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world stock market, us stock market
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4/26/07 Investment House Daily
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SUMMARY:
- Market has the typical post surge sluggishness.
- Fed is hard on the trail once again, stating the obvious.
- Earnings tug of war after hours in tech as market rides gains into weekend sporting strong gains.
Market has an 'off' day, closes mixed.
Once more the industrial, 'old economy' stocks were a hit with earnings, giving the market a positive bent. Ironic, isn't it? The 'old economy' stocks are actually 'new economy' stocks with respect to the global boom that sees the BRIC (Brazil, India, China) and other industrializing countries building everything basically from scratch. That and the currency exchange rates are really boosting the earnings of the multinationals or indeed any company that enjoys overseas sales. Throw in the river of money running through world markets, and when there is good news the results are dramatic.
Even with that it was a mushy session, somewhat typical of this market. After a big surge it tends to take a couple of days off and then resumes the move. That said, the trade was mostly positive with the SP500 closing off a hair. There was a lot of news for a slow economic session, though it seemed not to have that much of an impact. Homebuilders pulled their guidance for the year en masse. After all that excessive bullishness in the spring of 2005 when the housing market topped, the builders are finally getting appropriately worried, meaning the housing market is finally getting ripe for a bottom. Jobless claims fell significantly, getting back into their average range; oil was down, up, then down (closed at 65.06, -0.78). Lots of news, not a lot of movement.
Technically it was just as mushy. There was the continued low to high intraday action though the indices gave up significant ground in the last hour, cutting the afternoon rally in half. The weaker finish kind of summed up the session. Volume was mixed, not necessarily bad, but with NASDAQ volume weaker on a gain and SP500 volume higher on a loss, it was backward from what you typically want to see. Small caps were positive, however, so the volume was basically status quo: still solidly above average, indicating there are still a lot of players in the game. Volume has been somewhat of an enigma on this move, not 100% in line with the gains. For example, NASDAQ trade was often flipped from 'healthy' volume, i.e. up on up days, down on down days. That could prove to be an Achilles heel at some point, but that is a hard argument to make given the strength outside of NASDAQ.
As for Friday, the market could be a bit winded after the surge. As noted, it tends to make a big surge for a session, then soften a couple of days. With solid gains in the bag and the weekend there are always some ready to take some gains. As we have seen, the money has used those to move back in.
THE ECONOMY
The Fed speaks again.
There were several Fed speakers Thursday as the Fed-speak renewed after a period of strange silence. The most prominent speaker was Dallas Fed president Fisher, known for his view of foreign economies providing a buffer to US inflation as well as being a basic wing nut.
Fisher stated the obvious: the US economy would slow but would not go into recession. Problem is, as is usual with the Fed, it was behind the times. The economy has slowed, beginning in the second half of 2006. It has slowed since. Fortunately the Fed's actions were more in line with reality that its talk. In August 2006 the Fed paused. That coincided with the economic slowdown rather nicely even if the Fed continued its tough talk. Thus the Fed has already acknowledged the slowdown in action, and with its most recent statement that dropped the 'additional firming' lingo.
So, is Fisher just mouthing the Fed's belief from 9 months ago, or does this indicate the Fed is even more concerned about the future? If you look at money supply you would get the impression the Fed is concerned. Again, however, it has been concerned before Fisher's statement. M2 has risen for the past year, and M1 has really ramped up its growth. The Fed is likely raising this more given worries about lack of liquidity given the housing issues and slower credit as a result. Whatever the reason, money supply continues to rise, aiding the global money rush into economies.
THE MARKET
MARKET SENTIMENT
VIX: 12.79; -0.42. Hanging out above the 200 day SMA where it has found some support. It is not falling as the market rises, so no real correspondence right now with the market movement.
