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us stock market, stock watch
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11/20/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: AMR; C; ESRX; MS
Buy alerts: RIG (bonus)
Trailing stops: FSLR; GYMB
Stop alerts issued: None issued
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
HOLIDAY SCHEDULE
Monday and Tuesday: Full report
Wednesday: Market summary, play tables.
Thursday through Sunday: No report
Report resumes Monday
SUMMARY:
- Market absorbs bad news, rallies early, tanks, then rebounds. Another typical day of late.
- Oil on its way to $100 again, and it will likely hold it.
- FOMC minutes show the Fed already moved away from cuts after the first 50BP move.
- Market might finally find a bounce ahead of Thanksgiving after a reach to new lows on this leg and a rebound.
Another early gain is lost, but market rebounds after new lows are hit on this downside leg.
After some good after hours earnings from HPQ and JWN on Monday night, there was plenty of bad news in the morning. FRE and TGT missed earnings, and even a $10B buyback by TGT could not push it positive. Housing permits were at a 14 year low and oil was surging (closed at $98.36, +3.72/bbl). Looked bad, but a rumor of a Fed rescue on the heels of the FRE earnings and the resulting implosion in the lenders helped jack the futures up: bad news somehow was going to bring a newly recalcitrant Fed back into action.
That hope, pipe dream, fool's wish, whatever you want to call it, started stocks higher. Unlike other sessions, stocks did not start selling from the open but managed to not only hold the opening gains, but add to them through the morning. Well, through most of the morning. Right before lunch on the east coast the indices started to give some back, but were holding a 35ish to 40ish point gain on NASDAQ. Then the slip-sliding began and over the next 2 hours the indices were all negative with NASDAQ undercutting its 200 day SMA. A modest bounce into the FOMC minutes brought some hope, but our mid-afternoon alert warned that it would bring some more selling, but then a late short covering bounce. The sellers did come back in after the minutes showed a Fed not debating over 25 or 50BP but zero or 25BP.
The market broke to new session lows in the hour following the release with the indices hitting new lows on this leg of selling. We took some downside gain off the table. NASDAQ was back below the 200 day SMA, but sure enough, the rebound started in the last hour. A 40 point NASDAQ rebound brought it back above the 200 day SMA and DJ30 into its range of recent lows. SP500 lagged, but it did close over its August interim lows. That turned the large caps positive and pulled the market back from the brink of real ugliness.
Technically you can say the market held up pretty well in the face of some bad news early on. FRE and TGT missed earnings, pressuring lenders and retailers yet again. Yet the futures were up and the market opened higher and rallies. You could argue that was an indication the market was a bit sold out. Of course it rolled over and fell like a WWII bomber suffering a direct flak hit, but it did manage to rebound positive at the close. Sure it was all short covering, but all rebounds start with some covering. In the end it wasn't great (it closed lower than the early session highs), but it salvaged a gain from a loss.
Internals: Volume was strong, back up above average on NASDAQ and was strong on NYSE as well. That is good on a reversal session as was basically Tuesday, though it also often accompanies short covering rallies in a weak market. Let's look at breadth. It wasn't necessarily bad breadth as we have seen on the downside sessions of late, but it was still negative despite reversals to positive on the large cap indices. This narrow breadth and high volume are pretty classic indications of short covering bounces in a selling market.
Charts: NASDAQ undercut its 200 day SMA twice on the session, but twice it recovered that level. That is somewhat typical of an undercut of support: there is more selling after the undercut but then a rebound move as the shorts cover their good fortune as they were playing for a new low and got it. Lots of talk of a 'technical' breakdown, and that tends to trigger some rebounding. That rebound kept NASDAQ above its 200 day SMA and in its recent range of closes. Similar action for the Dow in that it stayed in its range of recent lows. SP500? Well, the financials are not giving it any room to breath and it is below its recent range. Very volatile on all of the indices and volatility as we say is a sign of change. After some harsh selling the past week this can signal a bounce coming. Likely just a short covering bounce, but a bounce.
