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us stock market, trade stock
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1/26/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: WFT; DIOD (bonus); STT
Trailing stops: GRP
Stop alerts issued: ACI
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:
- Stocks fight fire with fire, meet Wednesday churn with strong volume advance.
- Durable goods orders better than expected
- 2006 challenge: Encouraging investment in our own ingenuity.
- Market trying to turn another corner, shrugging off last Friday and continuing the rally.
Buyers return along with better intraday action.
Early Thursday had a familiar look with futures higher and an early advance that was sold into when SP500 ran into first resistance at 1273. Wednesday stocks started higher but rolled over on stronger volume when SP500 failed at the same point, showing weak intraday action and some sellers creeping back into the market. Thursday started similarly, but there was a bit different feel with some better earnings guidance providing a brighter backdrop. Not a big difference, however. Still, the market made a lower high on the rebound attempt, threatening to start the downward intraday spiral shown on Wednesday.
The indices managed to hold positive, however, with SOX and SP600 leading the action. Stocks recaptured their bid heading into lunch, managed to hold during a midday pullback, and then rallied into the close. SOX and SP600 hit new 52 week highs (new all-time high for the small caps) and NASDAQ moved through the December 2005 highs and the near term moving averages. SP500 moved above near at the 10 and 18 day EMA and even cleared 1275. It could not hold that last level, however, fading some in the last half hour.
That remains an issue, but with surging volume on the upside gains, decent breadth, and solid leadership (including a shakeout and recovery by energy stocks), it looks as if that final move by SP500 is, we almost hate to say it, a formality. Earnings outlooks have improved, and after hours there was more good news along that front. After a harsh expiration Friday, the indices held at key support, and now look as if they are turning the corner to continue the rally after a shakeout move.
It is, of course, not a done deal. SP500 is still struggling to follow; it had the opportunity to join in, but gave it back late. The Fed meets next week, the yield curve has just barely recovered from flat to slightly inverted, oil is lower but still high, deficits are high, there is talk of reversing tax cuts, Iran tensions - - take your pick of issues. As we said a week back, that has built quite a wall of worry to climb. Friday's sharp correction was similar to the type you see in a continuing uptrend. We did not like the Wednesday higher volume selling, but it was met in the face with higher volume buying Thursday. Fight fire with fire, and the bigger fire was Thursday. There is still plenty of wall to climb, but after hours some big earnings were helping and even MSFT was being treated decently after reporting in line earnings. In short, a good recovery and the stage is set for SP500 to contribute. Despite some mild distributive action Wednesday, the recovery volume has been very strong. Even DJ30 is trying to make a move as well. Wonder if it can make it through 11K this time around? Sure has been a pretty mild winter for hell to freeze over, however.
THE ECONOMY
Durable goods lower in December but still solid.
1.3% was better than the 1.0% gain expected. November was revised higher to 5.4% from 4.4%. Very strong airplane gains in November faded some in December; ex-transportation durables rose 0.9%. Shipments rose 3.5%, inventories were flat, and unfilled orders popped 2.4%. Those all indicate some good demand for these items made to last 3 years or more.
More strength was shown in the non-defense capital goods ex-aircraft orders, the business demand side of the report. It jumped 3.5%, the strongest monthly gain since August 2005. We discussed improved business confidence last week, and despite it being a lagging indicator, it is clear that the confidence is resulting in a year-end jump in expenditures. Well, it didn't hurt. The year end is typically a time when businesses buy last minute items to use up budgets and to get tax advantages for the year.
The monthly results were solid, but the 2005 results were impressive. Orders rose 14%. Business investment surged 34%. Shipments rose 8% and unfilled orders jumped 17%. The business investment is particularly stunning as it occurred without many of the tax incentives that expired in 2004 and in the face of much higher energy prices.
What about the year ahead?
What about 2006? Expectations are that the economy will slow, starting with the lowered GDP expectations for Q4 2005. That would typically mean slower overall demand. The key for most is business spending as the consumer slows some as housing prices pull back. We saw in 2000 and 2001 what happens when businesses don't spend even if consumers do. The economy needs businesses not just for their demand, but for what it ultimately produces: better technology, better supply, and better jobs.
That supply issue should not be overlooked. We have often noted that when businesses invest in new equipment and technology, they tend to produce better ideas, services and products, taking us to the next level in jobs and standard of living. That investment and research creates new supply and that creates its own demand. You have to be careful here, however. If a toilet paper producer makes an extra 500 million rolls of paper that does not mean more people will go to the restroom just to use up the extra supply. Now there may be some new use for toilet paper discovered, but you get the point. We are talking about investment in a business that comes up with better services, products, and ideas.
