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us stock market, trade stock
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3/27/08 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: AGU; GME
Trailing stops: None issued
Stop alerts issued: WFR; WMS
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:
- Selling intensifies slightly but indices are still holding near support.
- Q4 GDP holds positive, but at 0.6% the 'no recession' crowd is splitting thinning hairs.
- A test lower early Friday will set the stage for a short covering bounce.
Third session lower as tech earnings worries trigger profit taking on large cap techs.
Q4 GDP held positive with personal consumption revised higher and the price deflator was lower, and the market viewed that as positive, i.e. the consumer strengthened and inflation eased. Well, not really. The PCE inflation gauge rose on the quarter, but that didn't seem to bother anyone, particularly with the 'we have your back' Fed of late. Jobless claims were less than expected at 366K (371K expected), the five episodes of Fed-speak were repeats (the 'we have your back' theme), and at the Fed auction not even half of the $200B offered by the Fed was taken. All were taken as positives.
That still didn't set the market screaming higher. Worries about technology earnings and a big new write-down from MER prevailed and though futures rose after the morning economic data, they did not shake off the recent selling mindset (or more accurately, lack of buying mindset), and the market opened flat to lower and sold off further. A recovery attempt took the indices back to their opening levels and turned the NYSE indices, positive, but they slumped in the afternoon, closing at session lows with 1% to 2% losses.
ORCL really hurt techs, and another GOOG downgrade did not help. The tech stocks that moved higher the past week were vulnerable and with ORCL and GOOG, the 'excuse' side of a rally took over, that is, the excuse to lock in some gains given the news. NASDAQ was hardest hit with the large cap techs leading lower what with ORCL and GOOG on that index, but financials were hammered as well, particularly the brokers, after the MER write-down.
TECHNICALLY the intraday action tried to improve after the lower open with a recovery after the selloff, but in the afternoon the few bids through lunch dried up and that gave a few sellers the opportunity to push stocks to their session lows. Bearish intraday action, but you can expect a day of that during a pullback to test.
INTERNALS: Compared to what they have been over the past few months, the -1.6:1 reading on breadth was not bad. NYSE was positive heading into the last half hour, but that selling to the close took it down into NASDAQ territory. Volume is the big factor on this test, and it was mixed, rising on NASDAQ while falling on NYSE. Just so we don't get the wrong idea, volume was still very light and below average even with NASDAQ's increased libido. This was not an increase in volume that indicates dumping of shares. There were some NASDAQ issues that were dumped, but overall that was not the case for the indices.
CHARTS: A bit more pullback in terms of points lost, but the indices did violate any key support to the downside. The rally off the March lows put in a lot of points and took the indices up to some natural resistance points with DJ30 making it to 12,500 and NASDAQ and SP500 moving to their 50 day EMA. They are now testing, and this is exactly the kind of pullback you want with the low volume and orderly test of near support. Make no mistake about it, however, they need to hold in this range. Another test lower Friday and we want to see at least a short covering response. In the end, they need some help again from tech, a sector that was coming around before the ORCL earnings and needs to shore up again.
LEADERSHIP: Tech, one of the recent emerging leadership groups, was hit on that earnings report, and stocks such as AAPL and RIMM that advanced nicely caught the 'excuse' disease, i.e. they found an excuse to sell (ORCL) after a week or more of gains. They were not the scapegoat. Energy and commodities used the weakness to rest as well, making easy pullbacks to near support. Retail and transports, emerging leadership groups as well, faded again. Most of the recent leaders faded but did not fold up the tent. On the other hand, some of the recent rebounders were whacked as the brokerages were pounded on the MER write-down. Pounded on volume. That can gut a sector trying to change its stripes. There were some breakdowns in tech as well as early leaders WDC and WFR were gang tackled on higher volume and broke support. Those are an issue as the market continues the test of the rally from early March, but the breakdowns were still not widespread on the session. They are coming back to near support, and they are getting to the level where they need to hold.
THE ECONOMY
Back in late 2006 we were talking about a recovery that was getting long in the tooth, though it continued to move ahead nicely in 2007 - after an iffy start to that year. With the strong 'over there' trade on anyone that sold anything overseas, however, the weakening US economy (with spurts of impressive strength as in Q3 of 2007) didn't hamper our stock market profits.
