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us stock market, trend trading stock
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12/02/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: BID; NKE
Trailing stops: None issued
Stop alerts: ASH; IYT; SPY; VMI
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VIDEO MARKET & TECHNICAL SUMMARY. Detailed chart-based analysis of the key index and leadership charts are covered.
TO VIEW THE VIDEO MARKET & TECHNICAL SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/TechnicalSummary.wmv
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SUMMARY:
- Dollar firms and stocks stall at the prior highs as buyers cannot push enough and sellers are not strong enough.
- Jobs talk peaks in preparation of the 'jobs summit' or is it in preparation of a really weak unemployment report?
- Fed Beige Book more optimistic but it states the obvious and ignores the important.
- Indices again touch highs as some funds try to push higher to year end while others are content with their gains.
Firmer dollar, jobs talk, stocks go nowhere.
The dollar picked up some ground (1.5044 vs 1.5082 Tuesday), and though it was still below the recent lows, that hampered stocks from the onset. The indices finished the session bracketing the flat line, at least on the large cap indices (the smaller and mid-caps posted solid gains), but the other markets reacted much more sharply to the dollar.
Gold surged yet again (1216.80, +16.60). Oil sold (76.56, -1.81), hurt by the firming dollar and a 2.09M build in inventories that topped expectations. Bonds sold a bit more (3.31% 10 year versus 3.29% Tuesday and 3.19% last Friday investors are a bit more comfortable again but the 10 year is well off the 3.5% from earlier in the year. Something is still bothering the bond investors. They could be wrong, but often they are dead accurate. Remember when Greenspan said the inverted yield curve was not a sign of economic trouble ahead, merely excess buying of US treasuries by foreigners? Wrong. The big meltdown was coming and he missed it. No surprise there; he missed them all.
Jobs was the morning headline, however. ADP came in at -169K, worse than the -150K expected, but the eighth month of declining losses. Some crowed about that, but with construction jobs declining 34 consecutive months, the smaller declines are not a case of less equaling more. Challenger/Gray reported a 73% drop in planned layoffs, also showing continued improvement.
Much to cheer about right? Hardly. With the recession starting in December 2007 and 7.3M jobs lost since that time, you would EXPECT less layoffs simply because the jobs market is so bad. Yes you have to hit rock bottom before you can truly recover as they say, but it still hurts hitting it. Of course that is a lesson that our government and Fed cannot learn: sometimes it is better to have a sharp, nasty dive lower as that cleanses the system and lays the foundation for a strong rebuilding period. Right now the Fed and federal government have tried to cure the problem of excess credit with more credit. That is like telling the fat man (as Ronald Reagan called the federal government) to eat more food to cure his growing hunger. Again, hardly good news.
There was also the Labor Secretary coming out with the statement that real unemployment is likely 17% versus the 10% the government officially reports. This just ahead of the 'jobs summit' dog and pony show where the Administration will let us all know it 'feels our pain.' The last one of these was, appropriately, during the early Clinton term. Lots of ceremony and grandstanding, no results. It was not until the republicans captured the Congress that compromise was required and something came of it all. Of course back then the economy was already on the mend; indeed, it was recovering before the election. Jobs simply lagged in a rather routine recession. That of course is not the case this time and there is little hope this Administration will do what works, i.e. cancel the rest of the 'stimulus' spending and diverting the funds to corporate tax cuts, small business incentives, tax credits, and other proven recovery devices. Not going to happen.
TECHNICAL
INTERNALS
Volume declined on both NYSE and NASDAQ, and with the indices bumping up at prior highs that is more bullish. Why? It shows no churn as the indices traded in a tight range, unable to punch higher. There was no hot potato with shares that happens when the 'smart money' bails from the market. This action suggests that if the indices fade from the tops of their ranges the pullback will be modest versus a deeper dump lower.
CHARTS
SP500 traded at a new rally high but could not hold the move, closing with a candlestick doji. Makes sense as it is at key resistance levels and continues to struggle. On the other hand it is trading in a tight, well defined range. If it pulls back here it will be to the recent lows and from there it could attempt a real breakout. It is showing better volume the past three sessions, and thus it may simply hold near this level and then try higher. That is the power of liquidity. As with the old cheese commercials extolling the power of cheese, the power of liquidity is not to be ignored.
