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us stock market, trade stock
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7/02/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Thursday given the holiday week.
MARKET ALERTS
Targets hit alerts: CLB; FLIR; SPWR
Buy alerts: CLF
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:
- Stocks bounce to start the new quarter as new money, solid economic data, and lower bond yields provide the fuel.
- ISM posts a 14 month high as economy continues the resumption of its expansion.
- NASDAQ already at next resistance as it tests the trendline and the June high.
- Looking to use further upside to take some gain, pick up strong movers, in sessions bracketing Fourth of July
No volatility as new money pushes stocks higher.
Futures were up as the new quarter started as the new money we have seen each month and each new quarter bid up stocks before the open with many institutional orders. There was some added sauce for the session from renewed M&A activity (HCR, BCE going private, T buying DCEL, and a rumor Virgin Media was going private) to help get stocks higher out of the gate. They were indeed higher with many gapping up due to all of those pre-market orders pushing money in to the market. Many of our plays gapped higher and did not look back.
After that initial surge there was a quick test, but with the ISM manufacturing hitting a 14 month high and bond yields falling once more (the 10 year closed at 4.99%, breaking that key 5% level), stocks turned right back up and continued the move higher. A midday respite did not give any gains back, and then an afternoon turn back up pushed the market to close at the session high. There was no volatility even despite some lower volume; the buyers were in, pushing new money into the market, and that pushed the market higher.
You could tell it was new money coming into the market given all of the gaps higher across most sectors. Those orders were placed to buy on the open, a very efficient way for big institutions to put money to work. Thus the gaps higher. The interesting part is that the moves held into the close as more money was put to work in the afternoon after the midday siesta.
Technically it was the better low to high action, or in this case more of a high to higher intraday move. NASDAQ gapped higher and rallied to its trendline and the June highs. SP500 and the other NYSE indices bounced off of the 50 day EMA. Solid intraday action with some solid 4:1 breadth on NYSE and 2:1 on NASDAQ. There was no volume, however, something that we did anticipate that actually came to be. There was nice breadth as new money was allocated across the market, but it was not deep as the volume was substantially lighter. NASDAQ is already being tested with as it is at its trendline, and the NYSE composite is just below its early June twin peaks. Interesting action and NASDAQ could very well continue its leadership ways and break to a new high; SOX looks ready to make another run at that breakout itself. The real problem is how SP500, DJ30, and SP500 respond as they rebound toward those double tops. That was a lot of the talk on the floor today, and that in itself is encouraging: if everyone is worried about those peaks then the market will try to climb them.
THE ECONOMY
ISM offers more evidence the economic expansion has resumed.
After the Fed officially recognized the lower inflation rate on Thursday and the Friday PCE gave the Fed even more to consider at 1.9% annual growth (you know the Fed saw this number before its 2-day FOMC meeting concluded Thursday), the economy churned out some more solid economic data in the form of the June ISM, the national manufacturing report. It posted a solid 56.0 reading versus the 55 that was expected to match the 55.0 in May. Nice.
New orders and production moved above 60 from sub-50 levels at the turn from 2006 to 2007. Inventories were down below 50 for almost a year running. Some view that as negative, but after the slowdown in the second half of 2006 companies stopped producing as much 'stuff.' They also throttled back on investments in capital goods. Now a year later what this means is more investment and more inventory building as the economy recovers. That only adds to the manufacturing activity in the months ahead. Prices fell to 68, continuing a 3 month slide after jumping to 73.0 in April as oil prices surged.
This was foreshadowed by the regional ISM reports, particularly the Philly Fed, the region that has been the anchor chain on the economy since the 2005 Gulf storms. This shows broad growth across the country. It is not the kind of growth that the economy enjoyed coming out of the recession (those were levels not seen for 20 years, i.e. when the US moved out of that horrid 1970's recession), but it is the kind of solid rebound in growth that will push GDP near 3.5% in Q2 and moving ahead. Hard to complain about that.
THE MARKET
MARKET SENTIMENT
VIX: 15.4; -0.83
VXN: 17; -0.86
VXO: 14.78; -1.91
Put/Call Ratio (CBOE): 0.85; -0.17.
Bulls versus Bears:
Bulls: 53.8%. Still holding high levels, rising from 53.3% after a spike to 56.7% three weeks back. Still too high, but as noted before, bulls 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: 20.4%. Back up above the 20% threshold considered bearish after falling to 18.9% three weeks back. After hitting near 30% in March it has faded back in the subsequent rebound and this current selling has not done much to jump it higher. Looking only at this indication and the fact it has not risen as it did in March when the selling took hold, you would conclude that there is more selling to go. Well off the 27.5% hit in April. 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: +29.07 points (+1.12%) to close at 2632.3
Volume: 1.861B (-9.55%). Volume fell back below average as NASDAQ moved higher. There was buying but not heavy accumulation as already many fund managers had left for the week before it even started. NASDAQ now faces the trendline and the June high already. The price of success.
Up Volume: 1.318B (+368.211M)
Down Volume: 515.797M (-645.736M)
A/D and Hi/Lo: Advancers led 1.94 to 1. Nice breadth as NASDAQ pushes to the prior highs.
Previous Session: Decliners led 1.25 to 1
New Highs: 151 (+93)
New Lows: 58 (+14)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ turned up from the Friday test of the 18 day EMA, continuing the run higher off its 50 day EMA and lower trendline test to end June. NASDAQ has now taken the mantle of trending higher within its channel just as DJ30 and SP500 did prior to the June pullback. That, however, leaves NASDAQ at its June high (2635) and the upper channel line in its uptrend. With the light volume and the momentum in NASDAQ's favor, it could push on through this week but then will likely have to come back and test the move. No problem with that at all as NASDAQ will be dealing from a position of better strength.
