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world stock market, us stock market
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12/02/04 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Target hit alerts issued Thursday: None issued
Buy alerts issued: MONE; ATVI; HLEX; OPWV
Trailing stops issued: CLF; TLM
Stop alerts issued: None issued
SUMMARY:
- Stocks struggle, turn in mixed result following Wednesday surge.
- Initial jobless claims move higher but factory orders post a solid rise.
- Private jobs services hint of a strong jobs report.
- Soft start, solid recovery, then a fade as buyers more pensive after big Wednesday upside.
- INTC pleases after hours and ignites market. Strong jobs report could really move stocks.
Early rally struggles and fades, leaving only techs positive on the close.
After the Wednesday surge, stocks were lower pre-market and in the opening trade. They found early support and rebounded sharply, at least until NASDAQ hit next resistance at 2154. It paused and pulled back to reset for another run at resistance, but oil found a bit of support after an early plunge. Stocks faltered, and a modest pullback continued through lunch with the indexes almost trading to the morning lows. A modest afternoon rebound kept NASDAQ positive on stronger trade, but small caps lagged all session, semiconductors reversed from leader to laggard, and the large caps just sat there all day.
Volume was up on NASDAQ, not bad given it led all session and posted a gain on the close and up volume handily topped down volume. SP500 and SP600 were more problematical as volume held roughly steady on NYSE; no real distribution, but some churning (high volume hot potato) after that strong surge. In short, a mixed session that is hard to call a day of rest after the Wednesday surge given the continued strong volume. We view it more of a pause, particularly after INTC appeared to reignite the rally.
THE ECONOMY
While the economic news was not a clean sweep of positives Thursday, it was certainly no slouch and more than enough to help continue the rally. Jobless claims were higher but did not disrupt the trend lower. Factory orders beat expectations and September was revised to flat after a nasty loss initially reported. Moreover, oil continued its fall; when it has dropped stocks have performed better.
Factory orders in October surprise to upside, September written higher.
Factory orders rose 0.5% (0.2% expected) on the back of a strong rise in defense orders (+18.4%). Take out defense and orders were flat. Finished goods shipments, a window into how busy factories are, rose 1.2%, rebounding from a 1.3% loss in September. Thus while most of the gain was government spending (providing no real indication of the more important private sector), there was some good indications with the factories that corroborates the PMI and ISM data that has shown great progress.
What we really like is the September revision. Previously reported at -0.9%, it was revised to flat. Wow. No big gain, but almost a 1% swing is huge even if it did only bring the result back to flat. Upside revisions reveal the real trend, the true story, the nitty gritty. While hardly a great endorsement of a surging manufacturing sector, it shows the predictions of its demise were untimely.
Jobless claims jump to 349K, but private jobs tallies hint at another good number.
Expectations were for a modest gain to 330K from 323K, but claims climbed back to 349K. Below 350K is still considered a sign of an improving jobs market, and the trend of late has shown fewer and fewer claims until Thursday. This trend indicates an continued improvement in the traditional jobs market as measured by the non-farm payrolls number.
In addition, one of the good indicators the past several months has been the Monster.com jobs survey. It was very good this month, rising to 117, an all-time high. Just prior to last month's jobs report that saw a strong surge in non-farm payrolls it rose to 114, an all-time high at the time. That bodes well for the Friday report, and with the INTC news, things could be rocking in the market.
Oil continues its fall.
Oil was down early and moved below $43/bbl. It managed a 2% bounce off that level mid-morning, and that as much as anything else, took the wind out of the stock rally. Seems that stocks got a bit ahead of themselves Wednesday vis- -vis the oil decline, and thus the additional drop and modest rebound caused some pause in the equities side.
Overall, very good action at least for consumers and businesses that rely heavily on energy. Oil has broken its trend, tested the break, and failed. That does not mean it eventually won't climb back up, but as with any stock or commodity, when the trend is broken it often has to base some before it recovers and tries to rally again.
Why would it have broken the trend for now? There was that rather large terror premium built into the price ahead of the election. Would there be a terror attack in the US prior to the election? More specifically, would there be an attack on oil production facilities in the Middle East or on the high seas in an attempt to influence the election or the US and world economies? When that did not come to pass and the election went off without a hitch compared to some scenarios, things calmed down, the speculation was taken out of the price, and we have seen oil come down. We expect it will come much closer to $30/bbl before it gets close to $60/bbl.
