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us stock market, trend trading stock
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12/13/04 Stock Split Report Update
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Stock Split Report Subscribers:
Full reports issue Tuesday, Thursday and Saturday.
MARKET ALERTS
Targets hit alerts issued Monday: CME
Buy alerts issued: BWLD (bonus); MNDO (bonus)
Trailing stops issued: SHFL; ZQK
Stop alerts issued: SINA; TUES; NTES; PIXR
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 test top of range but once more on mixed volume.
- November retail sales top expectations, October revised sharply higher.
- Leaders are starting back up once more, but will they lead the market to the breakout this time.
- FOMC and options expiration to set Tuesday pace.
Solid move but all oars still not rowing together.
Investors had more positives to work off of Monday, and they wasted little time getting to work to start the week upside. More merger news was out with the ORCL/PSFT shotgun marriage turning into a lovers' leap, and with the JNJ/GDT deal imminent, that had investors worked up, looking for the next possible marriages. NXTL/FON (Sprint) is considered imminent as well, and many others could be announced as the economy continues to transform with the big names merging to enhance economies of scale and to streamline. While this gets investors excited and is ultimately good for the economy and thus our future standard of living, in the near term that means fewer traditional jobs as the big names pare back positions ahead of and after mergers.
Retails sales were also good news as November beat very modest expectations, but October was revised sharply higher. That was the source of the excitement along with reports that weekend sales were very strong. Oil was up, however, and after an early bounce stocks started to sell as oil started to rally. Stocks hit session lows in the morning session as oil rallied, but the oil market is volatile, and oil soon reversed its gains. As oil fell, stocks began to recover. The recovered, and recovered, and recovered some more on into the close.
That pushed the indexes right up to next resistance, closing at session highs. Good action but once more volume was mixed with NASDAQ posting rising, solid volume but NYSE volume holding basically flat on below average trade. This mixed volume has worked to undermine breakout attempts from the 4 week lateral range; each time the market is on the brink of the breakout it falters as it did last week as all oars have not been in the water or at least not working together. Leaders have moved higher, presaging the overall breakout, but thus far they have not been numerous enough to propel stocks overall. Once more the indexes are at the top of the range, ready for the move. Things look good to go, and we are moving into the individual stocks as they make their moves. The rest of the market needs to follow for us to enjoy one more good surge on into Christmas as year end.
THE ECONOMY
Retail sales continue to surprise to the upside though hardly blowout.
One thing about the US consumer: he has nine lives. Pretty much written off after 2003 and the tax incentives in that year were spent, the consumer has continued to doggedly defy the pundits and continue to consume. What is really mystifying, however, is how quick the pundits were to write the consumer off when there was an economy growing at roughly 4% and over 2 million non-farm jobs created in the past 12 months. Those are not statistics you would associate with a timid consumer.
As it turns out the consumer has not been timid at all, buying homes at a record pace and steadily increasing purchases above and beyond 2003 growth levels that were supposedly going to be the zenith in this expansion given the tax incentives were expiring. We wrote at the time that the power of marginal tax reductions went much farther than just the near term child tax credits as lower marginal rates mean more money in the pocket all the time. In any event, consumers have continued consuming and appear to be picking up the pace.
In November retail sales grew a modest 0.1%, but when expectations were 0.0%, that is all upside. Ex autos, sales rose 05%, better than the 0.3% expected. Not dog food. Moreover, the proof is always in the revisions, and October was sharply higher than originally thought with 0.8% overall gains (0.2% originally reported) and 1.1% ex autos (0.9% original). Big upside revisions, and while they were in part influenced by energy prices, the numbers stores are reporting in new stores shows the consumer is indeed consuming more.
So much so that if sales stay flat in December, something we think the recent days' strong sales suggest is wrong, holiday sales will be up 7.4% over 2003. That is way above expectations (4%ish). There will also be some misleading data when the numbers finally come out as we hear in our spot checks that gift cards, growing each season, are even bigger this year than last year. Stores cannot report those as sales until the cards are redeemed, an accounting fiction that they are required to adhere to. Why is it ridiculous? Because, believe it or not, gift cards are in a substantial number of cases never redeemed. Pure, 100%, unmitigated profit. I owned a share of a retail store once, and I was amazed at the percentage of gift certificates sold that went unredeemed. I suggested we sell just gift certificates, but of course that idea was shot down. The point is the gift cards keep us in the dark as to how strong sales are, and those analyzing sales in traditional methodology underestimate holiday sales.
