Market Consolidated during the last two trading days with low volume and finished today with flat after the reversal call during the mid day. As noted, I do not believe that market has topped from the recent "Double Bottom" reversal call with "W" formation.
Qs daily shows an up-TL resistance which was the intra-day high on 3/21/07 rally after the FOMC meeting announcement. After the huge rally, we now have three consolidation trading days in a tight trading range. As called intraday reversal earlier during the mid day, the intraday low, 43.63, was the 60m support. Qs closed at the intraday resistance near the intraday high.
On Qs 60m, it bounced off from the support which was the same as the intra low of the day. As we can see that it closed slightly above the intra day TL which is coming from the the end of Feb top. Therefore, technically, market up TL is still in tack. Even if Market trades to lower support which is 43 +/- when it broke above the 3/12 high.
SPX is also traded to upper resistance near at 1440. As we can see on 60m chart, it consolidated during the last three days. Having three-day consolidation in low volume actions is a positive sign for further upside. We need to see it closing above 1440. Again, I do not see any major technical damage to negate retesting the Feb 2006 top after filling the run-away gap with a possibility of new highs which is consistent with "Breakout Retest" scenario.
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DOW closed at a resistance, 12470, on 60m and daily 50dma. Therefore, we need to see it closing above the resistance to continue the recent upside momentum.
Nasdaq closed above 50dma and 60m resistance. Having said that, we need to see it trading above 2460 which is the recent three-day consolidation TR resistance.
In summary, while I am cautious at this point with a possible "Lower-High" scenario, I do not think that this is the ST top.
4:20 pm : Since there is still a risk that a housing crisis will develop and spread to the broader economy, more proof today that it may take longer than anticipated for the housing correction to subside gave anxious investors an excuse to take some money off the table following last week's huge run-up.
With the market already showing signs of fatigue and uncertainty over the previous three sessions, discouraging comments from Lennar Corp (LEN 44.53 -0.01) made a market increasingly sensitive to weak data even more nervous about the sustainability of recent gains.
Lennar opened down nearly 4% after management withdrew its 2007 earnings guidance and said the typically strong spring selling season has not yet materialized. Lennar also warned that "soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market."
It is worth noting that Lennar shares did close well off their highs, but much of that can be attributed to short covering since homebuilders are among the most heavily shorted industry groups in the S&P 500.
Further underscoring the troubled state of the U.S. housing market was the S&P/Case-Shiller home-price index, which showed that the price of homes in 20 U.S. metropolitan areas fell in January for the first time in at least six years. Albeit not a well-known survey, a fixation on over every piece of weak data exaggerated its importance.
Even though monthly sentiment data don't correlate well with spending in any case, a larger than expected drop in consumer confidence also provided the bears with an excuse to send the bulls into hibernation for the time being.
A growing understanding that the upcoming earnings season will be uninspiring, and that guidance may be extremely cautious, also acted as an overhang. The first quarter comes to a close on Friday and there's a strong likelihood that 14 consecutive quarters of double-digit profit growth for the S&P 500 will come to an end, which will restrain the near-term outlook for stocks.
Of the eight sectors that closed lower, Materials was the day's biggest laggard. However, that wasn't all that surprising since it's also this year's best performing sector (+10.3%). DuPont (DD 49.81 -1.55), the day's worst performing Dow component, plunged 3.0% after Soleil cut its price target to $48. Newmont Mining (NEM 42.70 -1.03) tumbled 2.1% after being downgraded at HSBC Securities, earmarking Gold as today's biggest disappointment.
The absence of leadership from Financials, however, was an even bigger drag on the day's action as more negative commentary about the subprime situation pushed mortgage lenders even lower on the year.
The inability of the Health Care sector to benefit whatsoever from its defensive characteristics further underscored the market's difficulties attracting buyers. Managed Health was under pressure after a consumer group urged the Justice Department to block UnitedHealth Group's (UNH 55.95 -0.93) proposed purchase of Sierra Health Services (SIE 41.32 -0.12).
