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us stock market, trade stock
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4/06/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: LRCX; APH; BRCM
Trailing stops: ORB
Stop alerts issued: GILD
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:
- Market trades flat after weaker retail sales and ahead of feared stronger jobs report
- Same store sales disappoint though retailers stage comeback after slower open.
- Monster.Com online jobs index higher again, pushing non-farm jobs whisper number higher.
- Can the market respond positively to stronger jobs report?
Flat day, mixed finishes, mixed volume.
With the jobs report due Friday, stocks were not in any hurry to try and run higher. Add onto that the March retail sales reports coming in below expectations, a strong Monster.com jobs report, and concerns about a presidential leak of classified information to bolster the Iraq invasion decision, and the market was hard-pressed to make any headway Thursday. Indeed, the NYSE indices traded modestly lower while the tech indices, led by a stronger semiconductor sector, posted just modest gains.
It was a positive to see the market recover in the afternoon session after dipping on these issues, and price/volume action was more or less in line, i.e. stronger on a NASDAQ/SOX gain, lighter on NYSE losses. That is basically what you wan to see, though it can be argued that higher volume on NASDAQ with no appreciable gain represents churning, i.e. high volume turnover occurring after a two week, albeit choppy, rise.
It really helped that chips were stronger for a second session, leading the action and the chip indices clearing important resistance. In addition, stocks recovered into the close, recouping losses as leaders in the chip sector, joined by new chip breakouts, provided that extra push the market has lacked.
Technically SP500 did close below its March highs after move through them Wednesday. The volume was not that strong on the upside move, but it was even lower downside; again, not great but workable action. The rest of the market managed to hold near support, keeping them in good position to continue the rise from the breakout test.
Of course, they have to weather the jobs report. Lately the market has tried to react upside to solid economic news despite the Fed overhang. Of course good economic news is good for stocks, particularly when the market anticipates an improving economy. The only caveat is the outside influence of the Fed. As the recent Fed-speak has said, many on the FOMC believe rates are at neutral; the rub is whether the economy 'behaves' as one put it. Typically that means slows. The marquis economic data that everyone looks at to gauge economic strength, however, is not slowing just as it was not slowing in 2000. That keeps the Fed in the game, and even an overall healthy economy with a few issues can succumb to the termites if it is stressed enough by the Fed.
That said, the indices are well-positioned to absorb the news and move higher. Thus far the market has overcome setbacks in the form of stronger (and at times weaker) economic data, an on again/off again Fed, higher energy prices, rising protectionism, slowing housing, etc. and continued its advance. There is a lot to be said for NASDAQ's breakout from its long term accumulation pattern lending support to the entire market, and thus far it has helped the market rebound from its bouts of uncertainty. Friday it will get another chance, and Thursday's gain in the chips is a good indication it will try to do the same thing.
THE ECONOMY
Is it against the Constitution to blame retail sales slowing on Easter?
Same store retail sales results for March hit the wires Thursday, and overall they were below expectations. There were still plenty of home runs (e.g. COST), but the teen retailers suffered their first real setback in a long time (ARO -9.35%, HOT -12.7%, GPS -13%). That is viewed as a sign that the Fed rate hikes that are driving up short term and now longer term rates are starting to impact the consumer (along with gasoline topping $2.60/gallon). The teenager is pretty much a spendthrift, and if that group is on the decline it suggests that discretionary dollars from mom and dad are drying up.
The retailers were quick to blame any outside force. With the economy looking strong to everyone given the reports on the evening news and financial stations they had to look elsewhere. This year it was Easter as it is coming three weeks later than last year, supposedly taking sales out of March and laying them off into April. Of course when Easter came early they complained that it was still too cold for consumers to get out and buy the spring attire. Seems Jesus still has to bear the cross even today with respect to retailers and retail sales.
