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world stock market, us stock market
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3/10/10 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts: SHLD
Buy alerts: GLW; GOOG; SWN; TJX
Trailing stops: None issued
Stop alerts: ABVT
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:
- SP500 still below the January peaks, but NASDAQ and SP600 keep pulling it along.
- We can all calm down: EU president tells us all is well.
- Wholesale inventories post modest decline as inventory moves continue.
- Budget deficit balloons, but after Thursdays recalculation of the total 2010 deficit, that is no surprise.
- Worried about the SP500 for nothing?
Another rally by NASDAQ, small caps, and mid-caps drags SP500 to the January peak.
Wednesday morning saw another thin news tape and the financial stations were casting about looking for a story with sex appeal. They tried the old Greece line, but the EU president was talking about how the Greece issue was resolved. Earnings are still trickling out with AEO and JCG in retail beating expectations; more in the line of better than expected retail results. Good but the futures didn't pay it any mind. As with Tuesday, the stations finally went back to history and talked about the tenth anniversary of the NASDAQ peak at 5000 and compare those tech and net stocks that survived and were still around to day. Good enough. I would rather hear history any time than the usual morning banter . . . at least before I have a cup of sustenance or make a circuit around the neighborhood.
But I digress. There was little news and the futures were flat to slightly lower. The dollar traded up over 1.36 euro after closing again below that level. Even with a slightly weaker greenback the stocks were gun shy after the Tuesday afternoon selling that took a late bounce to keep some of the shine on that move.
Nonetheless, after a soft start the buyers saw their opportunity and stepped back in, using a modestly lower open as an entry point for more positions. That took a lower market and turned it higher through midmorning. The afternoon was an up and down range, but the sellers that showed up Tuesday did not show up Wednesday. Well, okay, they didn't show up with as much panache. They tried to sell to start the last hour, but didn't even get in ten minutes worth of downside before the buyers responded and used the dip as another entry point. Stocks closed near the session highs though it was still not enough to push SP500 to or through its January high. NASDAQ led the way with a 0.78% gain with the small caps at 0.65%. SOX came to life and made a serious move toward its prior high; what do you know. I badmouth them some and they make the break. Okay, the ENTIRE market is not for crap. Now everything should rise.
OTHER MARKETS
Dollar. Down again and back over 1.36 euro on the close (1.3650 versus 1.3598 Tuesday). Another day of lateral consolidation with no real change on the close while trading up and down considerably during the session. As noted the past few days, the dollar is simply consolidating its last run as it did after its initial break of the downtrend. It could take another week or so of consolidation before it makes its next move unless there is some outside catalyst to speed the process.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Oil. Made a credible run at the top of the range, hitting over 83 on the high, the peeling back to close at 82.09, +0.60. Oil is effectively at the top of the range, trading at the October peak as it tests the slightly higher January peak in the range. This is the lick log for oil of course because it is at the apex of the trading range. We will see if can breakout or break back down. The Wednesday action was a surge and then a reversal to give much of the move back. It did not hit a new high on the move but it is trying those levels. We will keep watching this action and if it breaks down you can play some DUG as an ultra-short ETF. If it breaks to the upside, best to wait for a test of the breakout to hold, then move in.
http://investmenthouse.com/ihmedia/xoil.jpeg
Gold. Gold keeps looking as it will make the break higher, then it keeps blowing opportunities. Nice doji with a long tail on Tuesday tested the 50 day EMA and rebounded. Wednesday it tested again but did not bounce at all. Still over the down trendline, moving basically laterally over the 50 day EMA, and after a trend break that beats giving up the break, but it is thus far unable to capitalize on the move, closing at 1108.20, -14.10. 1100 is some support, so this is an important test.
http://investmenthouse.com/ihmedia/xgld.jpeg
Bonds. Still trading in the range though giving some ground on Wednesday, advancing bond yields (3.72% 10 year versus 3.69% Tuesday). A week ago the 10 year was trading around 3.6%. It has crept higher after Bernanke and the Fed discussed for the first time raising rates even though it was in terms of not doing so for quite some time. We all know this is how the Fed gets that ball rolling. It is a slow, slow roller, but bond prices are starting to erode and yields are edging higher since the Fed broached the subject. For now the possibility of the Fed raising rates, even months down the road, is trumping any concerns over what may happen to the US economy in the late summer of the back half of the year when the Fed actually does remove the monetary stimulus and the government spending wanes.
http://investmenthouse.com/ihmedia/tip.jpeg
TECHNICAL
INTERNALS
Breadth. Decent breadth given that the growth indices were the only ones making any substantial gains. NASDAQ advancers led 1.8:1 while the held a 2:1 lead on NYSE thanks to the small and mid-caps. Decent, but shows lack of participation by large caps.
