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us stock market, trade stock
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3/24/08 Technical Traders Report
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MARKET ALERTS
Targets hit alerts: MA
Buy alerts: GILD; NUE; PCLN; PTNR; RIMM
Trailing stops: None issued
Stop alerts issued: APC; CRK; CRZO; ECA
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/alertttr.html
SUMMARY:
- Market gets a few positive catalysts, takes off on another upside leg.
- Existing home sales perk up, add to argument housing is bottoming.
- Solid move, at resistance already, still looking for a follow through.
Who needs expiration? Stocks surge again after holiday though volume still on vacation.
The market recovered well last week into expiration, driven by the money shuffling that accompanies expiration, particularly when volatility rules as it did last week. After such a close you expect a bit of giveback, but that was not the case Monday.
There were some good earnings news as TIF was all polished up and WAG was making money on its usual excessive markup and lack of real service in the pharmacy (sound like personal experience? You bet). The big driver, however, was JPM upping its buyout of BSC to $10 from $2. There are many reported reasons why this happened, but charity comes to mind. It didn't have to because the Fed forced the deal. In the final analysis it was public scrutiny as much as anything else. JPM should at least cover the prime office space it was taking by most accounts, so there you go.
It was enough to start the market higher and, similar to a session last week, it just kept going higher. It was a broad move, but the real movers on the session were higher out of the gate, gapping higher and never looking back. Existing home sales rose 2.9%; another boost to the market. Oil and gold were basically flat, stemming last week's selling, but not rebounding. With the dollar still feeling frisky after its Cialis dose, that gave the market rally Monday staying power, so to speak. Technology joined the transports, financials and hombebuilders in leading the market higher. With the big techs leading once more (AAPL, RIMM, GOOG), the market didn't lose its drive into the close.
TECHNICALLY the action was solid with one nagging exception, the lack of volume. Intraday the action was strong as the market started high and went higher. Lots of gaps to the upside to start things off, and not many took a look back at the starting gate. Stocks rose higher all session, even fighting off the inevitable afternoon selling attempt as NASDAQ and SP500 hit their 50 day EMA and faded back modestly. All in all the intraday action was solid.
INTERNALS: Solid breadth once more (4:1 NYSE, 2.8:1 NASDAQ) as the recent emerging strength in transports and financials received aid from the techs. The weak link, the Achilles Heel, the piece of data that kept this from being a strong follow through to last week's renewed rally was the lack of volume. While you don't expect it to match the strength of expiration Friday, a little above average trade would be nice. Indeed, that is what you need to show the buyers are in there and give you some follow through. Instead stocks rallied nicely but on weak turnover. There were some great individual price and volume moves, but overall volume was too thin.
CHARTS: Hard to argue with 1.5% to 3.5% gains on the indices, but their success this past few sessions has led to a quick encounter with next resistance. Now DJ30 moved right on through the 50 day EMA and some at 12,500 as well without a thought, but NASDAQ and SP500 rallied up to their 50 day EMA and stalled. They made it through intraday, but they stumbled into the close and gave it away. SP500 stalled at that level in late February and set off the test of the January low. This is, however, NASDAQ's first trip to the 50 day EMA in almost 3 months. That puts this move in a bit better light, and if they pause here after that move, so what? Other than the low volume, that is. That keeps things a bit dicey on any test, but overall you have to like the move to this point.
LEADERSHIP: As noted, the techs came to play finally and put on some solid upside runs in some big names as well as a swath of smaller issues in chips and across the sector. Transports continued their breakout with rails and trucks moving together after the rails took a wrong spur part of last week. Financials and homebuilders were up again, improving their positions, though you can hardly say they were moving from strength. Energy, commodities, and agri were up as well, but they were more like rebounds on low trade than new moves to resume there leadership role.
THE ECONOMY
Housing starts better than expected, building on the bottom theory.
Over the past few months, just about every time some housing data comes out I talk about how it appears the market is trying to put in a bottom, at least in the sense that the decline is appreciably slowing. Glowing praise indeed, but every bottom has to stop its declines before it can actually be a bottom.
Whether it is housing starts, sales, or mortgages, the large slides lower have disappeared for now. It is still a bumpy road, but the data is leveling out. Another data point Monday saw existing home sales for February rising 2.9% and topping expectations at 5.03M versus 4.86M and 4.89M prior. That was the first monthly gain in a year after hitting a 10 year low in units just the month before. Inventories are still high at 9.6 months, but that is a six month low. Last week we noted that when housing starts hit around 1M units annualized you are historically at a bottom.
