|
|
world stock market, us stock market
* * * *
3/01/03 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Friday: None issued
Buy alerts issued: COH; SBL; FIC; EXPD; APOL
Trailing stops issued: FDS; EAT; JEF; LUV
Stop alerts issued: ESRX; SOX; PFCB; WB
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Bouncing like a ball, the market closes out a flat month.
- Economic data improving, but market is not buying it.
- We closed downside positions just in case, but there are obstacles as well as possibles to a war next week.
- Subscriber Questions
Market continues its lack of commitment.
A surge up, a surge down, and then dribbling in a narrow range the last three hours, the Friday intraday action matched that of the week and the month in general. It managed a positive close on some slightly higher volume, but the action was a picture of non-commitment.
Good (at least not as bad as thought) economic news regarding GDP, Michigan sentiment, and the Chicago PMI helped cycle the action higher early and set the pace. Selling came in right before lunch as investors used the rally to unload long positions ahead of an uncertain weekend. Not to be outdone, shorts used the dip to start covering again. For the next three hours the market bobbed up and down as shorts and longs covered and sold on each dip and rally. Cover, sell, cover, sell, cover, bell. The bell rang on the last short covering round leaving the indexes positive for the session. The last three hours of the session were a microcosm of the week.
Still, the market is trying to put something together. Oil prices have been surging, but they have backed off from the highs in the last week. Gold has been surging as well but it is also backing off recently. The dollar has actually started to firm the last month, ending the steep slide from last November. Stocks themselves are in a downtrend but have refused to turn for the next plunge, making a higher low the past two weeks. We are seeing some good patterns starting to breakout and some chips have perked up. Nothing outstanding, but a move is trying to form.
THE MARKET vis- -vis the ECONOMY
GDP stronger but weak, Michigan sentiment stronger but weak, Chicago stronger but weak.
First we have to run through the statistics to set the stage. The numbers continue to show steady, uninspired improvement. Well, not exactly. Some are improving, some are just hanging in there. Given the economy that is not bad, but given the carnage it is bad. There is a lot of damage to be undone in a short period of time so those baby boomers will have something when they retire other than an IOU from the government.
Q4 GDP came in at 1.4%, better than the 0.7% preliminary number but well off the 4% Q3 gain. There are calls for 3% or 3.5% growth for the year, but it will have a lot to overcome. One bright spot, however, was the continued improvement in measures of business investment. The January durable goods orders showed yet another gain in non-defense capital spending less transportation (need a road map for this stuff, huh?), a measure considered a proxy for business capital spending. The Q4 GDP number measured the first increase in business investment in 9 quarters. That is good news, but it is hardly blockbuster. It is like seeing Johnny from 'The Dead Zone' twitch in his coma; could be something there, but it could also just be a random twitch.
Michigan sentiment (February) came in at 79.9 versus the 79.2 prior.
Higher than expected, but still at its lowest reading since 77.9 in September 1993. It is also down from the January 82.4 reading. Present conditions are decent at 95.4, down from 97.2. Expectations were 69.9 versus 72.8 in January. Basically consumers are spending right now because they fell okay, but they are worried about the future. This is one of those 'say one thing, do another' indicators. Consumers are still there, just wavering.
Chicago PMI beats expectations at 54.9 versus 52.5 expected, and 56.0 prior.
This is expansionary and shows that the mid-west managers are still feeling somewhat positive about the future. New orders were the most impressive segment, at 59.9. This is the fourth straight Chicago gain after sub-50 showings in September and October and indicates some upward momentum with new orders being the lifeblood.
Market not impressed with the economic numbers.
Economists are talking about that 3% growth for the year, but the market is not buying it. While the improvement in economic numbers, particularly the business investment, are beguiling, you have to remember that the market is the best forecaster of the economy. It has always moved higher ahead of real economic gains. It starts topping action and then moves lower ahead of real economic weakness as it did in early 2000. After a nice move off the July to October double bottom, however, the market has slid lower and lower, not taking any solace from the slowly improving economic reports. That means the collective of stock buyers do not think the economic recovery is showing enough to warrant higher stock prices (i.e., higher future earnings to support higher prices).
Is it the Iraq war? Greenspan and his henchmen seem to think that is the problem. Surely the improving reports and all of that monetary stimulus will work just like magic once the Iraq boogeyman is removed. Problem is, Iraq is just the front burner issue ahead of North Korea, Al Qaeda, economic relief package, and Venezuela. Take away Iraq and you have yet another to take its place though perhaps not as imminent.