SP600 was a market leader Wednesday but after approaching its November peak it faded from its high. Three upside sessions after that Monday reversal and now the key test is coming. We said to watch it over the next week, and it is hitting the key resistance. If it fails and makes a lower high here that is a portent to trouble in 2010.
Overall each of the indices is still holding its general uptrend. They are, to different degrees, consolidating the last run just as they did May to early July. They have not changed their trends to the extent you can expect a sharp and deep selloff. For now they are choppy for sure as they move laterally, but they are still holding up.
LEADERSHIP
Key names such as AAPL and GS still struggle. The sectors remain split within themselves and with each other. Some financial are weak (GS, MS) while others are strong (STT, EWBC). Steel remains solid (STLD, CLF). Retail continues its strength overall (RTH is solid along with AMZN, ANN), but there is also some serious weakness as well. What about overseas? EEM, the emerging market ETF, is extremely gappy as investors are uncertain as to what 2010 holds for the smaller economies.
Even commodities are showing indecision despite the weaker dollar. As the dollar has continued its trend lower the commodities index has stopped its advance, working laterally the past 4 weeks.
A stealth leader is healthcare. It is defensive and it is giving those that are nervous about the future a place to put their money even as the financial institutions play growth. MDT is surging and HUM is sporting a solid uptrend. Big Pharma is hitting rally highs, important for its implications even if they move similar to snails.
THE MARKET
MARKET SENTIMENT
After spiking last Friday on the Dubai news, VIX has turned tail and is close to the October and late November lows. It is not making the higher lows and trending higher as the market rises, an indication of a market top. It is, however, selling back to the level that has led to near term or interim market peaks as it works its way along in its ongoing, albeit slowing, uptrend. With SP500 bumping its highs and showing a doji as it could not punch through, and with NASDAQ closing well off its high, we could easily see the market test back near term based on the VIX.
VIX: 21.12; -0.8
VXN: 22.58; -0.7
VXO: 20.04; -0.44
Put/Call Ratio (CBOE): 0.89; +0.05
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: 50.6% Up from 44.4%. Moving to a high on this last run, matching the levels from September and October. Hitting highs again just as SP500 bumps prior peaks yet again. 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: 17.6%. Bears are leaving the building the past three weeks, falling sharply from 26.7%. This is the lowest level of the entire rally and is at a bearish level. Just in time for the SP500 testing the prior peak. Peaked near 28% on this round, falling short of the 35.6% hit in July 2009. 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: +9.22 points (+0.42%) to close at 2185.03
Volume: 2.026B (-2.81%). Closed off the high but the volume was lighter, indicating not the high volume turnover that shows investors getting out of stocks. That indicates more of an interim pullback than a serious breakdown.
Up Volume: 1.358B (-336.152M)
Down Volume: 651.483M (+218.114M)
A/D and Hi/Lo: Advancers led 1.58 to 1
Previous Session: Advancers led 2.18 to 1
New Highs: 119 (+20)
New Lows: 29 (+2)
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: +0.38 points (+0.03%) to close at 1109.24
NYSE Volume: 1.032B (-8.77%)
Up Volume: 583.328M (-345.617M)
Down Volume: 387.547M (+194.137M)
A/D and Hi/Lo: Advancers led 1.81 to 1
Previous Session: Advancers led 3.84 to 1
New Highs: 352 (+38)
New Lows: 59 (+7)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -18.9 points (-0.18%) to close at 10452.68
Volume DJ30: 159M shares Wednesday versus 190M shares Tuesday. No real churn at this level as volume backed out.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Thursday will be prep for the Friday jobs report what with the dog and pony show 'jobs summit'. Again, anticipate a rising unemployment rate given the Labor Secretary's comments about the 'true' unemployment rate.
As for the market action, it is trying to move higher to the year end as it often does, and it is getting a nice assist from the liquidity gratis the Fed and federal government. Wednesday SP500 tried a new high but could not pull it off. With VIX hitting low levels and SP500 at the top of its range it may give a quick pullback before trying to break higher once more, especially with the jobs report on Friday. That would set it up for a break to a new high that once again holds and continues the modest climb higher toward year end.
