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world stock market, us stock market
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1/14/08 Technical Traders Report
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MARKET ALERTS
Targets hit alerts: BG
Buy alerts: AGU; APA; UPL; NILE
Trailing stops: None issued
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:
- IBM earnings guidance renews upside bounce.
- Market has left itself some bounce room heading into earnings.
- Leadership again comes from stocks with global ties.
Earnings, not financial deals, spur a new advance.
Friday it looked as if the two-day relief move had run its course. We felt that some more deals in the financial space on Monday might revive it, but they were not forthcoming. Instead, IBM pre-announced strong Q4 earnings and guidance driven by its overseas business, and that proved to be an impressive upside catalyst. Analysts were already upgrading AAPL ahead of MacWorld and Credit Suisse upgraded US stocks to overweight for the first time in 10 years. The confluence was nectar for the market. Futures turned smartly positive as stocks opened higher, fought off some midday selling that brought them back near opening levels (though never really threatening negative), and then rebounded to new session highs to close. Nice sharp continuation of the relief bounce.
TECHNICAL: Yes we are still calling this just a relief bounce. It could have been a day of follow through, i.e. a strong day on the fourth session after a new rally attempt, but volume was quite low. There was some great intraday action, i.e. starting higher, shaking off a midday selling attempt as noted, and then powering on up to close at session highs.
INTERNALS: Internals were not bad . . . if you look at NYSE breadth alone. At 2:1 it was solid while NASDAQ's 1.5:1 was out of line with the 1.6% gain on the index. Volume was lighter as well, fading back below average on both NYSE and NASDAQ. That is hardly the stuff of a new leg in stock accumulation, and it kept the session from acting as a follow through to the rebound that started on Wednesday. All in all not the kind of numbers that back up the strength of the price gains.
CHARTS: The indices continued their recovery off of last week's lows that saw the major indices test the August lows and start the current rebound move. Monday put them back over the November lows and SP500 over a long term trendline, but still below near resistance at the 10 day EMA. The action on the charts coupled with the lower volume and the ho-hum internals still suggest this is just a relief move in response to the hard, hard selling to end December and begin 2008.
LEADERSHIP: Techs jumped on the IBM outlook as they continued to claw back some lost ground over the past couple of weeks, but their charts, even with the rebound, still look similar to a cliff dive gone bad. Not all; AAPL and GOOG are building toward something to drop two big names. The real buying was in stocks with ties to foreign economies given that most of IBM's outsized earnings gains are due to overseas operations. While techs bounced on lower volume there was real buying in these other groups (e.g. energy, agriculture) as volumes jumped along with their prices. Solid long-term buying there. Unfortunately, that represents a rather small slice of the pie and thus the kid of buying you want to see to drive a rebound into a new rally is not there in enough quantity.
In sum, the market received a strong dose of unexpected good news that allowed it to turn the rally back on after the Friday thumping. There was some serious buying in stocks with world ties, but overall the characteristics exhibited still point to an oversold relief move. Thus we will let the bounce run its course, buying into those stocks that have solid underpinnings overseas, letting laggards rebound as well for at least some better exit points, and let the downside possibilities set up once more for when the rebound runs out of gas.
THE MARKET
MARKET SENTIMENT
VIX: 22.9; -0.78
VXN: 28.08; -0.74
VXO: 25.02; -1.69
Put/Call Ratio (CBOE): 0.96; +0.03
Bulls: 48.4%. Hefty drop from 52.2% the prior week and 54.9% before that. Down from 56.50%. Didn't make it below 45% (it hit 40.6% on the low for the prior round of selling), a key indication, but on this run it may just do that. 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: 25.8%. Not bad, up from 24.5%. Bears continue rising as you would expect as the market continues falling. After a rather quick drop near 20% from 29.0% in late November. Significantly above the threshold 20% considered bearish but needs to get over 30% to really show the kind of washout fear needed. 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: +38.36 points (+1.57%) to close at 2478.3
Volume: 2.127B (-10.68%). Volume fell below average for the first time since the holidays. Of course the volume came on an upside session, indicating no real strength in the upside NASDAQ gain. As noted above, the internals did not match the gain in price.
