Dow -51.70 at 11326.32,
Nasdaq -14.59 at 2310.96, S&P
-7.07 at 1260.31
Dog
Days.
It looked like it may be a pretty good week on
Tuesday and Wednesday as end of month buying was present
but the next two days showed no follow trough so the
week ended quite flat for all major indices. These are
the dog days when many take their vacations so volume is
usually quite light and the market numbers can be pushed
around pretty easily but with light volume comes lack of
strong commitment. On Friday the official government
jobs report came out after the earlier-in-the-week
ADP National Employment
Report. Both shown below. Seems the best
was priced into oil stocks as Chevron reported an 11%
increase in income but this was lower than some
expected. Exxon
Mobil had a similar situation but that stock
dropped more and is now on our watch list as a
possible short.
Jim Cramer wrote that
the market has made a bottom. "The bottom. What
does it mean? It means that every time we get a big
decline, you have to buy it, because we are not going to
take out the July 15 low." I would not be willing to
take that bet. It could be the bottom but most
indicators would like to see some more correction and it
seems much better to be more sure and actually see a
trend change than to simply hope there is a bottom.
He also said, "I think that housing prices are
bottoming, because the worst-hit areas have bottomed."
Form all that I have read this does not even look close.
Maybe a bounce but in some areas houses may have another
20% to fall in price over the coming year or so. There
is a basic growth rate of how many new homes need to be
built each year to account for needs in an expanding
population and growing economy. John Mauldin wrote that
this rate went above the norm by 48% since 2005 so now
has to work through all those additional homes, about
3.5 million of them. The home building rate now is under
1 million a year but could get down to 400,000 a year so
the existing homes can be sold. Prices have to reach a
level where people will buy or rent and with
unemployment growing this adds to the difficulty. There
will likely be some nice bargains in 2009 to 2010.
Actually for renting there seems to be now. A friend who
may rent in Florida has sent some of the listings there
where you can get a 4 bedroom with a glassed in swimming
pool for under $1,000 a month. With out the pool as low
as $695. Seems to me it makes more sense to rent
until prices have stabilized and those prices
suggest that many feel the same way.
This is how the week looked on the major indices:
As there was no new housing data this week, jobs took center stage and the first
report out was
the ADP national employment report that showed that the U.S.
non-farm private sector added 9,000 jobs in July.
The previous month’s
employment numbers were revised up to show a decline of 77,000 from the
originally reported 79,000 decline.
Then the official report came out where July came in close to expectations, with nonfarm
payrolls falling by 51,000 which was better than the expected decline of 75,000.
This is 7 months of job losses.
The rate of unemployment rose
to 5.7% from 5.5% if you exclude several
categories as the true rate is much higher. This rate is the highest in 4 years
and while it goes up the wage increases paid are falling.
Among the sectors, the goods producing sector lost
46,000 jobs, with the construction and manufacturing sectors losing 22,000 and
35,000 jobs, respectively. Meanwhile, the services sector lost 5,000 jobs.
Retail trade and professional and business services lost about 17,000 and 24,000
jobs, respectively. The report shows that the leisure and hospitality segment added 39,000 jobs.
A separate report showed that the number of individuals claiming for unemployment
benefits rose 44,000 in the week ended July 26th to a total of 448,000.
Oil closed up 1.5% for the week wile for the week ended
July 18th crude oil inventories declined by 1.6 million barrels to
295.3 million barrels and remain below the lower half of the average range for
this time of the year. Distillate
fuel demand is down
2.4% from the year-ago period, while jet fuel demand during the corresponding
period declined 2.5% year-over-year.
For the week these are the top and bottom sectors.
And this is the year to date look at the sectors.
Seems with gas prices up rail is a preferred way to
ship. Beer also looks popular.
The best and worst industries
for the week.
We have now
started August and an election year. On average in
election years the market has bottomed in June, rallied
to September then finished the year nicely. This year ff we can
make a bottom by September we could see a year end
rally also.
The Dow now has upside
resistance at the January and March lows which are at
the triangle down trend line at about 11600. Then the
50-day EMA 11716. A break below the 11200 support would
test the low from last week and if failed the year's low
come into play.
This is a monthly Dow chart
and it is under the 38% Fibonacci from the 2002 low to
2007 high and under the 50-month EMA. This charts now
looks like the path of lease resistance it to test the
50% at 10720. Below that we have the 62% which is
basically inline with the trend line. (the trend line is
not exact as the two touches were years ago.) The RSI does not have to get back to 30 as it did in 2002
but if it does it could start a new bull trend.
This is the Ultra Dow ETF DDM
that goes up when the Dow goes up.
I was reading someone who expects that
the utilities may break to the upside from the weekly
triangle. To me it looks like they could break down here
to test the 200-week EMA. That is also close to the late
summer 2005 high or 438 and would likely provide support.
The Nasdaq has also formed a
triangle not drawn but the top line is resistance at
2354. A break down would be a move to under about 2270.
The Nasdaq NASI
which basically looks at the gap between the number of
advancers and decliners continued to rise
while the Nasdaq was flat. The VIX in the lower
portion is in a pretty tight range.
QLD is the Ultra ETF for the
QQQQ or Nasdaq 100. It looks similar to the Nasdaq and
a move over $76.16, the 50-day, would be playable. A
break under $70 - short able it seems.
The S&P 500 is in a much
talked of triangle. Basically though it would have to
break over the 50-day EMA to be a long at 1298 to 2000.
The monthly S&P 500 is similar
to the the Dow monthly and the same comments apply,
This longer term weekly chart of the S&P 500 shows it is at the first
Fibonacci level while the 200-week EMA is still under the 50-week EMA which is
still bullish long term. One could put Elliot wave labels on this Fibonacci
clearly define support areas.
