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yahoo stock, us stock market
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3/18/08 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: Took some interim gain on STLD
Buy alerts: CHK; CSX; HCBK; STLD; WFR; XTO
Trailing stops: BVN; DBC; QID
Stop alerts issued: FCX
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 rallies before and after rate cut as pundits start praising the Fed
- Market gets what it wants, and now Bernanke is a sage.
- Housing starts better than expected as housing market continues to show inklings of a trough.
- PPI core growls
- Dollar gets a yen for the euro, starts to recover.
- Maybe some backfilling, then we see if this has legs.
Stocks rally early to avoid the Christmas rush, but rallies late as well.
The market was ready to start higher come hell or high water (wow, two hell's in the opening paragraph on consecutive nights). Futures were up well before the open. Housing starts came out higher but still at low levels. Hurrah! LEH and GS beat watered down earnings expectations. Hurrah! Yahoo affirmed Q1 and the year. Hurrah! PPI core exploded higher . . . hurrah anyway! The point: the market didn't care. It was ready to rally on the now accepted, even before the FOMC decision, view that the Fed was going to keep the economy soggy with liquidity, regardless of the price concerns to come.
The market rallied into the decision, putting in 2% gains. There is always the worry that the market prices in the move on rallies ahead of the announcement. That was a worry Tuesday, but except for about 40 minutes it was not a valid one. We took part of the gain on STLD ahead of the number. Nice gain but unnecessary. The news came out of a 75BP cut, some gains were taken, but within an hour the buy buttons were clicking all across the market, driving the indices to new session highs.. More than that, they added another third to the gains after recovering from the post-Fed dip.
The result were 3.5% to 4.5% gains on the indices as basically all stocks rallied. With financials leading the SP500 led the large cap indices. NASDAQ posted its largest daily gain in 5 years (2003 when the market roared to life in anticipation of the economic recovery). Impressive.
TECHNICALLY it was a powerful session, but at the same time it was not that powerful in ways. The intraday action was strong: high to higher, finishing with a strong late kick to the close. That is bullish, but you have to put it into perspective. When the post-FOMC selling did not win out and the market blew past the prior session highs, shorts were screaming with their hair on fire as they ran to the exits. That is what propelled the indices straight up in the last hour and closed it out at the session highs. Thus it was not a massive long buying spree. Nothing wrong with that at all as all rallies start with the shorts covering for a reason. It was a hell of a short covering rally (got it in again).
INTERNALS: Massively positive breadth on NYSE (8:1) as the financials finally all rowed together. NASDAQ wasn't bad at 3.3:1, but it was a piker, an amateur compared to the NYSE. Volume was solid, though mixed. Up on NASDAQ, down on NYSE. Relatively, however, volume was much stronger on NYSE than NASDAQ as its volume was well above average while NASDAQ just barely, grudgingly moved past average.
CHARTS: Well the NYSE indices, particularly SP500 with its full test, made that bounce off the January lows. Given the explosive nature of the moves, they are already at some resistance with DJ30 brushing up to the 50 day EMA. SP500 moved past the 18 day EMA as did NASDAQ. SP500 looks ready to rumble, and indeed it did rumble Tuesday. NASDAQ, however, is still rather choppy; will see if it can stumble on out of this and hit its stride. Before then it may need to retrench some after roughly 700 points on DJ30 in less than 24 hours.
LEADERSHIP: Just about everything was up, but that does not mean everything was a leader. A stock has to have a good consolidation behind it and be trending higher to be a leader in good position to buy. Many stocks have been diving like a cliff diver in Mexico, and a bounce up from that breakneck plunge is not the definition of a leader. On the other hand, there was a broad swath of stocks moving higher Tuesday, and moving higher from good consolidations. We bought some energy, steel, tech and financial. A broad array. We were picking good patterns from the relative few there are, but with this kind of lateral action the past two months with some steep dips interspersed, stocks can develop some good patterns to rally from. Sometimes it takes a few weeks for this to develop, but if you have leadership to start a rally, more can follow in the footsteps as things develop.
THE ECONOMY
Now that the Fed is in full helicopter mode Bernanke gets some respect.
