|
|
us stock market, trend trading stock
* * * *
4/25/05 Stock Split Report Update
* * *
Stock Split Report Subscribers:
Next full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: NMGA; HSY
Trailing stops: None issued
Stop alerts issued: 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. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Stocks start strong, try to give move away, recover into close.
- Existing home sales surprise upside following dismal housing starts report.
- SP500 clears recent highs but now has to retake H&S neckline to continue the relief bounce.
- Economic data to come back into full focus with earnings as consumer confidence Tuesday, personal spending, Chicago PMI Friday.
Late rebound saves the session.
Stocks rallied early on some new week optimism. A group of upgrades of some name brand stocks (AAPL, SBUX, MU), a VLO acquisition, and some passable earnings set the stage pre-market, and it carried over to the open with NASDAQ gapping higher 8 points. Stocks rallied the first hour with small caps and mid-caps leading the way with solid 1% gains. The move continued until SP500 ran right up to the 18 day EMA and the neckline of its head and shoulders breakdown. Several tries to move through that level failed, and in the afternoon stocks were selling again, back down to toward opening levels.
Volume was very light, and that made it easier to push stocks around. It was looking pretty grim with just over a half hour left as NASDAQ cut to a session low, undercutting its gap higher. SP500 was making the test of the move through the 200 day SMA that we were looking for after the morning open pushed it through that level, but it was making the move lower at the end of the day, not the best timing, at least if you are looking for upside strength.
That same volume, however, allowed some late buying to blitz stocks higher. NASDAQ ran 11 points, SP500 5 points in about a half hour. That pushed the indices right back up to the session highs as SP500, DJ30 and SP400 cleared the recent peaks from last week. The low volume shows very little enthusiasm for this move, but we are not necessarily looking for a barnburner on the way up.
We want a move that has some staying power, that can last a couple of weeks or more. It does not have to have volume just as the SP500 move higher from August 2004 to through September 2004 did not have volume. What that did, however, was set up a shakeout that led to the run higher to end the year. Of course that run was also predicated on oil prices that looked ready to roll over and the idea that the Fed was just about done. The start of 2005 set both of those in their ears. Oil is still rising and the Fed is still talking tough about rate hikes. The economy and the Fed funds contract are indicating otherwise regarding the Fed; we will have to see how that plays out, and indeed that is what the market is weighing right now as it made this pullback and now tries this modest relief bounce.
THE ECONOMY
Existing home sales surprise with a 1% gain.
The gain topped expectations for a bit more modest March, and on top of the dismal housing starts report last week it was heralded by some as a resurgence in the sector. This was the third highest tally on record following the June 2004 all-time high. The gain was driven by rising prices; housing sales, just as with the sales in any market, are measured by dollars and not by units. The rising home prices fuel the rise in the overall sales. Of course stronger prices mean a tighter market, so the result indicates a continued solid housing market, particularly as existing home sales make up 80% of the home sales.
It does not mean, however, that the housing market is ready to take off once more. Housing is flattening despite the record gains sporadically reported the past year. There is increased volatility in the month to month data, and that is always a sign that a trend in place is weakening. Thus you can see records spike up still even as the market peaks. Housing is an early cycle market, and it was really early this last recovery with the introversion after 9-11. 9-11, historically low rates, and demographics where boomers buy second homes and immigrants buy their first homes have driven this market. It is not going to implode from what we see, but it is not going to power higher and higher because we are moving away from the first two elements, and the latter is running its course as boomers near retirement.
THE MARKET
Monday was about as shaky as a house made of sticks surrounded by a pack of wolves. Optimism was high as a new week began and that picked stocks up off the Friday selling. Volume was low and the session was volatile, but it made its upside move and managed to hold it with a late recovery. It wouldn't have taken much to blow it down, but the sellers were not so inclined and it managed the low volume gain.
The small and mid-caps led the move higher, and the SP500 was in the hunt as well. Indeed, the SP500 is the relative leader of the pack of late, and it is at a critical level marked by the 18 day EMA (1165) and the neckline of the head and shoulders pattern that formed January to the recent collapse to 2005 lows. This is a key test. Volume was good Thursday as SP500 came off the low for the year, giving the index some buying momentum. We say buying because it comes from shorts covering as well as longer term buyers; rallies start with shorts covering, and it is no different this time.