Industrials was another weak spot for investors. Ingersoll Rand (IR 43.88 -1.45) was the sector's worst performer (-3.2%) after it was downgraded to Neutral at UBS; but it was the inability among transportation stocks to take advantage of an intraday pullback in oil prices that further echoed the lack of enthusiasm to own economically sensitive equities. BTK +0.4% DJ30 -71.78 DJTA -1.2% DJUA -0.2% DOT -0.2% NASDAQ -18.20 NQ100 -0.7% R2K -0.8% SOX -0.7% SP400 -0.5% SP500 -8.89 XOI +0.1% NASDAQ Dec/Adv/Vol 2015/1019/1.74 bln NYSE Dec/Adv/Vol 2269/998/1.30 bln
3:30 pm : In similar fashion to Monday's late-day heroics, the bulls evidently believe that stocks remain attractively valued at current levels. More evidence that the housing correction will remain a drag on real GDP for at least a couple more quarters unquestionably remains a risk to the economic outlook, and a market ripe for a pullback seems to concur with such underlying concerns.
However, there's no denying that valuations on stocks remain very good. With a forward P/E of around 15.2, the S&P 500 carries an operating earnings yield of 6.6% which, based on expected earnings growth of 5%, suggests stocks are still undervalued by at least 30%.DJ30 -52.24 NASDAQ -13.58 SP500 -6.52 NASDAQ Dec/Adv/Vol 2022/1008/1.41 bln NYSE Dec/Adv/Vol 2335/933/1.06 bln
3:00 pm : The major averages are bouncing off their worst levels of the afternoon but buyer's last ditch efforts to cut their losses aren't amounting to much. Not only are the most influential of S&P 500 sectors also among today's biggest laggards, but below average volume merely underscores the lack of confidence the bulls have in sustaining a late-day push like the one yesterday that closed the indices mixed.
With only an hour left in the session, the NYSE still hasn't seen more than 1.0 bln shares trade hands. The Nasdaq isn't faring much better since total volume on didn't surpass 1.0 bln shares until an hour ago. DJ30 -66.63 NASDAQ -16.67 SP500 -8.03 NASDAQ Dec/Adv/Vol 2072/919/1.28 bln NYSE Dec/Adv/Vol 2311/934/972 mln
2:30 pm : After falling from three-month highs and consolidating throughout most of today's session, oil prices have since turned positive heading into the close of trading on the NYMEX in sympathy with natural gas futures surging 3.5% to two-week highs.
While it remains to be seen if crude for May delivery will settle in positive territory and it's currently clinging to the smallest of gains, the commodity's uptick has merely given an increasingly nervous market of buyers another excuse to stay on the sidelines. DJ30 -83.55 NASDAQ -20.05 SP500 -9.98 NASDAQ Dec/Adv/Vol 2001/973/1.18 bln NYSE Dec/Adv/Vol 2296/936/904 mln
2:00 pm : Aside from weak housing data and waning consumer confidence contributing to today's widespread consolidation efforts, there's also a growing understanding that the upcoming earnings season will be lackluster and that guidance may be extremely cautious.
As a reminder, the first quarter comes to a close on Friday, with quarterly results from Dow component Alcoa (AA 33.98 -0.19) officially kicking off the Q1 earnings season two weeks from today. Slower economic growth and pressure on margins, as well as tougher comparisons after several strong years of earnings, are expected to snap 14 straight quarters of double-digit profit growth for the S&P 500. DJ30 -66.73 NASDAQ -14.43 SP500 -7.33 NASDAQ Dec/Adv/Vol 1931/1003/1.07 bln NYSE Dec/Adv/Vol 2231/972/830 mln
1:30 pm : Not much has changed since the last update as the major averages continue to vacillate in relatively narrow ranges. Energy, though, has recently inched into positive territory even in the face of falling oil prices; but its 0.1% advance is doing little to offset the absence of leadership from more heavily-weighted sectors like Financials, Health Care, Technology and Industrials.
The Utilities sector has also turned the corner; but its gain has also been minimal and merely underscores a more risk averse market looking for defensive-oriented names like Independent Power Producers (+0.4%), which now ranks among today's top ten performing S&P indsutry groups. DJ30 -63.76 NASDAQ -13.76 SP500 -7.49 NASDAQ Dec/Adv/Vol 1932/973/990 mln NYSE Dec/Adv/Vol 2263/935/760 mln
1:00 pm : More of the same for stocks as market internals remain decidedly negative. As reflected in the A/D line, decliners on the NYSE hold a nearly 3-to-1 edge over advancers while those on the Nasdaq hold a 2-to-1 margin.
