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us stock market, trend trading stock
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5/20/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: EXC. Took some interim gain on another strong move: DO
Buy alerts: CCJ; PXP; WNR
Trailing stops: None issued
Stop alerts issued: 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/alertssr.html
SUMMARY:
- More of the Monday 'usual' starts stocks higher, but they struggle to hold the move.
- SP500 taps prior closing high then backs off.
- NASDAQ tries to show some leadership but small caps steal the day.
Many themes to start the week result in a mixed session.
Another day and more money being thrown around at takeover targets. GS leads a group to take AT private. HOLX swallows one of our favorite trading stocks (CYTC). Earnings are still coming as well. LOW (HD's foil) missed, showing it is not just HD's lack of guidance under the last management team. SKS was in line, and as everyone assumed luxury goods were still flying off the hangers that was an unsettling result. While retailers showed some good news on Friday from KSS and JWN, Monday brought the sector back to reality. At least consumers are eating soup; CPB beat and guided higher, and its stock price surged. Then everyone seemed to conclude simultaneously 'it is just soup.' The stock closed as flat as watery broth.
In addition there was the China story with the central government raising its currency value modestly. That worked to stall the Chinese market for about 10 minutes before it reversed and rallied to a positive close. There is also the energy situation with gasoline prices hitting an average of $3.18/gallon nationally, up $0.11 for the week. No storms, not the official driving season, and over $3/gallon. Hard to get happy about that . . . though the refiners started to move again Monday after a bit of a dormancy (they had to digest all of the enthusiasm thrown their way in the spring).
With that, stocks started the session higher, but as our pre-market alert noted might occur, once SP500 hit its prior closing high (just 5 points higher), it lost its starch. There was no rollover, no race for the exits, it just faded back. It caught itself and tried again. Once more it could not hold the move, and on the second trip lower it sold harder, giving back most of the session's gains. That happened to most indices in the afternoon: with an hour to go a sell program triggered and took them all lower. Nothing devastating, but it took back half the gains on NASDAQ before a late bounce recouped some ground.
That action on SP500 left it and showing dojis on the candlestick charts. That can indicate a swing in momentum. Now earlier in this run it only signaled a pause before a continued run higher, so you have to take this signal in context. There were some changes to the context, however. NASDAQ showed relative strength once more and it moved to a new post-2002 high. It would be fitting the techs take some leadership given the large cap NYSE have done all of the work for it. It was trying once more Monday as it did three weeks back.
It could not hold the lead to itself, however, as the small caps, took over and posted an impressive 1.17% gain. Sure energy was stronger again along with metals. They were not huge gainers, however. What we saw happening was some money coming out of the large cap NYSE stocks and moving into the smaller caps. That explains more of SP500's inability to break through to a new high just yet. After an impressive run some money is coming out. It is not leaving the market but moving to a sector that struggled to advance even as the DJ30 and SP500 rallied nicely. That rotation is another sign of a healthy market. After the large caps work off some of the froth from the last solid rally they will likely present new buying opportunities. In the meantime the small caps and to a lesser extent technology stocks are benefiting.
Technically the action showed the market was still a bit tired after the run, but the focus shifted as noted above. The large cap NYSE stocks posted a strong week, nearly sizzling in some instances, and with SP500 tapping at the prior closing high, the combination of the last run and the old high may start some profit taking in that area and allow those stocks to take a needed rest. The intraday action suggested this somewhat with the double tap at the old high and then backing off. Volume was light on the gains for NASDAQ and SP600, so even with their relative strength there is still a question as to whether they can take the lead with the same gusto the large caps did. Further, SP500 was not the only index tapping at a key point; SP600 rallied to its May high and backed off as well. Of the two, however, SP600 looks as if it has some momentum behind it.
In sum even though SP500 could not close out with a new high for the session as some used this move to unload some large cap stocks from that prior big run, the money did not leave but instead moved smaller. After some consolidation the large caps will likely be right back in there pitching, and frankly that will give us some more great entry points on some stocks that had blistering runs the past few sessions. While they pullback we will see if the good set ups we see building in other areas, e.g. small and mid-caps, can make the strong moves higher and provide us more solid upside.
