Dow +228.87 at 12849.36, Nasdaq
+61.14 at 2402.97, S&P +24.77
at 1390.33
Full
Speed Ahead. A week ago on Friday the market was taken aback as the poor
earrings from GE surprised and not only put the brakes on the market
advance but put it in reverse as the Dow dropped 256 points. Speed ahead one
week and we see a 228 point rally on the Dow as the week-ago news no longer
seems to matter. For the week the Dow closed up 4.25% putting it above the
February and March highs. It is now only 194 points away from the closing high
of 2008 and 415 away from the December 31 close.
Good earning's reports from IBM and Intel INTC helped begin the rally on
Thursday and the headline leader to really bring in the buying Friday was Google
GOOG, mentioned below. Citigroup
C Friday announced a $5 billion loss ($1.02 a
share) and closed up a dollar. Seems that even though the loss was worse than
expected by some, it was better than expected by others. Many keep hoping that
the bottom in financials is here or close and they seem to not want to miss it.
Honeywell HON and Caterpillar CAT announced better than
expected earnings so helped the mood and the buying interest on Friday.
The volume was better than lately but not impressive. What was interesting
though is that oil closed at an all time high over $116 while the markets also
made multi-month highs. Remember how the media for years loved to blame high oil
for every market decline while we showed that for the most part over the last 3
or so years the markets have gone up alongside oil.
Many are now pointing out a Dow Theory buy signal as both the Dow Industrials
and the Transports have made new highs. While this may be true, a one day signal
seems is not so valid as to throw caution to the wind. In bear markets we see
these big point rallies over and over. Their are tons of fund managers who care
mostly about one thing - doing at least as well as the S&P 500. (Actually
if the S&P were down 5% for a year these managers would get good bonuses if the
even slightly beat the S&P even if they lost client's money) So on days like we
had on Thursday and Friday many money mangers, fearing being left behind, dash
in and buy in case there is no pullback to come. This contributes to these large
moves.
We can see and be cautious that the strength in the market is not so much
correlated to great news as it is to not-as-bad-as-expected news. For more
dependable rallies there should be some basis in honestly good news. I have read
that about two thirds of companies have yet to report earnings this season so we
have them to look forward to in the coming days.
The Fed has another meeting near the end of the month and if the market stays
strong this may dictate no addional cuts? Another thing in the mix.
From our watch list we had 28 new trade entries this past week.
On this page are some of them at the end
of the week
- many continue to gain so move up stops accordingly.
Here is GOOG showing the large
gap which is not good medium term for the chart. The gap
does not have to completely fill but in time a portion
will. We have put on the Fibonacci numbers to point out
possible support areas on a pullback. The stock closed
just over the 200-day EMA and in our opinion it would be
very bullish for the chart if it could in time do a
lower volume retrace to the 50-day EMA now at the 50%
line at $482. $495 is another possible spot. The company announced
earnings of $4.84 per share for the quarter, which was better
than the $4.52 per share expected.
From Thursday the Labor
Department said that individuals
claiming for unemployment benefits rose 17,000 to
372,000 from the previous week's 355,000.
Here are the gains of the major indexes for the week
with only gold making a decline. All the others up over
4% each.
The top and bottom sectors for he week.
The best and
worst performing industries for the week.
Because of GOOG
internet was the leader -then yet again, coal.
The Dow RSI moved back over
its trend line but the index on the longer term chart
closed right at resistance though back above the 200-day
EMA. The 38% Fibonacci is at 12855 - only 6 points
overhead. A heavy volume close above the 38% after a
retrace to the 62% level often leads to a test of the
highs.
The closer view shows the trend line resistance. The
Dow also has moved up 4 days in a row and 5 in a row
is not seen on this chart at all. Stochastics are back
over 80 a bit but RSI has not gone over 70 yet. A better
set up to try for a break out would be another pullback
or several days consolidation. News at this time though
can continue to create wide swings.
Not only did the Friday candle pop above the 200-day EMA but also above the top
Bollinger band. This may be bullish longer term if it holds above the center
line (which is also now exactly at the 50-day EMA) but for the short term it is
over bought. The fact that the market is so close to its yearly highs with a
general background of job losses, recession, housing price declines and
foreclosures and the huge financial crisis is quit bullish for the market in the
medium term.
For those using the Ultra ETF DDM
that tracks the Dow it also is at resistance and below
its 200-day EMA. Too many gaps for safety at the moment
except for day trades. This ETF aims to do about 200% of
the Dow move but you see that on Friday it went up 2.37%
and the Dow up 1.81% so it did not live up to
expectations at the close.
