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us stock market, trade stock
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6/16/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: SAPE
Trailing stops: None issued
Stop alerts: AAPL
SUMMARY:
- Market flat lines, but that is not a bad thing for the bulls.
- May housing starts are pathetic, but market handles the bad news, not a bad thing for the bulls.
- FDX posts good results then guides below expectations for all 2011, but the market handles it. Not a bad thing for the bulls.
- Production and capacity utilization sport very nice gains, not a bad thing for the bulls.
- Obama gets $20B escrow from BP for damages despite a total lack of constitutional authority. Not a bad thing for BP.
- SP500 taps the 200 day SMA on the low and rebounds to flat. You know where I am going with this: not a bad thing for the bulls.
Kind of a boring, no, a really boring, session, but after the Tuesday gains, that is not a bad thing for the bulls.
Futures were down early in the morning, somewhat normal after a strong 2+% to 5% day for the major indices. Then the May housing starts came out down 10% and at 1991 levels and futures tipped over the edge to the downside. The market risked another episode of its 'take the high ground only to lose it a session later' drama. PPI was -0.3% thanks to lower oil, but it still fanned the deflation fear flames. NOK lowered its Q2 sales and margin guidance for yet another quarter. FDX reported solid current results but then guided lower for the entirety of 2011 despite commentary that it sees a nicely improving economic environment. Appears FDX has a bit of a Cybil complex right now.
All of that news was pretty much piling on to the downside pre-market. Then just before the open production and capacity hit the wire, nicely topping expectations. The futures twitched upside. There was life there after all.
Stocks opened lower of course, but they stemmed the damage, bounced, and then tested again at the first hour's end. That put SP500 at the 200 day SMA, the important point it broke over Tuesday after three prior tries failed, the latest on Monday. That was the low of the day as the indices ground higher, modestly so, into the afternoon session. They almost gave it away in the last hour as they sold and slipped to negative. A last half hour bid pushed them back to the flat line with only SOX (0.44%), NASDAQ 100 (0.41%), and SP600 (-0.49%) closing with any separation from flat.
Not a lot of movement and not a lot of excitement. After those big Tuesday gains that was not bad action. Moreover, the SP500 test of the 200 day SMA, the hold, and then the bounce back, is . . . not a bad thing for the bulls.
OTHER MARKETS.
A mixed picture with the other markets as they acted as if the 'fear trade' was back on somewhat, but at the same time didn't. The dollar and bonds were up, but gold was modestly lower. Oil was up despite higher than expected inventory builds when it is typically down when the fear trade takes over. Suffice it to say the other markets were about as directionless as the equities market.
Dollar. Modest gains (1.2302 versus 1.2343 Tuesday) though the dollar closed off of its pre-market highs. Again the stock market found some traction as the dollar weakened through the day. It was still up on the session and thus the stock market was basically flat to lower. The chart shows the dollar index bouncing modestly from the Tuesday selling, but still in a pullback from the recent high that basically matched the last 2008/early 2009 dollar peak. Down but likely now out.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds continue in their pullback but are holding above near support, posting modest gains Wednesday (3.26% versus 3.31% Tuesday). Bonds are off their recent peaks, and if the perception of Europe improves they should sell more if the US economy continues improvement as well.