Examples are everywhere. The classic is the personal computer. When Jobs and Wozniak invented their first PC, Woz had to present it to Hewlett Packard because he was doing some contract work for them. They laughed at him; who, said HP, would ever need a personal computer? They built it for themselves and gee whiz, we all realized we needed a personal computer. It is about investing in America, investing in our dreams and ingenuity. Millions of Americans have great vision for the future and they work to make it happen. The create and innovate, and along the way come up with products that the rest of us never knew we needed until we see it and say "I have got to have one of those!" iPods, flat screen TV's, ultra-premium wines and liquors, high end resorts, etc. The list goes on. There are many 'gee, I never thought of that' products and services we invent, and once those things we never thought of are available, we have to have them.
That is why we are excited about that investment, and we hope it continues. More than that we want to see the incentives for the small start ups to continue. If we create that environment for those millions of everyday people with good ideas can get the incentive to put those great ideas into motion, our standard of living continues to increase. It is not just big companies creating jobs; as we have discussed, they are losing jobs. It is the new great ideas and the environment where those ideas are encouraged to come to fruition that creates the new and dynamic jobs we want and need. Let the old line jobs go overseas. At the same time, however, indeed ALL of the time, we need to incent our natural ingenuity.
THE MARKET
MARKET SENTIMENT
VIX: 12.42; -0.45
VXN: 17.55; -0.38
VXO: 11.7; -0.61
Put/Call Ratio (CBOE): 0.7; -0.16
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: +22.35 points (+0.99%) to close at 2283
Volume: 2.492B (+10.49%). Big volume Thursday, bigger than last Friday's expiration and selling trade. That is an important point as it shows that the buyers are back stronger than that selling. It is not totally out of the woods; Monday and Tuesday volume was much lower and NASDAQ still has significant ground to retake. It is making the first test and this strong trade shows many were taking it together.
Up Volume: 1.672B (+667M)
Down Volume: 797M (-421M)
A/D and Hi/Lo: Advancers led 2.17 to 1. Excellent breadth once more. Something is happening here (and one of our readers pointed this out two sessions ago), i.e. an improvement in NASDAQ breadth on the upside, something lacking on the last leg of the rally. That gives this move more strength than the price pattern indicates at this juncture.
Previous Session: Decliners led 1.21 to 1
New Highs: 246 (+46). This is also improving. NASDAQ is just under 50 points off its January high but new highs are at the levels hit back then. The combination of improving breadth and proportionately more new highs at a lower level show that this move is not just the generals leading as last time. Indeed, the NASDAQ 100 is lagging this move by the rest of NASDAQ. The troops have swarmed in an attempt to lead.
New Lows: 29 (-5)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ broke back over the December highs (2273 closing, 2278 intraday) and moved through the 10 and 18 day EMA (2276, 2275) as well, pushing ahead on the strongest volume since that mid-December spike. It was upside trade, and that is a good sign for NASDAQ coming off last Friday and Wednesday that saw some selling volume enter the index. It is making a higher low at the 50 day EMA (2247) and the October/December up trendline (2255). It took a few days to shake off the Friday dump lower and it is still not out of the woods on this move. It is doing what it has to, however, and it is showing good price/volume action, good technical action, and strong leadership from within despite the lagging mega cap techs. Next test is 2300. After this pullback and walk along the 50 day, we want to see NASDAQ make a strong move to quickly retake that next level and move on toward the January high (2333).
SOX (2.88%) was strong. It gapped higher and rallied to close at session highs and right at the twin peaks hit earlier this month (539 is the intraday high). That is the near term test. After that the big resistance is at 560, the January 2004 high, the peak after SOX bottomed in October 2002. Strong move, and it is getting help after hours from BRCM, MRVL and other chip leaders.
SP500/NYSE
Stats: +9.15 points (+0.72%) to close at 1273.83
NYSE Volume: 2.073B (+10.72%). Excellent volume, almost matching last Friday expiration trade. Good accumulation to go along with solid volume Tuesday when SP500 led the market with a strong gain. There is accumulation in them thar' small caps that once again so many are saying you have to abandon.
A/D and Hi/Lo: Advancers led 1.82 to 1. Breadth was not that stellar even with the small cap move. Many of the smaller oil and gas stocks closed lower though they did stage an intraday recovery.
Previous Session: Decliners led 1.16 to 1
New Highs: 299 (+76). Not bad either. NYSE new highs fared better on the last leg than NASDAQ. If SP500 can forge higher and clear that resistance we anticipate seeing it clear 400 and approach 500.
