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world stock market, us stock market
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6/08/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: CLF; DLTR
Trailing stops: None issued
Stop alerts: CHCI; EXBD
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The Market Video is DIVIDED into component parts: Market Overview, Technical Summary, Economy, and the Next Session. This allows you to choose the segments you are interested in without having to find the spot in a longer video. Click on the link to the portion you wish to view.
MARKET OVERVIEW
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http://investmenthouse1.com/ihmedia/MarketOverview.wmv
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
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TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
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SUMMARY:
- Just another reversal . . . again?
- Bernanke acknowledges a 'modest' economic recovery, saying Fed likely to raise rates before full employment.
- US economic news not bad, Europe not horrible, and that is enough for stocks.
- Indices hold where they need to and try another reversal.
Bifurcated market finally starts rowing together late Tuesday.
There was no Monday bounce following the Friday selling, and for quite some time Tuesday there was a question if there was going to be another bounce at all. Stocks bounced midmorning and looked poised to surge only to sell back after lunch. Finally the bids won out and the indices rallied in the afternoon, pushing to highs at the close on the NYSE large cap indices with the 'growth' indices (NASDAQ, SOX and SP600) closing well off their lows and just missing holding a move positive in the last half hour of trade. All session the large cap NYSE indices led the move, holding positive as the growth areas lagged. That 'pattern' is new for the week; last week the growth areas tried to take the lead. They failed to hold it, but it is interesting that SP500 led the tumble to the February lows and now it is trying to post up and take the lead while NASDAQ 'lags' but is still comfortably above its February lows.
The reversals off of the lows were impressive. NASDAQ rallied 31 points from low to close, DJ30 181 points, and SP500 20 points. They were all flirting with important lows, and after 2.5 days of sharp selling they finally found some firm footing and rallied back. Volume was impressive on both NYSE and NASDAQ, the kind of trade you like to see on a reversal.
Looks promising, but . . . we have seen this movie before. Several intraday reversal attempts on the second leg lower held up for a day, then rolled back over or in some cases gapped back lower. Two weeks back one of those stuck, leading to that last bounce though it was a rather half-hearted attempt. Now the indices are again at that important support and again showed a high volume intraday reversal. We said the sentiment indicators were getting extreme and that they suggested a bounce. Now we see if they can make that bounce.
OTHER MARKETS.
Dollar. As always, the dollar/Euro relationship has driven much of the market action of late due to the fears coming out of Europe. On Tuesday, the dollar was back and forth. It closed out the day weaker, and that aided the late run in stocks to positive at least for the large cap NYSE indices. The dollar closed slightly lower against the Euro (1.1946 Euros versus 1.920 Monday). It lost some ground, but this is still a very low level after hitting below 1.19 overnight from Sunday to Monday. The dollar is at the prior peaks hit in late 2008 and early 2009. That is the white line on the chart. It is having a struggle at that level. It got close to the level over the past three weeks and stalled, but worked into a pennant or ascending triangle and made the breakout last Friday when things looked bleak. It has bounced up to the old highs and now is fading back slightly. It may come back some more, but I do not think it will sell off and roll over because Europe's troubles are nowhere near over. They really still do not know what they want to do. The Fed is still talking through Bernanke and trying to get them to be looser with their credit versus austerity with respect to lending. That happened there? We had to lend and we had to buy garbage off our banks. It may not work, but at least it got us out of the doldrums. Europe has to do something because things are not looking good.
