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us stock market, stock split
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Tech Traders 1/30/01 Market Summary
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Technical Traders Subscribers:
Continuing Plays:
NEU (Neuberger Berman Inc--$78.64; -0.25; optionable (NEU)): At support in the pennant showing a tight doji on lower volume (161,700; avg. 267,409). Looking for a breakout over the pattern high (85.69). Very tight pattern and should respond well to a rate cut.
BUY POINT: Aggressive: Up from here on continued rising volume. Breakout: 85.82, on volume of 361,000 or better.
POSITION: Aggressive: Stock. April options below the $85 strike have no open interests. Breakout: Stock and/or April $85 calls to buy (NEU DO; please note that this option still has only 10 open interests).
http://www.investmenthouse.com/ct/neu.html
(Click to view the chart)
CSBI (Century South Banks Inc--$33.56; -0.13; no options): Another financial stock in a tight pennant. Holding above support (10 day MVA, 33.44) on rising volume (63,900; avg. 81,090). A good shakeout in the pennant. Look for a breakout over the pattern high (34.72) as the financials stand to rally on the rate cut.
BUY POINT: Breakout: 34.85, on volume of 109,000 or better. Remains a buy up to 36.59.
POSITION: Stock.
http://www.investmenthouse.com/ct/csbi.html
(Click to view the chart)
NMTC (Numerical Technologies--$26.31; -0.07; optionable (QEK)): Continues to squeeze down prices in the flying plateau pattern that is serving as a handle to a 16-week base. Volume back down to average levels (312,200). Great buying and money flow. 200 day MVA is at 33.13.
BUY POINT: 28.88, on volume of 487,000 or better. Remains a buy on the breakout up to up to 30.32.
POSITION: Stock and/or April $25 calls to buy (QEK DE)
http://www.investmenthouse.com/ct/nmtc.html
(Click to view the chart)
LEH (Lehman Bros--$85.20; -0.52; optionable (LES)): Reached a new high Monday on good volume, then pulled back to show a tight doji on below average volume (1.9 million; avg. 2.4 million). On a hold of support, the doji suggests a move back up, so we are looking for that on the rate cut.
BUY POINT: Over 86.20 (tapped on the intraday high the last two days) on 2.5 million or better.
POSITION: Stock and/or April $85 calls to buy (LES DQ).
http://www.investmenthouse.com/ct/leh.html
(Click to view the chart)
New Play to look at:
CVC (Cablevision Systems--$89.20; -0.55; optionable ( CVC): A media stock trying to break out of a lengthy base, moving up nicely Monday but pulling back slightly Tuesday. Volume shot higher (1.6 million; avg. 542,181). Look for a breakout over the handle high of 91.50 as the stock moves back up in a rally. Good buying and great money flow.
BUY POINT: 91.63, on continued strong volume.
POSITION: Stock and/or March or June $90 calls to buy (CVC CR or FR).
http://www.investmenthouse.com/ct/cvc.html
(Click to view the chart)
TXCC (Transwitch Corp--$51.50; +4.44; optionable (TZQ)): A chip stock that is moving up for three days, the last two on building volume (4.9 million; avg. 3.2 million). Broke through resistance at the 50 level on the attempted move up higher into the right side of its 15-week base. Looking for a move over the January high (55.75) on continued strong volume in a rally.
BUY POINT: Aggressive: Up from here on continued rising volume. Safer: Over 55.75 on continued strong volume.
POSITION: Aggressive: Stock and/or May $50 calls to buy (TZQ EJ). Safer: Stock and/or May $55 calls to buy (TZQ EK).
http://www.investmenthouse.com/ct/txcc.html
(Click to view the chart)
Put Plays for a Selling Market: As we said in Monday night's report, we have looked at some stocks that look ready to give it up should we see some selling on the rate cut news tomorrow. These stocks are fighting with resistance levels and can move down with that kind of nudge:
JNJ (Johnson & Johnson--$91.60; 0.00; optionable (JNJ)): Drug Manufacturers
STATUS: Can't muster a move over the 200 day MVA (currently 93.17) the last three days, tapping at or near it on the highs after opening lower each day. Volume continues to drop lower below average (2.5 million; avg. 3.4 million). Tested 91.51 the last two days, but our target buy point is below 90.25 (hit 3 times) for the put play.
BUY POINT: On a move below 90 on rising volume.
