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stock market result, stock market news
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6/26/07 Investment House Daily
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: None issued
Trailing stops: CRZO; NTGR; SUN
Stop alerts issued: BRY; MRO; SPN
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SUMMARY:
- Another rebound attempt fails to hold its ground.
- More homes data leaves investors still feeling for the bottom.
- Mortgage issues stirring up the gloom as VIX closes in on the March high
- SP500 continues its struggle as NASDAQ tests its trendline.
Another upside rebound attempt sells off.
Futures were solid and rising into the open as stocks again were set for an early rebound attempt after a week of selling. There was some more M&A activity with a trio of deals, bond yields were a bit lower (4.87% two year, 5.08% ten year on the close), and oil was down again (67.77, -1.41 close). Yeah, that might have had something to do with the bounce try, but it was more related to a week of selling than any news that led to the early bounce attempt.
Within ten minutes of the open the sellers started to work once more, taking the indices negative from a solid start. The new home sales (weaker than expected) and consumer confidence (also a bit weaker) bounced the market, but that just gave the sellers another shot. To their credit the buyers came back in once more and rallied the indices close to the opening highs. It didn't hurt that some stories floated about BSC not needing to bail out its second hedge fund. To their detriment they were again unable to hold the move. A couple of hours working laterally, trying to get firm footing resulted in another afternoon slide that took everything lower. Word the SEC opened 12 separate probes relating to the collateralized mortgage market did not help one bit. A modest bounce in the last hour stumbled around and staggered into the close.
The losses were rather modest (-0.11% on NASDAQ and DJ30, -0.32% on SP500) at the bell, but the give back was the issue once more. Stocks started higher and were spanked as leadership areas such as energy, metals and materials continued their pullback. On the positive side, while SP500 looks somewhat similar to a manure pile, NASDAQ and DJ30 are not bad. Further, even after energy and friends have pulled back the past week, many, many are in very nice buy points. As we said before, however, the buy points are nice but they sure don't mean much until the big money steps up and actually BUYS.
Technically you had the bearish high to low intraday action, with about the only thing new being there were two upside tries Tuesday versus the one and done action of the prior sessions. The session encapsulated the action this month: choppy and trending lower. SP500 and SP600 both managed a close below the 50 day EMA, unable to hold an intraday break above those levels. On the other side of the scale you have NASDAQ and DJ30 that are at least making an attempt to hold above the 50 day EMA. They are no shining beacons of strength; they just haven't given up the 50 day EMA yet.
Of course after a week of selling and basically a month of trending lower, holding the 50 day EMA is something to note. It is not something that will necessarily make a difference, but if they hold here they can drag SP500 back from the abyss. Thus far there is nothing to indicate that is going to happen, but there are other positives that could potentially turn the tide. Namely, after that week of selling there is not a lot of negative volume on NASDAQ and many of the leaders that led the charge higher are still in good position to rebound.
All that means is that the market continues to act toppy and sluggish, and that it is time for the leaders to rebound if they are going to do it. They always hang in there better than the rest of the market, and they start to bounce nicely from this near support when a rebound is in the offing. That doesn't mean it is a lock; as noted, there is not much right now to hand your hat on and say a rally must ensue. SP500 continues to show distribution or at the minimum elevated volume on the selling that has taken it below the 50 day EMA. With the current negative action in the market overall, that is the most worrisome aspect. There are positives and negatives, and the market is at the point where the upside has to assert itself once more or start looking to the next level of support.
THE ECONOMY
Broken record: housing market continues its woes
More news regarding the housing market and none of it was good. Another homebuilder was out carping about the market. LEN said housing was going to continue to decline through 2007. LEN's cancellations rate was 29% the past month. LEN is having issues. Let's face it, all of the builders are going to have trouble until the last big group of projects is built and on the market. There are still many developments in progress, and with new home inventories at 7.1 months for May you can expect that number to get closer to the 8.4 months the existing homes are showing. The May number is, however, better than the 8.1 months in March. Thus there is improvement, but there is going to be some worse numbers just as the market hits its bottom as 2007 progresses.
More housing effects on the financial markets.
Of course the homebuilders are in the tank and heading lower. The charts are not showing any sign of a bottom just yet. Neither are the financial stocks related to the mortgage market. BSC fell off the cliff to the March low as its troubles relating to its mortgage hedge funds unfold. GS has sold for 4 of 5 sessions on high volume as rumors abound that it will announce something next.
On Tuesday the government added injury to insult when the SEC announced it initiated 12 probes relating to the dealings in this market. As we predicted a couple of months ago the government was going to get involved and it would be after the fact and the result would be to further chill the market. What is done is done and if there was wrongdoing it needs to be rectified and those involved punished.
