|
|
start investing, money investment
* * * *
10/26/09 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: AMSC; INFY
Trailing stops: CELG; ESRX
Stop alerts: BEE; JAZZ; SD; TIE; UPS; VMC
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdly.html
SUMMARY:
- A good start on more solid earnings reverses for the second time in four sessions
- Dallas Region PMI improves to less negative. High praise.
- 'Too big to fail' bill tosses creditors overboard along with shareholders, but that is no new ground.
- Bonds dive, yields rise as US starts a week of record auctions in US Treasuries.
- Germany, New Zealand, France, Hong Kong and now South Korea are out. Will US follow them or the UK?
- SP500 falls from its October lateral consolidation.
- Earnings might not be showing the market what it wants to advance the rally at this juncture.
Another reversal from the highs takes SP500 out of its lateral consolidation.
Overall good news helped stocks move higher out of the gates. Earnings from GLW (glass for flat panel televisions) topped expectations and the company forecast 15% growth in 2010. RSH showed increasing revenues. MRVL increased its outlook. Outside the US, South Korea notched a 2.9% Q3 GDP advance, topping expectations (1.9%) and cranking up the fastest growth in that nation in 7 years. The dollar was lower from the Friday close.
Plenty of upside news to get stocks started higher. A flattish pre-market moved higher before the bell and stocks continued to build as the session unfolded. Indices posted 0.8% to 1+% gains. Soft start, solid move higher.
Then things changed. The dollar reversed and reversed big, moving from down to positive with a move that recaptured all ground lost in the prior week (1.4863 versus 1.4948 Friday and well over 1.5 on the high). The Dallas Fed region manufacturing October report showed a 3.3% contraction versus the -0.5% expected. At least it was better than the -6.4% in September.
It did not help when Barney Frank announced some details of a 'too big to fail' counter bill that would purportedly throw shareholders and secured creditors under the bus in the event one of these big institutions failed. Is that really anything new, however, given the Chrysler secured creditors were ignored in that government takeover? Frank is simply codifying the U.S.' turn away from contract law in favor of government edicts.
Some argue this could actually help future situations from becoming excessive given that secured creditors would know they are not secure. Then they would not get involved in deals and areas too deeply and thus act to prevent bubbles. Maybe, but it also just might keep foreign investors out as well: if you cannot get security even if you want to pay for it and the government does not abide by its laws in a time of perceived crisis, good luck getting the creditors you need to fund deals. Also, what about the fact that Congress and several administrations played a huge role in promoting lending to borrowers that had no business receiving loans.
But I digress. The market reversed from 1% gains to 1% losses (on the NYSE) by the close. That is the second high to low reversal in 4 sessions with some volume attached as well. That shows emboldened sellers even as earnings results show improved revenues, at least to some extent. The market is having a hard time advancing on a bit better earnings, and indeed is showing some high to low reversals.
TECHNICAL
INTERNALS. Decliners led by a substantial margin at -2.5:1 NASDAQ and -3.1:1 on NYSE. Volume fell on NASDAQ but was up almost 10% on the NYSE. No rising trade on NASDAQ but definitely another above average session for the techs as they sold and another above average session on NYSE. The last above average day prior to that was last Wednesday when the NYSE indices rallied to new highs and then reversed again. Not the best action the past couple of weeks.
CHARTS. The biggest news was the SP500 as it broke below the lows in the October lateral move. It is no longer a lateral move, right? Of course that does not make it a massive rollover; SP500 has made a series of bounces up its trendline over the 50 day EMA (1046) and it is pulling back to test in its continuing up trendline.
NASDAQ sold but it managed to hold above the Thursday intraday low and closed at the 18 day EMA. Volume was lower, just above average so the selling was not as heavy; that was reserved more for the financials and commodities. NASDAQ gave up its March/July trendline but that is not as big a deal here; the 50 day EMA is still rising below it and the 50 day has acted as support since March.
SOX (+1.03%) was the only positive read on the day and it showed a nice hammer doji at the 50 day EMA after selling to that level last Friday. A trickier pattern here. It did make a higher high this month and if it holds at the 50 day it makes a higher low as well. That is a positive but the last high was a nominal new high, nowhere near the strength of prior moves to a new high. It likely bounces here but then the key is whether it moves up to the September high or lower and then stalls.
