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money investment, investment help
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6/22/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: DIA; SPY
Trailing stops: None issued
Stop alerts: CHK; PNRA
Once more I thank everyone for their thoughts and prayers. My brother is out of surgery and now we are looking forward to a good, speedy recovery. Thank you again.
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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 segment in a longer video. Click on the link to the portion you wish to view.
MARKET OVERVIEW
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SUMMARY:
- Another upside move gets turned over as buyers close the checkbook.
- May existing home sales fall quite short of the mark, and fears of a housing double dip ultimately weigh down stocks.
- AAPL sells 3M iPads in 2 months, twice expectations, but even that cannot keep techs positive.
- SP500, DJ30 close below the 200 day SMA.
- FOMC decision day usually positive, followed by some downside.
Delayed reaction to housing sinks stocks, putting SP500 below the 200 day SMA.
It was not a great day for stocks. Another attempt to the upside early in the session was thrown back, this time with SP500 and the DJ30 closing below their 200 day EMAs. Stocks started off rallying but then got in trouble. They were helped out even though there was a weak May existing home sales number that came in much worse than expected at -2.2%. That does not sound too bad, but if you consider that they were expecting 6.10M units versus the 5.66 they received, then you can understand why the market was taken aback. It did not tank on the news, however, and fought its way back up into the lunchtime hour and was positive. Both SP500 and the Dow were up, as were NASDAQ and the growth indices.
As the afternoon continued the dollar strengthened, and I think investors believed that the news about housing was more important than they had originally thought. The bids dried up late in the afternoon. Mid afternoon the stocks were heading lower, tried to hold, and then they tumbled off to session lows at the close. Again, I think the concern was the existing home sales report was much weaker than expected, and there is a fear of a double dip in housing. After all, there is nothing to spur demand like the first time buyers credit. Since the market was never able to find its bottom the first time around, now that the stimulus is removed it is trying to find its bottom now. That could be a problem for lawmakers as they wrestle with whether they want more stimulus (as the President said he wanted today) or to let the markets finally clear themselves out and reset for a move to the upside.
Looking at the SP500 daily chart, it closed below the 200 day EMA that it fought so hard to take, and then it valiantly held. It does not mean it with necessarily collapse, but I do think that giving that area up, as well as the 10 and 18 day EMAs suggest it will come back down. Volume was not huge, so it was not a massive overrunning of the buyers by the sellers. The buyers just gave up, closed the checkbook, and went home for the day. That left stocks to fall into the close.
NASDAQ did not undercut its 200 day EMA, but it was held up by AAPL that reported it sold 3M iPads in two months; that was twice what was expected. With AAPL helping out, the NASDAQ was able to avoid crashing through its 200 day EMA but not able to avoid the selling as it closed down 1.2%. It seems that after that Monday move where stocks shot out of the gate, the NASDAQ moved over its 50 day EMA and its January peak, and the SP500 rallied up to the bottom of its January peak and reversed. It took the buyers out of the buying mood. Since then when upside shows up, it has been used for selling to some extent. Without buyers coming back in on the lows this time around, the indices had to find their bottom, and they found it by the closing bell. Otherwise they would have likely moved even lower.
OTHER MARKETS.