The problem is the impact on the rest of the market while the Feds work to right the wrongs. The market already corrected itself by clamping down on loans of all kinds, particularly the lower end of the market. During the investigations the market continues the lockdown for fear of poking the Federal bear and bringing its attention onto them. That keeps the market from recovering as quickly as it normally would because a lot of qualified buyers are turned away during this period.
At least Congress is not getting involved . . . for now. Indeed the SEC probes are likely an effort by the Administration to head off any congressional hearings and action that would really stifle the market for an unnecessarily prolonged period.
THE MARKET
MARKET SENTIMENT
VIX: 18.89; +2.24. Volatility really spiked late in the session as the selling spiked higher, closing 0.74 off the March closing high (19.63, 20.41 intraday). This is a good indication if the indices are going to hold at this point. In March SP500 smashed through the 50 day EMA by the time VIX got to this point. Thus there is the possibility, given NASDAQ and DJ30 are holding their trends and leadership is still in good shape to rally back, that this spike could help set the bottom of this selling.
VXN: 19.59; +1.52
VXO: 18.23; +1.13
Put/Call Ratio (CBOE): 1.11; -0.01. A third straight close over 1.0, the fourth in five sessions. Getting there along with the other sentiment indicators, e.g. VIX.
Bulls versus Bears:
Bulls: 53.3%. Back below 55% after spiking to 56.7% last week. Even with this decline they are historically too high, but then again, they have been in this range since last October. The 55% level is 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: 18.9%. Dumping back below the 20% level considered bearish after 21.1% last week. It held in the 22 range more or less after bouncing back up from 20.7% a month ago, but it tumbled right back down. 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: -2.92 points (-0.11%) to close at 2574.6
Volume: 2.055B (-0.84%). Volume was lower once more and slightly lower as NASDAQ again rallied but then failed to hold the move. No distribution of significance on the fade the past week as NASDAQ tries to counterbalance the NYSE higher volume selling over the same period.
Up Volume: 790.99M (+172.99M). This was not grossly out of proportion to the down volume.
Down Volume: 1.245B (-150.734M)
A/D and Hi/Lo: Decliners led 1.22 to 1. Hardly anything nasty after those really volatile sessions the first three weeks of the month.
Previous Session: Decliners led 1.93 to 1
New Highs: 89 (-22)
New Lows: 96 (-6)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
The internals outlined above show that NASDAQ has sold but has not undergone dumping as it has come back to its trendline and the 50 day EMA. This makes the pullback look very much like the 'ordinary house brand' pullback in a continuing uptrend. As noted before, NASDAQ made a higher high on the last move and can still easily put in a higher low at its trendline. That is pretty solid action and if the other indices such as SP500 was not in such a fight for its life, this would be a very solid looking position to bounce. It still does, but it has to drag the NYSE large caps with it on any bounce. ORCL after hours was not helping early on but as the conference call wore on ORCL moved modestly higher after hours.
SOX (-0.26%) looked pretty crappy early on but it rebounded to post a modest loss and it held the 18 day EMA on the close. It gave up its breakout in pretty dramatic fashion Friday and Monday, but the doji Tuesday indicates it is going to make another run at the breakout.
SP500/NYSE
Stats: -4.85 points (-0.32%) to close at 1492.89
NYSE Volume: 1.733B (-0.43%). Volume was a fraction lower but still above average as SP500 and SP600 moved slightly lower. Now this is an interesting point. Yes volume was still strong on a move lower, but it was not much of a move lower, particularly compared to the prior week as SP500 and SP600 tumbled lower. SP500 is also at the early June low and with the downside narrowing at the prior low, the higher volume suggests the buyers and sellers are evening out in their strength.
Up Volume: 533.812M (+110.614M)
Down Volume: 1.167B (-109.677M)
A/D and Hi/Lo: Decliners led 1.73 to 1. As with NASDAQ, the breadth is not making those big swings day to day and they are not the extremes seen such as -11:1 and -5:1. Combined with the volume action this is looking a bit better. A bit.
Previous Session: Decliners led 2.18 to 1
New Highs: 54 (-12)
New Lows: 128 (+17)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 sold again but as noted above the losses are slowing and volume remains high; sellers still won the day but there were more buyers stepping in to keep it from turning into a rout. The high to low action was not great as it shows the sellers are still in control, but there were buyers in there early. It is holding just above the early June lows (1490.72 closing) and after breaking below the 50 day EMA this is the next point the large caps will try to find some support. Again, the volume and internals show the selling intensity backing off some, but with that double top this month SP500 still has a lot to prove.
The small cap SP600 (-0.51%) also has a lot to prove. It broke its 50 day EMA and trendline as well as it too tests the early June low. There is a thick layer of support at 425 (closed at 427.60). Hardly a good accumulation pattern to this point, however, and as with SP500 it has a lot to prove if it is going to hold the line here.
