|
|
us stock market, understanding the stock market
* * * *
6/2905 Technical Traders Report
* * *
Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ASTM
Trailing stops: CLHB; DSTI
Stop alerts: CDWC
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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
Seminar Series Sale!
The new seminar series is scheduled to be ready in July, and we are closing out the inventory on the current series CD's at fire sale prices. Save on the best technical analysis, stock splits, covered calls and options seminars and enhance your understanding of market and stock moves and learn straight forward strategies to put that understanding to work and make more money. A great bargain.
http://www.StockSeminarsOnline.com
Seminar Series Sale!
SUMMARY:
- Stocks get really boring on first day of FOMC meeting.
- Q1 GDP stronger than expected, PCE still tame.
- All quiet ahead of Fed decision. Kind of.
Stocks unable to carry through with the Tuesday bounce.
The 50 day EMA provided support for NASDAQ and SP500 Tuesday as those indexes bounced off that key support. Good start to a rebound from the selling last week. Wednesday was unable to push the ball down the field, however. Stocks started a bit stronger, buoyed ostensibly by a stronger than expected final Q1 GDP reading and continued declines in oil prices. That fizzled quickly as sellers moved in ahead of the oil inventory data. When stocks rose as opposed to falling (+1.1M bbl crude, +1.7M bbl distillates) new life was pumped back into stocks. They rebounded and moved back up to session highs, working just below 2075 and 1202 resistance on NASDAQ and SP500. Nicely done.
That held through the morning, but as we noted in the lunch alert, the indexes were wedging higher, and that often indicates a weakening move. Sure enough stocks turned back from near resistance and started an early afternoon dive lower. They managed to hold near support levels (the trade was in a very narrow range Wednesday), but that was about it. A weak rebound attempt mid-afternoon had nothing behind it and faded into the last hour where stocks closed quietly.
Really boring action. Continued low volume, narrow breadth, few leaders making moves, very narrow trading range. Summertime and a two-day Fed meeting are pretty much recipes for stuck in the mud trading and that is what happened. The averages did hold support and the small cap SP600 was out in front leading once more, but those were modest silver linings. There simply were very few solid moves as the market went on hold ahead of the Fed announcement that is basically baked into the cake.
Not really bad action, but with the recent turn lower Wednesday's session did not do much to reverse those losses. As we indicated over the weekend, this kind of dump lower typically takes more time to rebuild from given the hard tumble from key resistance. With the Fed on the horizon once more and earnings already starting to show up, the lull is hardly surprising if you can slap yourself awake from the overall market slumber.
THE ECONOMY
GDP rises 3.8% in Q1, up from previously reported 3.5%.
The amazing growing economy. GDP is reported in stages, something like the Michigan sentiment report. As with the sentiment, that makes for typically wide margins of error as conclusions are drawn from incomplete data. It was no different for Q1. Expectations were for a 3.7% gain so the 3.8% had a bit of 'rah rah' effect for our fearless leaders. Given the prior reading of 3.5% and the 3.1% initially reported, it was quite a swing.
Housing was strong and helped fuel the gain once more. Indeed the result had many asking 'what soft patch?' Slice it anyway you want, it is hard to call 3.8% growth soft. The quarter appeared to slow near the end, but the late data, that data from the last part of the quarter, came in stronger than expected and pushed GDP higher. Home building climbed 11.5% versus the 8.8% originally reported, up sharply from the 3.4% posted in Q4. Exports were stronger as well at 8.9% versus the 7.2% reported. That was also about three times the 3.2% originally reported.
That gives the Fed more than enough ammunition in its current meeting to continue on its merry measured pace. The personal consumption expenditures less food and energy, one of Greenspan's favorites, was written down to 2% from the 2.2% originally reported. That was up from the 1.7% rate in Q4, but given the solid surge in GDP, the gain was nominal. Thus the Fed has ammunition to continues its rate hikes, but there is nothing pressing it to really get aggressive. Of course that will hardly keep the Fed in check. It has a target in mind despite what it says in public, and Thursday will be another step toward that target that only Alan and his henchmen know.
THE MARKET
MARKET SENTIMENT
VIX: 11.77; +0.19
VXN: 14.46; -0.38
VXO: 10.83; +0.12
Put/Call Ratio (CBOE): 0.78; -0.03
Bulls versus Bears:
Bullishness is rising and bearishness if falling. Both ends of the spectrum have pushed to what are considered bearish levels. With the summer slog ahead and earnings, this is another weight upon the market and is taking on more importance as the market struggles with key resistance.
Bulls rose to 55.1% from 53.9% last week, the seventh consecutive weekly gain, up from 47.95% just a few weeks back. Bulls bottomed in early May at 43.5%.
Bears fell to 19.1%, below the 20% level considered the bright line for bearish implications. This follows a steady erosion of bearish views (20.2% from 20.3% from 20.9% from 25% from 26.1%).
