|
|
us stock market, trade stock
* * * *
6/03/08 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: ACI
Buy alerts: BTU; DNR; SGR; TTES
Trailing stops: BHI; CSX; WFT
Stop alerts: BMRN
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/alertssr.html
SUMMARY:
- Bernanke backs the dollar, but another day of credit worries takes precedence, sinks stocks.
- Split market: NYSE large caps slumping even as growth conditions improve.
- Bernanke covers the waterfront, zeros in on the dollar for the first time.
- Large caps threaten to take the market back down while small and mid-caps show relative strength. Getting to be decision time.
And credit worries trump yet again.
Stocks bounced early, adding onto the late Monday rebound attempt after stocks sold to start the week on the return of credit worries. Bernanke spoke and covered the waterfront, but in particular he expressly discussed the dollar and the impact the Fed's actions on the currency. Given the Fed has left the dollar as an unmentionable, the fact that he addressed its decline, the reasons therefore, and its impact on inflation, it was taken as an important shift in policy regard the greenback whether or not the Bush administration thinks it is.
That focus helped the dollar surge. It ripped into oil as it continued to slump (124.36, -3.40), now starting to test its up trendline. Gold gapped lower (883.70, -13.30), making another lower high as it struggles with its breakdown. On top of that, April factory orders jumped 1.1% versus the 0.1% decline anticipated. All positives that helped the market rebound from the Monday drubbing. Not a big move, but a rebound.
The market moved modestly higher through lunch, then tested the move, still holding positive. Then a new LEH rumor hit, this time more than the 'need to raise cash' rumor. It was said to be at the discount window, pawning off junk on the Fed for good currency. Credit fears back to front and center. For the second session those fears arose and they took the market down . . . hard. Another late afternoon rebound when the LEH rumors were rebutted, but a run at positive fell just shy and the bounce wavered then wandered a bit lower to close.
The market had a hard time finding leadership as energy stocks struggled after being up early as oil slumped and continued to sell all session. Financials were of course a drag and that left the entire NYSE large cap contingent lower once more. Ag was back up and the small to mid-caps as well as SOX and techs held up well to decent. Basically we have a split market here with the NYSE large caps dogging it in the early dog days of summer while the growth contingents continue to look pretty darn solid. Nonetheless, a split market is a market that finds a hard time moving higher, and this large cap decline, led by DJ30, threatens to drag the rest of the rally down with it.
TECHNICAL. Started modestly higher then sold off hard and a rebound in the last half of the afternoon session failed to turn anything positive other than the mid-cap index. Typical action on weak sessions.
INTERNALS. Breadth was just modestly lower (-1.5:1 NYSE) but volume was up on both NASDAQ and NYSE, moving above average on both. Distribution cropping up again after remaining at bay for over a week what with the rebound move to the upside last week. Distribution showed up during that mid-May selling, the first significant in the rally. It was not much, but now it has friends. Still not the death of the move higher, but it shows that some big investors are dropping their stock holdings as summer starts. We have been doing that some as well.
CHARTS: DJ30 continues lower, making a lower low following its lower high. It is in full retreat, falling through 12,500 support. SP500 is no picture of strength as it hangs on at 1375, but has made a lower high and has a near term head and shoulders set up. NASDAQ held the 18 day EMA, keeping a higher low hope alive, but it still is dealing with the early May peak and a potential head and shoulders of its own. NASDAQ 100 is not bad, SP600 remains with a higher low, and the mid-caps, the lone positive finish of the day, are trying a higher low at the 18 day EMA as well. The growth areas are moving nicely, but they have a lot of baggage with the large cap NYSE stocks.
LEADERSHIP: Energy, metals and commodities in general struggled on the rising dollar. They have struggled the past week but there is strength and weakness in the same sectors. Metals and commodities struggled as well. Agriculture rode again, back in the saddle after a six-week hiatus. The small and mid-caps and many techs, while not surging, held up well, trying to offset the NYSE laggards as growth areas continue the attempt to hold up and set up for further upside moves.
THE ECONOMY
If the administration won't help the dollar, the Fed will try.
The Fed's mandate is to promote the fastest economic growth while maintaining price stability. Something along those lines but you get the gist. So how does Bernanke get to the point of actually talking up the dollar? Because of inflation. As we have discussed probably too frequently for most readers the past year, the fall in the dollar makes import prices more expensive. Yes exports help a part of the economy, but not most of it. In any event, exports are not offsetting the drag on the economy that rising oil, commodities, and even day to day goods are causing. As the dollar falls our dollars buy less and less of the same barrel of oil. We are importing inflation.
Tuesday Bernanke directly acknowledged that. He detailed the entire string of events. The Fed's actions in reducing the Fed Funds rate pressured the dollar and sent it lower. That decline raised effective prices on US citizens as it takes more dollars to buy the same number of goods. More currency chasing the same number of goods; textbook inflation. Bernanke went further than just providing us an economics lesson in how currency fluctuations relate to inflation. He said the Fed would mind its dual mandate and it was very cognizant of the impact of the lower dollar. Bernanke did not come flat out and say the Fed was going to work with Treasury to support the dollar, but he took the issue head on, and that in itself was something the Fed and the administration had refused to do.
