By Gareth Soloway on June 23rd, 2010 11:51am Eastern Time
The market moved lower early as more homes sales data shocked Wall Street. The Commerce Department reported new home sales crashed 33% in the month of May. Sales fell to a seasonally adjusted rate of 300,000, this is the lowest rate of all time. Analysts were expecting a drop of 20%. The markets which had opened flat on the day took a nose dive on this news. However, since then, they have recovered nicely.
Retail investors would have thought this news would have crushed stocks like Toll Brothers, Inc. (NYSE:TOL), KB Home (NYSE:KBH) and The Home Depot, Inc. (NYSE:HD) but it has not. Initially on the news, these stocks dropped sharply but quickly recovered. Toll and KB Home have gone positive and Home Depot is near the flat line. Why were these not crushed? Simply put, the news was already baked into the cake. Take a look at each and every one of their daily charts. They have all fallen drastically in the last couple months, sitting at 52 week lows. This tells us that today may have been the capitulation day for the home builders in the short term.
Keep a close eye on this sector, this massive drop in home sales is somewhat expected since the tax credit has now expired. These may be putting in a bottom today and may have a 10% upside potential from here into mid to late July. To get more information, analysis, guidance, education and swing trades, join the Research Center.
Gareth Soloway
Chief Market Strategist
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PBOC OVERSHADOWS FOMC as hardly a word is said about this week's FOMC announcement. Although China's central bank used the rationale of improved domestic and global economy for its decision to allow more flexible currency regime ie further strengthening, the US central bank is widely expected to reiterate its cautious mantra of federal funds rate remaining 'exceptionally low ... for an extended period". If no hint is made about selling the Fed's assets, then markets have a good reason to regain last week's highs. Note the SP500 has fallen back below its CURRENT and PREVIOUS 200-day moving averages of 1111 and 1107 respectively after last week's decisive break above the average of 1107. Jitters with European banks rather then the Fed were cited as a reason to the retreat in stocks (as well as latest US housing data). UK BUDGET had enough cuts and tax hikes to appease the budget hawks, which was positive for GBP (see retreat in EURGBP eyeing 0.8150). Algeria and Ghana are the only remaining 2 African nations to have hope for qualifying to the 1/16 round of the World Cup as Algeria faces USA at 1400 GMT and Ghana faces Germany at 1830 GMT.
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By Gareth Soloway on June 22nd, 2010 1:03pm Eastern Time
Financial stocks still have a dark cloud over them due to the continued litigation threat and looming financial regulation. Stocks like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC) and Morgan Stanley (NYSE:MS) are mixed on the day as the markets hover around the flat line. The key here is to get the financial regulation behind them. As long as it hangs over the sector, these are likely to have trouble rallying in a major way.
Chart wise, all these are just off their recent lows. Goldman Sachs has pushed up into the 20 moving average on the daily and is seeing a pull back from yesterday continue today. Support remains the recent low of $131.00. If that breaks, $125.00 would be sure to follow. If Goldman can break through the 20 moving average on the upside, this could soar quickly to $145.00. However, bottom line is getting this financial regulation over.
JPMorgan Chase has a much more solid chart on the daily. The stock pushed through the 20 moving average a few days ago and is holding above it. It is now consolidating in a slightly bullish manner. As long as JPM holds the 20ma, this has upside potential in the short term, though limited with financial regulation looming. First target could be up to the 50ma and gap fill at $40.75. Should it break back below the 20ma, watch out as a sharp fall down to $37.00 may occur.
Wells Fargo and Morgan Stanley have similar charts to Goldman Sachs. Use the same thinking for these two as with Goldman Sachs. JPM chart wise is definitely the strongest but still has risks because of the financial overhaul coming down the pipe. For more guidance, education, swing trade alerts, videos and analysis, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
By Gareth Soloway on June 22nd, 2010 1:32pm Eastern Time
Monday saw a massive gap higher only to fade and see the markets turn negative. Today, the markets are hovering around the flat line as the Federal Reserve begins their meeting on interest rates. The announcement will come tomorrow at 2:15pm ET. There is little question that interest rates will remain at their current levels with no raise in sight, but the key will be the dialogue the Federal Reserve releases. The markets are likely to remain flat until until that announcement.
The markets failed to sustain any of the rally from the weekend announcement that China would allow the Yuan to float slightly higher against the U.S. Dollar. It appears, the recent pull back in the dollar already factored in the Chinese move. The dollar has actually turned higher in the last two days. This often happens as news is never released all at one time, but will leak out over the course of a week or two to key players. This is why it is so important to ignore news and focus on the charts. The charts do not lie.
In addition, housing data today was very disappointing. The National Association of Realtors reported that sales of existing home sales fell 2.2% to a seasonally adjusted 5.66 million in May. Analysts were expecting a rise of 6%. This data was not good considering there was a tax credit available.
Technology continues to be stronger with the leaders being the obvious Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG). Solid IPAD sales continue to be reported for Apple.
