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us stock market, trading system
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3/09/10 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: CTCM; STLD; UPL
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
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/MarketOverview.wmv
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/TechnicalSummary.wmv
TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/NextSession.wmv
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SUMMARY:
- Stocks rally on 1 year anniversary of market bottom, but the sellers started to show up in the afternoon.
- Market has built in expectations of economic gains: will the economy deliver as it has in other recoveries?
- Government owned financials rally on rumor of short sale protection.
- Sellers show their hand in the afternoon, and may force a test from here before the market can move higher.
- Several stocks/sectors consolidated during the recent rally and are ready to bounce even if market tests.
Soft start, positive close is appropriate for anniversary of the market bottom.
It is the one-year anniversary of the 2009 March market bottom. Stocks did not want to let investors down on the anniversary of a year-long rally. SP500 is up around 65% and the NASDAQ is up 70% +, so it was fitting that the market closed higher on the day. It did not starting out that way. The futures were lower on the SPY chart premarket, but began to rally as the opening bell approached and stocks turned positive. There was an announcement from CSCO that would "change the internet forever." There was much anticipation, but the announcement was overhyped. CSCO announced a router that was 12 times faster than anything out on the market. That is impressive download speed (it will be possible to download the Library of Congress in less than a second). This is no doubt an important step, but it was not the kind of news that would surge the market higher, especially CSCO as it had a nice rally Monday on news of its big announcement. Even though there was a momentary letdown, stocks continued higher into the afternoon. That pushed all of the indices higher and SP500 closer to its January peak, although it did not make there yet. Stocks then came back down and tried to give it all the away with the Dow turning negative on the session. There was a late-rally rebound that pushed stocks back up, and all closed comfortably above the flat line, except for the SOX which posted a modest loss. There was not a lot of news to drive the market.
The dollar was stronger earlier in the session and then backed off on its gains, although it still finished higher against the Euro. When it did back off, that fueled the upside in the morning and early afternoon. There was a bit of selling pressure. It came into the market late and but for the last half-hour rally the indices were all showing tombstone doji again. It was just a continuation move when they showed them before, but you still have to watch out for those. When the market gets to these kinds of resistance levels, you have to start looking for the pullback. NASDAQ, SP600, and SP400 have all broken their January peaks and can come back and test that move. They will test it at some point, and with SP500 not through the level, we have to watch every time the market shows potential stalls. That is particularly true with SP500 at the January consolidation range because that can mean there is a pullback to test the prior move. I still think the NASDAQ and the small and mid-caps will pull the SP500 back through if everything remains as is. For now, there may be a pullback to test after a very solid run higher.
Outside of CSCO, there was not a lot of news to drive the market. Stocks have rallied in anticipation of solid economic gains over the last year. With 70% up, you cannot chalk that up to a normal rebound; they are anticipating economic gains. The problem is that the gains have not occurred yet at least not to the extent that the market has rallied. Over the weekend I discussed the 1982 rebound how, at this stage in that recovery there were over 1M jobs created. We have lost over 1M jobs during this supposed recovery. The question of sustainability always crops up when the market hits an important level and shows a stall. Profits are up in a lot of big companies, so that is not an issue as it drives stock prices higher. The small caps are no doubt anticipating greater economic gains as they lead the market higher. The question is whether there will be delivery. In other words, will this recovery begin to mirror the 1982 recovery? In 1982, there were massive tax cuts and incentives to invest in the United States, but we are going the opposite route today. We have massive deficits and anticipate raising taxes and insuring more deficits. That has caused some countries to begin removing investments in the United States. In 1982, this country was taking aggressive steps to push our economy and investment in the US, and there was a resulting 20-year boom. We are now doing the opposite, and that has some people myself included worried what will happen down the road. For the day, the market performed just fine. It managed to expand its gains a bit more, continuing the move up to and through key resistance. Every day that this market moves up and holds the gains, it is a positive. It is not getting reversed and sold off on high volume, and that means the sellers have not shown up in enough force to push it back.
