Friday, April 11, 2008 2:47:20 PM
Wkly Technical Comments by ArtHuprich 04/11 morning
Friday Morning 04/11
Here are some of the news headlines from yesterday: “I don't think we're optimistic about it ending anytime soon,'' J.C. Penney Co. Chief Executive Officer Myron Ullman told reporters. Clothing retailers Limited Brands Inc., Gap Inc. and American Eagle Outfitters Inc. posted sales declines greater than analysts anticipated….Same-store sales fell 0.5 percent last month, the biggest decline in almost a year and the worst March since 1995...” Yet, the DJIA (12581.98) gained almost 55 points and the S&P Retail Index (RLX/395.39) gained almost 1.8%. In all fairness, WMT helped the action of the RLX. My point is that despite the fact that the news keeps getting worse, I believe the stock markets discounting mechanism is at work. I believe the stock market leads the economy.
Also relative to yesterday’s tape action, an upgrade of a slew of semiconductor stocks aided in placing a bid under NASDAQ and helped the Semiconductor Index (SOX/371.36) continue to carve out a bottoming pattern. Strength in biotechnology stocks also helped NASDAQ, which gained 29.58 points yesterday.
On the NYSE, volume marginally expanded to 1.28 billion shares. There were 783 net advancing issues, a good number. New 52-week lows (40) expanded for the third consecutive day. This needs to stop. Otherwise rallies will fail and downside selling pressure will increase.
Conclusion:
A few weeks ago I discussed the SOX closing above a multi-month down trend line and that the index was carving out a bottoming pattern. Based on the Point & Figure chart of the Semiconductor HOLDRs Trust (SMH/$30.49), following, I still feel that is the case.
Thursday Morning 04/10
Somewhat similar to the movie “The Perfect Storm”, during which a number of simultaneous events produced a “hair-raising” outcome, Wall Street experienced its own version of the “perfect storm” yesterday; this lead to a broad pullback in equities. Wall Street’s “storm” consisted of lackluster earnings, a record high by crude oil and news that initial estimates may be shy of the actual damage still on the books of several investment banks. The so-called Level 3 assets, which are the hardest securities to "value," may still lead to continued "write-downs" for these financial behemoths. Also, is it possible that “trading types”, aided by the demise of the “uptick” rule for shorting stocks and exert a lot of intraday and day-to-day influence on the market, were disappointed when the “flag” pattern was not completed to the upside and actually made obsolete? The DJIA (12527.26) closed down 49 points or 0.39%. NASDAQ (2322.12) lost almost 27 points or 1.13%. The small and mid-cap indices were down between 1.50% and 2.00% as well. On the NYSE, volume expanded to 1.21 billion shares. There were 1323 net declining issues, much worse than the decline by the DJIA. New 52-week lows (31) expanded again. Sentiment wise, the newsletter advisory figures (sentiment is a secondary indicator, less important than price and volume) showed 37.4% BULLS, versus 36.4%. The BEAR reading was 38.5% versus 37.5%. This is the fifth consecutive week of more BEARS than BULLS. “Advisory sentiment” is still rated as “positive” and implies that the stock market is continuing to develop an underlying base. The Index P – C Ratio closed at 200%, its third consecutive reading of 200% or greater
Relative to various market indices, the most significant action yesterday surrounded the Dow Jones Transportation Index (TRAN/4803.18). After getting turned back at resistance “in and around” 5025 a few days ago the TRAN declined just over 3.50% yesterday. In order to avoid nullifying its recent “inverse head & shoulders breakout” and violating it 200-DMA, this index needs to hold support in the 4780 to 4765 area. Regardless, please tighten up your stops across the entire “Transportation universe.”
Within the context that the upper end of my target range is $115, Crude Oil ($110.87) hit $112.21 marginally exceeding its March 17 2008 intraday peak (resistance) of $111.80, but was then “turned back.” Minor support levels are $106, $104 and then critical support between $99.55 and $98.65. Let me also state that 1) the current trend is bullish and orderly; it isn’t parabolic. 2) Barring a close below critical support, a higher target (low to mid $120) is realistic.
Conclusion:
Within the context of a successful “Low-rally-Retest” sequence, the DJIA has been moving laterally over the past 11 weeks, unable to complete its bottoming pattern, confined to what my friend and former colleague would classify as “an obnoxious trading range.” I will say that in light of the continual onslaught of “gosh-awful” news that has been thrown at the stock market, “lateral” is good and I view it as bullish.