That straight talk about the issue spoke volumes to investors. The dollar jumped and oil tanked. Gold continued to sell off. A stronger dollar buys more oil than yesterday, and gold selling off indicates inflation is not the issue many make it out to be. Indeed, by talking about the import of a strong dollar and moving the currency higher the Fed is actively working against the inflation we import each month.
The reaction to the Fed even addressing the dollar after ignoring it for several years shows just how powerful the trade against the dollar is. Until recently it has been an automatic short for many currency traders as it was (and is) evident that the Bush administration actually liked the weak dollar so the big multinationals could sell more goods overseas and give the economy the look of strength even though here at home businesses and citizens get little benefit from that trade. Our dollars buy less of the same as we experience inflation thanks to the dollar. Again, the tradeoff between export gains and inflation losses here is hardly an equitable trade to most US citizens and companies.
Now if the administration would do anything to support the dollar other than the dogma about believing in a strong dollar set by market forces, an explosion in the greenback would occur (as opposed to an implosion). That would reinvigorate the US citizenship at a time when it is really needed as gasoline, natural gas, food, and other prices spiral higher. Hello, Mr. lame duck President? Please do the right thing before you leave office and let Treasury Secretary Paulson take real action on the dollar.
THE MARKET
MARKET SENTIMENT
VIX made a higher low and has rebounded to the 50 day EMA where it failed on the last move. It has started a modest climb off the lows, holding the gains made two weeks back. If the selling continues it will of course continue higher. VIX is still well above the lows hit before the last part of the 2007 run started to churn VIX higher. This underscores the fallacy of the argument about VIX being too low, etc. VIX climbed in the last part of the rally before this bear correction, and that is contrary to what those saying VIX is too low now are arguing. That is because at the end of a run upside, volatility climbs.
During this move higher since March, volatility has declined as it should when the market rallies. It has recently started to bounce, but not because the market is rising, because it is falling. Again, that is normal. Thus we are not stressing over what VIX is doing right now as we have had a selloff after the climb in volatility and that 're-set' volatility readings.
VIX: 20.24; +0.41
VXN: 23.89; +1.01
VXO: 20.74; +0.73
Put/Call Ratio (CBOE): 1.14; +0.05. Second straight session over 1.0 on the close after a drought for a few weeks. Continues showing that anxiety returning to the market as DJ30 stumbles and SP500 struggles as well.
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: 37.9%. Have to love this drop. Over the weekend we discussed how there was a lot of pessimism relating to this rally and its longevity, and this nearly 10 point weekly decline is an indication that the bulls remain very skeptical, and that is always good for the market. Down from 47.3% last week and 46.0% the prior week. A continuing rise from 44.4%, 40.9%, 39.1% and 37.8% where it held for a few weeks. 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: 32.2%. Continued the gains from the prior week though not in the dramatic fashion of the bulls. Up from 30.8% last week and 29.9% the prior week. That makes three of the last four weeks to the upside for bears. 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: -11.05 points (-0.44%) to close at 2480.48
Volume: 2.145B (+9.44%). Volume back above average and the highest in three weeks as NASDAQ struggled to hang onto the 18 day EMA on the close.
Up Volume: 772.718M (+299.436M)
Down Volume: 1.438B (-36.474M)
A/D and Hi/Lo: Decliners led 1.32 to 1
Previous Session: Decliners led 2.28 to 1
New Highs: 70 (-3)
New Lows: 117 (-19)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher, rallied up to the 200 day SMA (2514) on the high, looking solid, and then the reversal. Undercut the 18 day EMA intraday then rebounded to hold that level on the close. Lower high, trying to hold and make a higher low at the 18 day EMA and below the 200 day SMA. This is where the silicon hits the road.
NASDAQ 100 held the 18 day EMA on the close as well, trying also to make a higher low to take on 2050 resistance. It is above its 200 day SMA but has to take out that mid-May high to keep the trend higher in tact.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -8.02 points (-0.58%) to close at 1377.65
NYSE Volume: 1.318B (+13.05%). NYSE volume just cracked above average as the NYSE indices posted modest to moderate losses. Distribution session for this exchange as well, its first since the rebound last week. It suffered two distribution sessions in the prior selling; not out of hand yet but with the weaker pattern it not a positive for the upside.
Up Volume: 520.002M (+251.723M)
Down Volume: 790.21M (-87.012M)
A/D and Hi/Lo: Decliners led 1.53 to 1
Previous Session: Decliners led 2.25 to 1
New Highs: 75 (+16)
New Lows: 87 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Having to drag the financials around puts a strain on SP500. It fell below the 50 day EMA on the close on rising, slightly above average volume. It bounced back off the lows to hold the late May low at 1375. A modest positive as the pattern, noted above, is a head and shoulders the past 5 weeks with a lower right shoulder. With the financials still selling, SP500 has a tough road to hoe.
