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stock share, stock market today
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8/07/02 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS
Target hit alerts issued Wednesday: None issued
Buy alerts issued: QQQ; OEX
Trailing stop alerts: None issued
Stop alerts: None issued
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SUMMARY:
- Late rally salvages session, but right back at resistance.
- Lack of solid push in technology despite 'CSCO rally.'
- Overall market action is working on a bottom, but not there yet.
- Team Trades
Market rallies late versus selling late.
A big gap on the Cisco earnings was expected, and then the market ran out of steam at the 18 day MVA. It sold until just before the final hour. In a reversal from the Tuesday action the market instead rallied as shorts covered when the push lower stalled at near term support on all three large cap indexes. Two stalls make a right? The indexes then rallied sharply to close near the session highs, i.e., right at the 18 day MVA. Talk about banging around inside a tight range. Things are pretty much at a standoff when neither the bulls nor the bears can push the indexes below support or above resistance.
Rallying to a close is typically considered bullish action, and no one can discount that action today. Still, there were not many buyers out there once again. NYSE volume contracted on the gains while Nasdaq volume edged ever so slightly higher. Both were still well below average. As noted before, that underscores how unenthusiastic this rally attempt is. No doubt some late summer doldrums are at work here, but after the heavy, heavy July selling volume, the current action is on comparatively puny trade. Shorts are not swarming the market like a bunch of angry fire ants, and buyers are in no feeding frenzy either. Thus a game of tennis has apparently begun with the two sides volleying back and forth without much intensity.
CSCO numbers inspire short-lived buying.
The market gapped higher, inspired by more Cisco cost cutting and market share growth. In about 10 minutes that inspiration turned to perspiration as the indexes hit the 18 day MVA and started selling. They did not show much life and we entered some aggressive downside positions as the market turned lower after a small bounce attempt. That was our plan and though it was aggressive it looked good, at least until the last hour when the shorts could not push the market lower. There was then short covering as many shorts lost there nerve because it is not so easy to push the market lower; when they cannot make an easy killing, they tend to cover and then come back to try later.
That is what caused the push higher in the last hour. On the way back up the market hesitated at the 10 day MVA and we were ready to add to downside positions if it turned over, but it continued the climb. Right at the close the indexes moved up to the 18 day MVA and then the move ran out of gas. This continues to be a key level for the market as the 18 day MVA has acted as resistance since mid-May when the really gnarly selling began.
What about the big techs? How did they respond? Well, most gapped higher and sold down with the market, then rallied back with the market, etc. Notably, however, stocks such as KLAC, AMAT, QLGC, JNPR, BRCM, and BRCD all finished the session well off of their gap up highs, showing doji's on the candlestick charts, right at the 18 day MVA, and on rising volume. That is a litany of potentially negative features that when combined create a less than pretty picture. The techs are just coming off the test of the July sell off lows and after a brief rally have hit near term resistance at the 18 day MVA and are showing classic signs of peaking out already. Near term they could very well be under more pressure.
THE MARKET
Lick log time here at the 18 day MVA.
Once again the indexes and key stocks find themselves at key near term resistance and showing signs they are ready to pullback again in a continuation of the move along the downtrend line that started up in March, took a couple of 50 day MVA hiatus' in April and May, and then started taking it on the chin to the bottom of the July selling. At that point sentiment indicators hit extreme levels, suggesting a rally attempt at hand. The indexes shot higher with the Nasdaq jumping 160+ points and the Dow 1200 points. They tested the move on low, low volume; very good action after such extremes. Then they started higher the past two sessions after making a higher low. Volume, however, while slightly higher, has been weak, indicating no real long term buying ongoing.
So now the indexes are back at the 18 day MVA. Continue the downtrend or rally further? A failure here is a lower high to throw water on that higher low just made Monday. Futures were up after hours but their gains were whittling steadily away even with the late charge; seems momentum either direction cannot keep it up so to speak.
Overall this is part of the bottoming progression discussed over the past week. Extreme sentiment readings on heavy volume selling, markets swinging back and forth similar to storms that accompany a change of seasons, continued high skepticism and pessimism about the future. Those are typically signals that there is a bottom being set as the buyers and sellers are not able to gain advantage. After months and months and months of selling, the fact that the sellers are not able to get their way is a very stark and very telling indication that something is different.
