|
|
us stock market, trade stock
* * * *
7/11/02 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: Another downside bonanza: ACDO; BGEN; NCR; MHP; ESRX
AXP; HLT; BGG; CPRT; CYMI; JPM; RYL. Upside: WHI pre/post split play.
Buy alerts issued: FO
Trailing stops issued: RF
Stop alerts issued: None issued
You can sign up for Stock Split Report alerts 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:
- Fear ratchets up a bit more but the bounce up starts before it can reach critical mass.
- Typical downtrend action: undercut to new lows and then rally to near resistance.
- Jobless claims continue to stumble along, prices still low overall, and discounters keep raking in the money.
- Very intense selling indicates somewhat of a season change.
- Subscriber Questions: how to take advantage of the selling.
Volatility was running, but then something familiar happened.
The VIX hit 41.64 on the high and the selling was intense. Stocks were really getting hammered. That was the first 15 minutes. Then the indexes bounced and took the heat off. Yes they sold back one more time, but the bottom on the move was set. The Nasdaq bounced up off of the session low and it led the Dow and S&P 500 back up.
The action once again let the market off the hook as the climbing negative sentiment found a relief valve. The levels are still strong, just not reaching critical that signals a firm set of the bottom. The bounce was too soon from historical levels, and if this rally to the upside continues up to near term resistance or a bit beyond as we think it will, the market will have to gear back up for more downside to take the indexes again a bit lower and fear a bit higher before any real bottom can be talked about.
The downtrend action continues: undercut then rally.
Oh yes, there was the usual talk about program buying and a 'Barton Bigg's rally' as CNBC called it (Biggs said the time was here or near and that tech, telecom, financials and others would lead higher), implying real buying was occurring.
Sure there was some of that, but look at the stats: they are so familiar. First, the indexes had tested near resistance and started yet another selling binge in the downtrend. This one was even more intense than the past reversals at resistance. After undercutting the previous lows (the Dow and S&P 500 did so Wednesday, but the Nasdaq did not until today) intraday, a rally started that carried the indexes well off of their lows and even to the positive side. Third, volume was massive. The Nasdaq AND the NYSE topped 2 billion shares with relative ease. Fourth, large caps did the reversing; as noted, the Nasdaq and S&P 500 turned positive. The small cap S&P 600, however, closed down 1.1%, not far from its session lows.
Sum it all up and you have blistering selling that reversed where they always reverse in this downtrend. On top of that the large caps were leading the rally, the usual suspects that are sold short and then covered up after 3 or 4 days of serious selling. Once again there was a short covering rally that mirrors all of the short covering rallies we have had in this downtrend. As we have said before, these are not bad things as most rallies of any sort start with short covering. It is just nothing new, nothing that changes the trend. There are some new attributes as we will discuss below, but nothing that has changed the bigger picture just yet.
THE ECONOMY
Jobless claims back over 400K.
403,000 actual when 390,000 were expected. That was up 16,000, but again, the prior week was revised higher to 387,000 from 382,000 reported the prior week. Adjusting for jobless rate 'deflation,' that means jobless claims rose by 21,000, not just 16,000. Most of the gain, however, is attributable to auto plants shutting down to retool for the new model year. Those workers apply for unemployment benefits instead of using up vacation time. The 4-week average was 395,000 up from 393,000 a level that was also revised higher. Continuing claims actually 'fell' to 3.64 million from a revised 3.67 million. Again, the moving bottom line is very distracting and misleading. The trend is still sloping lower right now, just not a whole lot. It is still in the peaking process, just on the verge of starting significantly lower. It takes a while for the jobs picture to change in coming out of recession, particularly one that has been led by such a business demand slowdown.
Producer Price Index up a tenth more than expected.
+0.1% in June, up from -0.4% in May. The core rate (without food and energy, you know, those things none of us need), the PPI was up 0.2%. Both were 0.1% more than expected, but both showed no appreciable change in producer prices, certainly not enough to think about inflation. Are these government numbers accurate? Sure prices are rising in some areas. They are also falling in other areas still (ask the PC makers and semiconductor makers). On a whole the rise is mild, particularly when energy prices fall as they have recently.
Same store sales remain mixed, i.e., the discounters and specialty shops reap the sales.
