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zarif
- 09 Sep 2003 06:09
how do you see the dow index going today
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zarif
- 18 Jun 2004 16:56
- 1946 of 2279
managed a quick long just before and am just watching the dow standing up like a cobra -it can either lash up or down so best to wait and make sure before it takes a chunk out of you.
rgds
zarif
rgds
zarif
zarif
- 22 Jun 2004 07:11
- 1947 of 2279
Copy of Tom Hougards Email I recieved last night.
rgds
zarif
Good morning,
It is nice to finally be out of the expiration week. We settled right in the middle of the range for the day and also in the middle of the range for the week. From history we know that as we go before the expiration we will go after the expiration. As we went nowhere last week this could easily happen again. I am somewhat bearish the market even though we are consolidating below the recent highs so let me be more specific.
I will be bearish below 1132 in the SP500 September contract. I will also consider short positions if the Dow hits 10480 with a stop above 10520. I am already short the NASDAQ 100 September contract. I am looking for a trip down to 1420 on this contract. I would prefer to see lower prices early on in the week. I got Monday as a fairly neutral range day with a negative bias (despite the big mark up in the market this morning). I got Tuesday as a definite down day in my analysis and confirmation of weakness comes from trading below 1132. Above 1142 will most likely cause short covering and a lot of breakout traders entering the market. I will short weakness and not strength, and any move above 1142, in particular after expiration, can cause the kind of vertical moves that I have seen countless times after expiration. Dont get in the way of those moves.
NASDAQ is definitely not a happy index and I am already short here. I think we will see weakness here first and I will add to positions less than 1470.
The European markets are a mixed bag this morning with the FTSE down for the day and the DAX up for the day. I am fully aware of the bullish potential, in particular in the SP500. The all-time high in March 2000 was 1553. The 24th June is 1553 days from the all-time high and I am waiting for this time and price square out to occur
We are entering a time period in the market with huge cyclical turns. One is the square out but I also got cycles from the All-time high, the 9/11 low, the bear market low and the highs in February. Additionally I got the big master cycles pointing to a momentum move within the next 10 trading days. It is without doubt going to be a mover and I would advice you to stay on your toes.
What are the obstacles? We got the Iraq handover at the end of the month. If this can take place without any disturbances the market will be pleased and will begin to look forward to the election. Seasonally and statistically this would mean rising equity prices into September or longer. Until the 30th deadline the market could be nervous. However, the flipside is the month-end and quarter-end mark up. Funds will look to mark up stock holdings going into the last day of the month. This will add to volatility.
I am long gold and I think this commodity is on the verge of breaking higher. Unfortunately I dont know what the earthly implications are for rising prices or to be precise what gold is pricing in? Is it the Iraq handover? Is it the Money Supply situation in the US? Who knows? Any suggestions are welcome. Either way the metal is moving higher and I want to be onboard. I bet small in this as it can be quite volatile. That is one advantage of a spread betting account. You can trade a commodity in a size that suits you.
By the way I do from time to time post on www.TacticalTrader.com . It is a very good site with good posters and a nice atmosphere. It is free as well.
I promised myself last week not to disclose my positions again. I mentioned what I was trading and what my positions were. Unfortunately I received a flood of questions whether I was still in or I had taken profits. If you decide to take out positions in the market, then decide upon your stop before hand. If you dont know how to derive buy or sell signals using for example mathematical trend lines or geometry then dont follow my calls ( which is you own responsibility either way). If you want to learn these methods then feel free to drop me an email. I will then contact you later in the year when I am running seminars.
Today is solstice. It is the day when the sun stands at its highest point on heaven. It is a seasonal turn date. Does solstice ever mark a turning point in the markets?
Answer: I can only answer for the equity market and only for the Dow and only for the last 25 years (because I have to do it manually and it is time consuming). Hopefully a sample space of 25 years against a history of 125 years will suffice.
The conclusion is in my opinion ( visually and not a mathematical opinion - i.e. I have not performed rigorous checks ) that SOLSTICE - the point in the year - a seasonal date according to Gann and others - where the sun is highest on the heaven - DOES NOT MARK A SIGNIFICANT TURN IN TREND enough times to make it statistically significant.
Of the 25 years I went through the Dow had 5 significant turns on this day or the day before or after.
14 years saw no significant change in trend.
10 years saw a slight change in trend - for as little as two days and as much as 5 days but within a confined range.
Of the 10 years there were 5 years where the 21st market a low or high for the next month or more.
I wish you a happy trading week.
Tom
rgds
zarif
Good morning,
It is nice to finally be out of the expiration week. We settled right in the middle of the range for the day and also in the middle of the range for the week. From history we know that as we go before the expiration we will go after the expiration. As we went nowhere last week this could easily happen again. I am somewhat bearish the market even though we are consolidating below the recent highs so let me be more specific.
I will be bearish below 1132 in the SP500 September contract. I will also consider short positions if the Dow hits 10480 with a stop above 10520. I am already short the NASDAQ 100 September contract. I am looking for a trip down to 1420 on this contract. I would prefer to see lower prices early on in the week. I got Monday as a fairly neutral range day with a negative bias (despite the big mark up in the market this morning). I got Tuesday as a definite down day in my analysis and confirmation of weakness comes from trading below 1132. Above 1142 will most likely cause short covering and a lot of breakout traders entering the market. I will short weakness and not strength, and any move above 1142, in particular after expiration, can cause the kind of vertical moves that I have seen countless times after expiration. Dont get in the way of those moves.
NASDAQ is definitely not a happy index and I am already short here. I think we will see weakness here first and I will add to positions less than 1470.
The European markets are a mixed bag this morning with the FTSE down for the day and the DAX up for the day. I am fully aware of the bullish potential, in particular in the SP500. The all-time high in March 2000 was 1553. The 24th June is 1553 days from the all-time high and I am waiting for this time and price square out to occur
We are entering a time period in the market with huge cyclical turns. One is the square out but I also got cycles from the All-time high, the 9/11 low, the bear market low and the highs in February. Additionally I got the big master cycles pointing to a momentum move within the next 10 trading days. It is without doubt going to be a mover and I would advice you to stay on your toes.
What are the obstacles? We got the Iraq handover at the end of the month. If this can take place without any disturbances the market will be pleased and will begin to look forward to the election. Seasonally and statistically this would mean rising equity prices into September or longer. Until the 30th deadline the market could be nervous. However, the flipside is the month-end and quarter-end mark up. Funds will look to mark up stock holdings going into the last day of the month. This will add to volatility.
I am long gold and I think this commodity is on the verge of breaking higher. Unfortunately I dont know what the earthly implications are for rising prices or to be precise what gold is pricing in? Is it the Iraq handover? Is it the Money Supply situation in the US? Who knows? Any suggestions are welcome. Either way the metal is moving higher and I want to be onboard. I bet small in this as it can be quite volatile. That is one advantage of a spread betting account. You can trade a commodity in a size that suits you.
By the way I do from time to time post on www.TacticalTrader.com . It is a very good site with good posters and a nice atmosphere. It is free as well.
I promised myself last week not to disclose my positions again. I mentioned what I was trading and what my positions were. Unfortunately I received a flood of questions whether I was still in or I had taken profits. If you decide to take out positions in the market, then decide upon your stop before hand. If you dont know how to derive buy or sell signals using for example mathematical trend lines or geometry then dont follow my calls ( which is you own responsibility either way). If you want to learn these methods then feel free to drop me an email. I will then contact you later in the year when I am running seminars.
Today is solstice. It is the day when the sun stands at its highest point on heaven. It is a seasonal turn date. Does solstice ever mark a turning point in the markets?
Answer: I can only answer for the equity market and only for the Dow and only for the last 25 years (because I have to do it manually and it is time consuming). Hopefully a sample space of 25 years against a history of 125 years will suffice.
The conclusion is in my opinion ( visually and not a mathematical opinion - i.e. I have not performed rigorous checks ) that SOLSTICE - the point in the year - a seasonal date according to Gann and others - where the sun is highest on the heaven - DOES NOT MARK A SIGNIFICANT TURN IN TREND enough times to make it statistically significant.
Of the 25 years I went through the Dow had 5 significant turns on this day or the day before or after.
14 years saw no significant change in trend.
10 years saw a slight change in trend - for as little as two days and as much as 5 days but within a confined range.
Of the 10 years there were 5 years where the 21st market a low or high for the next month or more.
I wish you a happy trading week.
Tom
zarif
- 22 Jun 2004 12:04
- 1948 of 2279
Tom Hougards email for today analysis
Good morning,
I got the downside I was looking for in the NASDAQ. Stops are in. I still got today as a down day as well, but I am wary that there was a spill-over from the cycle and I got most of the downside yesterday. I still would like to see 1420 in the NASDAQ and will run the position. The problem (there are always problems in the market and things to watch out for J ) I have is the month-end pattern. We have 7 days left of the month and the quarter. In this time period we tend to see the market make an effort to push higher to mark up Wall Streets portfolios. It is common practise and something you should be aware of.
Technically I would say to you that as long as the market is below 1142 but above 1132 in the SP500 the market is neutral and is just market time. A move above is bullish and a move below is bearish. Yesterday we tried for the 1128 but held. You may recall that the 1128 was the support area from the decline earlier in the month, funnily enough also on a Monday!!
