|
|
us stock market, trade stock
* * * *
10/28/09 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: IWM; GS; STLD
Buy alerts: None issued
Trailing stops: BCSI; BEN; BLKB; COP; DO; PAET; SPN; SY; TRLG
Stop alerts: APOL; CAST; CGA; DWSN; FLIR; ILMN; LRCX; ORN; QSII; RIG; THC; TRLG; ZEUS
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:
- Harshest selling of the rally as SP500 breaks its March up trendline.
- Dollar continues its rise, economic data continues to waffle, market continues to sell.
- Some economic data improves, other economic data continues to backslide, bolstering consumer worries.
- Sharp selling undermines many potential set ups from industrial and energy stocks, requiring more retrenching to set up once again.
Market not ready to bounce at all as SP500 breaks its trendline.
The session itself was pretty ugly with a 1.2% loss being the lighter side, and by quite a margin, of the selling. More than just the Wednesday session, however, this bout of selling that started two weeks back with a relatively low new high and a few intraday reversal sessions has turned into the most severe round of selling for the entire rally from March in terms of the ground lost in a short period of time. Other pullbacks may have been a bit deeper, but they occurred over much longer spans. The move was a bit long in the tooth and that bit it on the behind today.
The session started modestly lower. Durable goods orders were up nicely, earnings were their usual mixture of good results and results that got shredded. New home sales were a massive disappointment; the market sagged immediately upon their release. Of course the dollar was a primary force again. It wasn't any stronger in the morning, it just wasn't giving up its recent gains. By the close it was much stronger (1.4709 versus 1.4794), and while there was a lot of intrigue this session, that stronger dollar was the dominant factor as the stock indices sold off hard.
TECHNICAL
INTRADAY. Stocks started modestly weaker, not necessarily a bad thing as a weaker open allows buyers to step in and build the session higher. Never happened, never tried. Indeed when the new home sales miss hit the wires the indices hit new lows. SP500 quickly undercut its March trendline and the selling continued steadily all session, right into the close.
INTERNALS. Bad breadth. -7:1 on NYSE and -5.4:1 on NASDAQ. Just about everything was down other than food stocks (nothing like a selloff to prime people for comfort food; any food for that matter). Volume spiked to the highest level in over a month on both NASDAQ and NYSE. Big volume on the selling, prefaced by the jump to above average trade as the indices posted intraday reversals mid-October. Investors are dumping their stocks right now.
CHARTS. SP500 provided the initial significant move on the session with a break of its March/July trendline. It also undercut the 50 day EMA, a level that has held since the bottom in July that ended the 8 week consolidation of the initial run higher. Just for grins SP500 also broke through an interim low from late September; it looks as if the large caps are going to come back and test the late August peak at 1031 (closing).
NASDAQ gapped lower and closed at the low on strong volume. NASDAQ already gave up the trendline and it snapped its 50 day EMA Wednesday. It is heading rapidly toward the October low that roughly coincides with the late August peak. That is another 20 points lower, just a blip away in this kind of selling. 2000 looks like more significant support for the techs that are selling on some hefty volume.
SP600 (-3.05%) is getting thrashed, undercutting the early October low and thus making a lower low, the first in four months. It is in a range of support from 310 to 290, heading toward 290 at a rapid clip.
Summary: All of the indices are getting oversold in a rather rapid fashion. The downside momentum, however, is very strong, and there are some support levels that the market looks as if it wants to test. The action scuttled a lot of good setups, and even if the market checks up there will be fewer ready to bounce up and continue good moves near term.
LEADERSHIP. As noted, many good setups were ripped. Energy lost its footing. Industrials were in position to set up. Some are still close (CAT, BUCY) but overall the selling is pretty intense. Energy is the same way: many good lead ins to Wednesday were broken lower and will require more work to get back into position (e.g. BHI, BTU). Retail took a beating again with some old standbys breaking lower (e.g. ROST, one of our downside plays). Other strong stocks sold hard, but they are also going to set up some good buys at some point in the not too distant future (e.g. TJX, URBN, COST). In sum, pretty much all leadership is under pressure and is undergoing a correction. Many, however, are still above support (e.g. BUCY, ICE, FFIV), and they will be in position to rebound and make us money when the market finds its bottom on this round of selling.
THE ECONOMY
Durable goods gain for the fourth month in six.
At 1.0% in September orders for washing machines and the like matched expectations. In the past half year sales rose two-thirds of the time. Very respectable, particularly when compared to the -2.6% in August (revised from -2.4%).
Take out transportation and the gain fell just slightly to 0.9% and that topped the 0.7% expected and the -0.4% in August (revised down from flat). The big number: Capital goods expenditures ex-transportation - a fancy way of saying business investment - rose 2.0%, more than reversing the -0.84% in August. Many companies have relatively new initiatives to take advantage of lower prices and low interest rates.
