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money investment, day trading
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10/08/07 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: Took some interim gain on AAPL
Buy alerts: AMX; NILE; SSRX
Trailing stops: DO; EDU; OIH
Stop alerts issued: EDU; PDE
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SUMMARY:
- Holiday, 'day after' strong rally lead to a sluggish session as large cap techs lead, materials, energy lag.
- Economic news front strangely quiet for once.
- Indices are making the breakout, now they have to do something with it.
Columbus Day had the bond market closed and the market snoozing.
After a breakout session such as Friday the market often takes a powder for a session. The fact that Columbus day closed the bond market pretty much ensured that action as stocks did not have their main foil to reflect their moves off of. That adds up to a sluggish session with the same themes seen of late continuing.
There was some M&A activity that saw some deals close. TXU finally said its deal would close. SAP is buying BOBJ. Textron is buying United Industrial. Nothing near the level of prior activity, but after the drought it shows there is some life and positive outlooks in the business sector. It was Monday and of course that means analyst calls. After a bounce higher in financials it was time for some downgrades, and BAC along with MER shared the honors. There were some warnings as well as Ryder (R) in trucking confirmed its weak chart pattern, complaining that the US slowdown extends beyond housing and construction. Oil closed sharply lower (79.02, -2.20) as it corrects back some from its run over $80/bbl; a calm Gulf of Mexico helped cool oil some. Quite a broad mix of news and data, but there was not a lot of movement on it, or at least the data did not change the action of those moving higher, those holding steady in consolidations, and those continuing to struggle.
Indeed, as noted above, the action in stocks, while much quieter than Friday, was simply a muted version of that move. The large cap techs (AAPL, BIDU, GOOG, RIMM) move smartly higher again, overseas shippers surged (DRYS), agriculture continued its uptrend (MON). On the other side of the ledger energy, materials and to a lesser extent metals, continued to lag and struggle. Most remain in good position, but there were some breaks lower in energy that took those stocks through near support. How they hold up as the week unfolds will be key for the market; it needs the support form more than just some large cap techs.
Technically the end result was an overall weak session where a late spurt by the large cap techs took NASDAQ positive and pulled the other indices close to flat. Not bad action given the weaker open across the board, but it was no clear surge following a weaker open. In the end, however, they did not give up their gains (or much of them), and that is not badk. Volume was very weak, not unexpected given the holiday in the bond market and the stronger Friday move. Breadth was a bit downside oriented on NYSE (-2:1) as the small caps, after being percentage leaders on the move higher, were percentage leaders on Monday's weakness.
Leadership traded basically the same as it did last week. The big techs continued higher, taking NASDAQ higher with them, though the move was narrow, meaning more tech stocks were down than up. Pretty clear that the index finished higher on the back of a few stocks. Overall the action left many solid stocks still in nice pullbacks, consolidations or bases, and that remains a positive for the market as it rests after the break higher last week. Some of the stocks broke lower, however, falling through near support (some energy names were most notable). The lateral move in metals and energy is getting to the point where they have to make some upside and fend off the erosion taking place. Nice consolidations to be sure, but as with most things in life, if something lies around too long it becomes unwanted. Pretty looking consolidations, but many are getting to the point where they need to make a move or risk making a deeper test. This will be one of the important keynotes in the market as it works through this week.
In sum it was not bad action overall despite the lower closes on the NYSE and some breadth tilted decidedly negative. There was no real selling given the low volume and the recovery from the lows, just a pause in progress after last week's break higher. It is the time, however, where the move needs to spread out as the market rebounds from this pause after the prior gains. RIMM, AAPL, GOOG and friends are really extended, and while they make the pullback to test the market needs some money moving into other areas to keep painting the nice picture it is showing right now.
