Stock Tiger Stalking Stocks™

For Monday March 12, 2007  

Close

Dow +15.62 at 12276.32, Nasdaq -0.18 at 2387.55, S&P +0.96 at 1402.85

In December 1996 Alan Greenspan gave his "Irrational exuberance" speech and little did he know that it had only begun as the Nasdaq at that time was only at 1300. He did nothing but watch the bubble grow and then pop. No regulation on margin etc. This time in the last few years it was the housing market and now again nothing was done so it seems that bubble popped though we will know more in a few years. Since December at least 30 sub prime lenders have gone out of business and maybe they should not have been allowed in the first place to suck in buyers who now cannot pay their higher monthly costs. (notice how I used suck just like the CEO of the home builder D. R. Horton) I have read that with the new regulations as many as 10-20% of buyers will now not quality for mortgages so that is of course expected to cause a long term slow down in housing.

But with such a backdrop the markets still manage to hold up quite well and all major indexes closed up for the week. The news is not so important it seem as what is more important and that is - if people want to own stocks or not. We could pretty well make a decent case why the Dow could move up or down a few thousand points but with the vast amount of money in the world it has to go somewhere and if it goes into US stocks the prices will go up and if it goes somewhere else they won't. We use the charts to try and pick low risk entries in the direction that the money is gong today and even with the current pullback we are still in a bull market.

Here is how the main indexes did for the week.

The market is however more sensitive to other situations when it is nervous. Here is the chart of the Japanese Yen in US$. Last May when the Dow dropped (lower part of chart) the Yen had just shot up but actually this was slow in correlation. The Yen had another spike in December but the market seemed not to worry about it. This time however this correlated with the recent market decline. Hedge funds and others had borrowed money from the low interest Japan to buy higher interests notes and equities in the USA or other places (carry trade). Maybe on this run some got nervous so sold some of their holdings to pay back the borrowed money but with Japanese rates at about $0.5% and US at about 5% or Australia at 7% why care if the Yen moves up a tiny bit?  They call this process "unwinding" and with the Yen/US$ falling back it helped relieve some worries but also stopped the selling that was being done for that reason. I do not know how big a market mover this may be be if the Yen does actually breaks its downtrend and heads up but there is for sure much written about it and doing a Google "carry trade" search would supply plenty of reading material.

On Friday the markets ran up early on a job report that showed that February nonfarm payrolls rose  97,000, which was better than expected. Payrolls for the prior two months were upwardly revised to account for an additional 55,000 new jobs and the unemployment rate unexpectedly fell to 4.5%, near a five-year low so no signs of recession and no increase in economic slowdown.

Here are the sectors that gained or lost the most for the week. Ouch the winning forestry sector that was on top last week is now on the bottom.

The Dow chart shows the general bounce near the 38% retrace and 200-day EMA but it did not touch those but was only close and many would feel much better if it can successfully retest that area. It is now near resistance but a break above the shadow tops in green could take it to the 50-day EMA just under the center Bollinger band where there must be a ton of short sell orders waiting. I am one of those that would like to see a retest as I also would be very curious to see the RSI and stochastics. They both gave buy signals as they crossed up above their lower lines and it is rare that they would both then soon go back under these lines. Stochastics has in the past but not both. So it seems on the daily chart a trade would be to go long at 12353 for a possible move to 12430 or a short under what may now be a break of the bear flag (not drawn on chart).
 

The weekly Dow chart shows how it bounced where everyone was watching to get in but the stochastics on this weekly are still going down as is MACD. A few more weeks and a dip under 20 could make for a good summer rally. Historically this week generally ends higher and it is options expiration week and the "max pain" on the Qs and S&P is above the current prices.

The transports rallied from the first trend line to the 50-day EMA but on lower volume. A drop to the lower trend and 200-day may be greeted with more enthusiastic buying should the drop happen.

You can see that many times in the last few years this Pro Funds Ultra Short Small-cap looked like it may become a good long term play but it always failed at the 65-week EMA. Now days there are real time ETFs so this fund would not be the best to use as you can place your order only one time a day but it is good to refer to as it has a real past history. The stochastics are still going up so if they reach to 80 level and drop back we could have a renewed small cap rally.

The Dow Jones World Stock Index also after having reversed above the 38% retrace has now almost made it to the underside of the 50-day EMA - resistance. This also would be a better chart if it can fall again and do some backing and filling.

The Nasdaq also bounced at the 50-day area and the trend line on the weekly chart with still falling stochastics so not impressively bullish.

While the top 100 market cap stocks from the Nasdaq (weekly chart) are about in mid channel so they  also may find another drop ahead as stochastics are under 50.

The semiconductors have been holding up very well n the pullback and have yet to break the support. That is pretty impressive.

An the other view using the SMH shows the range.

We show a lot of charts and looking at a lot over a long time is a way to be better at seeing things that can help your trading. Not all charts have direct use but add to the overall picture.

The S&P 500 looks quite weak here as the volume has fallen off on the rally. The resistance overhead is at the 50-day EMA.

Actually the NYSE does not look so different from the SPX in the short term.

The percent of stocks in the NYSE trading over their 50-day EMA dropped a lot down to 26% from over 80%. It is now at 45% and we could expect another drop as it is the most common route as the chart shows.

The Russell 2000 similar to others however it did touch its 200-day EMA. This  may be its low for this correction but still needs a test the low even if it is higher higher. The stochastics and RSI have been correct on the other calls in the past year.

But ---- on the weekly chart the stochastics still falling so that is quite cautionary. (There are two sets of Fibonacci on this chart. The blue ones are from the actual recent high and the gray are projections I made)

Last Summer and Autumn we were looking for the 4-year cycle low to come and did not want to count the June/July low as it would be too early but now it looks like that was indeed the low.

The CRB commodities index ran into the 38% level and could not break above. No real comments on it now but it seems to be making a good consolidation.

Gold dropped again to the 50% line that is not a usual placement of the lines but one that we have been using since June on this chart. Stochastics again moved above the 20 mark. Gold may need the US dollar to fall in order to stage a good rally but the US$ may rally itself.

Silver did manage to drop only briefly to the lower channel and near the 200-day

The weekly economic calendar from briefing com. I suppose the CPI and PPI may be the ones that could move the market the most this week.

We have many new subscribers each week and they do not all see the home page. So a reminder that on the home page we have a video of the new watch list socks and some others that seem they may be ready to move. For all the current watch list go to the Current page.

Uranium has been very hot - almost radioactive over the past 4-5 months so I though tit may be of interest to show 6 that have done well. These are not "picks" or on the watch list at the moment but ones you may want to know about if Uranium continues. A few are near possible break outs again.

URRE is very popular and maybe the most heard about low priced one that had a nice run lately.

URST went to touch its trend line intra day and it seems the 50-day EMA has been giving support after a high volume run up and light volume pullback.

BAY on the Vancouver exchange in a channel.

Great symbol -- U  on the Toronto exchange near a break out point at $14.90. Moves slowly it seems but still a double since October.

URME also has done extremely well up 400%.

And UUL also on the Vancouver exchange penny stock that is not anymore as it ran up almost 300% in the last 2 weeks.

Now for some more usual watch list additions.

CNH tried like many and pulled back but stayed with green candles so may try again over the $40 area.

JAV over $5.75

DYN above $18.41

PTSG looks attractive over $1.55

RNO a miner over $3.50. Getting a bit high above its 50-day EMA so maybe quick profits if it goes.

COP has the space it may fill but no exact buy point. Maybe over the $68.30 high it had Friday.

NYMX over the $6.70 ish line but showing this as it looks like a momentum play for those who like some higher risk movers to enter at your discretion.