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us stock market, trade stock
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7/09/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: CMI; FCX; GME
Buy alerts: CHTT; ESV; GMRK; JEC
Trailing stops: FLIR
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:
- Breadth was thin, volume was so-so, but the leaders were surging.
- Alcoa "underwhelms" with its earnings report, but it is not going to be the determining report.
- Market has bounced ahead of earnings and will need to beat expectations to drive NYSE indices to new breakouts
And the leaders shall lead.
There was no roaring star to the pre-market and the new week, no real surprise following the move higher over the holiday last week. It didn't help that LXK tried to splash cold water on the start of earnings by guiding lower or that analysts got some cold feet and started with some valuation downgrades after some leaders such as BIDU blasted higher last week.
That started the market off kind of sloppy, but it did not stock stocks from rising, at least the leaders we have been playing. CMI received an upgrade but you would have thought it crushed earnings with its explosion higher. COP announced a huge buyback and that ignited energy, or at least certain parts of it, once more. That news helped fuel another big move in industrial equipment and large cap energy, but the leaders in other sectors followed as well (e.g. GME, GRMN). It did not hurt that bond yields backed off some (4.95% 2 year, 5.14% 10 year, down from 5.17% Friday), but with yields bouncing from 5.33% down to 4.98%, then back to 4.20% all in the last month, this rather small move in yields was not going to change the market's character.
The moves in some of the leaders were truly impressive, and that engendered talk of the market being on fire Monday. After an upside week the addition of those strong moves understandably revved up the journalist majors populating the anchor desks on the financial stations (makes you hope Murdoch is successful with his bid for the WSJ and establishes a new heavyweight in the market). Yes, certain stocks were but Monday the overall action was thing with flat breadth, so-so trade, and few new highs. Most of the market is edging along, dragged higher by those surging leaders.
As noted, the technical action was thin on the internals while NASDAQ posted a new post-2002 high, joined by the NYSE Composite that scored a new all-time high. They dragged DJ30, SP500 and SP600 closer to highs of their own in a manner similar to the leading stocks pulling other stocks with them.
The charts show potential issues, however, and the weak internals don't show help much. NASDAQ hit another new high, always a good sign, but SP500 and DJ30 are still below the June highs and not showing a lot of volume on the way up to this level. Typically low volume and narrow breadth are not friends of a rally. NASDAQ is showing a doji on the candlestick chart after a week and one-half of gains. The indices are getting close to needing a test, and if they do that is nothing bad. It would simply give NASDAQ a chance to test its break to a new post-2002 high and leaders a chance to test a bit and set up the next move higher. That sounds great and is what we were looking for this week given the light volume run higher last week. Thus far, however, investors are not willing to let that happen. Similar to March the market, money is moving in to the market, but right now it is more focused than at that time.
That just means we have to be in the right stocks such as CMI, GRMN, GME, FCX, WNR while other leaders such as BIDU, CTRP, MA, PCLN, SLB take a breather. While it may be too much to ask for new breakouts from DJ30 and SP500 at this moment, we will stay focused on these leaders, and as they give us buy points we will move in whether it is more positions on current stocks we are in or new stocks.
THE ECONOMY
Slow session for economic news, and that is just as well given the mountain of data the past two weeks as well as the start of earnings season. Oil moved above 73 on the intraday high before closing lower at 72.19 (-0.62), but gasoline futures rose yet again on some refinery closures despite the others that re-opened last week. All that shows is oil, energy and other prices have solid support due to usage around the world; these up and down swings are all within a range, a range that continues to move higher.
Consumer credit for May was the one report out Monday. It jumped $12.9B well above the $6.5B expected and $2.3B in April. The consumer is not dead. The housing slump thus has not killed the consumer. Energy prices have not killed the consumer. There may be something still out there ready to exact revenge; if there are too many issues to handle eventually something breaks. With the rebounding economy and falling inflation, however, the positive underpinnings remain.
THE MARKET
MARKET SENTIMENT
VIX: 15.16; +0.44
VXN: 17.08; +0.56
VXO: 14.38; +0.07
Put/Call Ratio (CBOE): 0.81; -0.07
Bulls versus Bears:
Bulls: 49.4%. Now that is quite a drop from 53.8% the prior week and well off the spike to 56.7% a month back. Heading in the right direction but still needs to be lower to get to a comfort level. The 55% level is considered bearish, and it topped that level on this last run. Still off the 60% hit in December 2006 but getting closer. For reference it bottomed in the summer 2006 near 36%.
Bears: 18.0%. Bulls may be falling, but bears are as well, and that leaves the indicator mixed and thus less than an good signal. Quite a drop from 20.4%, and now at the lowest level on this cycle (hit 18.9% a month back). After hitting near 30% in March it has faded back in the subsequent rebound and this current selling is not jumping 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: +3.51 points (+0.13%) to close at 2670.02
Volume: 1.88B (+15.41%). Volume jumped significantly, but it was from very low, holiday week trade levels. NASDAQ could not make much of the extra volume, however, posting a small move. After a run higher the past two weeks that suggests a bit of churn, but that has not stalled out the advance.
Up Volume: 978.563M (-21.066M)
Down Volume: 861.5M (+268.182M)
A/D and Hi/Lo: Decliners led 1.03 to 1. Flat breadth even with the overall NASDAQ topping the large cap NASDAQ 100.
