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world stock market, us stock market
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7/18/05 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts: TLWT
Buy alerts: None issued. Waiting on the test and the rebound to start.
Trailing stops: None issued
Stop alerts: None issued
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SUMMARY:
- Earnings rattle market a bit, but overall stocks just continue the test that started last week.
- Very quiet on the economic front, but Greenspan speaks to Congress Thursday.
- IBM takes its turn at trying to drum up the market but it may be too early to spark the rebound just yet.
Citigroup earnings trump market action.
There were two major bank earnings reports out Monday, one miss and one quite solid report. After a good run higher the past two weeks and some signs of the move making an interim peak, you can guess which report directed market action. With a bit of indecision in the market, Citigroup's earnings miss was what investors focused on, taking the market lower for the session.
Stocks started weak, made a rebound attempt early on, but then settled into a trading range below the flat line for the rest of the session. A lukewarm consolidation attempt mid-afternoon was sold into in the last hour, finishing stocks on their session low.
Bearish intraday action, but overall it was a pretty tame session. Volume was significantly lower than Friday's already low volume. Breadth was down but not crushingly so and the weakness was spread out across the market with large caps and small caps receiving equal opportunity selling. Mid-caps were the market leader with just a 0.2% decline.
Overall stocks held near support as the small cap SP600 sold back to the 10 day EMA and the large cap indices to fade back after showing some interim topping action last week. That interim topping action is normal after a run, and the low volume and leadership mostly holding near support is good indicia that the move is holding up and will resume after this test.
THE ECONOMY
Slow day in economics.
There was not a lot of action in the world of economics Monday with no scheduled reports. Greenspan is going to be speaking to the Senate Thursday in the son of Humphrey-Hawkins testimony where Greenspan gives his assessment of economic conditions and what the Fed is doing. There will be little new information provided given all of the recent attention on the Fed with its rate hiking campaign.
While Greenspan will receive the usual amount of attention, this week is really devoted to earnings. Thus far they have been hot and cold. Tech is a bit better than expected in the early going while the industrials and financials are lukewarm to disappointing. There are two causes for that. First, the industrials are getting hit by higher energy costs. Talk that the US can take $80/bbl oil and show no effects is preposterous. Companies are feeling the pinch, and as seen in the CPI, they are not able to pass much of that bite onto the consumer. The dollar is not helping them either of late, as it posts a solid rise the past two months. Second, the flat yield curve is making it harder for the banks to make their money on their loans due to the lower spread due to the flat yield curve. With Citigroup on restrictive lending status it is having an even harder time, as evidenced by the earnings, making its profits.
THE MARKET
MARKET SENTIMENT
VIX: 10.77; +0.44
VXN: 13.81; +0.47
VXO: 10.07; +0.03
Put/Call Ratio (CBOE): 1.08; +0.33. Pretty sizeable jump in put activity as the market makes its first real downturn since this rally resumed in early July. High put activity can mean speculation by option investors on the downside or big funds buying downside protection in the event the market starts to fall harder. Either way it indicates a pretty solid belief the market is going lower, and that is a good contrary indication, i.e., more worry about the downside means a serious tumble is less likely.
Bulls versus Bears:
Last week: Bulls increased slightly while bears did the same, maybe working to offset each other but still close to levels considered bearish for the market. This has taken them out of the clearly bearish levels of three weeks back, but again, still very close to levels considered bearish.
Bulls rose to 54.5%, back up after a one-week hiatus where the fell to 53.9%. Still below the 55.1% from two weeks back that put it above the 55% level that is considered a bearish indication. Bulls bottomed in early May at 43.5%.
Bears offset the bulls a bit, rising for a second week and moving to 22.2% from 21.4% the week before. That keeps them above the 20% level for the second week after dipping to 19.1% three weeks back. Below 20% is considered a bearish indication for the market. Hit a high for the year at 30% in early May.
