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us stock market, trade stock
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3/02/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: GG; MRVL; SLB
Trailing stops: JOSB; DRI
Stop alerts issued: CHS
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:
- Retail sales, rising oil trip market, but afternoon rebound keeps stocks in play.
- Retail sales suffer through February.
- Stocks set for rubber match after up one and down one.
Stocks unable to continue Wednesday rebound but manage late bounce to cut losses.
The session was hamstrung early on when February retail sales failed to meet expectations. There were those that surpassed the whisper and other numbers, but a majority, 64%, missed expectations. It was a tough year over year comparison and the snowstorms hurt, but that was supposedly factored in. They still missed and that put investors in a sour mood.
In addition, there was more oil news from Nigeria with some kidnap victims released but followed with renewed threats of violence. Then an OPEC official stated that $60/bbl oil was a 'fair' price and the market interpreted that as indicating upcoming production cuts. The result pushed oil to 63.36 (+1.39/bbl). Gasoline rose as well, ending a three-day run up of 10%.
As a result, energy led while retail lagged. Semiconductors were up early, faded, but then closed positive, showing some relative strength. Volume was mixed, lower on NASDAQ and higher on NYSE. Price/volume action quality has flip-flopped this week with NASDAQ showing much better action and NYSE backsliding.
Even with NYSE selling volume increasing, the indices managed an afternoon rebound to cut their losses to modest levels. They did not close at session highs, but the rebound was enough to keep NASDAQ and SP500 right below the January resistance that stopped the recent attempts to move higher. It was a passable to decent intraday action with stocks overcoming some early bad news and rebounding to cut losses to minimal levels. Even with the rebound, however, this rebound attempt still has to prove itself at the same resistance and with oil and gasoline prices rising once more.
THE ECONOMY
Retail sales said to suffer from the 'January effect.'
We talked about the January effect on sales after the January results were announced. Gift cards helped keep consumers at the stores and they apparently bought more than just what was on the card. That really boosted January sales, clobbering December and from the results released Thursday, February as well.
As noted, 64% of those reporting missed expectations. Most of them were in the apparel sector and particularly in teen apparel (e.g., ANF, ARO). Even CHS, a long term market stalwart, missed on its earnings and sales and was summarily dispatched by sellers. There were some winners such as COST, but the winners were the minority and they were not going to rescue the sector on Thursday.
Cold weather and poaching by January were blamed, but they were also built into the expected number. That makes 2 our of 3 months well below expectations. That is no big deal in a surging economy with employment expanding, right? It may not be, but it is foolish to ignore it, particularly with other areas of weakness showing up. Housing is falling as the home sales and inventory levels show. Construction fell sharply and surprisingly. Regional manufacturing data is softening despite the strong national report on Tuesday; remember, the national report lags the regionals by a couple of months. GDP was shockingly low in Q4. There were rational explanations for it, but it was slow nonetheless. The bond yield curve is inverted and has been for a month; that may not mean recession given the degree of inversion, but inversions at this level typically lead to significant economic slowdowns.
We call it weakness but it is really just less growth at this point. That is what makes it so sly, so stealthy. It just looks like a slowdown in an otherwise strong economy. As we have said before, there is nothing wrong with the US economy that, left alone, it couldn't handle. The problem is, the economy is never left alone. Greenspan's Fed was infamous for tinkering with it to get things 'just right.' He has Black Monday and the crash and bear market of 2000 to October 2002, two of the worst financial events in our history, as credits to this 'fine tuning.' The problem is it becomes too easy to overlook some slowing in light of stronger employment and other lagging indicators. You think the economy will ride through it; after all it has done so well up to that point. Then all of the rate hikes start to catch up (about 75 basis points is still hanging out there, ready to hit the economy) even as the Fed launches a few more. Thus a slowdown is stamped down into slow growth or at worst a recession.
There is enough empirical evidence out there to warrant at least a pause by the Fed. Not after the March meeting or after the May meeting, but now. This is just what happened in 2000. Things looked pretty good with signs of slowing here and there. We said at the time the Fed had gone too far as there were still rate hikes to hit the economy and the yield curve was inverted. It continued its campaign and we know the result. Right now there are similar signs of slowing in an otherwise decent economy. However, there are still rate hikes to impact the economy and this time oil is over $60/bbl and gasoline is rising once more, still above $2/gallon. It is time to give the economy and the market a break.
