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Dallas, TX
April 10, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Market Faces Headwinds Again
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What's Hot Today: |
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U.S. stocks are again looking to open lower, as uncertainty about inflation and
poor economic growth continues to mount.
Today's Economic Calendar: 8:30a.m. Initial Jobless Claims. Expected: -17K. Previous: +38K. 8:30a.m. Feb Trade Balance. Expected: $57.0B. Previous: $58.2B. 10:00a.m. DJ-BTMU Business Barometer. Previous: +0.1%. Sources: The Wall Street Journal and Marketwatch.com.
News For Thought
The Bank of England lowered interest rates this morning.
Gasoline demand is falling as prices hit record highs. According to The Wall Street Journal: "U.S. gasoline demand has trailed year-earlier levels over the past 12 weeks, the longest period of sustained lower demand since 1991, according to weekly data released by the Energy Information Administration on Wednesday. But less driving isn't putting a dent in the price at the pump, which this week reached a record-high average of $3.33 for a gallon of regular gasoline, the agency said." |
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Market Faces Headwinds Again
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Internals Turn Sour
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The stock market is once again facing some headwinds, as the major indexes have run into resistance and the market's internals are also having some trouble.
Market breadth has soured over the last couple of days, and the number of stocks making new highs on the Nasdaq has continued to fall even as the market has recovered of late. These kinds of technical divergences tend to be troublesome in the context of longer term rallies.
More important is the fact that volume rose on 4-9, as the market sold off, and we've now seen two days in a row where the market has given up gains to end up on the down side.
It may be too early to consider this the end of the current bounce. But as it stands right now, two or three more days of high volume selling could easily send prices back toward a test of the March lows.
Chart Courtesy of StockCharts.com
On a sector basis, biotech (BTK, above) was leading the charge in the Nasdaq. But on Wednesday, the sector took it on the chin, giving up a good chunk of its hard earned gains over the previous several days. That's just the opposite of what you want to see in groups that are leading rallies, as it shows that there is very little confidence on the part of those holding the stocks.
Energy, though, continues to hold up, with the oil index (XOI, below) starting to catch up to the natural gas and oil service indexes, the two sub sectors that have been leading the way higher for the group.
Chart Courtesy of StockCharts.com
Finally, the S & P 500 (SPX, below) is still above its 50-day moving average, but has had trouble getting above the 1375-1400 area. A break below the 50-day is likely to trigger program selling from strictly technical based trading systems, and selling could accelerate given the potential for external events, bad earnings news, and other issues such as any moves made by central banks over the next few days.
Chart Courtesy of StockCharts.com
Conclusion
The market's rally is being called into question, just a short time after it seemed to be picking up steam.
That's not the best of scenarios for trend following traders and investors. This is a good time to pay very close attention to open positions, and to consider taking profits on any significant gains, as well as tightening stops on any positions that are not showing enough staying power.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
Stocks Pull Back To Support
The Bollinger Bands around the 20-day moving average for the S & P 500 continue to shrink, while prices are moving lower toward the average.
The big question is whether the move will be up or down, after the index tests the 20 day.
Still, it's all about volume. If it starts picking up on down days, the rally might have seen its best days.
Our growth stock list is starting to expand. Our SPY model is long.
For now, patience is still important, but it's a good time to start building long positions.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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Has MO (NYSE: MO) Lost Its Mojo?
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The Altria Group (NYSE: MO), formerly known as Philip Morris, the world's biggest tobacco purveyor is known for withstanding even the deepest of recessions. Yet, the stock has suddenly lost all support.
Chart Courtesy of StockCharts.com
The conventional wisdom is that the U.S. has or will slip into a "mild" recession. In such economic times, the conventional wisdom calls for consumer staple companies, such as Philip Morris and Procter & Gamble to hold up better than growth stocks, such as Google.
But, something else may be going on, as Philip Morris, the ultimate survivor of bear markets took a big dip below its 200 day moving average on 4-9. It's a simple concept. People will buy booze and smokes during any time. And hard times lead them to often buy more of the stuff that fuels their vices.
So, what gives? Well for one thing, Altria and Philip Morris are two separate companies now. Philip Morris International (NYS: PM) was spun off from Altria on March 31st. And although PM, which is now based in Switzerland, and focuses on international business, is a separate company, its shares are also starting to dip.
Which brings us back to the initial question. What gives? If you look at other vice stocks, such as Anheuser Busch (NYSE: BUD), it's also having problems.
We're not sure what this means. It's hard to believe that people are giving up their cigarrettes and beer. The other alternative is that long term investors, the kind that tend to buy BUD and MO shares, are having a change of heart, about (GULP!), the long term of the markets, and perhaps the economy. |
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