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us stock market, stock split
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4/20/06 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: BTU; MGI; AH (took some interim gain ahead of earnings)
Buy alerts: THQI
Trailing stops: None issued
Stop alerts issued: RMBS; JNC
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 lose some punch at prior highs as leading sectors take a breather.
- Leading Economic Indicators lower, Philly Fed shy of expectations, but Fed likely unconcerned.
- GOOG to try and reignite tech upside move for an already tired market.
- Market rest will bring about more opportunity.
Mixed session as recent leaders take a breather.
Techs and small caps led the move this week out of the selling, and Thursday they had to take a breather. Both peeled back from their recent new highs as the large cap indices took some of the limelight, posting gains versus NASDAQ and SP600. There was a lot of up and down action, but in the end NASDAQ held its breakout over the April closing highs as did SP600. They sold intraday ahead of the GOOG earnings, but in the final tally, investors could not stay away from the leaders. Yes they were lower on the session, but they rebounded and held their breakouts. That is precisely the action we wanted to see.
The large caps 'led,' but they could not push the ball forward. In opposite action of NASDAQ and SP600, SP500 rallied to new post-2002 highs but gave that move back by the close. Thus while they led the session, the large caps plowed no new ground on the move.
Volume was higher, and with the gains on SP500 you would normally view that as positive. The price action in relation to that volume, however, was not that solid: a run higher to a new high and then selling off most of the gain. Something of a reversal, but with the indices closing positive and DJ30 looking pretty salty on its own we are not going to quibble about that move. It simply was not 'powerful' as one financial station anchor termed it late in the session.
Volume faded on NASDAQ, basically what you want to see on a softer session. EBAY and INTC somewhat handicapped the tech session, particularly with GOOG earnings due after the close. A good test lower intraday and a rebound to hold the breakout. After a good upside move, that is the kind of pause you like to see as it works to shakeout some of the short term sellers. The pause is likely not done, though the GOOG earnings could spur some additional buying on the Friday expiration session.
The real weight on the market was the weakness in metals, materials, energy, etc.; basically the industrial sectors that had led the move higher (many are on the small cap index) were under pressure and that was the reason the market struggled all session. After strong moves some air was let out. That might take another session or two to get it all out of the system particularly with expiration on Friday. You can explain the action anyway you want, but the bottom line is that after the strong surge off support and the strong run by commodities, the market needed a breather. Thus the weak internals (negative breadth even as several indices posted gains), mixed volume, and paltry, mixed closes on the indices.
Thus we anticipate a bit more consolidation after this move as the indices try to rest and reset for another move higher. As noted Wednesday, the move this year, while up, has been choppy and jerky. We don't' really anticipate an end to that action as the market tries to advance the ball further. One thing was clear; Thursday the ball was in the hands of the large caps, and they could not do much with it.
THE ECONOMY
Leading Economic Indicators fall 0.1% versus 0.0% expected.
For the second straight month the LEI faded, though the 0.1% drop was better than the revised 0.5% February decline. After the Gulf storms the LEI has been quite volatile, finding it difficult to draw a bead on the economic future. It is clear, however, that it is lower than it was (now basically flat to declining) 12 to 18 months back. That suggests slowing 6 months down the road, something the Fed seems to believe will happen as well after a strong Q1.
It is interesting, however, that the LEI are starting to show a potential decline ahead while the ECRI weekly leading indicator has bottomed and indicates the slowdown that looked to be coming will likely not be as severe as we were originally concerned. That pretty much sizes up the two indicators, however, i.e. the ECRI indicator picked up the potential weakness first but is now suggesting the slowdown will be less severe just as the LEI is picking up potential slowing. That is why the LEI does not carry a lot of weight anymore.
Nonetheless it does help you focus in on what is important such as rising energy prices and rising rates and their impact on the economy down the road. So while we might not be all that enamored with the LEI's predictive ability, we do use it to help focus on the bigger picture. The fact that it helps corroborate the Fed's belief that the economy is going to slow is worth noting as well.
Philly Fed rises but lower than expected.
After the New York PMI dumped lower in April, the other regional reports gained some import, particularly with the Fed weighing its options on rate hikes. Thursday the Philly region reported a 13.2 reading, up from March's 12.3 but below the 14.0 expected. This was basically the best of both worlds: lower than expected and thus good for Fed action, but not tanking, an indication the economy is still carrying on.
The sub-indices were the most telling, however, because they are independent of the overall index. Indeed, if you use the method of the ISM the Philly index fell 1.9 points. New orders and shipments fell to 12.2 and 19 respectively, not so bad when you realize the March readings were annual highs. Employment quadrupled to 21.7, posting the strongest gain since September 2004. As usual, prices paid jumped, coming in at 29, driven by the continuing rise in commodity and energy prices.
