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us stock market, stock watch
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11/23/05 Investment House Daily
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Investment House Daily Subscribers:
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Holiday Schedule:
Happy Thanksgiving! Celebrate a great country to live in and all the wonderful things we have!
Monday, Tuesday: Report as usual.
Wednesday: Market summary, continuing play tables
Thursday: Market closed.
Friday: Market open half session. No report
Reports resume Monday.
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MARKET ALERTS:
Target hit alerts: None issued
Buy alerts: EFX
Trailing stop alerts: None issued
Stop alerts: ALXN
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:
- Market posts its sixth consecutive gain, but closes off high.
- Michigan sentiment tops expectations, preliminary reading, and October final.
- Next week packed with economic data as market prepares for a pullback
Stocks start soft, rally after oil data, but cannot hold most of gains.
The market continued to show its bullish bias, starting soft once again and rallying on the weakness, putting in the over a week of upside gains. The action needed a catalyst again, and it got one, albeit rather weak, when the oil inventory data hit the wire. Inventories gained 400K bbl, less than the 800K expected, but distillates rose 1.1M bbl, and that was enough to put a little pop into a recovery attempt after that soft open.
Indeed the market put in a slow, steady rally through the morning, lunch and early afternoon. Volume was decent early, but as the afternoon wore on and the holiday drew near, buyers became scarce and volume dried up. What was a higher volume NYSE session closed on lower, below average trade. Breadth remained weak, and new highs just edged higher.
With an hour and one-half left, the buyers put the wallet on the hip. After almost six straight up sessions profit takers emerged. NASDAQ gave back two-thirds of its gain, SP500 half its gain. SOX managed to post a new high for 2005, but it could not hold it, closing negative. SP600 posted a new high as well, but it too could not hold the break to the close. Seems the trip to that level was a long enough move in itself and they could not hold the gain once it was achieved.
We suspected that SOX and SP600 might have trouble breaking through and holding the new 2005 highs after such a solid move just to get to that point. The NASDAQ and SP500 close off their highs after over a week of gains also suggests they are a bit tired after on heck of a nice run that took them through the 2005 highs. We somewhat expected this action as noted in the Tuesday report, but thought the gains might hold through the week. When we saw the indices start to come off their highs we watched to see if it was just a brief pullback or if it held into the last hour. It did, and that kept us very conservative in taking new positions. When the overall market is tired, it is better to wait a bit, let the pullback take place, and then move in. Even on those stocks that posted strong moves Wednesday we will likely get a better entry point after this pullback runs its course.
THE ECONOMY
Michigan sentiment final for November shows continued improvement.
Softening gasoline prices, stock market gains, solid economic numbers post-Katrina, Rita and Wilma all contributed to a stronger showing in sentiment than expected. The November final reading rose to 81.6 versus the 81.0 expected, the preliminary 79.9 preliminary reading, and October's 74.2 slump.
The sentiment jibes with what consumers are showing at the store. Indeed, consumers were still solid in October even when the sentiment readings were sagging. Sentiment never got to the level where you would anticipate a slowdown in consumption, and this rebound puts a good buffer zone before the consumer would start to back off.
While gasoline prices play a role, the key in all sentiment and consumption is jobs. If consumers feel confident in their employment they will continue to consume. The jobs market has not been stellar and there continue to be real issues as the economy transitions from the 1990's tech boom to 2000 tech bust (e.g. pensions, healthcare, the demise of the US auto industry), but the continued strength in consumption has kept the consumer going, and it looks as if it will for the 2005 holiday season.
Still big issues for 2006
Beyond that depends a lot on what the Fed does and whether it is content to let the housing market drift downward on its own, whether energy will decline more in 2006, whether Congress and the administration can get serious about spending cuts that cut fat and not services as well as continue the capital gains and dividend tax reductions that free up capital so the economy can continue to grow.
Those are all very much up in the air and that makes 2006 a very problematic year economically. The expansion is right at 3 years old and at that age it needs help not hindrance from the Fed. Historically the economy runs in approximate three year cycles, and that makes sane people wonder why the Fed would keep raising rates when there are so many indications of this economic cycle's maturity. Of course, the Fed does not think as sane men and women. It would prefer to be able to cut rates if it has to even if that means raising them a bit too far. Sounds ludicrous and flies in the face of the comments in Tuesdays FOMC minutes, but that is often the Fed's history. Again, much depends upon what the Fed does or does not do when Bernanke takes over.
