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us stock market, trend trading stock
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2/24/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: F; HOLX
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 shows some surprise strength, fends off negative data, rebounds from 2 days of selling.
- NASDAQ, SP600 bounce nicely, SP500 is hanging in there.
- German consumption falls but corporate debt swaps in the US improving
- January new home sales thumped
- Bernanke reiterates low rates forever mantra as Government Motors owners posture at dog and pony show targeting Toyota.
- Maybe this market CAN bounce.
Credible bounce but still needs some work.
Tuesday looked pretty ugly with volume jumping on some impressive price and percentage losses. Then Wednesday the futures were modestly higher and the market built on that strength all session. The indices posted gains that, while less in magnitude than the Tuesday selling, were quite solid. Indeed, SP600 managed to come within 0.01% of recapturing all that was lost Tuesday.
The rebound was rather puzzling as there was nothing seemingly that significant to turn Tuesday's selling around. Indeed the early news was not great. The EU was out with more negatives as German consumption and investment turned negative. Earnings were mixed. FNM lost $6.4B of our money in Q4 and is in the process of buying extremely risky underperforming assets. New home sales fell 11.2% in January after a 4% December loss. Not a whole lot of positives to turn the market from the Monday and particularly the Tuesday selling.
Then there was Mr. Bernanke going to Washington to deliver to the House Financial Services Committee his Son of Humphrey-Hawkins testimony (that will be repeated to the Senate on Thursday). Bernanke said that while the jobs market was still struggling, there was a "nascent" recovery that warranted an "exceptionally low level of the Fed Funds rate for an extended period." That was enough. The dollar weakened a bit from its surge below 1.36 euro this week, and that gave stocks an upside opening. SP600 picked up 0.97%, NASDAQ 1.01%, SP500 0.97%, and SOX 1.92%. Credible indeed. Perhaps the market can pull off an orderly test of the 2 week rally, righting the ship so to speak after the Tuesday sharp selling.
OTHER MARKETS
Dollar. The dollar was off against the euro (1.3534 versus 1.3512 Tuesday) as well as against the basket of currencies making up the dollar index. Bernanke's statement re exceptionally low rates for an extended period undercut some of the recent dollar strength. Overall, however, the dollar, despite Bernanke's and the Fed's continued mantra re low rates, continues to rise in its uptrend. It is much feistier than we originally anticipated when this run began, and it is showing no indications the trend is in jeopardy near term.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds traded basically flat with the 10 year treasury ticking lower (3.68% versus 3.69% Tuesday). Bond sales in the afternoon did not impact bonds significantly. Interestingly, the TIPS sold even with Bernanke's low rate mantra. They would anticipate more inflation with a loose money Fed but they did not act that way Wednesday.
http://investmenthouse.com/ihmedia/tip.jpeg
Oil. With a weaker dollar oil prices rallied, bouncing off the 78 support level, now looking for a run toward 82 to 83 at the top of the range. 80.09, +1.23.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. After holding above 1100 in a lateral move the past week, Gold slipped lower (1096.60, -6.60), falling through the 50 day EMA on the close. It tapped the down trendline on the low and rebounded to cut the losses, but it is giving up its consolidation after the trendline break. Perhaps just a shakeout before renewing the upside, but the Wednesday trade is consistent with the TIPS: with continued low rates gold should anticipate some inflation, but the action in both TIPS and gold on Wednesday didn't reflect that.
TECHNICAL
INTERNALS
Breadth. Mixed at 1.7:1 on NASDAQ and stronger at 2.7:1 on NYSE. Pretty much the picture of late with the NYSE showing more positive breadth thanks in large part to the continued relative strength in the small caps.
Volume. Contracted on both NASDAQ and NYSE, falling back below average on NASDAQ and remaining below average on NYSE. Not much strength from buyers in the bounce, at least clearly not as strong as the Tuesday selling. Even with low volume this move has continued upside and we have not worried about the low trade because this is a relief bounce. Now it is trying to hang on after some volume entered on the downside, and that puts the burden on the buyers to produce some more quality trade to overcome the immediate and next resistance levels. The lower trade on the upside Wednesday move showed that has not occurred yet, and that makes a break by SP500 over next key resistance a bit more problematical.
CHARTS
NASDAQ. Gapped higher and took out the Tuesday high, but could not hold all of that move. Not bad action mind you, as NASDAQ held where it had to, i.e. right above the November/December consolidation at 2205. More downside trade than upside, and that is the big question mark on this rebound attempt. Techs are providing the market needed leadership along with the small caps so how they hold up on this test of support is key.
SP600. Similar to NASDAQ, the small caps (+0.97%) bounced off of a support level and resumed the upside. Indeed, SP600 looks the best of the indices with no real pullback other than the Tuesday dip. They are right back up at the bottom of the January lateral consolidation and peak, a very important point for the small caps and the market. If they can break on through to the other side that will help NASDAQ and indeed even SP500.
SOX. As with the other growth indices the semiconductors held at a key level (the September and October twin peaks), bouncing Wednesday with a gap higher. Closed off its high so it is not automatically on the upside again. With NASDAQ and SP600 bouncing, SOX did the same.
