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world stock market, us stock market
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3/08/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: EJ
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:
- Painfully slow session, but at least stocks did not blow their gains.
- Not much movement overall, but the movers were again led by technology.
- France will help Greece if needed; Greece says it needs no help (to collapse?).
- Mutual funds low on cash near term.
- Indices trading at prior highs but not showing any signs of weakness.
Wake me up ahead of the bell . . .
That is what most of us felt like Monday. Stocks were flat at the open, flat at noon, and flat at the close. Oh sure I exaggerate; SP500 after all, traded in a 4.81 point range, NASDAQ in a 9 point spread. After the barbell gains last week (Monday and Friday surges, quiet in between) that took NASDAQ to a fractional new rally high and SP500 to the January lateral range, no one was really ready to put much money to work to start the week. Thus a very pancake shaped session.
Not that such a session is a bad thing. Worst case the indices run up to that resistance then turn tail and dive lower as the sellers swarm in. While there was some weakness on DJ30 and SP500, they were both basically flat and volume fell almost 14%, again well below average. NASDAQ trade still topped 2B shares, but it was down 7%. With NASDAQ posting a gain that was not necessarily great, but the losses and gains didn't mean much this session: the market was flat and the internals were flat as well.
There were movers in certain areas, however. Technology was not the first to break through its January highs (small and mid-caps had the honor), but it made the break nonetheless, and Monday tech was a frontrunner once again. Cisco enjoyed a banner day and brought a lot of stocks in related sectors higher with it. The growth stocks in tech and of course the small and mid-caps are leading the way higher for the entire market. Where growth goes you would expect SP500 and DJ30 to follow.
OTHER MARKETS
Dollar. After breaking higher from the 1.36 to 1.38 euro range a week back, i.e. trading below 1.36 euro, the push higher has lost some momentum. The dollar is backsliding into the prior range (1.3630 Monday versus 1.3618 Friday), but it is not breaking down just yet. Looked as if it might be trying last Wednesday, but the dollar index has checked up at 80, trying to hold that level as support. The dollar is still in its solid uptrend off the November low, but has hit a stumbling block the past two weeks. That doesn't mean the run is over, just that it is winded. Look at the chart: this last run is roughly equal to the first, indeed a bit longer. Normal place for it to take a breather and consolidate.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Oil. With a weaker dollar early in the session oil was up quite nicely, posting a gain of 0.65 and more. As the dollar recovered toward the close, however, the gains faded. Positive on the close, but a third of the highs (81.73, +0.23). The chart shows Oil testing and stalling just a bit at the October 2009 high at 82. Makes sense as 82 to 84 is the top of the range, marked by a couple of peaks. Thus the air pockets at these levels. The question right now is whether oil makes the breakout or makes a turn back down into the range. We are watching closely for a play either way. A reversal after a break higher would be a good downside play. A successful test of a breakout would be a good upside play.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. Monday was not the day for gold to make a new break higher off the second test of its February breakout over the December/February down trendline. Sellers undercut an early rise and sent gold down to its 18 day EMA where it bounced and closed near the 10 day EMA, cutting the losses. Pretty hefty downside (1122.10, -13.10), but the rebound showed some buyers stepping back in, and the pattern is still pretty solid as it holds over the February post-break highs.
http://investmenthouse.com/ihmedia/xgld.jpeg
Bonds. Bonds sold some more with the 10 year closing at 3.71% after a 3.68% Friday close. The short end saw the 2 year rise as well to 0.90% from 0.89%. The short end has risen faster lately in terms of yield, flattening a very steep curve. Recall that the curve hit record spreads on several occasions and that raises the threat that the long end the Fed does not control breaks free of the short end, causing chaos. Thus it is good to see the short end catching up a bit. Overall bonds are turning into a tough investment with the Fed jawboning about taking back stimulus, meaning rate cuts, ahead. It will be months before it does anything, but the ball is rolling and you will start to see bonds erode though of course all moves are a game of give and take in an overall trend. More on bonds in the 'Economy' section.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Pretty flat as you would expect given the index prices. 1.1:1 on NASDAQ and 1.4:1 on NYSE thanks to the small caps leading the market once more. Over the rally the upside breadth has enjoyed solid strength thanks to the leadership of the small and mid-caps.
