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us stock market, trade stock
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2/27/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: FCX
Trailing stops: None issued
Stop alerts issued: 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/alertssr.html
SUMMARY:
- Market listens to Bernanke, takes a day off after three upside sessions.
- Very few fireworks at Bernanke testimony.
- Durable orders continue the bouncing ball routine.
- A bit more resting likely before market makes another move.
Market pauses to hear Bernanke and rest after its bad news rally.
After the Dow showcased its best three-day move of the year ending Tuesday the stock market needed to take a pause and survey the landscape. DJ30 broke above its 50 day EMA, leading the upside move along with, somewhat surprisingly, the small cap SP600 that also cleared that same hurdle. Still lagging behind is SP500 and NASDAQ, but while they are not out in front leading the interference, they are not wallflowers either.
The day saw more of the usual along with a healthy dose of Fed-speak. Bernanke was on Capitol Hill addressing the House Banking committee in day one of his 2-day testimony assessing monetary policy and the economic health, but he also had his minions out talking about the Fed's continued vigilance as to economic slowing despite some intensifying inflation. Indeed, that was the gist of the Fed chair's testimony.
The chairman and his henchmen were not the only game in town. Durable orders were out and after a good December gain they showed their volatile reputation with a 5.3% loss, quite a bit worse than expectations. New home sales fell more than expected also, dropping 2.8% to 588K units (600K expected). The dollar hit a new low again, putting off my plans to go to the Tour de France this year; as they are trying to keep Levi out of the race, however, it might be a good year to skip it.
The market started weak on the news, but frankly after 3 upside sessions on questionable trade levels it was due a rest, particularly the leadership groups such as the commodities, energy and agriculture, and even some retailers (e.g. TJX) that scored solid weeklong or greater upside moves. Even with the soft start and lackluster early trade the market found some legs when news came out during the Bernanke testimony that the caps on FRE and FNM were lifted. More perceived positives for the housing and mortgage sectors, and more positive response from the market. It was no new break higher, but it helped turn the indices positive and though they gave up a long intraday consolidation late in the session to close mixed, for a rest day the action was not bad.
TECHNICALLY the action was a subset of what the market has shown on a daily basis of late. There was the low to high action that couldn't quite hang on across the market into the close, but as noted, there was no collapse lower. Just call it a low to flat session, not as solid as prior sessions, but once more the market digested not so great news and held its ground.
INTERNALS: Very much in line with the market with flat breadth and lower volume that remained below average on both NYSE and NASDAQ. The string of low volume sessions is impressive, spanning 3 weeks. As always that is the caveat behind the upside even with strong volume in the sectors leading the gains; after the kind of selling that initiated the correction this low volume rise is not the kind of surefire, can't lose recovery new bull runs are typically made of. Everyone is getting a bit comfortable with it, and with the strong leadership it is easy to overlook the volume. As the market pauses it is time to remember to be watching what happens to volume in the leaders and the indices. If it spikes as stocks pullback it is time to play it safer with upside positions and not let them get out of hand. Right now it is not showing that; just keeping honest with what the market is showing because as noted a few weeks back, just as everyone gets comfortable with a low volume recovery is when it can blow up on you.
CHARTS: The Wednesday action left no relative change in the index charts. For a second day SP500 danced with the 50 day EMA, and for the second day the 50 day EMA did not go home with it. The Dow held its break above the 50 day EMA, but it tried the key 12,750 resistance again and it was rebuffed. NASDAQ actually improved its position, but even in doing so it remained below the mid-February peak and the early February peak, still looking decent in its lateral move, but still lagging the NYSE indices.
LEADERSHIP: All was quiet on the leadership front as well. The recent leaders in energy, agriculture and commodities took the day off, easing on mostly lighter volume. They needed the rest given the solid runs, and after a nice pullback we may get some solid new entry points for them. Of course there were still those that bucked the overall trend as seen with our one buy on the session, FCX.
