|
|
us stock market, trade stock
* * * *
7/18/02 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: MAR
Buy alerts issued: AVY; HNR
Trailing stops issued: QCOM
Stop alerts issued: IVGN; ANFI; INTU
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:
- Slow motion rollover.
- Earnings in full swing. More bunts than home runs.
- Same old story with jobless claims while leading indicators flatten out.
- Techs closed well despite the Nasdaq point loss, but earnings are a drag.
Moral victories? Who needs them?
Wednesday may have been a moral victory in that the market did not totally roll over and collapse, but moral victories don't put money in the pocket. After struggling to log a gain through the lunch hour, the indexes gave up. It was not a crash, it was not a dramatic drop. It was a slow erosion to session lows at the close.
Volume was light, very light. The rumor we heard from some floor trading friends and traders at big brokerages said that there was a move to short the market prior Friday's expiration and S&P reshuffling. Others were saying the shorts were moving in because they believed some mutual fund redemptions were going to hit the market, particularly the index funds. When index funds are hit with redemptions they have no choice but to start selling the stocks in the index. They have to sell them in proportion as well; they cannot sell a dog and keep a good one because then the fund would not reflect the index. That is the secret dread of fund managers; it would really pressure the stocks in the big indexes as well as the smaller indexes. We know that funds make up 70% of the volume; if they have to dump shares to meet redemptions, the indexes ain't seen nothing yet as far as downside.
That was not happening today with the light volume selling. Indeed, on the close many big techs were holding up well. It was the after hours action that had techs under pressure with MSFT reporting so-so earnings. After some initial selling, however, the techs stabilized with some moving higher. Indeed, on some downside plays we waited until that last half hour to decide if we wanted to get in. Volumes were not heavy, but we know that these selling bouts often start on lower volume. We took some positions but did not go wild to the downside.
Earnings decent, but even with low comparison hurdles, they basically stink.
Companies are not vaulting over the lower earnings hurdles set in 2001. They are edging past them. Maybe more conservative accounting is part of the issue, but they are nowhere near where analysts had previously pegged them 6 to 9 months ago when it was thought the earnings recovery would be well underway. Earnings are indeed better, but not that much. On top of that, investors are not very confident that they are all that accurate. What is beating the street by a penny when there is a lingering doubt that perhaps a billion or two in losses are not accounted for?
There is usually a bump up in anticipation of earnings. If this is the bump (more like not falling hard), then we don't want to see the selling.
THE ECONOMY
Jobless claims lower but higher last week.
Once again the jobless claims were lower, but the size of the drop was helped by the size of the revision higher. 379K actual was down from 407K prior, bumped up from 403K. Now this number may be low enough to take it out of the margin of error, and it may mean that the bump higher the last couple of weeks was for the auto retooling operations as discussed at that time. The 4-week average fell to 391K from 395,750. Continuing claims bumped higher to 3.591 million from 3.59 million. In short, there is not a lot of job creation yet though job reduction is slowing.
Leading indicators flat while Philly Fed falls flat.
The 6-month indicators showed no gain, ending a string of gains. The momentum is still to the upside, but it is still slow going for the economy. The Philly Fed plunged from 22.2 in June to 6.6 in July. A very sharp decline in manufacturing sentiment (not necessarily activity), but that followed that big spike in June. It is still positive, and that shows positive sentiment, but it also shows that the manufacturing businesses in parts of the country are still not ready to go all out. That leaves a recipe for continued steady but weak gains.
THE MARKET
It was a slow meltdown, nothing climactic. At least not the textbook definition. Usually you look for a big sell off on volume. At least that is what you hear on television. Today was interesting. Not a strong sell off as there was no big volume. The Nasdaq is still above its recent lows, the Dow held onto its recent lows. The S&P 500, well, it closed at a new low for the year as did the small cap index. Bread was very negative but there was not harsh selling. It was slow motion action, and sometimes bottoms, whether near term or longer term are made on sloe action that just bleeds downward.
Now that is a grand statement, and today certainly did not show any manifestation of a bottom as far as the actual trade. Indeed, it looked like more of the same story: a try higher that rolled over. Still the planets align a little more and the Nasdaq continues to try to hold the recent lateral move despite Thursday's selling. We continue to play the trend, but we are watching the big techs and Nasdaq closely.
Sentiment Indicators
The volatility indexes, despite what the television voices say, are not at reversal levels. They were excited when the VIX moved over 30. No rally. They were excited when the VIX moved over 40. No rally. Why? Because they had really not hit that historical level that coincides with real fear and real bottoms. Short term rallies? Sure. Longer term? Not yet.
