|
|
yahoo stock, world stock market
* * * *
7/19/05 Technical Traders Report Update
* * *
Technical Traders Report Subscribers:
Next full report issues Wednesday.
MARKET ALERTS
Targets hit alerts: DESC; GLW; UNWR
Buy alerts: BRCM; WITS;
Trailing stops: None issued
Stop alerts: MDRX
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:
- IBM earnings set the tone, and stocks drive right back up after a short respite.
- Housing starts flat but solid.
- HPQ to lay off 14,500 as big companies continue shedding workers.
- IBM led Tuesday charge, but INTC & YHOO threaten to lead the other way Wednesday.
Earnings still setting stage, and market rallies back on IBM results.
Stocks needed some more rest but after the IBM results they were not inclined to wait around any longer. After showing some topping action on the large cap indices and just one downside session in the previous eight, stocks gapped up once more on the heels of a better than expected IBM earnings report. A down day Monday on the C results and then a jump higher on IBM.
The leaders that carried the weight in the rally thus far were back at it. SP600 was the leader (1.6%), and it had a legitimate pullback, coming back to the 10 day EMA in a session pullback. It was set up to move. The other indices glopped onto its back, rallying without taking any real rest, rescued by the IBM numbers. NASDAQ, the other leader, was there as well with a 1.3% gain. Late comer SOX participated with a 1.7% move, but as with NASDAQ it has provided a true breakout on this move.
Volume was stronger on both NASDAQ and NYSE, with a solid above average move on NYSE. Breadth was impressive as well with better than 2 to 1; with the small caps leading that is what you would expect. It was a solid session based on price/volume action, breadth and leadership as many stocks resumed their upside moves with a decent volume injection.
SP500 remains something of a handicap for the market. It logged a solid gain on above average NYSE volume, but it also could not clearly distance itself from the March high (1129.11 intraday). A new closing high on volume is good, but you want to see it break free to indicate it is really making the move and supporting the other leading indexes.
That is more problematical Wednesday given the after hours earnings. As demonstrated the past two sessions, earnings are driving the action. AMGN exploded expectations; the rally to start July is now explained. Who says regulation FD, Sarbanes-Oxley, and all of the other regulations are preventing insider action? Right. Intel, Yahoo, and Motorola, however, failed to meet investors' expectations. YHOO missed on revenues and it was sold. Intel earnings were not bad, but not good enough. The market will be pressed tomorrow to hold onto the Tuesday move.
THE ECONOMY
Housing starts flat, below expectations; permits top expectations.
2.004M annualized units for June was flat with May but less than the 2.045M expected. Moreover, May was written down to that level from 2.009M. The South saw starts jump 11.4% while the Midwest dropped 12.1%, the West lost 10.4%, and the Northeast declined 0.5%. Not a huge change and still a lot of housing starts. It does show the continued flattening in the sector that we have been talking about the past few months. Strong market fueled by low mortgage rates, but a plateau is setting in.
Permits rose 2.4% to 2.111M annualized units, beating the 2.080M expected (2.062M in May). This is generally considered a sign of confidence by builders about the future market, but it is really just custodial. A permit does not mean a house has to be built, but you cannot build one without it. Thus while the market remains solid builders are going to keep getting permits to build. Permits will only fall off after the housing market has really hit the skids; thus as with consumer confidence or jobs reports it is not really the leading indicator that some attribute it.
You cannot swing a dead cat (from Huckleberry Finn) on a financial station without hitting someone talking about the coming crash in the housing market. If rates run up sharply that will be bad for that market. Low mortgage rates have made homes more affordable and have allowed first time buyers as well as second home purchasers to stretch their dollars.
That 'stretch' is what gives most pause. If buyers were only buying traditional mortgages that would be a good indication that everything was under control, i.e. buyers buying for their own use. Problem is more and more of the mortgages are interest only or some related 'creative financing' loan. In California, interest-only mortgages in the past year have risen from 8% of the market to 42% of the market. That suggests two things: buyers getting in over their heads and speculative buyers wanting to flip properties without putting much money into it. Both of those groups are going to get hurt if mortgage rates jump appreciably.
Can the California results be spread across the rest of the country? Thus far nationwide numbers are not available, but it looks to be hot in the usual areas: California, Florida, the Northeast coast - - the usual suspects when real estate gets heated. There are a lot of places in Texas where prices are going down while in some areas of Texas (central Texas near Austin) prices keep going up. There is no question that many areas of the country are seeing substantial price increases, but it is not nationwide.
This does not necessarily suggest the housing market is going to collapse. If rates remain in a controlled and modest rise (though it has been back and forth the past year even with the Fed hiking on the short end), any widespread crash is less likely because there is time to adjust. There will still be areas that get hammered; it happens every time any market rallies above the norm or mean for a substantial period of time.
