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us stock market, trade stock
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11/19/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: VMI
Trailing stops: None issued
Stop alerts: HOC
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VIDEO MARKET SUMMARY. Detailed chart-based analysis of the key index and leadership charts are covered.
TO VIEW THE VIDEO MARKET & ECONOMIC SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/MarketSummary.wmv
TO VIEW THE VIDEO TECHNICAL SUMMARY ONLY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/TechnicalSummary.wmv
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SUMMARY:
- Dollar advances modestly as NASDAQ, SP500 break back below resistance.
- Jobless claims hold steady. That's improvement?
- Prime mortgage foreclosures top sub-prime.
- Breakout was not that strong and neither was the breakdown.
- Leadership remains somewhat extended, but nothing a short correction would not rectify.
Dollar shows some traction, stocks do not.
The market was down, so you can bet that the dollar was stronger (1.4914 Euros premarket, versus 1.4957 at Wednesday's close). The stocks opened lower, and the dollar strengthened and it sent stocks sharply lower than the futures has suggested. Stocks sold off hard in the first half hour and then the dollar bottomed on the day and started to erode some of the gains. The market made a steady recovery with a pop at the end of the day, but it was not enough to erode any of the serious and significant losses that were shown on the session. It put NASDAQ down around 1.6% when it had been down over 2%. The SP500 closed down 1.34% when it was down nearly 2% earlier in the session. There was recovery as the dollar backed off its gains, but it still closed stronger. That had its effect on the market, along with some other things that piled on top of that (and there was question about whether some were positive or negative).
Jobless claims came in (305K, flat from 305K the prior week; revised from 302K). Some people heralded this number as great news, but at still over 500K, it is hardly something to trumpet about.
There was a downgrade of chips. Merrill Lynch and Bank of America downgraded eight specific stocks and the whole sector in general; they stated that there was too much inventory, and that gapped the chips down. INTC recently said there would be shortages of inventory, but INTC did not have as much impact as did the downgrade on Thursday.
Mortgage delinquencies were seriously higher. The telling factor was how many prime mortgages (not just subprime) were falling into delinquency and foreclosure; indeed, there were more in the prime sector than the subprime sector in foreclosure this past month. That was sobering for the market, and it had a hard time getting over that as well as the stronger dollar. Any relationship between the dollar and the stock market that I thought was breaking down did not break down on Thursday. It was back in full force, and it put pressure on stocks.
The major indices that broke out (SP500 and NASDAQ) gave up their gains. They fell back through the trendlines as well as the support and resistance levels that they broke through, but there was not much change. The breakout itself was not that strong. There was low volume, and the indices had come a long way from the bottom of the range to make the breakout. It seemed they used their last bullets getting over the breakout as they immediately stalled. Leadership is extended. There have been long runs, and there are not many great leaders to buy into right now. A pullback would do them well, giving them a chance to consolidate and get in better buying position.
With those three factors, the breakout was not great, so when the indices broke back down on Thursday with volume a bit higher (but not strong), it was not an issue. It takes time to try to reverse a trend, and this trend has been ongoing since March (with a hiccup in June and July). October sold off sharply, but the trend held and kept moving higher again. Such a strong, long trend cannot be changed overnight, and it will go back and forth. The volume has not been huge the past week as the indices broke higher and then lower. The buyers and sellers are fighting it out, and it is in a process of trying to transition. There is enough selling in October to send them down lower in their range. Sending them lower in their range is not a change of the trend but is only a needed consolidation. Even with all the liquidity, stocks have to take a break once in a while. A test down into the range, near the October lows, would not hurt the indices at all; in fact, it would help them out a lot. The indices have butted up against serious resistance, and though they are having trouble getting through, they are not selling off. Keep in mind that this is a process of transition, not an abrupt transition. Rarely is there a one-day event that turns the market. They can happen, but that is not the case right now. There was a lot of volatility when the market peaked in March of 2000, but there was not one day that changed things. It was a process of forming that top. The market may not be forming a top now, but it may be preparing for another correction. Do not get too bent out of shape about the market being unable to hold the breakouts on SP500 and NASDAQ. It was not a big issue on the breakout, and it is not a big issue today.
