Dow -171.22 at 11543.96,
Nasdaq -44.12 at 2367.52, S&P
-17.85 at 1282.83
Labor
Day in USA. The holiday originated in 1882 as the
Central Labor Union (of New York City) sought to
create "a day off for the working citizens".
Congress made Labor Day a federal holiday in 1894. All fifty states have made Labor Day a state holiday
as well. We hope all will enjoy the day off or the overtime you should get if
you work.
This week started off with a down day then a consolidation
Tuesday and by Wednesday the rally picked up steam - not in volume but in
points. On Wednesday a government report showed the GDP for the second quarter
at over 3% and the market rallied like it believed it. Well in fairness maybe it
was stronger that expected. After all you had a very weak US dollar in the past two quarters and
that boosts sales overseas and you also had all those US government stimulus
checks that were sent to many. As the dollar has now strengthened and most of
the stimulus checks probably have been spent there is likely to be a decline in
the economy for only these two reasons alone. On top of those one expects
increasing foreclosures and probably more unemployment as credit woes
worsen and home prices in many regions continue to decline. This would lead to a
harder recession one would think.
On Friday after the three-day rally it seems traders no longer cared so much
about quarter 2 GDP numbers and instead wanted to take profits and get out before
the long weekend which has hurricane Gustav scheduled to roar through the Gulf
of Mexico this coming week. Oil production could be hurt by the hurricane and
that would probably spike oil up some. Dell DELL missed expectations but also
warned of a slowdown in IT spending and that hurt the Nasdaq as you see below it
was the week's worst index and it fell almost 2% for the week.
The weekly major index performance. The Brokers, financials, homebuilders and
banks were up over 3% for the week. Biotech, Internet and semiconductors were
down about 3%.
Fannie Mae
FNM and Freddie Mac FRE
were the two issues that led the financial sector
rally this week. While the general market volume was the
lowest all year these two traded over 100 million each
day. That is half a billion dollars in a session each
during the last days. Many in the chat room
started buying a week ago Friday and early this week in
the $2s and selling in the $3 and $4s for super gains.
These are not really independent companies so many
wonder why the government allows them to trade like a
normal stock. The trading has more to do with if and
when the government will figure out some other bail out
plan either on its own or by orchestrating a deal
involving other institutions. Regardless, they are at
the moment good gambling vehicles that can trade up or
down and have plenty of liquidity.
Here are the top and bottom sectors -
amazing gains in mortgage finance and at least the two
above had great volume. However the market itself was
tiny volume that does not support the rally.
For ten straight sessions the market traded under 1 billion
shares each day.
The best and worst industries for the week.
Preliminary second quarter GDP report released by the Bureau of
Economic Analysis showed that second quarter GDP rose at an annual rate of 3.3%
compared to the advance estimate of 1.9% and first quarter growth of 0.9%.
On a year-over-year basis, second quarter GDP growth was 2.2% compared to 2.5%
in the first quarter. As we partially said above, the increase in second
quarter GDP compared to the previous quarter reflected positive contributions
from exports, personal consumption expenditures, federal government spending and
state and local government spending.
The Labor Department said that the number
of individuals claiming unemployment benefits declined 10,000 in the week ended
August 23rd to 425,000 from the previous week's upwardly revised average of
435,000. The four-week average that
removes volatility declined 6,000 in the recent week to 440,250 from the
previous week's revised average of 446,250. Continuing claims, which is
calculated with a week's lag, increased 64,000 in the week ended August 16th to
3.3655 million.
The personal income and
spending report showed that personal income declined 0.7% compared to
the 0.2% decline expected by economists. The July reading represented the first
decline since August 2005. Meanwhile, personal consumption expenditure climbed
0.2%, in-line with economists’ expectations. On the chart though it looks like
Consumption also declined.
Seasonally September is the worst month of year and this year could turn out
the same. However the chart below is for the Dow and is an
average of at least 28 years. During the 4th year of the Presidential
Cycle (which includes the very poor 2000) the Nasdaq has been up 73% of the time
with an average gain of 1.1%. This is because we also had some excellent
gain years.
