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us stock market, stock trading services
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11/04/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Monday: KLAC; CCCG; SHFL
Buy alerts issued: ARTI; EXPE; AVID; SFAM; IDCC; QQQ
Trailing stops issued: COCO
Stop alerts issued: None issued
THE MARKET
Big volume rolled in early, particularly on the Nasdaq, and that gapped stocks higher. They held most of the gains, even rallying higher after the first test of the gap higher. Internals were solid with a 2:1 A/D line, and heavy, heavy buy side volume on the Nasdaq. Then the afternoon selling hit on the Rumsfeld statements, and a good move was tarnished. It still held positive on some excellent Nasdaq volume, but instead of challenging resistance again as it looked it was ready to do, much of the gain was given away as the internals eroded.
Failed rally signs already? Don't think so. The move was strong and we view the selling on the reminder that there was still going to be some military action at some point as providing an opportunity to catch some stocks that were making moves that were putting them a bit out of reach without ever giving a good entry point. AMAT reported after hours it is cutting more jobs and restructuring; that put some pressure on stocks after the close but nothing dramatic. This could be one of those situations where a needed restructuring is viewed as good news, but that remains to be seen.
Sentiment Indicators
VIX: 34.47; +0.49. Rose on a session that showed strong upside resolve until some war news. That shows that there are still jitters in the market, and that is healthy. Keep them afraid and that allows the rally to gradually pull money in as opposed to an all at once rally that burns out.
VXN: 49.22; -0.64
Put/Call Ratio (CBOE): 0.67; -0.04
Nasdaq
Gapped up and ran to the September 2001 closing low and sold back. Strong, strong volume.
Stats: +35.84 points (+2.63%) to close at 1396.54
Volume: 2.375B (+28.67%). Strongest volume since coming off the July low.
Up Volume: 1.934B (+347M)
Down Volume: 406M (+158M). At one point up volume had close to a 10:1 lead on the strong upside surge. Volume backed off in the mid session and then picked up again after the Rumsfeld statement helped get the selling started.
A/D and Hi/Lo: Advancers led 1.69 to 1. Was 2:1+ at one point but weakened considerably.
Previous Session: Advancers led 2.09 to 1
New Highs: 83 (+41)
New Lows: 28 (-15)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Big gap higher as the techs were the stocks of choice. It was a solid move up, a test, and a surge higher right to the September 2001 closing low (1423; high today 1420) and the July and August interim highs (1425ish). It consolidated that move and looked ready to try another run when the afternoon selling started and pushed it to close just below 1400, giving up 23 points from the high. That left a big doji on the candlestick chart after a 34-point gap higher; that is not the most savory of patterns, but it is also the result of two weeks of more or less lateral movement that was building for some kind of upside breakout. From here it may try to fill in a bit with the AMAT after hours announcement and with some quick profit takers, but it looks as if the index has shown its hand as to where it is going, and we will use pullbacks of these breakouts as an opportunity to enter positions for further upside positions.
S&P 500/NYSE
A hyperbolic move with the large caps giving back 16 points from the high. Was giving the strong move and breakout but reversed it.
Stats: +7.39 points (+0.82%) to close at 908.35
NYSE Volume: 1.64B (+13.88%). A solid surge but not a huge volume surge to support the move early. In the end selling volume asserted itself somewhat and took the luster off the session.
Up Volume: 1.1B (+11M)
Down Volume: 516M (+151M)
A/D and Hi/Lo: Advancers led 1.44 to 1. Very anemic action on the upside after being close to 2:1.
Previous Session: Advancers led 2.59 to 1
New Highs: 45 (+13)
New Lows: 23 (-16)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps gapped higher and were running well up to the last down trendline from the March/May highs. This was not a major resistance point, but when the news hit that war could be closer, it was enough. The large caps closed just below the July and September interim tops, the point of real resistance that they needed to move through. That makes a big doji on the session and that raises some caution, but we feel it was related to intraday news and not indicative of a desire to toss out stocks on this move.
Dow:
Blasted over 8500 with authority but it reversed sharply and held onto just a measly gain on the close.
Stats: +53.96 points (+0.63%) to close at 8571.6
Volume: 1.64B (+13.88%). NYSE volume was solid but nothing special. DJ30 volume was up sharply over the prior week of consolidation. That is what we wanted to see on a move up, it just would have been better if it had held on.
It was a very nice consolidation and the Dow was on a huge binge higher. Then it ran out of steam at the July, August and September tops. Actually, as with the other indexes it was on its way up to try that resistance again when the war news hit and cut the legs out from under it. It managed to close over the October high, a good sign. The intraday reversal was frustrating more than anything else in our view as it was driven by a news story that we do not think will have a lasting impact.
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
ISM services is out at 10ET and it is expected to come in over 50 (52 versus 53.9 prior). That is logical as services continue to see employment expansion (employment report) and regional expansion in services as opposed to the manufacturing sector. As services make up the larger part of the U.S. economy, it is always somewhat comforting to see services expanding.
