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world stock market, us stock market
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6/21/08 Stock Split Report
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MARKET ALERTS
Targets hit alerts: DIA
Buy alerts: CE
Trailing stops: None issued
Stop alerts: None issued
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:
- Expiration, even more financial issues pile drive NYSE large caps.
- Market pricing in worse economic times to come
- Looking for what rises from the rubble of expiration.
Tech leadership here today, gone tomorrow.
Thursday the large cap techs were hot with the likes of RIMM and QCOM leading the way upside, putting some starch in a wilting market. SP500 held its trendline and volume was solid on NASDAQ as some big names made some nice moves.
Friday the market didn't even try to extend the Thursday gains. There was a turn back to gloom on simply too much bad news, led by financial issues, and yes, of course more oil problems. MER downgraded regional banks, making official what many are suspecting and indeed what a few of the early warnings were showing. Then in a typical turn of market irony, MER was subject to its own issues as rumors circulated it would be announcing lower earnings, write-downs, etc. MER issued a statement that it would not be announcing that kind of news . . . on Friday. What a confidence booster for the market.
Oil was its usual problem, spiking pre-market as news hit Israel had made a dry run of an attack of Iran's nuclear facilities. It was up 4 clicks though it finished the session lower at 134.62, +2.69. Financial issues and oil rebounding hard after selling hard. That set the market up for weakness, and expiration only magnified the selling.
There were some positives. Saudi Arabia said it was going to raise the level of its production increase to 500M per day versus 200M per day. Impressive given most theorize that Saudi doesn't have the capacity to do so. Sure it will be heavy, sulfur-riddled sludge, but the numbers are impressive. In addition, NYSE short interest was reported at its highest level ever. That doesn't sound like a positive and indeed some of the financial stations reported it as a bad sign. Actually, short interest is a contrary indicator, and thus an all-time high always gets you looking at other sentiment indicators to see if they are reaching extreme levels. Bullish advisors and bearish advisors crossed paths last week and that is a strong indicator. They are getting there. More work to do, but they are getting there.
Those positives were not enough to make a difference. Oil was still up and investors still sold stocks. Stocks started lower, tried a midmorning bounce, but failed horribly. The large cap indices closed at session lows on some huge expiration volume.
TECHNICAL. The intraday action was down to lower. A modest midmorning bounce could not turn the tide and stocks rolled over once more and closed at session lows. Weak.
INTERNALS: Very weak breadth at -4.4:1 NYSE, -2.5:1 NASDAQ. Volume was huge as expiration lived up to days of old when everything was saved up for Friday; now it is spread out through the week. Looking at Friday, however, you would not believe there was anything done before Friday. Even with expiration volume, the selling was fiery.
CHARTS: SP500 was so heavily watched the old adage about a watched pot would seem to come into play. It didn't. SP500 plowed under its 2003/2004 trendline. DJ30 continued its leadership lower, now just 100 points from its March low. NASDAQ managed to hold above its June lows, a modest victory, but it is no pillar of strength. SP600 and its small caps had the best day, bouncing off the lows to hold the 50 day EMA on the close. A modest show of strength, but a showing nonetheless. Interesting given their ties to the economy and the overall market's indication that the economy is weakening again.
LEADERSHIP: While not many stocks were moving Friday, at least to the upside, if you look down the list of the 'safe sector' and Big 3 stocks we are playing upside, they held up well. They held up remarkably well when you look at how the NYSE large caps are diving. It remains a bifurcated market, and while that usually does not work in that they typically resolve in one direction, this one is working. It has the food element driving agriculture stocks, it has the energy element that is also driving agriculture as well as a broad spectrum of energy stocks, and commodities that everyone needs in a world with surging populations and surging industrial activity as more countries take their share of the industrial world. Mega drivers that keep money flowing into these areas.
