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world stock market, us stock market
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4/28/08 Technical Traders Report
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MARKET ALERTS
Targets hit alerts: BUCY; CSX; SOHU
Buy alerts: DRYS
Trailing stops: AKS; CSH; XTO
Stop alerts issued: IIVI
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:
- Candy deal cannot sweeten a dull day.
- Stocks on low volume hold ahead of FOMC
- Commodities still dealing with a stronger dollar.
- Mid-Caps take over leadership. Better economy?
- Fed to start its 2-day meeting, and its decision will tell us about the jobs report.
- Trying to find buys at this level, but not many want to lead the way with all of the news this week.
Earnings, M&A cannot trump FOMC.
Thank goodness there are more than a couple of financial stations to choose from these days. Investors getting their news this morning had to deal with an annoying CNBC habit the past year, the 'Buffet Brown Nose.' A couple of the young female journalists have cozied up to the old investor and he uses them to get immediate access for stories he wants to run about his investments and they use him to try and drum up ratings. What we get is a half hour of gushing and slobbering during prime time pre-market news. It is all under the guise of news about what a great investor is doing, but Buffet shunned this kind of exposure for years (even fought to avoid having to announce what he invested in) until he figured out it was a great way to influence positions he was already in. Some news, but more talk about what he wants to happen (couched in the 'I think this is going to happen' phrasing). He is no fool, so draw your conclusions as to what that makes the others. But I digress.
So Buffet likes candy. That was enough to get the indices to new rally sugar highs, but as is often the case with sugar induced runs, they crash when the sugar boost is gone. Stocks didn't crash, but they certainly could not hold their modest gains, at least not much of them. Earnings were decent though no spectacular.
TSN (chicken) reported it would spend an additional $600M this year on feed for its chickens. That is a story we are hearing over and over, and the subject of hot debate by some of our fearless leaders in D.C. Just heard one republican senator close to screaming that feed corn had nothing to do with price rises in food. Wow. Has he looked at what we feed our cattle and poultry? Has he asked any of his constituents why they are slaughtering their animals early and then pondered what that means for food prices later in the year? Instead he was adamantly stating that ethanol would help us get off OPEC oil. He needs to poll his electorate: do you care if we get oil from OPEC if it means you won't have $8/lb hamburger in the summer ALONG WITH $4+/gallon gasoline? In the near term most would prefer to have at least lower hamburger prices because we know gasoline isn't going to be lower. Yes we are showing OPEC is boss; buying a hardly measurable fraction less oil and pushing our meat prices through the roof. Way to go.
But I digress . . . for a second time already today. Earnings were okay but not enough to get anyone riled up. Oil tried $120 again, settling just below 119. Gasoline hit $3.60/gallon national average just as the Lundberg Survey said it would. The EU said the euro was overvalued and the 'good times' were over for the EU economy. Never got over 3% growth and the good times are over. Bummer. The dollar liked that and continued to firm; can't call it a surge, just not the tapioca consistency it had for the past two years.
Stocks started soft but quickly moved to rectify the weakness, rising from midmorning to mid-afternoon with a steady, solid climb. Some softness ahead of the last hour, but they hung on. There was light volume, however, and ahead of the FOMC meeting starting Tuesday there were not enough buyers to make the move stick. A quick 60 point drop in the last half hour took DJ30 negative, leaving NASDAQ and the small to mid-caps positive, but just barely. The gains ahead of that last decline were nothing on the NYSE indices anyway. NASDAQ was no great shakes either, but it did have a better intraday gain it squandered.
TECHNICALLY the action was middle of the road, quite apparent by the close. Flat open to then post gains looked promising, but there was never any power behind the move as volume lagged all session. There was no new ground broken and without any volume it faded to flat. No power.
INTERNALS: Modestly positive on breadth but lackluster (1.4:1, 1.2:1 NASDAQ). Volume was significantly lower, falling below average on NASDAQ for a second session while NSYE trade continued to languish below that key level. Given the session and the late surrender of the gains, low volume is okay volume.