Volume. Lowest volume of the year on the NYSE at 906M. Of course it was no great shakes last week either or indeed the entire month as trade has not hit average or better yet. March doesn't need volume to rally; it is often an up month regardless. The issue we have with the volume at this point is the break to new highs by SP600, SP400, and NASDAQ and SP500's test of the January consolidation. You like to see more volume on those moves to give them staying power. Light volume means the whole market is not in the game on the move, and that leaves any move suspect in the long haul. Shorter term, well, we have seen what the market can do.
CHARTS
NASDAQ. Onward and upward, led by Cisco and its break to a new rally high, clearing a 5 month rectangle on huge volume. Not a huge gain and volume was back below average, but there was big volume to start the month as NASDAQ broke out, and solid above average volume Friday on that gap and run higher. So NASDAQ looks pretty solid in its move though the proof is when it tests the move.
SP500. NASDAQ and the small caps were pulling, but SP500 was too heavy Monday. The financials were not playing along, at least not all of them, and in the end the large caps closed flat. No trade to push it as volume fell to the lowest level of 2010. Very important level of course, but if NASDAQ and the growth indices continue their push higher they should grease the tracks enough for SP500 to follow. In that case what likely happens is that they drag it a bit more and get it up to that peak, then everyone tests with NASDAQ coming back to test the old high. Then they all rally again and SP500 makes the breakout. That is how it would work unless it doesn't, i.e. in the event SP500 gives up the ghost at the January high for any one of the multiple reasons that it could: Europe's issues suddenly worsen, China and its empty offices in Beijing (50% empty) are finally taken at face value, the US passes all of the trillions of dollars more of entitlements, etc.
SP600. The small caps led the move once more though at 0.28% the gains shrank. Understandable given the pretty incredible SP600 run the past four weeks (14%). This is one of the indices that can drag SP500 along and then test back to the breakout at 345ish (closed at 354ish) and then continue the run IF everything remains status quo with respect to beliefs regarding a continued albeit slow recovery.
DJ30. See the SP500. Basically the same issue.
SOX. Still well, well off its January high at 370 (closed at 351) and at a minor resistance level. It is trying to stair-step back to the upside after that sharp January to early February drop. The pattern is a downside ABCD pattern; that has the potential to fall nicely. Of course patterns always have potential. If they breakout, great; if not, forget them.
LEADERSHIP
Retail. Once again the retail sector found buyers. Not the same stocks as last week necessarily, e.g. ANN, but still the consumer retail sector. Casual dining popped: EAT, PFCB, BWLD are among those surging. JCG (men's apparel) gapped to a new rally high after two prior strong sessions. Box stores such as JWN and JCP continued higher. Retail remains a market leader. BBBY could be interesting for us.
Financial. GS rallied again, gapping once more, as it shows once more it is the leader of the pack. It was trailing its mates during the time the government was trying to knock it down, but it held a key level during the accusations, and it blasted off last Thursday. Most other financials took the session off; not selling, but unable to move.
Technology. Cisco and company rallied. EMC and JNPR blasted higher as well. RIMM ripped higher out of a three week consolidation, gapping and running on very strong volume. That will put some life in our positions. On the session HPQ lowered its outlook a bit. After hours TXN raised the low end of its guidance. That wasn't really lighting any fires after hours as TXN faded from its closing price. No harsh selling, just fading back. All in all tech of course remains one of the stronger sectors as it has broken its January highs and is holding.
Energy. Rising modestly but holding back behind the recent leaders after peaking early in the year. Soon energy will start coming to the fore as well given it likes to run ahead of the summer drive. We will be watching for opportunity.
THE ECONOMY
The EU is under control. Right.