Now if the Fed was really on the ball it would take this as a very important piece of economic data, a leading piece of data to put into the mix as to where the economy is heading. The jobs report is a nice data point politicians can flaunt or argue over, but as we have said before, it is one of the more lagging indicators. What teen's and the rest of us are spending as rates and gasoline prices climb higher is very telling about the future, particularly when gasoline prices are only going to rise in the coming months. It seems so elementary, but the place to look is ahead with respect to whether you try to slow the economy or not, not behind. If you don't, however, play it say and blame the Easter bunny. Perhaps that will be politically correct.
Monster.com index rising again.
The index rose 7 points to 164 from 157, the third gain in three months. This index has become a fairly reliable indicator of the strength of job creation, particularly when it puts together a string of data pointing in the same direction. With this third consecutive monthly increase, the whisper number for the non-farm payrolls report Friday has moved above 200K and is closer to 220K.
That should be great news and it is. It also, however, baits the Fed into playing its same old game plan for any recovery: at some point the economy actually looks good. It overcomes all the naysayers and shows good job creation, good investment levels, good manufacturing and service growth, a solid consumer, etc. That is exactly what the current expansion has done. It typically does that even as the expansion gets a bit mature and does not have the same vigor as in the beginning, even though the numbers are impressive. That is normal; any rebound is stronger in order to get things going (remember the 7+% GDP in Q3 2003 that turned the economy around?) and then rides the wave as the economic pieces fall into strength. Put too much stress on an aging expansion and it doesn't have the same pool of investment, etc. to pick it back up as it did at the beginning.
The Fed gets caught in the game of perceptions, however, when it should be above that. It should recognize a lot of what we see and hear with respect to the economy's strength is delayed recognition of facts. Most were in denial in 2003 through 2005 when the expansion was in its prime. Just now they are accepting the strength. Just as most investors are late to the game in each market recovery, they are late in the recognition of a strong economy. Thus the Fed feels it has to act tough in the face of strong economic indicators when it should really be looking at the leading indicators and the signs of trouble ahead (Thursday's retail sales and this month's soaring gasoline prices to name two) in making its policy decisions. We will see what happens. The talk has been encouraging, but the Fed is the Fed, and until it can prove it is different, it is still the same old Fed playing by the same old playbook.
THE MARKET
MARKET SENTIMENT
VIX: 11.45; +0.32
VXN: 15.63; -0.29
VXO: 11.04; +0.44
Put/Call Ratio (CBOE): 0.78; -0.08
Bulls versus Bears:
Bulls: 46.7%. Edging higher last week after a sharp jump to 46.3% from 42.3% the week before. Down from 60.4% at the start of 2006, the fall was hard in February, and is now leveling off (48.9% to 45.3% to 42.6% to 42.3% to 43.6%). It has undercut the two prior lows that helped spark rallies in May and October.
Bears: 28.3%. Bears fell from 30.5% the prior week as the aftermath of the rally. A sharp drop from 33% the prior week. Continues the dramatic turn from the steady rise from right at 20% on this leg. The progression: 33% from 31.3% from 30.8% from 29.5% from 27.7% from 25.5%. Again, it started this move just above 20%, the threshold level. Above 20% is considered better while below 20% is considered bearish for the market. Bears surpassed the readings from the two prior market bottoms in May and October 2005 (30% and 29.2%, respectively).
NASDAQ
Stats: +1.42 points (+0.06%) to close at 2361.17
Volume: 2.206B (+8.29%). Volume bounced above average for the first time in a week, indeed since NASDAQ showed its strong volume breakout move last week. Technically positive given the NASDAQ point gain, but the modest gain and doji on the candlestick chart shows some of the trade was indecision ahead of the jobs report. There was plenty of upside trade, however, and with the semiconductors enjoying a strong session, it is also clear that not all of the trade was churn after a two week advance.
Up Volume: 1.41B (+39M)
Down Volume: 764M (+134M)
A/D and Hi/Lo: Decliners led 1.06 to 1. Price gain but negative breadth. Again NASDAQ 100 (+0.37%) handily outpaced overall NASDAQ as the large cap techs outperformed.
