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money investment, investment help
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4/23/08 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: BRCM
Buy alerts: AMT; CHT; CSH; CTRP
Trailing stops: STLD
Stop alerts issued: None issued
SUMMARY:
- Some more earnings, GE comments, M&A, flat oil help push stocks right back up.
- Gasoline inventories slide but refinery runs jump.
- AAPL earnings setting the pace for Thursday, and fortunately for the upside investors liked what they heard on the call.
Stocks bounce right back on some better volume.
Tuesday stocks had a tougher session as TXN disappointed and oil surged over 119, prompting some sell programs, sending stocks lower on modestly rising trade. New day, new earnings stories. PM guides higher, CYMI beats, BA pleases, R beats and raises. That offset UPS' warning it saw no signs of economic improvement and ABK's huge, almost awe inspiring miss.
On top of that, GE changed its tune a bit. GE was the culprit for the belly flop two Fridays back when it surprised everyone with a miss due to the late quarter collapse of its financial services business. Wednesday GE said that the capital markets had indeed improved from the late March issues that poked a hole in GE's earnings report. Call it giving back a little, call it trying to woo back some investors, but whatever it was it seemed to help the market. Not GE, but the market overall.
There was also a hit of M&A in the air. Liberty Mutual, a private entity, put the moves on Safeco (SAF), offering a 50% premium. Someone willing to spend money for someone else other than Blockbuster and Yahoo. Wow.
Stocks moved higher on that news, but it was an up and down session though holding the upside all session. Nervously cautious buying is the way one of our traders described it. With some big gun techs out after the close, that is understandable. Volume was up, good to see on the upside, but breadth was weak. Nervously cautious buying (NCB).
TECHNICALLY the action was not bad. Stocks opened stronger, rallied, gave most of the gain back, then put in another steady afternoon upside session into the close. The indices did not get back to the session highs, something of a disappointment on the recovery, but with the NCB it was not surprising they did not leap back up in the afternoon.
INTERNALS: Breadth was bland. Not bad, just bland. For a 1.1% gain in NASDAQ, a 1.2:1 breadth reading is pathetic. Very few moving for the many. Volume was good to see. After a whiff of distribution in the morning on Tuesday, the indices moved back up on stronger trade. Still not blowout, but NASDAQ was average and it was a return to better price/volume action, i.e. up on the upside days, down on the downside days (most of them), though all of this at a lower level than you would expect to see.
CHARTS: NASDAQ gapped higher, tapped the 90 day SMA on the pullback, and rallied back up on volume. Cool. SP500 tapped the 90 day SMA as well and bounced, showing a nice doji on rising trade. Very nice. Cool as well. DJ30 held easily above the 10 day EMA, never threatening it. It closed in the lower half of the range. A gain, but not as cool. SOX was cool. It broke to a new high since the last selloff in January to the four month flat base. Providing support for NASDAQ. Very cool.
LEADERSHIP: Some chips are stirring despite the TXN earnings news. BRCM and CYMI surged on positive earnings results. Hardly in positions but making solid moves higher. Tech was providing some leadership once again, back in the saddle after the Tuesday boxing. The triumvirate of energy, ag, and metals sold back. Not all components for sure, but there were some cracks in the armor, particularly in ag. A spurt of growth the past two weeks and the bloom is spent for the moment. Overall leadership continues to form up in new areas. Casual dining has emerged despite high gasoline and a supposedly beleaguered consumer. Despite all of the calls for carnage, stocks tied to consumers continue to set up and make upside breaks. In sum, the rotation is a solid. You want to see new names step up as older leaders flag a bit. As with the charts, that is cool.
THE ECONOMY
Crude was up more than expected (2.42M versus 1.5M) but gasoline supplies dropped for the sixth straight week. No wonder gas prices are expected to hit $3.60/gallon nationally over the next few weeks. Fun for all. There was no joy in distillates either, the crack that diesel fuel comes from. They fell 1.38M bbl versus the 50K drop expected. Higher diesel as well and more trucker protests. Could it be that we will have another 1970's style 'convoy' of the C.W. McCall type? Mercy sakes alive.
It is not going to change anytime soon because as always we have not planned ahead to take care of the inevitable spike when other countries crawled out of the stone knife and bear skin industrial age. No nuclear, no natural gas (plentiful, cheap, cleaner), no plan for the vehicle fleet. Ethanol is no plan; it is a design to prolong our dependency upon oil in keeping the gasoline and oil burning combustion engine alive versus doing something radical and getting us off oil for transportation and stop sending money to countries that only want us around so we can buy their oil so they can use the proceeds to war against us. Not exactly the kind of symbiotic relationship you see in nature; more like parasitic. Whoops. The emails will fly over that one. Guess I am just bitter.
