|
|
world stock market, us stock market
* * * *
9/07/04 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Target hit alerts issued Tuesday: TRA
Buy alerts issued: CME; LIFC; POOL
Trailing stops issued: DUSA; COO; TUNE
Stop alerts issued: FAST; STSI
SUMMARY:
- Stocks start 'new year' stronger, avoid afternoon sell off attempt.
- Oil falls on OPEC claim plenty of supply. Job layoffs jump but future hiring plans looking up.
- September starts well as is typical, but same issues still confront market.
- Subscriber Questions
Better volume as stocks start key stretch in positive territory.
Techs struggled as semiconductors again faced more downgrades, but even with that drag NASDAQ managed a solid gain along with large caps. Small caps were the leaders, however, posting a 1.2% gain. The downgrades and Iraq violence seemed to roll right off the market. Sure semiconductors were down once more, but the rest of the market posted broad gains.
Stocks started strong but got the mid-morning dips when SP500 struggled below the down trendline. They fought off that dip to rally to new session highs in the early afternoon. Once more the sellers moved in and pushed NASDAQ to new session lows heading into the last hour. The buyers were undeterred, rallying stocks back in the last thirty minutes. SP500 recaptured the down trendline (though NASDAQ failed to take the 50 day EMA) as volume expanded. Still below average, but definitely showed more players were involved, particularly on NYSE.
All and all a pretty typical Tuesday following Labor Day with stocks advancing on some improved volume. That brought out more comments about a solid market and talk of no September sell off. As we said over the weekend, maybe that will happen, but the volume seen Tuesday was not a clear indication of strong accumulation that will forestall another test lower. Moreover, while not a primary indicator, VIX is still near 14, a level that has indicated pullbacks during this past summer. In short, Tuesday was a good start, but not the end all in the analysis as to whether this rally will continue significantly higher from here.
THE ECONOMY
Oil slides, purportedly on OPEC supply statements.
OPEC issued a statement this week that the world enjoyed plenty of supply, indicating supply is more than 1 million bbl/day above of demand. That was credited with prompting oil's slide below $43/bbl, but this statement is nothing different from what we heard in July and August when Saudi was telling the world that speculation and not supply was the cause of rising prices. Well, no one really believes that oil would have reached near $50/bbl unless there were some supply issues. Certainly fears put a premium on the price per barrel, but the surge in prices from the low thirties to nearly fifty was not just a terror or fear issue.
Oil thus reversed the quick turn higher last week and started once more to work on sliding back below $40. It is not a straight drop, but after assurances from traders and others supposedly in the know that oil would hit $50/bbl and keep on going, the softness suggests that the tap at $50/bbl was the peak on this move.
August layoffs rise, hiring set to improve.
The August jobs report was not bad, but it was not nearly good enough to absorb the new workers and put those without jobs back to work. Hourly earnings were up for the second consecutive month, a very good sign for further hiring. Indeed, Challenger/Gray, the private sector's jobs statistician noted that planned new hires in September jumped to over 130K in their survey. Good thing as August's layoffs jumped 6.6% (75K), the largest increase in six months. Thus there continues to be the tug of war in the job market, but there is still overall improvement. There will have to be much more dramatic improvement, however, and the Challenger report is encouraging.
THE MARKET
Stocks kept something of a streak alive, i.e. a gain following Labor Day. Volume was better overall and many individual stocks showed solid trade as well. SP500 managed a late rebound to reclaim the early 2004 down trendline. Small caps showed renewed life. Definitely some positive undertones to the action.
At the same time NASDAQ never threatened resistance at its 50 day EMA. SOX continued to struggle though it managed to stem the bleeding from Fridays harsh drop. Volume was higher overall, but nowhere near a big surge you might expect now that summer is officially over. SP500 volume surged past Friday trade and topped its trade levels of the past two weeks. It still fell shy of the higher volume levels when the rebound off the August low began. NASDAQ volume was higher (5%), but really lukewarm for the return of the bigger money players.
All in all it was a solid session with several strong volume moves. Solid, but it did not clearly demonstrate there would be no September pullback. One thing we need to bear in mind as we watch the day to day market action. 2003 was an atypical year for the market as it recovered from the long downtrend and was responding to strong incentive measures. 2004 has been a much more typical year in the seasonal cycles as well as its consolidation of the 2003 gain. Thus we are not writing off a September to October slump, particularly after a low volume rally leading up to this point. There are more and more who are suggesting perhaps no September slump. That is the old 'this time it is different' mindset that often is the very indication that indeed things will remain the same.