In light of the severe amount of “chart damage” that occurred between the summer and fall of 2007 to the January 2008 low, additional lateral action should not be surprising and ultimately, should be viewed favorably. I say this because further lateral action would provide a bigger base of underlying support from which to 1) manage risk and 2) if and when the base is completed, an upside target can be gleaned.
Wednesday Morning 04/09
Despite upgrades of a select group of companies in the financial complex, Wall Street was disappointed by round one of corporate earnings season yesterday. The DJIA (12576.44) lost 86 points at the open. The “senior index” fought back a number of times, as neither the “bull” nor “bear” could gain the upper hand. At the bell, the DJIA lost 36 points. Inside the DJIA and using a Point & Figure chart, DD (beta = 0.92) recently broke a quadruple top at $49. This comes from a stock whose relative strength trend is similar to where it was 12-months ago. NASDAQ (2348.76) lost 16 points and underperformed. While I am discussing the OTC market and Point & Figure charts, if you look at DELL and use a one-quarter point box size, a nasty breakdown will occur at $18.75. Please respect it, if it occurs.
On the NYSE, volume contracted to 1.19 billion shares. There were 491 net declining issues. In terms of identifying emerging leaders, both sector and stock wise, it’s important to monitor the number of new 52-week highs. On the flip side, in terms of identifying weakening market internals, it’s important to monitor new 52-week lows. Within the context of yesterday’s decline, while yesterday’s new 52-week low reading of 19 was above Monday’s reading of 8, it isn’t yet concerning. This figure would have to significantly expand in order to concern me. The Index P – C Ratio ended at 259%, the Oversold – Overbought Oscillator closed at plus 2.8.
Conclusion:
Since last Tuesday’s big rally, the DJIA has moved laterally for the past five trading sessions, accompanied by relatively low volume. In doing so, the DJIA has formed a very tight short-term, flag pattern. “Flags” are normally continuation patterns, which in this case, is up.
As a guidepost to its completion and sustainability, let’s keep our eyes on the new 52-week high and low readings, as stated above.
Tuesday Morning 04/08
Led by mining and banking stocks, equities rallied into early afternoon yesterday. The DJIA (12612.43) hit 12733 (critical resistance, the “rally high” portion of my often discussed “low-rally-retest” sequence, equals 12768) and at one juncture, was up 124 points. However, with no help from NASDAQ (2364.83), which lost just over six points, the DJIA gained only three points by the closing bell.
On the NYSE, yesterday volume expanded to 1.27 billion shares. There were 338 net advancing issues. New 52-week highs (91), continues to expand. This is a good “internal” reading as it implies emerging leadership. Currently, strong price action (leadership) is being exhibited by the following areas: Steel – producers, Building – residential / commercial, Exploration & Production, Machinery – farm, Chemicals – fertilizers, Energy – solar / coal, Oil & Gas – drilling, Transportation – rail. The Index P-C Ratio closed at 248%, indicating a “healthy” (bullish), sense of skepticism.
Consistent with yesterdays tape action, following is a chart of the SPX (1372.54) produced by the excellent Web site Thechartstore.com, showing the indices big swings since last fall. My conclusion is that one of the big winners over the past six months has been “volatility.” I think this will continue and besides “putting ‘bids’ to buy technically and fundamentally sound stocks in under the market and or ‘offers’ to sell or reduce positions above the market”, I recommend calling the Options department and or Closed End Fund department for ways to benefit.
Conclusion:
When a stock, sector proxy or market index approaches an important resistance point (please refer back to paragraph one), many times the vehicle in question has a tendency to either pause marginally below the resistance level or move through resistance and then quickly pull back. In either case, as an important resistance level is approached, you get some selling pressure.
Within the context of believing that the “bottoming” process will get completed to the upside, if I combine this tendency with an overbought reading of plus 5.5 by the Oversold – Overbought Oscillator from the close last Thursday (it closed at plus 3.9 last night), yesterday’s price action is normal.
How deep it will go and how long it will last, will be dictated by the market internals, which so far, have been supportive.
Chart courtesy Thechartstore.com>
Public companies mentioned in this report.
