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us stock market, trade stock
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7/30/07 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: SPWR
Trailing stops: None issued
Stop alerts issued: GLF; GPOR; PCAR
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 Daily alert service you can sign up at the following link:
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SUMMARY:
- Took awhile but market finally held onto some gains.
- Market rallies decently in afternoon but shows relief bounce attributes.
- Now, how much relief is in this relief bounce
Relief bounce finally sticks.
After a hard week of selling the indices were set for something of a bounce, and early Monday they were set to do that. But the lack of any Monday M&A deals brought some sellers into the pre-market, sending the futures back down before the opening bell gave them a chance. Once more they came back, however, aided by some overseas gains to start the week.
Stocks started higher and added some more quick gains early on, but then sold right back to negative within the first hour as the upside confidence was akin to a kid with braces on his first date and moving in for the kiss. NASDAQ sold below the 90 day SMA where it found support last week as stocks wandered laterally at their lows for almost two hours. At least they did not continue the nasty slide lower, and that couple hours of lateral movement gelled enough to provide a floor to bounce from in the afternoon session, aided by a recovery in financials after MS' debt received an upgrade. It was not much of a bounce in the financials, resembling more of a dead cat bounce, but it was enough to prop up the other indices and allow an afternoon bounce to spread out.
Technically the indices close near their session highs and that is always a positive for the upside, but outside of that the attributes of the bounce all pointed toward a relief move. Volume was lower; breadth, while not bad on NYSE, was nothing to indicate a big reversal from sellers to buyers; many stocks made it up to support they just broke and stalled. Look up 'relief bounce' in the trading dictionary and you pretty much see the SP500's chart.
In sum, Monday did not change the character of the playing field from last week. We expected an upside test to start this week and Monday it did. As outlined above, there was not much power in it, and the real question is whether it can muster some more legs and continue this upside for another session or two to give a better shot at holding another downside leg in the vicinity of the prior test and to set up some quick downside plays a bit better.
Not a great vote of confidence in the move, but it doesn't deserve any yet. After that tail kicking last week the upside has to prove itself. There were some solid upside movers Monday such as SPWR, BG, and MA, and others such as NVDA and SNDK still look good. If they spread out to more of the market, great. The action Monday, however, has to prove itself further.
THE MARKET
MARKET SENTIMENT
VIX: 20.87; -3.3. Diving back down after the big spike Friday that took VIX over its June 2006 peak. Did its work near term and now the market has to work through its pullback and set up the next break higher after another test. Recall from last week's discussion: volatility typically spikes on that first leg and then settles down as the market works through its correction. Thus the fact that it fell today is nothing to worry about. It acted as you would expect.
VXN: 20.76; -2.42
VXO: 21.39; -3.7
Put/Call Ratio (CBOE): 1.16; -0.22. Not as much put activity, but still the sixth straight close over 1.0 and that is getting to the point of meaning something for a market bottom to try and start forming.
Bulls: 53.9%. Rose last week from 52.3%, continuing the move higher from 49.5% and 49.4%, but it is going to change quite a bit after this past week. Hit 56.7% 7 seven 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: 18.0%. Right at the lows for the past two months, falling sharply from 19.3%. That is what that breakout did. Dow below the 20% threshold level considered bearish. 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: +21.04 points (+0.7%) to close at 2583.28
Volume: 2.407B (-13.38%). Volume was down but still well above average . . . as it has been for two weeks. Lower on the bounce so not a lot of strength compared to the selling, however.
Up Volume: 1.575B (+1.067B)
Down Volume: 745.488M (-1.435B)
A/D and Hi/Lo: Advancers led 1.25 to 1. Pretty pathetic for any move, and even more so when stacked up against the hefty downside breadth in last week's selling.
Previous Session: Decliners led 2.46 to 1
New Highs: 69 (+4)
New Lows: 315 (+18)
NASDAQ CHART: http://www.investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ reached below its 90 day SMA intraday, tapping 2550 and basically in the lower half of its May/June range. It snapped back in the afternoon to hold the 90 day and make a good showing of setting up a bounce at this rather logical floor level. It showed the right price moves, but the volume and breadth was not of great character. A good start to a relief bounce, and as we are not expecting a sweeping recovery on this particular move, can't complain much. Just want NASDAQ to put in a good bounce for the week to set up a second test and have enough room to test without things getting out of hand on the downside. In other words, the more it bounces on this bounce, volume or not, it sets up a good solid test without it having to reach far below the prior July low to do establish a bottom.
SOX (+1.71%) was the holdout all session, sticking positive even when the other indices did not. Good hold, decent bounce, but it is not out of the woods at all.
SP500/NYSE
Stats: +14.96 points (+1.03%) to close at 1473.91
NYSE Volume: 2.031B (-9.05%). Very solid volume even if it was lower than the Thursday and Friday spanking. Solid but it was just a start. This kind of trade, however, tends to provide some more upside pop in a relief bounce, and that is what this market needs, i.e. at least another couple of days of upside as it rebounds.
Up Volume: 1.522B (+1.116B)
Down Volume: 492.701M (-1.357B)
A/D and Hi/Lo: Advancers led 1.7 to 1. Not bad when compared to NASDAQ as energy scratched out a rebound and helped push the rebound. Still pretty lame versus last week's downside breadth, however.
