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us stock market, trade stock
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3/14/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: PNRA; LLL; VTS
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:
- After three tries, market gets the rebound going.
- February retail sales fall hard overall, and even ex-autos they cooled with the weather.
- Market continues to flirt with disaster and then skate away.
Will the real market please stand up?
After flirting with a breakdown and showing a weak rebound effort the market shook off some negative news in the form of weaker retail sales (in this environment of Fed tightening, however, weak is likely better) and rising oil prices and rallied. Futures were indicating a lower open, and in the pre-market alert we almost jokingly said buyers could use that as an opportunity to move in.
Well, from the open they did just that, pushing NASDAQ back above the 50 day EMA and by the end of the session SP500 and DJ30 rallied to post-2002 highs. The market got a boost along the way from a Wall Street think tank that opined the Fed was going to halt hikes after the March meeting. They are thinking along the lines of Bernanke as a housing market watcher, mixing in some hope as well. Tuesday a bit of hope was enough to get stocks off the bubble and get the rebound moving that had tried but failed for almost a week.
Give NASDAQ and SOX an assist; they finally got off the dime and rallied. For SOX it was the first upside day in 7 tries; it almost had nowhere else to go. With those two pitching in, SP500 was able to take advantage of that nice pattern we talked about Monday night. NASDAQ and SOX are not near a breakout, but with them rowing that gave the better looking indices the chance to show their moves.
Volume was up but hardly impressive, a continued issue in this market. There was some accumulation, but even on NASDAQ where the volume was stronger, trade was still below average. NYSE trade was up a hair, but that also kept it below average. No major groundswell of big money buying but enough to overpower the sellers who appear about as committed and confused as the buyers at this point.
The hole in the boat remains the growth areas, specifically NASDAQ and SOX, though the small caps, a sector definitely dependent upon economic growth, put in a solid performance. The mediocre commitment to the upside forces us to continue viewing this as a relief move even with the DJ30 and SP500 breakouts. NASDAQ still has to prove it is on board; Tuesday it played a needed supporting role and that let the other stronger indices breakout. If it can keep pitching, great.
Though we view it as a relief move, we have to view it as one with potential. After all, SP500 broke out from a nice looking base and NYSE showed excellent breadth, though that was helped by the resurgence in energy stocks on the small and mid-cap indices as oil rebounded. This market, however, has had just about every reason to call it a day, but it has refused to do so. Leaders continue to set up and move higher, some on low volume similar to the market, but others on strong trade. The market continues to dance on the edge of the cliff, but as long as the leaders perform the market rallies away from imminent danger. As long as we continue to find leaders that are seriously set up to move higher and then do so, we are going to continue participating because when it comes down to the lick log, the market knows best. Maybe it is pricing in the Fed being at the 'one and done' stage, but if the volume was not the kind that indicates a blowout move where the buyers are convinced.
THE ECONOMY
February retail sales fall even as chain store sales show a month of gains.
The headline was lower than expected with a 1.3% drop versus 0.9% expected, but take out autos and sales fell 0.4%, less than the 0.5% expected. January was revised to 2.6% from 2.2%. Strong January on warm weather and gift cards. February saw colder weather that kept some consumers out while the January binge had to cool off some.
Given the Fed's 'watching the data' bent, however, slower sales are not necessarily bad in an overall upward sloping sales curve. Case in point: weekly chain store sales rose 0.1% for the week ending 3-11-06. Doesn't sound like much, but it marks the fourth weekly gain. Thus in the month that sales slowed chain store sales rose. Year over year they slowed to a 3.7% gain, but they are hanging on.
The point? Who knows. The Fed looks at all data, but with respect to inflation, retail sales does not tell anyone much. Higher energy prices at the pump help push retail sales higher. That also drains money from discretionary areas and overall negatively impacts retail sales. In any event, buying is not inflationary despite Greenspan's worries in 1999 and 2000. The indication of inflation is whether prices are rising and supply is stagnant or declining. Retail sales does not show you that.
The important point to take away is that retail sales, while still overall solid, have waffled some even in the important December holiday month. If gasoline prices rise as they are without a doubt going to do this summer, pressing against $3/gallon, retail sales are going to suffer. The Fed should be looking ahead to what is going to happen this summer when prices rise versus looking in the rearview mirror to see what they have done. It doesn't take much imagination to look at what happened last year when oil prices were this high and a storm hit. Prices are running higher already and it is not yet driving season and no storms are here yet. The Fed's history is working towards a goal in a vacuum; when the inevitable 'unexpected' crisis or problem arises the Fed's plan is derailed.
