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us stock market, understanding the stock market
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7/11/05 Technical Traders Report
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Technical Traders Report Subscribers:
Jon Johnson is traveling again this week, once more visiting companies for investment opportunities. This week he is in the Austin area. The reports may be a bit abbreviated, but as always he is sending in his market commentary and play selections.
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ITG; BJS; CCC
Trailing stops: None issued
Stop alerts: 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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
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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.
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SUMMARY:
- Stocks waste no time, continue rallying after Thursday reversal.
- Dennis leaves Gulf oil alone, China's imports falling, and oil does as well.
- Earnings are delivering so far with solid DNA results.
Rally continues as SOX leads techs & small caps higher.
The market continues its healthy action with NASDAQ, small caps, mid-caps, some large caps, and now semiconductors sharing in the gains. Oil stocks led the way into this rally, and while they are easing back here after the recent run and a less severe impact from Dennis, the rest of the market is receiving a nice influx of cash. The small and mid-caps are flat out rallying while the large caps have been reluctant to step forward. NASDAQ has led those larger companies higher, and Monday saw a key move by the semiconductors as they cracked above their recent trading range. Not a clear breakaway move, but a strong rally into the close that pushed SOX to a new 12 month closing high. That is a key move that provides a lot of support to the resumption of the rally.
Volume was stronger and above average on NASDAQ. NYSE volume was again a bit disappointing, falling and dropping below average as the NYSE indices added to the Friday rally. SP500 moved past the June closing highs Monday, a much needed move, but it sure would have been nice to see stronger volume as with NASDAQ.
Nonetheless, overall volume remains improved, moving to average or better the past week as the indices tested the lows of the range and then reversed after the London bombings. NASDAQ volume has been rallying with each upside session. NYSE volume has been at or better than average for the past week; volume does not have to be contained in one big surge, but solid, steady volume shows sustained buying. If you have a choice between a big volume surge for one session or a series of solid average or better sessions we will take the latter. Again, it shows sustained buying as opposed to a big surge of buying by a few institutions that is not then sustained by the rest of the investors. This move is not showing stellar volume, but it is showing sustained accumulation of late, turning the tide of that distribution in the two weeks heading into the London bombing.
More and more it looks as if that dip lower and rebound was a decent washout session that gave buyers the upper hand. It was enough to break out NASDAQ over 2100 and of course SP400 and SP600 have been surging to new all-time highs. Hard to argue with new highs and solid leadership. Volume is still questionable, but as noted over the weekend, it is not bad for summertime, particularly on NYSE the past week as it has sustained at near average or above average levels as SP500 closed above the June closing highs, making its own mini-breakout. Hard to argue with the leadership, the breakouts, and the breadth. It is still susceptible to upset with a big news event, but that is always the case.
THE ECONOMY
Oil continues to slip back as near term events, longer term trends ease.
Remembrances of Ivan had oil traders concerned as hurricane Dennis moved through the Gulf of Mexico over the weekend. Prices were already easing, however, even as it moved through as it became evident there was not going to be much damage to any oil production facilities. The storms were the near term issues that were pushing the price early. You would expect them to fade when the initial hype subsided and more news about the actual damage came through.
The longer term trends are demand issues. It has not been current supplies that have driven price the past year, but expectations about what demand will be in the future. Given that, near term oil inventories could not blunt ever increasing prices. After all, near term supplies are going to get burned up by that continued demand down the road.
Monday a little more information about that long term demand surfaced. One of the main issues re price has been the competition between the west (specifically the US) and China for oil reserves. The Unocal deal is one manifestation, but there have been many others with China out in the international market, wooing other producing nations to turn over more supply to it. Last year Chinese demand was ramping ever higher, up 45% through July. This year things are a bit different. Chinese demand is up just 5% over the same period.
In response to the near and longer term influences, oil closed lower Monday, falling to 58.92 (-0.71) after briefly topping $62/bbl a week back. Oil did not tank on the China news. Seems that even if Chinese demand has lowered this year there is still too little production to cover even lower levels of demand. There is still talk of a collapse in oil prices, but with the US economy solidifying further, the dynamic of demand remains strong. Oil is moving lower in its range, but unfortunately it has established a higher range this year.
