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world stock market, us stock market
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10/11/04 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: SNDA (bonus)
Trailing stops issued: None issued
Stop alerts issued: None issued
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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Very sleepy session shows some late life.
- Light economic data, closing bond market leaves stocks with little direction
- Fed, like consumer, says one thing and does the other.
- Stocks hold near support for afternoon bounce, but buyers were not strong.
- Stocks poised to bounce if they get the catalyst.
Sluggish action returns ahead of earnings.
Stocks stemmed last week's selling as SP500 held above its 200 day SMA on the session low. Indeed, after a morning languishing near the Friday close stocks even managed an afternoon rally that closed the major indexes positive. Not a bad response to the selling and one we were looking for, but it lacked any strength.
With the bond market closed (Columbus Day), no economic news, and earnings ready to get underway, stocks had no catalyst either way. Given that scenario, the fact that they managed to rise after a mixed morning was a modest positive. The indexes held support and provided a modest afternoon bounce as many leaders further tested and held near support as well. Again, it was decent action in stemming the Thursday and Friday selling, but it did nothing to show a strong rebound was resuming. As earnings results ramp up (INTC Tuesday after the close) stocks will show their true intent at this support level.
THE ECONOMY
Very light economic day after the big jobs report Friday, and with the bond market closed, stocks had little to direct them. It showed with volume falling off the table. The data will ramp up in a big way on Friday with PPI, New York PMI, Preliminary Michigan sentiment, and an important retail sales number. Until then there is little in the way of reports other than, of course, the earnings reports.
The Fed versus the data.
The Fed likes to say it relies on what the economic data show it. Indeed, in all of its statements the past 6 months it has included the comment that even though it was removing the policy accommodation at a measured pace it reserved the right to do differently if the data warrants. Sounds very reasonable, showing a Fed that has its ideas about economic direction but is open to adjusting them as the economic activity changes.
Unfortunately, that is how the Fed always sounds. The Greenspan Fed has always couched its decisions in language that appears quite flexible in its approach. It is also, however, subject to quite a bit of flexibility in its interpretation. As seen in 1999 and 2000, it throws in enough 'Greenspeak' or 'Fed speak' to leave most scratching their head as to just what this more open and transparent Fed actually meant. In the lead up to the stock market crash the Fed used a lot of fancy rhetoric to justify its rate hikes the were really designed to slow US growth to allow the rest of the world to play catch-up as opposed to fending off inflation. We wrote at the time that the economy was already slowing after a strong spurt, but the Fed kept talking about a 'runaway consumer' and the imaginary 'wealth effect,' something that has zero empirical data to support it. Inflation is much more of a worry now (though still a distant one) than it was in 1999 given how the crash and subsequent recession and massive inventory overhang has left the business side still leery of fully buying into the recovery. That has allowed demand to outpace supply in the recovery, and thus we see shortages in commodities and in other goods that give rise to higher prices. The saddest irony of all, the one that cost millions of retirees trillions in lost retirement savings, is that in supposedly jousting with inflation during the boom the Fed helped foster the very environment that is now leading to real inflation.
Now we have the not so unusual situation where the Fed created a problem when it once again forgot lessons of the past and started tinkering with the economy to fine tune it. That always has disastrous effects. Then it has to lower rates until the economy shows it is recovering. After this crash where there was a massive inventory overhang left in the ruins of the economy, it had to lower and lower and lower rates, and still there was no impact. Not until the low rates were combined with real investment incentives did the economy's strength show itself again. After some strong 2003 growth, the Fed is back to raising rates again in order to try and stave off some inflationary pressures as well as give it some maneuvering room for future economic slowdowns or crises.
That leaves the Fed hiking rates even as the economy has hit a 'slow patch' in the summer. Indeed, the rate hikes coincided with that slowdown almost to the week. The Fed has bolstered its rate hiking subsequently by claiming that the 'soft patch' is ending or has ended as the economy supposedly has regained 'traction.' The economic data, however, still shows slowing. Not a contraction, but a slowing expansion. That is not the same as regaining 'traction,' however, because the economy is not picking up speed once again, at least according to the monthly governmental data and the private data.