WMT reported a big gain in sales as Sears, Federated and other similar retailers reported down sales. On the whole retail sales rose 5.1% (WMT up 7.9%) in June with discounters continuing, as they have for over a year, to take home the lion's share of the sales. TGT (+4%); COST (+6%); TJX (+3%), and KSS was up a monstrous 14.8%. Discounters are huge business in the U.S. now as buying norms have shifted to getting quality goods at the lowest prices. KSS is efficient and they have the products at the prices consumers want. That old 'sell yellow dresses if the public wants yellow dresses' theory put into play. The rumors of strong June sales were not rumors, or at least they were accurate rumors. The consumer is still buying, taking advantage of summer sales. When GM starts its 0% financing again, expect vehicle sales to move up again.
THE MARKET
The market performed on cue again, selling down early and then rallying back with another great 'comeback' rally from those fresh lows for the year. We now look for the upside momentum to carry back up to the near term resistance as the first test. From there we expect it to move higher after so much selling, but we expected that last time as well. We still played the breakdown stocks anyway, however, as the market had now shown a change in its pattern. Today that paid off big time with another bumper crop of puts slamming into downside targets.
Sentiment Indicators
VIX: 38.64; -0.38. Hit 41.64 on the high during the second dip of the session when the S&P undercut its prior session lows. Close but not there. Don't be fooled by reports on the financial stations that over 40 is sufficient. It may bounce the market, but it has not indicated a bottom.
VXN: 68.99; +3.77. Peaked at 70.83. Now this one is getting there, but it still has to travel up into the eighties intraday to provide a good signal.
Put/Call Ratio (CBOE): 0.89; +0.26. Back up but could not close over 1.0 again on the selling as the market reversed. It has already shown several moves over 1.0 in the last two months however.
Nasdaq
Techs led the move back today as the Dow and S&P 500 continued to move lower after Wednesday's 2002 lows, but it was not until the Nasdaq undercut and reversed did the others stem the tide. Again, there are some tech patterns that are holding up though they are hold up at the bottom of their bases. But, that is where stocks have to start up from anyway.
Stats: +28.42 points (+2.11%) to close at 1374.43. A 50-point round trip on the session to turn positive.
Volume: 2.282B (+23.8%). Volume jumped sharply, the highest since the start of the month. Technically accumulation, but all market circumstances say it was more massive short covering after some heavy selling.
Up Volume: 1.555B (+1.126B)
Down Volume: 707M (-687M)
A/D and Hi/Lo: Decliners led 1.37 to 1
Previous Session: Decliners led 2.11 to 1
New Highs: 15 (-16)
New Lows: 266 (+39)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Surged over the March down trendline, but it has a load of near term resistance to tackle. The May down trendline is next at 1385 (near the September 2001 low at 1387) and the 10 day MVA at 1400.20. After that is 1418, the interim test after the September low, and then the 18 day MVA (1432.32). That is a boat load of resistance, but this last sell down from the down trendline marks trip number 5. It is really hard to squeeze more out of a trend than that. The 18 day MVA is the key point to watch, but we won't be surprised if it moves up to 1500 on the next rally.
Dow/NYSE
Big sell off and the a reversal on high volume that shows a hammer doji. Bounce ahead.
Stats: -11.97 points (-0.14%) to close at 8801.53. 200-point round trip to close a hair lower.
Volume: 2.106B (+18.66%). NYSE volume exploded, running neck and neck with the Nasdaq again as the NYSE stocks work on selling out as much as the Nasdaq has.
Up Volume: 1.133B (+900M)
Down Volume: 961M (-594M)
A/D and Hi/Lo: Decliners led 1.52 to 1
Previous Session: Decliners led 3.04 to 1
New Highs: 39 (-8)
New Lows: 326 (+113)
The Chart: http://www.investmenthouse.com/cd/$indu.html
Big sell off to fresh lows for the year and a tight hammer doji at the bottom of the downtrend channel are classic signs of a bounce coming after some intense selling that carried the Dow down 805 points in 4 sessions. It started today off the lows and now has to deal with 9000 and the 10 day MVA at 9081.77. Those are the warm ups. Then the 18 day MVA (9213.45) and the March down trendline at 9244 make it interesting, and they are right at some price resistance at 9250 as well; thicker ice. Anything above that will be a surprise, but if it does, 9500 and the 50 day MVA (9561.71) are the likely resistance points.
S&P 500:
The same action as on the Dow with the fresh 2002 lows and then a reversal, but the S&P managed to turn positive on that big NYSE volume. It is begging for a rally up to the near resistance levels, but after the prolonged selling it can rally farther. It is still below the lowest bottom channel line of the March downtrend (928) and the predominant bottom channel line at 954 and the 10 day MVA (958.19). The May down trendline and the 18 day MVA are together at 958.19. That will be the critical test to see if the downtrend holds at current levels. After that 987 is the March down trendline. That move will be a lot of work for the index, but after such selling the large caps could rally to the 50 day MVA at 1022.51 where the second March down trendline resides.
