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us stock market, trade stock
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7/23/08 Stock Split Report Update
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Jon Johnson continues his travels visiting several companies for potential investment opportunities. He is sending in his market comments and plays he likes as he travels. The reports will be a bit briefer until he returns on Thursday.
MARKET ALERTS
Targets hit alerts: BUCY; PVA; PDS; XEC
Buy alerts: HCBK; STZ; URBN; XOM
Trailing stops: GENZ
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:
- Large cap techs lead the session but market overall is sluggish as the indices tap near the 50% retracement points.
- Earnings providing some 'not bad' optimism but investors unconvinced.
- Market searching for a catalyst for renewed strength as the indices approach resistance.
Another gain as NASDAQ probes key resistance.
Earnings are not bad overall with several beating expectations, and given that investors are expecting maybe not the worst but not very good results, investors have that 'not too bad' response. The outlooks are the keys to the market, and outside of some disappointments here and there (e.g. AAPL with its usual sand bagging, BRCM with a cautious outlook), no one is predicting disaster. Again, a little 'not bad' optimism as a result.
Just a little bit of optimism, however. Futures were up but stocks started a bit lower. After a short stint in negative territory they started higher, but when oil inventories fell by 1.3M bbl versus the 600K or so expected, oil recovered to flat from losses over 2 points, and when it did the market gave up that early move. Indeed, once more the key for the session was oil's movement. After bouncing back up to flat it turned tail again; gasoline inventories rose nicely and some traders pointed to that along with the lack of impact from hurricane Dolly. Oil returned to its tumbling routine and closed sharply lower again at 124.44, -3.98. Gold decided to join it, falling to 922.80 (-25.70) after visiting 970+ last week. Bond yields moved back up, particularly on the short end as the safety trade in treasuries continues to thin out (2.74% 2 year, +13BP).
The result was enough to bounce stocks back up in the afternoon. Large cap techs bounced back and led the session from an index standpoint while transports provided some true leadership once more, rallying from good patterns. There were some other areas posting gains, but the move lacked any punch, showing some spaghetti-like qualities after growing some backbone Tuesday.
TECHNICAL. Intraday the action was overall up, but it took a wandering route to get there, losing that early bounce, turning lower, then recovering but never reaching back up to the early highs. Not as decisive a session, and with NASDAQ tapping resistance early and fading back the indices looked a bit tired.
INTERNALS. Everything was a bit mushier Wednesday outside of volume. Trade jumped on both exchanges and was well above average. Breadth was modest at 1.5:1 or so. There was a lot of movement but it was not decisively upside. After more than a week into the bounce, however, and a bit of weariness in the move is typical. Doesn't mean it was great action, but it was typical.
CHARTS: As noted, the indices' success is also their own doom so to speak as each upside session brings them closer to the 50% retracement levels that tend to tamp out or restrict relief bounces in bear markets. There is no magic at that level, just history where indices or stocks tend to retrace half their losses then start lower again. Wednesday NASDAQ tapped the 50 day EMA that has dropped just below its 50% level. DJ30 did not get that close, but it did move within 50 points of the key 11,750 level and back off, showing a doji on the candlestick chart. That shows the indices losing some momentum as they approach these levels. Nothing definitively negative in the action, and again after more than a week of gains that is not surprising. It is an area to watch closely, however, given the historical significance and the continuing issues for the market and economy. Maybe oil will drop below $100/bbl and we will all have candy and nuts at Christmas. Until then we are viewing this level with caution.
LEADERSHIP: A bit harder to find Wednesday though transports were strong once more and retailers were in the mix. Large cap technology was the point leader but they also got boxed up while much of the market bounced, and they were playing catch-up on the upside. Staying power was an issue. Retailers posted gains, but the closed well off their early session levels. Same with financials. They were all hot and revved up early but could not keep it up at the highs. With medical/healthcare taking a breather after their solid early leadership there were not enough to take up the torch Wednesday. Thus decent gains but no upside expanding to other areas.