No, we need some thinking outside the oil barrel. Wind is okay if you want windmills spoiling every horizon. Kind of ironic that one. I was on some litigation where a wilderness group brought suit against drilling in an extremely remote part of Alaska. The sledding expedition went about 100 miles out of their way to go within sight of the lone oil rig so they could say it spoiled the view. Of course, many of these groups support dozens and dozens and dozens of windmills spread out for miles in clusters over the plains, visible to all and hardly the picture of unspoiled grasslands, etc. More than the occasional sledding expedition traveling 100 miles off its usual route sees these windmills. Everyone sees them; I guess somehow that makes it less important than a remote corner of Alaska where no one sees it.
That means jettisoning ethanol and getting our food prices lower once more. It means offering tax incentives (R&D incentives) to anyone doing serious research in finding an alternative. There is a compressed air car that runs on a few long Kevlar tanks of air designed not to explode when impacted say in a wreck. One of the vehicles has a gas motor so when you run out of air you switch over and use the engine. Cool thing: the engine refills the tanks while you drive and once filled you switch back over. You get 600 miles on a few gallons of petrol. It is not a mini sub-compact either. They have one that is a minivan type and can travel at speeds of 60 MPH. While it won't solve the need for raw power to pull equipment, boats, etc., it would be a perfect vehicle for millions of people in the city.
Incentives provide the seed money for creative ideas beyond simply ways to keep us in oil. Forget oil. It is a pollutant, a carcinogen, and inefficient. Talk about a bad fuel. If you want wind power, I like the compressed air wind better than the windmill. The point is, we simply need to unleash our creativity again in this field to get us off the one-dimensional thinking in terms of a combustion engine. There are numerous ways to go, and others we have not thought of. Release our creativity and we will solve the problems in surprisingly short order.
THE MARKET
MARKET SENTIMENT
VIX: 20.26; -0.61
VXN: 25.06; +0.52
VXO: 20.64; -0.68
Put/Call Ratio (CBOE): 0.94; -0.12. A rally pushed it back below 1.0 on the close. Again we really don't care because it put in close to a month above 1.0 on the closes. Its work is done here.
Bulls: 37.8%. Barely budged up as the market faded last week, up from 37.4%. Fell 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 yet 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: 38.9%, up a fraction from 38.5% and 37.5% the week before as the bears are still 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. Still pessimistic 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: +28.27 points (+1.19%) to close at 2405.21
Volume: 2.133B (+10.69%). Volume moved up to average on the gain, its third best showing of the month. Good to see the upside trade return in force after that hint of some distribution Tuesday.
Up Volume: 1.551B (+1.12B)
Down Volume: 534.464M (-916.371M)
A/D and Hi/Lo: Advancers led 1.19 to 1. Pretty tame for that 1% gain.
Previous Session: Decliners led 3.05 to 1
New Highs: 15 (-32)
New Lows: 128 (-30)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped back up for the Tuesday selling that took it below the 90 day SMA (2380), actually tapping the 90 day on the low and recovering to close in the upper quarter of the range. No new breakout but a nice recovery from Tuesday, holding the gains and setting up again for another try at the early February peak, the last real point to clear to take it out of this three month base.
NASDAQ 100 (+1.33%) held up well, bucking some at resistance at 1900, working laterally and preparing for the next move higher. AAPL was down early after hours on its earnings, but it recovered to flat so we will see if NASDAQ 100 can ride that news higher.
SOX (+4.12%) posted a new high after the selloff into the 4 month base that started 2008. Very nice action as BRCM, CYMI, XLNX and some friends lead semiconductors off the doormat (or out of the gutter; choose your metaphor).
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +3.99 points (+0.29%) to close at 1379.93
NYSE Volume: 1.352B (+1.71%). Volume edged higher on NYS as the indices did the same. Not the strength of NASDAQ as the energy, metals, ag stocks took time off.
Up Volume: 628.496M (+270.874M)
Down Volume: 695.473M (-266.087M)
A/D and Hi/Lo: Advancers led 1.12 to 1. Pancake like.
Previous Session: Decliners led 2.54 to 1
New Highs: 21 (-67)
New Lows: 41 (-70)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Still moving laterally and slightly lower, tapping the 90 day SMA and 10 day EMA on the low and rebounding, showing a nice doji on the candlestick chart. Like this action as it shows an orderly pullback to test the last move and hold over the early April peak. Puts it in excellent position to make the next break higher in this rally.
