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world stock market, us stock market
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2/10/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: BUCY; QID
Trailing stops: None issued
Stop alerts: None issued
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:
- Market does a decent job of swallowing testy news.
- Waiting on the EU to confirm some kind of bailout.
- Bernanke states the obvious regarding monetary policy adjustments needed . . . some day.
- US 10 year bond auction doesn't go that well. Greece threads run all across the globe.
- Indices pause below the near resistance avoiding further selling on Wednesday was modestly bullish.
Investors still wary of EU issues, removing stimulus on the home front.
The rest of the world stock markets were up Wednesday but the US was holding back with futures just below positive. Conflicting reports from Europe on the on again, off again Greece bailout, Bernanke testimony that the Fed would start working toward ending monetary stimulus (some day), and a lukewarm (read 'bad') 10 year bond auction kept investors on edge all day, and the result were losses, albeit modest in the -0.2% range.
Even with a bag full of reasons to sell, stocks did a decent job of holding up. Of course, holding up in this instance means trading flat and staying just below the 10 day EMA in their recent 4 week pullbacks. Not the picture of strength but then again, not selling off further when they are in position to do so was something of a moral victory on the day. Of course moral victories have a brokerage account value of zero, so you don't want to read too much into the lack of selling.
OTHER MARKETS
Dollar. The dollar was an important factor on the session. After a tail kicking Tuesday that succeeded in taking it back to the 10 day EMA, the dollar index bounced right back up (1.3729 versus 1.3786). Basically the move was a test of the solid break higher last week in the next leg higher: rally, test, rally, test. That is the usual pattern in an uptrend and the dollar is showing that action, aided by the continuing discomfort arising from the PIIGS in Europe that may be a precursor to what we may have ahead.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Gold. Gold faded modestly, but it took quite a bounce off the lows to get to the modest decline. After it broke below the December and late January lows that tried to set a double bottom, it quickly rebounded and closed just over those lows. A modest positive. Overall the pattern took on some serious water last week and while it is trying to bail it out and may be successful. The volatility, however, suggests gold has more work to do in this base before it is at that point.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil continued its Tuesday bounce off of the 200 day SMA, rallying for a modest gain (84.42, +0.67). Volatile yes, but it is staying inside the December to early January surge straight up. It is rather ragged, but you likely see the ABCD pattern that has formed. May be too ragged to make a difference, but it has held where it needs to hold on this pullback.
http://investmenthouse.com/ihmedia/xoil.jpeg
Bonds. Bonds were basically flat and indeed rallied a bit pre-market before the midday 10 year treasury auction. That auction was, to put it mildly, lackluster. The demand for the notes was rather slack, and while the Treasury did sell the $25B it wanted to sell (remember Greece could not sell all the bonds it wanted to sell), it had to pay a higher yield to attract buyers (2.692% versus 3.680% expected). That means the US will have to pay billions more in interest over the life of the bonds than anticipated (hoped?). The bid to cover was just 2.67 versus the 2.76 average on the ten prior auctions. You are seeing it around the world and this past year it has started to soften the US debt market: massive deficits make it harder and harder to attract buyers willing to take on what is perceived as higher risk.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Modest moves so modest breadth readings, basically flat along with the market with decliners roughly 1.1:1. Not much of a tell there.
Volume. Lower and below average on both NASDAQ and NYSE. As with breadth, it was not much of a tell either though the low trade shows very little selling interest even though the indices closed lower with modest losses.
CHARTS
SP500. Virtually no change in the large caps with a 0.22% decline. The index did recover off the low that roughly matched the Tuesday opening price and then rebounded to close with that modest loss. It remains below the 10 day EMA that has kept it in check since the selling started in mid-January. Not as definite a resistance point as on NASDAQ, and SP500 is holding over some support at 1045 (closed at 1068). It is, in short, basically indecisive here, but the near trend is downside. If it is going to find legs to bounce, however, it is going to do so in this range from 1045. If not, then it sells down to the early November low at 1030.
NASDAQ. Just a 0.14% decline on NASDAQ along with another candlestick doji just below the 10 day EMA. The 10 day has stalled NASDAQ the two prior times it has bumped that resistance on the selling from January. Again, if the 10 day EMA acts as resistance that indicates a pernicious downtrend. NASDAQ held steady Wednesday so perhaps it is attempting to buck up and bounce above the 2100 support level it tapped last Friday. If it breaks lower we are looking for a trip down near the November low at 2050 to 2035ish.
SOX. Flat on the session. Pancake flat as SOX showed its second straight doji that tapped the 10 day EMA on the high and the Monday close on the low. Similar to the other indices, SOX is holding over some support that it was testing late last week while it bumps the 10 day EMA, the level that held it in check three times on this selling. Remember, SOX was the first to the downside, and if it holds the line here and breaks higher we can see the other indices follow suit and get that bounce that really has not emerged since the market peaked in early January.
SP600 (+0.24%) was the lone wolf to the upside Wednesday, testing toward support at 312 and then rebounding to post the gain. Perhaps the small caps have had enough downside, having snugged up against support without breaking it and now trying a bounce. Interesting though the pattern is still extremely weak.
