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world stock market, us stock market
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2/08/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: FCX; MON; NFLX
Trailing stops: GIS; INCY; SLB
Stop alerts: TLB
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the SSR alert service you can sign up at the following link:
http://www.investmenthouse.com/alertssr.html
SUMMARY:
- Friday reversal not strong enough to push upside gains.
- Dollar weakened over weekend but resumed its upside move on Monday.
- Corporate bond yield spreads, an indicator of economic health, hit their widest since November.
- After the Friday candlestick doji the pattern turns to a resumption of the downside without much of a bounce.
- Greece bailout possibility is still out there.
Reversal stalls out before it gets started.
It did not take very long to determine the Friday reversal and move to positive off last week's lows was low on gas. Stocks were modestly higher ahead of the open, but opened modestly lower. They had to rally off the open, but they managed to do so and posted a gain by midmorning.
Why the rebound and the early morning gains? Late Friday a rumor hit that the EU planned a guarantee of Greece's short term debt. Given the market sold based upon Greece's and the other PIIGS' debt woes, word that a bailout was close at hand sent the shorts covering and drove stocks up off the lows. The dollar was up sharply again Friday, but as the rumor hit it pared its gains: no need to run to the dollar if the EU was going to take care of its members' debt issues.
The package did not appear before the Monday open, but the rumor was it could be announced early in the day. Stocks held the Friday reversal in anticipation, and the dollar was weaker as for the same reason. When no announcement came as lunchtime approached, however, the market lost its bid and started to give back the gains. The dollar started to grow in strength. Stocks turned negative while the dollar turned positive as the play from last week returned as the hope for a bailout, at least for Monday, faded.
Stocks closed down across the board with 0.7% (NASDAQ) to 1% losses (DJ30). Not a major selloff in itself, but combined with last week's selling and the Friday reversal, the failure to follow through on the reversal, the continuation of the selling, and the patterns the indices show makes this session more skewed to the downside than just the day's totals.
OTHER MARKETS
Dollar. As noted, the dollar fell from its peak on Friday and was lower Monday versus its weekend trade. It was, however, still higher than the Friday close. Thus it was 'down' even though it was up from Friday. As the session wore on, however, the dollar reversed its course and rallied to a gain (1.3650 versus 1.3861 Friday). Still strong versus the euro, but not as strong vis- -vis the yen and other currencies. Thus the dollar index did not show the gain the dollar/euro did.
Gold. Gold was up and down, but after hours sported a solid gain (1063.70, +10.90). That does not rescue it from its Thursday dive lower as this moves puts it up against the December/late January lows. A break back into that range is bullish, at least for a move up to the early February peak and possible the early January peak at 1150.
Oil. Black gold traded up and down the entire session, closing slightly higher, then trading slightly lower after hours (71.65, -0.24). The point here is oil for a second session tested its 200 day SMA just over the December low (that preceded a run to a new rally high) and bounced off that low. It is showing some stickiness here as it indicates it wants to try and move back through 72.50 resistance it broke Friday.
Bonds. Bonds traded flat as the 10 year yield held at 3.57%. While the dollar is getting bid up on worries of EU deficits, bonds are holding their gains but are not surging. The US debt sales likely have a dilutive effect on any desire to enter bonds as a form of safety during the PIIGS issues in Europe.
TECHNICAL
INTERNALS
Breadth not heavily negative, but at roughly -1.8:1 on both NASDAQ and NYSE on a turn from positive to negative, there was plenty of downside momentum in the numbers.
On the other hand, volume fell sharply on both NASDAQ and NYSE (30%). That pushed volume below average on both of the main exchanges. Thus no real dumping on the reversal from positive to negative on the session.
CHARTS
SP500. An early move positive tried to continue the Friday low to high reversal, but by midday that move was done. SP500 faded to negative and put in a new closing low on this selling leg that started mid-January. Lower trade as noted, so not a downside blowout, but last week there was plenty of downside trade. The key point is that SP500 attempted to rally but slumped back over, showing a negative combination of days on the candlestick chart: a reversal that failed and was engulfed by a selloff through the prior session open and closing prices. Resumption of the negative bias leaving SP500 vulnerable to 1030 down to the 200 day SMA at 1020.
