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money investment, financial investment
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4/07/08 Investment House Daily
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MARKET ALERTS:
Targets hit alerts: AAPL; AKS; CPST; LIFC; XIDE
Buy alerts: ASIA; TITN
Trailing stops: None issued
Stop alerts issued: None issued
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SUMMARY:
- Market feints a breakout move, fades back on no volume.
- Greenspan: It wasn't me; blame the professional investors for the housing bubble
- Investors pensive about driving stocks higher just ahead of earnings, but market remains poised.
DJ30 checks out 12,750, returns home.
After three lateral sessions following a big surge, the futures were up to start the week, indicating the indices might make a run at next resistance which just happens to be key resistance. There was some excitement about WM, hardly a loved name in the financial sector, as it was close to a deal to land $5B in private equity. If WM can get $5B then . . . anyone can get $5B, or at least that was the feeling on the street.
Analysts were upgrading stocks ahead of earnings as well with UBS (another less than loved financial issue), AAPL, and KLAC (chips) all getting the upgrade nod. Alan Greenspan then put everyone at ease about the housing downturn when he denied causing it with his 1% interest rates for over a year, instead blaming professional investors. Wow. Glad that is all it was. Now we can move on.
Regardless of the news, after three do-nothing sessions the market was interested in trying out the upside once more. It rallied out of the gates, sold back, posted a nice move through lunch. DJ30 reached up to 12,733 at that point, and that was it for the session. A long, steady slide commenced that took 150 points off the Dow and just over 30 points off NASDAQ. That was enough to turn the techs negative on the session. The move never had any volume punch, and that is one reason we took some gain off the table as stocks turned back down, particularly as DJ30 turned back from a tap at the next important resistance.
TECHNICALLY the action was mediocre as stocks started higher, rallied some more, then faded to give it all back after a run to resistance. Not great intraday action, but not sweating it too much as it was not accompanied by any great shakes of volume.
INTERNALS: Modest at best with NYSE breadth at 1.3:1 and NASDAQ just negative of flat. Volume rose on NYSE and fell on NASDAQ. It was, however, still low in a range of low. Thus even with the weak intraday action, the volume did not support any notion that investors suddenly decided to dump stocks.
CHARTS: After the tight lateral move the last half of the week, the indices made a move early. DJ30 came within 16 or so points of the 12,750 level just about everyone on the floor of the NYSE is watching. SP500 moved through 1380, another point many floor traders are watching, and on up to the 90 day SMA. As noted, both failed and faded back to flat, basically continuing the lateral move. Thus DJ30, SP500, and NASDAQ all look pretty good. The only iffy one in the mix is NASDAQ 100 because it enjoyed a better move than the other indices and it rose to end last week versus putting in a lateral move. It may need a test, and that suggests the market may take another couple of sessions of this lateral move to get a handle on a break higher.
LEADERSHIP: Once more the market turned back to the same old names, i.e. agriculture, metals, and energy. While they didn't all hold their upside gains, they were definitely out in front and most held gains. While they were up again, the other stocks that are setting up to make breakouts that we have on the report continued to do just that, i.e. put in the time in their bases to make the break higher. Still good groundwork, and still looking for the break higher that we can take advantage of as the indices break through next resistance.
THE ECONOMY
Very quiet on the economic front Monday. The dollar was modestly higher, but even with that rise oil was up once more ($109.90, +2.69) and gold jumped back up (926.80, +13.60). More of the same as we have seen of late after the dollar jumped for a week on the last whirlwind of Fed action. Since then it has been backsliding, and as it has commodity prices are returning toward their highs once more.
THE MARKET
MARKET SENTIMENT
VIX: 22.42; -0.03. Sliding below the 200 day SMA for consecutive closes for the first time since late December, and the outcome of that was not a positive for the upside.
VXN: 26.19; +0.59
VXO: 22.7; -1.05
Put/Call Ratio (CBOE): 0.97; -0.23. Only the third time below 1.0 on the close in the past month.
Bulls: 36.4%. Slight drop from 36.7% after the big jump from a very low 30.9% two weeks back. 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: 37.5%. Substantial decline from 41.1%, but you knew that was going to come with the recovery. As with the bulls the jump in bears did its job after hitting 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: -6.15 points (-0.26%) to close at 2364.83
Volume: 1.766B (-9.99%). Volume fell even below the weak levels from last week as NASDAQ gapped higher then found out it had no solid land below it. At least it didn't collapse lower similar to Wiley Coyote.
Up Volume: 683.928M (-401.905M)
Down Volume: 1.028B (+218.273M)
A/D and Hi/Lo: Decliners led 1.06 to 1. Flat as a pancake, matching the session.
Previous Session: Advancers led 1.07 to 1
New Highs: 57 (-2)
New Lows: 79 (+12)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped to the Friday high, but could not plow any new ground and faded back to flat. That kept it just below the August intraday low and the resistance at 2410 to 2415. While it has moved up and down in its daily range, the closes are very flat, and that is still a positive build as NASDAQ moves laterally over the 50 day EMA, sizing up the next resistance and looking for a break higher.
