|
|
us stock market, trade stock
* * * *
11/21/05 Investment House Daily
* * *
Investment House Daily Subscribers:
Holiday Schedule:
Monday, Tuesday: Report as usual.
Wednesday: Market summary, continuing play tables
Thursday: Market closed.
Friday: Market open half session. No report
Reports resume Monday.
MARKET ALERTS:
Target hit alerts: IIJI
Buy alerts: PTC; RADS; DESC; ALXN
Trailing stop alerts: 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/alertdly.htm
SUMMARY:
- Stocks start soft, ignore news, continue year end rally as some managers chase performance.
- Leading Economic Indicators spurt higher but still a dubious indication.
- Enjoying the year end rally with an eye on an overbought condition and 2006.
Year end rally continues as stocks overcome rocky start.
Expiration Friday was an up session and sometimes you get the opposite effect the following Monday. Stocks started soft on some news that GM was cutting 30K workers (in addition to the 20K previously announced) and closing five assembly plants by 2008 and some rising oil prices on concerns of a snowy Thanksgiving in the east.
Stocks spent the first half hour selling back some Friday gains, but both NASDAQ and SP500 found support at the 2005 highs that SP500 just broke Friday, and both bounced right back up. A midday pause basically moved stocks sideways for 4 hours but in the last hour stocks broke higher and rallied to the close as NASDAQ and SP500 put more distance on the 2005 highs. At the same time SP600 lead the move higher (0.96%) and is now knocking at the door of a new all-time high, trying to follow in SP400's (mid-caps) footsteps. The laggard was SOX; after a strong Friday it took the day off just below its 2005 highs.
Volume lagged Friday, understandable given Friday was expiration. Trade, however, fell below average, an indication that we are indeed in a shortened holiday week. As we noted over the weekend, this week is typically lighter in volume, and we cannot let that deter us too much. Indeed, there were some very strong volume individual moves, showing that there are buyers ready to buy hard even at this stage in the rally.
Breadth remained tepid following the one strong session last Thursday. Of course, that accompanied a strong and important move higher by the market after a nice, orderly test of the rally thus far. We are not putting too much into the diminished breadth, but as SP600 continues to improve we want to see some more 2:1 days. New highs improved above 200 on NYSE and NASDAQ, but this is still far, far below what you would expect as NASDAQ and SP500 hit new 2005 highs and SP600 and SOX approach highs of their own. This is an indication that the move is not total quality; it has shown great price/volume action early on and when it has needed it in the past few weeks, but you also have to look at how the other indicators improve. A market can run on a narrow A/D line, but ultimately those moves fail because eventually the money balks at going into just a few names. It can, however, run like that for quite some time as seen in 1998 when the big name techs were moving but not much else.
As usual, toward the end of the year you start to see a lot of performance chasing. The rally sowed its roots in October just as it did so in August in 2004. There were some great moves made then and that are still running now. We got in on those as they made their bottoms and started to rally. We are still buying stocks moving up off of tests or making breakouts, but a lot of big money players are chasing some big name stocks that are movers off that October low (e.g. HOLX, MRVL, HANS, SBUX, DNA, LM, etc.) in order to dress up the year end results. Hence the lack of strong new high numbers. Again, it can run for quite some time like this, particularly through a year end rally. After that 2006 can be another story, but you have to take what the market is giving based on what it is showing you now as opposed to speculating on what may happen in the future. It pays to be prepared by looking ahead, but the market tells us what is really going to happen.
THE ECONOMY
Leading Economic Indicators jump higher, slightly topping expectations.
October's 0.9% gain (0.8% expected) took back the loss from September (-0.8%), a drop due mostly to the impact of the Gulf storms. Indeed, the gains were broad with 10 of the 12 indicators positive. The declining components were building permits and the stock market. Since then the stock market has rebounded positive for the year.
A solid report and very good to see it snap back after the September drop. It is not, however, an indication that happy times are here to stay. The LEI can be very useful in seeing signs of life after a downturn, but it tends to lag despite its name. The economy can start to wobble long before the LEI picks it up with any authority. Again, good to see the snap back but we don't want to stake a claim in the LEI that the economy is going to be expanding in Q2 of 2006 based on this reading.
