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world stock market, us stock market
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5/23/02 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Target Hit alerts issued Thursday: TEVA (initial target; next is 72); BMS (put)
Buy alerts issued: INLD; UFI; WY; WIN; ABC; VWKS; ATVI
Trailing stop alerts issued: GMP; IMH
Stop alerts issued: CERN
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertssr.htm
Emails: We love your emails. We receive hundreds of emails a week, but we don't mind. We respond to them all as fast as we can, so bear with us.
SUMMARY:
- Another late afternoon rally; no rumor, just biotechs.
- Broader market moves up together with small and mid-caps resuming leadership for the day.
- A higher low brings indexes right back to the ever-present resistance.
- Strong durable goods orders don't inspire the market as continuing jobless claims remain at 20-year highs.
- Long weekend with terror threats could mean cautious trading late Friday and trouble next week.
Stocks push up late once again.
One more test of near term support tapped on Wednesday's low was enough to start the indexes on another afternoon rally. This one was not a last half hour run, but a sustained move over the last two hours. It was not a rumor rally as on Wednesday. When the indexes touched down to that support one more time and held, that was enough to spark short covering around noon ET. That move stuck, and then buyers entered along with shorts closing positions, and the afternoon rally was underway.
It picked up steam when the FDA approved BGEN's eczema drug. While there were problems with the drug, there was a definite need and a definite group that would benefit. The FDA indicated that if your drug was a 'first in class' drug, i.e., the first one that was out there to help a specific ailment, it would get some kinder treatment in the approval process. That sparked a lot of interest in the crushed down biotech sector, and the news added extra push to the afternoon rally.
Small caps and Mid-caps lead for the day as the move starts to broaden out.
The Nasdaq and Nasdaq 100 put in good sessions; they tend to lead on the rebounds and on the selling. Two of the groups absent from any recent positive action joined back in today: the small caps and mid caps climbed 1.5% and 1.4%, respectively, adding some punch to the upside move that was not there Wednesday. It is too early to say their recent struggles are over; one day up after some double tops does not light the green buy light. In short, many small and mid-caps are working through bases; some, however, continue to make their breakouts on huge volume, using the recent weakness to shake out some sellers. We have to admit that we were shaken out of a few positions that we should not have been shaken out of as we followed some tighter stop guidelines. Now we have to dust off and get the line back into the water on some of these.
Slightly higher volume on a higher low for the big indexes.
The move today was more technically driven than Wednesday's rumor move. After holding the Wednesday lows once more, lows that were more important because they represented prior support levels and the Nasdaq gap up point, the support was hardened or proved. The higher low continued the recent attempts at building off the early May meltdown. That caused some shorts to cover and some buyers to buy.
That combination was enough to push volume up a bit higher. Not a rush to buy. The Nasdaq volume edged slightly higher but remained below average. NYSE volume inched higher as well, but it too was still well below average. More buyers were showing some interest, but not in substantial numbers. The move up is attracting more buyers, but in dribs and drabs. Not many willing to commit, but in the long run, more will have to commit; low volume rises are usually doomed to failure at the next real resistance level or when the next disappointing news story hits. We have seen time and again the poor patterns from the old favorites try to mount a move just to get punched in the gut and tumble. Today was a nice session, but not one to bet the farm on.
THE ECONOMY
Durable goods orders jump.
Wednesday we felt that a 1% increase in durable goods orders might spark some upside excitement. It did for about 5 minutes. +1.1% versus expectations of +0.5%. Durables are considered something of a proxy for capital investment because they represent items that last 3 years or more. That includes computers (in theory; sometimes we wonder if they are designed the same as light bulbs), autos, machinery, and other capital equipment, not to mention A/C units, stoves, refrigerators, etc. on the consumer side. March was revised to +0.2% from -0.6%. Therein lies the problem: this number is very volatile, so not many put a lot of stock in it until a string of good numbers come out. Strip out transportation and it was up 2.9%. Take out defense spending and it was up 3.4%. Getting there.
There was not a lot of weakness in the report. Other than telecom and transportation, it appears that most every sector in cap spending has bottomed. Bottomed, however, does not mean a rapid rise, nor does it mean that CEO's will give the green light to hiring or expanded cap X spending. That will take time as the initial jobless claims continue to show us.
Jobless claims fail to improve.
416,000 new jobless claims were filed, but when the prior week is once again revised higher (to 425K), it does not mean that much. Moreover, now that the big jump from extended claims has been absorbed a bit, the continued 400K+ readings show continued recession-like attributes in the jobs market.
