|
|
world stock market, us stock market
* * * *
3/06/03 Technical Traders Report Update
* * *
Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Thursday: IMCL hit, but we decided to let it run.
Buy alerts issued: MEDI
Trailing stops issued: ASKJ
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:
- Rumor mill churns and so does the market
- Jobless claims ramp ever higher
- Common themes found in Fed rate hikes and current escalation in anti-US sentiment.
- Nasdaq holds 1300 as market freezes in the headlights.
- Subscriber Questions
Indexes slide lower as rumors and news take their toll.
Nasdaq held 1300, SP500 held 820, and the Dow did the best it could which was not all that great. Economic news was mixed at best, and then the rumor mill hit. First it was North Korea willing to allow US nuclear inspections. That was not bad news, but it did not have a lot of impact. Then it was Bin Laden's capture. Those two combined helped get the market running higher in the early and only upside bounce. Then the rumor hit that Iraq was dropping bombs on its oilfields, and that helped turn the market back (along with a general lack of desire to buy anyway) from its peak.
Then the announcement came of a Bush press conference and that spooked investors. The first thought was a war declaration but the White House said nay. Just a press conference to buck up the morale, clarify some points, talk of the Al Qaeda capture, and generally badmouth Hussein. With the high profile of Rumsfeld and Powell the past two days, however, that did not comfort anyone. It should. The sooner we get this mess over with one way or the other, the sooner businesses can start to plan, spend, etc. As it is now we are letting others tell us what we should do to protect our own interests. That is wrong and it puts our troops that eventually have to do the dirty work at even greater risk.
Regardless of the rationale of either side of the issue, while we wait the economy and thus the market suffers. Economists hail the numbers from December and January as showing improvement, but the more recent data from the manufacturing and service sectors, retail sales, auto sales, jobless claims, and anecdotal evidence shows the economy has shut down during this time of pre-war tension. There are great things happening such as the major terrorist arrest and the intelligence bounty obtained as a result, but they are lost in what has become the clamor of those afraid of the US and those favoring getting rid of Hussein. That standoff is the real threat right now, at least to the financial well being of the free world. Get it over with or just forget it altogether. Anything else and the economy dies the death of a thousand cuts and the market slides lower.
THE ECONOMY
Jobless claims jump.
430K blew past expectations for 403K new claims, keeping the recent trend higher moving higher. Last week was revised up just 1K to 418K. Still, that puts the index above 400K for a month, and it pushed the 4-week average to 408,750 from a revised 400K the prior week (up 250). Continuing claims rose as well, up to 3.52 million versus 3.34 million the prior week as those losing jobs are doing so at a faster rate than those falling off the jobless roles as their benefits run out.
With all of the layoffs announced the past two months it is no wonder we are seeing jobless claims rising. Whatever hiring plans may have been in the coffer, they have been tabled in advance of war, terrorism, North Korea, Venezuela, etc. That has shown up on the regional and national manufacturing and service surveys as businesses indicate they are in no mood to hire. Sad thing is, that won't change in the near future. War uncertainty is one thing, but it also works to push any recovery further down the road. As jobs lag economic activity, there is not much hope for job creation anytime soon.
We wrote about this as we discussed the ramifications of the Fed's attack on prosperity. At the time we said the consumer would not stop consuming until jobs were lost despite the Fed's rate hikes that were supposed to rein in the 'runaway' consumer. That is exactly what has happened. The consumer kept up his spending and even so during job losses given the money received from refinancing. That well is running dry, and as more and more jobs are lost with no view that there will be replacements anytime soon, the consumer is finally bottling up. There is no pent up demand (consumers have spent through the recession), and there is a lot of debt that will keep consumers from spending more. Look at the recent figures: savings rate is the highest it has been in almost 20 years. Consumers are sticking money into the bank and leaving it there. Once again the irony is pointed: the Fed wanted a higher savings rate. It got what it wanted, but as usual it caused the loss of 2.5 million jobs, trillions of retirement dollars, a recession, and the largest stock market crash since the Great Depression (and it is surpassing that in time).
