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world stock market, us stock market
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4/10/08 Technical Traders Report Update
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MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: AAPL; HGT; MTL
Trailing stops: CHT
Stop alerts issued: CHT
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 brushes aside weak same store sales as techs lead a rebound, though not a surge.
- Same store sales tumble overall as WMT guidance rises, affirming consumer recession.
- Trade balance rises even as exports continue their rise.
- Market trying to take the rally by the horns on its own but it still needs some spurs (i.e., a catalyst).
Not a half-bad bounce higher, at least for techs.
The British bankers felt it was time to cut rates and the BOE lowered its equivalent to the Fed Funds rate by 25BP to 5.00%. The EU, citing short term inflation pressures, did not, leaving its rate at 4%. Nothing new there, though it had the effect of sending the dollar lower yet again. Same store sales were lower all around with roughly one-third beating expectations and two-thirds missing. Jobless claims fell to 357K from a 410K that is being called an anomaly, beating expectations of 383K. Amazing how expectations have surged to the negative side on all the economic data. That is normal: expectations lag reality when the decline starts, and then when the dam breaks, the negative sentiment continues to build even as the economy starts its recovery. Not saying that the economy is recovering or has even bottomed, but that is what we watch for as events unfold down the road.
Nonetheless, the futures were flat to positive heading into the open. Indeed, the market rallied nicely into lunch despite a lack of positive catalysts, and indeed in the face of negative catalysts outlined above as well as WMT guiding higher, basically confirming the consumer is in a recession. It is the discounter phenomena, i.e. when discounter sales rise as shoppers retool their purchasing habits in light of a weak economy and uncertainty about the future. Until now, WMT's sales and stock price stunk the place up since the last recession ended. It broke out in March from a long base, indicating the market sees more economic slowing ahead and thus more Wal-Mart shoppers. It won't be long before WMT offers to cash those tax 'rebate' checks or at least take them in trade. That is what it did last recession and it is going to do it again.
Stocks did fine into lunch, then started a 4 hour lateral move that started to crumble in the last hour. Stocks still held their gains and a last half hour bounce helped blunt some of the late selling. The indices all closed higher and on better volume, but it was not as nice as it was with a couple of hours left. Respectable but not great. Steel was up again, but this time it was not the lone wolf; large cap techs were stirring, and chips, after getting gut-punched on the verge of a breakout by AMD's warning and a series of downgrades, bounced back up and is right back in the game.
TECHNICALLY the action was naturally a bit better than what Wednesday showed as the indices suffered their biggest loss of the current test. Stocks started flat and then rallied to gains, managing to hold onto most of the gains into the close. Good low to high action in the face of no real catalyst, and indeed with more negatives confronting investors.
INTERNALS: Breadth was decent but nothing great at roughly 1.5:1 on both exchanges. The volume was more interesting as NASDAQ showed its best volume in a month, coming within a gnat's rear of average. Man, volume is pretty weak when you get excited about 'almost average' volume. NYSE trade rose as well, but it still needs binoculars to see average. So, something to pique the interest to the upside, but not enough to really change the character. Of course, the character, despite the sentiment you hear all over, is definitely on the upside now and is on the verge of making the next break higher.
CHARTS: After the test back to next support at the 50 day EMA for the SP500 and DJ30 and slightly lower for NASDAQ, the indices posted a nice bounce higher Thursday. Nice with some rising trade, but not really as strong as it needs to get. That led some to pan the move as a failure. While it was not a powerful surge higher as two Tuesdays back, it was not a failure. The market needed to bounce and it did, and it got some better upside volume as it did. That still has the indices in a good pullback and looking to bounce where they need to bounce. Combined with the other technical aspects, that leaves us looking for more upside.
LEADERSHIP: Wednesday most of the leaders, longer term or more recent, were unaccounted for. Energy was the lone ranger. Thursday steel came back strong once more and it was joined by some large cap tech, coal, and others. That is the key moving ahead in this bounce: strength in numbers, particularly new arrivals. Some key large cap techs are set to move higher, and indeed AAPL started to bounce Thursday. If the move spreads out more then the rally will gain the strength it needs.
THE ECONOMY
You know you have economic trouble when . . . Wal-Mart guides sales higher.
March sales fell 0.7% for March versus an expected 0.1% rise. It was the worst March showing since 2000 when Thompson started keeping track. The weather and the economy were blamed, kind of a 'weakonomy' theme in the reports. As we said, with the weak economy it is kind of a 'smoke 'em if you got 'em' climate regarding retail sales, and the smoking light was definitely on with the month's reported results.