THE MARKET
MARKET SENTIMENT
VIX: 10.82; -0.3
VXN: 14.11; -0.25
VXO: 9.97; -0.58
Put/Call Ratio (CBOE): 0.8; +0.18
Bulls versus Bears:
Bulls: 53.1%. Another strong surge higher from 50.6% as bulls head toward the 55% level that indicates an excess number of bulls and alerts you to watch for signs of deterioration in the price/volume action and leadership. Hit 44.8% on the low on this leg, just above the 43.5% low in May.
Bears: 22.9%. Down from 24.7% and heading toward the 20% level that is considered bearish as too few are skeptical of the market. It hit 29.2% on the high this cycle, just below the 30% level hit in May when the market bottomed at that time as well.
NASDAQ
Stats: +14.6 points (+0.66%) to close at 2241.67
Volume: 1.717B (-16.67%). Volume fell below average for the first time in a week as NASDAQ continued its breakout move. Not too concerned with this: it is a holiday week, it follows expiration Friday, and the break higher last week that started on Thursday was on stronger, above average volume after a low volume pullback. That is solid price/volume action that spurred the move on.
Up Volume: 1.129B (-129M)
Down Volume: 557M (-210M)
A/D and Hi/Lo: Advancers led 1.63 to 1. Not very impressive, but as noted, breadth was solid Thursday as NASDAQ resumed its breakout move.
Previous Session: Advancers led 1.52 to 1
New Highs: 212 (+38). Broke over 200 but still would prefer to see 400+ new highs as NASDAQ moves into new high territory. As it is, the lack of new highs shows a rather narrow move as NASDAQ pushes further into a 2005 high.
New Lows: 56 (+4)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ continued its breakout move, pushing further into 2005 new high territory (2220 was the prior high). Though volume was low, the break higher to resume the move was on stronger trade. We like that it is putting some distance between it and the 2005 high; it will inevitably come back to test that move, and the more distance it puts between it and that level suggests it will more likely hold any test. Holding above that level on any test leaves it free of any overhead supply, i.e. a lot of purchasers at a higher level ready to get out as the index returns to that former ground. Indeed, the process NASDAQ just went through broke it through the only near term overhead supply. This run has a good foundation, and thus it can continue to climb despite days where trade drops off as on Monday.
SOX (+0.03%) held basically steady on the session, lagging negative all day but then recovered late in the session. That kept it just below some resistance at 480 and below the 2005 high at 486.34. SOX was a strong leader Friday but took a rest Monday. SOX needs to clear that resistance and join NASDAQ in a breakout above the 2005 highs to give the year end rally extra staying power.
SP500/NYSE
Stats: +7.58 points (+0.61%) to close at 1254.85
NYSE Volume: 1.551B (-13.8%). Volume also backed off on NYSE as SP500 pushed to new 2005 highs and SP600 tries for a new high of its own. Strong volume on the break higher last week shows good accumulation even as NYSE moved higher, 'coasting' on lower volume during this holiday week.
A/D and Hi/Lo: Advancers led 1.67 to 1. With the small caps yet to make the breakout, breadth has not shown consistent strength. Good strength on the breakout move, and that is what you want to see, but as with NASDAQ, a few 2:1 sessions as it continues the move is also expected. As the small caps breakout this should improve.
Previous Session: Advancers led 1.48 to 1
New Highs: 229 (+42). Better but not at the level you would expect as the indices break to new highs for the year and are knocking at the door to do the same.
New Lows: 169 (+35)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
SP500 put some distance on the break to a new 2005 high as well, coming back to test the high (1246) on the session low and then rebounding to continue the run. Very good intraday action even with lower overall volume on the session. As noted, volume was up as SP500 and SP400 did the heavy lifting last week that broke it higher and over the old resistance. Now it has some room when it comes back to test, and it will be testing for a position of strength as opposed to still being below key resistance and overhead supply.
SP600 is knocking right at the door of a new 2005 high, but it needs to clear 255 as a first step and then take out 357.86. It is on the way but with NASDAQ, SP500 and SP400 already well out in front, they may run out of steam before SP600 makes the move on this leg. SP600 has to make the move pretty quickly if it is to join the others on the current leg higher.
DJ30
DJ30 continues its move toward its own new high though it too showed lower volume as it continued higher after clearing some key resistance at 10,720. That leaves the December 2004 high (10,868) and then the March 2005 high (10,985). Likely not going to make the new high on this run, but it made a key move in clearing the July, August and September high that pushed it back since breaking below that level in March.