Factory orders up 2.1% in largest gain in 6 months.
That beat estimates for January by 0.3%, and well above the December 0.3% gain. Take out transportation and it was up 1.5 as car sales surged 14.6% at the first of the year. Durable goods were revised to 2.9% (down from 3.3%). Without defense spending on durables they rose 3.1%. This gives some more credence to the idea that businesses are starting to spend, but it is just a blip in a long downtrend. There has been no sustained, significant business investment. Moreover, this is the January number. The February and March numbers will plunge given no one is doing anything in the pre-war environment.
Is the world for Hussein or just against the power of the U.S.?
One thing that confounds many in the US is how the people wanting peace (and let's be real, 99.9% of us want peace; some feel it is necessary, however, to remove a tyrant with aspirations of global domination and who possesses and uses mass destruction weapons before he can some day use them again) seem to be for Hussein, a known murderous tyrant, and against the U.S. How can this be?
Back in 1999 we were writing about the Fed and its rate hike campaign against non-existent inflation. There was never any inflation; indeed, the Fed had us on the verge of deflation after its foolish actions. We speculated at the time that the Fed was raising rates with the purpose of hobbling the U.S. economy because the gap between the US and the rest of the world was getting too great. Without the USSR in the way our economic power kicked in. That further fueled the US technological lead and thus its military might as it incorporated that technology into military systems. We speculated that the US economic power and the new rich really scared the elite wealthy that control world oil, gold, diamond, and other commodity markets, and that they pressured the world central banks to work together to slow the U.S. and hopefully bring up the other economies to narrow the growing gap. There was a lot of new wealth being created in the US, and the new billionaires reduced the relative wealth of the ultra wealthy.
We all know the result. The central banks pressured the US to raise rates (the IMF, World Bank and other lobotomized organizations fell into line as well with their US bashing). Greenspan feigned independence, but he found 'new' inflation indicators that had always been seen before as signs of economic health and prosperity (everything the politicians promise over and over they would deliver) and used those as excuses to raise interest rates. Trying to 'manage' free markets is always a losing gamble, and the Fed and world central banks lost big. The US went down, and as it went, everything went with it. In the end we suppose the ultra wealthy got what they wanted. Many new rich were wiped out and the gap between the U.S. and rest of the world shrank. We are losing our technological edge that we argued we had to maintain as the baby boomers retired. We needed to be the far and away world technology leader to keep our standard of living as we would no longer have the huge consumption engine of the baby boom generation, but we have lost much of that lead and are losing more and more every day as no new businesses come to market with new ideas. Very sad predictions, but even sadder, they are coming true.
Now we hear the social scientists saying that the real fear among the world is a strong and unimpeded US. It seems that in trying to understand the reasons for the world protests against war on Hussein they have discovered it is the fear of an all-powerful US that is driving the anti-war sentiment. It is the fear of the US being able to do what it wants when it wants that is at the root of the protests. This is the sentiment we were speculating about with respect to the ultra wealthy and other governments over three years ago. It appears that this fear has filtered down through to the masses either as a direct result of propaganda or just a realization that the US has the best, most powerful form of government from which it unleashes great economic power.
What does this mean? It means the first part of the equation has been realized. All we can do regarding that is try to force our leaders to do what needs to be done to revitalize US business power ahead of the rest of the world, e.g., tax incentives and the like. As for those that are against us because we are what we are through hard-work and a constitution that allows for individual and national greatness, we cannot let them sway what we know we must do for our own good whether that be go to war or decide to back off. In other words, we cannot let those with interests materially different from our own rule our decisions regarding our well being. We are not the rest of the world, thankfully, because we do have a different form of government and law. It is our duty to our forefathers and our children to do what we know is right to protect this land of opportunity and keep it the land that those wanting to better themselves seek. In short, we cannot succumb to the politics of envy as the world central banks did. That almost destroyed the gains made in the past 20 years in the blink of an eye. We cannot let that happen just because others in the world fear the prosperity our form of government fosters.
