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world stock market, us stock market
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1/08/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Wednesday: MVL
Buy alerts issued: None issued
Trailing stops issued: None issued
Stop alerts issued: None issued
Retreat from resistance continues on lack of good news.
As anticipated the market continued to fall back after its unsuccessful try at key resistance, pulling back to near support as volume backed off. A load of negative news set the stage, and when an early morning recovery attempt failed the goose was pretty much cooked for the day.
The negatives started with Alcoa's big and unusual earnings miss (9 cents). It cited reduced aluminum demand, but analysts felt cost cutting would help make up the difference. It did not, and AA also announced an additional 8000 layoffs for 2003. Then there was Gateway lowering its earnings and revenues estimates as it continues to fail. It tried to compete by slashing prices but could not do the volume it needed to make the difference. The future for Gateway looks bleak. It once had a chance to merge with Compaq several years back but our sources at the time told us that one ego was getting in the way of the deal. That ego may not be so big these days, and a merger/acquisition may be the only thing that saves the company.
There were other warnings and misses such as MGM/Mirage that also weighed on the action. A telecom sector downgrade did not help either. The weaker dollar, now at the lowest level in almost three years also played a key roll. Bill Gross at Pimco said he favored a weak dollar policy as helping the U.S. and the dollar sank even more. When the world's largest bond fund manager talks there are a few listening. While a weak dollar may help U.S. manufacturers, a review of weak dollar periods never helps as much as the proponents would lead you to believe. Why? Because a weak dollar historically accompanies periods of very weak U.S. economic growth. Dollars are not in as much demand because no one is investing in U.S. business. That is accompanied by lower stock prices: low economic output/growth equals lower earnings. On top of that, when the U.S. economy is down what usually happens with the world economy? It is down as well. Even if CAT machinery is cheaper it won't mean that much if the rest of the world is down as well and does not need the machinery even at the lower relative price. Thus while exports might increase slightly because of a weaker dollar, it is a tepid victory as the rest of the economy and markets suffer. If world economies are strong they will need our products and have the money to pay for them. If they are weak, they won't buy them even if they are cheaper.
THE MARKET
The retreat from resistance continued Wednesday as all indexes turned lower with the Nasdaq and SOX leading the way lower as usual. Key to the move was volume falling appreciably on the selling as well as the indexes holding support. Likewise, many of the big movers in the recent move fell back on lower volume as well. This is along the lines of what we expected in the Tuesday report as the indexes had about as much good news as they could absorb for the time being.
While volume was lower on the pullback, the size of the losses are another thing to consider. Nasdaq dropped 2.1% and most of the indexes thudded down to support in one quick move. You prefer to see an orderly pullback of a few sessions with more grudging losses. The 'easy come, easy go' nature of the buying and selling in the market, while not distribution, does show there is a certain lack of commitment.
If volume stays light Thursday and the indexes can stem the losses after an intraday test below support, they will be set up well for the Friday jobs report. Good news would help send them up once again for a run at key resistance. Of course the jobs news would have to be positive, and there is little evidence at this point that there is any job creation ongoing.
Market Sentiment
VIX: 28.42; +0.94
VXN: 44.56; +1.6
Put/Call Ratio (CBOE): 0.89; +0.23. Put buying shot right back up as the market sold, indicating continued anxiety about the ability of the market to rise. As a contrary indicator this is a positive for the upside.
Nasdaq
Gapped below the August high and sold all session.
Stats: -30.5 points (-2.13%) to close at 1401.07
Volume: 1.459B (-17.05%). Volume shrank to below average on the pullback. That indicates there was not widespread dumping and indicates a higher likelihood of holding at support.
Up Volume: 228M (-910M)
Down Volume: 1.217B (+619M)
A/D and Hi/Lo: Decliners led 1.73 to 1
Previous Session: Decliners led 1.13 to 1
New Highs: 60 (-37)
New Lows: 36 (+1)
The Chart: http://www.investmenthouse.com/cd/$compq.html
The move tired as anticipated, and fell further than we would want in one session. It is still above support where the simple 50 day, 10 day, and 18 day MVA converge at 1392. We look for the Nasdaq to test and even undercut that level intraday Thursday but hold near it on the close. That sets up another run at the 1427 resistance of the August high if the employment data is a bit positive.
S&P 500/NYSE
The try of resistance at 925 was brief, and now the large caps have thudded to the July, August and September interim highs, the next support level.