The misses, whatever the cause, were impressively bad. KSS declined 15%, CHS 20%, ANF -10%, GPS -18%, JCP -12%. On the positive side COST sales rose 7% and BJS rose 6%. Both of those are in the wholesale/discount club market as is WMT and with the weaker economy and consumers shifting toward lower priced merchandise, these are the beneficiaries.
It is not just the shift in attitudes, but also gasoline prices. These wholesale clubs and big discount stores sell gas, and gasoline is accounting for a large chunk of sales. Excluding gas sales growth fell to 3% for COST and 2.6% for BJS. Growth, but not that great even for the discounters. Indeed, WMT missed its same store sales expectations though it raised its guidance and that provided an effective smoke screen.
Overall the trend is rising sales for discounters and flagging sales for everyone else. Not a huge rise in discounter sales while other retailers see big declines. Thus the consumer is indeed pulling back across the spectrum, shifting spending to the discounters but still not spending as much as before given the modest rises in discounter sales versus the big falls in the other retailers.
Trade gap helps illustrate issues with a weak dollar.
The February gap rose to -$62.3B versus January's -$59.0B level (-$57.4B expected). The spin, however, is that exports are still rising thanks to the weakening dollar, and thus we are okay because our businesses are able to sell overseas and remain afloat. Indeed, it is even called the savior of the economy during this downturn.
No doubt exports have really helped us out. Without a rise in exports, a weaker dollar would really, really hurt as there would be nothing to help our businesses out. The issue that needs to be addressed, however, is at what point do rising exports lose their marginal benefits versus the costs to US consumers and even US businesses associated with a weaker dollar?
In February exports booked $151.4B. Imports $213.7B. Both were up from January, January was up from December, etc. The only month imports missed a rise was December, but the imports to exports ratio is still heavily in favor of imports. All the while the overall trade deficit continues to grow.
The point: the weaker dollar hurts more than it helps as imports continue to rise in cost and outstrip gains from exports. The weaker dollar does in fact help exports because our goods are cheaper and cheaper to the rest of the world whose currencies are not tied to the dollar, e.g. Europe. The weaker dollar also hurts US consumers and businesses because we are still a major importer of goods, and as the dollar weakens the imports cost more and more. In other words we are effectively importing inflation via a weaker dollar. Some say that is good because it weans us off of foreign goods and we buy at home. That ignores the benefits of free trade in getting domestic goods priced lower for consumers AND it also ignores the hard facts that some goods we have to import such as oil. Further, try and buy goods that are not manufactured in China. WMT's guidance would not be up if we had to avoid Chinese made goods.
The trade deficit continues to rise because despite the rise in exports, import prices continue to rise faster thanks in large part to a weaker dollar. Oil as part of the February trade balance was down and yet import growth still outstripped export growth. While we are getting benefits from exports thanks to a lower dollar, the inflation we are importing is harder on the US than the marginal benefits to exporters. The conclusion is a stronger dollar would help more than letting it slide to the benefit of exporters.
THE MARKET
MARKET SENTIMENT
There is still a significant amount of pessimism in the market, understandable given the halting move higher, the lack of volume, and new leadership still not asserting itself. The Thursday move spawned comments such as 'stronger but not strong enough,' etc. Good. You like to see pessimism even as things improve because when it breaks there is a lot of short covering to really drive the move higher.
VIX: 21.98; -0.83
VXN: 25.77; -0.84
VXO: 23.15; -1.21
Put/Call Ratio (CBOE): 0.97; -0.19. A bounce and a quick drop, but it means little given the nearly one month of backlog of closes above 1.0 that show continued downside hedging and betting with put options.
Bulls: 37.4%. Creeping higher, up from 36.4% after falling to 30.9% in mid-March. The indicator did its job with the dive below 35% and the crossover with the bears. They remain in crossover mode even with the rise in bulls as bears edged higher again. 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: 38.5%. Up a point from 37.5% as the bears are skeptical of a potential bottom in the market. Heading back up toward the 44.7% peak, but not likely to make it there of course. Like to see the continued pessimism even as the indices form up a bottom and leadership improves. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March 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: +29.58 points (+1.27%) to close at 2351.7
Volume: 2.145B (+11.72%). Nice spike in volume, but even an 11% gain in trade did not quite get volume up to average. Good improvement, but on a breakout move it needs to blast past average.
Up Volume: 1.652B (+1.164B)
Down Volume: 551.388M (-868.018M)
A/D and Hi/Lo: Advancers led 1.48 to 1. Fairly weak; the large caps were leading the move.
Previous Session: Decliners led 2.82 to 1
New Highs: 35 (-9)
New Lows: 116 (+13)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
After undercutting the 50 day EMA for a session, NASDAQ bounced right back, moving higher on stronger trade. It did not win any new ground, but it bounced where it had to and the leaders showed good action along with that better volume. It has made the test and now it has to deliver the break higher. Still looking at large caps in great position for buys such as RIMM, and even AAPL after its move Thursday is still a buy on the continued rebound.
