|
|
money investment, investment help
* * * *
9/20/06 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts: AAPL (took some interim gain on one of our positions)
Buy alerts: GYMB; LIFC; MDRX; PLCE
Trailing stop alerts: None issued
Stop alerts: COST; MU
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 Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdly.htm
SUMMARY:
- Stocks rally on earnings into FOMC, waffle, but hold gains.
- NASDAQ pushes into early 2006 trading range while SP500, DJ30 fail to take out May highs
- FOMC holds at 5.25%, recognizes faster housing slump, still has a dissenter
- Stocks getting help from outflow of funds from oil, commodities.
- Wednesday rally extends current up leg a bit further, meaning it is still a bit extended, but stocks are still coming to the fore.
Earnings spur a further rally, FOMC does nothing to derail it.
FOMC or no FOMC, stocks were set to rally Wednesday after a trio of strong earnings results had the market buzzing. ORCL, MS (financial), and CC (consumer electronics) all beat the street and were the toast of the market both before and after the opening bell. Oil was down once more, and it only suffered more after the inventory data saw a really big build in distillates. It closed at $60.46, -1.20, flirting with a close below $60 intraday. Good earnings and now lower oil, a development that will only help earnings in the future. The excitement was high.
All indices moved higher, but it was clearly a NASDAQ move, though it took some time to separate the high grade from the lower grade sectors for the session. Sure energy was in the tank, but the rest of the market was solid on the open. Then things started to separate out. NASDAQ rode higher, particularly the larger caps on the back of ORCL's earnings. Outside tech, however, the market was up but was in the end somewhat disappointing. MS reported those strong earnings but managed just a $0.50 gain (too much already built into the run at this juncture). CC surged early as well, but it closed flat to down on the session; as with MS, too far already on this run and no gas left in the tank. Even with NASDAQ's lead, SOX was well off the pace as well, putting in a very modest session.
The action on those stocks is telling. NASDAQ surged into the January to March trading range, but when it got there, it had traveled a long way and could not push far into it. SP500 rallied above its May high but could not hold the move on the close. DJ30 could not even make the move through its May high. No complaints with the rally, just fact that the indices have basically matched their gains on the prior three legs of this rally and the Dow and SP500 could not surge past the old highs Wednesday when they had every reason to do it. When the Fed held rates steady and noted that 'gradual' slowdown in housing was no longer so gradual, all the indices got a bit rocky, and they never could recover the session highs.
They did not roll over and that was a real positive. They still have that next resistance to deal with and since they could not break through today on good news they likely have more work to do before they make that move.
Technically NASDAQ was solid with its stronger volume, big price move, solid breadth, and leadership. It made it to next resistance, holding its gains well after the Fed announcement. Breadth indications were solid at better than 2:1, showing that most stocks were upside on the session. The other indices posted gains as well and on rising volume; more accumulation of shares. As noted, however, SP500 and DJ30 did not make it through their May highs. The managed to hold most of their gains as well, but SP500 gave back its move through the May high and could not take it back. Volume was up and breadth was solid on NYSE as well, so it was no shrinking violet of a move here either.
We are pleased that the market rallied and managed to hold the gains after the FOMC decision. That shows the sellers are still on the sidelines and the market is still in good shape to move higher, continuing the current trend. The issue is whether it can extend this leg higher from here without a test, and that is getting to be a taller order given the move higher. For now we ride the positions we have and look for the next pullback to give new entry points.
THE ECONOMY
The FOMC left the Fed Funds rate at 5.25% with its second straight pause. That was expected. The market rallied ahead of the decision, looking for that pause and some more dovish language. The statement was basically the same, but the Fed did drop 'gradual' from its description of the housing market. Glad they are up with the times, though it was hardly gradual at the August FOMC meeting either.
Despite its second pause and nod to the housing slowdown, formally the Fed's policy stance is toward tightening given it stated the bias toward inflation pressures. Officially that keeps the Fed and the market watching each piece of economic data, but in reality the Fed is done with rate hikes. Why? Because it was willing to pause, despite a 'nay' from Lacker in August and on Wednesday, when inflation pressures appeared to be rising and the economy was not as clearly slowing as it is now. As you know from our commentary, it was no doubt slowing, but as is typical the Fed was looking at lagging indicators as accustomed under Greenspan. Bernanke, however, while saying they were following the Greenspan model, was obviously looking elsewhere and seeing the slowing.
