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world stock market, us stock market
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1/06/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Monday: NTES; SINA
Buy alerts issued: LOOK; EUNI; BRCM; LXK; HLTH; ROIAK
Trailing stops issued: LMLP
Stop alerts issued: ETM; CEPH
Market stimulated by dreams of fiscal help.
Monday continued the late-week rally with broad gains. Once again the action was led by the large cap laggards, but there were more leading stocks in good patterns moving as well. This action is more in line with the move up in October and November, and is starting to put the indexes in better position for longer term gains as opposed to a quick rally that flames out.
Most stocks were up as the indexes rallied toward key resistance. The SP500 managed to clear and hold some resistance at 925. The DJ30 and Nasdaq both traded just over key resistance levels, but could not close out the session with breaks of that overhead. The market was moving on a continuation of last week's move and on the promise of fiscal stimulus. The democrats and republicans are once again trying to outdo one another with a stimulus package as they did in the 2000 election, and the market likes being fawned over. While it is nice to see stimulus getting attention, it would be much nicer to see some real stimulus in terms of size and targets. In any event, the market surged on rising volume, clearly pleased with the prospects for future growth.
THE MARKET
A very broad rally that saw above average volume on the NYSE and the Dow helped push the large cap index over some important near term resistance in the head and shoulders pattern and pushed the Dow and Nasdaq right up to similar resistance. These moves are shattering the head and shoulders patterns that had formed, but they have not completely broken up the party. Much of the action was based on the promise of new stimulus and the promise (rumor?) from OPEC that it would produce enough oil to prevent upsets from the Venezuelan strike. Seems as if OPEC would need to already be doing that as oil has spiked though it did back off Monday.
The action did continue that rally as we anticipated, and it has already carried the indexes up to the next resistance. It did it with more force than we anticipated, and that provides the potential for an even further move from here. We saw enough to get us into several more positions as the rebounding stocks that helped lead the way up in October (e.g., KLAC, BRCM) as well as a greatly improved number of breakout stocks doing just that. The latter was a very refreshing element in any rally that aspires to be more than a bounce up to resistance. So far this one is showing some decent strength.
Market Sentiment
VIX: 27.41; -0.57
VXN: 43.45; -2.26
Put/Call Ratio (CBOE): 0.67; -0.09
Nasdaq
Ran up to resistance at the August high, but could not quite close over that level.
Stats: +34.24 points (+2.47%) to close at 1421.32
Volume: 1.57B (+36.25%). Rising volume, the highest since December 20, climbing almost to average.
Up Volume: 1.3B (+608M)
Down Volume: 243M (-192M). All buyers on Monday.
A/D and Hi/Lo: Advancers led 1.93 to 1. Another solid breadth gain, a return more to what the market showed in October and November.
Previous Session: Decliners led 1.08 to 1
New Highs: 97 (+26)
New Lows: 16 (+2)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Up out of the gates and did not show any wavering until the last hour when techs were trading just over the August high at 1427. It lost its nerve at that point, however, and closed below that high that has been the barrier since the move off of the October low. Yes Nasdaq rallied up to 1521 on the high on the November run, but it is this August high that has acted as repeated resistance and needs to be broken up with some authority to break up the topping attempt and also put Nasdaq back on the uptrend track as it reaffirms the higher high that was hit in November. It has double resistance ahead, still at 1427 and then at the 200 day MVA (1442). If it can take those out on this run and then come back and hold them on a test it will be in a position of strength moving forward.
S&P 500/NYSE
Jumped over near term resistance and then beat the early November high (925.66) on the close as volume moved above average again for the first time since 12-20.
Stats: +20.42 points (+2.25%) to close at 929.01
NYSE Volume: 1.414B (+26.56%)
Up Volume: 1.138B (+606M)
Down Volume: 266M (-312M)
A/D and Hi/Lo: Advancers led 2.96 to 1
Previous Session: Advancers led 1.18 to 1
New Highs: 131 (+62)
New Lows: 11 (+1)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Reports that the Bush stimulus package would be twice the size expected as opposed to half the size expected was apparently good enough news to break the large caps out of their range, and they did so on a good volume surge. Now because SP500 never took out the August high as did Nasdaq, the large cap index still has a lot of work to do, taking out the December high (954.28) just ahead of the August high (965). If it can do that on the close it will have broken the string of lower highs and will have changed the character of this prime average. It is a tall order as the 200 day MVA (955) is ahead as well. We don't think it will make such a dramatic move on this run as it has already moved 54 points from last week's close. A pause for a brief pullback at 950 would be best, but volume needs to remain strong on the move up and then tail off on a rest. That would be the indication that the move has some underlying strength.