Bernanke inherited a mess and everyone knew he did, but that doesn't matter. Bernanke was supposed to be a closer, supposed to be a history wonk who knew the mistakes to avoid of the past.
He may have known what they are, but he ended up doing the same thing. He started well but then he fell behind the curve at the wrong moment last summer when he could have stamped out any worries about the credit crisis that exploded onto the scene. The Fed once more underestimated the power of sentiment in financial crises, and the opportunity was missed.
Then it was a game of catch-up and the Fed seemed to be behind most of the way, still too cautious about inflation. Of course, for a while inflation was under control, but as things slowed and the prospect of higher taxes loomed in the future, it started to come back around. The Fed remained cautious even as it picked up the pace of the stimulus. Finally after things got out of hand the Fed poured on the coals, slashing rates, starting its Taffy program, opening the discount window, etc., etc. The administration and legislative branches got in on the act, but this rebate package is about as impotent as a 25BP rate cut when 150BP is needed.
Then a series of even bigger moves. Big expansion in Taffy. Broker allowed to go to the discount window. Weekend cut in the discount rate. Sacrificing a major brokerage. Cutting the FF rate and discount rate 75 BP, all within 5 days.
After that 'helicopter run' where cash has been thrown everywhere, Bernanke is being hailed as 'getting it,' as a leader. We always thought he got a bad rap with his early moves, though he did miss the opportunity to head a lot of this off. The problem with that is what always occurs with Fed delay: recession, and this time inflation on top of that and thus the stagflation worries popping up occasionally. The Fed did use the Taffy, and that gets money where it is needed along with opening the discount window, but it was also a late. It will help inflation issues, but it won't avoid them.
It was a hard way to start out as Fed chief. He did not panic at first, overreacting a la Greenspan and pushing the economy into immediate recession. He dried up the Greenspan liquidity and would have been great but for missing the sentiment part of the equation in the summer. Big miss. With this latest flurry of money drops he is helping rectify the problems, but he is not going to be able to hold off inflation at this point, and that is the next battle that has to be handled after this as the PPI indicates.
PPI core jumps.
Speaking of inflation, the core PPI rose 0.5% in February, up from 0.4% and beating the 0.2% expected. That was the fastest growth rate in the core in 18 months. There will be inflation issues to deal with after the recovery starts. It would help to get supply up with some solid investment incentives versus the weak-kneed rebates, but that is not likely to happen given the election is growing much closer.
Housing starts are up but still low.
For the third month housing starts were right at the 1 million range. That is not a great level even if they did top expectations. Beyond the near term low levels, however, there is always the bigger picture. Historically housing bottoms when starts start running in the 1M range. It just works that way.
This time it might be a bit different given housing and its bubble higher thanks to insanely low, low prices on homes courtesy of 1% interest rates for a prolonged period. Greenspan got us out of 1 bubble by inflating another. Now we are paying the price for that, and the question is whether given the bubble are the historical indicators skewed as well?
It is always trouble to say 'it is different this time.' This decline in the market certainly is mild given the run higher to this point and the magnitude of the issues facing the economy. It does look as if it is going to make a run for it, however, given the Fed's massive liquidity injection. The market will tell us if this endeavor is successful.
If it is, then we have a rally but we also have likely created another bubble as there was no cleaning out of the system as there was even in the 2000-2002 recession. Pretty bearish outlook, but with the problem of creating inflation with the liquidity on top of the administration's weak dollar policy, that is something we have to deal with.
Speaking of the dollar . . .
It is fairly amazing when a 75BP cut in interest rates can cause a 0.7% gain in the dollar versus the euro and a 2.2% jump against the yen. Of course when expecting 100BP, 75 is a full 25% less.
You have to wonder, however, about the staying power of the move. Yes the Fed talked a lot about its worries re inflation, but it is clear it is going to flood the economy with money at all costs, and that won't help the dollar.
That is why it was so disappointing this week when President Bush came out in a paisley dress with respect to the dollar after he started talking tougher last week about supporting it. We all went into the weekend more excited than in a long time, looking for more talk this week.
