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us stock market, stock prices
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11/18/04 Investment House Daily
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Investment House Daily Subscribers:
*NOTE: We have had an outbreak of flu or stomach virus with some staff today. At this juncture we are attempting to complete full play tables with summaries, but may be unable to do so in a reasonable timeframe.
MARKET ALERTS:
Target hit alerts issued Thursday: None issued
Buy alerts issued: CTXS
Trailing stop alerts: AEP
Stop alerts: 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/alertdly.htm
SUMMARY:
- Stocks start soft on earnings and economic data, then rally back on strong volume.
- Jobless claims starting to show a trend lower.
- Leading economic indicators fall again, Philly Fed less than expected.
- Large cap session as small caps lag, chips lead the market.
- Expiration Friday may give a gratuitous gain as the Magic Kingdom reports strong results.
Inherent bullishness emerges from a weak session.
The cards were against stocks Thursday with AMAT's warning about the future, weak leading economic indicators, and a Philly Fed that came in below expectations. On top of that the market is still a bit extended. It was enough to send stocks lower on the open, but NASDAQ held some support at 2090, and that triggered some buying. Nothing major, no strong surge, just some buyers once again entering on a pullback. The move was tested mid-afternoon, but in the last hour stocks rallied once more, closing near session highs on lower though still quite solid volume.
Not only was the late rebound a positive, but stocks overcame bad news. Semiconductors have lagged the entire move even though they have shown life of late. With the AMAT news you would expect the chips to be down. They were, but INTC helped things out a bit when he said his company saw a strong early 2005. Not only did that help chips rebound, but the SOX rallied straight through the close and led all indexes in gains. Indeed, even AMAT closed positive.
Overcoming bad news is a very solid indicator of health. It was no blowout session, but given the market has rallied a long way to this point, the ability to once again rally the troops was impressive. The move was a large cap one, however, as small caps and mid-caps lagged, closing just slightly negative. These indexes have been leaders on the rally, and when they have lagged the market has found making headway harder. It is a good indication that the market can rally as they lag, once more showing the ability to rotate and keep things moving in a positive direction as one leadership group takes a breather, or at least the kind of breather this rally allows. That means just a pause to catch the breath.
This was a good response to the down Tuesday session and sharp rebound Wednesday. It does not answer the question entirely as to whether those sessions were due to expiration Friday or the need for a more substantial pullback, but it was a solid indication of the overall health of the market. The market still needs a rest, but it may not take it.
THE ECONOMY
Weekly jobless claims show a solid trend lower.
Weekly jobless claims were higher than expected at 334K (333K expected) and last week was revised to 337K. Still, the trend is weekly claims edging toward 300K, the level that got the Fed all upset in 1998 and 1999 when it feared the ghost of inflation; not even the shadow, just the ghost. This 330K range is a level commensurate with job creation, and we have waited to see it hold in this range to feel better about the job market. It is doing it and we feel better. With the southeastern hurricanes, however, the jobs market has been spiked somewhat with the rebuilding effort. We still have to see how weekly claims continue to pan out and the November unemployment report the first week of December (delayed due to Thanksgiving).
Leading Economic Indicators fade once again and Philly Fed is less than expected, but data on expansion is mixed.
For the fifth straight month the LEI declined. LEI looks 3 to 6 months down the road, and thus if it looks that far ahead and it has been declining for five months we should see the economy slowing.
The data on that is mixed. We see more business investment and strong retail sales even without energy price increases factored in. Stocks are rallying well as indexes are breaking out of their year long base. Stocks rally based on the future, not the past. There appears to be some disconnect between the leading indicators and what is actually happening. The leading indicators factor in items such as energy costs. Thus is it easy to see why the October number was lower with energy prices still on the rise at that time. In addition, it looks at stock prices. They were declining most of October as DJ30 hit a new low for the year.
Thus the data is mixed, but it is clear that there is no super surge ongoing. GDP has started to expand again, and we have anticipated a good Q4 since early summer given the tax investment incentives expiring this year. Not enough is hitting on all cylinders right now to proclaim a strong start to 2005. Stocks seem to be saying something different as they look out much further than LEI, and Intel sees things bright for 2005. Intel does not have the best track record in forecasting the future (recall two Christmas' back when it way overshot on P4 production), but it would not make these statements, especially given its track record, unless it saw the orders.