Interestingly, Spain is experiencing the Greece Syndrome, i.e. a run on its debt instruments that is sending bond yields higher and higher. There is something under the surface here, some bank or other financial institution in trouble that is causing problems with Spanish debt. That is pushing money out of Spain and indeed continues the move out of Europe, and over to the US, Canada, Australia.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Modest pullback in gold (1230.50, -3.90) as it continues to chop sideways for the past week, all the while holding near support at the 18 day EMA and the December 2009 prior peak. Still holding the breakout and working laterally. It has benefitted from the fear trade as well as the recovery trade. If there is fear of Europe going down and dragging the US with it, gold is a value store. If the economies recover, there is the inflation threat thanks to all of the printed money. Gold is a hedge against weaker currencies in that situation. Gold may not be racing higher right now, but it is in position to benefit either way the market sentiment goes. Somewhat enviable position.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Modest gain (77.54, +0.60), but enough to push oil up through its 200 day SMA as it mimics SP500 and its Tuesday move. Oil continues its progress higher inside of its 7.5 month range, making a very technical move. No issue with that as we have some upside on it, and we are looking for oil to move up toward the top of its range or at least that March consolidation area at 81ish.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume fell 15% on NASDAQ to 1.8B shares, still below average and indeed significantly below average. Summer doldrums are here for the techs. NYSE trade rose fractionally to 1.17B shares though that is below average for the fifth consecutive session. Rallying, but trade is lower on the rally. As noted Tuesday, however, we are viewing this as a bounce toward the January peak, and thus volume is not that critical on a technical move. Definitely not enough trade to support any kind of follow through session.
Breadth. NASDAQ -1.4:1 decliners over advancers, and -1.3:1 on NYSE. Nothing out of line here, i.e. no divergences and thus no indication of any impending change in the market action, at least from this angle.
CHARTS
SP500. No significant movement as the index closed flat, but it did test the 200 day SMA on the session low and rebounded off of that to close. On the other hand it tapped at the 50 day EMA on the high and faded. The candlestick chart shows a doji, and after a run higher that can indicate a pullback. If so we would expect more of a lateral move that may undercut the 200 day MA but also hold at the late May/early June bounce peaks just below the 200 day (1103). Any pullback from the Wednesday close (1114.61) to that level is good enough for a new leg and a continued move toward the January peak at 1151.
NASDAQ. NASDAQ bumped up close to the January peak (2325, 2318 on the Wednesday high) and faded back to flat to close. That kept it below the 50 day EMA as well after breaking above it intraday. NASDAQ is bumping its January high already, but we don't view that as the definitive move for techs. A break upside to the May interim peak at 2425 closing or the march lateral consolidation (2415 closing high) would be more appropriate, particularly if SP500 is going to rally to its January range. Of course that depends upon whether NASDAQ or SP500 is the leader of this move. We could find out pretty quick when we see how NASDAQ handles the January high.
SP600. The small caps bumped the 50 day EMA again and faded, showing a doji on the candlestick chart. Not quite at the bottom of the March lateral consolidation, and a pause is nothing necessarily nefarious. Still viewing this as a bounce here as well, but one with more upside toward the last April consolidation.
SOX. Semiconductors were off their high but still led the market upside with a 0.44% gain. They are breaking through the January peak and the early April gap up point is the likely resistance for these stocks as they continue to lead the market higher.
LEADERSHIP
Semiconductors. Given the action from SOX it is clear that semiconductors are still leadership stocks though after the updraft Tuesday the gains were limited. A pullback after they make the gap up point on SOX will be a potential entry point and we will be watching for opportunities at that point.
Energy. BP's talk with the President sparked a lot of buying in BP though it didn't explode higher. It was not as bad as some feared the initial 'plan' would be so a modest bounce. Energy is still tilted toward the gas producers right now as the oil producers and offshore drillers are at the prior lows, trying to find support.
Financial. Modest gains from the likes of JPM as it holds its February lows, but thus far not a lot of traction. We are watching and would like to try another upside bounce on JPM when it is ripe. May be getting there.
Retail. Various levels of oversold to some interesting patterns. BBBY is getting interesting as it tests a break over the early June high in a potential double or triple bottom. Then there is UA, powering higher for us. Another pure apparel play, PVH, may set up for us as it tests a break above the 50 day EMA. JNY, more apparel, is also getting interesting if it can, as PVH needs, to base out laterally, form a handle, and then give us the break higher. Retail continues to set up as money rotates through its various sectors.
Technology. Okay, AAPL could not be kept down. It burst higher, clearing the 78% Fibonacci double top on stronger trade. SNDK, somewhat tied to Apple's hip, is also hitting new highs. EMC is a bit interesting but too far on this move without some kind of test.
