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us stock market, trend trading stock
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7/07/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: AKAM; CAT; LULU; NVLS; PCLN; SANM; SWKS; TIBX
Trailing stops: None issued
Stop alerts: None issued
SUMMARY:
- Sometimes slower is better: weak start lets buyers warm to the market, keeps sellers away, allows stocks to recover.
- Stocks surge back as a big oversold bounce pushes SP500, NASDAQ back above the prior 2010 lows.
- Big surge as market lets off some oversold pressure. Still room to the upside and looking for some tests, new breaks as the move continues.
No news is good news as SP500 tries the 2010 lows again and this time succeeds.
Tuesday the big oversold gap higher was just too much for the sellers to resist. Sure the market was already down for a couple of weeks and at a key level, tougher to sell even with that head and shoulders sitting on top of the market. Still, when the market shot higher with big upside gaps out of the weekend holiday the sellers could not resist. They stepped in and sold it again.
That was Tuesday. Wednesday the buyers were a bit more pensive. No big pre-market surge, and indeed stocks were on the negative side but not significantly so. In our pre-market alert we noted that this action was much more conducive to a rally as the buyers that wanted to buy Tuesday but had stocks thrown back in their faces would have the opportunity to start buying on their terms and build the move as the session progressed.
That is precisely what happened. A mushy start with little news. Europe was giign back some gains. MSFT was reported to be preparing for some 'small' layoffs according to the WSJ. A clear sign MSFT is no longer a growth company, something we have known for several years, but it is always interesting to see it act like the old, stodgy mature companies. It is damn funny that MSFT yanked its smart phone off the market after just a few weeks. As with the Zune it was out of its league, trying to follow AAPL's success. Hey, it is what made the company in the first place when MSFT took advantage of Jobs' arrogance and got the keys to the money box and launched Windows that jumped it over Apple. Apple has had the later laughs with its market cap now topping Microsoft's and MSFT's inability to come up with anything original. But, I digress.
Mortgage applications fell for the eighth out of nine weeks. FDO, a deep discounter, guided lower, leaving many wondering just what the status of retail really is. STT in the financial sector guided sharply higher on service charges and the like. The dollar was lower, bonds were flat. The combination was apparently right but more importantly the market was ripe for an oversold bounce; it was either going to try and die or try and make it stick.
It stuck the move Wednesday as the indices put in 3%+ gains. Great price gains that punched back up into the range, but as noted later, volume was not commensurate with the price gains. Oh well. It is summer and this move is, until further notice, just a relief bounce.
OTHER MARKETS.
Dollar. The greenback continues to struggle, gaining a sliver on the euro (1.2650 versus 1.2662 Tuesday) though down on the dollar index overall. Dollar continues its slide after falling through the 50 day EMA. Not a dump lower but a steady erosion as investors weigh whether or not to put more of their wealth in dollars given the worries about the US' economic future near term.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. Bonds faded a bit Wednesday (2.98% versus 2.94%) as stock investors enjoyed renewed vigor and money flowed from bonds to stocks. Sure there are still questions about the US economy, but they were not on the front burner Wednesday, at least not on the stock buyers' front burner. Thus a modest pullback, but that is very normal in a continuing uptrend and after the strong breakout two weeks back.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Modest recovery Wednesday (1203.40, +8.30) after another flop on Tuesday as Gold sold back from the test of its 50 day EMA. Gold is struggling right now and if it is going to hold near term it will need to hold near this level. It looks ready to test the old high again 1215, but not sure if it will break it on this attempt. Thus as it gets there and stalls, we have to look at selling some shorter term positions.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. After the dump lower last Thursday that broke the short term trendline off the May low, oil paused, trying to regroup. It managed the task Wednesday with a strong upside surge (74.32, +2.34). Failed just below the trendline (18 day EMA as well), but a good bounce and a potential higher low in its quest to move up further in its trading range.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume was basically flat on the session and below average on both NASDAQ and NYSE. Thus, as noted earlier, the trade was not really commensurate with the outsized price moves. It is summer, however, and volume has been anemic all through June outside of a few big sessions. If it was a new leg you would expect more volume. As it is, the volume is in line with what we have seen in this market action and thus it does not change the character. That means the bounce, while strong in price, is likely just an oversold bounce that will flame out after a good oversold surge.