Prices continue to slide, but as with most price indicators, they tend to lag the changes. Prices are off 15% from the July 2006 peak in prices (they peaked in 2006 but the housing market in terms of units sold and built peaked a year earlier; that is the lag) and were down 8.2% over the prior 12 months, but they still have 5% or so to go to get 'cheap' and clear out the inventory.
That is the data in the sector. What about the stocks? The housing stocks are trying to act as if a bottom is in as they work on climbing out of a long slide lower. Many are making higher highs to start this week (e.g. HOV, TOL, BZH), the first time they since September and October of 2007. As with the trucking stocks we have bought into, the housing stocks are trying to project stronger times ahead. Their patterns aren't as good as the trucks, but they are moving higher, discounting more sales ahead.
THE MARKET
MARKET SENTIMENT
VIX: 25.73; -0.89
VXN: 28.69; -0.36
VXO: 26.3; -1.21
Put/Call Ratio (CBOE): 0.82; -0.28. Twenty days was the limit. The put/call ratio dropped below 1.0 on the Monday close. Does that mean anything? No. Twenty days is a nice backlog.
Bulls: 30.9%. Bulls continue to fall as bears continue to rise, down from 31.1% last week. That week saw the bulls and bears cross paths, a very bullish indication. This reading follows a 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 and have crossed. 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: 44.7%. Bears are rising still, up from an already freakishly strong 43.3% last week. That was a surge from an already high 36.6% the prior week. 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). This is a huge turn, unlike any seen in recent history.
NASDAQ
Stats: +68.64 points (+3.04%) to close at 2326.75
Volume: 2.29B (-16.06%). After a day above average on expiration, volume fell back below average, making it 4 out of the last 5 below the red line. Volume died off in late February as NASDAQ moved laterally, picked up a bit on the selling into March, then was mostly below average this month. Some days above, but overall very low trade. Not bad for a consolidation period. Now it needs some volume on the upside.
Up Volume: 2.041B (-219.463M)
Down Volume: 242.711M (-194.374M)
A/D and Hi/Lo: Advancers led 2.79 to 1. Not bad at all, showing it was not just the large cap techs and their 3.56% gain.
Previous Session: Advancers led 1.99 to 1
New Highs: 53 (+20)
New Lows: 116 (-149)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ gapped higher and mobbed right through the near resistance from the February lows and bumped the 50 day EMA (2335) on the high. Backed off modestly, but it was no reversal at that level, just pausing after an excellent move. The drawback was the volume; weakly and sickly for such a strong 68 point move. A pause here is no big surprise; it could actually form a handle here, drifting laterally for a few sessions and getting everyone glum again. That would set the stage for a nice break higher, but it has to have some volume.
NASDAQ 100 (3.56%) actually made the break through its 50 day EMA, clearing the lat high in late February in the process. Volume was low, however, and that remains a problem. Other than that, it is a very good looking move taking shape. A little handle formed in this general area (a lateral lower move on light trade) would set up a really nice break higher, and after this run, a bit of backfilling in the form of a handle would do it.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +20.37 points (+1.53%) to close at 1349.88
NYSE Volume: 1.57B (-43.31%). After a week of solid, above average volume, trade trailed off as SP500 rallied but stalled at the 50 day EMA. As with NASDAQ, it too will need trade to make the move stick.
Up Volume: 1.256B (-844.243M)
Down Volume: 307.317M (-334.769M)
A/D and Hi/Lo: Advancers led 4.27 to 1. Strong breadth returns to the upside as the small caps enjoyed a 2.67% gain.
Previous Session: Advancers led 2.73 to 1
New Highs: 37 (+22)
New Lows: 38 (-78)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Nice strong move that cleared the 50 day EMA (1352) but then gave it up on the close. Volume, as noted, faded below average just as SP500 needed it to push it through the next resistance. It didn't make it, stalling in the middle of the February trading range, suffering from that low trade level. Stalled there in late February, and it stalled there Monday. It will likely pause here, but that does not mean it is going to fail the move. The financials will have to continue throwing in for the market as they have been, but they too need a breather after a this move. That will set up a follow through chance.
SP600 (2.67%) did what they had to do, break through the 50 day EMA that stalled them three times in February. That was the needed first step and now it can make a run at the next key resistance at 380 (closed at 372).
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 and SP600 continue to move together, both moving through the 50 day EMA Monday. DJ30 moved through 12,500 resistance, but it is still in a range with a key top at 12,750, and you can bet everyone is watching that point as the blues get near that level. Monday they reached 12,622. Likely to try that level or get close to it on this move, and as noted over the weekend, that is the resistance in the immediate future as it represents 5 separate bottoms and tops over the past eight months.
