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us stock market, trend trading stock
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10/30/02 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Wednesday: COCO
Buy alerts issued: CLE
Trailing stops issued: None issued
Stop alerts issued: None issued
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market overcomes downgrades, rallies to top of range.
- Nasdaq volume modestly higher on a light accumulation session.
THE MARKET
Dow lags on WMT downgrade even with upbeat IBM comments.
Goldman cut WMT to a market performer. That splashed some cold water on a recovering retail sector; apparently GS believes that the holiday season will be poor. Some are saying it could be the worst in a decade given the Iraq situation, stock market, and economic conditions that are impacting confidence. Similar problems last year with recession, 9-11 failed to stop spending. The big difference is another year of strong consumer buying has pushed many to debt limits as the economy has not created a lot of jobs. What we do know: consumers will spend if the price is right as long as worries are not too great about the job front. Confidence was still at 80, and that is a historically strong level considering it fell to the 50's in the early 1990's.
IBM positive comments.
The IBM CEO stated he felt that the economy had bottomed, that the tech cycle was at a bottom as well. He did not say it was all wine and roses from here; economic conditions are still challenging. Nonetheless, a bottom has to hit before the climb back up starts. The market welcomed that information and rallied the rest of the session. Well, at least it did not give the gains made on the news back. The Dow still lagged, however, unable to shake off the retail overhang even with its technology components rallying.
That was basically the tone of the market: technology put in the best showing with chip stocks surging while the Dow and large cap SP500 climbed but without any fervor. After performing relatively better, the Dow took a back seat as investor interest rotated back to techs.
Staples are in.
PG announced excellent earnings earlier in the week. Wednesday CLX, another consumer staples maker, blew away earnings. UL over in Europe posted an excellent quarter as well. Morgan Stanley said G, another consumer products maker, is looking good as well as it upped G to overweight. This does not mean the economy is ready to leap back up; staples are staples and we have to have them. The fact that sales are growing, however, indicates that the economy is holding its own as these companies eliminate the fat and enjoy the fruits of leaner operations. We have seen this with CSCO and DELL in technology, and it is spreading out. The key, however, is still the imperative that actual consumption increases as opposed to holding steady as companies increase efficiency.
Think of it as a light volume rally. Stocks go up and things look pretty good, but at some point the pool of buyers is exhausted and no more fresh legs are there to push it higher. The market needs more buyers to come in and drive it higher just as an economy needs more consumers to drive it higher. That means getting the business buyers to step up, something that has not yet happened.
Rallying toward the top of the range on some higher volume, some stagnant volume.
After testing the lows in the consolidation range Tuesday, stocks rallied toward the top of the range Wednesday. Nothing to strike up the band over as it is just another move inside the range. Nasdaq volume did expand, however, an important improvement in the price/volume action. This indicates that buyers were stepping in with more conviction Wednesday, but it does not wash away all of the prior distribution days. It did what it had to do at this stage of the game to keep the rally held together.
18 day MVA crossing over the 50 day MVA.
On each of the three big indexes the 18 day MVA is crossing over the 50 day MVA. Nasdaq has already crossed the simple 50 day MVA and is in the process of moving over the 50 day MVA. The Dow and SP500 are crossing their simple 50 day MVA. This is an important crossover as it indicates that near term prices are rising faster than prices over the last 50 days. It tends to indicate a shift in momentum that builds on itself.
Sentiment Indicators
VIX: 36.08; -0.72
VXN: 51.29; -1.18
Put/Call Ratio (CBOE): 0.85; +0.11. Very interesting to see the put/call ratio continue to rise as the market rallied higher in the range. Yet another indication that not all are buying into the upside action so to speak, and that is actually a good contrary indicator.
Nasdaq
The Nasdaq wasted no time resuming another move up without taking any more consolidation time. At least this time volume was up.
Stats: +26.19 points (+2.01%) to close at 1326.73
Volume: 1.677B (+9.07%). Rising volume on an up session, a rare occasion the past week. Volume was better than on Monday's distribution, a good sign, but it was hardly blowout volume. It was a good return to the proper price/volume action inside the lateral consolidation.
Up Volume: 1.39B (+1.024B)
Down Volume: 253M (-936M). Up volume was clearly in the lead as tech buyers used the IBM positive comments to buy.
A/D and Hi/Lo: Advancers led 1.67 to 1. Advancing breadth still outpaces downside breadth on the down days.
Previous Session: Decliners led 1.2 to 1
New Highs: 49 (+15)
New Lows: 50 (-17)
The Chart: http://www.investmenthouse.com/cd/$compq.html
The Nasdaq is trying to form a new floor to its consolidation at the 1300 level, just above the 10 day MVA (1297). It moved over that level on the close 5 sessions back and has closed above that level since, testing it or closing at it most of those sessions. Whether it can make something out of the action remains to be seen. Volume was up Tuesday, showing the first accumulation day in the last nine sessions. That is a start at a better consolidation that can lead to an upside breakout, but at this point it is just a start. 1350 represents price highs and lows since July, and as the Nasdaq has continued to march higher without much lateral consolidation, that has become the next key level it needs to break.
S&P 500/NYSE
Another day in the consolidation range, and though volume was down a fraction, it was not bad action.