The 4-week average fell to 420K from 422K, but still well above 400K. Continuing claims were still the fly in the ointment, up to 3.87 million, another 20-year high. There is no rush to hire. More contract workers are being brought in, but not a lot. CEO's do not view a recovery the same as an economist. A CEO wants things to return the way they were before the downfall to say there is recovery. An economist says 'recovery' when the economy turns up from its downward spiral. Thus the disconnect between what we hear about the economy improving and the lack of hiring.
This, however, is typical in a recovery. Companies squeeze employees and existing systems to the max before hiring new employees or buying new systems. Thus the big jump in productivity as fewer do more with all of those tech systems purchased in the late 1990's and put into use in the early 2000's. This action is going to linger even with the 6%+ revision to Q1 GDP out tomorrow. Orders and sales are what get businesses to hire and buy. That has not happened yet, so the recovery continues to grind along.
THE MARKET
Confirming the higher low somewhat with slightly higher volume, but the action for now is just more grinding between support and resistance levels. The indexes are set up for more of a short term upside move, but resistance blocks the path in bite-sized increments. Friday before the long weekend will most likely give us a continued drift higher and then a bit of profit taking late.
Basically, the indexes are in the continued process of trying to turn something positive out of the March to May plunge. The Nasdaq retested the gap up point (1652) for the second session and then rallied. Volume was up, almost to average levels. The S&P 500 the same. These always look hopeful; bulls coax and cajole the moves much as the television commercial trader does before he leaps out the window of his single story house when the move fails. Regardless of body English, chants, or shouted expletives, the market does what the market does. The past two sessions it held and avoided a nasty plunge, but it did not attract any buying conviction.
Ahead of the long weekend with terror threats outstanding, we don't really like this move. It gets you hoping that somehow the indexes can this time flaunt the downtrends and make that breakout. Returns from holidays in the bear market, however, have a tendency to be somewhat nasty, trashing and thrashing any weak and hopeful attempts to climb on low volume before the holiday. The indexes are trying to build higher, but the reality is they are in downtrends and the move up here is somewhat weak. Not a lot to get all teary eyed with sympathy over.
VIX: 20.35; -1.24
VXN: 43.20; -1.5
Put/Call Ratio (CBOE): 0.62; -0.24
Again the sentiment indicators continue to show no real signs of fear or concern, though on an up session we would expect these emotions to abate. On the selling, though they rise, they have not hit extreme levels since the week the market re-opened in September 2001.
Nasdaq
Tapped the gap point again and rallied in the afternoon. Higher low, higher volume look better. May high at 1750 is the major resistance.
Stats: +24.18 points (+1.44%) to close at 1697.63
Volume: 1.763B (+1.61%)
Up Volume: 1.188B (+240M)
Down Volume: 545M (-196M)
A/D and Hi/Lo: Advancers led 1.43 to 1
Previous Session: Decliners led 1.28 to 1
New Highs: 82 (+21)
New Lows: 63 (-41)
The Chart: http://www.investmenthouse.com/cd/$compq.html
As noted the Nasdaq is in the continued process of trying to turn something positive out of the March to May plunge. It solidified support at the 1650 gap up point with its second test and climb on rising volume. That gives it some leverage up toward the May high near 1750 where the 50 day MVA is (1747.54; simple). First, however, it must cross the January to March down trendline that stopped the recent move higher. That is right at 1705, and 1700 marks the February low as well. Double ice, and even if it clears it, without high volume it takes a lot out of the move. There could be a further move Friday on this pre-holiday momentum toward 1750. After that resistance is stacked up about every 25 points. Tough, tough sledding given the steep incline on the way down.
Dow/NYSE
Holds at 10,100, its own level of support, and climbs once more to try and test 10,300.
Stats: +58.2 points (+0.57%) to close at 10216.08
Volume: 1.169B (+2.66%)
Up Volume: 859M (+279M)
Down Volume: 300M (-240M)
A/D and Hi/Lo: Advancers led 1.74 to 1
Previous Session: Advancers led 1.04 to 1. A broader advance as the small and mid-cap indexes showed.
New Highs: 107 (+15)
New Lows: 23 (-7)
The Chart: http://www.investmenthouse.com/cd/$indu.html
As with the Nasdaq, it took another test of near support and a successful hold to cover some more shorts and bring in a few more buyers. Volume increased, but it was still well below average. There is even less intensity on this move up as on the Nasdaq. Without some serious volume the Dow will have a hard time with 10,300. It may test it tomorrow on a continued lazy move higher ahead of the weekend, but if it hits it we will be surprised if it can close over it ahead of the holiday weekend. Even if it does, it is subject to being rocked next week on heavier volume. It needs to show a definitive move over 10,300, meaning it needs good upside volume. Until then it is just marking time on low volume.