Of course there was no way the Fed was not going to pause. If it raised after a one-month pause that would have unleashed the dogs. You thought Bernanke was maligned before the pause talk in the early summer, just think how bad it would be if they started bouncing around month to month? Ugly. As it is, it is not what the Fed says, it is what it does. Some are worried about Lacker and his dissent; dissent is good. It shows the FOMC is considering all the issues in that Lacker is putting them out there for all to hear.
THE MARKET
MARKET SENTIMENT
VIX: 11.39; -0.59
VXN: 18.45; +0.19
VXO: 10.52; -0.33
Put/Call Ratio (CBOE): 0.87; -0.54
Bulls versus Bears:
Bulls: 45.8%. Up from 43.2% last week and 42.1% before. Steady climb this month toward the 55% level considered bearish. Still well below the peaks from January and April, and well below the 55% level considered bearish.
Bears: 35.4%. Bulls may be rising but so are the bears. As the market gets higher they are growling, coming back strong from a 33.7% the two prior weeks. This has reversed somewhat the steady decline from the 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: +30.52 points (+1.37%) to close at 2252.89
Volume: 2.252B (+5.68%). That is the way to counter some distribution: a strong volume surge to the upside. Tuesday NASDAQ suffered a bit of distribution though it did rebound in the afternoon. Wednesday with the help of the large cap techs volume surged and NASDAQ rallied, its seventh straight day of above average trade. One half distribution session out of seven. Good accumulation.
Up Volume: 1.726B (+1.085B)
Down Volume: 510M (-824M)
A/D and Hi/Lo: Advancers led 1.74 to 1. Not commensurate with the price move. It was a large cap day.
Previous Session: Decliners led 1.68 to 1
New Highs: 132 (+65)
New Lows: 49 (-12)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
Gapped higher, putting in two-thirds of the session gain on the open. After that move it rallied to the January to March trading range starting at 2250. It moved into that range (2250 to 2315), up to 2257. It then worked lower and laterally, rallied ahead of the FOMC, sold off after the Fed, but then rebounded to close right at the resistance. It showed good character in fighting the sellers and coming back. The buyers are clearly still in control. It is also at its next resistance while still in the fourth leg of this rally. It got some rest Monday and Tuesday, but it is still in the same leg and a bit extended as it has equaled its other legs. It can get more extended, however, before it needs to test. Overall a solid move as it rallied when it should have and held the gains after the FMOC.
SOX (+0.39) languished at the 10 day EMA all session, holding that level after dumping lower Tuesday in the distribution. Chips were, with a few exceptions, notable tech laggards. SOX is still in good position to move, it just did not move with the rest of the market. Note that it started its consolidation ahead of the rest of the market, and it kept on its consolidation Wednesday. You might view its failure to rally as a shortcoming, but it is more likely just setting up for another move higher when it is ready. Still like the pattern.
SP500/NYSE
Stats: +6.87 points (+0.52%) to close at 1325.18
NYSE Volume: 1.61B (+7.33%). Took awhile but volume moved higher on NYSE as well. Good to see the volume pick up as the NYSE indices pulled up together. Not blowout volume by any stretch, but some more accumulation as the large caps try to set up to take out their May highs.
A/D and Hi/Lo: Advancers led 1.88 to 1. Breadth was above 2:1 most of the session but frittered away as the market bounced up and down in the last two hours.
Previous Session: Decliners led 1.37 to 1
New Highs: 200 (+114)
New Lows: 47 (+4)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 tried hard to get through the May high (1326.70) once more, moving up to 1328 on the high before it stalled mid-session and could never get back to challenge that level. Once more missed out on taking out the May high though it did hold onto its gains into the close after failing at that resistance. Still trending nicely higher up the 10 day EMA (1315.20), and likely to continue doing so, but we still have to note that it did not clear that May high when it had the opportunity to do it.
SP600 (+0.99%) was not the best mover but it came off the 200 day SMA (372.42) nicely and posted a solid gain on the session. It has consolidated nicely along this key level the past week and this was a solid move. This is a key index to watch here as it is very economically sensitive and is working higher in its base. After this consolidation we want to see the small caps come off of this level. They don't have to lead for the market to continue, they just need to avoid imploding.
DJ30
DJ30 posted a gain as well, but it was a modest move comparatively speaking (as was SP500 and SOX). The Dow was unable to punch through the May high (11,670) much more the all-time high at 11,750.28. After a modest dip it is ready to do just that but the large cap NYSE indices are holding back still.
