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world stock market, us stock market
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6/11/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: AGU
Buy alerts: ATW; DIA; PDO; SDS
Trailing stops: CE; SCHN; TTEK
Stop alerts: AMZN; CE; INFY; SLT
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:
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SUMMARY:
- Oil does not collapse so stocks do so instead.
- China oil imports surge post-earthquake. World reserves lowest in 20 years.
- Transports collapse after diverging from DJ30.
- Fed party line surprisingly divergent at a critical time as Kohn undercuts Bernanke, tougher dollar talk.
- Getting a bit oversold but the downside remains the path of choice.
Suring oil sends the growth indices down the path of the large cap NYSE.
Volatility in oil remains, but it was all to the upside Wednesday as oil started up a couple of points and then just kept running higher, closing at 136.66, up $5.35/bbl. Not an all-time high, but a sharp rebound and more than enough to send the market lower. Why the rise? Demand. A 25% increase in Chinese usage following the earthquake. A report that global reserves are the lowest in 20 years. Take your pick; it was more of the same kind of news that continues driving oil higher when it shows signs of cracking.
There was more if you want to go there. The chip industry cut its 2008 forecast to 4.3% growth from 7.3%. Railroads were downgraded, and while downgrades are not the root of problems for a sector, it did transports no good as the Dow Transports fell 246 points (4.67%), turning to follow the Dow 30 after the two diverged the past month. Crude reserves fell much more than expected for the fourth week (-4.5M versus -1.5M). Fed vice chair Kohn undermines Bernanke's inflation fighting, strong dollar gambit with an asinine statement he could live with higher inflation - - just the kind of nonsense I alluded to last night in mentioning how the Fed fueled the inflation surge in the 1970's by flooding the economy with liquidity as energy prices surged.
It was a debilitating combination. The dollar fell as a result of Kohn's comments. The oil rise accelerated as a result. Bond yields gave back ground. Gold bounced back (884.30, +13.10). Investors around the world wondered just what the Fed was up to; most likely Bernanke's comments will hold sway, but the lack of a unified front once more gave investors no comfort and exacerbated the weakness in the currency and the added ripple affects through the financial markets.
The growth indices sold through support at the 50 day EMA. They are now basically playing catch-up to the NYSE large caps. Growth in trouble. The Dow transports (DJ20) sold hard as well, diving 4.67% (-246 points), reversing gains after diverging with DJ30 the past month. Transports were a leader in the market advance off the March low. They are now in full retreat. Another sector that prospers with economic growth bites the dust. In short, the growth sectors that provide an economic barometer are caving in as oil prices continue to surge.
As reported two weeks back, these indices rose in anticipation of the better economic data we are now seeing. They paused after that rally to gauge if the economic advance would continue. As oil broke lower toward 120 they broke higher. Then as oil rebounded with a vengeance they have collapsed through support. This indicates that $130/bbl oil is choking off economic activity and that these indices are now telling us the nascent economic improvement seen is not going to last.
TECHNICAL. Intraday there was a low to lower move, closing at the low as bad news piled onto bad news during the day.
INTERNALS: Very weak breadth at -4:1 on NYSE and -3.3:1 on NASDAQ. With the small and mid-caps diving lower breadth collapsed as well. Volume was mixed but still above average on both NASDAQ and NYSE on a selloff. Elevated trade the past week as the market started selling off harder. Trade remained elevated as the indices break support, and that shows distribution, i.e. high volume dumping as the big money investors in mutual funds, pension funds, hedge funds, etc. unload stocks.
CHARTS: NASDAQ, SP600, and SP400 broke below the 50 day EMA support, following the NYSE large cap indices lower. The latter showed relative strength Wednesday simply because they had already sold off hard before and the sellers throttled back some, focusing on the other indices. The break lower in these indices consummates last Fridays sharp reversal.
LEADERSHIP: Even the Big 3 were not immune though they fared much better than most of the market. Energy and agriculture rose, and metals, while not surging, basically held steady. Commodities in general held up decently. The rest of the market, however, did a close impression of throwing in the towel.
THE ECONOMY
Fed needs to pick a story and stick with it.
Bernanke has accomplished some milestones since taking over from Greenspan, managing to keep things going surprisingly well given the financial mess dropped in his lap. The facilities utilized as alternatives to unending Greenspan-like rate cuts actually did the job, a milestone for the Fed. One of his continuing problems is his inability to control the rest of the Fed or manage the information flow from the Fed with any kind of conformity. Maybe other Fed governors, presidents and FOMC members are still bucking for power and like to make waves for the chairman. Maybe he doesn't do a good enough job policing the others to reign them in. Maybe he is not clear enough with them as to what he wants for the company line. Regardless of the reason, the result is the same: chairman says one thing, his henchmen say just about anything they want.
