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1/09/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: AMT; BRCM; GS; URBN
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:
- Early 2007 money reallocation continues as techs lead the recovery from early selling.
- Earnings start with Alcoa delivering a solid report and reaping the benefit, but what about the real market leaders?
Late rebound helps, but large cap NYSE once more under some pressure.
Oil was diving once more, down over $3/bbl at one point, continuing the sharp decline over the past week and falling to something like a 1.5 year low. That had stocks moderately stirred ahead of the open, but no upside sprint developed. Russia was down 6% as money was allocated elsewhere and there were some more earnings warnings (TLB, S as in Sprint not Sears), and that seemed to hold sway. After all, most don't believe the oil move means anything, just a technical move after a run higher. There is also a reweighing of oil in some commodities indices, and that is causing some selling to get things at the right weight (is that 10w-30?). Thus the weakness in oil was viewed skeptically and stocks did not surge on its decline. Of course oil recovered some lost ground (closed at 54.55, -1.54) and that didn't help stocks, but still a hefty loss that was rather ignored.
After an early rebound attempt stocks sold off into lunch, basically hitting the Monday lows once more. Didn't look all that great being the second straight sell off, but when AAPL announced its iPhone after much speculation it would not, it clicked off 7 ticks upside and dragged the tech sector back with it. Mostly the large cap techs, of which AAPL is one, as they doubled up overall NASDAQ's gain.
The interesting aspect of today's rebound was that the techs maintained the lead versus the large cap NYSE on Monday. What this lower (again) and then back up (again) with large caps lagging indicates is further new year reallocation of funds. SP500 and SP600 are trying to hold on but are still fairly weak; looks as if they are still hemorrhaging some money that is being put elsewhere. From some of the good moves in the market it still looks as if tech is getting its share. But it is rather quiet accumulation; NASDAQ is not making any breakout move.
Technically there was nothing spectacular, no breakdowns and no breakouts, but more of the same in the major indices. NASDAQ and SOX still have a look as if they are building for a break higher while SP500 and to a greater extent SP600 look as if they are struggling to hang on. Those breaks higher in techs mentioned above are good signals for techs. They are just not that widespread right now.
Volume jumped back up well above average on both NASDAQ and NYSE. Given that the indices closed mixed, it was a mixed blessing. Some accumulation on NASDAQ, some distribution on NYSE. Breadth was rather lousy once more, so there was again no real strong, spread the wealth gain. Indeed NASDAQ breadth was slightly negative. NASDAQ remains in good position to try the move higher, they just have not made the breakaway move yet. Again, some modest accumulation appears to be building toward that, but it is a game of dragging the NYSE along as well. Sure they rebounded Tuesday, but they have to shake off their weakness.
THE MARKET
MARKET SENTIMENT
VIX: 11.91; -0.09
VXN: 17.89; -0.46
VXO: 11.83; +0.41
Put/Call Ratio (CBOE): 0.78; -0.09
Bulls versus Bears: Bulls are still easing back but still remain above the key 55% level. Bears continued their decline, and this time they broke below the 20% level and that is considered bearish. If you get too many bulls and too few bears, there is no ammunition on the sidelines to keep shooting the market higher.
Bulls: 55.3%. Bulls continue to decline, down from 56.5%, 58.8% and 59.6% at the high on this last spike. Still above the 55% level and two months above the point where there are too many for the market's good. Came within a whisker of the January 2006 peak at just above 60%.
Bears: 21.3%. Moved back above the 20% level considered bearish after falling below that level (19.6%) for a week. Bears finally heading in the direction of bulls but not at levels that indicate any major surge in the market. Trying to trend back up after a steady slide (20.6%, 21.3%, 23.9%) from 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: +5.63 points (+0.23%) to close at 2443.83
Volume: 2.137B (+10.97%). Volume was up sharply, the highest since the first session of the year as NASDAQ reached lower and recovered. As noted above, some accumulation there.
Up Volume: 1.199B (+9.737M)
Down Volume: 953.077M (+252.947M)
A/D and Hi/Lo: Decliners led 1.05 to 1. As shown by the 0.48% NASDAQ 100 gain, it was a session where the large caps dominated . . . again.
Previous Session: Advancers led 1.02 to 1
New Highs: 37 (-23)
New Lows: 31 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
More of the same action on NASDAQ with the reach lower and recovery for a modest gain. Volume was much stronger on the rebound so there is some accumulation though mostly in large caps. Not that the volume did not spread around at all, however. NASDAQ remains in its 8 week lateral range with some leaders trying to move higher ahead of earnings. Some accumulation ongoing, but nothing as of yet to indicate a breakout is imminent.
SOX (+0.73) was up again with another move off of the 50 day EMA (471.89). Some big names in chips made good, strong moves, pushing SOX toward 475, the level it needs to blast through to hold a breakout higher.
SP500/NYSE
Stats: -0.73 points (-0.05%) to close at 1412.11
NYSE Volume: 1.704B (+8.86%). Volume moved higher above average as the NYSE indices tested lower again and then rebounded to close mixed (but both near flat). Some distribution, some possible accumulation, but nothing major as they continue to test next support. Not much of a change from Monday.