LEADERSHIP
Industrials. Not a lot of strength here but not a lot of weakness as well. The industrials managed to bounce off of session lows and cut the losses, but as with many of the indices, these stocks are showing doji below the 10 day EMA as they bounce back a bit. DE and BUCY show that pattern, but TEX and JOYG are holding support, looking for a reason to bounce.
Metals. A mixed picture though most are struggling along with other 'over there' plays. MTL is not bad but not really in great buying position again, FCX is trying to continue its bounce off the double bottom at the 200 day SMA.
Technology. Not a lot of change among the main players. AAPL is struggling through its correction while GOOG continues to move laterally along some price support. SNDK looks top heavy below its 50 day EMA. Not major breakdowns but definitely in need of plenty of work before they are in a great position to surge.
Healthcare. HUM gave back part of the Tuesday gain but it also bounced nicely off the 50 day EMA once again. HOLX looks ready to jump higher. As with other sectors the picture is mixed, but it is also skewed more toward the bullish spectrum that other sectors.
Retail. Still one of the sectors that sports some good patterns. COST, ANN, NFLX, BWLD to name a few though there are still many, many retailers that need work.
Energy. Trying to hang in there but there are some bearish looks, e.g. HAL showing a bear flag while offshore drillers tank (e.g. DO). At the same time some natural gas plays look pretty decent (e.g. CHK). As with other sectors, a lot of work needs to be done before serious and sustained upside moves are made.
THE ECONOMY
Greece, Ireland, Italy, Portugal, Spain are symptoms of the underlying problem that never went away.
Conventional wisdom, as well as the party in power's mantra, is that the actions taken in the fall 2008 and into 2009 have prevented a second Great Depression. The certainly aided in bringing financial markets back to a level where they could operate following the surge in distrust between institutions, companies and individuals that caused risk spreads to widen and credit default swaps rates (insurance) to explode higher. That has allowed companies to get funding and go back to business, and allowed the stock market to bounce from a massive and sharp correction as the train wreck unfolded. Individuals have gone back to their lives as best they could, trying to hold things together with falling home values, shredded retirement accounts, and a severe lack of jobs.
All of that gave the appearance that the problem was solved and that it is just a matter of sticking with the plan in order to work our way out of the hole. Problem is, the fill they are using to build our way out are piles and piles of printed money creating unprecedented deficits. Doesn't matter where in the world you come from if your country's economy touched the plague of phony mortgage values. That would include most of the western economies.
That money was used to trowel over the initial problem and it helped Europe emerge from the recession first with the US following, purportedly, the last two quarters as GDP turned positive. Happy days again. The hope is that the world economies continue to improve, build strength, and ultimately work down those massive deficits.
Over the past three months we have reported how Europe was just not as strong as you would believe given it led the US out of the recession. Those warnings turned to reality as Greece suddenly turned sour, then Spain, then Italy, etc. Even the UK is in trouble as its sterling banking reputation was besmirched by Standard & Poor's.
The culprit: those massive deficits the money printing caused, adding onto already massive deficits resulting from entitlement programs that governments simply cannot pay off given the increases in life expectancy, population, and benefits. All the money printing only threw a log over the pit so economies could clamber across. It did not solve the problem.
What we are finding out with the PIIGS is that while the money printing bought some time, it is not a solution allowing countries to go about business as usual, i.e. living beyond their means sporting these massive Ponzi schemes called pensions, national healthcare, social security, Medicare, etc. The money printing was only a temporary bridge, but countries are acting as if was the cure and they can go back to their old ways. The financial markets are showing otherwise, however, as they are starting to choke on the continued debt additions with no plans to forestall or repay the new debts accumulated in the crisis. Thus the risk indicators in Greece started to run off the rails the past two weeks, and that same underlying problem threatens the rest of Europe.
It also threatens the US. We followed Europe out of recession using the same tactics and we have not changed our ways either. If you add up all the debt on the US books (and that would actually mean including the debt that is not on the books), it is a mind boggling figure that ranges anywhere from $100T to $600T. A huge spread, but when talking about these numbers, does it really matter? Indeed, we are talking about even increasing that amount with national healthcare and cap and trade. We don't even have all of the social programs Europe does and our debts are bigger. If we add those other two monsters to the mix the result is likely an explosion as our system implodes.
Some say we have to stop spending to solve the problem. Stopping spending won't solve this kind of problem. The debts are too massive. We could take our entire profits from all businesses we have for decades and not pay off this debt. Structural reform is the only way, e.g. social security. When implemented you had to outlive the actuarial tables in order to collect a penny. Now we outlive the age of eligibility by 13 years and that is only going to grow. Contributions have grown from 22 people for every 1 recipient to 3 to 1 right now, and as people live longer the situation worsens. Only by changing the entire system can it ever hope to work, e.g. dramatically raising the benefits age and having younger participants (but not that young) move to a private system or a combination private/public. It will take years to accomplish and the older citizens will rightly rebel as they paid in and anticipate a return as promised.
