|
|
world stock market, us stock market
* * * *
9/05/06 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: SPIL; HYSL (bonus)
Trailing stops: ECL
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:
- Rally leaders continue to lead higher as September gets underway.
- Announced layoffs starting to creep higher.
- New technology once more finding more hydrocarbons even as we are supposed to run out.
- Real face of September has yet to show up, but we will take this action as long as it lasts.
Leaders continue to rally after early stumble.
Chevron and company announced a very successful field delineation well in the deepwater Gulf, Intel was to announce job cuts, and the summer was officially over. While each has some serious ramifications of its own, even in combination they were not able to gin up much excitement pre-market. Stocks were wandering around, modestly positive, trying to figure out what September was to bring and what catalyst should be followed. Gold was surging $14 (646.90), oil was lower ($68.60, -0.59), and bond yields were modestly rising with the 2 year/10 year inversion gap closing (4.80% versus 4.78%).
Stocks started flat to up, sold off early, then managed to work steadily higher through the afternoon and into the close. Once more stocks managed to turn some weakness into a gain. Nothing major, nothing flashy, just catching a bid and rallying for gains. In short, it was a refrain from last week.
Technically it was familiar as well. The leaders from this last rally were leading again, i.e. technology, semiconductors, and small caps. Much was the same, but there was new mixed in with the old. Chips struggled early, but they recovered and rallied into the close, coming off the test of near support just as did SOX. SP500 struggled once more to put a definitive move on its range, managing to add a couple more upside points. Indeed all indices tacked on some gains with volume rising as you would expect, but not surging above average. Breadth was still lackluster to start the week just as it ended.
That was the old. The new was NASDAQ breaking through its old up trendline, now zeroing in on the 200 day SMA and the July high. More than that, the small cap SP600 broke through its 200 day SMA for the first time in 2 months as it too takes aim on its July high. Volume was still overall low, but once more there was some accumulation in the leadership as they advanced.
Thus we have a market that is still getting leadership and is able to make an important advance, but one that is also still untested post-summer rally. As noted last week, September often starts to the upside, and the first day back often lacks the volume we are going to see as more managers get back to the office, look over their sheets, and then decide what to buy and what to sell.
That means we still expect some upside as new money is put to work as the week progresses, but we are also still in that interim period before September really tips its hand. We are riding the crest of a late summer rally that has some promise but can easily break up when it hits the rocks near shore. Thus while we are pleased to see very nice moves in our positions Tuesday, we also have to realize that if we get another couple of upside sessions we could quickly see the rug yanked out from under once the new money is spent and the buyers' bids are filled. September is fickle that way, and thus we will ride it for what it is worth, but if things get rocky we will quickly close positions, take in the gain, then position ourselves to take what the market is going to give in this month. We obviously like what we see in our upside positions but we also are aware of history and not try to fight where the market is going.
THE ECONOMY
Announced layoffs increase even before INTC cuts.
Reports regarding INTC's 10% to 20% cut in jobs have circulated for over a week, but because they are not yet announced, they were not even included in Challenger's August job cuts tally. Challenger reported 65.2K layoffs announced in August, up 76% from July. Oh no, time to circle the wagons.
Of course, that is not the case. July, mind you, was a six year low at 37.1K. Moreover, the total for August is down 7.5% from August 2005. Only two months this year have shown increases in jobs cuts (June and now August). If you circle the wagons now you leave a lot of ground yet to be covered.
The easy call is to attribute most of the cuts to the housing slowdown. No doubt real estate job cuts were double last year, but the hardest hit sector was the computer industry with 17.3K announced cuts. Again, that is before INTC's announcement. Autos were a distant second at 7,639. Thus though housing is the easy sector to tag with the presumed job losses, it was down the list as far as announced job cuts.
