|
|
world stock market, us stock market
* * * *
2/06/07 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: Took some interim gain: VIP
Buy alerts: ACH; KSWS; MBT; STLD; WFR
Trailing stops: None issued
Stop alerts issued: NVDA; SOHU
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:
- Earnings, Bernanke, Paulson, oil. Market hears it all, yawns, and continues its consolidation work.
- Too much talk of anti-growth policies in the nation's capitol.
- Earnings season comes on strong in the second half.
- CSCO to try and rally beleaguered techs
Another good consolidation session working to set up the next upside.
Futures rebounded after the slow Monday session that saw modest losses on lower trade as the market took a breather from the prior week breakouts (in everything but NASDAQ and techs). Those rising futures did not lead to a renewed breakout run, however, as sellers entered after a half hour or so.
That move lower started with the grilling of Treasury Secretary Paulson Capitol Hill as he testified before a group of our fearless leaders about the state of the economy and the federal budget deficit. The posturing was high (with the presidential campaigning already at fever pitch what do you expect?) as Mr. Paulson fielded questions on the latest rap against the economy, i.e. the so-called inequality of the gains across society (we discussed last week how the arguments against a weak economy failed so now they are trotting out the 'inequality' argument; there MUST be an election coming).
Investors did not like the tone of the attacks and stocks sold. It did not help that NSM in the chip sector cut its estimates for the quarter and fell much like a rock. SOX had to deal with yet another albatross around its neck and was sluggish. Large cap techs started stronger but turned cold ahead of CSCO's after hours earnings. Stocks sold off but never got into trouble. On the low NASDAQ tapped the 18 day EMA while then NYSE indices never even approached their 10 day EMA.
In the early afternoon Bernanke delivered a speech somewhat counter to the attacks on Paulson and the economy. He said there was some disparity, but it had been brewing for 30 years. That anti-redistribution talk helped bounce the market back in the afternoon. It did not hurt that oil once more found resistance at $60/bbl intraday and faded back for a modest gain (58.88, +0.14). Stocks rose on into the close though the large cap indices did not recover the early session highs (the small caps surged on through).
Technically it was not much of a recovery in terms of price gains as the indices closed mixed again though mostly positive. Considering other than just price gains, however, it was positive. Techs were yes a drag thanks to chips and large caps ahead of CSCO, but even NASDAQ tested lower, holding the 18 day EMA, and rebounded positive. The NYSE indices showed even more strength with their recoveries. Volume was up as on both NASDAQ and NYSE, sharply so on NASDAQ as there was some pre-CSCO earnings jitters. Breadth remained modest but was very solid even when the market was lower early on.
In short, most of the market did not sell much during the day and everything recovered nicely into the close. That kept the NYSE indices holding their gains, not giving up any ground. Unlike on the playground, being stingy in the stock market is a good thing as stocks hold their gains. That is another way of saying not many want to sell, and when they did on Tuesday the buyers quickly picked up the issues that were sold. That made the session another solid consolidation day with a shakeout and recovery on rising trade. It may take a bit more to finish the job, but then again, CSCO surged on its conference call after its earnings were initially sold. It exploded the techs higher in November with its earnings, and it looks as if it may do the same thing here, truncating any further consolidation.
THE ECONOMY
The new Congress (democrats and republicans) joining to form a dangerous merger.
Democrats and Republicans, both now labeled as tax and spenders, complained that the average person was just not benefiting from this economy as they reminisced about the 'good old days' of the roaring late 1990's. Of course those came late in a boom and right before the economy ran over a cliff and left all of those jobs dashed on the rocks below along with tens of thousands of small businesses that created those jobs.
The facts are that the US economy has surged twelve-fold in thirty years. Household value has surged since the last recession as homeownership has surged to record highs. Houses are generally credited as the largest asset any household has. Are our leaders ignoring the surge in housing ownership and housing prices that have benefited tens of millions of 'average people?' Yes. Are they ignoring that many of these jobs, despite supposedly lower wages, enjoy rich benefits? Yes. Benefits are the fastest rising component of wages despite a tick lower of late as medical costs moderate just a bit. Many of these 'low paying' jobs have benefit packages that many of the self employed only wish they had.
There are 10 million millionaires in the US, far more than any other time in history. If there was a growing divergence in wealth wouldn't there be fewer millionaires? You also have to look at how the government accounts for wealth and poverty. You can be classified in the poverty level if you own a couple of cars, three televisions, and a house. One of the factors that has gone up is the threshold level one is considered to be in poverty. For example, someone who was not in poverty in 1970 would be considered in poverty today though they owned the same assets and had the same inflation adjusted wages. The point: everyone wants everyone in our country to succeed. It does not make us a stronger economic power able to create the jobs we want, however, if we engage in redistributionist actions.