VXN: 15.97; -0.39
VXO: 12.55; -0.03
Put/Call Ratio (CBOE): 0.83; +0.02
Bulls versus Bears:
Bulls: 51.1%. Down from 52.7% the prior week in somewhat of a surprise downturn given the market run higher. Of course that week saw the energy sector test and the market struggled as it did. Thus the decline. Up from 49.5% and 45.5% just a month back. It hit 50.5% level a couple of months ago though below 53.3% on the recent high. Bulls bottomed last summer near 36%. That is the lowest level since September 2006.
Bears: 26.1%. That fade in energy brought some bears in as well as they rose from 25.3%. That is still down from 27.5% three weeks back. Fairly volatile of late as it bounced from 25.8% the week before but down from 28.4% and 28.9% immediately before that. Still 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: +6.57 points (+0.26%) to close at 2554.46
Volume: 2.512B (-8.17%). Volume was lower but still well above average as NASDAQ scratched out a small gain.
Up Volume: 1.342B (-384M)
Down Volume: 1.139B (+158M)
A/D and Hi/Lo: Decliners led 1.07 to 1. Once more the lion's share of the move was with the large caps.
Previous Session: Advancers led 1.46 to 1
New Highs: 192 (-10)
New Lows: 67 (+15)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ posted a modest gain, slightly extending its new post-2002 high. Not a lot of strength on the continued move as breadth was meager with the large cap techs pulling the most weight. A bit vulnerable to end the week with MSFT posting solid results but many chips coming up short, but we will see more of what this move is made of, i.e. whether NASDAQ can hold onto its gains as did the other indices after their strong moves.
SOX (+0.72%) continued the breakout from its range, showing the best market move on the session. Looks as if it might have to pay up on Friday with several chips struggling with their earnings after hours (e.g. KLAC, SNDK, WFR).
SP500/NYSE
Stats: -1.17 points (-0.08%) to close at 1494.25
NYSE Volume: 1.698B (+1.16%). Volume bumped higher, still above average, as the large caps ran in place and the small caps edged higher. Price/volume action improved nicely in the latter parts of this move so we are not reading this as some start of distribution.
Up Volume: 776.278M (-583.451M)
Down Volume: 908.848M (+602.752M)
A/D and Hi/Lo: Decliners led 1.14 to 1. Even with small caps positive breadth could not muster a gain. Not a lot of leadership on the session.
Previous Session: Advancers led 2.37 to 1
New Highs: 321 (-79)
New Lows: 26 (+9)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 ran out of gas, showing a doji on the candlestick chart. Volume remained above average, indicating a bit of churn, but SP500 is stair-stepping higher on this move, mostly showing positive price/volume action. A day after breaking back into the channel the large caps took a day off. How it and DJ30 test their returns to this level will be the important test upcoming.
SP600 (+0.20%). A modest rise after the Wednesday move that took SP600 out of its short lateral move. Energy was as bit stronger Thursday and that helped the small caps, but as with the rest of the market there was not a lot of power on the session.
DJ30
Very similar action, posting a modest gain on basically flat but still above average volume. Solid earnings have boosted trade the past two weeks as DJ30 rallied higher. Thus it is showing the right kind of price/volume action as it made the break. It remains inside the channel that it retook Wednesday, and the key move will be how it tests that move higher.
Stats: +15.61 points (+0.12%) to close at 13105.5
Volume: 251M shares Thursday versus 250M shares Wednesday. Continued solid volume on DJ30.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
Economic data returns with the first run of Q1 GDP as well as some inflation reports (deflator, employment cost index). GDP is important, but the idea circulating around the trading floors right now is that the rest of the world is so strong that the US does not have to lead. Thus a so-so GDP report is not necessarily the end of the line for stocks as many of the products and services US companies produce are sought overseas. The economic data will be important but so will the after hours earnings. As noted earlier, MSFT's results pushed it higher after hours, but there are also several semiconductors trading lower on their results. Once more we will see how resilient the market is as it sorts through the reports and determines its direction. While many stocks were up and down after hours, the Q's basically flat; after all of that it was basically a wash.
