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world stock market, stock split
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1/09/03 Stock Split Report
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Stock Split Report Subscribers:
Thank you for all of the kind regards to Jon Johnson. Jon is back at home and at work with a clean bill of health, though the staff is forcing him to take it a bit easier.
MARKET ALERTS
Targets hit alerts issued Thursday: ALN
Buy alerts issued: ROST; CYMI; MRGE; FIC
Trailing stops issued: None issued
Stop alerts issued: AIG
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Return of positive news triggers rally a day earlier than expected.
- Retail sales surprise (?) investors while jobless claims slide.
- Nasdaq and SP500 give resistance another shot.
- Subscriber Questions
Market flips to the upside as news turns positive.
The move we were looking for came a day early. Helped by jobless claims that were a bit better, retail sales that were much better than the disaster anticipated, and UN inspectors that were not too hawkish on Iraq, the market started strong, held its gains, and then finished strong. The first two helped get the rally underway, and they were aided by an erroneous order on some Nasdaq futures where an extra zero was tacked on to the buy order. Strange how a clerical error can help trigger a move, but the market was setting up for another try at resistance. The combination of events helped to set the move in motion a day early.
Volume is rising (though still not really heavy) and the market is trying to trend higher, but it is still acting something like a weaker market. Specifically, it flips back and forth on the status of the daily news. Early in the week it was stimulus that helped it higher. Wednesday it was earnings misses, warnings, a weak dollar, Iraq and North Korea that sent it lower. Thursday it was back to better earnings, better economic news, and a lighter view of world events. Up, down, up. That is the action of an undecided market.
At the same time the volume is improving on upside sessions and the indexes thus far refuse to cave in after failed attempts to breach resistance. They were right back at it Thursday with Nasdaq closing over its 200 day MVA and the SP500 retaking 925 on some rising volume. If persistence pays off, the market is due for a breakout. Once again it is going to get the chance to prove if it is ready, and Friday's employment report may finally be the ticket it needs to get the next leg underway.
THE ECONOMY
Jobless claims fall in line with expectations.
389K versus 392K expected and 408K the prior week. That is the lowest since 12-21 (wow, 2 whole weeks). The 4-week average fell (406K) from 419K the week before but was still over the magic 400K level that denotes a weak job market. 390K, 400K, 410K? Six one way, half a dozen the other. It is still weak. The only thing it does show is that the major jumps in job losses are over. That is reflected in continuing claims that rose to 3.445 million from 3.41 the prior week.
Retail sales not the disaster claimed.
More retail sales came in Thursday and there were upside surprises. Surprises? I guess they were if you bought into the 'woe is me' line that was being put out by some stores and the retail analysts. HOTT (+10%); ANF (+10%); CLE (+10%); CHS (+12%); BBY (+10%); BLI (+10%). Maybe they were not blowout and maybe WMT (+2.3%) and big department stores did not make their grade, but it was not any confirmation of a weak consumer. The smaller stores and chains figured out how to take on WMT and had solid holidays as a result. Thus you will see in most articles the continuing claim that the season was bad, but as 2001's claims of holiday horror were incorrect, so was 2002. It was not great, but it was not bad. Shifting marketing tactics and preferences worked to the advantage of some and the disadvantage of others as it always does. Last year was WMT's year; this year the smaller and specialty retailers beat it and the big stores. Retail sales overall will be lower because of discounting, but the smaller stores show that the consumer was still ready to buy (and of course, the consumer was buying autos during this time as the monthly auto sales showed; maybe there were Jaguars, etc. 'under' the tree).
THE MARKET
The indexes turned around and ran right back up to the key resistance levels they need to break through. Indeed, Nasdaq broke back over the August high and the 200 day MVA while the SP-500 recaptured 925, the early November high. The Dow ran right up to 8800 where it still has to dance, but volume and breadth were up across the board and that lent credence to the quick recovery.
