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world stock market, us stock market
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3/28/05 Investment House Alerts Report
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IH Alert Subscribers:
We apologize for the late delivery. We have experienced some major computer problems through the holiday and are still working to get everything back on line. We will get all parts of the report to you as fast as possible.
MARKET ALERTS:
Target hit alerts: None issued
Buy alerts: ABRX; BEBE; SLM
Trailing stops: None issued
Stop alerts: TRMB; PACT
SUMMARY:
- Another relief bounce attempt struggles & fades in afternoon session.
- As dollar climbs oil comes under pressure as weak dollar contributes to much of oil's rally.
- Inside day leaves major indices flat but a bit weaker still.
- Market still looking for a catalyst to rebound but running out of time on this attempt.
Stocks higher out of the gate but again fade into the close.
Foreign markets were closed so the US market was basically on its own. After a 3 day weekend ahead of which stocks were still at the bottom of their recent range there was some initial enthusiasm. The dollar was stronger again (prospect of higher interest rates) and thus oil was lower, and that gave a bit more push to the futures. Some take-under news (SDS) added to the excitement, not to mention the return of the rumor mill when it was erroneously reported that Iraqi troops had surrounded Zarqawhi.
All the news and rumor merged into an early upside bounce, but even that move was modest as NASDAQ could not even crack a 1% gain. It cleared 2000 and SP500 cleared 1175 and even the march 2003 up trendline. They gave it back intraday but then rallied once more, trying to make it stick. Volume simply did not show up, however, and the second rally died out on SP500 just above the early morning high, unable to clear the Thursday peak. When that happened the indices rolled over with NASDAQ closing at session lows, hanging onto the 200 day SMA.
The move never had much volume nor did it have any breadth. The A/D line was barely positive on the session highs and flipped to negative late in the day. SP600, the small cap index, never even made a serious attempt at taking on its 50 day EMA, and that handicapped the entire move as well. In the end it was another low volume bounce that struggled even to hold a modest gain. For three sessions stocks have tried to rebound, and each time they have closed well off the highs, unable to hold the move. They are still at a point where they could bounce, but the inability to make something of the move is using up the few buyers that have moved in the past few sessions and it is also relieving some of the oversold pressure on the market. In short, it is wearing out the buyers and giving the sellers a rest from which they can come back with renewed vigor. Still at a point to bounce, but as has been the past three sessions, it is going to have to show us something upside soon or it is going to be in trouble as it heads lower.
THE ECONOMY
Oil continues to back off as dollar strengthens.
The conventional wisdom is that we are running out of oil. No doubt surging demand from China and India is adding to pressure on supply, and as we know supply and demand dictates higher prices with a static or declining supply. Of course, the Exxon CEO and many other major crude users say that supply is not the problem, at least for now. We discussed last week that there have been other times in history we were certain we were about out of oil and that price hikes were in line as far as you could imagine. That often preceded significant drops in price as the world economy fell in large part due to high energy prices. This time it may be a bit different with our efficiencies, but high prices are high prices. Moreover, the market tends to look to the future and the future shows continued strong demand. With that outlook oil has held onto the gains on its recent jaunt from $45, though it is fading back a bit the past week.
What is the cause for the fade? Some lowered hype is the first thing that comes to mind. After all, it was all you heard about on the financial stations two and three weeks back. Another factor adding to the pullback, however, is the slight strengthening in the dollar after a long and deep slide lower. Oil is denominated in dollars, and with the continuing declined in the greenback oil has continually moved the other way. Oil more than doubled in 2004, and the dollar sank lower and lower all through that year and on into 2005 as oil spiked higher on this last run. When the Fed put on a tougher face last week with respect to rate hikes, the dollar found some new life and rallied against the euro, yen, etc. Oil fell lower as the dollar moved up. Ask any economist and he or she will tell you there is a definite dollar, oil price link.
To this point the link has not really been quantified to show just what the correlation is so we can determine what is demand and what is dollar. When you adjust the dollar with respect to the euro's climb against it the past two years, i.e., take out the dollar's fall and then compare this to the price rise in oil, oil is trading just about where it has traded when it made minor bumps higher over the past 10 years. Thus but for the decline in the dollar oil is not much higher than what we would be used to. Europeans have not seen a noticeable rise in their oil prices while they have seen their buying power in the US increase. The dollar denominated countries have taken the largest hits with respect to energy.
Now as the dollar recovers as it has been doing in fits and spurts as the Fed verbalizes its 'tough love' policy, oil continues to decline in dollars. As the Fed continues its hiking up toward 4.5% or further, the US attracts more foreign investment capital looking for safe, steady returns. That increases dollar investments and thus more demand for dollars. As with many financial relationships, one builds upon the other and starts a synergistic chain of events. That speaks better for the US consumer and economy ahead, but at 2.75% on the fed funds rate, it is still a long way to go.
THE MARKET
Monday was an inside day, i.e. where the high and low is contained within the prior session. Some say that does not tell us anything about the action that day, but in a candlestick chart world that can indicate a continuation of the overriding trend. Couple with that the three failed rally attempts the past three sessions and you see a continued weak market, unable to take advantage of rally attempts. No surprise there.