1132 will now be new resistance I would expect traders come in and defend the 1128 today. I doubt very much anyone is interested in lower prices but if it does trade lower short positions are required and the first target is 1122 and then 1108.
The key will be the financials like banks and brokers. Many of them are reporting shortly, and most of them have had sizeable declines since the February highs. I would watch this group closely. You should also pay attention to the old generals like GE and MSFT. When the Dow drops 80 points intra-day and those two still hold up for the day, it is a sign of strength.
So the conclusion is unfortunately a mixed bag. I am short NASDAQ. I suspect that the SP500 will not attract any major selling until we are below 1128. There is very little to add.
IBM is a very interesting stock to follow. It tracks the big indices very well and has beautiful patterns and cycles. IBM is in a make-or-break situation. The blue line shows that IBM traded above this price level of $90 for 3 years. In April 2002 IBM broke $90 in a gap down which took 94 weeks to fill. The challenge is always to trade what you see and not what you think. It is even better to trade with the idea that you have to second-guess what they are thinking. In this case they are the big funds. IBM is a real bell weather and tracks the economic cycle well. I have included the volume figures for the chart as well. We are right at the critical $89/90 price level. The chart pattern is bullish but the volume is telling a different story. It points out that the last years rally has been on declining volume. That is not a bullish sign but you got to give the pattern the benefit of the doubt. If the latter part of the year is bullish I think IBM will perform well and regain $100. Use the $89 as a pivot. Have you ever heard the saying: Dont short a dull market? That is my concern here. We are simply doing nothing because no one really wants to sell and everyone is holding out for the summer rally.
Well, you are prepared price wise. Just follow the levels given in the SP500 and use prudent stops.
Tom
Good morning,
I got the downside I was looking for in the NASDAQ. Stops are in. I still got today as a down day as well, but I am wary that there was a spill-over from the cycle and I got most of the downside yesterday. I still would like to see 1420 in the NASDAQ and will run the position. The problem (there are always problems in the market and things to watch out for J ) I have is the month-end pattern. We have 7 days left of the month and the quarter. In this time period we tend to see the market make an effort to push higher to mark up Wall Streets portfolios. It is common practise and something you should be aware of.
Technically I would say to you that as long as the market is below 1142 but above 1132 in the SP500 the market is neutral and is just market time. A move above is bullish and a move below is bearish. Yesterday we tried for the 1128 but held. You may recall that the 1128 was the support area from the decline earlier in the month, funnily enough also on a Monday!!
1132 will now be new resistance I would expect traders come in and defend the 1128 today. I doubt very much anyone is interested in lower prices but if it does trade lower short positions are required and the first target is 1122 and then 1108.
The key will be the financials like banks and brokers. Many of them are reporting shortly, and most of them have had sizeable declines since the February highs. I would watch this group closely. You should also pay attention to the old generals like GE and MSFT. When the Dow drops 80 points intra-day and those two still hold up for the day, it is a sign of strength.
So the conclusion is unfortunately a mixed bag. I am short NASDAQ. I suspect that the SP500 will not attract any major selling until we are below 1128. There is very little to add.
IBM is a very interesting stock to follow. It tracks the big indices very well and has beautiful patterns and cycles. IBM is in a make-or-break situation. The blue line shows that IBM traded above this price level of $90 for 3 years. In April 2002 IBM broke $90 in a gap down which took 94 weeks to fill. The challenge is always to trade what you see and not what you think. It is even better to trade with the idea that you have to second-guess what they are thinking. In this case they are the big funds. IBM is a real bell weather and tracks the economic cycle well. I have included the volume figures for the chart as well. We are right at the critical $89/90 price level. The chart pattern is bullish but the volume is telling a different story. It points out that the last years rally has been on declining volume. That is not a bullish sign but you got to give the pattern the benefit of the doubt. If the latter part of the year is bullish I think IBM will perform well and regain $100. Use the $89 as a pivot. Have you ever heard the saying: Dont short a dull market? That is my concern here. We are simply doing nothing because no one really wants to sell and everyone is holding out for the summer rally.
Well, you are prepared price wise. Just follow the levels given in the SP500 and use prudent stops.
Tom
zarif
- 23 Jun 2004 11:10
- 1949 of 2279
Tom Hougards analysis for today
rgds
zarif
Good morning,
The Dow rallied after a weak open yesterday and it looks like typical portfolio mark up without any real conviction on the tape. Once the indices make it into positive territory the buying stops and the volume dries up. This is a typical pattern going into quarter end. Institutions are clearly nervous about being in the market but have to be fully invested at all times. Stocks like EBay are seeing huge intra-day reversals in pure manipulation of the tape. It is most likely that these NASDAQ ( EBay, Cisco, Klac etc) will lead to higher prices between now and the 30th June.
All in all we got a range bound market which is trying to think of an excuse to move higher, but there are too many uncertainties for Wall Street to deal with. The Fed meeting is on the back of peoples minds as is the Iraq handover.
I will have to be biased long above 1132 in the SP500 and short below 1128. This is the same strategy as yesterday. We are so close to the big turn that you have to be double alert for fake moves. It would be ideal to have a big spike into the 1144 area again before moving lower, if at all. As you know I got major cycles hitting between now and the 4th of July. If I see a strong rally develop today I will not short it as it could lead to a 2-3 day rally. Only a move back below 1128 will get me short again. I am still short NASDAQ and remain so. The weak Globex market is probably institutions hedging against any potential downside for the next week.
So the conclusion for me is that I will stay short NASDAQ unless the Comp gets back above 2000 (although I am trading the NASDAQ 100 contract). I will favour the long side in the SP500 above 1132 and favour shorts below 1128. From this point forward a move below 1128 should be terminal. The current pattern for the quarter-end is typical so dont stand in the way if they begin to mark up the go-go names mentioned above.
Today I got two potential highs, one coming in at 17:10 and another high near 18:50.
Vodafone is breaking down and possible target prices are as low as 107.50 pence. The geometry was hit perfectly yesterday and the low of 121.75 is a perfect equal wave relationship. If the 121.75 is taken out Vodafone should be on its way to 107.50 as the first target. The low of yesterday coincided with the geometry and also with a 38% retracement. This could have been it for Vodafone and higher prices are to follow. However a move below 121 should set about more weakness.
Good luck
Tom
rgds
zarif
Good morning,
The Dow rallied after a weak open yesterday and it looks like typical portfolio mark up without any real conviction on the tape. Once the indices make it into positive territory the buying stops and the volume dries up. This is a typical pattern going into quarter end. Institutions are clearly nervous about being in the market but have to be fully invested at all times. Stocks like EBay are seeing huge intra-day reversals in pure manipulation of the tape. It is most likely that these NASDAQ ( EBay, Cisco, Klac etc) will lead to higher prices between now and the 30th June.
All in all we got a range bound market which is trying to think of an excuse to move higher, but there are too many uncertainties for Wall Street to deal with. The Fed meeting is on the back of peoples minds as is the Iraq handover.
I will have to be biased long above 1132 in the SP500 and short below 1128. This is the same strategy as yesterday. We are so close to the big turn that you have to be double alert for fake moves. It would be ideal to have a big spike into the 1144 area again before moving lower, if at all. As you know I got major cycles hitting between now and the 4th of July. If I see a strong rally develop today I will not short it as it could lead to a 2-3 day rally. Only a move back below 1128 will get me short again. I am still short NASDAQ and remain so. The weak Globex market is probably institutions hedging against any potential downside for the next week.
So the conclusion for me is that I will stay short NASDAQ unless the Comp gets back above 2000 (although I am trading the NASDAQ 100 contract). I will favour the long side in the SP500 above 1132 and favour shorts below 1128. From this point forward a move below 1128 should be terminal. The current pattern for the quarter-end is typical so dont stand in the way if they begin to mark up the go-go names mentioned above.
Today I got two potential highs, one coming in at 17:10 and another high near 18:50.
Vodafone is breaking down and possible target prices are as low as 107.50 pence. The geometry was hit perfectly yesterday and the low of 121.75 is a perfect equal wave relationship. If the 121.75 is taken out Vodafone should be on its way to 107.50 as the first target. The low of yesterday coincided with the geometry and also with a 38% retracement. This could have been it for Vodafone and higher prices are to follow. However a move below 121 should set about more weakness.
Good luck
Tom
zarif
- 24 Jun 2004 11:09
- 1950 of 2279
Tom hougards email analysis and thoughts for today.
rgds
zarif
Good morning,
What an amazing trading day. The market held the 1132 area and turned on a dime. The target of 1144 area was calculated using a very simple 1 to 1 wave advancement technique and it was hit spot on at 1145.25.
It is always difficult for me to write the analysis after a big rally on Wall Street. Few would like to buy it here as they feel they have missed the boat. Given the fact that we have hit a major target in the market we should be short against 1145. This is a strategy that you can employ but it is probably not very wise. I am fairly certain that the market will have a stab at the 1148 area and depending on momentum we could see higher prices going into month end and the Fed meeting in a couple of days. In other words I dont think the market will stop here. It seemed strong to me yesterday and there was a real concerted effort to mark up the names I mentioned yesterday. Ebay, IBM, GE and INTC were all trading higher on the day. These stocks are always worth watching for a bit of tape manipulation before the important quarter-end mark to market for institutions.