With the dollar stronger, oil was down ($77.66 - 1.92). Gold up, as it does not seem to care about what the dollar does lately ($1,144.30, + 3.10). Gold is at a 200% extension on this last run, so it is being stretched. A correction would not hurt it at all.
TECHNICAL
INTRADAY
The SP500 gapped lower and cascaded down in the first half hour of trade. It did not hit the bottom then, but it made a bounce and then it hit the new low for the session. Notice how that was it. It continued to mount a rebound through the end of the day with a bump higher in the last half hour (that was more short covering than anything else). After a cascade lower, there was a steady recovery. Although it missed out recovering most of the gains, there was a recovery after the initial gap and cascade lower (on SP500 and NASDAQ). There are still buyers out there, as bad as things looked on the session.
INTERNALS
The breadth was negative ( -3.8:1 on NASDAQ, -4:1 on the NYSE). When the small caps lose almost 2.5% on the session, you know that a lot of small caps were down and you will see breadth expand dramatically to the downside. They have been lagging the whole way up, and they have not broken out over the September or the October peaks. When they turn back down, you can expect them to be sold again, and that is exactly what happened.
Volume was up. NASDAQ's trade did expand, and it came close to average. It is not as high as it was a week ago when the market sold off, but it was much stronger than any of the recent volume. There were two downside days that saw stronger volume versus any to the upside. There are issues with NASDAQ and what its volume is showing us. There are two higher-volume days to the downside, and there were many of them in late October. That is going to be an important thing to look at moving forward because NASDAQ is one of the growth areas. If it starts to sell off its large caps, then the SP500 and NYSE may follow it. It did not receive any help from the semiconductors, and that was a major drag on it. Maybe if they start slowing their losses, NASDAQ will not show this kind of downside trade.
The volume rose on SP500 as well, but it was up less than 2% ($1.08B on Thursday versus 1.06B on Wednesday). That is still well below average. The volume is still higher on the downside, but all of this is below average trade so it does not amount to a hill of beans. There has been no significant trade upside or downside on the NYSE. It is coming up to that old resistance and bouncing around without a lot of push and pull from the buyers and sellers. They are going back and forth, but there are not a lot of them beating each other up at this time.
As happened on the break higher, volume was not much of the factor. On Thursday's break lower, volume was up but still was not much of the factor. It was more of a factor on NASDAQ, but hardly at all on the NYSE. That says that the sellers are not crowding in. There are a few more, but there is no downside swamp here. We do not have to fear (yet) a massive rollover. It is more of a correction and a lateral move as they deal with significant resistance. I can live with that.
CHARTS
NASDAQ and the SP500 gave up the resistance they just broke over on Monday. It was no massive move lower. SP500 sold off, but it held the 18 day EMA on the low. That is coincident with the September peaks, and it cut some of its losses. That is not bad action - there are still buyers ready to move in, and they did so on Thursday.
NASDAQ is similar, but it is a bit more nefarious. There was a gap higher on Monday, and now there was a gap lower on Thursday on volume. That is called an island reversal. There is a gap higher, three days over, and then a gap lower. It moved below the 2008 lows as well as the October peaks. It came up off its low however, so it was not a total washout to the downside; the sellers were just not throttling the market. Buyers still came back in. This island reversal could be good for a test down at the 2100 area, and it could fill the gap from earlier in the month. That would not be unusual given this type of pattern. It could go further from there and get down around 2050, 2025, or 2000 --- those are logical levels for a pullback. This pattern does not demonstrate that in and of itself, it just shows stronger weakness on NASDAQ and that it has some more downside likely. It may just put it down to 2100 and the rising 50 day EMA (only based on this move), and that is not that bad. Many stocks are extended and need the opportunity to consolidate.
