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world stock market, us stock market
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3/11/03 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued as we decided to let ERES run
Buy alerts issued: None issued
Trailing stops issued: MYL
Stop alerts issued: CVD; SYMC; INSP; ASL
You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- The war that was not undermines the recovery that is not.
- US willing to wait some hoping on Bin Laden capture, but France counsels undecided nations to ask for more time to delay the war until the fall.
- Pessimism spikes and Barton Biggs is ready to buy again.
- War delay hurts the economy, and even after a war spike it has more troubles.
Market continues to slide as the war deadline does the same.
The DJ30 slipped just below its July low on the close as volume edged higher on the selling. SP500 managed to hold some support at 800, but that is relatively academic; the indexes slipped to a critical level and there is not much impetus to lure buyers in to rescue them at this point.
Stocks of all stripes were showing some fatigue. One thing the market has going for it is a cadre of stocks that are holding solid patterns. Tuesday many of those were shaken; they did not fall out of their patterns but not all of them maintained the same orderly action within their bases. Solid patterns are necessary but they are not sufficient. There has to be a point where there is a trigger to send them higher. Otherwise they run out of rope and the pattern is disrupted. Something needs to happen soon to turn these good patterns into good breakouts.
The reason: the war was anticipated to start over a week ago. You can look at the market and see that in the patterns setting up. When that did not happen they held on for another week. Now the diplomatic mess is an even bigger quagmire with Tony Blair in a fight for his life and the 'undecideds' wanting a 45 day deadline. That is the whispering of Jack Chirac in their ears: 'you don't have to vote against the US, just ask for a delay.' A delay is in effect a no vote, however, as the US has just a matter of days to start a war or put it off until the fall. That is the goal of those opposed to action: put it off long enough and they will win the current battle.
That is what has hammered the economy and now the stock market is starting to show the wear as even the holdout sectors are starting to show cracks. Waiting for the war to start, businesses and consumers have not been spending. Oil prices that were finally peaking and falling as it looked as if war was imminent two weeks back are now right back up again, up 20% for the year and up 75% from a year ago. That is a crushing weight on the economy by itself. With the addition of over a month of no economic activity, the economy will be extraordinarily lucky if it avoids a second recession. The longer this drags out the worse it gets. The administration has to either go to war in the next week or just drop it and totally back off, agreeing to a long series of inspections and testing throughout the summer, convincing everyone it will buy off on Iraq's ability to show it is complying. The latter won't happen, but the former will be hard to pull off with Britain putting heavy pressure on Tony Blair to get UN approval. The administration is between a rock and a hard place, and the economy is getting the life squeezed out of it at the same time.
Why is the US waiting?
Tony Blair for one. Without the UK, the US is basically alone though we do not belittle Spain and those other countries that are backing the US. Blair has incredible pressure on him to conform to the economic interests of France, Germany and Russia under the guise of getting UN approval. That is huge for the US.
The US also is hoping there will be some aid from another front, namely the terror fight. The word is that Pakistan and others were close on the heels of Bin Laden. Where they used to be weeks and then days behind, they now claim to be just hours behind. There is much more to this. We are told that the Al Qaeda mastermind arrested two weeks back was arrested before then. They sat on him and questioned him for at least a week before staging another arrest that they videoed. Then there was the story about capturing two Bin Laden sons that the US shrugged its shoulders over and then denied occurred. We hear that the news leaked out before it was planned and that is why it was denied. Apparently they were captured or someone of similar importance and they are again putting the squeeze on them as well.
What does that mean to the current situation? It means the US is hoping (and as you know, in most cases hope rhymes with dope) that Pakistan and others will catch up to Bin Laden and give the US a big boost of positive sentiment to go ahead and take care of business. Sure some will argue his capture would mean there is no reason to rush, but there is a good argument to go ahead and put more nails in the terrorist coffin. Let's face it, the US needs something positive to play off of in terms of PR. It does not matter to the world that the inspectors don't think Iraq has destroyed its biological and chemical agents, that Iraq has a drone that violates per se the terms of all resolutions, that Iraq remains in bald-faced breach of the UN resolutions dating from the end of the Gulf war, resolutions it agreed to in order to end the war. The UN is more interested in maintaining peace at all costs and most of the world is afraid of the US. Facts are not working, so some good PR just might give the US enough of a following to make its move.
