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us stock market, stock prices
Begin Part 2 of 3
THIS WEEK
First, it is a short week. The stock exchanges will close Tuesday at 1:00ET and of course be closed on Wednesday. Then they are closed the following Wednesday. Thus, even with the rebalancing still ongoing (it runs through the week), there may not be a lot of action. Typically the market rallies between Christmas and the New Year's Day; it certainly needs a rally to get the indexes up and out of this breakdown range and eliminate the toppy looking patterns.
Still, that won't change the current sentiment, and that has shifted predominantly to concerns about war with Iraq, the weaker dollar, and the Venezuelan oil strike. Those have not been resolved and they create the current uncertainty that stocks have found so unpalatable of late. Those concerns are not unfounded to a certain degree. Higher oil prices as a result of reduced supply do to Iraq and Venezuelan shutdowns would drive oil prices even higher and that has a detrimental impact on economies as the consumer has to use more disposable income for gas and businesses have profits eroded by rising costs of doing business. That would erode the current improving economic numbers, numbers that have continued to show steady though slow improvement since the market started this rally back in October in anticipation of better economics. It is important to note, however, that OPEC has already said it would increase production to fill in any holes in supply a Venezuelan shutdown may cause, and it would be likely that OPEC would ramp up production to cover any Iraq shutdown as well.
Thus there is the competing forces of continued economic recovery (though experts continue to predict, as they have for the last few months, that it is failing) that is threatened by the prospects of higher oil prices and a nervous consumer if the war issues are not resolved. That is all the more reason in our book to get to work on a business stimulus package in addition to or in lieu of the consumer stimulus planned. In any event the indexes may very well provide a continued relief move up this week after the sell off with the Trent Lott issue put to rest and just the Iraq news being out a few days. Unless the rest of the stocks in the big indexes can shake off their patterns that are mimicking the indexes, however, a sustained move will be difficult. The economy is improving, and if the threats to that improvement are removed, the market will start to rally again. Right now the timetable as to when that might occur is up in the air, and thus the market continues to suffer from a lack of serious, committed buyers as the continued low volume demonstrates.
With that back ground we anticipate an attempt to break over the 50 day MVA and even a further move higher. With the lack of great building patterns in many of the familiar, household names that we saw back in October and November, we will continue to concentrate our upside plays on stocks in superior patterns and better sectors (e.g., scientific & technical). We will also continue to look at stocks that are breaking down or continuing in downtrends. A further relief bounce will set many of those plays up for a failed test of their downtrends, our favorite point to enter downside plays. Until the market shows us more we have to be very particular where we put the money. If it is going to recover it has some work to do to get the stocks that make up the big indexes back into more bullish patterns.
Support and Resistance
Nasdaq: Closed at 1363.05
Resistance: The exponential 50 day MVA (1372). The 10 day MVA (1382) and the 18 day MVA (1392). The August high at 1427 is the focal point. The 200 day MVA (1464). Price resistance at 1500. 1574, the May low, is next.
Support: 1357.09, the October 1998 bear market low is still holding. July, August, and September interim highs at 1345. Some price support at 1300.
S&P 500: Closed at 895.76
Resistance: The simple and exponential 50 day MVA (899), and the top of the late October consolidation range at 899. The July, August and September interim highs at 909 to 911. 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 bottom of the October consolidation range at 875 is some price support. The September 2000/May 2001 downtrend line at 855. The March down trendline at 834. 850 to 855 (the October 1997 and Q2 1998 lows).
Dow: Closed at 8511.32
Resistance: The October high at 8500 is some resistance that has not been totally cleared. The exponential 50 day MVA (8513). The top of the recent range at 8630. 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: 8250, the bottom of the October consolidation range. Then 8000.
Economic Calendar
12-23-02
Personal Income, November (8:30): 0.2% expected, 0.1% prior.
Personal Spending, November (8:30): 0.4% expected, 0.4% prior.
12-24-02
Durable goods orders, November (8:30): 0.9% expected, 2.4% prior.
12-26-02
Initial Jobless claims (8:30): 400K expected, 433K prior.
12-27-02
Michigan sentiment revision, December (9:45): 86.5 expected, 87.0 prior.
New home sales, November (10:00): 1M expected, 1.007M prior.
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SUBSCRIBER QUESTIONS
The Thursday night 'editorial' portion of the market summary in the reports (and there was a warning it was editorial before the soap box was pulled out) drew many responses. Many were in agreement about shrinking government and providing stimulus addressing the root problem. Many addressed the comments regarding the extension of unemployment benefits being useless as a form of stimulus and not the best way to spend dollars that were supposed to be used to stimuluate the economy. A lot of those comments correctly accused me of being insensitive to the unemployed who are exasperated by the inability to find a job in this economy.
My purpose was to further stir that exasperation and anger and to provoke responses, ideas, and hopefully action. It is easy to write about the problems, but so hard to come up with solutions that are acceptable to enough to get them enacted. Even if good ideas arise, it takes action (calls, letters, emails, you know, just being the squeaky wheel) to get an idea rooted so it can grow. I have had the unpleasant experience of graduating with degrees twice in my life when the country and the field I had studied for were in recession. Did what I was told, got my degree and even re-educated myself when my other field was dead, and still it was a struggle. I have been there and it is frustrating, daunting, and dispiriting. The one thing those experiences taught me was to face all of those emotions with a simple attitude: they can only say 'no,' it only takes one 'yes,' and that I can make that 'yes' happen. That helped me deal with the 50+ face-to-face 'no's' and the hundreds of 'thanks but no thanks' letters. Seeing so many in that same situation today and knowing it was caused through the poor choices those in power made is one of the reasons I am so angry and so adamant about getting the government to fix what it broke and help those that lost most everything get it back NOW while there is time to enjoy the rest of the lives that were tarnished.
