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4/12/07 Technical Traders Report Update
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Technical Traders Report Subscribers:
MARKET ALERTS
Target hit alerts: None issued
Buy alerts: MON
Trailing stops: None issued
Stop alerts: None issued
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SUMMARY:
- Stocks start slow but take back Wednesday losses.
- March same store sales surge, though stealing sales from April.
- Choppy, but market holding up as it attempts to get the gist of earnings season.
Low volume rally fights back.
The momentum was downside after the Wednesday distribution session and the news was not providing much counterbalance. March same store sales were huge with 80% beating expectations. AEO +20%; JWN +15%, SKS +13%, JCP +10.5%. The numbers were impressive, but for the majority guidance was not. An early Easter pushed April sales into March, poaching sales down the road. Though that was expected, the initial reaction to the great results but weak guidance was negative. Jobless claims were also a question mark, jumping to an 8 week high at 342K (320K expected, 321K prior). After the hurrahs over last week's jobs report, the more contemporaneous weekly jobless claims added to the early hangover from the Wednesday distribution.
The indices started lower, undercutting the 10 day EMA, but they found bite at the next near support level, the 18 day EMA. Thirty minutes into the session they found bottom and started a solid, steady climb into the bell. Higher oil threatened to derail the move in the afternoon session as prices climbed almost $2 ($63.85, +1.84) with gasoline futures rising another 3 cents. $3/gallon gasoline looks like a sure bet, and at the first sign of real trouble from a storm or new Middle East tensions (Iran?) $4 is in the tank. The advance stalled and volume that was building through lunch slacked off. Stocks found footing once more in the last half hour, however, and bounced to close at session highs.
Technically the move took back the Wednesday price losses, always a good response to a distribution session. The intraday action was solid with the soft, negative start and then the rally to close at session highs. Low to high intraday action is always a characteristic of a more bullish climate. Breadth improved to close to 2:1, the best upside showing an matching the downside spread on Wednesday. Not bad.
Volume was the laggard once more on the upside as it did not follow with the same strength as the Wednesday selling. Trade topped the prior week's action and thus showed much more upside conviction than before, but the sellers by virtue of the Wednesday sell off strength still hold the edge. It is just an edge, however. As noted Wednesday, one distribution session does not kill a rally. Doesn't help, but it doesn't kill it. It also helps when the market trowels in some nice price gains to fill the holes the selling made. That said, there were a lot of moves higher Thursday but not a lot of volume moves or volume breakouts. There were any number of stocks moving higher, but we were not interested in chasing many low volume breakouts or stocks that are already extended past a reasonable buy point, particularly in the early stages of earnings season with the market still trying to find the gist of results. Thus we were mostly content to let positions bounce higher again as we let the market figure out what it wants to do with earnings. As noted last night, this market consistently shows the ability to bounce back from adversity, and Thursday was another example. It still has to convince us this move can survive, but as it does we are willing to let our positions in energy, metals, etc. move higher.
THE MARKET
MARKET SENTIMENT
VIX: 12.71; -0.78. Back down to the 200 day SMA where it found support the last trip. Still an unresolved situation here because the market response to earnings is still unresolved. Still looking for it to hold here and bounce, meaning the market will undergo a bit more selling.
VXN: 17.42; -0.32
VXO: 11.97; -0.68
Put/Call Ratio (CBOE): 1.02; +0.03
Bulls versus Bears:
Bulls slid and bears rose, a positive development after the converse last week threatened to derail the improvement. Is this enough to sustain a new move? If you were looking just at this indicator, no. Before the last significant market bottom back in August 2006, bulls fell to 36% in late June. Bears rose to 36% as the two kissed before going their separate ways once more as the market started to rally. They are still over 20 points apart, and that is not what new bottoms are made of.