POSITION: February $90 puts to buy (JNJ NR).
http://www.investmenthouse.com/cd/jnj.html
(Click to view the chart)
PEG (Public Service Entprs Gr--$41.94; -0.70; optionable (PEG)): Diversified Utilities
STATUS: Lost a battle with the 50 day MVA simple (43.18), tapped the previous three sessions. The stock gave that up Tuesday and closed below the 50 day MVA (42.43) and on top of the 18 day MVA (41.86). Volume continues to withdraw below average (392,700; avg. 743,681). On a break below 41.65, the 10 day MVA (the stock hit 41.75 six times since September), on strong volume, puts. Selling pressure.
BUY POINT: Below 41.65 on strong and rising volume.
POSITION: February $45 puts to buy (PEG NI).
http://www.investmenthouse.com/cd/peg.html
(Click to view the chart)
JKHY (Jack Henry & Associates--$47.88; +0.44; optionable (JKQ)): Business Software
STATUS: Just announced a split and ran up on that news; at the 200 day MVA (47.92) now and showing a doji as volume drops back off (339.400; avg. 508,727). A nice move up, but is now ready for some profit-taking. Nothing wrong with playing the move down. Showing selling pressure.
BUY POINT: On a move below 47 on stronger volume.
POSITION: February $50 puts to buy (JKQ NJ).
http://www.investmenthouse.com/cd/jkhy.html
(Click to view the chart)
ED (Consolidated Edison Inc--$34.87; -0.34; optionable (ED)): Diversified Utilities
STATUS: Another stock struggling with its 50 day MVA and 50 day MVA (simple), at 35.23 and 35.96 (respectively), tapping at or near the latter over the last week, and currently falling below the former on stronger volume (576,200; avg. 606,000). Closed on the 18 day MVA. The stock hit 34 six times since September, so look for a move below that level. Showing selling pressure.
BUY POINT: Below 34 on above average and rising volume.
POSITION: February $35 puts to buy (ED NG).
http://www.investmenthouse.com/cd/ed.html
(Click to view the chart)
EXC (Exelon Corporation--$61.41; -0.77; optionable (EXC)): Diversified Utilities
STATUS: Unable to break over its 50 day MVA (61.38) as the stock has thrown intraday highs over that level in the last 4 days. Volume continues to decline below average (617,100; avg. 1.3 million). On a move below the 10 day MVA (60.71, tapped on the low) on stronger volume on the rate cut news, puts. The stock is sitting on its 18 day MVA (61.04). Suffering selling pressure.
BUY POINT: Below 60 on stronger volume.
POSITION: February $60 puts to buy (EXC NL).
http://www.investmenthouse.com/cd/exc.html
(Click to view the chart)
CPN (Calpine Corp--$41.74; -1.26; optionable (CPN)): Electric Utilities
STATUS: Dropped back from a Monday doji at the top of a two-week price run which was made on steadily declining volume (1.5 million Tuesday; avg. 4 million). Look for a continued move down from here; the 50 day MVA is at 39.20, but in the downtrending rolling pattern the stock has formed since October price has tended to fall right through that support level. Under selling pressure.
BUY POINT: On a move down from here on (preferably) rising volume.
POSITION: February $45 puts to buy (CPN NI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
HGSI (Human Genome Sciences--$64.19; -3.62; optionable (HHA)): Drugs: Diagnostic Substances
STATUS: Can't hold a move over the 200 day MVA (68.26) as volume drops off below average (1.7 million; avg. 3.4 million). Opened near the down trendline (70) and moved down from there. Holding support at the 18 day MVA (62.21), but on a break of that level on the rate cut news, we will look at buying puts on the move down.
BUY POINT: On a move below 62 on rising volume on the rate cut news.
POSITION: February $65 puts to buy (HHA NM).
http://www.investmenthouse.com/cd/hgsi.html
(Click to view the chart)
PDLI (Protein Design Labs Inc--$73.06; -0.75; optionable (RPV)): Biotechnology
STATUS: Has run up from a January low of 42.88, volume dropping back off below average over the last few days as the stock ekes out a bit more to the upside, pulling back slightly Tuesday. Tapped a short term down trendline (December highs) on the high of 76.25. Looks ready for some profit-taking as the run looks tired out. Some selling pressure showing up. 18 day MVA is at 68.03.
BUY POINT: Down from here on stronger volume.
