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world stock market, us stock market
2/24/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: Letting GRMN run
Buy alerts issued: OSTK; PLCM; FDS
Trailing stops issued: None issued
Stop alerts issued: None issued
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Chips show relative strength as market slides on low volume.
- Weekly retail results show consumer strain.
- Indexes continue to trade within their recent range as SOX helps hold the market higher.
- Subscriber Questions
Monday selling as chips still hang in at the down trendline.
There was not a lot of really bad news, just no good news to offset it. Weekly retail sales were lower because of the weather, corporate accounting issues surfaced in Europe now, Morgan Stanley downgraded world economic growth expectations to 2.5% from 2.9%. It was enough to provide a sluggish start, and when the UN beauty contest continued with enough competing resolutions being submitted to make it look like the democratic presidential candidate list, the market just gave in and slid lower.
The day was epitomized by the news that Hussein has challenged Bush to a debate after Hussein said he would not destroy missiles the inspectors said are in violation and need to be destroyed. This comes on the heels of our ally Turkey telling us we can be its ally if we pay it enough billions of dollars; of course, this is after the U.S. went to bat for Turkey to get NATO defense in the event of an Iraq attack. The issues have devolved to almost laughable status, but no one is laughing. The market is looking at the Iraq situation, and it is also looking beyond that conflict to the next issue in line (N. Korea, terrorism, oil prices). All of that are just impacts on the continuing struggling economy that is still unable to gain its feet after it collapsed after the stock market back in 2000.
Stocks have been pricing in a war and have tried to bounce after a month of selling. They are now moving laterally just below support, acting as if they are anticipating the initiation of hostilities. We somewhat believe that the US will still strike in early March and are pushing for a quick vote on the resolution in order to use the new moon. Enough experts have discounted this now to make it plausible. The market may be responding by trying to anticipate the action.
It is not doing a great job, however, as the large cap indexes are straining to fall out of the lateral move formed the past week after a bump higher in the downtrend. There is so much weight hanging over the market in addition to that Iraq matter, even anticipation of the war is not working well. Many financial stocks turned lower Monday and did so on volume. They were joined by retailers and other consumer stocks that had tried to buck up some in anticipation of a closer start to the war. The uncertainty has them back in the fire a bit.
Chip stocks lost just 0.3% as measured by the SOX, and many individual issues were up (SOX has just 16 stocks in it). SOX is still just below the down trendline, tapping the simple 50 day MVA on the high and showing its second straight doji. It is trying to hold up and make a break higher as it tries to hold up Nasdaq as well, but it is not getting support from anywhere else. It will either help lead Nasdaq and the rest of the market higher or it will falter and follow them lower. We were looking at some possible downside positions Monday if it gave way, but it held on for another session. If it fails we will look at downside positions on it as well.
THE ECONOMY
No major scheduled reports, but retailers were providing their weekly updates and they were on the lower end of the range. Nasty weather was blamed, and that no doubt kept people at home. On top of that there is less disposable income as gas and oil prices continue to spike. Even with perfect weather retailers would continue having a harder time as consumers are cutting back after years of spending.
The Tuesday consumer confidence report will most likely reflect the continued concern looking out 6 months from now. That has shifted in just the past two months from a positive outlook down the road. That means consumers will tend to hold back on some spending, but it is not a perfect correlation. Consumers often say one thing and then do the other or at least don't act exactly in line with what they say. Thus there is no doubt the consumer is pulling back, but the consumer has yet to really go into hibernation. Higher energy prices and the outbreak of war will have a negative impact as consumers stay home to watch the results. That is temporary, but the economy cannot take too much down time from the only segment that is spending.
THE MARKET
The price losses were significant, but the volume was again subdued, coming in below average. No doubt some of the Friday volume was due to February options expiration, taking some of the gloss away from the advance. All major indexes tests resistance from the near hand moving averages and turned lower. They roughly held the recent range from the past week, but the large caps are slumping and there were some breakdowns on rising volume.