THE MARKET
MARKET SENTIMENT
VIX: 11.72; +0.18
VXN: 15.99; +0.5
VXO: 11.44; +0.67
Put/Call Ratio (CBOE): 0.95; +0.24. Jumped back up toward 1.0 but as with earlier in the week, no cigar as no close over that level. That still leaves just two such closes in the past three weeks, and that is not enough of an indication of anxiety to get the get the market turning around without other factors working as well.
Bulls versus Bears:
One of those 'other factors' may be this sentiment reading.
Bulls: 42.6%. Bullishness is really on a dive, dropping from 45.3% and 48.9% the week before. Quite a drop from 60.4% hit at the start of the year. It has now undercut the prior two lows that helped kick off their own rallies.
Bears: 30.8%. Bears did not grow as fast as in prior weeks (25.5% to 27.7% to 29.5%) or as fast as bulls fell, but as with NASDAQ, the reading has topped the prior two highs at 29.2% and 30% in May that presaged bottoms.
NASDAQ
Stats: -3.53 points (-0.15%) to close at 2311.11
Volume: 2.107B (-6.61%). Volume backed off as NASDAQ struggled. Trade still topped average, but after the Tuesday distribution, price/volume action has improved with the Wednesday accumulation session and the lower volume loss Thursday. Very volatile, however, and volatility always requires caution. Volume has jumped the past three sessions as the index trades back and forth. It is not out of the woods just because the price/volume action has improved a bit.
Up Volume: 983M (-837M)
Down Volume: 1.081B (+678M)
A/D and Hi/Lo: Decliners led 1.3 to 1. Very modest decline, aided by the afternoon rebound.
Previous Session: Advancers led 2.2 to 1
New Highs: 166 (-14)
New Lows: 35 (-2)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ started soft, made a move positive, but then gave that up as the morning progressed. It easily held above support, tapping some support at 2300 and then rebounding in the afternoon. It was no straight shot higher, but it was a steady rebound all afternoon that cut losses to modest levels. The rebound leaves NASDAQ back just below the late January high (23.15), the point that stalled NASDAQ in late January and is trying to do the same a month later. Volume has jumped; right now this is churn, i.e. higher volume turnover at resistance. It has to convert some of that volume into aggressive buying as on Wednesday if NASDAQ is going to clear this interim resistance to even get a shot at the January high (2333).
SOX (+0.08%) lost its early gains as well but managed to recover positive ground by the close. Showed relative strength all session as the semiconductors held most of their gains from the Wednesday break higher off the 50 day EMA (522.33). Strong surge that took SOX close to the January high (550.91); it would not be unusual for it to move laterally for a session or two and then try to make the breakout move.
SP500/NYSE
Stats: -2.1 points (-0.16%) to close at 1289.14
NYSE Volume: 1.79B (+9.6%). Volume jumped again on NYSE as those indices posted losses. Tuesday was clear distribution as SP500 tried the January high but was rejected on high volume. Trade slowed on the Wednesday rebound, but then picked back up even stronger than Tuesday as the NYSE stocks closed lower. It was not all selling volume, however. The indices rebounded late and recovered much of the lost ground. That indicates that buyers did have some strength as the indices rebounded in the afternoon session.
A/D and Hi/Lo: Decliners led 1.25 to 1. Very modest downside breadth, again aided by the afternoon rebound. It was never out of hand, however, never coming close to the -2+:1 on Tuesday. The selling, despite the rising volume showed less intensity.
Previous Session: Advancers led 2.47 to 1
New Highs: 149 (-26)
New Lows: 19 (-7)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 sold down to the 18 day EMA (1282.75) on the low and then bounced off that support to post a very modest loss. The dip lower to support and then the rebound on solid volume indicates a shakeout move more than any distribution. The Tuesday dive lower really shook up the pattern, and as with NASDAQ, you don't like to see volatility, particularly in the handle to a base. Still, it has maintained the pattern and gives itself the opportunity to make a breakout with this rebound.
SP600 (-0.13%) stalled out as well Thursday with a test lower and rebound. It was not much of a test, easily holding above the 10 day EMA (378.62) and the January high at 380. SP600 is still at the upper channel line of its uptrend, and that typically acts as resistance. If NASDAQ and SP500 break to the upside SP600 is likely to top the channel as it did in late January before coming back and testing lower to reset the move once more.