We are reaching the critical point. I recall discussions with some friends of mine 7 or so years ago about deficits and how at the level we were running I had no real concern for them. They were historically low as a percent of GDP both here in the US and in the history of the world. My friends were screaming about them. My response was that it would be a problem when China, India, and others supplying us goods for us to consume and thus gladly underwriting our debt realized that they were wealthy nations and could consume their own goods versus relying on the US to buy their stuff. Then they don't need to buy our debt and stop. Our deficits catch up with us.
Now our deficits are massive. As noted last week they will be 300% of GDP in 20 years. Absurd. It is already impacting us as our bond sales show. Wednesday's weak 10 year auction, even in times of economic worry, could not generate the interest the Treasury wanted and it had to sell bonds at a higher yield. China is talking about economic blackmail if we don't do what it wants in other international matters. They now have the leverage and you can bet your Chinese-made lead-paint toys and poisoned dog food they are going to use that leverage against us again and again. We have spent ourselves into economic weakness and decline and our enemies are more than willing to take advantage of it. Don't be surprised to see the same issues percolating back up through the debt in Europe arise here late in the summer.
THE MARKET
MARKET SENTIMENT
VIX: 25.4; -0.6
VXN: 25.23; -0.35
VXO: 24.27; -0.22
Put/Call Ratio (CBOE): 0.93; -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: 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: -3 points (-0.14%) to close at 2147.87
Volume: 1.975B (-8.21%)
Up Volume: 886.509M (-863.924M)
Down Volume: 1.113B (+644.387M)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Advancers led 2.53 to 1
New Highs: 30 (-7)
New Lows: 24 (-4)
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: -2.39 points (-0.22%) to close at 1068.13
NYSE Volume: 1.003B (-19.03%)
Up Volume: 440.871M (-579.826M)
Down Volume: 551.373M (+370.018M)
A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 3.32 to 1
New Highs: 82 (+14)
New Lows: 42 (-4)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -20.26 points (-0.2%) to close at 10038.38
Volume DJ30: 178M shares Wednesday versus 236M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
With the snowstorm in the East the only scheduled report is the weekly initial jobless claims. Of course there are the continuing issues regarding the EU and the PIIGS to be resolved. At this juncture, however, the market has pretty much priced in a rescue of some sort, so when it comes the market might feel some relief but whether it runs on the news and is able to shake off the current downside bias is problematical.
While Wednesday was not that bearish as the market withstood several layers of unfavorable news the standstill action did not alter the index positions. NASDAQ is still sitting below the 10 day EMA that stalled it the prior two tries in this selling. SOX has stalled there even more. SP500 is there for a second time. On the other hand, all have held and continue to hold some near support that is lower but not out of sight.
Thus the market is at its next decision point. The bias is down but the market did not sell off further Wednesday when it probably should have. We picked up a few QID and BUCY downside positions in the event the market opens lower tomorrow; great risk/reward points and if the market sells we make a tidy sum. If the market finds strength and tries to reverse the recent trend lower, we have good tight exit points.
There are some good setups either way, and that makes sense given the market's position right now. It is going to make its break one way or the other. We favor the downside but we cannot assume we are smarter than the market. It could always make that bounce to test the prior high and then roll back over. We would be 'right' but not at the right time. So . . . we will continue to pick good setups with good risk/reward points and if they show the move we can move in. At the same time we cannot have blind faith that just because we bought into a play it has to work. If it doesn't, drop it like a bad habit, don't take a big loss, and then look for another to make us a lot of money.
Support and Resistance
NASDAQ: Closed at 2147.87
Resistance:
2155 is the March 2008 intraday low
The 10 day EMA at 2164
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
The 50 day EMA at 2204
2205 is the November 2009 peak
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:
2143 is the October 2009 range low
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 2027
2015 from an early August 2008 peak
S&P 500: Closed at 1068.13
Resistance:
1070 is the late September 2009 peak
1078 is the October range low
The 10 day EMA at 1078
1084 to 1080 (September 2009 peak)
The 50 day EMA at 1099
1101 is the October 2009 high
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 1022
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 10,038.38
Resistance:
The 10 day EMA at 10,105
10,120 is the October 2009 peak
10,285 is the late December consolidation peak
The 50 day EMA at 10,280
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 9511
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): -0.8% actual versus 0.5% expected, 1.6% prior (revised from 1.5%)
February 10 - Wednesday
Trade Balance, December (08:30): -$40.2B actual versus -$35.8B expected, -$36.4B prior (no revisions)
February 11 - Thursday
Initial Claims, 02/06 (08:30): 465k expected, 480k prior
Continuing Claims, 1/30 (08:30): 4590k expected, 4602k prior
February 12 - Friday
Retail Sales, January (08:30): 0.5% expected, -0.3% prior
Retail Sales ex-auto, January (08:30): 0.5% expected, -0.2% prior
Michigan Sentiment, February (09:55): 75.0 expected, 74.4 prior
Business Inventories, December (10:00): 0.3% expected, 0.4% prior
Crude Inventories, 2/5 (11:00): 2.32M prior
Treasury Budget, January (14:00): -$46.0B expected, -$91.9B prior
End part 1 of 3
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