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money investment, day trading
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3/29/07 Technical Traders Report Update
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: None issued
Buy alerts: HWCC; SBUX
Trailing stops: BRCD
Stop alerts: None issued
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:
- Early rally turns to selling but stocks fight back.
- GDP final unexpected rise, strong jobless claims report give bolster stocks for the morning.
- End of quarter likely to give a bit more volatility, not answer the near term move question.
Boisterous start fades, manages a recovery.
Foreign markets were higher and the US to its cue from them. Higher than expected 2.5% GDP growth for Q4 and the lowest jobless claims reading in 2 months helped bolster the early gains, suggesting the economy was not as weak as the current common perception. Even with oil higher once more, the market ignored it early on.
Maybe after the Wednesday higher volume selling the shakeout was over and stocks could rally. Possibly. In the pre-market alert we noted to be wary of the move; Wednesday was not disastrous but the market is still in a correction, and a distribution session on the heels of a follow through is often fatal to a rally attempt. Sure enough, stocks started to backslide from the open. They sold all the way through lunch and into the afternoon session in a straight 45 degree angle down.
Chips were plummeting, undercutting the 50 day EMA and heading toward the 200 day. NASDAQ boasted relative weakness. Once again after showing some early leadership in the rebound attempt the techs were trying to slip out the back door and leave the NYSE with the heavy lifting. Despite the solid economic numbers, the trump card played its hand again. Oil popped again, hitting 66.03 (+1.95) while gasoline futures rose to $2.13. That is going to really hit consumers hard in the months ahead. The market reacted accordingly with that steady slide into negative territory.
The only steady performers during the slide lower were steel (helped by M&A activity) and energy (helped by oil prices). NASDAQ and SP500 undercut their 50 day EMA and were in trouble, but then a reversal in the last two hours brought the indices back to positive except for SOX. Volume was up modestly on the recovery, as the market turned a negative to something of a positive.
The back and forth action suggests a lot of quarter end jostling and also the relative weakness in techs and chips as big money unloaded them. Regardless of the cause, the action was at best mixed with SP500 and SP600 recovering nicely from just another test while NASDAQ and SOX really struggled.
Technically you can call it a positive reversal session with volume moving higher as the indices recovered. NASDAQ and SOX, as noted, were weak, however, and though they rebounded they were being sold off. NASDAQ was unable to recover the 50 day EMA. Half looks good for a bounce, half is struggling. Techs and chips struggled in the 2006 rally but managed to tag along for the ride. In the longer term they may do this, but as the market struggles to hold onto a follow through, their weakness is an issue in the near term correction. It is important to remember the market is still in the correction, and the action of late is not that strong. It does not take much to upset a rally in an ongoing correction.
In sum, an orderly pullback has turned volatile and a major segment of the market has weakened. Some distribution Wednesday after the follow through is a problem as well. Perhaps Thursday was just another shakeout in the pullback and the indices will continue the rebound. The overlay of the quarter end makes it a difficult call. In any event, the action suggests prudence as Friday is not likely to answer the question as the last of the quarter end shuffling takes place. The continuation of the correction is going to win out at some point and the indices are going to test. This action is not 100% constructive as it was up until Wednesday. As we said Wednesday, the chance of a continued successful relief rally decreased by half, and Thursday did not up the chances as part of the market bowed out.
THE ECONOMY
Final GDP Q4 throws off some better numbers, but weakness persists.
It is unusual to see the final iteration rise, but this time it did, moving to 2.5% from 2.2%. The trade deficit gave GDP a 1.6% gain as imports contracted 3% and exports jumped 11%. Consumer spending surged 4.2%, the second strongest quarterly growth in 2 years. Lower energy has more benefits than readily apparent.
Outside of that the report showed why it was just 2.5% growth. Fixed business investment fell 9.1%. Residential investment fell 20%, topping Q3. Government spending grew 3.4%; never like to see government spending grow as it is a false signal. We get much less bang for each federal dollar spent versus private, because a federal dollar takes well over $1 in private funds (taxes) to produce the dollar. The bureaucracy sucks up much of the value before it is ever spent. Inventory growth was much weaker, leading to a 1.2% drag on the GDP number. That is actually a positive as it means more production may be necessary.
All in all it was just a 2.5% GDP number. The economy slowed in the second half of 2006, and this report backs that up. It does not suggest a meltdown though it is a rearview mirror report. Nonetheless it shows the economy is growing though suffering through a mid-cycle slowdown. The last 3 quarters of 2006 posted just 2.4% growth. Rising energy prices is going to alter the trade balance picture for Q1, and thus more drag on this quarter's GDP.
The chain deflator was in line at 1.7%, but that lowered the year over year reading to 1.8% from 1.9%. That keeps this inflation reading within the Fed's comfort zone. Unfortunately, the PCE is well in excess of 2%.
THE MARKET
MARKET SENTIMENT
VIX: 15.14; +0.16
VXN: 18.53; -0.03
VXO: 14.76; -0.21
Put/Call Ratio (CBOE): 1.17; -0.2. Another session over 1.0, starting a new streak.
Bulls versus Bears:
Bulls: 48.4%. Bullish sentiment sparked up from 46.6% and 45.5% before that. Still off the 50.5% and 53.3% two months back, but now bulls are getting too high once more on this little bounce and that harkens another downside move in the correction. Bulls 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: 27.5%, down from 28.4% and 28.9% the week before. This bounce in the correction heartened investors, but there is likely going to be more rise again in the bears before this is over. Still holding much of the strong jump higher from 26.9% and 24.2% last month. 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: +0.78 points (+0.03%) to close at 2417.88
Volume: 2.019B (+5.02%). Volume jumped over 2B for the first time since the follow through. The recovery to positive indicates a possible reversal as buyers came back in, but NASDAQ is still below resistance and the reversal was not that strong as a lot of volume was on the selling side.
