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us stock market, trade stock
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6/04/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: Took some interim gain: EPIQ; XTO
Buy alerts: BHI; BWLD; DO; OMNI; SLB; XRAY
Trailing stops: None issued
Stop alerts issued: TMO
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:
- Market faces down China syndrome once more though struggles to push the ball forward.
- Factory orders lag on weaker transportation orders while March is revised higher.
- Still seeing breakouts as money continues driving the market despite being extended in some quarters.
Another dose of China selling, rate hike worries, Russian blustering met with more money.
The market woke up to another round of China flu syndrome with the Chinese market down 8%, just off the 8.3% decline in February that sent the US indices into that 4 week double bottom pullback. The ECB was still snorting about rate hikes and even the BOJ was getting a bit rambunctious with its innuendo (will they or won't they; only their central bankers know). Russia's Putin was apparently having another Cold War flashback, blustering about pointing nukes at Europe if we put a missile defense shield in NATO countries. Once KGB, always KGB as they say, and railing against the decadent West is still worth some points at home in Russia. Of course the USSR threatened invasion if we put tactical nukes in Europe during the real Cold War, but Reagan gave them the thumbs up so to speak and 10 years later the iron curtain rusted and the wall came down.
Those downers were stacked up against four upgrades of WMT, a stronger energy sector (maybe partly as a result of the Russian growling), and some good old liquidity. Stocks started weak on the downers but then started scratching back, stock by stock. A midmorning slump back to the lows was not promising, but again they fought back as more money used the dip to move in. By mid-afternoon we noted in an alert that the indices, though struggling, were poised to make a break if the money continued to come in. It did and the indices all turned positive into the close with energy, some consumer stocks, some metals, and basically a smattering from across the market moving higher.
No huge overall gains, no big volume, no sweeping breadth. Indeed, NASDAQ, SP500 and SP600 are still pushing at their upper channels, trying to break on through to the other side and join DJ30 in a higher channel. There was still some new, beginning of the month money ready to come in, and when it saw the weakness it started methodically coming in and accumulating positions, and in some sectors (e.g. energy) it was enough to drive new breakouts.
Technically the day, as noted above, did not change the overall picture much. SP500, NASDAQ and SP600 are still near their upper channel lines, a point of demarcation for this move as the former try to break free and move their channels higher. DJ30 did that a month ago and has not looked back, so the door is open for the other indices to follow. Volume was not there to push them Monday, remaining below average similar to Friday, but that in itself was something of a good thing as it was low on the early selling, showing no dumping even with the early negatives. Breadth was flat. As noted above, however, there were some stocks moving, providing the leadership that allowed the market to recover into the close. Despite the inability to move substantially higher on the session there were positives with the low to high action and leadership. Not a breakout session but once again, it could have been a breakdown session but stocks did not do so.
THE ECONOMY
Factory orders lower but still trending higher.
March was revised up to 4.1% from 3.5% but April could not meeting rather modest expectations, coming in at 0.3% (0.6% expected). After a down January, this was the third straight rise in orders and the sixth out of eight months to the upside. The slowdown from last year that pulled orders to negative relented as orders now stand at 1% growth year/year. Durable goods now sport a 3% annualized again and core capital goods are up 2%. Unfilled orders rose another 1.8%, making 6 quarters in a row of gains.
All of this simply means the recovery from the 2006 slowdown continues, albeit not at a rip-roaring pace. Of course it typically is not the rocket up the pants blast that you see in the initial phase of an economic recovery. Going on five years of expansion, you would not expect to see a massive surge. What we are seeing across the economy, however, is a significant turn back up, and that strength turned up in the market well ahead of the actual data. That is typical as well.
Factory orders are volatile yet boring, but they are another indication that the economy is well on its way back from that slowdown.