What will really sink the market overall is when the combination of rates and prices reach a level that makes homes or land less affordable for those wanting to buy homes to live in or those wanting to buy in order to sell. We don't see a big spike in long term rates ahead, and that will keep the market active. The key is what happens to values after the current speculation wave runs its course as it always does. When the speculators start losing on their deals that part of the market will dry up quickly and values will fall. It will hurt in California, Florida, etc. where prices have soared. Then again, it always hurts in California when these air pockets are hit. There is a lot of pain and then the market comes back once more in those areas because they remain very desirable places to actually live. The more lingering pain will be felt in those areas not traditionally real estate hot spots but have enjoyed significant gains during this run. The cycle there takes longer to come around and it takes longer to shake off the downturn when it inevitably hits. That is what concerns us most, i.e. those buying into areas with long recoveries.
HPQ continues the string of large company layoffs.
HPQ, a big, old line technology company, announced a mostly anticipated restructuring, part of which involves laying off 14,500 employees or 10% of its worldwide workforce. It is restructuring its retirement plan as well as it attempts to save almost $2B/year in costs. In short, HPQ says it has to better compete with Dell as HPQ's printer business is attacked by Dell and others.
This may sound familiar. HP (before Compaq merger) was known as an innovator. Now it is trying to save its cash cow, the printer and toner business, from the attacks of other companies desiring a piece of HPQ's market. So, HPQ is cutting costs in order to streamline and push as much of the revenue generated by its cash cow down to the bottom line. It is no longer an innovator and thus it does not feel it needs the 14,500 employees. It is going to cut and pare those areas that are not clearly adding to the bottom line while it maintains a few areas to do some R&D to make some new bells and whistles for its line of printers. Its computers are a commodity. Go into CompUSA and they are just another brand alongside Sony, Toshiba, Acer, etc. They have to cut costs to maximize the profits on their remaining money makers. Such is life in the land of mature industries.
HPQ is just the latest. It is not only the old industrial companies that are streamlining by cutting employees and other overhead; the 'new economy' but still old line technology names are doing the same thing as they are no longer in growth areas. They can make the transition and really do well; look at IBM. It made the tough changes 3 and 4 years back and is reaping the reward now as it has changed its business model to focus on growth areas in the economy (business services is huge, particularly with the rise of new companies from the self-employed ranks that grew during and following the most recent recession.
THE MARKET
MARKET SENTIMENT
VIX: 10.45; -0.32
VXN: 13.06; -0.75
VXO: 9.73; -0.34
Put/Call Ratio (CBOE): 0.81; -0.27
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: +28.31 points (+1.32%) to close at 2173.18
Volume: 1.714B (+27.33%). Volume moved above average on the rally session, a good sign of accumulation resuming on this move. It was only the third above average volume session this month, but they have come on upside sessions so the price/volume action is positive in that respect. Pretty typical for summertime, however, and there is accumulation once more after things got a bit dicey the third week of June. The Wednesday session will be very telling as tech stocks have to deal with the Intel and Yahoo earnings.
Up Volume: 1.344B (+890M)
Down Volume: 341M (-517M)
A/D and Hi/Lo: Advancers led 2.07 to 1. Very solid breadth was a good confirmation for the nice rise in volume.
Previous Session: Decliners led 1.65 to 1
New Highs: 150 (+48). Pretty puny for hitting its highest level since the first session of the year.
New Lows: 23 (+5)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
One day down that filled the Thursday gap higher and NASDAQ was off to the races once more. It cleared basically all resistance but the late 2004 closing high (2178.34). The Tuesday gain pushed NASDAQ past the early 2004 high as well. This move has some substance with some strong volume on the big up sessions showing ongoing accumulation as the techs set up and rally higher. There was not much rest or pause after the initial surge, but a strong index will resume a rally without much consolidation if the environment is right. Through the Tuesday close the environment was right. Intel and YHOO may have changed that environment that was, as we feared, starting to expect earnings to beat expectations. In other words once more we were in that kind of 'whisper number' BS that was part of the late 1990's hype that saw earnings get fudged more and more. Not saying that these numbers are made of the same Swiss cheese of those prior reports, but the expectations game has taken over as companies easily trumped expectations for two consecutive quarters. When earnings are in line or heaven forbid there is a miss the resulting selling can be startling (e.g. AVP on Tuesday). NASDAQ will be hard-pressed to hang onto the gains Wednesday. It will be real test of its mettle.
SOX was right up in the leadership once more with its 1.7% gain. The move closed just off the session high on stronger NASDAQ volume as INTC rallied ahead of its earnings. The move drove SOX further out of the trading range it broke through just over one week ago (the top at 450, SOX now at 468.75). Strong move on the breakout, but as with NASDAQ it will be under pressure Wednesday as the INTC results are digested.
SP500/NYSE
Stats: +8.22 points (+0.67%) to close at 1229.35
NYSE Volume: 1.552B (+29.16%). Solid volume, almost matching the trade from last Thursday. This shows accumulation as well in the large cap and small cap stocks populating NYSE, exactly the kind of action you want to see on upside moves. As with NASDAQ it is not blowout volume, but some solid trade for the dog days of summer.
A/D and Hi/Lo: Advancers led 2.29 to 1. Strong across the board as just about everyone pitched in on this move.
Previous Session: Decliners led 1.57 to 1
New Highs: 222 (+72). Almost respectable but don't want to go as far as to say it was good.