CHARTS: Not much to show here as the indices held steady, giving back modest intraday gains that saw SP500, after clearing the February peak on Friday, stall at 1400. It has joined NASDAQ and DJ30 with its move over the February peaks, but it did not show any power on the move, and it could very well come back a bit more ahead of the FOMC decision at 2:15ET on Wednesday.
LEADERSHIP: Commodities were dealing with a stronger dollar once more though the results were mixed even within these sectors. Ag was hit across the board while energy and metals traded on both sides of the flat line. Large cap techs were decent but as with most sectors could not hold all of the gains. Transports were up once more leading the entire pack. Outside of these same old, same old leaders, the market is still waiting for the next group to show it wants to join in and lead higher. Mid-Caps have answered the call to a certain extent already, rising faster than SP500 and posting a good breakout to end last week. While not small caps, mid-caps are also typically associated with the US economy and its gains and losses. This break higher by the mid-caps is bolstering the moves by NASDAQ and DJ30. Ahead of the FOMC the leadership is pausing; we will see what emerges next to lead and that we can buy into.
THE ECONOMY
Not much on the economic front on Monday other than the usual: oil flirts again with $120/bbl; dollar firmed a bit more; food prices continue to rise; Fed ready to meet.
All of these items are interestingly related yet not. The Fed said about 4 months ago that was going to start looking at food and energy costs as part of its inflation watch. We all know energy prices continue to rise and that food has shot higher, helped along by the decision to tie food to fuel with the ethanol folly. Thus the Fed is watching these areas as part of inflation, but it cannot do anything about them outside of sending the US economy into deep recession and severely truncating our need for oil and gas. Of course with the rest of the world economies still sucking up all the oil they can, the impact would not knock oil back down to $60/bbl, not even close.
Nonetheless, the Fed's concerns about food and energy has many worried the Fed is going to take a hard line in this week's statement regarding rate cuts. It can cut 25BP or even pause without causing much damage to the market. What it says about inflation, however, is going to be important to investors. If the Fed suddenly switches from major liquidity provider and financial backstop of the world to inflation harpies, that will scare the markets.
There is a modest recovery ongoing in the stock market and the dollar, and bond yields have firmed. Anticipation of a tougher Fed is partly behind that, but the big turn occurred when the Fed changed its MO for fighting the problem as we noted in the weekend report. The Fed hit upon the means to inject liquidity where needed without flooding the entire economy with more cheap money. If the Fed gets too hawkish the result will be a backlash, and the Fed has worked too hard and somewhat cleverly to risk that with some errant words about inflation.
Another thing to consider, albeit it will be on Wednesday afternoon, is that the Fed will have the jobs data in its hands when it issues its decision and statement. We can forecast the report by just how harsh the Fed is on inflation, its assessment of economic strength, and the debate among the FOMC members as to the course of action (though we won't know much about this from the statement, just a tally of dissenters).
THE MARKET
MARKET SENTIMENT
VIX: 19.64; +0.05
VXN: 23.65; +0.31
VXO: 19.79; -0.73
Put/Call Ratio (CBOE): 0.98; +0.08
Bulls: 39.1%. Up significantly this time, rising above last week's 37.8% where it held for a few weeks. Has now crossed back above bears, the usual positioning of the two. Fell to 30.9% in mid-March. The indicator did its job with the dive below 35% and the crossover with the 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: 35.6%. Sharp decline as the market makes a rally attempt stick for now, up from 38.9% last week and 38.5% and 37.5% the week before. 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: +1.47 points (+0.06%) to close at 2424.4
Volume: 1.754B (-12.23%). Lightest volume in a week as NASDAQ tried higher but had nothing to push it. Just resting ahead of the FOMC after a good, high volume breakout Thursday. No issues with that.
Up Volume: 898.421M (+13.709M)
Down Volume: 813.609M (-285.255M)
A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.29 to 1
New Highs: 30 (+12)
New Lows: 48 (+14)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Tried to extend last week's break over the February peak, but without the volume to push it the techs slipped back to close flat, holding a nice lateral move the past couple of sessions. NASDAQ bounced up off the lows Friday, bounced down from the highs Monday, but it did both on lower volume and that keeps it above the resistance it just broke and setting up for a new break higher up toward 2520ish.
