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world stock market, trend trading stock
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12/20/06 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Thursday.
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: LUK; TRMB
Trailing stops: None issued
Stop alerts issued: AEOS; CERN
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:
- Another higher start ends lower as stocks struggling to advance.
- Stocks continue the holiday shuffle, trying to find some buyers.
- GDP headlines the economic news as next round of regional manufacturing data begins.
Small caps come back, lead the move higher, but stocks still finish off session highs.
Stocks overall, regardless of large cap or small cap, tech or industrial, are struggling a bit right now. Once more they were up early but for the third time in the last four sessions they squandered a solid upside move and closed well off the intraday highs. The sector action was more of the same as well, i.e. the large caps holding their trends while techs struggled, but the small caps continued their rebound off the Tuesday 50 day EMA test, posting the leading gain, at least for those indices still holding their uptrends (and that would be SP500 and DJ30).
Some more merger activity kept the hype going as ERIC proposed to buy RBAK; finally a tech merger. That created a bit of a buzz, but it had to offset some more lukewarm earnings. FDX beat the street but its guidance was lukewarm along with its description of business. It fell. AIG and PBG guided lower; every day a few more stocks come out with a warning about 2007. Everyone expects the economy to slow some in 2007 (at least most; it should start recovering from some slowing according to ECRI) so for now these warnings of some slowing are not overly impacting stocks.
Indeed, stocks basically ignored the warnings and rallied. They started to test the early move, but even when crude oil inventories came out way less than expected (-6.3M versus -1.7M) stocks bounced. That may have been a head fake, however, because within 20 minutes the indices peaked on that rebound attempt and started lower for the day. Oil held roughly steady (63.72, +0.26), but stocks sold lower into the early afternoon. An afternoon bounce failed and stocks trailed lower into the close, finishing near session lows. Another day where stocks avoided trouble, but they also avoided any Christmas rally.
Technically, there was that up again down again action that shows a lack of real buying conviction where the sellers can come in and win the day. It was not a breakdown session of course; as noted SP500 and DJ30, while lower, easily held their trends. Moreover, SP600 rebounded further from its 50 day EMA test, still holding its trendline as well. NASDAQ is still trying to recover the 18 day EMA and its trendline, but it failed to do so and is struggling. SOX managed to hold its 50 day EMA again, but that is about all. Volume was lower and below average on both NASDAQ and NYSE while breadth was modestly positive at 1.2:1 on both. The internals remains weak but they are not breaking down.
Basically the large cap indices were again holding their trends while the growth indices try to work through this choppier trade and figure out if investors really believe in continuing economic growth and thus growth in these stocks. In short, more of the same action since NASDAQ failed to carry through with the renewed break higher last week. Overall not a lot of breakdowns and there are some solid moves higher. Most stocks are sluggish, however, and thus far no catalyst, despite the M&A activity, has convinced buyers to step in with real vigor ahead of the new year.
THE MARKET
MARKET SENTIMENT
VIX: 10.26; -0.04
VXN: 16.07; -0.48
VXO: 9.73; +0.05
Put/Call Ratio (CBOE): 0.85; -0.11
Bulls versus Bears: Bulls eased a little further but still are well above the key 55% level. Bears continue their decline, less than a point from the 20% level considered bearish. The current stall in the market was preceded by this rise in bulls and fall in bears. Again, if you get too many bulls, there is no ammunition on the sidelines to keep shooting the market higher. The overseas money (OPEC, strong world economies) along with the strong profits in the US, keeps filling the stream of incoming money thus far.
Bulls: 58.8%. Another dip lower, this time picking up some speed from the 59.6% reported last week. May be topping some here after a steady move higher 56.4% four weeks back. This is the fifth straight week the bullish advisors topped 55%, the level where the market is viewed as overdone and some corrective activity can enter. Still closing in on the January peak at just above 60%.
Bears: 20.6%. Still falling toward the key 20% level, though the rate of decline is slowing (21.3% last week and 23.9% the week before). Well off the 37.1% hit in July (the highest level in this entire cycle), now so far in the distance you can barely see it. 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: -1.94 points (-0.08%) to close at 2427.61
Volume: 1.801B (-9.88%). Volume fell back to below average after the Tuesday gap lower and rebound. A rather weak response, particularly when coupled with the price pattern on the chart.
Up Volume: 926M (+154.965M)
Down Volume: 799M (-404.149M)
A/D and Hi/Lo: Advancers led 1.25 to 1. Very modest, but it was up on a down day for the index.
Previous Session: Decliners led 1.25 to 1
New Highs: 98 (+34)
New Lows: 48 (+16)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ gapped higher and rallied up through the 18 and 10 day EMA on the high (2443), all in the first hour of trade. That was the peak and it trended lower the rest of the session. It gave up the 10 and 18 day EMA, remaining well below its July trendline. The low volume showed no real desire to break back to the upside, and the candlestick chart shows a doji below modest resistance. That combination really looks to be setting up a lower high for NASDAQ. Thus far, however, NASDAQ remains in its 5 week lateral range roughly between 2400 and 2470. A bit more distribution has crept into the picture, and that leaves NASDAQ questionable for any near term upside.
SOX (+0.68%) led the percentage gainers, but it is not providing a lot of help. It held its 50 day EMA and posted a modest gain, but it closed over 4 points off its session high. In short, it wasn't ready to go anywhere either. Still holding key support and thus still in the game.
SP500/NYSE
Stats: -2.02 points (-0.14%) to close at 1423.53
NYSE Volume: 1.38B (-11.63%). After an average showing on the Tuesday rebound from the selling, volume fell off below average as SP500 basically held its ground. Not much to get in a twist over as it rests once more in its trend higher. Just the usual stuff, i.e. extended, needs rest, etc.
