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world stock market, us stock market
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1/10/07 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: None issued
Buy alerts: BIDU; LRCX
Trailing stops: None issued
Stop alerts: 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/alertttr.htm
SUMMARY:
- Early to sell, late to rise: techs lead afternoon rebound yet again.
- Trade deficit continues to fall on falling energy, falling dollar.
- Getting closer to the end of the reallocation and to a NASDAQ breakout even as earnings season looms
Solid low to high action continues, at least in techs and financials.
You wake up on Wednesday and look at the futures and wonder if something ugly transpired overnight. Asia and Europe were down with no green on any trading screen. Oil was lower (closed at 54.02, -1.62) so that was not the issue. No new wars, or hostilities, just the usual ones. No major earnings warnings from any bellwether stock. There were more downgrades, however, as analysts fret about the ability to continue earnings growth at levels justifying higher prices. Thus good moves from stocks such as BRCM and QLGC on Tuesday were met with downgrades on Wednesday. There is a lot of that going on right now, but the most interesting aspect of the calls is that the market is ignoring the analysts and continuing higher. Nonetheless the sellers took another shot at the market on Wednesday morning while institutions lightened the load a bit more with respect to the NYSE stocks, both large and small caps. It was more of what we have seen, but in the morning it looked a bit grimmer.
As trade started, SP500 once more dipped toward the 50 day MA, roughly matching the Monday and Tuesday lows, then once more rebounded into the close, posting a modest gain at the bell. If you look at it by itself you admire its fight, how it sells off but doggedly rebounds. Of course the market is interconnected and you have to look at SP500 relative to the other indices and sectors. Sure it is gamely coming back after repeated selling attempts, but that action looks pretty sickly juxtaposed to the action in NASDAQ, SOX, and particularly NASDAQ 100. Those indices sold as well, but the downside was quite modest, and it did not last long. Within a half hour they started fighting back, rebounding once more.
They not only rebounded, they logged solid gains on a nice boost in already strong volume. They picked up speed all session, and when the financials, down hard early, started to recover, the rebound really got a head of steam.
Technically the action was solid as NASDAQ once more started soft and then rallied on strong volume, again showing accumulation. NASDAQ 100 was even stronger, and SOX broke through resistance at 475. No breakouts from the 8 week lateral moves though they are banging at the door. The question is, will they kick the son of a b**ch in (our thanks to Bum Phillips)? Breadth was pretty anemic, virtually flat on both NASDAQ and NYSE. The move was thus another large cap tech move without a lot of soldiers backing the generals' charge. There is not any help from SP500 or SP600. The NYSE large caps are trying to hang on, but that is about all. The small caps continue struggle below the 50 day EMA, not exactly leading any charge higher. Thus it looks to be up to NASDAQ and SOX, particularly the larger cap versions. With the accumulation ongoing in techs, even with this narrow breadth a breakout from NASDAQ 100 and NASDAQ is looking better.
THE ECONOMY
Mortgage applications of all types jump to start the year.
Seems a rather unusual New Year's resolution: I will get a mortgage. Nonetheless, homebuyers and homeowners were doing just that, helped along by fading interest rates. The overall index rose 16.6%. New home mortgages jumped 16.2% while refi's surged 17.3.
The news was more ammunition for those believing the housing market has bottomed. There are definitely signs that is trying to occur, but it takes more than a week's worth of data to turn the trend. Indeed, the monthly average declined 2% despite the gains to start the year. Low interest rates are powerful inducements, particularly when many perceive they are going to keep rising. Thus a fade in rates combined with a new year sent applications soaring. More evidence the correction in the market is slowing, and it has to slow down and find a bottom before it can work on the recovery.
Trade gap decline is greater than expected.
It is easy to get turned around by talk of shrinking trade deficits when the trade gap is $58.2B, but that was lower than the $59.9 expected. A weaker dollar made US products a bit more attractive to foreign buyers, and a declining oil price is helping. For November total oil imports were $21.5B, the lowest since 2005. Just think what it is going to be like for December with oil falling from 62 to 54. Those surging exports are going to require some upward Q4 GDP revisions.
Even with that November drop, inventories are still on track for a record in 2006. With the 'fixed cost' of oil imports, we are never going to have a 'balanced' trade gap. We have discussed before the need to get off the 'oil standard' if we want to get the trade deficit under control. That is not going to happen anytime soon because we prefer to give tax incentives to drill for oil and drain the US first versus incentives to truly seek vehicle fleet replacement with currently viable alternatives such as bio-diesel and hydrogen powered hybrids. If we get back to reality, however, we have to realize we will always have a fairly massive trade deficit.
Not that we really care about that. Not many are likely to 'call' our debt; doing so would be curtailing their own wealth because if the US has an economic crisis the world has one and those trade 'IOU's' lose a ton of face value. That reality is always overlooked by those harping about the trade gap. If we would instead focus on investment in the US that would lead to more technological advances, our position in the worlds economic future would be unmatched and untouchable. Instead we focus our energies on protecting BVD's made in the USA versus innovations in alternative engine technology, next generation intelligence, etc. Those are the things the rest of the world will flock to our shores to get, not tidy whitey's. A good set of briefs feels good, but not as good as a higher standard of living that new technological innovation brings.
