|
|
money investment, investment help
* * * *
6/25/08 Investment House Alerts
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: BRCM; DIA; GS
Trailing stops: PDO
Stop alerts: GTE
SUMMARY:
- Market bounces ahead of, after FOMC, then changes horses in the last hour.
- Fed pauses, worries about inflation and growth, lays no foundation for future actions, at least that we can see.
- Durable goods flat after falling, worse ex-transports
- New home sales fall in May after posting some modest gains.
- Techs were the Wednesday leaders, but they will be challenged Thursday thanks to RIMM and ORCL.
Stocks bounce as anticipated, but then swap out in the last hour.
It was time for the oversold NYSE indices to bounce and the leaders in the Big 3 (energy, agriculture, steel/commodities) to retrench as money moved back into the less favored areas on this bounce. The market started the session in textbook fashion. Durable goods orders were flat but unlike April, where negative (-0.8%) ex-transports. New home sales sagged 2.5% after 4.8% April gains (revised from +3.3%). Oil was lower after inventories rose 800K barrels (closed at 134.42, -2.53), despite Saudi Arabia arresting 701 terrorists planning to strike Saudi's oil fields. Earnings, the few out there (MON, BBY) were solid. There was also the FOMC out in the afternoon where nothing was expected to happen, and indeed nothing did (no rate hike, a bit more jawboning about inflation, a weak but improving economy as oil prices fall).
Mixed indications, but they had no impact on stocks and what they were going to do. Those beaten down sectors bounced, e.g. financials, helping send the NYSE indices higher. Money moved out of the Big 3 as money swapped out of those into the rest of the market. After solid bursts higher the past couple of weeks they were ready once more for a bit of retrenching. They were doing that.
The dollar weakened after the Fed failed to cut rates, but further, remained worried about the economy's ability to recover. With those two competing issues, mandated by the Fed's dual mandate, neither side was satisfied and some investors moved into treasuries to temporarily sort things out, driving rates lower (2.81% 2 year, 4.10% 10 year).
Then in the last hour there was a reversal. The Big 3 rebounded; seems some investors could not stand it and jumped back in after 1.5 days of selling in those stocks. MON was down early on its blockbuster earnings and raised guidance, but it rebounded off a 50 day EMA test. Indeed many of these stocks tested and rebounded, energy included, even if oil did not bounce. Financials turned tail once more and so did DJ30, giving up a 100+ point gain. SP500 gave up two-thirds of its 21 point advance. Seems there was a complete reversal of interest, at least outside of NASDAQ. The techs held up very well though they gave up a 50 point gain to close up 33 points. Excellent strength for the growth indices as the small caps performed nicely as well (1.06%). Unfortunately, NASDAQ is going to be upwardly challenged Thursday after RIMM missed earnings and revenues and ORCL's guidance range was a penny lower than expected. Both were getting filleted after hours.
TECHNICAL. The intraday action was bullish as you would expect from a market ready to bounce after selling hard. An early higher open, a midday lateral test, then a spurt higher after the FOMC confirmed expectations of a 'no-decision' meeting. Looked good and getting better. Then they showed their inherent weakness in the last hour as sellers used the gains to sell into and then put money back into the Big 3 and other leading sectors (industrial materials, parts). They managed to turn nice gains on the NYSE large caps into 'so what' sessions. The small caps and NASDAQ held some nice gains, but they made no major inroads into their weak technical patterns.
INTERNALS: Advancing issues held 2.3:1 on NYSE though off session highs given that last hour plummet. NASDAQ was so-so at 1.8:1, just about holding its levels at the session highs; definitely a large cap move in the techs (that will change Thursday as noted above). Volume rose further above average on NYSE and fell a bit on NASDAQ though still above average on that move. Volume did not tell us much Wednesday other than NASDAQ's move was not overwhelmingly strong, at least not as strong as you would want.
CHARTS: SP500 rallied up to the 10 day EMA and the old 2003/2004 trendline . . . and stalled. It fell back to near flat, still trying to hold above the January closing lows and set up a bounce. DJ30 moved higher but stalled at no particular resistance and it again finds itself just over the March lows. NASDAQ held much of its gain but it stalled at the 10 day EMA and slid back to close near the early February high, the resistance as it worked to make a breakout from its double bottom. Talk about back to the drawing board. A 1% gain on SP600 only took it back to the neckline of its head and shoulders; looks suspiciously like a test to lead to more downside. In sum, not a lot of inroads into the downtrends even with the bounce.
