|
|
us stock market, trade stock
* * * *
1/11/05 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: JAH
Trailing stops issued: None issued
Stop alerts issued: INFY
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:
- Monday bounce cannot hold but sellers cannot break it down.
- Weekly same store sales reports mixed but solid for first week of the year.
- NASDAQ, SP500, SP600 back to Friday close, but hanging on.
- INTC earnings providing after hours lift; stocks poised to open higher after first of year hit.
Stocks start weak on earnings worries, weaken further, post a modest comeback.
AMD and AA, pretty much at the opposite ends of the spectrum (at least in perception; AMD's chips and Alcoa's aluminum products are both mature industries) had similar impacts upon the Tuesday market action. AMD warned its sales were way down for the quarter and AA missed its earnings forecast. They basically summarized the day with respect to earnings: disappointing.
The market responded in kind, reversing the Monday bounce with a gap lower and some further selling that took NASDAQ below the 50 day EMA and below the interim high. It took SP500 down through its 50 day EMA briefly. Stocks then managed a rebound, something they have done the past few sessions after that initial selling. That rebound has been typically torched in the last hour, however. Tuesday stocks sold again in the last hour, but it was not a blowout to the downside. SP500 managed to hold the 50 day EMA and NASDAQ managed to hold the April high. SP600 held 310 support. SOX was not as fortunate, selling through next support at 400.
Basically, even though stocks weakened late, they did not tank as in the prior serious weakness. Except for SOX, they finished where they did last Friday. Volume nudged higher on NASD, but it was basically flat along with NASDAQ trade. The point: despite the bad news and the ensuing selling, sellers could not push the indexes past last week's low point. The bias is still downside as stocks have yet to put together a solid accumulation session (SP500 showed some mild accumulation Monday), but the inability to take stocks lower than Friday levels given all of the negative views Tuesday shows stocks are oversold at this point and ready to try a rebound.
THE ECONOMY
Redbook sales rise, UBS sees a slight weekly decline.
The very fancy sounding International Council of Shopping Centers/UBS reported a 0.6% decline in sales the first week of January versus the last week of 2004. Year over year sales for the week slowed to 4.4% from 4.6%; either way you slice it, not bad. for the month the ICSC expects 3% sales growth. Now we know you are confused by the 'international' in the name. The report covers US retailers same store sales. We know some of you thought the Bush administration was trying to bolster sales numbers by including the bustling markets in Kabul and even Beijing and thus had 'international' inserted in the title. That is not the case. Nor did it include the Tokyo fish market when it was sponsored in part by the Bank of Japan/Mitsubishi.
The Redbook survey of same store major retailers' sales reported growth. A 1.1% gain for the week and a 3.1% year over year gain. Good steady growth carrying over into the new year, reflecting gift cards as part of the sales.
When you average the reports you come out pretty much in the middle (isn't that what usually happens when you average something?). More succinctly, there was continued sales growth, though slower, from the last week of 2004, but year over year gains remained on the same solid track they showed all of the holiday season.
The bigger economic points are still to be released (retail sales, PPI, and even the trade deficit on Tuesday now that the trade gap is the new economic worry). We can expect continued solid reports. What the market is focusing on is earnings right now, assuming the economic data will continue to show a positive trend.
Social Security issues.
This is one of the topics that scrolls across the screen every half hour or so. From a financial market perspective there are a few issues worth considering.
If there is privatization of part of the plan that would be a boon for financial markets as that would put more money into the market. Today people are living longer and will need to continue to grow their assets even in retirement. That is a powerful combination if it comes to pass.