THE MARKET
MARKET SENTIMENT
VIX: 10.96; +0.36
VXN: 14.16; +0.15
VXO: 10.56; +0.53
Put/Call Ratio (CBOE): 0.81; -0.24
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: +6.42 points (+0.28%) to close at 2259.98
Volume: 1.627B (-15.09%). Volume was running slightly lower early, but as the afternoon progressed it dropped off the table. That is a decent indicator in itself as NASDAQ lost ground late and the volume dried up. That means no heavy selling, just some profit taking after almost six complete upside sessions.
Up Volume: 1.112B (+3M)
Down Volume: 483M (-252M)
A/D and Hi/Lo: Advancers led 1.13 to 1. Very weak breadth again on the continued move, but again, breadth was strong on the key rebounds off pullbacks.
Previous Session: Advancers led 1.22 to 1
New Highs: 165 (-18). New highs fell even as NASDAQ pushed to new 2005 highs. Again, an Achilles heel after this holiday rally runs its course.
New Lows: 34 (-11)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ started modestly weaker and then turned up ahead of the oil inventory data and continued a steady march higher to 2269.30, a new 2005 and a new post-October 2002 high. Buyers waffled late, however, after mover a week of gains, and the index slipped in the last 1.5 hours. It held its ground at 2258, stemming the selling at that point for the last 45 minutes. It gave back two-thirds of its gains for the session, however, the biggest pullback after pressing higher during this run. That along with the very solid, steady gain to this point indicates it is in need of a test here.
SOX (-0.49%) is more evidence a pullback is needed. SOX rallied to the 2005 highs, trading above them for a brief moment Wednesday before rolling over and closing negative on the session. It was a long run to this point, and it used up its gasoline making the move; making the breakout was too much to ask just yet. It will likely need to fill part or all of that gap, with a test of the 10 day EMA (470.69) likely before it can regroup, make a higher low, and then make the breakout move in a continuation of the year end run.
SP500/NYSE
Stats: +4.38 points (+0.35%) to close at 1265.61
NYSE Volume: 1.448B (-13.79%). Volume fell well off pace and back below average Wednesday. Volume was running on par with Tuesday but it too faded late in the session as buyers left for holiday. As noted with NASDAQ, that is not bad action as the lighter volume on the later selling shows no sellers, just some profit taking when the buyers left the building.
A/D and Hi/Lo: Advancers led 1.49 to 1. So-so breadth again on another upside session. As with NASDAQ, it has been strong on the key rebound sessions.
Previous Session: Advancers led 1.46 to 1
New Highs: 237 (+26). Actually advanced but still well below where you want it as the NYSE indices press for new 2005 highs.
New Lows: 101 (-60)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
SP500 posted another gain, its sixth consecutive upside session, but similar to NASDAQ it also closed off its high, giving back just over half the gain on the session. After a move that is long in the tooth and the first real close off the high in the run, it looks as if SP500 needs to make a pullback as well to test this very strong move that has advanced well ahead of the 10 day EMA (1245).
SP600 (+0.47%) managed to hold its gain, but after it broke to a new high for 2005 as well as an all-time high, it could not carry through, closing just below that prior high (357.86). This week SP500 finally gave the breakout from the October double bottom with handle, and it was a solid surge that took it to test the 2005 high. Similar to the other indices it closed well off of its high on the session, showing a tombstone doji on the day. After a good run that often indicates a pullback, particularly if it occurs at resistance. No problem with that; all good moves need a test. A higher low sets up the next move that delivers the breakout.
DJ30
DJ30 joined the rest of the market in continuing the year end run, coming within 35 points of the 2005 high (10,985) before easing back not quite half of its session gains. Lower pre-holiday volume, so we are not making too much of the failure to take out the prior high. A relatively impressive move in the past week, and as with SOX and SP600, after the run to resistance a pullback that makes a higher low sets it up for the next attempt to clear the 2005 and try to make 11,000 that so many were talking about on the financial stations Wednesday.
