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us stock market, trend trading stock
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6/30/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: None issued
Trailing stops: None issued
Stop alerts: EMS; HNT; PAY
SUMMARY:
- Market tries to overcome weak ADP employment survey but cannot make it stick.
- ADP not the appetizer for the Friday jobs report that investors wanted.
- Chicago PMI lower but very decent all things considered.
- Foreclosures account for 31% of Q1 housing sales.
- SP500 heads a bit lower, NASDAQ and friends at the prior 2010 lows. The test by SP500 will indeed tell the story.
Stocks slide a bit further as early upside attempt loses traction.
Tuesday the ECB played a role in the massive selloff as it talked of not renewing bank loan facilities after the next payments came due. Wednesday the ECB released data that showed EU banks did not borrow as much from those facilities as originally thought. Maybe, just maybe, the financial situation in Europe is not as bad as thought. It was enough to bolster investors in Europe and in the pre-market hours in the US as well.
Then the midweek jobs report warm-up, the ADP private jobs survey, came out an hour before the open and it was quite disappointing. A mere 13K jobs in the private sector versus the 61K expected (okay, more like hoped for). Futures were uprooted on that news. They were not trashed, they just lost their gains. After all, following a massive mauling on Tuesday just how much downside was there left? You can beat a dog so much before it just gives up and doesn't care, right?
Besides, what can you expect regarding jobs in the private sector? Trillions of dollars of government spending to help states make good on their profligate spending plans and hire hundreds of thousands of new government workers (and of course thereby growing government), and at the same time ignore the specific enumerated duties of the federal government where the money should be spent. Oh there I go again, expecting the Constitution, the law of the land, to actually be honored.
Anyway the market is telling the tale. Bonds are soaring out of fear. There are worries of deflation versus inflation, but that is not stopping gold from rising. The stock indices are threatening a break to lows for the year. Commodities prices are falling. Don't need to wax poetic or go patriot on anyone. The markets are telling the story.
Even with ADP stocks managed to fight off the dips suffered early and rally positive in the first half hour and indeed through lunch. Chicago PMI managed to help some as it clicked in just ahead of expectations. Dell said it was going to hire 4,000 workers or thereabout. Things are not all bad out there.
That still did not keep the market from snatching defeat from the jaws of victory. Stocks were steady into mid-afternoon but then the dips started to hit again and the gains started to wither. Then in the last 40 minutes they slid inexorably lower and into negative territory, sporting -1% (DJ30) to -1.6% (SOX) losses on the indices. NASDAQ, SP600, and SOX are all at key levels while SP500 fell a bit farther below the 2010 lows. As I said Tuesday, the key will be in the test of SP500's break lower, i.e. whether it is a false breakdown or a bounce back up to kiss the former support goodbye before resuming the decline. Wednesday did not resolve that issue. Not close to doing that yet.
OTHER MARKETS.
Dollar. The dollar lost a bit of ground Wednesday (1.2228 versus 1.2181) after a strong Tuesday move. It was down but not out at all. It has a short double bottom at the 50 day EMA as it tests its nice April to June run; perfectly normal. Still looks as if it has plenty of upside here.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. This bond story continues its really almost scary theme. The US 10 year treasury closed higher again. Not by much (2.94% versus 2.95% Tuesday), but the big move was made Tuesday in all the fear. The import of Wednesday: none of it was given back. Bonds are rallying on investor concerns about the economic future; Europe, yes, but the US as well.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Gold has not moved much in the past two weeks, trading in a range after hitting a new all-time high. It is, however, holding its trend up the 18 day EMA. Indeed with all the worry about deflation, the fact gold is holding its highs is rather impressive. It underscores the fear not only with respect to some inflation, but also the fear that US government instruments (e.g. bonds) may not be the great safe haven they have always been if things really get ugly, say the US debt to GDP ratio hits Greece levels sooner than thought.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil is struggling, dropping a bit more Wednesday (75.28, -0.66). Down but not out. It tapped the up trendline from the late May low and recovered some lost ground. It is still in the trend off the bottom of its range and thus still in position to continue its advance on the low 80's.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Lower volume and sliding below average on both NASDAQ and NYSE. Not the dumping of Tuesday, but still no buyers wanting to step into the breach.