NASDAQ
Stats: -11.91 points (-0.55%) to close at 2144.87
Volume: 1.346B (-12.88%). Big drop in volume once more after the Thursday gap higher on the AAPL and AMD earnings as well as the CPI. There have only been two above average volume sessions this month. The index rallied on rising volume which is a good sign as it shows more buyers on up days than sellers on the down days, but as with the rally in May, it leaves the index vulnerable to a big news story, say key earnings that turn out pretty crappy. Thus far earnings expectations are pretty contained, so the prospects of a major miss are less likely. Want to see that volume remain light as NASDAQ heads back to test the 10 day EMA.
Up Volume: 454M (-392M)
Down Volume: 858M (+178M)
A/D and Hi/Lo: Decliners led 1.65 to 1. Fairly modest downside breadth as NASDAQ peaks out and starts to come back to test the recent rally.
Previous Session: Advancers led 1.08 to 1
New Highs: 102 (+3)
New Lows: 18 (-4)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ has filled the gap higher from last Thursday on the AMD and AAPL earnings, but we don't think this is the end of the pullback. A nice, easy pullback takes it to the 10 day EMA (2126), a good near term support level to begin the next leg higher. Volume dropped below average once more Friday and it was even lower on the Monday selling. That is what you want to see, and overall NASDAQ price/volume action has been positive on this move. Want to see that hold up as that means more buyers than sellers in the market, and that always gives more upside room after the rally is consolidated some. Now NASDAQ may try to come all the way back to 2100, the key top it broke through 7 sessions back (the 18 day EMA is at 2109). Thus far it has shown a lot of stinginess with its gains, however, and that is why we are focusing on the 10 day EMA as a likely point it will rebound. Want to see that volume remain light as it makes the test.
SOX did something unusual Monday, i.e. it matched the rest of the market with its 0.6% pullback. Typically SOX takes the market move and adds to it as it has a higher beta. Monday it eased back after the strong rally in July, but it is still well above the key 450 level and the 10 day EMA (451.03). Good to see it not shucking its gains quickly either.
SP500/NYSE
Stats: -6.79 points (-0.55%) to close at 1221.13
NYSE Volume: 1.201B (-9.01%). The large caps were taking it pretty hard Monday, but volume was not higher. That means the small caps sold back on lighter volume as well, good to see once more after the higher volume sell off Thursday for those stocks. Similar to NASDAQ it was well below average and down even further from Fridays lower trade. Thus far the pullback is just what you want, i.e. on lower volume than the upside moves.
A/D and Hi/Lo: Decliners led 1.57 to 1. Small caps and large caps were down the same and that kept downside breadth modest.
Previous Session: Advancers led 1.04 to 1
New Highs: 150 (+23)
New Lows: 24 (+5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
SP500 fell back as well, posting its first loss in 8 sessions as it tests the past week's rebound off of the 50 day EMA (1200). SP500 looked very dicey as it worked along that level in late June and early July, but it found its footing and followed SP600 and NASDAQ higher in the ensuing rally, showing some pretty decent price/volume action. Volume peaked out Thursday as it showed that tombstone doji on the candlestick chart (closed well off of its intraday high) and then slid back Monday. It fell through 1225, the March closing high after failing to take out the key 1229 on the close last week. It is easily going to test the 10 day EMA (1217) and the June closing high (1216) on this move if not the 18 day EMA (1211), unless the IBM numbers can spark enough excitement in the large caps to turn them. Without the financials kicking in, however, SP500 will have a harder time turning right back up.
SP600 held up reasonably well, closing just below the 10 day EMA (342.52) as it continues its pullback to test its second breakout to a new all-time high in the past month. SP600 started this pullback last week, well ahead of the rest of the market; as it led the move higher that is no surprise. What we are looking for is SP600 to find its bottom prior to the rest of the market, likely near the 18 day EMA (339.58), and then turn back up and continue the move. We will be watching the price/volume action closely as it continues the pullback to see if it remains positive. As long as the volume is lighter on the test and stocks hold near support then we will be patient and let them finish the test and grab leaders on the rebound. This is the leadership index and that is why we are paying a lot of attention to it.
