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world stock market, trade stock
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12/19/07 Technical Traders Report
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MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: APC; ICE; MA; SID
Trailing stops: None issued
Stop alerts: None issued
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http://www.investmenthouse.com/alertttr.html
SUMMARY:
- Fed auction went well, but with just modest changes in rates, the market was unimpressed.
- Auction number two set for Thursday, but even with expiration on Friday, market is winding things down ahead of Christmas.
- NKE, ORCL post strong earnings, rally after hours. How they hold the gains outlines the market's current theme.
Market shrugs at the auction results, rallies late to close flat. Breathtaking action.
Every morning there is the usual ticker of news stories. With January earnings season rapidly approaching we are hearing more with respect to guidance, not to mention the results from those companies announced here in December as opposed to the pack in January and February. MS (investment brokerage) reported decent earnings but also added a none-to-modest $5.7B in sub-prime write-downs to the $3.7B previously announced. Oh yes, it also sold part of itself for $5B to China (Morgan Stan-Lu?). UPR (railroads) lowered its outlook because diesel prices are adding an additional $200M for the quarter. Multiply that across the industry as well as the trucking and shipping industries as well.
Foreclosures fell 10% in November from October. That is still up 68% year/year, but as with the housing starts leveling out their losses (no gains, mind you, just not tanking as fast), maybe foreclosures are slowing a bit. Wouldn't that be just about the usual situation: by the time the federal government acts the problem is already resolving on its own. That modest positive was offset by the earnings data as well as the oil inventories that tanked by 7.6M bbl versus the -1.8M expected. Ouch. Heating oil fell 2.1M bbl versus the 550K drop expected. Brrr.
The big event, or actually, non-event, was the Fed auction results. The auction went fine with $61.5B sought, a 3:1 oversubscription to the $20B the Fed was offering. The consensus is that anything over $50B indicated tight money. No real brainer there, and the results confirmed that banks indeed are seeking cheaper funds to unload some of the collateral they are holding. Problem is, as noted Tuesday, the credit market is not showing much more improvement from the initial moves on the program's announcement. The dollar continues to rise as an offshoot of the plan, but rates have stagnates. In short, the market was 'underwhelmed' by the results and more specifically the reaction in the credit markets.
Technically, that left the market without a trigger or catalyst to send it up or for that matter down. As for the session action it was another up, down, then back up session that produced a mixed market trading around the flat line. Some modestly bullish action with the recovery, but that is putting the best spin on it. Outside of that it was basically a non-event day with respect to price.
Internals: Bland pabulum. That is the best description. Breadth barely cracked positive. Volume was lighter and still below average on both NASDAQ and NYSE. That internals matched the price action, i.e. flat lining.
Charts: The flat line in price left the indices in the same position. NASDAQ and DJ30 are butting heads with the 200 day SMA. SP500 tapped the 2006 trendline on the low and bounced back to flat. Still trying to make a higher low, but still struggling. This action left NASDAQ, NASDAQ 100, SP600 and SOX trying to set up those neophyte double bottoms. Can the ORCL and NKE blowout earnings produce a move that lasts?
Leadership: We could say the same old names were leading, but that is only partly true. MA, the charge card juggernaut, was right back up and we swallowed and moved back in. AAPL and other tech heavyweights were pensive ahead of ORCL's earnings. We will see if they can power up on Thursday in response to the strong results. Energy was back in the leadership mix with oil rising (91.35, +1.27) on those weak inventories. Alternative energy, but not all of the group, prospered on the signing of the energy bill. Leadership was rocked back on Monday, but it is stabilizing here, and that is what the market needs if it is going to try and put a little meat on the bones of these prepubescent double bottom attempts.
THE ECONOMY
Not a lot on the economic front other than what was noted above. The Fed auctions will show part two Thursday, but the Fed has not announced when the results will be issued. More important than the actual numbers, however, is the credit market reaction as we found out this week. Look to see if the dollar continues higher, but also we need to see LIBOR fall further.
THE MARKET
MARKET SENTIMENT
VIX: 21.68; -0.96
VXN: 24.88; -1.91
VXO: 23.5; -1.58
Put/Call Ratio (CBOE): 1.15; +0.13. Six out of seven sessions above 1.0 on the close. Like how it is holding at a higher level even as the market has stemmed the bleeding the past two sessions. In other words, there is still a lot of downside betting either through speculation or buying protection (no, not condoms, just protective puts) by the big institutions. As this is a contrary indicator, you like to see that negative sentiment rise as the market stabilizes, even a little bit.