Stats: +8.56 points (+0.97%) to close at 890.71
NYSE Volume: 1.414B (-0.28%)
Up Volume: 969M (+522M)
Down Volume: 455M (-525M). The action was mixed and the volume was not very powerful.
A/D and Hi/Lo: Advancers led 1.82 to 1. Breadth remained much better on the up sessions than the down sessions.
Previous Session: Decliners led 1.31 to 1
New Highs: 26 (+18)
New Lows: 43 (-12)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Another day on the range. The SP500 tested the 10 day MVA (882) and then recaptured the Tuesday loss. Volume was basically flat as the action has turned into about as middle of the road as you can get: lose a point, gain a point; sell on 1.4B, rise on 1.4B. The action was not bad; things are getting almost boring in the trading range, and that is exactly what you want to see other than an improvement in the price/volume action. The large caps were helped by IBM and hurt by WMT. The resulting standoff makes for a good consolidation session and it is setting itself up for a better move if the economic data shows some improvement.
Dow:
A modest move up on some rising Dow volume though NYSE volume was flat. Still a nice consolidation.
Stats: +58.47 points (+0.7%) to close at 8427.41
Volume: 1.414B (-0.28%)
After the Tuesday test of the 50 day MVA (8248) the Dow continued its action within the range with a small move higher. As with the SP500, the action is getting downright boring as it moves slightly lower on the intraday tests. This is very good consolidation action and the Dow looks ready to continue the move higher given some impetus.
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
The economic calendar heats up Thursday with Q3 GDP, jobless claims (is the move below 400K a trend or aberration?), and then October Chicago PMI at 10ET. While everyone is looking toward the employment report Friday these reports could get that ball rolling.
The action has been fairly steady the past week: Stocks mostly holding up or selling then recovering to hold the range. At the same time some leading stocks with good price patterns and accumulations are getting ahead of the action with some volume breakouts. The action is suggesting a move higher but there are still those distribution days to contend with. That is why we have been letting current plays run for the most part and picking up partial positions on those stocks making strong moves. Basically what we are doing now is accumulating some positions in leadership stocks that present the buy point while the market works through this consolidation. Even with the distribution raising caution flags at this point we are still anticipating an upside breakout based on the overall action. This lays the foundation for gains on a move up without getting us overextended if the consolidation takes a turn for the worse.
Support and Resistance
Nasdaq: Closed at 1326.73
Resistance: July, August, and September interim highs at 1345. 1357.09, the October 1998 bear market low. 1418, the interim test after the September 2001 low, and 1426 the August high. Then some price resistance at 1500 and the 200 day MVA (1545.44).
Support: The 10 day MVA (1297.03). There is a downtrend line from the March and May highs at 1283. The 50 day MVA (1274.78). The 18 day MVA (1274.93). 1200 (August closing low) to the July intraday low at 1192.42. The March/May downtrend line at 1188. There is price support from 1080 to 1100. Then there is a big shelf of support at 1050 down to 1000.
S&P 500: Closed at 890.71
Resistance: The March down trendline at 894. The September 2000/May 2001 downtrend line at 898. July, August and September interim highs at 909 to 911. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high.
Support: The 10 day MVA (882.17). 875 is some price support. The 50 day MVA (875.14). The 18 day MVA (872.21). 850 to 855 (the October 1997 and Q2 1998 lows). The first March down trendline 815. Prior closing lows and highs at 800 from July and October. The July intraday low at 775.68. 750 to 760 with an intraday touch to 730.
Dow: Closed at 8427.41
Resistance: 8500, former price points, is acting as the top of this range. The late July and early September interim high at 8726 to 8762.14 (8745 closing). A range of resistance from 9000 on up to 9050. The 200 day MVA (9306.77). 9500 from June and July lows.
Support: The 10 day MVA (8326.74) is possible. 8250, the simple 50 day MVA (8211.62) and the exponential 50 day MVA (8248.52) are key. The 18 day MVA (8222.56). The second March down trendline at 8060. 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
10-29-02
Consumer confidence, October (10:00): 79.4 actual, 90.0 expected, 93.7 prior (revised from 93.3).
10-31-02
Q3 GDP, Prelim (8:30): 3.6% expected, 1.3% prior.
Employment Cost Index, Q3 (8:30): 0.9% expected, 1.0% prior.
Initial jobless claims (8:30): 400K expected, 389K prior.
Chicago PMI, October (10:00): 49.0 expected, 48.1 prior.
11-01-02
Auto sales, October: 5.7M expected, 5.5M prior.
Truck sales, October: 7.6M expected, 7.3M prior.
Unemployment rate, October (8:30): 5.8% expected, 5.6% prior.
Non-farm payrolls, October (8:30): 0K expected, -43K prior.
Hourly earnings, October (8:30): 0.3% expected, 0.3% prior.
Average workweek, October (8:30): 34.2 expected, 34.3 prior.
Personal income, September (8:30): 0.5% expected. 0.4% prior.
Personal spending, September (8:30): -0.2% expected, 0.3% prior.
ISM Index, October (10:00): 48.9 expected, 49.5 prior.
Constructoin spending, September (10:00): 0.1% expected, -0.4% prior.
End Part 1 of 2
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us stock market
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