Market Sentiment
VIX: 14.07; +0.16. Still hugging the 14 level. Managed to rise as the market was back and forth several times during the session.
VXN: 21.44; +0.38
VXO: 13.58; -0.33
Put/Call Ratio (CBOE): 0.86; -0.17
NASDAQ
Solid gain though closing well off the session high. Holding near support but also needs to break through the 50 day EMA and 50 day SMA.
Stats: +14.08 points (+0.76%) to close at 1858.56
Volume: 1.325B (+5.75%). The right kind of price/volume action, showing continued mild accumulation. Still well below average and in need of some real volume in order to carry this rally to a breakout point. This is not the volume level to do that.
Up Volume: 850M (+682M)
Down Volume: 446M (-628M)
A/D and Hi/Lo: Advancers led 1.68 to 1. Decent breadth, but once more the semiconductors were a drag.
Previous Session: Decliners led 1.61 to 1
New Highs: 96 (+29)
New Lows: 42 (-2)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Started strong with a gap off support at 1850. Rallied toward the 50 day EMA (1870) intraday (high 1865) on rising though still well below average volume. It made a session low in the early afternoon, reaching back to that support at 1850. A last hour rebound pushed it back to the middle of the session range to close. In short, NASDAQ pretty much made its gain on the open. It is trying to set up for a move over the 50 day EMA as it holds near support. It is set up to make that attempt, but as with all of the indexes, it needs more volume on the continued move to show there really is new money coming into these stocks.
NASDAQ 100/QQQ showed stronger volume as well as they too tried the 50 day EMA but closed back below that level.
SOX continued under pressure with the downgrades following last weeks lowered guidance by several key components. The losses were much more contained Tuesday, but there are many
S&P 500/NYSE
Best looking move of the session, moving off the 200 day SMA on the best volume in three weeks. Trying to be a leader here.
Stats: +7.67 points (+0.69%) to close at 1121.3
NYSE Volume: 1.214B (+31.7%). Solid volume surge, though the Friday volume was anemic at best. Good trade as it cleared the 2004 downtrend, but still below average. If buyers were really moving backing we should see some above average trade.
Up Volume: 888M (+511M)
Down Volume: 310M (-223M)
A/D and Hi/Lo: Advancers led 2.73 to 1. Excellent breadth as the small caps led the market.
Previous Session: Decliners led 1.42 to 1
New Highs: 220 (+59)
New Lows: 15 (0)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Gapped over the March/April 2004 down trendline at the open and rallied to next resistance at 1125 (1124 on the high). A volatile session, testing close to the 200 day SMA (1113) on the low (1114). That late rebound sent it back over the down trendline (1118), and the recovery continues the bullish action exhibited on this entire run from the August lows. SP500 is exhibiting some leadership here; both the large and the small caps are stepping in to fill the void of the techs and the SOX. A good step higher to start the 'new year.'
SP600 along with SP500 was in leadership mode Tuesday, posting the best percentage gain. It still has to clear the 287 level that represents the next resistance. It has come about as far on this move as we anticipated; the 287 level will tell more of the tale, but the index looked solid Tuesday.
DJ30
Jumped off the 200 day SMA (10,263) after taking a rest Friday when INTC took the hit for the techs and swelled the volume. Indeed, volume was lower Tuesday, but still solidly above average on the gain. DJ20, the transports, also rallied once more, heading toward a new high and leading the industrials even without help from technology. Solid move and looking at next resistance at 10,500. With transports and industrials working on solid trade, they are also stepping up to provide some leadership as NASDAQ still struggles below the 50 day EMA.
Stats: +82.59 points (+0.8%) to close at 10342.79
Volume: 204 million shares Tuesday versus 215 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
Consumer credit for July is released late Tuesday. Ahead of that more campaigning, more Iraq, and more oil. Oil remains a concern for the market as long as it remains over $40/bbl. It is trending lower, and when you look at the events the past two weeks, it is also mostly ignoring news that had been pushing it higher. Again, it needs to continue trending lower and moving below $40/bbl. That will provide a big boost to confidence among investors.
The market is putting forth a pretty valiant effort at extending the low volume rally. Volume has crept up very recently but it still lacks real power, and that keeps us skeptical of the chance for a breakout from this rally. Add to that the sentiment gauges that never came close to extremes and how this year has been more typical, we still see it as hard for the market to escape September without a fairly serious test lower.
Putting it all into context, the market has based the entire year. It is setting up a good foundation to move higher. It is showing vastly improved price/volume action and better leadership. There are definite positives to the rally. Again, they may not be strong enough to make this move the breakout rally, but they are showing a change in the tide; another good test lower that sends sentiment higher and shakes out the remaining sellers would really set up the upside move.