Volume. Trade rose on NYSE, edging above average as SP600 continued higher and SP500 moved up closer to its January peak. NASDAQ trade faded slightly but still held well above average. Any issues? Not really. Maybe you could call it some churn on SP500 as it runs into key resistance, but then you have the SP600 and SP400 running to new rally highs with their components leading the market. That is positive price/volume action overall. Thus you can read negatives into the numbers but that is looking pretty hard for shadows.
CHARTS
SP500. Most focus is on the large cap index as it is came within 3 points on the intraday high to matching that level at 1151. It faded modestly from the high, a bit less than on Tuesday; it is feeling the resistance as it pushes toward that level, but it keeps adding to the gains each session. The volume is rising the past two sessions as it nears, showing some sellers but thus far not enough to stop the advance. As we have been noting, with NASDAQ and SP600 running to rally highs and still rising, this resistance could cause the pause, bringing those two back to test while the SP500 fades and sets up another run at this key point.
NASDAQ. Another move to the upside, extending the breakout for the fourth consecutive session. Volume a bit lighter but still strong and well above average. The price/volume action on NASDAQ is excellent as it powers higher on the breakout. At some point it will test the breakout and the turn could come quickly on some news story, but for now it is posting a great run with few if any negatives.
SP600. A 0.65% gain tacked onto the run that started back at 310, hitting 359 on the Wednesday high before backing off the high to close. The past two sessions the small caps have closed off the highs; they are getting a bit extended to say the least and are feeling the gravity with each move higher. That said, the small caps cleared a key level with the breakout that started this run and thus the strong momentum up to the next resistance it is just starting to tickle the past two sessions. SP600 has run well, sees next resistance just ahead, and will need to test. Still plenty of momentum, however, and not in bad shape.
SOX. Finally some life in the chips after spending a week chopping around at some interim resistance from mid-January. As the chips came into play on Wednesday that gave NASDAQ some extra juice to continue its run and extend its breakout. Similar to SP500, however, SOX will be primed to take a break if it makes its prior peak at January at 370, giving NASDAQ a chance to test and all indices a breather to take on the next leg.
LEADERSHIP
You can see the leadership in the gains on the indices with NASDAQ the percentage leader of the large cap indices with the small caps leading up the other issues. Growth once more was the focus of investor dollars though growth can be found in the SP500 as well in its energy and industrial components that are helping supply growth economies around the world.
Energy stocks, particularly smaller oil stocks that have based while the rest of the market rallied, are starting to turn higher in their ranges, coming off some very solid support levels. We are taking advantage of those moves as the start.
Technology enjoyed another solid session and we include GOOG in technology. It rallied close to 3% on the session and gave us a nice buy on its first day on the report. AAPL continued its new breakout though it is slowing. Basically a continued rally in tech and overall the group is getting a bit extended so it is a bit harder to initiate new positions across the board given the length of this move.
Retail continues to gain with stocks such as SHLD resuming the upside push (took some gain on this position) and TJX looking as if it wants to break higher after a short flag consolidation following a strong breakout. Extended overall as well, but lots of momentum and even a test would do it good.
Metals. An interesting mix. Most enjoyed strong surges in December to early January and then sold aggressively. The past four to five weeks they have recovered but many, similar to STLD, have formed the downside ABCD patterns. FCX, TIE, BHP, etc. That does not mean they all dive lower, it just means they are at an important juncture and could roll over as easily as continue the moves. We watch and see which, then make the play accordingly.
THE ECONOMY
Wholesale inventories gets ignored, as usual.
January wholesale inventories fell 0.2% versus an expected 0.2% gain. December was revised to -1.0% from -0.8%. Inventory to sales declined from 1.12 to 1.10 as sales moved up 1.3% versus 1.2% in December.
