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us stock market, trade stock
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9/18/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: BIDU; FTI; GRMN (some options); BCSI (Interim)
Buy alerts: GEO; PCU; POT; TKC; AMX; DRYS; EXM; JKHY; CMTL
Trailing stops: AAPL (options); IBM; BLUD; CROX; ANSS; GPRO; FLIR
Stop alerts issued: AMD; CROX
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:
- Market gets what it wants, knows what to do with it.
- Bernanke the renaissance Fed chairman
- Fed puts most of the market back into play.
Market likes a 50 - 50 call.
The PPI overall was quite low (-1.4%, -0.3% expected) while the core was a bit hotter (0.2%, 0.1% expected), but it was enough to engender the typical pre-FOMC decision upside move. Energy fell 6.6% with gasoline down 13%; that is not going to last but it sure made the headlines look good.
Stocks also moved higher as the shorts covered a bit ahead of the FOMC. That is normal as positions are squared just in case the Fed does something unexpected. Hmmm. As it turns out that was the prudent move Tuesday. Stocks had rallied but were fading back towards flat when the news came: 50 BP in the Fed Funds rate, 50 BP in the Discount rate. The Fed also commented about inflation being an issue, reinserting that into the statement, but at the same time noted that inflation had moderated and there were real risks to the economy posed by the credit and mortgage issues. Fed cares, Fed cuts, Fed stands ready however if inflation tries a comeback.
In short the Fed came to play ball and not split hairs. That was the right mix for the market as the indices jumped higher, paused for about a half hour to consider the ramifications, then rallied higher into the close.
The technical action was as you would expect given the circumstances: aces. Volume surged higher. It was below average still, but much stronger and above the level of 'pre-selloff' volume. Not huge trade but it did have to make up time after the FOMC meeting given trade was light ahead of the announcement. It did an admirable comeback job. Breadth was huge at almost 9:1 on NYSE with nearly all of the SP500 trading higher. Of course the indices broke out with SP500 crushing the 1490 to 1500 resistance level. NASDAQ cleared the June peaks and the early September peak where it failed to start the month. The Dow did the same, clearing the August high and the June peaks.
The significance of those moves? Whenever an index clears old highs, particularly twin peaks such as in June, that shows the buyers are now strong enough to beat out the old sellers at that level. Add on the higher lows the indices made the past three weeks and you have the picture of a strengthening market that only needed a trigger to send it higher. It of course got its trigger.
Leadership was widespread though it was hard to tell who was leading the mad rush higher. If you look at the biggest gainers, however, you could see the same leaders pre-Fed making big gains: FCX, RIO, SLB, CMED, BIDU, MON, etc. Many stocks moved higher and new areas found buyers, but some of the best moves were in the same old stocks that were moving well ahead of the Fed. No complaints. The more leadership the better as it increases the opportunity to get into fresh breakouts.
THE ECONOMY
This is not your Greenspan's Fed.
The divide is quite clear. Monday Greenspan indicated if it were he, a 'go slow' approach with rate cuts would be the case given the macro economic conditions. That was the safe bet, the one in the traditional Fed playbook. It is the one that Greenspan always took with rate cuts unless something catastrophic such as 9-11 hit.
Bernanke, however, did what he did back in August 2006 when he paused even as inflation measures were still rising. Greenspan would not have paused because he could still see inflation. He talked about things being too late if you could see inflation, but you can bet that when he actually saw it he would not move to cut one bit. Bernanke on the other hand, plays similar to a chess match, looking several moves ahead as he plans his strategy.
Thus while the Fed playbook says no cut or a nominal cut, Bernanke took the position it was the Fed's job to prevent a problem instead of reacting to it. The Fed threw in some language about inflation risks again but that was just to let everyone know it was considering all angles. It is in the cutting posture to stave off economic problems in advance and it is going to stay that way through the end of the year because it takes some time to work out the credit issues. It was a good start of confidence injection, however, to cut the 50 BP.