We thus remain cautious of this continued move higher, but we are also taking part in the leadership stocks that are posting strong moves. Not all of these stocks will hold up on a sharp selloff, and thus we are keeping a pretty tight rein on upside plays, making the leaders show that they are indeed leaders in any pullback. If we see stocks selling on rising volume, we would rather take a small gain and then be forced to move back in if stocks continue upside, than hang on too long and see gains disappear and even turn into losses.
Wednesday is an important session to us. Without any economic news but several tech updates this week, and given that the Labor Day Tuesday has been put to bed, we will see more of what this move has behind it. Volume still has not surged above average overall, and Wednesday to Thursday will give us a better picture of where volume, if it does come in, will take the market. Three full weeks of rallying on low volume has stocks potentially set up to fall; thus far they have refused to do so. That is another sign of that new swing toward bullishness that has underpinned this rally. We still have to see where the rising volume takes the market. Some distribution to end last week, some accumulation to start this week; what will the rubber match be? We remain cautious and watching volume closely, but we also will not ignore strong moves from leadership stocks.
Support and Resistance
NASDAQ: Closed at 1858.56
Resistance:
The 50 day EMA at 1870
May 2004 lows (1876 closing, 1865 intraday) may prove to be some resistance.
The 50 day SMA 1875
The March 2004 lows (1897 - 1989)
The 2004 down trendline at 1919
The 200 day SMA at 1968
Support:
The October 2002/March 2003 up trendline at 1846
The 18 day EMA at 1843
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 1121.30
Resistance:
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 March/April down trendline at 1117.50
The 200 day SMA at 1113
The 50 day EMA at 1102
1096 to 1100 represent price support.
The 18 day EMA at 1102
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1062 - 1058 from November 2003
Dow: Closed at 10,342.79
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 10,268
The 18 day EMA at 10,153
The 50 day EMA at 10,138
The February/April down trendline at 10,068
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.
September 8
Consumer Credit, July (3:00): $7.5B expected and $6.6B prior
September 9
Export Prices ex-ag., August (8:30): 0.6% prior
Import Prices ex-oil, August (8:30): 0.1% prior
Initial Jobless Claims, 09/04 (8:30): 345K expected and 362K prior
Wholesale Inventories, July (10:00): 0.6% expected and 1.1% prior
September 10
Trade Balance, July (8:30): -$51.6B expected and -$55.8B prior
PPI, August (8:30): 0.2% expected and 0.1% prior
Core PPI, August (8:30): 0.1% expected and 0.1% prior
SUBSCRIBER QUESTIONS
Q: Is there a way to measure the health of NASDAQ, exclusive of semis? Are semis always the leader?
A: Looking at the current rally you can see that semiconductors and NASDAQ are not always linked. NASDAQ has put together and maintained its upside move even as SOX modestly bounced and then spent the past three weeks selling back down. NASDAQ itself is not just tech laden anymore. Other issues are benefiting from the decline in technology price and exerting more impact on the overall index. Financials, biotech, energy, medical appliances, and healthcare are just a few examples of sectors that are exerting more influence.
It is also important to put into context what it means when the chips say they are not going to increase their earnings, revenues, etc. That is bad for their stock prices and that does have a drag on NASDAQ. But lower revenues often means lower prices for their goods. If demand tanks, then that is a problem for the entire economy; almost everything has a chip in it. What we are seeing is that a lot of areas that incorporate chips into their products or services are enjoying strong demand even as chip revenue is flagging. Thus the cycle where chips make big margins may already be over in this round of growth, and now the other sectors are taking over. Chips were an early leader off of the October 2002. We made great money on them that fall and then again as the market rebounded in March. Now we see the expansion moving into other areas and NASDAQ continues to rise as SOX continues to fade.
Thus there is more detachment between NASDAQ and the chips. They are still very important in our view of technology, but as with the PC, there are areas of chip-making that are mature. Wireless was a new area the past three years and demand for those chips shot higher. We see now that demand is ebbing some for those. At the same time other areas are showing strength such as chips TXN makes for certain television technology that is just emerging. Those areas will show growth in relationship to the rest of the economy where as chips that go into PC's as we currently know PC's is flat at best. DELL is not selling more computers because demand is surging but because it is taking more market share from its rivals. Those chip makers and chip equipment makers that purvey those chips and their equipment are in the same boat.
SOX is still an important component of NASDAQ, but it is not as important as it has been (is it a has been?). Still very important to watch, particularly if chips go into a big dive or rally.
End part 1 of 3
|
world stock market
us stock market
|