Stats: +53.95 points (+0.5%) to close at 10820.28
Volume: 250M shares Monday versus 351M shares on the Friday expiration.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
The FOMC minutes are out at 2:00ET Tuesday, and that is the only scheduled economic data. Some earnings continue to straggle in, and more updates from companies as to how sales are progressing in Q4. Case in point, TGT said things were going a bit better than it announced last week, but they are still running below original expectations. Just how this holiday retail season turns out is still up in the air, but with gasoline falling to $2/gallon on average, consumers will feel a bit better about the season.
The market itself has shown excellent strength and action in this rally. Price/volume action has been almost perfect; the blip of distribution a week back turned out to be a blip as suspected at the time. You look at the market and it looks overbought right here, and with NASDAQ and SP500 already stretching moves through the 2005 highs you start to anticipate a pullback to test ahead. That will no doubt come, but the question is when. When the market is making this kind of run into the year end it can become more and more overbought.
One thing that gives you an insight to the move and just when it may run out of steam is the number of strong breakouts. Despite the low overall volume Monday there were many stocks in good patterns breaking higher on very strong trade. That shows money is still ready to move in hard and fast into specific stocks, and that shows remaining conviction. When the breakouts are all on low volume that matches a general drift higher in the market, that is when you need to start pulling in on the buys and let things set up for the next move. That was not happening Monday, but with SOX and SP600 moving up to their resistance for 2005, having yet to make the breakout, the market may start feeling winded as they try to make the break as well.
We got some good moves today on some new buys and we had some strong moves on current positions. We are going to let them run for as long as they will, but if we see this run lose some steam we will be looking at taking some gain on those that have pushed hard and are in need of a breather. We can thus lock in some gain and still have a strong stock ready to make us money after a test. Indeed we are anticipating some tests ahead to give us an opportunity to add to some strong stocks and also to move in on some that we could not get comfortable with on their first move. In that way we can continue to play the run and the winners.
Support and Resistance
NASDAQ: Closed at 2241.67
Resistance:
2251 is the January 2001 low (2273 is the closing low)
2264 from the June 2001 peak
2328 from the May 2001 peak
3015 is the December 2000 peak and the October 2000 low
Support:
2220 is the August high
2205 was intraday resistance last week 2192 from the January intraday high and the mid-July high.
2187 is the September high.
2178 is the January closing high
The 10 day EMA at 2201
The 18 day EMA at 2178
The January 2004 high at 2154
2144 is the October gap up point.
The 50 day EMA at 2146
2100 was key resistance and support in the past
The 200 day SMA at 2083
S&P 500: Closed at 1248.27
Resistance:
1273 is the May and May 2001 peaks
Support:
The August high at 1246
The September high at 1243
The recent highs at 1238
The 10 day EMA at 1236
March 2005 closing high at 1225 and intraday high at 1229.11
The 18 day EMA at 1226
December 2004 high at 1219 and June high at 1220
The 50 day EMA at 1216
1210 held in late September on the close.
The 200 day SMA at 1203
1200 was solid price support at one time
1190 from prior prices
Dow: Closed at 10,820.28
Resistance:
10,868 is the December 2004 high
10,985 is the March high
Support:
10,754 is the February high
10,720 is the high in the recent lateral move. This is the key resistance.
The 10 day EMA at 10,684
The June highs at 10,646 to 10,656
The 18 day EMA at 10,609
Price consolidation at 10,600
The 200 day SMA at 10,505
The May high at 10,406 and 10,400, the bottom of the November/December range
10,350 was support in the recent August and September pullbacks
10,250 held in the June and July lows but is blowing out now
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 21
Leading Indicators, October (10:00): 0.9% actual versus 0.8% expected and -0.8% prior (revised from -0.7%)
November 22
FOMC Minutes, November 1 (2:00)
November 23
Initial Jobless Claims, 11/19 (08:30): 312K expected and 303K prior
Michigan Sentiment-Rev., November (09:45): 81.0 expected and 79.9 prior
Help-Wanted Index, October (10:00): 39 expected and 39 prior
Crude Inventories, 11/18 (10:30): -2159K prior
End part 1 of 3
|
us stock market
trade stock
|