THE MARKET
A weak open led to buying, some typical action for a strong bull market. Unfortunately the rebound could not hold after NASDAQ hit next resistance. Stocks faded, then foundered as the oil plunge found some upside traction. The afternoon saw a modest rebound, but only NASDAQ closed positive. Volume was up on NASDAQ, down on NYSE, decent price/volume action. It was nothing that damaged the rally move Wednesday, and with Intel getting things hopping after hours, stocks are still poised to move higher
Market Sentiment
Bulls versus bears: Last week there was not much change in the overall bulls to bears comparison. Seems the lateral move stalled out the rise in bulls and fall in bears with bulls at 57.3%, a bearish level, and bears at 22.9%, just above a bearish level but still quite low. No doubt a rally will add more bulls. Something to watch, but the market has rallied regardless of this secondary indicator.
VIX: 12.98; +0.01
VXN: 18.64; +0.4
VXO: 13.91; +0.45
Put/Call Ratio (CBOE): 0.84; +0.11. Good to see the put/call ratio jump on a bit of indecision in the market. That shows a high level of uncertainty that counters the bullish investment advisor survey.
NASDAQ
Started negative, recovered and rallied to next resistance and faded, having to fight to hold positive at the close on rising volume. A scramble, but it held its own.
Stats: +5.34 points (+0.25%) to close at 2143.57
Volume: 2.434B (+4.63%). Volume rallied as the techs put in a so-so showing. They were solid early along with volume, showing good accumulation, but when it was about to put in the big surge through next resistance, it broke up and drifted off like a thunderstorm hitting a high pressure band. Solid volume, and at least NASDAQ finished upside.
Up Volume: 1.443B (-496M)
Down Volume: 972M (+620M). A decent up to down volume ratio even with the fade from the morning rally.
A/D and Hi/Lo: Advancers led 1.11 to 1
Previous Session: Advancers led 2.08 to 1
New Highs: 339 (+10)
New Lows: 24 (+3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Next resistance at 2154 stalled the continued rally from Wednesday. Tech stocks led the move all session, but could not punch through to lead the market toward more gains. It was not a reversal, not a breakdown, just a pause to look at how and quickly it had resolved the trading range. It now has to complete the move with the break over this resistance that will take it to a new 2004 high and break the bonds of the base. We view Thursday as a pause after a strong surge; we suspect the Intel news will help it make the break higher.
Despite INTC showing some weakness ahead of its update, the large cap techs outperformed the broader tech index, posting another new high for the year. They will undoubtedly improve upon this close Friday as long as the jobs report is a decent compliment to the INTC news.
SOX tried to take off but gave it all back and more on the close, edgy ahead of the Intel update. After hours chip stocks enjoyed a broad move, and no doubt SOX will gap higher at the open making it hard to get into.
S&P 500/NYSE
Ran in place Thursday on lower though still very solid trade. A strong move Wednesday, a bit of a churn Thursday. Still in good shape.
Stats: +0.02 points (0%) to close at 1190.33
NYSE Volume: 1.773B (-0.65%). Slight volume decline as the large cap index showed a doji and the smaller caps gave back some of their recent run. Technically decent action, but it is hard to call this drop in price much of a pullback in volume. Strong trade going nowhere after a run is a sign of some churning. We are not assigning any alarm bells to it right now given the strong move preceding it.
Up Volume: 715M (-677M)
Down Volume: 1.024B (+656M). Wow. Dead heat. No real surprise there.
A/D and Hi/Lo: Decliners led 1.64 to 1. With the small caps lagging all session, it was a pretty safe bet the breadth would be negative. Not hugely so, however.
Previous Session: Advancers led 2.28 to 1
New Highs: 524 (+38). Still a great showing of new highs.
New Lows: 14 (+11)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps ran in place after the strong Wednesday move broke them to a new 2004 high. Not atypical action as a stock or index will often take a breather after a strong run the prior session. We were not too happy to see such strong volume as it stalled the move, but the market is showing more upside indications. Still needs to make a continuation of the move here, however, and not slip back into the trading range.
Small caps were lagging from the start and never did get on track. They closed out the day with a rather modest 0.4% decline, but that was the laggard of the day along with the mid-caps. When they don't perform the market has a hard time advancing. They struggled all session, and so did the market.