As Mike Burk points out; on July 15 there were 1304 new lows on
the NYSE, a record. After every record, with only one exception, after
every time there were even half as many new lows as we saw on July 15 there
has been a retest of the low by the blue chip indices. A retest of the July
15 low in the next several weeks is likely.
In August there were a a lot of hedge fund
redemptions that that could start illiquidity coming out of the markets
pretty soon. There is also the start of institutional tax selling. We expect
a good rally in the next two months but a decent decline also but the charts
are mixed as to a small rally first of a larger decline.
The multi chart of the major averages showing their Bollinger band relationship
for quick comparison. The small caps still leading.
The Dow 15-minute chart shows the nice trend line break out this week then the Friday
pullback. Looks like for a short it would need to break the upward trend line at
about 11525.
The daily Dow
shows the lower support if the pullback continues.
Beyond the short as shown in the 15-min chart a break of
the lower line may set up for a larger scale decline.
The other indicators here though are not yet showing a
sell signal in general so the cart is more bullish than
bearish. It would probably present a good trade over the
11765.
The monthly Dow -it is still looking like a
bear flag forming.
The DXD is the Ultra short for the Dow while its
twin is DDM for going long. You can however short
both so need only to use one if you wish. If the Dow
pulls back more in the coming week then this is the
one to play long.
The Transportation index ran to the trend line
and 38% retrace and a break out would be bullish.
The Nasdaq on Friday pulled back to the 50-day,
the 50% retrace and support shown in yellow. If that
breaks the strength of the selling will point to the
future. One to go soon to test the July low or only a minor
pullback. It has been playing the 500-50 pinball and
just needs to tip its hand one side or the other.
The Nasdaq has not yet broken support and the NASI,
though it had a slight crossover this week is still
pointing up.
The Nasdaq 100 is an index that can lead the rest when money decides to
get back into stocks. These are the top 100 market cap in the tech heavy sector
and looks like no one is interested in buying.
The S&P 500 60-min chart had a nice break out on Thursday and the RSI
topped 70 and stochastics well over 80 but came Friday and it gave it all back.
There is a chance of course that come Tuesday it will find close support at the
top of the broken trend line and the 200 period EMA. If it falls below,
especially with increased volume, it will be a short.
This S&P 500 60-min in
this
wide view shows that 1261 and if it does break that the next
level is about 12 points lower.
The S&P 500 daily shows two back tests of the broken trend line,
meaning it ran up from the bottom to test it. Both were sold.
And the monthly S&P 500
adds longer term perspective. Over time trend
line may still be in the cards.
The NYSE 60-min shows that is has tried to break above the 200-period 5
times and succeeded briefly on Thursday. The RSI went over 70 first time that
high for over a month and it closed close to the 200-period. Seems like a good
chart to just see overall health of the market as it has over 2700 companies in
varied businesses. Maybe a better one is to show market strength and weakness is
Value Line VLE, not shown this week.
The percentage of stocks on the NYSE trading above their 50-day moving averages
is now 62%.
The numbers of stocks on the NYSE making new 52-week highs is at a very
long term low. Some may take this as a contrarian indicator.
S&P 400 mid
caps have not done as well as the small caps
and like the Nasdaq are stuck between the 50 and 200-day
EMA.
The Russell 2000 still may make a run for the 764 highs.
The monthly Russell 2000
as we stated before, this may become a repeat of the
past with two months up then one down.
The homebuilders index XHB has been in the downward channel since its
start in 2006. It has made it back to the "center" line at the 50-day EMA.
A move back over the 50-day may trigger more buying. If volume were good
maybe a teat of the top line. Would logically seem better if it waited a bit
more and after a market pullback. Homebuilders are a wafting game and we expect
some general market strength leading into elections and maybe after. Both of
those after a market pullback in September.
The FTSE London
Financial Times often leads the Dow but the Dow did not
follow on Friday - maybe Monday.
GSG commodity ETF has a
positive MACD but the close was back under the 200-day
EMA and may re test the lower Bollinger band.
Hurricane Gustav's forecast track at time shown:
The millions of barrels of oil production reduction during some previous storms
in the Gulf of Mexico.
