|
|
world stock market, us stock market
* * * *
10/12/04 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Tuesday: None issued
Buy alerts issued: ENER
Trailing stop alerts: SERO
Stop alerts: SNDK; SFD; CK
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/alertdly.htm
SUMMARY:
- Stocks spooked on Tuesday open, hold support and rebound on better trade.
- Chain store sales continue their climb toward holiday season.
- Nice test lower brings in some buyers.
- INTC misses, but trades up after hours along with other chips. Will the market take the lead?
Nice recovery. Stocks needed it.
The low volume recovery Monday was on the ropes early Tuesday. Futures were seriously in the tank early on some less than savory news for semiconductors. Phillips announced its chip sales were flat and was pounded in Europe. The ISA then announce August world chip equipment sales fell 29% with the US (-31%) and China (-50%) leading lower. Throw in MER with some lackluster earnings and you have the makings for a down open in an already skittish market.
NASDAQ gapped below the 18 day EMA and continued selling. SP500 opened above its 200 day SMA, but quickly gave that up and went looking for another support level. Both sold to next support and there they held, NASDAQ at 1900, SP500 at the 50 day EMA. That stopped the selling. There was no immediate rebound, no trumpets blaring, no bell ringing, just a slow, steady recovery that built on itself as the session wore on. Volume built throughout the session as well. When the closing bell sounded SP500 had recovered the 200 day SMA and more on rising volume while NASDAQ retook the 18 day EMA and almost closed above the September highs, also moving on stronger volume.
Once again stocks managed to rebound from the session lows and close near the highs. Unlike Monday, volume was much stronger. That shows some accumulation even if the indexes finished negative, a positive development as buyers stepped back in when stocks were down. SP500 topped the Friday selling volume, a pretty decent show of strength though not as strong as the Thursday selling volume. Overall, it was a positive session: bad news started stocks lower, but they held next support, shook off the news, rebounded on stronger, above average volume, retaking support that was broken. Once again they are set to rebound. Once again they need to do it.
THE ECONOMY
Chain store sales get a boost from Columbus Day.
Chain store sales posted another weekly gain, rising 0.5% on top of the 0.3% gain the prior week. Cooler weather helped apparel sales, and the extra shopping day Monday thanks to Columbus Day helped push sales along even more. Year over year sales grew 3.7% as opposed to the 2.6% gain the week before. According to UBS, most stores were at or above their sales plans for the week.
The consumer continues to strengthen despite some slowing sentiment reports and continued rising gasoline costs. Thus far consumers have mostly ignored rising gas prices, able to offset them for now with the 5% growth in earnings seen this year. If prices remain high, however, that cannot last. Indeed, prices are already starting to top $2/gal once more; when it costs $25 to fill up a small car, that starts to hurt. Of course, a 40 gallon SUV or truck hurts even more. We are not far from that increase in earnings being soaked up by increases in gasoline costs once again, and that burns up discretionary income. Instead of going to buy some good or service, the money is burned up in the tank without producing anything really new. The only beneficiary is the producer and seller.
Thus, as long as oil prices remain this high, inexorably gasoline prices will rise because it is also heating oil season and refineries need to produce more heating oil. Heating oil is already high because of low inventories. Thus there is a double squeeze ongoing, and when this happens for several months on end, the consumer ultimately suffers. Indeed, oil prices above $35/bbl for an extended period, regardless of inflation adjustments, has led to at least a slowdown in business activity. In its worst case scenario it has led to recession.
Prices need to go lower, but at the present there is not a lot to suggest they will. Each time the oil stocks and oil service stocks start to show cracks, they recover, and then oil prices rise again as well. It is when everyone is convinced things will continue to rise with no end in sight, however, that the end typically comes. With the election still two weeks away and fears of terrorism ahead of that, and problems in several oil producing countries, there seems to be plenty to continue driving prices near term.
THE MARKET
Things looked really bad before the open, but as is often the case, when things seem really good or really bad that is when change occurs. After the opening selling took stocks through near support, they found the next level and, in the words of the Fed, gained traction. Stocks started a steady albeit slow recovery, and volume recovered with them. The could not hold the highs of the afternoon rally into the close, but they held most of the gains. All in all a positive session that left stocks in position to make a higher low and continue the upside move.
Market Sentiment
VIX: 15.05; +0.34
VXN: 20.93; +0.88
VXO: 15.17; +0.18
Put/Call Ratio (CBOE): 1; +0.19. A second close at 1 or better in the past week. Many were ready to jump onto the downside Tuesday and continued to be pessimistic even as stocks recovered into the close. The put/call ratio is a contrary indicator, meaning it usually is a signal of the opposite. In other words, when it rises there are more buying puts than calls, betting on the downside, and when that happens it often gives rise to an upside stock move.
NASDAQ
NASDAQ gapped below the 18 day EMA, tapped near next support at 1900, and then found buyers. It remains in position to make a higher low and continue the rebound.
Stats: -3.59 points (-0.19%) to close at 1925.17
Volume: 1.523B (+29.19%). After taking a day off Monday, volume surged back, rising just above average. Not a great resurgence; volume was much lower than on the selling sessions to end last week. A good start, however, as the index recouped over 20 points to close.
Up Volume: 622M (-102M)
Down Volume: 857M (+416M)
A/D and Hi/Lo: Decliners led 1.33 to 1. Recovered from -3+:1 early on.
