|
|
world stock market, us stock market
* * * *
11/02/02 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Friday: None issued
Buy alerts issued: OEX; LXK; CDWC
Trailing stops issued: None issued
Stop alerts issued: BBI
SUMMARY:
- Working toward a very important breakout as a confluence of events is changing the landscape.
- The indexes are still giving mixed signals but the scales are tipping again to the upside.
- Team Trades
Fourth up week ends with the start of a breakout.
The Nasdaq was leading, moving over the near term resistance on a solid volume surge, leading the market to a fourth straight week of gains. The action denotes a few positives right off the bat: no cold feet heading into the weekend after a rally, investors were moving after the more speculative Nasdaq stocks, and volume was stronger again, this time on a Friday. After hours an even bigger boost came as a federal judge stuck with the planned MSFT settlement, tossing aside state whining that the remedies did not go far enough to propel the political aspirations of the various state attorneys general. The company is not broken apart, it has to share some information, but a good organizational structure has been left intact. MSFT closed down 45 cents but was up almost $3 in after hours trade. On top of that the dockworkers and port authority came to agreement on the use of technology, the key dispute in the ongoing labor dispute. Those ivory tower types that said no progress would be made during the cooling off period are being handed a does of reality.
These two news stories came on the heels of some other positives that have been almost totally overlooked in the gloom of the economic concerns. Almost under the radar last week several stories combined to provide some certainty and some positives that have been lacking. The MSFT and dockworkers news was great. Add to that other subtleties such as the market firming up ahead of what we are now seeing as some positive yet overlooked currents in the economy, a domestic terror threat removed, an upcoming interest rate cut, and the elections will be in the bag and work can be done on a new stimulus package. These seemingly disparate points are all converging to provide a solid picture looking forward. You don't get that picture from the news and the headlines, but you never get the story from the news and the headlines. That is why major changes seemingly occur unexpectedly as the majority don't have their eye on what is important but instead only report what is popular.
MSFT resolution is extraordinarily important.
The MSFT lawsuit was one of the signposts marking the coming winter in stocks and the economy. It is no coincidence to us that the market topped almost to the day the ruling MSFT was a monopoly came down. Perhaps a limited settlement with a finite term will finally give the green light for companies once again to innovate and strive to dominate their sectors without fear of being singled out for success. It is an insane mixture of capitalism and socialism: be innovative, out hustle your competition, secure your position in your market and stay vigilant to protect your position. Just don't be too successful or the government will try to turn a free market success story into a confused crusade against capitalism cloaked in socioeconomic terms. The antitrust laws are so malleable that they really are not laws but are instruments of the will of the administration in power. The trial of the case speaks for itself as the trial judge maintained a personal vendetta against MSFT as seen in his comments and writings outside the courtroom during the trial that ultimately led to his removal from the case.
European and Asian countries were scratching their heads at why the U.S. would take one of its most successful and innovative companies and try to break it apart, thus jeopardizing the U.S.' technological lead. They were glad to see it, but you can bet your last yen, deutschemark, frank, ruble, etc. that they would not have tried to kill a cash cow that helped promote their global technological competitiveness. In the politically correct world of the 1990's the U.S. succumbed once again to success guilt, ashamed that it had the natural bounty, the best economic system, and the brightest and most innovative people in the world and thus produced incredible wealth for it and indeed the rest of the world. We came ever so close to blowing it for all of the wrong reasons.
THE MARKET
The Nasdaq drives higher on second straight day of rising volume while the SP500 cannot pull in the volume. The small caps, however, run with the Nasdaq.
Friday was close to a very important session, and all things considered, the action was good. Bad economic news as perceived by the mainstream was once again pushed aside and the market reversed off early lows and rallied to close at the session highs. The more speculative Nasdaq led again and attracted more buy side volume. Chips were and are hotter items again. The Nasdaq was able to stick its head over resistance on stronger volume. Breadth on both the NYSE and Nasdaq was excellent. MSFT will be huge, huge, huge for the market. Huge.
On the other side the SP500 was up but it could not attract volume. Neither could the Dow as they both ran up to the top of their range and tried to follow the Nasdaq. The mixed action of Nasdaq accumulation versus SP500 distribution is not perfect as obviously you would prefer to see everything moving ahead together. The Nasdaq volume for a Friday was impressive. The breadth was thus good to see as it showed the buying was at least spread out. We think that NYSE volume will follow soon particularly with the small caps starting to move very well again, blasting out of their range with a 2.3% gain that matched the Nasdaq.
