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us stock market, trade stock
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11/11/09 Investment House Alerts
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IH Alert Subscribers:
Happy Veteran's Day! Hug a Vet!
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: JBLU; JOSB; RIG
Trailing stops: None issued
Stop alerts: None issued
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VIDEO TECHNICAL SUMMARY. Detailed chart-based analysis of the key index and leadership charts are covered.
TO VIEW THE VIDEO TECHNICAL SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/TechnicalSummary.wmv
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SUMMARY:
- Lower dollar and liquidity help stocks post another gain, but by session end the resistance issues still remain.
- Dollar at important support, and with the other technical factors, you have to be ready for a potential near term market peak.
- Market continues to probe resistance as we watch for a break and test, a break and failure, or outright failure.
Weaker dollar leads to more gains but resistance still remains intact.
The news headlines seem more positive of late so it seems. We still see many worrisome headlines daily; they just don't get the same emphasis or billing as the positive headlines. Thus Wednesday we all heard about UPS seeing a global recovery, Macy's smaller than expected earnings miss, and AMAT's first profit in a year. What was buried back on the last page of the stories were the 'buts.' UPS sees improving volumes, BUT the global recovery is 'slow.' Macy's loss was smaller, BUT it lowered its outlook right at the start of the holiday shopping season. AMAT enjoys a long-awaited profit, BUT it lays off 1,500. You know the drill: non-farm payrolls 190K, down from over 700K; BUT the unemployment rate that is the better jobs tracking device when emerging from recessions is exploding higher. Yin and Yang; positives but negatives as well.
Did it matter? No. The dollar was weaker, trading over 1.5 (1.5018 versus 1.4978 Tuesday), and thus stocks were up and up big pre-market. Gold was in rally mode, up 12 clicks premarket and closed up 15.80 at 1118.30. Still think it can make 1500 after it cleared that prior resistance. Of course when is the key. The dollar rallied back, however, closing at 1.4980. Oil was up nicely but it slid back to a more modest gain on the close (79.26, +0.21).
Stock action was similar, at least to the dollar as it mirrored the dollar trade once more. So much for the break of the link, the cutting of the cord so to speak, between stock prices, oil prices and the dollar that the market hinted at last week. Stocks thus started stronger with solid gaps higher, ran further upside, but then peaked midmorning. As the dollar recovered its losses on the session stocks gave up their gains on the session. There was no wholesale rollover as all indices closed nicely higher, but the momentum ran out of gas as the dollar turned, and the interesting aspect is that it left SP500 and NASDAQ high and dry below the key resistance levels they face. SP500 even crossed over intraday, but it could not hold onto the move. That could be the story itself, but we will discuss that more in the Technical section.
On the day the market moved higher with some decent to solid gains but when confronted with resistance could not close the deal. Thus the indices were left just below key resistance after more than a week low volume gains. Rallying for sure but not the best picture of health.
TECHNICAL
INTERNALS. Volume was the key on the session and it was lighter on both NYSE and NASDAQ. Of course that is a continuation of the trade on this entire move, i.e. a weaker volume bid all the way up after the October selling. Caveat: it was Veteran's Day and the bond market was closed and thus lower stock exchange volume as well.
Now SP500 and NASDAQ both gapped higher to resistance and could not take it out. Volume was low so there was no clear reversal. That does not mean they won't reverse: many times when an index hits a high on low volume that means the buyers are just used up. That makes sense in this case when you see an October selloff on volume and then a November rebound on very light volume. Fewer and fewer buyers on the way up and then low volume doji at the resistance. Makes you take notice.
CHARTS. Both NASDAQ and SP500 gapped to resistance. SP500 took out its October high on the move and tapped the 2007 down trendline on the high. NASDAQ gapped higher and rallied toward resistance as well. Both were higher intraday and SP500 took out the October high. Neither could sustain all of the move.
Both showed doji on the candlestick chart. SP500 showed a tombstone, i.e. that reach higher and giveback, leaving a long wick/shadow. You could call that a reversal, but volume was light and SP500 managed to close positive. No intraday reversal but we have to watch this low volume test and inability to hold the break. NASDAQ is showing a star doji, unable to move the ball further. Two doji in a row on both indices at key resistance and no volume; talk about indecision.
What does it mean? If SP500 and NASDAQ gap lower Thursday that is an island reversal and it indicates the two are going to trade lower near term. Maybe down to the prior lows in the trading range, maybe not that deep. It is definitely worth playing, however, for a shorter term trade.
Beyond Thursday, however, there are three scenarios. First, the indices can break on through resistance and thus continue the rally. Do you buy then? No, you wait for a test to see if the move holds the breakout with either a full test or partial test of the high it broke. If it does then you buy in at that point.
Second, the indices make the break through but are rejected, i.e. they fail the test or are thrown back intraday and close lower. That indicates the breakout attempt failed and they are going to test toward the bottom of the trading range.
Third, they don't make the breakout at all, failing below the resistance and selling off harder. SP500 gave something of that on Wednesday but as noted it still managed to close higher. If it rallies and fails again and closed lower it is likely trading lower in the range as well.
Three scenarios, one upside, two downside. The wildcard continues to be the liquidity and thus far it has trumped every attempt to sell the market, snatching defeat from the jaws of victory for the bears and rewarding the bulls. Resistance versus liquidity; yin versus yang.
THE ECONOMY
Dollar at a key level as well.
Should this go under the Market or Economy section? Need some economic news so it goes here. So, here it goes.
