|
|
us stock market, trend trading stock
* * * *
9/04/07 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: AAPL; DE; DRYS; FTI
Buy alerts: GRMN; RADS; RVBD; VDSI
Trailing stops: AGU (took the October options); BCSI
Stop alerts issued: CAT
SUMMARY:
- September opens up with a gain as new money & a lack of sellers make for easy gains.
- ISM not flashy, but steady.
- Still waiting for September to show up.
September picks up where last week left off.
The analysts were active to start the month, returning to their desks after the official end of summer. MER cut the banks (BAC, WFC, PNC), INTC and URBN were upped, while RIMM was downgraded. First of the month shuffling. It didn't impact futures much. They were weak all morning as it looked as if September was going to live up to its usual rough time for stocks. Futures, however, recovered all morning to the open, and after the bell stocks headed higher.
The continued higher into the ISM and construction numbers. Construction was -0.4%, well off the 0.1% gain expected, but ISM was basically inline: lower but still showing a good expansion. That was apparently the right mix, the one the market has reacted to of late, i.e. not tanking but not the kind of strength to turn the Fed back to inflation fighting mode. Of course after changing its bias the Fed had to come out and remind everyone it was still thinking of inflation. Thus Kohn was out midday doing just that. Didn't slow the market down, however, as it was focusing again on the data and the fact the Fed had changed its bias, not some rather hollow finger wagging from a perennial inflation hawk.
Stocks rallied on into the afternoon with NASDAQ moving past its June peak. Energy and technology, the leaders from last week, were taking the point again, gaining strength into the last hour. Then with a half hour left the bids stopped and some profit taking started. After 4 consecutive up sessions on NASDAQ that is expected. Indeed we were doing some of that as well, anticipating some selling after such a hard run. That closed NASDAQ back below the June high, but no real damage was done in the late fade from the session highs.
Technically the stock made another solid upside push and held most of its gains. Once more there were no sellers willing to step in ahead of the upside. Some new money for the start of the month gave stocks a bid, particularly those we saw get the money to end last week, primarily energy and technology. Breadth was solid though not as great as on Friday (2.2:1 NYSE, 1.8:1 NASDAQ).
Volume was better on NASDAQ, moving up to 1.9B shares. That was solid but well off the levels in the July and August volatility. Of course that was an aberration so you want to adjust the volume back to pre-volatility to get a bit better read on volume. Even with that volume came in a bit light as average trade on NASDAQ was 2B. Thus volume was better to start September (at least for NASDAQ), but still light in the bigger picture. One thing you can say about it and that is most of the money is moving into technology as that is where the volume is.
As for the charts, NASDAQ pushed past its June intraday high as noted, but it could not hold all of that move to the close. SP500 and DJ30 both made inroads into their resistance ranges, but both also had trouble with the 90 day SMA, stalling there as SP500 did in early August. Definite improvement across the board with NASDAQ showing some real strength. The issue whether the volume that is going to come in does so on the upside and can thus drive the indices through this resistance.
THE ECONOMY
ISM lower but expanding as some of its 'internals' improve.
The 52.9 reading for August was basically in line with the 53.0 expected. Yes it was down from the 53.8% in July, but still solidly in expansion mode after dancing with sub-fifty readings in November 2006 and then January 2007 during the slowdown that started the second half of 2006.
The components actually improved in some aspects. Production rose to 56.1 from 55.6, employment bounced to 51.3 from 50.2, and export orders rose to 57.0 from 56.5. Prices dropped sharply to 52.5 from 65.0, continuing the decline from 65.0 the prior month and 73.0 in April.
Nonetheless, it was the slowest reading since emerging from that slowdown in 2006. It was not, however, a sharp drop off into the abyss. The index hit 56.0 in June, the peak of the latest run from that January sub-fifty reading that marked the low of the 2006 slowdown. A bit of give and take is normal in a run either upside or downside. Toss in some credit issues and worries over sub-prime and you have a modest slowdown, but at this stage nothing that takes the economy down or indeed reverses the trend of gains following the January read. Indeed, this reading is in line with the ECRI prognostication of continued though not stellar economic growth.
THE MARKET
MARKET SENTIMENT
VIX: 22.78; -0.6
VXN: 24.51; -0.02
VXO: 22.12; -1.46
Put/Call Ratio (CBOE): 1.03; -0.03. Another 1.0+ reading on an upside move, an indication that more shorts were covering just as they did Friday on that gain.