OTHER MARKETS
Dollar. The dollar was up on the session, although it came up off its lows. Premarket it was trading at 1.3558 Euro, but it faded on the close (1.3598 Euro versus 1.3630 Monday). It was still a gain, and it keeps it below the 1.36 level that is the bottom of the range traded in for the last few months. There is more time being spent below 1.36 even though it is popping up above that on occasion, and that might mean the dollar is set to break higher. Looking at the DXY0, it is consolidating very much the way it did in late December and early January after the initial break of the downtrend. Now it has had another strong run just over a month in length, and it is working laterally and doing the same type of consolidation. I am anticipating the dollar will hold. If all else remains as is, it will make another break to the upside. It is trading in a narrowing range, it is trading below 1.36 Euro, and it is gaining strength and momentum to make the next break to the upside. The dollar looks like it will have another leg up before the rally is over.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Oil. Oil is still butting up against its highs. It made the rally, broke out of the consolidation, it is back up near the highs, and it is having a bit of trouble. The dollar was up, so oil struggled and ended the day slightly lower ($81.37, -0.50). Oil is bumping at the top of its range, and it looks like it will fade. It has shown good strength, however, making higher lows and ratcheting its way higher. I would like to see something similar to January when it rallied, tried to make the move, and reversed intraday to come back down. It has not shown its hand yet. It is having trouble as one would expect at the prior peak but it has not shown a reversal or a breakout. If it goes to a reversal, we can play the move down using some of the ETFs that trade on oil price.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. Gold looked like it was going to try to give up the break of the downtrend that occurred in February. It was selling below the 50 day EMA intraday, but then reversed. It still closed down on the session ($1,119.90, -4.10), but that was a big reversal off the lows. There is a test back down, a reversal that is holding the range and peaks in early January and February, and then it snapped back. When there are the snaps back, it shows buyers are present. Back in December and February, you can see the same type of thing: in late February, the reach is lower than the snap back up, and that shows the buyers are there. Now we will see if it makes the break higher off this point. If it does, then that is the potential play I have been watching for that, but it has to get all the sellers wrung out of the system before it can make its move higher.
http://investmenthouse.com/ihmedia/xgld.jpeg
Bonds. The 10 year closed lower (3.69% versus 3.71% Monday), and that showed that bonds rallied. Bonds have been selling and yields rallying of late. Looking at the year-long picture in bonds, the yield curve between the 2 year and 10 year stood at 190BP one year ago, and is now in the 280's. That is a sharply broader and steeper curve, and I said the problem was it was getting too steep and stretched, and most of that move was made by mid-year of 2009. There is still a very steep yield curve, but it has improved dramatically over what it was a year ago, which that tends to indicate continued economic recovery. A good yield curve shows expectations of an improved economy. One has to assume there will be economic improvement if you mix that in with the fact that the small and mid-caps are doing well and that the market has put in the best year-long rally since the Great Depression. There are other issues at play, namely trillions of dollars in liquidity and interest rates effectively at 0% that are driving a lot of that move. The question is, when this is pulled away, will the economy (and thus the stock market) be able to continue? I have made comparisons in the past between this and prior recoveries, and history shows that we have to ignite the private sector to get that kind of sustainability. The stimulus package we have is focused primarily on creating government jobs and in transfer payments. That does not create the incentives to start new businesses. That will be the problem we have to deal with whether there is enough private activity to keep the economy going once the Fed raises interest rates and the effects of the government spending start to wane. Those are the big questions facing us in the last half of 2010 and in 2011, along with how many of the additional entitlement packages we decide to pass and burden the economy with. Those will tell much about how well the economy and the stock market perform over the next five years.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Advancers led on NASDAQ, but it was rather paltry at 1.2:1. They were also paltry an NYSE at 1.3:1.
Volume. Volume was up 16% to 2.4B well above average on NASDAQ and up 24% to 1.1B on NYSE. That moved it back above average for the first time in March. Indeed, in the past month, it has only traded above average on three sessions.
CHARTS
SP500. The SP500 traded up toward the peaks in January and reversed off of that level. It still closed positive on the session, but it gave up more than it gained overall. That high volume shows the sellers were ready to push it back down. They did not reverse it and crush it, but the sellers showed themselves, and now we have to take that into account. I figured they might be there because, looking at NASDAQ, it has already made the breakout over its January peak and will likely come back and test. The sellers will push it back down and take some profits. We will see how intense they are when they push it lower. Volume was up and finished well off its peak. It lost more points off the peak than it gained on the session, with roughly 13 points off the high to close up nearly 8.5 points. It was a respectable move, but the sellers did show up, and we have to be cognizant of that as we make our plays. We bought few positions that had rallied early on and had been consolidating. We were looking to pick them up because they are a wave that moves higher while the rest of the market corrects.
