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us stock market, understanding the stock market
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11/13/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Wednesday: ITRU bought out.
Buy alerts issued: AMZN; NXTL
Trailing stops issued: CCCG (locked in rest of solid 30%+ gain)
Stop alerts issued: None issued
THE MARKET
A soft start that gave way to a solid surge up looked very promising, but the market hit the same obstacles it had Tuesday. The early good news that led the market higher could not sustain the move and the indexes fell negative. In a bit of a twist and turn back to prior weeks, however, some buyers stepped in late to pick up stocks. It was not a huge swarm into stocks, but with increased volume on the move higher early it was a small positive. One thing we noted in the last part of the session: many stocks have continued their pullbacks, but they were holding at support and still forming nice pullbacks and/or handles to their recent moves. These act as shakeouts of those eager to sell, and if the market finds support here that clears the way for another move higher.
So once again the market held where it had to, but it also once again gave up some good gains. That means the market is still in the game but it is going to have to show its hand soon as there is no real room to play with either way. Technology is leading the way, at least trying to, after the SP500 and its large caps have come under pressure. Indeed, it is the pressure on stocks such as GE, PG, C that have several analysts saying that this move is dead in the water. It definitely is stalled right here, but it has not broken down, primarily because those stocks are not acting as leaders now and were not on the move up. Look at PG, a stock specifically cited in the reports. When the market rallied in October, PG moved sideways. GE was already in the toilet. While we don't like seeing these fall, they were not the leaders on the recent move up in October.
Now looking to technology for leadership does not bring comfort to most investors given the lack of business spending. Then you have AMAT's earnings report after hours that was less than stellar. It beat by a penny but revenues were a hair light and it said new orders were down 12%. That was all in line more or less, and though it sounds bad, this is one of those situations where the news was not as bad as feared. Though down 12% (in the range and better than feared), new orders were up year over year 41%. There are still 'uncertain economic conditions' according to AMAT, and that is why it said it was laying off those workers. While the first blush reaction is @#%!**@ # from investors, business is better for AMAT over last year. The market starts building ahead of the actual good news hitting the wire. The improvement in AMAT year/year is one of the glimmers the market will be eyeing.
The immediate response, however, is what we have to deal with. The indexes finished just ahead or right at where they were on the Tuesday close, and that leaves them in the same put up or give up position. The Nasdaq looks to be the key here and it actually appears decent, moving off the 18 day MVA on rising volume. It will be challenged by AMAT early; that could be a good thing because if the move is for real, a softer open often leads to a move up. If those stocks that refused to break down Wednesday hold up again early, that bodes well.
Sentiment Indicators
Analysts are calling the move dead. Combined with the negative economic sentiment that creates a pretty grim situation. Gee, that is what we like.
VIX: 36.28; +0.89
VXN: 54.46; -0.79
Put/Call Ratio (CBOE): 0.75; -0.1
Nasdaq
Tapped the 18 day MVA on the low and then rallied. It gave back gains, but it also held onto half of the gain as volume rose. Not bad.
Stats: +11.78 points (+0.87%) to close at 1361.34
Volume: 1.907B (+22.93%). Above average volume again after a 4-session lull. While not powerful, Nasdaq volume continues to rise on up sessions and fall on down session, just as it should.
Up Volume: 1.369B (-13M)
Down Volume: 515M (+368M)
A/D and Hi/Lo: Advancers led 1.02 to 1. A standoff even with the gain.
Previous Session: Advancers led 1.71 to 1
New Highs: 28 (-4)
New Lows: 51 (-1)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Started soft and tapped the 18 day MVA on the low (1334.13) before mounting a rally that moved over near term resistance on the high (1371, 1357 resistance). It gave half the move back, but managed to hold over that near resistance. It will be tested once again Thursday with the AMAT earnings. It needs to hold support again, preferably the 18 day MVA as opposed to the 50 day MVA (1305) and then mount another recovery as it has been put on the spot as the market leader.
S&P 500/NYSE
A tight doji right on the 50 day MVA with some rising volume. Critical time.
