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world stock market, us stock market
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6/18/08 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: GTE; NBR
Buy alerts: ESMK; MEA; NAL; UTSI
Trailing stops: None issued
Stop alerts: BAM; ETN; GLW; VMI
SUMMARY:
- Volatile session with a predictable result
- Dollar hanging in there without any help.
- Eyes on SP500 as it tries to hold the long-term trendline and last week's low. Oh yes, and oil also.
Just a down session from the start.
There was depressing news well before the open, and unlike Tuesday when futures were up but provided only a ramp for stocks to fall from, stocks opted to give up any semblance of a bounce. There were earnings issues as MS beat the street on earnings but sported lower revenues and a gloomy outlook. FedEx was in line but guided lower for next year. FITB (finance) warned and slashed its dividend; the market took that as just another sign of more of the same to come. On top of that the Bank of Scotland issued a 'global crash alert' that could see the SP500 fall 300 points by September, blaming inflation as the culprit. Oil inventories came out midmorning and while the decline was less than expected (1.2M vs 2M), gasoline dropped 1.1M versus the 950K gain expected.
Nonetheless the indices rebounded and almost made it positive over lunch, climbing back to session highs. They then sold off all of that move, right back down to session lows to start the afternoon session. Then a rebound into the last hour before selling once more. Quite a volatile day and the late selling led to solid losses across the board with only the Big 3, particularly small energy, along with a few techs performing to the upside.
Once more the overriding trump to any movement was oil. It started the day flat, was negative after inventories, but then a steady climb higher closed it solidly in the black (136.88, +2.67). Oil too remains quite volatile, and it also remains the trump card, the anchor chain that keeps stocks struggling. Mix in the continuing issues with the financials writing down assets quarter after quarter, cutting dividends, and the spread of the infection to the regional banks, and you have SP500 and DJ30 heading lower on this downside leg after failing at near resistance on Monday.
TECHNICAL. Volatile intraday but volatile in negative territory. Stocks did make a run at positive twice, coming up a few points shy, but that may as well have been 50 points. Every run was met with selling, and that was true again in the last hour as the market turned back down. Managed to close above the session lows, but it is hard to call that any kind of victory. If the bell didn't ring they would have been back down there in a half hour or so.
INTERNALS: Breadth ramped up to the downside at -2.5:1, the strongest breadth in a week. Volume jumped sharply on both NYSE and NASDAQ, indicating more dumping of stocks overall. Right now the price/volume action has definitely swung to the downside with rising trade on downside sessions. Moreover, during the April to mid-May rally volume was below average. Trade did not ramp back above average until the selling started. That shows more sellers than there were buyers.
CHARTS: More of the same as DJ30 and SP500 continued lower, consummating the low volume bounce to and failure at near resistance (the 10 day EMA). NASDAQ gapped lower, tried to hold the 50 day EMA, but it too failed. SP600 and SP400, while not strong as they struggle below May and early June resistance, are still above key levels such as the 50 day EMA, and at least have the chance to hold that support and bounce nicely after SP500 and DJ30 finish selling this down leg. Of note: SP500 held the long term trendline from 2003/2004 where it found support last week. A positive there though hard to hang your hat on that. It is important, however, in that it did not break it on the close in the January selling, and it took the second bottom in March to close below it before that rally started. It held that level in the April test, and now it is back once more.
LEADERSHIP: The leader board thinned some but the names certainly were familiar: energy, particularly small oil and gas exploration and coal; metals (mostly steel once more though even that sector was mixed); scattered techs; and agriculture, though it took the day off after starting stronger but it still looks very strong. Very stock and sector specific. PDO, ICO, RIMM have bolted higher while the market overall sells. Leadership has thinned, returning to the 'Big 3' realm from back in Q4 2007.
THE ECONOMY
A slow session from the economic perspective. Weekly mortgage applications fell 8.7% as mortgage rates continue to rise. Bond yield were flat overall (2.85% 2 year, 4.14% 10 year). Oil jumped and gold edged higher (861.10, +9.20).
The dollar is trying to hold onto the break higher, but it has slipped below the May and early June peak. It is holding support at the 10 day EMA, refusing to breakdown despite a lack of support from anyone. The ECB begged Bernanke to get tougher and when he did Trichet pushed his hawkish rhetoric to the next level, assuring us he would hike rates next month. Paulson jawbones with China about letting its currency rise versus the dollar while mouthing our 'strong dollar but . . .' policy, neither of which help our dollar. Presidential candidates, both present and former, continue to talk trade protectionism. Congress refuses to do anything about energy, insuring we continue pushing dollars to OPEC and building trade deficits.
All of this is against the dollar yet it still looks as if it wants to rally. A major sea change? No. Just a needed rally after getting pounded so low for so long. These rallies can last months. It can last a year. Without real support, however, it ultimately will succumb to the same reasons that pushed it lower. The way out of this is growth, and you do that by implementing the right policies. Talking about windfall profits, raising taxes, truncating trade, redistribution, nationalizing the oil refining industry only undermine growth. No one wants to put money into the US if that is the kind of environment we are heading for, and the candidates both have real problems in these areas.
