|
|
world stock market, us stock market
* * * *
9/23/04 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Thursday: VLO
Buy alerts issued: SFD; BWA; BLL; NFX
Trailing stops issued: STLD
Stop alerts issued: Cleared out non-performers. URBN; SNDA; CELG; ECL; SHFL
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:
- Stocks pause after rough Wednesday, show true colors late.
- Jobless claims head wrong way, leading indicators continue decline, and oil ignores 'loans' from SPR.
- Techs lead a volatile session, but they cannot hold market higher into the close.
- Still key areas of strength heading into weekend as stocks try to shake off Wednesday reversal, but market not showing the healthiest action.
Stocks try to regroup after hard selling Wednesday.
There was almost a vacuum of news after Wednesdays downgrades, warnings and earnings disappointments ruled the session and stocks took a beating. Jobless claims were higher than expected and leading economic indicators were a bit worse than anticipated, and that did not help stocks, though it did not hurt them noticeably. The market did respond to the upside when news hit that the Feds were going to loan some refineries oil from the SPR, but that excitement faded rather abruptly into lunch.
Stocks tried another rally into the afternoon, but once again they could not enjoy prosperity, even the modicum that was there Wednesday. In the last half hour, just after NASDAQ broke to a session high, the indexes reversed and solid right into the close. SP500 closed on its lows. NASDAQ gave back almost all of its gain. SOX was the only index that had any strength into the close, finishing in the upper end of its range. That was no feat of strength, however, as it tried to break back over the 50 day EMA, but turned faded as well.
In sum it was not an overly weak day nor was it very strong. Stocks were roughed up after the Wednesday drubbing and were licking their wounds. Still showed some resilience as they tried to rally, but there simply were not enough buyers ready to step in after the sellers took control Friday. Indeed, they showed what their truer colors are when the sellers lined up again in the last hour and took stocks lower to the bell. Even that was not the deciding factor for the session, but it showed that the buyers were not ready to try to take control back after Wednesday.
THE ECONOMY
Jobless claims still in jumble after hurricanes.
Weekly jobless claims have yet to smooth out after the hurricanes started hitting the southeast. Claims dropped close to 300K as fewer claims could be filed in the southeast as the hurricanes came through, and now they are rising, presumably because those people can now physically do so. Claims rose to 350K (338K expected) versus the 336K reported last week. The 4-week average rose to 341K from 339K. That is a somewhat better picture, and it shows no real change. No decline that would show further hiring gains.
Speaking of hiring, the FOMC minutes from last month stated the Fed's belief that consumers were starting to consume more and that business sentiment would continue to improve and lead to improved hiring. To the Fed's credit, consumers have started to consume more the past three weeks as demonstrated in the weekly same store sales reports. As for hiring, well, the Fed appears to think that is still coming in the future. It certainly will come sometime in the future. There are a lot of things that will come in the future; hurricanes, earthquakes, bull markets, bear markets, a Red Sox pennant (maybe not a good example), but timing, as always, is key.
Leading economic indicators slip for third consecutive month.
Expectations for the August report were a 0.2% drop, but they came in -0.3%. That is the third straight decline in this economic forecaster that looks 3 to 6 months down the road. These are showing the same softening continuing, something contra to what the Fed is stating in its releases and meeting minutes. The ECRI weekly indicators also show a continued softening in the economy heading into Q4.
It is important to understand that the decline does not mean the economy is heading into recession, but at the levels of the LEI and ECRI, it is showing a weakening expansion. Moreover, it only takes into account what is happening now and projects forward. It does not take into account that there are tax incentives that will expire December 31 and that business and individuals typically wait until the end of the tax period to take advantage of the incentive.
Thus the pickup in business investment we anticipate in Q4 does not show up in the leading indicators. Of course, it does show more of the mean, meaning once the buying related to the tax incentive is over, growth will revert toward the mean again, i.e. slower growth.
Oil falls on news of a loan from SPR.
Oil fell over $1/bbl on news that some refineries request a loan of oil from the SPR to make up for lost production from the Gulf of Mexico in hurricane Ivan's aftermath. That was the impetus for the mid-morning rebound as well. It did not take long, however, before the news was viewed for what it really was: a loan that was to be repaid, meaning the oil would have to be purchased and replaced. That meant no further supply on the market and no real change in the administration's view of releasing SPR oil. Oil started to rise and by the close of trading posted gains for the session and moved closer again toward $50/bbl.
