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world stock market, us stock market
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1/22/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: None issued
Trailing stops issued: CRAY
Stop alerts issued: AMTD
You can sign up for Technical Trader alerts at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Indexes continue slide toward bottom of trading range.
- Mortgage applications continue to fall even as housing starts rise.
- Higher volume selling to support as indexes prepare to test the bottom of the range.
- Subscriber Questions
Blue chips take the brunt of the blow again.
The Dow cannot catch its footing. It all started with INTC and its poor guidance. Since then it has been slipping lower, picking up speed as the Dow components fail to provide positive guidance and in some cases (e.g., EK) fail to meet pretty easy earnings comparisons. Wednesday marked the fifth straight losing session on rising volume, the third out of the last five sessions. It is about to slam into the bottom of the range at 8250, and it is creating a vacuum that is sucking the others down with it. It will bounce in relief after a test or partial undercut of 8250, but will that be enough to keep it in the range.
There was no new news, just a continuation of the same old story. The President's economic speech drove that point home as the President thumped the war drum against Iraq for a good 10 minutes before ever turning to the economy and why his package should be passed. The market sold on his tough war talk against Iraq, and then it rallied back when he started talking about his economic stimulus package. Let's see. War talk, market sells. Economic help talk, market rises. Seems the market wants some economic help. Bush appears to know this as he is gearing up to go into Iraq once the troops are on location. He wants to get the overhang of prospective war removed from the picture by getting in as soon as possible, getting Hussein out, and then working on getting the domestic economic package passed. Without Hussein out there the market can breath a bit easier and he can get on to really pushing the economic package, hopefully with a strong and convincing Iraq campaign that ousts Hussein.
Until then it is a market of few stocks; few, that is, that are holding up and moving up. After this round of selling, however, we anticipate a relief bounce back up into the range. The big question is whether the bounce will take it up toward the highs in the range or just roll over and open the door to more selling.
THE ECONOMY
Mortgage refinancing continues its slide even as home starts rise. Disconnect?
Not much on the economic front Wednesday compared to most sessions, but the weekly mortgage report held some interesting nuggets that were not all that comforting. Specifically, even though mortgage rates dropped again, falling to 5.74% for the most popular 30 year note, mortgage refinances fell 6.1%. Though still choppy, the weekly refinancing numbers are starting to cool and turn down.
Refinancing applications and new home purchase applications fall even as home starts climb. Seems incongruous, but this is often the way trends work. Those involved in the trend continue to see rosy times ahead. The homebuilder CEO's come on the financial stations and are effusive with respect to the housing future; still. They don't see much of a slowdown ahead, and in the near term in several markets there is still a need for more housing. But is there a strong demand for the next 10 to 15 years as more than a few of the CEO's have stated on television? Now that gets a bit far out there, and that is something we have seen in other industries before they went into a sharper slowdown. It is rather typical of a boom period in any industry; those in it you would think would know better than anyone if things were going to slow. What happens, however, is that there are some cracks that show up (e.g., slowing applications), but they are discounted as aberrations. Some see the slowdown, others plow on ahead. Some land on their feet, some are caught without a net. It is a story that plays out each boom cycle. The slowing applications do not signal immediate problems; the trend can continue for several more months. It is one signal along with abandoned or incomplete projects here and there that start to show the slowdown is starting.
THE MARKET
Higher volume selling on NYSE and Nasdaq as the three major indexes continued toward the bottom of their trading ranges. Even the small cap index continued its selling, sending it toward the bottom of its trading range at 190. There was nothing to spur the further selling, just more of the same: earnings not that exciting, war still hanging right there. On top of that there is still this historic rally that is being ground out of the system. That takes time, and it is a process much as we have seen: working higher, but grinding along and testing your patience as it does. A series of events that are keeping us from getting too aggressive over the past couple of weeks.