THE MARKET
Nasdaq and SOX, while not charging higher, again showed relative strength to the SP500, DJ30, SP400, and SP500 as they held their support. That is not, however, a ringing endorsement of the action. Lower volume, modestly lower A/D lines, key indexes hanging on. It was the same familiar action: no desire to buy, no desire to sell heavily. In a market trending lower, that results in a general drift with the trend.
The index most are watching, but the one that has the smallest impact, is the DJ30. It has broken the 7750 level, a key level as it held on the last test lower in February. Now that level has been broke on the close many are saying the test of the October lows is baked in the cake. We do agree that the breach of 7750 opens the door lower. It is still in the larger reverse head and shoulders pattern, however, as long as it maintains above the July low (7532 intraday). It can hit that level and bounce and never look back. In any event, DJ30 is not the leading index; it suffers from a small gene pool. It could fall to the lows while the other indexes showing more strength never come close.
In any event, some relative strength by Nasdaq and the SOX is, well, relative to the other indexes that look weak and are edging lower in their downtrends. It will take more than relative strength to bounce the market higher. They may hold on while the world works through these final few days before a resolution to the war issue, but we don't expect a big run in the interim. We were looking for more of a bounce than we got, but with the UK now compromising on a resolution, the entire deck is being reshuffled.
Market Sentiment
VIX: 36.34; +2.11
VXN: 45.65; +1.31
Put/Call Ratio (CBOE): 0.94; +0.2. Second time over 0.9 on the close in the past two sessions. In the past when we have had a series of 0.9 closes or better a short term rally ensued. This is secondary, however, and if Nasdaq gives up on the INTC news it obviously trumps a secondary indicator.
Nasdaq
An early rally attempt failed in the face of rumor and news (a sign of weakness). About all you can say is that it again held support at 1300.
Stats: -11.51 points (-0.88%) to close at 1302.89
Volume: 1.273B (-6.42%). Volume backed off, again well below average on the selling. That indicates no more sellers, just meandering in the trend.
Up Volume: 391M (-187M)
Down Volume: 841M (+101M)
A/D and Hi/Lo: Decliners led 1.54 to 1. Very modest downside breadth, again underscoring the lack of intense selling. Just bleeding from several wounds.
Previous Session: Decliners led 1.05 to 1
New Highs: 48 (-11)
New Lows: 105 (+16)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq again flirted with support at 1300, testing that level 4 times (low 1299.81) before trending slightly higher in the last 2 hours. There was no power in the move after rebounding Wednesday on the heels of 2 selling sessions. We were looking for more follow through, but the news was not conducive to do so. Thus Nasdaq did the next best thing: it held support on lower volume, showing a doji on the candlestick chart. That is a continuation of the relative strength it has shown as it and SOX held their ranges. That is about the one last positive sign for market upside other than the general lack of real dumping. Even with no real dumping, however, Nasdaq and SOX have to maintain their ranges because as we have seen in the past, markets can die from the 'lack of heavy selling.' At some point the market just sinks and it does not matter how heavy the volume is. Thus Nasdaq and SOX are the key components to watch, and the SP500 is making a game of it as well.
S&P 500/NYSE
Turned back over but hanging in there for now on some lower volume.
Stats: +0.03 points (0%) to close at 822.1
NYSE Volume: 1.284B (-1.21%). Slightly lower volume on the selling. Suffice it to say volume remains weak both upside and downside.
Up Volume: 417M (-388M)
Down Volume: 848M (+354M)
A/D and Hi/Lo: Decliners led 1.65 to 1. As with Nasdaq, very modest downside breadth as market continues a slow bleed.