Breadth. -1.7:1 on both NYSE and NASDAQ. Nothing nefarious here after -8:1 levels on Tuesday. Breadth overall is stronger on the downside versus the upside.
CHARTS
SP500. Tuesday SP500 broke the 2010 low on its intraday low. Wednesday it made a closing low as well. Nothing surprising there; as noted last night it is expected once the lows are cracked that some will dump their stocks. That was exacerbated by the 50 day EMA crossing down over the 200 day SMA; more fuel for the selling bonfire. There may be some more downside before it rises to test the break of this very important level. The test is the thing wherein lies the conscience of investors. A little Shakespeare is a good thing. If that is not your bag, look at NASDAQ. Just straight old boring English there but some very good insight.
NASDAQ. A new closing low for NASDAQ in 2010 though it managed to hold just over the February low (2100). Similar to SP500 with its head and shoulders look, trading now at the neckline (the jugular?). This is the lick log for it, and as with SP500 it would be easy for NASDAQ to break the level. Then it would be up to the test to see how it, just as SP500, will trade over the near term. Still a very negative pattern, still a very negative economic picture, but also down for almost two straight weeks and at an important level. IF it does break this level it will try to snap back to the upside, and again, the test is the ting.
SP600. Same as NASDAQ but not a 2010 low just testing the early June low. Tuesday the small caps fell below the early June closing low but not the intraday low. It can hold here as well if SP500 tries to snap back and test the break to new 2010 lows. Small caps are economic harbingers: SO IT IS IMPORTANT TO NOTE THAT THE SMALL CAPS ARE IN MUCH BETTER POSITION THAN SP500 OR NASDAQ. No Shakespeare, just adding caps for emphasis.
SOX. SOX was down as well but it is still above not only the 2010 lows (by a long shot), but is above the key, long-term support still as well as the lows from May and early June. More of a trading range than an imminent breakdown, though if the other indices give way it will as well and test lower toward the February low. Not a beautiful picture, but SOX could easily bounce back up 30 or so points in its trading range. Indeed if you were not looking at SP500 or NASDAQ that would be one of your high probability anticipated moves for SOX.
LEADERSHIP
The true leaders of the market the past several months (e.g. AKAM, SNDK, APPL, NFLX, CMG, DECK) struggled again on Wednesday but overall no breakdowns. Sure they are down, struggling as well, but have not broken down. As noted Tuesday, as long as they can hold their overall trends the market likely tries a renewed bounce.
Financials. Not many want to go near these right now and indeed some we are looking at are floundering (e.g. FITB, a regional bank). JPM is down but it is at its prior lows in an important test. GS made a new closing low for 2010 but is right at the prior low. These are not diving lower but are trying to hold. That helps SP500 if it wants to put in a bounce.
Industrials. CAT is down the past two sessions, gapping below its 50 day EMA, but it is still over its 200 day SMA and the May and June lows. It could easily find support at the 200 day and rally back up in its range. Other industrials are at support.
THE ECONOMY
Housing foreclosures point to continued trouble in . . . housing.
More data on the housing market and its toils. Of course as Barney Frank, Chuck Schumer, and others told us at the height of the bubble, there was nothing wrong with housing, Fannie Mae, or Freddie Mac. Thank goodness for that. Just think how bad things would be if housing actually was a problem. Glad Barney Frank was on top of things before the crisis, during the crisis, and indeed now, right?
Housing is so good right now that 31% of the sales in Q1 were foreclosures. At least it wasn't 45%; that would really hurt. Prices are strong as well. The average price of foreclosed houses was 27% lower than regular, non-foreclosure sales. Thank goodness for those foreclosures keeping the cost of housing affordable!
Why wasn't the Obama administration crowing about this? Why wasn't Congress, democrats and republicans, out thumping chests about how things could be worse? We have affordable housing thanks to foreclosures. Well, of course you have to have money for them to be affordable. With 3 million jobs lost since the stimulus was passed money is kind of hard to come by. Thus even with the 10 year note near 2.9% housing is likely to get even more affordable. Lucky us. Just think if things were bad. Of course our leaders in Congress will let us know if that is going to happen just as they did this time. How comforting.