Unlike 1991 and the parallels being drawn, there is a lingering problem from the last item on the list. Oil prices are edging lower the past week, but they are not plunging ahead of war as in 1991 but have just hit 15 year highs. Their reluctance to sell is a signal that the war beginning and ending will not have much impact on prices. Venezuela is a big problem and has not been resolved. Other world tensions have not helped either.
Higher oil prices for an extended period are associated with recessions. There is more than Iraq keeping them up, and they have been high enough for long enough to cause another recession despite the budding signs of recovery. Those are still very modest, and high energy prices can overwhelm them. That appears to be what is keeping the market trending lower, unimpressed with the modest recovery signs. It is not a pretty picture. Historically lingering higher oil prices lead to recession. The market is still trending lower and lower despite signs of a slow economic recovery. Maybe history will be changed this time around and the economic numbers will lead the market and prolonged rising oil prices won't lead to economic downturn. Hope springs eternal, but it also rhymes with dope. A good surge on the war will be hard pressed to last.
THE MARKET
All indexes rose on rising volume with Nasdaq and SOX posting the largest percentage gains. Volume was up but it was not huge. Moreover, a lot of the action was short covering ahead of the weekend. A lot of that occurring given the new moon and concerns about the war possibly starting. On top of that there were actually some good upside moves that we took part in and some more setting up. The market has not bought into the economic recovery, but Nasdaq is trying to set up for a near term upside rally on the back of SOX in conjunction with a war or to celebrate one not starting.
Market Sentiment
Volatility has not been leading any indication that there is the type of anxiety in the market that would show the downtrend is ending.
VIX: 34.15; -1.03
VXN: 45.66; -0.5
Put/Call Ratio (CBOE): 0.59; +0.04
Nasdaq
Some decent volume to again test the 50 day MVA on the high.
Stats: +13.58 points (+1.03%) to close at 1337.52
Volume: 1.343B (+4.81%). Not huge volume, but moving up near average. Hard to call it anything other than some short covering action.
Up Volume: 990M (+84M)
Down Volume: 328M (-8M)
A/D and Hi/Lo: Advancers led 1.04 to 1. Index gained 1% but breadth was barely positive. This is not the sign of a strong market.
Previous Session: Advancers led 1.5 to 1
New Highs: 80 (+20)
New Lows: 68 (+7)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Rallied up to the 50 day MVA on the high (1342.73), faded back but held most of the session gains as volume moved up to average levels. It has made a higher low off of some support at 1300, moving laterally the past two weeks. It is still in the downtrend, but with the SOX clearing its 50 day MVA and short term down trendline Friday, Nasdaq can follow this key group's lead for a short term rally. The 200 day MVA is close at hand (1370); it stopped the last two attempts higher.
S&P 500/NYSE
Rallied on some higher volume, but could not get over the 18 day MVA yet again.
Stats: +3.87 points (+0.46%) to close at 841.15
NYSE Volume: 1.304B (+2.57%). Volume rallies some to average, but that does not put it in the recent league of volume.
Up Volume: 820M (-110M)
Down Volume: 473M (+130M)
A/D and Hi/Lo: Advancers led 1.5 to 1. Weak advancers after a good surge in breadth on the Thursday move.
Previous Session: Advancers led 2.09 to 1
New Highs: 73 (+19)
New Lows: 42 (-18)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps did not do much to turn the tide, rising to 847 on the high but then returned to close at the 18 day MVA (842). Volume was solid, but not spectacular; the big names were moving up on some short covering. As with Nasdaq the SP500 made a higher low this past week, but it is still in the downtrend and does not have the same look of Nasdaq. Still, it can be pulled along in a Nasdaq/SOX rally. 850 is immediate resistance and the 50 day MVA is next (863 exponential, 872 simple).
DJ30:
The blue chips squeaked out a gain after giving back 75 points from the high that tapped just over the 18 day MVA (7952). Volume declined on the action as the big names could not muster buyers or sellers. As with the other indexes the DJ30 is attempting a lateral move after holding some support at 7750 on the lows the prior two weeks. That shows some resilience, and while not screaming strength, the blue chips will more than likely follow the techs higher on any near term rally. The 18 day MVA and 8000 to 8150 represent resistance. If there is any move of substance, however, it should make it to the 50 day MVA (8160).