In Q4 of 2007 the spurt of the fall fell flat. The recovery was definitely in need of some Ensure to stay healthy and some Viagra to keep driving ahead, so to speak. The still too weak Fed response during that quarter was not enough to offset the credit and housing problems and GDP growth flopped to 0.6%. Not a negative reading that would be the textbook start of a potential recession, but when you fall from 4% growth, it sure feels that way.
Some took heart in the positive read and the improvement in some components. Personal consumption (how much we buy) improved in the final iteration to 2.5% from 1.9%. The price deflator fell as well, meaning you don't have to reduce the number as much to take into account inflation. That with the just hanging in there 0.6% GDP 'growth' reading was enough for those eternal (and perhaps infernal) optimists to extol the economy's strength. Maybe they are right. With a credit crunch and liquidity dustbowl, the fact that the economy didn't post a -2% decline is indeed worth noting.
It was not a great number, however, regardless of the causes for the 3.4% decline quarter over quarter. Indeed when you get significantly inside 1% of zero either way, it is hard to call it either way because the numbers the government gives us are so malleable. Suffice it to say we had 4% growth, and while you don't expect to grow at that level every quarter, the decline after such a nice long string of gains clearly paints the picture that the economy has markedly slowed into one of its cyclical declines. Nothing unusual about that. Just don't want to louse things up with too much liquidity that we have to pay for later.
THE MARKET
MARKET SENTIMENT
VIX: 25.88; -0.2. Bunching up at the 90 day SMA, not even moving the past two sessions as the market sold back. You would like to see it jump up with some fear of a selloff. That is a bit of a caution; options are not reflecting any fear of a pullback here.
VXN: 29.55; -0.2
VXO: 27.75; +0.55
Put/Call Ratio (CBOE): 1.12; +0.08. Continuing to hold over 1.0 for the second session and 22 of the last 24.
Bulls: 36.7%. Well you knew it could not last with the rally off the March lows. Bulls jumped from 30.9% after a steady decline since January. Not really worried about it; the indicator did its job with the dive below 35% and the crossover with the bears. They are still in crossover mode even with the rise in bulls and the decline in bears. 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: 41.1%. Bears were fewer in number thanks to the rally, falling from a very high 44.7% that was up from an already freakishly strong 43.3% the week before. 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: -43.53 points (-1.87%) to close at 2280.83
Volume: 2.016B (+5.93%). Volume moved higher but it was still well, well shy of average. There was some focused selling in some big names such as ORCL, but most of the index still sold on tame volume.
Up Volume: 413.014M (-133.981M)
Down Volume: 1.589B (+248.683M)
A/D and Hi/Lo: Decliners led 1.63 to 1
Previous Session: Decliners led 1.31 to 1
New Highs: 39 (+2)
New Lows: 99 (+6)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
After rallying to the 50 day EMA (2332) on the rally and is still testing back. Thursday it closed at session lows and right on the 10 day EMA and summer 2004/2006 up trendline. Low volume, rather orderly move back to support. Now it is at the point it needs to hold the line and start plucking up for another shot higher to take out the 50 day EMA resistance.
NASDAQ 100 (-2.17%) led the NASDAQ decliners as the large caps, the best of the techs on the upside, sold back more on the test. That is normal, but it was aided by ORCL's decline. That is what pushed the volume higher though as noted it remained well below average. It is still over its 10 day EMA and remains in excellent position to move higher and continue the move of the March low.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -15.37 points (-1.15%) to close at 1325.76
NYSE Volume: 1.428B (-0.16%). Volume remained at its low, low levels as the large caps and small caps continue their very orderly fade. Just what you want to see in terms of volume on this move higher and then this test.
Up Volume: 368.228M (-79.184M)
Down Volume: 1.055B (+80.421M)
A/D and Hi/Lo: Decliners led 1.64 to 1
Previous Session: Decliners led 1.36 to 1
New Highs: 24 (-1)
New Lows: 30 (-1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Similar to NASDAQ, after moving up to resistance at the 50 day EMA (1350) the large caps have faded back to test as well, holding near the 10 and 18 day EMA (1327) on the Thursday close on that same low volume. Even with the financials getting hammered back Thursday the large cap index held well at near support. It did just fine but as noted above, it is now in the range where it has to hold the line and look at breaking up through that 50 day EMA.
