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us stock market, trend trading stock
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4/23/02 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERT SERVICE
Targets hit this week: SCVL (+$3.60; +21%); ACF (+$7.79; +20%); CECO (+$5.39; +13% on bounce play); URS (+$6; +20%); OEX (+$7.45 per option); SYPR (+$3.90; +23%).
Trailing stops were active given the continued downside action: DD, DCOM, CMOS, MLS, PL, FULT were triggered, either preserving gains or cutting losses well below 7%.
Stops triggered: CHPC, NWRE, OAKT, INVN, SLAB, WOR triggered stops cutting losses before a weak position got out of hand.
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertdly.htm
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SUMMARY:
- Earnings once again fail to spark any enthusiasm; indeed, some sparked selling.
- Same story: small and mid-caps hold on
- No direction in the market? Sure looks down.
- Team Trades
The story continues: Earning just ain't making it for investors.
Generally earnings were decent, beating lowered expectations with modest forecasts toward the future. That is the majority case, and for the most part, just about the best case scenario there is right now. That in itself is not inspiring buying. When you ladle over that a big miss from XOM ('the worst business environment in years') and GATX (a railroad car supplier) stating that it sees no improvement with 2002 just equaling 2001, you get selling. Without better prospects for the future, investors have gone from a buyer's strike to selling the bigger names.
Techs again took the brunt of the selling simply because tech earnings were hoped to be better. They have not been, and investors continue to back out gains built in since the September low. Big oil stocks were hit on the XOM downside surprise. Financials were weak again.
Cyclical stocks actually held their ground today after looking weaker the past few sessions. Healthcare took a day off for the most part after leading the past several sessions. And of course, mid and small cap stocks held up the best though they too suffered some profit taking Tuesday.
Homebuilders continued to move higher. CTX blew out its earnings, the most recent of several homebuilders doing the same, riding the wave of the home buying spree. They still claim there is an unquenched thirst for new homes, projecting yet another great year in 2002. TOL broke to a new high while the rest of the group continues to build their bases after racing up off of the September low. It is hard to imagine that the homebuilders could match 2001, but they are continuing to outperform the market. It is hard to argue with the market; these stocks are current leaders.
THE ECONOMY
With a lack of economic news, the markets have been trading on their own. The semiconductor book to bill report Monday is about all the market has had to chew on, and it did not inspire chip or tech buying despite the ratio moving over 1.0 for the first time since November 2000. Perhaps it was the fact that new orders, though up 14%, were still down 30% year over year. Further, shipments fell 1% from February; hardly recovery type numbers, at least not a strong recovery. The report was pretty much ignored Tuesday.
San Francisco Fed president Parry continued the concerned talk coming out of the Fed. Tuesday he noted that the economic recovery was still uncertain and that the Fed could 'take its time' in making decisions on interest rates. This echoes Dallas Fed president McTeer's statements a few weeks back as well as Greenspan's in his recent speech to Congress. The Fed has adopted a 'we ain't leavin' 'til we're heavin' attitude, so to speak. Kind of a crude description, but I was tired of the 'whites of their eyes' clich .
Wednesday the economy comes back into play with durable goods, new home sales, and the Fed Beige book. The market has been stinking the place up on its own, so maybe some economic reports will make a difference. Then again, maybe not. Earnings did not back up what the economic reports had been showing, at least not as far as investors are concerned. It will most likely take more than a few additional positive economic reports to get investors excited.
THE MARKET
Today we heard the comment that there was no direction in the market. While it has been banging around in a range, the action of late has been decidedly down. All indexes are in short term downtrends, and the Nasdaq and S&P have bearish head and shoulders patterns on top of those downtrends. Today was not a complete breakdown, but the indexes sold down to or below key support on rising volume. Another distribution session on top of the others puts a lot of downside weight on stocks to continue to sell. With no upside catalyst, buyers are not around and sellers are growing in numbers.
Overall the smaller and mid-range stocks continue to outperform the rest of the market. The A/D line on the NYSE and Nasdaq was negative, but not by much. NYSE down volume did not rout up volume. Those are positives, but those are not stemming the tide in the overall market. Most people view the big three indexes as the universe of the market. When they sell, people get negative. That impacts sentiment and confidence. The Michigan numbers later this week will be instructive. They may not see the improvement that many were calling for as recently as this weekend.
Put/Call Ratio (CBOE): 0.69; +0.01. For the second straight session stocks sold but the put/call ratio went nowhere. This is a marked change from when we would see the ratio spike higher on even the whiff of selling. It is an indication to us (another one) that the big indexes have further to sell in this round before a more serious rally attempt can be tried.
