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3/22/07 Technical Traders Report Update
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: HMSY; MM; WFR
Buy alerts: SIGA; TIE; VCLK
Trailing stops: None issued
Stop alerts: CHRS
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/alertttr.html
SUMMARY:
- Stocks slumber through post-Fed hangover, avoid any immediate selling.
- Jobless claims remain in very good shape.
- Leading indicators sag for second month, continuing the trend lower.
- A rest before resuming the move would do the rally good.
Stocks hold the line after the Wednesday follow through.
In typical fashion the market struggled the day after a big gain, closing basically flat on low volume, trading in a narrow range all session. Call it a post-Fed party hangover or just a day off if you want. Either way it was not bad action all things considered. Some lament the lack of further gains, but after the seeing how sellers responded to upside sessions ahead of and during the correction, being able to hold the gains in a quiet session works.
Not that there was much to move the market in any event. There were some earnings to mull, some better (GIS, CAG), some better than expected but not really great (KB Homes), and others that were basically weak and had poor guidance (MOT, BGP, BKS). Analysts were at work as well, upgrading PG and CSCO among others.
That was not enough to turn futures higher, but when jobless claims came out with a bullish number once more (316K) they started to climb, turning positive ahead of the open. Despite the low non-farm payroll figures of late, the jobless claims are strong (in a job-creating respect), once more belying the corporate figures and supporting the results shown by the unemployment number, also called the household survey. With a market worried about the economic future, the continued solid jobless claims provides an underpinning to the consumer in that there are still plenty working and finding work, and that means continued consumption despite a weaker housing market.
In the final analysis that is the key difference many are missing or forgetting: of the two, with respect to consumption, job status is far more important. Sure a house can lose value and temper a consumer's willingness to spend somewhat, but its impact is modest compared to the impact of job security. A house value can fall, but it can also recover and rise again during the period a consumer owns it. If a job is threatened then the consumer worries about being even able to make the payment on the house. Much more threatening.
Thus the jobs were enough to bounce futures higher to start the session. It lacked any real pop, however, having shot a lot of its ammunition Wednesday. When oil prices started to surge (closed at $61.69, +2.08/bbl) the market action became more subdued and stocks traded narrowly for most of the session. As noted above, it didn't make any real headway, but it avoided a sell off.
The technical situation reflected the market action: flat breadth, low volume, little movement. In short, very quiet and showing no deterioration, just a flat session. Indeed, volume was lighter on NASDAQ as techs showed a modicum of selling. Leadership stocks such as those on the report lost very little ground and any weakness was on light volume. If this action remains for a couple of sessions the indices will be ready to attack the prior highs hit in late April.
When that happens the market needs to show solid upside volume once more because it is going to be dealing with the prior uptrend channel, and that can be a real struggle. Violent breaks of long trending channels, up or down, represent significant resistance when a stock or index tries to move back through. With such a short correction and small double bottom it is problematic whether the indices consolidated enough to support such a breakout and new rally. Typically such short consolidations have a lower percentage of success. In any event, the trendlines are just over 50 NASDAQ points away, still room to run upside before things get more interesting as they say.
THE ECONOMY
Leading economic indicators continue their trend lower.
Negative 3 of the last 4 months thanks to a downside revision in January (-0.3% from +0.1%) continue a weakening trend in the LEI. LEI was negative half of 2006, mostly the last half, and 2007 has started the same way. The LEI is not as accurate as other indicators, but when considering it, you look for three negative months in a row and a 6-month cumulative growth rate of -1.0% or more. It is not at those levels.
As we have noted before, however, LEI is not very accurate. It can show general trends but it is often wrong as it was when the expansion continued after the LEI showed a slowdown coming. The more accurate indicator is ECRI, and thus far it shows an expansion after the summer. The problem with LEI is it has turned more into a coincident indicator versus a leading indicator. Coincident economic indicators, however, does not sound as important.
THE MARKET
MARKET SENTIMENT
VIX: 12.93; +0.74. Still near the point of bottoming but if the volume continues on the upside it will break any correlation forming and volatility can remain low for an extended period once more.