The latest news out of Europe on Tuesday was that Fitch, one of the rating companies, said that Britain's fiscal challenge was "formidable." Moreover, the default swap prices are jumping due to worries about Spanish banks needing $60B to bail them out. That shows you how poor their balance sheets are. It is this cascade effect that was talked about with Greece through the rest of the PIIGS and the UK. It was a legitimate concern, and it is spreading beyond the PIIGS because Hungary is talking about issues with its very weak economy. The symptoms of a weak and unsound European financial system continue to pop up on a daily basis. It is reflected in the trades of the dollar versus Euro, and other markets such as bonds, but it is not shown on a daily basis. Indeed, the dollar had to back off a little on Tuesday after a really nice surge.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds did not make any headway on Tuesday after a nice rebound off the lows following China's reaffirmation of the Euro and European bonds. The 10 year US Treasury held constant at 3.18% for once, Treasuries did not rally over the past week. They are at a resistance level. They may stall out. I do not see anything yet to stop them because it is a fear trade similar to the dollar versus the Euro. If Europe is in trouble, US Treasuries and dollars look better and better to investors from around the world including Europe as they flee Europe to the "safety" of US markets. The US debt-to-GDP ratio is almost at 100% now, and some are saying it already is. That puts us well ahead of the original 5-10 year path of matching Greece. We could be there in two years. We do not have any ammunition left with interest rates still at 0% and still holding $1.25T of junk on the Fed's balance sheet. That is why Bernanke said last night that there was a modest economic recovery in the US and it was likely not going the significantly impact unemployment. In other words, unemployment would remain high, but the Fed said it would have to start raising interest rates before full employment. Bernanke realizes there could be trouble on the horizon if Europe cannot get its problems under control. If that is the case, the US will need to reload in order to have an impact if there is a subsequent crisis a double dip crisis, if you will. Bonds may have taken the day off, but I do not think they are done rallying.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Gold surged to a new all-time high on Tuesday, eclipsing the prior peaks, but it could not hold the move to the close. It made a new closing high, but it could not hold the intraday move ($1,246.50). Still up slightly, but not a huge move. It, too, is feeling a bit tired after a nice recovery run following the early May selloff on the deflation fears. On Monday gold was a safe haven for investments of all sorts no matter what kind of trouble we were having (deflation, inflation, or both). It surged higher and will likely struggle a bit at resistance, but there is nothing to keep it from moving higher.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil continues to try to bounce off the low of its seven-month trading range. It did bounce and has come back to test. That big Friday selloff was hard, but it is trying to hold and bounce back up and continue the move. Definitely still in an oversold condition. It has room to bounce back up in its range because it has been relatively consistent, so I would expect a further bounce to the upside. Either up to roughly $79.50 (where it spent a lot of time consolidating in March) or up to the January peak near $83.00. It can still rally back up, but there is not a lot of reason to do it other than technical. Technical patterns tend to dominate until something upsets the apple cart, changes the landscape, and forces in a new technical pattern. ($71.99, +0.55)
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume was stronger, up to 2.58 on NASDAQ +20%. That put it above average again after a series of below average days on the downside. That is decent action because it shows they are not dumping all the shares; they were just not getting bids for NASDAQ stocks. On the NYSE, volume rose over 15% to 1.6B. Third day in a row of very strong volume on the NYSE. It can be read as distribution on the big down days. On a reversal, that is not a bad indication because it shows the buyers came back in and pushed it back up to positive. That is good news. Strong, high volume at support ranges indicates buyers are stepping in. They are holding the index or stock higher. A bigger volume shows buyers are stepping in because it cannot break through that support level. That is a positive in this instance.
Breadth. Breadth mellowed out considerably. It was -1.5:1 on NASDAQ as it did reverse off the lows, and +1.5:1 on the NYSE as the large caps managed a gain. The small caps were struggling, so that is why the breadth was a bit anemic. Along with the fact that on reversal days, breadth tends to lag the move considerably. I am not too upset about this. If the market continues to rally, I would like to see breadth expand dramatically as stocks move back up. Then it could at least be in parity with the breadth on the downside when stocks were selling.
CHARTS
SP500. I did say a bounce was possible but iffy. There was another selloff, and there was an intraday reversal right off this important support. It has given it another shot. It is always good to see a reversal on high volume that closes positive. That can be a key reversal, and it starts the clock if you are counting for a confirmation of a follow through. That is technical jargon meaning that when there is a reversal you start counting to see when the next big day comes. If the next big up day comes four to seven days later, that is considered a positive. You do not want to undercut the prior low. The market could move laterally for a couple of days, and on the fourth day, if it surges higher on strong volume, you could say a new rally attempt was under way. That is one way of looking at it. There is the initial short covering bounce and then a slack off, and then the long-term buyers supposedly pick up the slack at that point. That sets the stage for a rally. It does not necessarily mean it will happen, but it lays the groundwork. That is what I will be looking at. We will see what SP500 can do after holding the February lows. It has another potential double-bottom possibility set, and it has volume as it approached the lows again. We will see if that volume can hold up as it continues to the upside.