Sentiment Indicators
VIX: 33.98; -1.93
VXN: 49.86; -3.13
Put/Call Ratio (CBOE): 0.71; -0.16
Nasdaq
Started the move out of the range on some rising volume. It should get even more kick from the MSFT news.
Stats: +30.95 points (+2.33%) to close at 1360.7
Volume: 1.846B (+4.67%). Rising, above average volume on the move up out of the range.
Up Volume: 1.587B (+502M). Very solid up volume
Down Volume: 248M (-406M)
A/D and Hi/Lo: Advancers led 2.09 to 1. Excellent volume. Advancing breadth has easily outpaced declining breadth all during the consolidation giving support to the entire consolidation.
Previous Session: Advancers led 1.11 to 1
New Highs: 42 (-4)
New Lows: 43 (-4)
The Chart: http://www.investmenthouse.com/cd/$compq.html
The Nasdaq was clearly in the lead toward the end of the week, moving up off a test of the range bottom Tuesday, moving up on higher volume the last three sessions of the week. Volume was good; not great, but the highest in 2 weeks and it was building in the last days of the week. MSFT will give the Nasdaq another boost; a defined penalty it has already accounted for in its operations is a signal to investors in stocks, start ups, and the U.S. economy that capitalism is back open for business. The Nasdaq's next level of resistance where it will need a rest is the August high at 1423, just over the September 2001 closing low at 1423. It is a good sign for the market overall when investors are willing to buy into the more speculative of the indexes. Recall how during the heavy selling NYSE volume started to outpace Nasdaq volume, a sign that the speculation in the market was over. Investors did not want speculative issues, instead taking solace in the stocks they understood such as homebuilding, basic materials, food. Now they are starting to step back into speculative issues, something we saw with the data on institutions starting to buy growth stocks.
S&P 500/NYSE
The large caps were moving as well, warding off the early bad news and the 50 day MVA once again to put together a rally that took it close to a breakout.
Stats: +15.2 points (+1.72%) to close at 900.96
NYSE Volume: 1.44B (-5.45%). Volume dropped to average on the gains, still unable to break the pattern of distribution.
Up Volume: 1.089B (+439M)
Down Volume: 365M (-509M)
A/D and Hi/Lo: Advancers led 2.59 to 1. Another very solid advance on an up session. The decliners have been very low on the down sessions; the selling when it comes is narrow. Note that the
Previous Session: Advancers led 1.26 to 1
New Highs: 32 (-2)
New Lows: 39 (-2)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps could not quite make the breakout though they did manage to cross the down trendlines from March 2002 and September 2000/May2001. There is still near resistance at 909 to 911 from the July, August and September interim tops and more volume will help clear that resistance. Then the August high at 965 is a real test. For now there simply needs to be a volume breakout to follow the Nasdaq. We believe that the MSFT news will help drive overall market investment higher this week and provide that breakout.
Dow:
The Dow tested some support on the early selling as well and then rallied to the top of its range. Looks good but volume was lower once again.
Stats: +120.61 points (+1.44%) to close at 8517.64
Volume: 1.44B (-5.45%)
The lower lows in the consolidation were tested once again early (8309.50) and then the Dow put together another rally. No help from MSFT or PG, but the blue chips are now at the top of its very good consolidation over the 50 day MVA (8264.67). Volume was not there on the NYSE nor on the Dow 30 volume by itself. It will take more to drive it up and out of the range, but again we believe the ramifications of the certainty with respect to the MSFT remedy and the message that sends to the market that companies are going to be allowed to recover without overregulation is going to help drive investment in the U.S. once again.
The Chart: http://www.investmenthouse.com/cd/$indu.html
THIS WEEK
Outside the MSFT ruling and its implications there is the election Tuesday and the FOMC meeting results Wednesday. Those are huge forces impacting the market. We expect the power in Congress will remain the same, i.e., Democrats in the senate, Republicans in the house. Of course, the outcome may not be determined for quite some time if the races are as close as they appear to be. Moreover, we hear both sides are ready to wage legal battles if necessary. Oh boy.