Company Name, Ticker, Priced as of 04/10/08,
RJ&A Rating (if Applicable)
American Eagle Outfitters, Inc. AEO $16.62
Dell Inc. DELL $18.77 Outperform
Dupont EI de Nemours DD $49.64
Gap Inc. GPS $18.47
J C Penney Corporation Inc. JCP $40.07
Limited Brands Inc. LTD $17.45
Wal-Mart Stores, Inc. WMT $54.66
Friday Morning 04/11
Here are some of the news headlines from yesterday: “I don't think we're optimistic about it ending anytime soon,'' J.C. Penney Co. Chief Executive Officer Myron Ullman told reporters. Clothing retailers Limited Brands Inc., Gap Inc. and American Eagle Outfitters Inc. posted sales declines greater than analysts anticipated….Same-store sales fell 0.5 percent last month, the biggest decline in almost a year and the worst March since 1995...” Yet, the DJIA (12581.98) gained almost 55 points and the S&P Retail Index (RLX/395.39) gained almost 1.8%. In all fairness, WMT helped the action of the RLX. My point is that despite the fact that the news keeps getting worse, I believe the stock markets discounting mechanism is at work. I believe the stock market leads the economy.
Also relative to yesterday’s tape action, an upgrade of a slew of semiconductor stocks aided in placing a bid under NASDAQ and helped the Semiconductor Index (SOX/371.36) continue to carve out a bottoming pattern. Strength in biotechnology stocks also helped NASDAQ, which gained 29.58 points yesterday.
On the NYSE, volume marginally expanded to 1.28 billion shares. There were 783 net advancing issues, a good number. New 52-week lows (40) expanded for the third consecutive day. This needs to stop. Otherwise rallies will fail and downside selling pressure will increase.
Conclusion:
A few weeks ago I discussed the SOX closing above a multi-month down trend line and that the index was carving out a bottoming pattern. Based on the Point & Figure chart of the Semiconductor HOLDRs Trust (SMH/$30.49), following, I still feel that is the case.
Thursday Morning 04/10
Somewhat similar to the movie “The Perfect Storm”, during which a number of simultaneous events produced a “hair-raising” outcome, Wall Street experienced its own version of the “perfect storm” yesterday; this lead to a broad pullback in equities. Wall Street’s “storm” consisted of lackluster earnings, a record high by crude oil and news that initial estimates may be shy of the actual damage still on the books of several investment banks. The so-called Level 3 assets, which are the hardest securities to "value," may still lead to continued "write-downs" for these financial behemoths. Also, is it possible that “trading types”, aided by the demise of the “uptick” rule for shorting stocks and exert a lot of intraday and day-to-day influence on the market, were disappointed when the “flag” pattern was not completed to the upside and actually made obsolete? The DJIA (12527.26) closed down 49 points or 0.39%. NASDAQ (2322.12) lost almost 27 points or 1.13%. The small and mid-cap indices were down between 1.50% and 2.00% as well. On the NYSE, volume expanded to 1.21 billion shares. There were 1323 net declining issues, much worse than the decline by the DJIA. New 52-week lows (31) expanded again. Sentiment wise, the newsletter advisory figures (sentiment is a secondary indicator, less important than price and volume) showed 37.4% BULLS, versus 36.4%. The BEAR reading was 38.5% versus 37.5%. This is the fifth consecutive week of more BEARS than BULLS. “Advisory sentiment” is still rated as “positive” and implies that the stock market is continuing to develop an underlying base. The Index P – C Ratio closed at 200%, its third consecutive reading of 200% or greater
Relative to various market indices, the most significant action yesterday surrounded the Dow Jones Transportation Index (TRAN/4803.18). After getting turned back at resistance “in and around” 5025 a few days ago the TRAN declined just over 3.50% yesterday. In order to avoid nullifying its recent “inverse head & shoulders breakout” and violating it 200-DMA, this index needs to hold support in the 4780 to 4765 area. Regardless, please tighten up your stops across the entire “Transportation universe.”
Within the context that the upper end of my target range is $115, Crude Oil ($110.87) hit $112.21 marginally exceeding its March 17 2008 intraday peak (resistance) of $111.80, but was then “turned back.” Minor support levels are $106, $104 and then critical support between $99.55 and $98.65. Let me also state that 1) the current trend is bullish and orderly; it isn’t parabolic. 2) Barring a close below critical support, a higher target (low to mid $120) is realistic.
Conclusion:
Within the context of a successful “Low-rally-Retest” sequence, the DJIA has been moving laterally over the past 11 weeks, unable to complete its bottoming pattern, confined to what my friend and former colleague would classify as “an obnoxious trading range.” I will say that in light of the continual onslaught of “gosh-awful” news that has been thrown at the stock market, “lateral” is good and I view it as bullish.