Bulls versus bears: An important milestone was met with bears versus bulls. This week they actually crossed over each other with bears right at 40% (39.6%) and bulls at 35.4%. That is the minimal signal. Historically, bulls at 35% and bears at 50% is really a good signal. Some further selling could get them there in a hurry given the negative sentiment overall.
VIX: 39.95; +0.15. Hovering in the high thirties, hitting 41.33 on the high. The slow, lazy action kept it from rising.
VXN: 63.61; +0.38. 65.38 on the high. A good spurt would most likely do it, but the Nasdaq is showing more strength now and many not get that selling here that drives the reading to 80 or better.
Put/Call Ratio (CBOE): 0.93; +0.11. A decent move but still not showing the high closes over 1.0 you would expect with continued selling.
Nasdaq
Stats: -40.30 points (-2.88%) to close at 1356.95
Volume: 1.838B (-21.11%). Volume backed off on the selling. Not a distribution day, i.e., not a day where the bigger institutions were dumping their shares.
Up Volume: 276M (-1.247B)
Down Volume: 1.548B (+757M)
A/D and Hi/Lo: Decliners led 2.29 to 1. It was a broad decline. The overall Nasdaq was down more than the Nasdaq 100 as the big name techs were attempting to hold the line a bit. Once again they were showing some relative strength.
Previous Session: Advancers led 1.28 to 1
The Chart: http://www.investmenthouse.com/cd/$compq.html
Wednesday's turn from the 18 day MVA continued Thursday, but the selling was on lighter volume. As noted Wednesday, the doji at the 18 day MVA indicated that the index may head down once again before making another attempt at the 18 day MVA. Now maybe it will just continue lower, continuing the usual pattern of a test and then accelerating drop. It did make a lower low again though it did not undercut the recent lows at 1346 (closing) and intraday lows near 1323. The action in many of the big techs shows some underlying strength. Maybe this is a false move or attempted move, but as we said, it is keeping us looking at the Nasdaq hard not only from an upside potential, but also for its effects on any downside plays.
Dow/NYSE
Tried to move up but failed, making a new closing low for the year. Volume was way down, but it was still average.
Stats: -132.99 points (-1.56%) to close at 8409.49
Volume: 1.724B (-10.86%)
Up Volume: 339M (-647M)
Down Volume: 1.376B (+454M)
A/D and Hi/Lo: Decliners led 2.12 to 1. It was an ugly day for the broader NYSE. The small caps sold as hard as the large caps.
Previous Session: Advancers led 1.3 to 1
New Highs: 29 (+10)
New Lows: 202 (+68)
The Chart: http://www.investmenthouse.com/cd/$indu.html
The Wednesday doji did not give rise to a bounce, at least not one that had any staying power. The Dow made a new 2002 closing low though it still is trading around the 8400 to 8500 level that provides a modicum of support. There was not a lot of heavy dumping compared to past sessions, but the selling was broad across the NYSE. The Dow remains in a very steep downtrend below the 10 day MVA (8728.79), and despite Wednesday's candlestick pattern and Thursday's low volume, it is once again backsliding, unable to retain any upward momentum. As noted above, it sure does not look like there is any upside action to come based on the day's trading as the Dow stays within its sharp downtrend.
S&P 500:
The S&P 500 basically gave up on the session, easily closing at a 2002 low and coming close to undercutting the recent intraday low at 876.26. July has been brutal for large caps; other than Wednesday's approach to the 10 day MVA (922.52) the index has been hammered lower. The one good sign was the volume, but rollovers in this downtrend often start on lower volume. The difference here is that the S&P is already well below even the short term moving averages, hardly coming up for air. Unlike the Nasdaq, it is showing no signs of trying to build a bottom; a good slide here lower would generate more negative sentiment that is ultimately needed. That said, if the Nasdaq can hold the recent lows and turn up and challenge the 18 day MVA again from here, the S&P slide will be stemmed somewhat as it follows the Nasdaq higher on that test.
Stats: -24.48 points (-2.7%) to close at 881.56
NYSE Volume: 1.724B (-10.86%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
FRIDAY
The trade balance and the CPI are out tomorrow. CNBC had a segment on whether costs are really holding the line. As we discussed a few weeks back, the government figures don't measure everything that is near and dear to our checkbooks. That said, it does measure the same things again and again, and as such it does provide a baseline for what the economy is doing now versus say five years back. In that sense we can at least tell if these same prices are higher or lower. We agree it is not perfect, but unless the numbers are counted differently (we all know numbers can be manipulated) they provide an accurate comparison and in that respect provide a common reference.