After the ECB's Trichet (from France) warned off the IMF from Greece's overtures to the same, France, rather reluctantly, said this weekend it would help Greece . . . if it had to. In response Greece said it would not need any help. Of course not; that is why it asked the IMF for assistance.
All the while the UK is sneaking up as a problem, ready to join the PIIGS. Not sure what that acronym would be (UKPIIGS where the K is silent?). It is not over, but it is noteworthy that European default swaps continue to decline, an indication the fear is subsiding.
Mutual Fund cash levels getting tapped out.
Monday Bloomberg reported that mutual fund cash levels are at their lowest levels since September 2007. Cash now makes up 3.6% of assets versus 5.7% in early 2009. That is the steepest decline since 1991. It is also notable, though I am not sure how significant, that 2007 trough was just before the 57% decline in the market. The funds ran out of the fuel (money) to keep driving prices higher. when the money is gone so is the bid. The market tests, and it continues to do so until there is reason for investors to put money back in. If it does not come a test turns into a correction, a selloff, then a bear market. Been there, done that.
A long stock market run has sucked in a lot of money, naturally lowering fund balances. That is not the only reason, however. You would expect strength in the market to pull in more cash. Investors, however, still have a lot of money in bonds and bond funds, playing the Fed's rate cutting and also in general fear of the economic recovery's staying power. Thus far they are not cashing out of bonds even as yields start to rise.
That may change if the Fed continues jawboning about the need for rate hikes 'at some point.' The thing is, 'at some point' always comes and comes sooner than anticipated. This is about as clear a warning as you are going to get from Bernanke, and thus there is already some selling in bonds. As more selling occurs, more money will likely find its way toward stocks, gold, and other commodities.
The issue for the stock market is WHEN this occurs. Cash is low for the funds and that means they cannot do as much buying as they have over the past year. Investors are typically slow to drop one asset class for another; indeed a lot of the market rise thus far has been a combination of investor capital and the unused money in the world courtesy of the Fed and other central banks without as much private money. If there is a slow transition there may not be enough capital to propel the market significantly further near term.
On the other hand there is somewhere in the neighborhood of $3.1T in money market funds that can quickly divert to stocks if the mood strikes. The thing is, even with SP500 up 65% over the past year there is still $2.1T in money market funds just sitting there. Investors are still afraid to come back in, likely concerned about coming in at the top, not to mention the concerns over profligate spending, ballooning deficits, currency worries, tax increases, new fees for banks and cap and trade policies, etc.
The point: if this rally has not sucked it in at this point, will it? The key is again whether bonds sell significantly enough to get the snowball rolling, i.e. investors looking for other places to park their money. If bonds sell off (rates rise) they will put some in money markets (higher yields) but also look at the stock market with a long stare. Investors have a knack for putting a lot of money in at tops. Initially they drive it higher then when the money is gone things can get uncomfortable.
For now the funds still have cash to put into the market and try to take on the current resistance. After that it really does become a case of whether or not they can get the supply lines needed to fill the tank back up. If not, then the market stalls and those holding back have their concerns vindicated and they hang onto their money even more. We will see.
THE MARKET
MARKET SENTIMENT
VIX: 17.79; +0.37
VXN: 18.67; +0.75
VXO: 16.85; +0.04
Put/Call Ratio (CBOE): 0.92; +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: 42.1%. Bulls rising but slowing the move (41.4% last week) after the 5 point run the prior week. Rising from 35.6% and over the 35% threshold level below which suggests bullishness. 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: 22.7%. Down from 23.3% last week, also slowing the move after dropping from 27.8%. 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: +5.86 points (+0.25%) to close at 2332.21
Volume: 2.126B (-6.87%). Just not the volume you want near highs, but then again, NASDAQ put in some good trade as it broke higher while NYSE did not.
Up Volume: 1.37B (-547.622M)
Down Volume: 772.871M (+405.658M)
A/D and Hi/Lo: Advancers led 1.17 to 1
Previous Session: Advancers led 3.83 to 1
New Highs: 247 (-10)
New Lows: 10 (+1)
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: -0.19 points (-0.02%) to close at 1138.5
NYSE Volume: 906.623M (-13.71%). Puny trade gets a bit punier.