That suggests a favorable picture, at least for the future, as inventories are thin now that that farm products stockpiling in October and November has ended. That was part of the same expansion in Q3 that pushed up inventory levels and thus those GDP readings. When sales stalled in November, wholesalers stopped building inventories further and they are on the slide. As the major point of activity in wholesale inventories the past several months, as they slid, so did inventories.
Computer inventories declined 2.4% on the heels of a 5.1% December increase. Increased sales (0.9%) was a large part of that decline, and more sales is always good news in this economy.
Overall the inventory/sales ratio remains well below historical norms. It is not so much the sales pushing it lower, it is the unwillingness to add inventories BECAUSE of overall still lackluster sales. At some point a rather large-scale burst of production will be needed, but right now companies are sitting on cash versus buying inventory, hiring workers, etc.
Why? Many factors but all of them underscored by one theme: uncertainty. If you don't know what your tax rate is going to be, if you don't know what your duties will be to new hires vis- -vis insurance, if you don't know if contracts will be honored, if you are wondering about stimulus and Fed rate plans, then planning for the future is not easy. Sitting on cash with just modest business growth appears to be agreeable with many businesses, large and small, at the present time.
In case you were worried, the Greek crisis is over and all is well in the EU.
The EU president offered those soothing words Wednesday, certainly relieving the entire world with respect to the massive debts still owed by Greece, not to mention Portugal, Italy, Ireland, and Spain, along with newcomer Britain.
But there is no need to worry. "For Greece, the problem is completely over" Prodi told a Shanghai newspaper. "I don't see any other cases now in Europe." Intervention to date "was enough" and Prodi believes countries such as Portugal and Spain "have plenty of time" to get their houses straight. Maybe he is looking at some old map of Europe, i.e. one that was made before these countries were established.
Certainly swaps prices are down. As swaps are insurance on potential defaults, that the market is pricing them lower does indeed show a diminished worry over Greece and the other PIIGS. The swaps rates don't suggest there is no problem, just not the fever pitched levels four weeks back. Greece announced another belt tightening step early this week, its third round of such steps in 2010. If you look at Greek bond yields they have abated as well, falling 88BP, but that is off a record 396 in January, 4 times the level two years ago. Spain is down 69BP, but that is twice what it was 2 years ago. Again, better, but not indicating things are normal.
So we are supposed to believe that Greece has the wherewithal to make good on the 20B in euro due in April and May. France is not so sure, saying the EU has to stand behind Greece or ruin the euro. Germany has never been a fan of this bailout, and it is not saying what it is going to do though most assume it will have to participate or risk itself if Greece goes down in a maelstrom.
In sum, the EU is taking on the British attribute of a stiff upper lip and trying to spin the problem in the best light possible. There is improvement; fear at least has subsided, allowing rates to come back some and get closer to levels where business can run. The crisis is not over, but if nothing else happens in the world to upset things, then Greece could get its economy in better order and Europe resumes its recovery that was hijacked by the PIIGS when it became apparent their debts and coming liabilities far exceeded what they told the EU when they joined.
THE MARKET
MARKET SENTIMENT
VIX: 18.57; +0.65. Interesting action on VIX as it rallied while the indices posted gains. Indeed, VIX held at the January lows after gapping lower last Friday on the surge that day in the market. That gap lower could have been something of an exhaustion move and it is noteworthy that VIX reversed after that and is rising on a rise in stock prices. This is an indication, not of a big selloff, but that this leg of the bounce is getting a bit old, prefacing a test.
VXN: 19.08; +0.32
VXO: 17.85; +0.94
Put/Call Ratio (CBOE): 0.82; +0.14
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: +18.27 points (+0.78%) to close at 2358.95
Volume: 2.417B (-2.3%)
Up Volume: 1.774B (+158.358M)
Down Volume: 714.212M (-29.905M)
A/D and Hi/Lo: Advancers led 1.8 to 1
Previous Session: Advancers led 1.26 to 1
New Highs: 240 (+29)
New Lows: 8 (0)
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: +5.17 points (+0.45%) to close at 1145.61
NYSE Volume: 1.14B (+1.4%)
Up Volume: 857.6M (+159.044M)
Down Volume: 272.142M (-144.456M)
A/D and Hi/Lo: Advancers led 2.1 to 1
Previous Session: Advancers led 1.28 to 1
New Highs: 540 (+4)
New Lows: 43 (-4)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +2.95 points (+0.03%) to close at 10567.33
Volume DJ30: 186M shares Wednesday versus 219M shares Tuesday. The Dow is stalling the past three sessions as the rest of the market rallies. Volume is mostly lower. Do we care? Right now it is a follower, and as I am not playing any index play on the Dow right now, the answer would be no I don't really care.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The economic data gets a bit more interesting Thursday with weekly initial jobless claims (460K expected) and the trade balance thrown in for fun. These numbers are very important in themselves, and in the week after week parade of economic numbers we become desensitized to their meaning. 460K jobless claims is a HUGE number. Those are NEW claims being reported, i.e. people being laid off from jobs that are eligible for unemployment. Many losing jobs are NOT eligible because their companies are not part of the system. They try to adjust for this but it likely understates the number. Reconciling this many jobs lost each week shows that the monthly jobs reports are really nowhere near correcting the problems.