THE ECONOMY
No Fed-speak, no economic reports. Just relative quiet on Columbus Day. Not much more news tomorrow, at least scheduled, until the FOMC minutes are released in the afternoon. That does not mean we don't get the stray Fed comment, and of course it is earnings season and that means those having a bad quarter will be ready to blame housing, construction, credit, etc. for the shortfall. With the jobs report showing renewed life and the more leading indicators showing continued expansion, earnings warnings and earnings themselves will carry the most stroke in the coming weeks.
THE MARKET
MARKET SENTIMENT
VIX: 17.46; +0.55
VXN: 20.25; +0.48
VXO: 16.49; +0.44
Put/Call Ratio (CBOE): 0.81; +0.03
Bulls: 56.5%. A second week above the 55% level considered bearish. The theory is that when too many investors or advisors are bullish then most of the money is in the market and there is nothing ready to come in off the sidelines to drive prices higher. Up from 55.6% last week and on a steady climb 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: 25.0%, down from 25.6%. Bears continue their decline, falling steadily just as bulls have risen steadily. Down from 27.0% three weeks back 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 in August, 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: +7.05 points (+0.25%) to close at 2787.37
Volume: 1.522B (-24.6%). A month low in volume as NASDAQ tested lower early then posted a modest gain. No distribution when it was down on the session and no accumulation as it recovered. Just being led around by a few large caps on low volume after a pretty solid volume session Friday.
Up Volume: 856.149M (-775.959M)
Down Volume: 583.34M (+218.653M)
A/D and Hi/Lo: Decliners led 1.34 to 1. Pretty modest but you can see it was all a large cap move as breadth was negative even as the index posted a gain.
Previous Session: Advancers led 2.84 to 1
New Highs: 108 (-31)
New Lows: 22 (-1)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ started modestly lower and then sold back, but it was never in trouble, never in jeopardy of giving back the breakout over the July high and the early October high (2747). It moved upside immediately after the open and hit basically the session high. It then rolled over and sold to the session low. As has been the case for quite some time, however, it bottomed midmorning and started a steady recovery into the close. The last trade pushed it to a new high for the session. Cannot complain about the low to high action, but as noted, the move was controlled by a handful of large cap techs that have dominated the action in the index the pat three weeks. It is coming to a point where the move has to spread out because RIMM, AAPL, GOOG, BIDU, etc. simply cannot maintain the current trajectories much longer, and in order to continue the breakout move NASDAQ is going to have to draft some new leadership.
SOX (+0.46%) was the relative leader in the session, but its gain only managed to push it to the 90 day SMA off of the test of some support at 490. Still not seeing much strength here though some stocks in the category have shown some life. They would be a nice backstop for the NASDAQ leaders of late when the latter start to test back.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -5.01 points (-0.32%) to close at 1552.58
NYSE Volume: 847.614M (-32.63%). Lowest volume since the July Fourth holiday. Basically meaningless statistic on this kind of day.
Up Volume: 237.987M (-813.188M)
Down Volume: 598.336M (+410.075M)
A/D and Hi/Lo: Decliners led 1.95 to 1. This was weaker than the action on NYSE as the small and mid-caps had some issues. They led the move higher in relative strength and when the move waned, they led the move lower in relative weakness.
Previous Session: Advancers led 3.14 to 1
New Highs: 66 (-101)
New Lows: 9 (+8)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 struggled just underwater all session, testing down into the July peak at 1556 (intraday high in July) and coming back on the close to finish in the middle of that weeklong peak. Extremely low volume so even though the sellers were in the majority, they were so few in number as to mean basically nothing. Thus SP500 is taking a rest along with the other indices and remains in very solid shape after that Friday move higher off the early October consolidation from the last break higher from a lateral test.
SP600 (-0.70%) struggled as well after the Friday move that continued its run toward a new high at 446. Two strong upside runs this month gobbled up a lot of territory and took it close to the breakout point. Now it likely needs another rest to try and take on that prior high. It has come a long way on this move already (up from 405ish from the early September low) and a bit of rest and lateral movement would let it set up once more for a new break higher and run at that old high.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 could not make the breakout Friday despite trading at that level intraday, and that left it somewhat suspect. The Monday action did not continue that disappointing Friday move as the Dow basically held steady on very low trade. That is a positive as it allows the Dow to hold its gains, rest, and prepare for the next move higher. Nice thing is, it is holding over the July peak (14,022 intraday) as it makes this test.