We hear that Bush's advisors, obviously holdovers from the 'Baker School' that ill-advised Bush I about the beauties of a weaker dollar, counseled him over the weekend to ease off on the stronger dollar talk lest exports might weaken. It is time, however, for the dollar to recover and assist the economy outside exporters. We are importing too much inflation with this weak dollar, offsetting the benefits of exports. Exports did their jobs but now the dollar needs to be able to do its job as well.
The Bush advisors remind me of Wormtongue advising King Theoden in 'The Two Towers.' Sage advice if your goal is losing.
THE MARKET
MARKET SENTIMENT
VIX: 25.79; -6.45. Fell like a stone.
VXN: 28.45; -4.54
VXO: 27.56; -6.74
Put/Call Ratio (CBOE): 1; -0.48
Bulls: 31.1%. Massive decline from 41.9%, one of the largest declines we have ever seen. The bulls and bears were eye to eye in mid-February. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. 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: 43.3%. Another massive move, up from an already high 36.6%. 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 has blown past 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: +91.25 points (+4.19%) to close at 2268.26
Volume: 2.399B (+0.87%). Volume was up and above average, but just barely so. The volume was not as strong relative to NYSE.
Up Volume: 2.196B (+1.666B)
Down Volume: 198.127M (-1.621B)
A/D and Hi/Lo: Advancers led 3.28 to 1. Hey, advancers outpaced decliners one day to the next.
Previous Session: Decliners led 2.85 to 1
New Highs: 37 (+8)
New Lows: 229 (-306). New lows did not explode higher except for that one session.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher and moved just over the 18 day EMA on the close, taking it to the top of the range for this month. Short double bottom over the past two weeks, but still a lot of overhead resistance. It was one of the percentage gainers, but its overall pattern is weaker than the NYSE indices. Strong move, however, and if the other indices continue higher it is in position to follow.
NASDAQ 100 (4.38%) is in slightly better position and looks ready to lead NASDAQ overall.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +54.14 points (+4.24%) to close at 1330.74
NYSE Volume: 1.949B (-2.34%). Volume was lower but still very strong following the high volume reversal on Monday. Thus the lower volume means little.
Up Volume: 1.853B (+1.412B). Almost 20:1 up to down volume. Impressive.
Down Volume: 93.421M (-1.438B)
A/D and Hi/Lo: Advancers led 8.12 to 1. Downside breadth was extreme. With the financials finally in gear the breadth was even more impressive to the upside as shorts were forced to cover all of the shorts on the financials.
Previous Session: Decliners led 4.29 to 1
New Highs: 28 (+1)
New Lows: 136 (-499)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
After the undercut of the January low just on Monday, SP500 exploded higher off of that test and moved through the 18 day EMA and the old trendline. It closed at a shelf of resistance at 1330 but has the strength to motor up to 1350 on this initial run, about where the 50 day EMA is trending lower. It failed at that point in late February, so this is will be its first test.
SP600 (4.53%) posted an impressive move as well, clearing last week's peak but still below some serious resistance at 365 to 370ish. How it and the other indices handle these rungs of resistance will tell us more about the quality of the double bottom and the surge off of that level.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips continued their rebound off the Monday reversal as well, putting in roughly 700 points off of that low. Never tested the January lows on this move, but the SP500 did it by proxy; just needed another big index to put in the test to join NASDAQ. Already DJ30 is at the 50 day EMA (12,428) and there is also resistance at 12,500. That is just the lead in to the big resistance at 12,750, and that is where the lick log is, the real test of this sharp bounce off of the test of the January low.
Stats: +420.41 points (+3.51%) to close at 12392.66
Volume: 367M shares Tuesday versus 382M shares Monday. Lower but still strong, well above average volume as DJ30 gets its teeth into this move.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Heard an interesting observation about the VIX and how the market has reacted to spikes in it. In August 2007 it spiked to 37.50 and the Dow rallied 1500 points. In January it spiked to 37.50 and rallied just over 1,000 points. Monday it hit 35.60. Does that mean the Dow gets 500 points? Well, no. It already has over 700 points under its belt in two days, counting from the intraday low as with the other moves after VIX spikes.
