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us stock market, trend trading stock
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3/03/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: GRMN
Buy alerts: COIN; CRZO; GRA
Trailing stops: None issued
Stop alerts issued: CEDC
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 again has plenty of reason to sell, but in the end rebounds to hold its range.
- National manufacturing hits the skids.
- Market trying to move in two directions as dollar-based stocks move higher, others struggle.
Market shrugs off some bad news, and while it did not rally, it avoided a further selloff.
Futures were lower on the heels of the Friday selling and an overseas selloff. Then a rumor hit that the Fed board of governors was conducting an emergency meeting, announced of course. Of course the Fed conducts two board meetings each month, and it does announce them. Emergency meetings get no such fanfare. It became apparent there was no emergency meeting, but futures held their rebound anyway. Maybe it was the M&A activity with UTX making a bid for DBD, a bid that DBD rejected later in the day. Nope. ABK suspending its dividend? Hardly. Thornburg facing a margin call and getting hammered? Not likely.
Stocks started modestly lower, but they did not sell off. Indeed, they rebounded sharply when a contracting ISM (48.3) and poor construction number (-1.7%) were released at 10ET. That set the stage for an up and down session, range trading all day, but in a range that was smaller than shown of late. There was a long afternoon fade off the midday high, taking the indices to new lows on the day, but that was met with a last hour goose higher that darn near tool all of the NYSE indices positive. NASDAQ was not that fortunate; it lagged all session and while it recovered as well, it did not make it nearly to flat.
TECHNICALLY the session had its interesting points, but it did not resolve anything nor did it change the current more negative bias, at least as far as the overall market is concerned sans commodities, energy, metals, and agriculture. Up and down trade, noncommittal as neither side could get the advantage on the other. Sellers had the upper hand as the indices were negative, but they could not take the market down as once more the indices held on.
INTERNALS: Breadth was as flat as the session with NYSE at -1.2:1 and NASDAQ a bit rougher at -1.7:1. Volume was lighter; no distribution, just indecision on a flat session.
CHARTS: SP500 and NASDAQ tested, and NASDAQ undercut, the February lows. They recovered to hold their range by a thread. DJ30 never really threatened to undercut its range, holding up quite well. All finished the session still in their range though NASDAQ is hanging on, despite a good reason to sell with the bad ISM. Friday there was definitely some end of the month adjustments made with the hefty decline and volume and by the Monday reaction with muted selling to some pretty seriously ugly economic news. The technical patterns are still weak after the drop lower, but once again, they have refused to totally fold up.
LEADERSHIP: Back to the same old, same old. Friday the leading sectors that are in their own bull market (energy, metals, agriculture) took the day off, testing back after strong runs. Monday they bounced back, not waiting around for any further pullback. Some good volume on the upside as well. On the other hand financials were lagging once more, and techs were definitely behind the curve, posting greater than 0.5% losses; not a major selloff, but they did not have the snap the NYSE stocks had when the afternoon rebound started.
THE ECONOMY
Monday picks up where last week left off: ISM goes negative.
Chicago manufacturing contracted in February and as is often the case, the national number followed with a 48.3 reading (49.0 expected). That is the lowest since April 2003 when the economy was on the upswing from the last recession, and it just eclipsed the 48.4 reading in December. Sorry Meatloaf, but 2 out of 3 ain't good in this case as the trend in manufacturing is heading down. As noted Friday, manufacturing, while fading in the US the past 30 years, is still huge. We still manufacture as much or more than anyone in the world.
Orders were sub-50 for the third consecutive month at 49.1 (49.5 in January and 46.9 in December). Production held onto expansion at 50.7, but employment put in its fourth straight sub-50 performance. Prides paid were lower, but at 75.5 (76.0 in January) they are still ridiculously high, jumping from the 68 in December and the 63 in October.
The ISM is a sentiment survey of purchasing managers, and though they have strong balance sheets and cash positions, not many want to be left in the lurch as in 2000 and 2001 when demand dried up overnight and huge inventories had to be swallowed. That left a bad case of indigestion and companies are not going that route again. Thus when the going gets tough, they pull the horns in quickly. Thus the turn in sentiment despite the solid financial statements.
The economy or the market?
This is just one more weight on the scale of recession. Warren Buffett says we are in recession, and whether technically or not it is the same thing: a significant slowdown that is likely to get worse before it gets better. The stock market is trying to make a stand above the January lows, and outside of the Friday dip it has put together a decent consolidation. Now the question is whether it will hold that low and continue the base. The market leads the economic data, and thus it could bottom even as the data continues to weaken.
Whether it holds or not, it is likely to try and hold either when it gets there or after a modest break below that level. So, declining economic data or no, you still have to look at the market to see what the economy is going to do just as in 2002, because the market will firm and make a bottom before the economic data becomes anything but clear. Our gut and history tells us there is more to this recession than just the January low, but as always the market is the final decision maker.
THE MARKET
MARKET SENTIMENT
VIX: 26.28; -0.26
VXN: 29.47; +1.03
VXO: 28.35; -0.55
Put/Call Ratio (CBOE): 1.24; -0.03. Five sessions over 1.0 on the close. Stacking up again on the extreme side of the ledger.
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: -12.88 points (-0.57%) to close at 2258.6
Volume: 2.182B (-13.45%). After some end of the month selling volume jacked trade up over average, it fell right back below average Monday as NASDAQ sold below the February low. No strength on that selling and it managed to recover.
Up Volume: 818.64M (+564.235M)
Down Volume: 1.35B (-835.004M)
A/D and Hi/Lo: Decliners led 1.73 to 1. Much milder but still not low enough to ignore.
