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world stock market, us stock market
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11/17/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: PIR
Trailing stops: None issued
Stop alerts: RS
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VIDEO MARKET 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:
- Dollar strengthens but the stock market holds its own along with energy and gold.
- Bonds also showing a dollar bounce to come?
- Home Depot, Saks, Target cast some doubt on Q4
- Producer prices continue to remain in check though as always the headlines are somewhat deceptive.
- Production and Capacity improve only thanks to colder weather
- Dollar still trying to put in near term bottom and that still means something.
Stock and other markets not buying any chance of a dollar bounce.
Plenty of news out Tuesday but the key was once again the dollar. It was stronger and thus stock futures along with other markets were lower. Cause and effect. Stocks started the session weaker as a result.
Sure HD, SKS, and TGT, all important retailers, posted cautious Q4 outlooks after beating third quarter estimates. Producer prices were in line and indeed less than expected. Capacity utilization and industrial production, however, fell below expectations. No doubt this data played a role in the early weakness, but it certainly did not cause any major morning realignment. No, the dollar was stronger, again attempting a bottom near 75 on the dollar index, and the other markets were accordingly lower: oil, gold, and once more bond yields. Of course you would expect bond yields to fall as stocks retrench as investors turn to treasuries. Okay, for the start on Tuesday everything seemed status quo.
As the session wore on into the afternoon, however, the dollar did fade from its early peak, and as it did stocks predictably recovered some lost ground. The dollar, however, was still easily stronger on the session yet stocks continued to recover. The dollar stopped its backpedalling and yet stocks still recovered. By the close all indices but SP600 posted modest gains even with a stronger dollar (1.4868 versus 1.4973 Monday). Oil was positive (79.14, +0.24). Gold was up was well (1141.10, +1.90). Bonds rallied again, pushing the 10 year yield to 3.32% versus 3.35% Monday.
Recall that the 10 year bond yielded 3.48% just 4 sessions back. Money running to bonds even as the stock market move continues. Typically money moves out of bonds and into equities if investors perceive safety in stocks. When stocks are up but bonds are as well, the bond market is suggesting trouble for stocks. With the dollar trying to put in a bottom at this level, interim or otherwise (likely the former), it makes sense bonds are rallying even as stocks rise because what will happen to stocks if the dollar spikes? Those stocks leading the market that are gaining on a weak dollar (industrials, commodities, energy, processing, etc.) will weaken UNLESS there is a predominant view that the world economy is going to continue to progress significantly and the US economy as well. Maybe that is right and all will be merry at Christmas (and beyond). In short, stocks are not buying what the bond buyers are believing.
TECHNICAL
INTERNALS. Breadth and volume declined on the session, hardly a surprise. -1.1:1 on NASDAQ and NYSE. The indices were basically flat, coming back from negative, and in that situation you get slightly lagging breadth.
Volume lagged as well, moving further below average on both exchanges. As the indices spent most of the session in negative territory, lighter trade shows a lack of any serious selling effort, indicating more of a post-rally pause than any return of selling such as seen the prior Thursday. At the same time you cannot hang much on the fact that the indices closed at new rally highs given there was simply no volume to push them.
CHARTS. Intraday tests lower and then a rebound to close basically flat, holding the Monday breakout over key resistance. SP500 tested back to 1101, for all intents and purposes holding a test of the October peak and the 2007 down trendline. NASDAQ tested the October peak as well and recovered.
SP600 was the lone lower close but it too was well off its intraday low. That low waved at but did not really threaten the prior lower high hit last week. In doing so it is holding its reversal quite well and it is a very key index given its economic ties. It is still below the September peak, bumping the bottom of that range Monday and Tuesday. How it fares after that initial Monday surge will be important for the market overall, maybe not near term, but looking out into 2010 when the economic bounce we are experiencing now.
LEADERSHIP. Mostly more of the same Tuesday as energy, metals and industrials posted gains, though they were hardly blowout. All in all, however, that is not bad considering the surge on Monday and the early weakness those sectors showed. Retail struggled after the triumvirate of earnings cast worries upon the holiday season. There was some action in defensive plays such as healthcare and pharma, but overall the action was status quo with what the market has shown: general move higher by most of the market with the dollar-related stocks in the lead. If the dollar rallies it will be interesting to see if other areas take the point.
Overall the leadership remains rather extended and in more difficult position to buy into. A test back in the range sure would have been nice . . . but so would snow on Christmas. We work with what the market gives us and right now that makes picking new buys a bit harder given the position of many of the market leaders.
THE ECONOMY
Producer prices indicate a tame price environment for now.
October prices rose just 0.3% overall after falling 0.6% in September. That was below expectations. The core fell a surprising 0.6% versus the 0.1% gain expected and -0.1% prior. Heady news indeed.