THE MARKET
MARKET SENTIMENT
VIX: 10.74; -0.63
VXN: 15.72; -1.53
VXO: 11.19; -0.41
Put/Call Ratio (CBOE): 0.77; -0.11
Bulls versus Bears:
Bulls and bears rose again last week and for the second straight week have surpassed the levels in May and October 2005 that signaled bottoms in the market ahead of rebounds. That remains a positive for the market, but even high levels while the market was at the breakout point recently was not enough to push the market higher. The closer bulls and bears come to each other the better potential for a bottom. Thus far it is not making the difference. We have to keep this in its place: it is a secondary indicator. It tells us to watch for signs of a turn. It does not declare a turn on its own.
Bulls: 42.7%. Edging higher from 42.6% the prior week. Bullishness had been diving hard, 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 undercut the prior two lows that helped kick off their own rallies.
Bears: 31.3%. Another solid push higher from 30.8%. Bear growth continues to slow, down from prior weekly climbs from 25.5% to 27.7% to 29.5%. Already has surpassed its readings from the two prior market bottoms in May and October 2005 (30% and 29.2%, respectively).
NASDAQ
Stats: +28.87 points (+1.27%) to close at 2295.9
Volume: 1.975B (+14.44%). Volume rallied as NASDAQ opened lower, right on its October trendline and bounced. It was still below average and still the fourth lowest session in the past three weeks. Not a wholesale sellout to the upside by the buyers. There were certainly more of them there than the prior two sessions, but the sellers were quiet and allowed it to happen.
Up Volume: 1.466B (+493M)
Down Volume: 480M (-224M)
A/D and Hi/Lo: Advancers led 1.78 to 1. Breadth was decent but hardly the level that instills confidence.
Previous Session: Advancers led 1.14 to 1
New Highs: 146 (+3)
New Lows: 44 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ gapped a hair lower and then found buyers as SOX started to rally as well. After failing at the 50 day EMA (2270) the past week it found the strength to make the move stick, rising to the mid-level of its 11 week lateral move. Making another run at the January highs (2314, 2333) but it is going to have to show a lot more strength than this to make that move and make it stick.
SOX (+2.23%) finally found the upside mojo to rebound. After seven downside sessions in a row it was about time. It held roughly at the December peaks (506 to 503), used that as support, and is now rebounding to test the 50 day EMA (520). Long road to recovery and this was the first day. It helped the other indices make their moves but it has a lot of work to do on its own.
SP500/NYSE
Stats: +13.35 points (+1.04%) to close at 1297.48
NYSE Volume: 1.559B (+3.16%). Volume was up but still well below average as SP500 made a new post-2002 closing high. Volume was hardly impressive; there was some slight accumulation but not the kind of strength that typically provides the legs for a strong run.
A/D and Hi/Lo: Advancers led 2.8 to 1. Excellent breadth as the small and mid-caps rallied as well, bolstered by the rise in energy stocks. Hard to argue with the breadth, however, energy stocks or not. After all, the market rallies well with energy stocks leading the way in 2005.
Previous Session: Advancers led 1.33 to 1
New Highs: 184 (+25)
New Lows: 43 (-2)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 managed a new post-2002 closing high Tuesday, just missing the new high (1297.57) altogether. Making the breakout from its triangle, but the volume, while higher, is not the caliber you would expect from such a move. The price/volume action has improved as noted the past couple of reports, and that has been enough to send the index higher. It still leaves it susceptible to real selling pressure if the buying volume does not pick up the pace.
SP600 (+1.11%) was even stronger as it continued its move off the 50 day EMA (371.16) and the up trendline (372). The smaller energy stocks bolstered the gain; again, no real problem with that other than they are driven by rising product prices and that ultimately drags the economy lower. It is the choke point that is the question. We know from last summer, however, that $3/gallon gasoline starts to slow the consumer. In any event, SP600 continues its move up the 50 day EMA and its trendline, acting quite healthy.
DJ30
DJ30 made its new post-2002 closing high as well, just missing the high (11,160) on the close. Volume continued low, low, coming in well below average. Not a lot of pop to the move, but as we noted Monday, DJ30 was ready to follow if SP500 could deliver the breakout move. It did just that, making the break on low volume.
