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us stock market, stock watch
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12/04/06 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: None issued
Buy alerts: CELG; COGO; OMCL; TSRA
Trailing stops: CTRP
Stop alerts: CRM
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:
- New month and new money bounce the indices back up.
- Rather quiet day on the economic front before the next round begins.
- Seeing how far the new money can take the bounce.
Stocks start the money opposite (well, almost) from last Monday.
Last Monday stocks tanked lower on rising volume and the market struggled all week trying to get the lost ground back with just modest success. Things looked pretty weak after Friday, but Monday stocks got the draw on any further downside. Some merger news in the financial sector (BNY and MEL), a buyout in the chips (LSI buying AGR), and lower oil prices ($62.44, -0.99) sparked some early buying, and that grew through the session despite more hawkish talk by non-voting Fed member Moskow (quickly becoming known as 'the mouth' among Fed watchers because his is always open and wrapped around a microphone) and PFE's cancellation of a promising (at least before Saturday) drug cholesterol drug trial.
The indices bounced higher at the open and kept going through the session. After NASDAQ and SP500 bounced off of their July trendlines for the second time in a week they simply kept on going Monday. Another selling attempt averted? Cannot sing that chorus yet.
Why? Technically it was a mixed move, and that is a bit different tune than 'Happy Days are Here Again.' SP500 hit a new post-2002 high and SP600 is banging at the door of the May (and thus a new all-time) high. Not bad action if you can get it. NASDAQ and DJ30 are trying to put in a higher low and take on their recent highs as well. Breadth was excellent (3.2:1 NYSE, 2.3:1 NASDAQ) as stocks from all sectors moved higher and leaders were moving higher as well. Solid move from that respect, and given the breadth (and the rise in the indices to this point) it was not short-covering driven.
Volume was lower on both NASDAQ and NYSE, however, strikingly so on NYSE (-25%) with significantly lower volume even with PFE trading 289M shares (20% of NYSE trade). That lower volume tells us there was no heavy accumulation, i.e. no strong surge of buying. The combination of solid breadth and lower volume as well as a quick look at the calendar says the Monday action was new money hitting the market in a new month. It was not a blast of new money; volume was lighter. It was a steady application of buying across the market as some money funds painted with a broad brush lest they miss any sector that may rise or that they may have missed out on. Don't forget this is the last month of the quarter and of the year, and gussying up the portfolio for the final 2006 report is in the background as well.
It was basically the bounce we were looking for as the new money hit, but despite the new post-2002 high by SP500 we have misgivings as to whether it can hold on when the money dissipates. That makes the song you think of more like 'Once in a Lifetime' by the Talking Heads, i.e. wondering what's ahead 'after the money's gone.' If there is not a new swell of volume on any further moves what is ahead is likely a deeper test that SP500 and DJ30 have stumbled toward the past month. They are still trending higher but they are more volatile, showing some distribution and showing less accumulation. The new money looks to have rescued them from immediate selling, but again, after the new money runs dry that is when the market gets to the lick log, holiday season or not. As noted over the weekend, September and October were uncharacteristically strong, pulling the traditional holiday gains forward on the calendar. We will watch this rebound carefully, using it to unload some marginal positions, take some more gain (particularly on near term option plays), and of course consider buys on any particularly tasty looking plays. In the end, a pullback after such a long run is good as it sets up stocks for longer, sustained runs.
THE ECONOMY
Getting ready for more economic data.
Monday was a tune up for Tuesday's Q3 productivity revision, factory orders, and ISM Services. Actually it really wasn't a tune up; it was a day off because there was nothing new to add.
Sure Moskow the Mouth was on the microphone again, giving an exclusive to his CNBC pal yet again where Moskow said basically the same thing again: inflation pressures would ease slightly in 2007, but he wasn't holding out any promise there would not be further rate hikes. For a non-voting member he gets (wants, actively seeks, craves?) a lot of attention. Of course he has been around as long as Moses (Greenspan) and is infamous for his 'let them eat cake' attitude in 1999 and 2000 when he stated more people needed to be out of work. Yes Mr. Rogers, in order to save your job we have to eliminate it right now. Just temporary, mind you, until we get this inflation (the non-existent inflation, that is) under control. Of course, Mr. Rogers job was lost to China, India, Pakistan, Ireland, and South Korea for good when private investment dove off the cliff with the economy in 2000 and 2001 after the Fed tamped out the inflation threat by sending us from 10% to negative growth in just three quarters. Gee what a raging success that was.
