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stock split, stock prices
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9/02/04 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Thursday: AEOS
Buy alerts issued: EBAY; BMET; KMRT; CWTR; BOL; CLE; QCOM
Trailing stops issued: None issued
Stop alerts issued: SYK
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market surges past resistance on rumors and covering, but no volume.
- Factory orders solid as administration, jobs services hint at better number.
- Strong price surge, weak volume, and key economic data set a potential trap for the market.
- Will jobs report be the second shoe to drop after INTC disappoints?
Late afternoon surge has commentators strutting. Nice but no volume support.
Stocks showed the same old bullish bias through lunch, starting softer and then rebounding. No big surge, nothing fancy, but once again a solid move off of the lows into positive territory. Then the rumor mill started to work. There was the old standard, i.e. Osama Bin Laden was captured, surrounded, or otherwise ready to fall into friendly hands. That is always good for a few upside points on some short covering. Then there were rumors about an upside jobs surprise Friday, something that always hits the market the Thursday before. This one had a bit more bite; there were direct quotes from some who should be in the know about how positive the jobs signs are. Boing. Light bulbs went off and shorts scrambled to cover some more.
The move pushed SP500 above the 200 day SMA. That brought on more covering and some actual long buying. Breadth was very wide. Volume was not. We scanned the market again and again for strong volume moves coupled with these price gains. Very few stocks filled the bill. What it came down to: the strongest stocks in the best patterns attracted the most volume. We bought into some of those moves, but let droves of stocks rallying on low volume go.
These light volume rallies can ultimately be vindicated by heavy buying at some later point, but greater than 9 times out of 10 the end result is not a new breakout. The basis of the move is lack of sellers and just enough bullish bias to push stocks higher. When some bad news hits or the market is negatively surprised, those relatively few buyers (whether long term buyers or short covering buyers) disappear and the bad news sellers enter. There are more sellers than there were buyers on the upside. The hard fought gains are overwhelmed by the rush of new sellers and the market falls. After hours INTC lowered its revenue range to a new bracket and dropped its gross margin estimate. It and techs were getting boxed around after hours. That was the first bad news; the jobs report may be the next.
THE ECONOMY
July factory orders ahead of expectations.
1.3% gain versus 1.1% expected. Moreover, June was revised to 1.2% from 0.7%. These are solid numbers but they only add some contra view to the softening regional and national manufacturing numbers. When you strip away transportation (namely aircraft), however, you get the same result as durable orders gained 0.5%. Still, the inventory-to-shipment ratio remained at 1.23 months (it takes that long at current sales rates to clear out all inventories).
Unfortunately, the manufacturing numbers are the freshest data. The good factory orders for June and July are part of the continued expansion, one that is slowing during the last part of the summer. Indeed, we still anticipate business investment to ramp up in the last part of the year as businesses take advantage of the last opportunity to use the expiring tax incentives.
Initial jobless claims rise but private job indexes rise as well.
Initial claims rose to 362K, topping the 340K anticipated. Jobless claims have been pointing to a potentially stronger August jobs report, and this weeks data don't change that tremendously. There is also the big surge in the household survey in July at odds with the employer data. Those point to revisions for July and perhaps a better outcome in August.
The other side of the ledger, however, has shown some decrease in job demand in the manufacturing sectors. Some private jobs companies are also showing some weakness (Hotjobs). Thus the positives are being offset by some equally fresh data.
Friday some more data hit and again held out some promise for a better jobs report. Monster.com released its employment index, and it was at an all-time high. 17 of 20 employment sectors were up. All nine regions it divides the country into showed gains. 49 of the 50 states showed gains. The last time Monster showed these types of gains jobs surged. In addition, the head of the Counsel of Economic Advisors, Stephen Friedman, stated Friday that the "signs for job growth are very positive." The President and the Fed get the numbers the day before they are released. Investors were connecting the dots and concluding the jobs report will be stronger than expected. Hence the short covering and the buying in the afternoon.