Previous Session: Advancers led 1.48 to 1
New Highs: 76 (+3)
New Lows: 55 (+2)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Unlike Monday, Tuesday showed us something with a sell off, test of support, and a rebound on rising volume. Sellers were in charge, but they lost control and buyers took over, driving stocks higher to the close. NASDAQ closed negative, but given the sell off and rebound, it is hard to call the action negative. After the test of 1900 and well above the 50 day EMA (1897), it is in position to make a higher low and also holding the September consolidation (high close at 1921). In short, it is ready to make the rebound if it can find a catalyst in the INTC and YHOO numbers.
NASDAQ 100 tested toward the 50 day EMA on the low, rebounded, and recovered to hold the 18 day EMA on the close. Still below the 200 day SMA and the down trendline, but held the September consolidation and ready to rebound as with NASDAQ overall.
SOX lagged ahead of the INTC earnings, but held the 50 day SMA (384.68) as it rebounded to the close. Still has a couple of tops from 404 to 406 to deal with near term.
S&P 500/NYSE
Tapped the 50 day EMA on the low and rebounded to hold the 200 day SMA on rising, above average volume. A very good test and hold of two important support levels.
Stats: -2.55 points (-0.23%) to close at 1121.84
NYSE Volume: 1.32B (+40.41%). Very nice volume recovery as the large cap index did the same. Still closed negative, but given the price action in holding and recovering key support levels, the rising recovery volume was a positive development for a continued move higher.
Up Volume: 437M (-16M)
Down Volume: 872M (+395M)
A/D and Hi/Lo: Decliners led 1.12 to 1. Nice recovery as the small caps turned and closed flat.
Previous Session: Advancers led 1.15 to 1
New Highs: 91 (+7)
New Lows: 39 (+12)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Very solid price/volume action as SP500 tapped the 50 day EMA (1113) on the low and then rebounded to close back above the 200 day SMA (1119) in a round trip session. Though it finished negative on the session, it closed higher then the opening price after a nice recovery. A good test of important support and then a higher volume recovery. Again, very positive price/volume action, and SP500 is set up for a higher low and a continuation of the rebound rally.
SP600 sold as well, but it rebounded after holding some prior price tops at 290, showing a very nice doji with tail on the close. That tail shows the sellers were in charge, but the buyers took over and ran the table, carrying SP600 back up to flat on the close. Now it is in position to try for yet another new high.
DJ30
The blue chips managed to recover from their selling as well, but they still look shaky. In position to make a higher low, but languishing below the 50 day EMA (10,151). Pinching off some between 10,000 and the 200 day SMA (10,294), but still needs to be led as opposed to being a leader.
Stats: -4.79 points (-0.05%) to close at 10077.18
Volume: 215 million shares Tuesday versus 157 million shares Monday.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
The stage is more or less set for a continuation of the August rally with the indexes and leaders reaching lower and then rebounding to close near the session highs and hold near support. All of this was done ahead of the INTC, YHOO and other earnings, anticipating something to rally about.
After hours INTC was holding modest gains from the close while the rest of the chip sector, relieved INTC showed no inventory overhang, was rallying as well. YHOO cooled the internet stocks right after its release, but as the late session wore on, it improved above its 4:00ET close. Not a rip roaring reception, but setting the stage for a continuation of the rebound from the August lows, making another higher low.
When stocks dip the dips are sharp, but thus far the market has managed to continue the move higher in spite of rising oil prices and what appears to be a slowing economy. Logically this cannot continue indefinitely; rising oil prices only exacerbate slowing economic conditions, and both impact earnings. Stocks rally because they anticipate higher earnings down the road. Either stocks will have to stop rising or there is more growth in the picture than most pundits allow for.
That keeps us looking down the road for speed bumps, but right now it looks as if stocks are intent upon continuing the rebound near term, at least into the first part of earnings. That is not an unusual scenario, i.e. rallying into earnings then rolling over as earnings lose their excitement. The market certainly set itself up for a move higher as earnings start with last week's sharp decline. Stocks tested lower and rebounded, and that placed many leaders in a good rebound position. Again, those will be our overall focus.
Support and Resistance
NASDAQ: Closed at 1925.17
Resistance:
October gap up point at 1952.
The 200 day SMA at 1964
January/late June down trendline at 1970
Price resistance at 2050
Support:
The 18 day EMA at 1916
The low of the September range at 1900
September gap up point at 1894
The 50 day EMA at 1897
The October 2002/March 2003 up trendline at 1884
S&P 500: Closed at 1121.84
Resistance:
1125 to 1130 is prior price resistance, and 1128 is the September closing high.
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 1119.92
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 10,077.18
Resistance:
The 50 day SMA at 10,120
The 50 day EMA at 10,151
The February/June 2004 down trendline at 10,250
The 200 day SMA at 10,294
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): -$51.4B 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): 340K expected and 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): 0.7% expected and -0.3% prior
Retail Sales ex-auto, September (8:30): 0.3% expected and 0.2% prior
Industrial Production, September (9:15): 0.3% expected and 0.1% prior
Capacity Utilization, September (9:15): 77.5% expected and 77.3% prior
Michigan Sentiment-Preliminary., October (9:45): 94.0 expected and 94.2 prior
Treasury Budget, September (2:00): $22.0B expected and $26.3B prior
End part 1 of 3
|
world stock market
us stock market
|
