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world stock market, trade stock
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1/24/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: HOLX
Buy alerts: DTAS; RJF; DBRN
Trailing stops: None issued
Stop alerts issued: BRL
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/alertssr.htm
SUMMARY:
- A better rebound session shows volume and breadth, but does not turn around Friday selling.
- Little happening in the economic world.
- Existing home sales, crude inventories on tap, but earnings guidance has everyone's attention.
Market shows more strength, but still a long way to go.
Some good earnings from some large cap names helped spark a better market rebound from the Friday dump lower. Monday stocks eked out gains, but the action was quite tepid. With some decent guidance and some lower oil prices, stocks started higher. That was quickly tested, however, when NASDAQ and SP500 ran into upside resistance. Stocks fell back to where they opened, holding modest gains. A three hour lateral move set up an intraday double bottom, however, the indices jumped sharply, starting the afternoon session with gusto.
In 15 minutes they hit the intraday highs, showing a lot of momentum. That was all they were showing, however, as the move waffled and then drifted off to the close. Sure the indices held some gains, but the move that looked as if buyers finally were charging back in had a very small fuel tank.
Stocks closed higher with the small caps and SOX posting 1% or better gains. Volume was running higher all session and finished higher. Breadth ran 2:1 on both NYSE and NASDAQ. Good internals that show there was a return to some accumulation in the market after the Friday thrashing. In addition, stocks posted gains even with energy stocks basically flat to slightly lower. The leaders were doing some leading once more.
That is what we wanted to see after Friday, but it was hardly a return to a sharp upside rally. It is a long way from recovering the Friday thumping and despite the afternoon rebound, the fade from resistance into the close did not signal runaway strength. The market found some buyers and most stocks rose. That is good action and a start to the recovery. It was not an unmitigated blast of accumulation, however, as the last hour fade shows.
Ironically, though some large cap names such as MCD helped get things started, as we have seen with any substantive advance, SP600, NASDAQ and SOX were the leaders. Maybe that is the role the large caps play here, i.e. stirring the pot. They got buyers to open their wallets even though it was not for their stocks (DJ30 rose 0.22% and SP500 0.24%). I used to coach little league, and when a kid couldn't hit I taught him to bunt so he could contribute to the team and gain confidence. Tuesday, DJ30 and SP500 laid down the bunts that moved the runners into scoring position.
THE ECONOMY
Not much in the economic world Tuesday. There was a TIPS auction at the Treasury, and it was rather lightly bought. More buyers are expected at the 2 year auction later in the week so no one was panicking. Indeed, the yield curve slope improved with the 10 year pulling back out in front. Hardly anything more than a flat curve, but a flat curve beats an inverted one.
Remember, a flat curve typically indicates an economic slowdown to below trend. An inverted curve typically indicates a recession. There is, however, tremendous buying of treasuries with recycled petro-dollars and other trade gap imbalance dollars that is pushing yields lower. The $64 trillion question is how much lower they are pushing yields, i.e. is a flat curve really not that flat and the slight inversion we have seen not really an inversion at all?
At these levels of buying we feel the slight inversion is not really an inversion. It would have to get more severe such as, say, if the Fed hikes rates another 25 basis points on January 31. THAT and how the yield curve responds to it is the key indicator in this cycle. Right now, if the market can hold the recent breakouts from longer term bases (e.g. NASDAQ's breakout from its 2 year triangle) and continue higher, that would predict no recession in the future and indeed some continued economic gains. That would suggest that the flat bond yield curve is being substantially impacted by the foreign buying of treasuries.
THE MARKET
MARKET SENTIMENT
VIX: 13.31; -0.62
VXN: 18.37; -1.06
VXO: 12.61; -0.45
Put/Call Ratio (CBOE): 0.57; -0.31. Big drop in put activity as the market rebounded. Those selling put options for premium slowed to see market direction.
Bulls versus Bears:
Bulls: 57.3%. Up slightly from 56.8% the week before. That was a one-week decline after hitting 60.4% the week before. Still over the 55% level considered extreme. This, as with VIX, is an indication and not a fact of market direction. Hit 44.8% on the low on this leg, just above the 43.5% low in May.
Bears: 22.9%. Creeping higher after 22.1% and 23.7% the prior two weeks. That followed a low at 20.88%. 20% is the threshold where a lack of bears is considered extreme and bad for the upside. 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: +16.78 points (+0.75%) to close at 2265.25
Volume: 2.15B (+9.08%). Volume remained above average and rose over Monday levels. While still lower than Friday, Friday trade was goosed by expiration. We like the increased volume. Coupled with the other internal indications this showed a return of some accumulation at key support.
Up Volume: 1.235B (+309M)
Down Volume: 839M (-174M)
A/D and Hi/Lo: Advancers led 1.97 to 1. Solid breadth as NASDAQ pushed higher. Been a while since NASDAQ has shown some good breadth readings, making this all the better.
Previous Session: Advancers led 1.19 to 1
New Highs: 189 (+66)
New Lows: 34 (-5)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ gapped higher and never came back to fill. It tested the gap higher point and bounced from there mid-morning; that is one of the typical support points on a gap higher that is stronger. NASDAQ rallied closed to resistance at 2273 as the December closing high (2269 on the high), and that stalled the rally both times it tried that level. That leaves it below the 10 and 18 day EMA (2277, 2275), but it also was a bounce off the 50 day EMA (2245) and the October/December up trendline. A start to the recovery, but lots of work to do with the December high and short term moving averages as the first order of business.
