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us stock market, trend trading stock
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3/01/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: ANN; ASH; MON; ISRG; NETL
Buy alerts: ABVT; CY; FIRE; KSU; SSYS
Trailing stops: None issued
Stop alerts: AMZN; ATHR; CTSH; MA RIG
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:
- New money for the new month overcomes so-so economic data.
- Dollar rises but so does the market.
- SP500 manages a higher close than in November/December as NASDAQ bumps the bottom of the January range.
- Incomes sluggish, construction negative again.
- ISM expands for seventh month but slows.
- Prudential buy of some AIG assets gives federal government a bailout.
- Can the market make the break through resistance if the new month money dries up?
New money helps market take on next resistance.
The market hung up some big numbers after last week's more modest gains. Given the news of the morning, it was clear new money is at work in the market more than any other catalyst, and that new money pushed the market sharply higher. How clear? The dollar was up, closing back below 1.36 euro (1.3561), but stocks did not mind. Economic data showed mediocre gains, but the market acted as if the data showed new economic momentum. In short the news was not bad, it just wasn't the kind of data that would propel the market to gains easily topping 1%, and in some cases much more.
New money or not, the indices performed well. SP500 closed just over the closing highs in the November/December consolidation. Of course the intraday highs are still in play, but the index is whittling away at the range. NASDAQ is at the bottom of the January consolidation peak, ready to take on those highs similar to SP600, the latter having broken into the middle of that range. They are definitely giving the resistance a serious run for the money with a solid upside break to start the month. Of course whether the upside drive remains when the new month money is spent is the bigger question. If it can hang around long enough it is strong enough, at least as evident Monday, to challenge that next resistance.
OTHER MARKETS
Dollar. The dollar rallied higher yet again, posting most of its upside early in the session. It made most of its inroads against the euro (1.3561 versus 1.3616 Friday) and the pound even though the Greece summit was reported as reaching key agreements on a bailout. As for the dollar index where it is measured against a basket of other currencies, the dollar closed basically flat, continuing the week of flat-lining on the close. Intraday it rallies, but at the close the bids are gone and it slides back to flat. The dollar index is at the June peaks, the bounce point highs before the last round of selling that took the dollar to its 2009 lows that immediately preceded this rally. That makes this a key level for the greenback and thus the pause at these levels. If it breaks through it is good for a run toward 84, maybe 86. With a Monday close at 80.73, that would be impressive.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Oil. Similar to the dollar, oil is basically flat line the past week as it bumps a prior resistance level. It was up pre-market, but as the dollar held its gains oil was not (78.75, -0.91). The pattern it is setting up, however, is a nice flag pattern. That is setting oil up for a break higher and run at the top of the trading range carved out over the past five months. This short consolidation is setting up that run.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. Must be the thing to do in the markets outside of stocks, i.e. working laterally, trying to set up a new move higher. The yellow metal closed basically flat Monday after trading flat all day. Consistency at least. It broke over the December down trendline mid-February and has essentially worked laterally since. Bad thing? Not really. Gold was trending lower then broke the trend and is now testing it, holding the break. That keeps the upside in play, i.e. a run back toward the January peak near 1165 as well as the December peak just over 1225.
http://investmenthouse.com/ihmedia/xgld.jpeg
Bonds. Bonds were flat-line again with the 10 year treasury closing at 3.61%, down a tick from 3.62%. The 10 year is in its own range as well, but it continues to receive a bid despite Bernanke starting the process for raising interest rates with the Discount Rate hike and talking candidly about the need to raise rates at some point. That gets the wheel turning, but bond buyers are still interested in bonds even with these early indications the end of lower rates is much clearer than it was just a few weeks back.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Very solid advance in breadth accompanying the upside movement, bolstering the price gains on the session. (3:1 and more on NASDAQ and NYSE).
Volume. Trade was really good and then not so good. NASDAQ trade rallied and again moved back above average. NASDAQ posted its best trade in three weeks, the best since the index sold off and reversed in early February. NYSE on the other hand was hardly impressive. As SP500 cleared the recent February peak and took on the top of the November/December consolidation its volume fell 22%, dropping back below average after the solid trade to end last week. One solid, one not, and the trade action is true to form with the indices that are stronger versus those that are not, i.e. NASDAQ versus SP500.
CHARTS
NASDAQ. Gapped higher out of the lateral test the past week that tapped 2205 on the low and reversed intraday last Thursday. Held all of the gap and rallied to close near the session high. Strong above average volume. Techs bolting higher. The move put NASDAQ at the bottom of the January lateral consolidation that marked the last top of the rally off of the March 2009 lows. NASDAQ is bumping at the intraday lows of that consolidation range, making its first contact. Now the interesting part starts, i.e. how it reacts at the level and if it can make the break on through.