LEADERSHIP: As noted, the Big 3 and other 'safe sectors' (e.g. industrial equipment) were down early but then rebounded as the false leaders in the early bounce reversed ground in the last hour. No new breakouts by the leaders, but after the pullback there were buyers moving back in. Techs were stronger also, and it was mostly a large cap move given the breadth. That will change tomorrow with the ORCL guidance and RIMM earnings miss. More incentive to move back into the same old leadership.
THE ECONOMY
Fed does nothing, as expected.
More than leaving the Fed Funds rate at 2.0% and reiterating its worries over inflation but at the same time a weak economy, the Fed left investors feeling that the governor's of our economy (sad but true in many instances) are not going to do anything about rates for several meetings to come.
In the big picture that makes sense given the Fed just got off a rate cutting program and this was the first meeting since last summer where the Fed DIDN'T cut rates. Historically it would have been quite aberrant if the Fed cut in one meeting and then hiked the next. It's just that many felt the Fed should not have cut at the last meeting, instead pausing then so it would be ready to hike now.
Given the Fed's 50/50 statement and its failure to compare inflation and growth risks, however, even if the Fed had paused last meeting it would not have hiked this week. It has to give the markets more preparation and Bernanke is hesitant to do so. He likely has a plan as to how he is going to proceed, and as with the other plans we are not privy to it. Those plans were not that bad at all outside once mistake where he lost his nerve, but he then recovered. Thus while many are railing for a rate hike right now to support the dollar and fight inflation, he is not telling what he is going to do. Hopefully, (yes hope is often foolish) he has a plan to help bolster the dollar soon given this meeting of pause. That would be his history, short as it is thus far.
THE MARKET
The sentiment indicators are moving closer to extreme levels, but not all are there. Bullish advisors are near 35%, the crossover point to bullishness for the market. Bearish advisors are at 37.4%, crossing over bulls, historically a powerful indication of extreme conditions. NYSE short interest is at a record high, another extreme. The put/call ratio posted several sessions closing above 1.0; getting there. VIX is still quite low. It moved just over 24 as the selling jumped in early June, but stalled there. Historically it needs to get over 35 to really make a difference. The Fed has put a governor on it with its rate cuts; if the Fed turns more hawkish then VIX might break free once more on the next round of selling.
MARKET SENTIMENT
VIX: 21.14; -1.28
VXN: 26.39; -1.75
VXO: 22.41; -0.82
Put/Call Ratio (CBOE): 0.86; -0.13
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: +32.98 points (+1.39%) to close at 2401.26
Volume: 2.147B (-2.45%). Lower but still above average volume. No overwhelming surge in buyers.
Up Volume: 1.738B (+955.898M)
Down Volume: 397.803M (-994.2M)
A/D and Hi/Lo: Advancers led 1.74 to 1. A large cap advance, and as noted, that will have issues on Thursday given the earnings and guidance from RIMM, ORCL.
Previous Session: Decliners led 2.6 to 1
New Highs: 46 (+3)
New Lows: 217 (-145)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Bounced up to the 10 day EMA on the high before fading to close just below the early February peak. If NASDAQ can get some more out of this rally it will likely run out of gas at the 2450ish level (the 50 day EMA is at 2435). It has set up the inklings of a short term double bottom base, and to breakout it would have to clear the mid-June peak at 2484. That is pretty wishful thinking, particularly with some big names disappointing on earnings.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +7.68 points (+0.58%) to close at 1321.97
NYSE Volume: 1.401B (+4.49%). Rising, above average volume but did so as the big indices gave up substantial early gains. Not the best showing of volume, but it was still solid on the upside and with the indices still in position to bounce there was some buying ongoing.
Up Volume: 956.748M (+355.72M)
Down Volume: 401.7M (-323.799M)
A/D and Hi/Lo: Advancers led 2.35 to 1. Helped out a lot by the small caps though the last hour selling took a lot of the shine off of very strong breadth.
Previous Session: Decliners led 2.23 to 1
New Highs: 23 (-24)
New Lows: 157 (-249)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 took off to the upside with the bounce we anticipated. It made it up to the 10 day EMA (1334) and just below the old 2003/2004 trendline (1338), but then sold off two-thirds of the gain. Managed a decent gain on the close, but the selling into the strength shows SP500 has a lot of overhead supply (stock bought at higher prices investors are ready to unload) even after the financials have been torched. Nonetheless, we are only looking for a relief bounce from this move and despite the Wednesday intraday reversal, it still looks as if SP500 is going to bounce some before it resumes the selling.
