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us stock market, trend trading stock
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2/12/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: AXP; DAKT; WDR
Trailing stops: AKAM; AMT; JCI; RL
Stop alerts issued: CLB
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.html
SUMMARY:
- Market slides again but much milder selling than Friday.
- Monday was rather quiet, but expiration has not yet begun to heat up.
Inauspicious start for expiration week.
Stocks sold once more Monday, but at least the selling intensity was less. Maybe it was the new M&A activity that saw the Four Seasons going private or VRNT buying WITS. There were analyst upgrades as well (AAPL, ADBE); they hardly move the market these days, however. Then there was oil, down sharply on Saudi Arabia's statement that the oil market was healthier than expected and required no adjustments (meaning no production cuts). Oil tanked $2.08/bbl to close at $57.81.
These certainly didn't hurt, but they did not help all that much either, at least when it came to generating any upside. Stocks started flat and immediately tumbled lower as the Friday selling momentum carried over into the new week. The selling was not of the same magnitude, however. Volume was lower and below average on both NYSE and NASDAQ, a nice change from the strong selling volume Friday and the start of expiration week. The indices mostly held near support or continued their modest pullbacks within their uptrend channels. There were fewer breakdowns in leading stocks. Indeed, breadth was downside, but not that bad (-1.3:1 NASDAQ).
So the internals and the overall selling was not that bad, but it does not absolve the market of Friday's distribution. Not that Friday itself was that bad. Every rally has its bad days, kind of like the black sheep in a family. The problem is the frequency and type of bad days in the rally. NASDAQ has shown more and more and three key distribution sessions reversed what looked to be key, strong volume, high breadth upside breakouts. The market is not dead by any means, but it would take a priest to forgive NASDAQ for that type of action (or the market equivalent, i.e. a breakout that surges higher for several sessions and sticks the test).
Absolution aside, given the milder selling action, was this a pause before further selling or a pause in the selling that prepares for a renewed upside bounce? There are some great stocks that are still in good shape, stocks that used the market selling to come back to near support. We are certainly looking at those as possible buys if they can hold up and the overall market weathers the near term selling. With expiration week upon us and three key distribution/reversal moves on NASDAQ, however, we anticipate at least more volatile trade this week and mostly expect some more downside. The action of reversing breakouts and doing so almost immediately on higher volume is quite unhealthy action. The NYSE indices remain in their uptrends and for the most part continue to show good price/volume action; they can sell some more and still recover to keep the rally going. We need to see them get through this week and make that hold after some more selling, however.
THE ECONOMY
All was pretty quiet ahead of Bernanke's appearance before Congress Wednesday and the onslaught of economic data that comes with it (e.g., personal income and spending).
Oil was the leading economic story Monday as it fell over $2/bbl on Saudi Arabia's comments regarding the need to tinker further with production. Saudi's comments were not express but clearly implied it would not agree to further production cuts. As Saudi Arabia is the only cartel member that sticks to its quota cuts and bears 50% of the production cuts, when it says no more are needed it is saying that no more are coming. All it has to do to bring the others in line is not live up to its cuts and flood the market with its share of the production cuts. Oil plunges back near $50/bbl and this time maybe breaks that support level. It fell $2.08/bbl on Monday alone as Saudi Arabia only implied threats to produce more (closed at 57.81). If it opened its spigots back up the price is back to $50 in a flash.
THE MARKET
MARKET SENTIMENT
VIX: 11.61; +0.51
VXN: 17.34; +0.23
VXO: 11.37; +0.51
Put/Call Ratio (CBOE): 1.18; +0.24. First pop above 1.0 on the close during this selling bout. It typically takes several closes above 1.0 to indicate the apprehension is high enough to start factoring in a rebound. That makes sense if you view the NASDAQ distribution as leading up to more selling.
Bulls versus Bears:
Bulls: 52.2%. Modest decline from 53.3% after bouncing up from 50.5% a in late January, and after grazing past 55% (the 55.4%) just before. Still quite a bit of bullishness though backing down from the 55% threshold considered bearish as it signals pretty much everyone is in the market.
