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us stock market, trade stock
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10/10/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Thursday
MARKET ALERTS
Targets hit alerts: FCX
Buy alerts: CTRP XTO
Trailing stops: None issued
Stop alerts issued: APH
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:
- Early earnings stall the Dow, but as expected money is moving to new areas.
- Wholesale inventories rise modestly but no one pays it any mind ahead of Friday retail sales.
- Like the rotation to new sectors, and looking to play that move as it spreads out.
On the surface a lackluster session, but most of our stocks were rocking as money was rotating.
BA finally admitted its Dreamliner was stuck counting sheep and would be delayed by several months. Boeing hit some clear air turbulence and plunged through the 90 day SMA midday, taking the Dow down over 100 points at its low before an afternoon rebound cut that to a mere 85 (-0.61%). The rest of the market was not immune, at least at the open. MON guided lighter for the next year while IP, VLO and CVX warned, the latter two due to refining issues caused by that narrowing crack spread that is well off the rather incredible summertime (and likely lifetime) highs. On the other side, COST and SGR reported excellent results.
The market decided to view things negatively, though only moderately so. It sold early but recovered through midmorning. Lunch did not go down well, however, as the only thing heading lower was the market. The indices hit new session lows, but as quickly as they sold off (about 40 minutes worth) they rebounded, and by the last hour they were at session highs. NASDAQ posted a modest gain once again while SP500 and SP600 cut most of their losses by the bell.
The move back up was led by a charge in energy and metals. Energy, after the MRO, CVX, and VLO issues, found its footing and surged into the afternoon. Oil prices rode higher after a softer open, pushing past $81 once again after a quick test below the $80/bbl level. Metals also surged, particularly copper though aluminum and some steel (though not all steel) posted gains as well. What was cool about the move in energy? For one it overcame some negative news in the sector. The second and more important, the sector fired up with a vengeance after a three week slumber following the initial breakouts in the second half of September.
What that means is some rotation in the market, something we expected once the leading NASDAQ 100 got a bit winded (though with GOOG, RIMM and other still moving up you have to wonder just how winded they are). The action was the same in the metals: after a 3 week rest in some big names (e.g. FCX) they were off and running hard. Money is moving back into these leaders of the last charge higher after an appropriate rest period. That is excellent action and shows buyers moving their money around the market and keeping the move alive. Even with a flat market overall, there was excellent leadership, and of course it did not hurt that we are heavy into that leadership.
Technically the Dow was an outrider weighed down by Boeing. The other indices were flat, coming back after an intraday dive lower. Once more some decent low to high action and this in the face of some adversity. Breadth was flat and volume was mixed (up on NASDAQ, lower on NYSE) but it still showed the same positive price/volume action, i.e. up on the moves higher, down on the moves lower.
As for the charts, SP500 held its breakout after testing lower intraday. NASDAQ added to its breakout, making it 5 upside sessions in a row, something not accomplished since July. Notably that was just before NASDAQ peaked mid-month after earnings just got started. Something to consider as NASDAQ is extended heading into earnings. DJ30 closed below but close to its early October high. Meanwhile the small and mid-caps are still eyeing their all-time highs from spitting distance, but they were not inclined to take on those levels Wednesday.
As noted above, leadership was the twist, or as they were saying all day with respect to the republican debate, the beef. Some consolidating or slumbering sessions woke up, e.g. energy and the big metals. After a 3-week rest they were filled with vinegar and were surging. Shipping was still trucking higher; their moves are absolutely explosive, worthy of the Dylan Rattigan 'holy crap' designation. This is exactly what you want to see as it shows a healthy market as investors don't leave, just move money from one sector to another and indeed put new money to work.
THE ECONOMY
Wholesale inventories rise modestly.
Sometimes you have to ask the question 'what if you had an economic report and no one cared?' The wholesale inventories were hardly reported on the financial stations. Up 0.1% versus the 0.3% expected and 0.2% prior. Okay, that either means there was a lot of buying that drew the inventories lower or there was not much manufacturing activity. As we know, regional manufacturing showed gains and the ISM, while lower overall, still expanded. Thus there was some build from manufacturing and some drawdown from sales. Given the credit issues the economy faced it is hard to carp much about the data. Of course, it would do no good to carp about it because no one really cared about the report.
THE MARKET
MARKET SENTIMENT
VIX: 16.67; +0.55
VXN: 19.73; +0.31
VXO: 16.29; +0.84
Put/Call Ratio (CBOE): 0.9; +0.09
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: +7.7 points (+0.27%) to close at 2811.61
Volume: 1.959B (+3.62%). Volume was pretty darn solid, moving toward the 2B level. Posted the second highest level of the month as more money chased NASDAQ higher.
Up Volume: 1.187B (+731K)
Down Volume: 747.282M (+68.33M)
A/D and Hi/Lo: Decliners led 1.11 to 1. Price was up but breadth was down. Very narrow move (GOOG up $10).
Previous Session: Advancers led 1.38 to 1
New Highs: 121 (-13)
New Lows: 29 (+12)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped higher, tested negative early afternoon, then moved to a new post-2002 high on the close. Higher volume after a 5-session run (and up 13 of the past 17 sessions) but very narrow breadth shows some money chasing the winners higher. That typically does not continue. The NASDAQ generals are leading but the troops are not following and that leaves NASDAQ a bit extended, at least with respect to the large caps that led this move. There is a bevy of NASDAQ stocks that have consolidated while the large caps ran higher. If they make the break higher, i.e. if money rotates their way, then NASDAQ can continue this move.