SP600 (-0.24%) as with NASDAQ and NASDAQ 100, held the 18 day EMA (tapped it on the low) and rebounded to close just below the May peak. SP600 is just below its 200 day SMA and still in an ascending trendline. The small and mid-caps continue to maintain bullish price patterns, using the market weakness to modestly retrench. It is a duel with the large caps and thus far the small and mid-caps are holding their own.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Heading lower again and on rising, average trade. DJ30 broke 12,500 support and is heading for the next at 12,250 where it bottomed mid-April. Quite the rounded top with a left shoulder the first two weeks of April and the right shoulder to end May and start June. Dragging the financials around is a tough business and the Dow is heading lower to next support. The issue is what happens with the other indices.
Stats: -100.97 points (-0.81%) to close at 12402.85
Volume: 227M shares Tuesday versus 199M shares Monday. Breaking lower on rising volume is never a good act.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
The economic data continues to perform better than expected what with the ISM beating expectations and just missing 50, factory orders totally crushing expectations, oil falling, gold falling, interest rates rising. The data does not slow Wednesday with ADP employment, productivity, ISM services, and crude oil inventories. All of that is important of course, not the least of which is crude inventories. What has wracked the market this week, however, are the credit issues. Can the market move higher if the credit issues abate? The growth indices appear willing, but with the large cap NYSE indices selling, they are under pressure as well. They are holding the line, however, and given the weakness in the large caps, that is a pretty solid showing.
In the final analysis, however, they need the large cap indices rowing with them because as the market shows time and again, it has a hard time when divided. Thus while the small and mid-cap indices still look solid, we have been protective with positions, closing those that start to struggle in order to preserve gain; we can always get back in if they hold and resume their moves.
Given there are still many stocks in solid position to move higher we are not closing the book on looking at new positions and buying into them if they put together good moves. Definitely time to look for the best moves given the split in the market. After this pullback on the renewed credit fears if they subside the small and mid-caps as well as most techs are in position to make a renewed break higher; that is the beauty of holding up well as the overall market sells.
So we will continue to protect positions as warranted while at the same time watching for the strength in the small caps, mid-caps, and techs to turn into a new run higher. If that occurs we will be ready to add more positions.
Support and Resistance
NASDAQ: Closed at 2480.48
Resistance:
2500 from interim August lows.
The 200 day SMA at 2514
2540 from November 2007 low
2552 is the May high
2576 represents a range of interim peaks and troughs from May 2007 into December 2007. At least 8 in that period.
2618 from a June 2207 peak.
2624 is an old trendline from summer 2004/summer 2005
2668 to 2673 from November/December 2007 interim peaks
2720 (July 2007 peak), 2724 (December 2007 peak) are key resistance points
Support:
The 18 day EMA at 2479
March 2008 trendline at 2461
2451 is the August closing low
The 50 day EMA at 2433
2419 is the January 2008 peak and the early February peak
2392 is the April 2008 peak
2386 is the August intraday low
2378 is the mid-February peak; 2379 from the October 2006 peak
2370 from the April 2006 peak
The 90 day SMA at 2362
2340 from the March 2007 low
2315 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
S&P 500: Closed at 1377.65
Resistance:
The 50 day EMA at 1385
1387 is the April 2008 intraday high
The 10 day EMA at 1392
The 18 day EMA at 1394
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
The 200 day SMA at 1425
1432 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
1446 from the December low
1460 is the February 2007 peak
1481 represents several peaks and lows ranging from April 2007
Support:
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 90 day SMA at 1362
1339 is an ancient trendline
Dow: Closed at 12,402.85
Resistance:
The 90 day SMA at 12,520
12,518 is the August intraday low
12,573 is the mid-February high
The 18 day EMA at 12,668
The 50 day EMA at 12,670
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
The 200 day SMA at 12,980
13,092 is the December 2007 intraday low
13,133 is the May 2008 high
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:
12,250 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.
June 2
Construction spending, April (10:00): -0.4% actual versus -0.6% expected, -0.6% prior (revised from -1.1%)
ISM Index, May (10:00): 49.6 actual versus 48.0 expected, 48.6 prior
June 3
Factory orders, April, (10:00): 1.1% actual versus -0.1% expected, 1.5% prior (revised from 1.4%)
June 4
ADP Employment survey, May (8:15): -30K expected, 10K prior
Q1 Productivity (8:30): 2.5% expected, 2.2% prior
ISM Services, May (10:00): 51.0 expected, 52.0 prior
Crude oil inventories (10:30): -8.88M prior
June 5
Initial jobless claims (8:30): 372K expected, 372K prior
June 6
Non-farm payrolls, May (8:30): -60K expected, -20K prior
Unemployment rate, May (8:30): 5.1% expected, 5.0% prior
Hourly earnings (8:30): 0.2% expected, 0.1% prior
Wholesale inventories, April (10:00): 0.4% expected, -0.1% prior
Consumer credit, April (3:00): $7.0B expected, $15.3B prior
End part 1 of 3
|
us stock market
trade stock
|
