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us stock market, trade stock
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11/21/07 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: CAT; DIA; MS; QQQQ; SPY
Buy alerts: GOOG
Trailing stops: None issued
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, plays table summary (giving the staff some time off)
Thursday through Sunday: No report
Report resumes Monday
SUMMARY:
- Mirror image to Tuesday: weak start, recovery to mid-afternoon, late plunge back down.
- Thanksgiving is for the bears, and Christmas is for bulls. Bulls are ready for a relief bounce, but what will the timing be?
- Large cap techs making a last ditch effort at holding on and rebuffing recession signals, but they need some Fed help.
o Holding up for a bounce as noted. Won't withstand further selling, bounce
- A half session Friday then we see if a bounce can set in.
Still weak: stocks try to rebound from a weak open only to get flattened late.
There was news out, but it was not major. Jobless claims fell 11K to 330K; the upside creep continues despite the decline the prior week. Paulson was playing father, warning 2008 mortgage defaults will be significantly higher than 2007. Foreign markets were in the tank. Given the market bias right now that was more than enough to send stocks lower from the open. A modest bounce heading into Michigan sentiment (76.1 actual, 75 expected, 85.9 prior month) was sold into, and weaker oil inventories (-1.1M) provided sellers more fodder. By midmorning DJ30 had undercut the August closing low and NASDAQ had made no attempt to retake the 200 day SMA it gapped below.
Midmorning brought about a bottom once more, however. At least some things other than selling have been something of a constant in this market. After DJ30 undercut its August closing low, stocks climbed back slowly but steadily through lunch and into the afternoon, with a decent recovery that still left stocks underwater. Basically the shorts were covering after feasting once more and driving an index below key support once more. In the last hour the rope broke, however, and the indices tumbled back down, sending DJ30 to close below the August low.
Technically it was another weak session with a lower start, an attempted recovery to put a better face on the action, then a belly flop into the close. The intraday action has not improved.
Internals: Weak A/D once again near -2.5:1 on both indices. Volume was lighter ahead of Thanksgiving as more took the day off, and with the lighter trade the market was pretty easily pushed around. NASDAQ 100 again showed some relative strength as some of its leaders closed positive, e.g. GOOG, RIMM. Too few, however, to really make a difference as even NASDAQ 100 finished down more than 1%.
Charts: DJ30 closed below its August closing low, and with DJ20 already breaking below that level this generated another official sell signal according to Dow Theory. NASDAQ gapped below its 200 day SMA and it never really threatened to climb back over that level. SP500 really didn't plow much significant new ground, but it does look to be heading toward its August closing low similar to DJ30. Breaking support isn't hard to do for this market.
Leadership: Leadership is as thin as a cannibal on a deserted island. NASDAQ 100 is providing the only offerings with the strongest leaders in the last run holding ground at the 50 day EMA with some, e.g. GOOG, moving higher. Indeed we bought some GOOG in anticipation of a NASDAQ 100 led relief bounce. Risky, but had to like its relative strength. Energy could not provide any new upside direction as oil did not make the rendezvous with 100 (closed at 97.13, -0.90). Perhaps energy is worried about a recession with $100/bbl oil.
Bears have feasted. Can bulls pull off a Christmas rally?
There is a saying that Thanksgiving is for the bears while Christmas is for the bulls and the so-called Santa Clause rally. The past three weeks the bears have enjoyed an excellent repast ahead of Turkey day. With this kind of selling the market is getting oversold once more and a bounce between now and Christmas is rather inevitable, and with the large cap techs holding up nicely the stage is set for a bounce.
The question is the timing, and that says something about the economy overall. There has been some tax loss selling ongoing and that will be over likely next week. If that is the case the large cap techs are ready to lead and the energy stocks out side of the large integrated can pitch in as well.
If the large cap techs sell significantly before such a bounce, they can still make that Christmas bounce, but if they sell off similarly to the DJ30 and SP500, that says a lot about the larger picture. Yes there could still be a Christmas bounce, but a severe sell off by the techs as well would tell us that the market is going to head even lower after such a relief move.
Will the Fed rush back in again?
If the techs can bounce higher from here they are saying they are not wanting to head lower at all and are going to try and lead the market higher out of this morass. They likely cannot do it on their own, however. They will need the Fed to act and to act soon before things get more economically out of hand. If the Fed steps in after this selling and cuts unexpectedly once again the market gets a big psychological boost that could help unlock credit and get things moving again.
It is not only necessary to act quickly to stave off a recession, but if the Fed acts too late as it typically does then when it does start cutting rates it is too late and it is 'pushing on a string' as is so often said of Fed action. Why? Because the early bird, psychological impact has long since past and you are just dealing with rate cuts that take 9 months or so to impact the economy. It is like having medicine needed to cure someone but you delay administering it until it is too late and even with the shots the patient dies. In short, if they wait too long as is the usual case, the economy fades to recession.