Okay so what is the story behind the numbers? On a yearly basis the core rose 0.7% in October, halving the 1.4% year/year gain shown in September. So is there deflation ahead? There are underlying reasons for the price declines. The core fell due to large vehicle price declines (-0.5% mo/mo, down from 1%) and a 5.2% decline in light truck prices. New vehicle prices hit the wire in this month's report and the price declines indicate the car producers are willing to drop prices after cash for clunkers ended in order to keep sales moving. That means prices will remain lower through at least a couple of quarters in 2010.
Crude goods, those that go into the pipeline for producers gained 0.5%, not bad at all. The overall crude prices were high, led by a 5.2% gain in food and 8.3% in energy.
So far the numbers remain light with respect to price gains. The type of money printing the US is doing (up 100% in the past six months) cannot last without inflation showing up. Inflation won't stay away with interest rates at 0% combined with that free printing press. For now the economy remains sufficiently slack to absorb the money (it is going into the financial markets); consumer consumption remains depressed and thus there is no excess demand built up beyond supply. That is called velocity, and since no one wants to spend there is no velocity. Thus the Fed can, for now, get away with this 24-hour printing press running.
October production and capacity up, but needed help to keep the streak going.
Industrial production gained 0.1% in October well off the 0.4% anticipated and 0.6% in September. Disappointing, but still up for the third straight month after a string of 19 down months out of 20. So the recent bump higher is still in place even though it was weaker.
Of course it was not a great month even with the gain. It needed a colder October and a corresponding 1.6% jump in utility output to make it to that 0.1% gain.
Capacity posted a gain as well though not as much as expected (70.7% versus 70.8%). As with production, it was utility output that kept the string of gains alive. Very important, however, is whether the increase string is indeed in jeopardy. Shipments and orders of manufactured goods have lagged even as production increases. If orders don't increase, i.e. if the demand does not rise in consumer and business sectors, manufacturing and capacity will start to backslide. At the minimum production is not going to maintain its trajectory as the already weak speed of the recovery wanes further.
THE MARKET
MARKET SENTIMENT
VIX: 22.41; -0.48
VXN: 22.14; -0.99
VXO: 21.59; -0.25
Put/Call Ratio (CBOE): 0.88; +0.04
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: 44.4%. Finally cracking some from the recent spike (48.3% last week, 49.5% prior). Of course this is just in time for SP500 to break key resistance. Believers may have waned but the liquidity did not. 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: 26.7%. Bounced up on the selling in conjunction with the decline in bulls. Up from 24.7% and 22.5% before that. Rebounding 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: +5.93 points (+0.27%) to close at 2203.78
Volume: 1.82B (-11.63%). More below average volume as NASDAQ started soft but then managed to scratch out a gain. No heavy selling on the downside, no strong upside buying either. Status quo on a status quo day.
Up Volume: 1.084B (-569.105M)
Down Volume: 781.224M (+324.738M)
A/D and Hi/Lo: Decliners led 1.16 to 1
Previous Session: Advancers led 3.18 to 1
New Highs: 125 (-52)
New Lows: 24 (+7)
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: +1.02 points (+0.09%) to close at 1110.32
NYSE Volume: 972.182M (-15.12%). As with NASDAQ, puny below average volume shows no real selling on the early downside but no big buyers coming in. All in all after a big swoosh higher that is not necessarily that bad.
Up Volume: 493.925M (-506.753M)
Down Volume: 455.179M (+319.445M)
A/D and Hi/Lo: Decliners led 1.19 to 1
Previous Session: Advancers led 4.29 to 1
New Highs: 255 (-260)
New Lows: 50 (-24)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +30.46 points (+0.29%) to close at 10437.42
Volume DJ30: 158M shares Tuesday versus 202M shares Monday. Same story here as with the other exchanges.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Despite the re-emergence of shades of a dollar/stock market separation, the dollar still remains the focus. Maybe, as noted above, the market will start to ignore the dollar decline in pricing gains, instead basing a stronger dollar and stronger stock market on US growth prospects. That sure is a tougher call right now; easier to play the cheaper export game that helps energy, multinational industrials, and commodities plays as well as the carry trade (borrow US dollars, go overseas and convert them into another currency or asset to earn money versus 0% in the US).
The dollar and its action is a key participant in that scenario. If it jumps higher then the carry trade turns into the 'crushed trade' quickly. It also impacts the export trade and thus the stocks rising on the expectation of future exports. If dollars cost more so do goods and the allure of exports diminishes based upon the rate and amount of rise.
That is one reason that the Fed is not doing anything about the dollar. Bernanke has to play the lackey for the federal government, keeping rates and the dollar low (aiding Treasury in so doing) so its attempt to inflate its way out of the fiscal crisis (paying back money owed with cheaper and cheaper dollars) can continue. It is a desperate race to try and ignite some kind of economic output before our creditors all cash out of dollars for gold (50% of the demand for gold is now gold funds and governments seeking more gold assets) and thus don't need to hold our dollars any longer. If that happens the game is over for us here in the US. The world is finally getting into the position where it does not need the US to buy its goods anymore. That is the tipping point and unfortunately it is happening at the worse time for us, i.e. when we have $100T in both on the books and off the books debts and entitlements and are languishing in the worst recession since at least the Carter years.
