|
|
money investment, investment help
* * * *
2/25/08 Investment House Alerts
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: Took some interim gain on ILMN
Buy alerts: ECA; MON, TRA
Trailing stops: None issued
Stop alerts issued: IBM; SU; XOM
SUMMARY:
- Flat session gets another mortgage-backed boost, rallies home in the afternoon.
- Existing home sales not as bad as thought, help early rebound from selling.
- S&P keeps mortgage insurers at AAA, but what choice does it have?
- NYSE indices clearing the lateral consolidation.
Another afternoon upside move, gratis mortgage news.
Friday it was a short covering move on word of an ABK bailout that turned a second day of selling to a gain. Monday the indices were not getting clubbed as hard, but it was another mortgage-backed story that boosted them in the afternoon. Specifically, Standard & Poors affirmed the MBI and ABK AAA ratings. As if the alternative were possible and the mortgage rating agency single-handedly send what was left of the sector out of the toilet and into the cesspool. I suppose the threat of downgrading the ratings was successful with its intentions of getting investors moving into the beleaguered companies. Indeed, after hours Wilbur Ross, a weekly fixture on the financial stations of late, announced to the world that he was going to make an announcement in the next week regarding the mortgage insurers. An announcement regarding an announcement. That is about the state of affairs in the mortgage industry.
Didn't matter what the reasons were. The market has fended off news that would have cracked it a month ago, just moving laterally in a narrowing consolidation. Then it gets some expected, rather vague news about deals and bailouts in the mortgage sector and it reverses losses to post gains that are breaking the NYSE indices out of their lateral consolidations.
It was not all the mortgage news and it was not all positive news. GS again said that more write-downs were to come from C, LEH, and BSC. LOW beat earnings but guidance was less than forecasts. The market had reason to sell again, and it was doing so early. Then the January existing home sales did not stink as bad as expected, and after a half hour into the session after the indices gave up a gain, the 'better' than expected home sales started the market back to the upside. It was no foregone conclusion, however, as they sold back to flat just after lunch. Then a bounce, then the goose from the S&P announcement, then the run higher to close at session highs. Better volume on NYSE, lower on NASDAQ. Solid breadth. Technically not perfect, but it is not a wallflower of a move either given the leaders from energy, metals, agriculture and commodities in general were joined across the board - - less financials - - even with the positive mortgage news.
TECHNICALLY the action, while not perfect as noted, showed further strengthening. Friday the NASDAQ showed better volume while lower on NYSE. Monday the roles reversed. That is not bad for the upside as it shows the money is moving around. Not a lot of upside money, but more than the sellers. It was another low to high session as the market suffered through some less than flattering news but didn't seem to care, rallying on some less than stellar news. Slice it and dice it, but in the end the market finds a way to move up.
INTERNALS: Solid 3.3:1 NYSE breadth and 2:1 on NASDAQ. Fresh breadth. Volume was up on NYSE, showing a bit more buying, but not a whole lot: trade levels were still well below average. NASDAQ trade backed off from average levels. Its price/volume action is mixed, i.e. not showing all upside volume on up days. NYSE is a bit better, showing the stronger volume on the upside, but still not able to muster even average volume. Improving but still a long way to go.
CHARTS: SP500 broke higher, clearing its 2-week lateral range. DJ30 broke to a new closing high in its lateral move, clearing the 12,573 intraday high but unable to quite hold it on the close. NASDAQ is not nearly as far along. It came off the bottom of its range but is only about a third way up from the bottom. NYSE stocks with the energy, metals, ag and commodities are leading the way. NASDAQ is following. Even the small caps were in the action, moving back up to the 50 day EMA for the fourth time this month. So many visits, the refusal to give up, indicate something is brewing here as well.
LEADERSHIP: From the above it is pretty clear that energy, agriculture, metals and commodities in general continue to lead. Drug, pharma and biotech were on the move. Even some of the financials are trying to hold the line, work laterally, and set up their own bounce to follow along. Not great patterns, but after selling for so long, if the financials even stop selling and hold the line the NYSE does better. Hence the better moves Monday.
THE ECONOMY
January Existing Home Sales Fall Less Than Expected.
The 0.4% month to month decline was another sour note in the housing market, but the tune was a bit better as expectations were for a 1.8% month over month decline. Over the past six months there have been three occasions when the monthly declines were less than expected. Still declines as in January, but less than expected declines.