Breadth. Solid at 5:1 NYSE and 3.4:1 NASDAQ. Plenty of stocks on the upswing, and frankly that is how this market has been: big breadth on the big upside and downside sessions, and that underscores this very choppy basing period and tells you that the basing is still very much ongoing and not settling down with the buyers slowly and quietly taking over as is what happens before a base can complete.
CHARTS
SP500. SP500 was indeed ripe for a bounce and that is what it did. Big surge that continued all session and this time it didn't forget the gravy, i.e. it was able to close the deal and hold the gains. That pushed it through the three prior 2010 lows and back into the lower reaches of its 6 month range that is a head and shoulders pattern all of the bears are still licking their chops over. New upside breakout coming? Nah. Low volume oversold bounce, but . . . perhaps one of those false breakdowns that can now stretch its legs up to the January peak range or so. Now wouldn't that be a nice move indeed.
NASDAQ. Similar move on NASDAQ that pushed it through its triumvirate of the 2010 lows. It is even lower in the range than SP500, and there is that gap down point from just a week back (2184) that is the next challenge, just 25 points away. That will be NASDAQ's first real test on this move that is, as with SP500, a low volume bounce.
SP600. The small caps bounced 3.47%. A nice move by any standard, but SP600's pattern is a laggard here. It started higher than the others and never breached its February low; a real positive. Nonetheless, it has not recovered any significant levels as did the large cap indices on Wednesday. Instead it finds itself just below the February consolidation and the May and June lows. Maybe it means nothing; if the other indices bounce it should follow. There is a large band of resistance from late May and June, however, that could stymie SP600's recovery, particularly as that range is guarded on the downside by the January peak. If the small caps falter on their bounce there is really no way the rest of the market will succeed either.
SOX. 5% on the upside as the chips, having held a key long term support level on three prior occasions since May, held that level once more and blasted higher. We picked up some chips for ourselves on the way. This is the move SOX was projecting and it is nice to see it make that move.
LEADERSHIP
Financial. GS and JPM started higher as STT energized the entire sector. Impressive move by JPM: looks like a false breakdown.
Energy. Continuing upside. APA is recovering lost support levels. BP continues to gap upside as more sovereign funds look at it as an investment. HAL gapped higher and rallied to a higher high. Energy, after getting roughed up, is making a comeback of sorts.
Semiconductors. The chips flipped upside as anticipated with NVLS and SWKS, a couple of stocks discussed Tuesday, surging. A common theme for the semiconductors with the likes of LCRX jumping, and one we were watching (and only watching unfortunately), XLNX, jumped 6%. Chips surged. Cool.
Technology. FFIV, AKAM, TIBX and company enjoyed a good day.
Retail. NFLX, PCLN, the non-traditional retailers we talked about posted big surges. TJX is bouncing off its support. LULU looks as if it is starting as well; great risk/reward position here as well.