One counter argument that could be made is the spike I was talking about yesterday. Last night could have been it. I was looking for a spike into the major square out of the all time high in calendar days. This came in last night or early today. Momentum will be the key but a move below 1138 will send a cold shiver down the bulls spine and will most likely cause more selling. That would be a major disappointment to the bulls.
So to conclude: we hit a major target last night on the dot. When targets are met the market sometimes lingers around before turning, while at other times they turn promptly. In this case I will favour no turn at all. I think after basing for as long as we have the market could move higher over the coming day or two before turning. You may want to consider a few shorts with tight stops but I would not fight the tape if we are making new highs on the day after 19:00 UK time. I got a nice turn today around 18:00 UK time and I will in case we are moving higher consider a short day trade position around this time frame.
I shall however not be trading the market this morning. I am going to my first Wimbledon experience and luckily it is not raining today in London J
Tom
rgds
zarif
Good morning,
What an amazing trading day. The market held the 1132 area and turned on a dime. The target of 1144 area was calculated using a very simple 1 to 1 wave advancement technique and it was hit spot on at 1145.25.
It is always difficult for me to write the analysis after a big rally on Wall Street. Few would like to buy it here as they feel they have missed the boat. Given the fact that we have hit a major target in the market we should be short against 1145. This is a strategy that you can employ but it is probably not very wise. I am fairly certain that the market will have a stab at the 1148 area and depending on momentum we could see higher prices going into month end and the Fed meeting in a couple of days. In other words I dont think the market will stop here. It seemed strong to me yesterday and there was a real concerted effort to mark up the names I mentioned yesterday. Ebay, IBM, GE and INTC were all trading higher on the day. These stocks are always worth watching for a bit of tape manipulation before the important quarter-end mark to market for institutions.
One counter argument that could be made is the spike I was talking about yesterday. Last night could have been it. I was looking for a spike into the major square out of the all time high in calendar days. This came in last night or early today. Momentum will be the key but a move below 1138 will send a cold shiver down the bulls spine and will most likely cause more selling. That would be a major disappointment to the bulls.
So to conclude: we hit a major target last night on the dot. When targets are met the market sometimes lingers around before turning, while at other times they turn promptly. In this case I will favour no turn at all. I think after basing for as long as we have the market could move higher over the coming day or two before turning. You may want to consider a few shorts with tight stops but I would not fight the tape if we are making new highs on the day after 19:00 UK time. I got a nice turn today around 18:00 UK time and I will in case we are moving higher consider a short day trade position around this time frame.
I shall however not be trading the market this morning. I am going to my first Wimbledon experience and luckily it is not raining today in London J
Tom
zarif
- 24 Jun 2004 15:06
- 1951 of 2279
Just watching the dow atm. no positions open.
Closed the cable long in good profit. so that will hopefully make for a good weekend and any quick scalps if possible on the dow will be bonus for the slush fund.
rgds
zarif
Closed the cable long in good profit. so that will hopefully make for a good weekend and any quick scalps if possible on the dow will be bonus for the slush fund.
rgds
zarif
zarif
- 25 Jun 2004 11:28
- 1952 of 2279
Tom Hougards thoughts for todays market.
rgds
zarif
Good morning,
Thursday was a bit of a disappointment for the bulls but there was no real damage done to the chart. I hope some of you caught the 18:00 turn which came in bang on time. We are still bullish above 1132 and this can now be extended to 1138. I think we are in the quarter-end mark up period but I dont think institutions intend to take stocks too much further. There are 4 days left of the quarter. Today can go either way and I will favour the long side above 1138. There are clearly some items on the exogenous agenda that can and potentially will shake the market a little. The FED meeting is next week, and the Iraq handover is taking place. You also got the Russell 2000 re-weighting in this major index which will require some adjusting of the big portfolios.
I will keep todays analysis short. I dont see any real reason to be bearish right now. It was mixed bag yesterday but stocks like Goldman Sachs, Bank of America, Citi Group and Lehman all had good reversals and the strength in the financials is usually a good sign for the general market.
For today I got another 18:00 UK time turn. I wont be trading of course as I will be warming up shouting and cheering for Denmark. J
Have a nice weekend.
Tom
rgds
zarif
Good morning,
Thursday was a bit of a disappointment for the bulls but there was no real damage done to the chart. I hope some of you caught the 18:00 turn which came in bang on time. We are still bullish above 1132 and this can now be extended to 1138. I think we are in the quarter-end mark up period but I dont think institutions intend to take stocks too much further. There are 4 days left of the quarter. Today can go either way and I will favour the long side above 1138. There are clearly some items on the exogenous agenda that can and potentially will shake the market a little. The FED meeting is next week, and the Iraq handover is taking place. You also got the Russell 2000 re-weighting in this major index which will require some adjusting of the big portfolios.
I will keep todays analysis short. I dont see any real reason to be bearish right now. It was mixed bag yesterday but stocks like Goldman Sachs, Bank of America, Citi Group and Lehman all had good reversals and the strength in the financials is usually a good sign for the general market.
For today I got another 18:00 UK time turn. I wont be trading of course as I will be warming up shouting and cheering for Denmark. J
Have a nice weekend.
Tom
zarif
- 25 Jun 2004 11:32
- 1953 of 2279
Hi guys/Gals.
I have added the Live charts link above and it is a mine full of information on indices,currencies etc etc.
rgds
zarif
I have added the Live charts link above and it is a mine full of information on indices,currencies etc etc.
rgds
zarif
Insider trader
- 28 Jun 2004 08:27
- 1954 of 2279
- Indexes closed mixed, poised for next week.
- GDP pulled lower by surging imports, Michigan sentiment rises.
- Fed ready to raise rates, but cautious of Japan lesson.
- Good finish to a solid week as semiconductors come to life.
- Big week, market ready to run ahead of the actual news.
Stocks hold gains ahead of important week.
The major indexes finished mixed with semiconductors, techs and smaller caps closing higher, DJ30 and the large cap SP500 closing lower. In the end they all closed around the highs for the week, mostly maintaining the solid gains that occurred when the market suddenly found volume on Tuesday and Wednesday. Not blowout volume, but a return to solid trade after a couple of months of low volume drift.
Why are we not throwing Friday volume into that mix? Because volume was snoozing until the close. It was the final day for the rebalancing of all of the Russell indexes, however, and though funds had 10 days to accomplish the feat, it appears that they, much as teenagers writing a term paper, waited until the night before to do their homework. NASDAQ volume was a sleepy 1.2B with less than 30 minutes left. It finished at 2.67B. NYSE experienced an uptick as well, coming in at 1.8B. Stocks went wild at the close with massive market on close orders sending stocks down, up and then back to where they were just moments before.
That volume left things looking different at the close versus 20 minutes earlier. Before that influence, however, stocks were mostly holding steady on lower volume, down from the session highs but holding up as they moved into another weekend filled with high anxiety about the stepped up Iraq violence. After a nice move Tuesday and Wednesday, stocks stood by their gains as they took a breather, and are poised to move higher Monday and Tuesday ahead of the FOMC meeting and the Iraq handover. If stocks do continue the move as we anticipate, that will put NASDAQ near the April highs. At that point and when the anticipation becomes fact, the market may have a bit of a struggle.
That is one reason we issued several alerts taking some interim option gains that were building up nicely as stocks had moved up well last week but started to falter over lunch. It was worth locking in some solid gain ahead of the weekend and we will look at doing the same ahead of the mid-week headlines on a further move. We still anticipate a move up into that news barring any major Iraq or other geopolitical event, and that will rack up more gains that we will look at banking ahead of the news.
THE ECONOMY
Final Q1 GDP 3.9%, below 4.4% expected.
It all depends upon where you get your news as to what view you have of the economic data that comes out. Many stories we saw on GDP only talked about how it was below expectations and down for the second straight quarter (4.1% final in Q4). That of course is not the best news for the economy, but it is not the negative impression that many of the stories left you with as they left out key facts that complete the picture.
The primary story is how GDP is calculated. GDP measures production here in the US. In Q1 consumers bought a lot of imported goods. A lot. Imports are deducted from GDP because they are not created domestically. The US consumer, however, buys foreign and domestic goods with equal enthusiasm when he or she feels confident about the future. IN Q1 the import purchases were much greater than expected, so much so that they were the primary cause of the fall in GDP from 4.4% to 3.9%. Without the imports, GDP would have been right up with expectations.
This always causes a lot of angst with economy watchers who refuse to factor in consumption of foreign goods as an indication of a strong domestic consumer. In addition there are other indications than the consumer; the big surge in imports masks them in final GDP. Thus the headlines about a weak GDP are somewhat disingenuous, but when you are in a political campaign year, the 'facts' are often adjusted to fit the purposes of the writer.
Not that the economy is surging, but it is not crumbling either.
