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world stock market, us stock market
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2/27/03 Technical Traders Report Update
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Wednesday: Let GRMN continue to work
Buy alerts issued: BBY
Trailing stops issued: BEN
Stop alerts issued: FAST; BSC; CTXS
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Market bounces on news that triggered some short covering as indexes continue the tennis match.
- Volatile durable goods spike but so do jobless claims.
- Indexes climb but then fall back to close right at the short term MVA.
- Subscriber Questions
Indexes turn from early trend lower to rally on Hussein promised response on UN missile destruction demand, reduction of terror alert.
The news was out before the open, but it was not confirmed until 30 minutes into the session. In 48 hours Hussein was going to respond to UN demand that contraband missiles be destroyed. Apparently some took that as a promise to destroy them (the early confirmation was to be a letter telling the UN why he does not have to do so; late Thursday that was changed by the Iraqi ambassador to say they would be destroyed) and evidence of a delay in the war. If he does actually agree to destroy them that will keep some on the side of no war over inspections, but Bush was pretty clear that even if he did destroy them it would not alter the course; when the heat is on a chemical warhead magically appears, the inspectors destroy it, and Hussein and his buddies crow about this 'evidence' of his compliance. If only they would produce complete and accurate records of all weapons and their destruction, the whole world would be satisfied. Unfortunately he won't, and the administration is not going to chance letting him keep the weapons he has not shown destroyed so he or someone else can use them in the future. Right or wrong that is the course that is set, and thus any good feelings about what transpired Thursday are misplaced.
The up and down action is not providing the downside acceleration we wanted. The market is still trending lower, and indeed after testing higher the indexes could not clear their short term MVA. Still, we wanted some straight selling heading into the weekend to better square up positions and take some nice gains even if they were not the originally targeted gains. Now if the action holds, Friday or at least part of Friday should be a down session. There is no real technical underpinning to that, just that the Thursday action was prompted by news that lead to short covering and produced the rally. Responding to news in such a manner is a sign of a weak market, and thus Friday could easily roll lower when that short covering push is not present. It may not, however, and we went ahead and closed some nonperforming downside positions that had stopped falling when the market sold and were not rising when the market rallied.
THE ECONOMY
Durable goods orders post highest gain in 6 months.
+3.3% versus the 1.0% gain expected and a revised loss to -0.4% from -0.2% in December. This is an extraordinarily volatile number. It careens back and forth even in good times. Much of the gain was in transportation orders. Still, there are some continued positives building. Even last month non-defense capital goods spending was up, and it rose again in January by 5.4% excluding aircraft. Computer sales were up 3.2%, also a second straight gain.
That continues the very tepid start of business spending, emphasis on tepid. We first noted this back in the fall, but note how the economy has not been roaring back. At the start of each quarter you see an increase in durable goods orders; then the next two months they back off. That is an improvement over the continued falling seen during the worst part of the recession, but it still shows just how scattered and weak the buying is. Second, the stock market is not really building this gain in yet. There was a rally off the July and October lows, and while not totally reversed, the market is not forecasting any strong economic recovery despite the ever so slight buds of capital spending. When it comes to forecasting, we have to defer to the market; it does not wait until it is obvious. It sold ahead of the economic collapse in 2000; it will make a significant move before the first clearly strong reports come in.
Jobless claims jump again.
Jobless claims moved further over 400K last week, coming in at 417K versus the 390K expected and the 406K prior (up from 402K). It is true that the jobs market tracks well back of the rest of the economy when it comes to improvement, but you usually see the figures plateau before they start to rise. Certainly economic activity has to be stronger than it is now to even consider a substantive gain in job creation and rehiring. Instead the weekly jobless claims have worsened. The 4-week average rose to 399,750; on CNBC anchor breathed a sigh of relief that it was still below 400K and what is considered recessionary. Gee, aren't we lucky! Given that the margin of error is in excess of 10K, for all intents and purposes it is there. Layoffs continue to be announced and pile up. Continuing claims were lower, but again, that was due to people using up their benefits and falling off the rolls. The jobs picture is not good and there needs to be much stronger economic growth before it can improve.
New home sales crater 15.1%.
We have been anticipating the housing market to start showing problems, and though refinances remain strong while other areas fade, that is a signal that the move is getting a bit winded. Thursday's drop in new home sales was much greater than expected, more evidence that the market is suffering. Economists were quick to point out how the numbers were still at historically high levels, but this is just what they did when the economy was starting to falter: 'look at how strong the numbers are historically', 'this is an aberration in a still strong market.' Those kind of blinders helped them get blind-sided when the economy plunged from 8% GPD growth to -1% growth inside two quarters. The housing market has done yeoman's work in holding the economy together. Like the old year is ready to hand the reins over to baby new year, the housing market is looking for some other sector to hold the economy up. With some luck and a strong economic package that provides some short and long term stimulus, the business sector could be it. That is a big 'could' at this point, but there is promise if we don't blow it by worrying so much over deficits.
Deficits versus pork.