Speaking of living longer, when SS was first enacted you had to live three years past the average lifespan to get your first check. If you did make it, you were not expected to live to get many checks. Now we live 15 years past that point where you start collecting, and that grows each year. To be at parity with when the program was enacted, the point where you start receiving checks would have to be adjusted to near 80. There is a lot of talk about the 'math'; that is the clearest problem we see with respect to the math
The other 'math' issue is the number paying in per recipient. It used to be 16:1, now it is 3:1 and it is expected to hit 2:1 in six years when the boomers start retiring. Here is another way to think of it: the birth rate in the US is declining as it is in most post-industrial nations. Not only are there more seniors, there are fewer juniors taking their place. We will get blasted with mail, but it is like a Ponzi scheme: trying to draw upon a shrinking pool fund a growing pool. You can do it if you want to raise taxes higher and higher on those fewer paying in, but when the economy stalls and revenues plunge as a result of tax hikes, there won't be enough revenue to pay all of those IOU's piled up at the Treasury as a result of Congress pilfering the so-called SS trust fund. The ONLY time SS is paid for is when there is a surplus in the federal deficit. But we know that is an illusion because that is spent on other things and never goes into the fictitious 'trust fund.'
Some say it is too much work for the individual to invest part of his or her money in a private account, and thus they won't learn and won't make good decisions. Given that most people spend far more time planning vacations than their retirement that may be true. As most are putting money into 401k accounts now, however, would it be much harder to choose from a small list of solid, relatively stable investment choices? Indeed, if it is your future, it is something that needs to be planned; the price of living in a republic is educating yourself. Or, reform the tax code to a flat tax so we don't spend millions of worker hours figuring out taxes. That would free up some time to learn about investing. Compared to the poor job the feds are doing with your hard earned money, an average 10% per year return is huge. If you could have put all of your SS payments in stock index funds since you started working you would be able to retire very comfortably if not very rich and there would not be this idea that SS is supposed to be your retirement nest egg. Personally I would prefer to invest for my parents', my children and my future than relying upon the government to wisely spend the 12% to 15% of gross earnings sent in each year to cover SS.
THE MARKET
The ground recovered Monday was quickly yielded Tuesday as stocks gapped lower. They had their choice of bad news, but most of it related to earnings and earnings outlooks. NASDAQ gave up the 50 day EMA, SP500 sold back to the 50 day EMA, and SP600 returned to near support as well, all basically at the same place they close Friday. SOX was again the exception, selling harder on the AMD news and undercutting support at 400 as chip investors decided not to wait for the Intel earnings after the close.
NYSE volume faded slightly, NASDAQ volume rallied (chip selling boosted trade), and breadth went from really weak intraday (NASDAQ -3:1) to weak on the close (-2.2:1 NASDAQ). The selling put NASDAQ in a similar position to SP600 (small caps), i.e. below the 50 day EMA, struggling to hang on and avoid a further drop. At the same time SP500 and DJ30, while selling as well, managed to again hold their 50 day EMA.
Thus scratch Monday, at least with respect to holding those modest gains. As noted above, however, there was no rout even though there was enough bad news on the tech side and even the 'old economy' side to really reignite the selling. Instead stocks held on a bit better in the afternoon, not doing the complete dive to the session lows as has been its fondness of late.
That gives the market a hint of oversold as sellers had every opportunity to send stocks lower but could not make major inroads to new lows. It is just a hint, however. Even with SP500 and DJ30 holding above their 50 day EMA, NASDAQ and SP600, the two real leaders, are struggling hard. The large caps are definitely showing relative strength and there may finally be that shift on with respect to those issues, but to this point the market has not rallied without NASDAQ and SP600 performing well. The large caps have not stepped up to the plate yet if in fact they are going to get that new money.
Thus after Tuesday, despite some modest improvements with respect to intraday action and the like, the market action is still much more negative than positive. We could easily see another relief bounce attempt or short squeeze take hold from here, but the overall look is still negative even with, as discussed below, the INTC earnings after the close.
Market Sentiment
Volatility is still holding at very, very low levels. Even with the selling to start the year volatility has not risen appreciably.
VIX: 13.19; -0.04
VXN: 19.67; +0.06
VXO: 13.03; -0.14
Put/Call Ratio (CBOE): 0.86; +0.04. Not spiking as much as we want to see to really set a rebound.
NASDAQ
Gapped back below the 50 day EMA, managed a modest recovery, but still posted a sizeable loss on the strongest volume in four sessions.