As noted above, however, NASDAQ looked pretty similar heading into the July earnings, riding a nice 3.5 month gain into the results. After some initial gains on the results it corrected with the sub-prime/credit issues. This is a bit different in that now the index has faced the credit issues and has moved to a new post-2002 high nonetheless. It will likely test after such an impressive run, but that does not look to break the move to the new post-2002 high.
SOX (-0.58%) continues to really bite. Tapped the 200 day SMA on the low and did bounce to cut most of its losses, but while it is forming a base, it is also shown no ability to move higher.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -2.68 points (-0.17%) to close at 1562.47
NYSE Volume: 1.161B (-2.28%). A hair lower volume as the large caps sold off but then recouped most of the losses. No issue with that volume action.
Up Volume: 504.231M (-383.53M)
Down Volume: 633.956M (+350.761M)
A/D and Hi/Lo: Decliners led 1.09 to 1. Pretty much matched the action of the NYSE indices.
Previous Session: Advancers led 2.28 to 1
New Highs: 124 (-46)
New Lows: 11 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 struggled as the energy sector waffled at first and the financials were giving back some of the Tuesday gain (at least GS was; it is really the best mover in the entire financial arena). On the low SP500 tested the July high and then rebounded into the close. It posted a loss, but volume was lower and it held the breakout. That is good shakeout action and not bad at all for a downside session where it faced some early earnings worries.
SP600 (-0.20%) lost ground on the session, but similar to the large cap indices and the cup with handle bases they formed and broke out of, the small and mid-caps are working laterally in a narrow range this week, forming handles and preparing to take on their prior highs as well. Constructive action and if they can forge a breakout as well that would be a good confirmation of the economic expansion continuing at a decent pace. Not a thunderous pace, but a decent pace considering it is 5 years into the cycle. Looking for a bit more handle formation and then a trigger to send it to the breakout. Retail sales are a possibility come Friday.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The Dow struggled under Boeing's delay and thus it was the relative laggard on the session. Despite the Boeing selling, volume was lower and DJ30 bounced off near support at the 10 day EMA on the low. It closed below the early October high, but that is really no impediment. It handled Boeing decently and still remains in solid shape.
Stats: -85.84 points (-0.61%) to close at 14078.69
Volume: 163M shares versus 176M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Weekly jobless claims, oil inventories (delayed due to Columbus Day) and in the afternoon the Treasury budget. Weekly jobless claims will be watched closely as will inventories. All of that is ahead of the retail sales, and that means Thursday same store sales results for the month. After hours AEO reported a 2% decline due to lower traffic and it was down 3% after hours. As we move toward the holiday season the same store sales become a focal point. Many are convinced the market and the economy are paper tigers and are in trouble. Thus the same store sales will be scrutinized as many expect the worst holiday season since the recovery. Whatever. They expect that every year and while it is still early, we don't see a run off the cliff this Christmas.
Indeed the market itself is not suggesting this what with the breakouts by the indices and the rotation currently ongoing. Those are signs of health, not signs of death. Indeed, the market overcame some ugly times in the summer, helped by the Fed recognizing those were very serious issues and its relatively quick and outsized actions.
Regardless of the cause, the market is showing us good signals and we are going to continue looking for buys in strong stocks that are in position to buy and show us they are ready to be bought with some good upside volume and price moves. A lot of stocks moved on lower trade Wednesday; we want to see that coupled with some better trade to move in, but with strong stocks making moves sometimes you have to just wade in. The NASDAQ leaders are a bit extended but the money is moving again, and that is giving us buys elsewhere. We will continue to follow the market cues and its 'buy me' signals as that has worked extremely well for us this entire year despite a lot of worry and gnashing of teeth by the pundits along the way higher.
Support and Resistance
NASDAQ: Closed at 2811.61
Resistance:
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2778 from a July 1999 peak
The 10 day EMA at 2757
2751 is the November/February up trendline
2725 is the July high
2704 is the November/December/February up trendline
2673 is the early July high
The 50 day EMA at 2652
2634.60 is the June peak
The 90 day SMA at 2618
The 200 day SMA at 2541
S&P 500: Closed at 1562.47
Resistance:
Still holding new high
Support:
1556 is the July intraday high
1553 intraday high from March 2000 used to be the all-time peak
The 10 day EMA is at 1547
1541 is the early June high
1539 is the mid-June intraday high
1534 is the early July high
1510 is the July 2006/March 2007 up trendline
The 50 day EMA at 1507
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 1472
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 14,078.69
Resistance:
14088 is the early October closing high
8.3% above its 200 day SMA (13,078). When it gets near 10% it starts to struggle.
Support:
The July high at 14,022
The 10 day EMA at 14,004
13,985 is the old channel line
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 13,640
The mid-May peak at 13,556
The 90 day SMA at 13,528
13,265 is the July 2006/March 2007 up trendline
13,121 is minor support from the April peak
The 200 day SMA at 13,086
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): 0.1% actual versus 0.3% expected, 0.2% prior.
October 11
Initial jobless claims (8:30): 315K expected, 317K prior
Trade balance, August (8:30): -$59.5B expected, -%59.2B prior
Crude oil inventories (10:30): +1.1M 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): 0.5% 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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