Just thought you would like to know. We are told that deficits are such a big problem facing us all and there is a monumental struggle over whether we can 'afford' tax cuts at this juncture. The budget that was just passed increases spending, and it should disgust and anger into action all hard-working taxpayers and business owners who are told you are not worthy of tax breaks or incentives to help get the economy going again.
Here are some examples of non-critical spending that were just too important to cut: $90,000 for the Cowgirl Hall of Fame, $350,000 for the Rock and Roll Hall of Fame, $750,000 for the Baseball Hall of Fame, $800,000 for the Grammy Foundation, a non-profit arm of the Recording Academy (they could have passed the hat at the recent Grammy Awards and come up with that). There are another 885 such projects in just ONE part of the 2003 Omnibus Appropriations bill.
Now we are supposedly at basically a time of crisis: weak economy, at war, another war contemplated, budget deficits, social security shortfall. We are being told to cut back by our leaders in Congress because, after all, this is a time of war. Nothing against those organizations above and the others in the bill, but why should the taxpayers have to cut back but still fund those entities? They should be the first to get the axe in favor of those who pay the bills. When times are better, we MAY want to fund them; I don't see anywhere in my copies of the Constitution that says the federal government has any business in funding those entities. Basically you are having to suffer the burden for those who have set up non-profit entities to avoid paying taxes and at the same time receive government funds (grants). I am sure most of you are as appalled as we are. It may not sound like a lot of money, but there are thousands of these programs that are included in that budget that just cannot be touched in these hard times. They are shoveling the BS fast and deep, and you need to raise hell with your elected officials.
THE MARKET
Another short covering move on news of destruction of missiles and a reduction in the alert status. The move came on the first confirmation of the Iraq statement regarding its missiles, and in typical short covering fashion it snowballed. There was more breadth, however, as small and mid-caps are enjoying some breakouts. We took part in a few more breaking out today as they have been doing each session despite the overall market trades.
Volume was lower on NYSE, slightly higher on Nasdaq. A mixed performance that still had overall volume below average. In other words, there was no real power behind the overall moves higher. There were some individual solid moves, but we emphasize individual.
While the indexes managed to rally and close positive, they backed well off of their highs and closed just below the short term MVA. They are still trying to hold the line and move laterally, but the continued failure to move over the short term MVA is a continuing weakness in the indexes and many stocks. They are continuing in the downtrends, and the bias is thus lower. At the same time the back and forth action is not giving way to several sessions of straight selling. By not falling and hanging on for the most part, stocks are trying to prepare for news that would send them higher. If it does not come they would be set up to cascade lower. Given the uncertainties that the market has no control over, stocks are a powder keg that could blow either way.
Again the bias is still down as the indexes and many stocks could not break and hold over their short term MVA, still holding the downtrend. At this juncture, however, the shorts are so nervous over the external uncertainties, any news stories send them to the 'cover' button. That is keeping us from jumping into more downside positions.
Market Sentiment
VIX: 35.18; -1.84
VXN: 46.16; -0.81
Put/Call Ratio (CBOE): 0.55; -0.27
Nasdaq
Again held above 1300 on the low and bounced, but came back to close below the 18 day MVA.
Stats: +20.26 points (+1.55%) to close at 1323.94
Volume: 1.281B (+6.06%). Nasdaq volume crept higher on the session but was still below average. No power in any buying and not a lot of short covering.
Up Volume: 906M (+729M)
Down Volume: 336M (-682M)
A/D and Hi/Lo: Advancers led 1.5 to 1. Modest advancers matching Wednesday's modest decline. Indecision.
Previous Session: Decliners led 1.52 to 1
New Highs: 60 (+6)
New Lows: 61 (-20)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Taped 1305.56 on the low, just above the 1300 that many traders are focusing on. From there it reversed on the Iraq news and rallied to 1331.79. It peaked 1.5 hours into the session, moved laterally, sold off and had to rally to close just below the 18 day MVA (1324). It is still trending lower, but the action is still more lateral than lower. It is waiting for a catalyst as it has no direction on its own.
S&P 500/NYSE
Large caps tried to rally, making the 18 day MVA on the high but falling back to close at the 10 day MVA.
Stats: +9.72 points (+1.17%) to close at 837.28
NYSE Volume: 1.272B (-4.22%). No volume on the move with volume falling below average on the move. Indicates a lack of buying strength.
Up Volume: 930M (+468M)
Down Volume: 343M (-522M)
A/D and Hi/Lo: Advancers led 2.09 to 1. Much better breadth as the small caps continue to help out.
Previous Session: Decliners led 1.54 to 1
New Highs: 54 (+16)
New Lows: 60 (-38)
The Chart: http://www.investmenthouse.com/cd/$spx.html
825 pushed it higher again, up to the 18 day MVA (842) on the high, and then gave a chunk back to close right at the 10 day MVA (837). Not a move of strength with lower volume and fall back to the 10 day MVA on the close. The large caps also continue their downtrend, riding down the short term moving averages but not rolling over and tanking. As with Nasdaq they are looking for a catalyst one way or the other. Right now it looks very much as if they are anticipating the outbreak of hostilities soon: shorts cover on any news and buyers are not selling much but are not ready to really buy.