NASDAQ 100 (1.47%) was the leader outside of SOX. After tapping the 50 day EMA they put in a solid move but as with NASDAQ, they still have to show a stronger upside move. We think they are going to do just that.
SOX (1.79%) has come back from what looked to be just another rollover by a snake bit index. It rallied up the February peak to star the month and then tanked on some downgrades and AMD's quarterly earnings warning. Down hard one session but then bounced off the 50 day EMA and continued the move Thursday. It was over the 90 day SMA, free and clear of the early April high, but it could not hold it. This resilience, however, shows the chips are not going to be down much longer.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +6.06 points (+0.45%) to close at 1360.55
NYSE Volume: 1.285B (+5.66%). Volume was up as the NYSE indices came off the 50 day EMA, but it was not up nearly enough, still over 300M from average
Up Volume: 776.181M (+518.33M)
Down Volume: 492.027M (-457.432M)
A/D and Hi/Lo: Advancers led 1.66 to 1
Previous Session: Decliners led 2.46 to 1
New Highs: 40 (-17)
New Lows: 48 (+10)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 tested the 50 day EMA (1353) Wednesday, did it again on the Thursday low, and then bounced on some rising trade. It was an iffy session as it closed in the middle of the trading range. Basically the large caps held where they had to hold and bounced modestly. Still in position to make the break higher and we are still looking for that move though it looks as if NASDAQ will have to led the way.
SP600 (0.95%), after thumping down to the 50 day EMA Wednesday, bounced Thursday with the rest of the market, though it tapped the 90 day SMA on the high and faded modestly. Still in position to continue higher, but after that fall from an outstanding position on Thursday it looks as if it is going to try and be a follower for now.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips continued working on their nice pattern, holding the 10 day EMA more or less and bouncing up to the 90 day SMA on the high. They too slid back to the close giving up more points than they gained on the session. Rising trade though still low overall, but really like the pattern and still looking for the breakout move.
Stats: +54.72 points (+0.44%) to close at 12581.98
Volume: 227M shares Thursday versus 195M shares Wednesday. Better trade as it tries higher, but as with the other indices it will have to show more.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
Export and import prices will provide more insight as to the trade deficit figures reported Thursday, and the preliminary April Michigan sentiment report is out as well. That is about it. There are some earnings; DNA announced after hours, and after an up and down post-close session it had the slightest of gains. That is going to be one of those that has to show what it is going to do given the response. It has enjoyed such success with its products that even success in the numbers isn't always rewarded right away given expectations. This one, however, could be a sleeper and push DNA higher.
The market is trying to bounce back out of this pullback, showing signs of doing so Thursday as the large cap techs started to stir. Friday they may continue to break higher, but we typically don't like to do a lot of buying on Friday as it can be a short covering head fake. If we see strong, well-positioned stocks breaking higher on stronger volume we will move in, however, because those are not suffering short covering but are being bought for longer term. Again, RIMM and AAPL are top candidates, but there are many others building in the market.
Thus we are not going to get too revved up for Friday action, but if the market wants to rise on stronger volume that is exactly what it needs and we won't complain, just look for opportunity. Next week will show the real move as the market remains poised and earnings will hit full stride. That is the thing that will reveal the conscience of the rally.
Support and Resistance
NASDAQ: Closed at 2351.70
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
2392 is the April 2008 peak
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 2545
Support:
2340 from the March 2007 low
The 50 day EMA at 2335
The 18 day EMA at 2321
2294 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 1360.55
Resistance:
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 90 day SMA at 1382
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:
The 50 day EMA at 1353
The 18 day EMA at 1349
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 12,581.98
Resistance:
The 90 day SMA at 12,643
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 13,122
Support:
12,573 is the mid-February high
12,518 is the August intraday low
The 18 day EMA at 12,463
The 50 day EMA at 12,457
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): -1.9% actual versus -1.0% expected and +0.3% prior (revised from 0.0%)
FOMC Minutes, March (2:00)
April 9
Wholesale inventories, February (10:00): 1.1% actual versus 0.5% expected, 1.3% prior (revised from 0.8%)
Crude oil inventories (10:30): -3.1M actual versus +2.3M expected, 7.3M prior
April 10
Initial jobless claims (8:30): 357K actual versus 383K expected, 410K prior (revised from 407K)
Trade balance, February (8:30): -$62.3B actual versus -$57.4B expected, -$59.0B prior (revised from -$58.2B)
Treasury Budget, March (2:00): -48.1B actual versus -$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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