Will this data turn into a big upside surprise? We continue to feel there will be upside revisions for July, possibly June as summer jobs estimates are typically widely divergent because of difficulty in estimating during retooling and summer hiring and because of the adjustments made that can skew a weaker report even more. In addition, the household survey in July was vastly divergent from the employer number. The last time that happened the employer data surged the next month. So, there is data that supports a jobs surprise, and if you believe in what the administration was hinting at Friday (and how could you not given they have the numbers?), it could be a nice one. On the other hand, there is data that does not support a big creation of new employer jobs. Thus it may be those revisions that has the administration smiling. Nothing wrong with revisions, but to satisfy investors and the electorate, the current data needs to be solid as well. Given what we have seen, we expect good revisions and a decent jobs number. The issue is whether they are good enough to support the low volume run ahead of the news.
THE MARKET
During the session we heard that the market had already priced in some bad news from Intel, and thus the market, including Intel, was able to rally ahead of the news. After hours Intel lowered revenues to a new range altogether and margins were lowered 2%. Maybe investors had factored in bad news, but not this bad. Intel was down $2 after hours.
It is rather foolish to say the market, after a three week low volume advance, has priced in bad news. It had priced in bad news ahead of the move; it always does. Stocks continued to climb in the face of less than exciting economic news and indeed started the rally as oil prices jumped sharply. The market it seems anticipated the peak in oil prices as well as the slowing expansion. After all, it has been coming to grips with that for 8 months. As for Intel, it may well shake off that news, but judging from after hours trade, it won't be easy.
The problem was an extremely low volume rally. Stocks were jumping broadly, but as we scanned the market again and again we found very, very few moving on significant volume. It was pretty much amazing how little volume was being drawn by stocks. Overall volume lagged as well. The financial stations were buzzing about the great rally, but it was a paper tiger, supported by short covering and modest buying. Certainly there were some solid moves, but as usual they were mostly found in leadership stocks in good patterns. We took some positions in those, but found no reason to rush in.
The market has set itself up for a potential fall. There was definite hope of a stronger jobs report driving Thursdays afternoon move, and as we have seen, hope is not the best investment criteria when it comes to the stock market. One of the scenarios we discussed earlier in the week was a low volume rally over near resistance ahead of the jobs report that set up the point where stocks started to sell into the next bottom. Thursdays action definitely fit into this scenario with SP500 blowing through the 200 day SMA and rallying to the down trendline while NASDAQ cleared the 50 day EMA, both on very low volume. It looks as if it is up to an upside surprise on the jobs support to keep this afloat.
Market Sentiment
Bulls versus bears: As expected, the rally has had an impact on the percentages of bullish versus bearish advisors. Bulls moved back over 40 to 43.6%. Bears faded to 27.7%. They were merging before this week and still need to continue the recent trend to indicate a bottom is nearing. This small move the other way will quickly fade if the market starts selling once more.
VIX: 14.28; -0.63
VXN: 21.62; -1.03
VXO: 14.37; -0.61
Put/Call Ratio (CBOE): 0.92; -0.13
NASDAQ
Started lower, recovered, then 'powered' ahead to the 50 day EMA on the close. The price move was powerful, volume was not.
Stats: +23.02 points (+1.24%) to close at 1873.43
Volume: 1.215B (-15.08%). Volume did not tract the move, falling significantly lower and making the price move less significant.
Up Volume: 945M (-33M)
Down Volume: 245M (-134M)
A/D and Hi/Lo: Advancers led 2.01 to 1. Breadth helped by the smaller cap techs leading the market.
Previous Session: Advancers led 1.48 to 1
New Highs: 58 (-51)
New Lows: 31 (-9)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
A steady rise all session that turned into a gallop higher in the last two hours. Volume did improve in the afternoon, but it was not a big enough surge to show meaningful buying. With the rumors flying, much of the volume was attributable to short covering. It was good enough to push NASDAQ above the 50 day EMA (1871) on the close though it took a late bounce to bring it back over that level. It was a strong price surge that carried NASDAQ well into its second up leg in this rally. Unlike the move last week or Thursday, however, the volume was not the kind that will hold the move. As noted, much depends upon the jobs report to help this move hold its gains.