DJ30:
The Dow traded over the 10 day MVA on the high (7924) and then fell to close below the 10 day (7905). The blue chips are resuming their downtrend after bouncing up to test the 18 day MVA a week back, but they are doing so grudgingly. The sellers have no conviction while the buyers just sit on the sidelines and watch. That is keeping it above 7750 and below 8000 in a very narrow range.
Stats: +78.01 points (+1%) to close at 7884.99
Volume: 1.272B (-4.22%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
Preliminary Q4 GDP is out before the open followed by Michigan sentiment for February and the Chicago PMI (manufacturing sentiment survey). There has been some shuffling of the expectations, but GPD is expected to show a 1% gain; the rising imports may make that hard to reach but we doubt it will be significant enough to be shocking.
Can we expect the tennis match to continue Friday? News sent shorts covering Thursday and the volume shows there was not a lot of buying whether covering or longer term investing; there was no real reason to buy otherwise as the same issues are out there. Thus we will look for a drift lower, but the idea of getting a nice steady downside move into the weekend is out. At best there is a modest downside tomorrow that drifts into the weekend given the nervous shorts and indifferent buyers.
There are a few snafus in any plans to start a war early next week. Turkey delayed the parliamentary vote on letting the U.S. use Turkey as a staging ground for our forces. After $30+ billion guaranteed in payments and obtaining NATO coverage one would hope for some action from an ally. Of course that is what we said about the French. It is interesting that some French lawmakers are saying they are unwilling to stand by and let the NATO alliance be cracked all for the name of a 'tyrant' (i.e., Chirac). In any event, the delay from Turkey keeps U.S. forces from the north on standby, not yet ready to make the second front to secure those northern oil fields. However, we do note the story (as did one of our subscribers) that US and UK troops are already in Iraq and in position to control 75% of the fields as soon as the action starts.
Then there is the 'second' (or is it the eighteenth?) UN resolution. Blix speaks to the UN Saturday. The US was meeting with other security council members Thursday, and it is unwilling to negotiate on the rather simple and clever resolution that the US has submitted. If Blix says Saturday what he has been saying about the continued lack of cooperation and change of attitude, the US will go in that afternoon and Sunday and try to get the votes for the resolution. If it gets them it will push for an immediate vote. If it does not have them, it will most likely withdraw the resolution or simply say that the UN is unwilling to enforce its agreements.
But for the Turkey delay that would set the stage for an attack in the coming week. If it cannot be done this week things get really confused. There will be no new moon until early April, and the US uses the dark moon to give its troops the maximum advantage and protection. If we wait until April to start an air war, however, then our ground troops go into Iraq when it is already heating up, having to wear hot chemical/biological suits. We may be dead wrong, but the US will push for all of the above this weekend and then start an air campaign next week. That can last a week or so, during which the US could complete offloading and moving the ground troops and equipment. Again, we could be dead wrong, but the market is trading extremely nervously in anticipation of something happening soon.
Thus we are not going to be too fired up about taking new positions Friday. We have been focusing new money on those mostly smaller issues that continue to perform regardless of what the market is doing. Those are showing buyer interest in uncertain times. They will move well in a rally, they will hold up better and at least buy us some time if the market turns and sells. We were unloading some downside plays that were not performing, but kept several open for some potential selling Friday after another short covering round. We still intend to square up most of these positions before the close.
Support and Resistance
Nasdaq: Closed at 1323.94
Resistance: The 18 day MVA (1324). Exponential 50 day MVA (1344) and simple 50 day MVA (1356). 1357, the 1998 bear market low. The 200 day MVA (1372).
Support: Price support at 1300. 1250 after that is another point where some lows have held.
S&P 500: Closed at 837.28
Resistance: The 10 day MVA (837). The 18 day MVA (842). Price resistance at 850 to 860. The exponential 50 day MVA (863), simple at 874. The bottom of the October consolidation range at 875.
Support: Some price support at 825. The September 2000/May 2001 downtrend line at 806. After that 800.
Dow: Closed at 7884.99
Resistance: The 10 day MVA (7905). The 18 day MVA (7959) and 8000. 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 held on Tuesday. 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): +3.0% (6.09M annual units), 5.80M expected, 5.86M December.
Consumer confidence, February (10:00): 64.0 actual, 77.0 expected, 77.8 January (revised from 79.0).
2-27-03
Durable goods orders, January (8:30): 3.3% actual, 1.0% expected, -0.4% December (revised from -0.2%).
Initial jobless claims (8:30): 417K actual, 392K expected, 406K prior (revised 402K).
New home sales, January (10:00): -15.1% (914K) actual, 1.045M expected, 1.082M prior.
2-28-03
GDP preliminary, Q4 (8:30): 1.0% 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.
End part 1 of 2
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world stock market
us stock market
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