As a result of the nerves touched, there were some great ideas that came out. One of the most innovative and one that should be palatable to all comes from another worker laid off but then re-educated at his own expense only to find no work in this economy. Here is the idea:
"I do agree that the Fed can and should do something about this problem and my thought is to provide businesses with a full tax credit for every person they hire. The business gets the tax credit and the Fed gets increased revenue as the formerly unemployed person is now a tax payer. The people currently working at the business and who are in all likelihood over worked will finally get some relief. The problem that we have is 20% of the people are doing 80% of the work. Pareto's Law in action.
Unfortunately I don't believe that this government is innovative enough to do something like this and if they do it will be so watered down as if to be non-existent. Don't believe all the rhetoric about things getting better because they are not."
This is an excellent idea. It addresses some of the roots of the problem and has the beauty of having an IMMEDIATE impact: it gets businesses to invest in their business (personnel make it all happen), it puts workers back to work and part of the productive system, it obviates the need for spending scarce resources on unemployment benefits, and it helps unlock more consumption by those unemployed put back to work. Combine that with a modest $2500 to $5000 investment tax credit for capital equipment purchases and you have one of the most powerful, directed, and immediate economic stimulus plans ever devised.
Keep the ideas coming, and please do your part and take action by calling, writing, and being that squeaky wheel to those in Congress and in the White House. If it is demanded often and loud enough they will listen.
THE PLAYS:
Good moves: AVID; GRMN; VZ; UNTD; SJM (looking ready to breakout)
Best Plays:
1) AIG: Ready to fall.
2) AVO: Very nice consolidaton on low volume as the storm rages.
3) AVP: Beautiful breakout test.
4) AFCO: Holding up so well you have to like it.
5) SAY: Now showing a volume spike after the shakeout.
6) UTHR: Very nice volume.
7) PFGC: Starting the fall.
8) HSIC: Ditto.
New Plays:
Upside:
Play Date: 12/21/2002
NTII (Neurobiological Technology--$6.48; -0.12; no options): Biotechnology
http://biz.yahoo.com/p/n/ntii.html
STATUS: Testing the breakout. NTII exploded out of its 8-month cup base in November, shooting from 4 to 6.50 in 4 sessions. It successfully tested that breakout in early December with a fairly steep drop that held the 18 day MVA on the low. It has moved to a new 2-year high and is making another test of the short term MVA. Stocks tend to make 4 rotations off of these levels before testing deeper toward the 50 day MVA. As NTII gives about $2 on each move off the short term MVA, that leaves us plenty of upside remaining on this move. Our first target is for the initial move, but we will let it test the short term MVA again if it is acting right, i.e., pulling back on lower volume, and ride it up further from there.
Volume: 57.9K Avg Volume: 65K
BUY POINT: $6.74 Volume=90K Target=$8.25 Stop=$6.18
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/ntii.html
Play Date: 12/21/2002
MBT (Mobil Telesys--$38.34; -0.03; no options): Wireless Communications
http://biz.yahoo.com/p/m/mbt.html
STATUS: Cup w/handle. We looked at MBT a few weeks back,but it never hit our buy point and then fell rather sharply in early December. It has since tested the 50 day MVA near 35.50 and has recovered to its pre-plunge levels in the otherwise very nice base. Accumulation is excellent at 8 up weeks on rising volume to 4 down weeks on rising volume, indicating that money continues to flow in despite the recent dip. Money flow is indeed jumping up sharply again, showing a positive divergence. Wireless has held up and managed to move up when most have been selling.
Volume: 101.9K Avg Volume: 166.8K
BUY POINT: $40.06 Volume=255K Target=$47.96 Stop=$37.26
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/mbt.html
Play Date: 12/21/2002
NSCN (Netscreen Technologies--$16.13; +0.09; optionable): Security software
http://biz.yahoo.com/p/n/nscn.html
STATUS: Pennant. NSCN is currently in a three-week pennant coming at the end of a nice rise off the summer lows under 10. NSCN was a new issue in December 2001 and it immediately started the current base in January. It is not ready for a breakout to a new high, but this is a good consolidation point after a strong run off the lows, and it has rested well for the next mmove. Accumulation since January is positive at 13 accumulation weeks to 11 distribution weeks, very good for this stage in the base when it is just starting to build the right side. Volume has been very low this month as NSCN formed the pennant, and that is what it should be; nice, quiet action in a consoldation works out the easy sellers and leaves the hardcore holders. Money flow into the stock is huge. A lot of positives.
Volume: 297.8K Avg Volume: 1.25M
BUY POINT: $16.69 Volume=1.8M Target=$20.15 Stop=$15.45
POSITION: QKN FC - June $15c (67 delta, low OI)
http://www.investmenthouse.com/ct/nscn.html
End Part 2 of 3
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us stock market
stock prices
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