|
|
us stock market, stock watch
* * * *
Tech Traders 1/25/01 Market Summary
* * *
Technical Traders Subscribers:
Continuing Plays: While most of the stock on this week's report are holding up well in today's selling, a few are holding up very well:
AMAT (Applied Materials Inc--$48.75; -0.88; optionable (ANQ)): Semiconductor
STATUS: May not have a good day tomorrow on the PMCS earnings news (that stock was killed after hours), but currently is holding up well in the ascending wedge pattern, remaining above support. After hours it still looked decent enough.Volume dropped below average (17.3 million) as the stock showed a tight doji above support (10 day MVA, 48.25).
BUY POINT: Breakout: 51.63, on volume of 25.5 million or better. Remains a buy on the breakout up to 54.21.
POSITION: Breakout: Stock and/or April $50 calls to buy (ANQ DJ).
http://www.investmenthouse.com/ct/amat.html
(Click to view the chart)
BSC (Bear Stearns Companies--$61.13; +0.13; optionable (BSC)): Moving laterally for three days, volume dropping below average to 810,700 (avg. 1.2 million). The low tapped the 60 level, as it did Wednesday, and that support looks solid should the stock pull back from the current support. BSC attempted a breakout Tuesday (cup with handle) and has not retreated from the closing high that day (61). 10 day MVA, 58.81.
BUY POINT: Over 61.88 on volume of 1 million or better, or, from a pullback to 58.81.
POSITION: Stock and/or April $55 or $60 calls to buy (BCS DK or DL).
http://www.investmenthouse.com/ct/bsc.html
(Click to view the chart)
TGP (Georgia-Pacific Cp Timber--$30.94; -0.06; no options): Continues to move laterally in the handle to its cup base, on below average volume (103,500). Handle high is 31.88 for the breakout as the stock moves up from the perfect doji shown today. Earnings are out before the bell Friday, which most likely will impact the stock's movement. Basic materials usually perform well on Fed rate cuts.
BUY POINT: 32.01, on volume of 240,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/ct/tgp.html
(Click to view the chart)
VRTY (Verity Inc--$29.94; -0.81; optionable (YQV)): Continued the ranging pattern, the stock pulling back slightly on below average volume (414,300) and holding at support on the closing price (hit earlier in the pattern). Could have a tougher day tomorrow on continued selling in the Nasdaq, but we like the hold in the pattern. Tuesday's high of 32.75 beat the 200 day MVA (32.60).
BUY POINT: Over 32.75, on volume of 560,000 or better, or, from the 10 day MVA (28.91) after the stock pulls back to that support.
POSITION: Stock and/or March or June $30 calls to buy (YQV CF or FF). From 28, stock and/or March $25 calls to buy (YQV CE).
http://www.investmenthouse.com/ct/vrty.html
(Click to view the chart)
New Play to look at:
WY (Weyehaeuser Co--$50.06; +2.12; optionable (WY)): A materials and construction stock that is moving up from the base of its handle (9-month cup with handle base) on stronger volume (1.3 million; avg. 976,000). Handle high is at 54. August top is at 51.69, although a breakout move can bypass that. High money flow and good buying. Prior basing high is 64.75 (this pattern is part of a lengthier base).
BUY POINT: Aggressive: Up from here on continued rising volume. Breakout: 54.13, on volume of 1.46 million or better. Remains a buy on the breakout up to 56.84.
POSITION: Stock and/or April $50 calls to buy (WY DJ).
http://www.investmenthouse.com/ct/wy.html
(Click to view the chart)
COX (Cox Communications Inc--$49.25; +1.06; optionable (COX)): A media stock that is breaking out of the handle of a cup base that formed at the bottom of a lengthier cup. The handle high in the current base is 49.44; strong volume (1.85 million; avg. 743,000) looks ready to break the stock over that resistance. Money flow steadily uptrending since September; high relative strength.
BUY POINT: 49.57, on volume of 1 million or better. Remains a buy on the breakout up to 52.05.
POSITION: Stock and/or March or June $50 calls to buy (COX CJ or FJ).
http://www.investmenthouse.com/ct/cox.html
(Click to view the chart)
THE SUMMARY:
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
TONIGHT:
- We said Wednesday looked like a reversal and that we were looking for selling, but not this heavy.
- What took two weeks to build in many stocks is wiped away in a day.
- Did Greenspan exacerbate the selling? Get the real story.
- Economy: Greenspan tips us off as to fourth quarter GDP.
- Subscriber Questions
- Team Trades
The reversal gets pretty nasty.
We were looking for a nice, orderly pullback if there was selling in the market. While volume was lower on the Nasdaq (barely) it was also lower on the NYSE. So, the Dow's move is not that impressive and the Nasdaq's move looks just about as bad as it was, especially with the after hours torching going on. Lot's of undercurrents today, and not many made any sense with what happened. This was either an aberration, or things are about to get really ugly in the short term.
Yes Nasdaq volume was lower by 260 million shares (10%), and that was a silver lining and gives us some hope for the resumption of a more orderly pullback. That was about the only good sign we could find on the day. That indicates that what we had was just some consolidation, but the magnitude of the drop and the action of individual stocks does not altogether support that view.