Stats: -22.28 points (-0.16%) to close at 14043.73
Volume: 116M shares Monday versus an already low 183M shares Friday. DJ30 is volume challenged of late even as it pushes for a new high again. Needs some more trade to show investors actually care.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Not much on the economic calendar Tuesday until the afternoon with the FOMC minutes; the economic data is backend loaded this week. The Fed may chime in as it only has this week to say its peace before it has to button it up ahead of the Halloween FOMC meeting. Earnings will take more precedence as the week wears on. Thus far the warnings have been somewhat light again while the early results are promising (RIMM last week, YUM after hours Monday).
The market made a breakout ahead of the results to come, and now we see if the results live up to the billing and can continue the move. Monday was a rest day after the Friday surge and a Monday holiday that is not unusual. As this test concludes the market needs to show the break higher once more and show the kind of breadth and better volume it did on Friday so we know there is interest outside of the few leaders of late. That means seeing some of these solid patterns break higher, showing some volume as they do. That will signal the break higher still has life in it, and of course as they break higher that will give us some nice stocks to buy into.
Thus far the market continues to show solid upside action with good leadership and more waiting in the wings. It will take those waiting in the wings to come to the fore and break higher as well as the horses that led the last move make the obligatory test back. As noted, stocks in the energy, metals and materials remain in good position, but it is time for them to step up, not to mention some other techs in NASDAQ other than a handful of large caps.
Support and Resistance
NASDAQ: Closed at 2787.37
Resistance:
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2778 from a July 1999 peak
2748 is the November/February up trendline
The 10 day EMA at 2732
2725 is the July high
2702 is the November/December/February up trendline
2673 is the early July high
The 50 day EMA at 2640
2634.60 is the June peak
The 90 day SMA at 2613
The 200 day SMA at 2537
S&P 500: Closed at 1552.58
Resistance:
1553 intraday high from March 2000 used to be the all-time peak
1556 is the July intraday high
Support:
1541 is the early June high
1539 is the mid-June intraday high
The 10 day EMA is at 1539
1534 is the early July high
1509 is the July 2006/March 2007 up trendline
The 50 day EMA at 1502
The 90 day SMA is at 1499
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 1471
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
Dow: Closed at 14,043.73
Resistance:
14088 is the early October closing high
7.0% above its 200 day SMA (13,038). When it gets near 10% it starts to struggle.
Support:
The July high at 14,022
13,975 is the old channel line
The 10 day EMA at 13,949
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 50 day EMA at 13,600
The mid-May peak at 13,556
The 90 day SMA at 13,518
13,255 is the July 2006/March 2007 up trendline
13,121 is minor support from the April peak
The 200 day SMA at 13,070
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 9
FOMC Minutes, Sept. 18 (2:00):
October 10
Wholesale inventories, August (10:00): 0.3% expected, 0.2% prior.
Crude oil inventories (10:30): +1.1M prior
October 11
Initial jobless claims (8:30): 371K prior
Trade balance, August (8:30): -$59.0B expected, -%59.2B prior
Treasury budget, September (2:00): $100.0B expected, $56.2B prior
October 12
Retail sales, September (8:30): 0.2% expected, 0.3% prior
Retail sales ex-autos, September (8:30): 0.3% expected, -0.4% prior
PPI, September (8:30): 0.4% expected, -1.4% prior
Core PPI (8:30): 0.2% expected, 0.2% prior
Business inventories, August (10:00): 0.3% expected, 0.5% prior
Michigan sentiment, Oct. preliminary (10:00): 84.0 expected, 83.4 prior
End part 1 of 3
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money investment
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