Stats: -0.43 points (-0.05%) to close at 882.53
NYSE Volume: 1.427B (+5.31%). Rising though still below average volume.
Up Volume: 725M (-181M). Very evenly matched.
Down Volume: 701M (+271M)
A/D and Hi/Lo: Decliners led 1.08 to 1. Indicates the standoff in the large caps.
Previous Session: Advancers led 1.58 to 1
New Highs: 20 (-1)
New Lows: 55 (+14)
The Chart: http://www.investmenthouse.com/cd/$spx.html
After the doji at the 50 day MVA (882) Tuesday, the large caps showed an even tighter open/close range, testing below support at 875 on the low and rallying back to flat at the close. On the high it once again tapped the 10 day MVA (892.51) and that pushed it back. Key resistance at 900 that it has to take out (the top of the late October range) and then the November high at 925. It is walking a tightrope as some of its major components are indeed under pressure, the action that has caught the eye of several analysts. It is the lick-log time for the large caps.
Dow:
Same action as the SP500, showing a second doji on the 50 day MVA on rising volume.
Stats: +12.49 points (+0.15%) to close at 8398.49
Volume: 1.427B (+5.31%)
The Dow tested below the 50 day MVA (8336) but held above 8250. On the early rally it once again tested 8500 and once again it was turned back. It is being squeezed once again, this time between 8250 and 8500 as immediate resistance. A doji above support with rising volume is what we like to see, and it is time for the Dow to make a move.
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
Retail sales for October are out before the open and are expected to drop 0.2% overall after a 1.2% September drop. There may be a slight upside here. That would be a nice offset to the AMAT results.
We are expecting a modestly softer open Thursday, and once again the key will be whether the indexes can hold support and make a more sustained rally. They have managed to hold support on the close the past two sessions despite severe negative sentiment about the economy and about the rally's health. We are as cautious anyone right now given the fall back into the consolidation range; that is not a show of strength. On the other hand the indexes are holding at support and the Nasdaq is moving higher on increasing volume just as it should do. The key now is whether it can shake off the recent weakness and overcome the AMAT earnings report (not great, but not as bad as feared) and mount a significant rally. It needs to show it can again shake off bad news and move higher as a sign of renewed strength. With Dell reporting after hours Thursday, the market could move in anticipation of a better Dell report. Dell has continued to perform well heading into its numbers. That could provide some support to the market even with the AMAT earnings.
Once again we will be watching early where the indexes find support and whether stocks once again hold support as they did Wednesday. There were still some good moves on volume in the market, but it was not a day of strong surges across the board. The market is still trying to regroup at support, and to make the move it will need the big money to step back in. Today it was a mix of short covering and some buying that drove volume. The institutions have sat on the sidelines of late, and they will either step in here at support or let the market slide lower. Despite the economic gloom we still see the market discounting a better 2003 and thus anticipate more upside. Again, the market is walking a tightrope right now and that is nerve wracking along with all of the gloom. As of yet, however, the indexes are holding support and showing good price/volume action while many, many stocks are still in very orderly consolidations.
Support and Resistance
Nasdaq: Closed at 1361.34
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 (1517).
Support: 1357.09, the October 1998 bear market low. July, August, and September interim highs at 1345. The 50 day MVA (1305). 1250 from some prior price lows. 1200 (August closing low) to the July intraday low at 1192.42. 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 882.53
Resistance: The 50 day MVA (882.17) and the March down trendline at 877 have not been totally cleared. The September 2000/May 2001 downtrend line at 889 and the 18 day MVA (887.35). July, August and September interim highs at 909 to 911. Some resistance at 921. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high. Then price resistance at 990.
Support: 875 is some price support. 850 to 855 (the October 1997 and Q2 1998 lows). 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 8398.49
Resistance: 8500 from October high (10 day MVA at 8464). 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 (9244). 9500 from June and July lows.
Support: The exponential 50 day MVA (8336) and then 8250. The simple 50 day MVA (8167). 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-13-02
WMT earnings, before the open
AMAT earnings, after the close
11-14-02
Initial jobless claims (8:30): 396k expected, 390k prior.
