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us stock market, trade stock
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6/23/08 Stock Split Report Update
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Full report issues Tuesday.
MARKET ALERTS
Targets hit alerts: DXD
Buy alerts: BTU; FLIR; FLR; FSLR; GPN; XTO
Trailing stops: None issued
Stop alerts: AMZN
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:
- A weak relief try on NYSE, NASDAQ takes another hit.
- FOMC starts its 2-day meeting as UPS warns energy costs are just too high.
A relief bounce, but not much of one.
Futures were up to start the week, pretty typical following an expiration Friday hammering. Oil was off a bit early on and gold was down; more impetus to the relief move. A couple of M&A deals, a Saudi Arabia claim to increase production by 10% by year end 2009, and some analyst upgrades helped spice up the mix.
It did not take long, however, before the early surge fell to enemy fire. Stocks started to slide and continued into midmorning where the indices spent until lunch consolidating. Then they broke higher to start the early afternoon, trying to recapture the morning glory. That didn't last. Midway through the afternoon session the indices made a lower high and solid into the close, leaving only SP500 higher, and just a fraction above the flat line. There were no large losses on the NYSE indices despite a hammering once more in the financial sector, thanks mainly to the strength in energy, ag, metals, and commodities in general. NASDAQ sold further to the 90 day SMA, undercutting the prior June lows. The indices are trying to hold the line after a flogging, but with the current downtrends, the burden remains on the buyers to set a NASDAQ double bottom or mount some kind of bounce.
TECHNICAL: High to low intraday action shows the continuing selling pressure overhanging the market. The only time you find positive intraday chart is on a strong upside session, and there haven't been many of those of late.
INTERNALS: Volume well off pace set Friday, but that was some old fashioned expiration volume and you cannot really attribute it all to distribution or wholesale unloading of shares. Overall volume was below average; basically a session where volume took cover to try and recuperate. Breadth was not great at -2:1 on NYSE, but was bad at -2.4:1 on NASDAQ as the growth sectors took hits. New lows jumped over 300 for the first time in this selling. Not an extreme level that indicates a bottom trying to form, at least by this measure.
CHARTS: The NYSE large caps held the line after collapsing Friday. That does not mean a whole lot given they dove through key support last week. All they really did was stem the selling and give them a chance to bounce; the action doesn't suggest they will. NASDAQ sold off further, undercutting the June lows but holding over the 90 day SMA. As noted above, maybe, repeat maybe can set up a short term double bottom. Not much suggests that other than the price pattern, i.e. no price/volume confirmation. The mid-cap SP400 did hold at its 50 day EMA once more; some promise there.
LEADERSHIP: As the end of the month approaches the winners are extending their gains as the big funds start populating their portfolios with the stocks that put in the gains. That is why energy, agriculture, metals, commodities, industrials jumped and financials were hammered along with some technology. There were some moves from new areas, however, as the big builders and some technical instrumentation stocks rallied. Money continues to leave much of the market, but it also continues to funnel into the Big 3 as well as a few other sectors that continue to improve even as the market overall deteriorates.
THE ECONOMY
Nothing really to report on the economic front today. Oil closed higher (137.16, +1.80) after starting lower. As it rallied stocks faltered. Same old story, new week. Gold was lower (885, -18.60); it cannot go ahead and make that breakdown, so instead it is basing laterally. That is not as positive as it was a couple of weeks back.
The FOMC starts a 2-day meeting Tuesday, and while the Fed funds futures have built in four rate hikes over the next 9 months, it has not build one in for this week. Most would prefer the Fed would go ahead and get on with the inevitable. The Fed typically does not do that, but we are very accustomed to the Greenspan Fed and how it would not move quickly no matter what. There is room for a surprise hike, and that would in the longer run help the financial markets.
THE MARKET
From the weekend but worth repeating: 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: 22.64; -0.23
VXN: 27.53; +0.78
VXO: 23.56; -1.26
Put/Call Ratio (CBOE): 0.87; -0.46
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: -20.35 points (-0.95%) to close at 2385.74
Volume: 1.91B (-29.33%). Back below average after the expiration selling.
Up Volume: 396.397M (+7.124M)
Down Volume: 1.5B (-691.896M)
A/D and Hi/Lo: Decliners led 2.42 to 1. Took the brunt of the selling again.
