|
|
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.
End Part 2 of 3
|
|