Factory orders and ISM services are also out early in the week. The end result of all of this information? Some more certainty about the future, and the market prefers certainty regardless, more or less, of what that certainty is. There is continued improvement beneath the economic headlines that portray the economy is still sick. It is not healthy, but it is not the grim picture that it was two months back. Even with this underlying improvement, the majority still view the economy negatively and we still hear the same old song about how the market won't get better until investors see real economic improvement. Once again, the market will discount that ahead of time and we think it is doing that right now. It is not pretty, it is not perfect action, but it looks as if recovery is continuing and we will continue to take positions as they present themselves. That way we build positions into the rally as we have done the last several weeks and can take advantage of the further moves as we build into strength.
The moves Friday were dominated by some of the battered sectors, e.g., chips and telecoms, as the leadership stocks of late were still boxed around or made less than stellar recovery attempts after the hard selling. Leadership will have to again appear in solid stocks with good sales and earnings and that are trading near their highs. Perhaps the downtrodden can rally and allow these stocks to recover and then help continue the move. Not all leaders are gone; retail looks good again, and as we said before, we believe this is because there is going to be a better holiday season than thought. We are doing our holiday shopping now while there are still a tremendous amount of sales out there. TSCO, COH, CHS, ROST, etc. are forming up very well. Then the internet stocks, specific ones, are doing well. EBAY, AMZN, SYMC and others have been building and are now on the verge of moves. A lot of print has been focused on the medical and education breakout failures, but while those have been grabbing headlines a new wave of stocks have been quietly building up, ready to take the lead after those stocks broke down after long, sustained runs. This new batch have not all had such sustained runs and have a lot of upside in them.
Support and Resistance
Nasdaq: Closed at 1360.70
Resistance: 1357.09, the October 1998 bear market low has not been totally cleared.. 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 (1539.24).
Support: July, August, and September interim highs at 1345. The 10 day MVA (1313.48). The 18 day MVA (1289.12). The 50 day MVA (1280.22). 1200 (August closing low) to the July intraday low at 1192.42. The March/May downtrend line at 1250. 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 900.96
Resistance: 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 September 2000/May 2001 downtrend line at 895. The March down trendline at 890. The 10 day MVA (886.12). The 50 day MVA (876.55). The 18 day MVA (876.51). 875 is some price support. 850 to 855 (the October 1997 and Q2 1998 lows). The first March down trendline 810. 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 8517.64
Resistance: 8500, former price points, is acting as the top of this range and has not been totally cleared. 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 (9293.53). 9500 from June and July lows.
Support: The 10 day MVA (8371.91) is possible and held on the Thursday low. 8250 and the exponential 50 day MVA (8264.67) are key. The 18 day MVA (8270.05). The simple 50 day MVA (8189.70). The second March down trendline at 8035. 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-4-02
Factory Orders, September (10:00): -3.0% expected, 0.0% prior.
11-5-02
ISM Services, October (10:00): 53.0 expected, 53.9 prior.
11-6-02
FOMC meeting results, 2:15ET
11-7-02
Productivity, preliminary, Q3 (8:30): 4.2% expected, 1.5% prior.
Initial jobless claims (8:30): 410K prior.
Wholesale inventories, September (10:00): 0.3% expected, 0.2% prior.
FOMC minutes (2:00)
Consumer credit, September (3:00): $5.0B expected, $4.2B prior.
TEAM TRADES
CDWC: We saw this one Thursday making a move late in the session and were loooking at it for Friday. Started a bit slow but then was up and running. An hour into the session CDWC hit the buy point in its base. Volume was decent, but given the excellent volume the previous two sessions it did not have to be absolutely stellar. We were looking at options and we want to buy time in this market; we think stocks are goig to be making a lengthier move up and we want to be able to ride them without having to worry about running out of time. So we stepped out to April and in doing so we moved to the $55 strike (stock at 54) to get the price right. They were trading at 7.90 by 8.20 after the alert was issued and we put in a limit order at the ask. Just so happened that the stock ran up a bit more and then pulled back, starting to move laterally. That is when the fill came and CDWC moved mostly laterally the rest of the session. The MSFT news shot it up $1.50 after hours. Not a bad start.
End Part 1 of 2
|
world stock market
us stock market
|
