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world stock market, us stock market
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2/13/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: CMED; DRYS; FLO; ISRG; WFR
Trailing stops: None issued
Stop alerts issued: ESRX
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:
- Retail sales, oil strength team up to continue the light volume rally
- Retail sales stronger but not as strong as the headlines
- Business inventories rise to a 1.5 year high
- Sellers holding back ahead of Bernanke/Paulson congressional address, expiration.
Market continues higher, low volume or no.
Retail sales looked good from the headline and the helped bounce the futures from flat to energetic, but as with the Buffett 'bailout' it was a paper tiger of sorts. Auto sales were up big when unit sales were down; the fleet sales must have been booming, right? Gasoline sales jumped 2% when they were expected to fall. That is not where you want your sales dollars going, i.e. down the tank and into the atmosphere. Earnings were what really helped as KO, FSLR, DNA, PFCB, JNY and a wide range of stocks reported very nice results.
That news got the market off on a positive foot, but it started to give in heading into midmorning. It didn't threaten to give the move away, but it was getting tested again. Then oil inventories came out and they were up for the fifth straight week. After sagging near $80/bbl at the height of the recession and world slowdown fears, oil has risen back over $93/bbl on the Wednesday close. Oil is rising despite rising inventories here. That speaks of anticipated world demand recovering or remaining strong. Investors seemed to like that in addition to the earnings data, and the market continued its low volume move higher. Investors liked it, but the volume says not all of them. Suffice it to say that it was enough to keep the sellers playing hooky still.
The indices pushed through near resistance on solid breadth. Volume was mixed, still lagging average and very light for an expiration week. Even with that light volume, with no sellers willing to get in the way with the earnings, the retail sales, and the Bernanke/Paulson combo in front of Congress Thursday. That allowed stocks to rally to the close without the volatility that have marked almost all sessions in recent history up to this point.
TECHNICALLY
There was no intraday volatility Wednesday, just a low to high finish that is of course more bullish than say the intraday reversal NASDAQ showed Tuesday. Of course that didn't slow it down as the index jumped over 2% on Wednesday.
INTERNALS: Solid upside breadth across the board, but particularly on NASDAQ (2.5:1) as the techs came back to life in a big way. NYSE was not hash either with a 2:1 showing. Volume was odd again. It was up a bit on NASDAQ, down a bit on NYSE, but still below average on both. Peculiar for an expiration week, but when there is no volume midweek during expiration, it typically shows up to end the week. Thus we can expect the volume and volatility to return at least on Friday, particularly given the rally into expiration that will require a lot of positions be rolled over reshuffled.
CHARTS: The indices did away with near resistance, still rallying off that higher low made last week. There are definitely buyers; we have been buyers as well, but it is more of a lack of sellers as volume remains below average outside of the reversal move that started the rally. The sellers have left the building for now and they were not ready to step in Wednesday ahead of the Bernanke/Paulson duo addressing congress Thursday. Low volume rallies are always suspect, but again, the sellers are staying away. DJ30 looks as if it wants to test its 50 day EMA up near 12,750 (ouch) as SP600 looks as if it may try that move again itself. SP500? Well, it doesn't look as if it will make it on this move, but thus far nothing has stepped in to wreck the move higher, low volume or no.
LEADERSHIP: More upside from energy, agriculture, big tech, small tech. The first two were leaders early on, the latter are catching on. Metals were mixed, taking another breather after they were early leaders as well. This rising market action is allowing more stocks to base as they held a bottom and are working up and laterally. That is what they need to form bases, and that is giving heart in many. Still, you look at a lot of patterns and they still resemble an alpine profile going downhill versus a nice accumulation base. That means there is still work to do and still some testing ahead, rally or no.
THE ECONOMY
Business inventories and other data suggest economic weakness, but is this all just lagging data now?
The retail sales as discussed above were stronger (0.3%) on the headlines but the components didn't all add up. Clothing was up nicely. Makes sense. Auto units were reported to fall 6.4% but auto sales for the month were reported up 0.7%. Take out autos and sales were still up 0.3%. Gasoline sales rose 2% when they were expected to fall. As noted, that is not where you want the sales money going.
Business inventories rose, however, coming in at 0.6% versus the 0.5% expected. Not a big miss, but up from 0.4% the prior month. Business inventories are one of those strange 'half full, half empty' indicators. If you are on the upswing in the economy moving from low to high is good as it shows production is surging. If on the downswing, low to high shows products stacking up, especially if sales fall.
December saw sales decline 0.5% after a 1.4% Novembers surge. This was the first decline in four months, but in this stage of the economic cycle it is hard to mistake rising inventories for inventory building in anticipation of buying. It is not catastrophic but it is more of the same the economy has been showing.
All water under the bridge?
