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world stock market, us stock market
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3/04/03 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: None issued
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/alertssr.htm
SUMMARY:
- Indexes trudge to the bottom of the range with techs trying to show relative strength.
- Announced layoffs rise again, retail sales remain squishy.
- Indexes are back at the bottom of the recent range with Dow, SP500 looking puny. Can the techs lead back up?
Market hit from all fronts and fumbles to the bottom of the range.
Automakers were downgraded in another great bit of foresight from the major brokerage houses, making those bold moves a day after automakers reports a big drop in sales as well as after the even earlier durable goods report showed a big drop in sales as well. That timely downgrade had its effect, however, pushing autos lower. Just for good measure investors sold just about every other durable goods manufacturer as well, sending WHR, GE, CAT and others tracking lower on rising volume.
On top of that there was the bombing in the Philippines that was clearly terrorist related. There was Warren Buffet saying he saw nothing in the market that moved him and that derivatives were some form of hell. There were also the continued rumors about war with Iraq and a timetable for getting to it. There is some validity there as you well know. We talked last week about how a Russian or French veto promise would tend to push the U.S. to forego a vote on its resolution. With Jack Chirac saying France could win without using its veto, those fearing war started to get nervous. Nervous means no buyers. In a market with a flat to down trend, no buyers means the indexes edge lower.
Then Greenspan spoke about housing and his version of what a housing bubble would be. Of course, one wonders if he would know one if he saw one given his view of the tremendous money supply-led stock rally in late 1999. I suppose if you help create it by pumping monetary supply up it is hard to admit you actually did it. Nonetheless, he talked of housing and the lack of a bubble, but also threw in that the housing market would fade some in 2003. No surprise there; there is no way it can sustain the growth trajectory regardless of what homebuilders say. If interest rates tick higher at all the housing market starts shutting down. Greenspan knows this; do you suppose he was preparing the way for higher rates?
That selling in durables led to selling in consumer products and cyclicals as well. All of those are large caps, and it was, as usual, a large cap selling session. Nasdaq bounced up and down all session, but in the end tanked to the bottom of the range along with DJ30 and SP500. Techs and chips tried to show some relative strength, minimizing losses. Many of the leading stocks held up well (e.g., YHOO, EBAY, AMZN) while other techs did not sell off much. Again, some relative strength as the indexes again hit the bottom of the trading range.
Given all of the bad news hammering the market today, the fact that it sold on light volume and basically held the range was not that bad. As indicated, that bad news did not bring out the sellers as much as keep the buyers at bay, and that allowed the market to sell to the bottom of the range.
THE ECONOMY
Job cuts over 138K in February.
A 5% gain over January's 132,222 announced layoffs (that was a 40% jump over December) show that the jobs market is still as bad as it has been during the recession. As jobs lag the economy, the fact that the economy is still at best growing slowly does not bode well for any near term improvement. Not one of the companies we have surveyed in the past month has hired anyone this year, and most have no plans to hire anyone anytime soon.
Weekly chain store sales reports mixed.
Redbook measured a 0.2% decline in weekly sales from the prior week, and a 2% decline in the 4 weeks of February. On the other side of the fence, Bank of Tokyo-Mitsubishi/UBS Warburg saw a 0.2% gain for the week Take your pick. Either way, retail sales were down for the week and compared to the same period in 2002. No pillar of strength remains the U.S. consumer.
Recovery? Those in the trenches that make the economy work don't see it, and that tells the story. The economy, like the emperor, has no clothes. Many are saying this, but the emperor and his men (president, congressmen, and their advisors) just don't see it. What we do have are rising producer prices on the back of strong commodity prices with no real increase in business activity to justify it. That is very troubling as we wrote last week. Again, commodities prices are not justified by the poor world business activity level. They are being driven by other factors. Sure oil and gold are up on war worries, but so are commodities across the board.