For example, the regional and national manufacturing surveys continue to cool though still showing an expansion at slower rates. Private jobs firms are reporting more layoffs and the government data is not showing any kind of surge in employment. Leading economic indicators continue to slow. The ECRI report last week continued to show overall slowing in the expansion even though its weekly indicator rose. Its annualized growth rate indicator fell to -0.6% from -0.3%. That indicates the 'soft patch' from the summer is still ongoing and is likely to extend into 2005. ECRI's future inflation gauge fell, but that can be expected from an economy that is not rising as fast as it was.
The Fed has continued to hike, however, right into continuing declining numbers. It says it will watch the data, but there was no change in its most recent statement where it bumped rates higher again. Last week there was a lot of Fed speak about using caution in its policies including one quip from Bernacke that if the data slowed the Fed would slow. Further, McTeer from Dallas said it looked as if inflation was not a real worry now. That would lead you to believe the Fed would take a pause, that perhaps it is looking at the data showing the 'soft patch' as now a skid mark. Sounds good, but very similar to the consumer, what the Fed says versus what it does often are not often the same. Thus we would be very surprised if the Fed stopped hiking right now, and at this point it would appear the Fed is going to hike the next two meetings. The Fed hiking rates out of sync with the actual direction of the economy, and even as energy prices spike higher and higher. Nothing new, and unfortunately, the outcome may not be anything new either.
THE MARKET
Again, a very slow session where stocks managed to test and mostly hold near support on very low volume. They did what they needed to do ahead of earnings, halting the slide from late last week, holding support, and ready to rebound if the earnings give the nod.
Market Sentiment
VIX: 14.71; -0.34
VXN: 20.05; -0.64
VXO: 14.99; +0.04
Put/Call Ratio (CBOE): 0.81; -0.2
NASDAQ
Held the 18 day EMA after tapping at that level Friday. Techs managed a rebound late in the session but volume was remarkably low, indicating there was no real buying interest. In the absence of any news, however, the market drifted higher, showing some upward bias.
Stats: +8.79 points (+0.46%) to close at 1928.76
Volume: 1.179B (-29.88%). That is low volume, coming in well below average and the lowest since the late August, early September sessions.
Up Volume: 724M (+455M)
Down Volume: 441M (-955M)
A/D and Hi/Lo: Advancers led 1.48 to 1. NASDAQ was a market leader Monday, and there was some modestly positive breadth during that period.
Previous Session: Decliners led 2.26 to 1
New Highs: 73 (+11)
New Lows: 53 (+10)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
It was a nothing session given the volume, and the highs and lows that were contained within the Friday trading range. Given that volume was a no-show, it did the next best thing, holding near support as it stopped the selling from Thursday and Friday. It is set up for a rebound and a higher low that held the mid-September consolidation range; until earnings start flowing, that is about the most you could look for Monday. We note that some big names, e.g. EBAY, started back up on the session, and that is a positive for a further advanced. They suffered from lower volume as well, however, so we still cannot take too much comfort in some of the leader moves.
NASDAQ 100 bounced as well, but it stalled at the 200 day SMA and the January/early June down trendline. QQQ showed the same action of course, and its volume was minute, the lowest in many months.
SOX tapped the 50 day SMA on the low and rebounded to post a modest gain after lagging all session. No major hold of support, but bounced at an important level. Still has to get back through the 50 day EMA (394.96) and 400.
S&P 500/NYSE
Held easily over the 200 day SMA and posted a modest bounce on very mild volume. It stopped the bleeding but now needs to make the rebound through the down trendline.
Stats: +2.25 points (+0.2%) to close at 1124.39
NYSE Volume: 940.134M (-27.29%). A big volume drop as with NASDAQ shows no accumulation on the modest rise, just a few more buyers than sellers in a very quiet market.
Up Volume: 453M (+91M)
Down Volume: 477M (-435M)
A/D and Hi/Lo: Advancers led 1.15 to 1. This was about as flat as it could get all day when the late bump higher pushed a few more stocks to the positive column. Very indicative of the day.
Previous Session: Decliners led 1.04 to 1
New Highs: 84 (-51)
New Lows: 27 (+3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
After two large point losses to end last week and that tapped the 200 day SMA (1119.78) on the low, the large caps held easily above the 200 day, never really threatening it Monday. They never threatened any resistance level either, however, failing at 1125 where there is some old price resistance and not even approaching the March/June 2004 down trendline (1129). The large caps basically held above the 200 day SMA and set themselves up for a higher low and another run at the down trendline if they can get some favorable earnings results and guidance.