Dollar. While the dollar started relatively lower on the session, it moved up during the day (1.2265 Euros versus 1.2323 Monday). It started to bounce higher on Monday after testing the 50 day EMA and continued the move on Tuesday. This is the DXY0 which is compared to a basket of currencies and not just the Euro. It performed better against the Euro, but there is a nice trend higher after the breakout from if flat range. Now it is just an ordinary test of the 50 day EMA. It looks like it will continue to the upside.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds started to show their strength again. When existing home sales came in -2.2%, the 10 year really started to rally (3.16% versus 3.25% yield Monday). Bonds rally with worries about the economy. Bond have rallied back up to the prior closing highs and that is important. If it breaks through and closes above it and can hold, it shows bonds are on another leg higher. The bond market is what you look to determine whether the economy is healthy. Bonds are rallying and rates are falling. The yield curve the still okay. It is nowhere near inverted, but we have to watch for the reason why bonds are rallying in this kind of climate. Right now it is concern about the US economy, particularly the housing market and whether it can avoid a double dip.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Gold did not have much to say. It managed to bump slightly higher ($1,241.30, +0.60). It is not in a bad pattern at all; it is showing a great break, a test, and stair stepping up to the prior peak. It hit a new high last week. It is testing it and looks like it will try to hold at the near term support and continue the move to the upside. There is no reason for gold not to move to the upside if there are worries about the economy or inflation. People often say that inflation comes with improving economies, but inflation really shows up when economies are weak. They are weak and then suddenly get traction with all the extra money out there. They create excess demand and it gets too much velocity going. In other words, the money starts turning over again after it has been flat forever. Then inflation pressures start to develop because there is not the supply to keep ahead of demand.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil had a tougher time of it given there were concerns about the US economy and a double dip in the housing market. It filled the gap from Monday and came back from it, bouncing back up for a modest loss ($77.21, -0.61). It is moving back up in its range. Steady, slowly, but surely, it is moving to the $80.00-83.00 level, and that is where we will want to look at this to bank some gain on the USO as well as watching to see if oil can break out of the range or break down. It was not hurt today by a federal judge the Louisiana lifting the ban on drilling in wear deeper than 500 feet. He said that the executive could not just issue that kind of an order banning the drilling; it is insufficient. It is an age where Presidents rely way too much on executive orders the constitutionally of which is not an issue. They are not constitutional, but no one ever holds their feet to the fire because it is a way to do what we want without having to go in front of Congress. If it would not pass in Congress, they just write an executive order. I think one of the Clinton's aides said, "Stroke of the pen: power of the law." That is exactly right, and that is what makes it unconstitutional. Of course I digress.
Oil is moving higher in its range. It looks ready to rally to the top of the range. It gives us a nice gain, but the problem is whether we will get $4.00 gasoline. The removal of the ban on deeper water drilling will help that and may ease some of the pressure on gasoline prices now that we are in the teeth of the summer.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume was down on NASDAQ to 1.8B shares and was up slightly to 1.1B shares on the NYSE. Those are both low volume areas. We are in the summer doldrums and getting lower volume. We saw the buyers basically go on strike and were not willing to put bids up in order to keep the market from falling. This is not due to serious selling, but that does not matter. If volume was light on the way up, it can be light on the way down and you can still get just as much selling.
Breadth. Breadth was matching the action. It was pretty stout at -3.5:1 on NASDAQ and -3.4:1 on the NYSE. With hefty flips during the day, there was hefty downside volume. That is the way it's been: heavy on the downside days and heavy on the upside days as the bulls and bears continue to swat it back and forth (with no one really taking advantage). Although the bulls like as if they may try to take the lead over the past week. There was a break over the 200 day EMA and the attempted move higher on Monday that was tossed right back in their faces.
CHARTS
SP500. SP500 rallied up to the 50 day EMA where it bumped all of Wednesday through Friday last week. It turned over, fell through the 200 day EMA for the first time in five sessions, and it fell a good amount. There is support at 1095 and there are other levels where it has hit this point and turned back up. We will see. It looks like it may be trying to run back down to the bottom of the range at the February lows. That with why we moved into SPY put positions. I am looking for a downside move. If it gives it, I will take it. It is a hedge on what is going on in the rest of the market.
NASDAQ. AAPL tried to hold up NASDAQ but was unable to. It still sported a 1.2% decline, and it failed at its 50 day EMA and the January peak. That is the more important indication. It gapped through that point on Monday and reversed. Unable to hold it, it added to the downside on Tuesday. It was not a major selloff, however, staying well above the 200 day EMA. The volume remained low, but you can see how low it was on the way up as well. Not very inspiring. Support down at this lower range, but again it looks like NASDAQ has a better chance of holding up at this point. It still has plenty of support in the range of 2200. It is not terrible for NASDAQ, but just not great overall. It is much worse on the NYSE large caps.
SP600. The small caps did not have a great day either. It failed at the 50 day EMA again, but it is still above the 200 day EMA and the trendline it broke through last week. It can still find support above the 200 day EMA. Not a major collapse, and looks like part of the lateral consolidation move. I would not be surprised if it came down near the June low, started back up, and continued the sideways movement to set up a new base. Not surprising action. Still base building and was not ready to make the move higher.