We should know something rather quickly, however, as financial markets moved significantly in response to the action. The 2 year dove lower as the yield curve turned sharply steeper. How the commercial paper and mortgage backed securities markets respond over the next month will be key. They were improving with the Fed injections but needed more. The Fed is watching how the credit market loosen as its guide because it knows that if this problem is not solved there are many more that result. That means the Fed is in the prevention mode and will remain there until it sees the credit markets loosen significantly.
THE MARKET
MARKET SENTIMENT
VIX: 20.35; -6.13
VXN: 23.28; -5.46
VXO: 20.75; -5.82
Put/Call Ratio (CBOE): 1.04; 0.
Bulls: 48.3%. Major surge in bullishness, up from 42.9% and 40.6% as the low for this round. Wanted it in the thirties but did not make it. This is down from 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: 31.0%. Major drop in bears, plunging from 37.4% where it held for 3 weeks. It is still well up from the very low 18% hit 8 weeks back, and it topped the June 2006 peak (36%). That June peak eclipsed 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: +70 points (+2.71%) to close at 2651.66
Volume: 2.117B (+47.67%). Best volume since mid-August, and though it was below average on the move it as low heading into the FOMC meeting. Thus it was on the comeback trail in the afternoon and thus was very good volume.
Up Volume: 1.903B (+1.6B)
Down Volume: 185.543M (-937.93M)
A/D and Hi/Lo: Advancers led 3.67 to 1. Very solid advance.
Previous Session: Decliners led 2.42 to 1
New Highs: 78 (+53)
New Lows: 36 (-25)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Impressive breakout from the reverse head and shoulders and a move that takes techs over the June peaks at 2635 and the early September high at 2645. That basically puts NASDAQ above everything but the prior high at 2725 with a big accumulation move higher.
SOX (+2.84%) came to life and rallied to the 90 day SMA, but it still has a mountain of overhead resistance. The Fed decision will help it and we will simply have to see if it will give the chips enough money to break through the resistance.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +43.13 points (+2.92%) to close at 1519.78
NYSE Volume: 1.653B (+49.36%). Same as NASDAQ, rallying back up near average and indeed moving above average as measured prior to the 'sell off' volume in the August dips. Very solid accumulation.
Up Volume: 1.595B (+1.283B)
Down Volume: 53.494M (-720.954M)
A/D and Hi/Lo: Advancers led 8.73 to 1. Massively positive upside breadth. That is fitting given how strong the session was in comparison to the selling breadth in August. Downside strength then and upside strength now.
Previous Session: Decliners led 2.16 to 1
New Highs: 131 (+103)
New Lows: 15 (-33)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps rid themselves of some of their own demons as well as SP500 cleared the August and September peaks as well as the June lows. That broke through that initial range of resistance through 1512 and now it is looking at the June peaks at 1535 as the last resistance prior to the old high (or not so old) at 1556. Looking solid and the next test runs from 1525 to 1535. With the Fed delivering this kind of support it should make short work of those though it may take some consolidation after a strong run up to test those levels. The main question for SP500 is whether it continues to get help from the financials that were raging higher on the heels of the Fed rate cut.
SP600 (3.74%) was the gains leader on the session. Nothing like the Fed stepping in with the intent of staving off a downturn to push the growth needy small caps back up. They cleared the August and September highs, moving to the 90 day SMA on the close. Still resistance at 432 and still has its work cut out for it, but it is making a good start at doing so.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The Dow blew past the August peak as well as the June highs as it posted a large gain on above average volume. After a couple of higher lows this breakout over that resistance, all in one move, was obviously impressive. Not a whole lot more you can say about the move other than it will need to take a breather as it approaches the old high near 14,000.
Stats: +335.97 points (+2.51%) to close at 13739.39
Volume: 277M shares Tuesday versus 169M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
With a 50 BP rate cut the Fed put most of the market back in play from the small caps to the financials to the techs to the global stocks. Tuesday afternoon was a big party in celebration. The questions are already rising about whether the Fed is doing a 'one and done' cut or is going to hold in the cutting mode until it cures the ills it sees. It would like this cut to be a one and done but the very reason for cutting, i.e. preventing an economic downturn, will drive the next moves. The credit markets need to respond and the Fed has to see markets working as they should before it is going to change the course it just took.