The dollar got whacked since November started and thus the market has rallied back up from the late October selling when . . . the dollar bounced sharply from the 1.5 euro level. It is now back down to that level, trading at 1.50+ on Wednesday. Then it reversed to close flat. It is trying to hold where it held in late October.
Look further to the right of the chart, all the way back to late 2007 and early 2008. The dollar bottomed at this level before rolling over hard in the middle of 2008 ahead of the crisis. The dollar index is back at that level, forming a short double bottom here.
Marry that with the indices at key resistance on low volume. Consider the driving force behind the market rally is the weaker dollar. Get the picture? Many elements are merging that suggest the market may break lower from here. Liquidity is the wildcard but it is hard to ignore the action in the dollar AND UUP, the US dollar bullish ETF. It is bottoming and traded in a huge range on Wednesday.
THE MARKET
MARKET SENTIMENT
VIX: 23.04; +0.2
VXN: 23.06; -0.33
VXO: 21.91; +0.48
Put/Call Ratio (CBOE): 0.9; +0.06
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%. Surprisingly holding steady for the second week after a drop from 49.5% two weeks back. Still a lot of believers in the rally, and that may be to investors' detriment near term as the market consolidates a bit more. 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: 24.7%. A rise as expected, but not a surge despite the rather sharp, high volume selling to end October. Bears remains relatively low, hardly in excess numbers but not so low to start looking for a reversal. Last week 22.5%, and hanging around in the 23% range before that. 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: +15.82 points (+0.74%) to close at 2166.9
Volume: 1.814B (-6.93%)
Up Volume: 1.356B (+497.286M)
Down Volume: 482.959M (-651.035M)
A/D and Hi/Lo: Advancers led 1.66 to 1
Previous Session: Decliners led 2.04 to 1
New Highs: 117 (+30)
New Lows: 34 (-8)
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: +5.5 points (+0.5%) to close at 1098.51
NYSE Volume: 1.046B (-2.5%)
Up Volume: 680.637M (+233.55M)
Down Volume: 359.251M (-247.535M)
A/D and Hi/Lo: Advancers led 1.68 to 1
Previous Session: Decliners led 1.37 to 1
New Highs: 286 (+61)
New Lows: 38 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +44.29 points (+0.43%) to close at 10291.26
Volume DJ30: 166M shares Wednesday versus 193M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
I covered a lot of this in the Technical section talking about the three scenarios as well as whether the indices gap lower after the gap higher to a doji. If the indices gap lower there is a chance to short them. We have a downside SP500 play in the form of the SPY. You can also play it with an upside play using the SDS, an ultrashort ETF. On NASDAQ you can play a QQQQ put or something upside like the QID, the QQQQ ultrashort ETF (rises as QQQQ falls, 2:1 ratio).
There is the dollar index relationship to consider as well, and while you should not lean one way or the other, particularly given the liquidity trade out there, that sure ahs us looking for opportunity if the dollar bounces and the market, particularly the dollar related areas, fall.
If it breaks higher and clears resistance on the close we get patient and see if it holds a test and then we can play the upside. Of course if it gaps higher we have a lot of upside positions already in play and we can play the break and any subsequent run by taking some gain off the table. Then we let it test and if it holds we reload some positions to play the upside move.
It is important to recognize these areas so we know when to take some money off the table or buy in. That darn liquidity tends to trump negative setups and you need to keep that in mind as things unfold. The market looked to be on the ropes last Wednesday but then surged the next session. It still looked to be at issue Friday, then surged again on Monday with the G20 news and the dollar pounding. That put the liquidity money back into the market.
The lack of volume continues to be a sticking point so thus we have upside and downside plays at the ready. The fact that the indices are at very important resistance is another reason to keep those three scenarios in mind as the action unfolds the next couple of weeks. Near term we watch how the indices react Thursday: HPQ announced an acquisition and pre-announced strong results. It was down thanks to the acquisition, but the Q's were higher. Maybe there is no gap lower, BUT . . . watch for a gap higher that reverses after good news. That would be very bearish for the market. Keep flexible and let the plays come to us! Then take what the market gives.
Support and Resistance
NASDAQ: Closed at 2166.90
Resistance:
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:
2155 is the March 2008 intraday low
2143 is the October 2009 range low
2099 is the mid-September 2008 closing low
The 50 day EMA at 2090
2070 is the September 2008 intraday low
2060 is the August peak
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 1812
S&P 500: Closed at 1098.51
Resistance:
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 1089
1080 is the September 2009 peak
1078 is the October range low
1070 is the late September 2009 peak
The 50 day EMA at 1054
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 928
919 is the early December peak is bending
Dow: Closed at 10,291.26
Resistance:
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:
10,120 is the October 2009 peak
9918 is the September 2008 peak
9855 is the early September peak in its lateral range
9835 is the late September 2009 peak
The 50 day EMA at 9778
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
The 200 day SMA at 8667
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
Initial Claims, 11/07 (08:30): 510K expected, 512K prior
Continuing Claims, 10/31 (08:30): 5700K expected, 5749K prior
Crude Inventories, 11/06 (11:00): -3.94M prior
Treasury Budget, October (14:00): -$162.5B expected, -$155.5B prior
November 13 - Friday
Export Prices ex-ag., October (08:30): 0.0% prior
Import Prices ex-oil, October (08:30): 0.6% prior
Trade Balance, September (08:30): -$31.9B expected, -$30.7B prior
Michigan Sentiment-Preliminary, November (09:55): 71.0 expected, 70.6 prior
End part 1 of 3
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