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us stock market, trade stock
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12/12/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: LMLP (took some $ off the table with a stellar gain)
Buy alerts issued: CREE; MERQ; GTK; MSN; CPHD
Trailing stops issued: None issued
Stop alerts issued: SFNT (had second thoughts on this one)
Its up, its down, its in between.
Thursday continued the same trading action seen all week: choppy, back and forth, narrow range, and low volume, all right over the 50 day MVA. An early rally after another 50 day MVA test turned over, purportedly on more concerns about nerve gas from Iraq falling into the hands of terrorists and the implications both for war with Iraq and terrorism. Another test of the 50 day MVA and then a gradual, grudging climb back to the middle of the session range. Another day of running, or more accurately, walking in place.
THE MARKET
Another session of light trade above the 50 day MVA that you can look at as half full or half empty. The latter view is that the short term head and shoulders pattern on the large indexes have not been broken as the indexes were into serious water treading Thursday. If they fail at that level they could roll down further. The former view is that the indexes did hold the 50 day MVA again and volume was even lower as the Dow and SP500 closed the session lower, continuing the consolidation of the gains in a more orderly manner.
Moreover, even as the large indexes continue to churn through this consolidation, the small caps are starting to move higher. The SP-600 managed a 0.6% gain Thursday, the best performance of the widely followed indexes. Indeed, the past few sessions we have seen many of the small cap plays on the report make stellar breakouts or impressively resumed their rallies. Smaller cap stocks from retail, business services, regional banks, and insurance are taking off to the upside. There may be the general, media reported idea that the economy is in a soft patch and business spending is not increasing, but these stocks are trying to tell a different story. This time of year, however, is almost always good for the start of a small cap run.
Sentiment Indicators
VIX: 30.81; -0.59
VXN: 51.05; -0.57
Put/Call Ratio (CBOE): 0.77; +0.01
Nasdaq
The tech index posted a gain on the session, but hit the 18 day MVA on the high and gave most of the gain back. Same old action.
Stats: +2.96 points (+0.21%) to close at 1399.55
Volume: 1.417B (-0.74%). Volume remained below average, edging lower on the price gain.
Up Volume: 811M (+68M)
Down Volume: 575M (-86M)
A/D and Hi/Lo: Decliners led 1.03 to 1. No movement from Wednesday.
Previous Session: Advancers led 1.02 to 1
New Highs: 39 (+3)
New Lows: 40 (+3)
The Chart: http://www.investmenthouse.com/cd/$compq.html
The Nasdaq tried to make another stronger move, but it had not volume and stalled at the 18 day MVA on the high (1411.69). The move kept it below the August high at 1427 and still in that potential head and shoulders pattern forming since the early November high. It has held the 50 day MVA on the Monday low (1372.49) and posted a weak rally to the 18 day MVA. From here it will most likely walk sideways a bit more unless there is some stellar sentiment Friday. It is getting close to making its move; it needs a trigger.
S&P 500/NYSE
Tapped the 18 day MVA on the high as well and fell back to close again just over the 50 day MVA.
Stats: +0.01 points (0%) to close at 901.58
NYSE Volume: 1.224B (-3.3%). Volume backed off even further below average on the selling.
Up Volume: 625M (+18M)
Down Volume: 599M (-46M). Dead heat.
A/D and Hi/Lo: Advancers led 1.15 to 1. Another standoff.
Previous Session: Advancers led 1.23 to 1
New Highs: 40 (0)
New Lows: 28 (+6)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Moving nowhere in a hurry, trading higher then lower and then splitting the difference on the close. The move kept the large caps over the 50 day MVA (900.01) but also below the early November high at 925. That is the key level that the index needs to break over on the next move higher. The SP500 is setting up for that move with this low volume lateral movement.
DJ30:
Man. Same story, different index. The blue chips traded up to the 18 day MVA on the high (8615) and down to the 50 day MVA on the low (8510.84) before closing in the low end of the trading range. As with the SP500, that keeps the Dow still trying to consolidate its gains and still in the potential head and shoulders pattern. 8800 is the key price to break (the early November high) on the next serious rally attempt.
Stats: -50.74 points (-0.59%) to close at 8538.4
Volume: 1.224B (-3.3%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
The action remains very quiet though we are seeing small caps form up and breakout and other breakouts rallying again after testing the breakouts. All of this is occurring as the household, brand names are wallowing through the sessions on low volume. The fact that small caps are forming up and breaking out and other early leaders are starting up on good volume is a very positive development. Again, it is that rotation that is the key to the market. It may not be moving into the well-known names at the moment, but money is moving into other areas of the market. It is not running away, and that is key.
Overall the economic numbers continue to improve at their own leisurely pace. Actually we believe it is picking up more steam than the economic reports are indicating, but it is not rip-roaring and still needs help. Still there are many business service stocks that have formed good patterns and are breaking out with others forming up right behind them. Stock prices anticipate news events in the future; they do not reflect what happened last month or the month before.
With that in mind, while we view this consolidation with the usual dose of apprehension, particularly given the technical patterns in the indexes. Overall, however, the market has not been distributing heavily as it works through this consolidation, and with the economic situation still improving and the promise of more stimulus (at least by name) the outlook shows continued improvement. Indeed, there is the chance of a really good 2003 economically speaking of the stimulus is passed with haste and businesses and the market gain confidence from that action.
What we are doing now is building positions for the next upside move. This takes discipline and purpose, keeping in tune with what the overall market is doing. The market moves through ebbs and flows. It rallied off the October lows, it moved laterally, it rallied from there, pulled back, and then rallied again. Now it is in another pullback/consolidation phase. During each of those consolidations we were doing what we are doing now, i.e., building positions in anticipation of the next big move. We are not going out and buying any old stock and hoping that the next rising tide will lift them all, but we continue to look at solid patterns and the early leaders that are pulling back to consolidate their gains as well. They tend to start moving before the rest of the market, and the past two days we have seen them start to move again. We work our way into these stocks, and then when the next big move comes we are in the nice position of watching those that were apprehensive and not moving in when the stocks told them it was time to move in frantically bidding up the prices of our stocks as they want to get in on the action.
