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Market Stage
(5/6/2008) On Monday we said that 'even if we see a correctional move down generated by the selling volume seen on the 60-day chart, most likely it will be a correction within the dominant up-trend.'- The indexes moved up despite of the negative SBV oscillators on the 60-day chart.
The 60-day SBV(20 period) chart continues to show a declining (almost flat) SBV oscillator. At the end of the session we see the following SBV oscillator values: plus 11% on the NASDAQ 100, plus 15% on the S&P 500 and minus 2% on the DJI. The declining SBV oscillator points to still high odds of a correctional move down.
On the other hand the 1.5-year SBV(10 period) chart show a flat SBV on both the S&P 500 and DJI while there is rising SBV oscillator on the NASDAQ 100. With all these SBV oscillators still at very high positive levels, it could be premature to talk about changes in the mid-term trend. This chart indicates that even if we see a correctional move down generated by the selling volume seen on the 60-day chart, most likely it will be a correction within the dominant up-trend.
Market Status
(5/6/2008)
Market Performance:
| | Last | Change | Volume | | S&P 500 | 1,418.26 |  | 10.77 (0.77%) |
| 3,278,720 k | | NASDAQ 100 | 1,990.61 | | | 14.79 (0.75%) |
| 983,360 k | | DJI | 13,020.83 | | | 51.29 (0.40%) |
| 598,832 k |
With the price of oil moving higher near the $123 a barrel mark on Tuesday, the NASDAQ 100 pushed higher to close up 0.75%, the S&P 500 added 0.77% and the Dow closed up 0.4%. The weekly gains show the NASDAQ 100 trading positively 0.44% while the S&P was higher 0.31% and the Dow is lagging behind, down 0.29% for the week.
After a string of below average volume days, today’s output of 3,255 million shares on the S&P 500 was close to the daily volume average of the past 3 months.
NASDAQ 100 - 5/6/2008.
1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 – 10:00 Opening the trading session with a slight gap lower, the NASDAQ 100 did not continue its move down. Instead it traded at those low levels for a short period of time. Looking at the yesterday’s trading session, we see a large amount of buying volume put in and that excess accumulation of volume no doubt caused the index to move higher.
10:00 – 16:00 In reaction of the large buying volume accumulation noted in the period time period, the NASDAQ 100 was prepared to move higher. The index moved higher and created higher highs while putting in higher lows (classic definition of an up trend). There were bouts of selling surges (a selling surge is a spike in the volume moving average that appears in the index volume pane and is accompanied by red – denoting selling volume - on the SBV oscillator pane).
The index ignored the selling surges and continued to move higher up. Nearly all the volume production was that of selling volume in this session.
Short Term (lasts a few hours to a few days): In our last short term outlook we had ended the discussion by stating that “The main trend will be higher but there could be weakness in the short term.” The result from today’s session was that the index gained a moderate amount after opening down by a similar amount.
With today’s addition of more selling volume, we see a growing probability that there will be some weakness in the near term. For the last 3 sessions, the NASDAQ 100 has traded in a small area where as the Dow has started to move down.
Chances have grown that over the short term there will be more weakness within a dominant mid-term up.
Analyst’s Daily Tip:
Charts: Setting Alarms
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VMA Surges
In our market analysis, we are particularly interested in the appearance of large VMA Surges during a price increase or decline - VMA Surges of prolonged duration or a sequence of several VMA surges. VMA Surges indicate bursts of significant Buying Volume or Selling Volume over a prolonged period of time.
Financial Press Overview:
The future of oil continues to look up as a new Goldman Sachs prediction that the commodity could rise to $200 within two years, although the falling dollar and fears of declining crude production have added a fear premium to this price. The Energy Department raised its oil and gasoline price forecasts, but also predicted that the heightened price will cut demand more than previously thought.
There are those with differing views about where the price of oil is going. They cite the new sources of oil coming online including the oil sand in Canada. Also alternative sources of energy such as wind, sea, solar and nuclear will become increasingly attractive as the price of energy rises. These analysts say that the price of oil could go to $40 a barrel as easily as $200.
Fannie Mae sees sharper house price declines say president and CEO, Daniel Mudd. The company reported a $2.2 billion first quarter loss. The company currently forecasts a nationwide drop of 7 to 9 percent of home prices in 2008, initially the forecast was for 5 to 7 percent. As a result the company will loose money on 13 to 17 of every 1,000 mortgages. In 2007 the prediction was a loss on 4 to 6 of every 1,000 mortgages. The company plans to cut dividends and issue new shares. The government will help out by loosening capital requirements. Currently the company is required to keep surplus capital of 20 percent of their total mortgage debt, but plans will be to lower that requirement to 15 percent.
Key economic data for the week starting May 5th, 2008. Numbers shown are consensus estimates (market anticipates this value) and prior value.| Wednesday: |  | 08:30 Productivity-Prel Q1 1.2% 1.9%
10:00 Pending Home Sales Mar -0.6% -1.9
10:30 Crude Inventories 05/03 NA 3848K
15:00 Consumer Credit Mar $6.3B $5.2B |
| Thursday: | | 08:30 Initial Claims 05/03 NA 380K
10:00 Wholesale Inventories Mar 0.4% +1.1% |
| Friday: | | 08:30 Trade Balance Mar -$61.3B -$62.3B |
Index-Day-Trading – Market
Research Team
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