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stock split, stock market report
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2/28/08 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ADM; FCSX; HAL; KWK
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 handles GDP, jobless claims, but a couple of Bernanke moments of honesty are more than the market can bear.
- Pullback shows attributes of a routine test outside of the Russell 2000
- Jobless claims still jumping and so is oil, copper, steel, gold . . .
- Keeping an eye on the small caps as the market continues its test.
Market starts to come back from early economic data, but Bernanke comments help it start the test.
The second look at Q4 GDP was lighter than expected, matching the first reading at 0.6% growth. Jobless claims jumped to 373K, easily topping estimates. Earnings were mixed with the headlines dominated by the misses (e.g. Sprint, Sears). Futures were weaker to start with and they weakened further on the news. Oil was surging again (closed at 102.59, +2.95/bbl), gold jumped, copper jumped; you name the commodity.
That got the market started off lower but it was no downside rout. Indeed after the downside start the indices started back up, fighting back from weaker economic news as they have done frequently the past two weeks. Bernanke started to speak to the Senate Banking committee at 10:00ET and the market still moved higher. Then under some questioning from senators who were quite skeptical about the Fed's ability to control inflation, Bernanke made two statements or admissions that the market did not like. First, he answered in the affirmative a question regarding whether banks would fail during this crisis. Second, he said that this downturn was worse than the 2001 recession.
The price of honesty. The market couldn't handle the truth and it sold off hard. DJ30 dropped 110 points on top of its losses, NASDAQ 29 points, SP500 15 points. It was still not down and out for the day, however. After that dump lower it worked laterally for three hours then started an afternoon recovery. The losses were whittled in half; another recovery underway. Then the bids died out and so did the recovery. I the last hour the indices skidded back down. They did not hit session lows, but they were significantly lower on the close.
TECHNICALLY the market tried, but it could not pull off another low to high move after swallowing another round of disappointing economic data. It came close, but the bids left the market in the last hour.
INTERNALS: As has been the case on both the upside and downside sessions, the breadth was skewed sharply in favor of the market's direction. Thursday that meant downside breadth enjoyed a solid lead of better than -2:1. Volume on the other hand was lower on NASDAQ and a smidge higher on NYSE. In both cases it was still well, well below average. Thus, despite the losses on the indices there was no real distribution. After the gains it was a rather typical low volume test that showed no real distribution.
CHARTS: All indices pulled back but the large cap indices all held their 10 day EMA on the lows with DJ30 and SP500 rebounding off of that test. NASDAQ didn't rebound, but it did manage to hold that near support as it sold. Again, a typical pullback, particularly when combined with the very low volume. SP600 also held its 10 day EMA on the low, but a larger measure of the small caps, the Russell 2000, fell back from the test of its 50 day EMA from below, and it could not hold that near support. It warrants watching as the market test continues; if it breaks down it is an early indicator, kind of a canary, for US-tied stocks.
LEADERSHIP: Most stocks were lower as the breadth shows, but those tied to heavy industry, the build out of the rest of the world, were up. Energy (oil, natural gas, coal), metals (steel, copper, and gold the inflation bug), agriculture they were all up yet again. Their run is strong, but it is also getting a bit extended, particularly for some of the energy and metals stocks that got this last run started. They are getting primed or a pullback, and when they do, that will be the real test for the market as they have been the stocks holding it up and pushing it higher.
THE ECONOMY
Weekly jobless claims painting an economically depressing picture.
The volatile readings to start the year (low numbers at 301K then spikes to 375K) were inaccurate and due to seasonal mis-adjustments. The time for adjustments is over, but the numbers are high and getting higher. 373K for last week with the 4-week average at 360,500K and continuing claims all the way to 2.8M. The 4-week average is getting to a level that is consistent with the start of the 1990 recession (362K), and is closing in on the 373K average hit to start the 2001 recession.
The weekly claims are definitely not suggesting any rebound in employment after the January jobs report showed a decline in non-farm payrolls. As noted last night, the confidence numbers show an increase in worries about jobs. Hate to be a pessimist, but it is also foolish to ignore the facts. The market has rebounded in the face of declining economic data, but it still has not made a clean breakout move. Again, while this pullback looks like a typical one, we are watching the Russell to see how it fares on its pullback.
THE MARKET
MARKET SENTIMENT
VIX: 23.53; +0.84
VXN: 26.6; +1.54
VXO: 24.98; +1.28
Put/Call Ratio (CBOE): 1.24; +0.14. Three sessions above 1.0 on the close, adding to the backlog for the month that piled up despite the rally after that initial February selloff.
Bulls: 42.0%. Basically moving laterally, up slightly from 41.6%. That followed a big bounce back up the prior week as the market rebounded from the early February selling. Hit 36.7% two weeks back, the low for this selling round. 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 eleven 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: 36.4%. Bulls might be heading up, but bears are still growing in ranks, up from 33.7% the prior week when the bulls and bears stared at each other. Bears are chasing the bulls right now; another dip and they may cross, a very bullish indication. Up sharply 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: -22.21 points (-0.94%) to close at 2331.57
Volume: 2.071B (-3.36%). Volume fell off to the lowest in almost two weeks as NASDAQ faded modestly to the 10 day EMA. No distribution, just a modest pullback.
