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us stock market, trade stock
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12/01/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: Took some interim gain: AAPL; FSLR; MA
Buy alerts: EDU; TXT
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
SUMMARY:
- Bernanke gaps stocks higher but end of month shuffle closes them off the highs.
- The importance of the 50 day EMA shows itself this week.
- New month means new money and we will see if the leaders can move through the prior highs with that boost.
Stocks have all the good news they can handle. More than they can handle.
Big Ben, Uncle Ben, Ben There Done That. Whatever your favorite description of the Fed chairman, the market liked what Bernanke had to say Thursday night when he talked about weakness in the economy and cramping in the credit markets. It seems the economy is something you can talk smack to and no one gets upset. Try doing that around my family at Christmas; you see holiday cheer fly right out the window.
In any event, Bernanke's comments echoing Vice Chairman Kohn's jazzed investors enough to overcome the Dell margin issues and a Goldman Sachs downgrade of key technology stocks. At least at the open. There was other news as well, good and bad, but leaning to the positive. Personal income and spending was half that expected with a 0.2% gain (0.4% forecast), core PCE was in line at 0.2%, and Chicago PMI was quite refreshing with a 52.9 read, bouncing it back above the 49.7 in September and the 50.5 expected. Oil was ripped again, falling to 88.71 on the close, down $2.30/bbl. Not bad, and with the Fed 'troubled' about the return to a credit freeze already, the better manufacturing data was definitely a relief. Not a turn in the economy, but nice to see no back to back sub-50 readings in Chicago.
Again, stocks gained, at the open. They gapped higher on Bernanke bliss, but that was the zenith for the session. After the strong open they struggled all session, sinking through the morning, through lunch, and really dropping mid-afternoon. NASDAQ was the downside leader as the large cap tech leaders went from a strong gap higher to negative. It took a bounce in the last hour to push the NYSE indices firmly positive and drag NASDAQ up off its lows for a more modest 7 point loss and not the 25 point spanking it was rubbing as the last hour started.
Volume was strong on both NYSE and NASDAQ. Distribution on NASDAQ? Accumulation on NYSE? Likely it was just end of the month shuffling. The moves for the week caught many with the pants around the ankles and there were some adjustments to be made to end the month and prepare for the new money to be put to work to start next week. The early move higher was used by some to take some positions off the table. We did some of that as well. There were sellers in there taking their shot as well; by sellers we mean short sellers versus just profit takers. The sharp move left many scrambling, however, and thus the higher volume as the indices closed mixed.
Technically the action left a bit to be desired though it was not a necessarily nefarious session. The intraday action was high to low. Yes the NYSE indices finished positive, but the action was down from the open with sellers using the action to sell and long players using it to take some gains on the week. Weekend, great news from the Fed leading to a big surge; yes, taking a bit of gain was quite normal, particularly given the harsh selling leading into this past week and its rally.
Internals: Decent breadth on NYSE with a 2.4:1 advancing edge. NASDAQ was rather anemic at 1.2:1. Volume jumped sharply. It was the strongest on NYSE outside of one session in the selling in early November. NASDAQ was no slouch either. Mixed signals if you look at whether the indices gained or lost ground, but when you factor in the unexpected surge for most involved in the market along with the month end, the reason for the volume becomes clearer. Thus it was not likely a session where the sellers showed they are going to overrun the market again just yet, but it is also something to watch into next week as the leaders and the indices need to hold their ground if the holiday rally is to continue.
Charts: Advances on SP500, DJ30 and SP500, though the indices could not punch through key levels. SP500 failed to hold a move over the 200 day SMA and DJ30 could not hold the move through the 50 day EMA. Sounds pretty worrisome, but considering that the indices jumped sharply for four straight sessions, the inability to push through that resistance is not shocking, surprising, or otherwise too worrisome.