DJ30
DJ30 again held the 18 day EMA (11,007) on the close after testing it intraday. Volume was again below average as DJ30 tests, holding near the early January high (11,048). The low volume is setting it back up for the move upside despite the high volume burst Tuesday that took DJ30 down to the 18 day EMA on the close. Similar to SP500, it tested lower and recovered some lost ground. It is still holding well at near support, about the minimum it can do in response to the Tuesday heavy volume selling.
Stats: -28.02 points (-0.25%) to close at 11025.51
Volume: 2.74M shares Thursday, slightly topping Wednesday's 2.7M shares. Still in the recovery mode from the Tuesday dive lower, trying to hold support and consolidate on lower volume.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
The economic data gears up once more with final Michigan sentiment and ISM services. President Bush is heading to Pakistan, and with the car bomb killing of a US diplomat near the US consulate today, we anticipate the market will be on edge while he is there. With oil prices climbing back from the brink once more, there is plenty to keep the market edgy heading into a weekend.
Thus even with some continued decent action in the indices since the Tuesday distribution (chips rebounding and then showing relative strength Thursday along with techs, NASDAQ rebounding on even stronger trade), the market will face the usual obstacles plus a new wrinkle heading into the weekend.
We are looking for semiconductors and techs to show some leadership, however, and with QQQQ closing positive along with SOX after a dip lower as the sellers made another run at the market Thursday, we could very well see some more 'bargain' hunting that gives these sectors some more upside strength. We liked the relative strength they showed all session. We also liked the strength the energy sector showed, coming off the recent selling with several rebounding off of or through the 50 day EMA.
Those areas may prove fertile Friday, and we will look for opportunity where it pops up. At the same time we continue to watch the overall market; NASDAQ and SP500 are trying to clear resistance, and while there has been some volume improvement on NASDAQ, NYSE is not there yet. Of course, neither has made the breakout either.
Support and Resistance
NASDAQ: Closed at 2311.11
Resistance:
The late January high at 2314.36
2328 from the May 2001 peak
2330 is the October/December up trendline.
The January high at 2333
3015 is the December 2000 peak and the October 2000 low
Support:
2288 from December 2000 low.
The 10 day EMA at 2292
The 18 day EMA at 2285
2278 is December 2005 intraday high.
2273 is December 2005 closing high.
The 50 day EMA at 2269
The October 2005 up trendline at 2251
S&P 500: Closed at 1289.14
Resistance:
The January high at 1295
1297.57 is the recent February high.
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
Support:
The 10 day EMA at 1286
The late January peak at 1285
The 18 day EMA at 1283
The December highs at 1275 (intraday) and 1273 (closing)
The 50 day EMA at 1273
1264 from the December 2000 lows
The bottom of the November/December 2005 range at 1248
Dow: Closed at 11,025.51
Resistance:
11044 is the January high.
11,176 - 11,186 from April 2000
11,350 from the May 2001 peak.
11,401 from the September 2000 peak.
11,425 from April 2000 peak
Support:
The 10 day EMA at 11,039
The 18 day EMA at 11,007
10,985 is the March 2005 intraday high
10,965 from Q4 2000 and November/December 2005
The 50 day EMA at 10,912
10,868 is the December 2004 high
10,754 is the February high
10,720 is the high in the recent lateral move
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
February 27
New home sales, January (10:00): 1.233M actual versus 1.270M expected and 1.298M prior (revised from 1.269M)
February 28
GDP second preliminary, Q4 (8:30): 1.6% actual versus 1.6% expected, 1.1% first iteration
GDP chain deflator, Q4 (8:30): 3.3% actual versus 3.0% expected, 3.0% prior.
Chicago PMI, February (10:00): 54.9 actual versus 58.2 expected, 58.5 prior.
Consumer confidence, February (10:00): 101.7 prior versus 104.0 expected, 106.8 prior.
Existing home sales, January (10:00): 6.56M actual versus 6.60M expected, 6.75M prior (revised from 106.3).
March 1
Personal income, January (8:30): 0.6% expected, 0.4% prior
Personal spending, January (8:30): 1.1% expected, 0.9% prior
Construction spending, January (10:00): 1.2% expected, 1.0% prior
ISM, February (10:00): 55.5 expected, 54.8 prior
Crude oil inventories (10:30): +1.121M
March 2
Initial jobless claims (8:30): 297K actual versus 285K expected, 279K prior
March 3
Michigan sentiment, final, February (9:50): 87.5 expected, 87.4 prior
ISM services, February (10:00): 58.0 expected, 56.8 prior.
End part 1 of 3
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