ECRI's weekly leading index slid again the past week, continuing the string of lower indications the past month. As noted last week, this does not mean the expansion is over, it just means it is slowing from a very solid pace. New home sales surged in May, existing home sales (84% of the market) jumped 2.6%, corporate profits were up 2.1% in Q1 over Q4, much better than the 1.4% reported in May. That was slower than the huge 7.6% jump in Q4, but the pace is still solid overall.
It is important to remember that the economy moves ahead in spurts and then pauses, all the while maintaining its trend. In our society of instant information, we spend way, way, way too much time looking at not just the trees, but the individual twigs and leaves as well. The daily, even hourly, economic reports tend to obscure the bigger picture if we don't keep grounded in the bigger picture.
We continue to see signs of slowing ahead, but not a catastrophic drop in the economy. There is some uncertainty as to the future with the Fed about to embark on a rate hiking move, and that has, based on our surveys of businesses, put a bit of a slowdown on future investment. It has not stalled it, but uncertainty is the hemming in the strength of the expansion as some plans for investment and hiring are put off a bit longer just to see what happens. The Fed's history of killing off expansions casts a long shadow
The Fed's tightrope walk.
While the world is certain inflation is rising in the US, there are many undercurrents that the Fed has to be concerned with, and from what we hear from our friends at the central bank, the Fed is aware of them.
High energy cost paradox.
One that we have discussed in the past month is the paradox of higher energy prices. Oil prices have finally hit a peak and are hovering between $36 and $38/bbl. All of that production has had some impact and we anticipate it will continue to weigh on prices a bit more. They are still high, however, high enough to crimp the economy. Higher energy prices can pass through to consumer prices at some point. They have not in the last few price spikes, but that is always a threat. Higher consumer prices caused by rising energy prices can be called inflation, but it is not the textbook definition, i.e., more dollars chasing fewer goods. Energy price hikes are different from other price increases, however, because they work to slow the economy. Thus if the Fed raises rates because prices rise as a result of rising energy prices, that has basically a double if not even further magnified slowing effect on the economy. Just ask the 1970's Fed that raised rates to combat rising energy prices. All we got were incredibly high interest rates to go along with an incredibly depressed economy.
The Japan lesson.
The Japanese depression is the other undercurrent the Fed has to factor in. We swung from deflation fears to inflation fears in just about record time. Deflation was still a topic de jour the second half of last year, even among FOMC governors. Now it is not mentioned. Much.
Not many remember or ever knew or cared, but before Japan really went down the rat hole in the 1980's it looked as if it was recovering. After the first stock market bust similar to the US market's April to May 2000 plunge that took NASDAQ down 40%, the Japanese economy slumped as well, but then stabilized and appeared to be rebounding. The Japanese central bank was ready to stave off inflation that could crimp the recovery, so it hiked interest rates gradually. Problem was, the economy was not nearly as strong as they thought. The problems that gave rise to the collapse were deep rooted; the secular downtrend was in place, and the apparent recovery was just a bounce back in a bigger downtrend. The rate hikes simply put a few more bullet holes in an already declining economy.
The Fed is aware of what happened in Japan. Here in the US the pundits like to say that the US reacted differently, lowering rates rapidly and injecting fiscal stimulus into the system with tax cuts. That is true. As we noted during the recession and slow recovery, however, the Fed was behind the curve in lower rates, never getting ahead of real rates to the downside and thus providing incentives to borrow until after the fiscal stimulus had come into play. That helped prolong the decline and mitigated the recovery.
Now we are now 21 months from the market bottom, the true measure of when to start the clock for an economic recovery. We have had some very strong economic growth rates and the economy has expanded nicely, but we also have major problems facing us. We are at war, we have the threat of nuclear attack here at home, federal spending remains out of control. It is sickeningly ironic that our leaders ask us to sacrifice when their proposed highway bill has so much extravagance and pork in it. They say the entrepreneurs must sacrifice but at the same time funnel tax dollars to feed the fat man as President Reagan called the federal government.
The point: while everyone is concerned about inflation, we see signs of slowing economic activity down the road. Just look at commodities prices. The CRB peaked in March and has been trending lower since. The CRB industrials index did likewise. Commodities indicate that China has in fact slowed its economy, and as we are arguing, the US economy is slowing as well. Right now it is not an immediate problem, but with sustained higher energy costs that are working to slow the economy already, a series of rate hikes could accelerate the slowing already occurring. The growth rates have been impressive, but we have come through some very strange times. Stock prices started out at relatively high P/E's when the recovery began. There is another world war of sorts ongoing, and that has a way of bleeding economies. While there may be signs of near term price increases that need to be recognized and addressed, there are also big macro currents that raise the possibility of another undulation lower. Thus clamping down on growth by rate hikes is not the way to rectify the perceived price problem. Instead, actively promote supply with incentives to continue investing in the US. That way you address the price issues by increasing supply, and you also build up economic activity to help stave off any bigger picture macroeconomic downturn.
For now that is not even a consideration. There are two different camps in this political fight: making tax cuts and current stimulus current or cut it back, redistribute it, and then increase federal spending even more with national healthcare, etc. Both sides need to figure out spending is the real problem and slash federal spending. Cut the spending and let the taxpayers decide where their money should best be spent. The way both sides are racing to spend our money, that won't happen anytime soon.
THE MARKET
Stocks fought off the weaker GDP number and showed some early strength. While they backed off by the close, they did not roll over and they did not give up their higher volume gains from earlier in the week. The large caps and blue chips had a harder time late in the session, but overall stocks are poised to continue the move that started mid-week on rising volume.
The big difference in the market last week was the resurgence of the semiconductors. They rallied off some support at 450, paused after breaking the 50 day EMA, and are now heading toward the 200 day SMA (488) where they failed twice in the past month. Another good rally puts SOX right at that resistance. Whether it breaks through or fails will key the rest of the market's move. We anticipate the rally to resume ahead of the FOMC and Iraq handover Wednesday, and that would put SOX at the 200 day SMA and perhaps a bit beyond toward 500. Just as with the April highs on NASDAQ and SP500, that won't be easy for SOX to break through, at least on the first try. Volume will have to be even better than last week to clear those next levels.
Again, it is set up to move higher to try the next levels early this week, but moving significantly past those levels will be difficult unless there is a true change of market character.
Market Sentiment
Bulls vs. bears: Bulls backed off last week to 54.6% after hitting over 56% the prior week. 55% bullish advisors is a bearish sign, but the market rallied in any event. As noted last week, there was the 'indicators don't work anymore' feeling on the floor, and that is often the signal that at least near term there is enough pessimism to start a move higher. With bulls still near the 55% level and bears still low at 18.6% (20% is considered bearish), sustained upside will be hard to come by. Still, remember that these are secondary indicators. Price and volume action along with leadership stocks are the primary indicators as to the market's next move. Last week saw a good volume resumption of the rally that has some more upside in it.
VIX: 15.19; +0.38
VXN: 18.96; -0.4
VXO: 14.89; +0.5
Put/Call Ratio (CBOE): 0.68; +0.02
NASDAQ
One of the market leaders last week, NASDAQ posted another gain Friday, just eclipsing the early Junee highs. In good position to make a run at the April highs heading into the FOMC meeting.
Stats: +9.9 points (+0.49%) to close at 2025.47
Volume: 2.671B (+55.72%). Huge volume in the last few minutes made it look like an accumulation session. Before that surge, however, volume was 1.2B, well off pace from earlier in the week.
Up Volume: 1.728B (+968M)
Down Volume: 904M (+24M)
A/D and Hi/Lo: Advancers led 1.41 to 1. Not bad breadth for a slow session.
Previous Session: Advancers led 1.09 to 1
New Highs: 168 (+41)
New Lows: 84 (+54)
Once again rallied over the Junee high (2024) to 2033 before backing off at the close. Held the break over the Junee high but it was hard to quantify the action with the huge late volume surge. Before that surge volume was light, so the move was pensive. It has, however, left the NASDAQ in good position to continue the break higher. The initial targets are the late April high (2059) and early April high (2079). From there it is a matter of whether the move can gain additional strength.
The large cap techs put together a decent move itself though volume again eased, coming in well below average on QQQ. NDX, the full strength measure of the large cap techs showed solid volume heading into the weekend. QQQ and NDX have formed nice patterns and are ready for a break higher early in the week.
S&P 500/NYSE
The large cap names along with the blue chips took the hardest beating, falling back hard late as a lot of money moved around in the Russell rebalancing.
Stats: -6.22 points (-0.55%) to close at 1134.43
NYSE Volume: 1.817B (+30.29%). Huge volume jump late in the session. With less than a half hour left volume was just over 1B. Thus the selling was not distribution.
Up Volume: 841M (+240M)
Down Volume: 938M (+158M)
A/D and Hi/Lo: Advancers led 1.22 to 1. Very modest breadth but still positive even on a downside session.
Previous Session: Advancers led 1.06 to 1
New Highs: 149 (-56)
New Lows: 30 (+7)
Again cleared the early Junee high (1142) on the high, but was unable to hold the advance. It was holding up well until when it fell off the table with all of the market on close orders. It managed to hold roughly at the 10 day EMA (1134) and the 2004 down trendline. Despite the late dump lower, this leaves it in good position to move higher early this week. A 16 point move to April high (1150) with the January to March highs (1158-1163) realistically in range as well given NASDAQ still has plenty of upside before it gets to hits April high.
