* * * *
11/09/06 Technical Traders Report Update
* * *
Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: BIDU; EZPW; IIG
Buy alerts: MTW
Trailing stops: SMSI
Stop alerts: SMSI
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/alertttr.htm
SUMMARY:
- Delayed effect: market gaps higher on CSCO earnings, can't hang on.
- Struggling to make the next break higher as market grapples with future after election.
Market rethinks Wednesday post-election rally.
Cisco powered the early market move with techs gapping higher as the mega-tech posted a second straight quarter of much better than expected earnings. Everything was up early then started to peel away, starting with the NYSE large caps as financials stumbled. Techs hung in with gains, and energy, steel and other diverse metals were higher as well. One by one, however, sectors fell back as the session moved ahead. Finally NASDAQ gave in, turning negative mid-afternoon.
That punched a hole in the session and the market finished the lower across the board. Earnings could not hold the move. A narrower trade gap resulting from record exports could not shake the image of Senator Schumer sowing his new oats with an anti-China tariff in hand. It was a more sober look at the world after the Wednesday party on the heels of the election results. Buyer's remorse? World's shortest honeymoon? Most everyone you talked to today had lost the wisp of optimism as the party leaders made nice in the election aftermath. It was replaced with much more critical analysis of what 'common ground' could be found. On Iraq we are pretty sure they will agree on its geographic location. Beyond that is a toss up. The budget? When you start talking about what can be cut to lower spending you get to that same old Congress-speak: there just is not enough discretionary spending to cut to really make a difference, so why cut? Instead just raise taxes. Those are not the kind of thoughts that pry the wallet off a buyer's hip.
Oil started to climb again as well, rising to 61.13, +1.33. It has found a range between 58 and 62 of late and is bouncing up and down there now that OPEC has decided to act with respect to production. That stemmed the tide of the downtrend, and with it the market has struggled. Recall our conversation about the Fed following oil prices, and if they buck up and hold the line then the Fed is less inclined to even consider a rate cut. You can bet the market is aware of this.
Technically it was one of the days you don't like to see. A quick look and the damage does not look that bad, and it wasn't. The action sets up some potential weakness, however. Specifically the gap higher and then the reversal to close negative on surging volume by NASDAQ just after it once again made the breakout to a new post-2002 high. It did not collapse, but it faded right back to the April high on the close. SP500 failed at the October high and sold on rising trade; it still has that potential double top to worry about. SOX, well, it turned away from the 200 day SMA again, thudding lower. No breakdown but back to having to hang on and rebuild again.
Again, it was not a collapse, but the action was troubling. Leaders held on as well for the most part, but they did not escape the turn down on rising volume. Many are hanging onto support, but many were sold on rising volume as well. Once more the market is having a hard time delivering on another breakout after such an extended move by DJ30 and SP500. NASDAQ remains in position to play catch up with them, but the election is another worry regarding the future, and thus far as DJ30 and SP500's struggle has not led to money rotating into techs, at least not wholesale. Friday the market starts once more having to hold the line and try putting together another move back up. Not a great risk/reward position for DJ30 and SP500 with NASDAQ having to hold onto the breakout.
THE ECONOMY
The trade gap shrank on lower oil prices and a surge in exports to $123.2B, another record on top of the August record. You know where the strength came from: a $990M rise in civilian aircraft exports. That gain along with the sharp decline in oil prices dropped the gap to -$64.3B from -$69B in August (forecasts were for a $66B gap).
Good to see the gap decline, but not enough to offset the protectionists that have been ready to raise our cost of living with tariffs. Many we talk to are worried that Schumer and his followers will use the democratic sweep to be more aggressive with tariffs. The September numbers may stave that off a bit, but the worry is out there.