Stats: +44.66 points (+0.41%) to close at 10916.09
Volume: 236M shares Wednesday versus the 311M shares Tuesday. Volume dropped back below average as DJ30 stretched toward the 2005 but could not quite make it.
The chart: http://www.investmenthouse.com/cd/^dji.html
THE WEEK AHEAD
Friday is a half session, and typically it continues the move in place for the week simply because there are too few players to establish anything new. This week we saw the start of some signals that the nice break higher over the past six sessions was a bit winded. Tuesday was quite sluggish until the FOMC minutes sparked a high volume surge. That shows buyers are still ready to rush in and push the market higher, but it took some heady news to get the market off the dime. Wednesday the move continued, but after a strong run much of the gains were given back. It has been a solid run to this point, and we were waiting to see if the action could sustain itself. When it showed some weakness late, we decided it was a good game plan to hold off on a lot of new buys until the market tests back and lets DJ30, SP600 and SOX set up for their breakouts as did NASDAQ, SP500, and SP400 just over a week back.
The indications are that the move will take a rest in the coming week, and that is a healthy thing for the year end run. Price/volume action has been superb and leadership excellent; a pullback will allow leaders to take a breather, shakeout some profit takers, and then resume the move. As noted Tuesday, the financial stations started talking about 'technical breakouts' in the market. Well, that was old news and it was another indication the move was getting a bit worn. After a pullback for a few sessions we expect to hear that the year end rally is over. As long as volume remains in control on the pullback, those predictions of the rally's demise will pretty closely coincide with its resumption. That will give us some good entry points on leaders and current plays where we can focus our money on the strong.
Thus we don't anticipate doing much Friday outside of perhaps taking some profits on some positions if the indices put in one more upside push. Some stocks that showed good moves could be bought but as noted above, we will likely get a good buy point on them as the overall market eases back. We love taking positions on a successful test more than a breakout because the test shows us that the big money still wants the stock even after the breakout. That is where some serious moves are typically made.
Basically right now is a time of patience. We have enjoyed a great move that we got in on early as we were taking positions in October despite the turmoil in the market and the feeling Pepto-Bismal was needed in order to push the 'buy' button. The action told us a rally was coming, and stomachs be damned, we were buying. Again, those positions have unfolded nicely overall and we have enjoyed watching the big money and performance chasers coming in and driving our positions higher. We will now let the market makes its test, and if conditions still hold we will look at moving into more positions as the year end run resumes.
Support and Resistance
NASDAQ: Closed at 2259.98
Resistance:
2264 from the June 2001 peak
2328 from the May 2001 peak
3015 is the December 2000 peak and the October 2000 low
Support:
2251 is the January 2001 low (2273 is the closing low)
The 10 day EMA at 2220
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 18 day EMA at 2194
The January 2004 high at 2154
2144 is the October gap up point.
The 50 day EMA at 2154
2100 was key resistance and support in the past
S&P 500: Closed at 1265.61
Resistance:
1273 is the May and May 2001 peaks
Support:
1250 may prove to be some psychological support.
The August high at 1246
The 10 day EMA at 1245
The September high at 1243
The recent highs at 1238
The 18 day EMA at 1234
March 2005 closing high at 1225 and intraday high at 1229.11
December 2004 high at 1219 and June high at 1220
The 50 day EMA at 1220
1210 held in late September on the close.
Dow: Closed at 10,916.09
Resistance:
10,868 is the December 2004 high; cracking through that level
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 10,754
The June highs at 10,646 to 10,656
The 18 day EMA at 10,666
Price consolidation at 10,600
The 200 day SMA at 10,507
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): Inflation is still an issue as economy rebounding well after hurricanes. Raised issued of not going too far.
November 23
Initial Jobless Claims, 11/19 (08:30): 335K actual versus 312K expected and 305K prior (revised from 303K).
Michigan Sentiment-Rev., November (09:45): 81.6 actual versus 81.0 expected and 79.9 prior
Help-Wanted Index, October (10:00): 39 expected and 39 prior
Crude Inventories, 11/18 (10:30): +400K bbl actual versus +800K expected and -2.159M prior
End part 1 of 2
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us stock market
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