THE MARKET
MARKET SENTIMENT
VIX: 26.84; -2.81
VXN: 28.06; -3.59
VXO: 26.33; -2.81
Put/Call Ratio (CBOE): 0.87; -0.26
Bulls versus Bears:
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% for the second straight week as bulls became pensive. They rise as the market peaked on this last selloff and held steady as the selloff raged. Talk about an inverse relationship. 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: 33.3%. Unlike bulls, bears rose as some investors became more bearish during the market selling. Makes sense and now it is approaching the 35% level that is considered market bullish. 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: +65.59 points (+3.13%) to close at 2159.47
Volume: 2.097B (-3.33%)
Up Volume: 1.953B (+936.436M)
Down Volume: 224.454M (-850.645M)
A/D and Hi/Lo: Advancers led 3.44 to 1
Previous Session: Decliners led 1.96 to 1
New Highs: 16 (+2)
New Lows: 131 (-49)
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: +32.21 points (+3.13%) to close at 1060.27
NYSE Volume: 1.338B (+1.65%)
Up Volume: 1.275B (+589.725M)
Down Volume: 60.362M (-486.763M)
A/D and Hi/Lo: Advancers led 5.3 to 1
Previous Session: Advancers led 1.08 to 1
New Highs: 102 (-1)
New Lows: 85 (-34)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +274.66 points (+2.82%) to close at 10018.28
Volume DJ30: 220M shares Wednesday versus 217M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Short week and already the next important data, the weekly jobless claims. They have basically blown the past several weeks and indeed months after a few lower weeks that were obviously, in retrospect or otherwise, flat wrong. 460K are expected as expectations are finally ratcheting back up after being so wrong for so long. A 420K level would really spark a continued rally. Why would you expect that? Because when the experts finally give up and go with the latest trend that trend is often ending.
Are we counting on a 420K level? Not at all. Don't see anything to change the trend, but just experience says that when the experts change their view start looking for a change. That said, we are not necessarily looking for that kind of spark to continue the move, but we do anticipate the move lasting more than just Wednesday. Now it may not move upside every session; indeed those rebounds that move up a couple of days and then appear to stall out for a day or two are the ones that tend to overall produce the best bounces.
With such a big rush higher Wednesday, Thursday could very well start softer or fade after an early move. That would resurrect the wall of worry rather quickly, and that is okay. Many stocks shot higher Wednesday and we of course could not catch them all. There are some quality stocks that could give a relatively quick test after the strong surge higher, and that test provides opportunity for new positions on stocks that are moving well. After such a surge as on Wednesday, you have to look for those tests from the early runners to get a chance at them. Of course there will be others jumping out in the next wave and we will be looking at some of those as well as we look to catch a week or so move to the upside.
Support and Resistance
NASDAQ: Closed at 2159.47
Resistance:
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
2184 is the June gap bottom side.
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)
2221 is the gap down up side point from June.
2245 from July 2008 through 2260 from late 2005.
The 200 day SMA at 2252
The 50 day EMA at 2256
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
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
Support:
2155 is the March 2008 intraday low
2100 is the February 2010 low
2024 from November 2009
2020 to 2005 from the Q4 2009 peaks
S&P 500: Closed at 1060.27
Resistance:
1070 is the late September 2009 peak as well as several other peaks and valleys even in 2010
1078 is the October range low
1084 to 1080 (September 2009 peak)
The 50 day EMA at 1096
1101 is the October 2009 high and the recent May and June 2010 interim peaks
1106 is the September 2008 low
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:
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 10,018.28
Resistance:
10,120 is the October 2009 peak
10,260 from the May and June 2010 interim peaks
The 50 day EMA at 10,268
10,285 is the late December consolidation peak
The 200 day SMA at 10,362
10,365 is the late September 2008 low
10,496 is the November 2009 high
10,594 is the June 2010 peak
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:
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
9325 is a late 2008 interim peak
9034 from early 2009 peaks
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 06 - Tuesday
ISM Services, June (10:00): 53.8 actual versus 55.0 expected, 55.4 prior
July 07 - Wednesday
July 08 - Thursday
Continuing Claims, 06/26 (08:30): 4600K expected, 4616K prior
Initial Claims, 07/03 (08:30): 460K expected, 472K prior
Crude Inventories, 07/03 (10:30): -2.01M prior
Consumer Credit, May (15:00): -$3.0B actual versus -$3.0B expected, $1.0B prior
July 09 - Friday
Wholesale Inventories, May (10:00): 0.4% expected, 0.4% prior
End part 1 of 3
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us stock market
trend trading stock
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