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money investment, investment help
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6/28/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: FNSR; GDI; KWR; TSCO
Trailing stops: None issued
Stop alerts: None issued
SUMMARY:
- Stocks try a half-hearted bounce, can't make it stick, but avoid a reversal.
- Personal income down but decent, spending tops expectations.
- G20 fails to come to agreement on a world bank tax. Thank goodness.
- Just another AAPL success story with 1.7M iPod 4's sold through Saturday.
- Bonds continue their rather startling rally. Recovery? Definitely in jeopardy.
- SP500 tries to reload at the top of its support range.
Almost a good move.
Stocks started a bit soft and sold into the first half hour. Personal income and spending were not bad, the G20 couldn't agree to anything and thus so much for a world bank tax for now. Of course AAPL scored another huge win, selling 1.7M iPhone 4's through Saturday. Some things don't seem to change. Look at that chart of AAPL: Breakout from a nine week base and now a nice test. Looks very intriguing.
The market looks somewhat intriguing as well. Somewhat. SP500 bounced off the top of its support range . . . for awhile. It tried and then tried again. It got some help from NASDAQ with that index setting up an intraday ABCD pattern through lunch. The indices started to rally off of that but just could not close the deal. They were holding their own in the last hour, bouncing nicely toward the close, but then in the last ten minutes they crapped out and slid to the bottom of the afternoon range. That left basically everything flat, albeit just slightly lower outside of SOX and its 0.57% gain.
Basically no movement on the indices is not necessarily a good thing at this juncture though it didn't really damage them Monday. SP500 remains at the top of the range defined by the long term support from 10 years back, the February low and the May low. There are many quality stocks in good position, though granted there are more stocks not in such great shape. In sum, the market has the potential to make a higher low and bounce from here, thus continuing the 'rally' off the May and June lows, but it has to prove it at this point.
OTHER MARKETS.
Dollar. The dollar continues to bounce along the 50 day EMA in this pullback from the rally high and the late 2008/early 2009 high as well. Is it in trouble, is it at risk of falling on its face? Not really, not really at all. Modest gain on the session (1.2280 versus 1.2387) as the dollar still looks ready to make the bounce upside after it completes this test.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. The amazing US bond rally continues with bonds breaking out to new highs on this rally. Economy supposedly improving, the EU's trillion dollar baby supposedly saving the day for the PIIGS and company (e.g. Hungary), yet bonds are rallying. Bonds tend to be a very important future economic fortune teller, and when investors are buying more bonds than stocks (just look at the bond rally - new highs - versus stocks struggling to hold an important support range), investors are speaking with their wallets.
Now it is not all panic. The yield curve is not inverted and remains steep enough. Problem is, the Fed is in control of the short end of the curve, keeping it down despite talk it wants to raise rates. If it lets short term rates go it could very well see the curve flatten further and start suggesting a second slowdown or recession. Heck, I even had teenagers telling me today that a sharper, deeper recession was yet to come. Teenagers worried about recessions. The times we live in.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. At the cusp of a breakout to yet a new high, gold faded back with a fairly hefty loss. Even so it remains in its uptrend, holding near support at the 18 day EMA. Fear of a weaker economy here and elsewhere blunts the worry of inflation, though that is an inaccurate conclusion, and gold faded a bit. There is nothing wrong with its uptrend, however, and we have seen that fear of weak economies ultimately trumps and has thus far sent gold higher and higher.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil was lower Monday (78.12, -0.13), but that was more of a blip in the continued move up in its range. The cause? Storm Alex is not considered a big threat to Gulf oil production facilities. Is that going to stop the move higher in the range? Not yet. Oil still has room to the upside and nothing suggests it is not going to continue that move.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume fell off the table with roughly 50% drops on both exchanges. No big deal given the Friday volume was artificial due to the Russell rebalances. Volume Monday was well, well, well below average, hardly the kind of volume to push stocks up or down. So, they went nowhere.
Breadth. Negative breadth at -1.4:1 NASDAQ, -1.2:1 SP500. Once again breadth matches the action, thus not providing any different insight that some turn is ready to take shape.
CHARTS
SP500. Modest loss on Monday after SP500 moved higher intraday. Could not make the move stick, but SP500 did manage to hold right at the top of it support range, holding the long term support spanning a decade that is stacked on top of the February and May/June lows. As noted over the weekend, SP500 is in position to hold this support and make a higher low in its move off this support. This is where it needs to show it has the stuff to do it.
NASDAQ. NASDAQ is still caught in no man's land, below the 200 day SMA for the third straight session, trying to move laterally. Not a great position for NASDAQ to provide SP500 support of the latter tries to put in a higher low. Both can be argued as having formed head and shoulders tops over this year. It is clear that NASDAQ has more work to do as it continues working in the range.
SP600. Holding where it needs to, right at the January high and above the 200 day SMA, working on possibly the right shoulder to a 5 week inverted head and shoulders. Pretty cool that it is holding at those key support levels as it works on that base. You can even see an ABCD pattern here as well. Lots of talk about how the economy is in trouble and heading toward a double dip (NYTimes columnist says we are in the early stages of a depression); how the small caps react in this pattern gives an idea as to the validity of that point of view.
SOX. Holding at the 200 day SMA again, trying to rally but unable to hold all the move though it was the index that did post a gain. Holding over that important support at 337-335, indeed trying to make a higher low at that 200 day. SP500, SP600, and SOX are all in position to make a higher low. Now we see if they can do it.
LEADERSHIP
Technology. As noted, AAPL looks nice as it tests another breakout. Of course it could not advance on the news of 1.7M new iPhones through Saturday. FNSR looks solid. Chips have their solid issues, e.g. LSCC, NVLS, LRCX.