THE MARKET
Last night we talked of the high gloom, and today Barton Biggs was talking about the same. Barton thinks it is high enough now to warrant moving into the market. He said that in October, and the market did rally but as Biggs readily admits, it sputtered and failed.
There is gloom, but it is not massive. There is an incredible amount of indifference out there (what we term the 'give a s - - ts') as opposed to fear. Volatility remains at relatively low levels for a reversal. Short interest is rising again, but it is still well below October levels. Individual investors according to the AAII poll. IDB's sentiment gauge did fall below 50 (48.8), a level that precedes recessions (it did so before the March 2001 recession). That level puts it 5 points below where it was when that prior recession started.
There is some fear, but it is not what you would associate with bottoms. After July and October, there is no real need for the anxiety to hit new highs IF those levels are going to hold. As noted Monday, low volume tests of prior lows are technically good. Coupled with some high anxiety they are even better.
The key now is whether the lows hold. DJ30 slipped below the July low Tuesday. It has not breached it precipitously and can still bounce right back. The SP500 is holding at some support at 800, and Nasdaq is still holding above the February lows as volume remains very low. What the market needs is a reason to start anticipating the start of a war or the fact that it won't happen for 6 months. As no one believes the latter, the issue is whether the market receives reason to anticipate a war in the very near future. With all of the turmoil that has been the market's Achilles heel. After a vote on any resolution this week, that picture should clear up, and that should help the market get over this war anxiety.
That will allow the market to rally near term, but after that the same problems continue: high oil prices for a year, North Korea, terrorists, economic package in limbo. Those will be weights on any rally higher after it shoots most of its ammunition as in the October to December run.
Market Sentiment
VIX: 38.08; +0.23
VXN: 47.53; +0.5
Put/Call Ratio (CBOE): 0.81; -0.06
Nasdaq
Tried to rally higher but when push came to shove late the sellers (or more like the lack of buyers) took control and pushed Nasdaq to a new closing low for the year.
Stats: -6.9 points (-0.54%) to close at 1271.47
Volume: 1.251B (+11.95%). Volume moved up but was still well below average as the low volume test/bleed continues.
Up Volume: 436M (+199M)
Down Volume: 767M (-98M)
A/D and Hi/Lo: Decliners led 1.21 to 1. Big names mostly as the breadth indicates.
Previous Session: Decliners led 2.53 to 1
New Highs: 33 (-2)
New Lows: 122 (-5)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq closed at a new closing low for the year but still held above the February intraday low (1261.79). That keeps Nasdaq as the index that is still hanging on to its lows much as the SP500 was the lone holdout in October 2002. Many eyes are watching Nasdaq to see if it can hold up. If not, its next test is the July bottom at 1192.42; for the other indexes it would be the 2002 lows.
S&P 500/NYSE
Tried to rally as well, but gave up the gains, managing to hold at 800, just over the July closing low.
Stats: +0.01 points (0%) to close at 800.73
NYSE Volume: 1.393B (+15.79%). Rising, above average volume on the bounce attempt as more shares turned over as the indexes tested the next support level.
Up Volume: 387M (+322M)
Down Volume: 978M (-168M). Down volume was still way out ahead of up volume even as the index tried to close higher, failing in the last half hour.
A/D and Hi/Lo: Decliners led 1.42 to 1. Modest downside breadth.
Previous Session: Decliners led 3.03 to 1
New Highs: 70 (-9)
New Lows: 285 (+27). New highs still churning in at solid levels though not extreme at his point (400 or more is getting there).
