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world stock market, us stock market
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12/21/06 Stock Split Report
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Stock Split Report Subscribers:
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Holiday Schedule
Market is closed Monday for Christmas.
No weekend report. Giving the staff a break.
Reports resume Tuesday.
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MARKET ALERTS
Targets hit alerts: VSEA
Buy alerts: LEH
Trailing stops: None issued
Stop alerts issued: ATW; WFR
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:
- Q3 final GDP weaker, Philly Fed negative, Fed adamant. Stocks react the same, give up early gains.
- GDP final shows even more slowing than anticipated.
- Philly Fed posts another down month as the regional manufacturing reports now garnering a lot of attention.
- MU, RIMM will try to do a job on the market and bring back the buyers, but have to fight the holiday give-a-damns
Weaker Philly Fed takes steam out of latest bounce attempt.
Once more stocks started higher and finished lower with NASDAQ and SOX leading the downside. Sure there were different reasons for the decline, and on Thursday you could at least say that investors had reason to leave the action, but the result was the same: stocks could not hold gains as investors left the market and some modest selling took over. In the end everything was pretty much in the same shape, just a bit lower. Kind of like bleeding from a few hundred cuts.
GDP final for Q3 limped in at 2%, down from 2.2% and 2.6% initially reported; nothing like a 23 basis point drop from what the original reading. That, however, did not pop investor interest even with the deflator a bit hotter than in Q2 (1.9% versus 1.8%). There were some solid earnings (NKE, GIS, ACN; PAYX) and oil was lower (closing at 62.66, -1.06), and that started things higher.
At 12ET the Philly Fed came in at -4.3 versus the 3.0 expected, and that killed the rather puny rally attempt. Buyers vacated the premises and a few sellers entered. With the light holiday action (many traders and fund managers are already on holiday) that was all it took to push the market lower once more.
Technically it was another weak day with the high to low action and NASDAQ falling further from its trendline. It was a continuation of the weakening action in the growth indices, pushed by the modest shift toward the large cap NYSE stocks. Low volume, but even with that lower trade the prevailing trend struggled, at least on the growth indices. In the end SP500 and DJ30 once more easily held their trends while SP600 struggled but held on. NASDAQ fell further, led by the large cap techs. Looks as if NASDAQ has a date with the 50 day EMA.
As noted, Thursday continued the same action seen this week. That is not a breakdown, however, even with NASDAQ. Sure it broke its July uptrend on a bit of mild distribution, but thus far it is hardly a collapse. Strong run off the July low (over 4 months), and a test of the 50 day EMA is not scandalous action. The bigger question is whether DJ30 and SP500 can continue to hold their trends. Thus far that is not an issue as investors favor the large caps heading into 2007.
THE ECONOMY
Q3 GDP revisions trend lower, Fed still on the warpath.
The economy slowed in Q3, no real surprise as it continued the slowing from Q2 (2.6%). The only question was how much the final number would soften in the final reading. About 60 basis points as it turns out (2.6% originally reported down to 2% final). Q2 was weaker than Q1, but it its initial read was written sharply higher.
In any event, GDP was lower but activity was not lower across the board. Personal spending rose 2.8% versus 2.6% in Q2 (down from 4.8% in Q1). Business investment with equipment and software up 8% after falling in Q2. The trade deficit pushed the number 0.2% lower as did a surprisingly low 1.7% gain in government spending.
The deflator was revised up to 1.9% from 1.8%, pushing the PCE to 2.8% from 2.6% in Q2. That keeps the Fed pressure on, evidenced by Lacker's latest speech Thursday, warning that inflation was still the main concern regarding the economy. What comforting words. Reminds me of this story about a big ship that was sinking but the captain and crew told everyone the ship could not sink. Of course the ship did sink. Yes, comforting indeed.
Philly Fed goes negative.
Going negative in and of itself is not that big a deal for the Philly Fed. It was lower in September and October before the November rebound. The 8.3 point swing from expectations was a kicker, however, particularly when the national ISM contracted in October. That suddenly made the Philly report very important in the eyes of many. CNBC called it the most important regional report. Strange, up until last month that was Chicago's role. Moreover, when you look at Philly's history you see an index with more bouncing going on than a Playboy bunny party. It was slaughtered after the 2005 hurricanes, but that was not an accurate reading of the economy. It continued to bounce around even as the economy recovered, and little has changed as it has slowed. As an indicator it pretty much sucks.
Maybe that is why Lacker was unrepentant in his Thursday speech, still singling out inflation as economic enemy number one. Of course you can look beyond Philly and see economic slowing. You can look beyond that and see that inflation pressures peaked in 2005 and that the inflation readings are now starting to manifest that peak. You have to hand it to Lacker; he is always wrong. That's what is so right about him.
THE MARKET
MARKET SENTIMENT
VIX: 10.53; +0.27
VXN: 16.41; +0.34
VXO: 9.98; +0.25
Put/Call Ratio (CBOE): 0.79; -0.06
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: -11.76 points (-0.48%) to close at 2415.85
Volume: 1.767B (-1.87%). Volume just about matched Wednesday's low trade, coming in well below average as NASDAQ faded. No churn, no selling, just lack of interest.