Stats: +72.28 points (+0.63%) to close at 11613.19
Volume: 226M shares Wednesday versus 178M shares Tuesday. Volume moved up to average as DJ30 moved up toward the May high. Not bad but will need to keep the volume up as it moves toward the next level over that support.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Jobless claims, the Leading Economic Indicators, and the Philly Fed are on tap, but the major economic fireworks for the week are over with the FOMC decision. The market will continue to be on Fed watch, but with oil prices still heading lower the market is getting a bid at energy's expense.
Not only are investors in better humor due to lower prices and the increased buying power for consumers (many retail stocks enjoyed nice gains Wednesday), the market is also getting money from the fall in the commodities. As money leaves the energy and commodities, it is finding a home in equities, particularly the techs that were in serious trouble before starting the rally in August. As money continued to come out of energy and the commodities, stocks have continued to benefit.
With commodities still falling that should hold. The one thing that would upset that is if the commodity decline is a presage to more economic weakness than anticipated. If that is the case, stocks would start to factor that economic downturn as well. As of now they are not showing that weakness, instead reaching toward the old highs in some cases and forming nice bases in others. They will probably need a breather before too long unless they are now into marathon running. There continue to be stocks that are setting up and breaking higher in waves, providing more or less a sustained crop of frontrunners. Case in point: chips sat out much of Wednesday, but they are setting up for the next move. The market cannot run higher and higher indefinitely without a break, but when we see a key sector setting up, we are not going to ignore it when its leaders start making good moves.
Support and Resistance
NASDAQ: Closed at 2252.90
Resistance:
2250 is the March 2006 closing low.
2316 from interim tops in January and March 2006 (the 2250 to 2316 range is the Q1 trading range for NASDAQ)
2376 is the April high, the post-2002 high
Support:
2234 is the June 2006 peak (intraday)
The 200 day SMA at 2222
2206 is the August 2004/April 2005 up trendline
The 18 day EMA at 2197
2190 is the July 2006 high
2185 to 2182 is the September 2005 peak and interim high from November 2005.
2177 is the December 2004 high.
2168 is the August intraday high.
The 50 day EMA at 2161
2158 from the May 2005 low.
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 1325.18
Resistance:
1324 to 1329 from the October 2000 lows.
1326.70 is the May 2006 high
1334 is an October 1999 peak
Support:
1315 is the May and May 2001 peaks
1311 is the April closing high.
The 10 day EMA at 1315
The 18 day EMA at 1309
1302 the recent August highs
1294 is the January 2006 high and 1297.57 is the February 2006 high.
The 50 day EMA at 1293
The early June high at 1288
The late January peak at 1285
1280.37 is the recent July peak.
The 200 day EMA at 1280
1266 is an old trendline from the August 2003/August 2004/October 2005 lows.
Dow: Closed at 11,613.19
Resistance:
11,642 is the May 2006 closing high
11,670 is the May intraday high
11,750.28 is the all-time high
Support:
The 10 day EMA at 11,515
The 18 day EMA at 11,448
11,401 from the September 2000 peak and April 2001 highs
11,384 is the August intraday high.
11,350 from the May 2001 peak
The March 2006 highs at 11,329 to 11,335
The 50 day EMA at 11,314
11,279 is the late May closing high
11,243 is the early August peak closing high.
11,228 is the July closing high.
11,097 to 11,137 is the last peak from the February top.
The 200 day SMA at 11,107
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
September 18
Current Account, Q2 (8:30): -$218.4B actual versus -214.0B expected, -$213.2B prior
Net Foreign Purchases, July (9:00): $32.9B actual versus $75.1B prior
September 19
PPI, August (8:30): 0.1% actual versus 0.3% expected, 0.1% prior
Core PPI, August (8:30): -0.4% actual versus 0.2% expected, -0.3% prior
Housing starts, August (8:30): 1.665M actual versus 1.75M expected, 1.772M prior
Building permits, August (8:30): 1.722M actual versus 1.74M expected, 1.747M prior
September 20
Crude oil inventories (10:30)
FOMC policy statement (2:15): No change 5.25% Fed Funds Rate. Removed 'gradual' as an adjective describing the housing decline.
September 21
Initial jobless claims (8:30): 310K expected, 308K prior
Leading Economic Indicators, August (10:00): -0.2% expected, -0.1% prior
Philly Fed, September (12:00): 14.4 expected, 18.5 prior
End part 1 of 3
|
money investment
investment help
|