In sum the region continues along basically the same pace that has sustained the growth through the past year with some slowing moving toward 2006. The Philly Fed is the other index that has shown significant volatility after the Gulf storms. Thus it is important, but as is usual, the Chicago PMI released next week tracks truer to the national ISM.
The reports and the Fed.
Given the LEI and the Philly Fed, how does the Fed's view change? Not at all. They will be factored into the Fed's calculus, but their weight is minimal given other data the Fed reviews. Basically, the LEI is in line with the Fed's belief of a slowdown after Q1; thus its best use is corroborative, and with the Fed mostly leaning to take a pause in the hikes, this data does little to impact the 'data dependent' state of the Fed. Remember, the Fed typically stays in one mode until it sees some serious impact on the economy. Despite its rhetoric about overshooting, it still wants tangible evidence of slowing. The irony is, the Fed is quick to act ahead of anticipated inflation ("if you wait to see it, you waited too long"), but it won't anticipate slowing even with oil closing in on $73/bbl, gasoline heading to $3/gallon, and housing already showing signs of slowing. We all know, as with inflation, if you wait until you see a slowdown, you are too late.
THE MARKET
MARKET SENTIMENT
VIX: 11.64; +0.32
VXN: 15.52; +0.31
VXO: 10.71; +0.05
Put/Call Ratio (CBOE): 0.78; +0.09
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: -8.33 points (-0.35%) to close at 2362.55
Volume: 2.218B (-1.19%). Volume backed off slightly but remained above average as NASDAQ spun its wheels Thursday. It reached lower and rebounded to hold the breakout, and you can view the strong volume with the rebound as a positive. Even with that, it still shows a bit of churn, i.e. high volume turnover, after a bounce off the 50 day EMA. The market has shown this after each upside move this year, and that keeps it from really gaining traction for a blowout upside move.
Up Volume: 867M (-605M)
Down Volume: 1.274B (+530M)
A/D and Hi/Lo: Decliners led 1.25 to 1. Not really bad given the downside in techs. Definitely much weaker than the upside breadth the prior two sessions.
Previous Session: Advancers led 1.91 to 1
New Highs: 259 (-50)
New Lows: 38 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ sold down to the early April closing high (2361) on the initial low and bounced. That was the action we wanted to see. Of course, then it rolled over and sliced through that level, hitting 2354 on the low. After the early hold at support that was disappointing, but NASDAQ was not through. An afternoon recovery, albeit modest, brought NASDAQ back to close above that support level. That indicates something of a shakeout of sellers after the strong run off the 50 day EMA (2310) and October/March up trendline (2311). Good to see it hold the break over that key level, but it was hardly a session where NASDAQ assured itself of a further move higher. It basically remains at the hold high tapping the early April intraday high on the Thursday session high (2376). After the run NASDAQ was sluggish with profit taking. We anticipate a bit more given expiration Friday, but we also note that GOOG announced strong results after hours and that stock tends to have some coattails with respect to the rest of the index. Overall, however, NASDAQ looks ready to continue testing the strong break off the 50 day EMA earlier this week.
SOX (+0.52) posted a modest gain, able to hang onto some of its stronger early move that took it to 535 on the high. It closed well off that level (529), suggesting that SOX may try to form a handle near this level to the double bottom that has tried to form the past two months. The chips will get a boost from BRCM and SNDK on Friday as both were initially down after reporting results but then recovered and traded higher after hours. That had some coattails with stocks such as MRVL that moved higher after hours as well. Good to see the chips back in the game; they are needed to keep this upside move alive.
SP500/NYSE
Stats: +1.53 points (+0.12%) to close at 1311.46
NYSE Volume: 1.782B (+1.88%). Volume rallied above average for the third straight session and the third straight gain. The rising volume and rising SP500 suggests some accumulation, but SP500 also closed 7 points off its high. Thus the rising volume suggests, as on NASDAQ, some churn as SP500 bumps the April high. The close well off the high is typically not good action, particularly when accompanied by rising volume. In addition, SP600 lost ground on the session, and indication of some weakness, though it did rebound well into the close. In sum, the price/volume action was not the best, but given the prior moves this week it is at this point nothing damaging.
A/D and Hi/Lo: Decliners led 1.13 to 1. With the small caps under pressure, breadth was weak as well.
