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11/27/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ISRG; NETL; GILD (bonus)
Trailing stops: None issued
Stop alerts issued: AMZN
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:
- Market gets a boost from a cash injection into Citigroup.
- Down one day, up the next, trying to put together a Christmas bounce but not there yet.
- Consumer confidence not at recession levels, but the trend and size of the declines are not encouraging.
- Techs really want to try an oversold, Ho-Ho bounce.
Nothing like money to bring some buyers back to the market.
Staples beat its earnings expectations and Activision guided higher on its Guitar Hero game, and Chevron received an upgrade. Oil continued its slide with a nasty $3.33 decline to 94.37. On the other side of the ledger the Schiller Housing Index estimated the housing impact in 2008 would include the loss of 524K jobs, $6.6B in tax revenue to the states (income and property taxes), and drop GDP by a full percentage point. In addition, GS downgraded 13 separate sectors, dropped its growth forecast by 1%, and basically said to go defensive. Pretty broad market call there.
The trump card for the day, however, was the Abu Dubai $7.5B cash investment in C for a measly 4.9% of the company. Many positives in the deal. First, someone actually wanted to put money into C and the financials. Is it a case of more money than sense? The oil producers are dying to find places to put their money, and it was likely burning a hole in AD's pocket and they wanted to beat anyone else to the punch. Probably early in our view, but it gets some other speculation going because others that were thinking of making similar moves now feel the heat to do so sooner than later.
It was certainly enough to excite the market here. After a clubbing on Monday, the C news jacked up the futures, and they managed to hold on into the open. They rallied early, gave back some as expected, but held the gains, fought off an afternoon selling attempt, and bounced to close at or within spitting distance of the session highs hit early on. Yee ha the bull is back! Well, maybe for the day, and maybe for some sort of Christmas rally trying to set up.
Indeed, the day to day action continues to be up one day then down the next. Sellers slam stocks, some covering and buying occurs the next session, then another gut punch. Tuesday looked pretty good with some higher volume and solid gains in response to the Monday selling, but in the bigger picture none of the indices broke back through resistance and indeed DJ30 and SP500 remain in some pretty ugly downtrends below the 10 day EMA. This volatility can signal a top or a bottom, but it has been basically unabated since the selling started so it is hard to classify it as signaling any kind of bottom right now.
There is something of a change, and that is found in NASDAQ and more particularly NASDAQ 100. The latter sold off hard to start November, but then it grabbed some support near 2000 and has refused to give it up, working laterally the pat two weeks. Indeed it is trying to set up something of an interim double bottom to make a break higher in a holiday rally. Looking at some of the large techs, e.g. GOOG, RIMM, AAPL, BIDU, you see some positive moves on high volume. We have been picking up some shares in these and are looking at more in anticipation of a Santa Clause rally despite the overall downtrend simply because they have started to behave better, acting as if they are going to move up. Indeed, GOOG already gave us a nice gain as it stepped out ahead of the pack. Even some of the ETF's were in on it today. DIA bounced on strong volume along with QQQQ and SPY. Santa's sleigh is trying to take off.
Technically it was not a bad session. Stocks started higher, fought off a couple of selling attempts that never threatened to turn them negative, then rallied up to close near session highs.
Internals: Volume was up on NYSE and NASDAQ, moving nicely above average on the gains. That was great, but it is not definitive. Often a short covering rally has some strong volume with it. The thing you look at in that situation is the breadth. NYSE breadth was up and down with the moves, and it was about 1.5:1 heading into the last hour. Then with the move up into the close breadth moved to 2:1 on NYSE. That gave the move a bit of credibility beyond just a short covering run. NASDAQ was a meager 1.3:1, but as discussed above and in leadership below, even that has some positives to it.
Charts: SP500 and DJ30, despite the moves, are still in some pretty pernicious downtrends, still below the lowest possible resistance in the form of the 10 day EMA. When a stock or index trends lower below the 10 day EMA, that shows a pretty well entrenched downtrend. As a positive, SP500 recovered its up trendline and DJ30 recovered the August closing low. After breaching those levels a rebound is usually in the cards as noted last night. We were looking for a further test lower before a bounce, but the C news may have short-circuited that. It will have to prove it, however, given those downtrends. NASDAQ is trying to move as well, but it could not top its 200 day SMA, and volume, while higher, was just average on the move. The large cap NASDAQ 100 looks as though it could lead, however.