The Trade Balance is expected at -$41B after -$40.2B in December. We watch this each week as if it will make a meaningful change. Unfortunately we have a large fixed cost in this report each month in the amount of imported oil. As long as we are importing most of our oil we cannot make any significant dent in the balance (more aptly, imbalance). The rise in the dollar helps blunt the deficit and the inflation we import every day when the dollar is falling (oil is priced in dollars: cheaper dollar means sellers demand more dollars), but again, the differences are marginal given the magnitude of the imports. So do we worry about it? We can drain the US first I suppose, but I would prefer to drain everyone else first . . . AS LONG AS we don't forget to develop our reserves and other energy forms when the inevitable supply interruptions occur during disasters or geopolitical strife.
So some more interesting data. Market moving? Not necessarily but it can be. The indices have put in a good leg on this last run that started in late February. NASDAQ, SP600, and SP400 broke out. SP500 has rallied 3 points from its January high. The indices are in great place to take a pause and give up some profit taking. If the news is upsetting enough that could start the profit taking round. Upsetting would mean jobless claims closer to 500K. Will they be there? Who know with all of the aberrant weather, and that is what makes these next few weeks of data interesting in terms of surprise potential and just how the trend changes if at all as a result.
Growth is clearly leading the way and there are areas inside SP500 that are growth as noted above, e.g. those stocks aiding the growth of foreign economies in their industrial ages. Financials are moving, those tied to the federal government and on Wednesday more moves in regional banks as well. If financials push, SP500 moves. It has to be the large cap issues, however, and they are following, just not leading. That mirrors the SP500 action and relationship with the other indices.
Our game plan is the same. Before too long the market has to test this move, and while there are some small signs it is a bit overdone, they are indeed small signs. The momentum is strong. Momentum moves can and often do surprise you as to how long they last.
Thus we continue to look at upside plays that are not extended, that spent time consolidating while much of the market rallied. They can get money to rally from those stocks undergoing profit taking after the moves of the past four weeks. Rotation as discussed Tuesday. Not all stocks rally at once.
Of course there are those potential downside setups noted above, e.g. some metals stocks. When the market tests these are setup to fade as well and can give us the downside moves the patterns have set up. Thus despite the trend moving higher overall we could have some downside opportunity and make some nice gain on a countertrend move as the market makes a routine test of a solid breakout and run higher.
In sum, a great move by the growth indices, a bit extended but still with plenty of momentum. SP500 is bumping resistance, feeling some pressure. Weekly jobless report could trigger some profit taking, but it would have to be a bad number that was not viewed as weather related. Important level for SP500 and if the market is inclined to test/take profits, this is a logical place. We will still look for upside positions that are getting money and have not necessarily rallied with the rest of the market as well as those downside setups to play any profit taking move in the market overall. After that there should be some good buys on some of the recent leaders as they test solid runs.
Support and Resistance
NASDAQ: Closed at 2358.95
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
The 10 day EMA at 2304
2292 is a low from January 2008
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 2240
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 2079
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 1145.61
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 1127
1119 is the early December intraday high
1114 is the November 2009 peak is breaking
The 50 day EMA at 1108
1106 is the September 2008 low
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 1042
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 10,567.33
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 10,345
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 9704
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% actual versus 0.2% expected, -1.0% prior (revised from -0.8%)
Crude Inventories, 03/06 (10:30): 1.43M actual versus 4.03M prior
Treasury Budget, February (14:00): -$220.9B actual versus -$222.0B 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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