Previous Session: Decliners led 2.64 to 1
New Highs: 62 (+10)
New Lows: 306 (+47). First top of 300 in this selloff. Still not at the level that indicates a potential turn (450 to 500+).
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Undercut the prior June low and holding over the 90 day SMA (2379). The price pattern suggests it can put in a short term double bottom to bounce, but as noted above, the burden is on the buyers to put in the bottom. Trading right at the August 2007 intraday low.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +0.07 points (+0.01%) to close at 1318
NYSE Volume: 1.086B (-46.18%). Below average trade as the NYSE indices hold their ground. You usually like to see higher volume as they hold the line after a selloff as that shows the buyers are stepping in to pick up the stocks the sellers are dumping. In other words, the buyers have stepped up and are as plentiful as the sellers after leaving the building earlier.
Up Volume: 389.11M (+104.728M)
Down Volume: 686.501M (-1.041B)
A/D and Hi/Lo: Decliners led 1.95 to 1
Previous Session: Decliners led 4.4 to 1
New Highs: 69 (+24)
New Lows: 333 (+38). As with NASDAQ, the first 300+ new low session of this selling. Getting there, but not there.
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
Held the line on the session after plunging Friday, and it may try a relief bounce here, but given the pattern and the price/volume action, it would be just a relief bounce at this point.
SP600 (-0.98%) continued lower but is still above the early July lows. Can still make a higher low but needs to show it. SP400 (-0.06%) held steady at the 50 day EMA, trying to put in a higher low as well, but as noted above, it is on the buyers to make the move.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
The blue chips held the line above the March lows (about 100 points away) as DJ30 has put in a parabolic move after bouncing up off the March lows. Testing that level will likely result in a relief bounce but there has to be a sea change in character to make any bounce anything more than a relief move.
Stats: -0.33 points (0%) to close at 11842.36
Volume: 182M shares Monday versus 429M shares Friday. Expiration pushed it higher, then it was the morning after and volume had a headache.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
The data starts Tuesday along with the FOMC meeting. After a Monday that was basically a hangover session from Friday's drilling, Tuesday stocks can start to make their moves once more. Of course the leaders were already making their moves Monday, and that was higher.
UPS is going to influence that action some. FedEx lowered its outlook last week and after hour Monday UPS guided lower by 20%. It is not so much a lack of goods to ship but the cost of jet fuel and diesel fuel eating it alive.
As noted under the DJ30 section above, it will take a major character change to turn the tide in the markets. That character change hinges in large part on the price of oil. Thus far it has refused to give up despite some high volume reversals and high volatility the past month. Even with that, oil is basing laterally in a narrowing range over near support. You know what that means: the odds of an upside breakout move are increasing. An upside breakout over 140/bbl would bury the indices in this downtrend for some time longer.
Hate to sound gloomy, but the financial markets and now the economic data show that when oil hit over $130/bbl things changed. Consumption patterns changed, investment changed, etc. The market and economy are demonstrating they need oil to dive near $100/bbl so they can catch their breath. Thirty years of do-nothing oil policy other than holding hearings when prices rise is now hurting us all and hurting our economy in ways we don't fully understand yet.
At the same time there are winners in the sectors that benefit from these higher prices in energy and food. We own many of those and were buying more Monday. We will continue to look for opportunity in these areas. With stocks such as PDO almost doubling in a couple of weeks you can see why it is worth looking in these areas even if the trade is crowded. The money continues to move their way so we will continue to play them, just being aware if they start to distribute.
Support and Resistance
NASDAQ: Closed at 2385.74
Resistance:
2388 is the June 2008 low
2392 is the April 2008 peak
2419 is the January 2008 peak and the early February peak
The 50 day EMA at 2439
2451 is the August closing low
2500 from interim August lows.
The 200 day SMA at 2506
March 2008 trendline at 2522
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.
2635 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:
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
2323 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
S&P 500: Closed at 1318.00
Resistance:
1324 is the April low
1331 is the June low
1338 is an ancient trendline
The 10 day EMA at 1342
1350 where it held early in the week.
1362 is the 90 day SMA
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 50 day EMA at 1370
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 1417
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 11,842.36
Resistance:
12,050 from the March 2007
12,070 from the early February 2008 lows
The 10 day EMA at 12,086
12,250 from late March 2007 lows
The 50 day EMA at 12,448
The 90 day SMA at 12,486
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 12,905
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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