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world stock market, us stock market
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12/07/05 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: PAAS
Trailing stops: GILD; FLR
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 SSR alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Stocks post another loss but lighter trade and still holding near support.
- Ford purportedly to announce up to 30K layoffs but layoffs overall running lower than late 2004.
- TXN mid-quarter update sparking chip stocks after hours as market searches for a catalyst to continue the rally.
Stocks fade to near support, still searching for a reason to continue rallying.
Once more stocks were unable to push higher after last week's strong jump off near support, fading back to the 10 day EMA on lighter volume. After the Tuesday late day tailspin the market tried to bounce early, but that action ended in about 5 minutes and the selling resumed in a series of downside legs. In the last hour stocks managed to rebound and recoup some losses, and indeed the major indices used that bounce to retake the 10 day EMA.
That keeps stocks holding the trend, trying to set up for the next move, searching for a catalyst. Crude inventories were higher than expected (gasoline and heating oil as well), prompting oil to pullback (59.21, -0.73). Global chip production equipment sales estimates for 2006 were bumped to a 9.1% rise, up from the 8.1% previously estimated and 2005's down year. No effect. Stocks were sluggish all session, picking up the pace later in the session once again as the session wore on. A late bounce helped, but overall stocks were simply not ready to attempt a move higher.
The indices basically continued the lateral move that started about 2 weeks back. The inability to continue the move after the Thursday jump on strong volume was worrisome, but now the market is shifting into a lateral move where it is testing near support but not giving it up. It is stingy with its gains, and that is always a good sign for a market that is in a trend higher. Volume was lower, showing no distribution, i.e. no heavy selling where big money is dumping stocks it bought on the rally.
The action is not pristine, however. We have noted the lack of new highs on the most recent move higher when NASDAQ, SP500, SOX, SP600 and SP400 broke to new 2005 highs. Breadth readings have been great on the big upside days, but in between they have been mediocre. This week we started to see some intraday bearish action, i.e. starting higher and ending lower. Sentiment indications got a bit overly complacent. The market has stumbled in response after a stellar showing last Thursday with DJ30 undercutting the recent range intraday Wednesday before a late rebound took it back above 10,800 to close.
You can look at this as half full or half empty. Right now there has not been any serious selling, the testing is on lighter volume and that is an indication of a shakeout as opposed to setting up for a collapse. We are still being cautious at this point, however. The last bounce almost immediately fell apart when on prior bounces we have seen a good week more or less of gains before the next test. The run has been solid for six weeks and some big money is idle right now in remembrance of last year. Half full, half empty. We want to let it show us the move back up and then we will continue to participate with quality stocks ready to move.
THE ECONOMY
Ford purportedly to lay off 30K as auto industry leads surge in November layoffs.
Similar to GM, Ford is starting to face reality, that is, it cannot compete in the real world of auto manufacturing without reorganizing its business method. High labor costs, huge benefits, unfunded pensions; hard to compete with Toyota, Hyundai, Nissan, etc. with those fixed costs. GM is working hard to bring auto making back to the forefront of its business as opposed to its healthcare benefits business that makes cars on the side. It is getting so bad that the US is losing its dominance in light trucks, the former last vestige of uniquely American autos. So, Ford is also going the layoffs and plant closures route, with a guesstimate of 30K layoffs and 10 plant closures.
The job cuts are not even announced at Ford, but auto layoffs helped push November layoffs up 22% from October (99K versus 81.3K) according to Challenger, Gray & Christmas (should that be Challenger, Gray & Winter Holiday?). Those job cuts totaled 16,870 and 105,886 for the year, making up 11% of the job losses. For the year cuts are running 3.6% more for the same period in 2004. Overall, however, Challenger notes that jobs during this quarter are running lighter than in 2004.
