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world stock market, us stock market
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10/24/07 Stock Split Report Update
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Stock Split Report Subscribers:
Full report issues Thursday.
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: GENZ; NYX; SGR
Trailing stops: None issued
Stop alerts issued: COP; SLB
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:
- Intraday rollercoaster adds to the day to day volatility.
- Existing home sales barely existing as inventories balloon.
- Market still bouncing up and down with some stocks moving very well, but overall this kind of action typically does not lead to anything very solid to the upside.
Volatility remains, it just goes intraday as techs come under fire.
Over the weekend and again on Tuesday we talked about the market getting just too volatile once again with a big down day, a big up day, another down day, etc. If you looked at the close Wednesday you might say yes a bit of volatility on NASDAQ given its big Tuesday gain, but SP500 and DJ30 were flat. Instead of day to day volatility, the buyers and sellers decided to go hand to hand intraday. NASDAQ swung down 60 points from morning high to morning low (80 points from the Tuesday close; ouch). Then it swung back 60 points to close. DJ30 dumped 200 points in the morning then gained 200 points in the run to the bell. It closed basically flat but that end does not bespeak the wild day investors faced.
After strong earnings drove NASDAQ and the market higher Tuesday, Boeing announced monster earnings. It, however, could not withstand the tide of negatives on Wednesday, e.g. MER (broker), NSC (rail), TLB (retail), ALTR (chips), and of course, AMZN, JNPR, and BRCM. Of course the market started lower, but it tried to recover in the first half hour, suggesting the worries were overdone. Then existing home sales came out and they really should have been renamed 'non-existing home sales.' The market turned, gapped lower, and the rout was on.
That set off the run to the bottom. Oil inventories were a half hour later and the market actually rebounded some into the number. They came in down 5.2M when a 1M bbl gain was expected. That sparked some energy stocks, but it gut punched the rest of the market. Now the rout was rally on. SP500 again found itself at the key 1490 level. NASDAQ fell to the July high. They both visited those levels on the Monday lows and were right back at a do or die level, at least for SP500. Financials were getting mauled on the MER earnings and the additional write-down ($8B versus the $4B stated just a couple of weeks back). Techs were getting roughed up as well as that last bastion of strength was getting its mettle tested.
Ironically, the market again found bottom midmorning at that SP500 and NASDAQ support. It was not a sure deal, however, until the afternoon session when it tested those levels again after a three hour weak bounce faded. When the indices did not break through those support levels, the shorts started to cover and the indices bounced from that intraday double bottom. The market got an assist from the rumor mill. Usually you see these from the shorts when they put out rumors when the market is recovering from some selling and the shorts have their chestnuts in the fire. This time it was on the bull side: the Fed was supposedly meeting to cut the discount rate even though the FOMC meets next week. Yeah, right. Nonetheless, the transparent, rather obvious ploy worked. Stocks rallied sharply back up to the close and took back most if not all of the losses.
Technically you can call the session a reversal if you want though it did not close positive and that us usually the preferred, but not necessary, course of action. It was a whiplash session for sure and frankly, when we saw what was going on early and saw the bounce off the same support it bounced from Monday, we just sat back and watched to see how that played out. That is it; just watched. As it turned out it held again and bounced again. You can credit the rumor or not, but the action of finding bottom midmorning and finding it at the same support was more than coincidence. It may not win out the day with this correction, but it shows the sellers are still very nervous with this pullback.
The internals improved as the rebound took hold (of course). Breadth went from -5:1 to -2:1 or less. Volume surged on NASDAQ as some of the big names came under some selling pressure, but they also rebounded into the close on that same strong volume. NASDAQ suffered some distribution with the higher volume loss, but it also cut its loss by 54 points as it rallied to the close.