NASDAQ. Very similar action on NASDAQ with a move positive and then a reversal to close negative. NASDAQ was indeed in the lead most of the session, so when it gave up the conclusion was pretty much foregone. Lower trade but higher trade last week in the selling, so not too much solace there. As with SP500, the candlestick pattern is bearish as the Friday reversal was overtaken by the rally higher that turned over. 2100 is some support, however, and NASDAQ bounced off that level Friday on the low. After that you look more to 2030 to 2025ish.
SP600. The small caps never gave much of an effort at rallying, turning back down to close at the low, holding at the August intraday peaks. SP600 held at 309 Friday (closed at 312 Monday) so there is some life there. If that does not hold then 300 is the likely touch down point.
SOX (-0.36%) was the true leader most of the session, rallying nicely intraday but closing with a modest loss. On the high it again hit the 10 day EMA where it hit in January twice and again in early February as it made a series of lower highs. Key test ahead: it is obviously trending lower but there is support from 315 to 304 that is fairly solid. Indeed SOX touched that range in late January, bounced, and is now testing it again. Not a lot of downside for SOX at this juncture unless things get really ugly for the market. As SOX was the first index to head lower in the selling, if it starts to find a bottom we should look for the other indices to finish their selling and do the same.
LEADERSHIP
Technology. GOOG gapped higher and rallied but we wanted to see how it closed and it did not close that well. GOOG fell almost 9 points off its high. Given it was ready to bounce, its action was very representative of the rest of the techs in terms of those ready to bounce versus just hang on. It is still in position to move higher. AAPL looks range-bound for the near term, not providing much impetus for a NASDAQ recovery. Of course MSFT continues its trend lower, not even trying to hold a range. Overall tech tried to lead Monday but failed.
Industrials. Some decent action here with CMI showing a doji as it tries to make a higher low. BUCY is in bad shape but found some support at the bottom of the November/December range. JOYG is still holding the 200 day SMA, showing another doji at that level. Some life here but not exactly great buys yet.
Metals. FCX tried to rally but could not hold the move. No major selling, just didn't have enough to continue the Friday bounce that was not a reversal but a rally from the start. The rest of the group is pretty much a struggle. And not in very good patterns, though they are not really in good position to play the downside either. That in itself is somewhat promising for the upside as a bounce could occur near term.
Energy. Showed no life Monday with no bounce attempts, or at least attempts that did not last very long. HAL, APA, CVX are just examples of stocks that sold further. CHK in the natural gas sector held its 200 day SMA for the third session. It can still make a higher low here but again, it is not that well positioned even for an upside trade.
Retail. There are still patterns here, patterns that are solid. ANN continues looking solid. DBRN is not bad as it tests its 50 day EMA. There are patterns ready and setting up.
THE ECONOMY
Signs of spreading problems again: corporate credit risk climbs.
The European deficits are causing the same 'contagion' fears the US housing and mortgage issues fostered in the summer of 2008 ahead of the crash in the fall that year. While the US deficits are monumental, Europe's are the same and are experienced by many countries in the EU.
Just as the US issues did not stay in the US, the European issues are not staying in Europe. U.S. Corporate debt (bond) yield spreads are rising rapidly, now equaling the levels from last November. As confidence falls, perceived risk rises, and thus spreads widen as a means of insuring against the increased risk. Even as US economic data continues a slow but steady improvement, the European discord is overshadowing those improvements.
Credit Default Swaps (CDS) are a form of insurance, unregulated, that entities use to cover their risks. They pay the buyer (insured) the face value of an instrument if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and is equal to $1,000/yr on a CDS contract protecting or 'insuring' $10M of debt.