NASDAQ
Stats: -1 points (-0.05%) to close at 2068.89
Volume: 1.687B (+2.6%). Volume edged higher as NASDAQ waffled on its move off the 50 day EMA. It remained below average but was distinctly higher that that posted on the Tuesday gain. With the modest loss and the hold near the 18 day EMA, that was not all that bad of action but with the volume creeping higher it smacks of some churning, i.e. higher volume turnover. Just a hint now, but after the volume drop last week and the fact that it occurred on the heels of the Tuesday rebound it is something we are going to watch closely after the Fed announcement.
Up Volume: 890M (-396M)
Down Volume: 765M (+435M)
A/D and Hi/Lo: Advancers led 1.08 to 1. Basically in line with the action, helped by the small and mid-cap leadership.
Previous Session: Advancers led 2.63 to 1
New Highs: 117 (+19)
New Lows: 33 (-3)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ gapped modestly higher but then could not advance the ball beyond a 6 point gain. In the afternoon the buying interest was gone and techs gave back the gains to close basically flat. ORCL reported solid earnings but that helped ORCL and that was about it. There were no coattails as investors await the Fed and muddle through the summer heat. NASDAQ fell back to hold just over the 18 day EMA (2068), a good point to pause and take a breather. That keeps it on track for a continuing rebound, but that is about all it showed Wednesday as NASDAQ churned right in the middle of its 4 week range between the 50 day EMA (2044) and resistance at 2100.
The semiconductors were once more laggards, posting a market leading 0.9% loss. That pushed it back down to the 50 day EMA (421.41) on the close, right back to where it closed Monday as the chips continued their flop back to support. This is a do or die level for SOX. Well, maybe not die, but it does not help if SOX slips below this level. There are still some chips in good shape, e.g. TXN, WFR, ADEX; some are household names, some are not. They key to chips is similar to the rest of the market: finding the specific stocks set to move higher.
SP500/NYSE
Stats: -1.72 points (-0.14%) to close at 1199.85
NYSE Volume: 1.313B (-3.96%). Volume was just about flat on NYSE as the indices on that index traded mixed. Still well below average so there was no real churn or accumulation, just summertime, pre-Fed slogging. Overall there is a hint of negative bias still hanging over from last week.
Up Volume: 873M (-487M)
Down Volume: 803M (+421M). Just about a dead heat.
A/D and Hi/Lo: Advancers led 1.35 to 1, thanks to the small and mid-caps.
Previous Session: Advancers led 2.63 to 1
New Highs: 202 (+25)
New Lows: 35 (+1)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps moved through the 10 and 18 day EMA (1201.63, 1200.79) in the morning, but that did not hold into the close. Very modest losses as SP500 held most of its gains off of the Tuesday 50 day EMA (1192) bounce. Still trying to regroup from the late week dump lower that dumped many low volume and comparatively small advances. Still watching closely how SP500 handles a test of its recent highs (1219-1220), but the Wednesday action gave no insights as SP500 did not come close to those levels.
The small cap SP600 continued higher Wednesday, moving further off of the pseudo-test of the 50 day EMA (320) earlier in the week. The move was lackluster and was fading some in the afternoon. SP600 is moving closer to its recent highs spanning 336 to 339 where it peaked on this last move. That matched the March highs as well, making this rebound here very important for the index and indeed the market as the small caps have been the leaders. Trying to rebound and breakup a potential double top. Has plenty of work to do to get there, particularly given the overall market.
DJ30
DJ30 tapped at the 200 day SMA (10,445) on the high and then beat a hasty retreat back below the 50 day SMA (10,392). Volume edged higher as DJ30 tapped this resistance and turned over. This looks very much like the kiss goodbye where an index tests a break lower with a modest rebound to resistance and then rolls over. Not looking too savory here, at least for the upside.
Stats: -31.15 points (-0.3%) to close at 10374.48
Volume: 222 million shares Wednesday versus 215 million shares Tuesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Wednesday was the anniversary of the Fed's current rate hiking spree. Hardly anyone noticed. Wednesday was quiet but Thursday will likely not be a repeat. In recent times, the day of a Fed announcement has been met with early softness and then a steady climb into the proclamation. Afterwards there is some waffling as various bets and hedges are squared once the statement's impact is absorbed, but of late they have then resolved positively.
There is a bit more spice to add Thursday with the personal income and spending reports out as well as the Chicago PMI. That is the last bit of moderately current news the Fed will get as it makes its decision to raise rates 25BP. The statement is the key, and we expect more 'measured pace' language.
Not everyone is. There is one crowd that is pushing the no more rate hikes or one and done theory. No more rate hikes would be a stunner and would ignite a surge higher. The odds of that happening are as likely as rain on my yard tomorrow. We are in a drought here, but that might be overstating the chance of no rate hike Thursday. The Fed Funds Futures contract gives it a 100% chance of a 25 BP hike, and on this eve of the meeting the FFF is a lock.
