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us stock market, trade stock
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7/19/07 Technical Traders Report Update
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Technical Traders Report Subscribers:
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This weekend there will be no detailed market summary and summar table barring some major event. Jon Johnson's family and friends are celebrating his wife's successful end to a year of battling cancer. They were even celebrating some tonight and thus a bit of a delay in the report. Thank you in advance for your understanding.
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MARKET ALERTS
Target hit alerts: None issued
Buy alerts: CBEY; CTRP; FCX; HAL
Trailing stops: Banked some nice gain on the remaining positions on EDU and SPWR
Stop alerts: HANS
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/alertttr.html
SUMMARY:
- IBM counters INTC as techs and energy lead a renewed bounce.
- Bernanke, FOMC minutes and reality point to no rate hike.
- GOOG earnings miss threatens tech again but leaves more money for the 'old economy' stocks.
From testing to resuming the breakout, but the action was a bit spotty.
Ever see the Seinfeld episode where George laments that he pushes women into lesbianism and Kramer brings them back? Well, as usual, Intel's earnings pushed buyers of tech into sellers on Wednesday, then IBM's earnings brought them back. IBM's solid outlook gapped NASDAQ and the techs higher Thursday after the give back after Intel. The sellers took their shot after the higher open, but the buyers returned and pushed stocks back up even with the Philly Fed returning to its weaker ways (definitely the laggard region ever since the 2005 Gulf storms) and Bernanke parroting his Wednesday testimony and answers. The market did not seem to care about his comments that much; given many dealt with wage inequality and other areas out of the purview of the Fed (and constitutionally, the Congress), the collective yawn on day two of his Washington dog and pony show was understandable.
Stocks bounced off the morning attempt to sell and rallied into the afternoon. The FOMC minutes undermined the move, but just for a half hour before the buyers returned. NASDAQ moved to a session high in the last hour, overcoming the news (yet again) that the Fed was not going to cut rates, at least according to its rhetoric. Once more, however, the sellers returned as investors got some cold feet ahead of the GOOG and MSFT earnings. Indeed, NASDAQ shed 5 points right at the close and just ahead of GOOG's out and out earnings miss. Seems someone knew what was coming before the general market. No surprise. The M&A activity and the stock moves ahead of the announcements show that the wall supposedly cordoning off such information is made of paper as opposed to brick.
After hours techs took a hit as a result of the earnings from this leader as the rumors of the EBAY boycott impacting GOOG were true. MSFT's earnings were not bad but it was down after hours. AMD beat and rallied nicely and SNDK posted some excellent after hours gains. Not all bad, but a lot of the action after hours was weaker with regard to technology. We will see if money tries to rotate out as it did Wednesday, but we have a feeling there are a lot more good earnings reports that will blunt GOOG's miss.
Technically the action was okay. Not great, just okay. Stocks gapped higher, fought off two selling attempts, and closed near session highs with techs and energy leading. That low to high action is always good. Volume held up on NASDAQ as techs showed another above average volume session, but NYSE trade fell below average. Breadth was middle of road. The indices finished higher and the gains were not bad at all, but the action was focused in a few areas with money coming back to tech after trying to leave for a session on Wednesday. It was also nice to see energy start breaking out from a month-long lateral move. With oil at 75.92 (+0.87) and low gasoline inventories, no wonder they are moving higher again. You have to like the way money continues to rotate from one area to the next as investors continue to look for opportunity as opposed to an exit.
THE ECONOMY
Bernanke bores, FOMC minutes bum, but there is no reason to fear a rate hike.
Bernanke gave his second day of testimony to Congress and there were no surprises. Jobless claims fell to 301K but that brought no more than a the same comments about a solid jobs climate. President Bush Thursday was more dynamic in discussing the economy's success than Bernanke; that puts Bernanke's testimony into perspective. With much of the Q&A moving far afield into social engineering issues (income equality, socialized medicine, etc.), you can understand why investors lost interest.
Skip ahead a few hours and then you get the June FOMC minutes. We had to check and see if they were simply a duplicate of Bernanke's prepared testimony. I think one of our researchers found a different comma. Snore. The market didn't like it, however, because it viewed the minutes as more hawkish than the last set. The market sold off, bummed there was no further acknowledgement of weakening housing, falling core inflation, etc. It sold after the announcement and it took a rebound to pull it back again.