Bulls: 53.3%. Up from 49.4% as bulls continued their run higher, bouncing before it got to 45% as we wanted (hit 40.6% on the low for the last round of selling). It spent 5 weeks above the threshold 55% on the last spike higher. 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: 25.6%. Also uncool, falling from 27.6%. That is down from 29.0% after one week at a higher level, jumping from 26.6% the week prior. Up from 22.2% 5 weeks back after bouncing up and down over 20 for several weeks. It is still 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: +4.98 points (+0.19%) to close at 2601.01
Volume: 1.873B (-6.79%). Volume was lower and still well below average as NASDAQ made a rather wimpy attempt at moving through the 200 day SMA. Needs more than this to make the break higher and try to start building that right leg to a potential double bottom.
Up Volume: 904.752M (-444.854M)
Down Volume: 942.104M (+314.182M)
A/D and Hi/Lo: Decliners led 1.01 to 1. Snore.
Previous Session: Advancers led 1.52 to 1
New Highs: 55 (+7)
New Lows: 247 (-108)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Moved up and through the 200 day SMA (2596) but then faltered and closed right at that level on lower, below average volume. Tapped in the middle of the November closing lows on the Tuesday intraday reach lower and rebounded. Trying to set up some kind of double bottom here, but thus far not showing the kind of strength you want to see as it tries higher. Some would say the fact that it is trying is something. Moral victory at best. Needs to hold in this range and get some upside volume to make a new break and make the upside interesting. Otherwise the head and shoulders gets consummated with a selloff below the November closing low (2541).
NASDAQ 100 (+0.07%) lagged overall NASDAQ once more as its big names were a bit gun shy ahead of the ORCL earnings. We will see how they respond after the very solid earnings. As in November, the large cap index is attempting to hold the line once more at 2000, well above the 200 day SMA. The ball is in their court now, but we note the leaders in NASDAQ 100 don't have the same cache they enjoyed in November.
SOX (+0.13%) mirrored the Tuesday action with a second doji just over the November lows. It is trying to hold and set up a double bottom to rally from. It needs it after this October to November slide from the breakdown of the last consolidation attempt. Do you risk an upside play if it bounces? That would take certain body parts made of steel or some other hard substance. We may take a flier on that, however, with some of the winnings from this year.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -1.98 points (-0.14%) to close at 1453
NYSE Volume: 1.353B (-9.33%). Volume faded back from average as SP500 walked in place Wednesday. Showed some good upside volume Tuesday, and want to see more of that as it holds this trendline and tries the next break higher.
Up Volume: 588.61M (-386.432M)
Down Volume: 754.374M (+255.704M)
A/D and Hi/Lo: Decliners led 1.25 to 1. Flat as the small caps and mid-caps were basically flat.
Previous Session: Advancers led 1.63 to 1
New Highs: 29 (+6)
New Lows: 278 (-92)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Still holding the 200 day MA (1487.52), tapping that on the Wednesday low and rebounding to close flat. A doji on the candlestick chart, but waiting for some volume to move in to the upside to give this attempt at a higher low some staying power. The financials are still in the toilet, and thus SP500 is going to have issues even as it tries to hold up and make this higher low at the 2006 trendline.
SP600 (+0.16%) were not going anywhere either as the added nominally to the Tuesday bounce off the November lows. It is another one of the indices trying to establish a double bottom. Strange if the economy is not going to recover as small caps are very economically driven. If they do double bottom and jump on strong volume that is an indication the Fed's and the other world central banks are having the desired impact. We are not putting a lot of stock in its ability to finish off the pattern and make the break higher.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
For the second session the blue chips tapped at the 200 day MA (13,314) on the high and then fading back to close. Low volume of course; just not a lot of interest as DJ30 bumps that key level from below (and the mid-November high as well). Its pattern remains quite negatively biased at this juncture, however, leaving it up to the others attempting double bottoms to form up to do the upside lifting.
Stats: -25.2 points (-0.19%) to close at 13207.27
Volume: 208M shares Wednesday versus 233M shares Tuesday. Not much for the Wednesday ahead of expiration Friday. There was no dumping on the selling and now there is no buying as it tries to recover.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Another Fed auction but we doubt anyone will be holding their breath for this one. More to the point will be the ORCL and NKE earnings after hours that were, without question, blowout. They were both up smartly after hours. Of late the market has treated this kind of good news with a jump then a dump. As with many things in life, staying power is the key. If they are rewarded early and then sold off, well, that tells you a lot about the condition of the market and that these nascent double bottom attempts in NASDAQ, NASDAQ 100, SOX and SP600 are bogus.
