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world stock market, us stock market
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3/07/07 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: WNR
Buy alerts: BTJ (bonus); UCTT; WFR
Trailing stops: None issued
Stop alerts: ICE
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:
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SUMMARY:
- Late selling sinks modest intraday gains.
- Housing: it either 'sucks' or has bottomed.
- Wednesday was a washout but stocks can show further upside prior to Friday jobs report.
Stocks rally from morning selling but sellers hit in the last hour.
There was not a lot of scheduled economic data, but there was no shortage of economic information for investors to digest. The ADP housing report suggested just 57K jobs for the month. That set the stage though the ADP numbers have not very accurately tracked the non-farm payrolls and even more so the household survey. Housing was in the news again with disparate views. New Zealand raised interest rates to 7.5%; it is where a lot of carry trade money is parked, so that actually helped world markets though the impact was not readily evident.
Oil inventories fell 4.8M bbl and gasoline fell more than twice the expected 1.6M bbl decline (-3.8M). Oil closed higher again at 61.82, +1.13; it topped 62 intraday. That helped push energy stocks higher, one of the few leadership groups Wednesday.
The market took it all in, starting modestly lower after the Tuesday surge. Nothing unusual about that. Stocks quickly rebounded into positive territory. Looked like a soft open, rebound to continue the rebound kind of move. Sellers took their shot, however, and sold it off through the morning. An afternoon recovery and stocks were again positive. Volume was running lower, however, and there were few leadership groups.
That left it vulnerable and when the Fed released its Beige Book that reported overall expansion but on-third of the districts reporting slowing, stocks faltered. They again fought back, but in the last 40 minutes the sellers took control, driving the indices back to close near session lows. The only positive index, and that by a hair, was the mid-cap index, buoyed by its energy components. Energy and metals were the leaders, but they were about the only ones.
Technically, it was a down session but it was not a bloody one. Up and down for sure, but volume was lower on NASDAQ and NYSE and breadth was basically flat. It was a down session and that was disappointing to many that there was no 'follow through,' but as we noted last night, these relief rebounds in a correction are often up and down as they trend higher. Thus this pullback on the heels of the Tuesday surge is not necessarily a red flag, particularly given the internals: lighter volume, flat breadth.
Leadership was the sorest spot. Energy, metals and some machinery with a smattering of strong stocks in various other sectors. Financials were weak yet again; hard for SP500 to move with the financials down pretty much across the board. Leadership will have to spark up if the rebound continues for a few more sessions. Energy still looks good as do metals. If retailers can bounce on their same store sales we see a further bounce higher overall into the jobs report on Friday morning.
THE ECONOMY
Housing has bottomed! Or does it 'suck?'
Three views of the housing market hit the wires Wednesday. One was positive, saying the market had bottomed. One was not bad, saying inventory was clearing out nicely. The other was rather negative for all of 2007.
Let's start with the weekly data. Mortgage applications rose 7.3% on the back of strong refinancing (15%) due to lower rates. That trend is holding up, and it goes along with what TOL executives noted Wednesday, i.e. that cancellation rates were dropping. TOL went on to say it looked as if things were bottoming, and if this trend kept up its inventory would drop by half in 4 to 5 months. It said others in the industry were echoing this. Further, those supplying the homebuilders chimed in that the sector sure looked to be bottoming.
Then there is the other end of the spectrum. We also heard from the DHR CEO as to his take on the industry. He was far from enthusiastic and he made his point quite clearly, claiming the housing market would 'suck' for all of 2007. Not disappointing, not weak, but suck. That implies a really lousy market if you can say that language implies anything.
One says it is better (the higher end), the lower end says it is still bad. The deciding factor: Greenspan. Greenspan? Well, he spoke out on housing today. Why not? He has spoken out on just about everything else of late. He said the housing market had bottomed. Guess that is the determining factor, i.e. the kiss of death.
Likely the market bottoms in the second half of 2007. That means there is still room for 'sucking' prior to that time. The rate of decline appears to be lessening based on what the suppliers are saying, but prices are still heading lower for now and that means too much inventory still. We all know about inventory corrections from 2000 to 2002; it takes some time.
