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us stock market, trade stock
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3/03/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: JOYG; NKTR
Buy alerts: PDS
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:
- Economic data improves again, dollar weakens, but stocks cannot take advantage.
- Challenger layoff, ADP payroll reports indicate continued firming in the jobs market.
- ISM services posts best level in 2 years, employment rises.
- Beige Book underscores a problem in all post-bubble busts.
- Greek is unfortunately a drop in the bucket of Europe's issues.
- Market idles on Wednesday at the next important inflection point.
Market cannot take advantage of weaker dollar, decent economic data.
After overcoming a lot of bad news during the rally the preceding 4 weeks, the market suddenly finds tougher sledding midweek as the indices broach key levels. The dollar was off, moving back above 1.37 euro intraday. Economic data was positive with Challenger layoffs at very low levels (42K, -77.4%), ADP payrolls came in as expected (-20K), and ISM Services Index moved close to a 2 year high (53.0).
Stocks started higher but quickly capped out the move, bouncing laterally bumping the early high all morning before a midmorning spike ran out of gas and stocks spent the rest of the session slowly frittering away somewhat modest gains to close basically flat. Stocks have rallied almost four weeks after the sharp January to February selloff and after a 7.5% move on SP500 they are taking a breather as the indices test key resistance. This is turning out to be the key test of the recovery. Stocks did not sell off Wednesday after those Tuesday evening star doji on NASDAQ and SP500; basically nothing was decided. Over the next few sessions investors will make their decision. If investors are going to sell this is the general area they will start and thus a bit of patience on our part is warranted as they make their decision. Thus we have been taking gain when it is there and approaching new positions with patience, often taking part of a position at a time.
OTHER MARKETS
Dollar. The dollar took it on the chin Wednesday, breaking down from its lateral consolidation of the past week. The dollar had just broke its range against the euro, closing three sessions below 1.36 dollars per euro. That appears to have been the buyers' last attempt to push it further as the sellers rushed it on Wednesday, closing the greenback at 1.3698 euro (1.3605 Tuesday) after it moved over 1.37 euro intraday. This occurred as Greece threatened to run to the IMF and the scope of the exposure in the EU was revealed.
Perhaps the move lower is simply a more ordinary test than the lateral move of the past week; time will tell. The vigorous selling in the dollar Wednesday, however, suggests there may be more to this. Strange given the US economic data continues its slow progress and the dollar is supposed to strengthen as the economy strengthens. Not that the dollar is diving lower; it has rallied since the late November low. This sharp break lower from its lateral consolidation, however, is a new character and if the dollar tanks back down, that is not a good indication for the economy later this year.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Oil. Oil, unlike the dollar and indeed aided by the dollar's decline, broke higher out of its one and one-half week lateral range. Now it looks as if oil is going to make a run toward the top of its pattern ranging from 82 to 83.95 over the past 5 months. Had to be the dollar: inventories were sharply higher than expected (4M versus 1.1M) yet the dollar still posted gains.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. Gold continued its upside move as well, adding to the strong Tuesday surge with a $12 gain to 1140.10. Gold has now bounced off its low in early February, tested the move, and broke to a new higher high this week. It appears gold's consolidation is over and more upside is to come near term, perhaps a run toward the prior high at 1225.
http://investmenthouse.com/ihmedia/xgld.jpeg
Bonds. Bonds are hanging in a tight range with the 10 year bond yield closing at 3.62% versus 3.61% Wednesday. The 10 year continues to trade in a range, now hanging closer to the bottom of the range at 3.6% versus 3.8%. The chart is ambiguous as to what bonds will do: they bounced off the December low but have made little headway after that bounce. If the economy is going to rally, bonds should sell, particularly when the Fed has started giving lip service to the need for eventually hiking interest rates.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Pancake flat on NASDAQ at 1.1:1. The NYSE with small and mid-caps positive, managed a 1.3:1 spread. Basically mirroring the flat trade in the market.
