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money investment, investment help
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5/01/08 Technical Traders Report Update
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MARKET ALERTS
Targets hit alerts: CTRP
Buy alerts: ACL; ATK; AXP; BBD; BRCM; JRJC; MSCC; PCLN
Trailing stops: BUCY; FCX; ICO; KWK; PQ
Stop alerts issued: APC; FSLR; SLB
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:
- New money decides it likes the Fed action.
- Dollar rebounds, gold dives. You wanted confirmation, and this is giving it.
- Exxon and other energy companies, fearing more congressional heat, trot out some weaker results.
- ISM falls at a slower rate. Break out the domestic bubbly? (have to; champagne costs too much thanks to the weak dollar)
- Jobless claims jump right back up, indicating no joy for Friday jobs report
Rational thinking takes over, market rallies after Fed move.
Of course we discussed it last night, the debate over whether the Fed was not tough enough and thus led to the afternoon selloff in the dollar and equities. With gold diving that afternoon and given it was month-end we did not buy into it. Thus when stocks shot higher Thursday we were all into patting our own backs about what prescience we had. Of course it was also the start of a new month and money was being shoved into the market, but let's not cloud the gloating with facts.
After the Wednesday weakness post-FOMC, however, investors slept on it and had a change of heart. Futures were up early. They managed to hold up decently, at least in tech, even after XOM missed its earnings and the economic data was not all that positive. Personal income was a tenth lower than expected while spending was two-tenths higher. The core PCE was a bit hotter, and jobless claims jumped 35K to 380K, well over the 360K expected. The market started mixed, but that was it. Straight up through lunch, a lateral move in the afternoon, then a move higher to the close.
The dollar rallied, gold dove lower again (853.70, -11.40), bond yields rose (2.37% 2 year, 3.76% 10 year), commodities were beaten up (at least early in the session), and the 'anti-weak dollar' stocks rose. All indicia that the market, after some thought, liked what the Fed did: it has used innovative means to inject liquidity and has backed off on rate cuts, starting with the 75BP two meetings back instead of the 100BP expected. It has basically said it is done with the rate cuts and is going to use its facilities to inject whatever money is needed. Cool. Dollar likes it, bonds can deal with it, and stocks seemed to love it.
TECHNICAL. Yes there is no doubt some new, first of the month money was going to work and driving stocks higher, but when you look at where it was going it was simply following a pattern, particularly as it moved into technology. Stocks started higher and rallied all session, stalling late in the day on the NYSE indices, but not giving any ground. NASDAQ rallied on to highs at the close; plenty of positive action. You could even say it surged.
INTERNALS: Sold 2:1 breadth on both NYSE and NASDAQ. Volume jumped on NASDAQ, trumping the higher Wednesday selling volume, just about the clearest indication of serious buyers moving into the market. Of course, NYSE volume lagged NASDAQ, unable to top average. Always some tarnish on these moves, never the pure power we were discussing and lamenting somewhat last night.
CHARTS: Some big moves higher with NASDAQ putting some serious distance on the February peak and now looking at some resistance at 2500 on up to the 200 day SMA. SP500 finally put the 1400 and 1406 level behind it with a solid point gain. Again, that volume did not follow so . . . the financial laden large cap index still has something to prove. DJ30 came right up to the 200 day SMA and there it may pause; a lot depends upon what INTC, MSFT, and HPQ do from here as tech looks strong. And last but not least, SP600 cleared the early February peak; the last to do it and coming along almost grudgingly, but make the move nonetheless.
LEADERSHIP: Technology came on strong once more, particularly the large caps; nothing different there as AAPL, RIMM, INTC made good moves. Commodities were refried beans in the morning, but then, even as the dollar remained stronger, they turned around and surged back up to recapture the losses. It was an impressive turnaround in itself, but even more so with the dollar. Could it be that these leaders are going to rally even with a stronger dollar because there could be an economic recovery on the way and that there will thus still be demand, weaker dollar or no? Definitely possible; that recovery was not chopped liver. The overall action in leadership from tech to transports to the recovery by the Big 3 is pretty impressive.
THE ECONOMY
Energy sandbagging?
XOM reported $11B in revenues but that disappointed a crowd that was expecting Exxon to really pound earnings. APA in the natural gas arena managed to missed. Maybe just some issues with refining for Exxon that dragged earnings a bit? Maybe, but once more there is a lot of talk, this time election year talk, about taxing oil company profits to pay for just about anything from alternative energy research to healthcare. You always have to wonder who is going to do that 'research' the money is earmarked for. If it is like all the other government managed programs, let me in on it. I can probably pick up a few hundred thousand with a hypothesis and a few pages of BS describing what I am going to research. Then it is off to Australia for a few brews down under.