The charts show about the same action. SP500 tested support again and bounced again. DJ30 was again weak but it too rebounded from a higher low than on Monday. NASDAQ gapped lower, sold to the July peak, but it too rallied back and closed in its recent range and above the 10 day EMA. SP500 and DJ30 are still in it deep, but you can argue the action this week with the two intraday reaches lower and the intraday rebounds has set up a short double bottom they will try to rally off. That is the less likely road given the patterns, however, as both remain fragile, and their inability to bounce back quickly from the Friday selling leaves them looking more bearish than bullish.
Leadership was thin. Techs took a hit after rallying the market Tuesday. Good earnings one day and it is a party, weaker earnings the next and they are in a crying game. These are the leaders and they are acting much too fickle. Sure they rebounded back up, but the leaders in the world markets are taking some body blows and not a lot of other areas were stepping up to help out. Energy rallied modestly on the inventory data, but outside of the drillers it didn't really have its heart in it, and it certainly was not enough to spark mount a major rally and lead the rest of the sectors higher. At least that is not the look of it. With a 200+ recovery on the Dow and 60 on the NASDAQ, however, you just have to see how this shakes out.
As for the look of the market after the close, it remains bifurcated. NASDAQ rallied back and finished nicely. DJ30 and SP500 held support, but they are still in weak patterns that are simply more bearish than bullish in the near term. They are trying to bounce off support, but as of Wednesday they are still seeking some sort of bottom to this selling.
THE ECONOMY
Existing home sales in September see big inventory gains but modest price losses.
Sales fell 8% month over month and 19% from a year ago. It was the seventh consecutive decline and the largest of the string. Of course that put existing home sales at some new record for weakness, I think the lowest since early 2001 when the economy was in recession. Of course that leads some to believe we are in recession right now. Indeed you can't swing a dead cat without hitting someone talking about a recession (for any taking offense at this reference it comes from an American classic, Huckleberry Finn). It may help lead to recession, but we are not in one.
In any event the decline is picking up speed once again. Inventories hit a high for this downcycle at 10.5 months, easily topping the August 18 year high. Tell me when it gets to a year.
Prices, however, were down just 4.2% on the median year over year and 3.2% on average. That may seem encouraging to many homeowners, but it does not reflect the market. Inventories are climbing because no one wants to buy at the current prices as they believe they are going to fall further. Until they do the inventories won't clear out and the housing issues continue.
It is a big deal? Sure it is. Housing is a substantial part of the US economy and it impacts all of us, even more so now that the housing boom has put so many into new homes that before did not have any. Remember when President Bush was extolling the virtues of so many new home owners back in 2005, just when the funny financing was really getting underway. Now Treasury Secretary Paulson is chastising the lenders making the loans so all of those people could by homes and there is a general consensus that the Fed under Greenspan left rates way too low for way too long and created a lot of the very issues we are having today as new homes were bought on low adjustable rates and now they are sucking air under the weight of the refinancing. My how changing times require our politicians to change stripes.
The real issue is whether consumers start losing their jobs or more importantly, fear losing their jobs. If that happens then the consumer does slow consumption and does lose confidence about paying for the homestead and thus is worried about having enough money at Christmas so his wife will make love to him and he can buy the GI Joe with the Kung Fu grip for his kid (from the greatest market movie of all time, 'Trading Places.'). Then the consumption dries up, and combined with declining corporate profits we would then head into recession. How the market resolves this back to back correction/pullback episode will forecast where the economy is heading.
THE MARKET
MARKET SENTIMENT
VIX: 20.8; +0.39
VXN: 24.8; +0.67
VXO: 20.96; +1.11
Put/Call Ratio (CBOE): 0.99; +0.02. Cleared 1.0 intraday but by the close it was back to just below that level given the strong rebound.
Bulls: 62.0%. Up from 60.2% the prior week and continuing the streak higher and well above the 55% level considered bearish. Fourth week above that level, an indication that the market is getting overdone. 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. On a steady climb from a low of 40.6%, the low for this round. Never made the thirties. Hit 56.7% in June and now it has blown past that. The market peaked about a month later. For reference it bottomed in the summer 2006 near 36%, and 35% is considered bullish.
