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world stock market, us stock market
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4/17/06 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: NUE; USG
Trailing stops: CHRW
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 fall right back on continued oil climb, rising rates, Fed-speak, etc.
- Foreign purchases still more than enough to support oily US trade deficit.
- New York PMI slows.
- Stocks back to last week lows on rising volume, once more having to fish or cut bait.
Stocks poised to bounce into earnings, but other issues get in the way.
This is the week earnings ratchet up to full throttle and they started off nicely enough with the solid marquis Citigroup report. That may have helped the market start off decently, posting modest gains for the first couple of hours. Once more, however, there were a lot of issues in the 'other' category.
Net foreign purchases were strong once more, easily offsetting the trade deficit. New York region manufacturing slowed, however, and homebuilder sentiment was down yet again. That was livable, however. Even with the analysts out with typical post-holiday downgrades stocks were still posting gains early on.
What really hurt was the continued oil price climb (closed at a new high @ 70.40, +1.08), rising interest rates (10 year @ 5.08%). Gasoline futures hit $2.16/gallon; they have surged from below $2.00 just over a week back. In turn, the national average at the pump is now at $2.78/gallon. You hear some of the talk shows discussing a world economic boom and how it will continue even if oil hits $75/bbl or more. Indeed today we heard the statement that likely indicates the turning point with respect to oil is close at hand: there is no relationship between the stock market and oil. The reasoning is that oil has rallied for four years and the stock market has rallied as well during the period. According to that logic, however, no matter how high oil rises the market won't be impacted. We know at some point oil will rise to a level where it crimps economic expansion. As the market rises on anticipated economic gains, at some point the market will start factoring in that oil related decline in economic activity. We feel that will start around $75/bbl to $80/bbl, and this recent laughing in the face of rising oil prices is a concern.
The market was concerned Monday though even with oil flirting with $70 it still managed modest early gains. When Chicago Fed president Moskow noted at 12:00ET, however, that the inflation was at the upper end of the range and that the Fed had to "stay vigilant," stocks threw in the towel for the day with respect to the rally.
SP500 traded above the 50 day EMA once more but then gave it up once more. DJ30 joined it below the 50 day EMA as well as the Dow's October/February trendline. NASDAQ could not advance the ball past the Thursday high early on, and then it faded as well. It tapped the 50 day SMA on the low and managed to rebound and close above the 50 day EMA. SP600 eked out a modest gain, but it could not clear the 10 or 18 day EMA on the highs. It is trading in the middle of its channel, but it looks like a test of the trendline is coming here as well.
In short the indices are more or less back to where they were Tuesday when they sold off on higher volume. Higher volume again on Monday though much lower and well below average. Indeed, volume was lower than the upside and downside sessions of late, so there was not much muscle to it. Yes sellers were in control but they were not shooting higher.
Nonetheless, that leaves the indices back at a point where they have to hold, and the weight is once more on the NASDAQ and SP600 as they are the only indices that are holding key support. Many stocks from across the market continue to hold near support, lending strength, but also fighting the modest but still present distribution. Commodities remain strong points, helped Monday by China's 10.2% GDP growth report, well above expectations. Again, however, you have to wonder just how much of both ends of the candle the market is burning as commodities rise on continued increases in price. Economic boom or no economic boom, at some point prices hit the choke point. Monday the market did not collapse, but it took a moment (once again) as it pondered these continuing developments. Despite the issues occurring all year, the market has yet to fold its hand.
THE ECONOMY
February trade gap narrowed as foreign purchases rose.
Last week we reported the February trade gap fell to $65.7B on declining energy prices (so much for that). That same month net foreign purchases of US securities and debt jumped past expectations, coming in at $86.9B versus $59B and $69B in January. Once more purchases easily topped the trade gap as foreign investors continue to buy US debt and equities. Oil was again a major component with OPEC nations purchasing $18B (20%), recycling that money back into dollars.
As oil prices rose in March and have taken off in April, the oil-related gap will increase in the coming reports. What everyone worries about is whether OPEC and other creditor nations will continue buying our securities. It is the same story we have written about many times before, how Robert Ruben and others speak of a 'possible' point 'sometime in the future' that 'may not occur' when creditors won't buy US denominated investments with their dollars. Yes that may happen, but until there is a significant change in the creditor economies, i.e. they start consuming their production as opposed to selling it to the US, there is likely to be little change. Of course, if they do consume more of their products then the US will consume less and the trade deficit will start correcting (outside of oil).
New York Empire State regional manufacturing stumbles.
This report has been a very volatile since the Gulf storms, up one month significantly and then down sharply the next month. April was no exception with a 15.8 reading that was well below the 24.0 expected and the 29.0 in March (revised down from 31.2). It still shows expansion, but the volatility is something we always note because it indicates change.