NASDAQ. NASDAQ has similar action. Big intraday reach lower, roughly matched the late May lows. Still holding well above the closing lows in February, and then the reversal. It did not make it back to positive as the SP500 did, but it did show a nice bump in volume to above average. That is the first one in two weeks, and it shows buyers came in and pushed it back up. They came en masse and showed the best trade in quite some time. Now we see if they can continue higher. You could start the clock here on NASDAQ, and you might as well because you will do it on SP500. They are all playing tag team. Note it has held up higher than SP500 did even though it has been lagging on the move with larger losses to the downside. Overall, it has not lagged and has held up better than the SP500.
SP600. This has very similar action to the NASDAQ. It is still well above its February peak, and it in fact just undercut its January peaks. It is holding at the bottom of the consolidation level in January which is also a February shelf of support. It moved laterally before breaking higher. It undercut, it rebounded, holding right at this level though it is still below it. Not as impressive a move, but overall the SP600 is a relative better performer on the selling than the SP500. It just has to show it is going to move up.
Interestingly, on Tuesday there was a report that the small business confidence hit a twenty-month high. A lot of the small cap companies would be considered small businesses, and they are supposedly feeling quite good. The problem is that confidence does not always play out well with future results. One would think that businesses and their confidence levels would be a good forecasting tool for better times. If it is a good confidence number, times should get better, yet it tends to be the opposite. We will see what happens with small businesses now. We will see if the small cap indices can rally. If they cannot rally or take a bounce and roll over harder, that is not good for the economy because the small caps are the canaries for the US economy. If they struggle, the economy will not be that great. You want to see the small caps in the lead and performing well. They are still in relatively better shape than the SP500 large caps because they held way above their February low, but now they need to start showing strength.
SOX. Similar action on the semiconductors index as well. Holding at the May intraday lows. Three reversals well above the February lows and holding at a key support level; this is a support level it has held for years. It is an important one, and it is trying to make a stand. All the indices are trying to make a stand at important support.
LEADERSHIP
Retail. LULU sold off sharply Friday and Monday more so than I wanted, but it is trying to reverse. Maybe I will put the play back on the report and see if it gives a buy. Nice intraday reversal on good volume. PNRA is in a similar pattern. It sold off Friday and Monday, Tuesday reversed to positive and held the 50 day EMA. It might be worth some new buys. DECK had a test and a nice doji with tail right over the 18 day EMA. It is a pre-split play and may be ready to take off. ROST started up on solid volume on Tuesday. This might be a good point to get into ROST if you are not in already.
Semiconductors. Semiconductors were maligned and dogged all day. NVLS sold off, reversed, and held a key level (January high). It could provide a bounce there. Not a lot of room to work with, but if you are a nimble trader, you might be able to make something out of it. SNDK has been the de facto leader of the group. It sold off intraday but had a nice reversal as well, trying to hold above a downtrend it broke through. Might be a good launch point for it. Nice pullback to that trend. Intraday reversal off the lows.
Metals. CLF held at the 200 day EMA with volume rising to average as it bounced. That was a good move. It would be a good point to start picking up positions. MTL is trying to hold as well. It is hard to pin a name on this one, but it might get an inverse head and shoulders. It might try to break higher. Patterns such as this are still in their infancy trying to set up, but the important point that, with the indices overall, it is holding a key support level and showing stickiness there.
Internet. The internet has been a worthwhile leadership area of late. The main leader has been AKAM. It has pulled back for three sessions after a breakout last Thursday. It has held the 18 day EMA on the low and had good volume as it tested. It may be ready to start the move back up. This would be a good entry point if you are not already in it. I keep looking at GOOG with some intrigue. It has bottomed. Something of a double bottom in May and then moved through a downtrend line from April to May. It has come back to test it, showing a move on Tuesday. It is a high risk position here. You do not get a lot of move, but you could get in at around 485 and maybe ride it up through the resistance through February. That is up at about 525, so you can make an option play out of that and do quite nicely.
Leadership is not blossoming everywhere. The indices are beat up. They dove back down to their lows, and that tends to jumble patterns. Some stocks are still holding up fine. If the markets hold and rally, they will do very well. If the markets collapse, then they eventually drag down all of the leadership. Eventually they fold their tent as well and have to sell off before a new bottom is set. That is what makes this hold at the SP500 February lows as well as the NASDAQ's long term support so critical. Even the SOX and SP600's long term supports are critical. If it holds up and they rally nicely, then the market can move higher. If not if they bounce and fail or just fail altogether, there will likely be a lot more downside in the economy, and that means downside in market as it tries to bottom. The market does lead the economy, so when it starts to bottom, we can expect that the economy will start to bottom. With ECRI still pointing toward "noticeable slowing" in the economy, we have to be weary of bounces and still look at them as trades versus long-term entry points.