Up Volume: 453.945M (-893.264M)
Down Volume: 1.575B (+724.557M)
A/D and Hi/Lo: Decliners led 2.16 to 1. Whichever way it goes the breadth moves with it.
Previous Session: Decliners led 1.08 to 1
New Highs: 56 (-6)
New Lows: 121 (-43)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
After rising to some resistance that marked the April 2006 double top NASDAQ faded modestly, holding the 10 day EMA on the close. The move did nothing to change its pattern, the tightening lateral move on low volume, i.e. its base. Nothing in the action suggests it is in trouble, just basing. Of course, nothing suggests it is about to surge higher.
SOX (-2.57%) turned back Thursday after its 3-day rise to waive at the 50 day EMA. It managed to close on the 10 and 18 day EMA, but it was a pretty hard decline for just one session.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -12.34 points (-0.89%) to close at 1367.68
NYSE Volume: 1.464B (+0.14%). Volume was up but as with NASDAQ it was still well below average, indicating no distribution. Of course there was no accumulation, or at least not much, on the move higher. Pretty much still moving laterally in its basing attempt, very similar to NASDAQ.
Up Volume: 392.725M (-330.739M)
Down Volume: 1.067B (+339.926M)
A/D and Hi/Lo: Decliners led 2.22 to 1
Previous Session: Decliners led 1.19 to 1
New Highs: 79 (-17)
New Lows: 111 (+53)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
After tapping at the 50 day EMA on the Tuesday and Wednesday intraday highs, SP500 faded back to near support at the 10 day EMA. A lower high, but no collapse, just a low volume pullback in keeping with the overall very low volume since the first week of February. Moving laterally in a narrowing range as it continues to base. The 50 day EMA is important, but just because it did not break through on this attempt doesn't mean it is turning back over.
SP600 (-1.29%) lost ground as well, falling back through its 50 day EMA and closing right at the 10 day EMA as well. It too continues its lateral move in a tightening range after bouncing up off of the January selling. SP600 looks just fine; it is the larger Russell 2000 that is worrisome as it did not clear its 50 day EMA on its last bounce, and it started down hard on Thursday. Might be worrying about nothing, but the steady decline in economic data puts the small caps at risk and the action in the Russell caught our attention.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
After a brief move over the 50 day EMA the blue chips sold back, but on the low they held just over the 10 day EMA and bounced up modestly to close off that level. As with the other indices, the volume indicated no distribution and was actually quite low on the Dow. After bumping up against key resistance at 12,750 on a 4 day upside move it was ready to take a breather. That is what Thursday was. There is support at 12,500, right in between the 10 and 18 day EMA. On this pullback to test that will be the key level. It showed nice snap on Thursday. So far a normal pullback.
Stats: -112.1 points (-0.88%) to close at 12582.18
Volume: 247M shares Thursday versus 263M shares Wednesday. Very low volume as the Dow pulled back; no dumping, just a pause.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
Bernanke is done speaking, but that does not mean Friday won't be hopping with economic information. Personal income and spending and the PCE inflation reading, Chicago PMI, and final Michigan sentiment for February. Key data on top of all of the data hitting the market the past week, and it has the potential to be market moving given the market has rocked back on its heels some. No real distribution on Thursday, so stocks are not in jeopardy of losing their recent gains given the action thus far. They will, however, have another test ahead of them if the data disappoints. Inflation has run higher than expected, manufacturing is slowing, and sentiment has surprised to the downside as well.
We will be watching to see how the small caps react to any disappointing data. If nothing is too far out of the expected range the market can just continue its test into the weekend, further setting up some rebounds by some solid runners that started to test the past couple of sessions. As noted above, this pullback is very typical of a test of a move higher, and outside of a bit of weakness in the Russell 2000, there is nothing else technically to suggest it is going to sell off hard. Again, we will use the pullback to take some new positions on strong stocks we already own as well as looking at some other stocks that ran higher and are now ripe for a buy on a test of that move.
Support and Resistance
NASDAQ: Closed at 2331.57
Resistance:
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 2417
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
2564 is the August 2004/April 2005/October 2005/March 2007 up trendline
Support:
The 10 day EMA at 2331
2315 to 2300 from old peaks
2286 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 1367.68
Resistance:
The 50 day EMA at 1386
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 12,582.18
Resistance:
The 50 day EMA at 12,650
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
13,296 is the 200 day SMA
Support:
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): 0.6% actual versus 0.8% expected, 0.6% prior
Chain deflator, Q4 (8:30): 2.7% actual versus 2.6% expected, 2.6% prior
Initial jobless claims (8:30): 373K actual versus 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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