This report is one of the newest regional PMI's, and thus it is often discounted to the point one wonders why it is compiled. In any event, we do note that other regions have been volatile as well, though to a much lesser extent. The trend is still growth, but it is also a group of reports we continue to watch as manufacturing, while a smaller part of the US economy, can be a canary with respect to the rest of the economy.
THE MARKET
MARKET SENTIMENT
VIX: 12.58; +0.2
VXN: 17.31; +0.97
VXO: 12.44; +0.62
Put/Call Ratio (CBOE): 0.81; -0.05
Bulls versus Bears:
Bulls: 53.2%. Another sharp rise, up from 49.5% and 46.7% the week before that. Rapidly approaching that 55% level considered bearish. On the low this cycle it hit 42.3%, a level below the prior lows in May and October 2005. The market moved higher after that but it did not show us a strong surge.
Bears: 24.5% from 27.8%. Well off its high at 33% for this cycle, a level that topped the prior two highs that gave way to strong rallies. Above the 20% level below which is considered bearish, but heading lower fast. It is coming full circle, having started this move just above 20%, the threshold level. Bears surpassed the readings from the two prior market bottoms in May and October 2005 (30% and 29.2%, respectively).
NASDAQ
Stats: -14.95 points (-0.64%) to close at 2311.16
Volume: 1.85B (+17.83%). Volume jumped higher after the holiday light Wednesday and Thursday trade. That is distribution, i.e. higher volume selling, but it was also still below average volume. Importantly, the increased volume was still below the levels hit the prior month whether upside or downside. Thus sellers were in control but once more there was no overwhelming rush to sell off NASDAQ as it held key support once more.
Up Volume: 501M (-646M)
Down Volume: 1.331B (+928M)
A/D and Hi/Lo: Decliners led 1.38 to 1. Very modest downside breadth.
Previous Session: Advancers led 1.47 to 1
New Highs: 130 (+41)
New Lows: 61 (+17)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ tried once more at 2333 resistance (January high) but it faded after a half-hearted upside attempt, cascading lower midday to test the 50 day SMA (2297) on the low and rebounding to once more hold the 50 day EMA (2303) on the close. NASDAQ gave up the light volume gains Wednesday and Thursday, and is now back at key support, trying to hang on and set up for another upside attempt. It is still capable of an earnings-related move what with the giveback of almost 70 points of gains from the April high. After SP500 gave up its 50 day EMA, NASDAQ along with SP600 have been the key to a continued upside move. NASDAQ is waiting for some catalyst to help it higher.
SOX (-1.48%) was not it. It tried the 50 day EMA (511.12) once more and then once more faded. It managed to close right at 500, the rough support level that marks the December high and the March lows. Critical point for SOX. It rallied to start the month but then gave it up quickly. Now it has to make a stand along with NASDAQ at this level.
SP500/NYSE
Stats: -3.79 points (-0.29%) to close at 1285.33
NYSE Volume: 1.33B (+7.2%). Volume was up but was miniscule, coming in lower than Wednesday's low trade ahead of the holiday. Hard to call this serious distribution though it is not helping out.
A/D and Hi/Lo: Decliners led 1.25 to 1. Very modest downside breadth. Where have we heard that before?
Previous Session: Decliners led 1.21 to 1
New Highs: 118 (+51)
New Lows: 191 (+22)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 tried to clear the 50 day EMA (1289) once more and as with the prior two sessions, it failed. That kept SP500 below that level that is also close to price resistance at 1295 from the January and February highs. Almost hate to say it because these patterns form and then have no impact, but SP500 is working on the right shoulder to a 9 week head and shoulders base, a bearish pattern. Suffice it to say it remains at a point where it needs to make an upside move if it is going to continue the rally to this point in 2006. It has already cracked its trendline, however, and likely has more consolidation work to set up the next upside move unless it gets some seriously strong earnings outlooks that are not anticipated.
SP600 (+0.05%) managed a late comeback to close positive, but it is still in the middle of its uptrend channel, testing the 10 day EMA (389.10) on the high but unable to break through. SP600 likely has a test of the trendline and 50 day EMA (roughly coincident at 382.18). SP600 and NASDAQ continue to do the heavy lifting for the market, and if the market is going to move higher they are going to have to do it again.
DJ30
DJ30 closed below its 50 day EMA (11,088) for the first time on this pullback, though it did rebound from the lows (11,039) to close. It also closed below its October/January/February up trendline (11,105). Volume was higher but still well below average, and similar to NYSE, below the recent volume levels outside of the holiday light volume last week. Not a massive breakdown and the rebound off the lows suggests some strength at that level still exists. It would be a good time to show it.