Bears: 19.6%. Falling below the 20% threshold, continuing the sharp drop. 21.5% the prior week and down 25.0% the week before that. It peaked at 37.4% on this move. Closer to the 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: -24.5 points (-0.88%) to close at 2774.76
Volume: 2.782B (+16.42%). Volume surged to the highest level since the August selling as the techs came under selling pressure again though the index did rebound. There was a lot of selling volume, however, as the up/down volume indicates as some NASDAQ 100 stocks (e.g. BRCM) were sold on high volume. It was not a great reversal session based just on the volume.
Up Volume: 617.936M (-935.292M)
Down Volume: 2.145B (+1.368B)
A/D and Hi/Lo: Decliners led 2.07 to 1. Better than it was during the morning when it was -5:1 but still stronger than the upside sessions that could not crack 2:1 as it was all generals (large cap techs) and no soldiers doing the work.
Previous Session: Advancers led 1.57 to 1
New Highs: 31 (-24)
New Lows: 105 (+35)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped lower to the 10 day EMA then collapsed in the morning. Sold down to the July peak on the low, and that set it off to the upside, though it took a couple of tests to start the move. Strong volume on the bounce, but as noted above, that is somewhat deceiving as it was not really strong buying that drove it back up. The action was positive in that NASDAQ held key support again and rebounded to close within its recent range and still in a rather normal test. The volume and wild day to day swings, however, are not really normal, and that indicates that NASDAQ is also subject to the high volume turnover that can erode an upside move. NASDAQ is still holding up with solid relative strength, but it is taking its shots as well. If it can take the shots and continue to hold the breakout as it has, that is good news for the index and indeed the market overall.
SOX (-3.51%). Broke down hard from its long head and shoulders pattern spanning the past 6.5 months. SMH, the ETF, broke down from a head and shoulders top as well. There is not much positive to say with respect to the chips.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -3.71 points (-0.24%) to close at 1515.88
NYSE Volume: 1.588B (+21.02%). Volume jumped to its second highest in a month, only eclipsed by the Friday expiration volume as SP500 and the NYSE indices sold off. Rebounded to flat, and the up to down volume was much more even than NASDAQ. Thus we are not viewing this as negative price/volume action.
Up Volume: 617.399M (-257.591M)
Down Volume: 953.987M (+541.739M)
A/D and Hi/Lo: Decliners led 1.66 to 1. The small caps were lagging and thus breadth lagged.
Previous Session: Advancers led 2.07 to 1
New Highs: 49 (-2)
New Lows: 40 (+10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Gapped for the second straight session, this time lower. It held the 50 day EMA on the open, but after that initial bounce in the market it undercut that quite easily. It sold down to the June lows and slightly undercut them (1489 on the low) before staging an impressive rebound that almost took it back to flat. It did take it back above the 50 day EMA on the close, and that gives SP500 something to work with. Not a whole lot, however, as the large caps are trying to hang on but are below some big resistance at 1525 on up to 1550ish. There is a modest chance of a bounce from here given the two intraday tests of key support, but that is the outside chance. Lots of work for the large caps.
SP600 (-0.75%) continues to struggle, again reaching down to some support at 415 on the low and recovering to hold the 200 day SMA. Still below the 50 day EMA and still below the late September peak. Looks to be stalling at the 50 day EMA (425) in what looks to be the right shoulder of a head and shoulders that set up with this week's bounce.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips rallied back as well form the selling, closing flat but still just below the 50 day EMA (13,694). Similar to SP600 it is threatening to roll over in the right shoulder to a head and shoulders trying to set up given that weak bounce from the Friday selling.