Previous Session: Advancers led 1.6 to 1
New Highs: 264 (-90)
New Lows: 106 (-22)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 surged higher early, running to a new post 2002 high at 1318 before giving most of the move back by the close. Indeed, it gave the breakout back as well, closing just below the early April closing high (1312). Basically SP500 was unable to push the ball forward, giving back a golden opportunity to make the breakout and reverse a breakdown to a breakout. Even though it failed Thursday, given its condition prior to Tuesday, the action is tolerable. SP500 looks ready to work laterally some and set up the next move. As with NASDAQ, however, it is going to get some boost from some strong GOOG earnings (just recently added to the SP500).
SP600 (-0.26) lagged all session, but as with NASDAQ, it too managed to hold its early April highs, tapping them on the low (396.30) and rebounding to post a modest 1.05 point loss (closed at 400.46). Overall good action, rallying to a new high and then testing lower to the breakout point, rebounding into the close. Pretty much textbook action and looking for some additional choppiness to end the week as the small caps and the large energy component consolidate some of the strong move higher to this point.
DJ30
DJ30 posted the best move of the session, breaking above its March highs (11,335) and then holding that move to the close as volume hit the best level in a month. Nice action, giving the market leadership when there was not much to be found Thursday as the recent leaders (energy, commodities, techs, small caps) took a breather. Very solid even with giving back roughly 40 points off the high.
Stats: +64.12 points (+0.57%) to close at 11342.89
Volume: 336M shares Thursday versus 292M shares Wednesday. Solid volume advance on a breakout, exactly what you like to see.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
Expiration Friday, and we have already seen some volume action this week as the indices reversed their weakness and caused a lot of shorts to reposition. After the strong move leaders were mostly taking a breather Thursday, selling off intraday but rebounding to recoup significant portions of the losses. Given the strong move higher and expiration, we anticipate more of the same Friday as the indices consolidate the move higher.
The variable is GOOG. In the past its earnings have shown quite a gravitational pull, whether good or disappointing. Thursday they were solid and GOOG avoided any socially improper statements in the conference call. Thus it was surging after hours, an dtechs were looking pretty decent in its wake.
Still, earnings are also showing the other side, with some major implosions after hours on reports that missed expectations. Nothing new; we saw that in January as well. At this juncture, investors might not be fully saturated with earnings results, but they are getting to that point. GOOG may produce some early upside in tech and the nets, but with expiration Friday and some significant moves ahead of the event, we could see more volatility as NASDAQ and SP600 continue to consolidate their strong moves higher early this week.
We took some more gain off the table Thursday and obviously the purchasing action slowed. What this action is doing, however, is giving some leaders a rest and letting them come back to near support, consolidate, and set up their next move. We are going to be looking for opportunity in those stocks. They may not be totally ready Friday given expiration, but we are going to be ready to move in when a solid stock makes a nice test and holds.
Support and Resistance
NASDAQ: Closed at 2362.55
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 February closing high at 2361.
The January high at 2333
2328 from the May 2001 peak
The recent high at 2325
The 18 day EMA at 2334
2314 is the October/March up trendline.
The 50 day EMA at 2310
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 1311.46
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 October/March up trendline and the January high at 1303
The 18 day EMA at 1299
1297.57 is the recent February high.
The 50 day EMA at 1291.50
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 11,342.89
Resistance:
11,350 from the May 2001 peak.
11,401 from the September 2000 peak.
11,425 from April 2000 peak
Support:
The recent March highs at 11,329 to 11,335
The 18 day EMA at 11,191
11,159 is the February high.
11,137 is the last peak from the February top.
11,130 is the October/January/February up trendline.
The 50 day EMA at 11,111
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): 1.96M actual versus 2.025M expected 2.126M prior.
Building permits, March (8:30): 2.059M actual versus 2.1M expected, 2.179M prior
PPI, March (8:30): 0.5% actual versus 0.4% expected, -1.4% prior.
Core PPI, March (8:30): 0.1% actual versus 0.2% expected, 0.3% prior.
FOMC minutes, March (2:00): FOMC split on continuing versus holding pat, but all agree near done.
April 19
CPI, March (8:30): 0.4% actual, 0.4% expected, -1.4% prior
Core CPI (8:30: 0.3% actual versus 0.2% expected, 0.1% prior
Crude inventories: -800K actual versus +2M expected and 3.23 million prior
April 20
Initial jobless claims (8:30): 303K actual versus 308K expected, 313K prior
Leading Economic Indicators, March (10:00): -0.1% actual versus 0.0% expected, -0.5% prior (revised from -0.2%).
Philadelphia Fed, April (12:00): 13.2 actual versus 14.3 expected, 12.3 prior.
End part 1 of 3
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us stock market
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