SP600 took out the peak it made, gapped lower, and finished near the session low. The next key is going to be where it made the higher low before it broke back above the lower peak it made to start the month. If it breaks below that, you are looking at 300 (possibly 290). The small caps are in trouble and have been struggling all along. If our economic worries are correct, the small cap index will break lower near term to start pricing in perhaps a double dip recession that shows up in mid-2010. It is not terrible action, but definitely not helpful at all. I will be watching over the next few sessions to see if it takes this level out. If it does, it will be a quick run down to 300 and then we see if it takes that low out. If it does, there will be serious issues moving into 2010.
The SOX is worth a look since the downgrade from Bank of America and Merrill Lynch. There was a gap higher, a lateral move, and gap lower. It closed below the 50 day EMA, and it did manage to bounce off of the early August peak. There are still buyers here, but it made a lower high in an island reversal. SOX is in serious trouble. If it bounces higher off of the rebound and fills the gap and rolls back over, then it will be in even deeper trouble. Off of this move, however, it can come down to the 300 level, and there is support there. It can come down to that level, then try that move back up. It is a laggard as well, and it made that lower low but recovered. It has now made a lower high and is gapping lower. There are serious issues with the indices outside of the SP500 and the Dow. Those two are the large caps that have the multinationals, industrials, etc. that are riding the weaker dollar move. That is helping those indices move higher and show the relative strength that we have seen even on the downside days. NASDAQ was down 1.66%, and SP500 was down just 1.3%. At the lows, NASDAQ was down more significantly than SP500 and the Dow, which closed down just 0.9%.
There is a breakdown by NASDAQ and, to a lesser extent, the SP500 as it fell back below the resistance it just took out. It was not a rout to the downside - volume was still light and they managed to bounce off of their intraday lows. It is a process right now with those indices, and they are up against very significant resistance. They have run a long way, not only from the March bottom but also from the recent lows. They ran from the bottom of their range to make the breakout, so they would be tired from that as well. Volume was not great on the move, and leadership is extended. It does not have a lot of strength or a big, solid base to rally from, so there is indecision and a lateral move. It may or may not break down - we will have to see what happens from here. I also think (given the action on the small caps, SOX, and mid-caps) that there will be more of a downside move and the type of correction there was in June and July before we get a serious move to the upside. I could be wrong. It could be a situation where it moves laterally and breaks higher, then the liquidity floods back in. That is the kind of market we are in.
LEADERSHIP
Leadership was extended, but there are still some good moves in progress. Retail continues to show some leadership to the upside and some wear and tear; it is an enigma. The consumers are hurting - some are going down, some stocks are going up. One of our plays, BBY, is moving up and rising on strong volume. Other stocks in the sector are doing similarly well. COST is having a nice pullback, and we might be able the get something out of this. It will be a trade versus a long-term play, but it is still in good shape.
Other stocks, such as PFCB, are in trouble. It had a gap lower, a rebound to the 50 day EMA, and then it turned back down. Consumer stocks are going to be mixed, and they could come under some more pressure moving forward. Healthcare has been a new leader in the market. Those stocks have been quietly moving up. MDT is in a good position to break higher off of a bullish flag. There are others in healthcare performing well also. The pharma has been doing well; those are more traditionally defensive stocks. We will see if we can get others that move better such as some of the medical appliances stocks (e.g., MDT), to give a ride higher. Energy is struggling, but it is not in dire shape. APA is coming back to the 50 day EMA as it has done all along. It did not make a higher high as it has in the past, so it is worth watching. All of these are extended and struggling a bit. SLB is the same story. It is above the trendline and the 50 day EMA, but it did not make a higher high on this move. It is still in the trend and showing a little weakness, but it has not broken down. BTU is in the same type of situation. It is moving higher up the trendline, and it indeed hit a new high this time. Energy is still okay. It may get worse if is dollar strengthens considerably, but it is still in decent shape.