Bears: 22.2%. Moving in a direction more favorable to market upside as bears bounce back from flirting with the 20% level considered bearish. Up from 21.1% last week and 20.9% before where bears 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: -9.44 points (-0.38%) to close at 2450.38
Volume: 1.887B (-12.1%). Sold off to the 50 day SMA but volume backed off as it did. You can look at it as half full: volume did not continue to pour in to the downside after the Friday sell off.
Up Volume: 558.163M (+9.479M)
Down Volume: 1.317B (-315.761M)
A/D and Hi/Lo: Decliners led 1.31 to 1. Very modest breadth as the selling pressure backed off to start the week.
Previous Session: Decliners led 1.94 to 1
New Highs: 60 (-40)
New Lows: 30 (+9)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ struggled again but much milder than Friday, and not just in the point category. The above average distribution volume Friday turned to the lowest trade of the month as the sellers left. The only reason NASDAQ fell is that the buyers didn't want to venture in just yet. Maybe the test of the 50 day EMA (2439) will bring them back out, but NASDAQ has made a lower high here and once again it turned lower on strong volume, pushing right back in the face of the stronger upside volume as NASDAQ tried to move toward a breakout once more. The continued reversals or selling into rallies undermines the foundation, and thus NASDAQ is rather precarious here and that is a blemish for the entire market.
SOX (-0.98%) sold yet again after the Friday sector upgrade. It made a lower high at 475 resistance and is now flirting with the 200 day SMA (456.76) again. Maybe it can pull off a lower high but no one really wants to get involved with these right now other than some long term institutions accumulating some positions. Overall the chips are under some distribution and this 200 day SMA test is key.
SP500/NYSE
Stats: -4.69 points (-0.33%) to close at 1433.37
NYSE Volume: 1.32B (-19.33%). Volume fell to the lowest level in a month and one-half as the distribution from Friday did not continue. Not as much distribution on NYSE as NASDAQ and these indices could very well test lower, still hold, and then continue their upside moves.
Up Volume: 463.24M (+43.521M)
Down Volume: 847.109M (-348.059M)
A/D and Hi/Lo: Decliners led 1.56 to 1. Downside breadth faded substantially as the NYSE indices continued their pullbacks. After a rough day they are returning more to the norm for this move. Unlike NASDAQ, there is not the series of clear reversals after upside rallies that show sellers using the rallies to unload shares.
Previous Session: Decliners led 2.32 to 1
New Highs: 69 (-87)
New Lows: 14 (+2)
http://investmenthouse.com/cd/^gspc.html
SP500 slid through the 18 day EMA (1436), but it is still above the December highs (1431) as it tests back. SP500 remains in its uptrend and above the 50 day EMA (1421) as it makes what appears to be a pretty normal test of its trend higher, at least in line with the other pullbacks during this trend. The distribution was a concern, the second distribution session on the heels of an upside move. Thus it is not just a plain-Jane pullback, and with its extended position you have to be concerned regarding a deeper test. Best to let it make its test and see how it holds, looking at how the financials for example, hold. They sold off hard again Monday, and SP500 is going to struggle until they can find a bottom on this selling.
SP600 (-0.31%) tested lower, tapping at the 18 day EMA (408.22) on the low and recovering to cut its losses. It is holding its late January breakout (407.54) on this test, making it and the SP400 the strongest indices right now.
DJ30
DJ30 slid further, undercutting the 18 day EMA (12,581) similar to SP500. It is fading on very low, below average volume as it comes back toward the bottom of its narrow uptrend channel. It has made this narrow 180 - 200 point up and down trek since December, and with the Monday move DJ30 is sitting on the trendline marked by the intraday lows starting in November. Thus far DJ30 is making a rather routine fade in its uptrend but it is closing in on the lick log where it is going to need to find support in this more recent trend. The initial trend broke, and this is the secondary trend as the move flattened out. It can fall to the 50 day EMA (12,452) and still rebound, but it would be much better to see it base a bit more from there and set a better foundation for the next move up. For now it is fading on overall low volume, and that shows no one selling these stocks very heavily.
