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us stock market, stock split
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10/03/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Thursday.
MARKET ALERTS
Targets hit alerts: TKC
Buy alerts: RESP
Trailing stops: Protected some gain: BG; CMED; CNH; CNQ; POT; RIO; VIP
Stop alerts issued: CNQ; VIP
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 struggles again on more profit taking and portfolio reallocation ahead of jobs number.
- Greenspan gives the 'all clear' on the credit crunch. Whew.
- ISM services mirrors ISM, comes in a bit lighter than expected.
- Early quarter upside led by the beaten down, but many leaders are just biding their time before moving again.
Another pullback session as big money continues to shuffle positions.
Wednesday there was not a lot to move stocks upside after the Tuesday selling once the new quarter got underway. The ADP jobs report, notoriously out of step with reality but in line last month, was more in line with the expected gains in the government's report due out Friday morning. There was not much rejoicing. Earnings and warnings were not positive; COP announced a buyback but then noted that refining margins were "substantially weaker." MU in the chip sector was lower on declining chip prices despite a lower net loss. MS downgraded the chip sector, also concerned about pricing. Thus there was not a lot to turn the tide back from the Tuesday pullback, and stocks started the session lower.
It was the same leaders higher through Monday that led lower on Tuesday and again on Wednesday. Large cap techs, energy, metals, industrials and Chinese stocks struggled once more even before the open. The also struggled after the open as stocks turned lower and sold until the ISM Services came out at 10:00ET. That was a touch weaker than expected (similar to the ISM manufacturing report) and that helped bounce stocks higher. Oil inventories were more bearish for oil (+1.4M bbl versus -400K expected), and that helped keep the overall market moving higher into lunch. Nice recovery, with NASDAQ and SP500 just 1 point off its Tuesday close.
Unfortunately it had the staying power of a 400 pound bike rider making his first try at Alp D'huez. After tapping at the Tuesday close the indices gave back the entire recovery and then some, at least on NASDAQ. A last hour rebound attempt had the bounce of a 4 year old golf ball; the indices made some recovery, but they closed in the bottom quarter of the session's range.
The leaders of late were under pressure again as more of the new quarter profit taking after last week's tape painting and ahead of the jobs report, and some portfolio reallocation to start out the month to try and pick up some laggards and make some quick gain. That kept the financials and homebuilders moving higher with a bid while the energy and others cited above struggled again. Most held up at near support on their pullbacks, but there were some breakdowns through near support, and we were closing them out to preserve gains as some of the action had a bit more virulence to it than just an old easy profit taking pullback. Many still look very good, and there is no real change in the global market, but there was that undertone of harder selling that we saw some on Tuesday. Thus we did not hesitate to take money off the table if we saw something we didn't like, and that was mainly a break of near support, higher volume selling, or a combination of both.
Technically the action had some promise given the lower open and recovery by midday. By mid-afternoon it was clear the promise was a sweet nothing as the low to high action turned into low to lower action. The buyers made a try but they were overrun. Volume moved higher on NASDAQ, backed off on NYSE. Not that bad, but there was some distribution on NASDAQ. It was not the index where most of the struggles occurred, however. What does that mean? It means the selling was rather specific, and in looking at the charts, that is what they tell you. In other words, despite the second day of weakness, most leaders remained in solid shape over near support. There were breakdowns for certain; after long runs some were sold pretty aggressively. More closed the session in continued good shape, however.
As for the indices, they are still in good shape on the pullback. While DJ30 slipped back through the July high, they are still holding up nicely in a very routine pullback. NASDAQ tapped at the June highs on its low and held; nice clean test thus far, and now we see if it is ready to turn right back up or not. Again, many leaders are in the same shape, i.e. still in position to rally some more once the first of quarter moves are completed and/or the jobs report comes out. Some good pullbacks are setting up for more upside, and some good consolidations (particularly in energy) look ready to try an upside move again as well. It is just a matter of whether they can hold onto near support until the market gets through this current first of quarter readjustment.
THE ECONOMY
Greenspan signals the 'all clear.' Thanks. Now just tell the markets.
In his weekly address to someone, former Fed chairman Greenspan Wednesday noted that the worst of the 'credit squeeze' was over. Note the market rally that ensued. At least this pearl of wisdom was not played repeatedly on the financial stations; well, at least not the usual 44 times.
Is the worst over? Yes that is likely the case. The stock market started its move higher when things looked about their worst. Fears of contagion were running rampant and then the Fed cut the discount rate and said it stood ready to do what was necessary to get credit flowing again and to fend off the effects of the lock up. While many discounted the Fed's move at the discount window, it started to have the intended effect. We noted at the time that the spreads started to narrow again and that the credit market, while still icy, was starting to flow once more. At the height of the worries the worst was likely already baked in given the Fed turned a 180 and started pushing liquidity. The cut in the Fed Funds rate was the icing, the confidence booster needed to show us commoners that the Fed really did intend to do what it needed to get this past us as rapidly as possible without a recession.