Retail sales, October (8:30): -0.2% expected, -1.2% prior.
Retail sales, ex autos (8:30): 0.2% expected, 0.1% prior.
Dell earnings: after the close
11-15-02
Business inventories, September (8:30): 0.0% expected, -0.1% prior.
PPI, October (8:30): 0.2% expected, 0.1% prior.
Core PPI (8:30): 0.1% expected, 0.1% prior.
Industrial Production, October (9:15): -0.3% expected, -0.1% prior.
Capacity utilization, October (9:15): 75.6% expected, 75.9% prior.
Michigan sentiment, November preliminary (9:45): 82.0 expected, 80.6 prior.
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TEAM TRADES:
AMZN: AMZN is showing a lot of orders coming in, and to us that just flies in the face of those adamently stating the holiday season will be a washout. I have yet to buy underwear from AMZN, but we do utilize its services. Today it made the breakout move relatively early in the session on some strong volume. We were looking at stock and options, the April 17.50 calls trading at 5.30 by 5.60. The move was strong, volume was good, so we went in at the ask. AMZN ran up to 21 on the high, putting in a solid move. Then when the market sold back AMZN came back as well, but it importantly held above the breakout point with some outstanding volume. We really like the action, and with the pullback to near the buy point, AMZN is still a buy on a test of 20 and move up again.
THE PLAYS:
BER (W.R. Berkley--$36.75; +0.27; optionable): P&C Insurance
http://biz.yahoo.com/p/b/ber.html
STATUS: Double bottom w/handle. After the strong move up the right leg of the base that cleared the 200 day MVA (36.20) in late October and has since pulled back on below average volume to form the handle the past two weeks. This is acting as the shakeout point where the profit takers move out of the stock and set up the move higher. Accumulation is solid at 6 up weeks on rising volume to 4 down weeks on rising volume. Great accumulation and money flow is screaming up ahead of the price even as it moves laterally and lower to the 200 day MVA.
Volume: 160K Avg Volume: 198.272K
BUY POINT: $37.55 Volume=306K Target=$44 Stop=$35.65
POSITION: BER DG - April $35c (66 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/ber.html
HTCH (Hutchinson Technology--$25.52; +1.77; optionable): Data storage
http://biz.yahoo.com/p/h/htch.html
STATUS: Cup w/handle breakout. Wireless telecom and data storage are two hot tech areas, and HTCH made a strong breakout Wednesday on a massive volume surge. The moved comes out of a base that started in January and sports accumulation at 10 up weeks on rising volume to 7 down weeks on rising volume. Relative strength is flying higher, breaking out on the move once again. After a false breakout attempt 7 days back HTCH formed a lateral handle and then with two volume surges exploded higher. After such a strong move we may see a bit of a pullback Thursday on the AMAT news (toward 24) and then a move higher.
Volume: 1.355M Avg Volume: 182.59K
BUY POINT: A test of 24, then 24.88. From the close: $25.65 Volume=351K Target=$30.75 Stop=$23.85
POSITION: UTQ EE - May $22.50c (71 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/htch.html
KRON (Kronos--$39.50; +1.15; optionable): Business equipment
http://biz.yahoo.com/p/k/kron.html
STATUS: Cup w/handle breakout. KRON is moving within a larger base that started in January. It bottomed July through October, forming the current small base that it broke out of in late October. It surged over the 200 day MVA (36.05) and just tested it. Tuesday it started up off that level and then Wednesday it blasted higher on some volume. Accumulation since the bottom in August is excellent at 6 up weeks on rising volume to 1 down week on rising volume. This was a good test and rebound off of that level. A breakout over 40 on continued strong volume gives it a lot of room to run.
Volume: 623.12K Avg Volume: 303.136K
BUY POINT: $40.12 Volume=450K Target=$47.94 Stop=$37.31
POSITION: KUE DG - April $35c (60 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/kron.html
End Part 1 of 2
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us stock market
understanding the stock market
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