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us stock market, stock watch
Begin Part 2 of 3
Sentiment Indicators
VIX: 30.21; -3.1. This is the third straight week volatility has cracked 35 on the intraday high. The prior two readings over that level set off a very short bump higher. The fact that it was up at that level three straight weeks is good from a bullish perspective, but to see a real bottom would have required an even higher spike intraday. The selling pressure had bled off for now. While we may get a further bounce higher on this move, we doubt a bottom has been set.
VXN: 56.28; -3.78. Rallied to 62 intraday this week and has turned back sharply. It reached over 65 on this recent spike, but that is most likely not enough for a firm bottom based on the short history of this indicator.
Put/Call Ratio (CBOE): 0.77; -0.18. Dropped off sharply, but as has been previously noted, the put/call ratio has done its work.
Bulls versus bears: More bulls and fewer bears this week even as the market surged lower Monday and Tuesday. Bulls rose to almost 46% from 43%. Bears fell to near 33% from just over 36%. This indicator is heading the wrong way without ever crossing over, the signal that indicates a bottom has been set. This is not a good sign for longer term bullish moves.
Nasdaq
Stats: +68.19 points (+4.94%) to close at 1448.36
Volume: 1.12B (-58.02%).
Up Volume: 955M (-1.191B)
Down Volume: 55M (-412M)
A/D and Hi/Lo: Advancers led 2.86 to 1. Very broad move, but on short sessions and light volume this can happen. It does not hurt to be coming off of a serious downtrend as well.
Previous Session: Decliners led 1.27 to 1
New Highs: 22 (-1)
New Lows: 55 (-221)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Cleared the March down trendline and the 10 day MVA (1432.62). The next level is a very important one, the 18 day MVA (1464.38), the point that has held the index back since mid-May when the Nasdaq tested the 50 day MVA (now at 1565.96). The index once again has more momentum than on other attempts. The last two tries it is noteworthy that the Nasdaq reversed intraday from the 18 day MVA to close at the lows. Friday the Nasdaq closed at its high. Things look ripe for a higher bounce, but we will see how the market performs when all of the players are back in town on Monday. A further bounce up to test higher does not mean the downtrend is over. No sentiment indicators have hit critical levels heading into this bounce.
Dow/NYSE
Stats: +324.53 points (+3.58%) to close at 9379.5
Volume: 710.685M (-53.73%)
Up Volume: 670M (-18M)
Down Volume: 40M (-797M)
A/D and Hi/Lo: Advancers led 4.39 to 1. Very, very broad NYSE rally.
Previous Session: Decliners led 1.59 to 1
New Highs: 32 (0). No change in new highs after a strong rally. Has sold a long way, so not too surprising.
New Lows: 35 (-209)
The Chart: http://www.investmenthouse.com/cd/$indu.html
A truly impressive point move that broke the 10 day MVA (9237.73) and the March and May down trendlines (9280 and 9350, respectively). It has not moved this much since early May, but the lack of volume on a short session makes any move suspect. 9500 is the next serious resistance followed by the 50 day MVA (9661.26). As with the Nasdaq Monday will tell more of the tale: a further move higher to test the next resistance level, or a great opportunity to sell into a stronger than usual rally?
S&P 500:
A very impressive move for the large caps. If only there was some other sign it meant something other than the point gain. The S&P 500 is in a nasty downtrend. Unlike the Dow and Nasdaq, it has not even hit its March down trendline yet (994) or its 18 day MVA (994.83). There is also the longer term down trendline from September 2000/May 2001 at 993. If it clears that ice it has some clearer sailing to 1025, maybe 1035.
Stats: +35.03 points (+3.67%) to close at 989.03
NYSE Volume: 710.685M (-53.73%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
THIS WEEK
Earnings season kicks off this week, and the uncertainty that brings is causing a tremor in the existing trend; could earnings be better and set off a rally? After the Cisco 'home run' quarter that was not sparked a rally, shorts are not taking chances after some good gains. Better to let things set up once again for more downside than push an extended downside run.