Leadership: Some more leaders emerged Friday even as some of the early leaders from NASDAQ struggled. Good sign as that shows some money actually spreading out and not just a narrowly concentrated short covering rally. Sure there is some short covering driving this; after that kind of selling that is a given. The fact that new leadership caliber stocks popped higher on strong trade once more even after a few days of solid rallying shows continued new buying as it did not occur in a narrow, initial short covering orgy. Some early leaders, e.g. AAPL, GOOG, RIMM came under pressure after good runs, but they were the early leaders and were fighting off a GS downgrade of leading techs. It will still be important to see how they hold up this week as they test this move. Want to see them hold their gains then rebound to take on and preferably take out the October or November highs, whichever the case may be.
The 50 day EMA proves key once more.
Even as the indices sold on heavy volume we noted over the past week how some of the leaders in the prior rally had sold as well, but they were not breaking down in the same manner as the indices. They had faded but they were holding around their 50 day EMA, not rallying, but refusing to give up this level. That had our attention, and indeed on Tuesday we stocked the report with several prior rally leaders that looked ready to move higher. Indeed they did. We did the same on Wednesday and Thursday.
So what is the deal with this level? There are certain support points that the big money in the market, the mutual funds, insurance companies, pension funds and the like use to either buy more of their stocks, sit on the sidelines, or sell. The 50 day EMA is one of those points. In strong uptrends following breakouts the 18 day EMA is an important point early on as it shows whether or not a stock's breakout is still strongly supported. The 200 day SMA is a make or break point where a stock either holds and tries to repair the damage or breaks and heads lower and lower in a major correction.
The 50 day EMA is more of an intermediate level. Stocks have definitely come under pressure but are not being totally dumped. There is something there, some big money refusing to sell, holding them up. We noted during the week the former leaders were milling about the 50 day EMA: GOOG, MON, ISRG, SOHU, AMT, AAPL, VIP, etc. The fact that former leaders held this key level was a positive as it showed the big money not totally bailing out on them. That suggested a rally coming as we noted. We put them on the report and then they started to break higher. Ah the power of the 50 day EMA.
Now after that break higher off of a key support level we have to look ahead and see what is next. That would be the October and/or November highs these stocks hit before they were knocked back to the 50 day EMA. That is natural resistance for these stocks as it stalled them out on the prior move. As some approached that level Friday they stalled; after 3 to 4 upside sessions, however, that is normal. The litmus test is this week as they rest and then turn back up to take on those levels. If they can punch through that tells us the Ho-Ho rally has more legs. If not, it may have made its run and is going to fall short of the actual holiday and forecasts some more, as the Fed would say, 'turbulence' ahead.
THE MARKET
MARKET SENTIMENT
VIX: 22.87; -1.1
VXN: 28.65; +0.38
VXO: 24.81; -0.84
Put/Call Ratio (CBOE): 1.07; +0.18. Bounced back above 1.0 on the close for the first time in 4 sessions. As with the higher volume Friday, we attribute this more to end of the month position shuffling than a spike in fear and anxiety.
Bulls: 47.3%, up slightly from last week's 47.9%. Really wanted a push down below 45% as it was 40.6% on the low for the last round of selling. Still it is well off the prior levels: 51.1%, 54.5%, 5 weeks above 55%. 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: 29.0%. Strong jump finally, up from 26.6%. It lagged the decline in bulls, but is now making significant progress. Up from 22.2% 4 weeks back after bouncing up and down over 20 for several weeks. Now significantly above the threshold 20% considered bearish. Fell to a low of 19.6% on this round. 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: -7.17 points (-0.27%) to close at 2660.96
Volume: 2.562B (+17.94%). Big volume surge, matching the selling volume, as NASDAQ gapped higher through the 50 day EMA but then sold for a loss. You can say the sellers moved in on the gain and no doubt that accounted for some of the trade, but it was also likely due that month end position rearranging given the sharp rally back from the selling.