Stats: +6.09 points (+0.08%) to close at 7891.08
Volume: 1.304B (+2.57%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THIS WEEK
Talking to floor traders and brokers Thursday and Friday, we found we were not the only ones speculating about the possibility of war. What happens on that front early in the week will be closely watched. We were not interested in going into next week with short positions and went about closing them as the opportunity arose on the dips. Tactically this week is the week to make the move, but several obstacles presented themselves late in the week. Turkey put off a parliamentary vote on allowing U.S. troops to marshal war there and then after voting 'yes' Saturday, the opposition said no quorum was present and it was rescinded. The UN is going to stonewall the US/UK resolution; some said it could take two weeks to vote on it. Iraq said it agreed 'in principle' with the inspectors' order to destroy its missiles, and that gives those wanting more inspections what they want to argue for more inspections.
On the other hand, the U.S. does not necessarily need to base out of Turkey, and there are already enough men, machinery, and weaponry ready to go that can do the job. Further, Russia indicated that the alleged Iraq agreement to destroy its missiles was enough for it to veto any resolution that 'directly or indirectly' authorized the use of force. Obviously Russia believes that the joint US/UK resolution will do just that. If Russia is going to veto the resolution, then there is little point for the US to wait for that to happen. There is also the continued pressure on timing; new moon, pre-summer weather in the desert. If we are going in, our troops have to have the best conditions to fight and defend themselves.
Of course, acting without putting the resolution to a vote (even if it would fail) would give rise to even greater discord, not that that would change our image in the world eye. We are seen as war mongers through and through. If Bush backs off it won't be seen as a reasoned response to some progress on inspections but instead it would be viewed as a victory over a war monger. That is just the way it is and Bush has to deal with it.
Unfortunately it has to be dealt with rather soon or the economy will continue to suffer. We cannot expect Bush to back off from his stance that has been so clearly stated nor can we expect France, Russia or Germany to back off. UK's Blair is also in a tight spot as he has promised a second resolution. Sticky situation that is bad for everyone involved.
That is one reason we feel that whether war starts early this week or it does not there will be some type of rally. The shorts were unable to push the indexes lower and they are ready to come up for air on any decent news. Of course they could have been anticipating war starting and when it does not occur they resume the downtrend. There are still many, many variables out there, but looking at the market action last week it is attempting to set up a near term move higher as the SOX broke its downtrend when it looked ready to fail. We were taking upside positions Thursday and Friday in anticipation of an upside move given that several smaller names in good patterns suddenly perked up, completed short bases, and started breaking higher. We don't expect any such rally to last long without a war to push it, but these stocks we are looking at and moving into are in nice patterns, moving up ahead of the market. That is always a good place to be.
After the war aspect, there are many economic reports out next week including the ISM, factory orders, personal income and spending, and the employment report. No shortage of news on any front. In the absence of war, economic news will be reviewed, but it still will play second fiddle; war could still come anytime during March, even early April at the latest (the next new moon). With that hanging out there we will have to watch any rally when it reaches near resistance.
Support and Resistance
Nasdaq: Closed at 1337.52
Resistance: The 18 day MVA (1325). Exponential 50 day MVA (1343) and simple 50 day MVA (1355). 1357, the 1998 bear market low. The 200 day MVA (1370).
Support: Price support at 1300. 1250 after that is another point where some lows have held.
S&P 500: Closed at 841.15
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 872. The bottom of the October consolidation range at 875.
Support: Some price support at 825. The September 2000/May 2001 downtrend line at 804. After that 800.
Dow: Closed at 7891.08
Resistance: The 10 day MVA (7902). The 18 day MVA (7952) 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 last week. If that gives up, then 7500, but a 7750 breach really opens toe door to test the low at 7197.
Economic Calendar
3-03-03
Personal income, January (8:30): 0.4% expected, 0.4% prior.
Personal spending, January (8:30): 0.2% expected, 0.9% prior.
ISM, February (10:00): 52.0 expected, 53.9 prior.
Construction spending, January (10:00): 0.4% expected, 1.2% December.
3-05-03
ISM services, February (10:00): 53.0 expected, 54.5 January.
Fed Beige Book (2:00)
3-06-03
Initial jobless claims (8:30): 400k expected, 417k prior.
Productivity, Q4 revised (8:30): 0.1% expected, -0.2% prior.
Factory orders, January (10:00): 0.4% expected, 0.4% December.
3-07-03
Nonfarm payrolls, February (8:30): 20K expected, 143K January.
Unemployment rate, February (8:30): 5.8% expected, 5.7% prior.
End Part 1 of 3
|
world stock market
us stock market
|