Stats: -17.42 points (-0.83%) to close at 2079.62
Volume: 2.28B (+7.34%). Volume jumped as the chip stocks were dumped on the MAD warning and ahead of the INTC earnings. Tech is one of the sellers' focal points with four distribution sessions (higher volume selling) this month. The liquidation did not stop after the first two sessions of 2005 but has continued. We note that over lunch when the index slid to its depths, volume dried up.
Up Volume: 501M (-379M)
Down Volume: 1.76B (+591M)
A/D and Hi/Lo: Decliners led 2.27 to 1. The afternoon bounce brought breadth back to bad levels from really bad levels in the morning (-3:1).
Previous Session: Advancers led 1.21 to 1
New Highs: 48 (-38)
New Lows: 37 (+8)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Monday's lower volume gain was Tuesday's launch point for selling. The 50 day EMA (2093) failed on the open and was never challenged. The challenge was whether NASDAQ would hold the April high at 2079. It undercut that level intraday (2073 on the low) but managed a rebound that, of course, was almost completely squandered. NASDAQ has again joined SP600 below the 50 day EMA; two leading indexes in 2004 now struggling for their lives. This is not forecasting good things for techs thus far in 2005. A bounce here, unless it is accompanies by strong volume AND breadth is most likely an opportunity to exit longer term positions or to make very short trades before the bounce/squeeze peters out.
NASDAQ 100 barely topped the overall NASDAQ, failing to show any real rebound in the large cap techs. You can thank the chips for that weak performance as they were cutting and ducking ahead of the INTC earnings after AMD spooked chip investors.
SOX continues to be the relative weakness leader. When the going got tough it turned lower, slicing through some support at 400 with ease. The INTC news will try to bounce it higher, but if it can make it back to the short term MA (10 day EMA at 410, 18 day EMA at 416) it will probably fail there unless there is a dramatic sea change of buying strength.
SP500/NYSE
Gave back the Monday bounce, managing again to hold above the 50 day EMA for the past 5 sessions.
Stats: -7.26 points (-0.61%) to close at 1182.99
NYSE Volume: 1.488B (-0.1%). Volume slid marginally as the large caps lost ground. Again no distribution since the first part of the year shuffling, indicating some relative strength. But as noted, the large caps have yet to step up and lead.
Up Volume: 359M (-570M)
Down Volume: 1.115B (+586M). Volume may have been lighter, but it was all downside.
A/D and Hi/Lo: Decliners led 1.75 to 1. Vastly improved over the -2.5:1 levels during the morning session.
Previous Session: Advancers led 1.69 to 1
New Highs: 52 (-11)
New Lows: 19 (+7)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Hanging on at the 50 day EMA (1181) once more as the large caps continue to tap dance along that support level. Thus far refusing to give in and showing relative strength as noted above. Relative strength is good as it shows there is a refusal to sell off positions. That does not necessarily equate to future buying. As also noted, when NASDAQ and the small caps lead, the market advances. When the large caps show relative strength the market hangs on. In short, as of yet that relative strength has not translated into money moving into the large caps.
The small cap SP600 is back at support at 310, but this is relatively minor support and with any more selling we would not expect it to hold. It broke the 50 day EMA (315) last week and has been tapping at it every other session as it tries to hold 310. To say the least it is not dealing from a position of strength. Indeed, these patterns typically break down versus recovering.
DJ30
Blue chips tanked lower to a new closing low for the year. That was supposedly a big deal on the financial stations, but it means little to start a new year. Kind of like saying the first golf shot you ever hit was the best of your life (or in some cases, the worst); it is undoubtedly going to change. More important was DJ30 giving up 10,600 support that marked the November and early December consolidation top and had held as support thus far. DJ30 closed at the 50 day EMA (10,546) on some rising though still below average volume. It did not help that AA missed earnings and HPQ was downgraded. About the best thing that can be said is it held the 50 day EMA along with SP500.
Stats: -64.81 points (-0.61%) to close at 10556.22
Volume: 255 million shares Tuesday versus 234 million shares Monday.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Intel reported some decent results after hours, beating on earnings and revenues and reducing inventories substantially. That was all positive and sent the stock and many tech stocks higher after hours. Guidance for Q1 was in line; no surprise there as Q4 is typically Intel's best followed by a slowing Q1. Intel also said that earnings growth would slow in 2005. Again, no surprise there. A strong early surge and then faded some as the after hours session continued.