DJ30
The blue chips faded along with the rest of the market, matching them on the pullback. Volume was lower as well, another good indication. Even with C and its disappointing earnings result (at least to the street), DJ30 fared pretty well. Tuesday it will have the chance for a nice move on the back of IBM and its solid results reported after hours. DJ30 still has that 10,600ish level to get through, and after this test to 10,557 or the 10 day EMA (10,520) it will be ready to try again and maybe exhibit a bit of leadership. Maybe it won't even go back to test further given the IBM earnings. Nah.
Stats: -65.84 points (-0.62%) to close at 10574.99
Volume: 206 million shares Monday versus the 239 million shares Friday. Good to see the low volume on DJ30 as well as the index pulled back from its 10,600 nemesis.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
June housing starts and permits are out tomorrow, but IBM and other earnings are likely to key the action. Right now we are in a relatively dead economic week, but with the earnings wave here that is just as well. Investors are going to take their cues from here on the earnings and guidance.
Given stocks rallied into earnings they typically get cold feet when the first results come out. Once the trend of the earnings becomes apparent (or the market feels it is apparent), stocks will move. That is what we are seeing now as the market peaked last week and sold on the C earnings Monday. They were expecting good results heading in, thus the rally. Now they need some reassurance and then they can continue the move.
Of course that coincides with a typical technical pattern: solid rally past key resistance (NASDAQ, SP600, SOX, SP500) and then a test of that move. Whether it coincides with this earnings pattern or some other seasonal event is typically irrelevant. What we want to see is continued solid price/volume action on the pullback and next rebound attempt as well as good action in the leadership. With this last move leadership is pretty broad, but health services (medical equipment, appliances, biotech), technology, and energy have been solid. Energy is in a pullback and fighting to hold on with some less than positive price/volume action. The other areas are looking good.
We are being patient here, letting stocks make their test as they always do, letting those that are holding up on good volume do just that, picking up some good movers if they show themselves, and cutting those that are showing the wrong action. During these pullbacks the market weeds out the strong and the also-rans. Right now there are a lot of stocks that are performing well; they just need some confirmation from the earnings to continue the move.
Support and Resistance
NASDAQ: Closed at 2144.87
Resistance:
2151, the early December closing high and highs from January 2004
2163, the mid-December closing high has stalled NASDAQ the past two sessions.
2178 is the January closing high.
2191.60, the January intraday high.
Support:
The 10 day EMA at 2126
The 18 day EMA at 2109
2100 was key resistance point, and a successful test sets it up as support.
2075 to 2078
The 50 day EMA at 2071
2051 from February, March price points.
Early April high at 2021, February lows at 2023.
The April high at 2022 was the higher high point.
The 200 day SMA at 2044
S&P 500: Closed at 1221.13
Resistance:
The March 2005 closing high at 1225
The March 2005 high at 1229.11
Price tops at 1265 from 1-28-99 and 2-99 & price bottoms from 12-20-00
Price top at 1-6-99 at 1272
Price tops at 1290 from 5-23-00
Price tops at 1364 from 1-29-01
Support:
The June high at 1220
December high at 1217 and the 10 day EMA at 1217
The 18 day EMA and the February intraday high at 1212.
1200 is some support
The 50 day EMA at 1200
1196, the mid-January high and the early December peak in the left shoulder.
The April high at 1194
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 1180
Dow: Closed at 10,574.99
Resistance:
Price consolidation at 10,600
The June highs at 10,646 to 10,656
10,754 is the February high
10,868 is the December 2005 high.
10,985 is the March high
Support:
The April high at 10,557
The 10 day EMA at 10,519
The 200 day SMA at 10,464
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 19
Housing Starts, June (08:30): 2009K prior
Building Permits, June (08:30): 2062K prior
July 21
Initial Jobless Claims, 07/16 (08:30): 326K expected and 336K prior
Greenspan speaks to Senate
Leading Indicators, Jun (10:00): 0.5% expected and -0.5% prior
Philadelphia Fed, Jul (12:00): 10.0 expected and -2.2 prior
FOMC Minutes, Jun 30 (14:00)
End part 1 of 3
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world stock market
us stock market
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