THE MARKET
MARKET SENTIMENT
VIX: 13.3; +0.54
VXN: 16.03; +0.12
VXO: 12.41; +0.07
Put/Call Ratio (CBOE): 0.96; -0.02
Bulls versus Bears:
Bulls: 54.3%, up from 53.5% last week and 51.7% the week before. This indicator is right at the 55% level considered bearish. Too high, but as noted above, there are other indications that say that there are potential investors out there that are still apprehensive. Still, it is too overdone as would be expected when the indices are hitting new all-time or multiyear highs. It was 45.5% seven weeks back. It has not topped its recent high at 53.3% but is well off the 60% hit in December 2006. For reference it bottomed in the summer 2006 near 36%.
Bears: 19.6%. Below the 20% level considered bearish, the level it hit last week (20.0%). A big plunge the past two weeks from 24.7%. Quite a drop from the 27.5% hit 6 weeks back. The rally has taken the bears down from the recent highs near 29 (28.4% and 28.9%). It is now matching its January and February lows. For reference, 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: +20.34 points (+0.8%) to close at 2578.79
Volume: 2.007B (-3.14%). Volume was below average as NASDAQ tried to show some leadership by breaking to a new post-2002 high. Expiration Friday trade was not that strong, not topping the last Tuesday distribution session. So, not a new burst of buying was pushing NASDAQ higher.
Up Volume: 1.539B (+172M)
Down Volume: 450M (-228M)
A/D and Hi/Lo: Advancers led 1.99 to 1. Nice breadth as NASDAQ move toward a new post-2002 high. Good to see, but volume would have been nice as well.
Previous Session: Advancers led 1.76 to 1
New Highs: 215 (+77)
New Lows: 50 (-43)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped modestly higher and moved to a new post-2002 high intraday and managed to hang onto at least a closing high. That last hour of selling pushed it back, and the volume was not what you want to see from a new breakout attempt. That has been much of NASDAQ's problem even as it tried to take on some leadership to start May: showing some better internals (e.g. the 2:1 breadth) but never really taking the ball and running with it. Maybe it gets some volume here if SP500 and DJ30 take a breather. There are techs in good position, but overall they are not showing the same kind of accumulation the NYSE stocks enjoy.
SOX (-0.17%) continued testing the breakout from its 6 month trading range, showing another doji over the 50 day EMA. It is do or die time for SOX to makes its rebound off of the top of the trading range.
SP500/NYSE
Stats: +2.35 points (+0.15%) to close at 1525.1
NYSE Volume: 1.509B (-8.43%). Volume faded below average on NYSE as well as SP500 and SP600 pushed toward new all-time closing highs. As noted frequently this month, volume has been less than supportive. Nonetheless without any sellers entering to take on the large caps the SP500 has moved well. SP600 was the struggling index, but it was finding its feet Monday.
Up Volume: 928.131M (-294.416M)
Down Volume: 560.225M (+149.705M)
A/D and Hi/Lo: Advancers led 1.48 to 1. Pretty modest breadth for the small caps moving up toward a new all-time high.
Previous Session: Advancers led 1.63 to 1
New Highs: 325 (+59). Not bad, not great. Should be rising given SP500 and SP600 are rapping at new highs.
New Lows: 31 (-2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 rallied to a new closing high intraday (1528) but it could not hold the move. The prior all-time high is at 1553 (from March 2000). It is still well off of that level, and with the action on SP500 Monday, i.e. a rally up and showing a doji after a solid run, it is not likely to scare that old high this week. After a solid week or more of gains that doji indicates is a flag to watch for another pullback in its range. Coupled with the fact that SP500 moved over the upper channel line but then closed below it, this action further suggests a pullback in its range is ahead. Nothing unusual about that.
After holding the up trendline last week SP600 (+1.17%) posted a solid gain to start the week. It just cleared the prior May high before fading back. Solid gain but no records, at least on the close. That puts SP600 about two-thirds up in its uptrend channel, leaving it plenty of room to move higher on this move. Money was moving its way Monday as it came out of the large caps, and that trend gives SP600 more upside room.
DJ30
DJ30 showed its second doji in three sessions, and after a strong run higher that indicates some momentum loss, but as noted last week, thus far these dojis have just meant the index was taking a day off before rallying once more. Volume was lower as the blue chips lost some ground; they continue to show pretty decent price/volume action though trade is lower overall. Strong uptrend is in place and many of the Dow stocks are still in position to move higher.
