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us stock market, stock market today
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Tech Traders 2/08/01 Market Summary
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Technical Traders Subscribers:
Continuing Plays:
NATI (National Instruments Cp--$55.06; +2.18; optionable (SJQ)): Computer peripherals
http://biz.yahoo.com/p/n/nati.html
STATUS: Broke out of the ascending wedge on good volume (502,000; avg. 234,409). The stock remains a buy on the breakout up to 57.10. Great money flow and high relative strength.
BUY POINT: Up to 57.10 on continued rising volume.
POSITION: Stock. March and June $55 options have insufficient open interests (SJQ CK or FK).
http://www.investmenthouse.com/ct/nati.html
(Click to view the chart)
NEU (Neuberger Berman Inc--$81.52; +2.21; optionable (NEU)): Financial services
http://biz.yahoo.com/p/n/neu.html
STATUS: Moving up from support (18 day MVA, 79.52) in the pennant, on stronger volume (157,400; avg. 280,772). High point in the pattern is 85.69. Great money flow and high relative strength.
BUY POINT: Breakout: 85.82, on volume of 379,000.
POSITION: Stock. March and April $80 calls (NEU CP or DP have low or no open interests).
http://www.investmenthouse.com/ct/neu.html
(Click to view the chart)
AZPN (Aspen Technology Inc--$40.06; +0.22; optionable (ZQP)): Software
http://biz.yahoo.com/p/a/azpn.html
STATUS: Showing a doji above a low that tested support at the 10 day MVA (38.68). The stock is in the handle of its 22-week cup base, and has pulled back the last two days on steadily lower volume (347,900; avg. 365,590) as price does the same. Looking for a move up from here (closed near the high of 40.50) on stronger volume for the breakout.
Good buying and money flow.
BUY POINT: 41.38, on volume of 548,000 or better. Remains a buy on the breakout up to 43.45.
POSITION: Stock and/or March $40 calls to buy (ZQP CH). May $40 calls (ZQP EH) have low open interests.
http://www.investmenthouse.com/ct/azpn.html
(Click to view the chart)
CSBI (Century South Banks Inc--$33.50; -0.13; no options):
http://biz.yahoo.com/p/c/csbi.html
STATUS: A financial that continues its pennant consolidation on low volume, showing yet another doji at support on very low volume (33,500; average 84,545). The stock continues to hold support at its short-term MVA's (10 and 18 day MVAs at 33.44 and 33.33, respectively), and we look for a breakout in a market rally. Outstanding money flow and good buying.
BUY POINT: Breakout: 34.85, on volume of 114,000 or better. Remains a buy up to 36.59.
POSITION: Stock.
New Play to look at:
BMCS (Bmc Software Inc--$31.56; +1.93; optionable (BCQ)): Application Software
http://biz.yahoo.com/p/b/bmcs.html
STATUS: Moving up on strong volume (7.7 million; avg. 4.3 million), making a breakout move toward its buy point in the 8-month cup with handle base. The pattern is in a much larger base that has a prior high of 86.63; current base has a prior high of 48.94. The stock broke its down trendline and 200 day MVA (26.03) in January, both of those moves on great volume. We are looking for similar behavior on this move. Good buying; money flow is coming off the floor. Relative has broken out ahead of price, a bullish sign.
BUY POINT: 33.13, on continued strong and rising volume. A buy on the breakout up to 34.79.
POSITION: Stock and/or May $30 calls to buy (BCQ EF).
http://www.investmenthouse.com/cd/bmcs.html
(Click to view the chart)
A Put Play:
OEX (Standard & Poors 100--$694.32; -6.45; optionable (OEZ)):
STATUS: Broke support Wednesday on stronger volume (50 day and short term moving averages), and continued the drop today as volume dropped back slightly (1.1 million; avg. 1.2 million). We are looking for another move down after the break of the major support.
BUY POINT: On a move down from here on preferably stronger volume.
POSITION: April $700 puts to buy (OEZ PT).
http://www.investmenthouse.com/ct/oex.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:
- Early rally attempt fails on waves of sellers.
- Retail sales mixed but mostly lower, and that is breaking down a lot of nice patterns.
- Shades of the end of the summer rally of 2000.
- Many tech stocks at levels before the first Fed rate cut.
- Team Trades
Today's follow through from Wednesday's late rally runs out of gas.
The indexes picked up where they left off Wednesday, opening higher and climbing to respectable gains early in the session. Even with the move up there was not much excitement as it seems everyone views any rally attempt with a rightfully jaded eye. Indeed, we do the same when the markets start the day stronger as they tend to burn out, especially when we start seeing signs of distribution, i.e., where the big money starts to dump shares. It has not been wholesale selling, but it is the first time the Nasdaq has done this in a month.
Today was not technically a distribution day as volume on the NYSE and Nasdaq was lower. Or was it? Wednesday CSCO traded almost 280 million shares with the Nasdaq turnover at 2.056 billion shares. Today volume came in at 1.885 billion shares, but CSCO traded a 'mere' 102 million. That is about 180 million shares less on CSCO alone, and if you take that off of Wednesday's volume you get 1.876 billion shares. This is not exactly an apples to apples comparison, but given that many key Nasdaq stocks sold on heavier volume today, the technically lighter volume may be camouflaged by the extraordinarily heavy CSCO volume on Wednesday.
The importance? A few quick distribution days can signal worse things to come as mutual funds, pension plans and other big money players are in a selling mood. Obviously, additional selling pressure would push the market down even further.
Retailers deliver weaker sales reports.