SP500. The large caps broke over last week's February peak, and with that move cleared 1114, the intraday lows of the range. This is still part of the move; it is not a done deal just because of the Monday move. It was a good price move, but volume lagged and SP500 still has to clear the intraday highs in the range up to 1119. The low, below average volume is also a concern as trade fell well off pace and well below average on this rally. That raises many questions as to sustainability. It is noteworthy that the financials were NOT participants in the upside move. They rallied Friday but were flat Monday. Without them SP500 volume remains lower even if it can move higher without the big financials.
SP600. The small caps surged as well (2.04%) as they broke into the January range and indeed are already in the top quarter of that range, just 2.5 points off the closing high. Ditto the mid-cap SP400. These bode well for the economy overall and thus the market, SP500 participating or not.
SOX. Gapped and rallied 3.13%, clearing the February peak on the move. SOX gapped lower in late January, almost at the point it gapped higher in mid-December. Now it has turned the tables, gapping higher almost at the same point it gapped lower in January. Something of an island reversal and that suggests upside momentum toward 360, the interim high ahead of the January peak at 370.
LEADERSHIP
As noted, small and mid-caps were big movers along with technology, providing a growth flavor to the move as techs and smaller issues moved higher on better trade. Energy managed gains even with a stronger dollar and weaker oil pricing. Healthcare, particularly biotech, shot higher on announcement of some M&A activity.
Retail has been on a tear, and it was mostly higher Monday once more. That allowed us to take some gain off the table on the likes of ANN. Auto parts were up again with TEN play surging. Airlines are enjoying a run as well; we saw these patterns set up, e.g. CAL, but succumbed to our prejudices against the group.
Financials lagged, very noticeable in their absence from the SP500 move. If they would join SP500 would tear through resistance. Metals, outside of copper, lagged as well. Perhaps the rising dollar, perhaps some concern about Europe and its impact on the US and other nations.
All in all the same themes continued, i.e. money still moving into retail and tech as well as some other relatively new areas such as healthcare, autos, airlines, while leaders from late 2009 in the 'over there' trades tend to struggle to find a bid for the present.
THE ECONOMY
Spending rises more than expected, outstripping savings.
Personal spending for January rose 0.5%, topping the 0.4% expected and December's 0.3% (revised from 0.2%). That led many headlines to trumpet strengthening upside economic momentum given the stronger consumer spending.
That can be true, but then you look at the other side of the equation. Incomes rose just 0.1%, a quarter of the 0.4% gain expected and off the downwardly revised 0.3% reading in December. Consumers can spend more, but if their incomes don't keep pace they cannot do it for long. I know that may be confusing to many given that each day Congress and the Administration tell us that we can spend all we want to save or create jobs, pay off our debts, create more government jobs, etc. regardless of what revenues are.
ISM posts another gain in February, making it seven straight.
The February ISM missed expectations, putting in a 56.5 reading, lower than the 58.0 expected and 58.4 prior. With 50 being the threshold for expansion/contraction, a 56.5 reading is not bad, and as noted, was the seventh consecutive reading of 50 or better.
The number certainly did not slow down the market and its move higher, though as noted above, the new money seemed to preordain the market was going to rally to start the month. Perhaps investors saw prices paid slip to 67 from 70 and change. If so they were overlooking a drop in production (58.4 from 66.2) and new orders (59.5 from 65.9). Hefty declines, much worse than the drop in the overall index in these two key areas.
Inventories are all the talk given the 5.9% Q4 GDP reading that is said to be 3.4% or more tied to inventory liquidation. This report bears it out as customer inventories fell rapidly from 50 to 37.
What does it mean? US economic data continues improving but at a slower pace. Impacts from Europe? Not yet. That is a possibility, but as reported last week, the swap spreads on US corporate debt is in better shape now than in Europe after tanking with the EU swaps initially when the Greek crisis erupted. Don't want to see the US data erode significantly further, however, as this is no time for the US recovery attempt to run out of gas. If the numbers do erode, however, that means we had better tread carefully through the summer.
One point: weather will play a short term role with respect to weaker data. Crippling snowstorms and atypically cold weather through much of the country will impact all numbers, INCLUDING the jobs report on Friday. We may see that report much worse than the -55K expected as of Monday.