The 60-min S&P 500 chart
and
you can trade which ever side breaks.
The Russell 2000 has been in a congestion range for 8 days between the 50
and 200-day EMA so a break on either side can be a trade.
The monthly Russell 2000 shows how well it has held up as it is still
over is 50-month EMA and 38% retrace. This seems strange as higher inflation
generally is believed to hurt small caps more and as they tend to be more
speculative investments they also do not generally do well when investors are
nervous, as they get out of them. In any case they are doing well compared to
other indices but there was a
3 month bear flag that resulted in a red candle decline and this type of bear flag
may be developing again. It may end up breaking to the upside so will know in
time but a longer term bear for this index would be if the trend is broken at
650.
The S&P 400 midcaps have not been as strong as the Russell 200 small caps
and are now in a trading range that could be a bear flag but also could break
out on the upside over the tend line. If the lower line holds then a new trend
could have a start but would need to be confirmed with a break out just the
same. Dog day summer rallies can have low volume and not be trustworthy but they
often can lead to decent gains just the same.
The GSG commodity ETF dropped to the 50% retrace of its gain from
January. RSI and stochastics are turning up a bit and it may put in a rally but
this may also over time want to test its 200-day EMA nearer the 62% retrace.
AGA the double short for the agriculture sector is now in a bull flag so
a buy on a break out of it.
Oil found support at the June low so far and may try a rally. In time
though the odds of it going at least to the 200-day EMA at the 110 area are
quite high IMO. Will watch stochastics for a move over 20 as a short term buy.
The US oil fund USO has resistance at the 50-day EMA at 104 and the lower
support at the gap would fill at about 94.
We have had DUG as a play on the general oil and gas decline since its buy
signal at about $26. It gave a sell signal as stochastic dropped under 80 and CCI
under 100.
DIG is the counter part to DUG, the anti mater so to speak. It had a nice
one day rally this week and we are pointing it out for those who cannot or do not
like to short DUG you can trade this long on gas and oil rallies.
Gold is still holding above
the trend line that it broke above in June. If it
rallies another time it may make a right shoulder of a
head and shoulders pattern or some may see one now. That
pattern would measure about 72 points so a break of the
neckline would have a target around $845 which is back
to the May low.
The gold cloud chart shows support at the red cloud from 890 to 900.
Market Vectors gold miners GDX 60-minute renko chart gave a buy signal on
Wednesday and by Thursday it also had a parabolic SAR dot under the pattern but
by Friday that dot moved back over the pattern though CCI is right at the -100
line. We have liked using this renko chart as it cuts out so much of the trading
noise but in this case it shows it is not 100%. We are still showing this as a
long but if it continues on Monday lower it will be a stop out and could be a
short however for shorts is is a better risk reward to sell when the CCI moves
under 100 from above it.
The GDX 60-min candle chart shows a higher
volume bounce at the support during the last 60 minutes
of Friday though CCI has not yet crossed back up over
-100.
The gold and silver index XAU is again near its support and 62% retrace at 159
and a break there would be bearish for gold stocks.
The Gold Bugs (Basket of Unhedged Gold Stocks) HUI is near its 3-year
trend line and again at the lower Bollinger band. If gold stocks can start to
outperform gold there will be a trend line break on the lower part of the chart
above the red line.
Silver Not much change though the stochastics
have now gone back over 20.
The US dollar regained its
position inside the channel. Stochastics is again over
80 but can stay there a while. It seems to be basing
pretty well. This has a long term cycle of 7 or more
years and it reached its high last at the start of 2002
after a 7 year uptrend. If this cycle continues
the new one would be under way in 2009 but there are
often rallies for months before the actual new
trend begins.
The healthcare sector ETF
XLV is in a pattern that could resolve to the upside
in which case stocks in this sector will be of interest
and this ETF can be trades on its own.
This week a couple of earrings reports to watch are AIG
in the financial sector and CSCO in technology as they may be a catalyst for
a market move.
Weekly economic calendar from briefing,com and the FOMC policy statement
on Tuesday.
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stockcharts.com
accounts there is a space to put in a referral name
on that form. If you enter
stocktiger@stocktiger.com they give
us credit. Thanks!
Stocks of interest:
NNRI
NNRF to Hold Shareholder
Conference Call
-
NNRF will hold a conference call on August 7
at 4:15 p.m. Eastern
Long term possibility
Sun Power Corp. SPWR Here is a weekly chart
of a solar stock that may be good for longer term -
perhaps well into 2009. If it breaks out over the trend
just over $81.70 this shows the first target at $100.
The long term possibility is to the 2007 high which
would be a double in price from here. As with all long
term holds you must decide on appropriate risk reward
and set your stops accordingly. Right now minor
support is at the last 3 week's low near $70 and longer
support at the lower trend line near $60.
New additions to the
watch list
.
Remember that we add many stocks to it each trading day.
STEC Over $10.56
(from mezz)
ICO Over $11.00 on good volume
SUN Over $42.75 could end the 13 month
downtrend that started at $84?
ELNK A bounce play at the 50-day with tight
stop or on good volume over the line at about $9.25 at the
moment.
ALTI It broke out a bit late Friday
so now a continuation over $2.82 or a slight pullback to
the 200-day at $2.72
Q Over $4.00 and 50-day EMA
IACI Short
under $16.85 - does now show positive MACD
divergence.
MSFT Short
under $24.87
NT Short
under $6.15
XOM Short
under $79.00
Unknown
photographers today....
in black and white
That's a full lid for today - will see you all during the week.
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