NASDAQ. NASDAQ had the same action, although it is above its January peak. There was the same intraday action, but their relative locations are different. NASDAQ is testing a breakout, while SP500 has not made it yet.
SP600. SP600 had similar action, although it fared a bit better. It finished well off its high, but it was not a major collapse. There was a strong run, it has made a strong move over its January peak, and is likely to come back and test to some extent. It is unclear whether it will come back all the way and test 100% or just partially. It has been very strong and there cannot be any complaints about what the SP600 is doing as well as the mid-caps. They are almost identical to SP600 very strong and in good shape, and still indicating the economy is in good shape ahead. The numbers just have to come through, and we will see if they do. I believe in the markets, but sometimes they get ahead of themselves and expect too much from our fearless leaders in Washington.
SOX. The SOX closed down 0.2%. It did not sell off hard, but was unable to make the move higher, since there was nothing to push the semiconductors. They have been working laterally over the past week, they are holding above a prior peak, but are well off the January high and do not have the same kind of pop in them that the other indices have. Something is going wrong with the semiconductors. Maybe they will catch up and start moving quickly, but they do not have that look overall. There are individuals that have good patterns, but the majority of them look sluggish and tired. They were the leader off of the lows when this recovery started a year ago, and are very much the laggards now.
LEADERSHIP
Financial. Financials are an important area of leadership that have been lagging for some time. Some of the big name financials GS, WFC started to move up last week. On Tuesday, there was a rumor that the government-owned financials such as AIG, FRE, and FNM were going to be subject to a rule that would not allow anyone to sell them short. The government was going to protect its own from the possibly of the prices being driven lower, and then AIG surged on huge volume. FRE and FNM also surged on huge volume as well, although they gave a lot of it up. AIG was able to hold its gains because it is looking to sell more of its assets. These performed very well because the government is trying to protect its own, and you know how I feel about the government running our private companies. Other financials were not as solid on this news. There had been good runs in GS, but it slowed on the day and showed the doji. It is probably just a continuation doji, but you can see that MS lost its momentum after a quick burst higher. JPM had a nice test, and it may produce a buy. These patterns are not great. The financials are still struggling to get off the dime, but they are at least doing that.
Technology. Technology has been one of the leaders. As AAPL goes, NASDAQ seems to go as well, and it posted another big day. There was big volume and a big move higher. It gapped, tested, and is rallying again. I was looking for a chance, I wanted to see it move laterally a bit, but it did not do that at all. It surged back up Tuesday on more big volume. It is strong and getting stronger. GOOG may turn into a buy. That would be very interesting to check into some positions. TXN had an update and did not do too well, gapping lower on volume. It held a range but looks very lackluster. NVDA is moving higher and breaking higher on volume. MRVL is a neat pattern that could yield an upside break.
Retail. Retail was up and down. It has been very strong and it took the day off overall, but there are still some movers. PNRA had big moves earlier and it took the day off. JWN had a great move and is stalling a bit. They are not in any serious trouble; they had big moves and one could expect a test. These have been a market-leading sector. If the market tests, these will test with the market because they have provided a lot of the leadership up to this point.
Industrials. Some industrials, such as TEX, are testing. It had a laterally side-step the past two sessions after an excellent surge, while others are continuing higher. JOYG is resuming its move to the upside. It gapped higher on good results. There was an island reversal, it gapped down, based, gapped higher, and now it is surging. It should make it up near the prior peak, and then we will see what happens. CMI has hit a new rally high on the session as volume moved up above average. It started lower but reversed and continued higher. Some of the same leaders are continuing to lead and others are getting extended and will need a test.
Energy. Energy is a mixed bag as well. Several stocks have been down and in a trading range for quite awhile, but they are starting to move higher. UPL has held on some high volume at the bottom of its channel and has started back up. This is happening in several patterns. HK had the same type of thing. There is a support level at 21 it has been holding and it was selling off, but then it checked up on Tuesday, tested lower, and reversed on big volume. There are positions out there that have been down that can still move back up despite the market being somewhat extended overall. Often energy and oil will move up in the spring and early summer, and it looks like a few of these are ready to make a turn back up in their range. SWN had big volume on Tuesday as it held its lows and turned back up. There are some interesting possibilities that we can take a look at for some upside plays even as the market overall looks like it might be peaking and in need of the test on the breakout on the SP600 and NASDAQ.
