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us stock market, stock split
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6/04/02 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit Tuesday: IWM (put); FRX (put); WYE (put)
Buy alerts issued: BVN; CYMI; PDG
Trailing stop alerts: PLB; KO
Stop alerts: PKG; IRM; KSWS; MHK; TBCC
To subscribe to the alert service you 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:
- Rumors and Greenspan add fuel to the market's ups and downs.
- Job cuts still coming from the behemoths.
- Indexes trying to mount that bounce off the lows.
- Subscriber Questions
Indexes continue the drop but then stage a 'rally' of sorts.
Monday momentum carried over Tuesday. Futures were really awful before the bank of Japan intervened to stave off some of the yen's strength. That brought futures off the floor and prevented an early meltdown. There was still selling early on, but unfortunately it lost a lot of its edge. The market needed a really good downside push after the Monday selling, but it did not get a major meltdown.
It was still trending lower as expected when a rumor hit that Pakistan and India had reached a truce. Let's see, last we heard they were at the peace summit but were not talking to one another, but a truce is still reached. Does not make a lot of sense, but in short term moves the market does not often make sense. It grabbed the story and ran up convincingly to session highs.
Then Greenspan opened his mouth at a conference and really wowed investors with his left handed comments about the economic recovery. Stating that the economy was on an upswing, he noted it was not dramatic and that it was in a current 'soft spot' (the economic numbers coming out do not seem to indicate that but instead indicate strengthening it seems). But the evidence of recovery is 'increasingly positive' though the economy 'cannot' stage a strong comeback because it did not suffer a very severe recession. Man, talk about a tennis match: good but not so good; better but not a lot better. No wonder the market started to sell as he talked. Once he finished, of course, it managed to turn back up again and mount a late charge toward the close (we use the term 'charge' loosely).
It is really interesting how Greenspan is already subtly rewriting history in order to insure his legacy. How foolish we all look after getting all worried about this silly little recession. Heck, the economy was not even negative for two quarters; given that we are shocked that Greenspan has not already started to say that it really was not a recession at all because it did not fit that textbook definition. Never mind that GDP growth dropped from over 8% to -1.5%, a mere 9.5% plunge. It sure felt like a recession and it still does; just ask all of those IBM, GLW, and HPQ workers that are going to get laid off as these companies continue to downsize in this expanding economy. Ask the 3+ million tossed out of work (a conservative number as many contract workers and others that do not receive jobless benefits don't get counted) during this 'little' recession. Look at the stock market collapse and the trillions of dollars lost. No, Greenspan would be a fool to try and say at this point it was not really a recession as the wounds are too fresh. Give it toward the end of the year. If the economy recovers well just listen to what he says about the recession. It will undergo some dramatic revisionist rhetoric just as most other events over the past 10 years have.
Job cuts continue.
IBM announced 5,000 job cuts today. HPQ said 15,0000 HP workers would take early retirement. GLW said 1,500 would go by the end of the week. GLW's news was part of an ongoing program previously announced according to the company, but the numbers become reality this week. GLW did say it would return to profitability by 2003; we have been saying that technology (particularly optics and communications) would take until 2003 to show real improvement and maybe longer.
Even as the economy improves we see the big names laying off personnel and restructuring. We touched on this subject the past week in discussing the large caps versus small caps, IPO's versus the old vanguard. Many analysts feel the big companies will be best able to weather the storm and return to the lead. In some instances that will be the case; Dell comes to mind in the PC market. PC's, however, will not be the growth industry it was in Dell's heydays in the late 1990's. The best performers will be those companies that are growing their business because they have a new or better way of doing something or they have something totally new to bring to the market. There are darn few IPO's out there right now even though the numbers are ticking higher. When the economy is strong enough to support new companies coming to market (meaning there is venture capital backing them as well), then the market can really start moving. Contrary to Maria on CNBC, new issues are good for the market, not bad for the market. With the myopia bred by television financial news, all they can see are the big indexes. As we have seen for the past many, many months, the large cap indexes are not the market.
THE MARKET
The selling continued on down to the support levels cited in the Monday report and rebounded. The Dow and S&P 500 did not make it to positive but the Nasdaq did, and it did so on higher volume. The chips and big name techs were the leaders to the upside. It is interesting that the rumor of a truce and the after effect of the Greenspan comments got the nod as the cause for the bounce. As we have discussed before, however, these are used as excuses when the market is ready to make a move. The indexes had been hammered. They had sold further to the next support level. They were thus due for a bounce as we anticipated Monday.
Some are calling it time for a substantial rally in the market. After all the Nasdaq is down 19% on the year, all indexes have sold hard, they sold hard again today and then reversed on rising volume. That sure sounds like medicine for a rally. It also sounds a lot like many 'reversals' that have occurred in the wonderful history of this bear market: hard selling then a reversal session where buyers come back in. Then they get squashed after a gain as the sellers use a rally to unload more shares.