Okay, so maybe the Fed is not about to lower rates near term, but it sure the heck is not going to raise rates anytime in the foreseeable future. Wednesday we discussed the two scenarios Bernanke appeared to lay out: no action unless energy bled over into the consumer prices (then a hike) or the housing issues sapped the economy (then a cut). Bernanke clarified this further on Thursday. He did not say the Fed was not going to hike; that would be Phillips Curve heresy. Instead the expectations he put forth demonstrated the Fed is not doing a thing if it can help it.
Specifically, Bernanke's forecast for economic growth is quite tame, in the 2% range. That is mediocre at best. With the housing issues still out there and with such low expectations with respect to growth, the Fed is not going to do anything other than talk about how tough it is on inflation. As we have seen, the market and the economy can handle that.
THE MARKET
MARKET SENTIMENT
VIX: 15.23; -0.77
VXN: 16.55; -0.22
VXO: 15.08; -0.76
Put/Call Ratio (CBOE): 0.8; -0.31
Bulls: 52.3%. Up from 49.5% and 49.4%. Moving back up toward that 53.8% hit a month back and 56.7% six weeks back. 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: 19.3%. Back down under the 20% threshold level, down from 21.3% after jumping up from 18%. Spent a month at 18%, well off the 30% hit in March. 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: +20.55 points (+0.76%) to close at 2720.04
Volume: 2.147B (-0.02%). Volume was a shade lower but still solidly above average as investors continued to accumulate technology shares after IBM goosed them following the Intel disappointment.
Up Volume: 1.579B (+838.674M)
Down Volume: 610.364M (-860.572M)
A/D and Hi/Lo: Advancers led 1.54 to 1. Mediocre but not bad as overall NASDAQ and NASDAQ 100 matched each other's moves.
Previous Session: Decliners led 1.67 to 1
New Highs: 121 (+73)
New Lows: 63 (-40)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher off the IBM results and aided by some strong tech numbers from an array of players (e.g. JNPR, a former leader that went bust and has been a long time recovering). NASDAQ was never in trouble even on a midmorning test of gap higher and the post-FOMC dip. The weak close ahead of the GOOG earnings, however, tell of 'issues' to confront NASDAQ in the morning. That said, however, GOOG is not the tech sector and it had specific issues that hurt it this past quarter. We expect investors will cordon it off from the rest of the market.
SOX (+0.79%) rebounded modestly from the Intel-induces selling on Wednesday. It is still easily in its trend higher after the breakout and test, and with AMD, SNDK and some others reporting solid results, the chips are not yet losing their strength on this breakout.
SP500/NYSE
Stats: +6.91 points (+0.45%) to close at 1553.08
NYSE Volume: 1.531B (-13.29%). Volume fell back below average though it still topped the Friday through Tuesday trade. Not bad volume but not great. Not enough to punch SP500 or SP600 (despite energy's recovery) through last week's highs as on NASDAQ
Up Volume: 922.377M (+277.412M)
Down Volume: 1.579B (+483.377M)
A/D and Hi/Lo: Advancers led 1.69 to 1. As with NASDAQ, not bad but somewhat mediocre.
Previous Session: Decliners led 1.8 to 1
New Highs: 164 (+86)
New Lows: 36 (-21)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps put in a gain but after surging higher early it wandered laterally the rest of the session, never reaching that first half our high. That kept it below the recent July highs and once again keeping it just off the all-time high on the close. It is not in danger, and indeed it is putting in a very good lateral test of the breakout with a good dip lower Wednesday acting as a shakeout. Hard to complain about this action.
SP600 (+0.84%) put in a market-leading performance, and that was enough to push it to an all-time closing high though it just missed a new intraday high. No complaints about that as SP600 made a higher low early in July and it is looking to do the same here just below the highs, and that gives it a great springboard to take off. Pretty cool as small caps are growth stocks, and they only do well if the economy . . . grows. Growing economy means growing earnings, etc. You get the picture.
DJ30
The Dow moved to a new closing high again on lower but still solid, above average volume. With IBM stroking the ball and rising almost 5 sticks on strong volume, the Dow was going to finish nicely higher. Not a bad add-on to the breakout after the Wednesday intraday test down near the 10 day EMA and then the rebound on the close. The Dow and its cadre of technology and industrial stocks are offsetting the financials and retailers, pushing higher and higher. Oh yes. The Dow closed over 14,000.
