Dow -11.72 at 11421.99,
Nasdaq +3.05 at 2261.27, S&P
+2.68 at 1251.73
Money
from Heaven. or Knight in Shining Armor. The market
is waiting to find the fate of Lehman Brothers LEH first as weekend talks
and negotiations including the NY Fed look at ways that outside solutions can be
found. Of course they would like to find some knight but it does not
appear like that will happen and the firm could be broken up and sold in parts.
In 1979 it looked like Chrysler may go out of
business as debt increased and profit did not exist. Their president Lee
lacocca went to congress with the idea that
the government would help and he had ideas of how the company could turn around
with new front wheel drive cars and this would save many thousands of jobs. The
government agreed to some loan guarantees which left many creditors receiving only
about 30% of what they were owed, similar to a bankruptcy reorganization. As
I recall, the government did not lose on this, though I may be wrong, but at the
time the the US treasury secretly said that other troubled companies should not
expect government help. He said, "Such assistance is neither desirable
nor appropriate, being contrary to the principle of free enterprise."
I read treasury officials made it clear the government
will not bail out Lehman Brothers. We will
soon know what is to happen. Another company in the news this week will be the
insurance company
International Group AIG as they will have to raise money.
This week saw an easing of inflation
it seems but this Tuesday CPI will be announced. Usually
higher unemployment points to lower inflation.
The market in general still does not
show major worry as shown by the VIX and the
percentage of relatively high number of stocks trading
over their 50-day moving average. This week we may see
more on the downside as we work toward a test of the
July lows. At the same time and as the carts below will
show, there are many sectors where things are looking
pretty good.
The major indices for last week.
A Commerce Department report showed
that retail sales fell 0.3% in August compared to the
previous month. The previous month’s growth was
downwardly revised to show a 0.3% decline.
The Commerce Department said the July trade
deficit widened to $62.2 billion. Exports increased $5.4 billion to $168.1 billion compared to a
$8.7 billion increase in imports to $230.3 billion. Overall, the deficit on
trade in goods rose $3.6 billion to $74.9 billion, while the services surplus
increased $0.2 billion at $12.7 billion.
The number of individuals claiming
unemployment benefits declined 6,000 in the week ended September 6th to 445,000
from the previous week's upwardly revised average of 451,000. The previous
week’s numbers were originally reported as 444,000
The number of people receiving
unemployment is now about 3.525 million, the highest
level since 2003. Some now feel that unemployment will
rise to 6.7% in 2009 and above 7% in 2010.
The top and bottom sectors
for the past week.
The top and bottom industry
groups for the week.
“There’s a bull market
somewhere” so the saying goes and perhaps these
industry groups are not exactly in a bull market, but at
lease since the July low in the markets, many have done
very well and continue to look strong. During the week
we will pick some stocks from these groups. If
you have or find a stock of interest that is part of one
of these groups it may be helped by the overall strength
of the group. You may recall that when we identified
Biotech as a strong group this spring that we had a lot
of individual biotech stocks that worked out well over
about 2 months or so. You can further identify stocks in
these groups at marketwatch.com and barchart.com.
Health Care has formed a bullish pattern during
this pullback and a break above the pattern and a turn
up of the MACD could take it back to test the highs.
Companies
EMS and GTIV have been doing well here.
Nondurable
Household Goods has moved up 20% since the low and
about at break even for the year. PG, WDFC,
CHD and CLX are a few strong stocks in
this group
Forestry and Paper DEL
is a low volume stock in the timber sector
Food and Beverage MED in
this group looks like it could test recent highs soon.
Consumer Services are stuck
between the 50 and 200-day EMA but watch for a possible
break out.
Personal Products One here RDEN
could break out again as it is about to have a golden
cross. PARL also looks good.
Airlines JBLU
and LCC have been strong but oil is quite
oversold and a bounce in it may mean the airline stocks
could pullback.
Delivery Service FDX recently
upped their guidance as the lower cost of fuel has
helped their bottom line. UPS has also just moved
back above its 200-day EMA.
Muli major index chart for quick reference and
comparison.
Those were short term looks and here are the major
indices in the view from the start of the bull market in
2003
The Dow is just under the
38% retrace and may return at least to the 50% line
before the end of October where there looks to be pretty
good support.
The Nasdaq in in a descending channel and still
above its 38% retrace. A break here could send it to
about 2,000.
The S&P 500 is between the 28% and 50%. Note that
on all of these three charts that the 200-week EMA is
still below the 50-week EMA and that suggests that we are
still in a longer term (decades long) bull market even though we have
been in a shorter term bear market for almost a year.
In the recent past these shorter term cycles have lasted
5 or 6 years but you see they also can have good
rallies. In 2001 the S&P 500 went up over 200
points from summer to winter. If we had a rally like
that it could take it to 1450.
Now to the usual charts.
Dow
industrials daily ran back up to the first broken trend
line and closer to the 50-day EMA at 11541. MACD is
still pointing down.
The monthly chart is about unchanged from last
week.
With oil getting back to 100 the transportaion
average is back to its downtrend line and the 50%
retrace. RSI and stochastics are up and MACD may be
about to crossover.
Utilities are very weak and bounced at the
200-week EMA and if it continued to the broken trend
line we could expect them to be shorted again.