One worrisome development is the manic weakness in retail and other consumer related stocks. Many are breaking below their 50 day MVA, some on strong volume and some on light volume. This is what he homebuilders started doing back in March. They corrected and tried to base, but some are now breaking lower, some are trying to hold on. Despite all of the talk about how real estate is a refuge from the market right now (CNBC has yet another real estate investment segment on tonight; maybe they should start a seminar?), homebuilders and building materials and suppliers are struggling after long runs. This is simply not a good thing for the market as there is not a lot of sectors waiting in the wings to step up. Tech may rally in short bursts after these selloffs, but there is no accumulation of these stocks and they will fizzle and fade again. Gold and metals are doing well, but they are not very good leaders as they are fear stocks. Smaller financials are still fine as their relative strength is high; can they withstand the selling in other formerly leading sectors? A rally may prop these stocks back up. How they handle the recent breach of support is the key; do they break back over and continue on with just a blip on the screen, or do they run into resistance at the breach point and then roll back over?
The market is working its way into deeper holes that are harder to recover from short term. Indeed it is putting in more obstacles to its recovery, and that means it will have to do more rallying and testing, rallying and testing, to overcome them. There are some improving sentiment signs as volatility is starting to rise, but they are still a long, long way from the indications that usually signal a bottom. Even quiet tests of the prior lows still generate more anxiety than this selling has done.
VIX: 26.94; +1.24. Into the higher range in the 'normal' 20 to 30 range, but still much too low to signal a turn in the market. That usually is a close above 50 and closer to 60 based on historical bottoms.
VXN: 49.66; +2.01. Right at the 200 day MVA where it topped out in May on that rally attempt. Reversals are found in the 80+ range.
Put/Call Ratio (CBOE): 0.87; -0.06. Was spiking higher but then the late rally brought it lower on the close, and it is the close that matters. The index needed another close or two above 1.0, and this recent selling was its best chance.
Nasdaq
The big names were bouncing with BRCD, BRCM, VRTS, EMLX, et al making the moves higher. As expected, when there is a sharp undercut of support, the immediate reaction is to try and rally the troops. Now we will see just how much rally there is in them. They are in steep downtrends and have the usual obstacles in a downtrend ahead, e.g., the down trendline and the 18 day MVA. As we saw on the most recent reversal attempt, even the 10 day MVA can stop upward movement in a steep dive.
Stats: +15.56 points (+1%) to close at 1578.12
Volume: 1.88B (+15.94%). Rising, above average volume on a reversal that found a bottom just under the May low. That is good volume on a reversal session. Now we see how it follows through.
Up Volume: 1.15B (+1.034B)
Down Volume: 714M (-779M). It was still a fight even with the positive close as down volume was tenacious.
A/D and Hi/Lo: Decliners led 1.18 to 1
Previous Session: Decliners led 2.86 to 1
New Highs: 52 (-35)
New Lows: 205 (+40)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Undercut the May low on the session low (1548.31) and then reversed to close higher though not at the session high. Volume rose to above average levels for the first time in three weeks. It looks like a reversal, and there will most likely be the jump higher that we were looking for in Monday's report. Question is, how long does it last? It is in a steep downtrend again, the latest rally attempt dead and buried. Thus we look for a bounce in a continuing downtrend and what resistance will be; if it does more than that, great. The 10 and 18 day MVA are at 1626.05 and 1647.37 respectively. That lines up with some prior prices at 1650, followed by the 50 day MVA at 1700 (1705.54) that represents resistance at the February low. That is about all you can see from the chart at this point.
Dow/NYSE
Continued down to test 9600 intraday and rallied to recover on very strong volume. Bounce ahead but the downtrend is here again and the Dow has to swim upstream to recover.
Stats: -21.95 points (-0.23%) to close at 9687.84
Volume: 1.468B (+12.86%). Above average volume on the intraday reversal, the highest volume in three weeks.
Up Volume: 524M (+364M)
Down Volume: 946M (-203M)
A/D and Hi/Lo: Decliners led 1.26 to 1
Previous Session: Decliners led 2.67 to 1
New Highs: 69 (-23)
New Lows: 89 (+16). This is five sessions in a row of 40 or more new lows. That is a signal of further selling to come. After this rally up to resistance we will most likely see
The Chart: http://www.investmenthouse.com/cd/$indu.html
Slammed lower to 9592.79 on the low, right in the 9500 to 9600 level of support before things get really ugly down toward 9100 level. The reversal indicates a rally attempt from a very oversold Dow, down from 10,300 just 11 sessions ago. That is a steep decline, and it needs to bounce up for some relief. It may be comic relief, however, as the 200 day MVA looms at 9882.0, just over the April low at 9811. Then the 10 and 18 day MVA right behind at 9923.62 and 9995.57, respectively. Then 10,100 after that. It has a lot of work but can make the bounce up to 10,100 on a very strong bounce, and this index can give those strong bounces when it gets oversold, e.g. in May. After the breakdown, however, it looks as if it will be just a bounce.