POSITION: February February $75 puts to buy (RPV NO).
http://www.investmenthouse.com/cd/pdli.html
(Click to view the chart)
NEWP (Newport Corp--$88.00; -4.44; optionable (NZZ)): Electronics: Scientific & Technical Instruments
STATUS: Turned down from the 50 and 18 day MVAs (93.08 and 91.80, respectively) on slightly stronger volume (2.2 million; avg. 2.8 million). The stock has been struggling with the resistance the last four days, and is showing selling pressure. Look for a move below 86.63 (tapped twice the last two days on the low) on continued rising volume. Up trendline is at 78.50.
BUY POINT: Below 86.63 on continued rising volume.
POSITION: February $90 or $85 puts to buy (NZZ NR or NQ).
http://www.investmenthouse.com/cd/newp.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:
- Two markets ahead of the FOMC announcement. Will we again see rotation on the announcement?
- Consumer confidence? More like consumer carnage.
- FOMC hype reaches new levels: anyone here for 75 basis points? Why not just cut 150 basis points and get it over with?
- AMAT leads after hours news with a warning in the first month of the quarter.
- Subscriber Questions
- Team Trades
Cyclicals rallying while techs go nowhere; looks somewhat familiar.
Last time the Fed cut rates back on January 3, techs were diving fast while the defensive sectors were capturing the money. The rate cut came and within 10 minutes the cyclicals and defensive sectors were getting sold and the techs were being bought. The rotation was fast and brutal. Over the next three weeks the techs put together a nice rally while the cyclicals took it on the chin. Just the past few sessions the Dow has looked better after forming a tight consolidation, and today it broke out of the tight range and is aiming at resistance at 11,020.
On the other side of the tape the techs traded flat, continuing their more or less sideways consolidation of the past 8 sessions as tech momentum takes a breather. Definitely no run into the announcement as with the cyclicals. That had many today once again stating that the Nasdaq had made its move and that it was going to be a sell on the news type of day tomorrow. The idea is that the Nasdaq has had its move and already built the rate cut in.
Sounds plausible, and indeed we have been working on the idea of a possible sell off on the news depending upon what the market did ahead of time. To us, what the market does these last few sessions is the key. The techs, unlike the cyclical and defensive sectors, have not moved out of their roughly 150 point range as the FOMC announcement approaches. Does this mean that the cyclicals are better to own when the Fed starts cutting rates aggressively? Not according to history. Financials, building materials, retailers and technology (the economic leaders) are the historical fare.
So what are we seeing develop? We still are still leery of what might happen on the actual announcement of a 50 basis point cut, but what we saw today leads us to believe that if we see similar action tomorrow (and we think we will), by the time the announcement comes it may just be time to rotate out of the cyclical stocks again and move into the tech sector and friends. After all, these cyclicals are the ones building in a rate cut ahead of the announcement. The techs were moving up when a 25 basis point hike was being factored in; they have turned sideways the past week as the Fed Funds Futures contract started to once again factor in a full 50 basis point cut. If you buy into the 'buy on the rumor, sell on the news' argument, the action we have seen tends to set up cyclical selling and tech buying on the news. We would not even mind seeing the techs cheat a bit right before the announcement, trying to get a jump on the news; to us, the fact that investors were willing to get in a bit early would signal that the techs would take the rate cut news well.
THE ECONOMY
Precipitous fall in confidence continues.
Last month everyone was pretty shocked by the 'sudden' drop in consumer confidence. That brought to the fore many cries that the economy was falling too hard. As we noted back in September and October, confidence had crested and what we were hearing from across the country at that early stage were households that were going to put off the holiday shopping just to 'see how things look' closer to year end. They thought December was bad until today when January confidence levels dipped to 114.4, well below the 125 expected and what they thought was bad at 128.3 in December.
This is the lowest level since December 1996, and as the conference board chairman reluctantly stated, when it starts reaching these levels, we have to worry about recession. Why? Because if consumers are not confident about the future, they don't spend. Simple. And with tens of thousands of layoffs already announced, confidence has indeed been shaken hard. Future expectations are at 77; they were at 96 in December. Last spring we said that the Fed's fight against consumer confidence was a mistake as consumers would not be shaken until they feared losing their jobs. We said then that if the Fed waited until that happened it would most likely be too late for the economy. Well, the Fed did not start cutting rates until the layoffs were already hitting the wires. It knows it dropped the ball. "Mr. Patience," "Mr. Baby Steps," the "maestro" let fly a 50 basis point cut inter-meeting in a desperate attempt to shore up flagging confidence. Strike one.