What is driving them? Extra money chasing them, i.e., the very definition of inflation (more dollars chasing the same or shrinking number of goods). The Fed has pumped so much money into the economy, but it is not being used. The primary reason is because banks are not lending it. It is extremely difficult if not impossible for a small business to get a loan. Even if they qualify the bank may decide not to risk it. Of course the bank ahs to be able to make these 'riskier' loans in the first place; the Fed still has many banks on restrictive status, effectively handcuffing them from putting that money into the economy. So, the money goes into the best market to park the money. In 1999 that was the stock market. Right now that is the commodity market. Flawed interventionist policies again fall prey to unintended consequences, distorting capital allocation and causing these bubbles throughout the economy.
The road the Fed is leading us is paved with higher interest rates and lower economic output, stagflation to those remembering the 1970's. What happens when commodities get so high consumer prices rise as well? The Fed raises interest rates to fight 'inflation.' That explodes what is left of the housing market and the final leg the economy stands on, another in the chain reaction of economic distortions to rectify itself after flawed policies created it. Commodities might fall then because the Fed will also drain the money supply again and call that money back from the banks. They then yank it out of the commodities market all at once (just like the stock market in 2000), and the commodities market plunges.
Greenspan has so many plates spinning up in the air that when a few start to fall they will all eventually crash down. About the only solution is mitigation at this point, i.e., removing restrictions on banks to get the money actually into the economy, tax cuts, short and long term stimulus, and let businesses and consumers spend money where they see fit. In short, give the money back to those that will put it to use and don't tell them how they should spend it. That is the only way to ease the bumpy transition from artificially stimulated sectors and provide the basis for growth after these man-made imbalances deflate as dollars are allocated where the market needs them. The irony of this (and there are many in Greenspan's legacy) is that there have been 'imbalances' created (Greenspan's favorite reason for harpooning the economy) by the very actions the Fed took to prevent our counter supposed imbalances.
The folly of intervening in a market showed itself in this post-boom collapse, and it is starting to show itself again in the Fed's incomplete attempts to undo the damage it caused while it also tries to expand its scope by lecturing Congress on fiscal matters. Greenspan has screwed up monetary policy, and it appears he will not be happy until he does the same to fiscal policy. He is an unelected official who is in ironclad control of our financial lives as he attempts to dictate what Congress should or should not do with respect to taxes. Further, if any administration dare confront him he will act to undermine their designs. He is truly the IRS of the financial world.
THE MARKET
So the indexes are once again back at the bottom of the recent trading range, again testing this level after just tapping the top of the range Friday and Monday. Same as last time around the SP500 and DJ30 look weak heading toward the lows while Nasdaq is showing some relative strength. The selling was again on light volume though breadth spread out more on the downside. They held and turned back up in the range on the last test just when they looked to be rolling over. They certainly have the look of rolling over yet again; will Nasdaq be able to turn and lead back higher yet again?
Chip stocks were modest sellers Tuesday. Some rolled over and tanked while others held up just fine. The SOX showed a doji right on the 18 day MVA, losing 0.7%, the smallest loss for an index. They are positioned well for another bounce attempt and thus help the Nasdaq hold up the rest of the market, but the large cap non-techs and the techs are trying to head in opposite directions. That is never easy on the market and it will test the resiliency tied to the possibility of war in the very near term.
Market Sentiment
VIX: 36.58; +2.49
VXN: 44.97; -0.86
Put/Call Ratio (CBOE): 0.9; +0.18. Rising to high levels that have indicated a short term bounce in this market.
Nasdaq
Bounced up and down all session but just when it looked it would break higher over the 10 day, it turned and dumped back to support.
Stats: -12.52 points (-0.95%) to close at 1307.77
Volume: 1.216B (-2.68%). Volume was basically flat, showing no increased selling intensity, just a lack of buying.
Up Volume: 290M (+32M)
Down Volume: 890M (-82M)
A/D and Hi/Lo: Decliners led 1.65 to 1. Still pretty modest selling.
Previous Session: Decliners led 1.28 to 1
New Highs: 61 (-3)
New Lows: 77 (+23)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq attempted to rally over the 10 and 18 day MVA (1320, 1323) mid-session but that was met with a wave of selling that sent it to session lows to close. It was still lower volume selling, and Nasdaq was still above support at 1300 on the close. Again, Nasdaq was helped by SOX that held the 18 day MVA, showing a doji. It is still in the range between 1300 and 1350, firmly below the moving averages. Lots of overhead and still in the downtrend, so we remain cautious. Without a lot of sellers and what we believe will be a war starting within the next week, however, it does not look as if Nasdaq is ready to fold yet.