SUM: Expiration lived up to the expirations of old with its vigor, and that skewed the action; magnified it as noted above. That, however, was not the determinative factor. Expiration simply took the market where it was going. That means DJ30 is heading to the old lows and SP500 with its financials is following. The overall market has to have financials working to rally. Right now the disease is still spreading, still not quantified. That keeps the market selling given the uncertainty as to just how much more the financials have to fall. At some point the market will start building in the recovery. We note that despite all of the bad news last week from financials, they did not dive lower as a group. With negative sentiment spiking, even with the diving market for now, the seeds of a new bottom could be germinating. For the moment, however, the selling continues.
THE ECONOMY
Dive in the market forecasting more economic weakness.
Thus far the economy has skirted an official recession. It has slowed, but GDP has remained positive. Then the economic data started to firm off the initial slowdown after the market rallied off the March low. Congress passed a stimulus package and spirits were higher: if the economy could start recovering without the stimulus, things could only get better.
The stimulus checks are hitting and while the surveys are mixed as to what individuals are doing with them, it is enough to note that even as the stimulus checks disseminate and help drive up consumption, the market is turning back down and indeed DJ30 is ready to test the March lows, sitting just 100 points off the coast. This indicates that despite the stimulus and the improvement in economic data, the dive in the market suggests a real textbook recession may be coming.
THE MARKET
NYSE short interest has moved to an all-time high. This is a contrary indication in that once everyone throws in the towel a move is over. Combine this with a surge in bears and a flop in bulls such that they have crossed over with bears more prevalent than bulls and you have some potent contrary indicators. VIX is still a laggard and has to spike up. It is likely to do that as the selling continues. The selling likely continues because the market bottoms after the sentiment indicators rally to extremes.
MARKET SENTIMENT
VIX: 22.87; +1.29
VXN: 26.75; +1.95
VXO: 24.82; +2.07
Put/Call Ratio (CBOE): 1.33; +0.35. Jumping back above 1.0 giving the selling, making it 3 of 4 of the last sessions above 1.0, the level that starts showing a high enough level of fear to help turn the market.
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: -55.97 points (-2.27%) to close at 2406.09
Volume: 2.702B (+17.76%). Strongest volume since the start of the year when the market sold off hard. Expiration for certain, but the sellers were all very ready to pile on.
Up Volume: 389.273M (-1.262B)
Down Volume: 2.192B (+1.59B)
A/D and Hi/Lo: Decliners led 2.64 to 1
Previous Session: Advancers led 1.35 to 1
New Highs: 52 (-11)
New Lows: 259 (+19). Not ramping up much given the selling, though NASDAQ is still above the early June lows. Need to see it near 500 to show an extreme that suggests a flush out of the system.
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ reversed the Thursday strength and for the second time this month a solid upside move met a vicious downside reversal the very next session. Expiration played its part. It is interesting and almost ironic that even with this kind of tail kicking NASDAQ can still make a higher low above the 90 day SMA, kind of its own double bottom base at that support level. Very interesting.
NASDAQ 100 (-2.74%) has a similar pattern though it is not really at any support for its two legs lower here in June. It will need to find support, however, and if it does move lower toward the prior June low it will bump the trendline formed off the two March lows.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -24.9 points (-1.85%) to close at 1317.93
NYSE Volume: 2.018B (+56.15%). Strongest volume since coming off the lows in March, exploding higher. Expiration yes, but also still some more serious selling.
Up Volume: 284.382M (-420.03M)
Down Volume: 1.728B (+1.165B)
A/D and Hi/Lo: Decliners led 4.4 to 1. Bad but not as bad as it gets. We have seen -11:1 at crescendo bottoms.
Previous Session: Decliners led 1.01 to 1
New Highs: 45 (-43)
New Lows: 295 (+91). With SP600 finding some support and bouncing, the new lows did not explode higher.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 exploded lower through the 2003/2004 trendline at 1338. May try to find some support at 1315 to 1310 (the latter is the January closing low), and 1300 represents a full consummation of the head and shoulders top as that marks a decline as large as the pattern was high. Of course these are all just possible points where the large caps could find some support. If the financial issues continue to expand and oil continues to work higher that will continue to fuel the selling.