S&P 500:
The big caps have almost made their 25-point move to next resistance, that being 1100 and the 50 day MVA (1101.65). That is its first challenge, one that it was not up to a week ago when it topped out at 1106.59. If it does make that move, the next resistance is about 25 points higher at 1125 in the form of the 200 day MVA (1118.63) and the September 2000/March 2002 down trendline at roughly 1127. The drop has not been as steep as the Nasdaq, and the big caps have had more lateral movement the past 5 months versus the tech index. It could thus mount a move up to that higher resistance, but again, it is making its moves on very low volume, kind of a paper tiger move. You can say 'gee, it rose on rising volume' and feel good about the move, or you can look at the downtrends and say it is rising on below average volume that is not going to be enough to overcome those significant resistance levels unless buyers start liking large caps soon. We don't hear too many saying large caps are now the way to go. Most of their charts are not saying that, and that is the real key.
Stats: +11.07 points (+1.02%) to close at 1097.08
NYSE Volume: 1.169B (+2.66%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Friday before a 3-day weekend, a weekend where there could be some terrorist activity. The indexes have been rising into the weekend, and they have momentum to continue Friday, at least up to the late afternoon. With GDP revisions to come in over 6% there may be a little more boost to the upward move, but this is already expected so the gains would be limited. The lack of volume on the pre-holiday Friday can allow the move to continue just as it can take some back late as traders and hedge funds get out of the market ahead of the uncertainty it brings.
On any drift higher we are going to continue to let our puts run. This has been a lower volume move higher (volume may be edging up, but relative to the past few weeks, volume has been low), and it is thus subject to upset when it hits resistance and/or adverse news hits the market. Even with the improving economic background there is still news that upsets the market: terrorism, rising energy prices, weakening dollar.
The dollar continues to be a problem for the market. There is more and more talk about foreign markets being better investments, dollars being converted, etc. The administration maintains a strong dollar policy, but the door has been opened through other means as we have discussed in the previous weeks. The slide has started, and it is going to be quite awhile before it is stemmed. What will it take? Primarily the U.S. economy showing it is still head and shoulders over the rest of the world as far as economic strength. We wrote on the subject at length when the Fed was trying to end the prosperity in the U.S., and this is one of the results we feared besides of course the crash of the stock market. When the U.S. should have been solidifying its economic leadership as the country aged, it purposefully hobbled itself and gave away its advantage. We are living and will continue to live ruing those inept, buffoonish decisions that set up and then brought about the collapse of our markets and the economy.
So, tomorrow we take it slow. Anticipating a possibly bleak return from the holiday's as has happened more than once the past two plus years, we are going to let the puts run and limit upside to those sectors that are in the best patterns and sectors. That will not protect them from major mishap outside the market, but they weather the bad times much better, setting up for the next move higher while the poor patterns burn lower.
Support and Resistance
Nasdaq: Closed at 1697.64
Resistance: The short March to April trendline at 1704 that turned the index back last week, and 1700 (February low). 1750 and the 50 day MVA (1734.62) are next. The January/March 2002 down trendline is at 1772 and the 200 day MVA at 1814.20.
Support: 1652, the gap up point, has been filled and held twice. Some support from 1600 to 1620 from the October consolidation. 1550 to 1560 are the October lows and could try to hold. Then 1500. After that is the September low at 1387.06.
S&P 500: Closed at 1097.08
Resistance: 1100 and the 50 day MVA at 1101.65. The 200 day MVA at 1118.63The March down trendline is at 1082 and has not been totally cleared. Then 1100 is a point to beat. The 200 day MVA is next at 1119.23. Then price consolidations at 1125. September 2000/March 2002 down trendline at roughly 1126.
Support: February lows at 1074 continue to hold. The October lows at 1050 are the last price consolidation level before the September low. There is possible support at 1000, but it is not much. The September low is 944.75.
Dow: Closed at 10,216.08
Resistance: 10,250 to 10,300. Then there is 10,400, the level that has acted as 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.
Support: 10,100 has held twice this week on the close. Then the 200 day MVA (9900.53). After that two lows at 9811. Then 9500 to 9600 in the shelf of support from 9500 to 10,100.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
5-20-02
Leading Indicators, April (10:00): -0.4% actual versus -0.1% expected and -0.1% prior
Treasury Budget, April (2:00): $72.5B versus $189.8B prior
May 23
Initial Claims, 05/18 (08:30):416K actual versus 410K expected and 425K prior. (revised from 418K)
May 23
Durable Orders, Apr (08:30):1.1% actual versus 0.5% expected and 0.2% prior. (revised from -0.5%)
May 24
GDP-Prel., Q1 (08:30):0 actual versus 6.0% expected and 5.8% prior.
May 24
Chain Deflator-Prel., Q1 (08:30):0 actual versus 0.8% expected and 0.8% prior.
May 24
New Home Sales, Apr (10:00):0 actual versus 885K expected and 878K prior.
End Part 1 of 2
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world stock market
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