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financial investment, day trading
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6/18/07 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: MA
Buy alerts: EDU; GOOG
Trailing stops: None issued
Stop alerts issued: None issued
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SUMMARY:
- Sluggish after late week gains though leadership still moves higher.
- Indices try to consolidate, set the next move at the prior highs.
Light news day has light action.
It is an eco light week with respect to news, and Monday was a prime example with only the weekly builders sentiment survey as an 'official' report. It hit a 16 year low; sure did not take long after those gushing '10 year demographic for surging home sales' forecasts the builders were gushing on the financial stations not much more than a year ago. Outside of this report there were the usual suspects, with some M&A (BHP showing interesting Alcoa again), analyst comments (coal downgraded in general, HAL downgraded), and earnings (MOLX guided lower). Oil was higher (it closed at 69.09, +1.09) and bonds were lower (5.01% 2 year versus 5.15% 10 year).
From that mixed bag stocks started the session higher, continuing the late week momentum from last week's rebound off of key support levels. SP500 and DJ30 tapped at their prior highs once more on that open and then the sellers took their shot, sending the indices negative midmorning. Once more, however, that started a slow, steady recovery through lunch, then another attempt to sell, then a bit more upside. Some selling into the close took all indices but SOX (+0.14%) and NASDAQ 100 (+0.10%) modestly negative.
The market recovered from the half-hearted selling attempt, but the buyers were never that strong on the rebound either. The market overall just could not get many buyers to commit after the big volume the second half of last week, and the indices just wandered modestly higher into the close.
Technically the market showed not much of anything with low volume, flat breadth, and stalling at resistance. In a way that showed a lot, i.e. a market that is a bit tired after that rebound from some sharp selling. In basketball if your team gets significantly down and makes a run to recover that is great, but it also takes a lot of out of the team. If it has to make repeated recovery runs it guts the players' stamina, making it hard to hang into the buzzer. With the market there is something similar. It sold off in February and March, fought back nicely and held on; very good. It stumbled again heading into late May then fell in June on some stronger volume. It rebounded but sold off again on stronger volume, then managed a strong comeback again to end last week. Great recovery but now the market needs to hold on and not succumb to heavier selling once more. A pullback to make a higher low at support would be good action; another high volume selling round would make it harder to stage another comeback.
That said, Monday was not a high volume rollover. SP500 and DJ30 tried their prior highs while SP600 tried an upper channel line and none could make any dent. Very mushy action following a nice move higher; not atypical. As noted above, where it goes from a pause here is the key. Again, no return to higher volume selling and a higher low at some near support would be the ticket.
Once again there was leadership moving higher despite the weak overall tape. MA, GRMN, GME, WNR; many of the leaders in this move higher continued to move Monday. Leadership is always the key even as the overall market stumbles around. If the leaders are moving well that tells you there are still buyers seeking the best stocks. That is the case now, but after the run off the last lows even some leaders are getting extended. That was quite a recovery off the selling that started last week and a 4 to 5 run by many of the leaders (they were leading higher even as much of the market was still selling). Look at OIH and XLE, a couple of energy ETF's. They are up 6 of 7 sessions, showing some dojis Monday. They are ripe for a pullback. Many of the leaders that started back up the past two weeks are in the same position. That doesn't mean we run screaming away from them, we just watch for their pullback and be ready to swoop in when they make the pullback. As they start setting up this week we will start putting them on the report.
THE MARKET
MARKET SENTIMENT
VIX: 13.42; -0.52
VXN: 15.86; -0.08
VXO: 13.14; -0.06
Put/Call Ratio (CBOE): 0.92; -0.12
Bulls versus Bears:
Bulls: 56.7%. Well so much for bulls fading in the selling. They spiked above 55% from 52.2% after falling over the past three weeks from 54.3%. This is over the 55% considered bearish, and is thus another factor along with the lower volume on this recovery bounce that suggests the market is still overbought here. Still off the 60% hit in December 2006 but getting closer. For reference it bottomed in the summer 2006 near 36%.
Bears: 21.1%. Tanking as well, falling from 22.8% last week. A one-week bounce from 21.5% is right back down. It hit 20.7% three weeks back after spending some time below the 20% level considered bearish (19.6%). It is still well off the 27.5% hit 2 months 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: -0.11 points (0%) to close at 2626.6
Volume: 1.783B (-30.65%). If you look way down below the 50 day average volume line you see the Monday trade. It was the lightest in four sessions and well off pace for the advance. After such a huge volume session Friday you expected lower and this was a lot lower. Good as that means no one was dumping the shares.
Up Volume: 798M (-1.1B)
Down Volume: 899M (+242M)
A/D and Hi/Lo: Decliners led 1.13 to 1. Flat, flat, flat.
Previous Session: Advancers led 2 to 1
New Highs: 167 (-53)
New Lows: 51 (-2)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ closed flat. Breadth was flat. Up to down volume was flat. NASDAQ traded further above the channel line then sold below it intraday, only to recovery and hold it on the close. NASDAQ remains above the early June high and remains well positions to continue its move . . . after it catches its breath some. It has traded up and down inside of this channel (that is how a channel is formed obviously) and this move can either signal an upside breakout to a higher range as with DJ30, or it will fade again and then continue on with its ascent at the same pace. Either way you have to like the outcome with respect to upside positions. It would be great to see NASDAQ take some leadership in the summer, a typically tough time for technology. Thus far each attempt has failed so we take this day by day and look at individual tech stocks as opposed to buying broadly.