Bulls: 49.5%, down from 50.6%. Fading back a bit though still above the 48.4% two weeks back, and that was up from 46.6% and 45.5% before that. Could be a double top building in as it hit 50.5% level a couple of months back though below 53.3% on the recent high. Bulls bottomed last summer near 36%. That is the lowest level since September 2006.
Bears: 27.5%. Solid jump in bears from 25.8%, putting it right back to the level hit two weeks back though down from 28.4% and 28.9% immediately before that. Well above the 20% where it held to start the year. 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).
NASDAQ
Stats: +21.01 points (+0.85%) to close at 2480.32
Volume: 2.009B (-2.39%). Volume faded but just modestly, topping the 2B share level and also topping average as well. Lower trade shows less strength than the sellers, but not by much. With just one day of distribution you have to view this as a positive. Not a clear renunciation of the selling, but a good response.
Up Volume: 1.446B (+924M). Almost 3:1 upside, a good showing despite trade levels dropping slightly.
Down Volume: 492M (-890M)
A/D and Hi/Lo: Advancers led 1.84 to 1. Good response to the Wednesday downside breadth.
Previous Session: Decliners led 1.9 to 1
New Highs: 130 (+21)
New Lows: 66 (-7)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
Started lower and sold to the 18 day EMA on the low, just undercutting the late March highs on that initial break higher off the double bottom. It found firm footing there and rebounded, rising steadily into the afternoon, pausing, then kicking it home to the bell. The move took out the Tuesday closing high in this lateral move and volume, though a bit lower, was still above average. It is still below the July/August trendline (2485), but if it continues to build strength off this pullback it will be able to handle that. Interesting that it found support well above the 90 and 50 day MA; suggests there is still strength in the move despite the low volume rise last week. Again, we let it continue to make the move as long as it will. We have our gut feelings, but the market teaches you to check your feelings at the door.
SOX (+0.98%) posted another move off the 50 day EMA, the third in 5 sessions. The other two sessions found it right back down at that support level lying in the middle of the 5 month trading range. SOX is still trying to make a higher low here and thus set a platform to at least try a move into the upper range once more. It is getting help from the chip equipment makers for a change. After hours LRCX reported earnings and was down, but late trades put it backup modestly ahead of its closing price.
SP500/NYSE
Stats: +8.93 points (+0.62%) to close at 1447.8
NYSE Volume: 1.491B (-4.99%). Volume was lower, fading back below average after the Wednesday distribution selling. Traded was still the best in a week if you ignore Wednesday, so there were more interested players to the upside than during the low volume ascent. Thus the buyers were stronger than before, but still not as strong as that flash of sellers. Again, a day of distribution is not fatal, and if buyers continue to build strength from here there is more upside ahead.
Up Volume: 1.083B (+615.379M)
Down Volume: 389.151M (-700.5M)
A/D and Hi/Lo: Advancers led 1.94 to 1. As with NASDAQ, a good response to the downside breadth on the distribution.
Previous Session: Decliners led 2.03 to 1
New Highs: 177 (-5)
New Lows: 31 (+3)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps tested down to the 18 day EMA as well and just below the late March highs before reversing course. They did not make a new high on this leg as did NASDAQ, but it was a very solid intraday turnaround, one of those low to high runs. Stronger volume than Wednesday would have been the proof of true strength. As it is SP500 is keeping the move alive and showing some improving buying strength, but a big break higher is still problematical at this juncture as earnings season just gets underway.
SP600 (+0.68%) lagged much of the session but came on strong after reaching deeper than the other indices on the initial low. Some downgrades of small cap stocks in general got it off to a rocky start, but the recovery and run to close at session highs was a solid sign. It failed to take out the recent closing high, but it was a solid recovery move. Money flow is moving higher ahead of the index and it looks good, having taken over leadership on this last breakout.
DJ30
The blue chips cut a little deeper on the lows, tapping at the 50 day EMA. They found support nonetheless and rebounded with the rest of the market. Unlike NASDAQ, the large cap blues did not move past the recent highs and volume was substantially lower. As we noted earlier in the week, the blue chips are just following the lead of the rest of the market.
