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us stock market, stock prices
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6/23/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: DECK
Trailing stops: None issued
Stop alerts: None issued
SUMMARY:
- Economic news, FOMC outlook buffet the market, but stocks show some resilience.
- New home sales plummet 32.7% percent in May.
- Mortgage delinquencies fall for the first time in 2 years.
- $26.7M in bogus tax credits to felons, etc. Your tax dollars at work.
- SP500 doesn't come close to testing the 200 day SMA but at least NASDAQ holds it on its close.
- Plenty of good stocks looking just fine in rather normal pullbacks.
Not a great session but it could have been worse.
The close was a mix with the Dow and SOX cracking positive while NASDAQ and SP500 posted very modest losses. Sounds rather boring but there was intrigue enough to go around, and with the afternoon FOMC rate announcement it was enough to keep the players around through the close.
The news started decently with a round of earnings beating the street (JBL, KMX, RAD, ADBE). The lack of news kept all the markets pretty much status quo to start whether dollars, bonds or gold.
Then things got a bit interesting as they say. Monday saw a 2.2% decline in May existing home sales and investors thought that was bad. It was a piker. New home sales were down as well. 32.7% down, the lowest on record since they were started in 1962.
Bonds surged plunging yields on the 10 year to 3.11%. Oil sold (75.80, -2.05). The dollar fell. Of course the stock market sold as well, falling rather precipitously the ten minutes after the news hit. The market was trying to rise ahead of the FOMC meeting as is typical, but that drop pushed the indices negative. Any rise into the FOMC decision would have to arise from the downside.
Stocks did work their way back up to the flat line ahead of the decision. It came out and the Fed, thanks to the issues in Europe, did nothing to the low rates forever language. The Fed did downgrade its US economic outlook because of the European issues. Stocks were all over the map in the aftermath, selling some first but then reversing sharply to session highs. Couldn't hold it. Gave it all back and then wandered laterally to the close. Just couldn't sustain ignition after the Fed given the worries about the economy.
Given the downer economic news the action wasn't bad. There was every excuse to close the book on the upside move and get out of town but stocks held in quite well. Indeed if you look at the charts of many solid leadership quality stocks they are in very good shape right now in this rather modest pullback. If NASDAQ can hold its 200 day SMA and lead higher there are plenty of stocks to follow.
OTHER MARKETS.
Dollar. Rallied early then after the economic news just could not get on track, closing lower (1.2312 versus 1.2265). During the EU worries the dollar was bought because of the US' economy and its relative strength. The housing data has everyone bummed about the US prospects and thus the dollar lost some allure. Not in any real trouble as it holds over the 50 day EMA for now.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds surged (3.11% versus 3.16%) as bonds broke to a new closing high on this rally. If the economy is weaker company earnings would be lower, and thus stocks not as valuable. People ran to bonds Wednesday as a result.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Down (1237.40, -3.40) but not in trouble as it tests back from the run to the new high last week. Managed to hold the 18 day EMA on the close and we anticipate it will continue upside.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. If the economy is not that strong certainly oil won't be in very high demand. Thus oil sold off Wednesday (75.80, -2.05), falling below its 200 day SMA after breaking that level solidly Monday. Not so solid I suppose. There is some resistance it ran into Monday at the bottom of the March consolidation, but didn't think that would stop oils rise so easily.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume was a bit lower on NASDAQ, a bit higher on NYSE. Both still below average as the indices test and try to hold next support. Low volume on the upside, low volume on the downside suggests not a lot of conviction.
Breadth. Flat as a board on a flat as a board price day. Not showing any divergences to draw upon.
CHARTS
SP500. Failed at the bottom of the January peak range on Monday and sold off, but Wednesday SP500 managed to bounce off its low though not at any significant support. Looks as if the easiest path is lower though NASDAQ could pull it back up if that index bounces off its 200 day SMA.
NASDAQ. Undercut the 200 day SMA on the low and then rebounded to hold that level on the close. That leaves NASDAQ in position to help lead a move back up to try its January peak once more. We will see, but in reality this is simply another index that is in the process of trying to put in a base.
SP600. Sold down to the January peak and just over the 200 day SMA and held, bouncing modestly off the session low. Could set up an inverted head and shoulders here with the Wednesday low starting the left shoulder. One of the better consolidations of the indices right now.
SOX. Similar to NASDAQ in that SOX is showing a doji at a key support level (50 day EMA), still in position to move higher. Triple bottom with handle? Looks as if that could be the case.
LEADERSHIP
As noted earlier, despite the selling to start this week there are many quality stocks in position to move higher. Many are in tests where they have not broken their patterns, but simply need some rest before moving back up.