You see, the Fed is similar to a reformed anything: it had obsessive/compulsive behavior before it was reformed and it has obsessive/compulsive behavior after the reformation, just at the other polar end. Before the new transparency you did not even know what the Fed had done until a few months later when the minutes came out. You never heard from them, saw them, hell, you didn't even know who was on the FOMC outside the chairman. Of course that was absurd in a republic governed by and for the people. So it moved to an immediate release of the move. Then they added a statement. Now they hit the road 5 days a week explaining the statement and their own personal views on monetary policy. The only time we don't get bombarded with their constant commentary is when the Fed goes into its self-imposed quiet time ahead of a meeting. They will probably do away with that next.
The result is the information flow has gone from next to nothing to next to nonstop. Sadly, the Fed is about as good at curbing information flow once it starts as it is making a decision to alter a current course. Thus the constant reminder from a non-voting member that the Fed is still on the cusp of more rate hikes when it is not. Bernanke has clearly embarked upon a different course than Moskow is spouting, but there is that old credibility box the Fed has built around itself. It seems to think credibility is about perceptions and doing what Greenspan would have done rather than doing what history shows needs to be done. That means we have to get used to Moskow and others buzzing around the financial markets every day as they seek the next photo op or microphone grab.
THE MARKET
MARKET SENTIMENT
VIX: 11.23; -0.43
VXN: 16.49; -0.11
VXO: 10.47; -0.97
Put/Call Ratio (CBOE): 0.88; -0.03
Bulls versus Bears: Bulls have moved above the key 55% but this is not the best timing indicator. It is a warning to watch for distribution, failing leadership and the like.
Bulls: 58.5%. Bulls are jumping even more, posting another big gain from the already high 56.4% last week. Second week the bullish advisors topped 55%, the level where the market is viewed as overdone and some corrective activity can enter. It started to do just that Friday and Monday. A sharp jump from 52.1% the week before and closing in on the January peak at just above 60%.
Bears: Held steady at 22.3%, hovering just above the 20% level considered bearish. Sharp drop from 26.0% and flirting with the 20% level considered bearish. Well off the 37.1% hit in July (the highest level in this entire cycle). 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: +35.18 points (+1.46%) to close at 2448.39
Volume: 1.997B (-2.81%). Volume was lower but it was not a sharp drop off in production as it hovered near average as NASDAQ broke higher. Unlike NYSE, this was more impressive action.
Up Volume: 1.599B (+1.058B)
Down Volume: 379.1M (-1.092B)
A/D and Hi/Lo: Advancers led 2.3 to 1. Excellent breadth as NASDAQ turned up off of the 18 day EMA. Buying was across the board; the index moves on the large cap techs, but the breadth showed it was not just those stocks sending things higher.
Previous Session: Decliners led 1.62 to 1
New Highs: 196 (+112). Not all that great.
New Lows: 35 (+11)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ gapped higher to the 18 day EMA and continued on up, closing close to session highs. This is a continuation of the move off the Friday intraday test of the July up trendline (2400) with NASDAQ approaching the November high (2469). Not bad action, and again, much better than on the NYSE where volume dropped off the table. NASDAQ, as it did in the last part of this rally, is once again getting more of the stronger buying.
SOX (+1.97%) showed more of its mettle Monday after holding at the October high last week. NASDAQ fared better than the NYSE, and with SOX it may be able to pull off another lead higher, taking the market from the jaws of a needed pullback and extending things a bit more before the ultimate decline that comes down the road. You can rail but you cannot change what the market will do, so if it moves higher it moves higher, and we have to take what it is giving.
SP500/NYSE
Stats: +12.41 points (+0.89%) to close at 1409.12
NYSE Volume: 1.398B (-25.48%). Volume fell well off pace, below even the lower volume sessions to start last week as SP500 reached a new post-2002 high. Not an impressive showing. It is even less impressive when you factor in PFE traded 20% of that volume. This action is what really defined the market as rising on a first of the month, new money bounce.
Up Volume: 1.048B (+380.008M)
Down Volume: 342.007M (-833.201M)
A/D and Hi/Lo: Advancers led 3.22 to 1. Very excellent breadth as the small caps came close to a new all-time high.
Previous Session: Decliners led 1.16 to 1
New Highs: 476 (+234). Excellent.
New Lows: 6 (0)
The Chart: http://investmenthouse.com/cd/^gspc.html
But for the volume this would have been a good session. Solid breadth, excellent new highs; the buying was across the board as SP500 broke to a new post-2002 high. Just that the buyers were rather low in numbers. They can keep things going for awhile with that new money, but once it runs dry the volume indicates the move will be challenged. We will see how it pans out. For now it was an impressive recover form the selling, but the volatility remains along with less than great price/volume action.