Previous Session: Decliners led 2.15 to 1
New Highs: 24 (+3)
New Lows: 431 (+31)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
As we expected, SP500 feinted toward the 200 day SMA (1449) early then rebounded before it got too close. That also kept it off the February peak (1465.30 closing), and on a test back you want to see a stock or index close at a prior peak before a base. You don't like to see it go back that far, but if it does that is where you want it to hold because if it does not then the action is really weak as it cannot hold the prior base either. Thus far it held where it absolutely had to and now it has that June low at 1484 and the 90 day SMA at 1498 that will be is next big tests on any further rebound it can muster.
SP600 (+0.93%) enjoyed a nice session as energy finally had a chance to take a breath after getting smothered the past month. In the end the small caps managed to just crack back above the 90 day SMA for their efforts. Not a lot of strength here. 423 is resistance on up to 425, and that is 11 points and a long haul for the small caps as they are the current unwanted step-children of the market.
DJ30
Similar to NASDAQ the blue chips dipped below the 90 day SMA on the low and then rebounded for a decent little gain. Holding at 13,250 on this last test that marks the June lows. It has to get through 13,692, the June peaks, to break up a head and shoulders that is trying to form. Those often look to set up and then never consummate. Given the weakness of late, however, this bears watching as the blue chips attempt this rebound.
Stats: +92.84 points (+0.7%) to close at 13358
Volume: 295M shares Monday versus 337M shares Friday. Not bad volume, still above average but not a total collapse in trade on the bounce.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
All of this leaves the market in position for more of a relief bounce, but as noted above, despite NASDAQ and DJ30 bouncing off the 90 day SMA, we don't expect anything more than a bounce higher to test last week's whipping. There is no economic data, but earnings season is in full swing. Investors, however, want some sense of easing credit issues, and the earnings had their shot before credit became an issue and they bobbled the opportunity. Now it will take time to work through the credit concerns, and we anticipate that means another test after this bounce.
We really want to get another couple of sessions at least out of this upside bounce. Sometimes you get a start and stop rebound; as long as they make progress we will let them, but if stocks don't show a lot more strength overall than they are now, on the whole we will have to look at closing short term positions as they make the test of resistance and stall out. We still see some strong upside, and we are looking for low volume bounces to resistance to give us some downside plays if this relief bounce proves to be just that and stocks start to roll over again.
Support and Resistance
NASDAQ: Closed at 2582.28
Resistance:
2601 is the October/December trendline
2601 is the mid-May intraday peak.
The 50 day EMA at 2616
The 10 day EMA at 2631
2634.60 is the June peak
2657 is the November/February up trendline
2673 is the early July high
2725 is the July high
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2568 is the 90 day SMA
2531.42 is the February high (post-2002 high); 2525 intraday
2523 was price resistance November 2000
2509 is the January 2007 high
The 200 day SMA at 2487
S&P 500: Closed at 1473.91
Resistance:
1475 from peaks in December 1999 and January 2000
1490.72 is the early June closing low
The 10 day EMA at 1504
The 50 day EMA at 1512
1534 is the early July high
1539 is the mid-June intraday high
1541 is the early June high.
1543 is the late November to February up trendline
1553 intraday high from March 2000 is the all-time index peak
1563 is the upper channel line from October/December 2006
Support:
1461.57 is the February 2007 high.
1466 is the July 2006/March 2007 up trendline
1440 is the mid-January high
The 200 day SMA at 1448
1427 represents some interim peaks from December 2006
Dow: Closed at 13,358.31
Resistance:
The 50 day EMA at 13,522
13,555 is the November/February up trendline that marks the lower channel.
The mid-May peak at 13,556
13,600 is the upper channel line in the November/February channel
The 10 day EMA at 13,610
The early July peak at 13,671
The mid-June high at 13,689
The early June high at 13,676 (closing), 13,692 (intraday)
The July high at 14,022
Support:
The 90 day SMA at 13,266
13,121 is minor support from the April peak
12,796 at the February 2007 high
The 200 day SMA at 12,756
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 31
Personal income, June (8:30): 0.5% expected, 0.4% prior
Personal spending, June (8:30): 0.1% expected, 0.5% prior
Core PCE, June (8:30): 0.2% expected, 0.1% prior
Employment cost index, Q2 (8:30): 0.9% expected, 0.8% prior
Chicago PMI, July (9:45): 58.5 expected, 60.2 prior
Construction spending, June (10:00): 0.2% expected, 0.9% prior
Consumer confidence, July (10:00): 105.0 expected, 103.9 prior
August 1
ISM Index, July (10:00): 55.5 expected, 56.0 prior
Crude oil inventories (10:30)
August 2
Initial jobless claims (8:30): 310K expected, 301K prior
Factor orders, June (10:00): 1.0% expected, -0.5% prior
August 3
Non-farm payrolls, July (8:30): 135K expected, 132K prior
Unemployment rate, July (8:30): 4.5% expected, 4.5% prior
Hourly Earnings, July (8:30): 0.3% expected, 0.3% prior
Average workweek, July (8:30): 33.9 expected, 33.9 prior
ISM Services, July (10:00): 59.0 expected, 60.7 prior
End part 1 of 3
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