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Market Stage
(5/13/2008)
On Monday we mentioned that 'The advancing SBV oscillator clearly points to the possibility of the move up higher.' In today’s activity, the Nasdaq 100 moved modestly higher while the S&P 500 ended the session unchanged.
The 60-day SBV(20 period) chart shows an almost flat SBV oscillator. At session’s end we read the following SBV oscillator values: plus 17% on the NASDAQ 100, plus 7% on the S&P 500 and minus 4% on the DJI. From one point of view we see selling volume accumulation on the S&P 500 and DJI that may push market higher, and from other side the absence of the selling volume on the NASDAQ 100 tell us that we still may see some flat and down markets. We will continue to monitor this chart setting in order to determine at which point SBV oscillator ether start to decline or start to advance - this might then reveal the higher odds of the correction down or further recovery respectively.
The 1.5-year SBV(10 period) chart continues to show a decline in SBV on the S&P 500 and DJI. The NASDAQ 100 SBV on this chart is flat. This is not a very good sign for mid-term up trend, and the fact that S&P 500 and DJI SBV moved strongly down to the zero line points to further weak markets and possibility of the changes in the trend. However, the NASDAQ 100 SBV is still at very high positive levels and it could be premature to talk about changes in the mid-term up trend.
Market Status
(5/13/2008)
Market Performance:
| | Last | Change | Volume | | S&P 500 | 1,403.04 |  | 0.54 (0.04%) |
| 3,284,031 k | | NASDAQ 100 | 2,000.61 |  | 3.59 (0.18%) |
| 801,420 k | | DJI | 12,832.18 | | | 44.13 (0.34%) |
| 820,452 k |
With corporate news all that is on the spotlight the markets remained relatively unchanged. The NASDAQ 100 gained a slight 0.18%, the S&P 500 finished marginally down 0.04%, and the Dow was most negative down 0.34%. Combined with yesterday’s totals the weekly results show the NASDAQ 100 is up strongly 2.06%, the S&P 500 is up 1.06%, and the Dow has thus far gained 0.68%.
Today’s volume output was higher than the current anaemic volume outputs. The day ended with a daily of 3,284 million shares on the S&P 500 (this is close to the daily volume average of the past 3 months).
NASDAQ 100 - 5/13/2008.
1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 – 11:30 Opening the day after yesterday’s strong run up, the NASDAQ 100 was slightly lower than the closing level of yesterday. The selling volume put in during the last parts of yesterday’s session no doubt stalled the index’s move higher. In this time period, the index drifted lower and generated some more buying volume. By 11:00, when the index moved down to put in an intra day lower, buying surges (a buying surge is a spike in the volume moving average that appears in the index volume pane and is accompanied by green – denoting buying volume - on the SBV oscillator pane) were generated.
More buying volume was also generated as the index hovered around the lower levels for another half an hour. During the last part of this time period, the index had put in buying volume and was poised to move up.
11:30 - 16:00 After the generation of buying volume in the last time period, the index slowly moved higher. The nature of the trend can offer a clue as to how long it will continue. In this case because of the shallow slope of the trend, it lasted the entire trading session. At the later parts of the day, the trend added some large selling surges. These selling surges were relatively large and will no doubt affect the index in the future. The index finished slightly positive close to the high of the day.
Short Term (lasts a few hours to a few days): The forward looking outlook that we reported yesterday was that “If there will be weakness then it should be earlier in the morning while more strength should show in the later parts of trading.” In today’s trading, there was weakness in the early parts of the day and strength in the later and this conformed to the outlook.
The outlook tomorrow is not very positive, we have seen some accumulation of selling volume at the later part of today’s session and that may affect the trend. While we had cautiously looked for positive activities in the markets, the continual overall weakness does not bode well for the upward guess.
In the background, we have to remember that large buying volume has been put in while in recent trading small amounts of selling volume have been added. If there is weakness then it will probably be in the morning while strength will show at the end of the day. Probabilistically the index may trade at an unchanged or lower level in the next session. All this trading is in the context of a mid-term up trend.
Analyst’s Daily Tip:
Magnitude of a volume moving average (VMA) surge
When analyzing a VMA surge, observe not only its height, but also its width (duration). Place additional emphasis on surges that are wider than normal. For instance a wide VMA surge as price is moving down indicates prolonged buying interest. Likewise, the same principle applies (in reverse) to the analysis of VMA surges s the price is moving up.
Critical Levels:
In order to establish the optimal critical levels for the SBV indicator, a trader should consider the current market situation and review a chart history of prior volume surges including their magnitude (i.e., the level the SBV indicator reached). Furthermore, it is important to look at more than one chart and to use multiple timeframes. For instance, while a volume surge may look imposing and appear to be critical on a 2-hour or a 1-day chart, the very same surge may not look nearly as significant on a 5-day chart. A prominent surge appearing on a 1-day chart could well affect index levels and bring about a one to five point reversal. In contrast, a prominent volume surge on a 5-day chart may prompt a reversal of 5 to 10 points.
Financial Press Overview:
In today’s economic news, the Commerce Department reported that retail sales were lower by 0.2 percent. This was in line with the expectations of economists’. The dip was largest in the auto sales category. The 2.8 percent decline is due to the soaring price of gas and lower consumer discretionary spending. On the other side of the coin, sales at general merchandise stores, specifically chains such as Wal-Mart, rose by 0.5 percent. While not a direct sign that the economic is in recession, these facts do point to the difficulty that most consumers are feeling.
In the ongoing saga that is Microsoft’s acquisition of Yahoo, billionaire investor Carl Icahn is reportedly buying shares of Yahoo in order to gain a larger stake in the company to oust the board. According to CNBC and the Wall Street Journal, the financier has acquired 50 million shares and therefore a 3.6 percent stake in the Internet pioneer. Yahoo shares (YHOO) ended the day at $26.56 up $1.30.
Key economic data for the week starting May 12th, 2008. Numbers shown are consensus estimates (market anticipates this value) and prior value.| Wednesday: |  | 08:30 Core CPI Apr 0.2% 0.2%
08:30 CPI Apr 0.3% 0.3%
10:30 Crude Inventories 05/10 NA 5654K |
| Thursday: | | 08:30 Initial Claims 05/10 NA 365K
08:30 NY Empire State Index May 1.0 0.6
09:00 Net Foreign Purchases Mar NA $72.5B
09:15 Capacity Utilization Apr 80.2% 80.3%
09:15 Industrial Production Apr -0.2% 0.3%
10:00 Philadelphia Fed May -20.0 -24.9 |
| Friday: | | 08:30 Building Permits Apr 912K 927K
08:30 Housing Starts Apr 940K 947K
10:00 Mich Sentiment-Prel. May 63.0 NA |
Disclaimer: Individual
traders are responsible for making their own trades based on
our Market Outlook. |