Leadership: NASDAQ large cap leaders bounced as they looked to do as noted the past couple of reports. They managed to keep the market from totally rolling over during the midday selloff, holding onto some green though even with the late rebound they found it hard to get back up to their session highs and indeed they did not. Energy provided some late support as the energy stocks came to life on the big spike in oil. That prompted us to issue an alert on RIG as it came off the 50 day EMA on strong volume. The leadership even with some (and just some) oil stocks bubbling up is still very thin. There is still some significant basing to take place before the former leaders are ready to get back on the horse again. In the interim, the large cap tech leaders and some oil stocks that held the 50 day EMA are ready to give a bounce to kick off the holiday season. Recall how these stocks were leading in October but no one else was following? Likely the same thing this time as well, and thus a bounce is just a short term upside move as part of a larger basing process.
In sum, Tuesday's move had all the attributes of a short covering move ahead of the holidays. Thus we are not getting too excited about it. We will see some good moves from the prior rally leaders as they retake some ground lost in the last selling. We will see some beaten down and broken stocks (e.g. financials) rebound from the beatings they have taken. It does not mean a bottom has been set. Everyone wants to believe that all the market has to do is once again find a bottom near the old bottom in August and that will launch a new rally as it has done in the prior couple of years. In all likelihood that is not the case this time around given the Fed is sitting this one out and gives every indication it is going to continue to do the same.
We may get quite a holiday bounce given we have had quite a pre-holiday sell off. Ultimately what that likely accomplishes is just setting up some more downside moves we will take advantage of. In the past three sessions we have taken gains on 8 downside plays with an upside gain tossed in on Tuesday. The average time in the plays is roughly 4 sessions and change. As we always say, when the downside happens, it happens fast. No exception this time, but unfortunately for the bulls longer term, it looks as if we are going to have many more opportunities to play the downside ahead whether the market has found bottom here or if this is just a stopover in more selling. The DJ30 and SP500 patterns are quite ugly, and with respect to those indices it appears it could be the latter and not the former.
THE ECONOMY
Oil ready for $100/bbl. That is putting many gas tanks at $100/tank.
Oil looks ready to go to $100. A few weeks back we said it was going there but would fall after it made it. Oil came close but no cigar; it sold off down near 90 afterwards. Now it is going to $100, and because it has already been close but turned back, it is not going to fall as soon as it gets to that level.
Not great for drivers. It is no longer peak driving season but the national average per gallon is over $3. That puts a lot of your bigger vehicles at a C-note and more for a tank of gas. I know some guys who bought the big diesel trucks the past couple of years, not because they needed them to pull heavy loads and thus get better mileage than a gasoline truck, but because they though it was cool to own a big diesel truck. With diesel prices even higher than gasoline, they better like those trucks because they will never get their money back on them.
In any event, this time when oil moves to $100, that magic mark likely won't result in a sell off because it has already done that, retrenched, and is ready for the run. That may just get some energy stocks back on track as RIG showed Tuesday.
It will take a crisis to get the Fed to move.
The FOMC minutes splashed cold water on the loins of those hot with the 'Fed rescue' fever Tuesday. The fever takes hold when sane people feel the Fed is going to cut rates just as it did in September (50BP surprise) in order to rescue the markets from the fall they are currently in, particularly the financials as they suffer the effects of outrageous fortune during the very long (in historical terms) housing rally following 9-11-01.
After initially running to the aid of the financial markets, the Fed has stepped back. It acted initially to inject liquidity and ensure the markets were working. It didn't care if they were up or down it said, just that they were working. They pushed in the liquidity and shook hands with each other on a job well done. Then the call from Robert Ruben and the parade of business execs who explained their predicaments in scenes likely similar to that in God Father Part II where Vito Corleone listens to the sheepish landlord explain why he was such an idiot for kicking out the tenant Corleone spoke up for. The Don cuts them a break, slashing the Fed Funds rate 50BP, but asks the favor that the lenders practice restraint next time. Now that the markets are in real trouble again, what is a Don to do?