THE ECONOMY
Bernanke speaks to Congress Finance Committee, repeats last speech.
Chairman Bernanke broke little new ground Wednesday in his testimony and answers to the House committee. He acknowledged the 'difficult situation' facing the Fed, one that in no small way is the result of his predecessor, but that is what Fed chairman are paid to do, indeed what they like to get involved in. That is a scary enough thought in itself, but there are indeed serious issues facing Bernanke.
At least he is acknowledging them, something his predecessor had a hard time doing. Indeed, Greenspan seemed to do the opposite, ignoring problems when they were screaming at him (the dive in the economy in the second half of 2000 went unchallenged until it was too late) or he made up problems when they were not there (the 'runaway consumer' comments, inventing new inflation indicators on the fly).
The sum was what he said last week: risks were on both sides of the ledger but for the present the Fed is focused on the downside risks to the economy and will attack inflation when the growth picture improves. Sure sounds like 'helicopter Ben' he is called as a result of some prior pre-chairman commentary is living up to that name. Again, as with Greenspan, he has little wiggle room given his mandate and what he has as weapons to use to carry it out.
As for the hearing, things got almost cozy at times. Greenspan was fawned over by some in Congress, but Barney Frank usually gave him a serious run at his ego, particularly in the last few years of the Greenspan rein. Greenspan was more hands off with respect to any regulation from any source, and I liked him for that. Problem is, he seemed to think it was okay when HE regulated markets through the Fed. Bernanke has been more hands on, using the bestowed powers to impact the housing market, etc. Frank loved that, concluding that the government can make a positive difference by creating incentives where none in the market exist.
He is right; the government can do that and when the economy is in the toilet it can provide stimulus such as tax credits, enhanced expensing, etc. Problem is, the regulation is usually incorrectly targeted and the best intentions have many unanticipated results. It happens when Congress gets involved and it happens when the Fed get involved. Look at the result of 1% interest rates for a prolonged period: the housing bubble and crash.
THE MARKET
MARKET SENTIMENT
VIX: 22.69; +0.79
VXN: 25.06; -0.89
VXO: 23.7; +0.47
Put/Call Ratio (CBOE): 1.1; +0.04. Didn't take much to bump the ratio back over 1.0 the past two sessions after a few closes below that threshold level. Basically the ratio has maintained levels that are conducive to a market bounce even after the January selloff, and that is helping provide some of the resiliency the market is showing.
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: +8.79 points (+0.37%) to close at 2353.78
Volume: 2.143B (-8.06%). Volume again faded after brushing at average on the Tuesday gains. As noted earlier, trade remains depressed all through the bounce and lateral move; not bad for a lateral move, but if it makes a break higher it needs to show some volume to indicate the move after the consolidation has some serious backing.
Up Volume: 1.347B (-243.657M)
Down Volume: 850.09M (+163.473M)
A/D and Hi/Lo: Decliners led 1.08 to 1
Previous Session: Advancers led 1.77 to 1
New Highs: 62 (-3)
New Lows: 164 (+75)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ continued its overall positive consolidation, showing some relative strength Wednesday, though that is of course all relative. The gains were modest but the series of higher lows off the January selloff is forming a base, and after a roughly 600 point decline, a base is what it needs. It has yet to make a higher high in this consolidation, and when it does on some solid volume that will act as more of a confirmation of the base.