SP600 (-1.74%) tested as well but is in solid shape at the 50 day SMA, still holding above the 10 and 18 day EMA. Very easy orderly test, very much in position to turn back up off a higher low and make a run at key resistance at 382.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Very similar story as DJ30 pulls back to test near support as well, holding just over the 18 day EMA (12,286) on very low volume. Gave up the 50 day EMA, but that is no matter here. A hold at this level puts it in good shape to bounce again just as with the other indices, and take a run at 12,750 resistance that held it back since the start of the year.
Stats: -120.4 points (-0.97%) to close at 12302.46
Volume: 235M shares again Thursday after 235M shares Wednesday. Still a dustbowl of volume.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
Personal income, spending, PCE inflation, and Michigan sentiment are all out before the Friday open. The Q4 GDP reading showed a rise in consumption, but that was the fourth quarter. We are now in the final days of the first quarter and things have changed. Sentiment has dropped off and worries about jobs are up. That combination often means slower consumption.
The data will be what the data is; of late it has been weak and getting weaker though housing is showing some nascent signs of trying to bottom. The point: no one will really be surprised by modest readings.
What we are interested in at this point is how the market reacts to the data, good, bad, or in line. Of late the market has absorbed bad news, indeed shrugged it off during the March rally. That shows strength and character it has not had in a long time. Thus, how the market reacts to the data after two to three sessions of easing back to near support will tell the most about this move. The market has put in the pullback in nice light volume, and it is in the zone to try and hold to make the next move up and take on the resistance that turned it back this past week.
Given the market closed on its session lows a test lower to start Friday would not be unusual. Indeed that might be just the thing that shakes out the last sellers on this move and starts a recovery attempt. Given that it is Friday and the market is down for a few sessions, some short covering ahead of the weekend is always in the cards as well. Thus a final shakeout and some covering could turn the market back to positive to end the week and for just about all intents and purposes, the end of the month and beginning of a new quarter.
Fridays are always tough to buy into in this kind of situation where the market has been weak, rallied, and is testing the rally. A lot can happen over the weekend as the rally is still new and needs a good follow through by NASDAQ and/or SP500. Still, if we see some of these high quality stocks that have tested back start back up, we will add some positions on ones we already own, and put some money to work on some others that are trying to come out after hibernation. Accumulating when the market shows you the right kind of action is how we can be in position to take some nice gains as everyone else is piling in, wanting to buy our shares and options at higher prices. Cool.
Support and Resistance
NASDAQ: Closed at 2280.83
Resistance:
2285 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
The 50 day EMA at 2332
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:
The 18 day EMA at 2276
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 1325.66
Resistance:
The 50 day EMA at 1351
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
1419 is a longer term trendline from the August 2003/September 2004 lows
Support:
The 18 day EMA at 1327 is trying to hold
1325 from May 2006 peak prior to the summer 2006 correction
1322 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 12,302.46
Resistance:
12,518 is the August intraday low
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:
The 18 day EMA at 12,286
12,250 from late March 2007 lows
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): 64.5 actual versus 73.4 expected, 75.0 prior
March 26
Durable goods orders, February (8:30): -1.7% actual versus 0.8% expected, -4.7% prior (revised from -5.3%)
New home sales, February (10:00): 590K actual versus 580K expected, 601K prior (revised from 588K)
Crude oil inventories (10:30): 88K actual versus 133K prior
March 27
Q4 GDP final revision (8:30): 0.6% actual versus 0.6% expected, 0.6% last Q4 iteration
Initial jobless claims (8:30): 366K actual versus 371K expected, 375K prior (revised from 378K)
March 28
Personal income, February (8:30): 0.3% expected, 0.3% prior
Personal spending, February (8:30): 0.1% expected. 0.4% prior
Core PCE inflation, February (8:30): 0.1% expected, 0.3% prior
Michigan sentiment, March revised (10:00): 70.0 expected, 70.5 prior
End part 1 of 3
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