When a market is healthy you look for it to move up on higher volume, pullback on lower volume, and be rather stingy with its gains. That means if you move up 3%, you want to move back in baby steps such as a half percent or one percent. A 104-point, 3.7% loss in one session is not being stingy. It is very reminiscent of last year's mindset to dump shares whenever anything looked the least bit troublesome. This was not in our mind a 'bit of a pullback' as described on CNBC by some; this snowballed from mild selling early on into a dumping spree that came close to swelling into higher volume.
Look at GLW. It was down 20% in one session as it was dumped on huge volume because it said that next quarter would be lighter. That is what nearly 80% of the reporting companies have said this season. A 20% drop is not just 'consolidation' as it was styled by some; two weeks' work shot in one session is not just a pullback. BRCM was down 16% and falling after hours on huge volume when it reported things looked great for the future. VRSN down 10% when it completely crushed earnings and said the future was very bright. AMCC was just a bystander and was whacked for over 10%. JDSU down 12.5% on heavy volume. Lots of stocks down on heavier and lighter volume, but the losses were large. That is not healthy action. That is the action we saw all last year.
After hours it was worse. JDSU reported good earnings and a decent future with some temporary slowing. It was hacked apart. PMCS met estimates but is really slowing down for the quarter. It was halted, but that did not stop the damage; it just gave divestors time to get their sell orders in. When it opened it did so at 72 and fell to 64 and change in seconds. The stock was at 111.75 Wednesday. We were looking at calls but mercifully never got hit. That is destroying stocks after hours with BRCM down $14 ($34 overall), AMCC $9 ($18 overall). The list goes on and does not get much better. So much for swallowing bad news with no problem.
We saw the reversal coming and we knew investors were going to start doing some selling on earnings announcements. We said as much. But we were looking for a stronger market that sold off 30 to 40 points on weak days. At this rate the Nasdaq could be easily testing 2500 before the FOMC announces its decision to lower interest rates by 50 basis points at 2:15 ET next Wednesday.
What the heck went on today?
Greenspan is just about as clear as he could be.
Costello over at CNBC was again talking about only a 25 basis point cut starting to 'sink in on investors' and thus the selling to take 25 basis points out of the market. Not sure what he was listening to, but the testimony and answers given by Greenspan today were all but screaming a 50 basis point cut is on the way.
Greenspan was very upfront. He gave us a lot to take to the bank so to speak. He stated that inflationary pressures were "very well contained" just as economic output has "slipped dramatically." In discussing Bush's tax cut (and he agreed it was an "average" tax cut in size), his explanation of the "glide path" for reducing debt required a tax cut to be phased in soon. That dovetailed perfectly with the proposed tax cut and shoots holes all through the argument that a tax cut would reduce the likelihood of more aggressive rate cuts. Indeed, Greenspan basically said the tax cut was necessary (marginal tax cuts too, not just the marriage penalty and estate tax) for the budget, and if the economy was going into recession, it would help it back out of it. He went as far as to say in response to a question that there was no incompatibility between a decrease in taxes and an interest rate cut.
Then it got really interesting (as if the tax cut support was not). When asked if in a recession, Greenspan stated that the U.S. was at "close to zero" GDP now, and that "we know the fourth quarter GDP was a very small positive." First, Greenspan knows what the fourth quarter preliminary GDP numbers are. Second, those numbers are much lower than the 2% to 2.5% that the experts are saying it was. We know this because the 'experts' and their prediction on GDP was mentioned in the question leading up to this statement. Greenspan would have said it was in line or something to that effect, but he specifically stated it was a "very small positive." If you think 2% to 3% GDP is normal growth, 2% is not a very small positive.
Looks like 50 basis points to us and the FFF contract.
Now, combine this with another quip he stated earlier in his testimony that was overlooked by many: "These problems intensify [the problems were decreased tax receipts and deficits] if equity values stay off their peaks" for a length of time. So, if equity prices stay low, that will cause problems with the surpluses everyone is talking about, and if the economy is slowing as fast as Greenspan indicated today, equity prices would not be rising without help. The help? Interest rate cuts to come, and from what Greenspan said, expect 50 basis points. Indeed, even the FFF contract priced a 50% basis point cut back up in the 85% range after today's trading.
Okay. It was clear to us (and to several others who listened) that Greenspan is still really worried about the economy and low equity prices as a drag in the future. It is clear to us that the Fed is going to drop rates by another 50 basis points at the meeting. So why did the markets just fold up the tent after the testimony concluded? It was not because as Costello said that there was not going to be a 50 basis point cut and that was hurting the market. If that was the case, why were the builders, a section that is sensitive to rate cuts and hikes, flying up today? Indeed, this morning housing sales were reported slower. With that bad news, would a less aggressive rate cut have sent them shooting higher? Don't think so.
Post rate cut selloff.
This looks more like a nasty little selloff developing along the lines of those we discussed three weeks ago when the Fed cut interest rates the first time. At that time we said four times in history have required a second rate cut to get the market rallying for good. That in those four instances the economy was heading into a recession and it took that extra aggressive move to get the market up and running. As the U.S. economy is heading toward recession, it appears that the stock market is heading for an ugly round of selling ahead of what is going to clearly (to us and the FFF contract) be a 50 basis point cut. Keep the powder dry, get out of what you have to, play some downside if you are nimble, and look at volume and watch those support levels We don't think this is going to test the lows down at 2200, but 2500 is easily within reach with the kind of carnage we saw today and after hours.
End Part 1 of 2
|
us stock market
stock watch
|