SOX (+1.21%) made it to the 50 day EMA, or pretty darn close, as it continued its bounce off the W bottom formed in January and February. It has to get past the 50 day even to challenge the early February high that marks the 'hump' in the 6 week pattern. Definite improvement as it works in tandem with NASDAQ. Still not a position of strength but a definite improvement.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -1.27 points (-0.09%) to close at 1380.02
NYSE Volume: 1.462B (-4.87%). Volume remained low as SP500 bumped the 50 day EMA on the high for the second consecutive session. Price/volume action improved on NYSE the past week but it is still below average volume. In the lateral consolidation that is fine; on the bounce higher this week it shows a lack of real commitment, just the sellers unwilling to step in with all the news of deals and ratings affirmations in the mortgage and debt sectors
Up Volume: 723.464M (-384.714M)
Down Volume: 727.251M (+314.145M)
A/D and Hi/Lo: Decliners led 1.19 to 1
Previous Session: Advancers led 2.34 to 1
New Highs: 96 (+3)
New Lows: 58 (-13)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
For the second session SP500 bumped its 50 day EMA on the intraday high then peeled back some on the close. No volume, no major reversal, just trying out the level to see what happens. That keeps it below the early February high at 1396 and resistance at 1407 from the August and November lows. As noted Tuesday, this is a point you would expect it to take a breather after bouncing to it. After it pauses, however, a bit of punch with some volume on a move through it would take it off immediate probation.
SP600 (-0.29%) traded just on the north side of its 50 day EMA for the second session after moving over that level Tuesday. It again tapped at the early February high but closed at the mid-February peak. The small caps responded to the Fed's rate cuts with the bounce and have consolidated laterally for three weeks. Now they are at the licklog just as with the other indices and are looking for a new break higher to continue the bounce off the January lows.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 and the SP600 have more in common pattern-wise right now than the large cap indices. After the bounce off the January low it has held some of the gain and is moving laterally below its early February recovery high that is also right at the November low at 12,750. The past two sessions it has tapped at that resistance level, not really trying to break through just yet. The move to this point was not bad and on a test that makes a higher low it will likely make the break and continue the move higher. A move through this 12,750 level that sticks is an important move.
Stats: +9.36 points (+0.07%) to close at 12649.28
Volume: 263M shares Wednesday versus 291M shares Tuesday. Given the pause the lower volume is fine.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The second iteration of Q4 GDP is out before the open along with weekly jobless claims. As discussed Tuesday with the consumer confidence report and the jobs aspect, consumers are getting edgy about the jobs situation, and that is the primary worry with respect to what the consumer will do. As long as the consumer is not overly concerned about a pink slip then he or she will likely continue to spend. Thursday's report won't tell us the answer by itself, but it will add to the data and it likely will show continued issues in the 350K range.
SP500 and DJ30 are still at next resistance, and once again the brush with that level did not send them fleeing in the opposite direction. That shows some of that backbone the market grew during February when it was hit with a lot of bad news but kept consolidating. Thus we anticipate the indices will still test some at this next resistance and then try another run at it after it catches its breath.
There are many leaders that are pulling back, testing the run just made. We are looking at those as fertile ground for new buys as they come back some and test near support, preparing for the next leg higher. We can use that to average up into some proven winners and catch the continued momentum higher.
Support and Resistance
NASDAQ: Closed at 2353.78
Resistance:
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 2420
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
2563 is the August 2004/April 2005/October 2005/March 2007 up trendline
Support:
2340 from the March 2007 low
The 10 day EMA at 2330
2315 to 2300 from old peaks
2285 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 1380.02
Resistance:
The 50 day EMA at 1387
1396 is the January 2008 peak
1406 is the August and November 2007 closing low
1415 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
The 200 day SMA at 1472
1474 is the June/July 2006 up trendline
1475 from peaks in December 1999 and January 2000
Support:
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
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
1316 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 12,694.28
Resistance:
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
13,300 is the 200 day SMA
Support:
The 50 day EMA at 12,652
12,573 is the mid-February high
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): 1.0% actual versus 0.4% expected, -0.3% prior
Core PPI (8:30): 0.4% actual versus 0.2% expected, 0.2% prior
Consumer Confidence, February (10:00): 75.0 actual versus 82.0 expected, 87.3 prior (revised from 87.9)
February 27
Durable goods orders, January (8:30): -5.3% actual versus -4.0% expected, 4.4% prior (revised from 5.2%)
New home sales, January (10:00): 588K actual versus 600K expected, 605K prior (revised from 604K)
Crude oil inventories (10:30): 3.2M actual, 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
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