Tuesday I railed on the Congress for its fickle nature, not wanting drilling, new refineries, nuclear power plants and yet refusing to extend tax credits for conversion and adoption of energy efficient and alternative energy equipment and materials. It is not that I am pro-drilling and pro-oil. I would love to see us off oil for our ground fleet, generating a new technology the rest of the world would want, creating new great jobs as a result, improving our health as pollutants decline sharply (and what a boon for our healthcare issues to come), saving our great outdoors for enjoyment versus exploitation. A treasure trove of benefits.
Problem is, we have to get there and we need the money to do it. Sending over $30B a month to oil producing countries that don't really like us at best is a waste of valuable resources. If we tapped some of this big supply that we have in various forms from oil from ANWR and the outer continental shelf (OCS), oil sands from the north central states, nuclear, coal gas - - we could impact world prices and have some supply to cut back on foreign imports. Then we could spend some money on developing alternatives. By spending I don't mean the government, but private enterprise figuring out the best way to get the job done. In short, I am agnostic as to drilling in these places. I would rather we didn't have to, but reality is we need some supply to do what we have to do. Of course, we would have to follow through and do it versus just sweeping the problem under the rug because we have some more supply, something we did all through the 1980's and 1990's when we have good times and could have really pursued a new technology. Now it is going to cost us dearly and it will hurt to get where we need to get.
THE MARKET
MARKET SENTIMENT
VIX: 22.24; +1.11. Lower than the early June move over 24, but it is making a higher low here.
VXN: 25.8; +1.1
VXO: 23.6; +1.43
Put/Call Ratio (CBOE): 1.12; +0.12. Second session above 1.0 on the close, typical when the market starts selling in earnest. Need to see 10 or so of these and also get VIX up 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: 43.0%. Fading as the rally rolls over, down from 44.8%. Bulls dropped sharply to 37.9% before that bounce back up. That followed 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: 32.6%. Bears gained ground, up from 31.1%. Bears rose during the last part of the market move higher, somewhat of a contrary move, but they had reason to doubt the move. 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: -28.02 points (-1.14%) to close at 2429.71
Volume: 2.061B (+12.59%). Volume moved up to average as NASDAQ gapped lower and closed below the 50 day EMA. More distribution on the selling.
Up Volume: 375.124M (-124.781M)
Down Volume: 1.657B (+377.133M)
A/D and Hi/Lo: Decliners led 2.55 to 1. Solid downside breadth.
Previous Session: Decliners led 1.73 to 1
New Highs: 61 (-7)
New Lows: 250 (+97). New lows starting to ramp up once more. Hit over 200 in the selling last week.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
After a bounce off some support at 2400 NASDAQ ran out of gas below resistance at 2500. The gap below the 50 day on rising trade is a sign of serious weakness developing more along the lines of SP500. A lower high after a lower low; NASDAQ is in danger of starting a downtrend similar to DJ30 if it cannot stem the tide.
NASDAQ 100 (-1.10%) gapped lower but it managed to hold the 50 day EMA on the close. It is flirting with a breakdown after it too put in a lower low then a lower high. It never did fill the two gaps from mid-April. Or the two in March as it came off the bottom.
SOX (-2.32%) is on the way to last weeks low in a hurry. That is key support at 380, but after a lower low and a lower high it will take something new like some really solid news to hold that level.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -28.02 points (-1.14%) to close at 2429.71
Volume: 2.061B (+12.59%). As with NASDAQ, volume jumped up to average as the NYSE indices sold.
Up Volume: 319.031M (-67.115M)
Down Volume: 953.159M (+256.391M)
A/D and Hi/Lo: Decliners led 2.53 to 1. Heavy downside as the selling volume picks up.
Previous Session: Decliners led 1.4 to 1
New Highs: 68 (-36)
New Lows: 219 (+81). Back over 200 as with last week.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Continued the selling that started Tuesday after failing at the 10 day EMA, selling on rising trade. It did hold the old 2003/2004 trendline on the close (1337), and that keeps it just above last weeks lows as well. That is an important trendline that was broken but recovered in March. It bounced last week from this level, but it has come right back to it. It is going to have to prove it can hang on given this quick return to key support.
SP600 (-0.76%) was a relative strength leader, and it showed some pop, touching the 50 day EMA on the low and rebounding. It is trying to make a higher low at that key level and take on the 200 day SMA at 390 and the recent highs. Not a picture of health, but infinitely better than the large cap indices and still in a position where it can turn this choppiness into upside. Needs some growth prospects to do it. YRCW was nice to see, but many others are dumping on it and the market right now.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Undercut last week's low on rising volume. The Dow is in a true downtrend following the May double top. It has made its third failure at near resistance (the 10 day EMA). It tried to bounce some at 12,000, a mostly psychological level. Another hard session lower and it will be ready to try a bounce, but that doesn't mean the downside is over by any stretch. Still looks as if it can make it to 11,750 on the downside.