The impetus is still upside of course as the indices, while struggling, are still trending higher and have not done anything to seriously jeopardize their trends. They are undergoing a consolidation similar to June and July. Nothing new there.
If SP500 does break higher, do you run in right away? Looking at the recent moves to highs that would not be the case. The indices have broke to highs and then immediately stalled. So, you wait for a test, and if it holds then you can be more confident of more upside after the breakout.
Of course individual stocks continue to set up and move higher faster than the indices, so we will continue to look for good setups that we can ride higher on a breakout by the indices, namely SP500. It will be a market for individual stocks, and that is likely the same in 2010 so we are getting a preview right now as the market chops around laterally the past three weeks. Fortunately they are still setting up, but at the same time some of those key leaders (GS, AAPL) are selling. As the market moves laterally you have good stocks moving in different directions. Thus the stock picking nature of this market right now.
If there is a pullback near term it is likely shallow in prelude to another breakout attempt. The jobs report could key that near term move, but one thing that remains constant: each dip is bought and the last dips have held the range on SP500. The dollar, liquidity, supposed foreign economic growth are all contributing to its strength, and those trends likely don't change near term. That gives the market the push it needs to make it to the end of the year.
Support and Resistance
NASDAQ: Closed at 2185.03
Resistance:
2191 is the October 2009 peak
2205 is the November 2009 peak
2210 (from September 2008) to 2212 (the July 2009 closing low)
2275 - 2278 from the February 2008 and April 2008 lows
Support:
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
The 18 day EMA at 2158
2155 is the March 2008 intraday low
2143 is the October 2009 range low
The 50 day EMA at 2124
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 1857
S&P 500: Closed at 1109.24
Resistance:
1114 is the November 2009 peak
The March/July up trendline at 1115
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
1101 is the October high
The 18 day EMA at 1096
1095 is the 2007 down trendline
1080 is the September 2009 peak
1078 is the October range low
The 50 day EMA at 1075
1070 is the late September 2009 peak
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
The 200 day SMA at 947
Dow: Closed at 10,452.68
Resistance:
10,496 is the November 2009 high
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
The 18 day EMA at 10,310
10,120 is the October 2009 peak
The 50 day EMA at 10,039
9918 is the September 2008 peak
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
The 200 day SMA at 8837
8829 is the late November 2008 peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 30 - Monday
Chicago PMI, November (09:45): 56.1 actual versus 53.3 expected, 54.2 prior
December 01 - Tuesday
Construction Spending, October (10:00): 0.0% actual versus -0.5% expected, -1.6% prior (revised from 0.8%)
ISM Index, November (10:00): 53.6 actual versus 55.0 expected, 55.7 prior
Pending Home Sales, October (10:00): 3.7% actual versus -1.0% expected, 6.0% prior (revised from 6.1%)
Auto Sales, November (14:00)
Truck Sales, November (14:00)
December 02 - Wednesday
Challenger Job Cuts, November (07:30): -72.3% actual versus -50.7% prior
ADP Employment Report, November (08:15): -169K actual versus -150K expected, -195K prior (revised from -203K)
Crude Inventories, 11/27 (10:30): 2.09M actual versus 1.02M prior
Fed Beige Book, November (14:00)
December 03 - Thursday
Initial Claims, 11/28 (08:30): 480K expected, 466K prior
Continuing Claims, 11/21 (08:30): 5400K expected, 5423K prior
Productivity-Rev., Q3 (08:30): 8.5% expected, 9.5% prior
Employment Cost Index, Q3 (08:30): 0.4% prior
ISM Services, November (10:00): 51.5 expected, 50.6 prior
December 04 - Friday
Nonfarm Payrolls, November (08:30): -125K expected, -190K prior
Unemployment Rate, November (08:30): 10.2% expected, 10.2% prior
Average Workweek, November (08:30): 33.1 expected, 33.0 prior
Hourly Earnings, November (08:30): 0.2% expected, 0.3% prior
Factory Orders, October (10:00): 0.0% expected, 0.9% prior
End part 1 of 3
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us stock market
trend trading stock
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