* * * *
6/19/08 Investment House Alerts
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: CHK
Buy alerts: AMZN; CSX; EAT;
Trailing stops: None issued
Stop alerts: IYT
SUMMARY:
- SP500 holds where it has to while techs rally on lower oil.
- Philly Fed weakens as manufacturing starts showing the weakness stocks forecast.
- Still looking for leaders getting the money to make us more money.
NASDAQ large caps give the market a backbone transplant.
We were watching SP500 to see if it could hold the longer term 2003/2004, but as for excitement on the session the large cap techs provided the fireworks. They posted far and away the best gains (1.62% on NASDAQ 100 versus 0.38% on SP500), making a higher low and looking better, but still facing all of that overhead supply from the May twin peaks.
There were the typical headwinds for the market and for large cap NYSE particularly. Citi warned that its next quarterly report will be more of the same as last: massive write-offs, dividend worries, etc. Of course it hardly moved on the session, showing that the dogs have a lot of the dog poop already priced in. Jobless claims were up more than expected again, Philly manufacturing faltered (-17.1 versus -10 expected), and gold jumped over 10 points. Plenty there to drive stocks lower and breadth was basically flat, showing a lot of stocks going nowhere.
On the flip side, the dollar was higher once more and oil continued its impressive volatility, falling over 3% to close at 131.93, -4.75. While there were negatives on the session, that was plenty to push stocks higher.
Unfortunately, it was nowhere near across the board. SP500 and DJ30 held where they had to after the two sharp losses this week. They held but basically went nowhere, trying to get some footing. The real movement was in some growth, but again, it was not across the board. NASDAQ and particularly NASDAQ large cap, led the move. At the same time some of the recent powerhouses in agriculture and energy took some lumps; big runs then some profit taking. NASDAQ showed some positives but a lot of the other action in the market was rebounding from selling as well as some profit taking in leadership sectors.
TECHNICAL. Market opened flat to lower with futures down early. Didn't take too long, however, before stocks bottomed with SP500 at its trendline, oil heading sharply lower, and techs leading to the upside. Rallied higher all session. Not a lot of gains on NYSE, but they did move low to high.
INTERNALS: Breadth was quite lackluster, and with no movement in the NYSE large caps or small and mid-caps, that is no surprise. Even on NASDAQ, however, with its 1.33% gain breadth was just modestly positive. A limited move mostly from the large cap techs as noted. Volume was up sharply on NASDAQ, moving well above average once more as large cap techs were snapped up. NYSE saw volume rise modestly, still right at average. No match for NASDAQ, but swelling volume at key support is not bad at all. Not definitive at all, but not bad either. The big caveat is it is expiration week and that means volumes jump as positions are rolled and money is moved around. That is clearly happening given the high volume selling in energy and ag and the move higher by large cap tech. Thus it may not have much lasting effect once the positions are shuffled.
CHARTS: NASDAQ made a higher low around the key 50 day EMA after making a lower low and then a lower high, threatening to open up a DJ30-like trend lower. Thursday it tried to break that up and did some damage, but it still has 40 points upside just to get to the early May high that preceded the May and June twin peaks double top. Still a lot of work to do to pin all hopes on this one move. SP500, DJ30 are holding where they have to with SP500 trying to put in a short double bottom at its longer term trendline. Long road to hoe, but after two sharp sessions lower it is trying to use logical support as a bounce point. Again, lots of work to do given the breakdown and successive moves lower below the 10 day EMA.
LEADERSHIP: Despite the overall trend lower in the market, upside leadership continues to emerge. Thursday large cap tech stepped up and took its swings, posting some impressive moves. Transports also came back to life after a brief siesta; CSX sure looks nice as it jumps off the 50 day EMA and gave us the buy. Steel bounced after waffling some and seems to be back in business. Retail improved with many stocks posting 2+% gains, but most retail as we know are in massive downtrends. Looked like a bit of relief bouncing there. At the same time, some recent hardcore leaders took some lumps. Energy was up early but was reversed and sold as oil tanked. Ag was hit hard on profit taking that got out of hand in the afternoon. Coal pulled back as well, but just modestly. Opportunity could come from these pullbacks. Moreover, it was good to see leadership fan out a bit after narrowing this week.
THE ECONOMY
Philly Fed joins New York with a weaker reading for June.
The regional manufacturing surveys showed some improving sentiment March through May, and they showed it nationwide, suggesting some firming in the overall economic picture. In the last recovery, the regional and national manufacturing surveys were some of the first data to firm, a precursor to the overall recovery. The reports are a mix of sentiment and data, but much heavier on the sentiment than facts. Unlike consumers, however, purchasing managers tend to stick to what they say in their answers.
The market bottomed and started moving up ahead of those initial numbers and rode higher as more reports came in showing improvement. New York was weaker to start the week, and Thursday Philly followed, posting a -17.1 reading versus the -10.0 expected. As we noted last weekend, the market rallied in anticipation of this economic improvement and then hit the lick log point, i.e. needing the economy to continue improving in order to build more gains. That pause saw oil prices surge and put the kibosh on economic growth. The market started to sell. Now we are seeing the weaker numbers turning up as a result of oil hitting the choke point for the economy and stalling demand and consumption of not only oil products. The market started lower in anticipation and now the economic numbers are showing that weakness.
Still comes back to oil.