The ratio of down to up volume further dictates the sense of reserve on the part of buyers as the sustainability of last week's rally remains in question given more evidence that it may take longer than anticipated for the housing correction to subside. DJ30 -65.16 NASDAQ -15.74 SP500 -8.24 NASDAQ Dec/Adv/Vol 1953/926/900 mln NYSE Dec/Adv/Vol 2324/874/680 mln
12:30 pm : No real change in the proceedings as the afternoon session gets underway. Nine of 10 sectors are still under pressure, now led by a 1.3% decline in Materials, which isn't all that surprising since it remains this year's best performing sector (+10.3%). DuPont (DD 50.18 -1.18) is down 2.3% after Soleil cut their price target to $48 while Newmont Mining (NEM 42.79 -0.94) is down 2.2% after being downgraded at HSBC Securities.
Telecom, meanwhile, is today's only sector catching a bid. Dow component AT&T (T 39.77 +0.46) is up 1.2% at a new 52-week high as shareholders applaud reports it will offer banking applications to wireless customers. However, since Telecom ranks among the least influential of the S&P sectors, it's 0.7% decline is barely making a dent in anything other than the Dow, which is being outpaced by the S&P 500 and Nasdaq to the downside. DJ30 -72.77 NASDAQ -16.24 SP500 -9.12 NASDAQ Dec/Adv/Vol 1922/946/836 mln NYSE Dec/Adv/Vol 2307/880/624 mln
12:00 pm : Stocks are trading lower across the board midday as a market increasingly sensitive to weak data, especially from the housing sector, finds excuses to take some money off the table following last week's sizable gains.
With the market already showing signs of fatigue and uncertainty over the last three sessions, discouraging comments from Lennar Corp (LEN 43.43 -1.11) have been the initial catalysts behind today's weakness. Even though we believe it is irrational for Lennar's report to have a broad market impact, a market ripe for a pullback after such a huge run-up has been vulnerable all morning.
Lennar opened down nearly 4% after management withdrew its 2007 earnings guidance, said the typically strong spring selling season has not yet materialized and warned that "soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market." Further underscoring the troubled state of the U.S. housing market was the S&P/Case-Shiller home-price index, which showed that the price of homes in 20 U.S. metropolitan areas fell in January for the first time in at least six years.
Despite monthly sentiment data not correlating well with spending in any case, a larger than expected drop in consumer confidence has provided the bears with even more fodder to stall last week's momentum.
From a industry standpoint, it's not surprising to see Homebuilding (-2.5%) get hit the hardest today. That, along with Target (TGT 60.33 -1.23) merely reaffirming its prior outlook as opposed to raising it, earmark Consumer Discretionary (-1.0%) as one of today's biggest disappointments. On a positive note, oil prices are slipping from three-months highs; but transportation stocks failing to take notice further underscores the lack of enthusiasm to own equities and leaves Industrials most influential laggard.
The absence of leadership from Financials, as more negative commentary about the subprime situation pushes mortgage lenders lower, and Health Care's inability to benefit whatsoever from its defensive characteristics, also reflect the bulls' uphill battle. HMOs (-1.4%) rank among today's worst performing S&P industries after a consumer group urged the Justice Department block UnitedHealth Group's (UNH 55.23 -1.65) proposed purchase of Sierra Health Services (SIE 41.39 -0.05). DJ30 -72.66 DJTA -1.2% NASDAQ -16.23 SP500 -9.51 NASDAQ Dec/Adv/Vol 1960/879/730 mln NYSE Dec/Adv/Vol 2359/794/540 mln
11:30 am : So much for the bulls trying to regain some momentum over the last hour as sellers remain in complete control of today's action. A technical breakdown is now adding to the market's recent struggles that leave all three major indices at session lows.
The Dow, S&P 500 and Nasdaq have recently failed to find support above key technical levels of 12410, 1428 and 2441, respectively. DJ30 -85.18 NASDAQ -19.08 SP500 -11.83 NASDAQ Dec/Adv/Vol 1864/916/596 mln NYSE Dec/Adv/Vol 2264/830/436 mln
11:00 am : The major averages are bouncing off their opening lows but hardly enough to make a significant change in the standings. Nine of 10 sectors are still posting losses with Industrials now pacing the way lower. Component Ingersoll Rand (IR 43.76 -1.57) is the sector's worst performer (-3.5%) after it was downgraded to Neutral at UBS, but it's the lack of a rebound in the transportation stocks in the face of a pullback in oil prices that remains a bigger concern for investors.