There was not much buying Monday, but now SP500 is at a point where it will show us additional buyers with a follow through to the Thursday rebound. SP600 showed such a move last Thursday. A follow through from SP500 would be nice and give the index a lot more upside momentum. As a 3 to 4 week move higher ahead of another test would better set up a test and longer term rally, we would like to see good volume and breadth as it breaks through the neckline. If nothing else the volume gives it the strength to make a better break through that resistance. If it does not, however, we won't be overly disappointed as long as it can move generally higher, continuing the rebound move. We look at it kind of like the men at the Alamo buying time for Sam Houston to get his army together. Ultimately the garrison fell, but Texas won the war because of the extra time bought at the expense of a stand that did not have much chance of success.
Leadership was solid Monday, but it was also somewhat mixed again. The up and down session had some impact, but typically leaders somewhat ignore the ups and downs and move in their own manner. Monday saw some strong moves on solid volume but there were also moves that started higher, looked solid, but then faded in the afternoon and could not recover. That action matches the lack of volume on the session: a lack of conviction to really send the indices convincingly higher. The leadership and overall volume are key to the upside move, and Monday leadership was mixed and volume was low. That is no flashing light alerting to a strong move ahead. We will take a low key, low volume move, however, and when it runs out of gas take the money off the table, play the test, and then be ready for another upside follow through with some more strength.
MARKET SENTIMENT
After bulls and bears made their closest orbit since August 2004, VIX popped up close to August 2004 levels, and the put/call ratio scored some high points (the overall put/call ratio hit an all-time high at 1.47), stocks have attempted a rebound. The indicators have backed off with the upside of the past few sessions but, they hit some decent levels and helped spark a rebound attempt. Now it is up to the indices to make the move.
VIX: 14.62; -0.76
VXN: 18.58; -0.46
VXO: 13.79; -0.86
Put/Call Ratio (CBOE): 0.80; -0.18
NASDAQ
Gapped higher, almost gave it back, then surged to the close. Light volume as it still tries higher to test the bottom of the late March/early April range.
Stats: +18.59 points (+0.96%) to close at 1950.78
Volume: 1.502B (-18.84%). Friday's selling volume was lower, but the Monday trade was even weaker, coming in well below average and at levels not seen for three weeks. That hardly inspires visions of NASDAQ churning higher up to the 1970 level or the 200 day SMA. Most of the August 2004 move was on pathetic volume, however, and the index stumbled forward, not picking up speed until two months later. The moral: NASDAQ can stumble forward on low volume and set up a test (it has a modest one in late September 2004) or just keep moving until shorts are forced to cover.
Up Volume: 1.12B (+768M)
Down Volume: 348M (-1.131B)
A/D and Hi/Lo: Advancers led 1.57 to 1. Modest upside breadth, no match for the recent selling breadth. Still a sign of weakness in the overall index.
Previous Session: Decliners led 2.18 to 1
New Highs: 39 (-7)
New Lows: 116 (-24)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
A solid (though not blowout) Thursday, a Friday that gave back that gain on lower volume (the low trade only redemption), and a Monday rebound on low volume. As noted, hardly inspiring. NASDAQ is still below the recent peak on the Thursday move (1963) as well as the 18 day EMA (1963). On the last bounce higher in this 2005 selling NASDAQ could not clear the 18 day EMA, at least not for more than one session. It has major resistance overhead starting at that point, then the bottom of the recent lateral move from March and early April (1970), the 200 day SMA (1990), the 50 day EMA (2002) . . . you get the picture. NASDAQ broke down two weeks back and has to deal with the resistance it created when its consolidation attempt failed as well as the 200 day SMA. Technically it is weak, and needs to break the 18 day EMA to keep the downtrend from becoming too entrenched.
NASDAQ 100 showed similar action: still below the recent rebound high, low volume, and in need of clearing the 18 day EMA (1449). The latter is still 12 points away just to test it, but it needs a move through that as an initial step to keeping this rebound attempt alive.