THE MARKET
MARKET SENTIMENT
VIX: 13.29; +0.51
VXN: 16.59; +0.01
VXO: 12.73; +0.22
Put/Call Ratio (CBOE): 0.9; 0
Bulls versus Bears:
Bulls: 53.8%. Down from two weeks at 54.3%. A modest dent in the bullish sentiment but not much. Still very close to the 55% considered bearish. As we have noted before, there are other indications that the 'average Joe' as CNBC termed them is still not in the market. It is where you would expect when the indices are hitting new all-time or multiyear highs. It was 45.5% nine weeks back, making a steady climb higher. Still well off the 60% hit in December 2006. For reference it bottomed in the summer 2006 near 36%.
Bears: 21.5%. Moving higher off 20.7% hit last week after spending some time below the 20% level considered bearish (19.6% the prior week). A quick plunge from 24.7% over the past month. A significant drop from the 27.5% hit 7 weeks back. The rally has taken the bears down from the recent highs near 29 (28.4% and 28.9%), 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: +4.37 points (+0.17%) to close at 2618.29
Volume: 1.911B (-1.25%). Volume was flat, still below average avert the rising trade last Wednesday and Thursday helped push NASDAQ to a new post-2002 high. The lower trade on the selling was not bad as it showed no dumping on the heels of the stronger upside volume last week. No real accumulation, however, as NASDAQ rebounded.
Up Volume: 1.09B (+31.507M)
Down Volume: 861M (+34.431M)
A/D and Hi/Lo: Advancers led 1.08 to 1. Flat breadth as the large cap NASDAQ 100 (+0.28%) outpaced overall NASDAQ.
Previous Session: Advancers led 1.68 to 1
New Highs: 197 (-52)
New Lows: 40 (-2)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ posted another gain, coming back after gapping lower on the open as it nicely filled the gap higher from Friday. The gap took it below the upper channel line marked by the November and January highs, but came right back to post a gain and close for a second session just over that resistance point. Low volume on the push past it so NASDAQ has yet to show it can hold this move after that 75 point run. The volume late last week was encouraging, but for now NASDAQ still has something to prove, i.e. holding the gain.
SOX (+0.09%) scratched out a gain, but it was a fraction and it also ran into resistance at the trading range high at 493. Trying to make a higher low over the 50 day EMA, and that would be a start as chips still try to find some sustained backing.
SP500/NYSE
Stats: +2.84 points (+0.18%) to close at 1539.18
NYSE Volume: 1.348B (-8.98%). Volume was below average Friday and it was lower Monday as SP500 pushed modestly higher. Volume is similar to NASDAQ, stronger Wednesday and Thursday but then backing off after pushing through the upper channel line.
Up Volume: 774.212M (-267.495M)
Down Volume: 551.833M (+128.56M)
A/D and Hi/Lo: Advancers led 1.37 to 1. The small and mid-caps led the move higher again with the energy stocks looking stronger.
Previous Session: Advancers led 2.01 to 1
New Highs: 348 (-44)
New Lows: 29 (-8)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps pushed higher through the upper channel line though volume continued to tail off after dropping on Friday when it made the move. The real volume came in Wednesday and Thursday as SP500 moved up to that resistance point. That gave the large caps some momentum to make the break. Now, however, we will see if there is more substance to this move given the break higher and the drop in volume on the move. As noted over the weekend, the break higher did not show a lot of power, suggesting a pullback if no renewed large cap buying comes in.
The small cap SP600 (+0.23%) was again the leader along with the mid-caps as they once again pushed at the upper channel marked by the November/December/February highs. While it has not made the break through this resistance, it has put together an impressive move up to this point. As with NASDAQ and SP500 that move last week may leave it a bit winded, but again, great move by the smaller caps and that is good news regarding the economy.
DJ30
DJ30 barely bumped higher but it did make a new closing high and that was good for the daily stats on CNBC. It could be a 0.10 point gain and it would warrant a CNBC alert. Nonetheless, DJ30 tested lower intraday and it also recovered to close positive. It also suffered the same low volume lethargy on the rebound. Thus there was no change in the overall pattern, just another upside session in the run. The bounce that started vigorously off the 10 day EMA a week back has slowed as the gains have contracted after several sessions. That is rather typical action as a bounce in a rally slows, but there is nothing to suggest the move is in any sort of trouble given the improvement in volume on last week's rise.