QQQ and NASDAQ 100 moved through the 50 day EMA and the 50 day SMA, managing to hold those levels on the close though on the same lower volume. Lots of resistance for QQQ near 35 and just over that level.
SOX rallied back up to the 10 day EMA, still struggling in its downtrend below the 18 day EMA. The Intel news will not give it any momentum to break through that downtrend.
S&P 500/NYSE
Volume was lower but held near the recent higher levels as the large cap index pushed through the 200 day SMA up to the March/April downtrend.
Stats: +12.4 points (+1.12%) to close at 1118.31
NYSE Volume: 1.118B (-1.45%). Volume was near recent levels but was still lower as stocks moved higher. That is not a strong endorsement of the move though better than NASDAQ. With a decent jobs report it could hold onto the move but has to fight the pressure Intel is going to place upon the market.
Up Volume: 931M (+219M)
Down Volume: 166M (-244M)
A/D and Hi/Lo: Advancers led 2.57 to 1. Solid breadth as the small caps led the action and all market sectors rallied.
Previous Session: Advancers led 1.67 to 1
New Highs: 161 (-15)
New Lows: 12 (+5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Broke through the 200 day SMA (1112) and rallied to tap the March/April downtrend (1119) on the session high. A solid surge through a key resistance point on volume that, while lower, was still in the ballpark of the last three sessions. Unfortunately, that ballpark is still well below average. We need to keep in mind that SP500 is making a solid price move in the second leg of this rally, and this is exactly what we want to see. We want the index to rally even higher toward 1125 over the next week or so before it rolls over. That is what we wanted, but with INTC, that may not be what we get. This may be the zenith of this move, but it has not been bad at setting up the next test lower.
The small caps led, surging through the 50 day SMA and above resistance at 280. It is doing a decent job of attempting to break up the toppish head and shoulders pattern. There is additional resistance at 287 on this move. Reaching that level will be a solid achievement on this rebound.
Rallied early to 1109, still below the 200 day SMA (1112). This is the area where it stalled last week. Better volume on this move so it has a better chance to move through that important resistance level. Not a bad start to the second leg of the move, but the close off the high was not the best action. We can expect more of this volatile, choppy action as this second leg continues its work to advance.
The small and mid-caps were leaders Tuesday, and they managed to move over the late August highs. Not a powerful move as the small caps need to get over 280 more definitively, but they are chipping away at that resistance and showing some leadership.
DJ30
DJ30 cleared the 200 day SMA (10,261), closing near the high. It was the one index that managed the move on rising volume. Still below average but the strongest in two weeks. Not a bad breakout from a 5 month double bottom with handle of sorts. The move was solid in terms of the recent market action, capable of providing some leadership. It will be tested with Intel on Friday, though INTC has not participated much other than a couple of modest gains the past two sessions. All in all one of the top two index moves of the day; a good jobs report could help it lead further IF the other indexes will follow.
Stats: +121.82 points (+1.2%) to close at 10290.28
Volume: 181 million shares Thursday versus 172 million shares Wednesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
There were flashes of potential leadership Thursday from small caps and DJ30, and even SP500 showed some decent though lower volume. The Intel news after hours was hurting stocks broadly. It will be up to the jobs report to put some validation on the Thursday low volume rally and overcome the Intel disappointment.
We have proceeded under the view that this low volume rally will lead to another test lower that will spike the sentiment indicators and work to set the bottom of the base. It is possible the current move higher can ultimately be successful; a strong jobs report could give investors a feeling of certainty regarding the election and perhaps the economy that will push the market higher without another significant test.
