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11/04/09 Investment House Daily
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: BKE; TWP
Trailing stops: THS
Stop alerts: EQIX
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Technical Summary. Tonight we include a video Technical Summary typically included in the Tuesday, Thursday and Weekend reports. Detailed chart-based analysis of the key index and leadership charts are covered.
TO VIEW THE TECHNICAL MARKET SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/11-04Technical.wmv
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SUMMARY:
- Market gets what it wants but cannot keep a gain even as the dollar drops.
- Employment reports looking better. Of course it is all relative.
- ISM services still expanding but not as rapidly.
- FOMC keeps the language the same.
- Inability to rally after market gets its desire is a problem.
Looked good even after the FOMC, but the market was spoiled: it got what it wanted and still threw something of a tantrum.
Stocks started on the upside, aided by a weak dollar (1.4796 pre-market versus 1.4713 on Tuesday) and the give back of gains over the prior two weeks ahead of an important FOMC meeting. The ADP jobs report, while at -203K it was worse than expected, did come in lower than September's -254K showing. The Challenger/Gray layoff report showed the fewest job cuts in 17 months with a 51% decline. Impressive numbers.
Numbers outside the US were not bad either. The UK service sector expanded at its highest rate in 2 yrs. The EU service sector put in its ninth straight monthly expansion. Not bad.
A half hour into the session the US Service ISM logged a 50.6 reading. Now that was lower than the 51.6 expected and the 50.9 in October, but it was enough to keep the morning rally going. Indeed DJ30 notched close to a 150 point gain in the early going.
All of this led up to the FOMC rate decision and as it turned out the Fed gave investors just what they supposedly wanted. No change in rates, no change in the wording with respect to 'extended' periods of 'extremely' low rates. The only change was a notation that household spending was expanding versus just stabilizing. No indication or hint of any change to come.
The market spiked then gave it up. Volatile as could be for a half hour but then the buyers appeared to wrest control. The indices climbed back up to their early session peaks and then . . . rolled back into the last hour and indeed into the close. It was not a rollover rout as SP500 and DJ30 closed positive, but it was a complete giveaway of the gains. The market got what it wanted but that was not enough. It threw a mild tantrum instead.
TECHNICAL
SEE THE ATTACHED VIDEO FOR THE DETAILS ON THE MARKET ACTION
INTERNALS
Breadth was mixed, up 1.3:1 on NYSE, down 1.5:1 on NASDAQ. Pretty much matched the action in the indices. Volume fell on the NYSE, staying just below average. NASDAQ trade climbed, but for a second session it remained below average. NASDAQ suffered a lot of distribution trade in October and as it tries to bounce this week the volume is fading. Still more strength to the downside as buyers are not yet ready to step in.
CHARTS
No real change from Tuesday, but there were important moves, namely giving up the intraday gains. NASDAQ is still below its 50 day EMA. SP500 is holding over the late August peak and the early October low, but it is having a hard time gaining traction. Indeed SP500 rallied to 1061, well below the 1075 resistance we were looking at, and fell back to the 50 day. Hanging on but that is not that great given the market got its Christmas present early.
SP600 is struggling the most. It gapped higher but rolled over negative on the close. It tried the early October low on the high and was rejected. The small caps are important as growth indicators but they are the downside leaders right now and that is not a positive indication for the economic future.
LEADERSHIP
There is still life in the dollar leaders thanks in large part to the dollar tanking (closed at 1.4877), but they were not surging. Many gapped higher and then ran into midmorning, then gave it back, at least to the gap point. Energy, industrials, even some techs showed this action. Does not mean they are dead, just that the road is not as easy even as the dollar falls and the Fed remains as easy as a . . . well, I had better not go there.
There is also some potential downside here. Retail showed some great leadership but it is now struggling, e.g. ANN. Not a horribly negative pattern but near term looks weak. Energy has some laggards such as ASH. It is also not a horrible pattern, just has some near term weakness that looks to get worse before it gets better. Then you have the blanket statement re the small caps and their weakness. Again, that is not a great foreshadow for the economy.
THE MARKET
MARKET SENTIMENT
VIX: 27.72; -1.09
VXN: 27.89; -0.99
VXO: 26.71; -0.27
Put/Call Ratio (CBOE): 0.82; -0.12
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. Fell slightly from 49.5%. They are still holding up surprisingly well, indicating that there was indeed excessive belief that the rally would sustain itself. Bulls have held in the 48% to 50% range for several weeks now though that will start changing some now, and that is for the better in terms of a renewed upside move. 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: 22.5%. Bears surprisingly show little strength despite the selling, barely moving from 23.1%. Bears have trended slightly lower the past several weeks but are mostly holding the line at this level. Now we expect them to jump, an upside positive. 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: -1.8 points (-0.09%) to close at 2055.52
Volume: 2.17B (+2.55%)
Up Volume: 1.099B (-137.901M)
Down Volume: 1.106B (+241.015M)
A/D and Hi/Lo: Decliners led 1.53 to 1
Previous Session: Advancers led 1.5 to 1
New Highs: 51 (+18)
New Lows: 41 (-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: +1.09 points (+0.1%) to close at 1046.5
NYSE Volume: 1.35B (-2.22%)
Up Volume: 623.326M (-306.074M)
Down Volume: 720.647M (+280.011M)
A/D and Hi/Lo: Advancers led 1.29 to 1
Previous Session: Advancers led 1.53 to 1
New Highs: 94 (+26)
New Lows: 40 (-9)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +30.23 points (+0.31%) to close at 9802.14
Volume DJ30: 224M shares Wednesday versus 231M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Productivity and the weekly jobs report. Jobs losses are not expected to fall below 500K, and with that, no matter how many jobs are created or saved as shown on Friday, the legions of chronically unemployed are not going to improve enough.
