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stock trading information, stock trading course
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3/10/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: None issued
Trailing stops: COIN
Stop alerts issued: COIN
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:
- Sellers stand off at open but come back in, pushing the market closer to the lows and an oversold bounce.
- Fed rumored (again) to hold an emergency meeting and cut rates. Why?
- Oil and gasoline prices starting to suffocate the consumer.
- TXN, WLP providing the fuel for further downside and may help foster a relief bounce.
Market finally sells as we wanted but instead of a quick plunge it takes all day to get there.
There was no big decline at the open that we were looking for to take all of the indices to the January low and ignite a relief bounce. It finally got close to those levels, but it took all session to bleed down to that level. Thus there was no climactic selloff, no quick jerk lower that flushed out the pipes. Oil was higher again, helping stifle the market as the consumer, both business and individual, feels the pressure of $3.19/gallon gas (national average) and oil climbing to $108.06, +2.91/bbl. Even the market's pleasure at seeing former New York AG Spitzer get his strong-arm tactics shoved back in his face could not provide anything other than comic relief.
Despite the gloom the market held up at the open though that early 'strength' (if you can call holding flat strength) was in large part the result of a GS prediction the Fed was going to make an emergency move to cut rates yet again even though the next scheduled FOMC meeting is next Tuesday. Hmm. Cut another 75 to 100 BP a week early and really drive home the point there is carnage in the financial markets and further gut the dollar? The market saw through that, and after that early resilience it crumbled.
Two big intraday legs lower pushed the market down near the January lows and closed the market at session lows. As noted, this was the selling we were looking for, but it took all day to do it and thus there was not that cathartic selloff that tends to put in a temporary floor. NASDAQ buried the January low while SP500 and DJ30 are just points away. Another selloff on the open Tuesday and the indices get where they need for an oversold bounce, and the market is now oversold as it was in January when that bounce started.
TECHNICALLY the action was as bad as the numbers indicate. The market started flat on those rumors of a Fed emergency meeting and then ran lower all session. The weak intraday action is what you would expect looking at the point losses.
INTERNALS: They were ugly once more after something of a respite on Friday when they were bad until the market rebounded from that selling. Monday there was no rebound so the internals remained negative to the close at -5:1 NYSE breadth and -3.3:1 on NASDAQ. Volume was lower on both NASDAQ and NYSE so there was no heavy dumping overall, but a lack of buyers in most of the market and some specific selling in recent leaders did their damage.
LEADERSHIP: As noted those recent leaders, particularly in metals and agriculture, suffered as they were taken down and played catch-up to the downside with the rest of the market. Everything else was relatively stronger though still lower. An exception was energy; it held up well, but if your main product sold more than doubled in the past two years you are going to hold up as well. The only thing in their way is if prices get too high and trigger worldwide economic slowdowns thus lowering demand. Energy remains a leadership group, but this market is throwing out leaders now as well. We would say it is desperately seeking leaders, but it isn't; it is looking for sectors to tear down right now though a bounce is setting up even as it does.
THE ECONOMY
Fed to cut early in addition to often?
As noted, one of the reasons the market didn't just chuck it all early in the session was another rumor the Fed was going to deliver an emergency rate cut just one week ahead of its next policy meeting. Its timing last week with its TAF increases was scoffed at; cutting a week ahead of the next meeting? That would be, well, in line with its other actions.
That said, the odds are low. Quite frankly, at this stage it simply won't make any significant economic impact if it cuts today or next week other than scare everyone further. The Fed knows this and that is why it increased the TAF (taffy) amounts, frequency, and collateral types to try and inject more liquidity to where it is needed. It worked some when it initially started this program, but those gains dissipated. So, it is now pumping up the volume to try and make a difference that sticks.
Fed needs help from the legislative branch.
To really get the job done, however, it needs fiscal to get things turned around. It needs much better help than the so-called stimulus package recently passed will ever hope to provide. This is the 2001 stimulus package redux, the one that was passed and the money spent and the economy continued slumping. It is as if the government has to go through the process: give people money to shore up political support, and after that doesn't work they go back and try something else. What it needs is the feds to give businesses and individuals reason to spend money when there is no reason to spend money. That is typically done with tax credits where you ONLY GET THE BENEFIT IF YOU SPEND the money. With rebates you don't have to spend it. If you are worried about your future, you won't. Immediate fiscal stimulus only works if it is user-based, i.e. you use it or you don't get it.
If that was done and if people and companies were also told their taxes were not going to automatically rise in less than 2 years they would be inclined to go ahead and make short term expenditures to get the tax credits and long-term capital decisions based on not having to 'feed the fat man more' in 2010 as Ronald Reagan would say. The economy is slowing and it could use that injection of capital investment, not some rebates that will be used for paying off debt or stuck in savings accounts.