DJ30
The blue chips are also sporting that double top from this month but unlike SP500 they are also holding the up trendline in their channel as well as the 50 day EMA. There has been some distribution on this decline but the Dow is also showing a pair of dojis at this key support level, and as with NASDAQ, it can still make a higher low here. It is not the picture of an upside powerhouse with that double top looming over it, but it has held the line where it needed to. With NASDAQ in a definite uptrend it could provide the '2' in a 1-2 upside punch.
Stats: -14.39 points (-0.11%) to close at 13337.66
Volume: 241M shares Tuesday versus 251M shares Monday. Volume is backing off at the trendline and 50 day EMA.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
The FOMC starts its next monetary policy meeting Wednesday, and with inflation readings still trending lower toward the Fed's stated comfort range (actually in it with respect to the core PCE) and the housing market still heading lower the Fed is not about to raise rates despite all of the inflation fears and hikes from other central banks. To think so is ludicrous: rates are actually responding higher to the stronger economy and doing the Fed's work for it. No way in hell the Fed is going to raise rates, and it is not going to start talking about rising inflation pressures either. The Fed has to be feeling very good about its performance and it sees no reason to change course.
Durable goods orders are out before the open and crude inventories at 10:30ET. Neither is likely to move the market significantly because the market really is not looking at news right now, at least over the past week. Just as the market puts its head down and rallies regardless of the news it also tends to ignore news when it sells. When it gets close to a bottom or a top then a significant story can jumpstart the move.
Right now the market has not shown it is out of the selling mode. NASDAQ is still holding key support in its uptrend, DJ30 is trying to hold support as well though its pattern is questionable, and leadership has made a nice pullback. Those are countered with a weak SP500 pattern that is trying to hold at the early June lows, but the pattern is more negative than positive. Definitely a divergence at this point in the selling as the indices take stock at the next inflection point.
ORCL and NKE may help spark another attempt upside but two higher starts this week merely played into the sellers' hands. We would prefer a softer start in the morning to further flush out the sellers and get VIX up to 20 or better then see if the indices could mount a credible (i.e. higher volume) rebound. As noted earlier, with VIX approaching the March highs while the indices are holding at higher levels (relative to the 50 day EMA), and leadership in position to rebound, there is a credible argument the market is ready to try a bounce if it can get a final shakeout of the sellers. In any event, it is likely to get the opportunity to prove it.
The market remains choppy and toppy, particularly on SP500, and that still trumps the modest improvement in the internal indicators and NASDAQ's testing its uptrend. Tech has tried several times to assert leadership but has failed. It is kind of early for it to bottom in the 'typical' cycle so we are not betting the farm on it. We still like the action in the leaders as they pullback; most are still holding above support levels. As noted Monday, however, it is time for those leaders to make a stand while NASDAQ and DJ30 test their trendlines.
Support and Resistance
NASDAQ: Closed at 2574.16
Resistance:
2601 is the mid-May intraday peak.
2620 is the November/February up trendline
2627 is the top of the November/February channel
2634.60 is the June peak
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2568 is the October/December/January trendline
The 50 day EMA at 2560
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 1492.29
Resistance:
The 50 day EMA at 1501
1524 is the late November to February up trendline
1528 is the March 2000 closing high
1541 is the June high.
The upper trendline of the channel at 1551
1553 intraday high from March 2000 is the all-time index peak
Support:
1490.72 is the early June closing low
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 13,337.66
Resistance:
13,448 is the upper channel line in the November/February channel
The 18 day EMA at 13,463
The mid-May peak at 13,556
The early June high at 13,676 (closing), 13,692 (intraday)
Support:
13,336 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,295
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 25
Existing home sales, May (10:00): 5.99M actual versus 6.00M expected, 6.01M prior (revised from 5.99M)
June 26
Consumer confidence, June (10:00): 103.9 actual versus 106.0 expected, 108.5 prior (revised from 108.0)
New home sales, May (10:00): 915K actual versus 925K expected, 981K prior
June 27
Durable goods orders, May (8:30): -1.0% expected, 0.8% prior
Crude oil inventories (10:30)
June 28
GDP final, Q1 (8:30): 0.8% expected, 0.6% prior
Chain deflator, Q1 (8:30): 4.0% expected, 4.0% prior
Initial jobless claims (8:30): 324K prior
FOMC policy statement (2:15)
June 29
Personal income, May (8:30): 0.6% expected, -0.1% prior
Personal spending, May (8:30): 0.7% expected, 0.5% prior
Core PCE, May (8:30): 0.2% expected, 0.1% prior
Chicago PMI, June (9:45): 58.0 expected, 61.7 prior
Construction spending, May (10:00): 0.2% expected, 0.1% prior
Michigan sentiment revised, June (10:00): 84.0 expected, 83.7 prior
End part 1 of 3
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stock market result
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