Year to date announced layoffs are still running lower than in 2005 for the first 8 months of the year (538.9K versus 711.8K). Thus we can sweep the numbers under the rug and forget about them. You can if you don't want to stay ahead of the curve on economic signals. Until the jobs market tanks, your year over year figures and year to date figures are always holding up well. What you start to see are cracks in the pavement. They can be normal settling cracks or they can indicate the start of new stresses that will crumble the foundation. What we do know is that announced job cuts have climbed two of the three past months, and the bulk are coming from areas outside housing. September is still likely to be under the gun even though INTC's after hours announcement of 5500 net new announcements was far less than the 10K to 20K expected.
Now job cut announcements don't necessarily equate to actual cuts, but the two do correlate. Similar to building permits preceding housing starts, you have announcements that ultimately end up in actual cuts. Thus when we see 2 of 3 months pop up with increases after a long stretch of declines, it is worth looking around and seeing the issues.
As noted, housing did not dominate, and that is surprising. Employers have never lit the fire under hiring this entire expansion. Jobs growth has been solid, but it has never been blowout given how employers were burned in the last slowdown and are still gun-shy. Companies remained fairly lean during the expansion, so there is not a lot of places to cut employees. What that tells us is that when they do start cutting, that is going to signal an important slowdown in this economy.
It is already an aging expansion, the yield curve has been inverted for months, particularly the very short end (overnight, 3-month) to the 10 year (about 50 BP right now), and as discussed over the weekend, that is still a valid indicator even according to the Fed (after Greenspan tried to undermine it). Thus we have to continue to proceed with caution. The bond market warns, then the stock market starts pricing it in. That makes this current correction very significant for the economy and of course the market. If it fails again and cannot hold the patterns it is telling us there is more of a slowdown ahead than many expect.
Conventional wisdom: There will be no more giant field discoveries. Time to re-write textbooks again.
When I was in undergraduate school in the late 1970's and early 1980's I was taught in petroleum geology class that all major fields, termed giant and super-giant fields, were already discovered. We were so damn smart with respect to hydrocarbon formation and how to get it out of the ground that any incremental knowledge would only add incremental barrels. Thus we were going to run out of oil and gas in 20 to 30 years. Out. Dry. Bottom of the barrel.
Then horizontal drilling and 3-D seismic came along and we learned we could produce a lot more oil from old formations and the new ones we were discovering. Then offshore drilling technology improved and we could drill in water over a mile deep; a mile before you even got to the ocean floor.
Not surprisingly, just as we heard a roundtable discussion last week saying there were no more major discoveries to be had, Chevron and company announced this week an extension of a previous Gulf of Mexico test well, the new well confirming the prior and flowing over 6,000 bbl/day in its test and has the potential to provide as much oil as Prudhoe Bay in its prime, i.e. 50% of all US reserves today.
That is some impressive news in and of itself. What is even more exciting and earth moving, however, is that the find is in the lower tertiary. More and more discoveries are coming from deeper and deeper wells. The original well was drilled in 2004, and this second well was for field delineation. The test set numerous world records for deep drilling whether in water or on land. Oil companies are finding that these deeper formations that were formerly skeptically viewed as capable of holding any large producible quantities of hydrocarbons just need to get a drill bit in them to show they can hold them and flow them back out. There have been maverick theories over the past 20 years about deeper and deeper formations not only holding hydrocarbons but holding them in massive amounts, but the conventional wisdom is that the pressure and heat is too great for them to form or even if they do, to get them out from such tightly compacted reservoirs.
While those theories apply to even deeper levels than the Chevron Jack field, this field extension shows that hydrocarbons can exist in large quantities and flow in large quantities even deeper in the earth's crust and from water depths previously believed unreachable. The endeavor has already cost billions of dollars and it will likely inject billions of investment dollars into exploring deeper and deeper even as Congress wants to assess companies with a windfall profits tax. Prices are now high enough to support this kind of investment, and indeed at $20/bbl less than where they are now. If, however, we tack an ill-conceived tax on companies we may not get this kind of exploration we need for some domestic energy security as we try to transition from an oil based transportation system to a less polluting system.