The small cap SP600 (+1.06%) bounced and held most of its gain on the session, but it had a hard time when it hit the neckline of its short 7 week head and shoulders top after breaking down through it Tuesday. It may try to come up some more toward the 50 day EMA, but after that it is likely to turn over again and that will be a downside opportunity though the options in the small cap ETF's historically have low deltas and thus the returns are not huge.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
The blue chips rallied 120 points into the early afternoon following the FOMC decision, rather impressive given Boeing was downgraded and was hammered 6.9% lower. It could not hold it, however, and faded back to close flat, showing a third doji just over the March lows at 12,750. Was that the bounce we were looking for? Yes and no. Yes it was a bounce, but no it was not the end of it either. There has been significant selling to this point and this bounce and reversal was not enough to let off all of the pressure. What it does suggest is that the bounce may not have enough guts to make it up to 12,250ish. If it gets to 12K and pulls another reversal, we won't be hanging around on the upside DIA positions.
Stats: +4.4 points (+0.04%) to close at 11811.83
Volume: 236M shares Wednesday versus 225M shares Tuesday. Volume moved up to average as DJ30 surged then purged. It is an indication of some churn, and that is not so bad after a hard selloff.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
GDP, jobless claims, existing home sales, day after FOMC pronouncement. Usually we wait and see what the FOMC does; this was a do nothing meeting. What we are watching as a result is what the dollar does (it tanked Wednesday after the Fed announcement) and what oil does. Given the Fed is going to do nothing right now, those two will play the role they usually do, i.e. the primary role for the market. Wednesday oil was hit even as the dollar sold, but it did recover late as the dollar fell. That was important: oil had broken down to its recent trendline early and the weak dollar late allowed it to hold and rebound off that level. Thus while oil was lower on the session, it did not break its lateral consolidation or its near trend. Thus oil is still in a more bullish pattern still, and that means it has more probability of breaking higher than lower, and if so, that will continue to dog stocks.
Also dogging stocks, at least techs, will be the RIMM earnings miss and ORCL's penny shy guidance that sent it lower after hours whereas before it was posting nice gains on the results. NASDAQ and NASDAQ 100 were leaders Wednesday but they are likely going to post losses Thursday unless something else major happens such as an oil breakdown of unusually large proportions. That would still benefit the overall market more than technology, but it would not hurt that sector either.
Not too bright a picture given the after hours developments, but as noted above, the NYSE large cap indices are still oversold and still look ready to provide a bounce higher even if it is not as big a bounce as initially indicated from the hard selling and the Dow's hold at the March lows. That is okay, as we can take what we can from that bounce and also look to move into some more of the Big 3 and other sectors that have been getting the serious buying as they come off of their tests. Then we let the bounce in the overall market peter out and look to some more downside plays a la DIA, DXD from last week that we took gains on this week.
Support and Resistance
NASDAQ: Closed at 2401.26
Resistance:
2419 is the January 2008 peak and the early February peak
The 50 day EMA at 2435
2451 is the August closing low
2500 from interim August lows.
The 200 day SMA at 2504
2540 from November 2007 low
March 2008 trendline at 2544
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.
2638 is an old trendline from summer 2004/summer 2005
Support:
2392 is the April 2008 peak
2388 is the June 2008 low
2386 is the August 2007 intraday low
2378 is the mid-February peak; 2379 from the October 2006 peak
The 90 day SMA at 2380
2370 from the April 2006 peak
2340 from the March 2007 low
2324 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2286 is the first April 2008 gap up point.
2261 is a March 2008 interim low
2202 is the January 2008 low
S&P 500: Closed at 1321.97
Resistance:
1324 is the April low
1331 is the June low
The 10 day EMA at 1334
1339 is an ancient trendline
The 50 day EMA at 1366
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
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 1416
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
Support:
1317 from the February low
1270 is the January low
1257 is the March low
Dow: Closed at 11,811.33
Resistance:
The 10 day EMA at 11,995
12,050 from the March 2007
12,070 from the early February 2008 lows
12,250 from late March 2007 lows
The 50 day EMA at 12,399
The 90 day SMA at 12,474
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 12,892
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): 50.4 actual versus 57.0 expected, 58.1 prior (revised from 57.2)
June 25
Durable goods orders, May (8:30): 0.0% actual versus 0.0% expected, -1.0% prior (revised from -0.5%)
New Home sales, May (10:00): 512K (-2.5%) versus 510K expected, 525K prior
Crude inventories (10:30): +800K actual versus -1.2M prior
FOMC policy statement (2:15): Left Fed Funds rate at 2.0%, warning of inflation and economic slowing, but not putting an emphasis on one over the other though its no change in rates and more talk of inflation issues shows it is shifting more in that direction.s
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): 375K expected, 381K prior
Existing home sales, May (10:00): 4.95M 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
|
money investment
investment help
|