The absence of leadership from Financials, as more negative commentary about the subprime situation pushes mortgage lenders lower, is also acting as an overhang.DJ30 -57.32 DJTA -1.0% NASDAQ -12.57 SP500 -8.39 NASDAQ Dec/Adv/Vol 1843/881/478 mln NYSE Dec/Adv/Vol 2240/815/340 mln
10:30 am : The indices are extending their reach to the downside following a larger than expected drop in consumer confidence. At the top of the hour, the Conference Board's monthly survey fell in March for the first time in five months to 107.2 (consensus 109.0) from a downwardly revised reading of 111.2 in February.
Even though the number isn't all that bad and the report isn't economically significant, since readings don't correlate well with spending, a market increasingly sensitive to weak data has viewed it as another excuse to take some profits. DJ30 -78.35 NASDAQ -14.20 SP500 -9.81 NASDAQ Dec/Adv/Vol 1858/793/334 mln NYSE Dec/Adv/Vol 2169/784 /214 mln
10:00 am : Equities are still on the defensive as nine of 10 economic sectors remain negative. Not surprising, Homebuilding (-2.6%) is pacing the way among laggards, extending its year-to-date leading decline to 18.6% on the back of discouraging housing data. That, along with a 1.0% decline in Comcast (CMCSA 26.01 -0.29), earmark Consumer Discretionary (-0.8%) as this morning's worst performing sector.
The absence of leadership from Health Care (-0.7%) is also weighing on the proceedings. HMOs (-1.4%) are under pressure after a consumer group urged the Justice Department block UnitedHealth Group's (UNH 55.71 -1.17) proposed purchase of Sierra Health Services (SIE 41.41 -0.03). DJ30 -52.87 NASDAQ -10.77 SP500 -6.75 NASDAQ Dec/Adv/Vol 1656/770/120 mln NYSE Dec/Adv/Vol 1918/527/56 mln
09:40 am : As expected, stocks open lower across the board as investors lack of the overwhelming evidence to sustain the momentum that recently lifted the S&P 500 to its best weekly percentage gain in four years. With the market increasingly panicky with every piece of weak economic news, especially from the housing sector, discouraging comments from Lennar Corp (LEN 42.76 -1.78) are giving investors another excuse to lock in recent market gains.
The homebuilder opened down 4% after management withdrew its 2007 earnings guidance, said the typically strong spring selling season has not yet materialized and warned that subprime mortgage lending woes exacerbated housing market weakness. As an aside, the S&P/Case-Shiller home-price index showed that the price of homes in 20 U.S. metropolitan areas fell in January for the first time in at least six years, further underscoring the troubled state of the U.S. housing market. DJ30 -48.54 NASDAQ -8.22 SP500 -6.07 NASDAQ Vol 82 mln NYSE Vol 42 mln
09:15 am : S&P futures vs fair value: -5.2. Nasdaq futures vs fair value: -5.8.
09:00 am : S&P futures vs fair value: -4.8. Nasdaq futures vs fair value: -6.0. Early indications still point to a lower start for the cash market. Aside from Lennar's disappointing report and no other economic data of note except an expected decline in consumer confidence contributing to the negative disposition, there's also a growing understanding that the upcoming earnings season will be lackluster and that guidance may be extremely cautious. The first quarter comes to a close on Friday and the strong likelihood that 14 consecutive quarters of double-digit profit growth for the S&P 500 will come to an end will be a major theme in April and restrain the near-term outlook for the stock market.
08:30 am : S&P futures vs fair value: -4.4. Nasdaq futures vs fair value: -4.8. Still shaping up for equities to open on a downbeat note as the futures market continues to languish below fair value. Even though monthly sentiment data don't really say much about the economic outlook and don't correlate well with short-term consumer spending trends, investors are anxiously awaiting the latest read on consumer confidence. The Conference Board's index for March will hit the wires at 10:00 ET and is expected to drop from a reading of 112.5 in February, the highest level in five-and-a-half years.
08:00 am : S&P futures vs fair value: -3.7. Nasdaq futures vs fair value: -4.2. So much for Monday's late-day momentum carrying over into this morning's opening bell as futures indications currently signal a lower start for stocks. As if yesterday's unexpected drop in new home sales wasn't bad enough for the troubled housing market, homebuilder Lennar Corp (LEN) followed up a 73% year/year drop in Q1 profits by withdrawing its 2007 earnings guidance and warning that "soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market."
06:19 am : S&P futures vs fair value: -5.6. Nasdaq futures vs fair value: -5.8.
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