THE MARKET
MARKET SENTIMENT
VIX: 12.63; +0.67
VXN: 18.35; +1.55
VXO: 11.24; +0.22
Put/Call Ratio (CBOE): 0.96; -0.04
Bulls versus Bears:
Bulls: 42.1%. After a sideways move for a few weeks, bulls are starting higher, rising from 40.0% the week before (40.2% and 41.5% the week before). Bulls are still well below the early 2006 highs and even the April high. The low of the cycle was in June at 38.7%. It remains below the levels hit on the last market sell offs in October 2005 and March 2006, but above the June low when it kissed the bears.
Bears: 33.7%. Continuing the decline from 34.7% last week and the 36.6% the week before and 37.1% hit in July. The 37.1% was the highest level in this entire cycle, easily clearing the 34.4% hit in late June back when bulls and bears kissed, just missing a crossover. Hit a new post-2002 high in that late June move, eclipsing the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).
NASDAQ
Stats: +12.54 points (+0.57%) to close at 2205.7
Volume: 1.795B (+29.74%). Volume moved up and through average for the first time in two weeks, i.e. since the second leg advance in the last summer rally. Shows some accumulation in NASDAQ, one of the leading indices the past week as the market finished out the summer portion of its summer rally. This is positive, but volume is still not likely at September levels given volume has trailed off much of the summer, dropping that average volume lower and lower.
Up Volume: 1.078B (+270M)
Down Volume: 681M (+209M)
A/D and Hi/Lo: Advancers led 1.56 to 1. Better but still rather mediocre, in line with most of the advance.
Previous Session: Advancers led 1.19 to 1
New Highs: 108 (+12)
New Lows: 34 (+6)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ was volatile early, but after turning negative the first hour it found its bid and continued higher through the afternoon. It even shook off an early afternoon dip and rallied to close near session highs. That move took NASDAQ through the up trendline from August 2004/May 2005 (2199) as it heads toward the 200 day SMA (2225) and June high (2234 intraday). Either one of those is likely to be a point where NASDAQ at least pauses on this move. Hard to complain about the advance, the rising, above average volume, and the leadership NASDAQ is showing.
SOX (+1.67%) bounced nicely off the 10 day EMA test from Thursday and Friday to end last week. Obviously many chip stocks rebounded as well, coming off near support of their own (e.g. NVDA). A good continuation of SOX' recovery with the break above its down trendline and then 50 day EMA (433.72) in mid-August. We said SOX needed to continue showing its better performance for the market advance to continue, and thus far it is showing solid action as it tests and then resumes its move.
SP500/NYSE
Stats: +2.24 points (+0.17%) to close at 1313.25
NYSE Volume: 1.34B (+19.07%). Volume rose on NYSE but remained below average as the NYSE indices advanced. Still not convincing volume on the NYSE indices as they struggle to determine if the large caps are going to actually lead from this good position or if the small caps, recently showing more leadership, are going to take over once more.
A/D and Hi/Lo: Advancers led 1.36 to 1
Previous Session: Advancers led 1.92 to 1
New Highs: 177 (-1)
New Lows: 17 (+1)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 hemmed and hawed all session, finally gelling for a modest 2 point gain. Volume was up but hard to call this anything but walking in place right now as the institutions decide whether to start buying back into the large caps and drive them definitively through this resistance that runs to 1312 and onto the May high (1326.60). It is making that move, but the volume is leaving it questionable.
SP600 (+0.79%) continues to outperform the large caps even though the large caps had the head start as well as a superior pattern. Tuesday the small caps broke through the 200 day SMA (37159), making yet a more definitive higher high. NYSE volume, as noted, was not stellar, but it was rising, and with the rally in the small caps there was more accumulation in these issues. They are economic canaries, and their improvement is important, particularly given the action in the bond market.
DJ30
DJ30 managed a modest gain after lagging all session. It has cleared all resistance up to the next level at 11,670 (11,400 being the last). Volume was higher but still below average. As with SP500, its good pattern is keeping it moving toward that prior high, but investors have not come back in just yet after setting up a great pattern into mid-August, instead focusing on techs, chips, and small caps. Still in position to move to that level, but not showing the pop it needs to clear that level.