SP600 (-1.01%) sold back to its 50 day EMA as well. After the July test SP600 has held the 50 day EMA on each test and bounced nicely. It is also at the March/July trendline; a key double level of support. Steady bounces off of this level ever since. As with SOX the last high did not rally as far. That is normal as a move starts to wane. How well it bounces off the 50 day is a key over the next week.
LEADERSHIP. Much of the leaders took a hit along with the rest of the market. Energy sold for another session and is approaching or at key support. Metals of all types were under pressure. Retail was basically flat, not selling off nearly to the extent of the commodities/dollar related stocks, and indeed many were modestly positive on the session. Industrials, e.g. equipment makers, were off as well, but the extend of the pullback was quite modest and they are actually setting up for a bounce once again. Energy could be in the same position if it slows its descent at support.
THE ECONOMY
Bonds run from record US Treasury auction.
Bond yields started to bump higher the past week as bonds sold off versus rallying as they have for several months. Last week bond yields jumped higher, closing at 3.49% Friday, bumping up against the 3.50% level that acted as a barrier.
Monday that barrier broke with the 10 year surging to 3.57%. Broke, smashed, pummeled; choose your adverb. The catalyst? Appears it is the record $123B of treasuries to be auctioned started impacting the bond trade. Monday that impact was apparent as bonds turned tail and yields surged after a rather weak reception to round one of the sales.
The US is hardly at the point where foreign money ignores us, but more money is moving elsewhere as foreign economies embrace capitalism and less regulation and thus see their economies running higher while the US lags. Maybe this week's GDP shows different, but even if it does many are saying it is a blip and not a real trend. There is little doubt that with other nations moving toward capitalism while the US trots out commentator after commentator over the weekend ranting about how the free market system has failed in the US. Newly wealthy countries and their citizens are not going to put their money into a government that is moving away from the very principles that just worked and worked very well for their countries and indeed now characterizes those principles as failures.
Failed? If there was pure capitalism perhaps that could be argued. The debacle that was this last crisis, however, cannot be blamed upon the private players, at least nowhere near the 100% that you heard this weekend. The problem is that the free market is perverted by the endless meddling and programs and regulations slapped here and their at perceived problems.
Greenspan kept rates artificially low for years, pulling more and more money into the housing market. Then Congress (Frank and Schumer to name just two) as well as administrations (Clinton and Bush are both guilty) pushed lenders to loan to non-creditworthy borrowers in an effort to put as many people into houses as possible as a sign of our prosperity. The Bush administration realized its errors and tried to push Congress to curtail Fannie and Freddie, but that only brought about Frank's infamous comment (that was overlooked apparently as he is more powerful than ever) that nothing was wrong with those institutions. Within a year they were finished.
Not any private actors there, just government officials and quasi-government bodies meddling in the economy and markets, distorting the markets by pushing money where it would not normally go. It always struck me as idiotic that Greenspan talked of imbalances that needed to be rectified by Fed action when it was Fed action that caused the imbalances as capital was forced where it would not have normally gone. Would private lenders make these terrible loans on their own? Not the ones that were there to start, but when you have so much money pushed into an area it does not take long before the sharks show up to feed, and they did just that. Money was to be made and up popped all of the 'no doc' lenders, putting people into homes in order to bundle the mortgages and sell them with the Fannie Mae seal of approval.
Bad policies created an environment for cheating and the regulators charged with oversight did nothing. Well, they did look the other way so they did something. Of course the way to solve the problem of too much intervention that created the environment for corruption and then the lack of oversight the public pays for is to take advantage of the situation and force more regulation upon businesses and individuals. That is how the government spreads its power and further takes over our lives. We are living it every day.
South Korea dials up a solid Q3.
Over the weekend I discussed whether the UK was a GDP harbinger for the US. After all the UK and US often track together and in this crisis our economies both had to deal with the sub-prime stink on them.
Monday the word was out that South Korea was the latest to increase its GDP in its return from recession. South K put in a 2.9% growth reading, topping the 1.9% expected. That rate is the fastest growth for the country in 7 years.
Okay, are there any threads connecting the US and South Korea? Not really. South Korea even wants to diversify away from the dollar as it noted way back in February. It retracted the statement shortly thereafter, no doubt under some pressure from the US, but you know it wants to do so and is doing so as the US continues its weak dollar policies of the Bush and now Obama administrations.