But redistribution policies are what many of our leaders are calling for. Second timer presidential candidate John Edwards wants more taxes on the 'rich.' Many calling for these policies are responding to the popular new argument to damn the current economy, wanting to cure the 'inequality' they think they see. In doing so they ignore the real inequalities for those they deem 'rich' and worthy of taxing. Many small businesses make in excess of the $200K Edwards and others consider the threshold for additional taxes. When you factor in they must pay 100% of the FICA taxes and 100% of the healthcare costs, the so-called inequality evaporates quickly. Indeed, small business and the self-employed have been targeted for years as Congress, looking for more revenue, closed off legitimate deductions for small businesses. If anything, the playing field between the self employed and the salaried or hourly worker is tipped in favor of the employee versus the small business owner. Not only are some proposing raising taxes on this group but they are also once again ready to eliminate deductions such as the cost of health insurance and healthcare for small businesses. Did I say balanced? Now it is tipped in favor of the employee.
We have seen these policies before.
Thus Congress is flirting with policies that will make it less attractive to start a business or expand a business because of incurring additional taxes. There has to be a reward for taking risk; risk taking is the engine that drives our economy as small businesses start up, grow, and create jobs. If you tax away the advantages of taking risk no one takes those chances that create new business and jobs and the economy begins to stagnate.
Just look at the 1970's. After a strong 1960's where the economy surged on the Kennedy tax cuts, the 1970's brought in a surge of higher taxes to pay for the Great Society and other programs Congress enacted. Did that raise more money from the rich to go to the poor through these programs? No, much of the money collected went to running the vastly expanded federal bureaucracy. A lot of the money the feds wanted to collect went into tax shelters and was effectively locked away from the economy. The rich were not going to spend or invest money if it was going to be taxed at high rates. No businesses were created, the economy stagnated, and the talk around the world was that the US had a good run, but its day was over. Unemployment surged, inflation surged, productivity tanked, and we were in the worst recession since the Great Depression. The Reagan tax cuts and incentives to invest finally freed that money up because it then became more lucrative to take risks once more.
The result was a 20 year boom that it took Greenspan and company to screw up. When they did there was no investment for three years in the US until the Bush tax incentives gave businesses a reason to invest. That triggered risk taking and new companies, and here we are going again. It took almost 18 years to get the level of job creation we had in the late 1990's. Starting from scratch after 2001 we have enjoyed something on the order of 18 quarters of double digit earnings growth, record low unemployment, record home ownership, and new highs in the NYSE stock indices. So, do you want to go down the route of redistribution once again or do you want to work for even more policies that incent risk taking and job creation by more and more US citizens?
Earnings season starts weak, comes back strong.
Even before Cisco's earnings release after the bell that caught many an eye, earnings were already on a strong comeback after a weak opening round. As of Monday, 65% of those reporting beat estimates, 15% missed, and 20% were in line. 85% met or beat expectations, the majority beating.
This is a long way from the sub-10% growth rates flashed in the first couple of weeks. Now we are in for another double digit gain as the later earnings are pushing totals well in excess of 10% growth.
THE MARKET
MARKET SENTIMENT
VIX: 10.65; +0.1
VXN: 16.61; -0.23
VXO: 10; +0.01
Put/Call Ratio (CBOE): 0.86; +0.04
Bulls versus Bears:
Bulls: 53.3%. Up from a brief dip to 50.5% a couple of weeks back, but still below the 55.4% hit on the just the week before. In short, bulls remain high and right at that 55% level that can be trouble because everyone is in the market.
Bears: 21.1%. Bears managed to rise even as bulls rose, up from 20.9%. where they flirted with the 20% bearish threshold. As with the bulls, it is still too close at this juncture as it indicates not enough pessimism. When bears are low it is the same as high bulls: everyone is in. Hit a new post-2002 high in that late June 2006 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: +0.89 points (+0.04%) to close at 2471.49
Volume: 2.147B (+10.29%). Volume jumped as the large caps traded nervously ahead of Cisco earnings, but you have to like how the index tested support at the 18 day EMA and then rebounded on strong volume. Good shakeout and then a rebound to close positive. Positive consolidation action.
Up Volume: 937.693M (+9.361M)
Down Volume: 1.187B (+203.789M)
A/D and Hi/Lo: Advancers led 1.26 to 1. Breadth held up well all session even when NASDAQ was trading lower. Another positive internal.
Previous Session: Decliners led 1.34 to 1
New Highs: 93 (-57)
New Lows: 17 (-13)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ gapped modestly higher but then sold off rather quickly and was not looking to spry in the morning. It managed to find some footing at the 18 day EMA (2457) midmorning and built off of that, making a series of higher lows on into the close. It closed positive and in its very tight closing range of the past week, still holding right at the December high. Good consolidation action and CSCO is likely to give it a jolt higher in the morning. In November CSCO set off a month long rally in techs.
SOX (-0.54%) felt the burden of the next warning, this one from NSM. It was not the death blow to the index, however. SOX held a test just above the 200 day SMA and recovered most of its losses. It remains below the 50 day EMA (467), but it showed more resilience than we expected it to. It has yet to clear this range and make a higher low, and its overall pattern the past 5 months is toppy. Still high risk but CSCO helped it in November and it may be what SOX needs to clear next resistance at 475. That hardly takes it out of the woods, however.