The data for the most part is bad with a few outliers here and there such as the retail sales. With the market making a higher low off the January reversal and rallying the past week, there is a lot of call for an economic bottom in the works, seeing how the market leads that move. Could be, but the market has not shown it is at a bottom. It has moved up on no volume. That is a characteristic of a bear market bounce despite the Fed in the game and rising commodities prices. It remains to be seen if the Fed acted in time, and to do so this market rally has to gather more strength. Right now it is making many giddy, but there is just no volume, and unless the market is basing, that typically means a rally ultimately fails.
THE MARKET
MARKET SENTIMENT
VIX: 24.88; -1.45
VXN: 25.35; -2.87
VXO: 26.67; -1.14
Put/Call Ratio (CBOE): 0.98; -0.16
Bulls: 41.6%. Up from 40.2% as the rebound last week buoyed spirits some. Down from 56.5 seven weeks back. Fell below the 40.6% hit on the last significant round of selling but has bounced. A move into the lower 40's is a decline of significance, but it needs a bigger move is to 35% which is a big bullish indication. If bulls and bears kiss or better yet cross, that is very bullish. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.
Bears: 32.6%. Bears continued to rise, albeit modestly from 32.2%. Up from 31.5% three weeks back after the massive jump higher from 26.7% the prior week. It is over 30%, meaning it is in the range that means business. Big move after falling to a low of 19.6% on this round. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that 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). Still a bit more work to do to really set a bottom, and that means more selling before it gets there.
NASDAQ
Stats: +53.89 points (+2.32%) to close at 2372.93
Volume: 2.238B (+1.29%). Volume edged higher as NASDAQ put on an upside show, but trade remained below average for the fourth consecutive session, and that accounts for all but one of the rally days. As noted above, these usually end with some sharp selling, but nothing is stopping it right now.
Up Volume: 1.886B (+934M)
Down Volume: 242M (-934M)
A/D and Hi/Lo: Advancers led 2.57 to 1. Excellent breadth as NASDAQ moved through some near resistance.
Previous Session: Advancers led 1.29 to 1
New Highs: 49 (-4)
New Lows: 92 (-19)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
It was the fifth day since NASDAQ reversed and volume was higher on a 2+% move. You could call it a follow through session but it was a weak one in terms of volume. We heard a lot of talk about the 'four horsemen of tech' being back. Some were, some weren't. GOOG and AMZN rose on above average volume, and only AMZN had decent trade. Still, NASDAQ is finding broad support if not overly strong as it moved through the 18 day EMA and is looking at the February high (2419) as next resistance and the 'hump' in a potential double bottom (based on the January closing lows). The low volume remains a concern, but as noted, no sellers are willing to stand in the way.
NASDAQ 100 (2.05%) moved up through the 10 and 18 day EMA as well on that low trade, working as well to try and put in a double bottom.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +18.35 points (+1.36%) to close at 1367.21
NYSE Volume: 1.414B (-7.56%). After rising on the Wednesday gain and close off the high, volume faded as SP500 and SP600 caught more wind in the sail. Low volume on the entire move here as well.
Up Volume: 1.089B (+147.027M)
Down Volume: 314.831M (-172.419M)
A/D and Hi/Lo: Advancers led 1.94 to 1. Solid.
Previous Session: Advancers led 1.64 to 1
New Highs: 35 (-16)
New Lows: 84 (-6)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Moved up through the 10 and 18 day EMA but remains well off the January high (1396). It has made a higher low and has rallied up to the recent down trendline from December. Hate these low volume moves; hard to buy, drive you mad. Thus far it continues to rise, but without volume it remains a target for selling when the sellers get their nerve back.
SP600 (2.05%) was impressive. It has returned to the 50 day EMA it tested and faded from to start the month. Now it has made a shallow test and higher low and is back to try again. Same action that it failed to breakout from in December, but there is a lot of water under the bridge since in terms of Fed action, stimulus, etc.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The buying came right back in Thursday, continuing the Wednesday advance. Low, low volume on the move , but DJ30 cleared the 18 day EMA and as noted above, is looking at the November low and early January low and high, respectively, at 12,750. The 50 day EMA is there as well. As with SP500, this low volume rise is rather maddening, but that is the way of the market.
Stats: +178.83 points (+1.45%) to close at 12552.24
Volume: 236M shares Wednesday versus 256M shares Tuesday. Low, below average volume the past four sessions, but that has not stopped the move higher.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Four of five upside sessions the last four on low volume as the indices continue to move higher off the higher low. With all of the stimulus talk and Bernanke speaking to Congress tomorrow to say he is still ready to throw more money out of the helicopter, the low volume was sufficient as the sellers didn't want to touch this move even with the low volume. Before too long it will get too enticing and they will give it a run. The low volume all week indicates that expiration will be more of a donnybrook, and the sellers might try their hand then. Problem with expiration rallies or selloffs, however, is that they are not trustworthy. The market is building up for some selling, but if it occurs on Friday, unless it is a huge selloff it won't be much you can analyze.
