|
|
world stock market, us stock market
* * * *
12/19/02 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Friday: None issued
Buy alerts issued: MATK; NTES
Trailing stops issued: None issued
Stop alerts issued: CREE
HOLIDAY SCHEDULE
Monday: Market stats summary and play tables
Tuesday, Wednesday: No reports
Thursday: Market summary, best plays
Saturday: Full report
SUMMARY:
- Relief rally fueled by expirations, rebalancing.
- Q3 GDP up 4% as expected but still mostly led by the consumer.
- Rally was pleasant, but same obstacles overhang the market: slow economic recovery and a war that seems inevitable.
- Subscriber Questions
Selling gives way to a relief bounce.
The Nasdaq and SOX as well as many of their components ended Thursday with the look as if they were ready to rally after three weeks of selling. That is how it started Friday, with the Nasdaq and SOX in the lead. Then the Nasdaq hit hits 50 day MVA and failed to take it out. That swing and miss seemed to take the guts out of the techs. They dove off of their highs and while closing positive, never regained any momentum. That was taken by the Dow which was joined by the SP500 in rallying to close near session highs.
At first blush volume looked strong, rising above average for the first time in weeks on both the Nasdaq and NYSE. Options expiration, the first ever individual stock futures expiration, and Nasdaq 100 and SP500 rebalancing, however, all worked to drive volume higher as institutions worked to swap stocks in and out of portfolios to match the new look of these indexes. Thus it is hard to say that the volume was the result of a surge of buyside interest at these levels. The lack of strong technology participation left a hole in the rally in addition to the fact that resistance won out each time it was approached. This was a reflex bounce that was set up; it started as expected, but for now it has all the hallmarks of being just a bounce. That can change, but until then treat it with caution.
THE MARKET
They were poised for a relief rally and they gave it Friday. NYSE action was broad, Nasdaq not so much. Volume was up, typically indicating more than just a relief bounce, but it was helped by a lot of expirations and rebalancing. Maybe it will turn into more than just a bounce, but Friday resistance levels kept the indexes well in check and the indexes did nothing to break up the toppy patterns that have formed.
Sentiment Indicators
That gloomy sentiment we reported Thursday night had indeed reached a level to provide a bounce. The question is whether it was enough to provide continued fuel to push stocks higher. When the gloom hit these levels back in late October and during the early November pullback the patterns were a bit different. For example, the semiconductors were in what we refer to as 'building' patterns, i.e., still way down in their larger bases, but setting up to make significant moves over or off of resistance. The wireless telecoms were doing the same thing as well as some other big tech sectors. On top of that the early market leaders were forming very nice bases. All of this was based on anticipation of better economic news as stocks started to make their moves. When the better economic news actually came out, the moves accelerated even more.
Right now there are still stocks in leadership rolls that have not broken down. Some are testing their breakouts while others are forming up and moving out of new bases. The telecoms (e.g., NXTL, VZ, BCGI) are still in excellent shape as are many smaller business services stocks (suggesting that there is some ongoing business recovery), scientific & technical instrument stocks, and smaller consumer stocks are in very good shape. They are moving up, breaking out, testing the breakout, and then moving up further. Very nice action. We don't include gold stocks in that mix as they are driven by short term swings in world events.
There appears to be no other group underlying these stocks, however, as there was in October and November. That does not mean these stocks won't continue to perform, but without the rest of the market setting up with good building patterns to support the overall market averages, it gets harder and harder for the stronger stocks to continue their moves en masse. When it all comes down to it, the big M (for 'market') controls. The big indexes have fallen back from their prior breakouts and are struggling to hold and break up the toppish patterns they are forming. They have not broken down, but they have to make the moves that re-establish their breakouts and new uptrends.
VIX: 31.47; -3.08
VXN: 48.51; -0.96
Put/Call Ratio (CBOE): 0.88; -0.07. Still holding at the very high end of the range even as the indexes enjoyed a strong move up.
Nasdaq
Gapped up, tapped the 50 day MVA on the high, but could not take it out. Did not show a lot of strength.
Stats: +8.95 points (+0.66%) to close at 1363.05
Volume: 1.996B (+20.38%). Huge volume jump, the highest since 11-21. Technically an accumulation day, but with all of the rebalancing and expirations it was somewhat artificial. Moreover, the Nasdaq failed to make much headway, more of a sign of churning than a powerful move higher.
Up Volume: 1.22B (+616M)
Down Volume: 680M (-349M)
A/D and Hi/Lo: Advancers led 1.32 to 1. Very mediocre breadth.
Previous Session: Decliners led 1.2 to 1
New Highs: 54 (+12)
New Lows: 67 (-10)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Two shots at the exponential 50 day MVA (1372) were rebuffed, and the techs just lost their stomach even as the Dow and SP500 rallied late in the session to close near session highs. While both the Nasdaq and the SOX showed signs Thursday they wanted to rally, holding up better than the rest of the indexes (the SOX looked particularly the best), after the first run of the session they gave up their leadership roles.
In the end the Nasdaq showed a very tight doji (following the hammer doji Thursday) right below the 50 day MVA on a big volume jump, barely moving back into the recent trading range. Maybe it is still massing on the borders for a move higher, but the small gain on the big volume surge was less than consoling. It looked a bit like churning, i.e., where stocks trade hands on high volume. When this occurs at the top of a run that is a bad sign: sellers have caught up to the buyers (there are not enough buyers to push it higher and overcome all the sellers). As Friday's action occurred after three weeks of selling it can be a positive, i.e., the buyers have caught up with the sellers, buying all the stock for sale and thus keeping the market from falling further. As more buyers come into the market the index starts back up. Those buyers still have to prove they are going to show up.
S&P 500/NYSE
The large caps outperformed the large cap techs, managing a solid gain to punch right back into the recent consolidation range.
Stats: +11.51 points (+1.3%) to close at 895.76
NYSE Volume: 1.743B (+28.64%)
Up Volume: 1.327B (+930M)
Down Volume: 428M (-527M)
A/D and Hi/Lo: Advancers led 2.02 to 1
Previous Session: Decliners led 1.19 to 1
New Highs: 62 (+29)
New Lows: 43 (-14)
The Chart: http://www.investmenthouse.com/cd/$spx.html
A solid move up, but the large caps also could not break over the 50 day MVA (899). There were many positive attributes to the session: higher volume, solid point gain, closing near the session high. It was a good start, but there is much work to be done. First clearing the 50 day MVA, then clearing the recent trading range top (911; that is also the interim tops from July, August, and September), then breaking up the head and shoulders pattern by clearing 926. With that in mind, however, the best that can be said for now is that the index is back in its consolidation range; hardly a ringing endorsement at this point.
DJ30:
The best performer on Friday, rallying on some huge Dow volume. The interesting thing about the Dow as opposed to the other indexes is that there is no rebalancing going on with a lot of these stocks. Sure they had to be bought and sold as part of the overall rebalancing, but none of these stocks were themselves involved in the actual change. In any event, the Dow rallied hard on volume, closing at the session high. That action still left it below the 50 day MVA (8512 - 8513, simple and exponential) though it did get it back inside the recent consolidation range, something it had to do right away. It has to clear the 50 day MVA and take out 8800, the early November high that marks the left shoulder of the head and shoulders pattern. That is a tall order given the evolution of the pattern and what is behind it, e.g., the uncertainty of the Iraq war.
Stats: +146.52 points (+1.75%) to close at 8511.32
Volume: 1.743B (+28.64%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
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.
End Part 1 of 2
|
world stock market
us stock market
|