Stats: -131.24 points (-1.08%) to close at 12029.06
Volume: 212M shares Wednesday versus 174M shares Tuesday. Volume was up, but unlike the other indices, trade was still below average. Rising volume on the downside, however.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
Thursday already, and thus far nothing but downside as oil remains stubborn, financial issues keep resurfacing, and the early earnings basically stink. Throw in some warnings about the future and you have what we have seen this week: a test of resistance and then a running away to the downside. DJ30 led the early upside move off the March low and it is again leading, this time to the downside as it broke to a new low on this selling.
While the Dow is leading lower, you have to watch SP500 closely as it tests that old trendline. If it can hold and bounce that gives live to SP600 and SP400, and their patterns are salvageable at this juncture. What would it take? Some really good news in the financial arena and lower oil. Neither are likely at this juncture. That means SP500 could bounce off of this support once more as last week, but that would not reverse the trend. Indeed such a quick trip back to this level suggests it will have a hard time holding.
Given the renewed distribution and breakdown in DJ30, there is not much reason to change the game plan. The overall market is struggling and heading lower while money continues to find the safe sectors, the Big 3. We are getting some tremendous upside moves from these stocks as they move inversely to the market. That means they are getting chased by some serious money and thus the screaming moves. That also means they are a bit crowded given that is all that is working to the upside. If things turn they can sell quickly but thus far the buyers far outnumber the sellers as the sellers are getting their wish with the rest of the market.
We are going to continue looking for these to the upside, not because we like playing the upside more than the downside, but because they are moving so well. We will look for stocks in position to move higher and move in as they do. Many such as the ag stocks set up well a week or two back and we moved in as they broke higher. They are out of reach now though a test looks to be coming and that could turn up some good add-to possibilities. As for the downside, after two hard sessions lower on SP500 and DJ30 we need to watch chasing them too much to the downside right now. Let this move bottom out and bounce, then look to move in at the next failure at near resistance.
As for oil, everyone is still talking about a breakdown after a blow off run. That could very well happen, but with everyone looking for it to happen it is not. Forget about it for awhile, feel some despair as oil breaks higher again, and that will start setting the stage for that more significant decline to test. The question is whether it will be just a test or a true breakdown.
Support and Resistance
NASDAQ: Closed at 2429.71
Resistance:
The 50 day EMA at 2442
2451 is the August closing low
2500 from interim August lows.
March 2008 trendline at 2505
The 200 day SMA at 2509
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.
2629 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:
2419 is the January 2008 peak and the early February peak
2392 is the April 2008 peak
2388 is the June 2008 low
2386 is the August intraday low
2378 is the mid-February peak; 2379 from the October 2006 peak
The 90 day SMA at 2376
2370 from the April 2006 peak
2340 from the March 2007 low
2317 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
S&P 500: Closed at 1337.81
Resistance:
1350 where it held early in the week.
The 10 day EMA at 1357
1363 is the 90 day SMA
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 50 day EMA at 1375
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 1420
1433 from a pair of August 2007 lows and December mid-month intraday low
1434 is a longer term trendline from the August 2003/September 2004 lows
1446 from the December low
1460 is the February 2007 peak
1481 represents several peaks and lows ranging from April 2007
Support:
1337 is an ancient trendline that held last week
1331 is the June low
1324 is the April low
1317 from the February low
1270 is the January low
1257 is the March low
Dow: Closed at 12,029.06
Resistance:
12,050 from the March 2007
12,070 from the early February 2008 lows
12,250 from late March 2007 lows
The 10 day EMA at 12,239
The 90 day SMA at 12,350
12,518 is the August intraday low
The 50 day EMA at 12,517
12,573 is the mid-February high
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 12,934
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:
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 16
New York Empire State Index, June (8:30): -8.68 actula versus -2.0 expected, -3.2 prior
Net foreign purchases, April (9:00): $115.1B actual versus $63.2B expected, $79.6B prior (revised from 80.4B)
June 17
PPI, May (8:30): 1.4% actual versus 1.0% expected, 0.2% prior
Core PPI (8:30): 0.2% actual versus 0.2% expected, 0.4% prior
Housing Starts, May (8:30): 975K actual versus 980K expected, 1.008M prior (revised from 1.03M)
Building Permits, May (8:30): 969K actual versus 960K expected, 982K prior
Capacity Utilization, May (9:15): 79.4% expected versus 79.7% expected, 79.6% prior
Industrial production, May (9:15): -0.2% actual versus 0.1% expected, -0.7% prior
June 18
Crude oil inventories (10:30): -1.2M actual, -2M expected, -4.5M prior
June 19
Initial jobless claims (8:30): 375K expected, 384K prior
Leading Economic Indicators, May (10:00): 0.0% expected, 0.1% prior
Philly Fed, June (10:00): -10.0 expected, -15.6 prior
End part 1 of 3
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world stock market
us stock market
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