Volume. Trade fell off on both NASDAQ and NYSE, remaining below average on NYSE though still well above average on NASDAQ. NASDAQ trade is interesting: high trade as the index bumps the January peak consolidation, unable to make much headway. That is called churning, high volume turnover. At highs that can indicate distribution. At lows it can indicate accumulation. Here NASDAQ is at resistance after a 4-week run. On balance that is more negative.
CHARTS
NASDAQ. As noted, there is some churn on NASDAQ at the bottom of the January range that was the rally peak (thus far). Watching the intraday action NASDAQ is reaching higher and fading on the close. The sellers are rebuffing attempts to move up higher in that January range with the index showing tombstone doji: they occur after a good run as the index reaches higher intraday but then closed back near the session low/opening price. Nothing definitive yet; NASDAQ is probing that level and it is not selling off. Very important level as we have been saying each night.
SP500. Very similar action on SP500 though SP500 is not at the January peak yet. It is bumping the late December high at 1125, however, testing it intraday and then fading back to the close in action very similar to NASDAQ. Volume, however, is the opposite, i.e. very low, below average trade. SP500 is also showing tombstone doji on the candlestick chart, a caution flag as the momentum is waning on this part of the rebound from the January to February sharp correction. Very important level, obviously, for SP500 as well.
SP600. The small caps again surged to a new rally high but on Wednesday they showed their own tombstone doji. Strong run higher, break to a new high then a doji. Is it going to be a reversal from this level or just a test? The small caps have been the leaders in the latter stages of this last rebound so how they react is an important aspect of the next several weeks. Thus far they still look solid.
LEADERSHIP
Retail. Continues to be the leader in the market even if it was a down session overall. Strong surges to rally highs are testing. After hours strong earnings from PETM, ZUMZ are driving those stocks higher. Retail suggests the consumers will be stronger. The market is usually correct even if there are few jobs being created. The market, however, does not always rally when things are going to be dramatically better. Lots of liquidity is having a multiplier effect on the moves in the stock market.
Industrials. Earnings from JOYG energized the sector. TEX surged on the news and held the gain. CAT tried to run but reversed intraday to show a tombstone doji. CAT may be a short soon. Very mixed sector.
Drugs/healthcare. Another area that continues to garner investment dollars. These sectors continued higher Wednesday as much of the market rallied then gave back some ground. A bit extended overall but there are still some stocks that are in position to move higher IF the market has not peaked on this current move.
Technology. AAPL is still a very important stock for the NASDAQ, and it shows a second doji as it trades in the lower half of the January range. This is a very key test for AAPL and the market as well. If AAPL fails here it can easily fall to 200 and indeed back down to 190.
THE ECONOMY
Private jobs reports scrimmage before Friday February jobs report.
Challenger reported just 42K planned layoffs last month, a definite improvement from the hundreds of thousands per month in 2009. You have to stop the layoffs before employment improves, but a slowdown in layoffs does equate an increase in hiring. Necessary but not sufficient in itself.
ADP was in line with -20K jobs for February. January was revised to -60K from -22K. Does this mean anything? ADP is trying to make its report mirror the government's report. That in itself takes credibility as it no longer bases the data on its models but the government's. What does this mean then? Not much. The market pretty much shrugged it off.
ISM rallies again in February.
The service sector posted another month of expansion in February, its second straight and third out of the past five months. At 53.0 it was up from 50.5 in January. That is the highest since 10-07, but still no barnburner in the sense it is not surging as it would in a more normal recovery, especially given the 5.9% GDP growth in Q4. Ah but that was inventory liquidation boosting the number, so that explains the GDP gains with very lackluster advances in the largest sector of the US economy.
Still, all categories of the survey were higher. That of course is good news but key subsectors are still below expansion levels. Backlogs increased from 45.5, but at 46.0 it is simply declining slower. There is no excess production occurring. Companies are only ordering what they need to fill existing orders. Perfectly understandable in a weak economy, and the number itself shows the economy remains weaker.