THE MARKET
MARKET SENTIMENT
VIX: 17.92; +0.13
VXN: 18.76; +0.09
VXO: 16.91; +0.06
Put/Call Ratio (CBOE): 0.68; -0.24
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: +8.47 points (+0.36%) to close at 2340.68
Volume: 2.474B (+16.4%)
Up Volume: 1.616B (+245.756M)
Down Volume: 744.117M (-28.754M)
A/D and Hi/Lo: Advancers led 1.26 to 1
Previous Session: Advancers led 1.17 to 1
New Highs: 211 (-36)
New Lows: 8 (-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: +1.94 points (+0.17%) to close at 1140.44
NYSE Volume: 1.124B (+24.01%)
Up Volume: 698.556M (+192.711M)
Down Volume: 416.598M (+22.856M)
A/D and Hi/Lo: Advancers led 1.28 to 1
Previous Session: Advancers led 1.38 to 1
New Highs: 536 (-30)
New Lows: 47 (-8)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +11.86 points (+0.11%) to close at 10564.38
Volume DJ30: 219M shares Tuesday versus 171M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
There may be more news out of the EU, but the market is taking the European situation well. Something worse could happen, but until it does, the market is assuming that the PIIGS will be bailed out. The UK could be the next real problem, jumping over some of the other PIIGS, but we hear that rumor every day. Until something else emerges, we have to look at it as problems that are being addressed. That is the way the market is looking at it.
The healthcare issue is out there every day, but the market seems to be handling that thus far. It is not acting too concerned for the moment. The market is going about its business from a technical standpoint. The economic data has been good enough to continue to drive stocks, so they have been moving up. Now they are a bit extended. Looking at NASDAQ, it indicated somewhat on Tuesday that it wants to put back and test that break over the January peak. That is something I said would be normal. SP500 did not break that peak, and it looks like it wants to test back down, reset, and then move back up. It will do that as long as the SP600 small caps and the NASDAQ test and hold that prior high. They probably will not hold it if they come back right now because there is not that much of the cushion, but they can break it and not crash into the next area and still bounce back up. It is not always an exact point that is the turn. Sometimes it happens that way, but usually not, so we watch to see how they test. While doing that, we can play some of the stocks that have sold off and are not extended. GOOG is pulling back after a gap higher. It gapped, it is testing that gap, and it has plenty of open field ahead of it. There are stocks that are not extended to the upside at all. The market moves in waves, it does not all rally or sell at once. It is often pigeon-holed that way on the financial stations because it is easier to explain. "The investors are scared because of Europe, so it sold off" or, "The investors were excited about the jobs report so it rallied." Not all stocks rally on the same news and not all stocks sell on the same news. They often go about their own business and make their bases while the rest of the market does what it does. Then, when they are ready, they move countercyclical to the market. It is not that they are countercyclical stocks, but the money moves around the market and finds areas it perceives are undervalued as it sells out of other areas and takes profits. That is called the rotation, and it is part of a healthy market.
We will continue to look for those stocks that did not participant in the last rally but are good stocks with nice bases. We will also look at the stocks in bearish patterns. If the market does pull back, they could pull back significantly and make us money. Those are some of the ABCD downside patterns that we can make some good money off of as the market fades back. We picked up a position in STLD today because it looked as if it had the potential of selling back. It had gapped higher on Monday, it gapped lower on Tuesday, and it is showing the hangman doji on Monday. It gapped lower, so I thought it would be worth a play to try to bring it down close to the A point in a nice gain. The price was right, so it was worth taking a risk on. We have a very good risk/reward stop-loss because there is resistance. If it breaks over that resistance, then we will get out of the play. We have the potential to make money down to 15 or 14 on the downside, where our stop-loss is roughly at 1850. And we take a position at 1770 or so. We have a short fuse on the stop side and thus will minimize losses if we are wrong (and every trader is wrong at one time or another). If you are right, you have the potential for a nice gain. That is how you should look at the risk/reward position with these plays. You have much more potential upside than you have for downside as long as you enforce your stops and stay disciplined. That is the name of the game. If you have enough of those plays, you will make money in the long run and in the short run as well, for that matter. Have a great evening.
Support and Resistance
NASDAQ: Closed at 2340.68
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 2291
2273 to 2282 marks bottom of January 2010 lateral peak
2275 C 2278 from the February 2008 and April 2008 lows
2245 from July 2008 through 2260 from late 2005.
The 50 day EMA at 2235
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 2076
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 1140.45
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 1124
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 1106
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 200 day SMA at 1041
The August peak 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 10,564.38
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 10,336
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 9692
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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