The Fed also needs help from the Executive branch with the dollar.
The Fed could also use the help. It needs to raise rates to start the end of the dollar's slide. It needs the Bush administration to say it is going to support the dollar. Then we stop the rise in commodities and start ending the importing of inflation. The dollar's decline helped pump up exports, but now it is getting to the point the weak dollar and the detrimental accouterments that go with it are outweighing any possible benefits.
It is an old saying that you never devalue your way to prosperity. At first there are benefits as exports run up. That is the precursor. After that, however, there has to be action taken that turns the benefits of the decline toward growth. Instead the Fed is on its own, having to cut rates and gut the dollar further to try and give the economy enough momentum to take flight. It cannot be successful on its own because if it continues inflation that has shown back up will ignite.
It needs Bush to get off ethanol. If he is serious about getting off oil then give tax incentives to ANYONE to develop alternative means of transportation. Saw a compressed air vehicle the other day that has a small gasoline engine in it. It can run for 150 miles on the compressed air. When it gets low you switch over to the gasoline, and while you drive it recharges the air cylinders. You can travel 600 miles at highway speeds on something like 5 gallons of gas or less. That was done without ethanol subsidies or any tax incentives. Just think what could be done if that money for ethanol subsidies was used to incent development of alternatives? The market would go where the success would be not where the government and the favors it owes thinks it should be. Even Senator Cornyn's office here in Texas, usually a free-market office, doesn't get that.
Some needs to get it. The Fed's hands are tied, and if it continues on this course without a concerted effort from the other branches of government, the damage done because it has to follow its mandate, could take years to undo.
THE MARKET
MARKET SENTIMENT
VIX: 29.38; +1.89. Still not nearly high enough.
VXN: 31.38; +2.13
VXO: 31.55; +1.2
Put/Call Ratio (CBOE): 1.48; +0.24. Nine sessions above 1.0 on the close. Plenty enough.
Bulls: 41.9%. Modest decline from 42.0%, but still holding the line as the market moved basically laterally. That will likely change now that the market has broken its trading range and is heading for the test. The bulls and bears were eye to eye three weeks back, and that was enough to set a bottom. Hit 36.7% three weeks back, the low for this selling round. That put the bulls and the bears eye to eye. Didn't quite make the 35% range considered to be bullish for the market, but was down 20 points from the 56.5 three months 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. Bears surged over 35%, 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: 36.6%. Bears continue to rise, albeit much more modestly now, up from 36.4%. Up from 33.7% the prior week when the bulls and bears stared at each other. Bears are chasing the bulls right now; with the current dip 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: -43.15 points (-1.95%) to close at 2169.34
Volume: 2.149B (-10.22%). Volume fell back below average as NASDAQ blew past the January lows. No heavy selling, but no one wanted to step in.
Up Volume: 379.538M (+293.728M)
Down Volume: 2.115B (+604.633M)
A/D and Hi/Lo: Decliners led 3.36 to 1
Previous Session: Decliners led 1.62 to 1
New Highs: 32 (-1)
New Lows: 478 (+30). Nearing the 500 level that indicates another extreme is being reached. One doesn't do it, but a few of these and you are ready for a bounce.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Sold off all session after a flat open, easily putting the January low (2202) to bed and plowing new low ground for the year. Typically breaking a key support level invites further selling, but once SP500 and DJ30 make their lows as well NASDAQ will be ready to try a relief bounce as those other indices undergo some short covering as well.
SOX (-1.42%) refuses to give in, holding the lows of its 2 month lateral range. After hours TXN lowered its outlook. That may change its relative strength outlook Tuesday.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -20 points (-1.55%) to close at 1273.37
NYSE Volume: 1.612B (-5.4%). Volume slipped back below average as it sold but no one was really taking out the hammer and pounding over it.
Up Volume: 166.418M (-395.315M)
Down Volume: 1.436B (+319.849M)
A/D and Hi/Lo: Decliners led 5.06 to 1. Pretty ugly breadth once more.
Previous Session: Decliners led 1.82 to 1
New Highs: 25 (-4)
New Lows: 403 (+7). Needs more.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Ever closer to the January low (1270) now just 3 points away. Will that be the magic level that ends the selling? Maybe for now, but something has to change big time for this to be the bottom. Things are getting negative, but not negative enough to set the bottom with this double bottom attempt. That can always change; if a relief bounce shows a follow through and leadership jumps back up, we are on for some more upside and we just have to see how far. As noted earlier, however, leadership will indeed have to emerge within a few weeks on any bounce.
