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world stock market, us stock market
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9/11/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ATW; BG; BHP; CNQ; FLIR; NOV
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 start higher, hang onto gains this time despite no news from Bernanke.
- Bernanke bypasses monetary policy issues
- Manpower survey shows companies planning to hire more than fire.
- Survey of small businesses does not see any credit crunch.
- TXN update pushes the upper end higher but also lowers the lower end
Stocks finish well this time though volume remains AWOL.
There was some more goods to get investors positive for another open. MCD again crushed same stores sales expectations (8.1% vs 4.4% expected) as it continues to redefine itself beyond the Big Mac, Quarter Pounder, and fries; WDC (disk drives) note that business was strong and that it had pricing power once more; ERIC was upbeat about its Q3 outlook.
Stocks started higher as they did Monday, and when the Bernanke speech was released at 11ET with no mention of monetary policy, stocks started giving back some of that solid early gain once more. NASDAQ made it up to the 90 day SMA and that was the barrier. The market came back and it looked to be more of the same, that is, another stronger start followed by selling. The financials were firm to start, but they started to waiver given the lack of policy commitment. Given it was a week ahead of the FOMC meeting, however, it was not too surprising Bernanke opted to enforce the Fed's 'blackout' period and avoid the issue outright. Again, it looked like more of the same.
The market bottomed over lunch, however. OPEC agreed to raise production by 500 bbl/day in November. Obviously stocks rallied in delight and energy faded, right? Kind of. Oil was flat to lower early in the session, but after the OPEC pronouncement it started to climb. Maybe it was because expectations were more for 1,000/day. Or, the commodity rallied because demand in the world is strong. In any event it rallied and closed at an all-time closing high at 78.23 (+0.74). Energy stocks rallied upside with the product, and that carried the market higher into the last hour. That took NASDAQ back over the 90 day SMA and SP500 held its move over the 200 day SMA. Looked positive.
Stocks tried one more time to give back the gain, however, as a sharp sell off hit in the last half hour. Some hedge fund news drove the selling as Pirate Capital (a name that instills confidence, huh?) announced it was closing two hedge funds to redemptions. That jerked NASDAQ lower 13 points in a flash as it gave up the 90 day SMA and SP500 threatened to give up the 200 day SMA. It looked to be a race to the close to see just how weak the close would be. As quick as the selling started, however, some buy on close orders pushed the market right back up to session highs. A sign of some strength at last.
Technical. That was not really the only sign, however, though it was a good one, i.e. the ability to hold the early gains, drive higher, fight off some late selling, and close near session highs. That is good, but the volume was again nowhere to be found. It still was not driving stocks higher, and that always leaves a move somewhat suspect.
Breadth was also decent in the 2:1 range. More importantly, SP500 was able to hold its move above the 200 day SMA. NASDAQ moved through its 90 day SMA and as a bonus closed above its 50 day SMA. On top of that the indices made a higher low in their fight to regain lost ground and chip back up through resistance. DJ30 continued the move off the 2006/2007 trendline where it showed a doji Monday. Leaders continued their testing of near support and they too then broke higher in the afternoon.
All positives showing excellent action. Still the move remains rather fragile. Low volume shows there is not a landslide of buyers. Thick resistance is still immediately overhead, particularly for SP500 and DJ30. Enough to keep the doubt alive, and that is always a positive. Leadership continues to set up and move higher, and for now that is what is pushing the market, though the action remains quite volatile.
THE ECONOMY
Manpower survey shows plans to hire, small business not worried about a credit crunch.
The Friday jobs report finally gave ADP something to boast about. Recall it typically is way off but it finally got closer though it still overestimated jobs by 42K. Nonetheless it likely felt a bit better about the results from a forecasting perspective after forecasting low numbers for several months. Proof again that even broken clock is right twice a day.
We said we felt that Friday report was an anomaly given it is out of line with about every other leading indicator that shows continued growth. Not great growth, but growth. Tuesday Manpower released the results of a survey that showed 21% of employers surveyed planned on increasing staff in Q4. Our first reaction was 'that is not very much,' but then again, only 9% planned layoffs in Q4. A significant differential and Manpower seemed to believe the 21% figure was quite good given the history of the survey.
Plans to hire are vastly different from actual job creation in that the data is fresher. It is still jobs related, however, so it is not really a leading indicator pointing to happy times once again. Nonetheless it shows continued strength in the jobs market as you would expect in an economy that recovered from a mid-cycle slowdown and started a new modest expansion. The jobs report reflects the slowdown from second half 2006 and Q1 2007. The Manpower survey shows plans for the future as the economy picks up some steam. It is telling that even after the credit issues and housing problems employers are still looking to hire.