New Lows: 38 (-7)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
The large caps had it in their hand twice today, i.e. a move over 1275 resistance. In the last half hour they let it slip away. They did manage to clear the 10 and 18 day EMA (1222.55, 1222.74) and the December closing high (1272.74), but missed the intraday December highs at 1275 and the October/December up trendline that is now at that same level. A good recovery on very strong trade, however, closing near session highs as SP500 made a bolder move off the 50 day EMA (1261) that kept it alive after last Friday's tail kicking. It looks like a formality, particularly with SOX, SP600, SP400 and now NASDAQ leading the way, but the large caps have stumbled around of late as earnings guidance was equivocal. We want to see NASDAQ make a decisive move through 2300, and we want SP500 to show us a decisive move through this resistance as well.
Another stellar performance by SP600 (+1.56%) as it blasted through 371 that had somewhat held it in check the past two weeks. Strong move even without the full support from the energy sector that was still in the process of shaking off some selling that arose after a bit of an excessive run.
DJ30
The blue chips posted a 0.93% gain, coming in just below NASDAQ on the session. It managed to clear the 50 day EMA (10,788), moving into the lower reaches of the December range. Still a lot of work needed to make a run at 11K, the first being a move through 10,900 to 10,950. One step at a time. DJ30 looked dead until Thursday.
Stats: +99.73 points (+0.93%) to close at 10809.47
Volume: 400M shares Thursday versus 412M shares Wednesday. Not bad trade as DJ30 enjoyed some solid trade from the likes of CAT after its strong earnings. MSFT is going to help out some tomorrow, but its impact is likely going to be modest.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
Advanced Q4 GDP, chain deflator, and new home sales are pretty hefty offerings on the economic side Friday, taking some of the light along with the continuing flood of earnings. GDP is expected to show a hefty slowdown. We are concerned it could be better than expected, and with the market worried about the Fed, beating expectations won't be considered the best news for next Tuesdays FOMC meeting. It won't change that meeting; the Fed is going to hike and invert the yield curve. The real contention is what it does at Bernanke's first meeting.
It was a solid session for the leaders, i.e. SOX and SP600, and NASDAQ enjoyed some very positive action as well. Earnings after the close were fueling more gains; of course, the market will want more solid earnings and guidance in the morning as well. It has an insatiable appetite, at times, for good news. Of course, it can fill up on it and then ignore it. Right now, with the indices coming off a hard mid-run correction last Friday on worries about large cap earnings guidance, the market is hungry for good news and is ready to move when it gets it. That is one reason we believe that SP500 can make the move it needs to make here: CAT earnings were strong Thursday, and that fueled both the DJ30 and SP500 move (along with a very healthy day in the financial stocks).
This was the start of a potentially good move that resumes the rally (it has done that on SOX and SP600), and we want to see the market finish the week the right way, i.e. driving the move home on continued strong trade. The GDP report and chain deflator are the potential wildcards that could upset things on the brink of success. Still, techs are getting further leadership from some big names growers after hours (not necessarily the mega caps), and if they can push NASDAQ further along with the strong showing in financials, SP500 could join the other indices and make a key move for this recovery as well.
With that in mind we are continuing to look at stocks making a rebound from the recent correction. Energy companies beat the rest of the market out of that slump, not really pulling back until this week. They made a quick test and many are set up to resume the upward move. That is one area holding promise, but the market is enjoying leadership from many areas.
Support and Resistance
NASDAQ: Closed at 2283.00
Resistance:
2288 from December 2000 low.
2328 from the May 2001 peak
3015 is the December 2000 peak and the October 2000 low
Support:
2278 is December 2005 intraday high.
The 10 day EMA at 2275.94
The 18 day EMA at 2274.80
2273 is December 2005 closing high.
2257 is the October/December up trendline.
2251 is the January 2001 low
The 50 day EMA at 2247
2220 (2218 intraday) is the August high
2216 is the August 2005 high
2212 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 1273.83
Resistance:
The October to December up trendline at 1275
The recent highs at 1275 (intraday) and 1273 (closing)
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
Support:
The 10 day EMA at 1272.55
The 18 day EMA at 1272.74
1264 from the December 2000 lows
The 50 day EMA at 1261.34
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 10,809.47
Resistance:
The 18 day EMA at 10,824
10,868 is the December 2004 high
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 10 day EMA at 10,797
The 50 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
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): 6.60M actual versus 6.87M expected and 7.00M prior (revised from 6.97M)
Crude oil inventories (10:30): -2.309M versus +2.741M prior
January 26
Durable goods orders, December (8:30): 1.3% actual versus 1.0% expected and 5.4% prior (revised from 4.4%).
Initial jobless claims (8:30): 283K actual versus 300K expected and 272K prior
Help wanted index, December (10:00): 39 actual and 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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