DJ30:
On a closing basis the DJ30 managed to top the early November high (8771.01), just missing taking out the early November intraday high at 8800 (traded at 8800.59 intraday Monday). Volume moved back above average for the 30 blue chips. The Dow is in the process of breaking up the short term head and shoulders pattern, leaving the December high (9043.37 intraday) and the August high (9077.01). At the same time it will also have to deal with the 200 day MVA (8968.35). In short it too has significant resistance to deal with but is moving to take it out. If it can maintain the volume we would anticipate a move to near 9000 where it would have to take a breather. Then we see if it can change the character of the index with a higher closing high.
Stats: +169.77 points (+1.97%) to close at 8771.46
Volume: 1.414B (+26.56%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
The big event Tuesday will be the Bush speech outlining his stimulus package. With the big Monday stock move on the purported increased size, it will be hard for the actual package to provide much more punch. Perhaps if there are some investment tax credits in there that no one is anticipating . . . Oh, that's right. Christmas is over.
Other than the Bush economic package that no less than 25 scholars have been quick to point out will provide no stimulus (and not an unsurprising number offering no counter proposal at all or just ducking the issue and saying none is needed based on what they see from their perch in the ivory tower), there is the November factory orders report and some upside earnings warnings after the Monday close. So many have been worried about the downside warnings (e.g., ROOM and its subsequent torching) that the upside 'warnings' have been a surprise. EMC said it would earn 2 cents as opposed to losing 2 cents as customers spent more than expected. HTCH in the storage sector said it was going to hit the high end of its projected range. MERQ also guided higher. That had technology momentum whipped up a bit more after hours.
We were concerned about the ability to continue to move over near resistance and the left shoulder of the head and shoulders patterns that had tried to form. Volume came in and pushed the SP500 over both levels. If fund managers continue to hear what they like, Nasdaq and DJ30 are ready to do the same. Doing so would be a very important milestone for Nasdaq.
Market moves are always a series of hurdles, particularly when overcoming resistance levels from a prior downtrend. Seeing more breakout stocks Monday along with the continuing rebound in many of the large caps was encouraging. This is similar to how the market rallied in October and November: the large caps rebounded along with stocks in good patterns breaking out. The latter helps fill in some of the gaps in the move. Seeing the good moves we let the market do the decision-making and we were entering positions that were showing solid action.
Overall the move was good but not stellar. Volume did not really match the size of the move even with everyone back from holiday. That keeps us wary of the upcoming resistance, but many of our plays are moving quite well in the market so we will let them run and add the select few as they present good buying opportunities.
Support and Resistance
Nasdaq: Closed at 1421.32
Resistance: The August high at 1427. The 200 day MVA (1442). Price resistance at 1500. 1574, the May low, is next.
Support: The simple 50 day MVA (1388). 1357, the 1998 bear market low. July, August, and September interim highs at 1345. Some price support at 1300. 1250 is the next price support after that.
S&P 500: Closed at 929.01
Resistance: Price resistance at 954.28 from the December high along with the 200 day MVA (955). 965, the September 2001 closing low along with the August 2002 high.
Support: The early November high at 925.66 was key resistance and with 921 it colud provide support on any test. The July, August and September interim highs at 909 to 911 are next. The simple 50 day MVA (903). The exponential 50 day MVA (898). The bottom of the October consolidation range at 875. The September 2000/May 2001 downtrend line at 847. 850 to 855 (the October 1997 and Q2 1998 lows). The March down trendline at 821.
Dow: Closed at 8773.57
Resistance: The early November high at 8800 is key to break up the head and shoulders pattern. The 200 day MVA (8968). A range of resistance from 9000 on up to 9050. The August high at 9077 would change the downtrend.
Support: The late July and early September interim high at 8726 to 8762.14 (8745 closing) have not been completely cleared. The simple 50 day MVA (8558). The October high at 8500. The exponential 50 day MVA (8507). 8250, the bottom of the October consolidation range. Then 8000.
Economic Calendar
1-06-03
ISM services, December (10:00): 54.7 actual, 55.8 expected, 57.4 prior.
1-07-03
Factory Orders, November (10:00): -0.6% expected, 1.2% prior.
1-08-03
Consumer credit, November (2:00): $3.8B expected, $1.5B prior.
1-09-03
Wholesale inventories, November (10:00): 0.2% expected, -0.3% prior.
1-10-03
Non-farm payrolls, December (8:30): 21K expected, -41K prior.
Unemployment rate, December (8:30): 6.0% expected, 6.0% prior.
Hourly earnings: 0.3% expected, 0.3% prior.