SP600 (+0.38%) managed to scratch out a gain but it did not alter its pattern much. It is holding just over its 50 day EMA, still below the early April high after failing to take that out on the last move. Still setting up to try, and if the other indices make the move SP600 will tag along.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Volume jumped as the blue chips posted a modest gain though finishing well off the intraday high up at 12,838. Still a very narrow range all things considered, and still quite a nice set up for a renewed break higher as the Dow holds above its near support at the 10 day EMA (12,655) as well as the 12,750 level marking the February and early April highs.
Stats: +42.99 points (+0.34%) to close at 12763.22
Volume: 244M shares Wednesday versus 215M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Durable goods orders, initial jobless claims, new home sales. Child's play versus the impact of the AAPL and AMZN earnings, and all of the others that are hitting before the open tomorrow. AAPL recovered nicely after the conference call, and RIMM and the quad-Q's did as well. As always, the morning will bring out the truth or at least what the majority of investors feel about the results. AAPL blew them out, sold 51% more Macs, and then guided conservatively for its slowest quarter. Typical Apple expectations management. AMZN posted decent earnings, but it didn't show the horsepower it has in quarters of late, and that hurt it after hours. AAPL rebounded; there was no 're' to the AMZN moves after hours unless you consider words such as 'reek.'
Of course we would prefer to see AAPL win out and the techs continue their move higher, providing leadership to the market as the longer term leaders in energy, ag, commodities take a breather. There was distribution in ag and some commodities, and the market needs those other sectors to step up and continue stepping up to keep the rally moving higher.
Gold is struggling and oil has run hard of late and is acting as if 120 is a near term barrier. The market could easily see more give back in those areas given the plenty they enjoyed on the last run. We have to watch how hard they sell; a pullback gives new opportunity to enter, but if volumes explode on the downside you have to be careful, take the gains, let them test, and see how they set back up. Wednesday left most of these areas still in good shape above near support, but suffering from some distribution.
We will keep an eye on them for sure. After a pullback we can get some good buys off of these for the next ride. It might take a couple of weeks for them to consolidate this move, however. Thus we will also keep an eye on the emerging leaders in tech, transportation, retail (surprise), machinery, industrials, etc. to see what they can show us in terms of breakouts to profitable runs. There are more and more showing up as the indices break higher, and this has the tendency to build upon itself. Recall back in February we talked about stocks building their patterns for weeks after a bottoming attempt, and that is happening. That is providing new opportunities as the rally progresses and we are constantly looking for new leaders.
Support and Resistance
NASDAQ: Closed at 2405.21
Resistance:
2419 is the January 2008 peak and the early February peak
2451 is the August closing low
Some modest resistance at 2500 from interim August lows.
The 200 day SMA at 2532
Support:
2392 is the April 2008 peak
2386 is the August intraday low
The 90 day SMA at 2383
2379 from the October 2006 peak
2378 is the mid-February peak
2370 from the April 2006 peak
2340 from the March 2007 low
The 50 day EMA at 2340
2297 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2261 is late March higher low
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 1379.93
Resistance:
1387 is the April 2008 intraday high
1396 is the February 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
The 200 day SMA at 1438
Support:
The 90 day SMA at 1370
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
The 50 day EMA at 1356
1326 is an ancient trendline
1325 from May 2006 peak prior to the summer 2006 correction
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
Dow: Closed at 12,763.22
Resistance:
12,786 is the February 2007 peak
12,845 is the August closing low
The 200 day SMA at 13,081
13,092 is the December 2007 intraday low
13,250 from price points in second half of 2007
13,563 is the late December peak
13,780 is the early December 2007 peak
Support:
12,750 to 12,768 is the February 2008 peak and a series of lows and highs from August 2007
12,743 is the November low
12,573 is the mid-February high
The 90 day SMA at 12,555
12,518 is the August intraday low
The 50 day EMA at 12,505
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 22
Existing Home Sales, March (10:00): 4.93M actual versus 4.92M expected, 5.03M prior
April 23
Crude oil inventories (10:30): 2.42M actual versus 1.5M expected, -2.35M prior
April 24
Durable goods orders, March (8:30): 0.0% actual versus -1.7% prior
Initial jobless claims (8:30): 375K expected versus 372K prior
New home sales, March (10:00): 580K expected, 590K prior
April 25
Michigan sentiment, April revised (10:00): 63.2 expected, 63.2 prior
End part 1 of 3
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