VXN: 16.77; -0.43
VXO: 12.28; +0.83
Put/Call Ratio (CBOE): 0.94; -0.18. Back below 1.0 on the close for the third time in four sessions after that strong of 18 in a row. This definitely reached the level to indicate an extreme though the other sentiment indicators needed some more work and still do for a really good bottom to set.
Bulls versus Bears:
Bulls: 46.6%, up from 45.5% and back at the same level of two weeks back (46.2%). Well off the 50.5% and 53.3% seven weeks back. When it bottomed last summer it was near 36%. That is the lowest level since September 2006. Still a ways to go, but when it cracks it can tumble quickly. A 4.3 point drop is pretty salty.
Bears: 28.4%. Down a bit from 28.9%, but holding the strong jump higher from 26.9% and 24.2% the week before. Not bad after spending the first two months of 2007 near 20%. The angst is still strong, and as with bulls, it is not all that far from levels that sparked prior rallies. It hit a post-2002 high in that late June 2006 move (hit near 36%), 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). It is not far from those 2005 levels.
NASDAQ
Stats: -4.18 points (-0.17%) to close at 2451.74
Volume: 1.992B (-11.47%). Volume fell back to well below average again after that one day spurt back above the red line. No problem as that shows a lack of sellers as NASDAQ faded slightly, catching its breath after that strong run Wednesday.
Up Volume: 772M (-1.179B)
Down Volume: 1.138B (+869M)
A/D and Hi/Lo: Advancers led 1.09 to 1. As flat as the session.
Previous Session: Advancers led 2.95 to 1
New Highs: 154 (+21)
New Lows: 33 (-17)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ held the line well, tapping the 90 day EMA on the low and recovering for a modest loss. The selling never did get out of hand as volume, breadth and prices remained in an orderly range. NASDAQ is still in the middle of the November to February lateral range, but in good position to consolidate a few days and take on the prior trendline just over 2500. As noted, the fact it did not sell off immediately is a start to continuing the rally.
SOX (-1.28%) gave back three-fourths of the Wednesday gain, still mired well within its November through February lateral range. It is trying to make a higher low as a prelude to an attempt at a breakout run.
SP500/NYSE
Stats: -0.5 points (-0.03%) to close at 1434.54
NYSE Volume: 1.617B (-0.63%). Volume remained just below average as the large and small caps went to sleep for the session. Not a lot of volume on the upside Wednesday, not much difference Thursday. NYSE has not made up its mind.
Up Volume: 748.913M (-727.263M)
Down Volume: 854.49M (+710.931M)
A/D and Hi/Lo: Advancers led 1.04 to 1. As flat as the session just as with NASDAQ.
Previous Session: Advancers led 4.57 to 1
New Highs: 220 (-27)
New Lows: 16 (-5)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 went nowhere on static volume and flat breadth. Just about a complete draw for the day, and not bad in the aftermath of the strong surge. As for volume, NYSE showed so-so trade Wednesday on the gain and held steady as it stalled Thursday. SP500 is not showing commitment to the upside yet, but if NASDAQ is willing to lead that will give SP500 time to get it together. Right now it is a weak spot in the market. It will need to show more strength as it moves toward the prior uptrend channel near 1457.
SP600 (+0.21%) edged higher but negligibly on that NYSE flat volume. Basically the same issues as SP500.
DJ30
Similar action to NASDAQ, tapping the 90 day MA on the low and rebounding, closing once more below the 50 day SMA. Same action as the other indices, pausing after the big move higher and on lower volume. There is some resistance at 12,500 where it is now. The channel is up near 12,750, close to the all-time high. That gives DJ30 some room to move before it tests that key resistance. It currently is in the middle of the December/January range at 12,500, and as noted Wednesday, that is about the level we initially anticipated DJ30 to reach on a relief move.
