|
|
world stock market, us stock market
* * * *
2/27/03 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: None issued
Buy alerts issued: SCLN
Trailing stops issued: BEN; CELG; PRU
Stop alerts issued: UPL; FAST; CTXS
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 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.
SUBSCRIBER QUESTIONS/COMMENTS
Q: You have provided a very credible scenario for price action in the event of
war. How would you see the market in terms of volatility and its consequent
impact on options?
A: Excellent question. We discuss volatility in the context of the VIX and VXN. These are measures of market anxiety, but they are based on the theoretical volatility of a near term, at the money SP100 option and Nasdaq 100 option respectively. Volatility is a component of option pricing. What impacts it? News drives volatility up immediately. We used to play split announcements a few years back before everyone had beepers; we had a broker call on the news and we would buy options and make a tidy sum when the stock jumped up. When everyone started to do it, the mere news was enough to drive the volatility component of the option higher. The stock could stay flat but the option value would scream higher; you could actually see the stock then move up but the option value fall as the 'news effect' wore off and the volatility component faded. Thus the news of the war will immediately jump option prices as that kind of uncertainty injects volatility into the market. After the event (and with war it could take a few days), volatility will fall, at least from a news factor.
Another factor impacting volatility is simply the movement up and down of stocks. The wider the range of movement, the higher the implied volatility because the option pricing has to take into account the potential range of stock price movement in addition to the actual movement. The more up and down motion there is (or the more movement in one direction unabated - - the old what goes up must come down idea) the higher the volatility as well. So, a big move pumps up volatility as well.
Option volatility is also impacted by trading activity. When the volume was drying up in late 2001 and early 2002, option volatility dried up as well. It moved up on the heavy selling and buying in July through October, but it has backed off again with lowe rvolume and the lazy action the past 3 to 4 months.
Thus the initial news will drive option volatility components higher, and the news could keep volatility higher for several sessions. After that it will be the volume of shares changing hands and the up and down action that will impact the volatility component.
SEMINARS ON CD
There is an incredible wealth of knowledge, years of experience, and 'how to' plans of action in these seminars. As one graduate put it, "I had no idea how little I knew about market direction and the reasons behind it until I took your course." Our graduates over the past year and one-half have made the bear market in stocks their own private second bull market because they learned how to and when to enter the downside and make dramatic profit from what most investors dread. Have the knowledge to take advantage of any kind of market as well as the confidence to act when you see the action unfold. We cover it all from trends, to accumulation/distribution, patterns, stocks, buying and selling options naked, covered, or creating spreads. Go to
http://www.stockseminarsonline.com
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:
We are still primarily looking at some upside positions to set up for a war rally given that the market appears aching to move up on the start of hostilities for at least a near term rally. We also are looking at a stock or two for a quick downside move over the next couple of sessions.
Good moves: APOL; BLTI; DAKT; EXPE
New:
Upside:
Play Date: 02/27/2003
DNEX (Dionex--$33.47; +0.79; no options): Scientific & technical instruments
http://biz.yahoo.com/p/d/dnex.html
STATUS: Breakout. DNEX formed a nice shallow cup base the past 4 months, breaking out 8 sessions back as volume surged. It rallied near 33, tested back to the 10 day MVA (32.75), and then exploded higher Thursday on excellent volume. Very nice 7 to 0 accumulation during the base, and this heavy volume break higher after a test of the 10 day MVA after the breakout is an excellent test and entry point.
Volume: 251.542K Avg Volume: 87.863K
BUY POINT: $33.55 Volume=150K Target=$38.58 Stop=$31.94
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/dnex.html
Play Date: 02/27/2003
FWHT (Findwhat.com--$8.15; -0.05; no options): Internet business services
http://biz.yahoo.com/p/f/fwht.html
STATUS: Ascending wedge. FWHT spent most of 2002 basing, and then exploded higher in November in a massive breakout. It peaked in January and has since formed the current pattern moving along the 50 day MVA (7.40), using that as support. Accumulation during the recent current pattern is solid at 3 accumulation weeks to 1 distribution week. Money flow is leading higher. We like these internet stocks as they have been showing some of the best action and returns given their price versus the moves they make.
Volume: 153.8K Avg Volume: 217.863K
BUY POINT: $8.44 Volume=255K Target=$10.24 Stop=$7.85
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/fwht.html
Play Date: 02/27/2003
ICST (Integrated Circuit System--$23.1; +1.56; optionable): Integrated semiconductor circuits
http://biz.yahoo.com/p/i/icst.html
STATUS: Double bottom w/handle. This is one sub-sector of the chip market that sports very solid patterns, and ICST is no exception. It is working in a 3.5 month base that is part of a larger base that started in January 2002, sporting solid accumulation at 12 up weeks on rising volume to 5 down weeks on rising volume. Thursday ICST started up on a strong volume surge that carried it to a breakout from the handle. Looking for a move up over the middle of the pattern for the entry point.
Volume: 2.047M Avg Volume: 1.468M
BUY POINT: $23.31 Volume=2M Target=$27 Stop=$21.68
POSITION: IUY GX - July $22.50c (60 delta, low OI) &/or Stock
http://www.investmenthouse.com/ci/icst.html
End Part 1 of 2
|
world stock market
us stock market
|
