
Put/Call Ratio (CBOE): 0.82; -0.23
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: +3.3 points (+0.16%) to close at 2027.73
Volume: 2.116B (+6.3%)
Up Volume: 1.299B (+233.07M)
Down Volume: 791.527M (-155.613M)
A/D and Hi/Lo: Decliners led 1.07 to 1
Previous Session: Advancers led 1.1 to 1
New Highs: 51 (-14)
New Lows: 9 (+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: +2.86 points (+0.28%) to close at 1030.98
NYSE Volume: 1.286B (+9.94%). Nice rise to near average on the rebound. For the upside you love to see volume rise after a test lower and an intraday recovery.
Up Volume: 864.521M (+327.227M)
Down Volume: 399.4M (-194.807M)
A/D and Hi/Lo: Advancers led 1.2 to 1
Previous Session: Decliners led 1.17 to 1
New Highs: 96 (-12)
New Lows: 36 (-1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +37.11 points (+0.39%) to close at 9580.63
Volume DJ30: 163M shares Thursday versus 154M shares Wednesday. Nowhere near average but it was up on the reversal.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
It is Friday already, and you know I do not like to buy a lot of positions on Friday. I would not turn my back on a good position, but I will not go chasing. This is especially interesting this Friday because again we have September right around the corner, which is typically a bad month for stocks. We have the market pausing here, like it is really contemplating what is going on ahead.
Another issue is that Dell reported some good earnings after hours, and its CEO noted a "powerful corporate refresh cycle." No one knows what a corporate refresh cycle is. I have never seen it before and never heard anyone talk about it. There is such a thing as an upgrade cycle, where the equipment that you have (technological equipment, construction equipment, etc.) gets outdated and worn out and must be replaced. That is a replacement cycle - people know what that is, and maybe he is talking about that. He did indicate that when Windows 7 comes out people will "love their PC again," referencing Vista which was a dog that everyone beat on a regular basis. In any event, that is possibly what he is referring to with this refresh cycle: people will want to get Windows 7 to replace Vista, and they may get that instead of a new computer. He says it is powerful right now, and we have to take him at his word. It makes me feel a bit better that they are seeing that kind of growth expectation for the tech side.
This means that techs will likely gap higher on Friday, and that is fine. The market has been looking for a catalyst to send it higher or lower. It is positive news that we have had earnings where the guidance was not very good and the revenues were not that good, but we saw good revenues. Dell beat on their revenues, it increased their margins, and it says things are good for the future. MRVL had a very solid report out as well, and it is up after hours, so it is looking nice as well. They are taking the other stocks with them, so we could very easily have a gap higher with respect to technology. My question is, at these levels and with September coming up, is there going to be staying power? Will the gap hold, or will the sellers use it as a prime opportunity to try to sell the market as they have been trying to do? Will they use the gap to sell ahead of September?
I do like energy and commodities. They pulled back a little bit, but they had a good reversal day today and that leaves them set up well to move higher. If they gap higher, we would prefer not to chase, but maybe we will buy some. I would prefer to get nice buys as they move on up. It is Friday, and I am not too wild about buying. When we see the reversal that we saw and the positions and the patterns that they are in, it might be worth picking up a few positions, but I am not saying to back up the truck or load the both with them. You may be asking why we are not buying technology since has been lagging the last couple of weeks. Although it has been lagging, they really have not set up great patterns. There are a few of them that are decent, such as XLNX which broke out of a little triangle and has come back to test and looks pretty neat. There are some like that, but they have not really pulled back and put in good bases yet, so they are not exactly in the best position to buy. When a stock that is extended gaps higher, it often comes right back and sells off.
That leads me to not want to chase technology, to liking the commodities and energy somewhat (and maybe willing to chance a few of those positions), to the possibly of a reversal after a gap higher. That is the worst-case scenario for technology, for NASDAQ and the SOX. You do not want to see a gap on good news that reverses. What we will find out is how much gas is in the tank, in other words, how much that money on the sidelines really wants to move in tomorrow. If the market gaps higher and can hold it, that is positive. We have to see what happens Monday because there may be some buyers' remorse over the weekend, but if it can hold on that is a positive because that shows there are still a lot of buyers out there and the sellers do not have the guts to come in and sell it ahead of the weekend. It is not determinative in and of itself because we have to see what happens on Monday, but it would be a very good indication of the strength that is still out there as far as the money ready to come into the market.
We are probably going to lay off of the techs. We will take a look at energy and commodities and scattered other stocks here and there - some software and others that look pretty good. We will look at those as well, but we are not going to chase the techs until we see what will happen and we are going to be watching out for a reversal. I am not saying that will be the case, but it is just based upon the time of the year, based upon where the indices are right now, and that could easily trump all of the money wanting to run into the market. Let us face it, if you have been to this point, the last week of August, and you are trying to get into the market but you know September is here and the market is up at its peak I am not saying that money managers act rationally, but you would think this would be a good time to wait a week or two and you might get a much better price. You might get to put all of that money to work at a better price and make more profit moving into the rest of the year. That is a key, too.
What about the rest of the year? We still have a ton of money out there. Ben Bernanke is supposedly going to be reappointed as Fed Chairman. The money is not going anywhere. If we get a pullback, if we get a gap and reversal, we should want to play that downside, to let our downside plays get a little money for us and when the techs do get in position to buy, and then we move in and buy them. You can bet if Dell is this positive about the future and others are feeling better as well, they are going to rally into the end of the year when you have all of the gains being bought. Do not get too much in the moment, firstly because Dell said things were getting better and it is up after hours and techs may gap higher. Secondly, if they reverse and come back (and that is a big "if"), we do not want to get too worked up about that. Helicopter Ben is still there with his dollars ready to throw them at the market. He has already done it, they are everywhere, and they will be ready to come back in when it is over.
It is Friday, and we will take what the market gives us. We will not try to gorge ourselves on it. If we get a good gap higher, you can bet we will be taking some profit off of the table. We took a little bit today, and I would like to take a bit more than that. If we get a good gap, we will be taking profit. We will be looking maybe for a few buys in commodities and energy, and then will watch out in case there is a reversal. I will see you tomorrow and then we will talk about this over the weekend. Have a great evening.
Support and Resistance
NASDAQ: Closed at 2027.73
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 18 day EMA at 1990
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 1921
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 1658
The January closing peak at 1653 (intraday)
S&P 500: Closed at 1030.98
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 1006
992 is the August 2009 consolidation low
The 50 day EMA at 971
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
The 200 day SMA at 878
878 is the late January 2009 peak
The prior April peak at 876
866 is the second October 2008 low
857 is the December consolidation low
Dow: Closed at 9580.63
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 9346
9116 is the August low
9088 is the January 2009 peak
The 50 day EMA at 9018
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 8325
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): 570K actual versus 565K expected, 580K prior (revised from 576K)
Q2 GDP - Prelim, Q2 (08:30): -1.0% actual versus -1.5% expected, -1.0% prior
GDP Deflator, Q2 (08:30): 0.2% expected, 0.2% prior
Core PCE, Q2 (08:30): 2.0% actual versus 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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