NABE released a survey of its own Tuesday and contrary to what many pundits on the financial stations are pushing regarding the US economy, the report indicated that many small business owners are upbeat about the future. Indeed, there was no worry or indication of any credit crunch impinging upon business.
Of course the credit crunch is more than just the ability to obtain funds from the bank you have a relationship with. It entails the corporate paper market, and that is the realm of the larger corporations. Thus the small companies would not feel this impact, at least directly. The indirect impact may be still to come if the Fed cannot thaw out the CP and other aspects of the credit market. Again, there is $128B in commercial paper coming up next week. That will be a good test of the status of the credit market.
THE MARKET
MARKET SENTIMENT
VIX: 25.27; -2.11
VXN: 27.52; -2.42
VXO: 24.96; -2.57
Put/Call Ratio (CBOE): 1.06; -0.1. Still above 1.0 on the close as the market posted a gain. There are still some sellers out there that have not capitulated, and that is good and bad. Good from the sentiment point as that is a contrary indicator. Bad from the technical aspect because the move higher has not garnered any strong volume.
Bulls: 42.9%. Up again from 41.7% and 40.6% before that, the low on this last round of selling. Wanted to see it crack into the thirties on this leg to really show some negativity. Still a good drop from 53.9% 7 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 flat for a third straight week. Bearishness is not falling as the market recovers; just pondering what it all means. Strong run from 18% just 7 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: +38.36 points (+1.5%) to close at 2597.47
Volume: 1.782B (-1.32%). Lower and still well below average as NASDAQ moved up through some resistance. Not what you would call an authoritative move.
Up Volume: 1.473B (+745.077M)
Down Volume: 284.957M (-748.526M)
A/D and Hi/Lo: Advancers led 2.24 to 1. Solid breadth returns to the upside though not blowout. Perhaps that will come when some strong upside volume returns.
Previous Session: Decliners led 1.81 to 1
New Highs: 30 (+17)
New Lows: 50 (-24)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher to the 50 day EMA and then moved on through. It took out the 90 day SMA (2588) and the 50 day SMA (2595) but then gave them up in the last hour sharp dip. With the sharp snap back up it recaptured those levels. It is now at some resistance at 2600, but really needs to get past 2650 to shake off all of that congestion since June. It was almost there to start September when the jobs report gapped it lower. It is rebuilding and still in the reverse head and shoulders pattern.
SOX (+0.82%) continued higher on more good news in the sector though it was no blowout session. It cleared its 90 day SMA but then gave it up on the close. Still in its pattern, something of a modified double bottom/reverse head and shoulders base. After hours TXN disappointed with its update. It raised the lower end of the revenue range but lowered the upper end. It lowered the lower end of the earnings range (0.42 versus 0.46) but raised the upper end modestly (0.53 versus 0.52). It was lower on the initial reaction and it got worse as the evening session wore on (closed at 35.72, after hours it was 34.95).
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +19.79 points (+1.36%) to close at 1471.49
NYSE Volume: 1.305B (-2.82%). Lower volume here as well as the NYSE indices pushed higher and made a higher low as well. Still no conviction in this trade.
Up Volume: 1.098B (+679.039M)
Down Volume: 199.177M (-700.519M)
A/D and Hi/Lo: Advancers led 2.72 to 1. Solid breadth as the small caps with their energy and metals helped push the breadth higher.
Previous Session: Decliners led 1.57 to 1
New Highs: 35 (+13)
New Lows: 16 (-48)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps had some help from financials early and moved up through the 200 day SMA (1461) where they stalled Monday. Already at the next resistance point at 1475 but made a higher low above the late August interim low, and that puts it in position to move through next resistance. To really put this behind it, SP500 needs to clear 1500, taking out the early August high and the early September high.
SP600 (+1.65%) rebounded and is trying to make a higher low (on the close) as well, but it remains in a thick range of ice on up to 423 - 425. Lots of ground to recover and the small caps simply don't have the backing they had back in 2006, and that is because everyone is looking for stocks with the global reach, i.e. that can tap into that global boom even as the US growth moderates.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 lagged NASDAQ and even SP500 some in terms of percentage move, but its action was solid. After showing a doji at the July 2006/March 2007 trendline Monday, it bounced up off that support for the second straight time. Volume was lower so no accumulation, but it bounced where it needed to and now it is again in position to start breaking up that resistance from 13,250 (which it closed above Tuesday) to 13,692 from the June twin peaks. Before that, 13,500 is a key point as that is where it bumped to start September and then fell on the jobs report. As you can see, still a lot of work ahead, but it is positioning itself to make the move.