In addition there is the election and then the Wednesday FOMC meeting. There have been hours and hours of exhaustive (exhausting?) coverage of the races. About all you can say at this point is that most of the close races are statistical dead heats and we will just have to see how they turn out. As we said before, we may not know even on Wednesday who won some of the races and what party has control of the house and senate. With the elections and the FOMC coming out Wednesday, there may not be a lot of action Tuesday as stocks may try to back and fill a bit after the gap higher. There was not a lot of excitement after hours with AMAT's restructuring and the turn down from the session highs.
Several stocks hit buy points today and given the big move to open we used it to take partial positions, waiting for some further backing and filling to complete the buys. When the market gaps higher we often take partials after the gap and test back intraday. That allows us to start positions in the event the market continues to run higher, and then we can add to positions at the next logical point, e.g., after a pullback following a further rise to test the move. When the testing is done we can move in and complete the position. Tuesday and Wednesday we will be looking for those opportunities ahead of the election results and the FOMC meeting.
Support and Resistance
Nasdaq: Closed at 1396.54
Resistance: 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 (1536.57).
Support: 1357.09, the October 1998 bear market low. July, August, and September interim highs at 1345. The 10 day MVA (1328.58). The 18 day MVA (1300.43). The 50 day MVA (1284.78). 1200 (August closing low) to the July intraday low at 1192.42. The March/May downtrend line at 1245. 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 908.35
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 893. The March down trendline at 888. The 10 day MVA (890.16). The 50 day MVA (877.80). The 18 day MVA (879.87). 875 is some price support. 850 to 855 (the October 1997 and Q2 1998 lows). The first March down trendline 807. 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 8571.60
Resistance: 8500, former price points, is acting as the top of this range and still has not been totally cleared with the big intraday pullback. The late July and early September interim high at 8726 to 8762.14 (8745 closing) stopped the move Monday. A range of resistance from 9000 on up to 9050. The 200 day MVA (9287.53). 9500 from June and July lows.
Support: The 10 day MVA (8408.21) is possible and held on the Thursday low. 8250 and the exponential 50 day MVA (8183.67) are key. The 18 day MVA (8301.79). The simple 50 day MVA (8276.71). The second March down trendline at 7995. 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-4-02
Factory Orders, September (10:00): -2.3% actual, -3.0% expected, -0.4% prior (revised from 0.0%).
11-5-02
ISM Services, October (10:00): 52.0 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
QQQ: With the techs looking like the leadership group, we were looking at a proxy for the sector overall and the QQQ is not bad. We knew the market was going to gap open, so we let it do just that, and then it started to pull back as gaps often do. Then when it started back up we were ready to start entering some positions. The January 22 options were trading 4.70 by 4.80, and we entered at the ask. The options are so liquid fills often come very quickly. The QQQ then started to march higher, up to 26.60 on the high twice before the late selling started whittling away the gains. It broke below 26 late, then managed a late rally to close at 26. The options were back to where they started. A round trip, but not the kind you like. That is why we took some partial positions as opposed to loading the boat all at once. Now we will see if there is more softness or if it can move from here. Either way we can complete the position at a good entry point.
THE PLAYS:
Good moves: CCCG; ARTI; IDCC; LXK; STN
Upside:
DELL (Dell Computer Corp--$30.05; +1.07; optionable): PC's
http://biz.yahoo.com/p/d/dell.html
STATUS: Breakout cup w/handle. Breaking out of a 10-month cup w/handle base on some huge volume. DELL has been able to grow earnings through solid cost cutting and efficiency. It is perfectly situated for a return to investment in new systems, and it has been under accumulation this year with accumulation weeks topping distribution weeks 9 to 7. Monday DELL was breaking out of the pattern on some hefty volume though it closed 47 cents off the session high. Think that is due to just the overall pullback.
Volume: 47.459M Avg Volume: 23.888M
BUY POINT: $30.55 Volume=36M Target=$36 Stop=$28.41
POSITION: DLQ EY - May $27.50c (70 delta) and/or Stock
http://www.investmenthouse.com/ci/dell.html
MVL (Marvel Enterprises--$8.55; +0.45; optionable): Toys, games
http://biz.yahoo.com/p/m/mvl.html
STATUS: Cup w/handle. MVL is in a 6-month base, racing up the right side of the base on some outstanding volume. After attempting a breakout last Wednesday, MVL turned back and fell to the 10 day MVA. It held and jumped right back off that level on rising, strong volume. Like this turn right back up as its solid accumulation at 5 weeks up to 2 weeks down.
Volume: 840.6K Avg Volume: 273.272K
BUY POINT: $8.74 Volume=400K Target=$10.75 Stop=$7.88
POSITION: MVL CA - Mar. $5c (77 delta) and/or Stock
http://www.investmenthouse.com/ci/mvl.html
STCO (Signal Technology--$12.64; +0.51; no options): Scientific & Technical
http://biz.yahoo.com/p/s/stco.html
STATUS: Testing the breakout. STCO is testing its strong move off of the September low, moving laterally along the 10 day MVA at 12. Volume was lower and lower until Monday when it jumped up on much stronger, average volume. It has broken over resistance at 12 and is ready to move from here. Solid accumulation at 5 up weeks on rising volume to 1 down week on rising volume during the very flat consolidation starting in May. Looks ready to blast off from here.
Volume: 89.2K Avg Volume: 73.227K
BUY POINT: $12.95 Volume=135K Target=$15.95 Stop=$11.95
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/stco.html
End Part 1 of 2
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