Previous Session: Advancers led 1.22 to 1
New Highs: 208 (+5). Continues its weak performance.
New Lows: 38 (-4)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ struggled early but never gave up any significant ground. On the lows midmorning after the news about potential presidential classified information leaks it easily held above the 10 day EMA (2338) and the January highs (2333). NASDAQ did churn some, unable to push higher as volume moved back above average; that indicates some uncertainty as stocks changed hands rapidly as the buyers and sellers played hot potato. Technically NASDAQ could fade some on the jobs report, but it did just come off a successful test of the breakout over 2333. Thus we would want to see a hold at the 10 day EMA or at the lowest 2333 on any disappointment from the jobs report.
SOX (+1.29%) was again a strong positive for technology, posting another solid gain and pushing through the 50 day SMA (522.10) as it did. The three week lateral move at 500 has yielded some upside and some solid breakouts from the next wave of chip stocks that set up during the lateral move. Some resistance here at the 525 level that marks the bottom of the February trading range from 525 to 550. Good advance that we would like to see take out 525 with another strong move and then take its breather above that level.
SP500/NYSE
Stats: -2.52 points (-0.19%) to close at 1309.04
NYSE Volume: 1.573B (-2.07%). Volume faded as the NYSE indices tested lower and posted modestly lower closing prices. Like that action because the Wednesday upside volume was stronger but still below average. NYSE volume has yet to really blast higher to show the buyers are behind the advance.
A/D and Hi/Lo: Decliners led 1.33 to 1. About on par with the rest of the action by the NYSE stocks.
Previous Session: Advancers led 1.55 to 1
New Highs: 215 (-37). On the next run maybe, just maybe we can get a real improvement.
New Lows: 68 (+11)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 gave back the move over 1310 (March intraday high), but it was not a bad session as it traded down just below the 10 day EMA (1303) on the low and the rebounded to recoup most of the loss. That maintains its prior breakout and shows there was no real selling on the session. Indeed, buyers actually moved in on the downturn and pushed the index back higher by the close. SP500 remains poised as well to continue the advance. Want to see it hold near support at 1300 (18 day EMA) on any disappointment following the jobs report.
SP600 (-0.11%) did nothing Thursday, at least when you look at the close. Intraday it was weaker with the rest of the market, tapping at its 10 day EMA (392.55) on the low but it too rebounded to shave most of the day's losses. Still holding above the upper channel, not really able to advance the past week after last Wednesday's break higher off that upper channel line (now at 391). On any pullback of significance it would be a real sign of strength if SP600 held the 18 day EMA (389.35; closed at 395.79).
DJ30
Similar action on DJ30, basically a test lower and then a rebound to cut the losses. DJ30 tested just below the 18 day EMA (11,182) and then 'rallied' back in the afternoon session. Volume remained low; no distribution, i.e. no heavy selling. DJ30 continues to hold the breakout over the February high (11,159) and is also in good shape to continue higher after the recent test of that breakout.
Stats: -23.05 points (-0.21%) to close at 11216.5
Volume: 240M shares Thursday versus 250M shares Wednesday. Low volume on most of this pullback.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
The jobs report dominates and it is out before the open. As noted, the whisper tops the 190K officially expected. All of the anecdotal evidence indicates more jobs will be created; after all, the economy is riding the crest as it does after the rapid acceleration gets the economic rebound underway. During that period business confidence rises (after lagging all during the start of the recovery as we have discussed before) and when that happens more jobs are created. Jobs do not create more economic expansion, however. They are a by-product of an ongoing expansion. While the Fed views that as a problem, i.e. creating more consumers with more money in their pockets, the historical reality is it does not really matter. What matters is whether the economy continues to create incentives for businesses and individuals to invest in further expansion and thus keep an aging economy strong. The Fed always plays a big role because it takes aim at the economy even as it is no longer has the capacity to fend off attacks at this stage.