Nasdaq
Under 1750 and focusing on the February low just below 1700. Volume really surged on the selling; this was no WCOM/ERICY effect. While the rest of the market was subjected to rather light selling, the Nasdaq was the selling beacon, particularly the NDX. Its distribution days are pointing toward more selling as well.
Stats: -28.39 (-1.6%) to close at 1730.29.
Volume: 1.958 billion (+15%). Second highest volume of the month and another distribution session. That is 4 in the past 11 sessions, and that is enough to pave the way for further selling if the Nasdaq cannot make a stand at the February low.
Up volume: 425 million (+226 million)
Down volume: 1.520 billion (+24 million). Most of the action was in the buyers as far as change, but the sellers were way out in front.
A/D and Hi/Lo: Decliners maintained the lead at 1.17 to 1, but that was well off Monday's 1.87 to 1 reading. The Nasdaq 100 was the big seller as the smaller Nasdaq stocks performed better once again.
New highs: 164 (-7)
New lows: 63 (+29)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Sold lower, led by the Nasdaq 100, approaching the completion of the head and shoulders pattern. The absolute breakdown would be below the February low at 1696.55, but if it breaks 1716 it is going down. Last night we said if volume picked up on the way down to 1700, it would breach it. That started today. Looking at 1650 as the next level that it could hold, the point where it gapped up back in October. If 1700 goes, however, we view the tankage down to 1625 to 1615. It has spend a lot of time trying to build a base above 1700. If it breaks, that will act as a weight on the index pushing it lower. Again, the distribution we see indicates more selling as it has been doing on the Dow and S&P 500. Before that happens we anticipate one more attempt to hold above 1700. When that rally fails, the downside could be fairly furious and rapid. Why? Again, it has worked hard to build a base. If that cannot hold, those buying the big techs during that base will be quick to sell on a breakdown, and that will be fuel to the breakdown.
Dow/NYSE
Not a big point loss as volume moved back above average. Many of the big name cyclicals (e.g., PG) held up fairly well. There was distribution, but the index did not lose a lot of ground as it tried to hold support. That can indicate that the buyers are moving back in: more volume but little price loss indicates buyers are almost equal with the sellers. Looking at the up and down volume, that is possible as up volume improved solidly while down volume fell; meeting in the middle. The Dow may not breakdown just yet despite the distribution, though the scales are tipped to the downside.
Stats: -47.19 (-0.5%) to close at 10,089.24.
NYSE Volume: 1.312 billion (+11%). Distribution again, 5 in the last 11 sessions. Today's action was a bit more positive, however, as the increased volume accompanied that smaller point loss right at support.
Up volume: 594 (+314 million)
Down volume: 719 (-168 million). Up volume grew, down volume fell. The selling was not as intense Tuesday even as the volume picked up.
A/D and Hi/Lo: Decliners led again, but a mere 1.01 to 1 (1.65 to 1 Monday). As with the up/down volume, the A/D line indicates the selling was not severe or widespread.
New highs: 162 (-12)
New lows: 36 (+2). Not getting out of hand.
The Chart: http://www.investmenthouse.com/cd/$indu.html
Selling further below the down trendline (now at 10,190) and again holding above the down trendline from the September 2000 and February 2001 down trendline. The Dow has successfully held this trendline four times this month, but of course, since then more distribution has been piled on. It continues to make lower highs, squeezing down on support at 10,100. It has slightly undercut the closing low in the February handle and hit a closing low not seen since February. The momentum is down, but as noted, the selling today was not that severe. We anticipate that it will try a bounce before it sells off up toward the down trendline. Again, it has not broken the support at 10,100 fully, and has shown resilience at this level. The distribution is weighing on the index, however, and that is the predominant influence for now.
S&P 500:
Down to 1100 on rising, above average volume. 1100 has been tested 4 times the past two weeks and has held each time. Back in March 2001 the S&P tested 1118 intraday. It then sold to the September bottom, and other than moving back through the level on the move up and in the February test to 1075, it is has not been here again. Now it looks as if it is going to test that 1075 level as volume increased and the big caps are close to completing the break below 1100 for the real test, i.e., where it double bottomed in February. The S&P 100, the largest of the large caps, is already breaking down out of its head and shoulders pattern. The index may try to bounce up off of this support level Wednesday. As with the Dow, when that move fails, that will be an aggressive entry point for more downside OEX positions, and the break below 1100 will be another entry point. As noted, the OEX is already there, so we will watch for a bounce from it and then another downside entry point as well.
Stats: -6.87 (-0.6%) to close at 1100.96.