Inside the numbers. Motor vehicle orders fell 0.1% even though dealer inventories remain low after they were depleted under Cash for Clunkers. That tells you that dealers don't believe demand will pick up through year end. Manufacturer's inventories are also low, falling 1% with transportation, -0.5% without. Either way they are lower and not getting rebuilt in a way that would give GDP a boost.
The key to the 'inside' numbers, however, is defense spending. Defense aircraft orders jumped 12.5%, and if you take out all defense orders the gain fell from 1% to 0.5%. Definitely a gain over the drubbing in August, but not the same apparent strength the headline number would convey.
Where does this number leave the state of durables? They are basically coming off the same levels hit in 2001 right after 9-11. As with that period, the recent durable goods readings have double bottomed and are in a nascent uptrend, now solidly off the lows. With some of the other economic indicators struggling durables may struggle October and November, but the move higher is always a stair-step. For now there is a decent bottom in place for durables.
New Home Sales fall 3.6% versus the gain expected.
This is a number that caught the housing market and the financial markets by surprise as a 5.5% GAIN was expected. So much for the first time buyer credit keeping sales of new homes rising through its expiration in November. Not that a large share of the sales were not at the lower end; 47% sold were less than $200K.
That begs the question whether the program should be extended. After all, consumer confidence on Tuesday showed a backslide into what are deep recession numbers (47.5). If consumers are acting as glum as they say they are, no wonder the number of new home sales contracts fell. Of course existing home sales at the lower end of the range surged, so there is a split in the data. With existing home sales comprising 80% or more of the market, well, you have to give the nod to those sales over what the new home sales data shows.
You have to wonder, however, what is holding buyers back. Some are speculating that it is too late to utilize the program as homes could not be built and completed by the end of November (and the program) and thus they would not be eligible for the credit. Thus there is an apparent need to extend the program . . . if you believe it is helping the economy. Congress is ready to extend it; lower income, getting people back into homes and set up another bubble. Yes, that is just the kind of program Congress has a history of sanctioning.
In any event, the stall in new home sales stalled inventories as well as they held steady at 7.5 months. At least they did not rise as sales declined. Prices were something of a surprise as they rose. The median price is $204.8K versus $199.9K in August. The average price increased as well, rising 10.2% to $282.6K. Consumers should feel a bit better at least about their home value, though that doesn't help those seeing to buy a new home.
Goldman Sachs lowers its Q3 GDP outlook, and with the lack of inventory build, it may be lower than what even GS predicts - but not likely.
It had to happen. With the backsliding in the regional manufacturing data, the durable goods showing none of the anticipated inventory building in autos or elsewhere, weakening consumer confidence, rising gasoline prices, and the slide in new home sales - - let me catch my breath - - some lower expectations for Q3 GDP were in order.
GS was the first to come out with its revision, lower growth expectations to 2.7% from 3.0%. Even GS' prior forecast undercut the consensus' 3.2%. Recall that GS revised its forecast for the last jobs report on the night before and it was within 20K. Thus the GS revision is likely reliable and it likely continues to raise the same questions as to what official(s) the firm has compromising pictures of.
That downgrade of the growth expectations makes sense. The UK was expected to post its first positive GDP reading and failed. Of course it is the odd man out as South Korea, France, Germany, New Zealand, and many others are already sporting positive growth. It would indeed be a real surprise if the US did not show some positive number, even if less than 2.7%, but with the numbers being revised lower and the lack of any inventory build as shown in the durable goods report, the number may be even lower than the downside revisions.
Could be. One thing seems apparent: GS has the fix in when it comes to economic data. Are they that much smarter or do they have better connections or are just smarter at coming up with the right connections? No matter how, the firm's track record is enough to get investors watching, and with the weaker data seen across the board the GS downgrade was enough to throw the old wet blanket on stocks for yet another session.
THE MARKET
MARKET SENTIMENT
What a spike in the VIX. It is a point off the September and early October peaks that marked the bottom of the selling and preceded the last two rally legs. Plenty of momentum and VIX could easily make it to 32.50 where it found resistance in May, June and July. VIX didn't even make a higher low before this rally, showing the zeal in the selloff. Judging from VIX, there is still some selling ahead during this pullback.