In any event it sure seems strange that when good companies in booming sectors disappoint. Exxon remembers when it reported the strongest quarter ever reported in the history of the world and it was suddenly the punching bag for every presidential wannabe simply because it had good management and grew large and profitable. It cannot hid its earnings, but it was able to underachieve as far as the expectations game, and maybe deflected some flak as it 'missed'. Of course, $11B is $11B, and when you have some in Congress who forget we used to have some pretty strong protections in our Constitution about Due Process for taking of property they don't really care if you hit or missed what Wall Street may have expected.
ISM manufacturing puts in a better but still weak showing.
Many looked at the jump in the jobless claims (380K) and saw that as the most telling piece of economic news as it gives something of an indication as to what the Friday jobs report will bring. So what? The jobs market is still weak and it won't be getting any stronger until some of this other economic data improves. Jobs lag. They get better after everything else. If it is stronger on Friday you have to wonder just how accurate the numbers are.
Thus we looked at the ISM as the more important data point. It was a bit getter than expected at 48.6 (versus 48.0), matching March. Maybe an attempt at bottoming is in process; two consecutive 48.6 readings, up from 48.3 in February after a 50.7 reading in January that moved it back above the breakeven point. Orders were flat as well (46.5) but production was up to 49.1, deliveries rose to 54.0, export orders were up again, and inventories rose to 48.1. That last data point can be a head fake: inventories rise when business slows. ON the other hand employment tanked to 45.4 from 49.2 and prices paid continued their climb, coming in at 84.5 versus 83.5 in March.
What the last five months show is a manufacturing sector that continues to shrink, but it is doing so at a slower and slower pace with just a 3 point range over the past seven months. Definitely slowing the decline but not an indication of a turn at this juncture.
THE MARKET
MARKET SENTIMENT
VIX: 18.88; -1.91
VXN: 22.72; -1.69
VXO: 19.33; -1.83
Put/Call Ratio (CBOE): 0.94; 0
Bulls versus Bears:
This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.
Bulls: 40.9%. The rally is having its impact, pushing bulls higher, up from 39.1% last week and 37.8% where it held for a few weeks. Crossed back above bears last week, the usual positioning of the two. Fell to 30.9% in mid-March as the low. 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: 31.8%. Bears are tailing off quickly, down from 35.6% the prior week and 38.9% 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: +67.91 points (+2.81%) to close at 2480.71
Volume: 2.361B (+12.31%). Nice above average volume as NASDAQ broke higher.
Up Volume: 1.907B (+1.079B)
Down Volume: 440.983M (-845.181M)
A/D and Hi/Lo: Advancers led 2.14 to 1
Previous Session: Decliners led 1.02 to 1
New Highs: 68 (+54)
New Lows: 87 (+37)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Surged on volume putting distance on the February high. Some minor resistance at 2500 from some August 2007 lows and then the 200 day SMA at 2524. Excellent breakout by the techs continues, showing great volume as it does. Flashed good volume on the break higher one week back as well, and that says accumulation continues in the techs.
NASDAQ 100 (3.27%) cleared the 200 day SMA, the first to do so outside the SP400 mid-caps. Powerful move lead by the biggest tech names. Resistance starts at this level but is thicker just over 2000 on up to 2050. When it gets to 2000 it will likely slow again given the psychological resistance as well as the price resistance from the November consolidation range and the December mid-month low.
SOX (+3.93%) surged back up off the 10 day EMA test, surging up to next resistance at 402, but looking very strong for a move up to the 200 day SMA near 424.
SP500/NYSE
Stats: +23.75 points (+1.71%) to close at 1409.34
NYSE Volume: 1.399B (-2.98%). Volume again remained disappointing, coming in lower and below average as SP500 and the NYSE indices broke higher once more. Not the power we talked about Wednesday.
Up Volume: 1.072B (+432.215M)
Down Volume: 321.355M (-467.137M)
A/D and Hi/Lo: Advancers led 2.37 to 1
Previous Session: Advancers led 1.12 to 1
New Highs: 72 (+55)
New Lows: 77 (+64)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Tested the 10 day EMA the prior three days then surged higher off that near support and putting the February high to rest. It also topped 1406-07 that is some resistance many were watching closely. Financials were up and that pushed the large cap index higher, but it still lacked the strength you want to see on this kind of move, and even with NASDAQ showing strength, the importance of the financials makes this move still suspect.
