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12/29/07 Technical Traders Report
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New Year's Schedule
Saturday: Report with new plays, plays table, market summary
Monday (New Year's Eve): Market open full day. Alerts but no report.
Tuesday: New Year's Day. No report.
Wednesday: Report resumes
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: APA
Trailing stops: BIDU
Stop alerts: 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/alertttr.html
SUMMARY:
- Market bounces right back from the international intrigue, but the upside gains cannot withstand a weak housing report.
- Housing starts hit the slowest annual growth since 1995.
- It is up to NASDAQ to provide leadership into the new year.
Early bounce, flat close.
After Thursday's international imbroglio that assisted the market's weakness that session, stocks rebounded early Friday, showing some much-needed character. Unfortunately, that display of intestinal fortitude did not make it past the first hour. The Chicago PMI Manufacturing report posted a much better than expected 56.6 reading (fixed 2.0 expected, 52.9 and prior). After the issues with the New York and Philadelphia PMI reports, it was good to see a more representative region post a nice upside gain, its highest in six months. Employment was lower, falling below 50 once more. On the other hand, new orders rose to 58.4 and backlogs jumped 14.8 points to 60.7. Even prices paid joined in good news falling 12.4 points to 63.8. The chance of inflation and seems to drop even more and more. After falling to 49.7 in October, the Chicago region has posted an impressive return to expansion, and the national ISM follows, more or less, Chicago's lead.
That is some pretty good news, something the economic reports of not shown of late. Unfortunately, the November new home sales were released 15 minutes later. The 647,000 annual unions were well below the 715,000 expected. Indeed it was a 9% annualized decrease versus the 1.6% decline expected. That was largest decline in housing starts since 1995. Although everyone knows the housing market is weak, some of the recent data suggested a slowing in the rate of decline. The sharp decline in new home sales in November pretty much trashed that nascent theory. It also trashed the nice little rally the market was enjoying up to that point.
NASDAQ boasted a 21 point gain heading into the housing report. Within five minutes if given half of that move back, and by the end of lunch it was 15 points to the downside. S&P 500 and DJ 30 suffered similar fates as they gave up their gains as well. The market did start a slow steady recovery into the afternoon at that point, and indices managed to return a sickly to flat by the close, but the mojo was gone for the session. Considering this was the Friday before the holiday and international issues still simmering just below the surface, a return to the flat line heading into the weekend was not that bad. It was disappointing to lose the early move on the heels of the Thursday selling, but as discussed below, leadership once again managed to hold the line, and it still looks in good heading into the new year.
Technically the market returned to that more bearish intraday action, i.e., a higher open and a lower close. As occurred on more than one occasion in the past week, stronger early action was overrun by the downside. Overran is too strong of a word; more like smothered. After all, stocks did manage something of a recovery in the afternoon. That pushed them back to the flat line and closed the indices mixed. High praise indeed. LA rally basically got things back to flattens squared the market ahead of the weekend.
Internals: Breadth was as flat as the indices, though NASDAQ did show a minus 1.3:1 reading. Volume was no great shakes, but it did show the right action, i.e. higher on NYSE with the gains in those indices, and lower on NASDAQ with the loss in that index. Bigger picture than didn't mean a whole heck of a lot given that volume levels were significantly lower the past week than they have been in months. It was a light volume week, and now allowed a few of the big-money players to push the indices around. Thursday was a classic example. When market held up fairly well following the Pakistan news, but then late in the session there was some panic when the market sold off. In sum, volume was really too light to be indicative of any new direction or trend.
Charts: The Friday charts were rather inauspicious. S&P 500 made a lower high on the week, giving up the 200 day moving average and unable to take out 1500, the start of the resistance that runs up to 1535. DJ 30 made a higher low as well in the week, selling off hard on Thursday, but managing to land and close on the 200 day moving average to end the week. Still a tremendous amount of overhead resistance is weighing down on the blue chips, and that lower high leaves it in a technically challenged position. How they manage to hold at the 200 day moving average this week will tell the tale with respect to this index. NASDAQ failed at the July peak on the week, right where it failed in early December. It spent Thursday and Friday fighting back, holding at the50 day EMA on the close. Despite the failure at the prior two resistance points, NASDAQ still remains in a much better position to move higher than its NYSE large-cap brethren. Thus once again, the market's fate rests upon NASDAQ.
Leadership: Despite the chronic lack of backbone in the major indices, market leadership is hanging in quite nicely. Energy provided most of the support Friday, as sustained higher old prices pushed different parts of the energy sector higher all week. They paved the way for some other leaders to make good gains early in the week, e.g. steel, telecom, and medical. Thursday and Friday energy stepped up when many of these early leaders tested back. That leaves them in good position to move higher in the new year. The action was also good enough with our present positions to hang onto them, and indeed to look for new buys after these tests are completed. In short, the leaders once again tried to hold the market up as the NYSE indices struggle under the weight of the financial stocks.