Thus Mr. Greenspan's comments are likely correct, but as noted, the market already knew this given the rally out of the bottom of the misery and the market's lack of response to the 'Maestro's' proclamation. Must be a drag no longer having the ability to make the market reverse on a dime just because you felt like it that day.
ISM Services holds its strength though some erosion in the components.
The 54.8 was a bit below the 55.0 expected and 55.8 in August (and July for that matter), but it was a modest loss that continues an overall solid picture though definitely slower than the 60.7 hit in June. That indicates a modest trend lower overall.
As for the components, new orders fell to 53.4 from 57.0; that was up from 52.8 in July but still off the pace of prior months (56.9 and 57.4). Inventories fell to 50.0 from 57.0, but the number has been volatile the past six months, both up and down. Employment moved up to 52.7 from 47.9, the lone dip below 50 this year.
Prices paid jumped to 66.1 from 58.6 in August, but that puts it back in the range it was running in the summer. One look at the rise in oil prices tells much of that story.
All in all it was a decent report though hardly one suggesting the economy is on the upsurge. Given all of the issues with credit and mortgages, however, it is a solid report and within the trend. Thus it is not time to get too critical as most everything slowed during the credit and mortgage fear spike. What we need to see is more of a return to trend as the credit issues recede as Greenspan claims they have done. Must be the case then.
THE MARKET
MARKET SENTIMENT
VIX: 18.8; +0.31
VXN: 21.55; +0.29
VXO: 17.64; +0.17
Put/Call Ratio (CBOE): 0.82; -0.18. Some retrenchment in the ratio on another day of selling. Jumped higher Tuesday then backed off as the selling continued. Still remains overall high given just a modest bit of selling.
Bulls: 55.6%. Bulls jumped again , up from 53.9% and topping the 55% level considered bearish. Big jumps the past few weeks from a low of 40.6%, the low for this round. Never made the thirties. Hit 56.7% in June. The market peaked about a month later. For reference it bottomed in the summer 2006 near 36%, and 35% is considered bullish.
Bears: 25.6%. Falling, indicating bears are declining. Down from 27.0% last week and 31.0% the week before. It held at 37.4% for 3 weeks prior to that. Still well off the very low 18% hit 8 weeks back, and it topped the June 2006 peak (36%) on this run. 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: -17.68 points (-0.64%) to close at 2729.43
Volume: 1.884B (+6.53%). Finally posted a pullback after the Monday break above the July high. Volume was a bit higher on this fade so there was some distribution, but compare it to Monday and you see it was lower so the sellers were not as active Wednesday.
Up Volume: 704.148M (-401.215M)
Down Volume: 1.158B (+515.308M)
A/D and Hi/Lo: Decliners led 1.59 to 1. Basically the mirror image of Tuesday.
Previous Session: Advancers led 1.45 to 1
New Highs: 60 (-71)
New Lows: 27 (+1)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
The techs were the victim of analyst action (downgrades of chips, and some of the leaders are chips, e.g. NVDA, and stocks that use those chips, e.g. AAPL, RIMM) as well as their own success of late. NASDAQ gapped lower, rebounded to flat, then closed in the lower half of the range. That tested below the July high (2725) on the low (2721) but rebounded to hold over that breakout point. Good recovery action despite all of the downgrades and negative comments about the Wednesday action. Could still test back some more but even with the volume edging higher on the selling it is still in very good shape, especially when you consider all of the angst on the financial shows Wednesday. That is what day after day of upside gets you.
SOX (-2.13%) was, you guessed it, socked, as the chips were downgraded on pricing and inventory issues. It was toying with the idea of challenging 510 and then decided to head south before winter sets in.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -7.04 points (-0.46%) to close at 1539.59
NYSE Volume: 1.247B (-2.01%). Volume was lower again, even lower than Tuesday as the NYSE indices faded modestly. No overall distribution; that was pretty much limited to a few sector specific stocks.
Up Volume: 468.446M (-243.452M)
Down Volume: 767.446M (+221.153M)
A/D and Hi/Lo: Decliners led 1.68 to 1
Previous Session: Advancers led 1.38 to 1
New Highs: 28 (-78)
New Lows: 7 (0)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Sold off, rebounded to flat, then sold off again and closed in the lower half of the range. SP500 slipped back to close right at the June closing high. Nice place to test and hold though SP500 could easily slip to the 10 day EMA (1528) before finding the footing it needs to make a run at 1556, the July high and all-time high. Definitely in the test mode and thus far it is on low volume and making exactly the kind of test you want to see.
SP600 (-0.71%), after two market-leading moves, faded back, giving up most of the Tuesday gain. Lower NYSE volume shows light selling. The small caps are economy-fed, and thus they will need to see some good economic data (it was so-so the past session) and some more Fed action to keep these stocks in gear.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The Dow sold off for the second session, still holding part of the Monday breakout gain. Volume was up but still lower than Friday and Monday, understandable given that Friday was the end of the quarter and Monday was the start of the new quarter. It slipped below the July high (14,022 intraday) and still has a some room before it gets to the 10 day EMA (13,880), the lower end of the range we want to see it hold and then continue the break higher.
