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4/03/08 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: RIMM
Buy alerts: CRM; SCHN
Trailing stops: FSLR
Stop alerts issued: None issued
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:
- Stocks fight off the early doldrums, rebound to flat, put in a nice consolidation session.
- Jobless claims spike to a 2 year high.
- ISM Services puts in a decent showing, all things considered.
- Jobs report expected to stink, and it likely will, but market has thus far swallowed bad news on this rally.
Not many help wanted signs, but the market handles it.
If you could see through the sleep in your eyes after this session you would be pleased with the view. Two days after the big Tuesday updraft the market was still in test mode, but the news was not great. Initial jobless claims spiked over 400K, a recession level. As John McClain said in 'Die Hard.' "welcome to the party, pal!" It was a very clear example of how employment is a lagging indicator: most all other indicators are in recession levels, and now jobs are getting there. Thus the Friday jobs report is likely to stink as well as it even lags the initial claims. May not stink to the same degree, but there will be a definite unpleasant odor about it.
There were also a lot of downgrades. Cisco was hit with one; we always wonder how John Chambers reacts to those ('aw gosh, a downgrade?'). The investment banks all downgraded each other in a game of tag, your it. They had to call the game when it got to Bear Stearns turn as it was not there. Announcements of layoffs on the street are starting to show up. Hmm, talk about lagging indicators; by the time they take action it is time to start buying. MU missed its earnings, but it was up as it was upgraded; a case of things are so bad they cannot get worse. GRMN, similar to my NUVI 660, cannot find its way, and it had to lower its outlook. It gapped lower on massive volume.
Naturally futures were lower and the market started weak. It went down from there but quickly found its footing and recovered right into the ISM Services. That report was not great as it was still below 50, but it just missed that level, better than expected. Nonetheless the market sold again, hitting new session lows on NASDAQ as the techs had a tough go of it early despite the RIMM earnings home run.
After NASDAQ almost tested the 50 day EMA, however, the indices found bottom and rallied steadily on into the early afternoon. They peaked out and came back from the highs, but they held onto gains into the close, clinging to modest gains at the bell. Basically they were flat, and indeed everything from stocks to oil to gold was flat on the session. Very quiet, very calm despite the bad news, and very much what the market needed to do as it rests after the big Tuesday updraft.
TECHNICALLY the action was just what the upside doctor ordered. Stocks started low, tested even a bit lower, then staged a steady recovery back to flat. Okay, there were some gains, but if someone sneezed at the bell they could have easily been down a few points. A nice intraday test lower on some tough news, then a recovery in the face of that news. Still positive action overall, giving that dip to shake out some sellers then a steady recovery.
INTERNALS: Volume was lower, substantially so, as the indices pulled back and tested a bit more following Tuesday. That is what you want to see. Breadth was mixed at a respectable 1.4:1 on NYSE while -1.1:1 on NASDAQ; the large cap techs pulled most of the train while the others snoozed. That is fine.
CHARTS: Have to like the action as the indices basically moved laterally on the closing price with an intraday dip to shake out some of the less committed and a recovery into the close. NASDAQ neatly held above the late March peak on the test, a sign that level has some strength. SP500 and DJ30 did the same thing, finding support on the late March peak and rebounding. Textbook test.
LEADERSHIP: While RIMM enjoyed a great day on its earnings, most non-energy and non-commodities leaders took the day off once more. Agriculture joined energy and metals to the upside. The past two sessions were owned by the hard stocks, those that hurt when you drop them on your foot after the rest of the market surged Tuesday. Of course, dropping seeds or fertilizer on your foot doesn't hurt, unless you drop bags or bushels on it. Size does matter in that respect I suppose. As noted Wednesday, that is decent rotation action and we have no problem with that. You want to see money move around when leaders take a breather and set up to move higher.
In sum, Thursday was a very positive session with a reach lower but then recovery in the face of some adversity, some nice orderly action in the indices, and more improvement in the market leadership.
THE ECONOMY
Jobless claims jump.