Stats: -13 points (-1.41%) to close at 909.93
NYSE Volume: 1.429B (-8.02%). Still above average but lower on the selling. It is worth noting that Alcoa traded over 130 million shares but its daily average is 3.1 million.
Up Volume: 385M (-263M)
Down Volume: 1.052B (+168M)
A/D and Hi/Lo: Decliners led 1.68 to 1
Previous Session: Decliners led 1.54 to 1
New Highs: 116 (+15)
New Lows: 22 (+12)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Large caps were not immune, selling to the 909-911 area that marks the July, August and September interim highs. It is also just above the moving averages that have bunched up just over 900 (simple 50 day MVA at 904; exponential at 899.8). There is a lot of price support at 900 as well. With the lower volume selling we anticipate the large caps will test the 900 level and hold for another run to conquer resistance at 927 if there is some more improving economic news.
DJ30:
Similar to the SP500, the blue chips fell to near support above the converging moving averages (simple 50 day at 8569; exponential at 8519). There is also price support from prior highs and consolidation at 8500. Volume was lower though still above average. Again it is noteworthy that AA accounted for 128 million of the volume, considerably raising the volume on the session. We anticipate the Dow will test 8500, perhaps undercut it intraday, and then try another run on some improving economic numbers.
Stats: -145.28 points (-1.66%) to close at 8595.31
Volume: 1.429B (-8.02%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
Jobless claims come out before the open and we will also hear more December retailer results Thursday as well. While positive numbers could provide a catalyst for a move higher we still anticipate a test lower to support before another attempt higher. That means an early move higher on some good jobless numbers is anticipated to give way to some selling ahead of the lagging but heavily watched unemployment report.
If the volume remains light on this continued pullback we believe the indexes will be ripe for another shot at the key resistance that just turned them back. Many of the plays we are running sold back on light volume, normal action after some big moves higher. If the selling remains light, the continued improving economic data and prospects of even better increases when stimulus is passed will keep stocks in demand and help them stair step higher. The big blast off from last week gets everyone revved up for more and more big gains, but the reality of this market is a stair step approach. As long as it starts logging higher lows after lower volume selling it will eventually break that resistance as it continues its slow recovery. That is subject to world events of course, but the big picture shows a lot of stimulus in the pipeline for economic recovery.
Support and Resistance
Nasdaq: Closed at 1401.07
Resistance: The August high at 1427. The 200 day MVA (1437.83). Price resistance at 1500. 1574, the May low, is next.
Support: The simple 50 day MVA (1392). 1375 is the exponential 50 day MVA. 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 909.93
Resistance: The early November high at 925.66. Price resistance at 954.28 from the December high along with the 200 day MVA (952.75). 965, the September 2001 closing low along with the August 2002 high.
Support: The July, August and September interim highs at 909 to 911 are trying to hold. The simple 50 day MVA (904). The exponential 50 day MVA (899.70). The bottom of the October consolidation range at 875. The September 2000/May 2001 downtrend line at 845. 850 to 855 (the October 1997 and Q2 1998 lows). The March down trendline at 818.
Dow: Closed at 8595.31
Resistance: The late July and early September interim high at 8726 to 8762.14 (8745 closing). The early November high at 8800 is key to break up the head and shoulders pattern. The 200 day MVA (8951.49). A range of resistance from 9000 on up to 9050. The August high at 9077 would change the downtrend.
Support: The simple 50 day MVA (8569). The October high at 8500. The exponential 50 day MVA (8518.77). 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): -0.8% actual, -0.7% expected, 1.4% October (revised from 1.2%).
1-08-03
Consumer credit, November (2:00): -$2.2B actual, $3.8B expected, $1.4B October (revised from $1.5B).
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: I notice in the newsletter there are many picks at the bottom. Some are new and some are old. How are we to treat the ones that are over a few weeks old? Are they there simply to let us know what you have been recommending but not to actually play the stock? Or should we still keep them as active plays?
A: The table at the end of the report is a summary of all plays we are currently following. They are in various stages, but they are plays that are active on the report. The table lists the status as new (new that report), buy not hit (buy point not yet hit), current (buy point hit and position entered/alert sent), buy not issued (buy point hit but we did not enter for lack of volume or other concerns), target hit (first or subsequent target hit), exited (closed the position because a stop or trailing stop was hit or we simply did not like the action). There can be multiple plays on one stock as we often like to average up on good stocks and take positions as the stock continues to improve and hit new buy points.