THE ECONOMY
May housing starts stink, pointing to another slump in housing market.
At 593K and -10% month over month, starts totally missed the 655K expected. With builder sentiment running up and down like the temperature of a woman having hot flashes, it is no wonder housing starts are volatile.
The expiration of the tax credit is revealing the continued weakness in the sector. It is cyclical, it was propped up too long by low rates and fancy pants financing, and when it started to crash the government tried to prop it up again. The renewed plunge in starts shows that it was all stimulus; the housing market has not corrected enough to rebound on its own.
Markets that are propped up too long or held down too long have to finish their cycle and clear out the pipes to start another run. Otherwise they stagnate just as the overall economy did in the Great Depression and in the 1970's when we tried throwing money at them to shorten the pain. All that did was lengthen the malaise.
Another major economic crisis and slowdown, and we have not learned a thing. That is why many smart economists are worried about another housing and indeed economic dip. ECRI continues to point to slowing into late summer and the fall. If you could spend your way to prosperity then Europe would be a bastion of economic prosperity and wealth. To the contrary, it has shown us another example of how government CANNOT SPEND its way to prosperity.
Indeed, it has spent itself to the verge of collapse with debt to GDP ratios well over 100%. Oh, and we are on that road right now, just a few years removed. With the President using the Gulf oil spill to shill for his cap and trade agenda and even more spending (he even talked about the 'costs' last night in very vague terms), we are planning even more spending and even a more rapid lurch toward European financial disaster.
Manufacturing is the great hope.
While housing and other areas of the economy have slowed a bit, after a late April/early May stall, manufacturing is on the mend and still trying to lead the economy.
Monday saw a solid New York PMI, not hitting expectations, but still on the rise. Wednesday saw a solid Production increase (1.2% versus 0.8% expected, 0.7% prior) and a strong jump in Capacity Utilization (74.7 versus 74.4 expected, 73.7 prior).
As with the last recovery that was also labeled 'jobless,' manufacturing is the leading sector out of the morass. Of course manufacturing is the smallest sector of the US economy, so even though it is gaining nicely it is not helping much with changing the jobs picture.
THE MARKET
MARKET SENTIMENT
VIX: 25.92; +0.05
VXN: 25.92; -0.45
VXO: 25.37; +0.29
Put/Call Ratio (CBOE): 0.95; +0.08
Bulls versus Bears:
This past week the bearish number of investment advisors topped bullish advisors. That is a rare event and thus very noteworthy. It falls into our theme that the sentiment indicators have hit extremes and are at levels sufficient for at least a more sustained bounce in the indices.
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: 38.5%. Falling as the last rally attempt failed, down from 39.8% the prior week. Down substantially 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: 39.9%. Huge spike from 28.4% shows a rare crossover as bears top bulls. It continues a sharp rise 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: +0.05 points (0%) to close at 2305.93
Volume: 1.854B (-14.98%)
Up Volume: 935.421M (-1.018B)
Down Volume: 965.876M (+692.937M)
A/D and Hi/Lo: Decliners led 1.46 to 1
Previous Session: Advancers led 3.97 to 1
New Highs: 59 (+13)
New Lows: 27 (-3)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -0.62 points (-0.06%) to close at 1114.61
NYSE Volume: 1.17B (+0.48%)
Up Volume: 406.276M (-706.832M)
Down Volume: 703.706M (+657.096M)
A/D and Hi/Lo: Decliners led 1.33 to 1
Previous Session: Advancers led 5.07 to 1
New Highs: 98 (-3)
New Lows: 42 (+17)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +4.69 points (+0.05%) to close at 10409.46
Volume DJ30: 166M shares Wednesday versus 203M shares Tuesday. Lower volume on a pause is fine.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Good grief it is Thursday of expiration week already and basically no volume on the week. It could show up Thursday, but with the summer light trade it likely means that it will be a more 'traditional' expiration, i.e. with volume showing up Friday.