After some less than pleasing earnings news to start the season, Intel is providing a little salve. Given the guidance we do not anticipate the earnings will spark the kind of buying that turns the recent tech selling into a full recovery. It could very well spark a short covering squeeze, particularly in the beaten up chips and to a lesser extent techs. The key to watching those moves is breadth. We often see strong price and volume bounces in a selling trend that suggest a turn. If it is short covering, breadth is typically weak as the main activity is in the stocks that have been sold the hardest as the sellers buy them back to cover up.
As for NASDAQ and SP600, the 50 day EMA remains the focal point on any rebound. If they can recover we want to see volume and breadth on the rebound. At this stage, given the inability of the indexes to rebound after the sharp selling to start the year, we assume a rebound is a relief move (lower volume bounce) or short covering (higher volume but narrow breadth). We use such a move to exit struggling long positions and to set up downside plays.
At the same time we note SP500 continues to hold the 50 day EMA and the mid-cap SP400 is holding right at that level as well. There are still solid stocks that are forming nice patterns or have eased back to support during this selling and are preparing to rebound. We are not going to ignore those just as we did not on Tuesday.
For downside we would like to see that short squeeze or relief bounce drive stocks back up as that would better set up the downside after the quick drop to this level and the subsequent lateral move. Stocks were not hammered lower Tuesday when there was a chance to do it; as noted, that suggests a somewhat oversold condition that we don't really want to sell into. Let it bounce and set back up. If the move is a weak one it will show up and we will see the downside positions rise to tap the 18 day EMA or other resistance on low volume and falter.
Wednesday we anticipate an attempt to rally on the open, but we know what stronger opens have meant this year: surge and purge. We will tread cautiously on any upside open, watching that volume and breadth and how the leaders move off of their support and how those that broke below support handle the re-test. Again the bias remains negative and will have to change its character for stocks to resume their uptrends.
Support and Resistance
NASDAQ: Closed at 2079.62
Resistance:
Price support at 2090.
The 50 day EMA at 2093
2110 - 2112, the top of the November consolidation.
January high at 2154 (early 2004 high)
2250 - 2260 from January/February 2001 highs and lows.
2282 from 5-2001 high.
Support:
The April high at 2079
2050, prior resistance and the June high.
S&P 500: Closed at 1182.99
Resistance:
The 18 day EMA at 1194.45
1200 acted as resistance on the last trip higher
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 50 day EMA at 1181.10
1175 second high in that double top that spanned late 2001.
Dow: Closed at 10, 556.22
Resistance:
Price consolidation at 10,600 level
The 18 day EMA at 10,659
10,754 is the February high
10,975 - 11,000 from Q4 2000, Q1 2001
11,350 from the May 2001 highs
Support:
The 50 day EMA at 10,546
The late April, June peaks at 10,478 to 10,512
10,400, the bottom of the November/December range.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
January 10
Wholesale Inventories, November (10:00): 1.1% actual versus 0.7% expected and 1.1% prior
January 12
Trade Balance, November (08:30): -$54.0B expected and -$55.5B prior
Treasury Budget, December (14:00): -$0.0B expected and -$17.6B prior
January 13
Export Prices ex-ag., December (08:30): 0.4% prior
Import Prices ex-oil, December (08:30): 0.7% prior
Retail Sales, December (08:30): 1.1% expected and 0.1% prior
Retail Sales ex-auto, December (08:30): 0.4% expected and 0.5% prior
Initial Jobless Claims, 01/07 (08:30): 340K expected and 364K prior
January 14
Business Inventories, November (08:30): 0.6% expected and 0.2% prior
PPI, December (08:30): -0.2% expected and 0.5% prior
Core PPI, December (08:30): 0.2% expected and 0.2% prior
Industrial Production, December (09:15): 0.5% expected and 0.2% prior
Capacity Utilization, December (09:15): 78.9% expected and 78.7% prior
End part 1 of 3
|
us stock market
trade stock
|