THE MARKET
MARKET SENTIMENT
VIX: 34.54; +0.41
VXN: 35.14; +0.12
VXO: 33.57; +0.46
Put/Call Ratio (CBOE): 1.07; -0.03
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: -25.94 points (-1.21%) to close at 2109.24
Volume: 2.113B (-23.34%)
Up Volume: 354.144M (+275.722M)
Down Volume: 1.782B (-853.026M)
A/D and Hi/Lo: Decliners led 1.71 to 1
Previous Session: Decliners led 7.96 to 1
New Highs: 16 (+5)
New Lows: 159 (-31)
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: -10.53 points (-1.01%) to close at 1030.71
NYSE Volume: 1.43B (-10.79%)
Up Volume: 386.393M (+359.822M)
Down Volume: 1.024B (-551.006M)
A/D and Hi/Lo: Decliners led 1.73 to 1
Previous Session: Decliners led 7.45 to 1
New Highs: 83 (+4)
New Lows: 134 (-13)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -96.28 points (-0.98%) to close at 9774.02
Volume DJ30: 235M shares Wednesday versus 291M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Another Friday jobs report aperitif with the weekly jobless claims. A mere 450K expected yet again. A 'new normal' as many on the financial stations love to say? No, it is just the same old weak economy that hundreds of billions of dollars of demand only spending produces, not to mention ballooning the debt on a path to match the 'PIIGS' of Europe in a few short years making investment in the US riskier than ever before in its history, perhaps outside of the Revolutionary War, but even France found the US worth investing in at that time.
Thursday also has the June ISM (national manufacturing) number, and if the ISM is reflected in the Chicago number as it purportedly is, then it should be acceptable. Now does that mean it will be acceptable to the extend buyers rush back in? Not with the June jobs report the next session and again, so much riding on how many government jobs were created by the $781B in original stimulus, not to mention the 'additional' stimulus subsequent. Personally, I would prefer to just divvy up the money spent by those losing their jobs; they would make more money than on the unemployment rolls.
As for Thursday there may not be much change in the tenor or the action. The jobs report follows so buyers will still be reticent to take out the wallet ahead of the release. Then there is the three-day holiday weekend (July 4th) after that. Until the jobs are known the status quo likely remains, though some short covering ahead of the report, given the rather sharp decline the past eight sessions, is likely.
We are going to continue watching stocks such as NFLX, SNDK, AAPL as well as how SP500 reacts to its break lower and NASDAQ, SP600, and SOX test their key support levels. Right now we are looking for opportunities off of this break lower and we will just have to be a bit patient and let them set up.
Support and Resistance
NASDAQ: Closed at 2109.24
Resistance:
2155 is the March 2008 intraday low
2167 from the July 2008 intraday low
2168 is the September 2009, intraday peak
2169 is the March 2008 closing low (double bottom)
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)
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
The 50 day EMA at 2281
2292 is a low from January 2008
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:
2100 is the February 2010 low
2024 from November 2009
2020 to 2005 from the Q4 2009 peaks
S&P 500: Closed at 1030.71
Resistance:
1040 is the May 2010 low
1044 is the October 2008 intraday high AND the February 2010 low
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 50 day EMA at 1107
The 200 day SMA 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:
1020 is the bottom of the late summer 2009 consolidation
946 from June 2009
Dow: Closed at 9774.02
Resistance:
9835 is the late September 2009 peak AND the February 2010 low
9855 is the early September peak in its lateral range
9918 is the September 2008 peak
9829 is the September 2008 closing high
10,120 is the October 2009 peak
10,285 is the late December consolidation peak
The 50 day EMA at 10,349
The 200 day SMA at 10,361
10,365 is the late September 2008 low
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:
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): 3.81% actual versus 3.4% expected, 2.35% prior (no revisions)
Consumer Confidence, June (10:00): 52.9 actual versus 62.0 expected, 62.7 prior (revised from 63.3)
June 30 - Wednesday
ADP Employment Change, June (08:15): 13K actual versus 61K expected, 57K prior (revised from 55K)
Chicago PMI, June (09:45): 59.1 actual versus 59.0 expected, 59.7 prior (no revisions)
Crude Inventories, 06/26 (10:30): -2.01M actual versus 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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us stock market
trend trading stock
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