Wednesday it was Vice Chairman Kohn's turn at the mike. Bernanke turned the page from rate cuts last week basically saying no more would come. There is a reason for that: with the credit facilities there is no reason from them. That is one of the reasons the dollar and stock market rallied as a result: no need to further debase the currency and push up inflation importation. Thus Bernanke's speech about getting tougher and protecting the dollar to protect against importing inflation, etc., signaling no further rate hikes.
Kohn opines today that he would be okay with rising inflation if that means keeping rates low and thus promoting growth. Laudable given the Fed's dual mandate of fighting inflation and keeping growth at high levels. Problem is, as with many of the policies we are hearing on the campaign trail, that is failed 1970's action. A lot of people all fired up about voting this time are listening to some feel good policies that you can almost lift from the seventies. We almost became an economic has-been as a result.
During that same time there was the Arab oil embargo that spiked prices. The Fed feared the shock would debilitate the economy. It definitely could do that; the impact of high energy prices tend to shut down the consumer and businesses more than spark inflation. Problem is, there were so many regulations, taxes and government interference in every aspect of business that when then Fed pumped money into the system there was no corresponding jump in supply. The risks were too great, and money stayed locked up in tax shelters. Demand was strong because consumers had to spend money on gasoline and other items that jumped in price as a result of the higher energy costs. Inflation exploded. Stocks fell. The economy slumped. Unemployment spiked. Stagflation was coined and at a later date, the misery index.
Kohn is willing to risk letting the current rather incredible spike in energy prices get away from us as in the 1970's with some loose money policy. This is so contrary to what Bernanke was trying to say that it borders on dereliction of duty. The Fed needs three more board members but the majority in Congress refuses to discuss or put any candidate up for consideration much more a vote. With the Fed lacking a full complement Bernanke may be having a problem consolidating power. Whatever the reason, Kohn's comments could not possibly have been approved and Bernanke needs to send Kohn and others out to take back the damage as the US heads into the G8 economic conference.
THE MARKET
MARKET SENTIMENT
VIX: 24.12; +0.94
VXN: 27.32; +0.74
VXO: 25.4; +2.03
Put/Call Ratio (CBOE): 1.14; +0.18. Starting the clock again with a move over 1.0 on the close. Several such closes start indicating the selling is getting overdone, but you have to see the other sentiment indicators move into line as well to suggest a bottom as opposed to just a bounce.
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: 44.8%. Despite the prior week's selling and the weak rebound, bulls surged higher from 37.9%. that quick drop lower from 47.3% the prior week seems to have evaporated. Did its job, however, as the market broke sharply higher. That quick decline occurred after a string of steady gains: 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: 31.1%. Bears fell but not nearly as dramatically as bulls (32.2% the prior week). This after a couple of weeks of surprising gains as the market bounced. Up from 30.8% the week before and 29.9% the prior week. During that strong three of four weeks saw bears rise. 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: -54.93 points (-2.24%) to close at 2394.01
Volume: 2.1B (+1.59%)
Up Volume: 231.238M (-391.462M)
Down Volume: 1.857B (+442.941M)
A/D and Hi/Lo: Decliners led 3.31 to 1
Previous Session: Decliners led 1.38 to 1
New Highs: 34 (-1)
New Lows: 233 (+32)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Could not hold the May lows or the 50 day EMA, falling below that support on rising volume. Even undercut the early February high that was a key breakout market for NASDAQ as it made the move off the March low. Plenty of downside room down toward 2275, but it won't be a straight line lower. There is some support at 23.80ish, but that is rather minor. NASDAQ did some damage today.
NASDAQ 100 (-2.44%) gave up the 200 day SMA and the 50 day EMA on rising trade as well, dropping from its double top as well. Some support near 1880 but in trouble.
SOX (-3.44%) is in full dive mode after TXN lowered its midpoint and the industry lowered its sales outlook.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -22.95 points (-1.69%) to close at 1335.49
NYSE Volume: 1.386B (-0.1%). Volume remains high and above average in the summer as the NYSE indices, large and small, sell off. As with NASDAQ, that shows dumping of shares.
Up Volume: 214.03M (-374.215M)
Down Volume: 1.17B (+378.972M)
A/D and Hi/Lo: Decliners led 4.18 to 1. The breadth shows dumping of shares across the board.