So the market has been selling and it looks bad. The Dow has sold 5 straight sessions as has the SP500. Let's not forget the Nasdaq either. Surely they are going to keep selling. Well, the Nasdaq is right at support and showing a hammer doji on rising volume. After a strong of selling that is a candlestick pattern that indicates a bounce coming. Indeed, Nasdaq was positive most of the session before a late program dumped shares across the board and undercut the tech rally attempt. With QCOM showing great earnings and great guidance along with TXN's solid earnings report, techs look ready to make that bounce higher. The Dow and SP500 could sell some more, undercutting their support, but then we feel there will be a relief bounce as well, pulled along by Nasdaq. How far a bounce depends upon how much buyside volume stocks attract; a good surge could send them up toward the top of the range.
Market Sentiment
VIX: 32.01; +1.48
VXN: 44.16; +0.92
Put/Call Ratio (CBOE): 0.73; +0.2
Nasdaq
Showed relative strength, holding above support with a hammer doji.
Stats: -4.77 points (-0.35%) to close at 1359.48
Volume: 1.504B (+9.11%). Rising though still slightly below average. This was a point where rising volume indicates a change in direction given the round of selling and the candlestick pattern.
Up Volume: 618M (+129M)
Down Volume: 868M (-4M)
A/D and Hi/Lo: Decliners led 1.51 to 1
Previous Session: Decliners led 1.7 to 1
New Highs: 64 (-25)
New Lows: 63 (+20)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Five straight selling sessions sent Nasdaq to the bottom of the range (1357, 1345). Tried to rally, showing relative strength to the rest of the market. In the end it could not hold the gain as a late program sold stocks across the board. It is set up to bounce and the QCOM and TXN earnings were not hurting after hours.
S&P 500/NYSE
Some big volume on the selling as large caps were sold again with more vigor on some less savory earnings.
Stats: -9.26 points (-1.04%) to close at 878.36
NYSE Volume: 1.543B (+19.02%). Big jump in volume as earnings from some large caps were much worse than expected causing volume jumps in the large caps.
Up Volume: 499M (+306M)
Down Volume: 1.052B (-65M)
A/D and Hi/Lo: Decliners led 1.78 to 1. Continues its negative bias.
Previous Session: Decliners led 2.24 to 1
New Highs: 87 (-13)
New Lows: 58 (+26). More and more new lows but not at a critical level. If the large cap indexes hold at or near their support it won't be an issue for now.
The Chart: http://www.investmenthouse.com/cd/$spx.html
Cascaded lower on stronger volume as the latest round of earnings gave investors little solace and emboldened sellers. The large caps are hovering just over the bottom of the range at 875 down to the late December lows at 870. If this does not hold on the close, 850 is the next lower level. We anticipate an undercut early and then look for a reversal and then provide a reflex bounce toward 900.
DJ30:
EK and GD really knocked the Dow lower on their earnings miss, easily offsetting the gains in MMM on its earnings report. That pushed Dow volume higher as it continued its vertical drop from 8870 toward the bottom of the trading range at 8250. The momentum is definitely straight down after 50 sessions where the speed of the drop has picked up the pace over the past few sessions. Volume has run higher 3 of the last 5 sessions, the type of distribution that can lead to even further selling. We anticipate the Dow will undercut 8250 and then try a bounce. The quality of the bounce is the key; the distribution sets up further selling, and if the Dow runs out of gas after a short, low volume bounce, we will be ready for more downside.
Stats: -124.17 points (-1.47%) to close at 8318.73
Volume: 1.543B (+19.02%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
After big earnings disappointments rocked the Dow and SP500, some upbeat tech earnings after the close from QCOM and TXN look to provide some upside pop. The news comes at an opportune technical point as the major indexes sell toward the bottom of their trading ranges. Since the start of earnings season, earnings have disappointed. Not so much the actual Q4 numbers, but the guidance has not been stellar. Stock prices were bid up ahead of the earnings on some improving economic numbers and some new money being put to work, and as we anticipated based on what we were seeing in the economic picture, the outlook was not what investors hoped for. The disappointment combined with the continued world troubles led to this week of pretty stout selling after a brave attempt at holding the line.
There is not a whole lot to give stocks the gumption for another run other than the selloff to the bottom of the trading range and the latest round of earnings. That spells a relief bounce in the making though the Dow and SP500 may undercut their trading ranges intraday before making a turn. After 5 sessions of selling we anticipate a bounce that will either provide a run further up in the range or provide just a short respite from the selling. Again, the buyside volume on any bounce will tell the strength. A lower volume move is prone to a resumption in the selling.