Stats: +180.54 points (+1.38%) to close at 13308.39
Volume: 200M shares Tuesday versus 221M shares Monday. Still no volume as the blue chips make an important higher low to take on resistance.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Bernanke is in the bag and now the market waits on what kind of rate cut the Fed delivers. In the interim there is the TXN update where it narrowed the range but not necessarily in a positive manner, particularly judging from the after hours response. Many traders we talked with, however, indicated this was a non-event for the market overall because it is in the same vein as TXN has delivered before. We will see. There did not seem to be much collateral damage with INTC, AMD and others quite upbeat about their quarters.
That leaves crude oil inventories on Wednesday, and with OPEC in the books already, that likely won't have too much impact on the market. The key for Wednesday is how the market reacts to the Tuesday move. The indices are in the process of breaking up the overhead resistance, and each upside move has the potential to bring the sellers back in. The support under the entire market right now is the Fed and its shift in bias, its 'standing ready' position, and the belief it is going to cut rates on Tuesday. 25BP is already baked in; if it does not deliver more we could see some backing and filling, and that means watching to see how far that goes and if the sellers throw in and try to take it lower once more. For now the guessing game keeps the sellers away. When guesses become fact or get close to becoming fact, then the sellers will be emboldened to give it another shot.
There are still many stocks moving higher in continuing runs as well as in new breaks higher from bases or good tests. With the indices making some higher lows we continue looking at solid stocks to participate in the move. We have many open positions and if we see laggards as the market moves higher we will cull them and focus on the leaders making new moves. That is what we have done the past week with current positions that made good tests and set up new buys. That is a continuing process as we focus our money on the stronger stocks.
At the same time, as we get another good break to the upside we will start seeing stocks peaking on the interim move. We will look to take some interim gain on such a move both options and with stock when we get some decent gain built in. Taking some interim gain does a number of things. With options it puts money in the bank with respect to a time-limited security. It raises cash for some other plays that may be ready to take off while the one we take some gain on is ready for a breather. It also lets us continue with a clear head as we then don't hang on every gyration in the market.
In sum, this move is far from perfect with its low volume and the NYSE indices under a range of overhead supply (a.k.a. resistance); any shock along the lines of the jobs report could scuttle the move just as it did the last attempt when SP500 was up near 1490. With good leadership moving well and more setting up to move higher as well, however, the market is building a solid foundation. We will continue to participate in that move.
Support and Resistance
NASDAQ: Closed at 2597.47
Resistance:
2634.60 is the June peak
2644 is the October/December trendline
2673 is the early July high
2685 is the November/December/February up trendline
2712 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:
The 50 day SMA at 2595
The 90 day SMA at 2588
The 50 day EMA at 2574
2531.42 is the February high (post-2002 high); 2525 intraday
The 200 day SMA at 2514
2509 is the January 2007 high
2450 is some price support from November and December 2006
2412 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 1451.70
Resistance:
1475 from peaks in December 1999 and January 2000
The 50 day EMA at 1475
The 50 day SMA at 1484
1490 is the July 2006/March 2007 up trendline
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:
1461.57 is the February 2007 high.
The 200 day SMA at 1460
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 13,308.39
Resistance:
The 50 day EMA at 13,327
The 90 day SMA at 13,443
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)
The August high at 13,696
The July high at 14,022
Support:
13,121 is minor support from the April peak
13,100 is the July 2006/March 2007 up trendline
The 200 day SMA at 12,928
12,845 is July closing low
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 10
Consumer Credit, July (3:00): $7.5B actual versus $9.5B expected, $11.9B prior (revised from $13.2B)
September 11
Trade balance, July (8:30): -$59.2B actual versus -$59.0B expected, -$59.4B prior (revised from -$58.1B)
September 12
Crude oil inventories (10:30): -3.97M prior
September 13
Initial Jobless claims (8:30): 325K expected, 318K prior
Treasury Budget, August (8:30): -$190.0B expected, -$192.6B prior
September 14
Export prices, August (8:30): 0.0% prior
Import Prices ex-Oil, August (8:30): 0.2% prior
Retail sales, August (8:30): 0.5% expected, 0.3% prior
Retail ex-autos (8:30): 0.2% expected, 0.4% prior
Industrial production, August (9:15): 0.3% expected, 0.3% prior
Capacity, August (9:15): 82.0% expected, 81.9% prior
Business inventories, July (10:00): 0.3% expected, 0.4% prior
Michigan sentiment, preliminary, September (10:00): 83.5 expected, 83.4 prior
End part 1 of 3
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