Damn it all. If a lawyer turned investment analyst can see the signs on the wall over a year ago, why are all of these high-priced economists wagging their tongues on the television so blind? They are fools for trusting the Fed and not what the numbers and history were showing, believing that the Fed had the good of the country as its central concern. While the Fed cut the legs off of our prosperity for the interests of others overseas, these economists smiled and nodded knowingly, all the while clamoring about the 'white hot' economy. Where is Ms. Swonke now when back in October she so brilliantly called for at least another 100 basis points in rate hikes after the first of the year? Where are all of those who were complicit with the Fed in its attack on our economy? They are belatedly saying we are going to have a recession. Well thanks a lot for the foresight and sounding the warning ahead of the train wreck.
Indeed, was the 'tech wreck' and 'internet bubble' really something that had to collapse? It did given that the Fed was bound and determined to increase unemployment, turn down consumer confidence, and get rid of a lot of the new wealth that was being created. Those premeditated roadblocks aside, would no inflation, burgeoning investment in R&D, surging investment by all of those employed citizens in their 401k's, and our ever-expanding technological lead have necessarily led to the fall? The old timers say 'yes,' pointing to the 1929 crash when radio stocks were the new technology. Well, that crash was ushered in by the Fed and a very similar attack on the stock market. Another era of massive wealth creation that the Fed felt compelled to turn back. Is there a pattern here? The Nasdaq was too high, but it has ways of dealing with that. It tends to correct itself when it gets too far ahead of its 200 day MVA. It would have pulled back, but if the economy was left to continue on its path, the fall would have been a routine correction back toward the 200 day MVA, not a crushing bear market.
We may sound a bit bitter, but so are many who believed the Fed was looking out for them. We are really concerned that the Fed has once again proved itself as the biggest impediment to the spread of capitalism by ushering in another unnecessary recession. That is very sad as there was no reason for it, at least from what politicians promise and hope to provide the citizens. Hey, we had prosperity with no inflation, low unemployment, low interest rates and the technological lead over the entire world. The Fed has to be super aggressive in its moves now, and we absolutely must have the full (if not larger) tax cut planned by the new administration. It is pretty clear to us that we have recession ahead and a tax cut is needed to mitigate the impact and hasten the recovery. Those saying the second half will be great are buying into the Fed's line that they have caught things in time. Hell, they also believed the economy was too hot, unemployment too low, and that this ride would never stop. Why believe them now?
Does that mean the stock market is dead? No, because it does in fact look 6, 12, and 18 months ahead when it discounts values. Thus, if we get a very aggressive easing and Congress gets onto a retroactive tax cut right away, the impact will be lessened and we may not even miss much of a step. The danger is that we believe everything we hear as we have done for the past two years and let those who wrecked it try to mend it. Greenspan at least had the nerve to come up with that yarn about needing a tax cut to help absorb the surplus that he told the Senate. He knows a tax cut is needed, but the 'maestro' cannot come out on the record and say he blew it yet again. Instead he now favors a tax cut hoping that his demigod status with Congress will carry the tax cut through. If we get it, we can avoid the problems that occur after the market starts to discount better times ahead but then finds out 4 months later that things are worse. That is where the pain comes in. So, we have to push, push, and push our leaders in D.C. to do what is right for the country. As we have seen over the last two years, those who supposedly know all about the economy got it wrong again and will keep getting it wrong. Grass roots baby.
Do we have 25? 50? 75? 150?
After the consumer lack of confidence numbers hit the talk turned from 50 basis points to 75 basis points. Nice, but no way it would happen. The Fed would be admitting things were in the toilet and its plunger was not big enough. That would get things rocking on Wall Street, but it would scare the tar out of everyone else in the world. What the Fed needs to do is just come out and say that it has a target for the Fed Funds rate and Discount Rate that it thinks will ensure prosperity and announce that it is cutting rates immediately to that level. That would resolve all of the guessing that industry has right now about whether the Fed will cut enough to forestall recession and get the money spent NOW, not three, four or more months from now. That is how you pull things back from the brink of disaster, not playing this game of "Who Wants to Avoid Bankruptcy." This is not a game as lives, jobs and our futures are on the line. Why play it like a game.
End Part 1 of 2
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stock split
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