A/D and Hi/Lo: Advancers led 1.29 to 1. Pretty mediocre as well even with the small cap recovery.
Previous Session: Advancers led 1.2 to 1
New Highs: 252 (+104).
New Lows: 18 (+3)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 was not tower of strength nor was it a den of weakness. It simply tried to bounce with the market early and then faded modestly when the move faded. It is still in the uptrend, just moving laterally in a test of last week's jump higher. Extended, low risk/reward, etc., just continues moving higher.
SP600 (+0.38%) continued its rebound off the 50 day EMA from Tuesday. That move was a real reversal quality session with the sell off to key support and then the rebound to close positive. It continued winning Wednesday as it again posted a gain and held above its August trendline. It closed well off the high, however, and that kept it below the 10 and 18 day EMA. That has our attention despite the solid rebound. Similar to NASDAQ, SP600 is finding resistance at the short term MA; an index usually doesn't have a problem with them when it is in a strong uptrend and is coming back form a 50 day EMA test. Important point to watch as the week continues.
DJ30
The Dow lost a bit of ground after trading again in new high territory as volume faded to almost holiday levels already. It remains in its uptrend and appears to be cruising along. It IS cruising along, ignoring how extended it is. It won't ignore it forever, but for now it is not showing signs of worry.
Stats: -7.45 points (-0.06%) to close at 12463.87
Volume: 193M shares Wednesday versus 233M shares Tuesday. Volume is already turning holiday light.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
The final revision of Q3 GDP is out in the morning, followed by the Leading Economic Indicators at 10:00 and the Philly Fed at 12:00. The LEI from the Conference Board does not carry much weight. The Philly Fed is not the final word when it comes to regional manufacturing, but after that 49.9 November ISM, every regional report is getting a close look this month. The Fed acknowledged the slowdown in a left-handed way, but it really didn't think much of it. It won't think much of the Philly Fed either, but we can use it to extrapolate to the future. It is expected to show a 3.0 reading, down from 5.1 but still above the 0 level that separates contraction from expansion.
Despite the choppy action on NASDAQ, SOX, and the smaller cap indices there are still stocks making some bold moves. There are others testing nicely. There are others that are slipping through near support; may just be a shakeout given the low volume, but we are disinclined to find out. Better to let them finish their trip and then step in.
In short, the market isn't saying 'buy me' right now as it was in August and September. Ever since November the action has turned choppier even as the overall trend higher continues. We continue to see worthy buys, but at the same time stocks in general are starting to lag, showing deeper tests and struggling more to hold support. The trend remains in place, but you have to consider the possibility that the foundation is eroding some from underneath it.
The turn of the year, either before or after, will likely show some rougher action. There has already been choppier trade as some pre-year end shuffling has started. As noted Tuesday, it may work itself out without losing too much ground or doing any real damage. After such a long move and seeing the choppier action it is simply a riskier time for the market near term. That is why we have been taking gains and closing positions for the past month even as stocks overall rode higher. We will continue to do so. At the same time we won't pass up an emerging move. We are still seeing stocks come out of bases or tests and making fast, strong runs. We are also seeing stocks that are getting new money, meaning they have the ability to fight the market chop. Thus we will continue to look for buys but we will also be trimming as well so we can be in good position to move with the market when this choppier trade winds down.
Support and Resistance
NASDAQ: Closed at 2427.61
Resistance:
The 18 day EMA at 2434
2450 is the July up trendline
2468.42 is the November 2006 high
2477 from January 1999
2493 is an interim peak from February 1999
Support:
2412 from June 1999 low
The 50 day EMA at 2390
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.
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 1423.53
Resistance:
1425 is an interim high from November 1999
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
The 10 day EMA at 1418
The 18 day EMA at 1412
1408 is the November high
1401 is a low from April 2000
1400 is the July up trendline.
1390 is the October high.
1389 is a low from November 1999
The 50 day EMA at 1389
1378 is a low from May 2000
1371 to 1373 is the December 2000 peak and the January 2001 peak
1358 to 1362 mark a series of peaks from April 1999 to August 1999 high and the February
2002 low at 1360.
Dow: Closed at 12,463.87
Resistance:
At a new all-time high. Back to 8.5% above the 200 day SMA, about the point where DJ30 started to struggle in late October.
Support:
The 10 day EMA at 12,394
12,361 is the November 2006 high
The 18 day EMA at 12,343
October high is 12,167
The 50 day EMA at 12,157
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 18
Current account, Q3 (8:30): -$225.6B actual versus -$225.0B expected, -$217.10 prior (revised from -$218.4B)
December 19
Housing starts, November (8:30): 1.588M actual, 1.55M expected, 1.488M prior
Building permits, November (8:30): 1.506M actual, 1.540M expected, 1.553M prior
PPI, November (8:30): 2.0% actual versus 1.2% expected, 0.5% prior (revised from -1.6%)
Core PPI, November (8:30): 1.3% actual versus 0.2% expected, -0.9% prior
December 20
Crude oil inventories (10:30): -6.3M actual versus -1.7M expected and -4.295M prior
December 21
GDP, final Q3 (8:30): 2.2% expected, 2.2% prior
Chain deflator, Q3 (8:30): 1.8% expected, 1.8% prior
Initial jobless claims (8:30): 315K expected, 304K prior
Leading economic indicators, November (10:00): 0.0% expected, 0.2% prior
Philly Fed, December (12:00): 3.0 expected, 5.1 prior
December 22
Durable goods orders, November (8:30): 1.5% expected, -8.2% prior
Personal income, November (8:30): 0.4% expected, 0.4% prior
Personal spending, November (8:30): 0.6% expected, 0.2% prior
Michigan sentiment, December revised (10:00): 90.2 expected, 90.2 prior
End part 1 of 3
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world stock market
trend trading stock
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