SP500. The large caps rallied as well, moving through 1100 and closing at 1105 that takes it over the October peak. It still has the top of the November/December lateral consolidation at 1113 to 1119 to contend with, its key resistance.
LEADERSHIP
Financials. The financials were back in the black after turning sharply lower Tuesday. Now up two of three days, stocks such as JPM and MS look as if they want to move higher. If they provide SP500 some upside after range trading for 6 weeks then the SP500 has a better chance of making it up to and challenging the November/December highs.
Industrials. Some decent looks here as well as some not do decent. CAT is in a nice pullback. CMI might give us an upside entry for a trade. DE has possibilities as it holds a gap.
Technology. Mixed picture with AAPL posting a bounce after a rough Tuesday while GOOG continued to sell. Not a lot of great patterns (e.g. MSFT) in the large caps, but overall NASDAQ is holding support and bouncing. Indeed, NASDAQ 100 held at support as well and bounced, so not all large cap techs are struggling.
Energy. As with most sectors, some life in the energy corridor after a pretty ugly Tuesday session. CVX was in full selloff mode but reversed off the low Wednesday to close positive and above the 200 day SMA. Natural gas such as CHK is holding support as well, showing a doji that could set a new bounce.
THE ECONOMY
January new home sales slump.
Tuesday Mr. Shiller stated a belief that housing prices would fall in the near future, wiping away a chunk of the improvement over the past 11 months. Wednesday the January new home sales appeared to back up that statement. Sales fell 11.2% on the heels of the December 3.9% decline. That makes three months to the downside, a quarter's worth, for new homes. Expectations were for a rise to 354K, but instead they came in at 309K.
What about Shiller's prices? The median price fell to $203K from $215.6K. The percent of new homes selling for less than $200K rose to 47% from 43%.
Why the decline? The company line is the 'payback period' after a surge of buying ahead of the originally scheduled expiration of the first time home buyer credit. That brought in a wave of buyers, and then when the credit was extended buyers had no need to hurry. The buyers that remained, that is. Many jumped into the market to take advantage before the credit expired. Then it didn't. Talk about proof that a credit actually will bring buyers into any market.
Experts say another month of slow sales and then they should pick up again. The deadline has been extended to April 2010 and so there is no need to rush. This is a January number and there will likely be an increase into April as the next batch of buyers moves in to beat the new deadline. Will it be extended again? Likely.
Germany shows more signs of trouble, Greeks on strike.
More data came out of the EU's biggest economy, and it is not that great. Consumption fell by 1% in the most recent report. Capital expenditures by businesses fell 0.7%. As noted Tuesday, German business confidence is down as well.
Makes sense. Some 25,000 Greeks are on strike and indeed are clashing in the streets in some occasions. With Germany as the ultimate backstop for any EU bailouts, you can understand the lower confidence and why businesses are not investing as much. Bailouts don't bring about immediate prosperity; they simply stave off disaster. It then takes time to work out the problems for the bailees, and then the bailors have to struggle to recover after they took on extra debt, etc. to make the bailout.
Will the EU debt and credit crisis hit the US?
There are indications that the US is inoculating itself from catching the European debt contagion threatening the PIIGS (Portugal, Italy, Ireland, Greece, Spain). Credit Default Swaps, the instruments used to insure various types of instruments, shot higher when the Greece issues hit. Indeed, swaps on US corporate debt surged 34%, in step with European swaps that rose 35%.
Since the EU's adamant statements of support and bailouts for Greece, however, the swaps are falling off in price, and indeed the US swaps are falling at a faster rate. Over the past week EU corporate debt swaps have dropped 2.1%. US corporate debt swaps, however, declined 7.3% over the same period.
This divergence in the rate of improvement indicates the US market is improving faster than Europe and may show that the US is immunizing against any EU issues. Of course . . . Europe, Australia, etc. all said the US credit issues would not impact them. A slight miscalculation to say the least. At least markets are more accurate than pundits, right?
THE MARKET
MARKET SENTIMENT
VIX: 20.27; -1.1
VXN: 20.63; -0.92
VXO: 19.49; -1.24
Put/Call Ratio (CBOE): 0.84; -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: 35.6%. Moved back over the 35% threshold level below which suggests bullishness. Bulls fell even as the market rallied for two weeks. Bounced up from 34.1% last week. After peaking at 53 on this move the bulls lost some nerve, 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: 27.8%. As bulls rose bears did as well, indicating more bearishness in the market still despite a modest tick higher in the bulls. Up from 26.1% the prior week and 22.2% before that. Over 35% is considered bullish for the market, so still a ways off even though bulls are falling to a bullish level. Continuing the rise 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: +22.46 points (+1.01%) to close at 2235.9
Volume: 2.059B (-4.58%)
Up Volume: 1.494B (+1.048B)
Down Volume: 578.584M (-1.26B)
A/D and Hi/Lo: Advancers led 1.66 to 1
Previous Session: Decliners led 1.96 to 1
New Highs: 97 (+37)
New Lows: 15 (+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: +10.64 points (+0.97%) to close at 1105.24
NYSE Volume: 1.008B (-6.72%)
Up Volume: 760.44M (+622.778M)
Down Volume: 238.632M (-697.257M)
A/D and Hi/Lo: Advancers led 2.67 to 1
Previous Session: Decliners led 2.31 to 1
New Highs: 156 (+19)
New Lows: 18 (+2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +91.75 points (+0.89%) to close at 10374.16
Volume DJ30: 181M shares Wednesday versus 190M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The ball is back in the buyers' court with the upside move Wednesday, snatching some upside away from a sharp selloff Tuesday. NASDAQ, SP600, and to a lesser extent SOX did push their advantage after Tuesday, i.e. their hold above support versus SP500's break back below. SP500 closed at 1105, and that puts it in position to try and follow those other indices higher.