SP600 (-1.37%) sold with the rest of the market after failing to take out the 200 day SMA . . . again. It was in full flight toward the June low when it checked up and rebounded to close at the 50 day EMA. Cannot read too much into this recovery given it was expiration Friday. It helped keep SP600 in the game, but we will need to see how it responds this week.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
After holding 12K for a couple of sessions DJ30 gave up the goods without a fight. As noted above, it is just over 100 points from its March closing low. It has been quite a run lower on this move, and another run lower toward that level will likely result in a rebound to come up for air. That won't change this pattern, however, without a change in the primary drivers, e.g. oil and financials.
Stats: -220.4 points (-1.83%) to close at 11842.69
Volume: 429M shares Friday versus 230M shares Thursday. That is a lot of expiration volume.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
MONDAY
A week chock full of economic data with consumer confidence, home sales, GDP, and personal income and spending. The big economic event is the two-day FOMC meeting. Interest rates have been building in Fed rate hikes, but they are not a sure bet on this meeting resulting in a hike. It might as well go ahead and do it versus talk about it, but again, it likely will not make the leap just yet.
The Monday after expiration, particularly a wild one as on Friday, often sees some retrenchment. It would be best if DJ30 went ahead and fell to the March lows; then it would be ready to make the rebound after this flogging. SP500? After a breach of major support there is often a bit more selling and then a rebound to test the breakdown. Thus we can expect a bounce in the first half of the week.
As for plays, after such a flogging the downside is overdone; better to wait for a rebound to pick up some new ones. Upside, if a stock could hold up during this beating then it has the right stuff. There are those out there. Some are plays that we have now and can take some new positions. There are others that will be new to us for now. Most of course are in the sectors that have received the money all along. Again, if they held up through this they are worth a long look.
Support and Resistance
NASDAQ: Closed at 2406.09
Resistance:
2419 is the January 2008 peak and the early February peak
The 50 day EMA at 2441
2451 is the August closing low
2500 from interim August lows.
The 200 day SMA at 2507
March 2008 trendline at 2520
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.
2633 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
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 2379
2370 from the April 2006 peak
2340 from the March 2007 low
2320 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
S&P 500: Closed at 1317.93
Resistance:
1324 is the April low
1331 is the June low
1338 is an ancient trendline
The 10 day EMA at 1347
1350 where it held early in the week.
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 1372
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 1418
1433 from a pair of August 2007 lows and December mid-month intraday low
1435 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:
1317 from the February low
1270 is the January low
1257 is the March low
Dow: Closed at 11,842.69
Resistance:
12,050 from the March 2007
12,070 from the early February 2008 lows
The 10 day EMA at 12,141
12,250 from late March 2007 lows
The 50 day EMA at 12,473
The 90 day SMA at 12,494
12,518 is the August intraday low
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 12,913
13,092 is the December 2007 intraday low
13,133 is the May 2008 high
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 24
Consumer Confidence, June (10:00): 57.0 expected, 57.2 prior
June 25
Durable goods orders, May (8:30): 0.0% expected, -0.5%
New Home sales, May (10:00): 510K expected, 526K prior
Crude inventories (10:30): -1.2M prior
FOMC policy statement (2:15)
June 26
GDP final, Q1 (8:30): 1.0% expected, 0.9% prior
Chain deflator, Q1 (8:30): 2.6% expected, 2.6% prior
Initial jobless claims (8:30): 381K prior
Existing home sales, May (10:00): 4.96M expected, 4.89M prior
June 27
Personal income, May (8:30): 0.4% expected, 0.2% prior
Personal spending, May (8:30): 0.7% expected, 0.2% prior
PCE Core inflation, May (8:30): 0.2% expected, 01% prior
End part 1 of 3
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