We will not be looking for much downside Thursday as catching the tail end of a run lower is asking for trouble. For those we will let any bounce run its course and then step in on the downside where weak stocks that have rebounded on low volume start to fail. As for upside plays there remain a few that have held up well in the selling and will continue to provide more opportunity on any move up. Those are getting pretty rare. Some stocks in distress will mount a recovery; we can use those upside moves to get some good exit points or better before the move starts to fade.
Based on the action we have seen we don't anticipate the bounce up having much strength. The distribution is eroding the support in the trading range. Unless stocks can generate a lot of upside volume based on the QCOM, TXN and other earnings, there is not enough upside interest to support a meaningful move up to the top of the trading range.
Support and Resistance
Nasdaq: Closed at 1359.48
Resistance: The exponential 50 day MVA (1387). The simple 50 day MVA (1402). The 200 day MVA (1420). The August high at 1427. Price resistance at 1500. 1574, the May low, is next.
Support: 1357, the 1998 bear market low. July, August, and September interim highs at 1345. The some price support at 1327 from the late December low, then 1300.
S&P 500: Closed at 878.36
Resistance: The exponential 50 day MVA (903). The simple 50 day MVA (906). The July, August and September interim highs at 909 to 911. The early November high at 925.66. The 200 day MVA (942). Price resistance at 954.28 from the December high. 965, the September 2001 closing low along with the August 2002 high.
Support: The bottom of the October consolidation range at 875. 850 to 855 (the October 1997 and Q2 1998 lows). The September 2000/May 2001 downtrend line at 832.
Dow: Closed at 8318.73
Resistance: The exponential 50 day MVA (8557). The simple 50 day MVA (8594). The late July and early September interim high at 8726 to 8762.14 (8745 closing).The early November high at 8800. The 200 day MVA (8877). A range of resistance from 9000 on up to 9050. The August high at 9077 would change the downtrend.
Support: 8250, the bottom of the October consolidation range. Then 8000.
Economic Calendar
1-21-03
Housing starts, December (8:30): +5% to 1.835M actual, 1.693M expected, 1.747M prior (revised from 1.697M).
Building permits, December (8:30): +8.2% to 1.880M actual, 1.700M expected, 1.738M prior.
1-22-03
Treasury Budget, December (2:00): $4.37B actual, $5.0B expected, $26.6B prior.
1-23-03
Initial jobless claims (8:30): 383K expected, 360K prior.
Leading economic indicators, December (10:00): 0.0% expected, 0.7% prior.
SUBSCRIBER QUESTIONS
Q: [Given the circumstances with the potential Iraq war and other global concerns] why would you bother to buy ANYTHING at all until this is resolved, especially given the fact that you even said the "market would take a hit" on the war news, when it finally comes?
A: The list of strong stocks has diminished, but there are still stocks out there that continue to hold the line and even move higher on solid earnings and sales as the rest of the market falls, and these are not all just gold stocks. Scientific & technical, medical appliances, some biotechnology, drugs, and even management services continue to improve. While we suspect the war will start once our troops are in place, i.e., 2 to 3 weeks, we are not making the policy. If these stocks continue to perform and provide good entry points we will take advantage of that; war could come, it could not come. We hate to be in the position of the computer buyer that never buys because a newer and better computer will come out in six months. He is frozen into inaction and does not even get the benefit of the increased productivity of having an 'inferior' computer.
If war comes the market will take a hit on the uncertainty, but we also think it will bounce back quickly. Maybe it won't keep running, but enough expect it to do so that there may be quite a jolt upside pretty fast before it stalls. That will give us time to act depending upon what occurs. Moreover, the stocks that have proved strong in the face of war prospects and the current earnings concerns will more than likely hold up better. We are not jumping quickly into upside positions; this is a time to be more conservative and we have substantially cut back on new positions, wanting to see strong, solid moves from stocks that continue to hold up and attract more than their share of money.
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End Part 1 of 3
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world stock market
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