In sum, we can conclude the expansion continues but its pace remains less than stellar. Some say we will be surprised in 2005, and if we are, great. There are enough indicators that are questionable; if things were roaring the reports would be lined up across the board. For now we continue to take the cue from the market, and it is looking down the road and likes what it sees even with high oil prices and rising gold prices.
THE MARKET
Chips had a reason to sell and they did. Just not for long. They reversed the early selling and rallied to the close, moving over their 200 day SMA on the close for the first time since April. The large cap DJ30 and SP500 were there also; they could not keep pace with the chips, but they showed relative strength when the market struggled early on.
This was important as the small and mid-caps again struggled. Sure they rallied to another all time high Wednesday, but they could not hold it to the close. They have spent the last four sessions moving laterally, showing some of that volatility of the other indexes. In a normal rally would expect this action to lead to a pullback at least to near term support to test the move. In this rally, however, rest is done on the fly with stocks and indexes moving laterally and then breaking higher once more.
We remain cautious about a steeper pullback given the more volatile action this week, and thus we will mind our positions closely. Nevertheless the rotation we see is healthy, and the chips are now providing support to the advance. That can keep the advance advancing so to speak as money flows to different parts of the market.
Market Sentiment
Bulls versus Bears: Bulls continued to rise, moving up to 58.2%, a small gain but still over the 55% level considered bearish. Bears sank a bit further, falling to 22.4%, just over the 20% level considered bearish. Both of these are near or at extremes, but the market continues to rally. They are worth watching in the event price/volume action deteriorates, but this indicator was high even as the rally started anew. Again, that is why it is a secondary indicators.
VIX: 12.98; -0.23
VXN: 18.79; +0.29
VXO: 13.95; +0.31
Put/Call Ratio (CBOE): 0.63; -0.02
NASDAQ
Techs were under pressure early as AMAT set the underachieving pace. That did not last long as NASDAQ reversed and posted a modest gain on lower though strong volume.
Stats: +4.6 points (+0.22%) to close at 2104.28
Volume: 1.983B (-11.48%). Volume was lower than the huge session Wednesday, but it was no slouch, coming in well above average.
Up Volume: 1.106B (-612M)
Down Volume: 859M (+373M)
A/D and Hi/Lo: Decliners led 1.09 to 1. The smaller cap issues were weighing down the overall index as seen in the NASDAQ 100's solid lead over the overall tech index.
Previous Session: Advancers led 1.91 to 1
New Highs: 125 (-58)
New Lows: 25 (+7)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ pushed above some psychological resistance at 2100 on the close, rallying from losses to post a modest gain. The index is still in a 45 degree climb off of the late October low, well ahead of the 10 day EMA (2067). It has solidified its break over the February high (2095) as well. It still needs a rest at some point, most likely before it takes on the January high (2154). At this point, however, it is just trending higher and higher.
NASDAQ 100 was the tech leader as the big chips reversed and provided market leadership. That was enough to push it to a new 2004 high once more. As with NASDAQ, it is in a strong uptrend, well ahead of the 10 day EMA. It did not pause at the January high; will the overall NASDAQ? Probably.
SOX was the leader, rising 1.3% and closing over that key 200 day SMA (441.59). SOX has lagged notably during this rally. It is picking up the mantle when the market needs it, i.e. when the small and mid-caps are taking a break.
S&P 500/NYSE
Posted a gain for the session but still missed a new closing high for the year as it continues to work laterally as well.
Stats: +1.61 points (+0.14%) to close at 1183.55
NYSE Volume: 1.459B (-13.59%). Volume backed off to average as the index struggled, unable to capture a new closing high.
Up Volume: 746M (-506M)
Down Volume: 688M (+271M)
A/D and Hi/Lo: Advancers led 1 to 1. Advancers edged out decliners, but it was a nice comeback after a pretty ugly open.
Previous Session: Advancers led 2.23 to 1
New Highs: 173 (-236)
New Lows: 9 (-3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps posted a gain but still no new closing high for the year (1184.17) as the index works laterally, trying to fight off the volatility from earlier in the week. It still shows good price/volume action as it does (up volume on up days, down on down days), and that indicates there is no distribution as it works sideways. That bolsters the idea that it is going to try to hang on and rally from here. The volatility from earlier in the week remains unanswered by this session, but the large caps showed relative strength and helped the market recover late.