The Dow transportation index
has for most of this year been stronger than the
other indexes. If oil pulls back this may give an
additional boost to stocks in this sector.
A closer view showing the break out of the triangle and the retest of it a
couple of weeks later. That is a bullish sign.
The Nasdaq is a long way from its downtrend line and now at its own
resistance overhead. It is still between the 50 and 200-day EMAs. I especially
do not trust Nasdaq gaps as they seem to fill on a regular basis.
The closer Nasdaq view. 2420 resistance below the 200-day at 2458. The
indicators are not overbought but to fill the first gap would be better.
Here is a 60-minute Nasdaq chart and you see the two separate islands that have
been created there. This does not lend to short term strength as they can easily
topple. Here the RSI is overbought.
The Nasdaq bullish percent readings are back to the lower line of the
former range. Once they can build support and return to the top range we will be
more bullish also.
The Nasdaq 100 as it is the top 100 market caps of the Nasdaq has a
similar pattern. The close was at the top Bollinger band.
The Nasdaq proxy QQQQ monthly so far shows a good month and the
stochastics did briefly drip under 70 so it is possible that is a bottom we put
in but we sure are not so enthusiastic about such brief trips under 20. A little
base building is much more dependable. However the RSI never dropped below its
2006 low and that is a plus for he bulls.
The stochastics for the semiconductor index SOX went above 20 giving a
buy signal shown here as the near term resistance is around the 380 area.
The longer term S&P 500 showing its bull and bear
stages. The RSI has gone back over 50 but the
stochastics have not gone under 20. This as well as the
short time frame on the decline so far, leads us to
believe that this is a bear market rally still.
Another look at the long term bear still in force shows the shorter term EMA is
still below the longer term one. It would be bullish if they cross back.
There is S&P resistance at
the 38% retrace, 200-day EMA and not far from the trend
line so if these are hit hit and not broken there may be
short entries.
A closer look at the S&P 500
Our S&P 500 bullish percent crossover indicator signaled a buy on
Thursday.
Along with our buy signal above we also had this break out of the trading range
of the S&P 500 we have been in for almost all of this year. A successful test of
the trend line would be mid term bullish and a further break over the 1396 could
lead to a rally to near the highs.
The NYSE has a similar chart to others and is still under resistance.
The number of stocks on the NYSE trading over their 50-day averages has not yet
reached a typical climax above 80.
While the NYSE got back to the February and March highs as seen in the bottom of
this chart, the cumulative advance-decline issues line did not make a new high
so this is another caution that the rally may not be ready to be trusted.
The Russell 2000 closed at resistance and has the next level at 730-735.
740 is the 200-day EMA. Stochastics signaled the long on the move over 20 and
now it is at 80 so will watch for a bit more possibly, then a move back
under 80.
Despite the billions of dollars lost in the sector, the financials closed
slightly above the trend line so are worth watching. This sector chart is
the ETF - XLF that you can trade.
This is an emerging market ETF EEM and it has components such as
Brazilian Petroleum, China Mobile, Chunghwa Telecom, Gazprom, Samsung
Electronic and Taiwan Semiconductor. The sector ETF has moved back up over
its downtrend line from last October and may be interesting in a diversified
portfolio for longer term as the stop would be under trend line. There is
however, at the moment, a gap from earlier this week and stochastics are a bit
over bought but perhaps on a pullback an entry could be be found closer to $140.
The VIX volatility index dropping under its 200-day moving average which
has been support, corresponded with the market rally as shown in the bottom of
the chart.
The 30-year bond yield again is back to just under the 200-day EMA and
closed at 4.517%. Eventually this will break out of this range and start a long
term (long term)interest rate rise. For the moment the 200-day and/or the trend
line are containing it so it may fall back and bonds rally.
The EURO/Yen ratio chart bottomed at the same point the market did and is
now near its own resistance so it may signal a market top. Watch it.
We had been saying those Japanese Yen gaps will fill and they have, while
creating more on the way down. Support may now be at the 38% retrace at 94.71.
OIL - Our chart shows
that the last two runs in price moved up about $16 until
making a new high so we are looking to see if this holds
true again and we will find out soon as oil hit our $116
target on Friday. Many predict $125 and or
$150 and momentum can indeed attract more buying but it
is, as you see, over bought already so a cautious area
before the pullback to come. T.
Boone Pickens was short oil at about $100 and on
Thursday he said he is now instead going long after his
big mistake in shorting so maybe this will be a good
contra-indicator of it pulling back.
USO is one way to play oil
and the crude oil total return index OIL is
another.
Gold looks like it is
starting to drop out of its bear flag. Longer term
support shown at the 848 level and points below.
