|
|
trade stock, stock trader
* * * *
6/17/02 Technical Traders Report
* * *
Technical Traders Report Subscribers:
MARKET ALERTS:
Targets hit Monday: None issued
Buy alerts issued: CBRL; WTW; BPOP; LGND
Trailing stops issued: None issued
Stop alerts issued: None issued
You can sign up for Technical Trader alerts at the following link:
http://www.investmenthouse.com/alertttr.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:
- Strongest continuation rally in month, but volume was not as impressive.
- Strong financial moves across the board
- Market shows good internals, but not the buying.
After a month of selling the market hangs onto a rally session.
The market had been locked in a downtrend below the 10 day MVA for a month, barely able to come up for breath. Friday it tanked to new lows and reversed. Monday it continued that momentum, breaking over the 10 day MVA on the close. It was easily the best price action on the indexes in a month as the indexes rallied early and then fought off a few urges to sell late. The break over the 10 day MVA and the strong close marks a slight change in character.
Price is one thing. Buying is another. Friday reversed after touching down at the next level of support. As we have seen in this downtrend taps at the next level of support after a breakdown usually give rise to some short covering on some strong volume. Monday's action was on notably lower volume with the Nasdaq and NYSE posting below average trade. While up volume easily trounced down volume, the lack of overall strong trade indicates that it was a more of a lack of sellers Monday than any surge in buying activity. Yes there were buyers out there; after all the indexes rose. In the bigger picture, however, there were not as many buyers on the Monday gain as there have been sellers on the down session. So, there was a character change, but it was not much of one yet.
We are always cognizant of change, however. We are not at all saying that Friday made the bottom as some suggested today, but it could propel the market higher on the bounce this time (indeed, it has already done so with the break of the 10 day MVA). After strong selling bouts we can get stronger bounces: that old physics rule about equal and opposite reactions from any action. Thus the indexes could rally to the next significant resistance level before turning back. That does not change the trend and at this point does not ruffle our feathers to much.
Financial stocks lead the move.
The sector that had most talking was the financials. There is an old adage that the market cannot move up without the financial stocks. They had been leaders up to two months ago and then started to falter. When the regional banks started to breakdown that was a real concern for us. Today there were some big reversals across the board. Big names such as BAC, WFC, JPM and others rallied big time but there volume was light. Light volume moves just have this history of running out of steam.
The real movers were the regional banks. Regional stocks such as WB had been market leaders. Seeing them move up on stronger volume was a strong positive: these are symbols of economic recovery, and if they can recover and breakout once again that is a continuing good sign for the economy and the market longer term.
While the financial action was important, many of the patterns in the bigger banks, investment brokerages, etc. mirror the big averages: a steady downtrend. There are some better patterns that had not totally entered severe downtrends before today's action, so there is still life in financials.
THE MARKET
The market finally got a real relief rally going that was more than a one session move if you count the Friday reversal (and in this market you have to as that can be a good percentage of any upside move). The small caps bounced up off of the 200 day MVA while the mid-caps jumped back over the 200 day MVA themselves. Of course the large cap indexes are a long way from retaking their 200 day MVA. Monday's bounce clearing the 10 day MVA, the close near the highs, and the Nasdaq gap higher on the heels of the moderate spike in the sentiment indicators indicates a bit more pent up demand that could carry the indexes to a higher resistance level on this move.
High enough to turn the indexes? Over the weekend we noted that the indexes had tested the September low enough on a historical basis for a move up. The continued the Friday reversal though volume was lower. The action today was welcomed by the bulls, but the real test of this move comes Wednesday and later; can it follow through with good volume? Based on the sentient indicators and poor large cap patterns we doubt a lasting bottom here, but the market is always the last word on its moves. Again, the price gains were good, but the volume was not there today. Even if the indexes can provide a true follow through session Wednesday or later (another big point gain on strong, rising volume), there are not a lot of patterns in the big cap stocks ready to lead those indexes higher. The lack of solid accumulation patterns in large cap stocks have left attempted follow through in the wreckage. Again it would be the small and mid-caps doing most of the lifting at that point, and we saw some of that action again today with some strong volume breakouts once again.
Friday also represents triple witching expiration with futures and options. That tends to skew action a bit early in the week and then again right at the end of the week. Over the past few months that has been the pattern and could also have been an influence in the Monday action. Could be; it usually is accompanied by a bit more volume with position squaring.
Breadth: A solid attribute on the NYSE was the breadth at almost 3 to 1 for advancers. This gives some clue that the action was not all short covering on the beaten up large caps that are still stuck in strong downtrends. That is a positive for the upside but not a thumbs up.
SENTIMENT INDICATORS
VIX: 27.6; -2.33. After hitting 36.01 Friday intraday the market rallied and the VIX tanked back down. One thing to note in past bottoms: the VIX did not just spike up one day and then drop off. It ran at a high level for more than a week and then made a climatic spike, something we did not see this go round.