Each move has its own stripes and you have to look at where it is coming from. This one is, finally, after two major indices fully tested the January lows, helped by a flood of Fed liquidity and other actions designed to restore order and confidence in the market (yes, that $2/share BSC takeout instill confidence in us). The market move Tuesday indicates it is going to give it a run and try for a bottom here of some substance.
At the same time don't lose sight that the Dow has run 700 points, NASDAQ 120, and SP500 75 points off the Monday intraday lows. After such explosive moves some consolidation and backfilling is typical as those playing the move sell out on the recovery, fearing another dump lower. After a few sessions it tries another move higher. There is still some more upside potential on this initial surge as key resistance points are still higher, but we need to recognize that the next real opportunity will be after those levels are tested and the market shows it is going to hold by making another strong move higher.
That would be another attempt at follow through for a new rally at least on NASDAQ and SP500 as those indices undercut their prior rally attempt lows on Monday before reversing. DJ30 never did undercut its lows, and thus this Tuesday move is a follow through for the Dow; that bodes well at least near term for that additional push higher.
Any move needs leadership, and Tuesday the old leaders were back in action, and as noted above, there were others making moves out of solid patterns. Many stocks are still in downtrends, however. A follow through allows them to finish basing, believe it or not. They start the rally off the lows, and then on a test of the move in the overall market and leaders these stocks continue working on their bases. Some will be putting in the finishing touches, and will be in position to make the breakout if the market continues its rally. In this way a rally is self-sustaining.
Still a ways to go before it gets to that stage, but as noted above, from the looks of the NASDAQ and SP500 test of the January lows and the response, it looks as if the market is going to make a run for it at least in the short term.
Support and Resistance
NASDAQ: Closed at 2268.26
Resistance:
2282 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2340 from the March 2007 low
The 50 day EMA at 2343
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:
The 18 day EMA at 2258
2252 is the early February low
The 10 day EMA at 2239
2221 is March low
2216 from August 2005 peak
2202 is the January intraday low
2175 from the December 2004 peak
2168 is the March 2008 low
2158 from May 2006
2164 From August 2006
2134 from August, September 2006
2100 from June 2006
S&P 500: Closed at 1330.74
Resistance:
The 50 day EMA at 1355
1368 is the high in this recent lateral consolidation
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:
1325 from May 2006 peak prior to the summer 2006 correction
The 18 day EMA at 1320
1320 is an ancient trendline
1317 is the early February low
The 10 day EMA at 1310
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
1272.66 is the March 2008 low
1270 is the January intraday low
1260 from July 2006
1258 to 1255 from May and June 2006 lows
Dow: Closed at 12,392.66
Resistance:
The 50 day EMA at 12,428
12,250 from late March 2007 lows
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:
The 18 day EMA at 12,190
The 10 day EMA at 12,138
12,070 from the early February 2008 lows
12,050 from the March 2007
11,731 is the March 2008 low
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 17
New York Empire Index, March (8:30): -22.0 actual versus -5.0 expected, -11.7 prior
Net Foreign Purchases, January (9:00): $62.0B actual versus $60.0B expected, $56.5B prior
Industrial production, February (9:15): -0.5% actual versus -0.1% expected, 0.1% prior
Capacity utilization, February (9:15): 80.9% actual versus 81.3% expected, 81.5% prior
March 18
Housing starts, February (8:30): 1.065M actual 995K expected, 1.071M prior (revised from 1.012M)
Building permits, February (8:30): 978K actual versus 1.02M expected, 1.061M prior (revised from 1.048M)
PPI, February (8:30): 0.3% actual versus 0.3% expected, 1.0% prior
Core PPI (8:30): 0.5% actual versus 0.2% expected, 0.4% prior
FOMC policy statement (2:15): 75BP cut in Fed Funds and Discount rate
March 19
Crude oil inventories (10:30): 6.177M prior
March 20
Initial jobless claims (8:30): 360K expected, 353K prior
Leading economic indicators, February (10:00): -0.3% expected, -0.1% prior
Philly Fed, March (12:00): -18.0 expected, -24.0 prior
End part 1 of 3
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