|
|
world stock market, us stock market
* * * *
2/22/07 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: CMG; NTGR; XTO
Trailing stops: JCP; KSS
Stop alerts issued: KSWS
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:
- More of the same as techs, small caps show relative strength, NYSE large caps fade back into channel.
- Interest rates move higher along with gold as inflation concerns again appear.
- Looking for DJ30 to complete its pullback and set things up for next week.
Early rally fades as NYSE large caps continue to test, but chips and some new money prop up NASDAQ
After one down session on DJ30 that followed the hotter CPI, investors were looking for a reason to buy. Asia hit record highs as the Bank of Japan said it would keep rates low. M&A was hot again with WFMI buying OATS (health foods), TOL (housing) raised its 2007 guidance, and the chips jumped on upgrades and better than expected earnings.
That news offset some retail earnings viewed as disappointing (JCP, ANF; KSWS) as well as a continued rise in oil prices (closed at 60.95, +0.88). Unfortunately, as is often the case, the early bounce did not last. After 30 minutes the indices peaked and sold to negative, at least all but SOX. Midmorning Iran spouted off about continuing its enrichment activities. The rumor mongers also hit as a story circulated the US was about to raise its threat level. Stocks did not like that and some morning weakness turned into some quick, heavy selling that gave back all of the early gains and more.
Those were factors, but in the real world the NYSE large cap indices were already top heavy and started to fade Wednesday. Combined with rising oil, rising gold, and rising interest rates, investors found no reason to put any more money in the large caps.
Their loss was again something of a tech gain. Money did not pour back into NASDAQ, but plenty of money found the chip stocks, the major laggards in this entire rally. SOX' 2.76% gain helped prop up NASDAQ and once more it showed relative strength versus the large cap NYSE stocks. NASDAQ thus managed an afternoon rebound, turning back to positive while DJ30 tapped the 18 day EMA on the low and closed near that level.
That left the market with the same relative finish as Wednesday: a gain on NASDAQ and SP600 but losses on SP500 and DJ30. The latter are making the tests toward the bottom of the channel once more while NASDAQ posts additional modest gains after its breakout move. A bit more money coming out of the large cap NYSE stocks on some profit taking, a bit more moving into techs as the other indices pull back.
Technically the action was basically status quo, following the same theme for the week with NASDAQ's breakout. Volume was a bit lower on NASDAQ, indicating no real accumulation as it dipped then recovered. NYSE volume moved higher, indicating that DJ30 and SP500 distributed slightly again. Indeed, DJ30 picked up some steam on the downside as it moves to test the bottom of its channel. NASDAQ is losing steam on its upside move, showing a doji after more than a week of gains. Same on the small cap SP600.
Once more there were not a lot of breakdowns as leadership was still pretty solid with metals, chips, and techs posting gains. Retail lost a bit of leadership strength as it struggled after a series of earnings announcements. It was not enough to stall the market, but a lot of retail resides on the NYSE, and thus the weight on those indices.
In any event it looks as if DJ30 continues its fade to test the bottom of its channel while NASDAQ may need to test as well: it and SP600 showed a doji on the close, and after a run higher that can signal a move is losing its momentum. You don't want to see volume get too strong on the decline such that DJ30 breaks its uptrend and NASDAQ gives up another breakout.
THE ECONOMY
Interest rates continue to rise.
The CPI stoked some concerns about returning inflation, but before the news gold was already rising, indeed almost surging. It is now within $30 or so of $700/oz once more. As we noted a few weeks back, interest rates were stronger as well, doing the Fed's work for it, at least with respect to rates. Thursday the 10 year treasury bond broke some resistance at 4.70%, closing at 4.73%. With oil back above $60/bbl and the Fed worried about commodity prices leading to inflation, that only fuels the concerns, so to speak.
There are reasons gold is rising such as the rise of the consumer class in China and India; when people become more successful they like to show it a bit. As with the inverted yield curve and the impact of foreign treasury purchases, however, no one really knows how much of gold's price rise is attributable to increased consumer demand versus demand for gold as an inflation hedge.
Interest rates can also rise due to increased and anticipated increases in money demand. That is why interest rates typically rise on their own in a strong economy, though as seen in the 1980's, the rise is modest when there is good balance between supply and demand. Thus the current level of rates is not a big issue unless this breakout over 4.70% by the ten year leads to a quick spike higher.