The key issue is whether it is a difference that ultimately makes a difference. The market has given some weak follow throughs to the rally that started with the big late July intraday reversal. There are some groups trying to show some leadership, e.g., health and medical stocks considered 'safe havens' in an uncertain market. That is better than what late July showed with all sectors getting clobbered, but they still need work before they are ready to break to new highs. What we anticipate is further bottom building action as we have seen with the indexes making a bit further push up and then faltering to form a handle or test lower once more. The upside volume indicates long term investors are not yet committed to the upside action. They are warming up and the shorts are nervous, but again, neither can take the advantage. In a continuing downtrend that puts the sellers at the near term advantage at any resistance point.
Sentiment Indicators
VIX: 43.07; -2.66. After a second close at its highest level since September 2001 and many years beyond, this fear measure is backing off but is still at significantly high levels.
VXN: 68.84; +4.66. There were few calm stomachs in the technology sector even with the great, stupendous Cisco earnings. A gap higher, sharp sell off, and jump back up to resistance on the close left tech investors' nerves raw.
Put/Call Ratio (CBOE): 0.76; 0. Again put action was solid, but not extreme.
Nasdaq
Gap, sell, rally, close at resistance. Higher volume but not much. Much rejoicing? Hardly.
Stats: +21.35 points (+1.7%) to close at 1280.90. Recovered 35 points in the last hour to salvage a gain.
Volume: 1.575B (+2.28%). Volume was higher but not much. It was still well, well below average on the gain, and that makes it hard to take comfort in the move higher as there are not many investors, buyers or sellers, doing much.
Up Volume: 1.027B (-331M)
Down Volume: 495M (+323M)
A/D and Hi/Lo: Advancers led 1.12 to 1. Not great, but with the big reversal from the lows it is not bad. It was quite negative at the selling's peak.
Previous Session: Advancers led 2.36 to 1
New Highs: 11 (-3)
New Lows: 133 (-9)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Short and sweet: after selling down the first three sessions of August to test the rally off the July massacre the Nasdaq has rallied up to the 18 day MVA on slightly higher yet relatively low volume. It showed a doji on the candlestick chart as it closed below dogged resistance at the 18 day MVA. this pattern is indicative of the bounce running out of steam. If this is the best it can do after Cisco supposedly presented a second consecutive solid earnings report, then the Nasdaq is ready to head lower.
Dow/NYSE
A similar late session surge recovered 242 points on the Dow and closed it near its high and right at the 18 day MVA.
Stats: +182.06 points (+2.2%) to close at 8456.15. Quite a comeback, but more or less typical of this volatile action.
Volume: 1.49B (-0.92%). NYSE volume contracted on the gain, exhibiting yet another session with long term buyers absent.
Up Volume: 995M (-233M)
Down Volume: 462M (+201M)
A/D and Hi/Lo: Advancers led 1.81 to 1. Decent but not the intensity at all; given it had to comeback, however, it was a decent.
Previous Session: Advancers led 2.92 to 1
New Highs: 23 (-3)
New Lows: 96 (+5). More new lows than highs on a recovery.
The Chart: http://www.investmenthouse.com/cd/$indu.html
The chart looks better than the Nasdaq simply because the Dow gap higher was much less intense than the techs. It masks the intraday action where the Dow hit the 18 day MVA and then fell back down to test near term support and then rallied once more. Closed near the high after coming back from a test of support. That gives the pattern a bullish look even if it closed right at the 18 day MVA as it made a higher low and is challenging resistance and possible the late July high. Volume, however, is not backing this move, a key shortcoming in rally attempts, particularly in a continuing downtrend. It may be trying to change direction, but it needs more than a basket of extreme sentiment indicators. That gets the ball rolling; buyers have to take the baton from there.
S&P 500:
The large caps showed that same old college try, rallying from support in the 850 to 855 range and closing just off of the 18 day MVA. Good intraday action (particularly compared to the late selling Tuesday), but as with the Dow it had lower volume to support the move, meaning that there were not many buyers out there to give the move continued strength. It is right at the 18 day MVA and just below the bottom channel of the March downtrend. It may try to carry over that Thursday, but thus far there has been no sustained backing for the upside gains as the market tries to move through the bottom forming stage.
Stats: +17.21 points (+2%) to close at 876.77
NYSE Volume: 1.49B (-0.92%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
THURSDAY
Up, down and up, closing at the 18 day MVA. Nasdaq volume a bit higher, NYSE volume a bit lower, and both less than enthralling. There are not many buyers and there are not as many adamant sellers, hence the up and down action on low volume. The fact that the sellers cannot jump on the market and keep it down indicates a change of some sort from the steady selling, and that is part of that bottoming process that is trying to take shape after that big July sell off when volume shot up and sentiment indicators hit some extreme levels. It has led to some upside, but it has yet to translate into a rush of stock buyers.
