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us stock market, trade stock
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1/30/06 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: NOV
Buy alerts: QSII; CNQ; TLM; FTO
Trailing stops: None issued
Stop alerts issued: 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/alertssr.htm
SUMMARY:
- Stocks struggle after solid week.
- Fed prepares to invert yield curve. Thus far market overall ignoring the issue.
- Waiting on the Fed while looking at the January highs.
Market decides not to deal with issues ahead of FOMC, takes the day off.
The futures were flat and suggesting a sluggish session, and the market came through with just that. An early bounce, a pull down back to flat, a lunchtime rebound that formed an intraday double top, and then an afternoon fall back to session lows. All on low volume and flat breadth. The indices closed mixed, all hugging the flat line. Sluggish.
XOM's earnings were huge and with the OPEC meeting they helped energy as one of the leading sectors on the day. Those earnings are a double edged sword, however, because they will eventually reignite the drumbeat to relieve XOM of the burden of all of those 'windfall' or 'obscene' profits. Maybe not right now, but if we get another 'perfect storm' of events later this year and gasoline moves back to $3/gallon and beyond, Congress will feel political heat to do something. Even more so because it is a political hot button in an election year and democrats will attempt to use it to gain seats in Congress. You can argue whether that is right or wrong, but you can make book that is going to happen.
While it was not openly discussed, we heard a few desks talking about just that, and complained it was part of the overall lack of direction. It was likely more than that what with the FOMC meeting to invert the bond yield curve on Tuesday, more earnings to come, and a lot more economic data this week as well. And of course, the January highs are just overhead as well; after two solid upside sessions the market was not ready to deal with that yet.
Volume was significantly lower and breadth was flat as a pancake. Leaders in last week's move took a breather (e.g. SOX and some of the semiconductor big leaders, BRCM, MRVL). Stocks were unable as a whole to continue toward the January highs; not a huge issue yet after such a solid recovery last week. After this pause, however, they will need to continue that move. Thus we are looking for a pause that refreshes even while the earnings, economic, Fed, and overseas issues bump against the market.
THE MARKET
MARKET SENTIMENT
Almost like clockwork on Monday, when the market slowed down after a move there was talk about low volatility, high bullishness in the market, and a low put/call ratio. We heard it from a television reporter on the floor, how these were at the lowest level in years, etc., and how that was an issue for the market.
It can be an issue, but as we have discussed on several occasions over the past couple of months, the market can entertain these levels of indicators for a long, long time before it really does become an issue. If the overall market is performing well, i.e. showing solid leadership and price/volume action, these have to take a back seat. They are definitely worth watching to help put overall moves into more focus, but they are not what you base your decisions on. On many occasions in the past twenty years I have heard comments from some traders about how they were selling or buying because volatility was at a certain level. On many occasions the market kept on moving in its trend despite what the volatility readings showed.
What is typically happening is that a reporter is getting some traders and hedge fund mangers whispering in her ear about these issues, trying to get some kind of negative move underway in an otherwise strong market. This particular reporter is an easy target because the depth is not there to understand the issue and then realize how she is being manipulated. The 'facts' about the VIX, put/call ratio, and bullish sentiment are parroted on the air, and if the market is weak enough it has an impact. Monday it did not even in a slow session.
VIX: 12.39; +0.42
VXN: 17.89; +0.58
VXO: 11.54; +0.14
Put/Call Ratio (CBOE): 0.66; -0.14. Even with the drop this is still a historically 'high' level with respect to a bearish market environment. If it drops in the 0.3 to 0.4 range that is more bearish. We note that the television comments were made before the session with CBOE put/call ratio at over 0.70 on the Friday close.
Bulls versus Bears:
Bulls: 53.7%. The selling in mid-January had its impact, pushing bullish advisors below the 55% level considered bearish. Quite a drop from the prior week's 57.3% reading. It hit 60.4% three weeks back. Good to see it down, but with this market advance it is likely heading right back up. Hit 44.8% on the low on the last leg, just above the 43.5% low in May.
Bears: 25.3%. A nice gain in bears from 22.9% after bottoming at 20.88% recently. It held above the 20% level that indicates too little bearishness. 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: +2.55 points (+0.11%) to close at 2306.78
Volume: 1.973B (-17.25%). Volume was some of the lowest of the month as NASDAQ struggled at the Friday highs.
Up Volume: 1.192B (-292M)
Down Volume: 766M (-89M)
A/D and Hi/Lo: Decliners led 1.1 to 1. Flat to nowhere as with the market price move.
Previous Session: Advancers led 1.42 to 1
New Highs: 223 (-83). Got respectable late last week and we want to it move over 400 as NASDAQ makes a run at and hopefully through the prior highs.
New Lows: 17 (-7)
The Chart: The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ was slow all session. It started flat and managed an immediate bounce only to sell it back. It held positive all session but squandered a 10 point gain at the midday highs that took it to Friday's high once more (2314). That still leaves it well off the January high (2333) as it takes a pause after a good week on strong upside volume took it out of immediate danger. A good higher low at the 50 day EMA and October/December uptrend and a strong volume and solid leadership move to this point. It can take a moment here on low volume just as shown Monday, but it needs to continue higher and take on that January peak when it starts moving again. That means it would not be a good move if it dips more than the 18 day EMA (2280). Not fatal, but this is a point NASDAQ needs to show real strength after extricating itself from the expiration sell off.
SOX (-0.71%) gave back a bit after the strong Friday gap higher when BRCM and MRVL surged, spearheading a SOX breakout. It deserves a rest here, possibly filling part of the gap from 536 (closed at 547 Monday). As with NASDAQ, we don't want to see too deep a test here before continuing and leading the rest of the market higher.