Up Volume: 1.603B (+1.096B)
Down Volume: 558.037M (-1.282B)
A/D and Hi/Lo: Advancers led 1.47 to 1. Pretty mediocre for 1.6% gain in the overall index. NASD 100 led with a 1.9% gain, explaining some of the weaker breadth, but the result is the same: mediocre for the price gains.
Previous Session: Decliners led 2.53 to 1
New Highs: 56 (+1)
New Lows: 224 (-77)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped higher, tested intraday, never threatening negative, and rallied to close just off the session high. That took NASDAQ back above the August closing low, but that still keeps it looking at several layers of resistance ahead starting at 2500, 2540, etc. Lots of overhead supply still weighing down on techs. There is room to bounce up toward the 10 day EMA (2515) as kind of a first test of the renewed relief bounce. From here it has to show what strength it has. Monday it was up, but volume was lighter and breadth was narrow.
NASDAQ 100 (+1.90%) held support at 1900 again on Friday and bounced, forming a very short double bottom as support. That sets the stage for it to try and lead NASDAQ higher toward serious resistance at its 200 day SMA (1992) to 2000 where it will face a major test after its early January breakdown took it below those levels.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +15.23 points (+1.09%) to close at 1416.25
NYSE Volume: 1.411B (-21.17%). As with NASDAQ, back below average as the NYSE indices moved higher. Not a lot behind the move as this stage though you can try to piggyback on the Wednesday and Thursday volume.
Up Volume: 1.004B (+534.059M)
Down Volume: 401.066M (-907.488M)
A/D and Hi/Lo: Advancers led 2.16 to 1. Not bad breadth, more matching the gains in the indices. Internals were better on NYSE though that volume lagged on the upside.
Previous Session: Decliners led 1.81 to 1
New Highs: 68 (+27)
New Lows: 187 (-29)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 is trying to get something going above its longer term trendline from 2003/2004, making a quick higher low at that level after the Friday selling was reversed with the Monday bounce. With the financials still showing strength the index is able to hold the line and try to set up a stronger relief move. That remains to be seen because many of the financials, after rebounding last week, are sitting just below resistance and have to make the next step or fade. If they fade, SP500 has trouble making much more upside here. Still below the 10 day EMA (1424) to the 18 day EMA (1437) that represent its initial resistance levels.
SP600 (1.13%) bounced as well, aided by gains in small energy stocks, but its gains still lagged for the most part. It is still trying to set up a more substantive rebound from a very ugly selloff. A move to the 380ish level would like be tops for it if the market can continue with a bit of good earnings news.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
As with the other indices, DJ30 is showing a small double bottom on top of the August intraday low. It bounced up through the November closing low . . . again . . . on the Monday close. Trying to piece together more of a bounce than the two-day affair last week but has near term resistance at the 10 day EMA (12,866) and at 13,000 from price resistance and the 18 day EMA. Thus it looks good for some more upside on some more favorable earnings snippets, but it has yet to change the character of its decline.
Stats: +171.85 points (+1.36%) to close at 12778.15
Volume: 245M shares Monday versus 301M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Heavy on the economic data starting Tuesday with retail sales, PPI, New York PMI and business inventories. It continues all week with the CPI and friends Wednesday. Overlaying all of that is the start of earnings season, and that really helped out the market Monday even though from an unexpected quadrant with IBM's preannouncement. That selloff ahead of earnings paved the way for a rebound as early earnings and earnings preannouncements first come out. Of course the rebound was paid for in spades with the late December, early January selloff, but you take relief where you can get it.
The declining volume Monday casts doubt on the continued bounce, particularly with so much resistance stacked over it. Still looking for the major indices to run into some resistance and resume the selling in the near future though more earnings surprises in the form of strong guidance from names of substance can fuel a rebound with more substance. As noted above, SP500 is trying to put in a bounce at its old up trendline, and how the financials respond now that they have risen to near resistance will determine SP500's next course. C is out with earnings Tuesday and many are looking at what its write-downs in mortgages will be along with how severely it will cuts its dividend to determine if it is worth buying; seems the more austere the more interest new money will have.
