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12/11/02 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: OVTI; IDXC; SOX; NTAI
Trailing stops issued: None issued
Stop alerts issued: ISSX; SLE; ACL all broke key support & we were not going to wait around.
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- More relief bouncing as volume stays woefully low.
- Indexes again hold the 50 day MVA, but cannot muster institutional involvement.
- Team Trades
Soft open, modest rally.
News was poor to start the show. INTC's CEO said it 'may be too early to forecast a semiconductor sector recovery,' and that worked to keep the tech stocks chained most of the session. As the day progressed, however, the news improved as CYMI upped its Q4 estimates to the high end of the range and ORCL received some favorable analyst comments (the fact that they were not from Larry Ellison gave the comments some weight). Still, nothing was enough to bring in the big money. Volume limped in lower and below average once again as breadth was, well, not very broad. It was another day of gains, but it proved nothing other than the market is still digesting its gains from October.
A quiet market is a deceptive market. You start to see things that are not really there. You start to conjecture about patterns that are not quite formed (as we did last night, but that was, of course, just full disclosure). You start hearing more and more about how the rally has run its course, stories on bear market rallies, Japan/U.S. comparisons, etc. Sound familiar? That is what we heard in late October and then again in early November just before big upside moves. Does it mean that the market will then surely rally once more? No, but the fact that the economic picture continues to improve (despite the renewed carping that comes in on the heels of the waning rally stories) and the fact that there will be more stimulus passed early next year (hopefully more than 'stimulus lite' as it looks now) combined with the negative sentiment keeps the fuel ready for additional rallying given that the overall picture has not changed much from the last time we heard all of this in early November during that pullback.
THE MARKET
Very uninspired trade when you look at the indexes and the big name stocks. Volume remained well below average once again as the big money sat on the sidelines again. A/D line a flat line. Very little price change. Very deceptive action.
It is said never short a dull or quiet market. This market is on the verge of comatose in the short run. Under that veneer of molasses, however, there are some active stocks. Not a lot of activity, but some nice patterns breaking out as seen today. Moreover, some leaders regained their footing and started back up, e.g., SYMC, on some volume. Further, money appears to be rotating to other sectors such as regional banks and savings & loans that have perked up nicely. Let's see, very low volume, holding the 50 day MVA, good patterns breaking out, leaders that have taken a rest and are moving up, not a lot of massive breakdowns.
Thus while the markets are flirting with forming some typically bearish head and shoulders patterns (just as they were purported to be doing in mid-November), they are not breaking down at this point nor are they suffering heavy distribution. As the bear talk resurfaces, the market is moving rather languidly along the 50 day MVA after pulling back from a strong run from the mid-November low. You would prefer to see them race up and off that level on some volume, but with the Iraq disclosure still being read and the change in Treasury still being digested, the quiet action is not bad. It will need to get some real buy side activity before too long, but it is not bad action right now.
Sentiment Indicators
VIX: 31.4; -0.27
VXN: 51.62; -0.13
Put/Call Ratio (CBOE): 0.76; -0.13
Nasdaq
It was a struggle all session though it held above the 50 day MVA and posted a slight gain. Basically no movement.
Stats: +5.83 points (+0.42%) to close at 1396.59
Volume: 1.427B (-3.39%). 5 straight sessions of significantly below average volume.
Up Volume: 743M (-432M)
Down Volume: 661M (+386M). Basically a standoff.
A/D and Hi/Lo: Advancers led 1.02 to 1. Going nowhere.
Previous Session: Advancers led 1.55 to 1
New Highs: 36 (+3)
New Lows: 37 (-1)
The Chart: http://www.investmenthouse.com/cd/$compq.html
For the third session Nasdaq tested near the 50 day MVA (1371.39), holding above that level. It was, however, unable to make a strong move off that level, failing to pick up any momentum as no big money buyers were moving in. The modest gain keeps the tech index below a critical point at 1420 to 1426, the August and early November highs that mark resistance and could set the right shoulder of the 6-week head and shoulders pattern trying to form. On the high (1407) Nasdaq made a move to test that level, but it had no stomach to take it on. It will have to find the guts to make the move before too long.
S&P 500/NYSE
Still trading over the 50 day MVA on below average volume as it too cannot generate a push off of that level after dancing around it the past 4 sessions.
Stats: +0.51 points (+0.06%) to close at 904.96
NYSE Volume: 1.266B (+1.42%). A rise in volume, but it was very small and volume was still well below average.
Up Volume: 607M (-368M)
Down Volume: 645M (+368M)
A/D and Hi/Lo: Advancers led 1.23 to 1. No widespread conviction Tuesday to continue the nice broad advance Monday.
Previous Session: Advancers led 2.19 to 1
New Highs: 40 (+7)
New Lows: 22 (-5)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Tested below the 50 day MVA (899.95) on the low and rebounded for a slight gain. It gave back 5 points from its high (909.94) where it tapped the 10 and 18 day MVA and turned back. The large caps are struggling at the July, August and September interim highs from 909 to 911, long before the more important test at 925 (early November high) that marks the left shoulder in the pattern. Of course, if it cannot clear 911, that makes that level important as well. Very quiet action. Will PG's positive outlook announced after hours provide a catalyst for the large caps? There needs to be a combination of events to provide the necessary catalyst to overcome the current negative sentiment. PG-like news is part of it, but there also needs to be some stronger economic news. Retail sales are out, but November is weaker because the holiday season got a later start.