NASDAQ 100 (+0.24%) rallied as well but then slipped back to a modest gain by the close. Lower trade, still in the two-day lateral rest stop after the Thursday follow through to the prior breakout early last week. Still solid but also already up near the 200 day SMA given the leadership the large cap techs are demonstrating.
SOX (-0.22%) is pausing as well these past two sessions after its own breakout last week, a strong week for the chips after a series of failed attempts. It has room to move sideways for a session or two more and then break higher to take on resistance at 400 (closed at 390).
SP500/NYSE
Stats: -0.87 points (-0.22%) to close at 1396.37
NYSE Volume: 1.209B (-5.57%). Lowest trade in a week as the NYSE indices stalled out (at least the large caps) after the break higher to end last week. Small caps and mid-caps moved higher, though the light volume indicates no heavy buying going in.
Up Volume: 624.502M (-246.874M)
Down Volume: 570.906M (+175.943M)
A/D and Hi/Lo: Advancers led 1.37 to 1
Previous Session: Advancers led 1.65 to 1
New Highs: 34 (-3)
New Lows: 12 (+2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
After clearing the February peak last Friday on the close (1396), SP500 hung on for dear life Monday, barely maintaining the break on very low volume. The break was on low volume as well so this back and forth is not surprising; it has yet to show the same conviction of NASDAQ, DJ30 or the SP400 mid-caps. It is very well positioned to move higher, however, and a bit of lateral movement if just find until it gets another catalyst from say the FOMC and economic data. Many are saying it is setting up to fail once more, and thus a modest fade is not bad as it will scare a lot into selling. That will provide a catalyst once those near term sellers get out.
The small caps were in the lead Monday (+0.56%) even topping the mid-caps and their stealth rally the past week. That moved the small caps right up to the February peak, crossing that intraday before fading back modestly. A four day upside move by the small caps but on no volume. Would not be surprised to see a bit of retrenching here for a couple of sessions (FOMC meeting is 2 days long) and then make the try once more.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips moved higher, could not take out the Thursday high, then faded back to basically flat. Low volume, narrow range, flat close. Comatose on the session, and that is not necessarily a bad thing given all that is coming down the pike. Broke out two Fridays back, moved laterally waiting for the rest of the market, then broke higher Thursday and Friday. Has yet to show more volume on this latter part of the move, but with another couple of days of lateral moves waiting on the Fed that will get the worries up again as with SP500, and that will help shakeout and set the stage for another try higher.
Stats: -20.11 points (-0.16%) to close at 12871.75
Volume: 222M shares Monday versus 240M shares Friday. Still light trade, waiting for the next catalyst to bring in some above average volume on the upside.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
The Fed starts its 2-day FOMC meeting, and that means we likely get more of the same on Tuesday as we saw Monday while waiting for the meeting to start. So we wait for the meeting to start and then we wait while the meeting works through its two days. Some rallying ahead of the announcement to cover and get square, then the news. Of course this week we then have the jobs report on Friday, so the Fed on Wednesday is not the end all.
Of course as noted above, the Fed will have all of the week's data in its hands as it reviews its policy, and thus what it says Wednesday foreshadows what we will all see on Friday. If rates are flat or cut BP with little dissent we can assume that the economic data is not that bad. Problem is, if there is an economic recovery underway, it has not showed itself in the data yet, and with the market just of late coming off the lows, it is still too early for that data to turn around. The jobs report lags everything else anyway; if it does pick up it is an aberration at this juncture. We are not expecting it to show anything special to the upside, and if it is there it has to be discounted and it will after maybe some initial euphoria.
As noted, the market is just trying to scratch its way out of a bear market selloff. It will either make it and thus make this a very shallow recession, or the leadership will fall apart and the move will follow the . . . leaders, indicating there is more economic downside to come. At this juncture the market action is still the key; it is always the key. The economic data lags the market and thus far the data has not turned positive though the market is posting gains off the January and March lows. It is possible that the economic news is so unexpectedly bad that it derails the rebound attempt, but with the kind of solid leadership we have seen thus far we will get plenty of notice from them if the economy is falling back into shambles rather than 'de-shamblizing.'