Average workweek: 34.2 expected, 34.2 prior.
SUBSCRIBER QUESTIONS
Q: What does "hedge" mean?
A: Think of the old phrase 'hedge your bets'. When you hedge you are taking steps to mitigate the risk in the event you are wrong. There are many ways to hedge based on what type of investment made and what type of risk you are concerned about. One of the most common in the investment world is seen with mutual funds buying puts at certain times to manage the downside risk. Mutual funds try to avoid continually buying into and selling out of positions as it logistically it is difficult to do this on the QT and it also can burn up the fund performance in the transaction costs associated with huge amounts of stock. They prefer to buy and hang on as long as feasible. When they are concerned about the market selling, they will purchase protective puts to hedge. If their stock positions decline in value the put will rise in value, offsetting to a certain extent the drop in stock price. This way the funds can avoid having to sell out on each market drop (at least for awhile). It is very similar to credit spreads where you sell one option and buy the other; the option bought acts as insurance if the position moves against you.
There are many other types of hedging with different instruments. The above was just one common method.
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THE PLAYS:
Good movers: BRCM; BSX; ECL; EUNI; HLTH; MVL; NTES; SINA; SYMC; VAR; VZ, etc.
New:
CCCG (CCC Information Services--$19.60; +1.11; no options): Management services
http://biz.yahoo.com/p/c/cccg.html
STATUS: Cup. This sector continues to improve as economic prospects do likewise. CCCG broke out of a nice cup at 14 in October and rallied to over 20. There it formed this current 9-week base sporting solid accumulation at 3 accumulation weeks to 1 distribution week. The pattern is good and CCCG has plenty of upside room to run on another breakout.
Volume: 82.929K Avg Volume: 115.136K
BUY POINT: $20.05 Volume=173K Target=$25.12 Stop=$18.65
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cccg.html
NBTY (NBTY, Inc.--$19.21; +1.57; optionable): Drugs
http://biz.yahoo.com/p/n/nbty.html
STATUS: Cup w/handle breakout. NBTY formed an 8.5 month base showing accumulation at 10 up weeks on rising volume (accumulation) to 5 down weeks on rising volume (distribution). During December it formed its handle that rode up the 18 day MVA on the close but tested lower intraday. Monday it blasted through resistance, breaking out on an excellent volume surge. A good breakout and still within the buy point.
Volume: 1.178M Avg Volume: 585.045K
BUY POINT: $19.38 Volume=878K Target=$23.25 Stop=$17.88
POSITION: NBQ FW - June $17.50 (69 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/nbty.html
OVRL (Overland Storage--$15.83; +0.84; optionable): Data storage devices
http://biz.yahoo.com/p/o/ovrl.html
STATUS: Cup w/handle breakout. QLGC and others in the sector enjoyed a good session and OVRL was not to be left out, surging out of its 6-month base on a strong volume jump. After hours EMC said it was going to beat the street, and that should continue the sector's momentum. Accumulation in the base is solid at 6 accumulation weeks to 4 distribution weeks. OVRL has a new high at 17.38; we like stocks that are breaking to a new high.
Volume: 534.934K Avg Volume: 70.272K
BUY POINT: $16.81 Volume=105K Target=$20.25 Stop=$15.63
POSITION: QOJ EC - May $15c (68 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/ovrl.html
Revisited:
Play Date: 12/07/2002
AFCO (Applied Films--$20.44; +0.73; optionable): Semiconductor
http://biz.yahoo.com/p/a/afco.html
STATUS: Ascending wedge. AFCO formed the current 10-month cup base, the past 5 weeks moving through an ascending wedge using the 18 day MVA (19.70) as the bottom of the wedge. Volume edged higher Monday as AFCO moved up toward the breakout level. We will watch for a strong volume move to enter positions.
Volume: 156.455K Avg Volume: 186.181K
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
Play Date: 12/04/2002
MATK (Martek Biosciences--$24.92; +0.72; optionable): Biotechnology
http://biz.yahoo.com/p/m/matk.html
STATUS: Testing the 18 day MVA. MATK is working through a 9-month cup base, marching up the short term MVA after testing the 50 day MVA (21.50) in December. MATK has pulled back to the 18 day MVA (23.87) on falling volume. It has tested that level for the past four sessions and looks ready to continue the move higher from here. Money flow is surging up ahead of price.
Volume: 222.59K Avg Volume: 240.5K
BUY POINT: $23.39 Volume=300K Target=$27.94 Stop=$23.88
POSITION: KQT FD - June $20c and/or Stock
http://www.investmenthouse.com/ci/matk.html
End Part 1 of 2
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world stock market
us stock market
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