Stats: -28.28 points (-0.22%) to close at 12552.55
Volume: 175M shares Monday versus 220M shares Friday. As noted, the weakest volume since the holiday sessions so there is not a lot of selling in these stocks.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
Still not a lot of economic data Tuesday; most all of the action hits Wednesday when Bernanke starts his testimony to Congress regarding the economy and the economic outlook. That likely won't stop the market from getting a bit more volatile Tuesday as expiration week heats up. Expiration can be quiet up to Friday or it is choppy Tuesday to Thursday. Last expiration it was the Tuesday to Thursday brand, but it was also wilder on Friday. Of late, most have been the Tuesday to Thursday variety, and with NASDAQ showing its distribution (SP500 as well), we anticipate things getting more interesting tomorrow even with Bernanke still on deck for the next session.
The market has yet to really correct on this run and this time around we see more distribution coming in. That primes it for a more volatile expiration week as positions are shuffled, closed or rolled over for the next month. As of this date it has defied any prognostications of a correction as money continues to come into the market at key points. The distribution shows that some is coming out, however, and that was not the case up until mid-December when NASDAQ suffered its first high volume reversal of a high volume break higher.
That means we will continue to play more cautiously, taking a gain or closing a position if some signs of trouble appear, willing to look at the stock again if it manages to hold the line and sets back up for another move. There are also other leaders that are pulling back and setting up more moves. Some will survive any market correction, but most will struggle during any overall market correction (3 out of 4 stocks follow the overall market). We will look for the strong to buy upside and we are also going to continue looking for ripe downside plays ready to make a quick drop in any market correction.
Support and Resistance
NASDAQ: Closed at 2450.38
Resistance:
2468.42 is the November 2006 high
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:
2450 is minor support
The 50 day EMA at 2439
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 1443.37
Resistance:
1440 is the mid-January high
The 10 day EMA at 1440
1444 from February 2000 is trying to hold.
1448 is the July up trendline
1475 from peaks in December 1999 and January 2000
Support:
1432 is the December 2006 high
1425 is an interim high from November 1999
The 50 day EMA at 1421
1408 is the November high
1401 is a low from April 2000
1390 is the October high.
Dow: Closed at 12,552.55
Resistance:
The 10 day EMA at 12,603
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:
12,535 is the up trendline connecting the November and January intraday lows.
12,499 is the December intraday high.
The 50 day EMA at 12,453
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 12
Treasury Budget, January (2:00): $38.2B actual versus $40.0B expected, $40.0B prior (revised from $21.0B)
February 13
Trade balance, December (8:30): -$59.5B expected, -$58.2B prior
February 14
Retail sales, January (8:30): 0.3% expected, 0.9% prior
Retail ex-auto (8:30): 0.4% expected, 1.0% prior
Business inventories, December (10:00): 0.1% expected, 0.4% prior
Crude oil inventories (9:30): -449K prior
February 15
Initial jobless claims (8:30): 315K expected , 311K prior
NY Empire PMI, February (8:30): 11.0 expected, 9.1 prior
Net foreign purchases, December (9:00): $60.0B expected, $68.0B prior
Industrial production, January (9:15): 0.0% expected, 0.4% prior
Capacity utilization, January (9:15): 81.7% expected, 81.8% prior
Philly Fed, February (12:00): 4.0 expected, 8.3 prior
February 16
Housing starts, February (8:30): 1.60M expected, 1.642M prior
Building permits, February (8:30): 1.59M expected, 1.613M prior
PPI, January (8:30): -0.6% expected, 0.9% prior
Core PPI, January (8:30): 0.2% expected, 0.2% prior
Michigan sentiment prelim, February (10:00): 96.5 expected, 96.9 prior.
End part 1 of 3
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us stock market
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