SP600 (-1.55%) is on its way to the January lows as well, but it is surprisingly stronger than NASDAQ or SP500 as it is still on a percentage basis farther above that level. When it hits we expect some kind of bounce attempt.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips are on their way as well . . . to the January low at 11,634. A mere 135 points away, something it could hit with a hard open on Tuesday. It may not bounce immediately at that point; it all depends upon how hard it falls, i.e. whether it is a slow bleed as on Monday or a sharp drop on the after hours earnings warnings.
Stats: -153.54 points (-1.29%) to close at 11740.15
Volume: 312M shares Tuesday versus 307M shares Friday. Volume remained above average for the fourth out of five sessions.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Trade balance is out Tuesday. It can make a difference, but right now the market is on a mission to get down to the January lows. NASDAQ is there, SP500, DJ30, SP600 are on the way. When they get there we are expecting a relief move, but it may come after an undercut that really scares investors. The market definitely needs that; VIX still has not cracked 30 on this leg lower.
The after hours warnings from TXN and WLP may do the trick, i.e. ratcheting up the fear factor and the selling buttons to get that VIX jumping and the market ready for a rebound after a pretty sharply selloff. SP500 is down 6 of 8 sessions and is getting oversold. Now it can get more oversold. Look at January; the market sold off for eight days, bounced for just four sessions (actually 3 of 4), and then sold off for another week. The fact that the indices are at those prior lows, however, provides an easily identifiable point where the shorts will cover some just in case. That will likely at least trigger some sort of relief move. Whether it has any legs is another story.
If we get a further downdraft on these after hours warnings and the general momentum to get to the January lows then we want to take some more downside gains off the table, particularly the nearer term option plays. For the stock positions in DXD, QID, SDS, TWM we can hold some positions for a continued decline after a bounce; that is personal preference.
After that we likely get a bounce, and what we do with that is let upside positions rebound and see just how strong they respond as well as how the market responds overall. It is not likely that any bounce here represents a bottom in the market, and when a bounce starts to run out of steam, particularly at resistance, we would want to close out the upside for caution, then play the downside once more.
Thus tonight we are looking at some upside plays that are in good shape as on the weekend report, but we are looking at them more along the lines of trades. Have to do that at this point in the market as it has rolled over, is in the middle of serious selling, and has to change its character to turn from a bear market to a bull market. That is a lot to bet on for this bounce. We just have to take our shots as the market gives them and if it shows unexpected strength, great. If not we play what it gives, i.e. upside bounces for trades, using the bounce to exit upside longs, and then looking to play the downside once more.
Support and Resistance
NASDAQ: Closed at 2169.31
Resistance:
2175 from the December 2004 peak
2202 is the January intraday low
2216 from August 2005 peak
2221 is March low
The 10 day EMA at 2250
2252 is the early February low
2286 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2340 from the March 2007 low
The 50 day EMA at 2350
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
2451 is the August closing low
Some modest resistance at 2500 from interim August lows.
Support:
2158 from May 2006
2164 From August 2006
2134 from August, September 2006
2100 from June 2006
S&P 500: Closed at 1273.37
Resistance:
1280 from June and August 2006
1288 from June 2006
1294 from the January 2006 peak
1305 to 1302 from an August 2006 peak and matches a range of support from March and April 2006.
1317 is the early February low
1319 is an ancient trendline
The 10 day EMA at 1320
1325 from May 2006 peak prior to the summer 2006 correction
1368 is the high in this recent lateral consolidation
The 50 day EMA at 1368
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
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
Support:
1270 is the January intraday low
1260 from July 2006
1258 to 1255 from May and June 2006 lows
Dow: Closed at 11,740.15
Resistance:
12,050 from the March 2007
12,070 from the early February 2008 lows
12,142 is the 10 day EMA
12,250 from late March 2007 lows is stretching
The 50 day EMA at 12,510
12,518 is the August intraday low
12,573 is the mid-February high
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
Support:
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 10
Wholesale inventories, January (10:00): 0.8% actual versus 0.5% expected, 1.1% prior
March 11
Trade balance, January (8:30): -$59.0B expected, -$58.8B prior
March 12
Crude oil inventories (10:30): -3.05M prior
Treasury budget, February (2:00): -$170.0B expected, -$120.0B prior
March 13
Retail sales, February (8:30): 0.2% expected, 0.3% prior
Retail ex-auto, February (8:30): 0.2% expected, 0.3% prior
Initial jobless claims (8:30): 355K expected, 351K prior
Export prices, February (8:30): 0.8% prior
Import prices, February (8:30): 0.6% prior
Business inventories, January (10:00): 0.5% expected, 0.6% prior
March 14
CPI, February (8:30): 0.3% expected, 0.4% prior
Core CPI, February (8:30): 0.2% expected, 0.3% prior
Michigan Sentiment, preliminary March (10:00): 69.5 expected, 70.8 prior
End part 1 of 3
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