Gareth Soloway
Chief Market Strategist
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By Gareth Soloway on June 22nd, 2010 4:05pm Eastern Time
The SPDR S&P 500 ETF (NYSE:SPY) sold sharply in afternoon trading as the markets closed at their lows. The pattern from the gap up on Monday dictated this late day drop on Tuesday after early consolidation. The big drop Monday, half a day of Tuesday consolidation and the the afternoon sell off was a perfect in spirit of bull flag formation that came to fruition. Learn these patterns, they will make you rich. To learn more, join the Research Center.
Just like we would expect, the markets ended down after the dollar pushed higher. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) closed up $0.04 to $25.07. The Euro fell while the flight into gold resumed today with the SPDR Gold Trust (ETF) (NYSE:GLD) moved higher by $1.06 to $121.45. Oil closed slightly lower on the day.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
By Nicholas Santiago on June 22nd, 2010 11:32am Eastern Time
Today the NASDAQ Composite is trading positive so far. Yesterday the NASDAQ staged a 55.00 point reversal from peak to trough closing sharply negative. The inflationary stocks such as energy stocks and commodity stocks are all trading lower on the session this morning. It is the tech heavy NASDAQ stocks that are keeping this market from becoming unglued. Today many of the leading technology names are trading higher.
Apple Inc (NASDAQ:AAPL) staged a 9.00 point reversal yesterday into the close after hitting a new 52 week high. Today Apple Inc is catching a modest bid trading higher by 3.12 to $273.25. At this time the stock is holding up well. Apple Inc will have intra-day resistance around the $275.00 – $275.50 levels.
Google Inc (NYSE:GOOG) is also trading higher today by $6.18 to 494.75. Google Inc sold off sharply yesterday staging a 20.00 point reversal from peak to trough. Google Inc will have intra-day resistance around the $497.50 level.
Amazon Com Inc (NYSE:AMZN) is trading higher today by 1.25 to $123.86. Amazon Com Inc is rebounding a little today after yesterday's 5.00 point reversal from intra-day high to the close. AMZN will have good intra-day resistance at the $125.00 level.
The major market indexes are trading at or near the flat line. However, the NASDAQ composite is trading higher by 11.00 points. It is the leading technology stocks that are keeping the markets glued together. As long as these leading stocks hold up the markets should be fine today. However, if they start to sell off watch out below as things could turn ugly very quickly for the markets.
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By Nicholas Santiago on June 22nd, 2010 9:56am Eastern Time
What can we say, when the dollar is flat the stock market indexes are flat. That is how it works as the dollar is the driving force behind every move in the major indexes. Yesterday the stock market reversed a sharp morning rally only to close negative across the board as the U.S. Dollar Index rallied throughout the day. As we all know by now when the dollar rallies it will deflate the stock market indexes. The opposite case can be made when the dollar declines the major market indexes will inflate and trade higher.
This morning the Currencyshares Euro Trust (NYSE:FXE) which tracks the Euro is trading lower by 0.17 to $122.62. Remember the Euro will trade inverse to the dollar, therefore, when the Euro trades higher the major indexes will usually trade higher as well.
Spot gold is trading unchanged this morning at $1241.00 an ounce. The popular SPDR Gold Shares (NYSE:GLD) are trading higher this morning by 0.88 to $121.27. Gold is a double edge sword as investors will buy it in times of fear as well as when the markets inflate. Only a strong deflationary picture will bring gold lower.
Spot crude is trading lower by 0.15 to $78.40. When the dollar is trading flat often oil will trade near the flat or unchanged area. The United States Oil Fund (NYSE:USO) is trading higher by 0.13 to $35.47.
Should the U.S. Dollar Index begin to decline the stock market indexes will inflate. All commodities should inflate as well and will generally lead the markets higher. However, should the dollar catch a bid higher the markets will decline. This inverse dollar and stock market relationship is very strong at this time and should be respected.
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CHINESE BABY STEPS wikk likely be the way of any yuan strengthening against USD after Beijing announced more flexibility in their FX peg regime. China allowed the yuan to rise 0.43% on Monday, which is close to the maximum daily permissible fluctuation of 0.5%. China could allow more of such increases ahead of this week's G20 meeting (such as three daily gains of 0.3%-0.5%) to achieve 2.30-2.50% increase. But the more relevant matter is that currency tightening is unlikely to prove as effective as monetary policy tightening (interest rate hikes and higher reserve requirements) to stem the +3% annual CPI. We noted in prev IMT that world stocks and Asian FX will be boosted on hopes of higher Chinese demand but will these gains hold into the rest of week. As markets await to see whether Chinals FX announcement was mereley political posturing ahead of the G20, they will want to recall that US stocks have mostly declined during the week after June expiration ie next week. EURUSD to test $1.2270 as tensions remain with French banks. In the WorldCup, LatAm nations remain the biggest winners following Chile's 1-0 victory vs. Switzerland. Spain's modest 1-0 win over Honduras may not prevent the group from turning into the battle over goal difference, while Portugal's 7-0 win over KoreaDPR could mean that Brazil will play Spain in the 1/16 round.
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