A closer look at Gold and how it ran up to the underside of its trend
line where is the usual place to enter shorts after a trend has been broken.
Stochastics also ran almost above 80 but were not able to break above and are
now declining. The MACD crossover we mentioned last week did happen but
looks like it was a fake out. We will know in a few days.
Gold stocks as shown in the XAU chart did the same, ran into the
broken trend line resistance and failed themselves. The lower portion still
shows a possible buy but if so it is on a chart by chart basis.
Silver which can make
dramatic moves is in a 2 point pattern now so
indecisive.
The US dollar still in
its, hopefully, bottoming process.
We have updated the triangle and it may test the downside one more time but then
a break out to the upside would be nice. If you live outside the USA but still
convert dollars it has been a tough decline as your money buys less and less.
The triangle at its widest part is about 2.5 points so a break to the upside at
say 72.5 could take to about 75 which is also resistance from February. We do
not want to think of a downside break.
|
Butch Cooley Market Comments
(Butch is founder of
Leg Up House
and the
Butch Cooley Worldwide
Hunting and Fishing . He has
been an active trader for decades.)
Stock Market Comments: April 18,
2008
Well finally we broke out. I was beginning to think it
couldn't happen. But then, my gut tells me the break
may end up being a fake out. I use 3 major tools to
trade with. First and foremost is technical analysis.
Secondly is old fashioned fundamentals. And last is my
gut. I do listen to my gut a lot.
The charts are telling me we should see some upward
action this coming week. But my gut tells me it's just
not there. CAT moved the markets today. But if you
look at a chart on CAT, it's only up because mining is
up, based on futures trading. Deere and other
agriculture stocks were up, really good earnings. But
again, only due to the high values placed on futures.
And I don't think it can continue. And I don't think
smart money was on the rally today either.
Citigroup wrote off $12 billion in bad debts, and on top
of that took a $5.2 million dollar loss. And a number
of analysts were calling for a bottom on financials. My
gut tells me otherwise. Banks are still not lending, and
have more losses forthcoming. So it's just too early
for today's rally to continue....in my opinion. I think
all we succeeded in doing today was break a resistance
level that needed to be broken. But now I still
maintain the 11,600 mark has to be tested before we can
see any real rally. In addition, banks have to start
making money again and lending money again.
BC
|
Weekly economic calendar from briefing.com a slow
week for news but a lot of earring's releases.
When any of
you sign up for a new
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 longer term
interest:
NNRF, Inc
released their
2007 year end 10K
results this week and it was the first to show fully
audited equity
accounting so now their report shows the income and
profit of ATOLL. In this report we see that in 2007
ATOLL had net revenues of $43,123,001 and a net income of $14,208,205.
Some have asked the worth of ATOLL in the past and now
one could use the net income as a guide. There are many
things that go into determining a company's value but a
very common and simple one is to use Price to Earrings
PE ratio. The S&P PE ratio average now is about 18 - so if,
as an example, we use that we have $14.2
million (Atoll income) times 18 equals a worth of ATOLL (based only on
18 PE) of $255 million. NNRF own 50% so their
percentage is then, on this example, worth $127 million. With
about 48 million outstanding shares of NNRF this puts
the worth per share of NNRI at $2.66 for its
ownership of ATOLL. To determine the worth of NNRI you
need to consider their other earrings and futures
earrings potential, other acquisitions, their assets and
their liabilities and all other details. This however
gives an idea of what to consider and shows, in my
opinion, that the current share price is very
undervalued.
From the 10K we see that the assets of NNRF jumped from
$1.6 million at the end of 2006 to $11.2 million at the
end of 2007. NNRF only owned 13% of ATOLL until Mid
March of 2007 when it was increase to 50% so for the
year they are showing equity income from ATOLL at
$5.6 million. (instead of the $7.1 million it would have
been if they had owned 50% for the entire year.) There is still a loss
then but much of it is
non cash as stock was used in 2007 for funding and much
of the loss is a one time event. I am not an
accountant but I suppose some of that past loss can can be used against future
profits for tax advantages. Please refer to the 10K for
all details.
What is
now clear from this audited financial report is that
NNRF is already a substantial company as ATOLL had gross
sales of (estimated over $70 million) and net revenues,
as mentioned above, over $43 million. NNRF is in their
new offices and the financial director and bookkeepers
of ATOLL are also there which makes for better
efficiencies and convenient continual communication.
The MACD still has a strong positive divergence
and money flow is above the center line.
Our photographs today show a lot of
sky though two at night so hidden.
If
you would like a free StockTiger.com email address that uses the Google Gmail
interface so you can check your mail from anywhere, (you do not need a Gmail
account) send me (ST) a