S&P 500/NYSE
The large caps were hammered Tuesday, but in a relative sense. Big point drop pushed them to the lowest since the mid-February dip.
Stats: -12.82 points (-1.54%) to close at 821.99
NYSE Volume: 1.206B (-0.24%). Basically flat volume on the selling. Again, not so much the sellers but the lack of buyers on all of the negative news.
Up Volume: 155M (-250M)
Down Volume: 1.035B (+288M)
A/D and Hi/Lo: Decliners led 1.8 to 1. Breadth is fanning out on the downside, but is still not the heavy -2+:1 typically associated with big drops.
Previous Session: Decliners led 1 to 1
New Highs: 74 (0)
New Lows: 114 (+58)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Tried the 10 day MVA (834), but not that hard as the large caps were under the gun from the open with the auto downgrades. Indeed, unlike Nasdaq, the large caps never really tried to bounce. They undercut 825, a point of some support in the range though the index has traded to 817 on the close and 806 intraday during this range. Definitely would prefer to see it rally here and hold the range as opposed to selling off, thus keeping the good consolidation in place.
DJ30:
Blue chips continue to lag, breaking below an important level at 7750. They breached it 6 sessions back (7719 intraday) and then again on 2/13 (7629 intraday). This is the low close for the year, however. The Dow is hardly the leader in the market, but it may test down to the prior intraday low before trying to rally. Volume remains below average on the selling yet again. Still a lack of heavy selling.
Stats: -132.99 points (-1.7%) to close at 7704.87
Volume: 1.206B (-0.24%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
The stage is set for another test below the recent trading range with the indexes closing on their session lows and negative sentiment ruling the trade. It looks like a breakdown could occur to take stocks further in the downtrend. If war is sensed near, maybe that would be the catalyst.
The relative strength in tech and chips are worth watching after an early move lower. While the large caps and blue chips look crappy, they have looked that way most of the year and have not been the leaders. If the chips hold, the prospects of an early selling binge reversing are decent. It is dicey at this level once again with stocks teetering on the verge of selling to test the prior lows. The stocks in trouble are the large caps, however, and as noted, they have been close to freefall just to reverse. The more tests lower, the better the chance for one to stick.
After getting boxed around by news Tuesday the large caps look bad but overall selling volume was not heavy. Tuesday was a bad news day and all of the positives building (lower oil, stabilizing dollar, etc.) backslid on that news. We are going to watch for a further test lower, watching the volume and see where the indexes try to find support if in fact they will. We will then look at positions in those stocks that have continued to hold up in the selling. If there is a breakdown in the indexes we will catch it on the test.
Support and Resistance
Nasdaq: Closed at 1307.77
Resistance: The 18 day MVA (1323). Exponential 50 day MVA (1341) and simple 50 day MVA (1352). 1357, the 1998 bear market low. The 200 day MVA (1366).
Support: Price support at 1300. 1250 after that is another point where some lows have held.
S&P 500: Closed at 821.99
Resistance: The 10 day MVA (834). The 18 day MVA (839). Price resistance at 850 to 860. The exponential 50 day MVA (860), the simple 50 day MVA (869). The bottom of the October consolidation range at 875.
Support: 825 is not totally broken. The September 2000/May 2001 downtrend line at 802 and some price support at 800.
Dow: Closed at 7704.87
Resistance: The 10 day MVA (7857). The 18 day MVA (7915) and 8000. A range of resistance at 8000 to 8150 from the late January lateral move. the 50 day MVA (8130). Then 8250, the bottom of the October consolidation range.
Support: Soft support at 7750 is being stretched. 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): 0.3% actual, 0.4% expected, 0.3% prior (revised from 0.4%).
Personal spending, January (8:30): -0.1% actual, 0.2% expected, 1.0% prior, (revised from 0.9%).
ISM, February (10:00): 50.5 actual, 52.0 expected, 53.9 prior.
Construction spending, January (10:00): 1.7% actual, 0.4% expected, 1.5% December (revised from 1.2%).
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.
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End Part 1 of 2
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world stock market
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