THE MARKET
MARKET SENTIMENT
VIX: 15.24; -0.72
VXN: 20.56; -0.63
VXO: 15.66; -0.28
Put/Call Ratio (CBOE): 1.22; -0.03. Eleven consecutive sessions above 1.0 on the close. Definitely enough downside option speculation/protective put buying to indicate sentiment is getting to extremes. It is not a precise timing device, however, as it can take weeks before stock prices actually make the turn. In addition, there is likely more upside on the volatility indices before stocks put in a bottom.
Bulls versus Bears:
Bulls: 50.5%, up modestly from 50.0%. Ticking higher after falling from 51.1% two weeks back and 53.3% just over a month ago. Not a lot of movement, but we can make book on it being lower next week. Still quite a bit of bullishness though backing down from the 55% threshold hit to end 2006 and considered bearish as it signals pretty much everyone is in the market.
Bears: 24.2%. Definitely more angst as bears rose from 22.2% and 21.1% before that. Held in the low twenties for 2 months but starting to come to life and will surge next week. Hit a 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: -10.5 points (-0.44%) to close at 2374.64
Volume: 2.073B (-7.06%). Volume was lower on the loss with volume falling further below average on the session. The sellers won the day but they were weaker than they have been. Overall, however, the sellers have been the strongest during the decline as the very high selling volume indicates.
Up Volume: 584M (-1.502B)
Down Volume: 1.458B (+1.333B). Very lopsided for a session that was trying to get positive in the last hour.
A/D and Hi/Lo: Decliners led 1.34 to 1. Very tame all session whether NASDAQ was up or down.
Previous Session: Advancers led 4.16 to 1
NASDAQ CHART: http://www.investmenthouse.com/cd/^ixic.html
NASDAQ tried to turn positive after a soft start and actually did in the early morning and early afternoon. Up and down all session but in a narrow range. Low volume fight between buyers and sellers and in the end the lack of trade and buy side bids left it open for the sellers to send it lower. Again, no distribution, just a lack of buying interest in the afternoon to keep things moving.
SOX (-0.45%) went nowhere, holding 460 once more on the low but still well below the 50 day EMA near 470. Firmly lodged in the lower part of its range despite some strong stocks in the sector.
SP500/NYSE
Stats: -3.44 points (-0.25%) to close at 1391.97
NYSE Volume: 1.711B (-6.72%). Volume faded on NYSE as well though it did remain above average. No heavy selling on the session, indicating there is still some upside on this bounce. As with NASDAQ, the sellers do remain in control overall given the high volume selling that pushed the NYSE indices lower.
Up Volume: 853.28M (-862.156M)
Down Volume: 835.3M (+719.9M). Unlike NASDAQ, this was a dead heat, helped by the strong moves in energy and metals.
A/D and Hi/Lo: Advancers led 1.03 to 1. No damage indicated by this internal either. Very noncommittal with respect to the selling.
Previous Session: Advancers led 4.82 to 1
New Highs: 74 (+3)
New Lows: 28 (-8)
SP500 CHART: http://investmenthouse.com/cd/^gspc.html
SP500 tapped at some resistance in the 1400 range and faded back to close lower, unable to hold the modest gains. Lower volume and weak financials left it open to the sellers in the afternoon. Nothing really nefarious in the session other than it could not extend the Tuesday rebound. Likely to try another run at 1400 before Friday if the retail sales reports can give the market a lift as the few reporting Wednesday were doing for themselves.
SP600 (-0.08%) was a non-event as well, showing a doji as it held its July/August up trendline after retaking that level in the Tuesday reversal. It is bumping into the middle of that late 2006 lateral range. Will need some muscle to make it up to 405 and the top of that range.
DJ30
The blue chips could not hold a gain either as they bumped up at 12,250 once again and faded. Volume jumped back above average on the move, showing some churn as the index bumped that level. Similar story to the other indices: still in position to try a bit more upside on this bounce, but the bids dried up on Wednesday and the sellers didn't see any need to cover.