As things stand now, with sentiment indicators never hitting extreme levels on this last run down that typically accompany bottoms, the likelihood of this being a successful bottom for a new bull run are not great. It can be done, but the move is suspect. In any event, there needs to be a follow through session this week sometime between Tuesday and Friday. You want to see another big move of 2% or more on some very strong volume.
Bear in mind, however, that is what happened in May and the market still ran out of gas at the 50 day MVA. There were just no strong large cap patterns to carry it higher and the small and mid-caps had topped out on that part of their run. This time the small and mid-caps have consolidated, so there is a better base for them to lead if a follow through occurs. For the large indexes, however, it is still rough going as they have been in distributive patterns; there is still a lot of healing to do that a sharp rally higher won't cure.
While the market could always reverse Monday and plow lower (during the bear market post-holiday sessions have a habit of being less than kind), this move has a bit more history behind it after the heavy selling. It is ready for a higher test toward the 50 day MVA, particularly with the first round of earnings coming in. Shorts are ready to cover some more and investors are, believe it or not, looking for something Cisco-like to latch onto for some more buying to let out some pent up demand. That could propel the indexes higher from here until the usual 'so why are we rallying on this news?' mindset returns after a week or so of earnings reports.
What we are going to do is let it rally higher. We are looking for some more downside positions to set up over the next few sessions as we also look at some upside action on what are continuing improving patterns in the small and mid cap sectors. They have corrected back in the recent selling as all of the market came under fire, and if they finish forming up their patterns, they will be in great position to resume their advance regardless of what the large caps do. We are also monitoring some existing plays that are more or less dead wood; either they have not moved but are holding on, or have fallen too much for our liking and are rallying back up to test resistance. When they show signs of wearing thin on the move we will look at closing those out at optimal levels.
Support and Resistance
Nasdaq: Closed at 1448.36
Resistance: The 18 day MVA (1464.38). After that is 1500 and the May low (1560.29). The second March down trendline is at1540. The 50 day MVA (1565.96) is where we would expect this rally to end if not sooner.
March down trendline at 1385, right at the September low at 1387. The long term up trendline from 1991 at 1406. The September interim test at 1418, followed by the 10 day MVA (1429.12)
Support: The September interim test at 1418. The long term up trendline from 1991 (1407). The March down trendline at 1382, just below the September low at 1387. The March downtrend bottom channel line at 1325. 1357.09 is the October 1998 bear market low. After that is roughly 1250.
S&P 500: Closed at 989.03
Resistance: The March down trendline at 994 and the September 2000/May 2001 down trendline at 993. The 18 day MVA follows (994.83). The second March down trendline at 1031 and the 50 day MVA (1036.22) is where this move may falter. Then the May low at 1048.96. 1060 offers minor resistance from previous prices. Then the February lows at 1074.
Support: The bottom channel of the March down trendline (962). The September intraday low is 944.75. 923.32 is the October 1998 bear market low. 900 is after that.
Dow: Closed at 9379.50
Resistance: 9500 is some resistance. After that is the 50 day MVA (9661.26), a very likely resistance point. Then a jump to 9750 and the April and May lows at 9800 to 9811, followed by the 200 day MVA (9813.59).
Support: The March down trendline at 9280, and then 9250 represents some prior price support. 9000 is the November low off of the first rally from the September low. The bottom channel of the March downtrend at 8935. There is a rest stop at 8500. The September closing low is 8235.81 and the intraday low is 8062.
Economic Calendar
7-08-02
Consumer credit, May (2:00): $6.08B expected, $8.8B prior.
7-10-02
Export prices, June (8:30): No consensus estimate yet.
Import prices, June (8:30): No consensus estimate yet
Wholesale inventories, May (10:00): -0.4% expected, -0.7% prior.
7-11-02
PPI, June (8:30): 0.0% expected, -0.4% prior.
Core PPI (8:30): 0.1% expected, 0.0% prior.
Initial jobless claims (8:30): 382K prior.
7-12-02
Retail sales, June (8:30): 0.6% expected, -0.9% prior.
Retail ex autos, (8:30): 0.4% expected, -0.4% prior.
Michigan sentiment, preliminary July (9:45): 93.3 expected, 92.4 prior.