Volume: NYSE volume moved above average to 1.312 billion (+11%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
The techs ignored the book to bill report. Will investors ignore the economic news Wednesday as well (durable goods, new home sales)? The Dow and S&P are at support, support that has bounced the indexes more than once in recent history. The futures are up a bit after today's action. What we may see is a repeat of Tuesday's action, i.e., an attempted rally early that gives way to more selling. This is a typical downtrend pattern when the market has a more bearish tilt: hope drives it higher early, and then sellers take over and push things lower.
The key will be the break of the support. The Dow indicated it may try to hold the line here with its smaller trading range at support as volume ramped up. Even with higher volume, the down volume backed off, the A/D line was nearly even.
The overall bias remains down, and we don't see much to change that. Any bounce the Dow can muster is suspect given the distribution. As always what we need to do is be patient. Let the play set up, let it start its move, and then act. The OEX puts were up and down, but the trend was down and by being patient for a few days, it worked out beautifully again. Let them set up, let them start the move, then act. There are upside and downside plays in this market as one half (or more) moves higher while others move lower.
Support and Resistance
Nasdaq: Closed at 1730.29
Resistance: 1775 is some resistance. 1775 and then 1800 (simple 50 day MVA at 1813.88). After that is 1850, followed by 1875, the bottom of the November consolidation and the 200 day MVA (1854.23). The top of the November consolidation at 1934 to 1941. After that is 1980 (the December gap up point) and some minor resistance at 2000. Then the January top at 2098.88.
Support: 1700 (February low at 1696.55). Then 1613 to 1626.
S&P 500: Closed at 1100.96
Resistance: 1125. The 200 day MVA (1132.23) is sitting right on top of that level. There is some resistance at 1150 as well; any bounce on low volume might find that level trouble. After that the December high (1173.62) and the January high (1176.97) are the real key to any longer term move higher. Those points also mark roughly the lows of summer 2001 consolidation that runs up to 1240. Before that point there is some resistance at 1183 from March 2000.
Support: 1100 held in the last round of selling. Then 1075, the February low that completes the head and shoulders. After that 1050 represents the October lows.
Dow: Closed at 10,089.24
Resistance: The March down trendline at 10,190. 10,300 blocked the move the last time it made to that level, and the up trendline from September is right there at 10,350. After that is 10,400, the barrier to the upper half of the March trading range. The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high) marks the top half of the March trading range. 10,800 represents some resistance. That is followed by resistance at 11,000 on its way to the May 2001 high at 11,345.72.
Support: 10,100 has been holding on the lows the past two weeks, but is looking shaky. After that 10,000 represents some support. That is backed up by the 200 day MVA (9941.42). From 9500 to roughly 10,000 - 10,200 is recent support off of the September bottom that for now is holding up.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
4-24-02
Durable Orders, March (8:30): 0.5% versus 1.8% prior
New Home Sales, March (10:00): 880K versus 875K prior
Fed's Beige Book (14:00)
4-25-02
Initial Claims, 4/20 (8:30): 425K versus 445K
Employment Cost Index, Q1 (8:30): 0.9% versus 0.9% prior
Help-Wanted Index, March (10:00): NA versus 51
Existing Home Sales, March (10:00): 5.60M versus 5.88M prior
4-26-02
GDP-Adv., Q1 (8:30): 5.0% verus 1.7%
Chain Deflator-Adv., Q1 (8:30): 1.5% versus -0.1% prior
Mich. Sentiment-Rev., April (9:45): 95.0 versus 94.4 prior
TEAM TRADES
SYMC: We have been watching for SYMC to fall after showing a series of doji's just below the 50 day MVA, and today it started the move. As with most stocks, it started the day slightly higher, but started selling quickly. It bounced off 36.80 (36.65 buy point) early, but then could not take out the opening high. We were tempted to enter there, but decided to let it take out the prior support. Over the next half hour it tanked down to 36.40, taking out the buy point. When the move was made we sent the alert, and by the time we got back to the stock it was bouncing off 36.40. It bounced right up to 36.80 over the next 15 minutes where it hit the 5 minute MVA and stalled; the downtrend looked to be really in place. We went ahead and jumped in on some July 45 puts, limiting our order at the ask (9.80) since the spread was fairly narrow (bouncing from 25 to 30 cents). From there we did not do a whole lot with the position. This was one that we had waited to set up for several days, let it hit the buy point, and moved in when it did. The rest of the session it bounced down the 15 minute MVA, failing a rally late to close at 35.30. After hours it was up some on the AMZN earnings, but we got the higher volume breakdown we were looking for, and we don't think AMZN will overcome that.
End Part 1 of 2
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us stock market
trend trading stock
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