Back in late summer and early fall of 2008 CDS rates exploded higher, rising at first hundreds of percent to over a thousand. In short, the risks jump so high that the 'insurance policy' price exploded in order to cover the perceived risk. Then there came the worry that the CDS would not even cover the possible losses. Panic ensued.
Greece is experiencing protests and planned strikes from its public work force as the idea of spending cuts is not sitting well with them. If Greece cannot get a handle on this disquiet then it will need a bailout from the EU. Of course if the EU delivers then there is a green light for bailouts of the other PIIGS countries (PIIS?) and fear of more problems versus a sigh of relief. Without a doubt a bailout announcement will receive positive responses initially, but if the EU is taking on their debt then the EU itself becomes suspect.
As a result US corporate swaps are jumping. BAC +5.5BP (135.5 BP total). MS +7BP (154.5). Citigroup swaps jumped 11BP (226.5). JPM was better off at 2BP (87.5) and GS 1BP (135.5). Compare this to Portugal where its leaders are trying to pass increased spending programs; its rates jumped 16.5BP. Greek swaps jumped 25BP to 420 overall.
The fear is that if the EU does not bail out Greece then you get a cascading problem feared in the fall of 2008 and was indeed underway. If the EU DOES bail out Greece then the worry is the EU is not big enough to contain the problem.
Kind of a damned if you do, damned if you don't arrangement. What do you think happens? Well the EU officials are heading back home from all over the world to discuss this in meetings this week with the head man cutting a trip to Australia short to attend those meetings. What will it do? Likely issue those guarantees rumored late Friday and over the weekend. If they don't they fear the result of Greece's financial system collapsing. They will prefer to avoid that and bail out Greece then face a more amorphous 'what if' scenario that they have no way of quantifying ahead of time. Here we go again.
THE MARKET
MARKET SENTIMENT
VIX: 26.51; +0.4
VXN: 26.92; +0.96
VXO: 25.43; +0.15
Put/Call Ratio (CBOE): 1; -0.21
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: 38.9%. The selling took further toll on bulls, dropping them from 40.0%. After peaking at 53 on this move the bulls continue to run, falling to a new low post- July 2009. Once again bulls peaked out near the 50% level. Bulls have bumped at 50ish since late August 2009, falling to 45ish and then rebounding. Getting close to the 35% level that is the threshold for what is considered a bullish climate. 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: 22.2%. Surprisingly bears fell for the week, down from 23.3% after a brisk rise up from 16%ish on the lows this leg where it held for several weeks. Peaked near 28% in November, 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: -15.07 points (-0.7%) to close at 2126.05
Volume: 1.991B (-27.62%)
Up Volume: 558.029M (-1.349B)
Down Volume: 1.46B (+593.795M)
A/D and Hi/Lo: Decliners led 1.82 to 1
Previous Session: Advancers led 1.19 to 1
New Highs: 27 (+11)
New Lows: 30 (-22)
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: -0.01 points (0%) to close at 1066.18
NYSE Volume: 1.085B (-30.54%)
Up Volume: 237.662M (-594.713M)
Down Volume: 837.629M (+125.284M)
A/D and Hi/Lo: Decliners led 1.72 to 1
Previous Session: Decliners led 1.42 to 1
New Highs: 58 (-5)
New Lows: 41 (-48)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -103.84 points (-1.04%) to close at 9908.39
Volume DJ30: 216M shares Monday versus 308m shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Wholesale inventories is the only scheduled economic report due out Tuesday. Earnings are still coming in but at a much slower pace. After hours ERTS was getting slapped around on its earnings miss.
As noted over the weekend, the dollar and its response to the ebb and flow of European issues as well as other economies (some are not bad at all, e.g. China) is the primary indication of investors' view of how these issues resolve. Gold is not acting as a store of value, indicating a worry about deflation trumping worries re inflation. US bonds are typically a safe haven, but with the US selling more and more bonds each week they are not attracting the 'flight to safety' money they usually garner.
The Monday action certain suggests the selling is set to continue for SP500, NASDAQ and other NYSE indices, but remember that SOX sold first in this selloff and it is trying to hold some support. First to sell first to put in a bottom and bounce? Often the case so we watch SOX closely.