Stats: +82.19 points (+0.59%) to close at 14000.41
Volume: 265M shares Thursday versus 324M shares Wednesday. Volume was lower but once again above average. That makes 5 of 8 sessions above average, not bad for the Dow.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
No economic reports scheduled, but the earnings tennis match continues. Intel swatted the ball down the line, IBM returned what looked to be a winner, but GOOG is trying to knock things back again. GOOG seemed to have the most impact (a bald faced miss will do that), but MSFT was no bouquet of cut roses either though its earnings were solid. There were other good results as noted above, but overall the after hours action was carrying a negative tone and lower prices.
That will give the market and the steady flow of buyers with money to spend another test similar to Wednesday when INTC missed and everyone realized not all techs and earnings were going to surprise to the upside. GOOG is a market leader, anointed by some with greater than life attributes. In the end it is a growing company that makes some stumbles, though this one was a big one and won't be forgiven right away.
Again, we will have to see how the overall tech market reacts to GOOG. That will not, however, stop the rest of the market that is non-Googled. Money continues to flow there as we saw Wednesday when NASDAQ was struggling but other sectors were making the break, e.g. energy and metals. We doubt NASDAQ will be down for the count as a result of GOOG, but even in the short term if money moves out the other 'old economy' sectors will likely benefit and receive some of that money. That will work to drive our current positions higher as well as those taken today, and it will also give us new buys. Liquidity is a nice thing.
Support and Resistance
NASDAQ: Closed at 2720.04
Resistance:
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2673 is the July high
The 10 day EMA at 2687
The 18 day EMA at 2665
2649 is the November/February up trendline
2634.60 is the June peak
2601 is the mid-May intraday peak.
The 50 day EMA at 2612
2595 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 1553.08
Resistance:
1553 intraday high from March 2000 is the all-time index peak
1560 is the upper channel line from October/December 2006
Support:
1541 is the early June high.
The 10 day EMA at 1540
1539 is the mid-June intraday high
1538 is the late November to February up trendline
1534 is the early July high
1528 is the March 2000 closing high
The 50 day EMA at 1515
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 14.000.41
Resistance:
The July high at 14,022
Support:
The 10 day EMA at 13,825
The early June high at 13,676 (closing), 13,692 (intraday)
The mid-June high at 13,689
The early July peak at 13,671
The mid-May peak at 13,556
13,548 is the upper channel line in the November/February channel
The 50 day SMA at 13,544
13,500 is the November/February up trendline that marks the lower channel.
The 50 day EMA at 13,494
The 90 day SMA at 13,156
12,796 at the February 2007 high
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 16
New York PMI, July (8:30): 26.5 actual versus 16.0 expected, 25.8 prior
July 17
PPI, June (8:30): -0.2% actual versus 0.1% expected, 0.9% prior
Core PPI (8:30): 0.3% actual versus 0.2% expected, 0.2% prior
Net foreign purchases, May (9:00): $126.1B actual versus $72.0B expected, $80.3B prior
Industrial production, June (9:15): 0.5% actual versus 0.5% actual, -0.1% prior (revised from 0.0%)
Capacity utilization, June (9:15): 81.7% actual versus 81.6% expected, 81.4% prior (revised from 81.3%)
July 18
CPI, June (8:30): 0.2% actual versus 0.1% expected, 0.7% prior
Core CPI, June (8:30): 0.2% actual versus 0.2% expected, 0.1% prior
Housing starts, June (8:30): 1.467M actual versus 1.45M expected, 1.434M prior (revised from 1.474M prior)
Permits (8:30): 1.406M actual versus 1.49M expected, 1.49M, 1.52M prior
Crude oil inventories (10:30): Gasoline -2.3M bbl
July 19
Initial jobless claims (8:30): 309K actual versus 310K expected, 309K prior (revised from 308K)
Leading economic indicators, June (10:00): -0.3% actual versus -0.1% expected, 0.2% prior (revised from 0.3%)
Philly Fed, July (12:00): 9.2 actual versus 14.0 expected, 18.0 prior
FOMC minutes, June (2:00)
End part 1 of 3
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