Of course the Fed has to deal with this as well as the plunging dollar. More cuts that potentially avoid a recession but result in a weaker dollar immediately, or no cuts, a likely recession, and a weaker dollar anyway because of a further weakening economy? The Fed is in a bad situation with nothing but bad choices. Greenspan had the luxury of a strong dollar that he could print money against at any time. Bernanke does not have that luxury and makes the choices bad ones. Some say go ahead and cut under the old 'better the devil you know' theory. Others fear the unknown of a super weak dollar, oil priced in other currencies, etc. For now it looks as if the Fed is going to try and split the baby, ensuring that nothing changes the current momentum in the economy and the dollar.
Beyond Thanksgiving.
About all the market can do to salvage 2007 is try a Christmas run. As noted above, there is likely to be a relief bounce between Thanksgiving and Christmas, but what the market does after that and indeed before that depends in part upon the Fed. The Fed may be able to turn things back, but it has to act quickly. ECRI, the best manmade leading indicator, shows a broad-based economic slowdown that is not screaming recession, but there is the addition of a series of economic shocks such as oil, housing, and credit; historically when those start to combine and the leading indicators weaken as they are doing, they start point to recession.
Even if the Fed acts, and we are not expecting it to at least before its next meeting, there is still the fact that the indices are down 10%+ since October just after they were down that amount in August. Much too closely spaced, and that speaks volumes as well. We talked of this in early November and indeed even in the summer selling we noted it came much quicker than the prior correction in the continuing market uptrend. This along with all of the other factors we outlined along the way (new highs on increased volatility, narrowing breadth, massive selling volume followed by light upside trade, etc.) simply underscores the weakening of the action to the current stage that saw DJ30 make a lower low.
So, we look for a tradable rally between Thanksgiving and Christmas, and after that if nothing changes with respect to Fed action or the political climate of raising taxes on capital, the economy will sink under the burdens of high oil, the credit lockup, and old age. That does not bode well for the market in 2008, but we will take what the market gives, and if that means playing defensive stocks such as KO, PG and the like while making a lot on downside plays, so be it. We have already made a lot of quick cash on the downside run in just the past week. We can make money on the relief bounce to come, and then again on the downside if the Fed fails to act and we the move tops out as it will do if no decisive action is made.
THE MARKET
MARKET SENTIMENT
VIX: 26.84; +1.96
VXN: 30.55; +0.66
VXO: 28.42; +1.61
Put/Call Ratio (CBOE): 1.22; +0.09
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: -34.66 points (-1.33%) to close at 2562.15
Volume: 2.073B (-21.28%)
Up Volume: 385.597M (-789.538M)
Down Volume: 1.569B (+128.058M)
A/D and Hi/Lo: Decliners led 2.42 to 1
Previous Session: Decliners led 1.4 to 1
New Highs: 39 (-12)
New Lows: 348 (-66)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -22.93 points (-1.59%) to close at 1416.77
NYSE Volume: 1.609B (-13.9%)
Up Volume: 260.09M (-633.592M)
Down Volume: 1.344B (+388.246M)
A/D and Hi/Lo: Decliners led 2.7 to 1
Previous Session: Decliners led 1.03 to 1
New Highs: 28 (-13)
New Lows: 528 (-86)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -211.1 points (-1.62%) to close at 12799.94
Volume: 284M shares Wednesday versus 325M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
Support and Resistance
NASDAQ: Closed at 2562.15
Resistance:
The 200 day SMA at 2584
2600 is some minor support.
2634.60 is the June peak is bending
The 90 day SMA at 2655
2673 is the early July high
The March up trendline at 2684
The 50 day EMA at 2693
2725 is the July high
2739 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:
2550 to 2540 from May/June consolidation
2525 is the February closing high
2510 is the August 2004/April 2005/October 2005/March 2007 up trendline
2451 is the August closing low
2386 is the August intraday low
S&P 500: Closed at 1416.77
Resistance:
1425 is some minor support.
1430 from the August interim lows
1438 is the November low
1440 - 1437 from January and March peaks
1459 is the February peak
The 10 day EMA at 1454
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 1493
The 50 day EMA at 1494
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
Support:
1409 is the June/July 2006 up trendline
1406 is the August closing low
1375 is the March closing low
1370 is the August intraday low
Dow: Closed at 12,799.04
Resistance:
12,845 is the August closing low
12,975 is the November low
13,000 to 12,985
The 10 day EMA at 13,111
The 200 day SMA at 13,236
The 18 day EMA at 13,266
13,450 is the July 2006/March 2007 up trendline
The 50 day EMA at 13,484
The 90 day SMA at 13,521
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:
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 actual versus 330K expected, 341K prior
Leading Economic Indicators, October (10:00): -0.5% actual versus -0.3% expected, 0.1% prior (revised from 0.3%
Michigan sentiment, revised November (10:00): 76.1 actual versus 75.0 expected, 75.0 first iteration (85.9 prior month)
Crude oil inventories (10:30): -1.07M actual, 2.814M prior
End part 1 of 2
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