The metals are bifurcated like retail. SCHN cascaded lower and is rallying back to test a key level. We will see if it can hold or not; there is other resistance at this level. On the other hand, FCX continues its trend higher like many of the energy stocks. In financials, GS had a lower high and is breaking lower. That could be significant. Chip stocks were hurt by the downgrade, and they were not looking great in any event. AMAT does not look that good. KLAC is gapping lower from the 50day EMA test, and that does not look too positive. All of this is because of the DXY0. It did not have much of a move and closed well off of its high, but it is holding at the 75 level. It is trying to put in a double bottom and is consolidating laterally. It may or may not do it, but it has been enough now to pause the market. If it rallies higher, the market will break down and correct. If it just fizzles and continues lower, the market will turn back up and will continue moving with the liquidity driving it. Industrials such as CAT will help lead the stock market back up. Industrials and energy are two sectors that have always played off of oil, as well as the metals and those types of commodity stocks.
In summary, the break higher was not very strong. Today's break lower back below resistance was not very strong. The market moved laterally, pushing and pulling back at that level. That is a key level given the important resistance points, and it is perfectly normal to see the market struggle at this level. There are downside plays that will make quick downside while it goes through this. Some investors will be cautious and sell out of them, sending them lower. That is the correction we need to see. If there is that correction in the overall indices, that would be even sweeter and would set up a nice rally through December and into January. The market is not tipping its hand right now, but the fact that it is struggling at this key level tells us that it has some work to do before it can move higher. In the interim, I would put the odds of a downside move greater than upside given where the market started on this last leg higher, the volume shown on the move higher, and the extended leadership. Energy is pulling back, and some metals are pulling back. If they can get enough of a breather and the dollar fizzles on its bounce attempt, some stocks and energy will be leading back to the upside.
THE MARKET
MARKET SENTIMENT
VIX: 22.63; +1
VXN: 23.3; +1.27
VXO: 22.41; +1.04
Put/Call Ratio (CBOE): 1; +0.16. Quickly up to 1.0 on the selling, but it takes several closes at or above this level to start signaling a turn back to the upside, and that means it would take more selling.
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: -36.32 points (-1.66%) to close at 2156.82
Volume: 2.136B (+9.46%)
Up Volume: 290.078M (-553.873M)
Down Volume: 1.904B (+765.81M)
A/D and Hi/Lo: Decliners led 3.78 to 1
Previous Session: Decliners led 1.53 to 1
New Highs: 33 (-53)
New Lows: 30 (+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: -14.9 points (-1.34%) to close at 1094.9
NYSE Volume: 1.083B (+1.87%)
Up Volume: 119.814M (-444.339M)
Down Volume: 954.541M (+472.539M)
A/D and Hi/Lo: Decliners led 4.05 to 1
Previous Session: Decliners led 1.24 to 1
New Highs: 76 (-168)
New Lows: 41 (-6)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -93.87 points (-0.9%) to close at 10332.44
Volume DJ30: 196M shares versus 166M shares Wednesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
It is expiration Friday, and there has been a lackluster volume week thus far. There may be volatility on Friday, and we have seen some already. There was a breakout over resistance, and it was given up on Thursday. This is a process rather than a one-day event. It takes time to turn a trend. It even takes time to turn it down to correct when you have such a strong trend in place right now, particularly when it is bolstered by all the liquidity. There is still money trying to come in. We saw the market rally back off the lows, and many stocks sold down and rallied back intraday. Buyers are still stepping in. They see the chance and are going to take it on the dips to move in. We have had two days down, but is that going to be enough? There is probably not going to be a lot of activity ahead of the weekend, and probably will not be a lot of shorts moving in to sell. There may be some buyers coming in if they see the possibly of an opportunity on a dip.
