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money investment, day trading
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1/22/06 Investment House Daily
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MARKET ALERTS:
Target hit alerts: None issued
Buy alerts: CROX; MA
Trailing stop alerts: COH; CYTC
Stop alerts: None issued
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SUMMARY:
- Stocks find no further relief during the session but stem the losses in the afternoon session.
- Techs in dire need of a catalyst to and TXN trying to put some starch back into techs with earnings
- Some energy stocks trying to recover even as oil price weakens.
Stocks waste little time turning back down.
The Friday relief bounce lasted through the pre-market, but as soon as the opening bell sounded the air escaped as stocks let out a long sigh and tumbled lower yet again. There were simply no positive catalysts. The earnings calendar was notably light to star the second week of the season. PFE beat expectations, but it hardly held sway over techs, the downside leader (along with SOX) last week. Oil was higher, continuing that bounce after it touched below $50/bbl last week, and like it or not, lower oil helped the growth sectors. It is noteworthy that stocks recovered late in the session as oil reversed and closed negative (closed at 51.13, -0.86). There was no economic data as the LEI was delayed a day. With bigger fish announcing earnings after the close no one was really willing to stick the old neck out.
After an initial drop the first 30 minutes, a pause gave way to a really ugly drop in the second half hour. With that kind of early drop and NASDAQ now showing 4 out of 5 sessions lower, it had to get a bit better. After about three hours sideways stocks did bounce into the afternoon and recouped some losses. Some. The downside was still substantial even with the afternoon 'recovery.' The late rebound was definitely nothing that changed the character of the day. After all, trade NASDAQ down hard a week and you are going to get some short covering.
Technically things deteriorated a bit more from Friday, but it was no major breakdown. SOX remains in dire trouble, but it did manage a bounce off some support at 450. DJ30 closed below the 18 day EMA, but SP500 held that level on its close. SP600 continued to gyrate around in its handle, looking neither overly great or overly bad. NASDAQ was again quite interesting. It gave up the 50 day SMA it held Friday but it also managed to bounce up off the 50 day EMA Monday. It can still make a higher low here. It has to if it is going to make the comeback from that gut punch reversal last week.
Internally there was nothing special. Breadth was negative by better than 3:2; most stocks were lower and you can read whatever you want into that. It was not massively negative breadth nor even strongly negative though it did recover from roughly -2:1 levels hit intraday. The A/D line slipped heading into NASDAQ's breakout but it was clear at that point that the NYSE stocks had run far and were in need of a breather; they were not going up as quickly while NASDAQ tried to make its play for leadership. Volume was lower on the pullback, a silver lining after the flood of volume last week as stocks sold. As noted over the weekend, no doubt expiration had something to do with that volume surge and skewed the technical readings.
Leadership remains interesting. We saw some nice relative strength as some leaders continued to hold up well (e.g. INFY, VCLK, IIVI, HMSY, WFR) while other leaders broke higher once more (e.g. GS, CROX, MA, MS). Other stocks that sold off last week managed to hold next support even as the market sold further Monday. The market sentiment and action is still overall negative but after 4 out of 5 downside sessions on NASDAQ these leaders that are moving up or poised to do so are key.
THE ECONOMY
A veritable dearth of economic information given the LEI was pushed back a day.
THE MARKET
MARKET SENTIMENT
VIX: 10.77; +0.37
VXN: 17.65; +0.84
VXO: 10.15; +0.4
Put/Call Ratio (CBOE): 0.96; +0.13. Heading up but notably still below the 1.0 level on the closes during this selling.
Bulls versus Bears:
Bulls: 50.5%. Quite a drop for the week, down 5 points form 55.4%. After a blip higher they are resuming what was a modest dip (down just 4 points over the past 6 weeks). Major drop here even as SP500 and DJ30 remain in good shape. Peaked in January 2006 peak at just above 60%.
Bears: 22.1%. Moving back up after nearly undercutting the 20% level considered bearish Up from 20.7% last week after a few weeks trading near 20%. 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: -20.24 points (-0.83%) to close at 2431.07
Volume: 1.925B (-7.39%). Lower trade as NASDAQ sold lower, unable to extend the Friday move. Better to see slower trade on the downside, and the surge in trade last week was in part expiration. At least the selling has slowed, and that suggests more chance of a rebound.
Up Volume: 377.237M (-847.686M)
Down Volume: 1.536B (+718.352M)
A/D and Hi/Lo: Decliners led 1.87 to 1. Breadth recovered from -2.1:1 with the afternoon 'rebound.' The large cap techs (-0.99%) again took the selling harder.
Previous Session: Advancers led 1.59 to 1
New Highs: 74 (+28)
New Lows: 39 (+20)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
Gapped higher but that was just about the high for the session as the selling started within the first 5 minutes. It got pretty ugly in the morning with NASDAQ down almost 30 points, but it found support at the 50 day EMA (2421) and recovered modestly into the afternoon. Lower trade though still above average indicates the selling is abating some, particularly with the index finding support at the 50 day EMA. It is still above the lows of the 9 week range it could not breakout of last week, and if it can hold at the 50 day EMA it will make a higher low. Lots of ifs given last week's failed breakout, but you have to like what some leaders are showing (e.g. INFY, VCLK) and how other sectors are picking up the slack such as biotech and other NASDAQ healthcare.
SOX (-1.01%) continued to struggle, giving back the modest Friday advance and a bit more. It tapped some support at 450 on the low and managed an afternoon bounce to take back some of the downside, but it never came close to challenging the 200 day SMA as it did Friday. TXN reported some likable earnings after the close and was up a point, helping out the sector in general, basically because things were not as bad as most thought.