THE MARKET
MARKET SENTIMENT
VIX: 11.47; -0.44
VXN: 17.25; -0.64
VXO: 11.32; -0.51
Put/Call Ratio (CBOE): 0.81; +0.03
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: +15.5 points (+0.63%) to close at 2459.33
Volume: 2.343B (+9.61%). Solid volume surge as NASDAQ breaks higher again, moving toward the top of the late 2006 trading range. That quiet accumulation is getting a bit more boisterous.
Up Volume: 1.678B (+479.296M)
Down Volume: 601M (-352.077M)
A/D and Hi/Lo: Advancers led 1.01 to 1. Led by large caps as the NASDAQ 100 rose 1.14%, almost twice overall NASDAQ.
Previous Session: Decliners led 1.05 to 1
New Highs: 93 (+56)
New Lows: 66 (+35)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
Another strong move on strong volume as NASDAQ rallies once more toward the top of its 8 week trading range between 2400 and the December high at 2471. It has shown accumulation all month, most of it quiet with early tests lower followed by higher volume rebounds. Wednesday it made a stronger break higher, clearing the early January closing high as it tries the top of the range again. It has big money buying right now and we will see if it can push on through.
SOX (+1.76%) finally made a more significant break higher, getting that large cap volume to push it off the 200 day and now 50 day MA. It still has to clear the November and December highs (493.25) to make a higher high and technically confirm a new uptrend. Making a good start.
SP500/NYSE
Stats: +2.74 points (+0.19%) to close at 1414.85
NYSE Volume: 1.565B (-8.15%). Volume faded back close to average as SP500 tested lower again and then rebounded. No accumulation as it recovers, but also no distribution, something it had issues with earlier in the week.
Up Volume: 865.182M (+103.87M)
Down Volume: 674.217M (-244.221M)
A/D and Hi/Lo: Advancers led 1.03 to 1. Flat as a pancake as well.
Previous Session: Advancers led 1.29 to 1
New Highs: 149 (+65)
New Lows: 25 (+14)
The Chart: http://investmenthouse.com/cd/^gspc.html
The large cap index was selling again early, as it has done for the past 5 sessions, but once more it recovered with the rest of the market. It did not lead, just tagged along. Volume was lower, so there was no accumulation on the rebound. It is hanging in there, helped by NASDAQ and primarily the large cap financials that continue to perform. Indeed, it recovered when those stocks reversed early weakness and rallied. SP500 cannot rally on financials alone, however, and it remains somewhat challenged at this point.
SP600 (+0.01%) barely scratched out a gain after once more tapping at the 90 day SMA on the low. Another rebound but on lower NYSE volume and still closing below the 50 day EMA. The small caps continue to struggle under distribution, but for now they are hanging on and that is all we ask of them at this juncture in the economic expansion (i.e. well after the initial economic advances).
DJ30
DJ30 continues going nowhere but it is holding its 18 day EMA (12,415) as it does. That keeps it trending higher but it is not leading, just holding on for now.
Stats: +25.56 points (+0.21%) to close at 12442.16
Volume: 226M shares Wednesday versus 225M shares Tuesday, still holding average.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Only jobless claims are scheduled on Thursday but again, the focus is going to be earnings as more and more companies report and warn. After hours DNA posted very, very impressive numbers, beating across the board. The stock was up, but it was not blasting higher. It will not, however, hurt the rest of the market as it tries to continue the move higher and see NASDAQ finally make the breakout to another new post-2002 high.
Ever since the Fed went on official pause and oil started to decline, the market has rallied. It has taken an 8 week pause to rest after the run from the summertime 2006 lows, a pause where the big institutions are swapping out last year's models for the 2007's. Thus the struggle in large cap NYSE and the strengthening of techs. A NASDAQ breakout would cement the notion of the change in institutional focus. It would also pout a lot of coin in our pocket as our positions continue to take off.
NASDAQ 100 may just beat overall NASDAQ to the breakout, but we might get a bit of a hiccup as they try to move past the November and December highs. Those peaks put in a thicker layer of ice the techs have to crack through, but this accumulation on strong volume is setting the stage for that move. We thus are going to continue looking for those stocks that are getting the money and are in position to make strong runs as the cash flows their direction. We find it a positive that investors are buying on volume even as stocks head into earnings; that shows they want to own them at earnings versus running scared from them.
Support and Resistance
NASDAQ: Closed at 2459.33
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 2419
2412 from June 1999 low
The 50 day EMA at 2406
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 1414.85
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 12,442.16
Resistance:
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 12,265
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): -58.2B actual versus -$59.5B expected, -$58.8B prior
Wholesale inventories, November (10:00): 1.3% actual versus 0.5% expected, 0.4% prior (revised from 0.8%)
Crude oil inventories (10:30): -4.99M actual versus -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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world stock market
us stock market
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