Q4 is the most prolific layoff period, and despite the layoffs, good to see it is a bit slower. It does not change the fact that US manufacturing continues to undergo a major realignment given foreign labor costs and the need for US companies to be able to compete internationally. We don't make it easier here in the US as our tax laws continue to punish US company foreign operations, something companies from other countries don't have. Congress loves to wrap itself in the flag and accuse domestic companies of unpatriotic actions when they keep operations and money overseas. Change the tax code and put US corporations on even ground with foreign corporations and you would solve much of the problem as seen by some in Congress.
THE MARKET
MARKET SENTIMENT
VIX: 12.18; +0.66. Volatility is showing a nice bounce on very little market selling. It made a higher low this past week and jumped nicely Wednesday. It is still well off any level considered high. Indeed, readings as low as 17 and 18 this year have triggered nice stock bounces.
VXN: 14.98; +0.62
VXO: 11.84; +0.62
Put/Call Ratio (CBOE): 0.79; +0.01
Bulls versus Bears:
Bulls: 55.8%. Well, bulls crossed over the 55% level considered bearish (up from 53.6% last week). The theory behind this reading is that when too many investors are bullish, then most of the money is in the market and it has a hard time sustaining itself. For now the nuts and bolts are solid (price/volume action, leadership), but we need to watch closely; if they deteriorate the combination of the sentiment and technical deterioration would be a sign to start paring back. Hit 44.8% on the low on this leg, just above the 43.5% low in May.
Bears: 21.1%. Holding just over the 20% level considered bearish. Quite a drop from the 23.2% the prior week. With bulls jumping if bears fade further that would be even a stronger indication and make any technical deterioration dangerous for the rally. 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: -8.75 points (-0.39%) to close at 2252.01
Volume: 1.787B (-3.87%). Volume was still above average but was lower as NASDAQ backed off, undercut the 10 day EMA slightly, and then rebounded to hold that level. That is not bad price/volume action at all.
Up Volume: 681M (-423M)
Down Volume: 1.067B (+356M)
A/D and Hi/Lo: Decliners led 1.63 to 1. Middle of the road, just what you want to see on a middle of the road downside session.
Previous Session: Advancers led 1.16 to 1
New Highs: 106 (-100)
New Lows: 47 (+6)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ undercut the 10 day EMA (2249) on the low but was never in jeopardy of really giving up the jewels of the rally. It managed a late bounce that recaptured the 10 day, a sign of continued strength at near support. That is about all it has shown the past few sessions after the strong gain last Thursday. Given it did not continue the rally this lateral drift is the next best action, holding gains, testing support, holding the trend. All it needs is something to send it higher before it gets something that sends it lower.
SOX (-1.2%) fell back after the market leading move Tuesday that bounced it off its 10 day EMA. It is still looks ready to head higher from its breakout in early December when it moved to a new 2005 high. Working laterally with up and down moves as the 10 day EMA (491.42) rises to meet it.
SP500/NYSE
Stats: -6.33 points (-0.5%) to close at 1257.37
NYSE Volume: 1.579B (-1.26%). Volume remained below average and was lower as the NYSE indices dipped to test near support, continuing their lateral move to set up once more after last week's one day strong surge.
A/D and Hi/Lo: Decliners led 1.68 to 1. Similar to NASDAQ, pretty modest breadth that matched the overall session.
Previous Session: Advancers led 1.21 to 1
New Highs: 115 (-106)
New Lows: 82 (+19)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
SP500 was struggling but it was on lower volume. It bounced off the 10 day EMA (1258) early in the session but that did not hold when the index suffered a sharp downside leg in the early afternoon. On the low it tapped toward the 18 day EMA (1250.85) before rebounding to close just below the 10 day EMA. SP500 has worked laterally for two weeks after breaking to a new 2005 high, holding 1250 and the 18 day EMA on the lows of the range. Good to see lower volume on the Wednesday action as it shows no distribution. That keeps it setting up for another break higher.