Stats: -63.87 points (-0.57%) to close at 11073.78
Volume: 239M shares Monday versus 230M shares Thursday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
Housing starts, PPI, and FOMC minutes, all from March, grace the economic headlines Tuesday. Housing starts remain a key indication for the Fed given that the Fed is targeting housing, but it has tenaciously held on despite starting a gradual decline. While the Fed could probably focus on other indicators at this juncture, it is likely still watching for housing to show a more defined fall before the Fed feels it is time to ease up. In non-Fed speak that means housing basically has to implode before the Fed gets off its back. Its tough living down your past; everyone can take cheap shots. Heck, we pay for the government so we should at least be able to talk trash about it. In any event, after we see that status of housing we will get a glimpse of the Fed's inner sanctum with the March FOMC minutes. From what we have heard the past week, however, the Fed is still very much trying to tell the world it is not going to roll over on interest rates. Indeed, the market would be shocked if some FOMC voting member came out and said 'we are done and I am out of here.'
As noted over the weekend, the Fed is in more of a pickle than in 2000. Back then it simply feared the market was too high, we had too many jobs, the US gap on the rest of the world was getting too great. Gold, oil and other commodities were not shooting higher. Inflation truly was contained without the pockets of nasty price hikes in this economy (e.g., education, drugs, healthcare). It simply pulled a 1929 central bank move, fought the market until the market left town, and then as the 2000 minutes show us, could not figure out it killed the golden goose until a year later. By that point it was way too late to stop the implosion. The current Fed has real inflation to deal with along with rising energy prices that threaten to ransack the expansion and the fear of 'monetizing' that jump in energy prices and thus sparking further inflation and interest rate hikes as in the seventies. Do you get the feeling the Fed is winging it once more? Sure you do; it always wings it.
The market is taking all of this in, and of late has been taking on some water as a result. Once more it is showing a sag on energy, Fed and the usual woes. Up to this point it has fought its way back each time and continued the advance. It has given up some ground into earnings, and that can be a good thing, i.e. giving it some upside room when the results hit. It can also be a forecast that it is not anticipating much and is getting a jump on the results. There is some distribution, but we see a wide swath of stocks that, despite some recent losses, are still holding up quite nicely. There are also some big moves lower on downgrades and such, indicating investors are nervous, ready to hit the eject button.
Thus the market is basically doing what it has done all year: up one and one-half steps, back one step. A lot of movement but not a lot of gains to show for it. That leaves the market back at a point it has to put together another upside move or break its trend that formed off the October 2005 low (NASDAQ). NASDAQ remains the focus given it is still holding its trend and some big tech names announce this week including some internets (GOOG, YHOO) and chips (e.g. BRCM). Leaders are poised to rebound, but they need a reason to do so. With continued bad news on the energy and interest rate front, earnings are the likely catalyst.
Support and Resistance
NASDAQ: Closed at 2311.16
Resistance:
2318 is the October up trendline.
The 18 day EMA at 2323
The recent high at 2325
The 10 day EMA at 2325
2328 from the May 2001 peak
The January high at 2333
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 50 day EMA at 2303
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.
S&P 500: Closed at 1285.33
Resistance:
The 50 day EMA at 1289.18
The 10 day EMA at 1293
The 18 day EMA at 1295
1297.57 is the recent February high.
The October/March up trendline and the January high at 1299
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 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 11,1073.78
Resistance:
The 50 day EMA at 11,088
11,105 is the October/January/February up trendline.
11,097 is the last peak from the February top.
11,159 is the February high.
The 18 day EMA at 11,149
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:
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 17
New York Empire State PMI, April (8:30): 15.8 actual versus 24.0 expected, 29.0 prior (revised from 31.2)
Net foreign purchases, February (9:00): $86.9B actual versus $69.1B prior (revised from $66.0B)
April 18
Housing starts, March (8:30): 2.025M expected 2.120M prior.
Building permits, March (8:30): 2.1M expected, 2.179M prior
PPI, March (8:30): 0.4% expected, -1.4% prior.
Core PPI, March (8:30): 0.2% expected, 0.3% prior.
FOMC minutes, March (2:00)
April 19
CPI, March (8:30): 0.4% expected, -1.4% prior
Core CPI (8:30: 0.2% expected, 0.1% prior
Crude inventories: 3.23 million
April 20
Initial jobless claims (8:30): 308K expected, 313K prior
Leading Economic Indicators, March (10:00): 0.0% expected, -0.2% prior.
Philadelphia Fed, April (12:00): 14.3 expected, 12.3 prior.
End part 1 of 2
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world stock market
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