It is these low volume rallies that can drive you crazy. You see stocks moving upside and you participate in that move. There are even some very good upside breaks as we have seen. Overall, however, the rise is on low trade. Part of the basing process in progress as the market tries to hold here versus undercutting the January low and opening the door to a new chapter of basing, prolonging the recovery. Thus this drives you nuts because the action is weak overall, but it is also part of the rebuilding. You try to play the moves and take some gains after they build in, but then have to watch if things turn. Indeed, on Thursday if there is another good push higher we will look to lock in some gain on the upside positions because if no volume musters in as well that only means the move is setting up for a harder fall.
The weak action is doing what we said it would a couple of weeks back: stocks would rally, some impressively, and that would create a sense that the worst was over, that basically all was clear. If the volume did not rise with it, however, it was likely just a bear market head fake that was going to scream lower. It doesn't feel that way with the downside plays we have, but with this volume the move won't sustain itself. Once this Buffett/stimulus package feel good catalyst dissipates, if something new doesn't come along the result will be some sharp downside.
When it dissipates is the next story. Friday we are likely to see a lot more volatile action given the quiet volume week leading up to expiration Friday. With these gains there will be a lot of rolling, shuffling, and cursing, and that will shake things up. Again, that won't tell us much in itself given the quiet action heading into the session. As noted, on some more upside we will look at taking some gain on positions that have some built in as that would make roughly a week of upside on very low trade.
As for new positions, we will still look at stocks in excellent position to move higher and have not extended themselves on this move. We said above that stocks were basing and setting up better, and we will put them on the report because if they show great moves that say 'buy me' then we will. We need to avoid the urge to chase this move, however, for the very reasons discussed: low volume rise leading to a false sense of security. Not a popular comment right now, but history shows that these moves in this kind of contracting economy don't end well.
Support and Resistance
NASDAQ: Closed at 2373.93
Resistance:
2379 from the October 2006 peak
2386 is the August intraday low
2119 is the January 2008 peak
2451 is the August closing low
The 50 day EMA at 2461
Some modest resistance at 2500 from interim August lows.
2540 is the November closing low
2550 to 2540 from May/June consolidation and the November lows
2555 is the August 2004/April 2005/October 2005/March 2007 up trendline
Support:
2370 from the April 2006 peak
The 18 day EMA at 2358
2340 from the March 2007 low
The 10 day EMA at 2337
2315 to 2300 from old peaks
2279 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2216 from August 2005 peak
2202 is the January intraday low
2175 from the December 2004 peak
S&P 500: Closed at 1367.21
Resistance:
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
1396 is the January 2008 peak
The 50 day EMA at 1399
1406 is the August and November 2007 closing low
1414 is a longer term trendline from the August 2003/September 2004 lows
1430 from the August interim lows
1440 - 1437 from January and March peaks
1459 is the February peak
1467 is the June/July 2006 up trendline
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1479
Support:
1359 is the 18 day EMA.
1351 is the 10 day EMA
1325 from May 2006 peak prior to the summer 2006 correction
1315 is an ancient trendline
1305 to 1302 from an August 2006 peak and matches a range of support from March and April 2006.
1294 from the January 2006 peak
1288 from June 2006
1280 from June and August 2006
1270 is the January intraday low
1255 from June 2006 lows
Dow: Closed at 12,552.24
Resistance:
The 50 day EMA at 12,732
12,743 is the November low
12,768 is the January 2008 peak
12,786 is the February 2007 peak
12,845 is the August closing low
13,050 to 13,000 range
13,092 is the December low
13,250 from price points from June through December 2007
13,336 is the 200 day SMA
Support:
12,518 is the August intraday low
The 10 day EMA at 12,380
12,250 from late March 2007 lows
12,050 from the March 2007 low is trying to hold.
11,670 is the May 2006 intraday high; 11,642 closing
11,634 is the January intraday low
11,317 is the March 2006 peak
11,228 from a July 2006 peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
February 12
Treasury Budget, January (2:00): $17.8B actual versus $20.0B expected, $38.2B prior
February 13
Retail sales, January (8:30): 0.3% actual versus -0.3% expected, -0.4% prior
Retail ex-Auto (8:30): 0.3% actual versus 0.2% expected, -0.3% prior (revised from -0.4%)
Business Inventories, December (10:00): 0.6% actual versus 0.5% expected, 0.4% prior
Crude inventories (10:30): 1.06M actual versus 7.05M prior
February 14
Weekly jobless claims (8:30): 350K expected, 356K prior
Trade balance, December (8:30): -$61.5B expected, -$63.1B prior
February 15
New York PMI, February (8:30): 7.0 expected, 9.0 prior
Net foreign purchases, December (9:00): $90.0B
Industrial production, January (9:15): 0.1% expected, 0.0% prior
Capacity utilization, January (9:15): 81.4% expected, 81.4% prior
Michigan sentiment, preliminary, February (10:00): 76.5 expected, 78.4 prior.
End part 1 of 3
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