SUM. It was a decent session with the indices holding onto some of the gains, getting a boost from oil's further decline. After a stronger morning move they never really got back on track with any strength even with oil prices turning sharply lower as the afternoon session progressed. Overall the market bounce was a bit weaker as it is a bit long in the tooth with over a week's upside run and it is moving closer to those retracement points. We have played some solid upside stocks on the move, staying in good patterns to help us ride the move higher and try and weather another test. Cannot afford to get too complacent, however, and if this bounce stumbles harder we need to be ready to close some and see how the bounce holds or if it folds and then turn to some more downside plays.
THE MARKET
MARKET SENTIMENT
VIX: 21.31; +0.13
VXN: 27.44; +0.35
VXO: 22.44; +1.05
Put/Call Ratio (CBOE): 0.9; -0.01. After 13 sessions closing above 1.0, the ratio has closed below it for 5 straight sessions. Still at an overall high level but as with most indicators, after it hit its extremes it has backed off as you would expect as some protection is taken off the table. Interestingly the indices are nearing resistance as it does back down, and that is how a contrary indicator works though it is hardly at a level low enough to call it extreme complacency.
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: 27.8%. Scratched back up last week, but basically no gain, up just 0.4% from 27.4%. I guess it just got about as bad as it could get as the market was not showing any signs of improvement at that point. A sharp plunge from 31.9% the prior week, blowing past the 30.9% low hit in March and well below the 35% level considered bullish for stocks (gets so low there is plenty of money lying around to fund a rally if things turn). Steep drop from a rebound high at close to 50% on the run through May. In March the indicator did its job with the dive below 35% and the crossover with the bears. Now it is going above and beyond. Bulls and bears have crossed over again, doing so 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: 48.9%. While the bulls may have managed a paltry optimism gain, the bears swelled their ranges, rising from 47.3%. Not as strong a move as before with a gain from 44.7% and 39.3% in the preceding weeks. Well above the bullish level and the highest since 1995. Again, that is 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. 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: +21.92 points (+0.95%) to close at 2325.88
Volume: 2.751B (+6.63%)
Up Volume: 1.745B (+214.22M)
Down Volume: 944.724M (+148.108M)
A/D and Hi/Lo: Advancers led 1.34 to 1
Previous Session: Advancers led 2.04 to 1
New Highs: 79 (+11)
New Lows: 83 (-23)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
One of the more interesting patterns of the day as NASDAQ tapped the 50 day EMA (2350) on the high and backed off. That is close enough for spitting with respect to the 50% retracement level at 2358. That took it past its old 2004 up trendline (2341) on an intraday basis, but it could not hold it. NASDAQ is encountering some headwinds here though as noted above, there is nothing fatal at all and it can still put in some more upside to the 2400 level if oil continues its healthy decline.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +5.19 points (+0.41%) to close at 1282.19
NYSE Volume: 1.726B (+9.81%)
Up Volume: 1.118B (+33.48M)
Down Volume: 594.974M (+119.365M)
A/D and Hi/Lo: Advancers led 1.66 to 1
Previous Session: Advancers led 2.31 to 1
New Highs: 54 (+18)
New Lows: 104 (-8)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 remains further below its 50 day EMA and retracement point (1309 and 1320, respectively), but it too showed a candlestick chart doji as it closed well off its intraday high after more than a week of rebound effort. It remains just over the January intraday lows and the March closing lows; if it can hold this level and consolidate again that is a positive for more upside toward those higher resistance points. It will likely need NASDAQ to continue higher, however, in order to make that move.
SP600 (+0.51%) let NASDAQ take the driver's seat Wednesday after a strong Tuesday session. On the intraday high that took it to resistance at 380 where it backed off on the close. SP600 has run far and well in its retracement and the action here at 380 is going to be key in how it and other growth indices, e.g. NASDAQ, fare over the next several sessions.
SP600 Chart: http://investmenthouse.com/ihmedia/SP600.jpeg
SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg
DJ30
DJ30 is still a long way off from its 50% recover level (11,982), but that does not mean the action Wednesday was not important. The blue chips rallied up close to 11,750 (11,698) that marks the March lows and they retreated some off the highs. It faces some headwinds there after its rebound move though as with the other indices, even with this Wednesday action backing off the highs, there is still plenty of upside on a further bounce that could see it all the way to 11,750 or the 50 day EMA beyond (11,830) and even on up to near 12K. A lot depends upon oil and earnings outlooks in the near term, but DJ30 is moving into a range where we need to watch its action just as with the other indices.