THE MARKET
MARKET SENTIMENT
VIX: 11.28; -0.17
VXN: 13.57; -0.23
VXO: 10.67; -0.15
Put/Call Ratio (CBOE): 0.81; -0.01
Bulls versus Bears:
Last week: A bit of improvement in the bulls/bears sentiment indications with both ends moving to levels that are just below those considered bearish. Last week they were clearly in the bearish indications and the market sold. That cleared out some of the bulls and upped the bears, but they are still right at the bearish threshold.
Bulls fell to 53.9% from 55.1%. That put them back at the level of three weeks back and ended the weekly gains at 7 weeks. Bulls bottomed in early May at 43.5%.
Bears rose to 21.4% from 19.1% the week before. That puts them over the 20% level considered bearish. Quite a drop from the 26.1% a few weeks back and the 30% reading in early May.
NASDAQ
Stats: +22.55 points (+1.07%) to close at 2135.43
Volume: 1.798B (+6.2%). Volume moved above average and to the best level of this rally, at least since the Thursday reversal when NASDAQ came off of the 50 day EMA. The increasing volume is a decent indication; better to have shown up later than not at all as in the past rally. This gives the move a bit more staying power, but we also note that this is just the first session of above average volume since coming off the 50 day EMA.
Up Volume: 1.487B (+44M)
Down Volume: 284M (+49M)
A/D and Hi/Lo: Advancers led 2.32 to 1. Solid breadth once more. Down from Friday, but still solid breadth is holding, and that is pushing the advance/decline line to new highs on this move, some very good corroboration of the NASDAQ breakout above 2100. In short, not just a few generals are leading, but the generals and the troops are coming as well.
Previous Session: Advancers led 2.67 to 1
New Highs: 266 (+84)
New Lows: 17 (-3)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ continued the breakout above 2100, closing at the session high with a late push back up after a midday pullback. The follow through is very good action on the heels of the Friday move. After the next breather we want to see the move continue on a new resumption of above average volume. Not saying it is done yet with this surge, but it will need to take a breath fairly soon, and resistance at 2051 would be a logical point. Nice strong continuation of the move.
SOX was a big boost to the market overall Monday with a market leading 2% gain that pushed SOX through 450 on the close (451.60), the highest close since this 8.5 month trading range started. It is not a done deal, but it is a solid move backed by stronger NASDAQ volume. As with NASDAQ it needs to put more distance on this move, but a very good start to a breakout.
SP500/NYSE
Stats: +7.58 points (+0.63%) to close at 1219.44
NYSE Volume: 1.401B (-4%). Volume could not continue building as the NYSE indices continued their move higher after that Thursday intraday reversal. The volume may be lower, but overall it has been stronger than on NASDAQ. That does not mean it is bulletproof; an above average volume session Monday would have been a nice confirmation of the reversal.
Up Volume: 1.436B (-69M)
Down Volume: 397M (+22M)
A/D and Hi/Lo: Advancers led 2.52 to 1. As with NASDAQ it was lower than Friday but still a very solid session with respect to the number of stocks moving higher.
Previous Session: Advancers led 3.07 to 1
New Highs: 503 (+93). Very respectable showing in the new highs as the tally breaks loose with SP500 making a new closing high over the June highs.
New Lows: 19 (+2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps pushed higher once more though on lower volume, clearing the mid-June closing highs near 1220. It is now taking aim on the March highs (1229.11 intraday, 1225.31 closing). That resistance will likely slow this move and give it a chance to catch its breath for another run. As always, don't want to see volume ramp up as it makes the test. The average trade is decent as noted, but it is not a clear blowout to the upside.
The small and mid-caps are simply surging with no resistance as they are at new all-times. Of course that does not mean they rally from here to eternity, but it makes the move easier because there are no angry holders of these stocks ready to sell into the move. It will come back and test the move, but that does not mean it is not a strong move.