The FOMC minutes indicate the Don is not going to help out, at least not on the rate cutting front. The debate centered around no cut or a 25BP one to follow up the 50BP cut. Seems the Fed has adopted the Bush administration's 'shock and awe' method of cutting. Cut hard at first, show everyone you mean business, then things will fall in line. Unfortunately the results are the same. The Fed, just as the Bush administration, needs to come to the realization it needs more boots on the ground to win this fight. Shock and awe is a start. It shows you mean business. Then you have to actually mean business. The Fed wants to do it with injecting more liquidity, and that is working somewhat, but it is not enough, at least according to the financial markets, to fend off a significant economic slowdown or dare we saw (again), a recession.
THE MARKET
MARKET SENTIMENT
VIX: 24.88; -1.13
VXN: 29.89; -0.22
VXO: 26.81; -0.07
Put/Call Ratio (CBOE): 1.13; 0. All of that up and down activity, despite the positive close on the large cap indices, kept the ratio over 1.0.
Bulls: 51.1%. It is about time bullishness started to fall. Down form 54.5% after 5 weeks above 55%. It still is not low enough to make a difference at this point. You have to go through the process of wringing out the bulls with a decline of significance, a.k.a. a move into the lower 40's. 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: 26.7%. Sharp jump from 22.2%. Has bounced up and down over 20 the past several weeks but now is making a significant move above the threshold 20% considered bearish. Fell to a low of 19.6% five weeks back after falling rapidly from 25% just couple weeks before that. Bearishness peaked at 37.4% on this move and it fell to 18% in August. 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: +3.43 points (+0.13%) to close at 2596.81
Volume: 2.634B (+21.02%). Volume jumped to the best level in a week as NASDAQ undercut the 200 day SMA and then rebounded to hold it. Some buying came in, short covering or long buying, it was buying that pushed it back up.
Up Volume: 1.175B (+828.563M)
Down Volume: 1.441B (-373.016M)
A/D and Hi/Lo: Decliners led 1.4 to 1. Still a large cap move as the breadth was narrow and the NASDAQ 100 was up 0.4%.
Previous Session: Decliners led 4.07 to 1
New Highs: 51 (+1)
New Lows: 414 (+52). Getting interesting at this level.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Twice NASDAQ undercut its 200 day SMA (2583) and twice it recovered to hold above that level. It broke to a new low on this leg with an intraday reach down to 2554 where there is some support. It was enough to send it back up. A breach of key support led to more selling and then a rebound. Held key support on the close. Short covering for sure, but saved by some large caps that did not give up. Making a higher low here and that has potential for a Thanksgiving bounce.
NASDAQ 100 (+0.44%) was up, down, up and down. It closed higher but that keeps it below the 90 day SMA and the July peak. Has yet to cross over but refuses to give up.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +6.43 points (+0.45%) to close at 1439.7
NYSE Volume: 1.868B (+11.48%). Volume spiked on NYSE to the best level in two weeks as the indices reached lower then recovered. Very volatile on volume. That can indicate change after a move in one direction.
Up Volume: 893.682M (+718.898M)
Down Volume: 955.264M (-538.405M)
A/D and Hi/Lo: Decliners led 1.03 to 1. The indices finished higher but breadth was lower. More signs of a relief move more than broad buying.
Previous Session: Decliners led 4.9 to 1
New Highs: 41 (+4)
New Lows: 614 (+69). This is where it starts indicating a bottom, and with the other signs we have highlighted, there is more likelihood of the same.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Reached down below 1425 but still above the August closing low (1406.70) before rebounding to close positive. It made a lower low on this move so it is in a very weak position. Still will likely try to make a move higher to test 1450 or the 10 day EMA (1461) after this test.
SP600 (-0.01%) reached way down to a 52 week low then rebounded to hold the March 2007 lows. Still massively weak, but after this selling and the big doji it showed Tuesday, it is getting ready to make a rebound.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips managed a positive close after selling around 165 points on the low. That took it right down to the August closing low and a bounce ensued. Volume was strong on the recovery to positive. The tap at the old closing low and the recovery on volume indicates short covering yes, but it also suggests a bounce at least to try the 200 day SMA (13,236) is possible.