Stats: -0.98 points (-0.01%) to close at 13675.25
Volume: 259M shares Wednesday versus 206M shares Tuesday. Volume jumped above average as the blue chips cascaded lower and then rebounded. Good rebound volume but it has a lot of overhead to overcome here.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Durable goods, initial jobless claims, and new home sales are on tap along with a slew of new earnings. After hours there were more and the results were varied yet again. Safe to say the market is not comfortable with the earnings that are coming out as it is led around by the nose with each batch of reports. If they are good things go up. If they are disappointing they go down. Not a little bit, but big; both directions. Again that shows a lot of indecision by investors. Not so much indecision, however, as there are those who are getting out and those that are getting in on the dips.
This action can indicate a top in progress: as the buyers move in on the dips and push stocks back up the sellers come in and use that rally as cover to sell and move money out of the market. It can also be part of a bottoming process, but you typically need more of a selloff and base to get to that point.
There is another factor to consider with this volatile action and that is that the market just got out of an ugly situation in July and August, breaking to a new high with a very nice recovery. SP500 and DJ30 have given that move back, falling right into the molasses again. These two back to back corrections indicate that all of the skeletons in the summer sub-prime and credit selling are uncovered.
While there are still many stocks out there that are in excellent shape, moving higher after breakouts, pausing after strong runs, or set up for a new breakout, the action in DJ30, SP500, and SP600 is weak. NASDAQ with its recovery remains in good shape, but if it goes under, the last bastion of support is gone and the selling intensifies.
Thus we will still look at the solid upside plays as potential buys if they show us good action, but we also have to be more defensive minded and if a position starts cracking near support we need to button it up. Rather not risk a major decline, and with a passel of techs gapping lower on earnings Wednesday, that just reinforces that even the stronger stocks are under pressure now.
We are going to look at some downside plays on the indices in the event DJ30, SP500, and SP600 roll over. They have put in low volume bounces back to resistance and that leaves them vulnerable to a resumption of the downside. One thing going for SP500: a lot of the financials were hammered the past two weeks but have spent the past three sessions working laterally; a bounce could be in the offing as they are near term oversold. Thus while a lot of gloom exists with the state of non-tech, they could show a bounce near term. That won't get them out of their current weak patterns, but it is part of the process of digging out of a hole.
Support and Resistance
NASDAQ: Closed at 2774.76
Resistance:
2778 from a July 1999 peak
2834 is the October intraday peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2768 is the November/February up trendline
The 18 day EMA at 2757
2725 is the July high
2713 is the November/December/February up trendline
The 50 day EMA at 2693
2673 is the early July high
2634.60 is the June peak
S&P 500: Closed at 1515.88
Resistance:
The 10 day EMA is at 1527
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 used to be the all-time peak
1556 is the July intraday high
1576 is the Thursday intraday high.
Support:
1517 is the July 2006/March 2007 up trendline
The 50 day EMA at 1515
The 90 day SMA at 1502
1490.72 is the early June closing low and early August peak.
The 200 day SMA at 1478
1475 from peaks in December 1999 and January 2000
Dow: Closed at 13,675.25
Resistance:
The early June high at 13,676 (closing), 13,692 (intraday)
The mid-June high at 13,689
The August high at 13,696
The 50 day EMA at 13,695
The 10 day EMA at 13,775
14,025 is the old channel line
The July high at 14,022
14,088 is the early October closing high
14,198 is the Thursday intraday high.
Support:
The early July peak at 13,671
The 90 day SMA at 13,566
13,315 is the July 2006/March 2007 up trendline
The 200 day SMA at 13,155
12,845 is the August closing low
12,786 is the June peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 24
Existing home sales, September (10:00): 5.04M actual versus 5.25M expected, 5.50M prior
Crude oil inventories (10:30): -5.2M actual versus +1M expected and 1.78M prior
October 25
Durable goods orders, September (8:30): 1.5% expected, -4.9% prior
Initial jobless claims (8:30): 320K expected, 337K prior
New home sales, September (10:00): 775K expected, 795K prior
October 26
Michigan sentiment, October final (10:00): 82.3 expected, 82.0 prior
End part 1 of 3
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world stock market
us stock market
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