SOX (+0.14%) put together another gain but as with the rest of the indices it was basically flat, holding its position from Friday after a strong recovery that saw 5 gains in 7 sessions. It is still above the 493 trading range top, but now it has to deal with 510 where it peaked on the last breakout attempt (closed at 503 Monday). Showing some life but we are not counting on it to hold the pole in the leadership category.
SP500/NYSE
Stats: -1.86 points (-0.12%) to close at 1531.05
NYSE Volume: 1.229B (-39.82%). Volume fell off the table on NYSE as well as the indices bumped prior highs and stalled. Volume improved a lot on last week's recovery and put the indices in much better position. The weak Monday trade was fine as they tapped at and stalled under the prior highs. As with NASDAQ, no issue with that.
Up Volume: 538.347M (-1.072B)
Down Volume: 679.237M (+280.864M). As with NASDAQ, flat up to down volume.
A/D and Hi/Lo: Decliners led 1.1 to 1. Flat, flat, flat. Where have we heard that before?
Previous Session: Advancers led 3.57 to 1
New Highs: 261 (-97)
New Lows: 39 (-4)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 reached up to its January high intraday Friday and faded back. Monday it held steady. After a solid advance off the 50 day EMA after making a higher low at that key support, the large caps need and are taking a breather. Two to three such sessions that see it hold its relative position or fade back toward the 10 day EMA (1520) sets it up well for a run at that prior high. Want to see that volume remain low as it does.
SP600 (-0.95%) tapped at an upper channel line (not the highest one on the move) at 441 and faded. It managed to recover nicely off early session lows, but there was no volume to drive these stocks through the channel line to challenge the early June high. As with the other indices, not bad action given the recovery off the up trendline and the 50 day EMA. We do note that SP600 has started to lag after it was in a leadership role to end May.
DJ30
Same action as on SP500, i.e. tapping weakly at the prior June high and then giving back some ground into the close. Low, well below average volume shows simply no action as the stocks in this index were flat. Reminds me of a bar the night after Fat Tuesday after Mardi Gras; it is open, but no one is there. Looking for DJ30 to test for another couple of sessions down toward the 10 day EMA (13,521) and then see if it can resume the move.
Stats: -26.5 points (-0.12%) to close at 13612.98
Volume: 174M shares Monday versus the whopping 425M shares Friday. Nice lower testing volume which is just what you want after strong volume upside moves.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
As noted, leadership continued to move higher Monday, but the list of stocks able to advance thinned considerably. Many are getting extended after a nice run higher the past week and one-half, and if the overall market comes back for another session or three then they will have a chance to come back and reload as well. As noted above, we will watch for that and as they 'get right' we will be slipping them onto the report.
At the same time there are some other stocks setting up to move higher, the next wave getting ready to move. We will definitely be look at those to show us something while we watch and wait for others to fade back and set up their next moves.
We want the pullback to run as it did Monday, i.e. modest losses and relatively light volume. Those continued comebacks from that higher volume selling takes it out of the buyers. After the hard selling that took the indices down to support it would be nice to finally see a test on lighter volume. The buyers certainly came back to the table after the inflation/interest rates connection was more or less debunked by hard data. It may take a couple more sessions of pullback to set up once more, but as usual there will be leaders breaking higher ahead of the rest of the market, and there are those set up right now and ready to provide that lead once the market puts in a bit of consolidation time. Still have to see DJ30 and SP500 hold up relatively well below their prior highs, but if the leaders hold the line that will hold things together for the next move.
Support and Resistance
NASDAQ: Closed at 2626.60
Resistance:
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2623 is the top of the November/February channel
2608 is the November/February up trendline
2601 is the mid-May intraday peak.
2590-95 from an April 1999 interim peaks
The July/August trendline at 2579
The 50 day EMA at 2551
2531.42 is the February high (post-2002 high); 2525 intraday
2523 was price resistance November 2000
2509 is the January 2007 high
S&P 500: Closed at 1531.05
Resistance:
1541 is the June high.
The upper trendline of the channel at 1545
1553 intraday high from March 2000 is the all-time index peak
Support:
1528 is the March 2000 closing high
1520 from the September 2000 peak
1517 is the late November to February up trendline
1500 from April 2000 peak
The 50 day EMA at 1498
1475 from peaks in December 1999 and January 2000
1461.57 is the February 2007 high.
1440 is the mid-January high
Dow: Closed at 13,612.98
Resistance:
The early June high at 13,676 (closing), 13,692 (intraday)
Support:
The mid-May peak at 13,556
The 10 day EMA at 13,521
13,405 is the upper channel line in the November/February channel
13,280 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,254
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 19
Housing starts, May (8:30): 1.485M expected, 1.528M prior
Building permits, May (8:30): 1.475M expected, 1.457M prior
June 20
Crude oil inventories (10:30): 82K prior
June 21
Initial jobless claims (8:30): 310K expected, 311K prior
Leading economic indicators (10:00): 0.2% expected, -0.5% prior
Philly Fed, June (12:00): 7.0 expected, 4.2 actual
End part 1 of 3
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financial investment
day trading
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