THE MARKET
MARKET SENTIMENT
VIX: 11.01; +0.26
VXN: 16.66; +0.27
VXO: 11; +0.54
Put/Call Ratio (CBOE): 0.84; +0.07
Bulls versus Bears:
Bulls: 52.1%. Ticking down from 53.7% last week and also below the 52.7% rung up the prior week. Still flirting with 55%, the level considered bearish. Has caught the April high and is moving closer to the January peak at just over 60%. 55% is considered a bearish indication.
Bears: 26.0%. Moving the opposite from the bulls, bears fell sharply from 28.4% and 30.1% before that, continuing the faster decline. Down from the 37.1% hit in July (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). It remains above the 20% level considered bearish but is back to heading that way with more speed. 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: -8.93 points (-0.37%) to close at 2376.01
Volume: 2.457B (+16.17%). Big jump in volume, the strongest since the October expiration, as NASDAQ gapped higher and reversed. A reversal accompanied by strong volume is not good, particularly when it occurs as an index is trying to make a breakout stick.
Up Volume: 1.09B (-337.395M)
Down Volume: 1.323B (+654.188M)
A/D and Hi/Lo: Decliners led 1.92 to 1. Pumping up the downside breadth.
Previous Session: Advancers led 1.46 to 1
New Highs: 141 (-2)
New Lows: 54 (+9)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
Gapped higher on the Cisco earnings but then spent the session just trying to hang on. It ultimately could not, closing lower on a volume spike. It managed to hold the April high at 2376 on the close, trying its best to hang onto the breakout move. Thus far it is, but the reversal on volume shows that big money was bailing out of tech stocks as tried to extend the breakout. Once more NASDAQ is in the position of having to hang onto a breakout, and it will have to act as a counterbalance to a struggling DJ30 and SP500.
SOX (-1.92%) was up early but after another tap at the 200 day SMA (471.66) almost identical to Monday it faded, this time reversing for a market leading decline. It found support at the 18 day EMA, and that keeps it inside its 9 week lateral move below the 200 day. As long as it hands on and continues its basing it is doing its job for now.
SP500/NYSE
Stats: -7.39 points (-0.53%) to close at 1378.33
NYSE Volume: 1.858B (+10.01%). Volume was the highest in a month as SP500 tapped at resistance again and then turned lower. It is now finding sellers at this level after seeing some accumulation here in late October.
Up Volume: 731.729M (-220.085M)
Down Volume: 1.087B (+366.399M)
A/D and Hi/Lo: Decliners led 1.42 to 1. Modest; good for now.
Previous Session: Advancers led 1.72 to 1
New Highs: 215 (-36)
New Lows: 23 (+3)
The Chart: http://investmenthouse.com/cd/^gspc.html
For the third straight session SP500 hit 1389 on the intraday high and faded. This time it fell to the 10 day EMA (1377) on that sharp volume increase. Rising trade as it turns down from this resistance indicates sellers taking control. Have to be careful here with SP500 showing rising volume as it falls away from the October high it could not break through. Potential double top that could take SP500 well past the 18 day EMA (1372). It remains extended, and this is the first time in this run it has shown this action. Not a good risk/reward point for upside large caps.
SP600 (-0.88%) continues to struggle in its lateral consolidation, but that is okay for now as it once more tapped and held the 18 day EMA on the intraday low. Overall it remains in decent shape, trying to make a higher low here at near support.
DJ30
After posting a new high Wednesday the blue chips struggled on rising volume fading to close at the 10 day EMA (12,092). Struggling similarly to the SP500, but managed a new high on rising volume this week, something SP500 could not muster. Still extended on this run and showing top-heavy action. As with SP500, not a good risk/reward point for the blue chips.
Stats: -73.24 points (-0.6%) to close at 12103.3
Volume: 275M shares Thursday versus 252M shares Wednesday. After a higher volume new high Wednesday, even stronger volume as DJ30 gave that gain back and more.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
The rubber match after the election results: Wednesday up, Thursday down, Friday in trouble. The Thursday action did not break down the market, but as noted above, it was not good action that opened the door to more downside. Sellers used the gap higher start unloading some stocks, leaving SP500 in a precarious position. NASDAQ is still hanging onto a breakout but once more it is having a hard time making headway after a strong upside move.