Of course this does not mean the US won't turn a positive GDP reading. Exports are up thanks to the weak dollar, cash for clunkers jacked up sales, and the first time credit for homes increased output as well. That will more than likely turn the Q3 output positive. It will also likely be a one-quarter affair, and that is not just according to us. Normally stimulus leads to lasting effects. It depends upon the stimulus, however. Ahead of the collapse the Bush administration engaged in another round of rebates; remember that? It did the same as its first stimulus and it didn't stimulate anyone, even MSNBC's Chris Mathews who we know is easily stimulated (felt that tingle up his leg when Obama was elected). That second set of rebates pushed retails sales higher for a quarter; then its effect was all gone and the economy went right on heading lower and eventually into the inevitable crack up of the bad policies and excesses they fostered.
So we see a positive GDP this week that gets everyone revved up. It has been built into the market at this point, however, so there may not be much of a positive reaction. In addition investors likely know it is a one-off quarter unless there is something more to come for some real investment in the US that gets businesses investing in the future.
THE MARKET
MARKET SENTIMENT
VIX galloped higher as it tries to break its downtrend after a dive lower the past three weeks. VIX surged to start October as the market sold off, then it faded to new lows on this decline from last fall's highs, touching a support level at 20 from 2007 and 2008. Big gap and run Monday. Now we see how it runs from here; in September and early October it hit 29 and stalled. Indeed it stalled impressively.
VIX: 24.31; +2.04
VXN: 24.52; +1.9
VXO: 23.28; +1.7
Put/Call Ratio (CBOE): 0.88; +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: 48.9%. Paring back from the 50.6% the prior week. Tough week of selling knocked the bulls back but the bounce will bring them up again. Still well over the 35% level that is the threshold for what is considered a bullish climate. It does not mean things are necessarily 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: 24.4%. Climbing on the market selloff, up from 23.6%. That puts it back up to the level hit three weeks back, still showing sufficient pessimism. Hit a low of 21.3% on this leg. Rebounding some from the big drop 31.1% and 35.6%. 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: -12.62 points (-0.59%) to close at 2141.85
Volume: 2.269B (-3.68%)
Up Volume: 694.61M (-32.577M)
Down Volume: 1.612B (-116.389M)
A/D and Hi/Lo: Decliners led 2.46 to 1
Previous Session: Decliners led 3.25 to 1
New Highs: 88 (-17)
New Lows: 26 (+11)
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: -12.65 points (-1.17%) to close at 1066.95
NYSE Volume: 1.388B (+9.74%)
Up Volume: 168.672M (+21.317M)
Down Volume: 1.213B (+158.782M)
A/D and Hi/Lo: Decliners led 3.17 to 1
Previous Session: Decliners led 3.01 to 1
New Highs: 170 (-82)
New Lows: 36 (0)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -104.22 points (-1.05%) to close at 9867.96
Volume DJ30: 270M shares Monday versus 305M shares Friday. Volume fading back after soaring on some earnings last week.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Earnings continue along with the Case/Shiller home price report and consumer confidence. Those kick off a week stuffed with economic data (durables, home sales, GDP, income and spending, Chicago PMI, Michigan sentiment).
After hours earnings were all over the map. LULU (apparel) beats, VFC (apparel) misses. BIDU misses. There will be more to come this week of course; Monday was just a warm-up. One thing worth noting again: earnings are not driving the market higher, at least not after the initial gap on the INTC earnings beat. After that the action has been up and down inside the range, at least until Monday when SP500 fell through its range.
The lateral range is cracking apart with SP500, DJ30, and SP600 falling below the range. The next test is how the trendline holds for SP500 and the 50 day EMA for SP600 and SOX. NASDAQ is still in its range as the techs are acting relatively immune to the dollar's movement. Makes sense; NASDAQ doesn't have all of the commodities dictating its moves. They are in the index, but those that are have much smaller market caps and don't influence the overall index.
Thus it looks like more testing is ahead as the indices make a test that the really needed to do even before the earnings season kicked off. That quick pullback was not enough to really consolidate the move before they started back up, and now they are taking some more time to digest the gains after a decent move off of little rest. As noted earlier, however, the new highs were not really ground breaking on this move; they slowed a bit.