SP500/NYSE
Stats: +1.48 points (+0.12%) to close at 1285.2
NYSE Volume: 1.664B (-14.34%). Some of the lowest volume of the month on NYSE as well as those indices took a breather. Trade was still above average, showing just how strong volume has been during January. Good price/volume action for a day off after some strong action to close out last week as the indices recovered from the expiration selling.
A/D and Hi/Lo: Decliners led 1.06 to 1. Basically flat, just as the NYSE indices.
Previous Session: Advancers led 1.83 to 1
New Highs: 287 (-151). Showed much better new high action Friday, and at this level ready to push back above 400 after this pause in the market.
New Lows: 29 (-7)
The Chart: http://www.investmenthouse.com/cd/^gspc.html
Sluggish as well, reaching up intraday to 1287 but never really attempting to challenge 1295 at the January high. Slow, low volume session on the heels of some strong upside moves on excellent trade levels. The October/December trendline (1279) is rising below SP500, and if it tests back here we don't want to see it move below that before starting the bounce to take on those January highs.
SP600 (+0.17%) led the market along with the mid-cap SP400 (+0.17%). SP600 posted another gain, but after the Thursday breakout, the Friday gain was smaller and Monday even smaller than that. A move that shows progressively smaller gains is running out of steam near term. SP600 is likely to pause with the rest of the market and then continue higher. Solid leader coming up off of this last low.
DJ30
DJ30 when nowhere, posting a modest loss on the session on the lowest volume in two weeks. It has run into the middle to upper range of the December lateral move (10,600 is the peak). It ran hard to get here, and as with the other indices, a brief pause is okay. Then it needs to try out that January high at 11,048.
Stats: -7.29 points (-0.07%) to close at 10899.92
Volume: 323M shares Monday versus 398M shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
More economic data hits Tuesday with the consumer sentiment, Chicago PMI, the employment cost index. Earnings will continue, and yes, the Fed announces its rate decision at 2:15ET.
The bond market has priced in another 25BP move that will add 0.25 to short term rates. With the 2 year/10 year spread at 0.01 Monday, it is easy to see a boost to the 2 year will invert the curve. That brings on a host of issues, the most worrisome is the old adage an inverted curve results in a recession. There are mitigating issues right now, but it remains to be seen how much inversion the curve and the economy can take.
History does not favor an inverted curve for the market, but as of now the market has ignored the slight inversion not to mention high energy prices. Indeed, the market has performed well, particularly coming off of the selling that hit on expiration Friday. Last week was solid and after this pause we are looking for a resumption of that strong trade.
Monday that market was waiting on the Fed, waiting to get it over with and see what the statement says. After the anticipation becomes news we don't expect the market to wait around much longer before trying the January highs. We are likely to get some more milling around the next session, and that is not bad. The semiconductors surged into the lead last week, and a couple of days rest would do them well in setting up the next move. That would also help the market overall reset for a next move as well, resting below the January highs and then trying them out for size once more.
Thus Tuesday may not bring a lot of significant movement ahead of the Fed (i.e. volume movement), but we could start to see some leaders that have made a pullback start back up ahead of the rest of the market. We see some moves brewing, and if they show us the right stuff we will be ready to move in.
Support and Resistance
NASDAQ: Closed at 2306.78
Resistance:
2328 from the May 2001 peak
3015 is the December 2000 peak and the October 2000 low
Support:
2288 from December 2000 low.
The 10 day EMA at 2286
The 18 day EMA at 2281
2278 is December 2005 intraday high.
2273 is December 2005 closing high.
2260 is the October/December up trendline.
The 50 day EMA at 2252
2220 (2218 intraday) is the August high
2216 is the August 2005 high
2218 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 1285.20
Resistance:
The January high at 1295
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
Support:
The October to December up trendline at 1279
The December highs at 1275 (intraday) and 1273 (closing)
The 10 day EMA at 1276
The 18 day EMA at 1275
1264 from the December 2000 lows
The 50 day EMA at 1263
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 10,899.92
Resistance:
10,965 from Q4 2000 and November/December 2005
10,985 is the March intraday high
11044 is the January high.
11,176 - 11,186 from April 2000
11,248 from the May 2001 peak.
11,238 from the September 2000 peak.
Support:
10,868 is the December 2004 high
The 18 day EMA at 10,839
The 10 day EMA at 10,832
The 50 day EMA at 10,797
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 30
Personal Income, December (8:30): 0.4% actual versus 0.4% expected and 0.3% prior.
Personal Spending, December (8:30): 0.9% actual versus 0.8% expected and 0.5% prior (revised 0.3%).
January 31
Employment Cost Index, Q4 (8:30): 0.9% expected and 0.8% prior
Chicago PMI, January (10:00): 59.8 expected and 61.5 prior.
Consumer Confidence, January (10:00): 105.0 expected and 103.6 prior.
FOMC decision and statement (2:15)
February 01
Construction spending, December (10:00): 0.2% expected and 0.2% prior.
ISM, January (10:00): 55.5 expected and 55.6 prior.
Crude oil inventories (10:30): -2.4M prior
February 02
Initial jobless claims (8:30): 295K expected and 283K prior
Productivity, Q4 prelim. (8:30): 1.0% expected and 4.7% prior.
February 03
Non-farm payrolls, January (8:30): 250K expected and 108K prior
Average workweek, January (8:30): 33.8 expected and 33.7 prior
Hourly earnings, January (8:30): 0.3% expected and 0.3% prior.
Unemployment rate, January (8:30): 4.9% expected and 4.9% prior.
Michigan sentiment, revised (9:15): 93.1 expected and 93.4 prior
Factory Orders, December (10:00): 1.0% expected and 2.5% prior
ISM Services, January (10:00): 60.0 expected and 61.0 prior.
End part 1 of 2
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