Friday is the Michigan sentiment statement about 15 minutes into trading. There was some positive after hours news with UTX upping guidance and affirming going forward and ADBE, but no barn burners. The market is getting close to making its move, but it may not come Friday. Thus we will continue to do what we have been doing, moving in on solid stocks as they make their moves, building positions for that next run. Many plays are already posting nice gains for us, and when the next run comes they will jump up to the targets.
Support and Resistance
Nasdaq: Closed at 1399.55
Resistance: The 18 day MVA at 1412.28 and the 10 day MVA at 1412.10 are still teamed up. The August high at 1427 is the focal point. Price resistance at 1500 and the 200 day MVA (1479.63). 1574, the May low, is next.
Support: The 50 day MVA (1372.49). 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 901.58
Resistance: The July, August and September interim highs at 909 to 911. The 18 day MVA (909.71). 921 is some price resistance. The early November high at 925.66 and key resistance. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high.
Support: The 50 day MVA (900.01) 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 864. The March down trendline at 846. 850 to 855 (the October 1997 and Q2 1998 lows).
Dow: Closed at 8538.40
Resistance: The 18 day MVA (8628) and the 10 day MVA (8624) still teamed 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 (8521). 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): -$127.0B actual, -$135B expected, -$127.6B prior (revised from -$130B).
Retail sales, November (8:30): 0.4% actual, 0.4% expected (upped from 0.3%), 0.1% prior (from 0.0%).
Initial jobless claims (8:30): 441K actual, 378K expected (lowered from 393K), 358K prior (revised from 355K).
FOMC minutes, November (2:00)
12-13-02
PPI, November (8:30): 0.0%, 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
MSN: An early leader that was testing its breakout, MSN was up early on the retail sales news on some outstanding volume. Outstanding volume. It moved laterally for 15 minutes or so and started higher and that was enough for us with all of the volume. The stock was trading 4.85 by 4.90. The move was strong, we did not want to miss it, so we put the limit in at the ask and with all of the trade ongoing we did not have to wait. The reason we like this was that the stock was that early leader that pulled back and tested the short term MVA and started back up on strong volume. That is picture perfect action.
THE PLAYS:
NEW PLAYS:
AMLN (Amylin Pharmaceuticals--$18.05; +0.08; optionable): Drugs
http://biz.yahoo.com/p/a/amln.html
STATUS: Ascending wedge. In September AMLN broke out of a base in excess of a year in length. It ran to 18 in October and has since moved more or less laterally up the 50 day MVA forming the current ascending wedge base. The stock has been under accumulation for a long time (11 accumulation weeks to 3 distribution weeks since March), and this base is a good consolidation of the gains thus far. The lateral move works out the profit takers, and the continued higher lows builds pressure from below the breakout of the constant highs running from 18 to 19. We like this type of base that follows a cup breakout; a strong combination pattern.
Volume: 542.35K Avg Volume: 954.681K
BUY POINT: $18.75 Volume=750K Target=$22.75 Stop=$17.25
POSITION: AQM DC - April. $15c (72 delta) and/or Stock
http://www.investmenthouse.com/ci/amln.html
HLTH (Webmd Corp.--$8.5; +0.3; optionable): Healthcare software
http://biz.yahoo.com/p/h/hlth.html
STATUS: Cup w/handle. HLTH rallied sharply off the October lows to form the right side of its base. It has run straight up the 10 day MVA and the pullback that started early this month is the first break it has taken. It needed to take a deeper pullback and tapped down to the 18 day MVA (8.25) Tuesday and Wednesday before starting back up Thursday on some rising though still below average volume. Accumulation in the base is excellent at 8 accumulation weeks (up weeks on rising volume) to 4 distribution weeks (down weeks on rising volume). Very solid and we are looking at picking it up on this move off the 18 day MVA for the next run.
Volume: 1.82M Avg Volume: 2.049M
BUY POINT: $8.85 Volume=3.1M Target=$11.35 Stop=$8.23
POSITION: HUT DU - April $7.50c (71 delta) and/or Stock
http://www.investmenthouse.com/ci/hlth.html
SAY (Satyam Computer Services--$13.19; -0.09; no options): ITS software
http://biz.yahoo.com/p/s/say.html
STATUS: Cup w/handle. Forming the handle to its base that started in January. Outstading accumulation at 12 accumulation weeks to 5 distribution weeks. SAY has started to move laterally, still holding the 10 day MVA (13), but will most likely test toward the 18 day MVA at 12.65 a few times before it is ready to make a stronger breakout. We will let it form up and make the move. Solid accumulation.
Volume: 127.4K Avg Volume: 165.09K
BUY POINT: $13.48 Volume=255K Target=$16.98 Stop=$12.54
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/say.html
Current Revisited:
Play Date: 12/07/2002
AFCO (Applied Films--$18.75; -0.19; optionable): Semiconductor
http://biz.yahoo.com/p/a/afco.html
STATUS: Cup w/handle. Very nice handle forming to the base as AFCO tests back to the 18 day MVA just over 18. The move back to the 18 day has been on lower, below average volume, showing a tight doji Thursday as it did. Solid accumulation supporting the base.
Volume: 95.569K Avg Volume: 168.454K
BUY POINT: $20.85 Volume=225K Target=$25 Stop=$18.79
POSITION: UOF DW - April $17.50c (55 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/afco.html
End Part 1 of 2
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