We are still looking to play more of the downside after the bounce plays out. NILE collapsed lower Monday even as the market moved higher; after the bounce runs its course there will be more stocks and indices ready to resume the downside. While we wait for them to set up we continue looking at the stocks that continue to hold solid upside positions, moving higher with strong buying based on demand for their products (energy, agriculture, foreign telecom, etc.).
Overall we view US markets as still under duress with more downside to come. That said, as noted over the weekend, there is some strengthening in the financials as the acquisitions emerge and P/E's still remain at historically favorable levels. It will take some more doing, but when this is worked out of the system the market will be in good position to sustain a new extended run. Right now it is in the process of determining when the economy will reach its low point, and it will start rallying with earnest several months before it turns back up.
For now we are going to keep straddling the fence some, taking long side positions on stocks that show the patterns and the earnings strength to move higher. We do remain cautious upside, not loading the boat with all upside positions, just cherry picking good moves, taking what it gives, banking some of the gain, then letting the rest run if it will. While this bounce continues, we also continue looking for stocks that rebound in relief moves and stall at resistance. Those are the plays we hit when the bounce fizzles.
Support and Resistance
NASDAQ: Closed at 2478.30
Resistance:
Some modest resistance at 2500 from interim August lows.
The 10 day EMA at 2515
2539 is the August 2004/April 2005/October 2005/March 2007 up trendline
2550 to 2540 from May/June consolidation and the November lows
The 18 day EMA at 2555
The 200 day SMA at 2616
The 50 day EMA at 2618
2634.60 is the June peak
2725 is the July high
2735 is the December intraday high
The March up trendline at 2745
2770 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:
2451 is the August closing low
2386 is the August intraday low
2379 from the October 2006 peak
2370 from the April 2006 peak
2340 from the March 2007 low
S&P 500: Closed at 1416.25
Resistance:
1430 from the August interim lows
1438 is the 18 day EMA
1440 - 1437 from January and March peaks
1457 is the June/July 2006 up trendline
1459 is the February peak
The 50 day EMA at 1462
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1491
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
Support:
1406 is the August and November 2007 closing low
1405 is a longer term trendline from the August 2003/September 2004 lows
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
1325 from May 2006 peak prior to the summer 2006 correction
Dow: Closed at 12,778.15
Resistance:
12,786 is the February 2007 peak
12,845 is the August closing low
The 10 day EMA at 12,866
The 18 day EMA at 12,998
13,050 to 13,000 range
13,092 is the December low
The 50 day EMA at 13,220
The 200 day SMA at 13,376
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
Support:
12,743 is the November low
12,518 is the August intraday low
12,250 from late March 2007 lows
12,050 from the March 2007 low
11,670 is the May 2006 intraday high; 11,642 closing
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
January 15
Retail Sales, December (8:30): 0.0% expected, 1.2% prior
Retail ex-Auto (8:30): -0.1% expected, 1.8% prior
PPI, December (8:30): 0.2% expected, 3.2% prior
Core PPI (8:30): 0.2% expected, 0.4% prior
NY Empire State Index, January (8:30): 10.0 expected, 10.3 prior
Business inventories, November (10:00): 0.4% expected, 0.1% prior
January 16
CPI, December (8:30): 0.2% expected, 0.8% prior
Core CPI, December (8:30): 0.2% expected, 0.3% prior
Net foreign purchases, November (9:00): $114.0B prior
Industrial production, December (9:15): -0.2% expected, 0.3% prior
Capacity utilization, December (9:15): 81.2% expected, 81.5% prior
Fed Beige Book, (2:00)
January 17
Housing starts, December (8:30): 1.150M expected, 1.187M prior
Building permits, December (8:30): 1.140M expected, 1.162M prior
Initial jobless claims (8:30): 335K expected, 322K prior
Crude oil inventories (10:30): -6.7M prior
Philly Fed, January (12:00): -1.5 expected, -1.6 prior
January 18
Leading economic indicators, December (10:00): -0.1% expected, -0.4% prior
Michigan sentiment, preliminary January (10:00): 74.5 expected, 75.5 prior
End part 1 of 3
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