SOX was the forgotten index Monday as it edged slightly higher, lagging the rest of the market. It tapped again at its 10 day EMA (394.37) on the high but fell back to close. It is tightening its range, often a precursor to another move, but thus far it is not indicating that move will be upside as the pattern is weak. It is moving in its trading range between 380 on the low side and 450 on the high side; from this position it would rally if that range is to hold. A solid move through the 10 day EMA would be an early indication it is going to try to keep the range intact. After hours SLAB reported earnings and mentioned its CEO was or has stepped out the back door. If he still has options, that door was slamming him on the butt as he left because SLAB was down over 2 sticks after hours.
SP500/NYSE
Not the best percentage move, but one of the better moves technically as SP500 cleared its recent highs and is testing key resistance. Unfortunately volume is low.
Stats: +9.98 points (+0.87%) to close at 1162.1
NYSE Volume: 1.425B (-14.84%). Extremely low trade as SP500 made a move up to next resistance. It too can continue higher on low trade, and we really don't mind about the lack of conviction on this move. The SP600 gave a follow through session last week, and that can provide enough strength to carry NYSE indices higher. With key resistance for SP500 immediately overhead, however, we are going to see what the lack of volume does to the rebound attempt.
Up Volume: 1.39B (+777M)
Down Volume: 382M (-1.01B)
A/D and Hi/Lo: Advancers led 2.39 to 1. Good breadth as the mid and small caps took the lead once more.
Previous Session: Decliners led 1.55 to 1
New Highs: 49 (+25)
New Lows: 52 (-61)
The Chart: http://www.investmenthouse.com/cd/^spx.html
SP500 continued its rebound attempt from Thursday on the low volume we have discussed at length. It is now at the next critical step, the 18 day EMA (1165) and the bottom of the head and shoulders neckline basically at that same level. This is a key area to break through for SP500 is it is going to test the 50 day EMA (1178) or the top of the right shoulder at 1191. That would give it enough of a rally to support a test of the recent 2005 lows. It does not, and ideally should not, be a straight move up to that level. We can expect a few upside days and then some downside to shake things up again, all the while keeping the move together. Key step ahead with the present resistance, and Tuesday may be a down session as it regroups. Just don't want a big rollover at this level.
The mid-cap SP400 was the most impressive of the smaller cap indices, clearing its recent highs on this last rally. It still has room to run before it hits the neckline of its head and shoulders pattern (649). Both SP400 and SP600 can play a big role in the next sessions as SP500 tries to move through its neckline. They all have the same problem that any selling index has: immediate overhead resistance it has to take out to avoid entrenching the downtrend that started in earnest at the March peak.
DJ30
The blue chips were buoyed as well as BA is selling more Dreamliners than anticipated. BA did not account for the move that it self was not all that spectacular. Low volume still below the 18 day EMA (10,300), the 200 day SMA (10,375), the March/April lateral consolidation attempt, etc. As with the other indices, all we want from DJ30 at this point is a decent, more or less sustained move higher to at least the 200 day SMA, preferably up to 10,600, and the longer it can stretch it out the better.
Stats: +84.76 points (+0.83%) to close at 10242.47
Volume: 231 million shares versus 273 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
More earnings and economic data ratcheting back up this week gives the market a two focal points as the big 'M' tries to figure out just what the economy is doing and how the Fed is going to react. Thus far the market has factored in some slowing and a Fed that is not going to let that alter its intent to run rates up. Thus the selling two weeks back. The Fed Funds Futures contract is still factoring in just three hikes in the next four meetings, not the rate hiking as far as the eye can see as was the case earlier in the year. The market anticipates what the Fed is going to do, not what it is doing now or says it is going to do. After all, the Fed said it was going to engineer a soft landing in 1999 and 2000, and that 10% swing in GDP growth over a few quarters did not feel soft to anyone but the Fed.
That pricing in the FF contract has given stocks some wiggle room and as seen last week, they are trying to make the most of it. Hardly a blowout upside move, but a follow through from the SP600 is attempting to set the stage for a continued upside attempt. As discussed, SP500 and the other indices are at a critical point, as always seems to be the case as stocks and indices try to recover from a breakdown.