Summary: I was questioning whether the oversold bounce part two would yield a run to the SP500 January peak, but it did not do it. It got to the bottom, and it can still reverse and rally up, but it is getting a little acceleration to the downside. That is why we moved in with some downside positions on it as well as on the Dow Jones with the DIA. It was breaking and closing below its 200 day EMA as well.
LEADERSHIP
Technology. AAPL was one of the bright spots for NASDAQ and the market overall as it sold 3M iPad. That was twice as many as expected over the first two months. It managed a little bit over a 1% move. Not huge, but not a bad gain not on the day where the market rolled over. SNDK is joined at the hip with AAPL. It was down, but it was not down badly. It is still in good shape and trying to hold above the near term moving averages as well as its peak from early June.
Financial. I have an eye on JPM. It is still near the bottom of its range. It tried to break higher, and it is coming back now. We will see how it tests. It might give a better entry point than I was looking at originally. You can add to some positions, or if you have not gotten in, buy a new position as it comes down to test. It would be great if it can test, hold, and bounce. I would have preferred it to just continue higher with that second test of the support level, but it did not. It looks like it may come down and come close to it. If it does, we can see how it bounces and decide how we want to move in with any new positions.
Retail. Retail is under some pressure. ANN started to break lower, and volume is not huge but is rising a bit as it breaks down. PNRA came under selling pressure as well. This was not a lack of buying today. Volume moved above average for the first time in 2-3 weeks just as it cracked the 50 day EMA. There is some support here, but better safe than sorry on these if the market looks like it is rolling over. There is a lower high, and there could be some trouble. You can also consider this a downside ABCD pattern. You have to watch that when it starts to form. If it cannot punch through and keep this move going to the upside, you have to watch out it has broken downward.
Industrials. JOYG was down but it is not in bad shape at all. It had a flag and tried to move on Monday, but it is just testing again. Still in good position to move up in its range, although it is halfway up in the pattern. This is one that had the reverse head and shoulders, broke higher, flag, and it is trying to break higher again off that flag.
Metals. MTL is moving laterally at the 200 day EMA and still holding up. It is not giving up. Commodities got a boost Monday, but they could not do much with it. We will see now what kind of mettle they have. (The wit flows like molasses around here some days.)
THE MARKET
MARKET SENTIMENT
VIX: 27.05; +2.17
VXN: 26.83; +1.26
VXO: 25.61; +2.18
Put/Call Ratio (CBOE): 1.04; +0.11
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: 37.0% versus 38.5%. Still falling even as the market tries to find footing, not an unusual occurrence. A steady slide and 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: 32.6%. Continuing its steady climb as the 39.9% from last week was revised lower to roughly 31.5%, so no crossover yet with bears topping bulls, but still approaching that rather rare occurrence. Solid rise from the mid to upper 20's. 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: -27.29 points (-1.19%) to close at 2261.8
Volume: 1.836B (-3.18%)
Up Volume: 218.9M (-273.591M)
Down Volume: 1.652B (+271.569M)
A/D and Hi/Lo: Decliners led 3.54 to 1
Previous Session: Decliners led 2.01 to 1
New Highs: 29 (-48)
New Lows: 59 (+10)
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: -17.89 points (-1.61%) to close at 1095.31
NYSE Volume: 1.117B (+4.63%)
Up Volume: 74.823M (-386.555M)
Down Volume: 1.033B (+433.252M)
A/D and Hi/Lo: Decliners led 3.39 to 1
Previous Session: Decliners led 1.29 to 1
New Highs: 76 (-72)
New Lows: 38 (+8)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -148.89 points (-1.43%) to close at 10293.52
Volume DJ30: 176M shares Tuesday versus 165M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Part two of the homes data will come out on Wednesday with new home sales. Existing home sales comprise 80% of the market, so it is key, but new homes are also very important because they gauge how many people are moving into the home market and what kind of extra goods they will be purchasing for their homes. There is a ripple effect with new homes since they have to be furnished; that tends to touch many areas of retail. We will see if it will be a better showing than the -2.2% drop in the May existing home sales.