NASDAQ 100 (-0.27%) tapped right at the 90 day SMA for the second straight session, and for the second straight session it faded. It has put in a low volume rise while the other indices moved laterally; it may need something of a test here before it is ready to move higher, and as noted above, that means the rest of the market will pause for another couple of sessions before it tries the break higher once more.
SOX (+0.13%) ran through the 90 day SMA itself, but it could not hold up and faded as well. Tapped toward the early February high and lost its nerve. We will see how it handles the action tomorrow as AMD warned after the close.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +2.14 points (+0.16%) to close at 1372.54
NYSE Volume: 1.274B (+2.7%). Volume nudged higher as the large caps tapped the 90 day SMA on the high and returned to flat. No accumulation, no distribution.
Up Volume: 791.574M (+170.768M)
Down Volume: 471.227M (-136.4M)
A/D and Hi/Lo: Advancers led 1.28 to 1
Previous Session: Advancers led 1.23 to 1
New Highs: 81 (+15)
New Lows: 16 (-3)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Tapped the 90 day SMA (1385) and returned to flat on low trade. That keeps SP500 in the tight lateral consolidation and still looking for a breakout move that will take it out of its double bottom with handle base. May take another session, may take two sessions, may take more. It remains in solid shape and all we are doing is being patient and waiting to see it show us the break that it has set up.
Another nice lateral move by SP600 (-0.22%) as it hugs the 90 day SMA on the low and forms the best handle of the group to its double bottom with handle base. This one could be the surprising upside leader. But is it really a surprise if there is going to be an economic recovery? Small caps should be out in front leading higher as they are inexorably bound to the US economy.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips engaged in some probing fire Monday, poking at 12,750 on the high (12,734) before fading back to flat to continue its tight lateral range. Low volume shows no big bias either way, but instead shows a steady accumulation as the Dow sets up the break higher from its 11 week base and the handle that is forming. It is in excellent position; it now has to show the breakout.
Stats: +3.01 points (+0.02%) to close at 12612.43
Volume: 198M shares Monday versus 181M shares Friday. Rising trade but still well below average as DJ30 continues its lateral move and nice set up.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
Not much news on the economic front or for stocks as well, but that changes Tuesday as more earnings hit the tape along with more economic data. Pending home sales midmorning, then the FOMC minutes mid-afternoon. Earnings are in gear as well as AA reported after hours (a miss but it was holding its ground) and many more crank it up this week.
The market has performed well up to these earnings. Indeed it is setting up for a break higher looking at its technical pattern. Good earnings, particularly improving outlooks, will break it out. The interesting thing is, outside of companies such as RIMM and other horses, expectations might not be that positive. You can bet that every company that feels the need is going to blame the economy for its shortfalls. Oh sure we know that the habitual earnings miss companies will use the economy, and most see through that. The problem is the marginal companies; any issues and they blame the economy. One positive: favorable comps down the road if indeed it was the economy causing the sub-par earnings.
While earnings will certainly influence the action ahead, the market has nonetheless set up for a breakout in the face of all of the negative economic data and the known reliance on a weak economy for guarded quarters and guidance. As with the improvement in the patterns of many good stocks, the patterns in the indices have set up as well for a breakout off of this pattern. Whether a breakout to a new bull market or just an interim rally remains to be seen. Indeed, the breakout remains to be seen. We all have our theories about whether it is a breakout that sends the indices to new post-2002 highs once more or just a bear market relief move. Doesn't mean we can't and won't make money off of it.
Looking for more stocks in good position to break higher and give us gains as they make the break. Looking at some index plays to do the same as they are set up for breakouts as well. It may not be the next new high rally, but it certainly is shaping up to be a move that we can make some money on.
Support and Resistance
NASDAQ: Closed at 2364.83
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 2549
Support:
2340 from the March 2007 low
The 50 day EMA at 2334
The 18 day EMA at 2313
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 1372.54
Resistance:
1374 is the March 2007 closing low
The 90 day SMA at 1385
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
1433 from a pair of August 2007 lows and December mid-month intraday low
Support:
1370 is the August 2007 intraday low
The 50 day EMA at 1352
The 18 day EMA at 1344
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 12,612.43
Resistance:
The 90 day SMA at 12,664
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
13,092 is the December 2007 intraday low
The 200 day SMA at 13,135
Support:
12,573 is the mid-February high
12,518 is the August intraday low
The 50 day EMA at 12,443
The 18 day EMA at 12,423
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.
April 7
Consumer Credit, February (3:00): $5.2B actual versus $6.0B expected, $10.3B prior (revised from $6.9B)
April 8
Pending home sales, February (10:00): -1.0% expected (revised from -0.5%)
FOMC Minutes, March (2:00)
April 9
Wholesale inventories, February (10:00): 0.5% expected. 1.0% prior
Crude oil inventories (10:30): 7.3M prior
April 10
Initial jobless claims (8:30): 383K expected, 407K prior
Trade balance, February (8:30): -$57.4B expected, -$58.2B prior
Treasury Budget, March (2:00): -$70.3B expected, -$96.3B prior
April 11
Export prices, March (8:30): 0.5% prior
Import prices, March (8:30): 0.6% prior
Michigan sentiment, preliminary, April (10:00): 69.0 expected, 69.5 prior
End part 1 of 3
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money investment
financial investment
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