Some upside moves after hours in semiconductors may provide some holdover into the morning. Many earnings are out before the open and consumer confidence and new home sales will add to the mix at 10ET. Plenty of sauce for the goose tomorrow as the indices attempt to continue the upside move through those important resistance levels.
We can expect further volatility given this light volume attempt to take out resistance. Volume shows conviction in a move; the rebound can thus continue on low volume if the sellers are not interested in moving back in. Low volume moves ultimately fail, however, and they can fail rapidly. That makes this a touchy environment and for upside plays we are sticking mostly to leaders that have pulled back and are now rebounding. We passed over some moves Monday that were on lower trade; even though market volume overall is lower, we still want to see good trade in the individual upside moves as that indicates buyers who are committing to the stock and less likely to bail out quickly when things slow a bit.
We are also watching this low volume bounce set up some more downside plays. Many stocks are still in downtrends, and if they fail at resistance we will be interested in those that can give us the right kind of gain; as discussed before, it is a combination of how far they can fall, the cost of put options, and the movement we can get on those options that determines, along with the technical position, whether the play is solid. If this rebound continues, then we will be patient and let these plays set up fully. When the rebound is over and the test starts, these will make pretty quick drops. Others will fall regardless of the market, and we want to be ready for those as well.
Support and Resistance
NASDAQ: Closed at 1950.78
Resistance:
1950 (top of October to December 2003 consolidation)
The 18 day EMA (1963) is potential resistance.
Late 2003 highs from 1960 to 1970 and the March/April consolidation low at 1974
Early October high at 1971 and the March low at 1973.
The 200 day SMA at 1990
The 50 day EMA at 2002 and the 50 day SMA at 2016.
Support:
1904 is the April low.
1900 from October 2004, March 2004, October to December 2003 (consolidation range bottom) held on this last test.
1876 from the May 2004 low and November 2003 low.
1860 from the late September 2004 low.
S&P 500: Closed at 1162.10
Resistance:
The 18 day EMA at 1165.
1164 is the January/March neckline to the head and shoulders pattern.
1175 second high in that double top that spanned late 2001 and early 2002 is trying to hold
The 50 day EMA at 1178
The 50 day SMA at 1187
March 2003 up trendline at 1190
1196, the mid-January high and the early December peak in the left shoulder.
1200
Support:
The 200 day SMA at 1154
1137 the recent April low.
1129 to 1125
1100 to 1095
Dow: Closed at 10,242.47
Resistance:
Some price resistance at 10,250.
The 18 day EMA at 10,300.
The 200 day SMA at 10,375
10,400, the bottom of the November/December range
The 50 day EMA at 10,466
Price consolidation at 10,600
10,754 is the February high
Support:
10,000 the recent lows.
10,065 from March 2004 lows.
9988 from September 2004.
9933 to 9900
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
April 25
Existing Home Sales, March (10:00): 6.89M actual versus 6.80M expected and 6.82M prior (revised from 6.79M)
April 26
Consumer Confidence, April (10:00): 98.0 expected and 102.4 prior
New Home Sales, March (10:00): 1190K expected and 1226K prior
April 27
Durable Orders, March (08:30): 0.3% expected and 0.5% prior
April 28
GDP-Adv., Q1 (08:30): 3.5% expected and 3.8% prior
Chain Deflator-Adv., Q1 (08:30): 2.1% expected and 2.3% prior
Initial Jobless Claims, 04/23 (08:30): 320K expected and 296K prior
Help-Wanted Index, March (10:00): 41 expected and 41 prior
April 29
Employment Cost Index, Q1 (08:30): 1.0% expected and 0.7% prior
Personal Income, March (08:30): 0.4% expected and 0.3% prior
Personal Spending, March (08:30): 0.4% expected and 0.5% prior
Michigan Sentiment-Rev., April (09:45): 88.9 expected and 88.7 prior
Chicago PMI, April (10:00): 62.5 expected and 69.2 prior
End part 1 of 2
|
us stock market
trend trading stock
|