Up Volume: 505.845M (-462.159M)
Down Volume: 393.742M (+319.756M)
A/D and Hi/Lo: Advancers led 1.38 to 1
Previous Session: Advancers led 4.74 to 1
New Highs: 566 (+8)
New Lows: 55 (+6)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -13.68 points (-0.13%) to close at 10552.52
Volume DJ30: 171M shares Monday versus 184M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
No scheduled reports Tuesday so it could be another quiet session. TXN did not inspire the market after hours, but then again, HPQ's warning did not really harm tech Monday. There is still money (maybe at low levels but it is there) seeking stocks.
Seeking stocks yes, but the market has four weeks of upside behind it after the biggest correction since last summer, and the large cap indices are pushing up under their prior highs. Thus it is not necessarily the most opportune time to buy, at least the entire market. Some areas still have plenty of upside on their runs while others are setting up for runs, having rallied before and are now consolidating as others take the point.
We have lightened the buying of late and took gain off the table last week after such a good run, but we are still looking for good upside buys as well as downside opportunity. With the indices at the prior highs it pays to have plays on both sides lined up. We had several downside a week back but the market rallied higher so we dropped many of those. There are still others in position and in downside patterns, so we wait patiently and see what triggers. Thus far it has been upside but again the market is at an important level with some indices over the January high and others still trying to get there.
Some are lamenting the lack of follow through to the Friday move, but in reality there has already been follow through: the initial reversal off the February low, the test to end February, then the rip higher on NASDAQ to start March. THAT was the follow through to the reversal. The Friday action was a continuation of that prior follow through from the reversal. Thus Monday simply was not anything that bad. Boring as all get out and not a lot of buying opportunities, but not technically bad. Thus we continue to look for good upside as it presents itself.
Support and Resistance
NASDAQ: Closed at 2332.31
Resistance:
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:
2320 to 2326.28 is the January high
2319 from the September 2008 peak
2292 is a low from January 2008
The 10 day EMA at 2280
2273 to 2282 marks bottom of January 2010 lateral peak
2275 - 2278 from the February 2008 and April 2008 lows
2245 from July 2008 through 2260 from late 2005.
The 50 day EMA at 2230
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
The 200 day SMA at 2073
2070 is the September 2008 intraday low
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 1138.50
Resistance:
1151 is the January 2010 peak
1156 is the Sept 2008 low
1185 from late September 2008
1200 from the July 2008 low
Support:
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
The 10 day EMA at 1119
1119 is the early December intraday high
1114 is the November 2009 peak is breaking
1106 is the September 2008 low
The 50 day EMA at 1105
1101 is the October 2009 high
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 1040
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 10,552.52
Resistance:
10,609 from the Mid-September 2008 interim low
10,730 is the January 2010 peak
10,963 is the July 2008 low
Support:
10,496 is the November 2009 high
10,365 is the late September 2008 low
The 50 day EMA at 10,327
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
The 200 day SMA at 9681
9654 is the November 2008 high
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 10 - Wednesday
Wholesale Inventories, January (10:00): 0.2% expected, -0.8% prior
Crude Inventories, 03/06 (10:30): 4.03M prior
Treasury Budget, February (14:00): -$221.0B expected, -$42.6B prior
March 11 - Thursday
Continuing Claims, 2/27 (08:30): 4500K expected, 4500K prior
Initial Claims, 03/06 (08:30): 460K expected, 469K prior
Trade Balance, January (08:30): -$41.0B expected, -$40.2B prior
March 12 - Friday
Retail Sales, February (08:30): -0.2% expected, 0.5% prior
Retail Sales ex-auto, February (08:30): 0.1% expected, 0.6% prior
Michigan Sentiment, March (09:55): 74.0 expected, 73.6 prior
Business Inventories, January (10:00): 0.1% expected, -0.2% prior
End part 1 of 3
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