We don't like the near term prospects for SP500, and by association, DJ30. Many tech leaders remain holding support and after the breakout move we are watching to see if they can continue doing just that and make another break higher. That will key the action of the market near term. NASDAQ is still in position to continue the break higher, and it is a battle between the large cap NYSE stocks and their top-heavy patterns on one hand and NASDAQ's attempt to hold a breakout on the other.
With this reversal on volume you have to play the cautious side. We anticipated some potential trouble as noted in the Wednesday report, and that is why we were taking some gain off the table early today as the market moved higher early. Unfortunately the market could not hold that move. Now we continue to play some defense, and we are going to watch our positions and other leaders to see how they hold. If they can't we will take more gain off the table and avoid letting new positions hurt us if the market heads lower.
Even with this we are still going to watch NASDAQ leaders to see if they can hold support and recover and lead the market higher. It is time for them to come around after SP500 and DJ30 led the last move and are just about exhausted. The market is still working through the election, and as noted, Friday is the rubber match for the week. It likely is not, however, the end result to the post-election gyrations. More of that to come next week after a weekend of more speeches and talk show analysis.
Support and Resistance
NASDAQ: Closed at 2376.01
Resistance:
2379 is the October high.
2384 is an interim peak from January 1999
2493 is an interim peak from February 1999
Support:
2376 is the April high, the former post-2002 high
2368 is the early October handle high.
The 10 day EMA at 2362
The 18 day EMA at 2350
2333 is the top of the Q1 2006 trading range (the January and mid-March 2006 highs)
2316 from interim tops in January and March 2006 trading range
2300 represents some price support
The 50 day EMA at 2294
2273 is the recent September peak
2250 is the March 2006 closing low.
2234 is the June 2006 peak (intraday)
2236 is the August 2004/April 2005 up trendline
The 200 day SMA at 2232
S&P 500: Closed at 1378.33
Resistance:
1389 is a low from November 1999
1390 is the October high.
1398 is a low from January 2000
1401 is a low from April 2000
Support:
1378 is a low from May 2000
The 10 day EMA at 1377
1371 to 1373 is the December 2000 peak and the January 2001 peak
The 18 day EMA at 1372
1358 to 1362 mark a series of peaks from April 1999 to August 1999 high and the February 2002 low at 1360.
1354 from the early October consolidation
The 50 day EMA at 1348
1339 is the late September closing high
1334 is an October 1999 peak
1326.70 is the May 2006 high
1324 to 1329 from the October 2000 lows.
Dow: Closed at 12,103.30
Resistance:
October high is 12,167. Making the break through.
7.8% above its 200 day SMA. Has been struggling since it hit near 8% above that level. Tends to start about 10%, so this is a bit early but it has been a long run.
Support:
The 10 day EMA at 12,092
The 18 day EMA at 12,048
11,865 from the early October consolidation
The 50 day EMA at 11,827
11,750.28 is the prior all-time high
11,723 is the January 2000 closing high
11,670 is the May intraday high
11,642 is the May 2006 closing high
11,488 is the early September high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 7
Consumer credit, September (3:00): -$1.2B actual versus $5.0B expected, $9.1B prior (revised from $2.6B)
November 8
Crude oil inventories (10:30): +400K actual versus +1.2M expected and +1.9M prior
November 9
Export prices, October (8:30): -0.5% versus -0.3 prior
Import prices (8:30): -0.6% actual versus 0.2% prior
Initial jobless claims (8:30): 308K versus 318K expected, 328K prior
Trade balance, September (8:30): -$64.3B actual versus -$66.0B expected, -$69.9B prior
Michigan Sentiment, prelim for November (9:45): 92.3 actual versus 93.5 expected, 93.6 prior
Wholesale inventories, September (10:00): 0.8% actual versus 0.6% expected, 1.2% prior
End part 1 of 2
|