SP600 (+1.55%) blew past the November high and just missed an all-time closing high by 0.01. Solid move as the small caps worked to extend their breakout. That NYSE volume remains an issue; it wasn't just lower, it was a LOT lower and 20% of it for sure did not go to the small caps (PFE). Nice move. Love to see it because SP600 is a growth index. Question is, will it still grow as the new month for the new month runs out.
DJ30
Fought off the PFE news and still put in a solid session. Without PFE it would have turned in another 30 points, just about 30 points off its closing high in November. Volume was lower even with the PFE volume explosion. Still has that quite toppy look to it, but as we noted over the weekend, it and SP500 have yet to give into the doubters.
Stats: +89.72 points (+0.74%) to close at 12283.85
Volume: 270M shares Monday versus 275M shares Friday. 289M shares went to PFE. Volume was quite low in that respect.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
The news cranks back up Tuesday, at least the financial news (factory orders, Q3 productivity revision, ISM Services); the M&A news keeps rolling along regardless as companies once again wait until prices are high before buying. High numbers of buyouts similar to high numbers of stock splits are signs of market tops, interim or otherwise. Saw it in the energy sector before it slid into its correction earlier this year.
The big issue ahead is whether the buying strengthens and can keep the rebound going, turning it into something stronger or whether the new month money runs dry and the market once again exhibits the same action it did last week, particularly on SP500 and DJ30. There are definitely competing forces what with breadth and new highs busting on NYSE not to mention good price rebounds and breaks higher by leaders and non-leaders alike. As noted, the lack of volume on NYSE is the clearest indicator there is potential trouble in turning the Monday rebound into another sustained run higher.
As usual we have our suspicions the well could run dry rather quickly (another session or two) as the new money runs its course. The trend, however, remains upside overall, and though it was struggling some last week and indeed the past month, as Kevin Cosner said in 'Bull Durham,' you have to respect a streak. There are plenty of good stocks in position to move higher, but as this move extends we really need to see some good volume from them to get seriously involved. We still expect a pullback, and if the move continues without much volume we will close some marginally performing positions and take some more gain in anticipation of a turn back down after the lower volume that is in the market dries up. If it gets more volume we will go with the flow. Of course, there are always stocks that move regardless of the market, and as things get a bit defensive we are seeing them perform better, e.g. healthcare in general. We can move toward those (as we have been doing) if they show the volume and the rest of the market does not.
Support and Resistance
NASDAQ: Closed at 2448.39
Resistance:
2468.42 is the November 2006 high
2477 from January 1999
2493 is an interim peak from February 1999
Support:
The 10 day EMA at 2430.74
The 18 day EMA at 2420
2412 from June 1999 low
2400 is the July up trendline
2384 is an interim peak from January 1999
2379 is the October high.
2376 is the April high, the former post-2002 high
2368 is the early October handle high.
The 50 day EMA at 2360
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
S&P 500: Closed at 1409.12
Resistance:
1408 is the November high
1410 is an interim high from March 2000
1420 is a July 2000 low
1425 is an interim high from November 1999
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
1401 is a low from April 2000
The 10 day EMA at 1398
The 18 day EMA at 1393
1390 is the October high.
1389 is a low from November 1999
1381 is the July up trendline.
1378 is a low from May 2000
1371 to 1373 is the December 2000 peak and the January 2001 peak
The 50 day EMA at 1371
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
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 12,283.85
Resistance:
12,361 is the November 2006 high
Support:
The 10 day EMA at 12,228
The 18 day EMA at 12,205
October high is 12,167
The 50 day EMA at 12,021
11,986 is price support from mid-October and the early November low.
11,865 from the early October consolidation
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.
December 5
Productivity, Q3 revision (8:30): 0.5% expected, 0.0% prior
Factory orders, October (10:00): -4.0% expected, 2.1% prior
ISM Services, November (10:00): 55.5 expected, 57.1 prior
December 6
Crude oil inventories (10:30): -360K prior
December 7
Initial jobless claims (8:30): 325K expected, 357K prior
Consumer credit, October (2:00): $4.5B expected, -$1.2B prior
December 8
Non-farm payrolls, November (8:30): 105K expected, 92K prior
Unemployment rate (8:30): 4.5% expected, 4.4% prior
Hourly earnings (8:30): 0.3% expected, 0.4% prior
Average workweek (8:30): 33.9 expected, 33.9 prior
Michigan sentiment, Dec. preliminary (9:45): 92.0 expected, 92.1 prior
End part 1 of 3
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