Up Volume: 1.063B (-35.896M)
Down Volume: 1.482B (+425.51M)
A/D and Hi/Lo: Advancers led 1.23 to 1. Pretty anemic, but it was higher on a down session indicating that most of the weakness was in the large cap leaders. That is actually not a bad thing as it shows some give back in the early rally leaders but overall NASDAQ was still holding up quite well.
Previous Session: Decliners led 1.19 to 1
New Highs: 89 (+54)
New Lows: 118 (+20)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher through the 50 day EMA (2678) but then turned over to close lower. It undercut the 90 day SMA on the low and rebounded back above that level to close, cutting almost two-thirds of the session losses. It stalled on the day still well off the July peak, and after this pullback and a bit of rest it looks as if it will be ready to continue the move. Want to see it hold in this 2650ish range on the test to show there are no real sellers in the rally just yet.
NASDAQ 100 gapped higher as well, but it was already over the 50 day EMA. It sold back through the 50 day on the low but held right on the 18 day EMA on the low and rebounded to recover the 50 day by the close. While a weaker session for the large cap techs, there was no real damage done and after a bit of a respite here they will be in position to take a shot a the 2150 to 2200 range from the October and early November highs.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SP500/NYSE
Stats: +11.42 points (+0.78%) to close at 1481.14
NYSE Volume: 1.924B (+44.41%). Screaming volume on the NYSE as they gained more ground for the week. Solid upside volume all week though you could argue Friday was a bit of churn with the SP500 bumping the 200 day SMA and DJ30 the 50 day EMA. As noted earlier, however, a lot of that trade related to the end of month shuffling thanks to a largely unanticipated surge.
Up Volume: 1.422B (+819.32M). Good upside volume versus NASDAQ's flat up to down volume ratio.
Down Volume: 488.684M (-202.261M)
A/D and Hi/Lo: Advancers led 2.43 to 1. Not blowout but very solid upside breadth as this indicator swings finally toward the upside after decliners basically had their way with the advancing issues in the selling earlier in the month.
Previous Session: Decliners led 1.21 to 1
New Highs: 82 (+35)
New Lows: 121 (+57)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Gapped higher and rallied through the 200 day SMA and the 50 day EMA, hitting the 90 day SMA on the high. That took it within a point or two of the June lows. As noted Thursday, this was the first real test on the move and as you would expect after four upside sessions this resistance stalled the advance. Now we see how it holds its gains to this point and deals with the 200 day SMA and the June lows this week after it takes a breather.
SP600 (+0.45%) surged through the 18 day EMA that stalled it on Wednesday and Thursday, then it rolled over and closed at that level, giving up most of its session gains. Still at that resistance at the 18 day EMA and still struggling.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Similar to SP500, DJ30 rallied through some near resistance (the 50 day EMA) only to give it up on the close. It still managed to post a gain on the session, putting a positive close on top of four solid sessions. As noted earlier, after that kind of run off the selling, a pause or rest at this resistance is nothing unusual. Now this week we want to see it hold the 200 day SMA (13,250) it recaptured on the Wednesday surge.
Stats: +59.99 points (+0.45%) to close at 13371.72
Volume: 312M shares Friday versus 201M shares Thursday. Big volume spike on par with those in the selling. Some buying, some selling, and some end of month shuffling.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
MONDAY
A week before the next FOMC meeting and the Fed often goes into quiet time a week before, but we have seen this Fed abrogate that unwritten rule a time or two. Of course after the Kohn and Bernanke comments last week nothing more positive for the market could come out other than a statement a 50 BP rate cut is coming. That is not going to happen, and so if anything does come out it will likely be some carping by the more hawkish FOMC members admonishing investors not to count their chickens, but that won't sway many.
There is a lot of economic data out including the jobs report. It will have an impact, particularly if it is really weak or really strong (that has been the case of late), but that is all the way out to Friday. Ahead of that there is the start of December, and a new month, even at year end, brings out some new money. Friday we saw the impact of the end of the month, amplified more than usual due to the strong surge last week off of the selling. We will likely see even more impact to start December.