Stats: -13.65 points (-0.1%) to close at 13542.88
Volume: 215M shares Monday versus the expiration 282M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Monday saw some potential shifts in the market with NASDAQ trying to take some leadership though it did not get a lot of volume as it moved to a post-2002 high. SP600 is showing similar life, moving to a new closing high though its volume lagged as well. Money came out of some NYSE large caps earlier in the year and NASDAQ benefited at that time as well, but it could not follow through and take any leadership.
More and more analysts are talking about tech being undervalued and thus the likely next leaders if the market is to advance. We do see some techs in good shape, but overall there are not nearly the number of solid patterns as in the NYSE stocks. In the 1990's there were many who though that the rest of the market, e.g. the old economy stocks, would have to eventually catch up with the techs based on a valuation measure. That did happen; it just took this post-crash expansion to do it.
The point is just because techs seem to be a better value given the run in the large cap NYSE stocks, that does not make them the stocks the market wants. If we see that develop and techs take off, great; that simply means the market rally has a lot of life left in it, and we will have many opportunities to play it.
For now we are going to continue doing what we have been doing, e.g. focusing on those solid patterns and solid pullbacks in leaders, and ride them as they make the next break higher. Our energy stocks had a blistering run of late, and after another good intraday move Monday they were showing dojis as well (e.g. BTU, GSF), indicating that this last shot higher is going to have a typical correction or pullback to test and set up the next leg. That will pull them back after their breakouts and set up the next run after the breakout moves. While they make a typical pullback to give us new entry points, there are other stocks that are set up to move higher, and they were doing so on Monday as well.
Indeed, even some energy was moving to new breakouts Monday as the early leaders came back off their highs from their runs. Metals are set up to make moves as well, and we are just waiting for the moves to start from good patterns, e.g. TIE. There are more in the wings as the plays on the report show. We have a lot of positions running, but this is a time to move when the stocks show you it is time to move in. Similar to the old adage that a golfer on a hot streak needs to play a lot of tournaments before he or she losses the momentum or groove, when stocks are setting up and breaking out because the money is there to push them, we should be there as well, playing solid stocks in solid patterns and taking advantage of what the market is giving.
Thus while SP500 and DJ30 may be showing some signs of slowing and taking a breather, solid stocks continue to set up, breakout, rally, then test, providing us with continued solid buy points. In short, those indices can take a deserved breather and we will still have stocks to buy because the money is moving around the market, not leaving. Indeed, SP500 may start back up; thus far those large cap indices have slowed for a session or two and then take right off again. They are still well below 20% above the 200 day SMA; if there is a paradigm shift in place that means they still have plenty of room to move before they need a more serious correction.
Support and Resistance
NASDAQ: Closed at 2578.79
Resistance:
2580 is the May high
2590-95 from an April 1999 interim peaks
2600ish is the top of the November/February channel
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2576 is the November/February up trendline
The July/August trendline at 2557
The 10 day EMA at 2544
2531.42 is the February high (post-2002 high); 2525 intraday
2523 is price resistance November 2000
2509 is the January 2007 high
The 50 day EMA at 2509
2471 is the December 2006 high
2468.42 is the November 2006 high
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 1525.10
Resistance:
The upper trendline of the channel at 1526
1528 close, 1553 intraday from March 2000 all-time index peak
Support:
1520 from the September 2000 peak
1500 from April 2000 peak
The 10 day EMA at 1511
The 18 day EMA at 1502
1496 is a peak from July 2000
1494 is the late November to February up trendline
1475 from peaks in December 1999 and January 2000
The 50 day EMA at 1473
1461.57 is the February 2007 high.
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 13,542.88
Resistance:
Now 10.7% above its 200 day SMA, a point where DJ30 has historically show some struggles.
Support:
The 10 day EMA at 13,411
13,294 is the upper channel line in the November/February channel
The 18 day EMA at 13,291
13,200 is the former up trendline that marks the lower channel.
The 50 day EMA at 12,953
12,796 at the February 2007 high
12,700 is the early February peak intraday high
12,623 is the mid-January high
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.
May 23
Crude oil inventories (10:30): 1.061M prior
May 24
Durable goods orders, April (8:30): 1.0% expected, 3.7% prior
Initial jobless claims (8:30): 300K expected, 293K prior
New home sales, April (10:00): 860K expected, 858K prior
May 25
Existing home sales, April (10:00): 6.10M expected, 6.12 M prior
End part 1 of 3
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