THE MARKET
SP500 hit another high, NASDAQ is on the verge, and even DJ30 hit a new closing high in its handle on rising volume. On the verge, on the verge. Leaders are moving higher as well with large caps scoring nice gains, leaders that tested rallying higher, and small cap leaders even making good moves while those stocks lag overall. The table looks set, but it looked set at the start the month as well when stocks surged on volume with NASDAQ and SP500 breaking out of their ranges and leaders moving up once more. That move, however, was reversed 4 sessions later on high volume (at least on NASDAQ). It was not crushed, however, as stocks never undercut the prior gains. With that life left in them they resumed the trend and are once again right at the breakout point. The horse has been led back to the water, and now we see if it will drink this time.
Market Sentiment
Once more the market ignored weak sentiment indicators, primarily a widely divergent bull/bear reading. Stocks are still at an important point, i.e. in a position where they faltered last time, and we won't forget the high bullishness and low number of bears. We were concerned about more distribution coupled with these numbers, and at least for Monday that did not happen.
VIX: 12.54; -0.22
VXN: 18.78; -0.79
VXO: 13.55; +0.35
Put/Call Ratio (CBOE): 0.72; +0.09
NASDAQ
Gapped higher, filled the gap, then a steady afternoon rally to close at the high on a solid increase in above average trade. Right back up to resistance at the top of the 2004 base.
Stats: +20.43 points (+0.96%) to close at 2148.5
Volume: 2.092B (+15.1%). Got the solid increase in volume to very respectable levels on a nice gain. Good accumulation, but we want to see the final peg, i.e. a high volume breakout from the 2004 base.
Up Volume: 1.496B (+655M)
Down Volume: 514M (-435M)
A/D and Hi/Lo: Advancers led 1.64 to 1. Very ho-hum breadth though NASDAQ and NASDAQ 100 both posted 1% gains (i.e. no distinct large cap versus small advantage).
Previous Session: Advancers led 1.17 to 1
New Highs: 138 (+47)
New Lows: 10 (-5)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
A good start to the week with an intraday test that did not turn into a sell-a-thon and in fact reversed for a nice 1% gain that closed at the session high. Good volume, good moves from techs of all sizes, and some solid leadership moves. A good combination that has put NASDAQ right back up at the breakout point from the 2004 base (2154). As noted over the weekend it is still in the uptrend but volume has surged this month as the index has become more volatile. That simply means we have to see a strong breakout to improve the comfort level that the trend stays in place into Christmas. Volatility has been up along with volume the past two weeks, and that is not great consolidation action. We are probably worrying about nothing given the season, but worry keeps you from making dumb mistakes.
NASDAQ 100 gapped higher as well on solid trade, nearing its recent highs. Recall that unlike NASDAQ, NASDAQ 100 has already cleared its 2004 base. We do note that QQQQ volume was miniscule, and thus the move upside was not just blowout.
SOX spent another day moving laterally above the 50 day EMA (419) after crashing back down through the 200 day last week. Trying to regroup, but after a lot of promise in November and early December where chips looked ready to join the party they have faltered yet again.
SP500/NYSE
New closing high for the year as it clears the recent trading range. Unfortunately volume did not clear average with it.
Stats: +10.68 points (+0.9%) to close at 1198.68
NYSE Volume: 1.463B (+1.78%)
Up Volume: 1.056B (+390M)
Down Volume: 362M (-383M)
A/D and Hi/Lo: Advancers led 2.24 to 1. Excellent breadth in the move as large and small caps advanced.
Previous Session: Advancers led 1.25 to 1
New Highs: 240 (+44)
New Lows: 16 (+3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps looked solid on paper with many strong stocks such as UTX making solid breaks higher and moving on solid trade. The overall index did not show that good volume, however, as it once again came in below average. This is the mixed volume we were talking about; NASDAQ showing strong trade but below average large cap and small cap trade. It does not mean the move is doomed jus that it was not as strong as it looked by virtue of the price gain and the move to a new closing high for the year. Other than that it was fine.
The small caps showed a solid bounce off the 18 day EMA after threatening to collapse toward the 50 day EMA. A good recovery, spending only one session closing below that level. Looks ready to continue its run after just the second test of the breakout move, but need to see some better NYSE volume.