Even though it is expiration week and the Tuesday volume bumped higher likely as part of that rollout process, trade is quite light overall. As noted Tuesday, some of the big trading houses have slowed operations already ahead of the Christmas holiday and indeed ahead of year end. Finding volume may be a problem for the market, but of course, the market can move without a lot of volume. Indeed, low volume can let a few institutions or programs skew the tape. Maybe that will allow for a Santa Claus rally that many are talking about the past two sessions, but we are pretty sure we saw that rally after Thanksgiving and into the first week of December. There are still solid leaders in position and some making good upside moves, but the Fed-related selling last Friday and Monday did some damage that has not been repaired with this slowdown in the selling the past two sessions.
We will continue to look for opportunity among the strong that continue to hold their trends and are in position to move higher despite the overall market. There is no reason to go out and load the boat with any particular position(s) though we are buying some here and there as opportunity presents. If we do get a move higher into Christmas, it will likely last to the end of the year. If we get that we will be selling to take the gains as we have a feeling that kind of set up would be irresistible to the sellers when the new year starts.
We will also look at some downside plays given DJ30's struggle at its 200 day SMA and its overall bearish pattern. Financials continue to look similar to warmed over mush. As they recover to resistance they can provide some downside as well. Some of the recent leaders are wobbly as well, e.g. AGU with its low volume double top; if things turn south once more the market will start taking these down as well.
Simply put we need to be ready for what it brings on. There is some promise, but it is in a swirl of pretty negative patterns and technical deterioration. It will take something pretty big to turn the tide and we note that $500B from the ECB and an oversubscription to the Fed auction did not do the trick. Thursdays last iteration of the Q3 GDP, the leading economic indicators, and the Philly Fed are not likely to provide that kind of lift, particularly ahead of expiration and what is basically a long weekend with the half day session on Monday. We will take what the market gives, but no point to get too far extended right now with a lot of new positions.
Support and Resistance
NASDAQ: Closed at 2601.01
Resistance:
The 200 day SMA at 2601
2634.60 is the June peak
The 18 day EMA at 2642
2673 is the early July high
The 50 day EMA at 2665
The March up trendline at 2709
2725 is the July high
2754 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 and the November lows, and that level held on the Tuesday low
2525 is the February closing high
2524 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 1453.00
Resistance:
1459 is the February peak
The 18 day EMA at 1471.
1475 from peaks in December 1999 and January 2000
The 50 day EMA at 1482
The 200 day SMA at 1487
1490.72 is the early June closing low and early August peak.
1530 to 1535 are the June twin peaks
1534 is the early July high
1539 is the mid-June intraday high
1541 is the early June high
1555 is the July 2006/March 2007 up trendline
Support:
1448 is the June/July 2006 up trendline
1440 - 1437 from January and March peaks
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 13,207.27
Resistance:
The 200 day SMA at 13,314
The 50 day EMA at 13,404
The 90 day SMA at 13,478
13,660 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
13,750 is where it stalled in early December
13,930 is the late October peak
The July high at 14,022
14,088 is the early October closing high
14,198 is the October intraday high.
Support:
Some support in the 13,050 to 13.000 range
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 17
Current account, Q3 (8:30): -$178.5B actual versus -$183.0B expected, -$188.9B prior
NY Empire State Index, December (8:30): 10.3 actual versus 21.0 expected, 27.4 prior
Net Foreign Purchases, October (9:00): $114.0B versus $15.4B prior (revised from -$26.4B)
December 18
Housing starts, November (8:30): 1.187M actual versus 1.175M expected, 1.232M prior (revised from 1.220M)
Permits, November (8:30): 1.152M actual versus 1.150M expected, 1.170M prior
December 19
Crude oil inventories (10:30): -7.6M actual versus -1.8M expected, -722K prior
December 20
GDP, Q3 final (8:30): 4.9% expected, 4.9% prior revision
Deflator, Q3 (8:30): 0.9% expected, 0.9% prior revision
Initial jobless claims (8:30): 335K expected, 333K prior
Leading Economic Indicators, November (10:00): -0.3% expected, -0.5% prior
Philly Fed, December (12:00): 6.0 expected, 8.2 prior
December 21
Personal income, November (8:30): 0.5% expected, 0.2% prior
Personal spending, November (8:30): 0.7% expected, 0.2% prior
Core PCE Inflation, November (8:30): 0.2% expected, 0.2% prior
Michigan sentiment, December revision (10:00): 74.5 expected, 73.5 prior
End part 1 of 3
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