Stats: +75.32 points (+0.68%) to close at 11151.34
Volume: 251M shares Tuesday versus 251M shares Monday. No real strength in the upside trade.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Well, well. The market was again on the brink, with NASDAQ unable to make a decent move off the bottom of its range and SOX was falling like a brick. Then in the face of rising energy prices it finds the legs for the bounce it wanted last week but could not deliver. Once more a bit of brinksmanship in the face of serious issues, but then once again a rally from the precipice. If it is a cat, it has used the majority of its lives up.
Despite the serious issues it is still trying to climb that wall of worry. It was not a great move forward; the price gains were nice and we saw some solid individual moves, but the drive higher does not have all of the big money behind it. That still makes this a rather treacherous market and a treacherous move higher because low volume rallies can be upset when those holding back decide something is not right and sell into the gain.
Knowing that, we have to approach cautiously, but if the market is going higher and we see strong moves from leaders we will participate in that move. The market knows best what its direction is. We would prefer to see strong upside trade, but as we have often said, perfection is rarely achieved. There is always doubt when moves get underway. We stick to the strong stocks and ride them as they give you more cushion if things start to go awry.
We are still concerned the Fed is going to overdo it; decades of Fed actions are hard to bet against. Not everyone was betting on it stopping in March as the Tuesday volume showed. Wednesday there is a bit more economic data along those lines with the New York PMI. In addition we get crude oil inventories, the current account deficit data, and the Fed's Beige Book. All more fodder for the speculation as to whether the next meeting is the end or not.
We want to see more volume but as noted, if we see individual moves on volume we will start some positions, continuing to work into the move higher as opposed to loading up all at once. This action is more of the same from a strength standpoint with a low volume rise, breakouts or no. That means we have to acknowledge going in that some stray piece of news could suddenly turn the market once more from one that can shrug off bad news into one running from it. This is all part of the overall choppy action. A strong upside volume day would help show that the big money was giving in.
Support and Resistance
NASDAQ: Closed at 2295.90
Resistance:
The recent high at 2325
2328 from the May 2001 peak
The January high at 2333
3015 is the December 2000 peak and the October 2000 low
Support:
2288 from December 2000 low.
The 18 day EMA at 2279
2278 is December 2005 intraday high.
The 10 day EMA at 2278
2273 is December 2005 closing high.
The 50 day EMA at 2270
A minor peak at 2249 is still holding.
2240 is closing low in recent range.
2218 from August 2005 peak
S&P 500: Closed at 1297.48
Resistance:
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 January high at 1295
The late January peak at 1285
The 10 day EMA at 1284
The 18 day EMA at 1283
The 50 day EMA at 1275
The December highs at 1275 (intraday) and 1273 (closing)
1264 from the December 2000 lows
1254 is the February low
1248 to 1250 is the bottom of the November/December 2005 range
Dow: Closed at 11,151.34
Resistance:
11,159 is the February 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:
11044 is the January high.
The 10 day EMA at 11,051
The 18 day EMA at 11,028
10,985 is the March 2005 intraday high
10,965 from Q4 2000 and November/December 2005
The 50 day EMA at 10,946
10,931 is the November 2005 high
10,890 is the December 2005 closing high.
10,868 is the December 2004 high
10,705 from the July/August 2005 peaks to 10,682 that is the September 2005 high
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
March 14
Retail sales, February (8:30): -1.3% actual versus -0.9% expected, 2.9% prior (revised from 2.3%)
Retail sakes, ex-autos (8:30): -0.4% actual versus -0.5% expected, 2.6% prior (revised from 2.2%).
Current account, Q4 (8:30): -$224.9B actual versus -$218B expected, -$185B prior
Business inventories, January (10:00): 0.4% actual versus 0.3% expected, 0.8% prior.
March 15
New York PMI, March (8:30): 19.0 expected, 20.3 prior
Net foreign purchases, January (9:00): $56.61B prior
Crude oil inventories (10:30): 6.76M prior.
Fed Beige Book (2:00)
March 16
Building permits, February (8:30): 2.13M expected, 2.216M prior
Housing starts, February (8:30): 2.03M expected, 2.276M prior
CPI, February (8:30): 0.1% expected, 0.7% prior
Core CPI (8:30): 0.2% expected, 0.2% prior.
Initial jobless claims (8:30): 298K expected, 303K prior
Philly Fed, March (12:00): 13.0 expected, 15.4 prior
March 17
Industrial production, February (9:15): 0.8% expected, -0.2% prior
Capacity utilization, February (9:15): 81.4% expected, 80.9% prior
Michigan sentiment, preliminary March: 88.0 expected, 86.7 prior.
End part 1 of 3
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