The SOX held up right at the downtrend line again, however, refusing to sell off with many chips holding flat or posting small gains. When the chips are on the Nasdaq holds up better. Chips are often considered early harbingers of moves, and it appears they have been trying to anticipate the start of Iraq hostilities. As noted, they are either the last holdout before the market turns back down or they are holding up, ready to lead higher.
Market Sentiment
VIX: 36.77; +2.63
VXN: 44.88; -1.22
Put/Call Ratio (CBOE): 0.63; -0.22. Put activity dropped off sharply as the market fell rather hard. The indicator has not been very accurate during the past year, and to the extent it is, it tends to show the lack of major anxiety despite all of the hand wringing.
Nasdaq
Turned back form the 50 day MVA once again to close at the 10 day MVA as Nasdaq continues to show some relative strength as to where it is able to hold up.
Stats: -26.64 points (-1.97%) to close at 1322.38
Volume: 1.234B (-7.47%). Further below average on the selling. This indicates selling remains rather light as Nasdaq works through the week-long lateral move.
Up Volume: 281M (-589M)
Down Volume: 909M (+469M)
A/D and Hi/Lo: Decliners led 2.12 to 1. Declining breadth spread through much of Nasdaq as it was not only the big names that sold off.
Previous Session: Advancers led 1.69 to 1
New Highs: 71 (+9)
New Lows: 71 (+2)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped lower after closing at the exponential 50 day MVA (1337), dropping down to the 10 day MVA on the close. Volume backed off so there was no stock dumping, just more of the standoff between buyers and sellers the past week after Nasdaq rallied up from the month-long downtrend. There were not a lot of breakdowns in big Nasdaq names as the individual stocks also trade within the recent lateral range. Nasdaq is right at the breakdown point at the bottom of its range. Chips held up again Monday, but if they break down as well Nasdaq will not be able to hold within this range, and 1275 is the closest support level.
S&P 500/NYSE
The large caps hit a new closing low since making the rally move up off the February low. After looking decent Friday, it is back to teetering on the edge.
Stats: -15.59 points (-1.84%) to close at 832.58
NYSE Volume: 1.206B (-11.13%). Volume fell back Monday after bouncing above average on the Friday gain. Not distribution, but the SP500 does not have a lot of room to maneuver here.
Up Volume: 230M (-754M)
Down Volume: 987M (+609M)
A/D and Hi/Lo: Decliners led 2.11 to 1. Not just the large caps were selling today.
Previous Session: Advancers led 2.38 to 1
The Chart: http://www.investmenthouse.com/cd/$spx.html
After trying 850 again on the Friday high the large caps fell to a new closing low since the rally off the February lows started 7 sessions back. Friday's low (831.48) is still holding on, but the sudden sharp price reversal after a decent Friday session just puts extra emphasis on how weak buyside support is for these stocks. Despite the lower volume on the selling, large cap stocks are bleeding lower in the range.
DJ30:
Triple digit gain Friday, larger triple digit loss Monday. The only thing missing to make the reversal complete was rising volume. The Dow gave up at the 18 day MVA (7997) and then plowed through the 10 day MVA (7937), showing little resolve to attempt to hold the line. It too hit a new closing low since the rally attempt, pushing to a new intraday low (7851.11) since the rally started. Much as with the SP500, the Dow again looks to be teetering on the edge of returning to the downtrend.
Stats: -159.87 points (-1.99%) to close at 7858.24
Volume: 1.206B (-11.13%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
Existing home sales and consumer confidence are out 30 minutes into the trading session Tuesday. Both have a bearing on the economy's current course as both impact to varying degrees the only aspect of the US economy that is not in slumber, the consumer. Thus the reports will capture the market's attention though January existing home sales are already historical. They are important, however, in that existing home sales make up the bulk (roughly 80%) of all home sales, and home sales almost single handedly kept the economy afloat in 2002.
Chips continue to hold the line and thus prop up Nasdaq while the other indexes look ready to throw in the towel on this bounce up in the downtrend. Basically it comes down to what trend is stronger, the continuing downtrend and the reasons behind it or the bounce attempt that is basically a release to a slightly oversold condition and anticipatory of a start of war. Overall the former is stronger, and the issue is whether anticipation of the war is strong enough to hold the market higher.