DJ30
Pretty damn good move by the blue chips, moving to a new closing high in the recent range, taking out the pesky 10,600 level that has kept it frustrated and promoted feelings of inadequacy among the large but unsatisfying caps that make up the index. Some good moves again from the leaders (UTX, GE, HON on an acquisition bid, and no it is not GE) but that volume, though higher, was still below average. May just be a formality now that it closed above 10,600, but with the Fed meeting tomorrow we may not get any volume confirmation until Wednesday.
Stats: +95.1 points (+0.9%) to close at 10638.32
Volume: 257 million shares Monday versus 242 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
The FOMC holds its annual Christmas party Tuesday after which it will say that consumer and business demand remain solid, that employment still shows signs of improvement, and, oh yes, here is another 25 basis point rate hike in your stocking. The Fed is on a mission to get rates back up to 3% or better, and it ahs seen nothing to indicate it should cease and desist. Unfortunately the Fed never sees anything to make it cease and desist until it is too late to matter. That has to fill you with a lot of warm Christmas cheer.
At this juncture it does not look as if the Fed's actions are taking a toll on the economy. Indeed many floor traders are viewing this meeting as a non-event. When we asked about the FOMC meeting and its impact on Monday trade we received a pretty uniform 'so what?' Still, the market may just take it easy ahead of the news, something not unusual.
The other economic news deals with production and capacity, and the trade balance will also be a hot topic given that it is now in vogue to worry about the dollar and deficits as some precursor to economic Armageddon where no one will want US dollars, stocks, bonds, treasuries, etc.
On top of that it is the Tuesday before expiration, and the past few months that has been a heavier volume, somewhat volatile session. Typically quiet before the FOMC and typically more volatile on the Tuesday of expiration. It could prove interesting, but most likely the market will do what it typically does for the FOMC: start mixed then work higher into the meeting, get a bit volatile on the announcement. After that expiration positioning may become more earnest.
Whatever happens, right now, despite the moves higher Monday, this is still a market of particular stocks that are making their moves. Some are breaking out of new bases, others are rebounding from tests. Many are setting up and we will pick the ones that have the best attributes.
Support and Resistance
NASDAQ: Closed at 2148.50
Resistance:
January high at 2154 (early 2004 high) stalled the move once more.
2250 from 2001 highs and lows.
Support:
2110 - 2112, the top of the November consolidation.
The 18 day EMA at 2111
Price support at 2090.
The April high at 2079
2050, prior resistance and the June high.
The 50 day EMA at 2043
October high at 1971
S&P 500: Closed at 1198.68
Resistance:
1200 stopped the last move.
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.
The 18 day EMA at 1182
1175 second high in that double top that spanned late 2001 is trying to hold.
January highs at 1158
The 50 day EMA at 1159
1142-1146 are the June highs and the October high (1142).
1128 to 1125 the September closing high.
Dow: Closed at 10, 638.32
Resistance:
Price consolidation at 10,600 level
10,747 is the February high
Support:
10,570 is the early April high
The 18 day EMA at 10,504
The late April, June peaks at 10,478 to 10,512
10,400, the bottom of the recent range.
September high at 10,342
The 50 day EMA at 10,357
The 200 day SMA at 10,237
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
December 13
Retail Sales, November (08:30): 0.1% actual versus 0.0% expected and 0.8% prior (revised from 0.2%)
Retail Sales ex-auto, November (08:30): 0.5% actual versus 0.3% expected and 1.1% prior (revised from 0.9%)
Business Inventories, October (10:00): 0.2% actual versus 0.5% expected and 0.0% prior (revised from 0.1%)
December 14
Trade Balance, October (08:30): -$53.0B expected and -$51.6B prior
Industrial Production, November (09:15): 0.2% expected and 0.7% prior
Capacity Utilization, November (09:15): 77.8% expected and 77.7% prior
FOMC Meeting, (2:15): 25 basis point hike expected.
December 15
NY Empire State Index, December (08:30): 20.0 expected and 19.76 prior
December 16
Housing Starts, November (08:30): 1980K expected and 2027K prior
Building Permits, November (08:30): 2010K expected and 2018K prior
Current Account, Q3 (08:30): -$171.0B expected and -$166.2 prior
Initial Jobless Claims, 12/11 (08:30): 342K expected and 357K prior
Philadelphia Fed, December (12:00): 20.5 expected and 20.7 prior
December 17
CPI, November (08:30): 0.2% expected and 0.6% prior
Core CPI, November (08:30): 0.2% expected and 0.2% prior
End part 1 of 2
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us stock market
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