Stats: +8.21 points (+0.06%) to close at 13676.32
Volume: 177M shares Monday versus 212M shares Friday. Other than that one session of above average trade Thursday, the overall volume level is lower though it is showing better price/volume action.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
ISM Services provides the next significant read on the economy, and the economic data has posted significant improvement over the past two months with April data showing the March improvements were not of the fluke variety. The market has been building that in since the February and March indigestion and indeed even before that.
The question is will it provide any catalyst to continue the move higher, at least with respect to NASDAQ, SP500 and SP600 really breaking upside and putting the channels behind them. Over the weekend we noted the run for the week left them somewhat extended as bumping up against the upside channel indicates. After all, it is a channel line for a reason, i.e. the indices stall at this point and fade back to test the uptrend. The ongoing debate, at least for the past three sessions, is whether they can break higher and establish a higher trend.
Thus far the money has not let the market consolidate much as each pullback is met with buying. Moreover, there are stocks stepping up and making new breakouts even at this level. We are not just talking about stocks continuing runs higher (though there are many of those bouncing after nice tests of their breakouts) but new breakouts from nice bases. That is another manifestation of the money still working into the market when it sees a chance, moving from one group to the next.
The leadership provides the acid test of any market move and thus we are going to continue moving into solid patterns that show good moves. The position of the indices, i.e. the solid move last week, and the bumping against the upper channel still warrant keeping an eye on the overall market action in the event some selling volume spikes or leaders start to reverse. Just because the market has found buyers on the dips to this point does not mean the well won't run dry or at least need to refill a bit at some point. That is one reason we don't mind ringing up some gains on part of a position during the strong runs higher. We don't get complacent with our positions and we are banking some gain while letting the market trend higher continue to work for us. We still see stocks well-positioned for Tuesday, and as we said before, we won't back down if they show us the right moves.
Support and Resistance
NASDAQ: Closed at 2618.29
Resistance:
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2610 is the top of the November/February channel
2590-95 from an April 1999 interim peaks
2587.68 is the 10 day EMA
2585 is the November/February up trendline
2580 is the May high
The July/August trendline at 2559
2548 is a newer trendline from December/January that has propped up NASDAQ in April and twice in May.
2531.42 is the February high (post-2002 high); 2525 intraday
The 50 day EMA at 2532
2523 is price resistance November 2000
2509 is the January 2007 high
2471 is the December 2006 high
2468.42 is the November 2006 high
2460 is the March high
S&P 500: Closed at 1539.18
Resistance:
1553 high intraday from March 2000 all-time index peak
Support:
The upper trendline of the channel at 1536
1528 is the March 2000 closing high
1520 from the September 2000 peak
The 18 day EMA at 1518
1506 is the late November to February up trendline
1500 from April 2000 peak
1496 is a peak from July 2000
The 50 day EMA at 1489
1475 from peaks in December 1999 and January 2000
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
Dow: Closed at 13,676.32
Resistance:
10.7% above its 200 day SMA where it struggled the third week of May.
Support:
The 10 day EMA at 13,573
The 18 day EMA at 13,480
13,330 is the upper channel line in the November/February channel
13,210 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,142
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.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 4
Factory orders, April (10:00): 0.3% actual versus 0.6% expected, 4.1% prior (revised from 3.5%)
June 5
ISM Services, May (10:00): 55.5 expected, 56.0 prior
June 6
Productivity, Q1 (8:30): 1.0% expected, 1.7% prior
Crude oil inventories (10:30): -1.9M prior
June 7
Initial jobless claims (8:30): 312K expected, 310K prior
Wholesale inventories, April (10:00): 0.3% expected, 0.3% prior
Consumer credit, April (3:00): $6.0B expected, $13.5B prior
June 8
Trade balance, April (8:30): -$63.0B expected, -$63.9B prior
End part 1 of 3
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