Employment remains mired in contraction though it hit its highest level since 2006. Still, 48.0 (44.6 January) is just not turning new jobs as the service sector jobs rolls continue to contract though at a slower pace. Expectations were for a reading over 50.0 for employment, but it didn't show, indicating the pernicious nature of the jobs hangover.
Summary: ISM Services shows continued improvement, i.e. starting to expand though key sectors are still declining at a slower pace. It has to slow before it turns, but if this is recovery as the Administration and the Fed claim, it is a pathetic showing not in step with the alleged 5.9% growth in Q4. As two of three months in Q4 saw a contracting service sector GDP should be over 7% in Q1 given these numbers. That shows the disconnect between the economic reports and reality right now.
Beige Book shows an age-old regulatory problem: restrictions too tight when they need to be loose.
The Fed released its economic survey of all 12 regions and it was the most upbeat report since the economy spiraled lower in 2008. So much so that many noted it appeared out of step with the economic data, i.e. that the economic reports are simply not strong enough to support the Fed's rosier outlook.
While there was a lot of fluff in the report, one section highlighted the problems in the recovery. The Fed noted that lending activity 'remains soft' in all regions, and the Fed spent quite a few paragraphs discussing lending.
The KEY aspect of this discussion shows the problem the economy has in regaining its feet: a few regions are improving and there are projects that are worthy of loans in order to get started. The problem: Fed lending restrictions are such that loans for real estate are virtually impossible to circumvent. Thus commercially viable projects are dying from lack of funds to make them work.
This is ALWAYS the situation in recoveries after a boom and bust. The government and Fed finally tries to regulate but it is too late; the damage is already done and the bust is upon us. In the public outcry aftermath the government and Fed vow to prevent this from happening again and place restrictions on lending in the VERY areas that were crushed in the crash. Instead of trying to nurture them and get money back into these areas the feds actively keep it out via overly tight restrictions. Let's face it; after the bust ONLY good projects would get money. Thus when the market wants to lend money at the bottom and thus revive these areas, the government prevents the money from flowing where it should and thus the downturn is prolonged long, long after it wanted to start the recovery.
This was very evident in 2000 and 2001 under Greenspan. The Fed finally started to lower interest rates, hacking them 50BP at a time. Problem is, it maintained the very tight lending restrictions and thus even though rates were low, given the bust, virtually no one could access funds needed to start the new ventures. Water, water everywhere, but the Fed would not let you access it. Only after the second stimulus package was passed that made funds available along with tax credits and expensing did the logjam break and the money started to flow.
The Dallas Fed reported this is the case: there are projects that are available but that will not get financing due to the restrictions in place for real estate living. Dallas avoided much of the downturn and is ready to expand and help lead the nation higher out of this morass. An inflexible federal government and Fed, however, are preventing the funds from flowing and thus the recovery remains weak and is mostly deferred. A recovery deferred . . .
THE MARKET
MARKET SENTIMENT
VIX: 18.83; -0.23
VXN: 19.35; -0.16
VXO: 17.73; -0.3
Put/Call Ratio (CBOE): 0.88; +0.09
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 holding 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: -0.11 points (0%) to close at 2280.68
Volume: 2.457B (-8.11%)
Up Volume: 1.535B (-191.314M)
Down Volume: 1.009B (-15.913M)
A/D and Hi/Lo: Advancers led 1.14 to 1
Previous Session: Advancers led 1.98 to 1
New Highs: 194 (-31)
New Lows: 11 (-3)
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: +0.48 points (+0.04%) to close at 1118.79
NYSE Volume: 937.224M (-12.54%)
Up Volume: 496.84M (-174.137M)
Down Volume: 399.957M (+34.54M)
A/D and Hi/Lo: Advancers led 1.31 to 1
Previous Session: Advancers led 2.5 to 1
New Highs: 365 (-46)
New Lows: 34 (+2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -9.22 points (-0.09%) to close at 10396.76
Volume DJ30: 183M shares Wednesday versus 217M shares Tuesday. Low volume as DJ30 works laterally at the February high.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The warm-ups for the Friday jobs report continue with the weekly jobless claims. With the weather keeping people and states from filing, who knows what will show up. It could be unexpectedly low or shoot higher. What does that mean? It means it is a throwaway week.