Thus the Fed is going to try and stomp out any attempts by the dollar to bounce. Treasury as well. The thing is, that destroys US consumers and small businesses, historically the US' strength. As with many programs currently promulgated in DC, they favor the few large businesses (financial institutions, large multinational companies) over our historical strengths. Playing with fire.
That raises the question as to whether the dollar can still bounce and the answer is affirmative. The Fed cannot issue news releases or sell more treasuries on each dollar bounce. There will be interim bounces and it is very possible the dollar is in the process of starting one of those now. That may provide the pullback in the market that would benefit new buy points and a subsequent rally, but the dollar/market relationship, as noted above, is trying to change.
This all plays into the market right now with SP500 and NASDAQ just clearing key resistance. If the dollar rallies and the leaders of the dollar inverse trade fall the indices will follow. Again, the relationship has waffled some the past two weeks so we see how it plays out. The dollar still has to rally . . . or not . . . to see the relationship. Still an important juncture with the indices testing the break over the resistance. Tuesday was a modest test and did not really answer the question of a test and hold. That is still to come over the next several sessions.
Late in the day INTC announced expectations that PC orders could rise 12% to 18% in 2010 and that would result in possible parts shortages. Asian and Australian markets are up on higher commodities prices, picking up on the US' late recovery to flat. So far nothing seems to deter the move. I think I used the term irrepressible last night, and that seems to still hold even on the Tuesday sluggish trade.
Support and Resistance
NASDAQ: Closed at 2203.78
Resistance:
2210 (from September 2008) to 2212 (the July 2009 closing low)
2275 - 2278 from the February 2008 and April 2008 lows
Support:
2191 is the October 2009 peak
2177 is a low from March 2008
2169 is the March 2008 closing low (double bottom)
2168 is the September 2009, intraday peak
2167 from the July 2008 intraday low
2155 is the March 2008 intraday low
2143 is the October 2009 range low
The 18 day EMA at 2141
The 50 day EMA at 2103
2099 is the mid-September 2008 closing low
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 1826
S&P 500: Closed at 1110.32
Resistance:
1133 from a September 2008 intraday low
1185 from late September 2008
1200 from the July 2008 low
Support:
1106 is the September 2008 low
1103 is the 2007 down trendline
The March/July up trendline at 1103
1101 is the October high
The 18 day EMA at 1082
1080 is the September 2009 peak
1078 is the October range low
1070 is the late September 2009 peak
The 50 day EMA at 1061
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
The 200 day SMA at 933
Dow: Closed at 10,437.42
Resistance:
10,609 from the Mid-September 2008 interim low
10,963 is the July 2008 low
Support:
10,365 is the late September 2008 low
10,120 is the October 2009 peak
The 18 day EMA at 10,115
9918 is the September 2008 peak
The 50 day EMA at 9860
9855 is the early September peak in its lateral range
9835 is the late September 2009 peak
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 8713
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 16 - Monday
Retail Sales, October (08:30): 1.4% actual versus 0.9% expected, -2.3% prior (revised from -1.5%)
Retail Sales ex-auto, October (08:30): 0.2% actual versus 0.4% expected, 0.4% prior (revised from 0.5%)
Empire Manufacturing, November (08:30): 23.51 actual versus 30.00 expected, 34.57 prior
Business Inventories, September (10:00): -0.4% actual versus -0.7% expected, -1.6% prior (revised from -1.5%)
November 17 - Tuesday
Core PPI, October (08:30): -0.6% actual versus 0.1% expected, -0.1% prior
PPI, October (08:30): 0.3% actual versus 0.5% expected, -0.6% prior
Net Long-term TIC Fl, September (09:00): $40.7B actual versus $30.0B expected, $34.2B prior (revised from $28.6B)
Capacity Utilization, October (09:15): 70.7% actual versus 70.8% expected, 70.5% prior (no revisions)
Industrial Production, October (09:15): 0.1% actual versus 0.4% expected, 0.6% prior (revised from 0.7%)
November 18 - Wednesday
Housing Starts, October (08:30): 600K expected, 590K prior
Building Permits, October (08:30): 580K expected, 573K prior
CPI, October (08:30): 0.2% expected, 0.2% prior
Core CPI, October (08:30): 0.1% expected, 0.2% prior
Crude Inventories, 11/13 (10:30): 1.76M prior
November 19 - Thursday
Initial Claims, 11/14 (08:30): 504K expected, 502K prior
Continuing Claims, 11/13 (08:30): 5600K expected, 5631K prior
Leading Indicators, October (10:00): 0.4% expected, 1.0% prior
Philadelphia Fed, November (10:00): 12.0 expected, 11.5 prior
End part 1 of 3
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world stock market
us stock market
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