VIX: 27.91; +3.08
VXN: 28.27; +2.87
VXO: 27.08; +3.71
Put/Call Ratio (CBOE): 1.11; +0.1
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: 49.5%. Bulls have held in the 48% to 50% range for several weeks now. That is likely to change in a rather dramatic fashion with this week's reading and for certain the following week. Has been a bit too ebullient and getting slapped back won't hurt. 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: 23.1%. Bears have trended slightly lower the past several weeks but are mostly holding the line at this level. They will jump this week. 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: -56.48 points (-2.67%) to close at 2059.61
Volume: 2.758B (+17.09%)
Up Volume: 216.675M (-115.584M)
Down Volume: 2.571B (+542.936M)
A/D and Hi/Lo: Decliners led 5.43 to 1
Previous Session: Decliners led 2.04 to 1
New Highs: 17 (-22)
New Lows: 48 (+11)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
With NASDAQ breaking the 50 day EMA (2083) it is closing in on the prior October low (2041) though the late August peak (2034) and early August consolidation (2011 closing down to 1970ish) look very likely given the early momentum in this selling. A straight drop to those levels? Can happen but not likely. A bounce at the early October low or above the late August peak is likely before a complete selloff to the lower range.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -20.78 points (-1.95%) to close at 1042.63
NYSE Volume: 1.673B (+19.78%)
Up Volume: 155.541M (-264.05M)
Down Volume: 1.515B (+601.884M)
A/D and Hi/Lo: Decliners led 7.06 to 1
Previous Session: Decliners led 1.85 to 1
New Highs: 59 (-25)
New Lows: 49 (+10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 broke its trendline (1065) and the 50 day EMA (1047). The next serious support is at 1025 to 1031. Looks like a lock to hit that level.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -119.48 points (-1.21%) to close at 9762.69
Volume DJ30: 257M shares Wednesday than 237M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
GDP is the buzz in terms of economic data, though weekly jobless claims always garners some interest. Goldman lowered its forecast and the consensus is still for 3.2%. It will likely be positive; if not then we had just better hunker down and get out of the way and let the market fall to where it will fall. Again, that is not likely.
The Wednesday action messed up a lot of nice set ups but better to mess them up before they make a move that draws you in. This selling is getting a bit overdone, but last night it looked as if it was about to run its course. With the Wednesday move it opened up a new chapter with respect to this pullback, knocking plays out of good patterns and set ups as well as taking the indices through support. Thus it is a time to let the downside positions run as far as they will while we watch to see how different sectors react to the selling to see if any want to emerge as leaders on the next bounce.
As noted, this selling has a bit more virulent character than previous pullbacks in the rally and thus you watch to see how deep of a corrective move it takes the indices. The deeper it takes them the more likely there is a change in progress, i.e. a change from the strong uptrend from March to a longer term correction. It could end abruptly if the buyers and the liquidity rush back in, sensing and opportunity, and if it does so without much more downside it is likely no major shift in the bias occurred.
Again, it is a time to let the downside plays run, watch the depth of the correction, and then play what arises based on that correction. Shallow means we look for more upside. Deeper, e.g. on down to near 2000 on NASDAQ, and you start to shift the bias. At that point you look for upside bounces to provide downside setups.
Support and Resistance
NASDAQ: Closed at 2059.61
Resistance:
2070 is the September 2008 intraday low
The 50 day EMA at 2083
2099 is the mid-September 2008 closing low
The 18 day EMA at 2129
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)
2177 is a low from March 2008
The March up trendline at 2181
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:
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
The 200 day SM A at 1782
1780 is the November 2008 closing peak
1773 is the May intraday peak
S&P 500: Closed at 1042.63
Resistance:
1044 is the October 2008 intraday high
The 50 day EMA at 1047
The March/July up trendline at 1066
1070 is the late September 2009 peak
The 18 day EMA at 1073
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 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 917
Dow: Closed at 9762.69
Resistance:
9835 is the late September 2009 peak
9855 is the early September peak in its lateral range
The 18 day EMA at 9882
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:
The 50 day EMA at 9667
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 8577
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 27 - Tuesday
CaseShiller Home Pri, August (09:00): -11.32% actual versus -11.90% expected, -13.26% prior (revised from -13.30%)
Consumer Confidence, October (10:00): 47.7 actual versus 53.5 expected, 53.4 prior (revised from 53.1)
October 28 - Wednesday
Durable Orders, September (08:30): 1.0% actual versus 1.0% expected, -2.6% prior (revised from -2.4%)
Durable Orders ex Transportation, September (08:30): 0.9% actual versus 0.7% expected, -0.4% prior (revised from 0.0%)
New Home Sales, September (10:00): 402K actual versus 440K expected, 417K prior (revised from 429K)
Crude Inventories, 10/23 (10:30): 0.78M actual versus 1.31M prior
October 29 - Thursday
Chain Deflator-Adv., Q3 (08:30): 1.4% 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): 5905K 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): 48.9 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
|
us stock market
trade stock
|
