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world stock market, us stock market
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12/27/06 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: ANST; MBT; MER
Trailing stops: None issued
Stop alerts issued: None issued
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:
- Stocks continue second day of year end run.
- November new home sales post surprise increase as inventories decline.
- Still looking for a few good stocks ahead of new year.
Stocks post another broad bounce as small caps lead again.
The Investor's Almanac says the last five days of December and the first two of January are typically upside. It was a day late in coming, but after the week of selling preceding it, the response has been solid. Indeed, the indices have erased or almost erased all of the downturn. The positioning that was ongoing a week back has wrapped up and now there is general modest accumulation across the entire market.
It helped that the foreign markets opened strong after a 4-day rest. Hang Seng up 2%, India 2%, and Europe was solid. Seems we might want to try 4 days off once in awhile. Lower oil helped as well as crude fell for the second session (60.34, -0.76) though that still had it above $60/bbl. That helped stocks overcome some issues such as AAPL under investigation for falsified documents related to its option grants and the UAE divesting 8% of its dollar holdings into other currencies.
Even with those positives, the sellers made another attempt, taking back much of the opening gains. New home sales at 10:00ET, however, got the buyers back on trace as they rose 3.4%, quite better than expected. Stocks caught their footing and started a steady climb back up the rest of the session, closing right at session highs. Small caps led the way with a 1.14% gain. Great recovery, but with that jostling a week back you have to be wary about the smaller cap issues once the new year hits.
Technically, it was pretty solid action as stocks started higher, fought off an attempt to sell, and then rallied higher the rest of the session. A good second session for stocks as they rose off their last test. Breadth was solid again (3.5:1 NYSE) with the help of the small caps as most stocks rose. Once more, however, it was not just a staggering relief move in response to the selling; many solid leaders that held near support on the recent choppiness moved higher, continuing their breakout moves. Buying continues in leaders and that is not short covering action, i.e. where stocks that are sold hard rebound while good stocks sit. The low volume continues, however, so that still leaves question as to what happens at the start of 2007 and beyond, but for now there is a good year end move starting and as long as we see strong stocks in good position making moves we will put some money to work in them.
THE ECONOMY
Home sales post a nice rebound.
Low interest rates spurred some more interest in new homes ahead of the holiday season as sales posted a surprise 3.4% gain. That is the third gain in four months with revisions adding 46K sales. That still has year over year sales down 15.4% and down 23% from the July 2005 peak.
There were other signs of revival. Inventories fell to 6.3 months from 7.2 months in October and the 7.2 month high in July. Moreover, median prices were up as well, up 5.8% year over year from October's flat showing and the 6.2% decline in September.
These are not signs the housing market decline is over, but the freefall has stopped and a bottom is attempting to form. Housing stocks themselves continue their three month recovery off the September low, suggesting that the market is starting to find its footing. Stocks almost always show improvement ahead of the actual news that shows the improvement.
That surprise helped brace a stock market worried about the economic future. The selling last week got its teeth when the Philly Fed fell to negative, following the October ISM lower. Fears were the economy would follow housing down the commode, but the new home sales improvement the past four months suggests the rumors bleeding from housing into the rest of the economy in 2007 might be vastly overstated. The Chicago PMI remains on Friday, followed by the national ISM to start next week; still a lot of economic issues to be resolved but the market liked what it saw Tuesday.
THE MARKET
MARKET SENTIMENT
VIX: 10.64; -0.62
VXN: 16.46; -0.98
VXO: 9.74; -0.71
Put/Call Ratio (CBOE): 0.77; -0.08
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: +17.71 points (+0.73%) to close at 2431.22
Volume: 1.235B (+18.59%). Volume jumped but it was so far in the hole it did not even come near average. Trade remains holiday light but there was more interest in the upside on Wednesday as NASDAQ tries to recover off the 50 day EMA. It will need trade as it still has a long way to go to the November and December highs.
Up Volume: 917.405M (+273.486M)
Down Volume: 299.632M (-84.622M)
A/D and Hi/Lo: Advancers led 2.42 to 1. Very nice breadth as NASDAQ gapped higher and managed to close near the session high.
Previous Session: Advancers led 1.62 to 1
New Highs: 291 (+207)
New Lows: 68 (+40)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ continued its move off the 50 day EMA (2394), gapping higher and clearing the 10 and 18 day EMA (2427) on a bit better trade. Don't kid yourself; volume was still pathetic, and it won't stand up any better than a candle in a spring thunderstorm in Houston if any real selling shows up. Despite the breadth it was mostly a small cap move as NASDAQ 100 (+0.56%) lagged the overall NASDAQ. NASDAQ still has to work its way back to the December high (2471) and the double top with the November high; that will be the real test of this rebound. At this point with the pattern and the volume you still have to look at this as a relief bounce.
SOX (+0.53%) gapped over the 50 day EMA and rallied to the 18 day EMA but a late bout of selling took away half the move and exposed some continued weakness in the semiconductors. The other indices held their gains to the close but the chips could not. They have been unable to clear and hold above the 18 day EMA since the start of the month. Not fatal, they just are not getting the buying to push them along with the rest of the market. Need to start showing something here or they will remain a ball and chain on NASDAQ.