Will they impact the market? No. The market knows what the score is with the economy: slow growth that is not going to lead to any rapid upswing, major hiring, or corporate buying in the near term. It is very much like the character in the new series 'Monk': it has 'issues' it must work on. As always, the primary issue is are stocks worth the prices they are at right now? With earnings coming in at way less than spectacular levels (crappy plus a penny in many cases), the answer has been 'no,' and stocks sell further. That just is not over with yet.
We are still keeping a close eye on Nasdaq as even in bear markets, secular or otherwise, you get rallies. Nasdaq is still trying to set up for a move higher. Friday is option expiration, and that will distort trade a bit, but it will be an important setup for Monday as we see how stocks react to the MSFT, SUNW, QLGC, and plethora of other earnings reports. Initially after hours there were some hits to MSFT, BRCM and some others, but they moved higher late. SUNW did not have such fortune, but QLGC was up sharply along with others.
As Friday could be more of a 'set up' day for next week, we may not get involved in a lot of new positions. Primarily, as we have seen, what happens early does not tell us as much about the market as what happens later. Several techs were up after hours, but the futures were down. As we see again and again, gains are illusive; what the Nasdaq needs is a breakout over the 18 day MVA, but it has to set up once again to do that. Friday it could continue lower, test the recent lows, and then try to establish another run at the 18 day MVA. That is not the best action it could have put together for an upside move; a higher low would have built for a better upside attempt. If it holds the lows and bounces now, it will have a much harder time breaking the 18 day MVA.
We again have plays that look up and some that look down. This is not as clear a transition as in the past because the Nasdaq is trying to put something to the upside together and the other indexes are already oversold. No point in getting into a rush to jump into positions, but if we see a play or two develop as we did today, we will take advantage of it.
Support and Resistance
Nasdaq: Closed at 1356.95
Resistance: The 10 day MVA (1394.93) and the 18 day MVA (1408.56). Then 1418, the interim test after the September low. After that is 1500 and the second March down trendline at 1499. That is followed by the 50 day MVA (1508.72).
Support: 1357.09 is the October 1998 bear market. The March down trendline (1338). 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 1295. After that is roughly 1250.
S&P 500: Closed at 881.56
Resistance: Some at 900. The lowest bottom channel line of the March downtrend (918). Then the 10 day MVA (922.52) followed by the predominant bottom channel line at 943. The 18 day MVA (944.99) and the May down trendline (955). After that 975 is the March down trendline. The 50 day MVA at 1001.18 and the second March down trendline (1016).
Support: The 855 the October 1987 low and 817 the February 1987 high.
Dow: Closed at 8409.49
Resistance: The 10 day MVA at 8728.79. The bottom of the channel of the March downtrend at 8795. The 18 day MVA at 8924.26 followed by 9000. The March down trendline at 9190. Then price resistance at 9250. Then the 50 day MVA (9377.31) and 9500.
Support: The rest stop at 8500 is roughly holding; roughly. The September closing low is 8235.81 and the intraday low is 8062. The October 1998 lows are at 7400 and 7467.
Economic Calendar
7-15-02
Business inventories, May (8:30): -0.2% actual versus 0.0% expected, -0.2% prior.
7-16-02
Greenspan speaks to Senate: Economy okay, can't legislate morality.
Industrial production, June (9:15): +0.8% actual versus 0.4% expected, 0.2% prior.
Capacity utilization, June (9:15): 76.1% actual versus 75.8% expected, 75.5% prior.
7-17-02
Greenspan speaks to House
Building permits, June (8:30): 1.67M actula, 1.680M expected, 1.735M prior (revised from 1.676M).
Housting starts, June (8:30): 1.70M actual versus 1.655M, expected, 1.676 prior.
7-18-02
Initial claims (8:30): 379K actual versus 395K expected, 407K (from 403K).
Leading economic indicators, June (10:00): 0.0% actual versus 0.0% expected, 0.4% prior.
Philadelphia Fed, July (12:00): 6.6 actual versus 18.0 expected, 22.2 prior.
7-19-02
Trade balance, May (8:30): -$35.3B expected, -$35.9B prior.
CPI, June (8:30): 0.1% expected, 0.0% prior.
Core CPI: 0.2% expected, 0.2% prior.
Treasury budget, June (2:00): $25.0B expected, $31.9B prior.
SEMINARS NOW ON CD!!
To learn more about options so you can take advantage of up and down markets, check out the Options You Can Use seminar now on CD's! Also be sure to look at the Technical Analysis series on CD as well as the stock splits and covered call series. Go to
http://www.stockseminarsonline.com
and look for the link to the CD seminars. This is Jon Johnson's internet site for online seminars and the theories taught are the same that have delivered dozens and dozens of fantastic downside put plays during this downtrend. Hope you check it out.
End Part 1 of 3
|
us stock market
trade stock
|