Previous Session: Advancers led 1.38 to 1
New Highs: 133 (+24)
New Lows: 37 (+7)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped modestly higher but had to fight off a midmorning sell off that stripped 11 points off the move. Buyers again used that as an opening and moved in, triggering a slow but steady climb higher into the close. Modest gain, rising but still below average volume, flat breadth, a doji on the candlestick chart. After moving higher for more than a week a doji on rising trade indicates some churn and could be the initial indication of a NASDAQ pullback to test that break to a new post-2002 high last Tuesday. As we noted last week, however, that leaves NASDAQ in a position of strength as it tests. Appropriate given NASDAQ has been the leader on this last leg of the rally.
SOX (+1.14%) showed the real strength Monday as it continued the breakout recovery. The chips could not hang onto their breakout, but finally it looks to stock as they move to a 12 month high.
SP500/NYSE
Stats: +1.41 points (+0.09%) to close at 1531.85
NYSE Volume: 1.334B (+6.93%). Volume was up but could not even surpass last Thursday's level as the NYSE indices moved higher, the NYSE composite hitting a new all-time high. Not a great vote of confidence as these indices approach their June highs.
Up Volume: 664.017M (-205.662M)
Down Volume: 652.691M (+296.012M)
A/D and Hi/Lo: Advancers led 1.15 to 1. Pancake-like.
Previous Session: Advancers led 1.52 to 1
New Highs: 200 (+23)
New Lows: 18 (+5)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
If you did not catch it on the financial stations, SP500 is not far from a new all-time high. It has not been far for a few days. Problem is, it has the mid-June (1539) and early June (1541) highs ahead of it and not a lot of volume to push from below. That does not mean they won't make it on that low trade; after all, that did not hinder the March recovery. Nonetheless they are below resistance and following NASDAQ. If NASDAQ comes back to test its breakout we may see money shift this way and allow the NYSE stocks to play catch-up. More likely there is a modest pullback that sets up the next run at those prior highs.
SP600 (+0.33%) posted one of the better gains of the session with the resurgence of energy stocks. That pushed SP600 past the mid-June closing high, leaving it in position to challenge the early June move if the energy stocks continue their run higher.
DJ30
DJ30 closed above the mid-June closing high (13,640) and has its eyes set on the June high (13,692). Volume was up but below average so there was no major volume push, but DJ30 is building off of some higher lows that used its up trendline as support. It may take a short test back toward 13,500 before making the breakout, but it certainly looks ready to make that move in short order.
Stats: +38.29 points (+0.28%) to close at 13649.97
Volume: 192M shares Monday versus 176M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
A slow economic week doesn't pick up much steam Tuesday with wholesale inventories, but the economy is old hat this week as the waves of data have hit and told us all that Q2 was a lot better than originally expected.
Thus earnings should be better than expected as we noted the past week. Alcoa did not set that standard, however, after the Monday close as it matched expectations (0.81 vs 0.81). That may set some of the industrials that are blasting off back on their heels a bit on Tuesday, but the market does not live or die by Alcoa. Remember, it missed several earnings reports even as other metals and materials stocks were blowing results out of the water.
If there is a pullback after Alcoa we view that as an opportunity. Again, we would welcome some sort of pullback ahead of the earnings flood after this rebound that saw NASDAQ break to a new post-2002 high. They can still take off higher from where they are if the earnings are solid enough, but a pullback provides a great entry ramp moving into earnings.
That said we are going to continue doing what has worked to this point, i.e. catching the rotation of money around the leadership. As described above, some stocks broke higher again Monday while leaders from last week took a breather. We are going to watch for those leaders to recover and break higher once more as well as more leaders emerging from new areas as technology continues to show leadership.
Support and Resistance
NASDAQ: Closed at 2670.02
Resistance:
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2638 is the top of the November/February channel
2634.60 is the June peak
2633 is the November/February up trendline
The 18 day EMA at 2621
2601 is the mid-May intraday peak.
The 50 day EMA at 2582
2579 is the October/December/January trendline
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 1531.85
Resistance:
1539 is the mid-June intraday high
1541 is the early June high.
1553 intraday high from March 2000 is the all-time index peak
Support:
1528 is the March 2000 closing high
1528 is the late November to February up trendline
The 18 day EMA at 1517
The 50 day SMA at 1513
The 50 day EMA at 1506
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 13,649.97
Resistance:
The mid-June high at 13,689
The early June high at 13,676 (closing), 13,692 (intraday)
Support:
The mid-May peak at 13,556
13,500 is the upper channel line in the November/February channel
13,438 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,360
The 90 day SMA at 13,011
12,796 at the February 2007 high
12,700 is the early February peak intraday high
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 9
Consumer Credit, May (3:00): $12.9B actual versus $6.5B expected, $2.3B prior (revised from $2.6B)
July 10
Wholesale Inventories, May (10:00): 0.4% expected, 0.3% prior
July 11
Oil inventories (10:30): 315K prior
July 12
Initial jobless claims (8:30): 315K expected, 318K prior
July 13
Import prices, June (8:30): 0.5% prior
Export Prices, June (8:30): 0.2% prior
Retail sales, June (8:30): 0.0% expected, 1.4% prior
Retail sales ex-autos, June (8:30): 0.2% expected, 1.3% prior
Business inventories, May (10:00): 0.3% expected, 0.4% prior
Michigan sentiment, preliminary, July (10:00): 86.0 expected, 85.3 prior
End part 1 of 3
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