SOX (+1.00%) bounced off the 18 day EMA (514) and through the 10 day EMA (519). Not bad but it also closed 6 points off its high (526), basically giving back half of the move. Trying to make a higher low here and continue the move. Notably, the index and the semiconductor sector overcame the TXN earnings. TXN was positive early on but that did not last. Still looking for some leadership from this important group as the market recovers.
SP500/NYSE
Stats: +3.04 points (+0.24%) to close at 1266.86
NYSE Volume: 1.861B (+13.28%). Volume surged as the small caps took the market lead once again. Some definite accumulation in the small caps even as pundits Tuesday talked of their demise. Whatever.
A/D and Hi/Lo: Advancers led 2.1 to 1. Excellent breadth, led by those small caps. We note that energy was off Tuesday, and many of those stocks inhabit the small and mid-cap indices. Breadth was still solid even with energy struggling. That shows a broad move.
Previous Session: Advancers led 1.71 to 1
New Highs: 249 (+93). Not bad. Not great either.
New Lows: 36 (+2)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
The large caps again rallied to the October/December uptrend on the high (1271) and fell back. That kept them below the 18 and 10 day EMA (1273.55, 1274) as they try to put in a floor at the 50 day EMA (1260) and resume the breakout move, making a higher low than the late December dip. Volume jumped, an indication that there was some accumulation, but most of that appears directed at the small and mid-caps.
SP600 (+1.43%) rallied well, leading the market and closing at the session high, something that the other indices could not manage. The move pushed SP600 to a new all-time high, and it really looks as if this is the start of the next serious upside move by the small caps. We love to see them leading this time as NASDAQ and SOX are likely to follow. That bodes well for the market.
DJ30
DJ30 still blows. It managed another miniscule bounce on rising volume. It peaked back over 10,700 but is still below serious resistance at the 50 day EMA (10,790). As noted above, it helped get the rest of the market started on its rally. Sometimes you have to bunt.
Stats: +23.45 points (+0.22%) to close at 10712.22
Volume: 375M shares Tuesday versus 366M shares Monday. Stronger trade as DJ30 'surged' 23 points.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Existing home sales and crude inventories are the scheduled releases, and crude will be watched closely because oil has jumped. Overall inventories are substantially higher than they were at this time last year, yet oil is also substantially higher. O'Reilly would say that is the essence of gouging. We all know that is the essence of a market that has to build in risk costs for things such as Nigeria rebel attacks, potential Iranian production cessation, etc.
Oil is important, but so will be the continued earnings and guidance that will take center stage: if companies see strong futures even with high oil prices and a flat bond curve, that is the best evidence of continued economic growth. Tuesday some stocks were sporting good guidance and the market responded. It was not a blowout response because not all sectors and market caps participated, and there is still a lot of ground to cover to undo the Friday damage. The small caps are showing the way, and we anticipate NASDAQ and SOX are going to follow if SP600 holds onto its new breakout.
It is still a fight at this point but Tuesday showed buyers are still ready to enter if the news is good enough. SP600 broke to a new all-time high as did the Dow transports (DJ20). Of course DJ30 is not about to support that move from the looks of it, but if NASDAQ and SOX join in more and SP500 rebounds more, DJ30 can follow along as it has done all long.
Support and Resistance
NASDAQ: Closed at 2265.25
Resistance:
2273 is December 2005 closing high.
2278 is December 2005 intraday high.
The 18 day EMA at 2275
The 10 day EMA at 2277
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
The 50 day EMA at 2245
2220 (2218 intraday) is the August high
2216 is the August 2005 high
2210 is the second October up trendline
2178 to 2182 from the December 2004 high and the September 2005 high; these roughly mark the breakout from the 2 year base.
S&P 500: Closed at 1266.86
Resistance:
The October to December up trendline at 1272
The recent highs at 1275 (intraday) and 1273 (closing)
The 18 day EMA at 1273.55
The 10 day EMA at 1274
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
Support:
1264 from the December 2000 lows
The 50 day EMA at 1260
The August 2005 high at 1246
The September 2005 high at 1243
March 2005 closing high at 1225 and intraday high at 1229.11
Dow: Closed at 10,712.22
Resistance:
10,720 is the high in the recent lateral move
10,754 is the February high
The 50 day EMA at 10,790
10,868 is the December 2004 high
The 18 day EMA at 10,813
The 10 day EMA at 10,839
10,965 from Q4 2000 and late November 2005
10,985 is the March intraday high
11,176 - 11,186 from April 2000
11,248 from the May 2001 peak.
11,238 from the September 2000 peak.
Support:
The June highs at 10,646 to 10,656
Price consolidation at 10,600
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
January 23
Leading Economic Indicators, December (10:00): 0.1% actual versus 0.2% expected and 0.9% prior (revised from 0.5%).
January 25
Existing home sales, December (10:00): 6.87M expected and 6.97M prior
Crude oil inventories (10:30): +2.741M prior
January 26
Durable goods orders, December (8:30): 1.0% expected and 4.4% prior
Initial jobless claims (8:30): 300K expected and 271K prior
Help wanted index, December (10:00): 39 expected and 39 prior
January 27
Chain Deflator, Q4 (8:30): 2.6% expected and 3.3% prior
GDP, advance, Q4 (8:30): 2.8% expected and 4.1% prior
New home sales, December (10:00): 1.225M expected and 1.245M prior
End part 1 of 3
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