What does that mean for the jobs report? Larry Summers stated Tuesday it could be hundreds of thousands off due to the weather. That makes it a throwaway report as well. The market may not take it as a throwaway, but if it is really bad it will discount it, and if it is not that bad it will be confused and may discount it or may take it as a positive (good report even with the weather). Of course the revisions could be a real buzz kill.
The market is factoring this in right now as well as what the next few weeks will show regarding the healthcare gauntlet the President threw down (vote on it regardless of what is in it and what the people want). Great timing given the market has rebounded to key resistance levels and is throwing doji, closing off the highs. Investors are definitely thinking about these issues as reflected in the chart patterns.
The market has not tipped its hand on this bounce. The indices are probing higher intraday and then fading. Unable to hold the breaks higher, but not selling off. Understandable they are stalling some here after the run the past month; that is a long way to go without taking pause, and with the jobs report to come Friday along with the resistance, pausing is normal.
As noted Tuesday, it is time for a bit of patience while this plays out. This is the scenario I have discussed the past month and we have some upside positions, a few downside with more at the ready if the market stalls here. Remember, a stall here sets up the potential for a significant downside run. You cannot assume it would happen, but the setup is there. Thus we are ready for a return to the selling with downside plays. We are also ready to let our upside run and to move into more upside if this simply turns out to be a pause that refreshes on a further run higher. The closes off the intraday highs suggests the indices are struggling, but thus far they are just suggestions. Need to see a sharp break lower to confirm and get us into positions. It still could reverse off of that but the risk/reward at that point is worth making the plays.
Support and Resistance
NASDAQ: Closed at 2280.68
Resistance:
2273 to 2282 marks bottom of January 2010 lateral peak
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:
2275 - 2278 from the February 2008 and April 2008 lows
2245 from July 2008 through 2260 from late 2005.
The 50 day EMA at 2219
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
The 200 day SMA at 2064
2060 is the August peak
2048 is the early October 2009 closing low
2015 from an early August 2008 peak
S&P 500: Closed at 1118.79
Resistance:
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:
1114 is the November 2009 peak is breaking
1106 is the September 2008 low
1101 is the October 2009 high
The 50 day EMA at 1101
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 1036
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 10,396.76
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 10,302
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
The 200 day SMA at 9650
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
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 - Tuesday
Auto Sales, February (14:00): 3.8M prior
Truck Sales, February (14:00): 4.4M prior
March 03 - Wednesday
Challenger Job Cuts , February (07:30): -77.4% actual versus -70.4% prior
ADP Employment Change, February (08:15): -20K actual versus -20K expected, -60K prior (revised from -22K)
ISM Services, February (10:00): 53.0 actual versus 51.0 expected, 50.5 prior
Crude Inventories, 2/26 (10:30): 4.03M actual versus 3.03M prior
March 04 - Thursday
Initial Claims, 02/27 (08:30): 470K expected, 495K prior
Continuing Claims, 02/20 (08:30): 4600K expected, 4617K prior
Productivity-Rev., Q4 (08:30): 6.3% expected, 6.2% prior
Unit Labor Costs, Q4 (08:30): -4.5% expected, -4.4% prior
Factory Orders, January (10:00): 1.8% expected, 1.0% prior
Pending Home Sales, January (10:00): 1.0% expected, 1.0% prior
March 05 - Friday
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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