Up Volume: 853M (+468M)
Down Volume: 1.097B (-370M). Closed positive but down volume was stronger. Distribution session when you get to the heart of it.
A/D and Hi/Lo: Advancers led 1.03 to 1
Previous Session: Decliners led 2.07 to 1
New Highs: 89 (-6)
New Lows: 72 (+17)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher and then sold steadily into the afternoon. Found some support at 2400, the 'hump' in the double bottom, and bounced from there. Managed an intraday rebound to turn positive but closed below the 50 day EMA (2427). Techs were relative laggards Thursday as NASDAQ tried to lead but is giving it up once again.
SOX (-0.94%) closed well off the lows but it made a sharp break lower below the 50 day EMA. Chips are once more selling after, similar to NASDAQ, they tried to take some leadership.
SP500/NYSE
Stats: +5.3 points (+0.37%) to close at 1422.53
NYSE Volume: 1.509B (+2.72%). Volume was up but still below average on a dip and recovery to positive. No real distribution on SP500 and SP600 as they held support and used that to recover nicely.
Up Volume: 937.114M (+602.248M)
Down Volume: 546.51M (-562.971M)
A/D and Hi/Lo: Advancers led 1.69 to 1
Previous Session: Decliners led 1.81 to 1
New Highs: 148 (+35)
New Lows: 25 (-10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps undercut the 50 day EMA intraday and then rebounded to close positive, shaking off the higher oil prices. Financials held up on LEH results, and that contributed to the nice recovery. The large caps are holding support while NASDAQ doesn't. NASDAQ could provide a drag, but SP500 rallied before without NASDAQ helping. Will have to do it again here.
SP600 (+0.35%) followed the lead of small metals and energy, tapping the 50 day SMA on the low and rebounding to close positive. Very nice action in a nice pattern. With energy leading the small caps are going to continue to perform.
DJ30
The blue chips struggled again below the 50 day EMA (12,382), bouncing off 12,250 once more (near the 'hump' in the double bottom). It is holding the break higher, but as with NASDAQ, it is below resistance. Suffice it to say it is not crashing, but it is not in the best position of strength to recover from here.
Stats: +48.39 points (+0.39%) to close at 12348.75
Volume: 208M shares Thursday versus 224M shares Wednesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
In addition to the last day of the quarter there is personal income and spending, Chicago PMI and Michigan sentiment. There is also oil and its daily climb. Lots of issues for the market to deal with as it tries to recover its rebound form and bounce off the hump in the short double bottom.
That is a combination that begs for a bit of volatility to close out the week in addition to the struggle to hold together the follow through. Even with all of this the market likely won't show us its direction out of this jagged test this week. As noted above, what was a nice, orderly test has tumbled into volatility with half of the market weakening and half holding up with a decent test.
It may not show its hand on this move Friday, but you have to say that after this week the downside regained some of its force. With the market in an overall correction that makes the reality of the next leg lower in the correction that much more probable. Still plenty of good leadership and still solid patterns that can lead higher when the correction runs its course, but there is still that next downside leg that historically occurs.
With all of this intrigue we are going to play it rather quiet on Friday unless something breaks hard one way or the other. For the upside we are going to try and focus on the areas getting the money, e.g. energy, metals, materials, chemicals. At the same time we are going to keep some downside plays at hand to play the breakdown. The market is at a crossroads, and when at that point you have to look both ways and go the road the market takes.
Support and Resistance
NASDAQ: Closed at 2417.88
Resistance:
The 50 day EMA at 2427
The July/August trendline at 2463
2468.42 is the November 2006 high
2471 is the December 2006 high
2509 is the January 2007 high
2512 is the December/January up trendline
2523 is price resistance November 2000
2531 is the February high (post-2002 high)
Support:
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 1422.53
Resistance:
1425 is an interim high from November 1999
The 50 day SMA at 1425
1432 is the December 2006 high
1439 is the March high
1440 is the mid-January high
1444 from February 2000
1458 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:
The 50 day EMA at 1418
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 12,348.75
Resistance:
12,350 is the March 'hump' high
12,361 is the November 2006 high
The 50 day EMA at 12,382
The 50 day SMA at 12,459
12,499 is the December intraday high.
12,796 is the February 2007 and all-time high
Support:
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
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
March 26
New home sales, February (10:00): 848K actual versus 995K expected, 882K prior (revised from 973K)
March 27
Consumer confidence, March (10:00): 107.2 actual versus 109.0 expected, 111.2 prior (revised from 112.5)
March 28
Durable goods orders, February (8:30): 2.5% actual versus 3.5% expected, -9.4% prior (revised from -7.8%)
Crude oil inventories (10:30): -0.9M actual versus +1.7M expected, 3.9M prior
March 29
Initial jobless claims (8:30): 308K actual versus 320K expected, 316K prior
Q4 GDP final (8:30): 2.5% actual versus 2.2% expected, 2.2% prior
Chain Deflator (8:30): 1.7% actual versus 1.7% expected, 1.7% prior
March 30
Personal income, February (8:30): 0.3% expected, 1.0% prior
Personal spending, February (8:30): 0.3% expected, 0.5% prior
Chicago PMI, March (9:45): 49.5 expected, 47.9 prior
Construction spending, February (10:00): -0.6% expected, -0.8% prior
Michigan sentiment final, March (10:00): 88.8 expected, 88.8 prior
End part 1 of 3
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money investment
day trading
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