DJ30
The blue chips were hammered on the close similar to SP500 with the likes of GE and XOM getting clubbed. It fell through the 10 day EMA (10,390), but it is hanging on in the recent range. Unlike NASDAQ, it gave back its gain from mid-week. It is still holding up and ready to move with the rest of the market if SP500 and NASDAQ can recover and resume the break higher.
Stats: -71.97 points (-0.69%) to close at 10371.84
Volume: 308 million shares Friday versus 214 million shares Thursday. Big volume on both upside and downside moves, again with much of the volume and movement coming at the close basically requires you to toss out the volume for this index as well.
THIS WEEK
Big week in all respects. The market broke higher on solid volume last week, paused, and is set to resume the move ahead of the Wednesday FOMC announcement regarding interest rates and the Iraq handover. The latter is not like, say Y2K, that was over on a date specific. It is an important date, however, for the effort in Iraq. The economic data is also huge with ISM, personal income and spending, consumer confidence, and the June employment report. All of this comes before the July 4 three-day holiday, another date brought up as a possible terrorist threat.
That is a lot to digest at any time. We still anticipate stocks moving higher in anticipation of the Wednesday events as they continue to price in the possibilities on the idea of the events. Once they are here we have to see how the markets react. Key resistance lies ahead at the April and January highs; again, volume will have to be much improved for the indexes to take those levels out and continue higher.
In addition, the second half of July is never really kind to stocks. They move up into earnings, rally some on the first solid results, but then run out of steam. Q3 estimates are being written higher toward 26% already, so guidance will have to be good to keep stocks moving higher. We don't see anything to change the pattern this time around, but as always, if the market shows strong volume pushing higher, we will let the market lead the way.
What we are going to focus on this week are stocks that have made good moves and in the softer market Thursday and Friday have pulled back to test those moves. When they start back up they have proven the breakout as they have passed the test. Those show very good support and often cruise right on up in a rally. We won't turn down good patterns of any sort, but with the market already having run well and with the potential to run up to the big news Wednesday and then pullback, we don't want to into too many new positions that don't have much time or room to run.
Again, we won't pass up great patterns making strong moves, however. Why? Because leading stocks making strong moves in good patterns are one of the top indicators of what the market is going to do. Further, those stocks move farther and faster, and hold up better if the market does hit some rocks. It all goes back to seeing the big picture of what can happen and what is likely to happen, but also being smart enough to know that the market is the final decision maker. Take what the market gives and be happy with that.
Support and Resistance
NASDAQ: Closed at 2025.47
Resistance:
2024 is the June high. Not totally broken here.
2050 represents some prior price points and has stopped NASDAQ the last time it tried that level.
April high is 2080.
2089 is the February closing high. 2112 is the early January high.
Support:
2000 is the top of the late 2003 base.
1998 is the January/April down trendline.
The 18 day EMA (1992)
The 200 day SMA (1975).
1925 is some support.
1900 to 1890.
The April lows (1880, 1878).
S&P 500: Closed at 1134.43
Resistance:
1142 is the June high.
The April and January highs (1150 to 1155).
Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support:
The March/April down trendline at 1133.
The 18 day EMA (1130).
1125 is key support.
The 50 day EMA (1124) and the 50 day SMA (1119).
1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100.
The 200 day SMA (1096)
Dow: Closed at 10,371.84
Resistance:
Late April peaks at 10,478 to 10,512
10,570 is the early April high
Price consolidation at 10,600 level
10,747 is the February high
Support:
The 18 day EMA (10,348)
The January/April down trendline at 10,315
The 50 day EMA (10,294) and SMA (10,255).
Price support at 10,250
The 200 day SMA at 10,148
March low at 10,007. Then 9900-9850.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 28
- Personal Income, May (08:30): 0.5% expected and 0.6% prior
- Personal Spending, May (08:30): 0.8% expected and 0.3% prior
June 29
- Consumer Confidence, June (10:00): 95.0 expected and 93.2 prior
June 30
- Chicago PMI, June (10:00): 64.5 expected and 68.0 prior
- FOMC Meeting (2:15): Expecting a 25 basis point rate hike as forecast by the Fed funds futures contract.
July 1
- Auto Sales, June: 5.6M expected and 5.7M prior
- Truck Sales, June: 8.0M expected and 8.5M prior
- Initial Jobless Claims, 06/26 (08:30): 349K prior
- Construction Spending, May (10:00):.5% expected and 1.3% prior
- ISM Index, June (10:00): 61.2 expected and 62.8 prior
July 02
- Non-farm Payrolls, June (08:30): 240K expected and 248K prior
- Unemployment Rate, June (08:30): 5.6% expected and 5.6% prior
- Hourly Earnings, June (08:30): 0.3% expected and 0.3% prior
- Average Workweek, June (08:30): 33.9 expected and 33.8 prior
- Factory Orders, May (10:00): 1.5% expected and -1.7% prior
- GDP pulled lower by surging imports, Michigan sentiment rises.
- Fed ready to raise rates, but cautious of Japan lesson.
- Good finish to a solid week as semiconductors come to life.
- Big week, market ready to run ahead of the actual news.
Stocks hold gains ahead of important week.
The major indexes finished mixed with semiconductors, techs and smaller caps closing higher, DJ30 and the large cap SP500 closing lower. In the end they all closed around the highs for the week, mostly maintaining the solid gains that occurred when the market suddenly found volume on Tuesday and Wednesday. Not blowout volume, but a return to solid trade after a couple of months of low volume drift.
Why are we not throwing Friday volume into that mix? Because volume was snoozing until the close. It was the final day for the rebalancing of all of the Russell indexes, however, and though funds had 10 days to accomplish the feat, it appears that they, much as teenagers writing a term paper, waited until the night before to do their homework. NASDAQ volume was a sleepy 1.2B with less than 30 minutes left. It finished at 2.67B. NYSE experienced an uptick as well, coming in at 1.8B. Stocks went wild at the close with massive market on close orders sending stocks down, up and then back to where they were just moments before.
That volume left things looking different at the close versus 20 minutes earlier. Before that influence, however, stocks were mostly holding steady on lower volume, down from the session highs but holding up as they moved into another weekend filled with high anxiety about the stepped up Iraq violence. After a nice move Tuesday and Wednesday, stocks stood by their gains as they took a breather, and are poised to move higher Monday and Tuesday ahead of the FOMC meeting and the Iraq handover. If stocks do continue the move as we anticipate, that will put NASDAQ near the April highs. At that point and when the anticipation becomes fact, the market may have a bit of a struggle.
That is one reason we issued several alerts taking some interim option gains that were building up nicely as stocks had moved up well last week but started to falter over lunch. It was worth locking in some solid gain ahead of the weekend and we will look at doing the same ahead of the mid-week headlines on a further move. We still anticipate a move up into that news barring any major Iraq or other geopolitical event, and that will rack up more gains that we will look at banking ahead of the news.
THE ECONOMY
Final Q1 GDP 3.9%, below 4.4% expected.
It all depends upon where you get your news as to what view you have of the economic data that comes out. Many stories we saw on GDP only talked about how it was below expectations and down for the second straight quarter (4.1% final in Q4). That of course is not the best news for the economy, but it is not the negative impression that many of the stories left you with as they left out key facts that complete the picture.
The primary story is how GDP is calculated. GDP measures production here in the US. In Q1 consumers bought a lot of imported goods. A lot. Imports are deducted from GDP because they are not created domestically. The US consumer, however, buys foreign and domestic goods with equal enthusiasm when he or she feels confident about the future. IN Q1 the import purchases were much greater than expected, so much so that they were the primary cause of the fall in GDP from 4.4% to 3.9%. Without the imports, GDP would have been right up with expectations.
This always causes a lot of angst with economy watchers who refuse to factor in consumption of foreign goods as an indication of a strong domestic consumer. In addition there are other indications than the consumer; the big surge in imports masks them in final GDP. Thus the headlines about a weak GDP are somewhat disingenuous, but when you are in a political campaign year, the 'facts' are often adjusted to fit the purposes of the writer.
Not that the economy is surging, but it is not crumbling either.
ECRI's weekly leading index slid again the past week, continuing the string of lower indications the past month. As noted last week, this does not mean the expansion is over, it just means it is slowing from a very solid pace. New home sales surged in May, existing home sales (84% of the market) jumped 2.6%, corporate profits were up 2.1% in Q1 over Q4, much better than the 1.4% reported in May. That was slower than the huge 7.6% jump in Q4, but the pace is still solid overall.
It is important to remember that the economy moves ahead in spurts and then pauses, all the while maintaining its trend. In our society of instant information, we spend way, way, way too much time looking at not just the trees, but the individual twigs and leaves as well. The daily, even hourly, economic reports tend to obscure the bigger picture if we don't keep grounded in the bigger picture.
We continue to see signs of slowing ahead, but not a catastrophic drop in the economy. There is some uncertainty as to the future with the Fed about to embark on a rate hiking move, and that has, based on our surveys of businesses, put a bit of a slowdown on future investment. It has not stalled it, but uncertainty is the hemming in the strength of the expansion as some plans for investment and hiring are put off a bit longer just to see what happens. The Fed's history of killing off expansions casts a long shadow
The Fed's tightrope walk.