Stats: -79.26 points (-0.56%) to close at 13968.05
Volume: 178M shares Wednesday versus 169M shares Tuesday. Volume was up but still lower than the breakout session on Monday when that new money was put to work. Want to see the volume remain light as it continues the test as that shows fewer sellers.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Light economic session with Factory orders and jobless claims ahead of the Friday jobs report. The big X factors are earnings warnings, early earnings results, China, and how far the first of quarter portfolio adjusting goes with respect to impacting the recent leaders. We saw the impact of some earnings and warnings/guidance Wednesday, as well as the portfolio adjusting. We also saw and are seeing again today the impact of China as it takes a weeklong vacation and its market gets nutty. It traded up and down the equivalent of 700 Dow points, and it is likely to be volatile again Thursday. Unfortunately, that bleeds over into our markets as well.
Thursday after the close RIMM, a tech leader, announces results. Ahead of that it could be another interesting ride as the leaders into the quarter remain under some pressure as some move out, some move in. There are some buying the homebuilders in an attempt to catch a turn, but they have not broke their downtrends. Financials are a bit better, but they could use a consolidation that makes a higher low to show the sellers are not going to rush back in and murder them. As for the leaders, we still see a lot of patterns in great shape despite the selling pressure, and if they can wade through Thursday and then get the jobs report under the belt, we could see some buying return their way. We prefer to pick up a proven leaders as it breaks higher on volume after a consolidation than pick up a laggard in rebound mode.
With all of the currents to start the quarter, the rebound in the dollar, the volatility in the foreign markets, and the worry after the US markets started breaking to new highs, Thursday could be what you would call an interesting session. It is time to be a bit patient and let good stocks complete their set ups if they will, because once this week is over, if they hold up they will likely start back up. We still have to be protective of gains, and if our positions in leaders come under pressure and threaten a break of near support then we will take the gain off the table, see if it sets back up, and if it does, treat it as a new play. Overall the action remains solid, but there is some selling dogging some of the leaders into this new quarter, and if it continues we have to be practical and protect ourselves. We can always get back in.
So we head into Thursday expecting some more volatility, looking for the leadership to hold near support, but if not, taking action to protect positions even as we look for new areas to put some money into and make some gains. There is some nascent rotation ongoing, but it is not a wholesale move out of some areas and into others. Thus we still believe that many of these leaders that are currently testing are going to move back up after this week of discontent ends.
Support and Resistance
NASDAQ: Closed at 2729.43
Resistance:
2740 is the November/February up trendline
2778 from a July 1999 peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2725 is the July high
2701 is the November/December/February up trendline
The 10 day EMA at 2701
2673 is the early July high
2634.60 is the June peak
The 50 day EMA at 2623
The 90 day SMA at 2608
The 200 day SMA at 2532
2531.42 is the February high (post-2002 high); 2525 intraday
2509 is the January 2007 high
2450 is some price support from November and December 2006
2425 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 1539.59
Resistance:
1541 is the early June high.
1553 intraday high from March 2000 is the all-time index peak
Support:
1539 is the mid-June intraday high
1534 is the early July high
The 10 day EMA is at 1528
1506 is the July 2006/March 2007 up trendline
The 90 day SMA is at 1498
The 50 day EMA at 1496
1490.72 is the early June closing low and early August peak.
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1469
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 14,047.31
Resistance:
13,975 is the old channel line
The July high at 14,022
7.7% above its 200 day SMA (13,038). When it gets near 10% it starts to struggle.
Support:
The 10 day EMA at 13,880
The August high at 13,696
The mid-June high at 13,689
The early June high at 13,676 (closing), 13,692 (intraday)
The early July peak at 13,671
The mid-May peak at 13,556
The 50 day EMA at 13,545
The 90 day SMA at 13,503
13,248 is the July 2006/March 2007 up trendline
13,121 is minor support from the April peak
The 200 day SMA at 13,046
12,845 is July closing low
12,796 at the February 2007 high
12,518 is the August intraday low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 1
ISM index, September (10:00): 52.0 actual versus 52.5 expected, 52.9 prior
October 2
Pending home sales, August (10:00): -6.5% actual, -12.2% prior
October 3
ISM Services, September (10:00): 54.8 actual versus 55.0 expected, 55.8 prior
Crude oil inventories: +1.4M actual versus -400K expected
October 4
Initial jobless claims (8:30): 310K expected, 298K prior
Factory orders, August (10:00): -2.8% expected, 3.7% prior
October 5
Non-farm payrolls, September (8:30): 100K expected, -4K prior
Unemployment rate (8:30): 4.7% expected versus 4.6% prior
Hourly earnings (8:30): 0.3% expected, 0.3% prior
Average workweek (8:30): 33.8 expected, 33.8 prior
Consumer Credit, August (3:00): $9.5B expected, $7.5B prior
End part 1 of 3
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us stock market
stock split
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