Oil has not moved much off
its base by the close on Friday. It has been weak even
with this hurricane in the forecast. Hopefully damages
will be light for all and oil will not need to bounce.
Under $110 we see $100.
Silver
had the buy from the RSI and stochastics and could
continue back to the broken support but watch the steep
trend line as it also could pull back again.
Gold is about at the former
support and one may expect it to pullback after running
to it. We are nearing the time of year that gold has run
pretty well into the new year. Actually though a retest
toward the lows could benefit it before a run. The
indicators still look positive.
Gold closed the month just over the 65-week EMA, the area that has been
support for many years. Stochastics are right at 20.
XAU gold and silver index also nearing resistance the the former support.
This week we will look at a lot of gold stock and see if any are setting up for
good entries. We would like the see the ratio chart in the lower section have
the green line get back to the 19 level. This is a pretty short time period
since breaking of support some some more time down here would help build up
strength.
The Japanese yen has
not changed much so has little affect on the market but
we keep an eye on it as if it breaks out and back over
its EMAs the US market may react with a sell off. They
seem to have become de coupled but the past connection
may return.
The FXE Euro currency ETF
continued lower as the dollar remained strong.
Stochastics have turned up though and the MACD has a
crossover that is positive.
The UUP is the US dollar bullish fund and
you see the resistance just over head. The MACD is close
to a negative crossover and RSI has some negative
divergence but there is the EMA golden crossover. Still
we would expect a pullback even if it first did attempt
or even succeeded in a short term break out.
The US dollar index with the
77.85 resistance. You can see that the move up was too
fast too quickly so it will have to go back down to fix
the weak pole it sits on.
On this long term US dollar chart you also see the downtrend line
resistance.
Weekly economic calendar from briefing,com
Friday will be employment numbers but initial claims can often spark the markets
also.
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accounts there is a space to put in a referral name
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We await the NNRI financials and the next company
update in September. The price has been tight all month
and the up day's volumes have been higher than the down
day's volume which is generally bullish.
Summer's end in the northern hemisphere -well officially
we have 3 more weeks. Enjoy Labor Day.
We mentioned have two solar stocks that so far look good for
longer term SPWR
and CSIQ.
SFL This is another that may come back to
an uptrend in the coming months. Yahoo has their profile
as: Ship Finance International Limited, through its
subsidiaries, owns and operates vessels and offshore
related assets in Bermuda, Cyprus, Liberia, Norway,
Delaware, Singapore, and the Marshall Islands. As of
December 31, 2007, the company owned a fleet of 58
vessels, including 27 crude oil carriers, 7 Suezmax
crude oil carriers, 8 oil/bulk/ore carriers, 1 dry bulk
carrier, 8 container vessels, 2 jack-up drilling rigs,
and 5 offshore supply vessels.
It has been pulling back since mid May but you can see
it is not extremely volatile. Lately the up volume is
noticeably higher that then down volume and a break over
the trend line at perhaps the $29 area may be a buying
opportunity again. If the market in general or shippers
correct more we one can just wait. Stochastics are now
over 85 so a pay attention for deeper pullback signals.
ON a longer term purchase it does not mean you cannot
take profits. Many like to trade some around a core
holding.
New additions to the
watch list.
Remember that we add many stocks to it each trading day.
MFLX
Short back
under $17.00 with good volume - recent low
was $16.61
JAVA Short
under $8.63
HPQ Over $47.50 - not a clean break out
point so will need good volume
GD Over $94.40 then $94.74
NTRS Over $82.00
FMCN Broke out a bit on Friday - Over
$32.80
UNP Broke on Friday but may try again
back over $84.00
TWX Over $16.52
JBLU Over $6.18 - watch oil as if a
rally this will fall.
HRB Over $25.80
IPHS Over $38.54 on good volume and/or top of $41.52
ARM Over
$15.75
ENER Over $83.33 but a pullback buy if the 50-day EMA and trend line
hold at about $67.70 area Short if volume
picks up and it falls under trend line and 50-day
CBS Short
under $16.00 and /or $15.76
Photograph by Juan Trujillo
Photograph by Jim
Tardio navy-pier-swings.
Photograph by S.
Madlen
That's a full lid for today - will see you all after a week.
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