While the world is certain inflation is rising in the US, there are many undercurrents that the Fed has to be concerned with, and from what we hear from our friends at the central bank, the Fed is aware of them.
High energy cost paradox.
One that we have discussed in the past month is the paradox of higher energy prices. Oil prices have finally hit a peak and are hovering between $36 and $38/bbl. All of that production has had some impact and we anticipate it will continue to weigh on prices a bit more. They are still high, however, high enough to crimp the economy. Higher energy prices can pass through to consumer prices at some point. They have not in the last few price spikes, but that is always a threat. Higher consumer prices caused by rising energy prices can be called inflation, but it is not the textbook definition, i.e., more dollars chasing fewer goods. Energy price hikes are different from other price increases, however, because they work to slow the economy. Thus if the Fed raises rates because prices rise as a result of rising energy prices, that has basically a double if not even further magnified slowing effect on the economy. Just ask the 1970's Fed that raised rates to combat rising energy prices. All we got were incredibly high interest rates to go along with an incredibly depressed economy.
The Japan lesson.
The Japanese depression is the other undercurrent the Fed has to factor in. We swung from deflation fears to inflation fears in just about record time. Deflation was still a topic de jour the second half of last year, even among FOMC governors. Now it is not mentioned. Much.
Not many remember or ever knew or cared, but before Japan really went down the rat hole in the 1980's it looked as if it was recovering. After the first stock market bust similar to the US market's April to May 2000 plunge that took NASDAQ down 40%, the Japanese economy slumped as well, but then stabilized and appeared to be rebounding. The Japanese central bank was ready to stave off inflation that could crimp the recovery, so it hiked interest rates gradually. Problem was, the economy was not nearly as strong as they thought. The problems that gave rise to the collapse were deep rooted; the secular downtrend was in place, and the apparent recovery was just a bounce back in a bigger downtrend. The rate hikes simply put a few more bullet holes in an already declining economy.
The Fed is aware of what happened in Japan. Here in the US the pundits like to say that the US reacted differently, lowering rates rapidly and injecting fiscal stimulus into the system with tax cuts. That is true. As we noted during the recession and slow recovery, however, the Fed was behind the curve in lower rates, never getting ahead of real rates to the downside and thus providing incentives to borrow until after the fiscal stimulus had come into play. That helped prolong the decline and mitigated the recovery.
Now we are now 21 months from the market bottom, the true measure of when to start the clock for an economic recovery. We have had some very strong economic growth rates and the economy has expanded nicely, but we also have major problems facing us. We are at war, we have the threat of nuclear attack here at home, federal spending remains out of control. It is sickeningly ironic that our leaders ask us to sacrifice when their proposed highway bill has so much extravagance and pork in it. They say the entrepreneurs must sacrifice but at the same time funnel tax dollars to feed the fat man as President Reagan called the federal government.
The point: while everyone is concerned about inflation, we see signs of slowing economic activity down the road. Just look at commodities prices. The CRB peaked in March and has been trending lower since. The CRB industrials index did likewise. Commodities indicate that China has in fact slowed its economy, and as we are arguing, the US economy is slowing as well. Right now it is not an immediate problem, but with sustained higher energy costs that are working to slow the economy already, a series of rate hikes could accelerate the slowing already occurring. The growth rates have been impressive, but we have come through some very strange times. Stock prices started out at relatively high P/E's when the recovery began. There is another world war of sorts ongoing, and that has a way of bleeding economies. While there may be signs of near term price increases that need to be recognized and addressed, there are also big macro currents that raise the possibility of another undulation lower. Thus clamping down on growth by rate hikes is not the way to rectify the perceived price problem. Instead, actively promote supply with incentives to continue investing in the US. That way you address the price issues by increasing supply, and you also build up economic activity to help stave off any bigger picture macroeconomic downturn.
For now that is not even a consideration. There are two different camps in this political fight: making tax cuts and current stimulus current or cut it back, redistribute it, and then increase federal spending even more with national healthcare, etc. Both sides need to figure out spending is the real problem and slash federal spending. Cut the spending and let the taxpayers decide where their money should best be spent. The way both sides are racing to spend our money, that won't happen anytime soon.
THE MARKET
Stocks fought off the weaker GDP number and showed some early strength. While they backed off by the close, they did not roll over and they did not give up their higher volume gains from earlier in the week. The large caps and blue chips had a harder time late in the session, but overall stocks are poised to continue the move that started mid-week on rising volume.
The big difference in the market last week was the resurgence of the semiconductors. They rallied off some support at 450, paused after breaking the 50 day EMA, and are now heading toward the 200 day SMA (488) where they failed twice in the past month. Another good rally puts SOX right at that resistance. Whether it breaks through or fails will key the rest of the market's move. We anticipate the rally to resume ahead of the FOMC and Iraq handover Wednesday, and that would put SOX at the 200 day SMA and perhaps a bit beyond toward 500. Just as with the April highs on NASDAQ and SP500, that won't be easy for SOX to break through, at least on the first try. Volume will have to be even better than last week to clear those next levels.
Again, it is set up to move higher to try the next levels early this week, but moving significantly past those levels will be difficult unless there is a true change of market character.
Market Sentiment
Bulls vs. bears: Bulls backed off last week to 54.6% after hitting over 56% the prior week. 55% bullish advisors is a bearish sign, but the market rallied in any event. As noted last week, there was the 'indicators don't work anymore' feeling on the floor, and that is often the signal that at least near term there is enough pessimism to start a move higher. With bulls still near the 55% level and bears still low at 18.6% (20% is considered bearish), sustained upside will be hard to come by. Still, remember that these are secondary indicators. Price and volume action along with leadership stocks are the primary indicators as to the market's next move. Last week saw a good volume resumption of the rally that has some more upside in it.
VIX: 15.19; +0.38
VXN: 18.96; -0.4
VXO: 14.89; +0.5
Put/Call Ratio (CBOE): 0.68; +0.02
NASDAQ
One of the market leaders last week, NASDAQ posted another gain Friday, just eclipsing the early Junee highs. In good position to make a run at the April highs heading into the FOMC meeting.
Stats: +9.9 points (+0.49%) to close at 2025.47
Volume: 2.671B (+55.72%). Huge volume in the last few minutes made it look like an accumulation session. Before that surge, however, volume was 1.2B, well off pace from earlier in the week.
Up Volume: 1.728B (+968M)
Down Volume: 904M (+24M)
A/D and Hi/Lo: Advancers led 1.41 to 1. Not bad breadth for a slow session.
Previous Session: Advancers led 1.09 to 1
New Highs: 168 (+41)
New Lows: 84 (+54)
Once again rallied over the Junee high (2024) to 2033 before backing off at the close. Held the break over the Junee high but it was hard to quantify the action with the huge late volume surge. Before that surge volume was light, so the move was pensive. It has, however, left the NASDAQ in good position to continue the break higher. The initial targets are the late April high (2059) and early April high (2079). From there it is a matter of whether the move can gain additional strength.
The large cap techs put together a decent move itself though volume again eased, coming in well below average on QQQ. NDX, the full strength measure of the large cap techs showed solid volume heading into the weekend. QQQ and NDX have formed nice patterns and are ready for a break higher early in the week.
S&P 500/NYSE
The large cap names along with the blue chips took the hardest beating, falling back hard late as a lot of money moved around in the Russell rebalancing.
Stats: -6.22 points (-0.55%) to close at 1134.43
NYSE Volume: 1.817B (+30.29%). Huge volume jump late in the session. With less than a half hour left volume was just over 1B. Thus the selling was not distribution.
Up Volume: 841M (+240M)
Down Volume: 938M (+158M)
A/D and Hi/Lo: Advancers led 1.22 to 1. Very modest breadth but still positive even on a downside session.
Previous Session: Advancers led 1.06 to 1
New Highs: 149 (-56)
New Lows: 30 (+7)
Again cleared the early Junee high (1142) on the high, but was unable to hold the advance. It was holding up well until when it fell off the table with all of the market on close orders. It managed to hold roughly at the 10 day EMA (1134) and the 2004 down trendline. Despite the late dump lower, this leaves it in good position to move higher early this week. A 16 point move to April high (1150) with the January to March highs (1158-1163) realistically in range as well given NASDAQ still has plenty of upside before it gets to hits April high.
DJ30
The blue chips were hammered on the close similar to SP500 with the likes of GE and XOM getting clubbed. It fell through the 10 day EMA (10,390), but it is hanging on in the recent range. Unlike NASDAQ, it gave back its gain from mid-week. It is still holding up and ready to move with the rest of the market if SP500 and NASDAQ can recover and resume the break higher.
Stats: -71.97 points (-0.69%) to close at 10371.84
Volume: 308 million shares Friday versus 214 million shares Thursday. Big volume on both upside and downside moves, again with much of the volume and movement coming at the close basically requires you to toss out the volume for this index as well.