What each of these weak bounces does is run through those few buyers that are in the market. There are not a lot of sellers, but the buyers are not strong enough to hold the gains, and thus the selling each bounce attempt. What that does is run through your buyers until none are left. At the same time the sellers get their rest, and that makes the market vulnerable to more downside without any real upside rebound or relief bounce.
The indices still are in position to bounce, at least with respect to NASDAQ and SP500, and with the end of quarter this week there is always some window dressing. That can always boost the market overall as some of the more popular or leading names are bought. There are leaders moving higher in the market still, and that indicates that there is still life in the upside, at least still trying to piece together a relief move. Those leaders will have to continue and gain some more support to get the market to follow. If it does that can give us some decent upside to play leaders, sell those losing their strength, and setting up some downside positions. After three days of struggling for the smallest of gains that seems like a tall order for the overall market.
Market Sentiment
VIX: 13.75; +0.33
VXN: 17.74; +0.59
VXO: 13.15; +0.27
Put/Call Ratio (CBOE): 0.66; -0.12. After giving 5 closing readings above 1.0 and a number in the nineties, the ratio is dropping hard without producing a substantial bounce. Similar to what we discussed above, i.e. wearing out your upside ammunition without getting any upside move.
NASDAQ
Modest of modest rebounds, moving over 2000 intraday but then totally failing to come away with any real gain. Low volume, hugging the 200 day SMA, but the 10 day EMA looks stronger as resistance than the 200 day as support.
Stats: +1.46 points (+0.07%) to close at 1992.52
Volume: 1.537B (-10.28%). Very low volume, the lowest of a month of low volume. That is negative in that NASDAQ tried to rally, but it is also in keeping with its basing during this year. Not many buyers, not many sellers, not much of anything.
Up Volume: 767M (-184M). Almost a dead heat on the volume.
Down Volume: 713M (-19M)
A/D and Hi/Lo: Decliners led 1.18 to 1. Breadth was never really anything noteworthy, hanging around 1.3:1 even at the market highs. That showed that the move was large caps when it occurred, but even they fizzled in the last hour.
Previous Session: Advancers led 1.16 to 1
New Highs: 54 (+13)
New Lows: 85 (+6)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
Cleared 2000 once more intraday, but that is no great feat of late. The move higher was lower than Thursday, unable to even challenge the 10 day EMA (2009) before falling to close just below the 200 day SMA (1992.85). It continues its slog at the 200 day, trying but unable to bounce off of that level and make it stick. Declining volume the past three sessions after the sharp selling last Tuesday has kept it tethered to that support level. It continues to base, but as we saw in early January at the 50 day EMA (2048), it has been unable to generate a sustained move off this level. That lateral move eventually failed when the buyers were worn out; this move is early, but it is showing similar characteristics with the inability to make any headway off this key support. If a stock or index fails at the 200 day SMA and does so on rising trade, that is a sign the big money is not holding stocks but instead is actively selling them.
NASDAQ 100 tapped at the 200 day SMA (1482) once again and then failed once again to hold the move. It remains below the 200 day SMA, a sign that the big money is not all that excited about holding these stocks at this juncture.
SOX was leading higher early in the session with a move up to the 50 day EMA (422), but that move failed and it rolled over, giving back all of the gain. It ended where it started, just above the 200 day SMA (414.48), still trying to find some firm footing at this key support level. Of the patterns, it has at least a decent one that could yield a rebound. But of course, if ifs and buts were candy and nuts . . .
SP500/NYSE
The large caps jumped back over 1175 as well but stalled out once more, falling to close right at that rather important level. Another very low volume session along with NASDAQ as buyers faded after the morning push higher.
Stats: +2.86 points (+0.24%) to close at 1174.28
NYSE Volume: 1.357B (+3.4%). Whopping volume gain as SP500 put its two lowest volume back to back sessions together since late December. Each bounce has found no real buying support to hold the move.
Up Volume: 768M (-212M)
Down Volume: 908M (+185M)
A/D and Hi/Lo: Decliners led 1.3 to 1. As with NASDAQ, never really that strong moving into the session highs as the small and mid-caps lagged. What little movement there was involved the large caps.
Previous Session: Advancers led 1.48 to 1
New Highs: 36 (+4)
New Lows: 72 (+15)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Another reach up toward 1180 on the high but unable to take out the Thursday peak. Same result with just a slight gain Monday. SP500 remains below some relatively important prices at 1175 as well as the March up trendline (1177). It has not given up, has not rolled over, but as discussed above, this low volume runs that are shot down run through the buyers that are in the market and gives the sellers a rest. If this gives way there is not much to stop it until 1155ish to 1150 (200 day SMA).
The SP600 did not even attempt to take out its 50 day EMA (324.48) after breaking below that level last week. The weak bounce was never strong as the smaller caps lagged all session. With this leadership group wheezing below the 50 day, much of the market's strength has fled. Monday the large caps tried to lead but the attempt was almost laughable. The small caps have spent four closes below the 50 day EMA. No strong rebound to try and get back through shows little interest thus far. It continues to work on something of a right shoulder to a short 8 week head and shoulders pattern, but as we have noted before, those patterns are not definitive until the breakdown. Needs a good, strong move back through the 50 day EMA to break up the right shoulder, but it has not shown the strength of late to produce that move.