407K easily topped expectations of 365K and 369K the week before. That was a 2 year high, and a reading over 400K is typically presumed to be a recession indicator though. As noted above, just one more piece of evidence on the trash pile that was an expanding economy.
Continuing claims were rather shocking with a move up to 2.94M, a gain of 97K. That is . . . how do you say it . . . high. It has surpassed the post-Katrina jump and is easily above the levels hit at the start of the prior two recessions. That is not that comforting as it indicates the pain may be more severe. The other indicators are not as weak, so perhaps this is just a delayed effect and is running, as usual, behind the market upswing. The 4-week average popped to 375K, and that is also higher than the same average at the start of the two prior recessions.
ISM Services contracts for third month, but slows the pace to a crawl.
After the manufacturing ISM showed some slightly improved numbers, the services side did as well. Still negative and thus contracting, but at 49.6 (48.5 expected, 49.3 prior), it is holding basically steady.
New orders moved back above 50 (50.2) and business activity strengthened its position (52.2 versus 50.8). Inventories rose from 50 to 51.5. Imports and exports were both up. On the negatives, employment was static at 46.9, deliveries fell to 49 from 50, and prices rose to 70.8 from 67.9.
Basically it was a decent report considering how things have mucked up economically the past few months. The report is basically a sentiment survey and its ability to hold up decently even though 3 months of sub-50 readings is encouraging. Man, talk about looking for silver linings. No, this really is not a crappy report, just not a glowing report.
Lots of weak economic data: what does it mean?
We all know that the economic data is not good. The economy has been and is in a slowdown. The bigger question is just where the economy is in this decline. Is it going to be shallow and rebound just after the indicators bespeak recessionary levels? The stock market is trying to put in a bottom here and it is the leading economic indicator. So far it is setting up some leadership and the action is decent. If it gets some serious volume it becomes very interesting. It doesn't seem like enough of a decline compared to some recessions, but if it is a mild one and financially driven as the bear market in 1998 (when there was no real recession), as noted over the weekend, the indices have put in enough of a correction.
THE MARKET
MARKET SENTIMENT
VIX: 23.21; -0.22. Modest loss still at the 200 day SMA. Recall, no move on this last selloff.
VXN: 26.93; -0.34
VXO: 24.77; +0.54
Put/Call Ratio (CBOE): 1.05; 0
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: +1.9 points (+0.08%) to close at 2363.3
Volume: 1.982B (-2.21%). Volume again contracted, perfect in a consolidation.
Up Volume: 1.187B (+257.817M)
Down Volume: 779.85M (-278.268M)
A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 1.17 to 1
New Highs: 38 (-14)
New Lows: 96 (+7)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Very nice action with a test down toward the 50 day EMA (2331) intraday and then a recovery to flat. Second day of low volume on a flat session as the techs could not capitalize on the strong RIMM earnings. No real worries, however, as NASDAQ is setting up beautifully for a new break higher after this test.
NASDAQ 100 (+0.35%) closed flat, riding RIMM's gain after gapping lower. Again, NASDAQ 100 is in the best position of the large cap indices, but it is a close heat with SP500 and DJ30.
SOX (+2.57%) continued its surge, moving up off the 50 day EMA and up to the 90 day SMA on the close. Best move for the chips since early February as they move up to the top of 3 month trading range.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +1.78 points (+0.13%) to close at 1369.31
NYSE Volume: 1.254B (-13.18%). Very low volume on a lateral move. Once again some very good price/volume action setting up the next move higher. Like it.
Up Volume: 745.223M (-90.528M)
Down Volume: 489.075M (-103.86M)
A/D and Hi/Lo: Advancers led 1.44 to 1. Now when will that happen again? Solid breadth on a flat session shows stocks still in good shape, not giving up much ground, champing at the bit for the next move higher.
Previous Session: Advancers led 1.44 to 1
New Highs: 47 (-5)
New Lows: 23 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Moving laterally the past two sessions just below the February peak (1388) and the 90 day SMA (1387). Again, no real attempt to take them out, just a nice lateral test to set up the next move higher. Very solid, catching its breath before it makes the next move. Another day or two of rest and it is ready to try that resistance at 1400ish.