Up Volume: 761.312M (-165.921M)
Down Volume: 918.438M (+302.321M)
A/D and Hi/Lo: Advancers led 1.29 to 1. Pretty slim advances, but hey, they were up when the indices were lower. Usually a positive and though the patterns are weak, they are hanging on.
Previous Session: Advancers led 1.47 to 1
New Highs: 84 (+8)
New Lows: 11 (+1)
The Chart: http://investmenthouse.com/cd/^gspc.html
SP500 tested lower again as it did Monday and similar to Friday as well. It recovered once more and just missed a flat close. Technically distribution but a coin flip. The more telling aspect is the weaker pattern that broke the July trendline Friday. SP500 has not retaken that level (1415-16) and the top has broadened here. Critical test for the large caps as they lose some of the money that pushed them higher and that has pushed them back toward the 50 day EMA where the index is trying to bounce.
SP600 (+0.14%) recovered for a second gain after breaking below the 50 day EMA Friday. It has sold off intraday and recovered but the pattern remains quite weak with an even broader top than the large caps. If they have some upside they are going to have to prove it.
DJ30
DJ30 lost a bit of ground along with SP500, holding near the 18 day EMA, but again it managed to hold the 18 day EMA (12,411) as DJ30 continues to trend higher. Its pattern continues in an actual uptrend from the summer lows while SP500 and SP600, while still higher, are trying to consolidate at a lower level below the summer uptrend.
Stats: -6.89 points (-0.06%) to close at 12416.6
Volume: 225M shares Tuesday versus 223M shares Monday. Still hugging near average.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Economic reports resume on Tuesday, but the trade balance and wholesale inventories are going to take a back seat to the start of earnings season. It 'officially' kicked off with Alcoa after hours and it posted results that were enough to send it higher about $1.75, not bad for a $28.50 stock. As noted last night, however, that is not likely to ignite a new round of buying in the market; commodities are on a slide and a laggard managed to beat expectations of lagging earnings.
We are being a bit hard on Alcoa, but you get the point. There is concern that after multiple quarters of earnings growth, earnings expectations may be a bit high with respect to reality. Of course wherever there are expectations there is the potential for surprise. Indeed, that has helped drive stocks higher and higher the past year (at least after the Fed got off the brake) as many said no way companies could again post such solid earnings.
Indeed, tech stocks are trying to start a rally into earnings results with some money moving their way and some solid breaks higher this week. That is providing some interesting entry points in several good stocks, but it is always the same old question: do you buy into earnings and sell before the news, wait it out, or just avoid it altogether?
If a stock surges higher ahead of earnings it is always a good idea to take some off the table; expectations pushed it up and as with infatuation, once the anticipation is over and you have what you want the thrill is gone. A solid pattern that is ready to breakout can yield great moves on a solid earnings report. You can buy before or catch it on the test, the latter being the less aggressive move of course. Sometimes stocks get antsy just ahead of results and sell off only to rebound on the number; the power of beating expectations. If a stock is in a good pattern we tend to stick with it because those good patterns show steady accumulation, and big institutions are less likely to dump something they believe in. There is a lot of hot money bouncing around, however, and that has a short term impact regardless of what the institutions.
It is always an interesting time, and the start of the new year makes it even more so what with the positioning ongoing. We will continue to look at solid patterns and focus primarily on stocks growing their earnings at solid rates. Those tend to be the stocks that have loyal holders because they keep posting the numbers and performing for them. Always good to have a lot of 'gruntled' shareholders versus disgruntled, particularly around earnings time.
Support and Resistance
NASDAQ: Closed at 2443.83
Resistance:
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 50 day SMA at 2417
2412 from June 1999 low
The 50 day EMA at 2404
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 1412.11
Resistance:
1415 is the July up trendline, and it held on Wednesday
The 10 day EMA at 1416
1425 is an interim high from November 1999
1432 is the December 2006 high
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
1408 is the November high
1401 is a low from April 2000
The 50 day EMA at 1399
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 12,416.60
Resistance:
The 10 day EMA at 12,433
12,499 is the December intraday high.
Remains roughly 8% above the 200 day SMA. It has struggled after hitting that degree of separation in late October, but is has not given up.
Support:
12,361 is the November 2006 high
The 50 day EMA at 12,258
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.
January 8
Consumer credit, November (2:00): $12.3B actual versus $5.5B expected, -$1.3B prior
January 10
Trade balance, November (8:30): -$59.5B expected, -$58.9B prior
Wholesale inventories, November (10:00): 0.5% expected, 0.8% prior
Crude oil inventories (10:30): -8.132M prior
January 11
Initial jobless claims (8:30): 320K expected, 329K prior
January 12
Export prices, December (8:30): 0.1% prior
Import prices, December (8:30): 0.7% prior
Retail sales, December (8:30): 0.7% expected, 1.0% prior
Retail sales ex-auto, December (8:30): 0.5% expected, 1.1% prior
Business inventories, November (10:00): 0.3% expected, 0.4% prior
Treasury budget, December (2:00): $24.0B expected, $11.2B prior
End part 1 of 3
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