Industrials. GDI, JOYG, and CAT all have a good look to them though it does not extend across all in the sector.
Financial. JPM had a good Friday and gave it back Monday; it is still in position to move, just not a good Monday. Looking at the regional stocks FITB has set up a pretty nice cup with handle base, using the 50 day EMA as support for the handle.
THE MARKET
MARKET SENTIMENT
VIX: 29; +0.47
VXN: 29.37; +0.79
VXO: 27.06; -1.14
Put/Call Ratio (CBOE): 0.79; -0.1
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: 41.1% versus 37.0%. Market sells off while bulls rise. Typical inverse relationship. Not a dangerous level but on the rise. Fell 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: 31.1% versus 32.6%. Of course bears fell as well as the market fell, again the inverse relationship. Solid rise from the mid to upper 20's, now waffling some. 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: -2.83 points (-0.13%) to close at 2220.65
Volume: 1.822B (-45.59%)
Up Volume: 820.131M (-1.327B)
Down Volume: 1.006B (-808.472M)
A/D and Hi/Lo: Decliners led 1.43 to 1
Previous Session: Advancers led 2.18 to 1
New Highs: 44 (0)
New Lows: 76 (-35)
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: -2.19 points (-0.2%) to close at 1074.57
NYSE Volume: 925.253M (-56.91%)
Up Volume: 368.981M (-1.399B)
Down Volume: 543.1M (-233.12M)
A/D and Hi/Lo: Decliners led 1.2 to 1
Previous Session: Advancers led 2.63 to 1
New Highs: 104 (+20)
New Lows: 52 (-12)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -5.29 points (-0.05%) to close at 10138.52
Volume DJ30: 164M shares Monday versus 434M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Case/Shiller and consumer confidence are on tap for Tuesday, but the real story is what SP500, SP600 and SOX can do at this attempt to make a higher low at support. Stocks are struggling under the weight of what the EU issues mean for the US, and when in doubt investors have pared back on their holdings, sending stocks down in May and early June. Stocks have put in a game recovery attempt, and now this test of that bounce tells the tale for the recovery attempt.
Plenty of negative views about the market and the economy to fuel a climb up the wall of worry. Summer is well underway and with low volume anything is possible. Are we talking a new high on the rally from early 2009? Nah. Just a decent summertime move into July and perhaps part of August before the end of summer blues hit. Seen it many times. Of course it is not a lock but with some quality stocks in good position to lead a move, having formed up over the past few weeks, the odds of a continuation of the rally here are better than they were back at the lows in May and June when the market found bottom.
Thus we picked up a few upside positions Monday, and we will look at some more as we still have some good plays on the report that can move well if those three indices find support and try to rally as they are hinting at. Bigger picture the indices have a bearish indication (the head and shoulders patterns), but that does not mean stocks cannot post a nice rally short term.
Bet the farm on it? Not at all. Just use some of your cash to play your favorites. We are looking at good risk/reward plays so if the market moves our way we can make some great money, and if it doesn't we don't lose much. A bit difficult to play the downside after the kind of drop seen last week as well as the support levels SP500 et al are trying to post up over.
It would seem the market cannot win with all of the headwinds, yet there are some really great patterns out there and the indices are trying to hold key support levels. The market often does what you don't expect it can do, and that is why you have to do what the patterns tell you versus how your guts feel.
Support and Resistance
NASDAQ: Closed at 2220.65
Resistance:
2245 from July 2008 through 2260 from late 2005.
The 200 day SMA at 2253
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 2294
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:
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 1074.57
Resistance:
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 1112
The 50 day EMA at 1112
1114 is the November 2009 peak
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:
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 10,138.52
Resistance:
10,285 is the late December consolidation peak
The 200 day SMA at 10,359
10,365 is the late September 2008 low
The 50 day EMA at 10,393
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:
10,120 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 28 - Monday
Personal Income, May (08:30): 0.4% actual versus 0.5% expected, 0.5% prior (revised from 0.4%)
Personal Spending, May (08:30): 0.2% actual versus 0.1% expected, 0.0% prior (no revisions)
PCE Prices, May (08:30): 0.2% actual versus 0.1% expected, 0.1% prior (no revisions)
June 29 - Tuesday
Case-Shiller 20-city, April (09:00): 3.4% expected, 2.3% prior
Consumer Confidence, June (10:00): 62.0 expected, 63.3 prior
June 30 - Wednesday
ADP Employment Chang, June (08:15): 61K expected, 55K prior
Chicago PMI, June (09:45): 59.0 expected, 59.7 prior
Crude Inventories, 06/26 (10:30): 2.02M prior
July 01 - Thursday
Continuing Claims, 06/19 (08:30): 4510K expected, 4548K prior
Initial Claims, 06/26 (08:30): 458K expected, 457K prior
Construction Spending, May (10:00): -0.9% expected, 2.7% prior
ISM Index, June (10:00): 59.0 expected, 59.7 prior
Pending Home Sales, May (10:00): -10.5% expected, 6.0% prior
Auto Sales, June (14:00): 4.0M expected, 3.9M prior
Truck Sales, June (14:00): 5.1M expected, 5.2M prior
July 02 - Friday
Nonfarm Payrolls, June (08:30): -100K expected, 431K prior
Unemployment Rate, June (08:30): 9.8% expected, 9.7% prior
Hourly Earnings, June (08:30): 0.1% expected, 0.3% prior
Average Workweek, June (08:30): 34.2 expected, 34.2 prior
Factory Orders, May (10:00): -0.7% expected, 1.2% prior
End part 1 of 3
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