After reviewing the action, it appears that the market is ready to sag lower in the existing trend. It can always sell some and then rally again on the start of hostilities. Again, will that be a green light to buy? Many view it as such as we view it as a trading opportunity if we are quick, but we are not convinced the start of the war is the watermark event for the market. It will help eliminate an obstacle for the economy, but there are still several more ready in wait. Again, we see it as an opportunity to make some plays that can make us money, but we are not anticipating long-term upside because of it. Maybe it would prove us wrong and just continue up. That is a long shot.
Much still rides on what the SOX does here at the downtrend. If it gives up that really frees the other indexes to continue their downtrend ahead of the war. We have still been playing that move and will continue to do so when the opportunities arise, i.e., mainly when stocks break lower from their trendlines. At the same time we have this growing suspicion that there will in fact be a strike in early March. The U.S. cannot wait to launch an attack because we hear it simply gets too hot too fast once April arrives in the Middle East, at least too hot for the suits our troops must wear in anticipation of Hussein using his chemical and bio weapons once it is clear this is for all the marbles.
That news could cause a sudden move lower and then a sudden move right back up as the market will become oversold on another week of selling and another lurch lower on the news will give rise to a strong move up. We need to be aware of that possibility so we can exit downside near March 2 if the US' version of the UN resolution passes or even if it does not.
Support and Resistance
Nasdaq: Closed at 1322.38
Resistance: Exponential 50 day MVA (1347) and simple 50 day MVA (1360). 1357, the 1998 bear market low. The 200 day MVA (1377)
Support: The 18 day MVA (1326) and the 10 day MVA at 1323 are still holding. Price support at 1300. 1250 after that is another point where some lows have held.
S&P 500: Closed at 832.58
Resistance: The 18 day MVA (845). Price resistance at 850 to 860. The exponential 50 day MVA (867), simple at 877. The bottom of the October consolidation range at 875.
Support: The 10 day MVA (840). The September 2000/May 2001 downtrend line at 810. After that 800.
Dow: Closed at 7858.24
Resistance: 8000 and the 18 day MVA (7997). A range of resistance here at 8000 to 8150 from the late January lateral move. Then 8250, the bottom of the October consolidation range.
Support: Soft support at 7750. If that gives up, then 7500, but a 7750 breach really opens toe door to test the low at 7197..
Economic Calendar
2-24-03
Treasury budget, January (2:00): $11.8B actual, $10.0B expected, $43.7B December.
2-25-03
Existing home sales, January (10:00): 5.80M expected, 5.86M December.
Consumer confidence, February (10:00): 77.0 expected, 79.0 January.
2-27-03
Durable goods orders, January (8:30): 1.0% expected, -0.2% December.
Initial jobless claims (8:30): 392K expected, 402K prior.
New home sales, January (10:00): 1.045M expected, 1.082M prior.
2-28-03
GDP preliminary, Q4 (8:30): 1.1% expected, 0.7% Q3.
Michigan sentiment, February (9:45): 79.2 expected, 79.2 January.
Chicago PMI, February (10:00): 52.6 expected, 56.0 January.
SUBSCRIBER QUESTIONS/COMMENTS
Comment: Of course the SOX has to work. So many things produced use semi conductors of some kind.
Response: You are so correct. Chips go into everything. They even have chips for chips. Thus the semiconductor has to be on board for the market to make any move, up or down. Getting out of the ivory towers and looking around the country you still see a lot of slack. Take a look at Austin, Texas and you see the impact of chip stocks. There are some big names there (e.g., AMD, LSI, SLAB), and they are not moving the market. Even with Dell increasing its earnings and revenues, it is not expanding. There are more than a few ex-Dell employees in Austin. There is quite a bit of office space Dell leased a couple of years back that is still empty. Dell uses a lot of chips, but it cannot make a dent itself. Even with automobile sales still strong (and they use quite a few chips), the rest of the economy just cannot sop up all of the extra capacity. So many every day items use chips, but there is so much chip capacity overall that it is hard to see any price increases in the near future.
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End Part 1 of 3
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world stock market
us stock market
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