We view that latter scenario unlikely given the market price/volume action, weak sentiment indications, and relatively recent improvement in accumulation and leadership. Those improvements help in the basing process and set up the bottom. The market needs to transition to accumulation and it is doing so. If it breaks out from here, showing great volume and even more leadership, we will follow the market as always. It is our guide and we take what it gives. Despite our misgivings about the life expectancy of this low volume rally, we have entered positions on strong stocks making strong moves. If this rally fails we will be out. If it continues we will let them continue.
Given all of the analysis about the jobs report and its near term impact, we also have to recognize that jobs are lagging. A big gain Friday does not mean the weaker manufacturing reports, slowing consumer, and otherwise decent but lackluster economic data are trumped. The economy is expanding, but at a slower rate. The market has been digesting the slowing economy for 8 months. It appears to be finally coming to an end to this base, but it has not yet shown the breakout. A great jobs report could push stocks higher near term, but we should not be surprised if after that move higher it still makes a test lower to finish the base.
Support and Resistance
NASDAQ: Closed at 1873.43
Resistance:
May 2004 lows (1876 closing, 1865 intraday) may prove to be some resistance.
The 50 day SMA 1882
The March 2004 lows (1897 - 1989)
The 2004 down trendline at 1923
The 200 day SMA at 1969
Support:
The 50 day EMA at 1871
1850 (July lows).
The October 2002/March 2003 up trendline at 1840
The 18 day EMA at 1841
July 2003 highs at 1755
Late July 2003 top at 1735.
June 2003 intraday highs at 1686 to closing range at 1644 to 1677 (mid-July low here as well).
S&P 500: Closed at 1118.31
Resistance:
The 200 day SMA at 1112
The March/April down trendline at 1119
1125 was key price support.
1142-1146 are the June highs.
The April and January highs (1150 to 1155).
1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support:
The 50 day EMA at 1101.
1096 to 1100 represent price support.
The 18 day EMA at 1099
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1062 - 1058 from November 2003
Dow: Closed at 10290.28
Resistance:
Late April, June peaks at 10,478 to 10,512
10,570 is the early April high
Price consolidation at 10,600 level
10,747 is the February high
Support:
The 200 day SMA at 10,261
The 50 day EMA at 10,125
The 18 day EMA at 10,116
The February/April down trendline at 10,078
9783 to 9793, the August lows.
9625 - 9660 from September 2003.
9500 from various price points in late summer to fall 2003.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
August 30
Personal Income, July (8:30): 0.1% actual versus 0.5% expected and 0.2% prior
Personal Spending, July (8:30): 0.8% actual versus 0.7% expected and -0.2% prior (revised from -0.7%)
August 31
Consumer Confidence, August (10:00): 98.2 actual versus 103.4 expected and 105.7 prior (revised from 106.1)
Chicago PMI, August (10:00): 57.3 actual versus 60.0 expected and 64.7 prior
September 1
Auto Sales, August: 5.2M actual versus 5.4M expected and 5.5M prior (revised from 5.5M)
Truck Sales, August: 8.2M actual versus 8.2M expected and 8.4M prior (revised from 8.4M)
Construction Spending, July (10:00): 0.4% actual versus 0.4% expected and -0.3% prior
ISM Index, August (10:00): 59.0 actual versus 60.0 expected and 62.0 prior
September 2
Productivity-Rev., Q2 (8:30): 2.5% actual versus 2.7% expected and 2.9% prior
Initial Jobless Claims, 08/28 (8:30): 362K actual versus 340K expected and 343K prior
Factory Orders, July (10:00): 1.3% actual versus 1.1% expected and 1.2% prior (revised from 0.7%)
September 3
Non-farm Payrolls, August (8:30): 150K expected and 32K prior
Unemployment Rate, August (8:30): 5.5% expected and 5.5% prior
Hourly Earnings, August (8:30): 0.2% expected and 0.3% prior
Average Workweek, August (8:30): 33.7 expected and 33.7 prior
ISM Services, August (10:00): 62.2 expected and 64.8 prior
End part 1 of 3
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