SP600 (+0.15%) continued its lateral move over the 90 day SMA, tapping it on the low and rebounding for a nice recovery to hold its gains. As with the other indices, setting up nicely for the next move higher. It has its major resistance from 382 to 385, and if the market wants to take a breather for a day or two that will help the small caps better set up for that move.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Sliding laterally just below the 90 day SMA (12,669) just below the key resistance at 12,750 that everyone is watching. Thus it is playing the watched pot routine, because with everyone watching it is not going, at least not yet. Instead it continues to prepare for the move; it is ready, it is just a matter of when.
Stats: +20.2 points (+0.16%) to close at 12626.03
Volume: 183M shares Thursday versus 232M shares Wednesday. Low, but again, that is what you want on a consolidation. Again, it will need a bit of trade as it makes the move on 12,750.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
The market has spent two days in preparation of the next employment report, consolidating a good Tuesday gain and at the same time refusing to give up any significant ground. Indeed, it has bounced after testing lower intraday. Like a market that is stingy with the gains as it shows the buyers are not willing to sell.
That bodes well for the market moving higher again off of the March low after this second rest. It has moved up close, paused, and is eyeing it, in good position to take it on if it can get some volume. The jobs data is the next big news hurdle for the market and this current run at next resistance, and the number is expected to be weak. Any better than expected will help, but even expectation or a little worse is okay as the market has managed to swallow bad or disappointing news and still move higher or at least hold its gains.
It has been a good test and we have picked up positions and will continue to do so as the opportunity arises. This pullback has set up stocks to move higher once more and as they make the move we will look at picking up more and riding this rally as far as it will go. Maybe it will be only a short term rally in a longer term bear market, but it is set up well and the market is what tells you what to do regardless of any gut feelings or rational thoughts (at least in our own minds) as to what the market and economy should or shouldn't do. Yes DJ30 still has to face some key resistance at 12,750 and that will tell a lot about this rally. Needs volume to get there. Leadership is solid as well, however, and that is a very big part of any move higher. As long as leadership continues to set up and breakout the rally has the lifeblood it needs.
Support and Resistance
NASDAQ: Closed at 2363.30
Resistance:
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.
The 200 day SMA at 2551
Support:
2340 from the March 2007 low
The 50 day EMA at 2331
The 18 day EMA at 2299
2292 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
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
S&P 500: Closed at 1369.31
Resistance:
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
1420 is a longer term trendline from the August 2003/September 2004 lows
Support:
The 50 day EMA at 1350
The 18 day EMA at 1338
1325 from May 2006 peak prior to the summer 2006 correction
1324 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 12,626.03
Resistance:
The 90 day SMA at 12,669
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
The 200 day SMA at 13,144
Support:
12,573 is the mid-February high
12,518 is the August intraday low
The 50 day EMA at 12,429
The 18 day EMA at 12,376
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
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
March 31
Chicago PMI, March (9:45): 47.0 actual versus 46.7 expected, 44.5 prior
April 1
Construction spending, February (10:00): -0.3% actual versus -0.9% expected, -0.1% prior (revised from -1.7%)
ISM Index, March (10:00): 48.6 actual versus 47.5 (lowered from 48.2) expected, 48.3 prior
April 2
ADP Employment, March (8:15): +8K actual versus -45K expected, -23K prior
Factory orders, February (10:00): -1.3% actual versus -0.8% expected, -2.3% prior (revised from -2.5%)
Crude oil inventories (10:30): +7.3M actual versus 3.2M expected, 88K prior
April 3
Initial jobless claims (8:30): 407K actual versus 365K expected, 366K prior
ISM Services, March (8:30): 49.7 actual versus 48.5 expected (revised from 49.2), 49.3 prior
April 4
Non-Farm payrolls, March (8:30): -50K expected, -63K prior
Unemployment rate, March (8:30): 5.0% expected, 4.8% prior
Hourly earnings, March (8:30): 0.3% expected, 0.3% prior
Average hourly workweek, March (8:30): 33.7 expected, 33.7 prior
End part 1 of 3
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