Previous Session: Advancers led 1.18 to 1
New Highs: 81 (-8)
New Lows: 174 (0)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Large caps sold again after a rally attempt Wednesday. It did not even make the 10 day MVA (831) on the high (829.56) this bounce attempt before turning lower. Still, it managed to hold above 820, and there is a sticky range from 820 to 825 that has been stubborn. It may just be a house of cards that will give up and tumble, but the large cap index looks a lot better than DJ30. I know, that is not saying much of anything right now as they are both in downtrends.
DJ30:
The second close below 7750 in three sessions as the blue chips are putting in a weak show of trying to hold above the February intraday low (7629). The blue chips and small caps are really the weakest of the indexes, kind of the bookends of the market. With the continued waiting game they will most likely get to prove their weakness further. 7532 is just an afternoon away, and that is the July intraday low that will have to hold up for the reverse head and shoulders pattern to have a chance at completing. Looks as if it will be tested.
Stats: -101.61 points (-1.31%) to close at 7673.99
Volume: 1.284B (-1.21%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
Intel raised the bottom of its revenue figure as expected, but then it lowered the top end of the range as not expected. It was getting kicked around after hours along with other semiconductors. The SOX' ability to hold the line in its range will get a real test Friday, and because they make up Nasdaq, Nasdaq will be tested as well. If they give in, then the Dow easily tests the lows and the large caps suck wind like a carp on a hot road as well.
We will see what Bush says tonight, but it is not going to be any declaration of war. The talk is there will be some compromise that the UK is pushing where the UN will come back and say 'Okay, Iraq. This time we mean it. Disarm or else. Really. We are not kidding.' That means another week or so before even starting to resolve this. In the interim the economy stays at a standstill, the market bleeds, oil prices stay high, and an energy price led recession becomes more and more a reality. Prices have already been high enough long enough to result in a recession; the inactivity preceding potential war is just adding weights onto the scale and tipping it toward a second recession.
That sounds pretty gloomy, and it is. That is further down the road, however, and we are looking at the near term impacts of a war. As more and more undercurrents swirled Thursday about compromise and deadlines a week or more away, the market started losing interest in hanging around in the range. It has not broken down, but Intel along with a poor jobs report Friday could see to that.
Many good stocks are still holding up well. Again, there are not a lot of sellers trying to take them down as there is still enough uncertainty to keep the buyers holding if not buying and keeping the shorts from letting their positions run very far. This market is going to get some big shocks that can push up and down; they are coming. It is difficult to be overly aggressive upside or downside as the moves are going to be sharp when they occur. That is why we have backed off from a lot of downside as we have not (as of yet) seen big, ugly breakdowns. The stronger patterns continue to hold up very well. If they start falling apart that will be the clearest signal that the market is imploding. They are not doing that yet, and thus we have been very conservatively adding a few positions here and there in those stocks. We will cut them loose if they fail and even turn on them like a tiger eating its young. Until then the potentially powerful impact of near term events keeps us conservative.
Support and Resistance
Nasdaq: Closed at 1302.89
Resistance: The 10 day MVA (1316). The 18 day MVA (1320). Exponential 50 day MVA (1339) and simple 50 day MVA (1350). 1357, the 1998 bear market low. The 200 day MVA (1362).
Support: Price support at 1300. 1250 after that is another point where some lows have held.
S&P 500: Closed at 822.10
Resistance: The 10 day MVA (831). The 18 day MVA (836). Price resistance at 850 to 860. The exponential 50 day MVA (857), the simple 50 day MVA (867). The bottom of the October consolidation range at 875.
Support: 820 to 825 is (roughly) hanging in there. The September 2000/May 2001 downtrend line at 800 and some price support at 800.
Dow: Closed at 7673.99
Resistance: The 10 day MVA (7811). The 18 day MVA (7877) and 8000. A range of resistance at 8000 to 8150 from the late January lateral move. The 50 day MVA (8098). Then 8250, the bottom of the October consolidation range.
Support: Soft support at 7750 was cracked again on the close. You want to see 7532, the July low, hold. The 7750 breach opens the door to test the low at 7197.
End Part 1 of 2
|
world stock market
us stock market
|