New Lows: 18 (-6)
The Chart: http://www.investmenthouse.com/cd/^spx.html
After its own one-day pullback SP500 was right back up on strong volume Tuesday, breaking past the recent highs and closing just above the March intraday high (1229.11). It did not pullback further and give itself a better test even to the June high (1219-1220). A good move, but it is going to be really tested Wednesday just as the index was on the verge of making a significant breakaway move. Right now it is going to have to hold the line after the pressure it will come under Wednesday given the after hours earnings. Still a good pattern, still good action to this point, but now it is going to have to show it can overcome some adversity and then make the clear breakout.
Nice rebound move from the SP600 as it posted a 1.6% gain off of the 10 day EMA (343.41). The jump off of the 10 day EMA, the nearest support level, is a very good sign of the continuing small cap strength. They are still maligned as being too pricey, but they are not showing signs of wear and tear, and as the economy continues to show expansion, the small cap companies benefit. Thus the continuing rally in these stocks.
DJ30
DJ30 recovered the Monday low and did so on strong volume thanks to IBM's earnings as well as anticipation of the INTC results after hours. That move managed to put DJ30 right back up to its recent highs (10,646 to 10,656) and the June highs; this is where it needs to make the decisive break for the index. As much as IBM helped Monday, INTC may act as a drag Wednesday.
Stats: +71.57 points (+0.68%) to close at 10646.56
Volume: 318 million shares Tuesday versus 206 million shares Monday. Showing the strong volume it needs to clear key resistance. Question is whether it can sustain that volume on another upside move given INTC.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Greenspan speaks Wednesday, not Thursday, addressing the Senate on the state of the economy from the Federal Reserve's perspective. That will receive some scrutiny, and indeed Greenspan gave a preview of what he is going to say. Over the weekend Greenspan told the world that they should not fear the current bond yield curve because there are other forces at work that are impacting its shape outside a view the economy will slow in the future. Greenspan and some others want to pin the curve on foreign buying of US treasuries, thus pushing blame off on the trade imbalance, one of Greenspan's pet topics the past two years (along with social security, deficit reduction, housing bubbles, etc.).
That makes sense. There are ALWAYS a variety of themes influencing the yield curve. What Greenspan is not acknowledging is one of the most pervasive: fear of a softening economy BECAUSE of the Fed's action in raising rates and drying up money supply. The market is fully aware of the Fed's track record when it takes action on the economy and that is a big part of the flat curve. Treasury purchases, big massive treasury purchases, take place daily and have taken place daily for decades as foreign trading partners fund US trade with them. There is always that influence on the bond yield curve. To blame the entire flattening on Treasury purchases is a whitewash. When the Fed starts this type of talk it is always trouble, and this talk has been ongoing ever since the rate hikes started.
Greenspan may simply be an aside to the real action Wednesday as the Intel and Yahoo numbers, and even the MOT results did not sit well with investors. Those stocks were under pressure after hours though MOT managed a very decent recovery. The issue will be how hard the analysts come out in the morning and push the results as being positive. We have seen other occasions where bad responses in the after hours were met with lots of positive comments and upgrades the following morning that actually had a positive impact. That remains to be seen. Missing revenues is missing revenues.
We want the market to avoid one of those abrupt reversals on the heels of a break to a new high. NASDAQ broke solidly higher Tuesday and SP500 is on the verge of its own solid breakout. If the sellers jump in hard on the heels of a breakout move that is typically a very poor indication, and at a minimum means the recent rally will be skewered.
Thus how the indices respond will be very, very important Wednesday. It seems redundant to say we expect a softer open in techs, but after that initial selling they need to hold near support and show some life off that level. May not be a big rebound given the big names that disappointed, but they will need to hold the key support to give them a shot at holding the breaks higher.
Support and Resistance
NASDAQ: Closed at 2173.18
Resistance:
2178 is the January closing high.
2191.60, the January intraday high.
Support:
2163, the mid-December closing high has stalled NASDAQ recently.
2151, the early December closing high and highs from January 2004
The 10 day EMA at 2135
The 18 day EMA at 2116
2100 was key resistance point, and a successful test sets it up as support.
2075 to 2078
The 50 day EMA at 2075
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.
S&P 500: Closed at 1229.35
Resistance:
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 March 2005 closing high at 1225
The June high at 1220 and the 10 day EMA at 1219
December high at 1217
The 18 day EMA at 1213 and the February intraday high at 1212.
1200 is some support
The 50 day EMA at 1201
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
Dow: Closed at 10,646.56
Resistance:
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:
Price consolidation at 10,600
The April high at 10,557
The 10 day EMA at 10,542
The 200 day SMA at 10,466
The May high at 10,406
10,400, the bottom of the November/December range
The recent April highs at 10,264
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 19
Housing Starts, June (08:30): 2004K actual versus 2050K expected and 2004K prior (revised from 2009K)
Building Permits, June (08:30): 2111K actual versus 2085K expected and 2050K prior (revised from 2062K)
July 20
Greenspan speaks to Senate
July 21
Initial Jobless Claims, 07/16 (08:30): 326K expected and 336K prior
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 2
|
yahoo stock
world stock market
|