A distinction without a difference? Perhaps. All markets, however, tend to slow their decline before they bottom. In other words, you usually don't see a dive of ever increasing intensity suddenly bounce and never look back. Thus these three periods of slowing decline following quarters of straight line drops suggests housing, while still seeking a bottom, is making some attempts at firming up.
Doesn't mean there won't be another sharp drop as things settle out; after all, how many times in a bear market do you see a rebound set up only to crumble and continue the downside? Given that there are serious attempts underway to bailout a key portion of the housing market (bond and mortgage insurers) you can understand why there would be firming in the stocks of companies with ties to the market, but would the housing market itself attempt to bottom on that news? Not likely. It is just showing signs of firming, and as noted, that is something that has to happen before it can bottom. Thus you have to view it as a positive for now.
THE MARKET
MARKET SENTIMENT
VIX: 23.03; -1.03
VXN: 26.67; +0.37
VXO: 24.02; -2.49
Put/Call Ratio (CBOE): 0.94; -0.21
Bulls: 41.6%. Big bounce back to positive as the market rebounded from the early February selling. Up sharply from 36.7% that put the bulls and the bears eye to eye. Didn't make the 35% range considered to be bullish for the market. Down 20 points from the 56.5 ten weeks back. 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. It is just about there. Moreover, with bears surging over 35%, they are making that 'kiss' that is quite bullish (even more so if they cross over one another). 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: 33.7%. Equivalent decline in the number of bears, down from 35.6%. It was a good surge from 32.6% the prior week, and that followed a nice move from a low of 19.6% on the last rally. It is over 30% and indeed over 35% the prior week, 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).
NASDAQ
Stats: +24.13 points (+1.05%) to close at 2327.48
Volume: 2.143B (-7.45%). Volume fell back from average the techs failed to attract any upside volume, just moving higher and following the NYSE.
Up Volume: 1.722B (+564.206M)
Down Volume: 397.349M (-657.674M)
A/D and Hi/Lo: Advancers led 2.03 to 1. Not bad at all.
Previous Session: Decliners led 1.24 to 1
New Highs: 58 (+21)
New Lows: 124 (-86)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
After reversing Friday on better trade NASDAQ followed up with a low volume gain up to the 18 day EMA. That leaves it still in the lower half of its trading range but still holding the line, making higher lows still. Same pattern of tightening range and higher lows, just not in the lead right now, content to follow along. Definitely a more positive than negative pattern as it extends the lateral move further.
SOX (+1.17%) is still trying to hold the line at the January low and set up a new bounce upside. It has failed so many times most have lost confidence in it, but it does have something of a double bottom going and when you lose faith that is typically when an index makes the move.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +18.69 points (+1.38%) to close at 1371.8
NYSE Volume: 1.514B (+6.86%). Volume advanced on the upside session, technically an accumulation session but also still well below average (as it has been for over 2 weeks) and thus no groundswell of buyers. Nonetheless the price/volume action is in the right direction with volume moving up on the upside and down on the downside sessions.
Up Volume: 1.297B (+272.472M)
Down Volume: 203.102M (-179.961M)
A/D and Hi/Lo: Advancers led 3.33 to 1. Very solid volume as the large and small caps both rowing.
Previous Session: Advancers led 1.49 to 1
New Highs: 83 (+55)
New Lows: 84 (-66)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps broke upside out of the 2-week lateral consolidation after making two higher lows following the early February selling. The financials were not selling, and as they firmed that gave the index some upside strength as the leaders from last week continued to move higher. This is a first step for the large caps but they are still more in a base than a breakout: the 50 day EMA is still just overhead along with the February peak. The move gets serious as it takes those two out.
For the fourth time this month the small cap SP600 (+2.1%) has bounced up to test the 50 day EMA. It failed three times but each pullback saw a higher low and it came right back. That shows buyers at this level, betting on the Fed cuts and the fiscal stimulus to reignite the economy. As small caps are very domestically sensitive, they are trying to make their own upside break ahead of any economic recovery. The move over the 50 day EMA (378) will be an important milestone if it can do it.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Broke higher from its Friday reversal, making a new closing high in its two week lateral move. Intraday it cleared the prior high in the range but slipped to basically match it on the close. As with SP500, the blue chips are making higher lows off the January dive lower, and a break to make a higher high here is a key move. It also has the 50 day EMA looming just ahead as well as key resistance at the 12,750 level. It is building strength as it moves, however.