THE MARKET
MARKET SENTIMENT
VIX: 33.7; -2.87
VXN: 35.22; -2.07
VXO: 32.01; -3.39
Put/Call Ratio (CBOE): 1.16; +0.2. Given the sharp selling, it was somewhat of an anomaly on Friday and Monday that the put/call ratio fell below 1.0. On Monday I said that might be an indication (in addition to some other sentiment indicators) that the market was getting a bit sold out and a bounce may be coming. Looks like that may play out. It is trying to make a reversal, but we have seen this before, too. It is noteworthy that the put/call ratio bounced above 1.0 again as the market tried to rally, but the interesting thing was there was a reversal in the NASDAQ. That could have been another indication to another overreaction, an extreme reading from sentiment as more people were playing the downside even as the market reversed.
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: 39.8% versus 39.3. Holding rather flat after some substantial drops from 43.8%, 47.2%, and 56.0% before that. This move started at a low of 35.6% in February, the lowest it has been since July 2009. 35% is the threshold level suggesting 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. 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.
Bears: 28.4% versus 29.2%. Surprising drop, but given the market's attempt to move higher, understandable. Still a big move up from 24.7% the week before where it held for a couple of weeks. Fell to 18.7% on the low. Hit a high of 27.8% level on the prior leg in February. Over 35% is considered bullish for the market; definitely at the lower end of the scale. 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: -3.33 points (-0.15%) to close at 2170.57
Volume: 2.581B (+20.12%)
Up Volume: 983.429M (+846.424M)
Down Volume: 1.654B (-413.54M)
A/D and Hi/Lo: Decliners led 1.46 to 1
Previous Session: Decliners led 4.77 to 1
New Highs: 8 (-4)
New Lows: 187 (+39)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +11.53 points (+1.1%) to close at 1062
NYSE Volume: 1.646B (+15.54%)
Up Volume: 1.239B (+1.021B)
Down Volume: 396.377M (-797.17M)
A/D and Hi/Lo: Advancers led 1.5 to 1
Previous Session: Decliners led 2.63 to 1
New Highs: 70 (+5)
New Lows: 158 (+35)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +123.49 points (+1.26%) to close at 9939.98
Volume DJ30: 259M shares Tuesday versus 223M shares Monday. Good volume on the reversal.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Wholesale inventories come out on Wednesday, and it will be interesting to see if they expand slightly, as expected, to 0.5%. If so, the question is whether it is because of an increase in production or just a lack of sales. There is concern that the economy is slowing down in the summer, and that is something I suggested would happen back in the spring. If it does slow, that would mean lower sales and thus inventories would rise. This is not a big rise in inventories anticipated; if it holds in this level, it is not anything serious. If we all of a sudden see them spike up 1.5%, that would be of some concern. It would show that the slowdown is occurring more rapidly anticipated. If it is more rapid, it would be deeper than anticipated as well. Crude inventories are out as well. Last time there was a surprise draw down more than expected, and that impacted oil. Oil is in position where it would rise again if it gets a draw down once more.
With the market trying to bounce once again, we will be looking for some upside plays as we have been thus far. I have been putting them on the report, and we have been taking partial positions as they show a good buy. I am trying to pick them at a support level or a stock that has been holding up well in a pattern. If the market rebounds we can get a quick hit play out of that. That is what we have to look at right now because, as noted earlier, you have to view any movement to the upside as a bounce. All we have had thus far are bounce attempts. Several of them failed, and the last bounce attempt has a bit of traction, but not much before it rolled back over.
If we get a bounce, we are looking to play some positions and make shorter-term gain. If they continue to move higher, that is fine. I am viewing it as a bounce until proven otherwise. Maybe we will get the follow through where we can start seeing good plays set up. Again, note there are not a lot of good leaders in good position. I am looking to play stocks similar to the SP500. Those that have come down to a long-term support range and are ready to bounce to the upside. We can play those for that bounce. Note how the SP500 still has the January peak to deal with it was not able to handle it last time. It may come back up there, and if it stalls again, you have an ugly head and shoulders formed. You also have to worry about the 200 day EMA and the early January peaks where it turned over. It ran up to the 200 day EMA, tried it twice, and could not get through. That will obviously be a near-term resistance point we have to watch on any bounce.