Stats: +29.88 points (+0.26%) to close at 11632.38
VOLUME: 264M shares Wednesday versus 273M shares Tuesday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
More earnings more oil as the market tries to get more than just mild optimism out of the earnings results. It also wants to get more out of this oil decline and push oil below 120/bbl. While oil can head lower still from here, just as the indices are approaching some resistance on the upside it is approaching some support on the downside in the 122 range. Indeed, it closed on the 90 day SMA Wednesday. Thus we could get a bit of a relief bounce from oil that puts more of a kibosh on the stock market's upside relief bounce.
The question is how the market responds after oil bounces and then fizzles out once more. Oil has broken both 2008 trendlines and after a bounce off this current support a test lower another 5 clicks from the Wednesday close would not be unlikely. Indeed, there is a gap higher in from early May about 7 points lower and another gap higher from early April a full 15 points lower. That would take oil to a longer term up trendline running from August 2007 to the February 2008 low. That would put oil near 110 and a much more palatable level for the economy.
That is, however, something that would occur a bit down the road and after a bounce here. It also requires no external shocks to send it back up. Thus we are still watching how this stock bounce reacts to this near resistance and will be ready to clip upside positions that despite their pedigree start to struggle. At the same time we continue looking at downside as we did even as this upside bounce progressed as stocks rebound from a thrashing but still have not put together a good foundation to run higher.
Support and Resistance
NASDAQ: Closed at 2325.88
Resistance:
2341 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2340 from the March 2007 low
The 50 day EMA at 2350
2358 is a 50% retracement of the June to July selloff.
2370 from the April 2006 peak
2378 is the mid-February peak; 2379 from the October 2006 peak
The 90 day SMA at 2380
2386 is the August 2007 intraday low
2388 is the June 2008 low
2392 is the April 2008 peak
2419 is the January 2008 peak and the early February peak
2451 is the August closing low
The 200 day SMA at 2467
2500 from interim August lows.
Support:
2286 is the first April 2008 gap up point.
2261 is a March 2008 interim low
2202 is the January 2008 low
2155 is the March 2008 low
S&P 500: Closed at 1282.19
Resistance:
The 50 day EMA at 1309
1317 from the February low
1320 is a 50% retracement of the May to July selloff
1324 is the April low
1331 is the June low
1345 is an ancient trendline
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
1387 is the April 2008 intraday high
The 200 day SMA at 1392
1396 is the February 2008 peak
1406 is the August and November 2007 closing low
Support:
1270 is the January low
1257 is the March low
1244 is an August 2005 peak
1240 to 1221 are September 2005 peaks1234 is the July 2006 low
1224 is the June 2006 low
1176 from the Q4 2005 lows
1167 is the January 2005 low
1154 from the May 2005 lows
1142 is the 2005 closing low
Dow: Closed at 11,632.38
Resistance:
11,634 is the January intraday low
11,670 is the May 2006 intraday high; 11,642 closing
11,731 is the March 2008 low
The 50 day EMA at 11,830
11,982 is a 50% retracement of the May to July selloff
12,050 from the March 2007
12,070 from the early February 2008 lows
12,250 from late March 2007 lows
The 90 day SMA at 12,274
12,518 is the August intraday low
12,573 is the mid-February high
The 200 day SMA at 12,660
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
13,092 is the December 2007 intraday low
13,133 is the May 2008 high
Support:
11,604 is the 2004/2005 up trendline
11,317 from March 2006
11,061 from February 2006
10,912 peak from March 2005
10,854 from December 2004
10,701-10,705 from July 2006, July 2005
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 21 - Monday
Leading Economic Indicators, June (10:00): -0.1 actual versus -0.1% expected, +0.1% prior.
July 23 - Wednesday
Crude oil inventories (10:35): -1.3M bbl versus -675K expected, +2.95M prior
July 24 - Thursday
Initial jobless claims (8:30): 380K expected, 366K prior
July 25 - Friday
Durable goods orders, June (8:30): 0.1% expected, 0.0% prior
Michigan sentiment, July revision (10:00): 56.4 expected, 56.6 prior
New home sales, June (10:00: 505K expected, 512K prior
End part 1 of 3
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