The close at the 18 day MVA on so-so volume, the Nasdaq pattern, the large tech action closing well off their highs and showing doji's suggests some near term selling once again. Futures were higher after the close but were waffling; futures the night before mean little for the next session's action, but the fact that they were already weakening after a rally to the close indicates the drive to the close did not have a lot of backing.
The Nasdaq pattern looks as if it is ready to top out near term even as it showed higher volume: higher volume on a reversal and doji at resistance is not usually good for upside action. The Dow and S&P 500 patterns look stronger but their gains were on lighter volume. Either way it does not look like a strong push up or down. Given that lower volume rallies usually tap out at resistance, however, we anticipate another try at the 18 day MVA and perhaps a bit beyond, and then some selling. The inability to generate heavy buy side volume on this move is the Achilles heel and it shows the market needs some more basing here before attempting a strong move or just a solid surge in buying that has not been there.
Thus we are looking at some further downside positions after some initial rally attempts. C said it is going to expense employee stock options and that had the stock moving higher after hours (+1.20) even though it is going to take 3 to 4 cents off the earnings. As it is a Dow component it could give the index a boost early on. This market is also giving upside positions even as it gives downside plays as the medical and health sectors, small financials, and a few others provide safe havens. As seen in July, however, if the selling intensifies enough, everything becomes tainted. Now that the sentiment indicators hit extremes and these patterns are shaping up, we have a more confidence in these positions if they show good volume; today that was a continuing problem: stocks hitting buy points but nowhere near sufficient volume.
Support and Resistance
Nasdaq: Closed at 1280.90
Resistance: The the 18 day MVA (1303.16) and price resistance at 1300. The hump in the double bottom pattern at 1354.48 followed by 1357.09, the October 1998 bear market low. Then 1418, the interim test after the September low. The 50 day MVA (1409.63) and the second March down trendline at 1425. That is followed by 1500.
Support: The March down trendline (1238). Price support from 1190 to 1200 (the July low is 1192.42). The bottom of the March downtrend channel (1177).
S&P 500: Closed at 876.77
Resistance: The 18 day MVA (881.73). The lowest channel line in the March downtrend channel (878). The middle of the potential double bottom at 911.64. The predominant bottom channel line from the March downtrend at 908. The 50 day MVA (941.41). The March down trendline at 946.
Support: 850 to 855 held Wednesday (the October 1997 and Q2 1998 lows). 830, the recent August low is possible, but 800 is more likely. Then the July low at 775.68. 750 to 760 with an intraday touch to 730.
Dow: Closed at 8456.15
Resistance: The 18 day MVA (8456.20). The lowest bottom channel line of the March downtrend at 8550. The late July high that is the potential middle of the double bottom at 8762.14. The May down trendline at 8730. The March down trendline at 8914. Then the 50 day MVA (8915.37). After that price resistance at 9250 and then 9500.
Support: The September closing low at 8235.81 more or less held Wednesday. 8062, the September 2001 intraday low, has tried to hold on a couple of occasions as well. Then the July low (7532.66). The October 1998 lows are at 7400 and 7467. After that is 7000, some 1997 lows and highs.
Economic Calendar
8-05-02
ISM Services, July (10:00): 53.1 actual versus 55.0 expected, 57.2 prior.
8-07-02
Import/Export prices, July (8:30).
Wholesale inventories, June (10:00): 0.3% actual versus 0.2% expected, 0.1% prior.
Consumer credit, June (2:00): $8.4B actual, $8.0B expected, $9.5B prior.
8-08-02
Initial jobless claims (8:30): 385K expected, 387K prior.
PPI, July (8:30): 0.1% expected, 0.1% prior.
Core PPI (8:30): 0.1% exected, 0.2% prior.
8-09-02
Productivity (preliminary), Q2 (8:30): 1.0% expected, 8.4% prior.
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TEAM TRADES
OEX: We were looking at some OEX puts after the SP500 tested the 18 day MVA and started to fall. The action was good until the last hour when the OEX moved up with the market. We were ready to enter more positions if the 10 day MVA held, but it gave way after some hesitation and the OEX closed just below the 18 day MVA. We placed our stop point near that level, and we were willing to live through a test of the resistance as we took more aggressive positions. When the dust cleared we were underwater on the position, but it was still below the 18 day MVA. On a resumption in the selling we will look to add to the September put positions.
End Part 1 of 2
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stock share
stock market today
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