As soon as the Nasdaq was an hour into the session and things looked pretty decent, it started to sell. Retail sales came out mixed but predominantly weaker, and that took a lot of steam out of the move. Indeed, retail stocks had been some of the stronger patterns in the market, but on today's news we saw high-volume selling that either took retailers out of their patterns or is threatening to do so. Last night we stated that the longer these stocks held in these patterns without a catalyst to break them out, the more likely they were going to start to fail. We could have seen that starting today.
This weakening and breaking down of patterns is also occurring in another strong post-Fed rate cut sector, the financials. While there are still some very solid patterns out there, some key players have broken to the downside, e.g., MWD, and that is a concern. When these stronger patterns start to fail, investors are inclined to begin to take profits, especially as many of the value players are saying that these stocks are overpriced. In a weak market as we have now, that can take its toll on otherwise strong stocks. If a market is solid, we know that stocks that are considered pricey by 'value' players break out of these patterns and really start to mount impressive gains. Without a trigger, e.g., another rate cut, there has not been anything to counter this view. When retail sales came in predominantly weaker, that started the selling.
Summer of 2000?
After what everyone thought was a pretty fast, brutal bear market in early 2000, the markets staged a comeback in May through July. Lots of battered stocks surged higher, very nice breakouts by SDLI, KEI, TEK, PWER and others moved the market higher. More cup with handle patterns were established and ready to move in the next wave. Then the rug was pulled out, and the summer rally turned into a 1200 point plunge, and that was just the first leg down.
This move in January has not been nearly as impressive as last summer's in size or in the quality of stocks moving up. Indeed, unlike last summer, the moves in January were not breakouts of strong patterns, but just rallies from the depths of a 52-week low and very ragged double bottom patterns. Just when the first set of good patterns appears to be forming, they are in jeopardy based on weak economic outlook. They may not get the opportunity to have that first round of breakouts.
Moreover, many key tech stocks are really looking pathetic. Not only have they experienced some selling, many are down to levels approaching 52-week lows where they were before the Fed stepped in to cut rates. Look at JNPR, BRCM, AMCC, ADBE, EXTR, EXDS, GLW, NEWP, SUNW, and VRSN to name a few. Some major selling in the seven sessions since the second Fed rate cut.
We are experiencing this weakness even as the Fed has cut rates twice for a total of 100 basis points in cuts in less than one month and a new tax cut bill was introduced into the Congress today. Problem is, we now have people waking up to a weak economy, something that was the furthest thing from the mind of most back in the summer. Which side will win out? History says the Fed and the tax cuts, but it looks for now as if we are experiencing one of those dips that occurs even after the Fed has pledged its support to right what it has wrecked. Obviously institutions are not convinced the Fed and Congress are up to the task as they appear to be selling stocks in volume right now. That requires us to think twice before we enter any play. We have to be certain we like the pattern, the fundamentals and the risk. There are still great patterns out there and several plays moving up on solid volume, e.g., NATI, THQI, EDS, FRED, SDS, and others. We don't abandon them, we just use our usual caution.
THE ECONOMY
Weekly jobless claims rose to 361,000, up 15,000 over last week and well above the 4,000 gain expected. That is the highest since December 2000 when the jobless claims hit a 2.5 year high. The four-week average climbed to 331,250 from 327,000 the week before. The January layoffs are showing up in the numbers as not all of those laid off are being converted directly into new jobs. We will have to see how this shakes out over the next four weeks at which point we feel we will get a better picture of how well the existing job market, which remains relatively decent, soaks up these new layoffs. Every time we contemplate these numbers and the lives impacted, we get steamed. The callousness of the Fed last summer saying that unemployment needed to be higher. Well, it has done wonders in wrecking the dreams and hopes of millions of U.S. citizens, even those still with jobs. Why? Just look at your 401k statements for the year that are hitting the mailbox.
The mutual fund effect.
A lot of investors received a shock they knew was coming when the yearly 401k statements came home. We were talking with a few such people today who were wondering what the heck to do. Put what was left in a money market? Bury it in the back yard so the Fed could not get it? What?
Realize that this is occurring millions of times over all across the country. We have a feeling that this is part of what we are seeing right now in the market: investors calling their mutual funds and saying 'liquidate.' Of course, the damage has been done for the most part. The time to sell mutual funds was when the market was showing major distribution back in March and April. At that time, however, we all heard no less than 10 times a day to 'stay the course, don't panic, let your money work.' Of course that is what the mutual funds say: they want to keep your money to generate fees that pay the bills. What happened was you money worked its way down to a fraction of what it was even as the mutual funds charged fees. That is the name of the game, however, and now is not the time to fret. It looks as if most of the damage has been, and if you pull out now and put money into a money market, the few percentage points you gain (on an annual basis) will most likely not mean much if the money is not put to work at the right time. If you are earning 5% per year on the money market fund and the market starts to move, if you don't believe it and wait too long, you could easily miss 15% or more of a move. The 5% (and that is annualized) that you earned does not make up for the other 10% you missed.
Anyway, there is by our sources about $2 trillion sitting on the sidelines. That is a lot of money (of course, not by tax cut standards) to hit the market. It needs something to push it. Right now fund investors are clamoring about taking some out while fund managers say 'don't do it.' That may have some impact on the market that we are seeing, but it is temporary at best. With all of that money on the sidelines, a bigger move is ahead.
Retail sales came in mostly as gains, especially from the big discounters, but as we had reported in December when the buying spree in the last week was occurring, even that would not bail them out as the sales were the result of massive discounts to move tons of merchandise. Thus, sales were fairly impressive from the discounters and certain specialty retailers, but the profits will most likely not be there when the earnings come. That appears to be the excuse for profit taking in these stocks, and we could see more selling that gives us short term short plays that could put some good change in our pocket. Another rate cut will turn that right back around, however, so we are looking for a quick move to the downside, make some money, and bank it. Efficient, machine-like.
End Part 1 of 2
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us stock market
stock market today
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