Ahead of the Fed we could see more of the Monday action, i.e. slow, somewhat cautious trade as the market waits on the next policy word from the Fed. The dollar has found a bottom along with stocks and gold has hit a top based on what the Fed did in March and the market's perception of what the Fed needs to do now, i.e. slow down on the cuts and do what it has been doing to keep liquidity where it is needed versus flooding the market with rate cut liquidity.
We will watch the cautious trade and see what leaders continue to form up well and others that continue to test their moves and whether they are showing nice low volume pullbacks we can look at as opportunity for more positions when the Fed and the economic data have run their course. The commodities and ag are still trying to swallow a stronger dollar. Some metals look great, some are selling; somewhat bifurcated, and that speaks to some weakness in itself though most are holding up just fine. Ag was under higher volume pressure Monday . . . again. When the market rallied Thursday it was down on the POT numbers. If it cannot hold the line where it closed Thursday and Monday (sandwiching a Friday rebound), it is heading lower and we will close those positions and see where they land. We will also have to watch if any others are dragged down in the backwash; these three areas were early leaders and as the dollar strengthens and money moves out to the hinterlands we may see further weakness. That means even if they sell others benefitting from an improving dollar can step in. They will need to if these Big Three fall as those three groups have held the market together to this point.
Support and Resistance
NASDAQ: Closed at 2424.40
Resistance:
2451 is the August closing low
Some modest resistance at 2500 from interim August lows.
The 200 day SMA at 2529
2598 is an old trendline from summer 2004/summer 2005
Support:
2419 is the January 2008 peak and the early February peak
2392 is the April 2008 peak
2386 is the August intraday low
2379 from the October 2006 peak
2378 is the mid-February peak
The 90 day SMA at 2375
2370 from the April 2006 peak
The 50 day EMA at 2350
2340 from the March 2007 low
2298 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 1396.37
Resistance:
1406 is the August and November 2007 closing low
1421 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 1436
Support:
1396 is the February 2008 peak
1387 is the April 2008 intraday high
The 90 day SMA at 1367
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
The 50 day EMA at 1360
1327 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 12,871.75
Resistance:
The 200 day SMA at 13,070
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:
12,845 is the August closing low
12,786 is the February 2007 peak
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 50 day EMA at 12,547
The 90 day SMA at 12,540
12,518 is the August intraday low
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 29
Consumer Confidence, April (10:00): 61.0 expected, 64.5 prior
April 30
ADP Employment, April (8:15): -60K expected, 8K prior
Q1 GDP first read (8:30): 0.5% expected, 0.6% prior
Chain deflator (8:30): 3.0% expected, 2.4% prior
Employment cost index, Q1 (8:30): 0.8% expected, 0.8% prior
Chicago PMI, April (9:45): 47.5 expected, 48.2 prior
Crude oil inventories (10:30): 2.4M prior
FOMC policy statement (2:15): Futures say a 25BP rate cut. Key will be in how inflation hawkish the Fed is.
May 1
Initial jobless claims (8:30): 360K expected, 342K prior
Personal income, March (8:30): 0.4% expected, 0.5% prior
Personal spending, March (8:30): 0.2% expected, 0.1% prior
PCE core inflation, March (8:30): 0.1% expected, 0.1% prior
Construction spending, March, (10:00): -0.7% expected, -0.3% prior
ISM Index, April (10:00): 48.0 expected, 48.6 prior
May 2
Non-farm payrolls, April (8:30): -75K expected, -80K prior
Unemployment rate, April (8:30): 5.2% expected, 5.1% prior
Average workweek, April (8:30): 33.7 expected, 33.8 prior
Hourly earnings, April (8:30): 0.3% expected, 0.3% prior
Factory orders, March (10:00): 0.2% expected, -1.3% prior
End part 1 of 3
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world stock market
us stock market
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