The market has certainly put in enough downside to form a base, but it has not completed a base yet and likely has more work to do. It is still rather ugly with the lower interim high followed by what could be a head. It has got to somehow base out, put all of that behind it, and it may simply be too soon for it to do that. Yes, there is a lot of negativity with respect to the market and indeed, to a certain extent, the economy but that in itself does not mean a turn of major significance is at hand. Everything else has to fall into place as well. Leadership has to be ready to move higher, and that is the most important aspect of any rally. During the 2000-2002 selloff, there were many rally attempts that just faded out. The market became oversold. It tried to rally, but the missing component was leadership; there were not any leaders in good position to rally higher. Everything was just oversold bounces and short covering bounces. Right now we do not have a lot of leadership, and we will just play those that look good and are in position to bounce. Keep in mind that, until proven otherwise, this is likely just a bounce in what is really a bear market despite the run off the lows from March 2009. Not a great note to end the report on, but I have to look at the facts. Looks like we have an opportunity to the upside now, but we cannot get deluded into thinking it is something great until it proves itself. Have a fantastic evening.
Support and Resistance
NASDAQ: Closed at 2170.57
Resistance:
2177 is a low from March 2008
2185 to 2195 represent support points for years: December 2004 peak, July to October 2005 consolidation, January, March and July 2008 lows, and October 2009 peak.
2205 is the November 2009 peak 2210 (from September 2008) to 2212 (the July 2009 closing low)
The 200 day SMA at 2236
2245 from July 2008 through 2260 from late 2005.
2275 - 2278 from the February 2008 and April 2008 lows
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 2010 high
The 50 day EMA at 2324
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
2434 is the May 2010 high
2453 is the August 2008 peak
Support:
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
2100 is the February 2010 low
S&P 500: Closed at 1062.00
Resistance:
1070 is the late September 2009 peak
1078 is the October range low
1084 to 1080 (September 2009 peak)
1101 is the October 2009 high
1106 is the September 2008 low
The 200 day SMA at 1107
1114 is the November 2009 peak
1119 is the early December intraday high
The 50 day EMA at 1127
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
1170 is the prior March 2010 high
1174 is the May 2010 high
1181 is the April selloff low
1185 from late September 2008
Support:
1044 is the October 2008 intraday high AND the February 2010 low
1040 is the May 2010 low
1020 is the bottom of the late summer 2009 consolidation
946 from June 2009
Dow: Closed at 9939.98
Resistance:
10,120 is the October 2009 peak
10,285 is the late December consolidation peak
The 200 day SMA at 10,305
10,365 is the late September 2008 low
10,496 is the November 2009 high
The 50 day EMA at 10,492
10,609 from the Mid-September 2008 interim low
10,730 is the January 2010 peak
10,920 is the recent May high
10,963 is the July 2008 low
11,100 from the 7-08 low
11,205 is the April closing high
11,734 from 11-98 peak
Support:
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 AND the February 2010 low
9774 is the May 2010 intraday low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 07 - Monday
Consumer Credit, April (15:00): $1.0B actual versus -$2.0B expected, -$5.4B prior (revised from $2.0B)
June 09 - Wednesday
Wholesale Inventories, April (10:00): 0.5% expected, 0.4% prior
Crude Inventories, 06/05 (10:30): -1.90M prior
June 10 - Thursday
Initial Claims, 06/05 (08:30): 450K expected, 453K prior
Continuing Claims, 06/29 (08:30): 4600K expected, 4666K prior
Trade Balance, April (08:30): -$41.3B expected, -$40.4B prior
Treasury Budget, May (14:00): $142.0B expected, $189.6B prior
June 11 - Friday
Retail Sales, May (08:30): 0.2% expected, 0.4% prior
Retail Sales ex-auto, May (08:30): 0.1% expected, 0.4% prior
Michigan Sentiment, June (09:55): 74.5 expected, 73.6 prior
Business Inventories, April (10:00): 0.5% expected, 0.4% prior
End part 1 of 3
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