Will there only be one more hike? Even if there are to be no more hikes we likely would not know that because the Fed will likely play things close to the vest in any event. Thus we could get a 25BP rate hike and more 'measured pace' language and then have no further rate hikes. Whether one hike or two, or more, the market has factored in two more 25 BP hikes. Anything that deviates from that will have a very real impact up or down depending upon whether they stop or continue on. Thus after Thursday we are likely to know very little more about what the Fed will do other than what the FFF tells us.
Thus we are banking on two more hikes as per the FFF, but we also know, and as a former Fed governor stated Wednesday, the Fed tends to go too far. Greenspan says that the Fed will know it has hit neutral when it sees it. Unfortunately he will probably be looking in the rearview mirror when he does see it. While he is looking in the rear mirror he accidentally runs over your retirement accounts once more. The Fed has a nasty habit of going too far, and that no doubt helped spawn the rumor out Thursday that the Fed is going to ignore a flat yield curve at least as an indication of an economic slowdown and/or recession. That is what we have feared all along, and Greenspan has certainly broached the subject already with his comments to Congress that a flat or inverted yield curve might not mean economic slowing. As we said before, this 'it is different this time argument' is pretty darn frightening as Greenspan is again holding himself out as smarter than the financial markets.
This boils down to us not expecting much 'news' out of the Fed tomorrow, i.e. a 25BP rate hike and a continuation of the 'measured pace' language. Greenspan wants to give the next Fed chairman the luxury of cutting rates if necessary in 2006, and as Bill Gross has opined, the next Fed chairman many very well have to cut rates. We wrote last week about this: raising rates to get to a target or comfort level regardless of the economy. As long as the economic activity is passable Greenspan can make the argument for raising rates. Problem is, it becomes a self-fulfilling prophecy: you raise the rates in order to have room to cut in the event of an economic slowdown and then you cause an economic slowdown by raising the rates. Kind of like a firefighter starting a fire, putting it out, and then taking credit for being a hero.
The key ahead depends upon the market's read on this. Up to now it has staked its move on just two more rate hikes, but the Fed remains a threat until it says it is over. If the market gets wind of more than a couple more hikes then the current waffling becomes real selling. Right now we doubt the Fed will give any indication of more intense or prolonged rate hikes, and the Friday ISM data will give more insight into what the Fed will do (a reading below 50 may just put an end to the rate hiking). Even with that we continue to watch for distribution or failures in leaders as a sign of a failing rally as NASDAQ, SP500 and SP600 try to move back up and test their recent resistance points.
Support and Resistance
NASDAQ: Closed at 2068.89
Resistance:
The 10 day EMA at 2069.72
2075 to 2078
2100 is a key resistance point.
2151, the early December closing high.
2163, the mid-December closing high.
Support:
2051 from February, March price points.
The 50 day EMA at 2044
Early April high at 2021, February lows at 2023.
The April high at 2022 was the higher high point.
The 200 day SMA at 2031
S&P 500: Closed at 1199.85
Resistance:
The 10 day EMA at 1201.62
The February intraday high at 1212.
December high at 1217
The June high at 1220
The March 2003 up trendline at 1226
The March 2005 high at 1229.11
Support:
Price levels at 1200 is trying to hold.
1196, the mid-January high and the early December peak in the left shoulder.
The April high at 1194
The 50 day EMA at 1192
The early May high at 1178
1175 second high in that double top that spanned late 2001 and early 2002
The 200 day SMA at 1174
Dow: Closed at 10,374.48
Resistance:
10,400, the bottom of the November/December range
The May high at 10,406
The 200 day SMA at 10,445
The 18 day EMA at 10,460
The April high at 10,557
Price consolidation at 10,600
10,754 is the February high
10,868 is the December 2005 high.
10,985 is the March high
Support:
The recent April highs at 10,264
10,065 from March 2004 lows.
10,000 the recent 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.
June 28
Consumer Confidence, June (10:00): 105.8 actual versus 104.0 expected and 103.1 prior (revised from 102.2)
June 29
GDP-Final, Q1 (08:30): 3.8% actual versus 3.7% expected and 3.5% prior
Chain Deflator-Final, Q1 (08:30): 2.9% actual versus 3.2% expected and 3.2% prior
June 30
Initial Jobless Claims, 06/25 (08:30): 325K expected and 314K prior
Personal Income, May (08:30): 0.3% expected and 0.7% prior
Personal Spending, May (08:30): 0.1% expected and 0.6% prior
Chicago PMI, June (10:00): 54.0 expected and 54.1 prior
Help-Wanted Index, May (10:00): 40 expected and 39 prior
FOMC announcement (2:15): Expecting a 25BP hike to 3.25%.
Jul 01
Auto Sales, June: 5.5M expected and 5.3M prior
Truck Sales, June: 8.0M expected and 7.8M prior
Michigan Sentiment-Rev., June (09:45): 94.6 expected and 94.8 prior
Construction Spending, May (10:00): 0.5% expected and 0.5% prior
ISM Index, June (10:00): 51.5 expected and 51.4 prior
End part 1 of 3
|
us stock market
understanding the stock market
|