Bulls: 41.7%. A rebound in the market, a rebound in bullishness, up from 40.6%. Looks as if 40.6% is the low barring a plunge back down to test the prior August low. Wanted to see it crack into the thirties on this leg to really show some negativity. Still a good drop from 53.9% 6 weeks back. Hit 56.7% hit in June. The 55% level is considered bearish, and it topped that level on this last run. 60% in December 2006. For reference it bottomed in the summer 2006 near 36%, and 35% is considered bullish.
Bears: 37.4%. Held steady at this level for the second week after a strong run from 18% just 6 weeks back. This tops the June 2006 peak. 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: +33.88 points (+1.3%) to close at 2630.24
Volume: 1.889B (+20.41%). Substantial gain in volume that pushed trade up to the Thursday level that was elevated itself compared to the prior upside volume for last week. That still leaves volume below average even when compared to pre-July/August levels. That likely will not last as the month progresses and more managers and traders get back to work.
Up Volume: 1.6B (+283.997M)
Down Volume: 273.82M (+45.434M)
A/D and Hi/Lo: Advancers led 1.85 to 1. Decent but hardly strong breadth. Most of the NASDAQ move was centered in the NASDAQ 100 as large cap techs such as AAPL and NVDA led techs higher.
Previous Session: Advancers led 2.45 to 1
New Highs: 103 (+23)
New Lows: 48 (-7)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ continued its recovery with an impressive 130 point move after making a higher low at 2500 last Tuesday. Volume has not surged, but it was up on Thursday and it was up on Tuesday as NASDAQ cleared the early August high and intraday topped the June peak (2635) before sliding back some at the close. Definitely the upside leader in this move though Tuesday the gains were dominated mostly by large caps. The volume is better but still overall light, and breadth narrowed. You can find fault with the move but for now it is enjoying strong leadership.
SOX (+2.20%) barreled back up to the May, June, and early August high at 510ish. It is trying to breakout from a short double bottom as it moved past 500 with ease and is already testing the next resistance. About as quick a turnaround as you can have.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +15.43 points (+1.05%) to close at 1489.42
NYSE Volume: 1.37B (-1.64%). Volume remained well below average even with the turn to September and some new money being put into play. That is a rather ominous sign in the bigger picture simply because low volume rallies typically have issues when they run out of steam.
Up Volume: 1.073B (-189.925M)
Down Volume: 291.744M (+171.107M)
A/D and Hi/Lo: Advancers led 2.28 to 1. Solid upside energy was positive and the financials caught some fire.
Previous Session: Advancers led 5.86 to 1
New Highs: 61 (+19)
New Lows: 53 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps posted the third gain in four sessions as this index made a lower high as well last week off the Tuesday selling. The move pushed the index through the 50 day SMA but on the high SP500 once more tapped at the 90 day SMA (1499) and faded back. It failed at roughly the same point in early August as SP500 tried to move through the June lows at 1490-1495. Lots of traders are looking at that level as a sticking point for SP500, particularly given the low volume on the rebound. Key level for the index without a doubt, and it will need more September volume to push it through . . . as long as that volume is on the upside. Thus far the volume has skewed in favor of the upside but again, that has been low volume.
SP600 (+0.70%) was up as well but it gave back half of its move that took it over the August highs. On the close, however, it was right back at that level, coming just below the February peak (422 on the close) as it closed the session. Again, this is the area it has to get over to make a clear break.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips showed some strong volume (just below average) as DJ30 rallied again. A lot of that trade, however, was due to HD as it sold off on high volume. The Dow banged into some resistance at 13,500 and then faded back to close at the 90 day SMA. As with SP500, it is still in the thick of it, having rebounded into the teeth of the May to July trading range. It made its own higher low as well, but it has to keep proving itself as it tries to recover the ground lost when it fell below 13,250 and this thick band of resistance it is currently cutting into. It is likely to test back from the 13,500 level to feel that 13,250 that was an important support point in June.
Stats: +91.12 points (+1.3%) to close at 13448.86
Volume: 262M shares Tuesday versus 235M shares Friday. Volume pushed up close to average for the first time in three weeks, but as noted above, it was a lot of HD and its troubles on the session. Thus it is hard to call this a solid accumulation session.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
It is a short week and thus far it looks as if the a lot of the managers see no reason to come back in just yet as the market makes a low volume rebound. When they all come back they could very well take some gains off the table or otherwise sell into the strength. NASDAQ looked solid, but SP500 and DJ30 both tapped at prior resistance and came back some into the close. After three out of four up sessions it would be normal to take a breather no matter what kind of market you were in.