In light of the severe amount of “chart damage” that occurred between the summer and fall of 2007 to the January 2008 low, additional lateral action should not be surprising and ultimately, should be viewed favorably. I say this because further lateral action would provide a bigger base of underlying support from which to 1) manage risk and 2) if and when the base is completed, an upside target can be gleaned.
Wednesday Morning 04/09
Despite upgrades of a select group of companies in the financial complex, Wall Street was disappointed by round one of corporate earnings season yesterday. The DJIA (12576.44) lost 86 points at the open. The “senior index” fought back a number of times, as neither the “bull” nor “bear” could gain the upper hand. At the bell, the DJIA lost 36 points. Inside the DJIA and using a Point & Figure chart, DD (beta = 0.92) recently broke a quadruple top at $49. This comes from a stock whose relative strength trend is similar to where it was 12-months ago. NASDAQ (2348.76) lost 16 points and underperformed. While I am discussing the OTC market and Point & Figure charts, if you look at DELL and use a one-quarter point box size, a nasty breakdown will occur at $18.75. Please respect it, if it occurs.
On the NYSE, volume contracted to 1.19 billion shares. There were 491 net declining issues. In terms of identifying emerging leaders, both sector and stock wise, it’s important to monitor the number of new 52-week highs. On the flip side, in terms of identifying weakening market internals, it’s important to monitor new 52-week lows. Within the context of yesterday’s decline, while yesterday’s new 52-week low reading of 19 was above Monday’s reading of 8, it isn’t yet concerning. This figure would have to significantly expand in order to concern me. The Index P – C Ratio ended at 259%, the Oversold – Overbought Oscillator closed at plus 2.8.
Conclusion:
Since last Tuesday’s big rally, the DJIA has moved laterally for the past five trading sessions, accompanied by relatively low volume. In doing so, the DJIA has formed a very tight short-term, flag pattern. “Flags” are normally continuation patterns, which in this case, is up.
As a guidepost to its completion and sustainability, let’s keep our eyes on the new 52-week high and low readings, as stated above.
Tuesday Morning 04/08
Led by mining and banking stocks, equities rallied into early afternoon yesterday. The DJIA (12612.43) hit 12733 (critical resistance, the “rally high” portion of my often discussed “low-rally-retest” sequence, equals 12768) and at one juncture, was up 124 points. However, with no help from NASDAQ (2364.83), which lost just over six points, the DJIA gained only three points by the closing bell.
On the NYSE, yesterday volume expanded to 1.27 billion shares. There were 338 net advancing issues. New 52-week highs (91), continues to expand. This is a good “internal” reading as it implies emerging leadership. Currently, strong price action (leadership) is being exhibited by the following areas: Steel – producers, Building – residential / commercial, Exploration & Production, Machinery – farm, Chemicals – fertilizers, Energy – solar / coal, Oil & Gas – drilling, Transportation – rail. The Index P-C Ratio closed at 248%, indicating a “healthy” (bullish), sense of skepticism.
Consistent with yesterdays tape action, following is a chart of the SPX (1372.54) produced by the excellent Web site Thechartstore.com, showing the indices big swings since last fall. My conclusion is that one of the big winners over the past six months has been “volatility.” I think this will continue and besides “putting ‘bids’ to buy technically and fundamentally sound stocks in under the market and or ‘offers’ to sell or reduce positions above the market”, I recommend calling the Options department and or Closed End Fund department for ways to benefit.
Conclusion:
When a stock, sector proxy or market index approaches an important resistance point (please refer back to paragraph one), many times the vehicle in question has a tendency to either pause marginally below the resistance level or move through resistance and then quickly pull back. In either case, as an important resistance level is approached, you get some selling pressure.
Within the context of believing that the “bottoming” process will get completed to the upside, if I combine this tendency with an overbought reading of plus 5.5 by the Oversold – Overbought Oscillator from the close last Thursday (it closed at plus 3.9 last night), yesterday’s price action is normal.
How deep it will go and how long it will last, will be dictated by the market internals, which so far, have been supportive.
Chart courtesy Thechartstore.com> Public companies mentioned in this report.
Company Name, Ticker, Priced as of 04/10/08,
RJ&A Rating (if Applicable)
American Eagle Outfitters, Inc. AEO $16.62
Dell Inc. DELL $18.77 Outperform
Dupont EI de Nemours DD $49.64
Gap Inc. GPS $18.47
J C Penney Corporation Inc. JCP $40.07
Limited Brands Inc. LTD $17.45
Wal-Mart Stores, Inc. WMT $54.66
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