DJ30
The blue chips led the market into the close Monday though they gave back half of their gains as well. Broke through 10,500 but never came close to the 10 day EMA (10,570) on the day. DJ30 again continues to show the best life as it tries to hold above the 200 day SMA (10,377) and move up toward the 50 day EMA (10,658). That may be all it is able to produce on a bounce, if it can generate one that can hold some gains into the close.
Stats: +42.78 points (+0.41%) to close at 10485.65
Volume: 213 million shares Monday versus 238 million shares Thursday. Microscopic volume. That is why it was pushed lower late in the session with such east. It did not take many sellers to push aside the buyers.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
The economic data gets a start Tuesday with consumer confidence at 10ET. After the oil and interest rate roughing up it is still looking for something to trigger an oversold rebound. It tried it on its own the past three sessions but nothing was there. Yes some leaders continue to post nice gains on impressive volume, but not many gains are sticking outside of those stocks. The market needs a catalyst, and the rising dollar/declining oil story, coupled with some upbeat economic data may produce the long-awaited rebound.
It will have to do something fairly soon. As noted above, the action the past three sessions tends to grind up the buyers that are in the market. Overall they cannot produce gains that stick in the overall market. The longer the market stalls at these levels after attempting moves higher, the more likely it moves lower because it is not really basing, just burning up the buyers that have come in after a steady, three week trend lower. Some good stocks continue to move higher on volume and are trying to lead, but again, they need friends.
The market has some lower oil prices, rising dollar, and three weeks of downside to help it out with a bounce. When you look at what the market is grasping at, you cannot have too much confidence in the chances. Even if we do get a bounce it is likely to be just a relief move. We will continue to look at the strong leaders that are set up to make good moves; they can run fast to the upside in a relief move. We will also continue to look at downside positions, but would prefer that upside bounce to set them up better after three weeks of downside.
Support and Resistance
NASDAQ: Closed at 1992.52
Resistance:
2000
The 10 day EMA at 2009 and the 18 day EMA at 2024 are the near term obstacles as the index bounces.
2050-54, prior resistance and the June high is stronger
The 50 day EMA at 2049
The 50 day SMA at 2052
2066 to 2070, the bottom of the January lateral move.
2100 from February and March.
January high at 2154 (early 2004 high)
Support:
The 200 day SMA at 1993 is trying to hold.
Early October high at 1971.
Late 2003 highs from 1960 to 1970.
S&P 500: Closed at 1174.28
Resistance:
1175 second high in that double top that spanned late 2001.
March 2003 up trendline at 1177.
1185, the top of the November consolidation range.
The 50 day SMA at 1194 and the 50 day EMA at 1193.
1196, the mid-January high and the early December peak in the left shoulder.
1200
Q1 1999 lows at 1215
December high at 1218.
Support:
1163 is minor support.
1154-1157 tops from early 2004.
The 200 day SMA at 1150
Dow: Closed at 10,485.65
Resistance:
The 10 day EMA at 10,570
Price consolidation at 10,600 level is a key level.
The 50 day SMA at 10,659
The 50 day EMA at 10,662
10,754 is the February high
10,868 from the December 2004 high.
10,975 - 11,000 from Q4 2000, Q1 2001
Support:
10,400, the bottom of the November/December range
The 200 day SMA at 10,376
September high at 10,342.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
March 29
Consumer Confidence, March (10:00): 103.0 expected and 104.0 prior
March 30
GDP-Final, Q4 (08:30): 4.0% expected and 3.8% prior
Chain Deflator-Final, Q4 (08:30): 2.1% expected and 2.1% prior
March 31
Initial Jobless Claims, 03/26 (08:30): 320K expected, 324K prior
Personal Income, February (08:30): 0.4% expected and -2.3% prior
Personal Spending, February (08:30): 0.5% expected and 0.0% prior
Chicago PMI, March (10:00): 60.5 expected and 62.7 prior
Help-Wanted Index, February (10:00): 41 expected and 41 prior
Factory Orders, February (10:00): 0.5% expected and 0.2% prior
Apr 01
Auto Sales, March (00:00): 5.4M expected and 5.3M prior
Truck Sales, March (00:00): 7.8M expected and 7.6M prior
Non-farm Payrolls, March (08:30): 220K expected and 262K prior
Unemployment Rate, March (08:30): 5.3% expected and 5.4% prior
Hourly Earnings, March (08:30): 0.2% expected and 0.0% prior
Average Workweek, March (08:30): 33.7 expected and 33.7 prior
Michigan Sentiment-Rev., March (09:45): 92.5 expected and 92.9 prior
Construction Spending, February (10:00): 0.6% expected and 0.7% prior
ISM Index, March (10:00): 54.9 expected and 55.3 prior
End part 1 of 3
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world stock market
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