S&P 500:
Very similar to the Dow with its plunge down to 1030.52 on the session low (there is no real support until 1000) and then reversing on strong, above average NYSE volume. The candlestick pattern is a hammer doji, and after a string of selling sessions that is indicative of a change in direction as the buyers caught up with the sellers and pushed the index back up near the session highs. It has tanked to the bottom of its downtrend channel in its renewed downtrend, and now it is ready to bounce up in that channel. It will have resistance at 1050, but more likely are the 10 and 18 day MVA at 1064.84 and 1072.89, respectively. The March down trendline is between those two at 1069.
Stats: -0.05 points (0%) to close at 1040.63
NYSE Volume: 1.468B (+12.86%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
ISM services is out at 10ET, the only real economic report due out. The continuing problems with the Indian subcontinent will hang over the market. The market appears as if it is going to make that move up, however, after the whacking it has received the past three weeks.
There are some decent plays out there. But we have just benefited from some good downside moves and are letting others run a bit more for us, and there are not a lot of stocks that are in great buy points right now for the upside. We could chase the big names on a bounce up, but we really are not wild about that at all. The downtrend is steep and we would rather let them set up with a run up to resistance and then roll over. That is our favorite downside entry point in continuing downtrends. If they breakout and move on up, so be it; we can adjust to what the market gives and take it.
What we don't want to do is force a play. We refrained from stopping out several upside positions today because we felt the rally was coming. Some were tanking and we closed them, but we kept most. That does not mean we are ready to chase them to the upside. As we said, there are some good plays out there that we can take advantage of, but we are not going to force a mediocre pattern or play. The downside has been good for the puts; the indexes are still in downtrends. We would prefer to let the puts set back up and then play the trend again. With the retailers now joining the homebuilders as a struggling sector, we want to see how things shake out for those stocks.
What we also don't want to do is play yesterday's trend, a.k.a., fight the last war. CNBC is running another segment on owning real estate, saying REIT's are a good way to play. REITS did well in 2001 just as the homebuilders. They are not suffering as much, but they have also had mega runs. CNBC is also talking about owning rental properties, etc. It is asking if it is too late, but the idea permeating the segments is that real estate is a way to go. This concerns us just as the retirement home purchaser did when he paid top dollar for a huge retirement home in an area he was not sure he wanted to live in but felt safe because he could sell it in a week and get more money. That is speculation. Then there are the 'experts' saying there is no bubble. Frankly, they would not know a bubble if they saw one. All of this attention to real estate is just like when a stock appears on a magazine cover or when the major publications start talking about a market trend, up or down: it is usually at its peak or bottom.
This is a long way of saying the charts are telling us there are problems out there in the homebuilders, materials, auto parts, and now retailers. They may just need a rest after long runs up; they could base out and launch again. With the improving economy that would seem logical. In this market, however, we need to stay on our toes for the trends and be ready to take advantage of what trends form, up or down. Right now the overall trend is down, and we are content to wait and let the move set up for us and then move back in.
Support and Resistance
Nasdaq: Closed at 1578.12
Resistance: 1600 is some resistance. Then the second March down trendline at 1648 and the 18 day MVA (1647.37). The next March to April trendline now at 1675 and the February low at 1700. The 50 day MVA (1705.54) and the January/March 2002 down trendline is at 1752.
Support: 1550 to 1560 are the October lows and held Tuesday. Then 1500. After that is the September low at 1387.06.
S&P 500: Closed at 1040.63
Resistance: 1050 is some resistance. 1060 offers minor resistance after that from previous prices. The March/April down trendline at 1069, right at the February lows at 1074. The 10 and 18 day MVA at 1064.84 and 1072.89. After that 1100 and the 50 day MVA at 1091.87.
Support: There is possible support at 1000, but it is not much. The September low is 944.75.
Dow: Closed at 9687.84
Resistance: 9811, the April and May lows. The 200 day MVA (9882.09). The September 2000/February 2001 down trendline is at roughly 9980. The 18 day MVA (9995.57), then 10,100. Then 10,250 to 10,300.
Support: 9500 to 9600 in the shelf of support from 9500 to 10,100.
Economic Calendar
Jun 03
Auto Sales, May (00:00):5.7M actual versus 6.3M expected and 6.3M prior.
Truck Sales, May (00:00):6.9M actual versus 7.4M expected and 7.5M prior.
ISM Index, May (10:00):55.7 actual versus 55.0 expected and 53.9 prior.
6-05-02
ISM Services, May (10:00): 56.0 vs 55.3 prior.
6-06-02
Initial Claims, 06-01 (8:30): 410K vs 410K prior.
6-07-02
Nonfarm Payrolls, May (8:30): 70K vs 43K prior.
Unemployment Rate, May (8:30): 6.1% vs 6.0% prior.
Hourly Earnings, May (8:30): 0.3% vs 0.1% prior.
Average Workweek, May (8:30): 34.2 vs 34.1 prior.
Wholesale Inventories, April (10:00): 0.1% vs 0.0% prior.
Consumer Credit, April (15:00): $6.0 B vs $4.6B prior.
End Part 1 of 3
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us stock market
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