THE PLAYS:
We anticipate that attempted move up. Just as well, many of the puts are extended though there are a few that are still in position to move lower. We are thus looking at some of the upside that held up well in the recent selling as these stronger stocks weathered the selling storm and tend to display good moves when the bounces come. That is how they give us returns; they hold up when the market sells, then they rally to new gains when the market rallies.
Good movers: Stocks were running up Friday. BBBY; NYT; KSWS; WEN
BONUS PLAYS:
Upside
METHA (Methode Electronics--$11.70; +0.14; optionable): Diversified Electronics
http://biz.yahoo.com/p/m/metha.html
STATUS: Cup w/handle, 13 weeks. A solid sector, and METHA appears to be readying for a breakout as well as it pulls back in the handle of its base on very low volume. Friday it showed a tight doji right at the 10 day MVA, an indication that the pullback may be over. Accumulation in the base is 3 weeks to no distribution weeks; very solid.
Volume: 66.6K Avg Volume: 240.818K
BUY POINT: $12.96 Volume=360K Target=$15.55 Stop=$11.95
POSITION: QME JB - Oct. $10 call (75 delta) and/or stock
http://www.investmenthouse.com/cs/metha.html
OVRL (Overland Storage--$16.14; +0.55; optionable): Computer data storage
http://biz.yahoo.com/p/o/ovrl.html
STATUS: Cup w/handle. OVRL is one of those smaller tech stocks that has been quietly outperforming the technology and the market as it works through a 5-month cup with handle base. Accumulation in the base is excellent with 8 weeks of price gains on rising volume versus just 3 weeks of price losses on rising volume. That shows very solid net accumulation of the stock. It looks very strong despite a rather wild session Wednesday when it tested down to the 50 day on the open and rebounded smartly. The news was a shortfall in Q4 revenues, but it also announced a new major system customer. The market apparently liked what it saw on sum, and the market has the final say on all such things. We will look for a strong breakout on strong volume to take positions.
Volume: 83.2K Avg Volume: 163.409K
BUY POINT: $16.85 Volume=270K Target=$20.45 Stop=$14.45
POSITION: QOJ KV - Nov. $12.50 call (78 delta) and/or stock
http://www.investmenthouse.com/cs/ovrl.html
Downside: While the market rallies up we will see some beaten up stocks rally back as well. We have our eyes on a few and will look for a move up to resistance levels and then a reversal in the general market and the stocks to enter positions.
ACDO (Accredo Health--$43.72; +1.97; optionable):
http://biz.yahoo.com/p/a/acdo.html
STATUS: Put. ACDO is in the health services sector and is suffering along with them. It broke below the 200 day MVA (47) a week back and fell hard to 40. It bounced Wednesday and Friday on lower volume. It looks as if it is going to give a weaker bounce up to the 200 day MVA and then run out of steam; or it is going to rally up and form a base if the health services sector recovers. We are going to watch for the stock to break down or run out of gas at the 200 day MVA and then make another play to the downside if it does.
Volume: 206K Avg Volume: 797K
BUY POINT: After a test of the 10 day MVA (45.41), $44.50 on the move back down. If it makes it to 47, then a move through 45.95 on the way back down. Volume=800K Target=$40.15 Stop=$47.50
POSITION: DZU TJ - Aug. $50 put (-70 delta)
http://www.investmenthouse.com/cs/acdo.html
ESRX (Express Scripts--$48.72; +1.56; optionable): Mail order prescriptions
http://biz.yahoo.com/p/e/esrx.html
STATUS: Put. Crashed through the 200 day MVA (50) Monday and rebounded late in the week on lighter and lighter volume. We anticipate that it will continue to climb toward the 200 day MVA this week where there is a range of congested prices at 50 to 52.50. A lot of resistance that will push it back unless the market is turning a new leaf to the upside.