The Nasdaq bounced close to the support trend
line and stochastics did cross back over 20 but we are
not yet too enthusiastic about it. If it could pick up
volume be may be more interested. There are still many
top Nasdaq stocks that have very broken charts.
NASI has now turned down as the Comp turned up a
bit. This may just be lagging but we are watching to see
how well this can perform as in the past it seemed much
better as an indicator.
The VIX is gaining and we like to see this as if
more fear comes we may be getting closer to a tradable
bottom. The July low saw 28 and it is now at 26. 30
would be even more significant.
Nasdaq 100 a bit of a bounce and if it gets to
its trend line would likely have to drop back again. The
plus here is that the RSI did get under 30 so it could have
made a low. Watch stochastics to move over 20 and MACD
to cross over.
S&P 500 60 minute chart shows a trade over about
1255 to the 200-day at 1265.
S&P 500 Daily had 3
consecutive days up and Mike Burk pointed out that the SPX has been up for 3 consecutive days for the 4th
time since the July lows and each previous occurrence
was followed by a short term reversal. More than 3
consecutive days in either direction often marks a
change in the direction of the trend. In early
September the SPX was down for 4 consecutive days. We
have a top trend line at the 50-day EMA at 1277.
Percent of stock on
the NYSE now over their 50-day EMA is still at
47% and at the July low it was at only 10.57% so we
could still see quite a decline before a medium term
bottom.
S&P 400 Mid Caps found support about where they
did in July and have bounced on volume a bit above the
norm. They would still need to get over the August high
to get them back over the trend line from June (not
shown)
Russell 2000
small caps the RSI is still at 47 as they remain
pretty strong in comparison to the other indices. Still
under the 50-day EMA and they could at any time play
catch up with the other indices and they have quite a
ways if they were to test the July lows. It is still
strange that the small caps have held up so well as in a
tougher financial environment usually large caps hold up
better. It may be that forced stock selling from banks
to raise money means that they mostly are selling large
cap stocks.
The banking index BKX has made it back to the
broken trend line on the monthly chart. RSI and
stochastics have now gone back above the 30 and 20
lines. If it can close back over this line there may be
quite a few banks that could continue to rally. Ones
with very low bad mortgage or credit card exposure that were
sold off along with the others. There is still expected
to be a lot of bank failures over the next year or more so
use caution in any selection.
This regional bank ETF KRE shows their strength
since the July low. Regional banks may have been much
more careful and conservative with their mortgage
placements.
The Home Builders XHB did break above the 50-day
EMA and the center line. It looks like quite a long time
before the sector can recover - maybe two or more years
but that will not exclude a rally from time to time.
Commodities ETF GSG was up in a minor bounce. Given
the oversold condition a more extended move will come at
some point but not many charts in the group are set up well for a good
risk/reward entries now.
GSG on the weekly view we see it made it to the
38% retrace. The 50% retrace is also at the 200-week
EMA and this may get there in time. The fall has made a
very steep inverted V shape so a bounce or at a minimum
some good consolidation is needed.
Oil made it to our $100. In the
chat room when oil was around $125 ish we said it would
go to $100 before it went to $150 and someone else took
the other side. As it neared $150 their position looked
pretty good but it only got to $147.90. So now on this
chart it got
within 8 cents but on the trading floor it did dip under
$100. It is quite
oversold so some rally is expected. We will see how the
damage and refining decline caused by hurricane Ike
affects oil price.
Oil monthly chart shows the longer term Fibonacci lines
and the 38% retrace at the trend line in brown.
US Oil Fund also made it to the support area near
$79.
Ultra short oil gas DUG reached over $46 from its
last low of $32 and a sell signal was given by the CCI
dropping back under 100. This chart has worked pretty
well for "automated" trading. You can either short this
as it declines or go long DIG instead.
Gold dropped below its trend
line and a bit below. Tradable bounces have
usually had a crossing of the stochastics back over 20.
Gold weekly shows the trend and the Fibonacci and we want to see a base
build up here or on the daily chart.
Gold and Silver index XAU
weekly made it to the support drawn and the trend line
and bounced, the yellow trend line is a significant one
and should contain this decline.
XAU daily shows the
bounce to and a bit over the lower broken support. A
break of the trend on the lower section would show that
gold stocks are outperforming the metal. Right now other
that bounces not many gold stocks look good technically
but many can have bottom bounces.
Gold Bugs HUI the unhedged gold stocks
became very oversold and this is the fist bounce. The
decline has been straight down so a rally could be sharp
also.
GDX renko chart gave a buy signal when the CCI moved back over -100. This
has been a solid money maker, especially since mid July. A short from 60 to 28
interrupted by two quick longs.
Silver made it very close to the $10
downside target and seems very oversold so a rally is
likely soon if the US dollar pulls back some.
Copper - we were speaking of this in the chat room so thought to show it
as it has reached its trend line on this weekly chart. If it breaks the 200-day
EMA is just below.
US Dollar made it to the top horizontal
line as stochastics were over 90. The weekly candle
suggests a short term top may be in place.
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On this week's calendar we have the CPI on Tuesday then
the FOMC policy statement. Wednesday brings the housing
starts and Thursday the unemployment claims. This is
also options expiration and futures contracts will switch
months.
Weekly economic calendar from briefing.com
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