Stats: +51.7 points (+0.4%) to close at 13010.14
Volume: 325M shares Tuesday versus 285M shares Monday. Strong rebound volume, even topping the Friday expiration trade.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
The day before Thanksgiving. Not sure how many will be going over the river and through the wood to Grandmother's house, and there is a definite lack of the cold weather that stings the nose and bites the toes (or is it the other way around?), and some say that is crimping retail sales already. Of course at the same time others say retail sales will be solid once more this season. The call: unemployment remains good, jobs are solid, but the consumer is worried about $100/bbl oil, the cost of everything, the falling dollar (even the consumer knows Bernanke is full of BS when he says a falling dollar won't hurt a consumer as long as he or she buys US products) - - there is plenty to for them to worry about and that will likely show up on the Michigan sentiment final for the month released tomorrow.
Just one more full session this week, off Thursday, and half a session Friday. Thanksgiving can be good or it can be bad; it has a mixed record. This time around the market is oversold heading into the Wednesday before, and the action Tuesday suggests a relief bounce trying to form up. Those same old tech leaders look even a bit better after this session, and we might get some moves that we can ride higher through this week and into next.
After that, well, we will have to see how much staying power any upside has. Some where saying Tuesday was a turn, a bottom of sorts given the talk of a 'technical breakdown' during the session, the test of prior closing lows on DJ30, etc. As noted above, that typically adds up to a bounce, but the clincher for us is the action in the former leaders that are still, thanks to the absence of any new takers, the only stocks the market can really look to for leadership. MO, JNJ, KO and the like do when times are hard, but they are not growth junkies. Moreover, in a market rebound they will lag. Thus we look for the former leaders coming off support at the 50 day EMA or something similar and look to play them to the upside. We also watch the laggards bounce and then when they run out of steam at resistance we play them to the downside once more, just like this last trip lower.
Support and Resistance
NASDAQ: Closed at 2596.81
Resistance:
2600 is some minor support.
2634.60 is the June peak is bending
The 90 day SMA at 2658
2673 is the early July high
The March up trendline at 2682
The 50 day EMA at 2699
2725 is the July high
2738 is the November/December/February up trendline
2778 from a July 1999 peak
2798 is the November/February up trendline
2834 is the October interim peak
2861.51 is the October peak
Support:
The 200 day SMA at 2583
2550 to 2540 from May/June consolidation
2525 is the February closing high
2451 is the August closing low
2386 is the August intraday low
S&P 500: Closed at 1439.70
Resistance:
1440 - 1437 from January and March peaks
1459 is the February peak
The 10 day EMA at 1461
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1484
1490.72 is the early June closing low and early August peak.
The 90 day SMA at 1495
The 50 day EMA at 1497
1534 is the early July high
1535 is the July 2006/March 2007 up trendline
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 October intraday high.
Support:
1438 is the November low
1430 from the August interim lows
1425 is some minor support.
1406 is the August closing low
1375 is the March closing low
1370 is the August intraday low
Dow: Closed at 13,010.14
Resistance:
The 10 day EMA at 13,181
The 200 day SMA at 13,236
The 18 day EMA at 13,321
13,495 is the July 2006/March 2007 up trendline
The 50 day EMA at 13,511
The 90 day SMA at 13,668
The early July peak at 13,671
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 July high at 14,022
14,088 is the early October closing high
14,198 is the October intraday high.
Support:
13,000 to 12,985
12,975 is the November low
12,845 is the August closing low
12,786 is the February peak
12,518 is the August low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 20
Housing starts, October, (8:30): 1.229K actual versus 1.175M expected, 1.193M prior
Building permits, October (8:30): 1.178M actual versus 1.20M expected, 1.261M prior
FOMC minutes, October (2:00): The debate was over a 25BP cut or nothing.
November 21
Initial jobless claims (8:30): 330K expected, 339K prior
Leading Economic Indicators, October (10:00): -0.3% expected, 0.3% prior
Michigan sentiment, revised November (10:00): 75.0 expected, 75.0 first iteration
Crude oil inventories (10:30): 2.814M prior
End part 1 of 3
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