Stats: +13.62 points (+0.11%) to close at 12461.14
Volume: 232M shares Thursday versus 245.9M shares Wednesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
Existing home sales are out at 10ET, and the home market is always an important issue. After all the Fed said it was undergoing an 'adjustment.' The big story for the market is whether it holds the gains and slips into next week ready to try and build on the follow through or whether Wednesday was a one-day wonder and the sellers return. The latter is a valid concern given the action shown ahead of the correction and the relatively short double bottom the market is attempting to build a new rally upon.
SP500 as noted above is rather ambivalent on this move given its volume, but NASDAQ is trying to take the lead. All indices have some more upside before they hit the former uptrend channel shown by the red and blue lines in the charts. The follow through Wednesday sets the foundation for a move to challenge these levels and we are looking to play that move and take what the market gives.
We have some good gain built into many positions and as more plays break higher we will look to play the further move to that next key level. As this was a short double bottom and the outcome of this phase of the correction is still in question we will continue to take gain as plays post good moves just as we did Thursday. As you can tell, we are still unconvinced this bottom attempt will sustain a new uptrend, but as always we are open to being shown otherwise, and will do what the market says. Indeed, that is why we were buying upside positions when they said 'buy me' and are enjoying some of the reward now.
Friday, if the market is intent on continuing the upside, we anticipate it will try to slip out of the week without giving up much ground. It needs a few side-steps to set up for the run at the old highs, and that would give it the best platform to do that and is typical action for a climbing market. Of course in a market in this position anything is possible and if it continues to climb we will be ready to participate. More than likely, after a strong Wednesday move it will, as noted, try to slip out quietly with some profit taking. The sellers will likely take a shot as well, but no one is likely to be too aggressive ahead of the weekend given the strong move Wednesday. The shorts will be as worried about another updraft as the buyers are worried about another sell off.
Support and Resistance
NASDAQ: Closed at 2451.74
Resistance:
2468.42 is the November 2006 high
2471 is the December 2006 high
2509 is the January 2007 high
2510 is the December/January up trendline
2523 is price resistance November 2000
2531 is the February high (post-2002 high)
Support:
The July/August trendline at 2452
The 90 day MA at 2439
The 50 day EMA at 2425
2405 is the 'hump' high
2400ish from the late November and late December 2006 lows.
2379 is the October high.
2376 is the April high, the former post-2002 high.
2368 is the early October handle high.
2340 is the March low
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
S&P 500: Closed at 1434.54
Resistance:
1440 is the mid-January high
1444 from February 2000
1454 is the late November to February up trendline
1461.57 is the February 2007 high.
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 90 day MA at 1417
The 50 day EMA at 1415
1410 is the 'hump' high
1408 is the November high
1389 is the October peak.
1374 is the early March low
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
Dow: Closed at 12,461.14
Resistance:
The 50 day SMA at 12,472
12,499 is the December intraday high.
12,796 is the February 2007 and all-time high
Support:
The 90 day MA at 12,408
12,361 is the November 2006 high
12,350 is the March 'hump' high
12,039 is the early March low.
October high is 12,167
11,986 is price support from mid-October and the early November low.
11,940 is the March low
11,865 from the early October consolidation
The 200 day SMA at 11,855
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
March 20
Housing starts, February (8:30): 1.525M actual versus 1.44M expected, 1.399M prior (revised from 1.408M)
Building permits, February (8:30): 1.532M actual versus 1.56M expected, 1.571M prior
FOMC day 1
March 21
Crude oil inventories (10:30): +4M actual versus +1.4M expected, +1.18M prior
Gasoline: -3.4M actual versus -1.6M expected. Pushed gasoline futures close to $2.
FOMC day two, policy statement (2:15): Rates steady at 5.25%, noted mixed economic signals, adjustment in housing, removed language re 'additional firming,' but said its primary concern was inflation not fading as anticipated.
March 22
Initial jobless claims (8:30): 316K actual versus 325K expected, 320K prior (revised from 318K)
Leading economic indicators, February (10:00): -0.5% actual versus -0.3% expected, -0.3% prior (revised from +0.1%)
March 23
Existing home sales, February (10:00): 6.30M expected, 6.46M prior
End part 1 of 3
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