THIS WEEK
Big week in all respects. The market broke higher on solid volume last week, paused, and is set to resume the move ahead of the Wednesday FOMC announcement regarding interest rates and the Iraq handover. The latter is not like, say Y2K, that was over on a date specific. It is an important date, however, for the effort in Iraq. The economic data is also huge with ISM, personal income and spending, consumer confidence, and the June employment report. All of this comes before the July 4 three-day holiday, another date brought up as a possible terrorist threat.
That is a lot to digest at any time. We still anticipate stocks moving higher in anticipation of the Wednesday events as they continue to price in the possibilities on the idea of the events. Once they are here we have to see how the markets react. Key resistance lies ahead at the April and January highs; again, volume will have to be much improved for the indexes to take those levels out and continue higher.
In addition, the second half of July is never really kind to stocks. They move up into earnings, rally some on the first solid results, but then run out of steam. Q3 estimates are being written higher toward 26% already, so guidance will have to be good to keep stocks moving higher. We don't see anything to change the pattern this time around, but as always, if the market shows strong volume pushing higher, we will let the market lead the way.
What we are going to focus on this week are stocks that have made good moves and in the softer market Thursday and Friday have pulled back to test those moves. When they start back up they have proven the breakout as they have passed the test. Those show very good support and often cruise right on up in a rally. We won't turn down good patterns of any sort, but with the market already having run well and with the potential to run up to the big news Wednesday and then pullback, we don't want to into too many new positions that don't have much time or room to run.
Again, we won't pass up great patterns making strong moves, however. Why? Because leading stocks making strong moves in good patterns are one of the top indicators of what the market is going to do. Further, those stocks move farther and faster, and hold up better if the market does hit some rocks. It all goes back to seeing the big picture of what can happen and what is likely to happen, but also being smart enough to know that the market is the final decision maker. Take what the market gives and be happy with that.
Support and Resistance
NASDAQ: Closed at 2025.47
Resistance:
2024 is the June high. Not totally broken here.
2050 represents some prior price points and has stopped NASDAQ the last time it tried that level.
April high is 2080.
2089 is the February closing high. 2112 is the early January high.
Support:
2000 is the top of the late 2003 base.
1998 is the January/April down trendline.
The 18 day EMA (1992)
The 200 day SMA (1975).
1925 is some support.
1900 to 1890.
The April lows (1880, 1878).
S&P 500: Closed at 1134.43
Resistance:
1142 is the June high.
The April and January highs (1150 to 1155).
Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support:
The March/April down trendline at 1133.
The 18 day EMA (1130).
1125 is key support.
The 50 day EMA (1124) and the 50 day SMA (1119).
1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100.
The 200 day SMA (1096)
Dow: Closed at 10,371.84
Resistance:
Late April peaks at 10,478 to 10,512
10,570 is the early April high
Price consolidation at 10,600 level
10,747 is the February high
Support:
The 18 day EMA (10,348)
The January/April down trendline at 10,315
The 50 day EMA (10,294) and SMA (10,255).
Price support at 10,250
The 200 day SMA at 10,148
March low at 10,007. Then 9900-9850.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 28
- Personal Income, May (08:30): 0.5% expected and 0.6% prior
- Personal Spending, May (08:30): 0.8% expected and 0.3% prior
June 29
- Consumer Confidence, June (10:00): 95.0 expected and 93.2 prior
June 30
- Chicago PMI, June (10:00): 64.5 expected and 68.0 prior
- FOMC Meeting (2:15): Expecting a 25 basis point rate hike as forecast by the Fed funds futures contract.
July 1
- Auto Sales, June: 5.6M expected and 5.7M prior
- Truck Sales, June: 8.0M expected and 8.5M prior
- Initial Jobless Claims, 06/26 (08:30): 349K prior
- Construction Spending, May (10:00):.5% expected and 1.3% prior
- ISM Index, June (10:00): 61.2 expected and 62.8 prior
July 02
- Non-farm Payrolls, June (08:30): 240K expected and 248K prior
- Unemployment Rate, June (08:30): 5.6% expected and 5.6% prior
- Hourly Earnings, June (08:30): 0.3% expected and 0.3% prior
- Average Workweek, June (08:30): 33.9 expected and 33.8 prior
- Factory Orders, May (10:00): 1.5% expected and -1.7% prior
zarif
- 28 Jun 2004 11:08
- 1955 of 2279
insider trader:
A very good morning to you and thanking you for your comprehensive report.Please keep posting and all comments good/bad are welcome.
rgds
zarif
A very good morning to you and thanking you for your comprehensive report.Please keep posting and all comments good/bad are welcome.
rgds
zarif
zarif
- 28 Jun 2004 11:14
- 1956 of 2279
Tom hougaards thoughts for today
Good morning,
There are a couple of things on the agenda today and this week which can influence the market or will influence the market.
The Iraq handover has been completed. I dont know if this will have an effect but the markets seem to like it. The US futures are pricing in a rise on the open today. (I got today as a positive day and most of the week points higher).
The Russell 2000 re-weighting of stocks plays havoc with the market. At least that is what we saw on Friday. Certain Dow stocks dropped a full dollar in seconds going into the close (our chief dealer was furious as we settle Dow bets according to the cash price, and the Dow kept ticking away for another 10 minutes after the close). The Dow dropped 30 points after the closeJ. The re-weighting may continue for the rest of the month, i.e. next 3 days.
The end of the quarter is coming up and this will almost always bring about attempt to push prices higher to mark up portfolios.
Finally we got the FOMC meeting this week which should bring about some decent volatility.
As for the technials we got a lovely mixed picture. The NASDAQ looks strongest of the lot while the SP500 and the Dow got some catching up to do. However, as long as the SP500 holds above 1132 I will lean on the bullish side. Below 1128 in the SP500 will be a bearish development for the index. We are coming into a strong period of the year and I have this week mapped out to be mostly rising prices. You should also be aware that the month of July and August historically is the strongest of the year together with December. As we are in an election year this should be even more evident.
Tom
Good morning,
There are a couple of things on the agenda today and this week which can influence the market or will influence the market.
The Iraq handover has been completed. I dont know if this will have an effect but the markets seem to like it. The US futures are pricing in a rise on the open today. (I got today as a positive day and most of the week points higher).
The Russell 2000 re-weighting of stocks plays havoc with the market. At least that is what we saw on Friday. Certain Dow stocks dropped a full dollar in seconds going into the close (our chief dealer was furious as we settle Dow bets according to the cash price, and the Dow kept ticking away for another 10 minutes after the close). The Dow dropped 30 points after the closeJ. The re-weighting may continue for the rest of the month, i.e. next 3 days.
The end of the quarter is coming up and this will almost always bring about attempt to push prices higher to mark up portfolios.
Finally we got the FOMC meeting this week which should bring about some decent volatility.
As for the technials we got a lovely mixed picture. The NASDAQ looks strongest of the lot while the SP500 and the Dow got some catching up to do. However, as long as the SP500 holds above 1132 I will lean on the bullish side. Below 1128 in the SP500 will be a bearish development for the index. We are coming into a strong period of the year and I have this week mapped out to be mostly rising prices. You should also be aware that the month of July and August historically is the strongest of the year together with December. As we are in an election year this should be even more evident.
Tom
zarif
- 28 Jun 2004 11:16
- 1957 of 2279
If anybody is interested in attending the Yorkshire traders group meeting which is run by Tim Leleux (aka THE PRIEST).the details are below.
This months meeting is Thursday July 1st at 7:30pm, Crowne Plaza, Wellington Street, Leeds
This months meeting is Thursday July 1st at 7:30pm, Crowne Plaza, Wellington Street, Leeds
zarif
- 28 Jun 2004 16:13
- 1958 of 2279
managed a quick long and short the dow so far. Also had a good long on the cable and have put in a short now.
rgds
zarif
rgds
zarif
Insider trader
- 28 Jun 2004 22:13
- 1959 of 2279
Will do Zarif.
zarif
- 29 Jun 2004 07:20
- 1960 of 2279
Insider Trader:
Look forward to meeting you on Thursday.
rgds
zarif
Look forward to meeting you on Thursday.
rgds
zarif
zarif
- 29 Jun 2004 11:25
- 1961 of 2279
Tom Hougaards thoughts for todays market
rgds
zarif
Good morning,
I will readily admit that I was surprised in a major way by the weakness yesterday evening. I dont know what caused the market to reverse like it. It doesnt really matter. Maybe there is liquidation of a portfolio or maybe it is the rebalancing of the Russell 2000 index. One thing I know is that support is 1132 and this will have to hold otherwise I will lean back on the short side.
The Fed meeting is tomorrow evening and maybe the selling was related to this. Either way we should know today if there is any more selling coming because if it is liquidation the seller will have to get the selling done over the next 12 trading hours. The US futures dipped down to 1127 overnight so we could see more downside today. Usually someone knows something and they will sell ahead to hedge themselves or front run the market. A lot depends on how weak Europe will open up in 20 minutes time.
I am cautiously optimistic that we will see higher prices as long as we can hold this area around 1132. For today I do have a dip near the open and a turn later on today. I suspect volume will dry up going in the FOMC meeting tomorrow, but I also know for a fact that institutions will do anything to keep prices afloat ahead of the 30th June mark-to-market cut off date. As the funds have to be fully invested I will bet that they will hold the market higher. As I stated over the weekend the market favours dip buying this week.