If such a rise would correct the yield curve inversion, however, not too many would complain about that as it would indeed show anticipated future demand for money due to economic growth and not so much due to concerns inflation was ready to run higher. Of course the increase would still have to be modest; a spike would indicate rates were rising with gold and reflecting inflation fears versus just an improving economy.
This mix of data conflicts according to historical patterns, and thus there is confusion as to what it really means. There are many good theories that explain the conflicting data, but there is not any empirical research behind any of them and thus the overriding reason for the conflicting data. We do note that net foreign purchases have declined some over the past few months, meaning less treasury buying, but that has not helped to narrow the inversion in the yield curve. If foreign purchases continue to want and the inversion does not correct or at least improve, that is some of the best evidence that the curve is reflecting concerns about future economic prospects versus just foreign buying of our securities.
THE MARKET
MARKET SENTIMENT
VIX: 10.18; -0.02
VXN: 15.3; -0.08
VXO: 10.11; +0.17
Put/Call Ratio (CBOE): 1.03; -0.1. Another close over 1.0, the second in a row and the third in the past two weeks. Again it rose on a mixed market with a lot of bets on the downside for NYSE large caps.
Bulls versus Bears:
Bulls: 51.1%. Off again, continuing the modest slide. 52.2% last week, 53.3% before that. This follows a bounce 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: 21.1%. Down from 22.2%, not the direction we want to see (up is better as more pessimism). Was moving in a direction more favorable to market upside as bears were bouncing back from flirting with the 20% level considered bearish. Back to 21.1% from two weeks back and 20.9% before. 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: +6.52 points (+0.26%) to close at 2524.94
Volume: 2.04B (-0.91%). Volume was lower but still slightly above average as NASDAQ posted a modest gain in a more up and down session. No real accumulation, but the volume remains strong as NASDAQ continues its breakout move higher. Volume cannot be stronger every session and good overall volume during a move is what you want. It would be nice, however, to see another strong upside session on strong volume as the breakout run continues.
Up Volume: 1.265B (+231.103M)
Down Volume: 746.557M (-124.841M)
A/D and Hi/Lo: Advancers led 1.23 to 1. Very modest breadth again as NASDAQ posted another gain. It had that one session of 1.9:1 on the Wednesday breakout, and that was solid. Want to see breadth widen again after NASDAQ makes its test and starts the next run.
Previous Session: Advancers led 1.03 to 1
New Highs: 163 (+38)
New Lows: 15 (+3)
The Chart: http://www.investmenthouse.com/cd/^ixic.html
Techs gapped higher at the open, continuing the breakout move this week and posting another new post-2002 high. Volume was lower but still above average volume; trade has been pretty good on this move. It shows a doji on the candlestick chart, and that is a warning flag that the momentum in the current leg may be running a bit low and precedes a test. No problem with one back toward the December high at 2509. It would need to hold in that general area, however, and then resume the move. NASDAQ is approaching its key test: can it hang onto a strong move this time around.
SOX (+2.76%) was the clear market leader for the session. It has lagged for a year and Thursday it finally could show off a bit, clearing 475 resistance and the early January closing high. Next shot is the November and December modest double top at 493.25 intraday. ADI reported better than expected results and guided higher. NSM was upgraded. Chips jumped higher pretty much across the board as money leaving other areas found these laggards.
SP500/NYSE
Stats: +2.11 points (-0.09%) to close at 1456.38
NYSE Volume: 1.469B (+2.79%). Volume climbed again, but remained below average, as SP500 struggled again at the top of its channel and SP600 showed a doji after its strong 2 week run. A bit of churn at higher levels.
Up Volume: 657.663M (-9.989M)
Down Volume: 780.315M (+42.775M)
A/D and Hi/Lo: Decliners led 1.16 to 1
Previous Session: Decliners led 1.17 to 1
New Highs: 228 (+39)
New Lows: 5 (-3)
http://investmenthouse.com/cd/^gspc.html
SP500 rallied early in the session right up to its upper channel line at 1462 and then fell to test the 10 day EMA on the low. By the close it rebounded to basically flat, showing a doji on the candlestick chart. Unlike DJ30 it has not closed significantly lower off its upper channel line, but it is showing some modest distribution the past two sessions. Tenacious and you always like to see an index stingy with its gains. SP500 is working laterally at its upper channel line just as it did in early February. It fell back from that attempt and it is likely to do the same here, but we note it has not followed DJ30 lower at this point.