Previous Session: Decliners led 1.99 to 1
New Highs: 38 (+2)
New Lows: 262 (+64). Starting to ramp higher. 500 or so is significant and starts indicating the selling is getting overdone.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 dove below 1350 after holding there for two session, continuing the breakdown from last Friday. It is at the old trendline; doesn't look as if that is going to hold right now, however.
SP600 (-2.02%) gave up the 50 day EMA and SP400 (-1.75%) thumped down to close at that level. SP600 is hit and going down. SP400 is taking cover at the 50 day EMA. It may hold but the damage has been done.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Fell through some support at 12,250 on rising volume as DJ30 continues lower after the Friday selling broke it through the neckline in its head and shoulders. 11,750 is the next concrete support though it will find a bottom to bounce some before it makes that plunge.
Stats: -205.99 points (-1.68%) to close at 12083.77
Volume: 247M shares Wednesday versus 240M shares Tuesday. Volume picking up on the downside after declining some on the two upside bounces. Shows the sellers are in full control.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Import and export prices, weekly jobless claims, retail sales and inventories highlight the economic data, but other than historical significance they mean little. Yes it will be interesting to see how much inflation we are importing and how much of retails sales has diverted to gasoline versus discretionary areas. With oil back over $135/bbl, however, its only significance is historical. The market is telling us the economy cannot survive $130/bbl oil; if oil stays at these levels there is economic trouble ahead.
The momentum was to the downside at the close and that suggests continued selling early on, but as we all know the market can bounce up and down on any given day inside a trend. Given that NASDAQ is down 4 straight sessions, if the economic data is palatable there could be a quick bounce to test. You always watch to see how strong bounces are and if any leadership develops, but at this juncture that looks to be a formality given that all of the indices but the mid-caps have broken key support. Nothing outside of a serious collapse in oil will have the stones to challenge this turn to the downside.
If a position had sold and was still above support we left it; the likelihood of a solid stock bouncing at support after some selling is high. That will at least give us better exit points. Many positions held up well as they are part of or closely related to the Big 3. We are going to keep looking for upside opportunity in those. We have some downside positions going and we will look for more opportunity in that direction though after such a sharp move you like to look for a bounce to set up the next downside round. As with upside breakouts, of course, the downside breakdowns come in waves; that means there are still downside plays we can step into even after the indices made this break lower.
In sum the action was a breakdown of growth as they follow the large cap NYSE lower as oil refuses to give in and break down. The pattern for oil is still problematical, but it is putting in a higher low at the 10 day EMA, and even if it is late in the breakout run, it has yet to make the rollover. You know what they say about the watched pot. In any event we are just going to keep looking for opportunity whichever way it comes (upside and/or downside) and take what the market gives. Nothing personal, just using the market for our own gain. How capitalistic, something we need to remember in an election year.
Support and Resistance
NASDAQ: Closed at 2394.01
Resistance:
2419 is the January 2008 peak and the early February peak
The 50 day EMA at 2441
2451 is the August closing low
The 18 day EMA at 2472
March 2008 trendline at 2485
2500 from interim August lows.
The 200 day SMA at 2512
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:
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 2369
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 1335.49
Resistance:
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 50 day EMA at 1380
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
The 200 day SMA at 1422
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:
1336 is an ancient trendline, trying to hold.
1324 is the April low
1317 from the February low
1270 is the January low
1257 is the March low
Dow: Closed at 12,083.77
Resistance:
12,250 from late March 2007 lows
12,518 is the August intraday low
The 90 day SMA at 12,509
12,573 is the mid-February high
The 50 day EMA at 12,591
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 12,954
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:
12,070 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 9
Pending Home Sales, April (10:00): +6.6% actual versus -1.0% expected, -1.0% prior
June 10
Trade balance, April (8:30): -60.9B actual versus -$60.0B expected, -$56.5B prior (revised from -$58.2B
June 11
Crude oil inventories (10:30): -4.5M actual versus -1.5M expected, -4.8M prior
Fed Beige Book (2:00)
Treasury budget, May (2:00): $165.9B actual, $159.3B prior
June 12
Export prices, May (8:30): 0.6% prior
Import prices, May (8:30): 1.1% prior
Initial jobless claims (8:30): 370K expected, 357K prior
Retail sales, May (8:30): 0.5% expected, -0.2% prior
Retail sales ex-auto (8:30): 0.7% expected, 0.5% prior
Business inventories, April (10:00): 0.3% expected, 0.1% prior
June 13
CPI, May (8:30): 0.5% expected, 0.2% prior
Core CPI, May (8:30): 0.2% expected, 0.1% prior
Michigan Sentiment, preliminary June (10:00): 59.5 expected
End part 1 of 3
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world stock market
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