DJ30
Very similar to SP500, the blue chips showed a doji after the strong Wednesday move. Unlike SP500, volume was lower (though still strong), it has still yet to breakout of its recent range, and it is still in the 2004 base. Most likely just taking a pause with the rest of the market. With the INTC news it will get a boost. It is still a follower here, however, as it has yet to come to the breakout point from its 2004 base up at 10,754.
Stats: -5.1 points (-0.05%) to close at 10585.12
Volume: 296 million shares Thursday versus 308 million shares Wednesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
Two hot topics, Intel and the jobs report. Intel really raised its revenue guidance significantly, from a midpoint of $8.9B to a midpoint of $9.4B. That is a solid bump. Stocks reacted accordingly after hours. Thus based on that, stocks, particularly technology stocks, are ready to rally at the open.
Then there is the jobs report. The indications we have seen show that job creation continues to strengthen. Will it be a blowout? It could with continued rebuilding efforts in the southeast combined with the continued overall improvement seen in the regional and national manufacturing and the private jobs companies (Monster, recruiters).
That could be a powerful 1-2 punch to drive the rally further. Things certainly looked favorable after hours, and the market is showing the right attributes: a lateral consolidation that held most of the gains, an end of the month higher volume selling session met with even more volume on the upside, and a breakout over near resistance on that strong volume. Sure looks positive, and we are anticipating more positive news Friday.
If there is a gap higher that makes getting into new positions more difficult. We will look at the strong stocks and try to pick our entry points as best we can. Typically there is a test of the initial gap; as long as it holds at the gap point or the prior close/high and rebounds along with some good volume at that point we can start positions. We have been accumulating all along, and a strong move Friday will put some of our current positions at targets and others well on the way.
Support and Resistance
NASDAQ: Closed at 2143.57
Resistance:
January high at 2154 stalled the move Thursday.
2250 from 2001 highs and lows.
Support:
2110 - 2112, the top of the November consolidation.
The 10 day EMA at 2106
Price support at 2090.
The 18 day EMA at 2083
The April high at 2079
2050, prior resistance and the June high.
The 50 day EMA at 2013.71
October high at 1971
S&P 500: Closed at 1190.33
Resistance:
Q1 1999 lows at 1215
October 1999 low at 1233
Q2 2001 peak at 1310.
Support:
1180 to 1185, the top of the November consolidation range.
1175 second high in that double top that spanned late 2001 is trying to hold.
The 18 day EMA at 1173.57
January highs at 1158
The 50 day EMA at 1150
1142-1146 are the June highs and the October high (1142).
1128 to 1125 the September closing high.
Dow: Closed at 10, 585.12
Resistance:
Price consolidation at 10,600 level
10,747 is the February high
Support:
10,570 is the early April high
The late April, June peaks at 10,478 to 10,512
The 18 day EMA at 10,451
September high at 10,342
The 50 day EMA at 10,296
The 200 day SMA at 10,239
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 30
GDP-Prelim., Q3 (8:30): 3.9% actual versus 3.7% expected and 3.7% prior
Chain Deflator-Prelim., Q3 (8:30): 1.3% actual versus 1.3% expected and 1.3% prior
Consumer Confidence, November (10:00): 90.5 actual versus 96.0 expected and 92.9 prior (revised from 92.8)
Chicago PMI, November (10:00): 65.2 actual versus 62.0 expected and 68.5 prior
December 01
Auto Sales, November: 5.1M expected and 5.1M prior
Truck Sales, November: 8.1M expected and 8.1M prior
Personal Income, October (8:30): 0.6% actual versus 0.5% expected and 0.2% prior
Personal Spending, October (8:30): 0.7% actual versus 0.4% expected and 0.6% prior
Construction Spending, October (10:00): 0.0% actual versus 0.7% expected and 0.1% prior
ISM Index, November (10:00): 57.8 actual versus 57.0 expected and 56.8 prior
December 02
Initial Jobless Claims, 11/27 (8:30): 349K actual versus 330K expected and 324K prior (revised from 323K)
Factory Orders, October (10:00): 0.5% actual versus 0.2% expected and 0.0% prior (revised from -0.4%)
December 03
Non-farm Payrolls, November (8:30): 200K expected and 337K prior
Unemployment Rate, November (8:30): 5.4% expected and 5.5% prior
Hourly Earnings, November (8:30): 0.3% expected and 0.3% prior
Average Workweek, November (8:30): 33.8 expected and 33.8 prior
ISM Services, November (10:00): 58.5 expected and 59.8 prior
End part 1 of 3
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world stock market
us stock market
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