Stats: +187.32 points (+1.52%) to close at 12548.64
Volume: 264M shares Monday versus 508M shares Thursday. As low as Thursday's trade was strong. Not a lot of pop on this upside move.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Consumer confidence is on tap at 10ET, but that is about all. After hours VLO in the oil refining sector said its Q1 was going to come in light. That only underscores the struggles energy is having right now even as gasoline prices and oil hit highs just a week back.
Indeed when you look at the leadership in commodities and energy there is money leaving those areas, and that money moved into equities following the latest Fed moves, hustled along by the firmness showing up in the dollar on the heels of the Fed action. That has helped drive the stock market higher, but interestingly, it did not hold it back the past two sessions as the energy and commodities rebounded some from the hard selling.
Those sectors look as if they still have some selling to do before they are ready to move again what with the low volume bounces back up to resistance. The overall market may have to take a pause itself given the nice surge higher and SP500 along with NASDAQ playing with the 50 day EMA. It is a perfect point for them to pause at some point this week and make a test of some sort. These resistance points are never tight right down to the point; they can be overshot or the move can come up a bit short, but the result is basically the same, i.e. things slow down at that point after a solid move.
The rally still leaves NASDAQ and SP500 looking for a follow through session to this last rally that started last week for them after they undercut their prior rally lows. Despite the strong price moves the volume did not get them there. Primed for a lateral move for a few sessions, however, to send everyone into worry that the move is over. Then they can spring the break higher. The action is trying to set up that way.
What needs to develop is more leadership. It is coming and we saw some techs make great moves higher Monday, moves that had some volume behind them. It is building up as we discussed last week. There are more patterns to build, and a nice pullback for a couple of sessions lets them build some more before they try for another follow through. That means we are going to keep looking for some solid upside, but really want a bit of a fade to set them up better versus buying into a further rally higher. That will let some positions test and give us a point we can add to the position and also pick up some new stocks as they test.
Things are not out of the woods overall of course. The commodities and energy bounced, but they are still in distress. Longer term the commodities still look strong, though near term they are struggling and look to continue struggling until they can put in more consolidation time. There are some potential downside plays to take advantage of their continued struggles.
All in all the market is putting in the time needed to consolidate and try a continued run higher. Some call this the bottom, some call it a bull trap bear market rally. It still remains to be seen how it plays out, and how the leadership evolves will tell most of that story. It is a rather short consolidation for a recession but the Fed has stepped in big time. It has bought time for leadership to develop, and with the transports taking off that is a strong indication the Fed is having a positive impact. More will have to keep coming to the fore because the killer of each rally attempt in the last recession and bear market was the lack of enough leadership to take the market higher. For now we will play those strong moves higher and watch for follow through and see if the market can avoid distribution.
Support and Resistance
NASDAQ: Closed at 2326.75
Resistance:
The 50 day EMA at 2335
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
2451 is the August closing low
Some modest resistance at 2500 from interim August lows.
Support:
2284 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
The 18 day EMA at 2261
2252 is the early February low
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 1349.88
Resistance:
The 50 day EMA at 1352
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 1322
1320 is an ancient trendline
1317 is the early February low
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 12,548.64
Resistance:
12,573 is the mid-February high
12,743 is the November low
12,750 to 12,768 is the February 2008 peak and a series of lows and highs from August 2007
12,786 is the February 2007 peak
12,845 is the August closing low
Support:
12,518 is the August intraday low
The 50 day EMA at 12,418
12,250 from late March 2007 lows
The 18 day EMA at 12,237
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 24
Existing home sales, February (10:00): 5.03M actual versus 4.86M expected, 4.89M prior
March 25
Consumer confidence, March (10:00): 73.4 expected, 75.0 prior
March 26
Durable goods orders, February (8:30): 0.8% expected, -5.3% prior
New home sales, February (10:00): 580K expected, 588K prior
Crude oil inventories (10:30): 133K prior
March 27
Q4 GDP final revision (8:30): 0.6% expected, 0.6% last Q4 iteration
Initial jobless claims (8:30): 371K expected, 378K prior
March 28
Personal income, February (8:30): 0.3% expected, 0.3% prior
Personal spending, February (8:30): 0.2% expected. 0.4% prior
Core PCE inflation, February (8:30): 0.2% expected, 0.3% prior
Michigan sentiment, March revised (10:00): 71.0 expected, 70.5 prior
End part 1 of 3
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