Mondays have been upside of late. I think there is going to be more of the process; I do not think there will be a break right back over those levels (if it is, it will not be strong). I think the crank is going to continue to turn as the market moves along these very important resistance levels and tries to feel its way along and break higher, or breaks down and consolidates. It is hard to ignore the liquidity, and you do so at your own risk, but I have to say this market is primed for a correction back down to the October lows. It will base out (it is healthy and needs to do that), and then it will make a quick pullback to those levels. It could happen quickly, over the course of a couple of weeks. That would not be surprising because the selloffs have been sharp, but the buying has been equally sharp. All we need is a correction that takes it through Thanksgiving and maybe on into mid-December. There will then be buying toward the end of the year to get a jumpstart on the January effect.
I do not like to buy on Fridays. It can give false signals, especially on expiration Friday. Nonetheless (and this may go against what some people are saying out there), I am going to look to take downside positions before Monday. The dollar has been trying to form a foundation to break higher. I do not think it will be a major break, I just think it will be a bump higher on an oversold bounce. That will hurt the market, and could take it down pretty quickly. We could try to add more positions to our SPY and to our IWM. There was some QID and some SDS, which is another way of playing the SP500. We closed them out when the market bounced up, but we kept others open; we were playing the balancing game. I did not want to be too far extended to the downside, but we may venture into more of those positions ahead of next week because I think it might be a down week. The market often rallies on Thanksgiving, but a little more exposure to the downside would not hurt at all. I will be looking for more of those, and if we can get some better pullbacks, we will get some of the leading stocks with the big names coming back up. There has already been energy pulling back down to a trendline or to the 50 day EMA, and that is a positive. If they can consolidate a bit down there, we can start looking at them for a bounce back up. We want to see the dollar make its move and then stall out - then they will all be primed to rally back. I will have some plays on the report for when that happens. Many times, you cannot wait until it happens because you get the gap up and then you are out of business. We will try to be ready, let them come back down and make their bottom, and then when they show that they are bottoming, we can start nibbling away at them and picking up some positions. When the dollar peaks out they will take off upside, and we will be happy. In the interim, we will try to pick up more downside to play the dollar strength/stock weakness. When that starts to flip, we will close out the downside, look back to the upside, and be back in business the other way. Have a great evening.
Support and Resistance
NASDAQ: Closed at 2156.82
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
The 18 day EMA at 2147
2143 is the October 2009 range low
The 50 day EMA at 2109
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 1832
S&P 500: Closed at 1094.90
Resistance:
1100 is the 2007 down trendline
1101 is the October high
The March/July up trendline at 1104
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 18 day EMA at 1086
1080 is the September 2009 peak
1078 is the October range low
1070 is the late September 2009 peak
The 50 day EMA at 1064
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 936
Dow: Closed at 10,332.44
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:
The 18 day EMA at 10,167
10,120 is the October 2009 peak
9918 is the September 2008 peak
The 50 day EMA at 900
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 8737
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): 529K actual versus 600K expected, 592K prior (revised from 590K)
Building Permits, October (08:30): 552K actual versus 580K expected, 575K prior (revised from 573K)
CPI, October (08:30): 0.3% actual versus 0.2% expected, 0.2% prior
Core CPI, October (08:30): 0.2% actual versus 0.1% expected, 0.2% prior
Crude Inventories, 11/13 (10:30): -0.887M actual versus 1.76M prior
November 19 - Thursday
Initial Claims, 11/14 (08:30): 505K actual versus 504K expected, 505K prior (revised from 502K)
Continuing Claims, 11/13 (08:30): 5611K actual versus 5598K expected, 5650K prior (revised from 5631K)
Leading Indicators, October (10:00): 0.3% actual versus 0.4% expected, 1.0% prior
Philadelphia Fed, November (10:00): 16.7 actual versus 12.2 expected, 11.5 prior
End part 1 of 3
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