That means stocks will bask in the glow of a friendly Fed as long as they can figure out that the Fed is going to stay friendly. There will be some second guessing and guilt feelings after such a strong run higher, and you will hear those saying the Fed did the wrong thing or that the Fed has set its rate cutting floor with such a large cut. That likely won't stop the market from doing what it is going to do, i.e. test those prior highs before too long. Sure it will pause to consolidate and think things through, particularly as new data hits; after all, the Fed said it was data dependent on its next move.
With that in mind there is the CPI due out before the Wednesday open, and it has yet to fall into the Fed's comfort zone on this decline, unlike the PCE. Of course the Fed knew that going in and it also likely knew what the Wednesday report says at its Tuesday meeting. Whether it was lower than expected or worse than expected, it did not stop the Fed from making its rate cut, and for the rest of the year it is not going to push the Fed into any kind of tightening mode.
That means we can 'play the field' so to speak with respect to new plays. We have focused on the 'global' stocks with great success during this uncertain time, and we will not stop doing so. Just because the Fed cut rates does not make these leaders no longer good investments. It does, however, open up the game to other solid stocks that were in waiting but just did not have as clear a future. Money will flow their way and that will open them up to buys.
After such a party binge Tuesday we will likely need to see some tests of breakouts and such before we get a lot more entry points. We let our positions run higher for us after the Fed announcement, and after the initial surge we took some positions in some new breakouts. We will continue to look for those but as always we will be patient and wait for the move to set up and show itself. We have many solid positions making us great money and there is no need to push a new position that is not quite ready. We will birddog them as they set up, and when they show us the moves we will move as well.
Support and Resistance
NASDAQ: Closed at 2651.66
Resistance:
2673 is the early July high
2688 is the November/December/February up trendline
2718 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:
2634.60 is the June peak
The 90 day SMA at 2591
The 50 day EMA at 2580
2531.42 is the February high (post-2002 high); 2525 intraday
The 200 day SMA at 2518
2509 is the January 2007 high
2450 is some price support from November and December 2006
2418 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 1519.78
Resistance:
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:
The 90 day SMA is at 1496
1494 is the July 2006/March 2007 up trendline
1490.72 is the early June closing low and early August peak.
The 50 day EMA at 1477
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1463
1461.57 is the February 2007 high.
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 13,739.39
Resistance:
The July high at 14,022
Support:
The August high at 13,696
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
The 90 day SMA at 13,452
The 50 day EMA at 13,352
13,165 is the July 2006/March 2007 up trendline
13,121 is minor support from the April peak
The 200 day SMA at 12,959
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 17
New York Empire State Index, September (8:30 a.m.): 14.70 actual versus 18.0 expected, 25.1 prior
September 18
PPI, August (8:30 a.m.): -1.4% actual -0.3% expected, 0.6% prior.
Core PPI, August (8:30 a.m.): 0.2% actual versus 0.1% expected, 0.1% prior
Net Foreign purchases, July (9:00): $19.2B actual, $97.3B prior (revised from $120.9 billion)
FOMC policy statement (2:15 p.m.)
September 19
CPI, August (8:30 a.m.): 0.0% expected, 0.1% prior
Core CPI, August (8:30 a.m.): 0.2% expected, 0.2% prior
Housing Starts, August (8:30 A.M.): 1.36 Million Expected, 1.38 Million Prior
Building permits, August (8:30 a.m.): 1.35 million expected, 1.373 million prior
Crude oil inventories (10:30 a.m.): -7.01 one million prior
September 20
Initial jobless claims (8:30 a.m.): 320K expected, 319K prior
Leading Economic Indicators, August (10:00 a.m.): 0.0% expected, 0.4% prior
Philadelphia Fed, September (12:00 p.m.): 2.5 expected, 0.0 prior
End part 1 of 3
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