Up Volume: 550.624M (-375.376M)
Down Volume: 1.145B (+345.54M)
A/D and Hi/Lo: Decliners led 1.26 to 1. Another very modest breadth session as the large cap techs led the downside again. If investors are interested in large caps, it isn't large cap tech, at least they are not topping the bill.
Previous Session: Advancers led 1.25 to 1
New Highs: 61 (-37)
New Lows: 36 (-12)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ faded back from the 18 day EMA and the July trendline once more, sinking after that second high last Friday that matched the November high lost its legs. After failing at that level it looks determined to test the 50 day EMA (2391). As noted above, not bad action after over 4 months of gains. It turned choppy to end November but it has not broken down. Bigger picture, a test of the 50 day EMA after such a run is pretty normal. It is SP500 and DJ30 that are not normal. They are not selling, but they are not normal. Of course all things considered, would you rather have normal as heading lower or go for old abnormal? In any event, a test back to the 50 day EMA or so ahead of year end would set it up nicely to start 2007. Not a lot of distribution, not a lot of breakdowns, just pulling back.
SOX (-1.35%) is still something of a wet blanket. It sold off again Thursday, falling through the 50 day EMA and tapping at the 200 day SMA (463.60) on the low. Not a picture of strength, but similar to NASDAQ, it is not a breakdown as it is still holding above the 200 day SMA it broke through mid-November. Granted, it has done squat since, but still holding that key level and in position to bounce. Question is when. Just depends upon when the big money decides to move in. We will keep looking for good plays to take advantage of such a bounce as we wait. When they move, so do we.
SP500/NYSE
Stats: -5.23 points (-0.37%) to close at 1418.3
NYSE Volume: 1.354B (-1.9%). Volume slipped further below average. It is getting pretty hard to find anyone willing to trade ahead of the weekend. No distribution, just a further fade due to lack of interest.
Up Volume: 447.396M (+447.396M)
Down Volume: 877.353M (+877.353M)
A/D and Hi/Lo: Decliners led 1.41 to 1. A bit stronger fade on the NYSE as the small caps had some issues as well.
Previous Session: Advancers led 1.29 to 1
New Highs: 126 (-126)
New Lows: 8 (-10)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 faded, closing just below the 10 day EMA, but holding both the 18 day EMA and the July uptrend (1401). No distribution, just a fade from the last run in a continuing uptrend. A 5 month continuing uptrend without any rest, but thus far there are still no sellers stepping in.
SP600 (-0.39%) again failed near 403 on the high before turning back down and closing, once more, right at the August up trendline. It has made a couple of lower highs since the early December new high, pushing down on the trendline. It can still test the 50 day EMA (395), however, and remain in good shape in this run. They have sold more than the NYSE large caps of late but again, they have not broken down.
DJ30
The blue chips faded as well, falling back to tap the 10 day EMA (12,398) on the low. Massive sell off indeed. Volume remained well below average; no selling here. The index continues to hold up just fine despite its 5 month run and the more volatile action in late October through late November. Investors are not acting as if they are ready to sell anytime soon.
Stats: -42.62 points (-0.34%) to close at 12421.25
Volume: 192M shares Thursday versus 193M shares Wednesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
The last session before the Monday Christmas holiday and volume will be ho ho holiday light. It was light on Wednesday for that matter. There will be economic data as well such as durable goods, personal income and spending, and at 9:45 final Michigan sentiment. Plenty there to stir the pot, particularly with overall light volume.
That light volume this week has allowed some sellers and portfolio shifters to send the growth indices lower. As noted, no breakdowns, but definitely not ready for a new surge higher, at least on NASDAQ as buyers are not around. Once this fade on position shuffling has run its course, it could find NASDAQ at the 50 day EMA and in good position to run higher.
That likely won't be Friday though RIMM and MU posted solid earnings after the bell and had tech land stirred up a bit. Maybe they can entice some buyers, but again, beware of an early higher open. NASDAQ is not showing distribution this week but the buyers are not there right now and it looks as if it has a date with the 50 day EMA before it is ready to try to put in any kind of floor. That may leave the pickings somewhat slim ahead of the holiday; with the light volume it is just as well not to get too intimate.
What we want to do is see more stocks setting up for a rebound move for next week or for the week after that starts the new year. That won't keep us from looking for more plays that are setting up; it always pays to be ready to step in because the market works on its timetable and not ours. Thus when we see good stocks in or close to good position we will put them on and be ready.
Support and Resistance
NASDAQ: Closed at 2415.85
Resistance:
The 18 day EMA at 2432
2452 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 2391
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 1418.30
Resistance:
1425 is an interim high from November 1999
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
The 18 day EMA at 1413
1408 is the November high
1401 is a low from April 2000
1401 is the July up trendline.
The 50 day EMA at 1392
1390 is the October high.
1389 is a low from November 1999
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 12,421.25
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 12,398
12,361 is the November 2006 high
The 18 day EMA at 12,351
October high is 12,167
The 50 day EMA at 12,167
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): 2.0% actual versus 2.2% expected, 2.6% prior
Chain deflator, Q3 (8:30): 1.9% actual versus 1.8% expected, 1.8% prior
Initial jobless claims (8:30): 315K actual versus 315K expected, 304K prior
Leading economic indicators, November (10:00): 0.1% actual versus 0.0% expected, 0.1% prior (revised from 0.2%).
Philly Fed, December (12:00): -4.3 actual versus 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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