As noted above, however, it is hardly a done deal. SP500 is in the midst of serious resistance and still has to make the break over the November and December consolidation peaks. If the financials are on board as they were again Wednesday, then the task gets much easier.
We see several stocks that recovered and actually are in place for a bounce that can give us upside plays if this relief move continues. If it does the market will have skirted some real danger . . . but STILL has to face the January peaks with NASDAQ still to test that level and SP600 to test that level again. When looking at upside plays we have to keep those levels in mind and shorten the initial targets to accommodate that level. If they continue higher, great. If not, you take some gain and congratulate yourself.
We will be looking at upside but also downside as there is no guarantee this lower volume bounce holds. Upside setups, downside setups both directions given the market is testing support, is just below resistance, and has experienced sharp moves upside and most recently downside. We will look for the great setups both ways and take them if they show their moves.
Support and Resistance
NASDAQ: Closed at 2235.90
Resistance:
2245 from July 2008 through 2260 from late 2005.
2273 to 2282 marks bottom of January 2010 lateral peak
2275 - 2278 from the February 2008 and April 2008 lows
2292 is a low from January 2008
2319 from the September 2008 peak
2320 to 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:
2210 (from September 2008) to 2212 (the July 2009 closing low)
The 50 day EMA at 2210
2205 is the November 2009 peak
2191 is the October 2009 peak
2177 is a low from March 2008
2169 is the March 2008 closing low (double bottom)
2168 is the September 2009, intraday peak
2167 from the July 2008 intraday low
2155 is the March 2008 intraday low
2143 is the October 2009 range low
2099 is the mid-September 2008 closing low
2070 is the September 2008 intraday low
2060 is the August peak
The 200 day SMA at 2050
2048 is the early October 2009 closing low
2015 from an early August 2008 peak
S&P 500: Closed at 1105.24
Resistance:
1106 is the September 2008 low
1114 is the November 2009 peak
1119 is the early December intraday high
Bottom of the January 2010 consolidation 1131 to 1136
1133 from a September 2008 intraday low
1151 is the January 2010 peak
1156 is the Sept 2008 low
1185 from late September 2008
1200 from the July 2008 low
Support:
1101 is the October 2009 high
The 50 day EMA at 1099
1084 to 1080 (September 2009 peak)
1078 is the October range low
1070 is the late September 2009 peak
1044 is the October 2008 intraday high
The August peak at 1040
The 200 day SMA at 1031
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
Dow: Closed at 10,374.16
Resistance:
10,496 is the November 2009 high
10,609 from the Mid-September 2008 interim low
10,730 is the January 2010 peak
10,963 is the July 2008 low
Support:
10,365 is the late September 2008 low
The 50 day EMA at 10,287
10,285 is the late December consolidation peak
10,120 is the October 2009 peak
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 9599
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 23 - Tuesday
Case-Shiller 20-city, December (09:00): -3.08% actual versus -3.1% expected, -5.34% prior (revised from -5.32%)
Consumer Confidence, February (10:00): 46.0 actual versus 55.0 expected, 56.5 prior (revised from 55.9)
February 24 - Wednesday
New Home Sales, January (10:00): 309K actual versus 354K expected, 348K prior (revised from 342K)
Crude Inventories, 2/19 (10:30): 3.03M actual versus 3.08M prior
February 25 - Thursday
Initial Claims, 02/20 (08:30): 460K expected, 473K prior
Continuing Claims, 02/13 (08:30): 4570K expected, 4563K prior
Durable Orders, January (08:30): 1.5% expected, 1.0% prior
Durable Goods - Ex T, January (08:30): 1.0% expected, 1.4% prior
FHFA Housing Price I, December (10:00): 0.4% expected, 0.7% prior
February 26 - Friday
GDP - Second Estimate, Q4 (08:30): 5.7% expected, 5.7% prior
GDP Deflator - Second iteration, Q4 (08:30): 0.6% expected, 0.6% prior
Chicago PMI, February (09:45): 59.7 expected, 61.5 prior
Michigan Consumer Sentiment, February (09:55): 73.9 expected, 73.7 prior
Existing Home Sales, January (10:00): 5.50M expected, 5.45M prior
End part 1 of 3
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