Of course that is a lead in for the Friday jobs report, but even that is not as significant as how the market reacts to this current rough patch it is in. Stocks were cruising ahead of the FOMC decision, got the words they wanted, but those words did not soothe or provide comfort.
That kept the indices in their current tribulation, having sold off ahead of the FOMC decision as the dollar rallied on worries the Fed may just actually say or do something. It didn't and the market still didn't want to move. Worried about gold? Gold jumped because India bought a s**tload as it is divesting out of dollars. Others are following and thus gold will have a bid under it in addition to the future inflation worries here in the US that were propping it up.
Now we see if stocks can gain traction again, another way of saying will the liquidity return and drive stocks back up in a new rally toward year end. There are definitely stocks in position to make a run higher if the liquidity returns; indeed most stocks would, it is just some are in better position. There are also definitely stocks in position to head and shoulders lower if the market cannot recover its mojo. Indeed some of these can fall even if the dollar related stocks start to move back up on a continued weakened dollar. Look at the attached chart of the dollar index; it shows the dollar could be heading lower and sending those stocks higher.
http://investmenthouse1.com/ihmedia/DollarIndex.jpeg
Support and Resistance
NASDAQ: Closed at 2055.52
Resistance:
2060 is the August peak
2070 is the September 2008 intraday low
The 50 day EMA at 2079
2099 is the mid-September 2008 closing low
The 18 day EMA at 2099
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
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:
2048 is the early October 2009 closing low
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
The 200 day SM A at 1796
S&P 500: Closed at 1046.50
Resistance:
The 50 day EMA at 1047
The 18 day EMA at 1060
1070 is the late September 2009 peak
The March/July up trendline at 1076
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:
1044 is the October 2008 intraday high
The August peak at 1040
The early October 2009 closing low at 1025
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
The 200 day SMA at 922
919 is the early December peak is bending
Dow: Closed at 9802.14
Resistance:
9835 is the late September 2009 peak
The 18 day EMA at 9848
9855 is the early September peak in its lateral range
9918 is the September 2008 peak
10,120 is the October 2009 peak
10,365 is the late September 2008 low
10,609 from the Mid-September 2008 interim low
10,963 is the July 2008 low
Support:
The 50 day EMA at 9692
9654 is the November 2008 high
9625 is the October 2008 closing high
9620 is the August 2009 peak
9430 is the early October low
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
The 200 day SMA at 8618
8588 is the May high
8581 is the July peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 02 - Monday
Construction Spending, September (10:00): 0.8% actual versus -0.2% expected, -0.1% prior (revised from 0.8%)
ISM Index, October (10:00): 55.7 actual versus 53.0 expected, 52.6 prior
Pending Home Sales, September (10:00): 6.1% actual versus 0.0% expected, 6.4% prior
November 03 - Tuesday
Factory Orders, September (10:00): 0.9% actual versus 0.8% expected, -0.8% prior (no revisions)
Auto Sales, October (14:00)
Truck Sales, October (14:00)
November 04 - Wednesday
Challenger Job Cuts, October (07:30): -50.7% actual versus -30.2% prior
ADP Employment Report, October (08:15): -203K actual versus -198K expected, -227K prior (revised from -254K)
ISM Services, October (10:00): 50.6 actual versus 51.5 expected, 50.9 prior
Crude Inventories, 10/30 (10:30): -3.94M actual versus 0.78M prior
FOMC Rate Decision, 11/4 (14:15): 0.25% actual versus 0.25% expected, 0.25% prior
November 05 - Thursday
Productivity-Preliminary, Q3 (08:30): 6.5% expected, 6.6% prior
Initial Claims, 10/31 (08:30): 522K expected, 530K prior
Continuing Claims, 10/24 (08:30): 5750K expected, 5797K prior
November 06 - Friday
Nonfarm Payrolls, October (08:30): -175K expected, -263K prior
Unemployment Rate, October (08:30): 9.9% expected, 9.8% prior
Average Workweek, October (08:30): 33.1 expected, 33.0 prior
Hourly Earnings, October (08:30): 0.1% expected, 0.1% prior
Wholesale Inventories, September (10:00): -1.0% expected, -1.3% prior
Consumer Credit, September (2:00): -$10.0B expected, -$12.0B prior
End part 1 of 3
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