THE MARKET
MARKET SENTIMENT
VIX: 20.74; +0.48
VXN: 23.63; +1.17
VXO: 22.27; +1.05
Put/Call Ratio (CBOE): 0.92; -0.06
Bulls: 54.9%. Some life taken out of the bulls, dropping below the 55% threshold considered bearish. Down from 56.50% after a jump up from 53.3% and 49.4% the week before. Didn't make it below 45% (it hit 40.6% on the low for the prior 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: 23.1%. Improving a bit as well, up from 22.4%. Fell like a stone from 25.6% the prior week and 27.6% the week before. Down from 29.0% after one week at a higher level, jumping from 26.6% the week prior. Up from 22.2% 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: -2.33 points (-0.09%) to close at 2674.46
Volume: 1.328B (-7.29%)
Up Volume: 508.319M (+220.338M)
Down Volume: 791.611M (-338.896M)
A/D and Hi/Lo: Decliners led 1.33 to 1
Previous Session: Decliners led 3.18 to 1
New Highs: 61 (-24)
New Lows: 173 (+3)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 is the most interesting pattern in the large-cap indices. The initial holiday rally, the failure after the Fed action, and in the Santa Claus rally over the past two weeks have formed a double bottom. Thursday and Friday NASDAQ 100 sold off along with the rest of the market, but that action only worked to form a handle to the base. Indeed, on Friday, it tapped its 50 day EMA on the low and rebounded to close modestly positive. Some nice action there, backed up by patterns in stocks such as MSFT, GOOG.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +2.22 points (+0.15%) to close at 1478.49
NYSE Volume: 1.036B (+5.23%)
Up Volume: 447.746M (+336.741M)
Down Volume: 530.39M (-338.751M)
A/D and Hi/Lo: Advancers led 1.09 to 1
Previous Session: Decliners led 3.38 to 1
New Highs: 41 (-19)
New Lows: 254 (+48)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 made a lower high at 1500 on the week. Since the October high that makes three lower highs of import to one higher low. Lots of overhead is weighing on SP500, along with the financial stocks and their continued weakness. With many financial stocks turning lower again Friday after the new home sales data, the modest gain was rather amazing; energy certainly helped out.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
After falling back to the 200 day SMA on Thursday, DJ30 showed a big doji at that level Friday. That does not mean a whole lot other than the market had a big fat question mark as to what to do with it on Friday. A series of lower highs, the last coming after the higher low mid-month show there is a pile of overhead supply. It can still make another higher low at this important support point, but at this juncture we need to see it.
Stats: -192.08 points (-1.42%) to close at 13359.61
Volume: 145M shares Thursday versus 122M shares Wednesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
Support and Resistance
NASDAQ: Closed at 2674.46
Resistance:
The March up trendline at 2720
2725 is the July high
2735 is the December intraday high
2759 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 50 day EMA at 2670
2634.60 is the June peak
The 200 day SMA at 2611
2550 to 2540 from May/June consolidation and the November lows
2530 is the August 2004/April 2005/October 2005/March 2007 up trendline
2525 is the February closing high
2451 is the August closing low
2386 is the August intraday low
S&P 500: Closed at 1478.49
Resistance:
The 50 day EMA at 1482
The 200 day SMA at 1490
1490.72 is the early June closing low and early August peak.
1524 is the December high
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
1560 is the July 2006/March 2007 up trendline
Support:
1475 from peaks in December 1999 and January 2000
1459 is the February peak
1451 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 13,365.87
Resistance:
The 50 day EMA at 13,408
The 90 day SMA at 13,505
13,690 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:
The 200 day SMA at 13,350
13,092 is the December low
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 31
Existing Home Sales, November (10:00): 5.00M expected, 4.97M prior
January 2
Construction Spending, November (10:00): -0.4% expected, -0.8% prior
ISM Index, December (10:00): 50.5 expected, 50.8 prior
FOMC Minutes, December 11 meeting (2:00)
January 3
ADP Employment survey, December (8:15)
Initial jobless claims (8:30): 349K prior
Factory Orders, November (10:00): 1.0% expected, 0.5% prior
January 4
Non-farm payrolls, December (8:30): 70K expected, 94K prior
Unemployment rate (8:30): 4.8% versus 4.7% prior
Hourly earnings (8:30): 0.3% expected, 0.5% prior
Average workweek, December (8:30): 33.8 expected, 33.8 prior
ISM Services, December (10:00): 53.5 expected, 54.1 prior
End part 1 of 3
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