It is clear that loans from the SPR won't stall oil's advance. It would take a full blown commitment, at least in word, to stall the price move. Still we have seen that natural forces will drop the price of oil. After the Russian Yukos problems and Iraq worries started dying down, oil prices almost fell into the thirties. Then the storms started hitting the southeastern US and the price started back up, aided by some well-timed comments from Yukos about its struggles to meet government tax bills. Think about it; Yukos wants prices higher so it can get more per barrel and thus make it all the easier to pay off the imposed debt. Thus Yukos is doing no favors for the rest of the world as it fights to survive.
Thus once the delays from the Gulf evacuation are resolved we should see price pressure ease. After all it is not a loss of the production, just a delay of the production getting to the market. Once that occurs, the most recent pressures will subside again. The key is whether anything new hits. With 3 or so more storms out in the Atlantic and almost 2 months left in hurricane season, the question is far from answered. That means continued near term pressure on prices and a further delay in major relief for consumers. Gasoline prices have declined overall, but they have bumped higher the past two weeks given refinery closings on the gulf coast. If prices remain high into November, that is not good for the holiday season though we note that consumers have ramped up their buying the past three weeks despite a contemporaneous rise in energy costs.
THE MARKET
Techs actually looked decent most of the session when compared to the large cap indexes. That is not saying much, however. SOX posted the best gain as it held its ground above the 18 day EMA and below the 50 day EMA. In contrast, the large caps fell through the 50 day EMA, showing continued weakness following through from Wednesday.
While stocks finished mixed, volume did not, coming in lighter. The market basically took a pause after the hard Wednesday selling, trying to bounce but failing to find any committed enough to venture too far. The result was status quo, licking the wounds from Wednesday while testing the upside to see what response it drew. By the close a few sellers came back in, a bearish indication. As with the upside attempts, however, the downside could not deliver any serious blow that continued the Wednesday action with any vigor.
In any event, the action the past three sessions has not been what you would classify as healthy: a break to a new high in this rally met with a harsh sell off. Stocks were still shell shocked Thursday after that reversal.
Market Sentiment
Bulls versus Bears: Something of an improvement, but modest at best. Bullish advisors held basically steady at 50%; 55% is considered bearish. Bearish advisors declined a bit more, falling to 22.9%; bullish is 50%, bearish is 20%. The bulls and bears converged in late August, early September, but they never reached levels considered bullish, never making that crossover that is a clearer signal. This is just another indication of the lack of seriously extreme sentiment levels ahead of this move.
VIX: 14.8; +0.06
VXN: 21.17; +0.11
VXO: 14.87; +0.3
Put/Call Ratio (CBOE): 0.92; -0.18
NASDAQ
Tried to lead the market, but gave most of the move back. Managed to hold over the 50 day EMA with a doji on low volume.
Stats: +0.72 points (+0.04%) to close at 1886.43
Volume: 1.404B (-12.6%). No volume on the bounce attempt, and NASDAQ found it hard to make the move stick. Two distribution sessions in the past 7 sessions versus 2 accumulation sessions in the same period. When looking at distribution, however, it is not a tit for tat reading. Two to three distribution sessions in a week to ten days can be the end of a rally.
Up Volume: 723M (+375M)
Down Volume: 646M (-605M)
A/D and Hi/Lo: Decliners led 1.16 to 1. Decliners led on the modest gain, showing weak internals.
Previous Session: Decliners led 2.92 to 1
New Highs: 51 (+1)
New Lows: 49 (+12)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Showed a doji over the 50 day EMA (1880) after the hard selling Wednesday. All in all not a bad response to that session. A couple of rally attempts failed and the index closed on the session lows. Volume was lower and it managed to hold the next important support level after the Wednesday distribution. Basically a pause after the hard action. Still in position to rally, and it had support from SOX once more. Nonetheless, the high volume failure at the down trendline, the second distribution session in a week, was a key day that will have to be reversed if NASDAQ is to move higher toward the 200 day SMA (1965).
SOX tried to retake the 50 day EMA (396.39), breaking through that level on the intraday high (397.21) but then giving the move back. Still in the range of the prior lateral move and still in position to rally if market can get buyers.
S&P 500/NYSE
Tried to make an upside move, but without volume the large caps faded to close just below the 50 day EMA. Not a failure given the volume, but a continued show of lack of support.