SP500/NYSE
Stats: +9.94 points (+0.7%) to close at 1426.84
NYSE Volume: 971.415M (+22.68%). Volume was up on the continued bounce, but as with NASDAQ it was extremely low. Sad say when a 22% gain in volume only gets volume half way up to average.
Up Volume: 837.786M (+283.275M)
Down Volume: 127.524M (-92.088M)
A/D and Hi/Lo: Advancers led 3.55 to 1. Excellent breadth as the small and mid-caps led the way higher.
Previous Session: Advancers led 2.21 to 1
New Highs: 234 (+108)
New Lows: 11 (+3)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 posted its second bounce after testing the 18 day EMA (1415), and is approaching the new post-2002 high hit just two weeks back (1431.81). Good to see volume higher on the move, showing some accumulation but nothing major. No complaints, however, as SP500 continues is solid uptrend. It quickly turned the close below the 18 day EMA around and is now right back near a new high for the year.
SP600 (+1.14%) again posted the best advance after touching its 50 day EMA last Friday. It too is approaching its December high (407.54), lacking just 2.6 points of getting there. Half a day's work based on the Wednesday action would put it there. The small caps are staging another strong rebound, and though they are not leading the market overall, they are doing their best to lead it back up. The jostling two weeks back still leaves a question mark over the smaller caps heading into 2007; they were shunned in favor of the large cap laggards (those large caps that did not participate in the 2007 move).
DJ30
DJ30 is the index that hit a new all-time high Wednesday, clearing 12,500 for the first time ever. Volume was up as well, but still well below average on the move; not a rush of new buying, but a decent amount in some key stocks and a dearth of sellers. DJ30 just keeps going, and going, and going.
Stats: +102.94 points (+0.83%) to close at 12510.57
Volume: 143M shares Wednesday versus 110M shares Tuesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Jobless claims, existing home sales, and oil inventories are the scheduled economic reports. The Fed speakers have taken the holidays off, but of course given the proximity to earnings season there is always the possibility of a warning or two; that was part of the plague a week back along with the weaker Philly Fed. Existing home sales may not show the strength of new home sales as the former are booked at closing versus new homes that are posted at the contract signing.
Overall we still see good stocks coming off excellent tests and with plenty of upside room left to run. Though volume is light and this is just a holiday move by most accounts, those solid stocks that held up during the selling are moving up, and as noted before, that is not short covering because these stocks were not heavily shorted. Thus there is some real buying out there for appreciation, basically what we have been doing. We will continue to look for those stocks that are strong and likely to carry the moves over into 2007.
In addition, we are going to let current positions run as far as they will on this move, and we will squeeze out as much as we can as long as it provides upside. When the well runs dry (if it does; it could morph into strong buying to start the new year), those that have not re-established themselves as leaders will be sold. For some positions that gives them two days to show us something in this rally; if they have not started to surge we will close them and book the loss for year end tax purposes. Likewise, we won't be taking a lot of gain unless we have some juicy option gain we want to take off the table, particularly with nearer term options.
Again, we like those strong stocks that held up well in the recent turbulence and are starting higher. That shows continued real buying interest; no shorts to cover here. With those we are nibbling on positions ahead of year end, looking for even stronger buying when the new year starts. There still may be some turbulence to start the new year and thus laggards may be sold; thus we will use the rise to lighten up and be ready for emerging leaders in the new year. Once more, we will continue to look for rebounding leaders now, however, especially those that never really threatened a sell off. That shows solid sponsorship getting in a bit ahead of the new year.
Support and Resistance
NASDAQ: Closed at 2431.22
Resistance:
2454 is the July up trendline
2468.42 is the November 2006 high
2471 is the December 2006 high
2477 from January 1999
2493 is an interim peak from February 1999
Support:
The 18 day EMA at 2427
2412 from June 1999 low
The 50 day EMA at 2394
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 1426.84
Resistance:
1432 is the December 2006 high
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
1425 is an interim high from November 1999
The 18 day EMA at 1415
1408 is the November high
1405 is the July up trendline.
1401 is a low from April 2000
The 50 day EMA at 1394
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 12,510.57
Resistance:
At a new all-time high. Back to 8.6% above the 200 day SMA, about the point where DJ30 started to struggle in late October.
Support:
12,499 is the December intraday high.
The 10 day EMA at 12,413
The 18 day EMA at 12,373
12,361 is the November 2006 high
The 50 day EMA at 12,224
October high is 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 27
New home sales, November (10:00): 1.047M actual versus 1.015M expected, 1.013M prior (revised from 1.004K).
December 28
Initial jobless claims (8:30): 320K expected, 315K prior
Existing home sales, November (10:00): 6.15M expected, 6.24M prior
Crude oil inventories (10:30): -6.323M prior
December 29
Chicago PMI, December (10:00): 50.2 expected, 49.9 prior
Help wanted Index, November (10:00): 30 expected, 30 prior
End part 1 of 3
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world stock market
us stock market
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