The gains were broad, but there were not a lot of breakouts from leading stocks, one of the weaknesses of the move this week. There are many beaten down stocks that are making a comeback, but with all of their overhead resistance/supply they can easily run into trouble of institutional investors are not willing to invest in the growth stocks that are showing the strong earnings gains. That is why we always want to see the leaders make their moves with or just after the rest of the market. Perhaps they will come in on a continued rally, but they usually lead the moves higher (hence the name leaders).
Along with the lack of new breakouts the volume is just so-so. It has definitely improved, but the comparison is to a very low volume holiday season. It is certainly not the type of volume you would expect on a strong upside move if the big institutions were throwing money back into the market. Thus we have the jerky action we have seen. The trend is trying to turn upward by breaking the August highs and establishing a new higher highs on each index, but it is a hard fight to do it.
Market Sentiment
VIX: 26.88; -1.54
VXN: 42.99; -1.57
Put/Call Ratio (CBOE): 0.74; -0.15
Nasdaq
Rumor has it the Nasdaq rally was aided to the upside by an erroneous futures order that tacked on an extra zero. Probably did not hurt, but FDRY's earnings as well as good retail results from many Nasdaq retailers helped get things rolling as well.
Stats: +37.39 points (+2.67%) to close at 1438.46
Volume: 1.689B (+15.74%). Rising, above average volume, but still lower than the Tuesday volume and not impressive.
Up Volume: 1.466B (+1.238B)
Down Volume: 210M (-1.007B).
A/D and Hi/Lo: Advancers led 2.36 to 1. Upside breadth continues to show renewed dominance over downside breadth.
Previous Session: Decliners led 1.73 to 1
New Highs: 104 (+44)
New Lows: 27 (-9)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Cleared the 200 day MVA (1436) on the close as volume rose back above average though still below the Tuesday session. Nasdaq finds itself right back where it was Tuesday (plus 7 points on the close), over the August high at 1427 and back with a higher high over the last downtrend high in August and now over the 200 day MVA as well. If it can continue the move and put some distance between it and the August high before the next pullback it could then use that level and the 200 day MVA as support, a much better point of attack. Still need to see breakouts, and there are Nasdaq stocks ready to do so. There has to be real buying by the institutions to do it.
S&P 500/NYSE
Recaptured the November high at 925, bouncing up off of support to do so. Volume almost beat Tuesday's selling volume. A positive rebirth.
Stats: +17.64 points (+1.94%) to close at 927.57
NYSE Volume: 1.515B (+6%). Back above average but not able to beat the Tuesday volume when the index sold. Just not the breakaway volume it needs.
Up Volume: 1.291B (+906M)
Down Volume: 234M (-818M)
A/D and Hi/Lo: Advancers led 2.43 to 1. Breadth has returned to its winning ways, dominating downside volume.
Previous Session: Decliners led 1.68 to 1
New Highs: 134 (+18)
New Lows: 11 (-11)
The Chart: http://www.investmenthouse.com/cd/$spx.html
A good jump off of support at 909-911 (July, August, September interim highs) on rising volume. The move beat the early November high, making a higher low as it did. Unlike Nasdaq, the SP500 is still below the 200 day MVA (951) that coincides with the December high. That is the initial target on this next move higher as the August high at 965 is just too far to be realistic in one move. The turf comes grudgingly at this point and the stair-step pattern is trying to establish itself again.
DJ30:
On the close the Dow beat the early November high (8771.01) but did not clear the intraday high at 8800. It looks ready to do that on a good jobs report Friday, but as with the SP500 it has not cleared the 200 day MVA (8943) and the December closing high at 8931 (intraday at 9043.37). The latter is just off of the August closing high at 9053.64. The Dow has a lot of work as well, and a run to 9000ish is what we should look for off of this move before another breather.