The small caps also suffered from a couple of hard selling days to end last week, but they held the 18 day EMA (292.22) Friday, and after undercutting that level Monday, rebounded to post a modest gain and show a nice doji right over that key short term support level. That also roughly coincides with the September highs, leaving the small caps in a very good position to rebound toward another new all-time high.
DJ30
The blue chips posted a low volume gain as well Monday, but they pattern is still in a much worse situation. The remain above the September low (9977) but below the 50 day EMA and SMA (10,154; 10,122), the January/June 2004 down trendline, the 200 day SMA (10,295), etc. They are not in a leadership position.
Stats: +26.77 points (+0.27%) to close at 10081.97
Volume: 157 million shares Monday versus 228 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
More earnings will start rolling in as we move through the week with INTC and YHOO after the Tuesday close setting the pace. INTC already warned, and we are hearing that retail demand for PC's is not that great, at least now with respect to those with Intel chips. Hard to believe, but AMD is doing better in the PC market with a better PC chip and a better server chip. Add some poor execution by INTC and you have what could be a disappointing quarter, but one that analysts are already saying is more Intel specific. Talk about pre-emptive posturing.
The bond market will be back in business, and that will help stocks with some direction. Bonds yields were rising, but with the softer jobs report both bonds and the dollar were under pressure last week. With INTC and YHOO reporting after hours, stocks may still mill around Tuesday ahead of those announcements. Some decent results after hours Monday could help, but no big names yet to really excite the buyers or sellers.
Stocks are set up to bounce, but need to continue holding near support as they wait for the next upside catalyst. The market has shown some distribution and then a solid recovery in late August and early September. Some distribution (higher volume selling) appeared on SP500 Thursday, but NASDAQ showed none. Overall leadership has remained solid, and that is the most important underpinning of any market.
There are many stocks still set up to make breakouts or continue breakouts after nice tests during this pullback. These pullbacks and selling bouts are what separates the leaders from the laggards. We note many stocks have held near support on this pullback. Those are the stocks we are focusing on in the coming sessions.
Support and Resistance
NASDAQ: Closed at 1928.76
Resistance:
October gap up point at 1952.
The 200 day SMA at 1964
January/late June down trendline at 1973
Price resistance at 2050
Support:
The 18 day EMA at 1915
The low of the September range at 1900
September gap up point at 1894
The 50 day EMA at 1896
The October 2002/March 2003 up trendline at 1883
S&P 500: Closed at 1124.39
Resistance:
1125 to 1130 stalled the last move and could be some support.
The March/June down trendline at 1129
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 200 day SMA at 1119.78
The 50 day EMA at 1115
The 50 day SMA at 1107
1096 to 1100 represent price support.
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1064 (August low).
Dow: Closed at 10,081.97
Resistance:
The 50 day SMA at 10,122
The 50 day EMA at 10154
The February/June 2004 down trendline at 10,255
The 200 day SMA 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:
9980 to 10,000 held last week.
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.
October 14
Trade Balance, August (8:30): -$51.3B expected and -$50.1B prior
Export Prices ex-agriculture., September (8:30): 0.4% prior
Import Prices ex-oil, September (8:30): 0.4% prior
Initial Jobless Claims, 10/09 (8:30): 335K prior
October 15
Business Inventories, August (8:30): 0.6% expected and 0.9% prior
PPI, September (8:30): 0.1% expected and -0.1% prior
Core PPI, September (8:30): 0.2% expected and -0.1% prior
NY Empire State Index, October (8:30): 25.0 expected and 28.3
Retail Sales, September (8:30): 0.6% expected and -0.3% prior
Retail Sales ex-auto, September (8:30): 0.4% expected and 0.2% prior
Industrial Production, September (9:15): 0.4% expected and 0.1% prior
Capacity Utilization, September (9:15): 77.5% expected and 77.3% prior
Michigan Sentiment-Preliminary., October (9:45): 95.0 expected and 94.2 prior
Treasury Budget, September (2:00): $16.0B expected and $26.3B prior
End part 1 of 3
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world stock market
us stock market
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