DJ30:
Tested the 50 day MVA (8520) again and bounced back up for a modest gain. Dow volume continued to contract. It has spent the past 3 weeks below average. On the high it also tapped its 10 and 18 day MVA (8643, 8639) and fell back to close. It too is moving along the 50 day on no volume, needing a break over 8800 on the next run to take out the early November high and break up that toppy pattern that is trying to form.
Stats: +14.88 points (+0.17%) to close at 8589.14
Volume: 1.266B (+1.42%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
Finally some more economic news Thursday. Retail sales, jobless claims and current account are out before the open. Retail sales expectations were nudged higher and jobless claims expectations were nudged lower. Last week that set the stage for disappointment and the market was indeed disappointed when heightened expectations were not met. Retail sales were strong late in the month, but whether enough to beat last year when Thanksgiving was earlier and the season kicked off over a week prior to this season.
Stocks are generally mixed. Most continue to hold up, but many of the big names that performed into the recent high are showing the same pattern as the major indexes, i.e., needing to break over their early November highs in order to clear out that somewhat toppy pattern. Others are running back up on volume while still others have put the last touches on their bases and are starting to breakout. The lack of many breakdowns is good to see as the market tries to get up off the 50 day MVA and overcome the general negative valuation sentiment that has again come to the forefront. As we have commented in the past, that sentiment can be a contrary indicator, particularly if the indexes are not breaking down.
We are not looking for a surprise from the retail numbers Thursday, so there may be one. Seriously, the increase in the expected number took that away. Thus we are not certain if there will be enough positive news to break the market up and away from the 50 day. PG upped its bottom line, trading solidly higher after hours. Other stocks are ready to make the breakout and move up from support. The market is poised to make a move, but it was also poised for a bounce Tuesday as well.
Given the lack of volume thus far we will continue to look primarily at solid patterns that can yield good breakouts as well as solid tests of support. We will also continue to keep some downside plays at the ready in the even things break down. We see several forming up below resistance. No point in getting too aggressive at this point until the quiet market starts talking louder.
Support and Resistance
Nasdaq: Closed at 1396.59
Resistance: The 18 day MVA at 1414 and the 10 day MVA at 1415 team up. The August high at 1427. Price resistance at 1500 and the 200 day MVA (9138). 1574, the May low, is next.
Support: The 50 day MVA (1371.39). 1357.09, the October 1998 bear market low. July, August, and September interim highs at 1345. Some price support at 1300.
S&P 500: Closed at 904.96
Resistance: The July, August and September interim highs at 909 to 911. The 18 day MVA (911.33). 921 is some price resistance. The early November high at 925.66. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high.
Support: The 50 day MVA (899.95) along with the top of the late October consolidation range at 899. The bottom of the October consolidation range at 875 is some price support. The September 2000/May 2001 downtrend line at 862. The March down trendline at 848. 850 to 855 (the October 1997 and Q2 1998 lows).
Dow: Closed at 8589.14
Resistance: The 18 day MVA (8639) and the 10 day MVA (8643) team up as resistance. The late July and early September interim high at 8726 to 8762.14 (8745 closing). The early November high at 8800 is key. A range of resistance from 9000 on up to 9050.
Support: The exponential 50 day MVA (8520). The October high at 8500. Then 8250, the bottom of the October consolidation range.
Economic Calendar
12-10-02
Wholesale inventories, October (10:00): -0.3% actual, 0.2% expected, 0.4% prior (revised from 0.5%).
FOMC meeting (1:15): Rates unchanged, bias neutral.
12-12-02
Current account, Q3 (8:30): -$135B expected, -$130B prior.
Retail sales, November (8:30): 0.4% expected (upped from 0.3%), 0.0% prior.
Initial jobless claims (8:30): 378K expected (upped from 393K), 355K prior.
FOMC minutes, November (2:00)
12-13-02
PPI, November (8:30): 0.0% expected, 0.1% prior.
Core PPI: 0.0% expected, 0.5% prior.
Business inventories, October (8:30): 0.2% expected, 0.6% prior.
Michigan sentiment, December preliminary (9:45): 85.0 expected, 84.2 prior.
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TEAM TRADES
IDXC: A nice cup w/handle had formed, and with those patterns we can just sit back and let them work through the handle and breakout. IDXC remained on the radar and was moving early on good volume. It raced up to the breakout point within the first hour. With the market showing up and down action early in recent sessions, we were going to let it come back and test the move before we moved in. Around 10:25 it dipped but held above the point it fell back to after the morning run. When it started back up makign that higher low we were willing to step in. We were looking at this play as a stock play in an IRA, getting in at 17.70 as it moved up. It was a false move of sorts, as IDXC continued to move laterally until the lunch when it started edging higher, then taking off with 1.5 hours to go. Good volume and good start of the move.
End Part 1 of 2
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