Leadership: The leadership ranks remain as thin as a dustbowl cow, but as noted above, the ones that are in the game are trying to set up for a move higher. A few solid stocks can give us a nice short term, holiday bounce, but as for a longer term move the prognosis is questionable. Nonetheless we see stocks such as RIMM, GOOG (still), AAPL, SOHU, GILD, BIDU, MON and POT to name a handful in good shape to move higher near term. And you have to like that these stocks can fly like the wind when they start to move just as GOOG did last week.
THE ECONOMY
Confidence is falling at a faster rate.
Nothing like a good market session to gloss over some not so great economic data. We have often talked about consumer confidence not being a worry until it reaches certain levels or the decline starts at a rapid pace. The most recent take on confidence released Tuesday showed a drop to 87.3 from 95.6. That keeps it easily within the safety zone; it takes readings in the mid to low sixties, indeed in the fifties, to really worry about a recession based upon a lack of consumption.
The other factor is the rate of change. You still don't fear a recession is imminent if confidence is in the seventies or better, but when the trend is heading lower you have to be vigilant and watch the rate of decline. The 8+ point drop in confidence from one reading to the next is a flag that confidence is reaching a tipping point where it can start a quick run lower. At this rate of decline it would take just 3 months, a quarter, to get confidence in the sixties and starting to flash the critical light.
This is on the heels of the Michigan sentiment survey released last Friday that saw a similar decline. On both sessions the market rallied. Either it is ignoring sentiment or is adopting the 'less is more' attitude that worse economic news means Fed intervention and a benefit to the market, etc. Maybe that will be the case, but rallying stocks is going to keep the Fed at bay. Of course as noted above the indices are still in a downtrend regardless of the Tuesday upside bounce. A Christmas rally on back burners the Fed more. Given the mounting forward looking evidence, evidence we have pointed out for the past 4 months, that shows the economy is weakening, it would be better to have the market sell more, get the Fed worked up, get Congress worked up, and get some action taken with respect to the mortgage issue as well as some tax relief. That will likely come, the market selling that is, but likely after a holiday rally, and at that point it may be, if it not already is, too late.
THE MARKET
MARKET SENTIMENT
VIX: 26.28; -2.63. Well, it got up near 30 on Monday and stocks bounced Tuesday. Looks to be more of a short term phenomenon. It looks as if there is more work to be done here, i.e. a really massive spike down the road to set the bottom and start building a recovery. Recall that on serious bottoms the VIX peaks weeks before the market bottoms. That means there will be more selling ahead before there is a bottom in place.
VXN: 30.76; -2.67
VXO: 28.47; -2.6
Put/Call Ratio (CBOE): 0.82; -0.16
Bulls: 47.9%. Nothing like some selling to get the bulls down in number. Down from 51.1% and 54.5% the week before after 5 weeks above 55%. Still needs to move lower given the indications the market is showing, i.e. the strength of the selling. 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: 26.6%. Disappointing, moving a bit lower from 26.7% after that sharp jump from the 22.2% just 3 weeks back. 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: +39.81 points (+1.57%) to close at 2580.8
Volume: 2.145B (+6.81%). Volume moved up to average as NASDAQ bounced off some support and bumped the 200 day SMA. Not bad but not as strong as the NYSE trade.
Up Volume: 1.741B (+1.386B)
Down Volume: 448.536M (-1.197B)
A/D and Hi/Lo: Advancers led 1.28 to 1. Pretty weak. Just the big names moving up, but as noted above, NASDAQ can bounce on just the big names.
Previous Session: Decliners led 2.87 to 1
New Highs: 54 (0)
New Lows: 282 (-5)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher and rallied to the 200 day SMA (2586) on the high, closing just off that level on rising, average trade. It has held the 2550ish level where it has shown some support, and is trying to make a bounce. NASDAQ overall does not look that impressive right here. It is NASDAQ 100 that looks stronger with its two week lateral move and formation of a short double bottom at some support at 2000 and similar action in the leaders described above.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SP500/NYSE
Stats: +21.01 points (+1.49%) to close at 1428.23
NYSE Volume: 1.654B (+10.24%). Volume jumped solidly to above average as SP500 bounced higher. Nice strength as it moved back above the summer 2006 up trendline.