SP500/NYSE
Stats: +3.72 points (+0.07%) to close at 1448
NYSE Volume: 1.474B (+4.48%). Volume bumped up nicely, but it was still below average for the third session. No issue with that because SP500 is still in the consolidation phase after breaking higher last week. The small caps put in a new high and you want to see stronger volume on that and it was stronger. Not strong, just stronger, so they are also in a period of quieter time.
Up Volume: 838.252M (+152.785M)
Down Volume: 619.013M (-79.977M)
A/D and Hi/Lo: Advancers led 1.78 to 1. Not bad at all given the rather modest gains in the market. Small and mid-caps were up 0.50% each, and that always pumps up the breadth.
Previous Session: Decliners led 1.22 to 1
New Highs: 250 (-6)
New Lows: 5 (0)
http://investmenthouse.com/cd/^gspc.html
SP500 posted a modest gain on rising though below average volume. Modest accumulation, no real churn as the large caps put in their third day of lateral moves after surging to a new post-2002 high last week. We were watching how it was going to handle the move higher and thus far it is being very stingy with its gains, buying each small dip. It remains overextended, but the trend is strong and in place. It has not come back to test after this run, and if it takes off here on strong volume then we need to start watching to see just how far it runs and on what volume. A ballistic rise on huge trade raises the potential of that blow off top discussed last week. Just have to keep that in mind as well as this thing continues to grow.
SP600 (+0.5%) posted another gain after just one session off, pushing to a new all-time high. The small caps remain on a mission, enjoying gains in energy that started this move but also in industrial related stocks. May take a breather over the next day or two, however, as NASDAQ 100 has its day on the Cisco earnings results.
DJ30
DJ30 slid more or less laterally for the third session, working sideways on lower, below average volume. Nice surge to a new all-time high and as with the other indices, it refuses to give back any gains. Almost the identical positioning as the SP500, and that means watching how it continues holds the gains, and if it really takes off from here, watching just how strong the move is. Not seeing anything right now that says get in the way of this move. Just move with it.
Stats: +4.57 points (+0.04%) to close at 12666.31
Volume: 201M shares Tuesday versus 204M shares Monday. Another below average volume session as DJ30 works laterally, digesting the gains from last week.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
Q4 productivity will give the inflation watchers something to talk about and crude inventories will be on the front burner given the deep freeze in much of the country. Paramount for the market at the open is the CSCO earnings. They were sold at first when the numbers came out, but when the call started and guidance came out the stock surged back up. It is going to gap higher Wednesday and take a lot of large cap techs and chips with it. It is a digital world and CSCO is part of the guts of that world.
This may ignite another rally in techs similar to November when CSCO beat the street. That was good for a month of gains before NASDAQ entered into the current mediocre malaise while the NYSE indices rallied.
Thus we are looking for techs to make a comeback and that is likely to drag the rest of the market with it, and start some of the leaders back up after their tests of the last move. They were already starting and we picked up some today such as WFR and STLD. We will be looking at more tomorrow.
We will also be looking for another surge to push our existing positions higher. Many will be buying tomorrow and we will let them push our positions higher. After a further good run we will bank some more gain.
As always we will approach a strong open with a bit of good old fashioned skepticism just to keep us honest. At the same time we don't want to get too upset as money shifts to the large cap techs for the session and leaves the smaller caps and some of the other leading sectors flat. What will likely happen is after an initial turn to techs the rest of the market will rise as well. The good thing is, that will allow these other leaders to set up a bit better while the spotlight is off them and give us some nice entry points. In any event we have many solid positions and potential buys that we can take advantage of to again take what the market gives us.
Support and Resistance
NASDAQ: Closed at 2471.49
Resistance:
2471 is the December 2006 high
2509 is the January 2007 high
2493 is an interim peak from February 1999
2523 is price resistance November 2000
Support:
2468.42 is the November 2006 high
The 10 day EMA is at 2462 and the 18 day EMA at 2457
2450 is minor support
The 50 day EMA at 2434
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
S&P 500: Closed at 1448.00
Resistance:
1475 from peaks in December 1999 and January 2000
Support:
1444 from February 2000
1441 is the July up trendline
The 10 day EMA at 1439
1432 is the December 2006 high
The 18 day EMA at 1433
1425 is an interim high from November 1999
The 50 day EMA at 1417
1408 is the November high
1401 is a low from April 2000
1390 is the October high.
Dow: Closed at 12,666.31
Resistance:
About 8.5% above the 200 day SMA. Still going strong, overcoming the chop as it pushes to a series of new highs once more.
Support:
The 10 day EMA at 12,607
12,499 is the December intraday high.
The 50 day EMA at 12,426
12,361 is the November 2006 high
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.
February 5
ISM services, January (10:00): 59.0 actual versus 57.0 expected, 56.7 prior
February 7
Productivity, Q4 (8:30): 2.0% expected, 0.2% prior
Crude oil inventories (10:30): +2.684M prior
Consumer Credit, December (3:00): $6.5B expected, $12.3B prior
February 8
Initial jobless claims (8:30): 310K expected, 307K prior
Wholesale inventories, December (10:00): 0.6% expected, 1.3% prior.
End part 1 of 3
|
world stock market
us stock market
|