The small caps struggled, but in the end they were dragged higher, closing just modestly lower. This index too has shown volatility but overall is moving laterally, trying to hang onto its gains. It may still come back to test the 10 day EMA (311.83) even if it does rally from here. After leading higher it needs a rest.
DJ30
The blue chips showed that relative strength as well intraday, helping the market hold on, regroup, and then follow the chips higher. After tapping resistance at 10,600 on the high Wednesday, it looks a bit winded. It is holding over the April high (10,570.81), but there is a significant band of resistance at 10,600. After this move higher and the immediate resistance ahead, it looks as if it needs a rest.
Stats: +22.98 points (+0.22%) to close at 10572.55
Volume: 242 million shares Thursday versus 295 million shares Wednesday. Below average volume on the attempted follow through to the strong volume Wednesday move.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
The Mouse House reported strong earnings after hours and was running higher. It is expiration Friday, and that could be a catalyst to head higher for a part of the session. After these big gains to this point you would expect a rest on a Friday as traders and big hedge funds square up some ahead of the weekend. October expiration was a high volume session, and we could see that once more as the last positions are squared up.
Most of that, however, was done earlier in the week on Tuesday and Wednesday as that volume and volatility showed. With the resilience of the market and the holiday coming, we could see it melt higher into next week, typically a solid week for stocks.
The market remains extended, and it has shown increased volatility this week, something that warrants caution. Again, with this holiday rally and continued resilience, stocks have taken short term rests and then powered higher. SP600, the small caps, appear to be in that type of lateral move, but it is not as tight as the last such move that started this rally.
So far most positions are holding up at near support, testing their moves. That is normal action. There are some breakdowns but just as many breakouts. We will continue to look at leaders that have pulled back to support and are ready to rally again. As we have noted before, we like to average up into a proven winner to put more money to work as it has shown us it has the right stuff in this rally.
Support and Resistance
NASDAQ: Closed at 2104.28
Resistance:
January high at 2154
Support:
Price support at 2090.
The April high at 2079
The 10 day EMA at 2067
2050, prior resistance, may provide some support on a test.
Some price points at 2000.
October high at 1971
The 50 day EMA at 1974
The 200 day SMA at 1953
S&P 500: Closed at 1183.55
Resistance:
Q1 1999 lows at 1215
October 1999 low at 1233
Q2 2001 peak at 1310.
Support:
1175 second high in that double top that spanned late 2001, early 2002.
The 10 day EMA at 1171.57
January highs at 1158
1142-1146 are the June highs.
1130 acted as some resistance on the move higher.
1128 to 1125 the September closing high.
The 50 day EMA at 1136.66
Dow: Closed at 10,572.55
Resistance:
10,570 is the early April high, and it has been cracked
Price consolidation at 10,600 level
10,747 is the February high
Support:
Late April, June peaks at 10,478 to 10,512
The 10 day EMA at 10,448
September high at 10,342
The 200 day SMA at 10,245
The February/June 2004 down trendline at 10,190
The 50 day EMA at 10,203
9980 to 10,000.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 15
NY Empire State Index, November (8:30): 19.76 actual versus 20.6 expected and 17.43 prior
November 16
PPI, October (8:30): 1.7% actual versus 0.6% expected and 0.1% prior
Core PPI, October (8:30): 0.3% actual versus 0.1% expected and 0.3% prior
November 17
Housing Starts, October (8:30): 2027K actual versus 1960K expected and 1905K prior (revised from 1898K)
Building Permits, October (8:30): 1984K actual versus 2000K expected and 1998K prior (revised from 1998K)
CPI, October (8:30): 0.6% actual versus 0.4% expected and 0.2% prior
Core CPI, October (8:30): 0.2% actual versus 0.1% expected and 0.3% prior
Industrial Production, October (9:15): 0.7% actual versus 0.4% expected and 0.1% prior
Capacity Utilization, October (9:15): 77.7% actual versus 77.4% expected and 77.3% prior (revised from 77.2%)
November 18
Initial Jobless Claims, 11/13 (8:30): 334K actual versus 333K expected and 337K prior (revised from 333K)
Leading Economic Indicators, October (10:00): -0.3% actual versus -0.1% expected and -0.3% prior (revised from 0.1%)
Philadelphia Fed, November (12:00): 20.7 actual versus 23.2 expected and 28.5 prior
End part 1 of 3
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us stock market
stock prices
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