Stats: +5.13 points (+0.04%) to close at 11469.28
Volume: 185M shares Tuesday versus 168M shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
The real action has not likely shown itself yet this week as volume was up but not huge, particularly on NYSE. The week traditionally starts slower and then builds as the managers make their decisions on what to do. There is quite a bit of negative view toward the market even with the move higher to end summer. September has that effect and it seems many are treading cautiously. We have to say we are looking at it the same way. The market has rallied pretty well on light trade to the next resistance, and the odds say there is at least an overbought condition to deal with on a further advance toward that resistance.
That keeps us watching our positions closely as the week progresses. We will continue to let them work higher as long as they will, and if we see good moves we will work into new positions. After all, the market has the last say on moves. Tuesday there was accumulation in technology, chips and small caps, though more in the former two than the latter. If they get too far on this run without more volume strength, however, when all of the players start participating there will be a propensity to sell some and then see if the buyers reappear.
The indices are working on building their patterns and another test back won't necessarily be bad after the test of next resistance. The key on that test is whether volume really jumps on the selling and undoes the solid work put together by NASDAQ and SOX, mainly breaking back through the higher highs and lows built in August. We like what we see with the chips as they bounce nicely off near support. We will still have to protect positions for now, however, playing more defense than offense so to speak until we get a better litmus of the September direction. We are still looking for a turn back down this month, but we also have to be as neutral and dispassionate as possible, letting the market show us what it will do. Again, thus far we have a low volume end of summer rally that shows promise with its patterns in technology and semiconductors. The large caps are right there as well, just slumbering. Even with those patterns we have to be ready for at least a modest pullback after any low volume rise such as the one to end the summer. Given this is September, you are always on edge form something that may turn into more than just a pullback.
Support and Resistance
NASDAQ: Closed at 2205.70
Resistance:
The 200 day SMA at 2224.63
2230 is the June 2006 peak (2234 intraday)
2250 is the March 2006 closing low.
Support:
2199 is the August 2004/April 2005 up trendline
2190 is the July 2006 high and is giving way
2185 to 2182 is the September 2005 peak and interim high from November 2005.
2177 is the December 2004 high.
The 10 day EMA at 2171
2168 is the August intraday high.
2158 from the May 2005 low.
The 50 day EMA at 2134
2100 from the early and mid-2005 peaks
2072 is the June closing low
2050 from the summer 2005 lateral range lows
S&P 500: Closed at 1313.25
Resistance:
1315 is the May and May 2001 peaks
1324 to 1329 from the October 2000 lows.
1326.70 is the May 2006 high
1334 is an October 1999 peak
Support:
1311 is the April closing high.
1302 the recent August highs
The 10 day EMA at 1303
1294 is the January 2006 high and 1297.57 is the February 2006 high.
The early June high at 1288
The late January peak at 1285
1280.37 is the recent July peak.
The 50 day EMA at 1282
The 200 day EMA at 1277
1264 is an old trendline from the August 2003/August 2004/October 2005 lows.
Dow: Closed at 11,469.28
Resistance:
11,642 is the May 2006 closing high
11,670 is the May intraday high
Support:
11,401 from the September 2000 peak and April 2001 highs
11,384 is the August intraday high.
The 10 day EMA at 11,377
11,350 from the May 2001 peak
The March 2006 highs at 11,329 to 11,335
The 18 day EMA at 11,324
11,279 is the late May closing high
11,243 is the early August peak closing high.
11,228 is the July closing high.
The 50 day EMA at 11,213
11,097 to 11,137 is the last peak from the February top.
The 200 day SMA at 11,072
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
September 6
Productivity, revised (Q2) (8:30): 1.6% expected, 1.1% prior
ISM services, August (10:00): 55.0 expected, 54.8 prior
Crude oil inventories (10:30)
Fed Beige Book (2:00)
September 7
Initial jobless claims (8:30): 315K expected, 316K prior
Wholesale inventories, July (10:00): 0.7% expected, 0.8% prior
September 8
Consumer Credit, July (3:00): $6.5B expected, $10.3B prior
End part 1 of 3
|
world stock market
us stock market
|