VXN: 54.98; -0.69. Hit 57.58 Friday on the high and then gapped lower today. It rose with the stock price gains, however. Interesting action, but nothing definitive.
Put/Call Ratio (CBOE): 0.75; -0.40. After climbing to close at 1.15 Friday the put buyers were not there today; no need for a lot of downside action today, but better to see if the rally runs out of steam.
Nasdaq
Stats: +48.55 points (+3.23%) to close at 1553.29
Volume: 1.589B (-13.01%). Followed Friday's big reversal session with a below average volume gain. That indicates there was not a lot of buying action in the market overall, but we also note that after reversal session on strong volume the continuation move is usually on lighter volume. The important feature was that there was no immediate distribution after the reversal. Without distribution, the next big volume event will accompany any follow through attempt Wednesday or later.
Up Volume: 1.21B (+289M) . Those that were in the market today were definitely buying, whether buying to hold or buying to cover shorts.
Down Volume: 367M (-512M)
A/D and Hi/Lo: Advancers led 2.06 to 1. The best positive A/D move in weeks, though we have seen these numbers posted on prior rally attempts. The Nasdaq 100 was strong, but the broader Nasdaq was stronger.
Previous Session: Advancers led 1 to 1
New Highs: 76 (+51)
New Lows: 65 (-177). After moving well over 200 new lows plummeted, but they never hit the 400+ you like to see on a firm bottom.
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped over the May down trendline (was at roughly 1502) and did not look back, clearing the 10 day MVA (1542.30), the MVA that had put the lid on the moves higher during the May downtrend. It now looks ready to test the next higher resistance level. That may not be the 18 day MVA (1571.74) this time around as there is some pent up demand after the strong selling in that May downtrend. It looks as if the next stronger resistance is right at 1600 with the second March down trendline (1605) and the 50 day MVA (1652.54). The 50 day is a strong move from the Monday close and would take a sustained move. After big selling bouts, however, the Nasdaq has used the 50 day MVA as upper resistance on reflex bounces. For now the downtrend remains in place though the heavy selling has led to a stronger bounce as we saw in early May. The index showed some resolve around 1500 as note over the weekend, and that is giving rise to this bounce after several short covering moves that closed near 1500.
Dow/NYSE
Stats: +213.21 points (+2.25%) to close at 9687.42
Volume: 1.23B (-19.98%). Lower, below average volume helped drive the session. It did not have Friday's strength behind it as volume was notably light compared to the up and down sessions the prior week.
Up Volume: 1.092B (+515M). As with the Nasdaq, clearly those in the market were on the buy side.
Down Volume: 133M (-817M)
A/D and Hi/Lo: Advancers led 2.93 to 1. A very broad move in the market overall. This gives a bit better view of the action as the small and mid-cap stocks performed as well. It was just not a short covering binge with respect to the beaten down large caps.
Previous Session: Decliners led 1.2 to 1
New Highs: 91 (+52)
New Lows: 28 (-149)
The Chart: http://www.investmenthouse.com/cd/$indu.html
The Dow picked up where it left off Friday and continued the momentum higher. It too crossed over the 10 day MVA (9644.29), not only holding its gains, but then rallying in to the close. Volume was not huge. The next crucial resistance is at 9750 t0 9811; the 18 day MVA (9742.17) is there along with prior price levels that have turned the index back before. Indeed, all the way up to 10,000 has a lot of resistance: the 200 day MVA (9850.33) and the 50 day MVA (9939.17). That would be almost 800 points from the Friday intraday low.
S&P 500:
The moved cleared the first March down trendline at 1025 along with the 10 day MVA (1029.28). NYSE volume did not back the move, coming in below average and below all levels last week other than Monday. It has some significant resistance ahead. The 18 day MVA (1041.44) may not stop it this time, but the second March down trendline is at 1055, right at the May low (1048.96). If it can muster some buying volume and clear that level it has to deal with the February lows at 1075 and the 50 day MVA at 1071.41.
Stats: +28.54 points (+2.83%) to close at 1035.81
NYSE Volume: 1.23B (-19.98%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
The indexes closed on their highs, and there is usually some continued follow through in that direction the next session. The usual action in this market after such a rally is a session or two of selling back to test the move. After that we will see if there is a follow through or not, i.e., another big gain on the major averages with some strong, rising volume. Unless large cap stock patterns get a lot better, however, the odds of success after a follow through are greatly diminished.
Futures were slightly lower to flat after the session, a normal situation after strong gains. Before the open the CPI and May housing starts are to be released. Expectations are for good numbers, and housing stocks were up ahead of the report. These could add a bit of fuel to the rally, but if it has cracks in it we should see some signs of that tomorrow. The worst for the rally would be that pullback but on rising volume. That has usually slapped down most rally attempts during the downtrend.