DJ30
DJ30 moved back above the 200 day SMA (10,450), following the rest of the market higher. Still in a weak pattern with next resistance at the June highs (10,600 to 10,650ish). Volume was below average on the move, falling from the Friday levels. As usual, the Dow followed the market, unable to make any wake of its own.
Stats: +70.58 points (+0.68%) to close at 10519.72
Volume: 225 million shares Monday versus 249 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
No scheduled economic reports Tuesday, and that leaves stocks on their own, or at least weighing the earnings reports that are starting to come in. After hours Monday DNA reported some very healthy results, coming in above expectations. The stock was up after hours after getting some cold feet ahead of the results.
That selling right ahead of the close shows investors are still coming to grips with what this season is going to show. 7% growth is expected, but the past two quarters companies have been beating expectations handily. There is some expectation that earnings will top expectations again, and that leaves room for some upside if the results don't step up. Stocks have rallied ahead of results, and they do need to show solid growth once more and of course good outlooks as well.
We now have basically three sessions of upside moves after the Thursday rebound. That kind of action cannot be sustained indefinitely, but it can also continue further than you think it would. What we are going to look for is some continued rotation. Last week saw money move into technology after pushing energy higher. That was in addition to the funds still moving into the small and mid-caps. We will likely see some more upside generally on Tuesday, but we also expect the move to start running out of steam. With that we could see some money move back into the energy stocks that have pulled back nicely to near support as the techs, chips, and to a lesser extent the large caps take a breather after that strong run higher. We will look for good volume as they start up. That is the nice thing about bull markets; they typically give you opportunities in waves as the money moves and injects life in sector after sector.
Support and Resistance
NASDAQ: Closed at 2135.43
Resistance:
2151, the early December closing high.
2163, the mid-December closing high.
2191.60, the January intraday high.
Support:
2100 was key resistance point, and a successful test sets it up as support.
The 10 day EMA at 2088.
2075 to 2078
2051 from February, March price points.
The 50 day EMA at 2054
Early April high at 2021, February lows at 2023.
The April high at 2022 was the higher high point.
The 200 day SMA at 2037
S&P 500: Closed at 1219.44
Resistance:
The June high at 1220
The March 2003 up trendline at 1230
The March 2005 high at 1229.11
Support:
December high at 1217
The February intraday high at 1212.
The 10 day EMA at 1205
1200 is some support (18 day EMA is at 1200 as well).
1196, the mid-January high and the early December peak in the left shoulder.
The April high at 1194
The 50 day EMA at 1195
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 1177
Dow: Closed at 10,519.72
Resistance:
The 200 day SMA at 10,450
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 May high at 10,406
10,400, the bottom of the November/December range
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.
July 13
Export Prices ex-ag., June (08:30): -0.4% prior
Import Prices ex-oil, June (08:30): -0.3% prior
Trade Balance, May (08:30): -$57.0B expected and -$57.0B prior
Treasury Budget, June (14:00): $28.0B expected and $19.1B prior
July 14
Retail Sales, June (08:30): 0.9% expected and -0.5% prior
Retail Sales ex-auto, June (08:30): 0.5% expected and -0.2% prior
CPI, June (08:30): 0.3% expected and -0.1% prior
Core CPI, June (08:30): 0.2% expected and 0.1% prior
Initial Jobless Claims, 07/09 (08:30): 319K prior
July 15
NY Empire State Index, July (08:30): 9.0 expected and 11.6 prior
Business Inventories, May (08:30): 0.4% expected and 0.3% prior
PPI, June (08:30): 0.4% expected and -0.6% prior
Core PPI, June (08:30): 0.1% expected and 0.1% prior
Industrial Production, June (09:15): 0.4% expected and 0.4% prior
Capacity Utilization, June (09:15): 79.6% expected and 79.4% prior
Michigan Sentiment-Preliminary., July (09:45): 94.5 expected and 96.0 prior
End part 1 of 3
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us stock market
understanding the stock market
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