That is one reason we were taking some gain off of the table as stocks rallied higher Tuesday; string together several solid gains and gains on low volume to boot, and it is not bad policy to bank some gain. If we get another gain tomorrow we will look at taking some more off the table on stocks that have put in a 10% or better move and options that are in the 50%+ range for gains. Never hurts at all and it still leaves us exposure to the upside if these indices continue to defy the odds and hold onto the low volume rally.
Some people ask why we focus so much on the volume on this move; why not just enjoy it. Well, we are doing both. I watch the volume because it is a gauge as to how strong the upside is. Volume that is lower than prior selling is always suspect. You can look at the July and August selling volume as an aberration tied to a specific cause and thus move that out of the equation (but you do so at a risk). Even if you do that, however, the recent upside trade volume is still below average compared to the pre-July/August days. Typical low volume to end summer, but that does not make it good volume just because you put that asterisk there.
The September volume boost has yet to hit, and we can anticipate the sellers will take a shot at it when they come back if for no other reason than to book some gains as noted above. The question is whether it is just a test back to make another higher low and then get some upside volume of significance.
The positive thing is there remains impressive strength in energy and technology. The financials showed some solid price gains as well though once more the volume was low on the move higher. There was a lot of pessimism on the selling as the sentiment indicators hit extreme levels. There was high volume selling, a high volume reversal, some Fed action, a rally, and a modest test. The things missing: a second test (usually occurs but not an absolute necessity) and some volume on the upside.
Now there is some volume in the techs and the energy sector, and of course, we have not held off from participating in the move higher. At each milestone or resistance point, however, we have to re-evaluate; it is an ongoing process. We still like these two sectors as well as some of the healthcare. We are even looking at some financials, but that may take a leap of faith that we just don't quite have yet. As always we will continue watching them and other sectors, and if they give us good entry points we will continue to participate. As we said the past couple of weeks when we were buying into the likes of DO, OIH, IBM, NVDA, SLB, AAPL etc., we may feel the market should be doing something else, but it tells us the way it is going to be.
Support and Resistance
NASDAQ: Closed at 2630.24
Resistance:
2634.60 is the June peak
2638 is the October/December trendline
2673 is the early July high
2677 is the November/December/February up trendline
2705 is the November/February up trendline
2725 is the July high
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2601 is the mid-May intraday peak.
The 90 day SMA at 2586
The 50 day EMA at 2572
2531.42 is the February high (post-2002 high); 2525 intraday
2509 is the January 2007 high
The 200 day SMA at 2510
2450 is some price support from November and December 2006
2407 is that old trendline from August 2004 to May 2005
2400 is price support
2386 is the August intraday low
S&P 500: Closed at 1489.42
Resistance:
The 50 day SMA at 1488 is cracking
1490.72 is the early June closing low and early August peak.
1534 is the early July high
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:
1487 is the July 2006/March 2007 up trendline
The 50 day EMA at 1477
1475 from peaks in December 1999 and January 2000
1461.57 is the February 2007 high.
The 200 day SMA at 1459
1440 is the mid-January high
1427 represents some interim peaks from December 2006 and the early August low
1406 - 1407 from March 2007 and November 2006 interim peaks
1389 from October 2006 interim peak
1375 - 70 from March 2007 low
1370 is the August intraday low
Dow: Closed at 13,448.86
Resistance:
The 90 day SMA at 13,438
The mid-May peak at 13,556
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)
13,730 is the November/February up trendline that marks the lower channel.
The July high at 14,022
Support:
The 50 day EMA at 13,345
13,121 is minor support from the April peak
13,055 is the July 2006/March 2007 up trendline
The 200 day SMA at 12,904
12,796 at the February 2007 high
12,518 is the August intraday low
12,500 is the December 2006 peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
September 4
Construction spending, July (10:00): -0.4% actual versus -0.1% expected, 0.1% prior (revised from -0.3%)
ISM Index, August (10:00): 52.9 actual versus 53.0 expected, 53.8 prior
September 5
Pending home sales, July (10:00): 5.0% prior
Crude oil inventories (10:30): -3.48M prior
Fed Beige Book (2:00)
September 6
Initial jobless claims (8:30): 330K expected, 334K prior
Productivity revised, Q2 (8:30): 2.4% expected, 1.8% prior
ISM Services, August (10:00): 54.5 expected, 55.8 prior
September 7
Non-farm payrolls, August (8:30): 110K expected, 92K prior
Unemployment rate, August (8:30): 4.6% expected, 4.6% prior
Hourly earnings, August (8:30): 0.3% expected, 0.3% prior
Average workweek, August (8:30): 33.8 expected, 33.8 prior
Wholesale inventories, July (10:00): 0.5% expected, 0.5% prior
End part 1 of 3
|
us stock market
trend trading stock
|