Semiconductors are testing nicely after leading the recent upside charge (NVLS, LSCC, KLIC). Big momentum retailers such as DECK and LULU are setting up. Not waves and waves of leaders, but a bit fatter and holding up thus far during this pullback.
THE ECONOMY
Maybe now the housing market will bottom.
The verdict as to the effectiveness of the buyer's credit: it isn't going to stop the housing market's fall. All the credits did was push people to buy to take advantage of the credit. If everything else was picking up it might have worked. As it is, now that the credit is gone, buyers are gone thanks to the credit's expiration pushing sales forward.
The housing market will likely recover some in the next few months as the 'sales forward' effect will diminish. Still there won't be a big rush back; the economy is still weak and the action of the housing market after the credit's expiration indicates that. If Congress stays out of it the housing market can contract further and perhaps find a real market bottom. The credits didn't do that simply because the housing market was too hot for too long, fostered by interest rates that were too low for too long combined with a Congress and a couple of Presidents too eager to get people into houses they could not afford as if that were some kind of measure of our prosperity. Indeed, with ECRI showing continued economic slowing, there is not much to keep prices higher.
Housing credits rife with fraud.
Of course IF all of the money went into housing maybe it would help. Audits of the program are turning up the 'usual' fraud. This year 14,000 people have collected $26.7M in bogus home buyer tax credits, including hundreds of felons currently in our prisons. Consummate homeowners.
We hear, however, things are improving. This year no 4 year olds were given the credit as happened in several instances last year. I feel so comforted and relieved given there is improvement, aren't you?
Delinquent mortgages fade slightly.
There is some light in the tunnel, however. Mortgages classified as 'seriously delinquent' fell 7.5% last month, the first decline in two years. Hard to call this one data point a turn, but it gets you watching for the next few reports to see if there is some signs of change, e.g. volatility in the number. One data point means nada. If there is some sustained change that would be much better news.
THE MARKET
MARKET SENTIMENT
VIX: 26.91; -0.14
VXN: 26.57; -0.26
VXO: 26.23; +0.62
Put/Call Ratio (CBOE): 1.12; +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: 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: -7.57 points (-0.33%) to close at 2254.23
Volume: 1.827B (-0.51%)
Up Volume: 706.68M (+487.78M)
Down Volume: 1.153B (-499.541M)
A/D and Hi/Lo: Decliners led 1.18 to 1
Previous Session: Decliners led 3.54 to 1
New Highs: 7 (-22)
New Lows: 65 (+6)
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: -3.27 points (-0.3%) to close at 1092.04
NYSE Volume: 1.13B (+1.17%)
Up Volume: 492.48M (+417.657M)
Down Volume: 621.599M (-411.304M)
A/D and Hi/Lo: Decliners led 1.14 to 1
Previous Session: Decliners led 3.39 to 1
New Highs: 63 (-13)
New Lows: 48 (+10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +4.92 points (+0.05%) to close at 10298.44
Volume DJ30: 195M shares Wednesday versus 176M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Jobless claims again along with durable goods orders. With the renewed worries about the US economy those jobless claims will get a real close look. They are expected to fall from the 470K range; need to.
SP500 was the focus but it looks as if it is abdicating in favor of NASDAQ and SOX that have held above key support and are giving some indications they want to bounce. There are certainly stocks in position to move as the report plays show.
We can play those and will if good patterns present buys, but just as this was an oversold bounce given the light volume and low numbers of leaders and we had to take that into account, this action is also part of something else, i.e. a basing process and thus likely continued choppy action as the buyers and sellers work out their differences.
Thus we won't turn down any good possible plays that show good buy moves, but again, all in the context that there is still basing to be done. That leads to some choppy action overall, but if strong stocks set up for upside moves, they are the leaders and will move well in market surges.
Support and Resistance
NASDAQ: Closed at 2254.23
Resistance:
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
The 50 day EMA at 2303
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:
The 200 day SMA at 2250
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 1092.04
Resistance:
1101 is the October 2009 high
1106 is the September 2008 low
The 200 day SMA at 1112
1114 is the November 2009 peak
The 50 day EMA at 1117
1119 is the early December intraday high
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 10,298.44
Resistance:
The 200 day SMA at 10,350
10,365 is the late September 2008 low
The 50 day EMA at 10,425
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): 300K actual versus 430K expected, 446K prior (revised from 504K)
Crude Inventories, 06/19 (10:30): 2.02M actual versus 1.69M prior
FOMC Rate Decision, June 23 (14:15): 0.25% actual versus 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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us stock market
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