SP600 (-0.81%) struggled all session as well, slightly undercutting the 10 day EMA (356.70) on the low but rebounding late with the market to hold that support. Thus far a rather normal test of a strong break higher off the 10 day EMA last Thursday. It is getting close to the point where it needs to show us a resumption of the move.
DJ30
The blue chips were acting similar to SP500, trading lower intraday and then rebounding toward the close to cut some losses and hold some near support (the 18 day EMA at 10,789). The late rebound also took it back above 10,800, the bottom of the pullback range the past two weeks, a level that held to end November. Some were calling the break below 10,800 a significant downside event, but with the rebound that indicates more of a test lower that acted as a shakeout of sellers and sets up the move back up.
Stats: -45.95 points (-0.42%) to close at 10810.91
Volume: 243M shares Wednesday versus 264M shares Tuesday. Good low volume test and recovery.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
A week has passed since the strong move last Thursday, and the market has been unable to make anything of it. On the other hand it has not sold off, just making a test of near support on continued good price/volume action as it searched for the next catalyst to warrant a move higher.
Thursday the only scheduled economic report is initial jobless claims, but TXN provided some encouraging mid-quarter guidance after the close, narrowing its earnings range to the upper end of the scale ($0.38 to $0.40 versus $0.36 to $0.40) and raising its revenue midpoint to $3.63B from $3.57B. That boosted the stock after hours and gave chips a charge overall. SOX broke out and is threatening to really make a serious move; TXN will help it along. Of course INTC provides its mid-quarter guidance after the Thursday close, however, so what TXN gives will be muted by what INTC might say. This is the strong quarter for INTC given holiday sales, so it will need to be a good number to provide more impetus.
There is some tarnish on the rally and that is bumping up some negative sentiment similar to what we saw last Wednesday before the market enjoyed a big day the following Thursday. Overall the market rally is in place and the action is still positive. Thus it we are still looking for another break higher to give us a continued run toward the end of the year.
Support and Resistance
NASDAQ: Closed at 2252.01
Resistance:
2264 from the June 2001 peak
2288 from December 2000 low.
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 2249
The 18 day EMA at 2232
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.
The 50 day EMA at 2184
2178 is the January closing high
S&P 500: Closed at 1257.37
Resistance:
1264 from the December 2000 lows.
1267 to 1273 is the May and May 2001 peaks (1315 intraday)
1324 to 1329 from the October 2000 lows.
Support:
The 10 day EMA at 1258 is trying to hold
1250 may prove to be some psychological support.
The 18 day EMA at 1250.85
The August high at 1246
The September high at 1243
The 50 day EMA at 1232
March 2005 closing high at 1225 and intraday high at 1229.11
December 2004 high at 1219 and June high at 1220
1210 held in late September on the close.
Dow: Closed at 10,810.91
Resistance:
The 10 day EMA at 10,838
10,868 is the December 2004 high
10,952 - 10,965 from Q4 2000
10,985 is the March high
11,176 - 11,186 from April 2000
Support:
The 18 day EMA at 10,788
10,754 is the February high
10,720 is the high in the recent lateral move
The June highs at 10,646 to 10,656
The 50 day EMA at 10,640
Price consolidation at 10,600
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
December 05
ISM Services, November (10:00): 58.5 actual versus 59.0 expected and 60.0 prior
December 06
Productivity-Rev., Q3 (08:30): 4.7% actual versus 4.5% expected and 4.1% prior
Factory Orders, October (10:00): 2.2% actual versus 2.2% expected and -1.4% prior (revised from -1.7%)
December 07
Crude Inventories, 12/2 (10:30): 2720K actual and -4188K prior
Consumer Credit, October (15:00): -7.2B actual versus $5.0B expected and -$0.1B prior
December 08
Initial Jobless Claims, 12/03 (08:30): 318K expected and 320K prior
December 09
Michigan Sentiment-Prelim., December (09:45): 85.0 expected and 81.6 prior
Wholesale Inventories, October (10:00): 0.5% expected and 0.6% prior
End part 1 of 3
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