Volume: 474K Avg Volume: 2.15M
BUY POINT: After a rally up to 50, $49.45. Volume=2.7M Target=$44.85 Stop=$51.50
POSITION: XTQ TK - Aug. $55 put (-68 delta)
http://www.investmenthouse.com/cs/esrx.html
ROOM (Hotel Reservations--$44.4; +2.22; optionable): Hotel reservations on the net
http://biz.yahoo.com/p/r/room.html
STATUS: Another put. Familiar pattern. ROOM is rallying toward the 200 day MVA (45.75; a familiar affliction after the selling in the market) after breaking down below this key level (previous prices at this level as well) in the last 2 weeks of June. It has held at 40 twice and is making a more serious run now, crossing the 18 day MVA Friday. Volume has been weaker on the rise so we anticipate the 200 day MVA to hold for a turn back down. At that point we move in to take some positions as there is plenty of room to the downside that it can cover in a hurry.
Volume: 165.2K Avg Volume: 942.545K
BUY POINT: After a test of 46, a move back down through $44.35. Volume=950K Target=$38.85 Stop=$46.25
POSITION: URD TJ - Aug. $50 put (-70 delta)
http://www.investmenthouse.com/cs/room.html
Revisited:
CLDN (Celadon Group--$13.00; +0.50; no options): Air freight
http://biz.yahoo.com/p/c/cldn.html
STATUS: Testing the breakout. CLDN hit the buy point on Friday but volume was a bit light on the session and we were a bit reluctant to take new positions upside until we see some more action this week. Volume was stronger than Wednesday, however, a good sign that the move could continue this week. We will look for new positions on a further move up on stronger volume.
Volume: 69.9K Avg Volume: 98.772K
BUY POINT: $13.25 (original $12.93). Volume=100K Target=$15.15 Stop=$11.50
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/cldn.html
PRE-ANNOUNCEMENT
BBBY (Bed, Bath & Beyond--$37.7; +1.38; optionable): Forecast to announce a split on 7-11-02 in conjunction with a board meeting.
http://biz.yahoo.com/p/b/bbby.html
BACKGROUND: Last announced a 2 for 1 split on 7-13-00 in conjunction with a board meeting. The stock price was $39. Additional shares were authorized at the annual shareholder meeting on 6-28-01. The company thus has sufficient shares for a 2 for 1 split.
STATUS: BBBY did not waste too much time in reloading for another move higher, rebounding immediately Wednesday and then again on Friday. The point moves were outstanding though the volume was on lighter and lighter below average volume. Given the holiday, that is not all bad. We already have some positions and are looking for more on a strong breakout to a new high.
Volume: 1.555M Avg Volume: 3.301M
BUY POINT: $37.85 Volume=4.8M Target=$45.45 Stop=$35.25
POSITION: BHQ KG - Nov. 35 call (70 delta) or BHQ KZ - Nov. 32.50 call (80 delta) and/or Stock
http://www.investmenthouse.com/cs/bbby.html
CHBS (Christopher Banks--$41.19; +1.17; optionable): Forecast to announce a split on 7-17-02 in conjunction with a board meeting or on 7-31-02 in conjunction with its annual shareholder meeting. The company will not confirm the board meeting date, but based upon our research this is the date for the meeting.
http://biz.yahoo.com/p/c/chbs.html
BACKGROUND: Last announced a 3 for 2 split on 11-14-01 in conjunction with a board meeting. The stock price was $38.76. The annual shareholder meeting is scheduled for 3:00 CT on 7-31-02 at which time no additional shares were authorized. The company has sufficient shares for a 3 for 2 split.
STATUS: Ascending wedge. Nice recovery from within the wedge, testing below the 50 day MVA Wednesday and rebounding on the close on rising volume; that indicates that there were buyers coming in to support the stock at that level. Friday it continued the move up on of course lower volume. Still within the wedge, and we are looking for a breakout (that will take it to a new high) this week on a continued market recovery. Want to see the good volume on the move to show there are big buyers out there. Again, accumulation is good in the wedge at 3 accumulation weeks to 1 distribution week.
Volume: 288.4K Avg Volume: 411.59K
BUY POINT: $43.58 Volume=606K Target=$52.35 Stop=$39.50
POSITION: URH IG - Sept. $35c (81 delta) and/or stock
http://www.investmenthouse.com/cs/chbs.html
End Part 2 of 3
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us stock market
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