Stats: +68.34 points (+0.55%) to close at 12552.96
Volume: 218M shares Thursday versus 245M shares Wednesday. Volume was again below average as the blue chips made an upside move.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
The economy is still the major concern of the market as it sizes up the incoming economic data as well as the earnings guidance so it can put a number on the future. Friday the trade balance, PPI, Michigan sentiment are the scheduled reports. Earnings season is really just starting, and the market has yet to give it the thumbs up or down. In the interim it is moving laterally, trading with that volatility we were expecting as the early returns come in.
It managed to fight back from the Wednesday selling, showing some character as it keeps the move off the March lows alive. Are we still concerned about its ability to hold the move? Sure. The market is still trending higher in this recovery, but it is showing some weakness as the upside volume falters and selling volume jumped. Leadership is holding steady for the most part, however, and that kept the move driving higher Thursday after the Wednesday issues.
In this environment we are still going to look for upside opportunity from stocks ready to join the move upside, but as you could see today, we are not jumping in with both feet. First, the price/volume action of late is not that great, and Wednesday there simply were not a lot of great entry points for stocks that were moving higher, primarily because of a dearth of volume or they were already running and rather extended. In this situation we remain patient, not chasing weak volume movers, but waiting for strong breaks higher.
As for existing positions we are going to remain vigilant with those that have not surged yet for us; if the market starts to sell again on volume we are still going to be defensive and close those out. That low volume rally thing and what it typically does. If it turns out the market continues higher, we can always get back in. There is no one point to enter, and when the next opportunity arises, we move in. A bit cautious, but given the nature of the rise and the bottom that was set, it is prudent. If we are wrong we still have some great positions that will run higher for us and make us some great scratch. Also, we still have some strong stocks in great patterns that will make us money as they run.
Support and Resistance
NASDAQ: Closed at 2480.32
Resistance:
The July/August trendline at 2485
2509 is the January 2007 high
2526 is the December/January up trendline
2523 is price resistance November 2000
2531 is the February high (post-2002 high)
Support:
2471 is the December 2006 high
2468.42 is the November 2006 high
2460 is the March high
The 18 day EMA at 2446
The 50 day SMA at 2442
The 50 day EMA at 2436
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
2331 is the March intraday low
S&P 500: Closed at 1447.80
Resistance:
1461.57 is the February 2007 high.
1469 is the late November to February up trendline
1475 from peaks in December 1999 and January 2000
Support:
1444 from February 2000
1440 is the mid-January high
1439 is the March high
The 10 day EMA at 1438
The 18 day EMA at 1432
1432 is the December 2006 high
The 50 day SMA at 1427
1425 is an interim high from November 1999
The 50 day EMA at 1424
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
1364 is the March intraday low
Dow: Closed at 12,552.96
Resistance:
12,623 is the mid-January high
12,700 is the early February peak intraday high
12,796 is the February 2007 and all-time high
Support:
12,511 is the March intraday high.
12,499 is the December intraday high.
The 50 day SMA at 12,453
The 90 day MA at 12,445
The 50 day EMA at 12,419
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
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
April 11
Crude oil inventories (10:30): +700K actual versus +1.7M expected, +4.3M prior. Gasoline: -5.5M actual versus -1.6M prior.
FOMC Minutes (2:00): Puzzled as to inflation continuing as the economy slows
Treasury Budget (2:00): -$96.3B actual versus -$90.0B expected, -$85.3B prior
April 12
Initial jobless claims (8:30): 342K actual, 320K expected, 321K prior
April 13
Trade balance, February (8:30): -$60.5B expected, -$59.1B prior
PPI, March (8:30): 0.7% expected, 1.3% prior
Core PPI, March (8:30): 0.2% expected, 0.4% prior
Michigan Sentiment, Preliminary, April (10:00): 87.5 expected, 88.4 prior
End part 1 of 3
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