SP500/NYSE
Stats: -7.55 points (-0.53%) to close at 1422.95
NYSE Volume: 1.488B (-9.07%). Volume was down as SP500 and SP600 both sold. Not bad following the higher Friday volume on the upside though that was also driven some by expiration. All in all not bad price/volume action on NYSE.
Up Volume: 435.635M (-718.343M)
Down Volume: 1.01B (+535.856M). Doubled up the upside.
A/D and Hi/Lo: Decliners led 1.75 to 1.
Previous Session: Advancers led 2.33 to 1
New Highs: 129 (-8)
New Lows: 12 (+8)
http://investmenthouse.com/cd/^gspc.html
Still in a modest pullback, holding the 18 day EMA (1422) on the close on lower trade. No distribution on the day, and that is a positive for the NYSE and SP500 as it hung in there and held near support. It is holding its own despite the troubles in technology, aided greatly by financials and drugs.
The small cap SP6500 (-0.93%) continued to struggle to start the week, giving back the Friday move and closing below the 50 day EMA. Even with that it continues to hold in its 9 week lateral move that is trying to form the handle to that longer 9 month cup with handle base. It is still slugging through this process and doses not look ready to make any definitive move yet though it still could make a higher low here. It is often when something looks as if it has only one direction to go it heads in the other direction.
DJ30
The blue chips closed modestly below the 18 day EMA, something it has done on occasion during its long run. Volume backed off as it sold back so no real distribution. Indeed volume was lower than all of last week so it was not a dumping session. The blue chips remain in the uptrend, thus far fighting off any serious selling. You have to like how it fought off the selling last week in a group of issues, but you also know it cannot take that kind of selling on a continuing basis and hold its uptrend.
Stats: -88.37 points (-0.7%) to close at 12477.16
Volume: 240M shares Monday versus 287M shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
The LEI is out (in theory) at 10ET, and that is it for the scheduled economic data. After hours TXN reported earnings and revenues that beat the street though its revenue guidance was weaker. Even with that it managed a decent after hours rally that helped some of the techs and chips. Not a huge halo effect but it helped. It was basically 'gee it wasn't worse' kind of rally, and that is not exactly the kind of news that is going to rescue semiconductors or tech in general from the recent tail kicking.
It does, however, give some of those stocks that have held up well despite the selling some room to break higher. There are still some techs in position, and as we have chronicled in the report of late, NASDAQ stocks outside of tech e.g. biotechnology, financial, healthcare are in good position and are indeed moving higher. Large cap tech continues to struggle, but it is not the world of tech. It was the part of tech that helped NASDAQ breakout to start the year, however, so no matter how you spin it, NASDAQ still has a hard time making serious moves without the large cap techs in there and pitching.
There are still plenty of stocks in good position to move upside. That is a product of money staying in the market despite this drop in NASDAQ and SOX. NASDAQ is trying to decide if it can hold the 50 day EMA and make a higher, DJ30 is extended and showed some signs of wear Monday, SP500 is extended though not showing strain thanks to financials and pharma, and the small caps continue to avoid selling off as they work on a larger base. Overall there are worse stories to tell though near term the action remains quite divided with most stocks undergoing a near term pullback.
Stocks are still waiting for the next phase of earnings season after the initial one started with disappointment about the guidance. After several downside sessions NASDAQ is trying to lean toward a few upside sessions as some of the selling pressure is worked off. As noted above, if it does manage a bounce off the 50 day EMA that will give some of these stocks that held up with some great relative strength the green light to bounce.
We will still be looking to play those upside because of their positions, the money still in the market and working their way, and a bit of an oversold condition on NASDAQ. Once any bounce on NASDAQ plays out without showing any real upside accumulation, the downside comes more into play. We are also going to consider some energy stocks that started moving up even as oil was selling off last week. Many are just making rebounds from a harsh round of selling, but there are some that have set up some decent patterns and are set up for a relief rally. If they are offering relief, even if it is a bunch of gas longer term, why not take it?
Support and Resistance
NASDAQ: Closed at 2431.07
Resistance:
2468.42 is the November 2006 high
2471 is the December 2006 high
2493 is an interim peak from February 1999
2523 is price resistance November 2000
Support:
The 50 day EMA at 2421
2412 from June 1999 low
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 1422.95
Resistance:
1425 is an interim high from November 1999
1426 is the July up trendline
1432 is the December 2006 high
1444 from February 2000
1475 from peaks in December 1999 and January 2000
Support:
The 18 day EMA at 1422
1408 is the November high
The 50 day EMA at 1406
1401 is a low from April 2000
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 12,477.16
Resistance:
About 8.4% above the 200 day SMA. It turned choppy after hitting 8.5% of separation in late October, but is has not sold off and has gained some strength.
Support:
The 18 day EMA is 12,486 is trying to hold
12,499 is the December intraday high.
12,361 is the November 2006 high
The 50 day EMA at 12,334
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 pre-2000 all-time high
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
January 24
Leading Economic Indicators, December (10:00): 0.2% expected, 0.1% prior
Crude oil inventories (10:30): 6.78M prior
January 25
Initial jobless claims (8:30): 310K expected, 290K prior
Existing home sales, December (10:00): 6.30M expected, 6.28M prior
January 26
Durable goods orders, December (8:30): 3.5% expected, 1.6% prior
New home sales, December (10:00): 1.05M expected, 1.047M prior
End part 1 of 3
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money investment
day trading
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