Previous Session: Decliners led 3.61 to 1
New Highs: 41 (+5)
New Lows: 290 (+87)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped modestly lower, recovered with the market, but then faded to a new February low just before the last hour of trade. It reversed and closed just inside that early February low, maintaining its trading range. It lagged the entire session, but even the laggard managed to hold the line and refused to crack on bad news. Still negative overall but until it breaks the prior low it has not entered a new leg of selling.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +0.71 points (+0.05%) to close at 1331.34
NYSE Volume: 1.571B (-10.76%). Volume was lower as well to start the new month and the lack of serious selling volume allowed the large caps to recovers off of ht eFebruary low test.
Up Volume: 737.219M (+640.602M)
Down Volume: 825.961M (-834.287M)
A/D and Hi/Lo: Decliners led 1.19 to 1. Pancake flat unlike NASDAQ.
Previous Session: Decliners led 6.29 to 1
New Highs: 45 (+4)
New Lows: 236 (+19)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
The large caps showed the same action as NASDAQ, but they did not undercut the February lows and rebounded to modestly positive to close. A nice doji with tail on the candlestick pattern, indicative of an attempted move higher off of this test. A serious dump lower last week but as with NASDAQ, attempting to hold the line at the trading range lows and set up another bounce. It made a lower high at the 50 day EMA last week, however, and the technical pattern is tilted a bit more to the downside.
SP600 (-0.05%) shows a similar pattern to SP500, slightly undercutting the February low then rebounding to close flat with a doji on the candlestick chart. After bouncing down from the 50 day EMA last week it is trying to hold up again and make another run. The small caps are the most sensitive to the economic data, and they held the line Monday. How they perform here is key for the rest of the market.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 tested lower as well, but on its low it was 100 points off that February intraday low. As it was, DJ30 was once again the relative leader in the market. It has plenty of room to work with even here above the February low though as with the rest of the indices it failed at the February highs (as well as its 50 day EMA) and that puts the onus on it to hold here at the February low (12,061) to keep the base basing so to speak.
Stats: -7.49 points (-0.06%) to close at 12258.9
Volume: 259M shares Monday versus 351M shares Friday. Definitely some end of month position shuffling added to the Friday trade.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
No scheduled economic data Tuesday, the lone session of the week without a full plate ahead of the Friday jobs report. With the weekly jobless claims as a guide, that report is not going to be a barnburner, at least as far as new job creation goes.
That leaves the market up to its own on Tuesday as the indices once more attempt to hold at the February low and keep their bases going. Though they were selling hard to end last week and the news was poor Monday, they still held their trading ranges.
The reason they held their ranges is that the recent leaders that tested back Friday were back to the upside to start the week. Outside of those stocks in . . . broken record time . . . energy, metals, agriculture, and commodities in general, there are pockets of strength, but the pickings are rather slim. Thus there is a somewhat bifurcated market once more. Those typically don't work out well overall; late in 2007 and early 2008 even those stocks with significant overseas connections sold off in the worldwide recession worries.
As we noted in the pre-market alert Monday, the key for the session and indeed this week will be how the market handles the February low, the stepping off point ahead of the January low. Monday the market absorbed the bad news and held the range. We see many of the leaders bouncing up off of tests of nice breakouts, and as they continue to move higher the market will benefit. Of course the indices were unable to hold up even with these stocks moving higher and higher; just not enough of them to offset the overall selling.
For now, however, those stocks are working, moving higher despite the market selling, aided by an ever-shrinking dollar. We are going to continue looking for upside opportunity in them as investors push money into those stocks that, as the old-timers say, hurt when you drop them on your toe. Any upside in the indices or stocks locked in downtrends or that have broken support, however, and we are looking for downside to further play their declines.
Support and Resistance
NASDAQ: Closed at 2258.60
Resistance:
2286 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
The 10 day EMA at 2309
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
The 50 day EMA at 2405
2419 is the January 2008 peak
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
2570 is the August 2004/April 2005/October 2005/March 2007 up trendline
Support:
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 1331.34
Resistance:
1368 is the high in this recent lateral consolidation
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 50 day EMA at 1382
1396 is the January 2008 peak
1406 is the August and November 2007 closing low
1417 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 1470
1474 is the June/July 2006 up trendline
1475 from peaks in December 1999 and January 2000
Support:
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 12,258.90
Resistance:
12,518 is the August intraday low
12,573 is the mid-February high
The 50 day EMA at 12,620
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
13,284 is the 200 day SMA
Support:
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.
March 3
Construction spending, January (10:00): -1.7% actual versus -0.8% expected, -1.3% prior (revised from -1.1%)
ISM Index, February (10:00): 48.3 actual versus 49.0 expected, 50.7 prior
March 5
ADP Employment survey, February (8:15)
Productivity revision, Q4 (8:30): 1.8% expected, 1.8% prior
Factory orders, January (10:00): -1.5% expected, 2.3% prior
ISM Services, February (10:00): 48.5 expected, 44.6 prior
Crude oil inventories (10:30)
Federal Reserve Beige Book (2:00)
March 6
Initial jobless claims (8:30): 360K expected, 373K prior
Pending Home sales, January (10:00): -1.5% prior
March 7
Non-farm payrolls, February (8:30): 40K expected, -17K prior
Unemployment rate, February (8:30): 5.0% expected, 4.9% prior
Hourly earnings (8:30): 0.3% expected, 0.2% prior
Average workweek (8:30): 33.7 expected, 33.7 prior
Consumer credit, January (3:00): $7.5B expected, $4.5B prior
End part 1 of 3
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