In the meantime the dollar gets a lot of our attention as it is the de facto barometer for the ups and downs of the world. With the dollar action and the market flipping the Friday reversal with the Monday slump, the downside again appears to be the path of least resistance. If the EU installs a Greece rescue package the immediate response is 'whew,' and that likely sends stocks to the upside as a major cause for the recent downside is averted, at least for the near term.
That risk remains regardless, but if we see the momentum continue downside then we have to go downside as well. Just never leverage too much in uncertain times. At the same time don't turn down a good play on the possibility that the EU or ECB comes to Greece's aide.
Thus we will look at downside plays that present themselves though the market did not give much of a bounce off of last week's selling. We spent a lot of the weekend play space on the upside given the rebound Friday and many stocks continued to hold support and set up potential upside moves. Many can still pull that off and thus we will continue to look at both directions and play the direction the market moves. The market bias is downside but there has also been a significant drop to this point. Some more selling through the first part of this week could spark a rebound, but there is still likely some significant selling first. Thus, play what the downside offers, keep some good upside plays at the ready, and play them as the show the moves.
Support and Resistance
NASDAQ: Closed at 2126.05
Resistance:
2143 is the October 2009 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)
The 10 day EMA at 2171
2177 is a low from March 2008
2191 is the October 2009 peak
2205 is the November 2009 peak
The 50 day EMA at 2209
2210 (from September 2008) to 2212 (the July 2009 closing low)
2218 is the August 2005 peak
2245 from July 2008 through 2260 from late 2005.
2275 - 2278 from the February 2008 and April 2008 lows
2292 is a low from January 2008
2319 from the September 2008 peak
2326.28 is the January high
2324-2370 is a range of resistance from early 2008
2382-2395 from 2008
2412-2415 represents a series of peaks and lows in 2007, 2008
2453 is the August 2008 peak
Support:
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
The 200 day SMA at 2020
2015 from an early August 2008 peak
S&P 500: Closed at 1056.74
Resistance:
1070 is the late September 2009 peak
1078 is the October range low
1083 is the 10 day EMA
1084 to 1080 (September 2009 peak)
1101 is the October 2009 high
The 50 day EMA at 1102
1106 is the September 2008 low
1114 is the November 2009 peak
1119 is the early December intraday high
1133 from a September 2008 intraday low
1150 is the January 2010 peak
1156 is the Sept 2008 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 200 day SMA at 1020
The early August intraday peak at 1018
The November 2008 peak at 1006 closing 1007.53 intraday
992 is the August 2009 consolidation low
Dow: Closed at 9908.39
Resistance:
10,120 is the October 2009 peak
The 10 day EMA at 10,134
10,285 is the late December consolidation peak
The 50 day EMA at 10,299
10,365 is the late September 2008 low
10,496 is the November 2009 high
10,609 from the Mid-September 2008 interim low
10,963 is the July 2008 low
Support:
9829 is the September 2008 closing high
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
The 200 day SMA at 9491
9430 is the early October low
9387 is the mid-October peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
February 09 - Tuesday
Wholesale Inventories, December (10:00): 0.5% expected, 1.5% prior
February 10 - Wednesday
Trade Balance, December (08:30): -$35.5B expected, -$36.4B prior
Crude Inventories, 2/5 (10:30): 2.32M prior
Treasury Budget, January (14:00): -$50.0B expected, -$91.9B prior
February 11 - Thursday
Initial Claims, 02/06 (08:30): 465k expected, 480k prior
Continuing Claims, 1/30 (08:30): 4590k expected, 4602k prior
Retail Sales, January (08:30): 0.5% expected, -0.3% prior
Retail Sales ex-auto, January (08:30): 0.5% expected, -0.2% prior
Business Inventories, December (10:00): 0.3% expected, 0.4% prior
February 12 - Friday
Michigan Sentiment, February (09:55): 75.0 expected, 74.4 prior
End part 1 of 3
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world stock market
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