SP600 (+0.05%) managed a gain as well, but it showed a doji as well, the hanging man variety. The name says it all. After 7 consecutive upside sessions that took it to a new all-time high, you can concede that a breather in the form of a pullback would be normal.
DJ30
DJ30 was down again, undercutting the 18 day EMA (12,664) on the low and managing to recoup some losses. It was not like the SP500 or other NYSE indices that rebounded to recover most of their gains. DJ30 closed nearer its session lows than its highs, but it did hold near the early February lateral consolidation range. Volume remained below average so no real distribution, just another run back down in its uptrending channel. That lower trendline is now roughly at 12,610.
Stats: -52.39 points (-0.41%) to close at 12686.02
Volume: 207M shares Thursday versus 213M shares Wednesday. Lower trade, still below average as DJ30 tests back. That indicates no real dumping as it comes back, just profit taking as it has had in its run in the trend. As noted above, don't want to see it jump up as it continues lower to test the trendline.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
No scheduled economic releases Friday. Stocks will be on their own. Right now money has moved toward technology and continuing its move to materials, metals, and the like. It is not powering into technology, but volume has remained solid even as the NYSE large cap indices struggle and in the case of DJ30, declined. The dojis on NASDAQ and SP600 signal there was no great move into these areas Thursday.
With SP500 bumping along at the upper channel line, DJ30 fading back into its channel, and NASDAQ showing a doji, the indices appear ready to slip into the weekend with a fade from the last run higher. DJ30 has already started and SP500 has stalled at its upper channel line. A pullback from here would be in keeping with the general trends of money rotation in a continuing uptrend.
The watch points are volume, leadership and just where the indices are able to find support. NYSE has shown modest distribution while NASDAQ's upside has shown accumulation. Basically you just want to see a pullback remain orderly with no big volume jumps, no big price losses, and no breakdown in leadership. Retail was a bit rocky Thursday, but everything else was in the orderly category. If it remains such, then we will look for DJ30 and SP500 to hold near their uptrends and NASDAQ to find support at its January high at 2509. The NYSE remains extended, but until it breaks the trend and fails a test it has been a cold stone to bet against.
Support and Resistance
NASDAQ: Closed at 2524.94
Resistance:
2523 is price resistance November 2000
2573 - 2852 from peaks in April and May 1999
Support:
2509 is the January 2007 high
The 18 day EMA at 2485
2471 is the December 2006 high
2468.42 is the November 2006 high
The 50 day EMA at 2454
2450 is minor support
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.
S&P 500: Closed at 1456.38
Resistance:
1462 is the upper band of the current channel
1475 from peaks in December 1999 and January 2000
Support:
The 10 day EMA at 1452
1444 from February 2000
1440 is the mid-January high
1438 is the late November to February up trendline
1432 is the December 2006 high
The 50 day EMA at 1429
1425 is an interim high from November 1999
1408 is the November high
Dow: Closed at 12,738.41
Resistance:
12,805 is the upper channel line marking the November to date uptrend channel.
About 8.6% above the 200 day SMA. Still going strong, overcoming the chop as it pushes to a series of new highs once more.
Support:
The 18 day EMA at 12,664
12,605 is the up trendline connecting the November and January intraday lows.
The 50 day EMA at 12,521
12,499 is the December intraday high.
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 21
CPI, January (8:30): 0.2% actual versus 0.1% expected, 0.4% prior
Core CPI (8:30): 0.3% actual versus 0.2% expected, 0.1% prior
Leading Economic Indicators, January (10:00): 0.1% actual versus 0.2% expected, 0.6% prior (revised from 0.3%)
FOMC minutes, January 31 (2:00)
February 22
Initial jobless claims (8:30): 33K actual versus 325K expected, 359K prior (revised from 357K)
Help wanted index, January (10:00): 32 actual versus 34 expected, 33 prior
Crude oil inventories (10:30): +3.7M actual versus 700K expected, -589K prior
End part 1 of 3
|
world stock market
us stock market
|