THE MARKET
MARKET SENTIMENT
VIX: 19.26; -0.24
VXN: 19.59; -0.19
VXO: 17.82; -1.34
Put/Call Ratio (CBOE): 0.94; +0.06
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: 41.4%. Significant jump in bulls, rising from 35.6%. 35% is the threshold level below which suggests bullishness. After the move bulls moved up. Perhaps this lateral market consolidation will be enough to send the indices back up. 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: 23.3%. As with bulls, a significant change in bears, falling from 27.8%. That indicates more overall market bullishness. Of course it comes after the rally, but at least the market is hold the gains with a consolidation. Down 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: +35.31 points (+1.58%) to close at 2273.57
Volume: 2.358B (+9.9%)
Up Volume: 1.72B (+548.37M)
Down Volume: 732.222M (-275.207M)
A/D and Hi/Lo: Advancers led 2.92 to 1
Previous Session: Decliners led 1.16 to 1
New Highs: 199 (+99)
New Lows: 19 (+8)
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: +11.22 points (+1.02%) to close at 1115.71
NYSE Volume: 966.936M (-22.47%)
Up Volume: 781.834M (+47.195M)
Down Volume: 177.387M (-319.886M)
A/D and Hi/Lo: Advancers led 3.51 to 1
Previous Session: Advancers led 1.65 to 1
New Highs: 349 (+139)
New Lows: 23 (+5)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +78.53 points (+0.76%) to close at 10403.79
Volume DJ30: 173M shares Monday versus 282M shares Friday. DJ30 had the lack of volume blues similar to NYSE.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Over the weekend I noted that March is often an upside month for the market, and it certainly started the new month on that theme. NASDAQ trade supported the move while NYSE trade was really quite pathetic. The strong upside action has you starting to look for a breakout from the indices, but the low NYSE volume slaps you with some reality. The action was solid on NASDAQ, and of course SP600 and SP400 look strong. Then there is the anchor chain SP500; it was moving but that trade issue remains.
That volume casts some doubt on the move but at the same time nothing is ever perfect. Thus when you see good patterns and setups that make the moves you anticipate then you move in. Maybe the March money runs out and so does the rally, leaving the indices high and dry at resistance. You have to watch for that possibility as the market advances. As noted last week, an inflection point, and the Monday action did not answer all questions. On top of all that there is the jobs report Friday, and it could be much lower than expected. The intrigue continues.
That is one reason we banked some gain after the initial surge Monday took SP500 up to the top of the range and then stalled. Best to put some money in the bank as well as look for new opportunity. After the surge higher Monday many upside plays are already extended, but there are still plays in the event the market rallies further. Now if there is a test back this week after this move you have to be alert as to whether it is a test or a failure at resistance. The action will give us some clues as to that point (reversal, volume up or down), but that potentiality was one reason we banked some gain on some solid movers.
Heading into Tuesday we will continue to scope out some upside plays that are not extended and can still rally and make us some money, but we did get some good buys Monday to add to our existing positions so there is no need to push it. And if there is a test later in the week, patience is needed before jumping into the upside in a buy on the dips mentality. The sharp correction in January and early February has not been resolved yet. The recovery is solid thus far but don't assume it is a fait accompli given that correction and the resistance still here. This is still the inflection point, and again, when the new money runs out will the bids continue.
Support and Resistance
NASDAQ: Closed at 2273.57
Resistance:
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:
2245 from July 2008 through 2260 from late 2005.
The 50 day EMA at 2214
2210 (from September 2008) to 2212 (the July 2009 closing low)
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 2058
2048 is the early October 2009 closing low
2015 from an early August 2008 peak
S&P 500: Closed at 1115.71
Resistance:
1114 is the November 2009 peak is breaking
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:
1106 is the September 2008 low
1101 is the October 2009 high
The 50 day EMA at 1100
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 1034
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 10,403.79
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 10,294
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 9629
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.
March 01 - Tuesday
Personal Income, January (08:30): 0.1% actual versus 0.4% expected, 0.3% prior (revised from 0.4%)
Personal Spending, January (08:30): 0.5% actual versus 0.4% expected, 0.3% prior (revised from 0.2%)
PCE Prices - Core, January (08:30): 0.0% actual versus 0.0% expected, 0.1% prior
Construction Spending, January (10:00): -0.6% actual versus -0.6% expected, -1.2% prior
ISM Index, February (10:00): 56.5 actual versus 57.9 expected, 58.4 prior
March 02 - Wednesday
Auto Sales, February (14:00): 3.8M prior
Truck Sales, February (14:00): 4.4M prior
March 03 - Thursday
Challenger Job Cut Survey, February (07:30): -70.4% prior
ADP Employment Survey, February (08:15): -10K expected, -22K prior
ISM Services, February (10:00): 51.0 expected, 50.5 prior
Crude Inventories, 2/26 (10:30): 3.03M prior
March 04 - Friday
Initial Claims, 02/27 (08:30): 475K expected, 495K prior
Continuing Claims, 02/20 (08:30): 4617K prior
Productivity-Rev., Q4 (08:30): 6.2% expected, 6.2% prior
Unit Labor Costs, Q4 (08:30): -4.4% expected, -4.4% prior
Factory Orders, January (10:00): 1.2% expected, 1.0% prior
Pending Home Sales, January (10:00): 1.7% expected, 1.0% prior
March 05 - Saturday
Unemployment Rate, February (08:30): 9.8% expected, 9.7% prior
Nonfarm Payrolls, February (08:30): -20K expected, -20K prior
Hourly Earnings, February (08:30): 0.2% expected, 0.2% prior
Average Workweek, February (08:30): 33.7 expected, 33.9 prior
Consumer Credit, January (15:00): -$3.8B expected, -$1.7B prior
End part 1 of 3
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