Even without the earnings and economic intrigue it is still a Friday after a solid move higher. That would suggest a bit of softness, but the past couple of Friday sessions were up. Regardless of which way Friday moves, the market is showing solid upside strength as money continues to work its way in when given the opportunity. That means on good earnings, after a pullback, into a new sector that has held back . . . anywhere it can. Thus even if the market takes a breather ahead of the weekend, with the money pressing to work its way in, another pullback likely leads to more upside near term. In addition, we have seen money work into new sectors or those that have pulled back; that keeps opportunity alive even if much of the market takes a breather.
With earnings handily beating lowered expectations we are seeing some big surges on the news. We are also seeing some big downdrafts on misses. That hot or cold response is happening with stocks in the same sector; one surges, one gets knifed. That can drive you batty.
One way we handle this is to forego making the earnings play and let the stock makes its initial move. If it surges we don't panic; we just remain patient. Big surges and breakouts are typically tested, giving us a good entry point after the stock makes the pullback and then resumes the move. At that point we know the buyers are back in, driving the stock higher in something more than a one-day wonder. We can step in with confidence as it rebounds, and confidence makes you a better investor as you make more accurate decisions with respect to a stock's movement.
This also keeps you from making a bad mistake we call 'chasing the bus' syndrome. Many investors see the moves and feel they are missing out. They rush in just in time for the stock to start its test or to see it dump lower as the move was a flash in the pan, a one-day wonder. The bus will come back around, and when it does you are locked in on it and move with that confidence discussed above.
Support and Resistance
NASDAQ: Closed at 2554.46
Resistance:
2568ish is the top of the November/February channel
Support:
2542 is the December/January up trendline
2531.42 is the February high (post-2002 high)
2523 is price resistance November 2000
The 10 day EMA at 2521
The July/August trendline at 2512
2509 is the January 2007 high
2471 is the December 2006 high
2468.42 is the November 2006 high
The 50 day EMA at 2465
2460 is the March high
2405 is the 'hump' high
2400ish from the late November and late December 2006 lows.
S&P 500: Closed at 1494.25
Resistance:
1496 is a peak from July 2000
1500 from April 2000 peak
1520 from the September 2000 peak
1528 close, 1553 intraday from March 2000 all-time index peak
Support:
1479 is the late November to February up trendline
1475 from peaks in December 1999 and January 2000
The 10 day EMA at 1477
The 18 day EMA at 1464
1461.57 is the February 2007 high.
The 50 day EMA at 1442
1440 is the mid-January high
1439 is the March high
1432 is the December 2006 high
1425 is an interim high from November 1999
1410 is the 'hump' high
1408 is the November high
Dow: Closed at 13,105.90
Resistance:
13,138ish is the upper channel line in the November/February channel
Support:
13,005 is the former up trendline that marks the channel.
12,796 at the February 2007 and all-time high
The 10 day EMA at 12,892
The 18 day EMA at 12,767
12,700 is the early February peak intraday high
12,623 is the mid-January high
The 50 day EMA at 12,575
12,511 is the March intraday high.
12,499 is the December intraday high.
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 24
Consumer Confidence, April (10:00): 104.0 actual versus 105.0 expected, 108.2 prior (revised from 107.2)
Existing home sales, March (10:00): 6.12M actual versus 6.50M expected, 6.68M prior (revised from 6.69M)
April 25
Durable goods orders, March (8:30): 3.4% actual versus 2.5% expected, 2.4% prior (revised from 1.7%)
New home sales, March (10:00): +2.6% at 858K actual versus 890K expected, 848K prior
Crude oil inventories (10:30): +2.1M actual versus -994K prior
Fed Beige Book (2:00)
April 27
GDP, Q1 advance (8:30): 21.8% expected, 2.5% prior
Chain deflator (8:30): 3.2% expected, 1.7% prior
Employment Cost Index, Q1 (8:30): 0.9% expected, 0.8% prior
Michigan sentiment, revised, April (10:00): 85.5 expected, 85.3 prior
End part 1 of 3
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world stock market
us stock market
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