It will take weaker oil to turn the tide. Thursday oil was definitely weaker with an almost $5 drop. Looking at oil's chart, price closed at the lows in the recent two-week lateral move, closing at the 18 day EMA on big volume. Another down session on big volume. Of course there have been big gains on big volume. There is that volatility again that suggests oil is topping, but it has not done it yet, still holding at near support. And while energy stocks were lower Thursday on the daily move in oil, they have not broken down, at least those outside of the majors (have to like those XOM puts). As seen in the market move ahead of improving economic data and now lower ahead of worsening data, the stocks would be breaking down if oil was. Maybe what we are seeing now is the start, but oil has had more lives than a young cat.
THE MARKET
MARKET SENTIMENT
VIX: 21.58; -0.66
VXN: 24.8; -1
VXO: 22.75; -0.85
Put/Call Ratio (CBOE): 0.98; -0.14
Bulls versus Bears:
For the second time this year bears are crossing above bulls, doing so basically where they did in March on their way to much more extreme readings just about the time the market made the March low and started the last rally. Positive for the market and if SP500 is going to hold the long term trendline is the place to do it.
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: 36.3%. Precipitous decline from 43.0%. It started to fade as the rally rolled over and last week it plunged as confidence faded. This is close to the 35% considered bullish. Falling from a rebound high at close to 50% on the run through May. 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. They are crossing over again now even before the prior lows are hit. 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: 37.4%. Big jump from 32.6%, taking it past bulls and that is always one of the best indications that sentiment is getting extreme on the negative side. It is again past 35%, the level that historically indicates too much pessimism. 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. 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: +32.35 points (+1.33%) to close at 2462.06
Volume: 2.295B (+11.35%). Strongest volume since the first day of May. There was buying in large cap tech but also it is expiration and volume jumps midweek.
Up Volume: 1.651B (+1.276B)
Down Volume: 602.703M (-1.054B)
A/D and Hi/Lo: Advancers led 1.35 to 1. Weakness shows it was a large cap move.
Previous Session: Decliners led 2.55 to 1
New Highs: 63 (+2)
New Lows: 240 (-10). Still over 200 even with the big gain. Makes you think about how strong this move really was.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Making a higher low and clearing the 50 day EMA though that level is rather porous of late. Key resistance at 2500 and then the twin peaks at 2550. Major resistance but we can get some good runs up to that point.
NASDAQ 100 (1.62%) cleared the 200 day SMA again and is at the early May highs. How it trades here will tell more about NASDAQ overall as NASDAQ still has 40 points to get to its equivalent interim resistance ahead of the double top.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +5.02 points (+0.38%) to close at 1342.83
NYSE Volume: 1.293B (+0.76%). A bit more trade at the average level as SP500 held support ahead of expiration. Can indicate some buyers stepping in at support but you have to factor in expiration to a certain extent.
Up Volume: 704.412M (+385.381M)
Down Volume: 563.354M (-389.805M)
A/D and Hi/Lo: Decliners led 1.01 to 1. Tells the story.
Previous Session: Decliners led 2.53 to 1
New Highs: 88 (+20)
New Lows: 204 (-15)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Dipped to the May intraday low and rebounded to hold its 2003/2004 trendline at 1337. May try to make a stand here with a short double bottom and take on that downtrend and the waves of overhead supply put in over the past 12 weeks. That is a heavy burden to carry but it looks as if it will make a go at a bounce after two pretty sharp selling sessions.
SP600 (+0.91%) moves up to the 200 day SMA once more after failing there last week. Higher low over the 50 day EMA so it is locked and loaded to try the May peak and see if it can move up as it did in early June. Diving oil will make a difference to these economically sensitive stocks.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
Held at 12,000 for the second session, refusing to give up that psychological level. A bit more volume, up to average. Still in a steep downtrend and after 2 hard downside sessions a bit of a try to bounce is normal. The pattern is very negative and it is up to the buyers to change the picture.
Stats: +34.03 points (+0.28%) to close at 12063.09
Volume: 230M shares Thursday versus 212M shares Wednesday. That higher pre-expiration volume.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
FRIDAY
No economic data on the session just expiration and the gyrations it brings. Expiration tends to skew the action and Monday will bring the real picture back into focus. That picture, even on the vastly improved NASDAQ, is still weak and the burden is on the buyers to change the character. The growth indices are in better shape but the large cap NYSE are still in rather entrenched downtrends. Even if they bounce further they will still have to break their downtrends to change the character.
Thus we stick with the patterns that have shown the strength and those that have set up ahead of this expiration gyration. Even though it is expiration we can take some positions if they show the moves. As for downside, it looks as if SP500, DJ30 are going to attempt a bounce given the SP500 trendline and the psychological 12,000 level on the Dow, and if it cannot change the character (we don't think it can without oil completely breaking down) we will get to move into some more downside positions to take advantage of the downtrend. For now this market allows you to play both sides of the street.
Support and Resistance
NASDAQ: Closed at 2462.06
Resistance:
2500 from interim August lows.
The 200 day SMA at 2508
March 2008 trendline 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.
2630 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:
2451 is the August closing low
The 50 day EMA at 2442
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 2378
2370 from the April 2006 peak
2340 from the March 2007 low
2318 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
S&P 500: Closed at 1342.83
Resistance:
1350 where it held early in the week.
The 10 day EMA at 1354
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 1374
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 1419
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:
1338 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 12,063.09
Resistance:
12,070 from the early February 2008 lows
The 10 day EMA at 12,207
12,250 from late March 2007 lows
The 90 day SMA at 12,500
12,518 is the August intraday low
The 50 day EMA at 12,499
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 12,920
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:
12,050 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 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): 381K versus 375K expected, 386K prior, revised from 384K.
Leading Economic Indicators, May (10:00): 0.1% actual versus 0.0% expected, 0.1% prior
Philly Fed, June (10:00): -17.1 actual versus -10.0 expected, -15.6 prior
End part 1 of 3
|