The other big news for the day will be the FOMC meeting. It had a two day meeting this week and will have its announcement on Wednesday afternoon. I do not believe it will do anything with rates because its hands are tied by Europe and the flagging US home market. Everyone is watching to see if it will take out the language regarding how long it will keep rates low. It will be about time for them to do that, but I do not believe they will. The case in many of the last FOMC meetings is that the market tends to rise into the announcement, and the following day it tends to decline. After two days down on the SP500, the Dow, and the indices, we may get a bump higher on Wednesday. Maybe it will take them up toward SP500 and maybe the Dow up toward the 200 day EMA. On Thursday I would then expect the market to continue back to the downside. If volume continues to accelerate to the downside, I would expect a test down to the lows from May and June. That is where the February lows were as well. If that is the case, then so much for the oversold bounce part two. It looks like the buyers were not ready to buy and the sellers were not really selling, but they definitely were not leaving the market alone either. If they smell a little blood in the water, we could see the shorts come back in. After all, this has not been very stellar move.
I am not expecting a breach of these. If the economy continues to decelerate, that may lead to a break of the February lows because there would not be the economic news and firepower to support stocks at a higher price. This looks a lot like a basing pattern. In other words, it could continue sideways bouncing up and down along the February support. The bears will tell you this is something of a head and shoulders with the left shoulder ahead. The right shoulder is a little weaker because it only tapped the bottom of the January range before it rolled over. We are playing a downside move and playing it down to what is essentially the neckline; that is where I anticipate it to go. It may hold there and bounce, and we will take some gain if that is the case. If it does bounce up a bit and then crash through, we will definitely let the rest of our position ride. If that happens, it is likely to get a bit ugly, but we do not know about that yet. It still looks very much like a basing scenario in the summer. You do always have the summer to worry about because stocks tend to be pretty crappy in the summer. Sometimes there are good late-summer rallies before the August and September blues hit. Looks like now we have a bit of momentum to the downside that could be building up. There could be a test down to the February low. That is why I said to keep your stops in place for your upside plays and why we have moved into some downside plays as well.
We will also be looking for some upside plays where they are just testing back. These are quality stocks that have performed well that may pull back during this selling after the 1-2 week bounce off these lows. If they can come back and they are in good patterns and can hold, then they will be ready to move back up. Until it shows us otherwise, this looks very much like a base trying to form. I could be very wrong if the economy is weaker than anticipated, but for now it looks like a base and we have to play it like that. Have a great evening.
Support and Resistance
NASDAQ: Closed at 2261.80
Resistance:
2273 to 2282 marks bottom of January 2010 lateral peak
2292 is a low from January 2008
The 50 day EMA at 2305
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:
2275 - 2278 from the February 2008 and April 2008 lows
The 200 day SMA at 2249
2245 from July 2008 through 2260 from late 2005.
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 1095.31
Resistance:
1101 is the October 2009 high
1106 is the September 2008 low
The 200 day SMA at 1111
1114 is the November 2009 peak
1119 is the early December intraday high
The 50 day EMA at 1119
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:
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 10,293.52
Resistance:
The 200 day SMA at 10,346
10,365 is the late September 2008 low
The 50 day EMA at 10,430
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:
10,285 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 22 - Tuesday
Existing Home Sales, May (10:00): 5.66M actual versus 6.10M expected, 5.79M prior (revised from 5.77M)
FHFA Housing Price I, April (10:00): 0.8% actual versus 0.1% prior (revised from 0.3%)
June 23 - Wednesday
New Home Sales, May (10:00): 430K expected, 504K prior
Crude Inventories, 06/19 (10:30): 1.69M prior
FOMC Rate Decision, June 23 (14:15): 0.25% expected, 0.25% prior
June 24 - Thursday
Durable Orders, May (08:30): -1.3% expected, 2.8% prior
Durable Orders ex Tr, May (08:30): 1.3% expected, -1.1% prior
Initial Claims, 06/19 (08:30): 460K expected, 472K prior
Continuing Claims, 06/19 (08:30): 4580K expected, 4571K prior
June 25 - Friday
GDP - Third Estimate, Q1 (08:30): 3.0% expected, 3.0% prior
GDP Deflator, Q1 (08:30): 1.0% expected, 1.0% prior
University of Michigan Sentiment, June (09:55): 75.5 expected, 75.5 prior
End part 1 of 3
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