Today we were taking some positions in some of the smaller and mid-cap stocks that were making good moves in solid patterns. At the same time we saw a lot of stocks in downtrends move back up, but they could not put together very impressive volume. Right now it has a lot of the look and feel of previous rally attempts that fell short, but there is the move in the financial stocks as well as the early price strength where the indexes cleared the near term resistance. We see many of the downside plays set up at resistance to fall again. We may see them move over resistance intraday before turning back down; they may even try to close there. If volume does not back the move, however, we are comfortable with the trend and the positions.
Support and Resistance
Nasdaq: Closed at 1553.29
Resistance: 18 day MVA (1571.74. May low is at 1560.20, combining with resistance at 1550, a level not totally cleared. 1600 combines with the second March down trendline at 1602. Then the following March to April trendline now at 1640, the 50 day MVA (1652.54), and the February low at 1700.
Support: 1500 is still fighting to hold. 1460 is some support. 1420is the bottom channel of the May down trendline. Then there is the bottom channel of the May downtrend at 1418. After that is the September low at 1387.06.
S&P 500: Closed at 1036.17
Resistance: The 18 day MVA (1041.44). The second March down trendline at 1053. The May low at 1048.96. 1060 offers minor resistance from previous prices. Then the February lows at 1074.
Support: 1025 is some possible support. 1006 is the September 2000/May 2001 down trendline. Below that is the bottom of the March downtrend channel at 998. The September low is 944.75.
Dow: Closed at 9687.42
Resistance: 9750 and the 18 day MVA (9742.17). The April and May lows at 9800 to 9811. The 200 day MVA (9850.33). The September 2000/February 2001 down trendline is at roughly 9940 and the 50 day MVA at 9939.17. Then 10,100, followed by 10,250 to 10,300.
Support: The January and February lows at 9620. 9500 is the bottom of the shelf of support from 9500 to 10,100. 9250 rose up from nowhere to turn the Dow Friday; possible support there. Then 9000 to 9100. There is a rest stop at 8500. The September low is 8062.
Economic Calendar
6-18-02
CPI, May (8:30): +0.1% expected versus 0.5% prior.
CPI, core (8:30): +0.2% expected versus 0.3% prior.
Housing starts, May (8:30): 1.600M expected versus 1.555M prior.
Building permits, May (8:30): 1.620M expected versus 1.634 prior.
6-20-02
Current account, Q1 (8:30): $-107.5B expected versus -$98.8B prior.
Trade balance, April (8:30): -$32.1B expected versus -$31.6B prior.
Intial jobless claims (8:30): 38kK expected versus 390K prior.
Leading Economic Indicators, May (10:00): 0.2% expected versus -0.4% prior.
Philadelphia Fed, June (12:00): 10.6 expected versus 9.1 prior.
Treasury Budget, May (2:00): -$60,0B expected versus -$27.9B prior.
THE PLAYS
Best Plays:
1) ACF: Looks ready to roll back over.
2) AET: Looks ready for the breakout.
3) APSG: Still in a very nice test.
4) ERTS: Really like the move.
5) SSNC: Just needs some volume.
6) CI: Making the low volume test of the breach.
7) LGND: Rolled over intraday on higher volume.
Continuing plays table: FTEK still looks ready to go.
NEW PLAYS
Upside
DTC (Domtar--$12; +0.29; no options): Paper products
http://biz/yahoo.com/p/d/dtc.html
STATUS: Cup w/handle. In a 14-week cup with handle that is part of a larger 2.5-year base. It is in the handle, and after a wild day Thursday on huge volume it tested the 50 day MVA (11.45) on the low Friday and made a solid move up today. It needs more volume for the breakout, but it has some room to move if it does. Accumulation is strong in the base at 3 accumulation weeks to 1 distribution week. We need to see the breakout on this one.
Volume: 41.8K Avg Volume: 63K
BUY POINT: $12.22 Volume=175K Target=$15 Stop=$11.36
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/dtc.html
Downside
ACF (Americredit--$29.38; +2.38; optionable): Credit Services
http://biz/yahoo.com/p/a/acf.html
STATUS: Put. ACF broke the 200 day MVA (30.50) 7 sessions back and tanked. It turned Friday off of 25 and started up on low volume, continuing that move today. It is close to the 10 day MVA at 30 and the 200 day right after that. The stock has been selling hard and though there was some upside in credit services, this action was weak. We will look for a move higher to further test the 200 day MVA and then a turn down from there.
Volume: 1.799M Avg Volume: 1.979M
BUY POINT: $29.20 after a test of 30.50. Volume=2.5M Target=$25.2 Stop=$33
POSITION: ACF TG - Aug. $35 put (-57 delta)
http://www.investmenthouse.com/ct/acf.html
End Part 1 of 2
|
trade stock
stock trader
|