For example, if a play is designated as 'buy not hit' that means we still consider it a play that we will enter into if it hits the buy point and meets the volume requirements, etc. As we enter positions based on stocks showing us that they are attracting enough buy side or sell side interest, we cover more plays than many services. We look for those that not only are strong companies but also are in good patterns to provide returns without having to buy and hold them forever. It does not always work that way, but many of our plays start the moves soon after appearing on the report. We will let them work for us as long as the action remains positive and we feel the stock will still perform and provide us the return we are looking for.
SEMINARS ON CD
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This is Jon Johnson's own site devoted exclusively to seminars designed to teach you what you need to know about the stock market and stock movement and how to take advantage of those moves without incurring the usual high costs of travel and related expenses usually associated with seminars.
THE PLAYS:
Good movers: ALN; MVL
New:
CYMI (Cymer--$36.56; -0.77; optionable): Chip equipment
http://biz.yahoo.com/p/c/cymi.html
STATUS: Cup w/handle. After the strong rally off the October low, CYMI has corrected into this 6-week base. A bit shorter than usual, but it has been on our watch list since it fell back. The past week it rallied up off the 50 day MVA near 32.50 on good volume and is now pulling back but being good and stingy with its gains. Accumulation since way back in March where it started this last decline is solid at 10 up weeks on rising volume to 7 down weeks on rising volume with a lot of the accumulation coming in the last few months of this pattern as it should. Money flow is solid, continuing its positive divergence, i.e., it is higher at the current price than it was when the stock price was higher back in May. Looking for another day of rest and then a move through the buy point.
Volume: 1.854M Avg Volume: 1.921M
BUY POINT: $37.75 Volume=2.9M Target=$45 Stop=$34.94
POSITION: CQG EG - May 35c (64 delta) and/or Stock
http://www.investmenthouse.com/ci/cymi.html
NXTL (Nextel--$13.47; -0.27; optionable): Wireless communications
http://biz.yahoo.com/p/n/nxtl.html
STATUS: Ascending wedge/double bottom w/handle. You can take your pick of what you want to call it, but NXTL has tapped the 50 day MVA (12.08) twice, using it as support in the current 6-week base. It rallied off the 50 day MVA the past week and showed a doji Wednesday on rising, average volume. It may need another session or two to prepare for the next move higher, but accumulation is only positive since it started its run, coming in at 10 accumulation weeks to 0 distribution weeks. Getting ready for the next move as it held up very well despite the telecom downgrade Wednesday.
Volume: 23.61M Avg Volume: 26.287M
BUY POINT: $13.85 Volume=30M Target=$16.65 Stop=$12.75
POSITION: FQC ER - May $12.50c (67 delta) and/or Stock
http://www.investmenthouse.com/ci/nxtl.html
Continuing plays:
Play Date: 01/06/2003
CCCG (CCC Information Services--$19.59; +0.1; no options): Management services
http://biz.yahoo.com/p/c/cccg.html
STATUS: Cup w/handle. CCCG is now forming a handle to its 8-week cup, moving laterally the past two sessions on lower, below average volume. Accumulation in the short base is solid at 3 accumulation weeks to 1 distribution week. May take another session or two, but setting up very nicely.
Volume: 71.245K Avg Volume: 116.045K
BUY POINT: $20.05 Volume=173K Target=$25.12 Stop=$18.65
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cccg.html
Play Date: 01/02/2003
SYMC (Symantec--$43.36; -1.25; optionable): Internet security
http://biz.yahoo.com/p/s/symc.html
STATUS: Double bottom w/handle. The play originated as a 50 day MVA bounce, but has turned into the current pattern, a pattern that (as you can tell) is being formed by many of the market leaders over the past month during this consolidation. SYMC has used the 50 day MVA twice as support for the pattern, and it is now pulling back on lower volume to form the handle as it tests toward the 18 day MVA at 42.86). A bit steeper drop Wednesday than we would like, so it may take another two sessions to make the turn. Still, we are going to let it make the breakout before we initiate any new positions.
Volume: 2.712M Avg Volume: 3.431M
BUY POINT: New: $45.59 (orig. $43.05) Volume=4.1M Target=$51 Stop=$40.45
POSITION: SYQ DH - April $40c (79 delta) and/or Stock
http://www.investmenthouse.com/ci/symc.html
End Part 1 of 2
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world stock market
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