The sellers will certainly take their shot this week given the indices bumped into resistance Friday as did many of the rally's early leaders, and they could not push through. How they respond to that will tell the tale of this rally, i.e. whether it was a 4-day affair or something with another week or so of legs to it. If the indices and leaders rally to take another shot at resistance or the October/November highs respectively and cannot punch through, we will use that to take some more gain off the table as we did on Friday, selling some into the strength. Then we see how the move works out, i.e. if the leaders can break through those prior highs and the indices move to the next stage of recovery after taking on first resistance.
Bigger picture we have to keep in mind that thus far this is still just a relief rally until it proves otherwise. We are making money on it but we have to keep it in context and thus not try to squeeze too much out of it. Therefore if we get some solid gain we bank at least some of it and then see what the next move brings.
Given that view, we are going to look for more upside plays involving more solid stocks in buy position in the event the indices break through resistance, pause or not. If we are right, this rally still has some more upside to it, and we will look at new vehicles to make money on that move, and that can include new positions on current plays that rallied well and make a quick test. We are also continuing to look for potential downside plays where the stock rebounded with the market rally but stalls out at resistance and cannot advance. When the market rebound stalls as we anticipate it will then those will be quite handy to make some more solid money on the downside as we did through last week.
As noted Thursday, some are saying the market has bottomed due to the Fed action and the market response this week, and is ready to move higher similar to the early 1990's. If that is the case, great. We will make a lot of money off of it. As we have stated, we don't view that as the likely outcome of this current rebound and thus while we are playing the move and making money on it, we are not going to be blinded by the moves, instead taking gain when it is there and being cautious. If it is the bottom we have not missed out on anything. If not, we made some money, we protected it, and we will make some more money on the downside, just taking what the market gives.
Support and Resistance
NASDAQ: Closed at 2660.96
Resistance:
2673 is the early July high
The 50 day EMA at 2678
The March up trendline at 2680
2725 is the July high
2746 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:
The 90 day SMA at 2651
2634.60 is the June peak is bending
The 200 day SMA at 2588
2550 to 2540 from May/June consolidation
2525 is the February closing high
2515 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 1481.14
Resistance:
The 200 day SMA at 1484
The 50 day EMA at 1485
The 90 day SMA at 1488
1490.72 is the early June closing low and early August peak.
1534 is the early July high
1539 is the July 2006/March 2007 up trendline
1539 is the mid-June intraday high
1541 is the early June high
Support:
1475 from peaks in December 1999 and January 2000
1459 is the February peak
1440 - 1437 from January and March peaks
1438 is the November low
1430 from the August interim lows
1425 is some minor support.
1415 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 13,371.72
Resistance:
The 50 day EMA at 13,406
The 90 day SMA at 13,470
13,580 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:
The 200 day SMA at 13,250
12,845 is the August closing low
12,786 is the February peak
12,743 is the November low
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.
December 3
ISM Index, November (10:00): 50.5 expected, 50.9 prior
December 5
Productivity, Q3 preliminary reading (8:30): 5.5% expected, 4.9% prior
Factor Orders, October (10:00): 0.4% expected, 0.2% prior
ISM Services, November (10:00): 55.0 expected, 55.8 prior
Crude oil inventories (10:30): -425K prior
December 6
Initial jobless claims (8:30): 352K prior
December 7
Non-Farm Payrolls, November (8:30): 75K expected, 166K prior
Unemployment rate, November (8:30): 4.8% expected, 4.7% prior
Hourly Earnings, November (8:30): 0.3% expected, 0.2% prior
Average workweek, November (8:30): 33.8 expected, 33.8 prior
Michigan sentiment, preliminary December (10:00): 75.5 expected, 76.1 prior
Consumer Credit, October (3:00): $5.0B expected, $3.7B prior
End part 1 of 3
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