Up Volume: 1.238B (+1.033B)
Down Volume: 339.356M (-952.641M)
A/D and Hi/Lo: Advancers led 2.08 to 1. Decent trade on the bounce though still lower than the downside breadth. Not as many large caps were moving higher.
Previous Session: Decliners led 3.18 to 1
New Highs: 26 (-19)
New Lows: 384 (+44)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 bounced back above its summer 2006 up trendline the day after undercutting that level. This could be the bounce discussed Monday, and as noted it is likely not going to set the bottom on this move, but it can give us a solid, tradable rally.
SP600 bounced but it was a piker compared to the large cap indices. It is trying to make a bottom near 382, but it is in a major downtrend and we are not looking to SP600 for anything other than a read on what the market feels the economy is going to do. Right now the small caps are indicating nothing positive.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Bounced off the February high, recapturing the Monday loss on some stronger volume. It failed to take out the 10 day EMA (13,013) on the move but as with the other indices, it is trying to put in an interim bottom here to bounce ahead of Christmas. It is still in a downtrend below the 10 day EMA, but with the NASDAQ leaders jostling for a move higher DJ30 is positioning to follow.
Stats: +215 points (+1.69%) to close at 12958.44
Volume: 296M shares Tuesday versus 265M shares Monday. Volume jumped further above average as DJ30 bounced toward the 10 day EMA.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
More economic data out Wednesday with durable goods orders, existing home sales and oil inventories, but investors are more or less resigning themselves to the data being less than hopeful, and indeed are converting that belief into a potential relief move under that 'less is more' theory discussed above.
What we are looking at are some positive short term patterns and moves from a handful of last rally leaders that are setting up for a move higher toward Christmas. We are looking to pick up on those as they show they are ready to break higher similar to AAPL and GOOG. At the same time we are going to keep an eye out for downside plays that set up well in the upside move (as we don't think it can last or be 'the bottom') as well as those stocks that fail to participate in any rally as that shows they are the weakest in the market.
Support and Resistance
NASDAQ: Closed at 2580.80
Resistance:
The 200 day SMA at 2586
2600 is some minor support.
2634.60 is the June peak is bending
The 90 day SMA at 2651
2673 is the early July high
The March up trendline at 2678
The 50 day EMA at 2680
2725 is the July high
2742 is the November/December/February up trendline
2778 from a July 1999 peak
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
2512 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 1428.23
Resistance:
1430 from the August interim lows
1438 is the November low
1440 - 1437 from January and March peaks
The 10 day EMA at 1440
1459 is the February peak
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 1481
The 50 day EMA at 1486
1534 is the early July high
1536 is the July 2006/March 2007 up trendline
1539 is the mid-June intraday high
1541 is the early June high
Support:
1425 is some minor support.
1412 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 12,958.44
Resistance:
12,975 is the November low
13,000 to 12,985
The 10 day EMA at 13,013
The 18 day EMA at 13,161
The 200 day SMA at 13,242
The 50 day EMA at 13,417
The 90 day SMA at 13,487
13,560 is the July 2006/March 2007 up trendline
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:
12,845 is the August closing low
12,786 is the February peak
12,518 is the August low
12,250 from late March lows
12,050 from the March 2007 low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
November 27
Consumer Confidence, November (10:00): 87.3 actual versus 91.5 expected, 95.6 prior
November 28
Durable goods orders, October (8:30): 0.0% expected, -1.7% prior.
Existing home sales, October (10:00): 5.00M expected, 5.04M prior
Crude oil inventories (10:30): -1.01M prior
November 29
Q3 GDP revision (8:30): 4.9% expected, 3.9% prior
Chain deflator (8:30): 0.8% expected, 0.8% prior
Initial jobless claims (8:30): 330K expected, 330K prior
New home sales, October (10:00): 750K expected, 770K prior
November 30
Personal income, October (8:30): 0.4% expected, 0.4% prior
Personal Spending, October (8:30): 0.3% expected, 0.4% prior
Core PCE Inflation, October (8:30): 0.2% expected, 0.2% prior
Chicago PMI, November (9:45): 50.5 expected, 49.7 prior
Construction spending, October (10:00): -0.2% expected, 0.3% prior
End part 1 of 3
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