SOX (+0.85%) was a relative laggard Monday, but its pattern is not bad at all as it tested the 10 day EMA late last week and then started higher Monday. It is making a higher low here and actually looks good for a break higher.
SP500/NYSE
Stats: +16.08 points (+1.07%) to close at 1519.43
NYSE Volume: 1.381B (-16.97%). Volume fell below average as well as the NYSE indices advanced on the new money hitting the market.
Up Volume: 1.152B (+444.761M)
Down Volume: 215.652M (-719.973M)
A/D and Hi/Lo: Advancers led 4 to 1. Excellent breadth as the market moved up across the board. Volume may have been lower, but those that were in the market were buying broadly, indicating institutions were buying.
Previous Session: Advancers led 1.07 to 1
New Highs: 178 (+122)
New Lows: 28 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps bounced off the 50 day EMA after making a higher low to end June, at least on a closing basis. No volume; pre-holiday session so that is understandable. That means SP500 will have to come up with some strength to move through the first trendline marking the bottom of its channel, but it is making the climb. This will be an important attempt what with the June twin peaks forming a double top. The holiday volume will keep the strength of the move somewhat obscured, but if it can move up through the trendline at least that gives it a better position to work off of similar to what we are looking for NASDAQ to accomplish. SP500 remains iffy at this stage; the low volume certainly did not change its character. With NASDAQ taking over leadership, however, it may simply be content to follow the techs. Understandable given the solid move thus far and the issues the financials are having.
SP600 (+1.2%) posted a similar move to SP500, bounding off a test of its up trendline and moving toward its mid-June peak. Unlike SP500, it is within its uptrend channel and that puts it in a bit better position overall. Still has a lot to prove but it is taking out the late May interim peak.
DJ30
The blue chips held the 50 day EMA and roughly its trendline last week and after a pair of dojis to end last week it broke higher Monday. The move was on lower volume but DJ30 made a higher low and is looking better and better as it works on its consolidation. Definitely the best looking of the NYSE indices (except perhaps the NYSE composite), and it is setting up to make a run at the June twin peaks at 13,692 and 13,689.
Stats: +126.81 points (+0.95%) to close at 13535.43
Volume: 196M shares Monday versus 262M shares Friday. Significant drop off in volume as DJ30 bounced, but it is going to be that kind of week with the national independence holiday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
The holiday week makes it a wildcard week. Monday we did not see the volatility we anticipated, but we did not complain about that. Even after a gap higher with the buy on open orders the market held its bid, trending higher all session. New money put the bid in the market, and it did not leave after the initial salvo.
Tuesday is another day, or more accurately, another half day. The market closes at 1:00ET and does not reopen until Thursday. That means the real players will likely be back Thursday, or they may take the entire week off. Either way it means light volume Tuesday and likely light volume to end the week.
Light trade always makes the action a bit more interesting as they say, but that is not always a bad thing. Monday we were using the light volume rise to take some gain on positions that had logged some good gain. If we get more upside Tuesday we will be looking to do the same.
It was not all light volume bouncing. There were stocks breaking higher on strong volume and we were happy to buy into some of those. We will continue to look for more good movers on volume to step into some positions though divining volume in a half session is quite tricky: it is low to begin with and then you only have part of a session. By 'stepping in' we mean we will take some positions, not necessarily using all the money we have allocated for that buy. If it is obviously strong we will take more; if not so strong and we enter, we will pare back the size on this buy and look for the next opportunity.
The point is, if we see strong stocks making moves we want to own we are not going to turn away because it is a short session. We believe strong leadership stocks move because they tend to forecast the rest of the market moves. With an overall sound economy and data showing the resumption of the expansion, lower inflation, lower bond yields, and not a lot of earnings warnings, that move still looks to be positive despite the current pullback. Thus we won't shy away from buying because a short week. We take that into consideration along with the market pattern, etc., but it alone is not the defining event. Accordingly, if we see a solid move we will move as well.
As for reports for the week, given the half session Tuesday and closure all day Wednesday we are not issuing a Wednesday report and the Tuesday report will consist only of market data and a summary play table with trading stats for the session.
Support and Resistance
NASDAQ: Closed at 2632.30
Resistance:
2633 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:
2627 is the November/February up trendline
2601 is the mid-May intraday peak.
The 18 day EMA at 2598
2573 is the October/December/January trendline
The 50 day EMA at 2568
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 1519.43
Resistance:
1527.50 is the late November to February up trendline
1528 is the March 2000 closing high
1541 is the June high.
1553 intraday high from March 2000 is the all-time index peak
The upper trendline of the channel at 1557
Support:
The 50 day SMA at 1510
The 50 day EMA at 1501
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 13,535.43
Resistance:
The mid-May peak at 13,556
The early June high at 13,676 (closing), 13,692 (intraday)
Support:
13,465 is the upper channel line in the November/February channel
13,390 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,318
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.
July 2
ISM Index, June (10:00): 56.0 actual versus 55.0 expected, 55.0 prior
July 3: Early close
Factory Orders, May (10:00): -1.0% expected, 0.3% prior.
Pending home sales, May (10:00): 0.6% expected, -3.2% prior
July 4: Closed
July 5
Initial jobless claims (8:30): 315K versus 313K prior
ISM Services, June (10:00): 58.0 expected, 59.7 prior
Crude inventories (10:30): 1.56M prior
July 6
Non-farm payrolls, June (8:30): 120K expected, 157K prior
Unemployment rate (8:30): 4.5% expected, 4.5% prior
Hourly earnings (8:30): 0.3% expected, 0.3% prior
Average workweek (8:30): 33.9 expected, 33.9 prior
End part 1 of 3
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