Stats: +180.87 points (+2.1%) to close at 8776.18
Volume: 1.515B (+6%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
We were looking for the Friday jobs report to act as a catalyst for the next move up. It was pre-empted by the retail sales results that started trickling in as well as some upbeat earnings outlook. With the indexes right back at key resistance they need a good jobs report still in order to continue the move up to break the downtrend's stranglehold on the market.
The weekly jobless claims are not low enough to warrant a big jump in hiring, but the November number may not have reflected any December retail hiring due to the later holiday season. Even a 100,000 increase in non-farm payrolls would be within the statistical margin of error with respect to expectations. Still, an increase in payrolls and a decrease from 6% in the unemployment rate would have some psychological weight and would help the market get over this near resistance it is still struggling with. We anticipated the Friday report being a trigger after a few sessions of pullback. Now it will have to provide the impetus for a move up from here if the run higher is to be sustained; another failure at this point would be hard to overcome.
If there is a good jobs report Friday that continues the move we will be focused on the action of leading stocks, looking for breakouts, strong rebounds, and higher volume. That will indicate serious interest in the move higher.
Support and Resistance
Nasdaq: Closed at 1438.46
Resistance: The 200 day MVA (1435.91) has not been totally cleared. Price resistance at 1500. 1574, the May low, is next.
Support: The August high at 1427. The simple 50 day MVA (1394.69). 1378 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 927.57
Resistance: The early November high at 925.66 has not been totally cleared yet. Price resistance at 954.28 from the December high along with the 200 day MVA (951.69). 965, the September 2001 closing low along with the August 2002 high.
Support: The July, August and September interim highs at 909 to 911 held Thursday. The simple 50 day MVA (904.94). The exponential 50 day MVA (900.80). The bottom of the October consolidation range at 875. The September 2000/May 2001 downtrend line at 844. 850 to 855 (the October 1997 and Q2 1998 lows). The March down trendline at 816.
Dow: Closed at 8776.18
Resistance: The late July and early September interim high at 8726 to 8762.14 (8745 closing) have not been put to rest. The early November high at 8800 is key to break up the head and shoulders pattern. The 200 day MVA (8943.60). 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 (8577). The October high at 8500. The exponential 50 day MVA (8528.76). 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
Jobless claims (8:30): 389K actual, 392K expected versus 408K prior (revised from 403K).
Wholesale inventories, November (10:00): 0.2% actual versus 0.2% expected, -0.5% (revised from 0.3%).
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: In the 1-2-03 letter, the writer is hesitant about the market action because of low volume and no leading breakouts. If 3-4 leading stocks follow index patterns, then why would you expect breakouts if these stocks are coming off support? Would it not be best for breakouts to occur after the stocks flirt with resistance?
A: Great question. Leading stocks typically do not follow the index patterns per se. Specifically, leaders have moved ahead of the rest of the market, forming good patterns near their highs while the rest of the market has dumped back lower. They have something special (growing earnings and revenues) that make the big money inclined to hold onto them even as the rest of the market sells back.
In a big bear downtrend even the leaders will eventually be shot dead, but in this recovering market, leaders will hold up and be stingy with their gains. Typically they will use the pullback to complete their test of a breakout or to finish their base (e.g., form a handle). Then when a move back up is preparing, these stocks tend to get their legs first as eager money comes back to those stocks that have the best fundamental qualities and are in sectors that are viewed as having the best chance of growth moving forward. They take off running and then the rest of the market follows. That is what we saw in October and November.
This latest move finds the leaders lagging behind a bit. They are not getting the early money. That is always a caution flag as it indicates that some smart money is not moving into them right away. Now there are some different undercurrents this time around with the Bush plan and the first blush interpretation that it would benefit dividend payers. That may have cast some indecision into the mix and pushed money into these stocks as opposed to the stocks leading higher. On the next move up we should know more as to whether they are asserting themselves; that would bode much better for the rally.
SEMINARS ON CD
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End Part 1 of 3
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world stock market
stock split
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