Stats: +0.03 points (0%) to close at 1108.36
NYSE Volume: 1.281B (-6.92%). Volume faded to average after the high volume Wednesday selling. Not a clear follow through to the selling, but still solid volume as the large caps slipped through the 50 day EMA on the close.
Up Volume: 427M (+216M)
Down Volume: 828M (-330M). Unlike NASDAQ, NYSE down volume continued to lead the upside volume.
A/D and Hi/Lo: Decliners led 1.2 to 1
Previous Session: Decliners led 2.33 to 1
New Highs: 90 (-13)
New Lows: 26 (-1)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps continued the selling Thursday. It may not have been on the same strong volume as Wednesday, but it was solid trade nonetheless, as the large caps showed their colors late by slipping below the 50 day EMA (1109). Looks as if the door is open to a test of 1100 to start. After that, it depends upon the selling volume as to how far it fades.
After the Wednesday reversal, small caps managed to make a stand, holding over the 18 day EMA (286) and showing a doji on the candlestick chart. That shows the selling intensity faded, but it hardly means the index is ready to rebound. The Wednesday selling was harsh, and it occurred at the April high, the potential left shoulder to a head and shoulders base. No breakdown, but that sure is not the action of a healthy index.
DJ30
Blue chips bombed lower again. After being weak all session the blue chips dove into the close, undercutting the 50 day SMA (10,114). 10,000 is some support, but 9900 is the real next level.
Stats: -70.28 points (-0.7%) to close at 10038.9
Volume: 222 million Thursday versus 240 million Wednesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
Durable goods and existing home sales are out Friday, but once more the market does not seem too interested in dated economic data. Thursday it showed signs of trying to make a stand, but the internal indicators were pretty weak and don't suggest an immediate bounce back. In short the day told us little; stocks often take a breather after a strong move one way or the other. It is when they jerk back the opposite direction as they did Wednesday where some problems arise.
Heading into the weekend stocks are not looking too solid. As noted, the attempted breakout to further the rally Tuesday failed with a high volume reversal, and that is not healthy action. Might try to bounce and retake some of the loss; the market showed some resilience in techs and chips, but overall the reversal after the third break higher is keeping us skeptical of a further move higher. Stocks are still in the range where we anticipated they would find resistance in September, and a test lower is something we are not discounting.
Thursday we were closing positions that were marginal or not moving as we wanted even though they had not breached the stop point. We also started some of the aggressive downside positions as we discussed Wednesday, and we will look at more if the selling continues and NASDAQ breaks through the 50 day EMA.
Support and Resistance
NASDAQ: Closed at 1886.43
Resistance:
Gap up point at 1894
The 2004 down trendline at 1908
The 200 day SMA at 1965
Support:
The 18 day EMA at 1883
The 50 day EMA at 1880
The October 2002/March 2003 up trendline at 1861
The 50 day SMA 1856
July 2003 highs at 1755
S&P 500: Closed at 1108.36
Resistance:
The 50 day EMA at 1109.50
The March/April down trendline at 1116
The 200 day SMA at 1117
1125 to 1130 stalled the last move.
1132 is the March/June down trendline.
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:
1096 to 1100 represent price support.
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1062 - 1058 from November 2003
Dow: Closed at 10,038.90
Resistance:
The 50 day SMA at 10,115
The 50 day EMA at 10,174
The 200 day SMA at 10,295
The February/June 2004 down trendline at 10,295
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:
10,000 is some support.
9900 is some support from the May and July lows.
9783 to 9793, the August lows.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
September 21
Housing Starts, August (8:30): 2000K actual versus 1930K expected and 1988K prior (revised from 1978K)
Building Permits, August (8:30): 1952K actual versus 1985K expected and 2066K prior (revised from 2055K)
FOMC Meeting (2:15): 25 basis point hike to 1.75%.
September 23
Initial Jobless Claims, 9/18 (8:30): 350K actual versus 338K expected and 336K prior (revised from 333K)
Leading Economic Indicators, August (10:00): -0.3% actual versus -0.2% expected and -0.3% prior
September 24
Durable Goods Orders, August (8:30): -0.3% expected and 1.6% prior
Existing Home Sales, August (10:00): 6.65M expected and 6.72M prior
End part 1 of 3
|
world stock market
us stock market
|