The market is showing signs this week it is trying to look through the Fed and see the positives that solid economic data should really evoke. That budding new attitude will be put to the test if the economy reeled off another 240K jobs in March. It is interesting, however, that retailers performed quite well Thursday after overall reporting lackluster results. It is not an exact parallel, but this nascent new attitude toward good economic news could foster a similar result if non-farm payrolls come in over 200K and the unemployment rate ticks down lower than expected. That is a stretch, but the market by its actions has taken heart from some of the Fed-speak this week. While we have discussed the potential folly of such a view, we also note that NASDAQ broke higher on strong volume a week back the day after the Fed raised rates and indicated that no, it was not done with rate hikes. That tells us there is some internal strength coming together in this move, the semiconductor advance the past two sessions being one of the latest indications of that strength.
That still leaves a big hurdle for stocks to jump. The indices are set up pretty decently to attempt a move higher, and we will see just how strong they are after any jolt from the jobs report. We enjoyed the semiconductor move Thursday, both with existing positions moving higher and some new positions making solid breaks. There was a lot of ancillary action as well as electronics companies and technical instrument companies fed off of that move as well. Friday we are going to keep looking at that area and its penumbral areas (hey, if the Supreme Court can use it so can we) to see if we get any opportunity on an early pullback on the jobs report. Same with many of the leading sectors such as telecom and medical devices and instruments. Additionally, if the market cannot swallow a stronger jobs report we are going to look at energy; it has a strong early to midweek and then took a breather Thursday. If the rest of the market lays an egg Friday it will like get some more money thrown its way.
Support and Resistance
NASDAQ: Closed at 2361.71
Resistance:
2477 is the January 1999 peak
2493 is the February 1999 peak
2523 from the December 2000 low
3015 is the December 2000 peak and the October 2000 low
Support:
The 10 day EMA at 2334
The January high at 2333
2328 from the May 2001 peak
The recent high at 2325
The 18 day EMA at 2324
The 50 day EMA at 2298
2288 from December 2000 low.
2278 is December 2005 intraday high.
2273 is December 2005 closing high.
A minor peak at 2249
2240 is closing low in recent range.
2218 from August 2005 peak
S&P 500: Closed at 1309.04
Resistance:
1311 is the March intraday resistance on this move.
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
1358 to 1362 mark a series of peaks from April 1999 to August 1999 high and the February 2002 low at 1360.
1371 to 1373 is the December 2000 peak and the January 2001 peak
Support:
The 10 day EMA at 1303.27
The 18 day EMA at 1300
1297.57 is the recent February high.
The January high at 1295
The 50 day EMA at 1289
The late January peak at 1285
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 11,216.50
Resistance:
The recent March highs at 11,329 to 11,335
11,350 from the May 2001 peak.
11,401 from the September 2000 peak.
11,425 from April 2000 peak
Support:
The 18 day EMA at 11,182
11,159 is the February high.
11097 is the last peak from the February top.
The 50 day EMA at 11,080
11,044 is the January high.
10,985 is the March 2005 intraday high
10,965 from Q4 2000 and November/December 2005
10,931 is the November 2005 high
10,890 is the December 2005 closing high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
April 3
ISM, March (10:00): 55.2% actual versus 57.4% expected, 56.7% prior
Construction spending, February (10:00): 0.8% actual versus 0.5% expected, 0.4% prior (revised from 0.2%).
April 4
ISM Services, March (10:00): 60.5% actual versus 59.3% expected, 60.1% prior
April 5
Initial jobless claims (8:30): 299K actual versus 305K expected, 304K prior (revised from 302K)
April 6
Non-Farm payrolls, March (8:30): 190K expected, 243K prior
Unemployment rate, March (8:30): 4.8% expected, 4.8% prior
Average hourly earnings (8:30): 0.3% expected, 0.3% prior
Average workweek (8:30): 33.8 hours expected, 33.7 hours prior
Wholesale inventories, February (10:00): 0.5% expected, 0.1% prior
Consumer credit, February (3:00): $3.0B expected, $3.9B prior
End part 1 of 3
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