The good news in my mind is that the quarter-end is nearly over and I suspect we will see a 2-3 week straight line move beginning in early July.
Good luck today
Tom
rgds
zarif
Good morning,
I will readily admit that I was surprised in a major way by the weakness yesterday evening. I dont know what caused the market to reverse like it. It doesnt really matter. Maybe there is liquidation of a portfolio or maybe it is the rebalancing of the Russell 2000 index. One thing I know is that support is 1132 and this will have to hold otherwise I will lean back on the short side.
The Fed meeting is tomorrow evening and maybe the selling was related to this. Either way we should know today if there is any more selling coming because if it is liquidation the seller will have to get the selling done over the next 12 trading hours. The US futures dipped down to 1127 overnight so we could see more downside today. Usually someone knows something and they will sell ahead to hedge themselves or front run the market. A lot depends on how weak Europe will open up in 20 minutes time.
I am cautiously optimistic that we will see higher prices as long as we can hold this area around 1132. For today I do have a dip near the open and a turn later on today. I suspect volume will dry up going in the FOMC meeting tomorrow, but I also know for a fact that institutions will do anything to keep prices afloat ahead of the 30th June mark-to-market cut off date. As the funds have to be fully invested I will bet that they will hold the market higher. As I stated over the weekend the market favours dip buying this week.
The good news in my mind is that the quarter-end is nearly over and I suspect we will see a 2-3 week straight line move beginning in early July.
Good luck today
Tom
Velocity
- 29 Jun 2004 18:54
- 1962 of 2279
Not trading indexes, but long csco, and looking at hnz and intc for longs and aa short, should get some movement when the movers and shakers get back from their indulgent lunches :-)
zarif
- 30 Jun 2004 13:18
- 1963 of 2279
Saxo bank analyis and views on the market for today
rgds
zarif
Published: Jun. 30 2004,
This market is whipsawing bulls and bears as FOMC is imminent.
Latest action reverses yesterday's bearish top and looks to higher levels - but still plenty of data on tap.
Note: I'm filling in temporarily for Mr. Robert Balan, who will return to this space on Monday, July 5. I will publish this column once daily in early US hours. - John Hardy
June 30, 2004 - New YorkImportant Data this week:
Today: Chicago PMI for June (US) at 14:00 GMT, FOMC Rate Decision (US) at 18:15 GMT, Tankan Survey for June (Japan) at 23:50 GMT
Thursday: Manufacturing PMI (Europe), ECB Announces Rates (EU), ISM Manufacturing (US)
Friday: Unemployment Rate and Nonfarm Payrolls (US)
My stab yesterday at predicting a weak Consumer Confidence number based on recent Bush approval ratings was a misstep indeed, as the confidence reading surged to the highest level in 2 years. Apparently the falling of prices at the gas pump and perception and headlines about job growth are having a bigger impact than I would have expected... This helped spark a rally that reversed the previous day's sell-off and gave many traders, including myself, a case of whiplash.
Volume and breadth was nothing to write home about yesterday, but it was interesting to note the kind of stocks that outperformed: semiconductors, Amazon.com, and the like. A very risk-willing market indeed. And the Russell 2000 index, another good risk-willingness measure, managed a new two-month high before retreating slightly at the close. But the broader market will also need to join in if we are to see this rally continue for much longer.
The pivot point today is, of course, the FOMC meeting, with the rate announcement (we STRONGLY believe in a 0.25% hike, which is also the market expectation - a 0.50% hike is a true longshot) coming at 18:15 GMT. The accompanying statement will be one of the most closely scrutinized ever, with signs of more hawkishness than expected the feared scenario - making a dovish tone (for example, a simple repeat of the existing statement) the surprise. I suspect the Fed will adjust it to a slightly more hawkish tone with an adjustment of a word here and there, but will not come out with guns blazing. The market will likely find this acceptable, but the market will be extremely volatile on stronger than expected language, or a 50 basis point move..
The latest action has me expecting the blow-off top scenario sooner rather than later, but I have little confidence in the market's (or my own!) predictability at this point. I'd still like to see how things look on the other side of Friday.
Equity Technicals:
Technicals in this section refer to the September futures for each instrument.
- DAX Index - The DAX is maintaining a tight range after making a marginal new high above 4100 today. The outlook is bullish barring a fall back through 4050, with 4200 the first upside target.
- FTSE 100 Index - The action on the FTSE remains uninspiring, but if there is enough strength elsewhere, it may be able to stave off a fall below 4470 minor support and drift back towards 4550 area resistance.
- S&P 500 - The index rallied after three days of selling off, but still needs to break free of 1150 area resistance to get the bullish theme fully back on track, a scenario that seems favored barring a dip below 1130 again.
- Dow Jones Ind Ave. - The Dow survived its test of the 10300 support area and bounced strongly. That bounce may continue towards 10800 if 10300 is not revisited on the downside.
- NDX 100 - The Nasdaq defied gravity and rallied strong despite the previous day's massive sell-off on the gap higher opening. This is giving trader's whiplash, but the force of the upmove still points upward toward the 1550 top unless 1490 support is taken out once again.
rgds
zarif
Published: Jun. 30 2004,
This market is whipsawing bulls and bears as FOMC is imminent.
Latest action reverses yesterday's bearish top and looks to higher levels - but still plenty of data on tap.
Note: I'm filling in temporarily for Mr. Robert Balan, who will return to this space on Monday, July 5. I will publish this column once daily in early US hours. - John Hardy
June 30, 2004 - New YorkImportant Data this week:
Today: Chicago PMI for June (US) at 14:00 GMT, FOMC Rate Decision (US) at 18:15 GMT, Tankan Survey for June (Japan) at 23:50 GMT
Thursday: Manufacturing PMI (Europe), ECB Announces Rates (EU), ISM Manufacturing (US)
Friday: Unemployment Rate and Nonfarm Payrolls (US)
My stab yesterday at predicting a weak Consumer Confidence number based on recent Bush approval ratings was a misstep indeed, as the confidence reading surged to the highest level in 2 years. Apparently the falling of prices at the gas pump and perception and headlines about job growth are having a bigger impact than I would have expected... This helped spark a rally that reversed the previous day's sell-off and gave many traders, including myself, a case of whiplash.
Volume and breadth was nothing to write home about yesterday, but it was interesting to note the kind of stocks that outperformed: semiconductors, Amazon.com, and the like. A very risk-willing market indeed. And the Russell 2000 index, another good risk-willingness measure, managed a new two-month high before retreating slightly at the close. But the broader market will also need to join in if we are to see this rally continue for much longer.
The pivot point today is, of course, the FOMC meeting, with the rate announcement (we STRONGLY believe in a 0.25% hike, which is also the market expectation - a 0.50% hike is a true longshot) coming at 18:15 GMT. The accompanying statement will be one of the most closely scrutinized ever, with signs of more hawkishness than expected the feared scenario - making a dovish tone (for example, a simple repeat of the existing statement) the surprise. I suspect the Fed will adjust it to a slightly more hawkish tone with an adjustment of a word here and there, but will not come out with guns blazing. The market will likely find this acceptable, but the market will be extremely volatile on stronger than expected language, or a 50 basis point move..
The latest action has me expecting the blow-off top scenario sooner rather than later, but I have little confidence in the market's (or my own!) predictability at this point. I'd still like to see how things look on the other side of Friday.
Equity Technicals:
Technicals in this section refer to the September futures for each instrument.
- DAX Index - The DAX is maintaining a tight range after making a marginal new high above 4100 today. The outlook is bullish barring a fall back through 4050, with 4200 the first upside target.
- FTSE 100 Index - The action on the FTSE remains uninspiring, but if there is enough strength elsewhere, it may be able to stave off a fall below 4470 minor support and drift back towards 4550 area resistance.
- S&P 500 - The index rallied after three days of selling off, but still needs to break free of 1150 area resistance to get the bullish theme fully back on track, a scenario that seems favored barring a dip below 1130 again.
- Dow Jones Ind Ave. - The Dow survived its test of the 10300 support area and bounced strongly. That bounce may continue towards 10800 if 10300 is not revisited on the downside.
- NDX 100 - The Nasdaq defied gravity and rallied strong despite the previous day's massive sell-off on the gap higher opening. This is giving trader's whiplash, but the force of the upmove still points upward toward the 1550 top unless 1490 support is taken out once again.
zarif
- 30 Jun 2004 16:32
- 1964 of 2279
managed a good long on the cable and am short at the moment and in profit will close it soon then wait till fed time.
My thinking is as follows:
Fed days usually follow the pattern of tight range into 19:00 and then move back into 19:15, followed by 2-3 spikes and then the direction....
so going to harass the kids for a while and a cuppa tea.
rgds
zarif
My thinking is as follows:
Fed days usually follow the pattern of tight range into 19:00 and then move back into 19:15, followed by 2-3 spikes and then the direction....
so going to harass the kids for a while and a cuppa tea.
rgds
zarif
Velocity
- 30 Jun 2004 20:10
- 1965 of 2279
my list of about 10 nas/amex equities just seems to be chopping about with no real progress just yet. have learnt to my cost to leave it alone when its like this so i'll come back tomorrow when the market has sorted its head out...
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