Again we are watching how the indices hold the next support level be it a trendline or the 50 day EMA. The liquidity is still out there and after this test many stocks will be ready to move again if the money obliges once more. Indeed some of the industrial equipment stocks are already in position after nice, orderly pullbacks. One of the benefits of continued money coming to the market is the continuing flow of plays setting up. We just need to be patient and let them make the sets.
As for existing positions, we took several off the table Monday as they gave up support. Others are holding support from sectors such as energy (the dollar trades), and if they continue to do so then we can get some buys there as well. The X factor for them is the dollar. The dollar surged from an oversold condition Monday, just as it has after each selloff since March when this long, steady decline started. Recall that the dollar index broke through support at 76 to start October, and now it is testing that level. It is at 76 now and can bounce on up toward 77 and the 50 day EMA. That will be the next big test and we will watch our dollar sensitive plays to see if they can hold support while the dollar makes that test. If they can do that, they are showing great strength and we can look for them to bounce and for new buys when they do.
Support and Resistance
NASDAQ: Closed at 2141.85
Resistance:
2143 is the October range low
2155 is the March 2008 intraday low
2167 from the July 2008 intraday low
2168 is the September 2009, intraday peak
2169 is the March 2008 closing low (double bottom)
The March up trendline at 2176
2177 is a low from March 2008
2191 is the October 2009 peak
2210 (from September 2008) to 2212 (the July 2009 closing low)
2275 - 2278 from the February 2008 and April 2008 lows
Support:
The 18 day EMA at 2140
2099 is the mid-September 2008 closing low
The 50 day EMA at 2082
2070 is the September 2008 intraday low
2060 is the August peak
2016 is the early August peak
1984 from late September
1962 is the bottom of the August 2009 range.
1947 is the October gap down point
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
The 200 day SM A at 1776
1773 is the May intraday peak
S&P 500: Closed at 1066.95
Resistance:
1070 is the late September 2009 peak
The 18 day EMA at 1075
1078 is the October range low
1080 is the September 2009 peak
1101 is the October 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 March/July up trendline at 1066
The 50 day EMA at 1046
1044 is the October 2008 intraday high
The August peak at 1040
The early August intraday peak at 1018
The November 2008 peak at 1006 closing 1007.53 intraday
992 is the August 2009 consolidation low
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
The 200 day SMA at 915
Dow: Closed at 9867.96
Resistance:
The 18 day EMA at 9898
9918 is the September 2008 peak
10,365 is the late September low
10,609 from the Mid-September 2008 interim low
10,963 is the July 2008 low
Support:
9855 is the early September peak in its lateral range
9835 is the late September 2009 peak
The 50 day EMA at 9655
9654 is the November 2008 high
9625 is the October 2008 closing high
9620 is the August 2009 peak
9387 is the mid-October peak
9116 is the August low
9088 is the January 2009 peak
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
The 200 day SMA at 8563
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 27 - Tuesday
Case/Shiller Home Price Report, August (09:00): -11.90% expected, -13.30% prior
Consumer Confidence, October (09:00): 53.5 expected, 53.1 prior
October 28 - Wednesday
Durable Orders, September (08:30): 1.0% expected, -2.4% prior
Durable Orders ex Transportation, September (08:30): 0.7% expected, 0.0% prior
New Home Sales, September (10:00): 440K expected, 429K prior
Crude Inventories, 10/23 (10:30): 1.31M prior
October 29 - Thursday
Chain Deflator-Adv., Q3 (08:30): 1.3% expected, 0.0% prior
GDP-Adv., Q3 (08:30): 3.2% expected, -0.7% prior
Initial Claims, 10/24 (08:30): 525K expected, 531K prior
Continuing Claims, 10/17 (08:30): 5915K expected, 5923K prior
October 30 - Friday
Personal Income, September (08:30): 0.0% expected, 0.2% prior
Personal Spending, September (08:30): -0.5% expected, 1.3% prior
PCE Prices, September (08:30): -0.5% expected, -0.5% prior
Core PCE Prices, September (08:30): 0.2% expected, 0.1% prior
Chicago PMI, October (09:45): 48.7 expected, 46.1 prior
Michigan Sentiment-Rev, October (09:55): 70.0 expected, 69.4 prior
Employment Cost Index, Q3 (10:00): 0.4% expected, 0.4% prior
End part 1 of 3
|
start investing
money investment
|