We are looking for SP500 to move up to the January range, bottom, middle, or top. It does not have to get there in two days. It has a nice run under its belt, took a break Wednesday, and it could easily take a further break Thursday and even Friday before continuing the move.
At this point we have taken some upside positions and are more looking for this pullback to provide us with some new opportunities as the indices rest and rejuvenate themselves and good stocks take a break from the run. There are already some starting that pause and rest as pointed out on the 'Leadership' section.
So on Thursday we are watching for pullbacks and whatever opportunity the market provides. As noted there are good stocks still setting up, and if they show us a positive move we can take some positions though we would like more of an overall pullback. The indices are getting closer to the bounce targets so buying at this juncture carries with it more risk of a pullback, but if there is a good test Thursday and even Friday, then they will be in good shape to make a solid upside run to those levels and then we see if there is a breakout.
In other words, we ride the positions we have and when we get to the target on the indices we can book some gains. We also continue to look for good stocks in position to buy because despite our beliefs about what the peak for the bounce may be, we know stocks and indices can run farther than we are anyone else expects. If the stocks show good setups and action AND good risk/reward, we rely on what they and the market are showing versus our gut feelings. That is why we take partials at our targets; how many times do they continue to move beyond what anyone thinks? Enough to make you rely on what the charts are telling you versus your guts.
Support and Resistance
NASDAQ: Closed at 2305.93
Resistance:
The 50 day EMA at 2308
2319 from the September 2008 peak
2320 to 2326.28 is the January 2010 high
2324-2370 is a range of resistance from early 2008
2382-2395 from 2008
2412-2415 represents a series of peaks and lows in 2007, 2008
2434 is the May 2010 high
2453 is the August 2008 peak
Support:
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 200 day SMA at 2243
2205 is the November 2009 peak 2210 (from September 2008) to 2212 (the July 2009 closing low)
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.
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
2100 is the February 2010 low
S&P 500: Closed at 1114.61
Resistance:
1114 is the November 2009 peak
1119 is the early December intraday high
The 50 day EMA at 1120
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:
The 200 day SMA at 1109
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 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 10,409.46
Resistance:
The 50 day EMA at 10,435
10,496 is the November 2009 high
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:
10,365 is the late September 2008 low
The 200 day SMA at 10,325
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 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 15 - Tuesday
Export Prices ex-ag., May (08:30): 0.6% actual versus 1.3% prior (revised from 1.4%)
Import Prices ex-oil, May (08:30): 0.5% actual versus 0.6% prior (revised from 0.5%)
Empire Manufacturing, June (08:30): 19.57 actual versus 20.0 expected, 19.11 prior
Net Long-Term TIC Fl, April (09:00): $83.0 actual versus $140.5B prior
June 16 - Wednesday
Housing Starts, May (08:30): 593K actual versus 655K expected, 659K prior (revised from 672K)
Building Permits, May (08:30): 574K actual versus 631K expected, 610K prior (revised from 606K)
PPI, May (08:30): -0.3% actual versus -0.5% expected, -0.1% prior
Core PPI, May (08:30): 0.2% actual versus 0.1% expected, 0.2% prior
Capacity Utilization, May (09:15): 74.7% actual versus 74.4% expected, 73.7% prior
Industrial Production, May (09:15): 1.2% actual versus 0.8% expected, 0.7% prior (revised from 0.8%)
Crude Inventories, 06/12 (10:30): 1.69M actual versus -1.83M prior
June 17 - Thursday
Initial Claims, 06/12 (08:30): 450K expected, 452K prior
Continuing Claims, 06/5 (08:30): 4475K expected, 4462K prior
CPI, May (08:30): -0.1% expected, -0.1% prior
Core CPI, May (08:30): 0.1% expected, 0.0% prior
Current Account Balance, Q1 (08:30): -$124.0B expected, -$115.6B prior
Leading Indicators, May (10:00): 0.5% expected, -0.1% prior
Philadelphia Fed, June (10:00): 20.0 expected, 21.4 prior
End part 1 of 3
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