SP600 (+1.70%) cleared the February peak and held it on the close. It also surpassed the November low, putting some icing on the cake. That clears the way for a run to 390ish and perhaps to the 200 day SMA at 395. As with SP500, nice but not powerful as the economically sensitive small caps continue playing tag along.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips rallied again, this time holding the ground it gave back Wednesday afternoon. It closed in on the key 200 day SMA (13,053), but we note that the 200 day did not slow down NASDAQ at all. If MSFT, INTC, IBM, and HPQ continue their tech move and the financials (JPM, C) continue their move, DJ30 can handle the 200 day. Its tech components had the volume; all of it. Overall DJ30 volume was lower as the rest of the market moves up, but again is not showing the power you want to see to be convinced the move really is a new bull run versus a solid bear market rally in an overall troubled market.
Stats: +189.87 points (+1.48%) to close at 13010
Volume: 245M shares Thursday versus 255M shares Wednesday. Still cannot garner the heavy buying it needed.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
What you hear on many of the financial stations (can say 'many' now given Fox has its own, but man, it is just a bit too chummy, too much like a coffee break for me) this evening: big rally . . blah blah blah . . . jobs report . . . blah blah blah . . . big rally . . . jobs report . . . blah blah blah. You get the picture; just don't use the same to describe this report.
Yes it is finally Friday and we will finally get to the next jobs report. Last time we checked expectations were for a 75K decline on top of the -80K in March. It likely won't surprise to the upside by much if at all. The weekly jobs figures pretty much insure that. Even if they are higher the market might get excited and drive some of our positions higher and we can take some gain, but that won't last because any strength is likely illusory given the continuing weakness in all of the other more forward, leading indicators.
We will also see if any of the other sectors can get some volume other than technology. Heading into this next leg that started Thursday techs can lead but they will need some help at some point. Growth looks pretty darn good here and transports continue higher. That combination does not usually occur with a dying economy. Financials are moving again and providing support, but as noted, it is not high volume support so you just cannot rely on it yet.
Thus for now we are still looking more towards tech and similar growth areas given they are getting the heavy dollars. And, we will not forget about the Big 3; we were intrigued here in the office Thursday as they fought back on some good trade. Interesting.
As for Friday, yes we will continue to look for buying opportunities, but we had a good rip higher and we were buying as the move set up and the leaders started higher for us. Thus we will look and if we see something good we will leap. On another rip higher, however, we will also take some gain on positions that have put in solid moves over the past week and will be looking for some rest. Particularly true of our options plays; after a good surge the options are all pumped up with volatility and we can sell part and bank a solid gain, then look for opportunity again.
Support and Resistance
NASDAQ: Closed at 2480.71
Resistance:
Some modest resistance at 2500 from interim August lows.
The 200 day SMA at 2525
2599 is an old trendline from summer 2004/summer 2005
Support:
2451 is the August closing low
2419 is the January 2008 peak and the early February peak
The 10 day EMA at 2415
2392 is the April 2008 peak
2386 is the August intraday low
2379 from the October 2006 peak
2378 is the mid-February peak
2370 from the April 2006 peak
The 90 day SMA at 2368
The 50 day EMA at 2360
2340 from the March 2007 low
2299 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 1409.34
Resistance:
1422 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 1433
Support:
1406 is the August and November 2007 closing low
1396 is the February 2008 peak
1387 is the April 2008 intraday high
1388 is the 10 day EMA
The 90 day SMA at 1365
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
The 50 day EMA at 1364
1330 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 13,010.00
Resistance:
The 200 day SMA at 13,054
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
The 10 day EMA at 12,819
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 12,585
The 90 day SMA at 12,528
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): 62.3 actual, 61.0 expected, 65.9 prior (revised from 64.5)
April 30
ADP Employment, April (8:15): +10K actual versus -60K expected, 3K prior (revised from 8K)
Q1 GDP first read (8:30): 0.6% actual versus 0.5% expected, 0.6% prior
Chain deflator (8:30): 2.6% actual versus 3.0% expected, 2.4% prior
Employment cost index, Q1 (8:30): 0.7% actual versus 0.8% expected, 0.8% prior
Chicago PMI, April (9:45): 48.3 actual versus 47.5 expected, 48.2 prior
Crude oil inventories (10:30): +3.8M, 2.4M prior
FOMC policy statement (2:15): 25BP cut in FF rate (2%) and Discount rate.
May 1
Initial jobless claims (8:30): 380K actual versus 360K expected, 345K prior (revised from 342K)
Personal income, March (8:30): 0.3% actual versus 0.4% expected, 0.4% prior (revised from 0.5%)
Personal spending, March (8:30): 0.4% actual versus 0.2% expected, 0.1% prior
PCE core inflation, March (8:30): 0.2% actual versus 0.1% expected, 0.1% prior
Construction spending, March, (10:00): -1.1% actual versus -0.7% expected, +0.4% prior (revised from -0.3%)
ISM Index, April (10:00): 48.6 actual versus 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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