Stats: +189.2 points (+1.53%) to close at 12570.22
Volume: 288M shares Monday versus 307M shares Friday. Friday showed some moderate accumulation, but Monday did not with its fade back below average. As with the other indices, it won't win any awards for best technical move, but it just refuses to give in and keeps building its base, now trying to take it to the next level.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
January PPI is out before the open and at 10ET consumer confidence is released; Michigan sentiment has dropped so we will see what the Conference Board's take on sentiment says; it is more business oriented so we will see if the recent decline in CEO confidence holds into this report. Chairman Bernanke starts his 2-day Son of Humphrey-Hawkins testimony where he advises Congress on the status of the economy and the Fed's position on monetary policy. It is an election year so in addition that means a lot of questions designed to give the candidates campaign trail sound bites to beat each other over the head with.
You almost hate to say it, but of late the news has not meant a lot. There has been no devastating story out, just more of the same. On the other hand, there are increasing comments and talk of 'plans' to assist a recovery in the bond and mortgage insurers. After hours following the 'dramatic' S&P news about MBI and ABK, MBI announced it was scuttling its dividend. Good news during the market then slipping in the old 'gotcha' after the close. Not too much damage was done after hours as a result; market seems to be ignoring potentially bad news again.
As noted above, the market is moving higher thanks to some firming in the beaten down and beaten up financials. When they hold the line the NYSE can move higher. When they don't it moves laterally. At some point they just give up responding to bad news; the pain hurts no longer. That is part of making a bottom and many are pointing to that. It has shrugged off negatives all month, at least after that early February selloff, but after that it has held the line and is basing as the same old leaders move higher. Yes the market is living off the leaders, but that is what it always does. It will be up to a new crop to emerge at some point; if this basing continues they will.
Thus we continue to look at more stocks basing and setting up to join those leaders with their next moves as the market, while still not a technical stalwart, continues to show resilience and set up for some upside. There are some important tests still ahead as the NYSE indices move toward the 50 day EMA. We will just let the stocks show us the moves with some strength, if they can.
Support and Resistance
NASDAQ: Closed at 2327.48
Resistance:
The 18 day EMA at 2336
2340 from the March 2007 low
2370 from the April 2006 peak
2378 is the mid-February peak
2379 from the October 2006 peak
2386 is the August intraday low
2419 is the January 2008 peak
The 50 day EMA at 2426
2451 is the August closing low
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
2562 is the August 2004/April 2005/October 2005/March 2007 up trendline
Support:
2315 to 2300 from old peaks
2284 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2252 is the early February low
2216 from August 2005 peak
2202 is the January intraday low
2175 from the December 2004 peak
S&P 500: Closed at 1371.80
Resistance:
1370 is the August 2007 intraday low. Cracking.
1374 is the March 2007 closing low
The 50 day EMA at 1388
1396 is the January 2008 peak
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
1473 is the June/July 2006 up trendline
The 200 day SMA at 1473
1475 from peaks in December 1999 and January 2000
Support:
1368 is the high in this recent lateral consolidation
1325 from May 2006 peak prior to the summer 2006 correction
1317 is the early February low
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 12,570.22
Resistance:
12,573 is the mid-February high
The 50 day EMA at 12,649
12,743 is the November low
12,768 is the February 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
13,306 is the 200 day SMA
Support:
12,518 is the August intraday low
12,250 from late March 2007 lows
12,050 from the March 2007
12,070 from the early February 2008 lows
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 25
Existing home sales, January (10:00): 4.89M actual (-0.4%) versus 4.80M (-1.8%) expected, 4.91M prior (revised from 4.89M)
February 26
PPI, January (8:30): 0.4% expected, -0.3% prior
Core PPI (8:30): 0.2% expected, 0.2% prior
Consumer Confidence, February (10:00): 82.0 expected, 87.9 prior
February 27
Durable goods orders, January (8:30): -4.0% expected, 5.2% prior
New home sales, January (10:00): 600K expected, 604K prior
Crude oil inventories (10:30): 4.2M prior
February 28
GDP, Q4 2nd iteration (8:30): 0.8% expected, 0.6% prior
Chain deflator, Q4 (8:30): 2.6% expected, 2.6% prior
Initial jobless claims (8:30): 350K expected, 349K prior
February 29
Personal income, January (8:30): 0.2% expected, 0.5% prior
Personal spending, January (8:30): 0.2% expected, 0.2% prior
Core PCE, January (8:30): 0.3% expected, 0.2% prior
Chicago PMI, February (9:45): 49.5 expected, 51.5 prior
Michigan sentiment final, February (10:00): 70.0 expected 69.5 prior
End part 1 of 3
|
money investment
investment help
|