Stats: +6.91 points (+0.75%) to close at 927.37
NYSE Volume: 2.106B (+18.66%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
FRIDAY
The trend continued its pattern with the move to fresh 2002 lows (the Nasdaq did not make it until today) and then a high volume intraday reversal led by the large caps. The intense selling was not intense enough to be called a bottom, so we look for more of the same pattern, but with a twist.
After the last round of selling we noted that the Nasdaq had already sold off four times down on this particular trend. This last round and bounce makes it 5 times. That is really long in the tooth on runs down a particular downtrend. We often won't play a fifth run, but the selling has been so intense we continued to cherry pick some puts and the results were good as we hit numerous targets.
Other than the number of trips down the trendline we note that the selling Thursday and the entire move down this trip was intense. The Dow sold over 800 points top to bottom in just four sessions. The S&P 500 led to the downside Tuesday and Wednesday. NYSE volume almost eclipsed Nasdaq volume earlier in the week. Volatility, while not reaching critical mass levels that indicate major bottoms, was sharply higher and held high levels. The storm to the downside was much stronger this last move down.
That is a theme that we always watch, and we call it the change of seasons. We all know that when winter gives way to spring there are strong spring storms. The weather can be beautiful and then a late winter storm blasts through. We all know the March wind indicates a season change. In the fall cold fronts blow through, changing the weather in hours. Markets are dynamic; their moves mimic movements in nature. When volatility ratchets higher, when trade gets wilder, that is an indication that change is coming. Look at March 2000; wild swings from positive to negative on massive volume both ways. This was a major change from the steady rallying higher from October where the Nasdaq rose over 50%. The severity determines the extent of change. This recent storm was strong, but it was not a hurricane. Thus we can get a move into some calmer weather at higher prices, but it probably won't last.
Thursday we anticipate upside momentum again. JNPR beat the street and some others reported decent results (pro forma; who knows what they mean) and the stocks were rallying. This is one of the times the battered techs can give us some fast returns. We have noted some of the stocks bucking the trend, trying to form up some quasi bullish patterns as the Dow and S&P 500 sold off. Now they can move up some for us. We are not going to delude ourselves and say they are long term buys; indeed we would look for just a few dollars here and there. At some of the depressed prices, however, a few dollars can be a good percentage gain. Go in with the eyes open and knowing resistance levels on each one so that you can pocket the gain once resistance is hit and the stock falters.
Support and Resistance
Nasdaq: Closed at 1374.43
Resistance: The May down trendline is next at 1385 (near the September 2001 low at 1387) and the 10 day MVA at 1400.20. After that is 1418, the interim test after the September low, and then the 18 day MVA (1432.32). Then 1500 and the May low (1560.29). The second March down trendline is at 1523. The 50 day MVA (1537.90).
Support: The March down trendline (1365). The July intraday lows may have some stability (1336) for a bounce back up in the downtrend. Then the March down trendline bottom channel line at 1311. 1357.09 is the October 1998 bear market low just for reference. After that is roughly 1250.
S&P 500: Closed at 927.37
Resistance: The lowest bottom channel line of the March downtrend (928) still is ahead of the index, but should not stop the upside move. Then the predominant bottom channel line at 954 and the 10 day MVA (958.19). The May down trendline and the 18 day MVA are together at 958.19. After that 987 is the March down trendline. The 50 day MVA at 1022.51 where the second March down trendline resides. Then the May low at 1048.96. 1060 offers minor resistance from previous prices. Then the February lows at 1074.
Support: The October 1998 bear market low at 923.32. 900 is after that.
Dow: Closed at 8801.53
Resistance: The bottom of the channel of the March downtrend at 8900. Then 9000 and the 10 day MVA at 9081.77. The 18 day MVA (9213.45) and the March down trendline at 9244 are right at some price resistance at 9250 as well. Then 9500 and the 50 day MVA (9561.71).
Support: 8750 is an intraday test level heading into and coming off of the September 2001 low and held on Thursday's close. 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
Wholesale inventories, May (10:00): +0.1% actual versus -0.4% expected, -0.9% prior (revised from -0.7%.
7-11-02
PPI, June (8:30): 0.1% actual versus 0.0% expected and -0.4% prior.
Core PPI (8:30): 0.2% actual versus 0.1% expected and 0.0% prior.
Initial jobless claims (8:30): 403K actual versus 390K expected and 387K prior (revised from 382K).
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 1 of 3
|
us stock market
trade stock
|