Stats: -15.14 points (-0.12%) to close at 12192.45
Volume: 265M shares Wednesday versus 192M shares Tuesday. Churned below 12,250 as Dow stocks went both directions on strong volume.
DJ30 CHART: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Initial jobless claims is the only scheduled economic data, but much of the news impacting the market is coming from other sources, e.g. foreign markets, the carry trade (yen, and foreign rates), and industry commentary (e.g. housing). As for the latter, Thursday the retailers report their same store sales results. The luxury end started reporting Wednesday and the results were mostly positive. After hours more were coming and they were, as usual, mixed. We will have to see how the market responds as to whether this is an upside catalyst that can push the indices higher another day and ahead of the jobs report. Retail has been hot and cold of late with many growing wary of the sector given the mortgage issues and some modest erosions in confidence.
The market may also give some short covering ahead of the Friday morning jobs report given that expectations are rather low and thus there is potential for upside surprise, Even with the Tuesday rebound the indices are still well below their recent peaks and have room to bounce. More than a few will want to square up ahead of that report and that could fuel the next move higher.
This is still a correction and just the first phase, the initial selling and the first test of that selling. The length of the rebound to test can vary quite a bit. There is likely more upside on this bounce, but with the jobs report looming and the market's new found concern for US economic data, any rally into that number that shows lackluster internals is one to use to lighten up struggling positions. Indeed, we are already looking for some more downside plays as the market makes this bounce higher. Directions can change fast in a correction (see the Monday to Tuesday swing) and if there is a decent rally ahead of the jobs report we need to be cognizant that the move could have been shorts covering ahead of the report, and once the news is fact the shorts could resume their selling.
Support and Resistance
NASDAQ: Closed at 2374.64
Resistance:
2379 is the October high.
2400ish from the late November and late December 2006 lows.
The July/August trendline at 2428
The 90 day MA at 2434
The 50 day EMA at 2440
2468.42 is the November 2006 high
2471 is the December 2006 high
2509 is the January 2007 high
2523 is price resistance November 2000
Support:
2376 is the April high, the former post-2002 high
2368 is the early October handle high.
2339 - 2334
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 1391.97
Resistance:
1400 is some price support
1408 is the November high
The 90 day MA at 1414
The 50 day EMA at 1422
1425 is an interim high from November 1999
1432 is the December 2006 high
1440 is the mid-January high
1444 from February 2000
1448 is the late November to February up trendline
1475 from peaks in December 1999 and January 2000
Support:
1389 is the October peak.
1371 to 1373 is the December 2000 peak and the January 2001 peak
1369 from early October 2006
1358 to 1362 mark a series of peaks from April 1999 to August 1999 high and the February
1353 to 1350 is the early October consolidation range
Dow: Closed at 12,192.45
Resistance:
12,361 is the November 2006 high
The 90 day MA at 12,389
12,499 is the December intraday high.
The 50 day EMA at 12,445
12,689 is the up trendline connecting the November and January intraday lows.
Support:
11,986 is price support from mid-October and the early November low.
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
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.
March 5
ISM Services, February (10:00): 54.3 actual versus 57.5 expected, 59.0 prior
March 6
Q4 Productivity, revised (8:30): 1.6% actual versus 1.7% expected, 3.0% prior
Factory orders, January (10:00): -5.6% actual versus -4.0% expected, 2.6% prior (revised from 2.4%)
March 7
Crude oil inventories (10:30): -4.8M actual, 1.4M prior
Federal Reserve Beige Book (2:00): 8 regions expanded, 4 showed slowing growth.
Consumer Credit, January (3:00): $6.4B actual versus $7.0B expected, $5.0B prior (revised from $6.0B).
March 8
Initial jobless claims (8:30): 335K expected, 338K prior
March 9
Non-farm payrolls, February (8:30): 100K expected, 111K prior
Unemployment rate (8:30): 4.6% expected, 4.6% prior
Average hourly earnings (8:30): 0.3% expected, 0.2% prior
Trade balance, January (8:30): -$60.0B actual, -$61.2B prior
Wholesale inventories, January (10:00): 0.1% expected, -0.5% prior.
End part 1 of 3
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world stock market
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