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps landed on 800, the closing low for July 2002 (797.70). They tried to show a hammer doji with a half hour to go, a signal that it was trying to set the stage for a bounce. That gave way and left an uglier picture. Volume was up on the selling, an official distribution day meaning that the sellers did increase their presence. SP500 is a notch further down in its selling than Nasdaq, already at the July closing low (intraday at 775.68). If this gives (and if Nasdaq does it will), then the October lows (775.80 closing, 768.63 intraday). 800 is a great level to hold, but it needs a reason; right now that would be the war that is not a war.
DJ30:
Landed right on the July low more or less (7532; closed at 7524) as volume edged higher but was still below average on the session. The Dow is in danger of slipping away toward the October low (7197) if it cannot find strength to bounce at this level. The turmoil and indecision in New York is keeping the market on the slippery slope. It too attempted to form a hammer doji right on this support; if it had held at 7532 it would have been prettier. As it is it is a loose doji that is a weaker potential signal. Suffice it to say that the DJ30 has to move up here or it is heading lower. Again, the Dow is not really leading to the downside. It is just the weakest of the indexes and it is waiting to see where the others make a stand.
Stats: -44.12 points (-0.58%) to close at 7524.06
Volume: 1.393B (+15.79%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
As some floor traders put it at the close Tuesday, everyone will be watching Nasdaq. We will also be watching those stocks that have held up during the selling but were getting a bit shaky Tuesday. They set up well in anticipation of an upside catalyst, specifically the war starting and getting that worry out of the way. With this dragging on and on, that is wearing on stocks just as it wears on the psyche of troops that stand ready to do battle but just wait and wait. More time means a slow economy for a longer period, and that also wears on stocks; after all stocks rise on anticipation of better future earnings. The longer the economy lies dormant, the longer it takes to recover and thus stocks are less valuable today.
The key will be how the indexes react to the current levels. The SP500 and DJ30 are at the July lows and Nasdaq is at the February low. They can bounce, or they can continue the further drop. Tonight a new (and somewhat absurd) report came from the White House that the US would give Iraq 7 days to disarm after a UN resolution vote this week (supposedly presuming the resolution would fail or be vetoed). Not sure what 7 days would do; it very much looks as if the administration is trying anything it can to sway the 'undecideds', but in doing so it looks rather lame. If war is going to be put off yet another 10 to 14 days regardless of the outcome (and we are not advocating war per se, just arguing its impacts on the economy), stocks will have a harder time holding these levels because that is an awfully long time given the swirling currents of policy.
If these levels give way you can expect SP500 and DJ30 to try to bounce at the October lows. That is 300 points on the Dow, 32 points on SP500. We anticipate some type of modest bounce from these support levels after an early test lower that follows through on the Tuesday selling. There has been a solid push lower, and shorts will want to take some gain. That could provide a weak bounce up to the 10 day MVA over two sessions before the waiting game starts again. A bounce up through Thursday and then a UN vote could turn it back down as the US will most likely not have even a 9-vote win that was vetoed in its hand.
Support and Resistance
Nasdaq: Closed at 1271.47
Resistance: The 10 day MVA (1301) and some price resistance at 1300. The 18 day MVA (1309). January 2002 down trendline (1317). Exponential 50 day MVA (1333) and simple 50 day MVA (1345). 1357, the 1998 bear market low.
Support: 1261 (the February low) and 1250 is point where some lows have held. After that there is not much before 1200.
S&P 500: Closed at 800.73
Resistance: The 10 day MVA (822) and price resistance at 825. The 18 day MVA (829). Price resistance at 850 to 860. The exponential 50 day MVA (852), the simple 50 day MVA (862). The bottom of the October consolidation range at 875.
Support: The September 2000/May 2001 downtrend line at 799 and some price support at 797.
Dow: Closed at 7524.06
Resistance: The 10 day MVA (7714) and price support at 7750. The 18 day MVA (7799) and 8000. The 50 day MVA (8043). A range of resistance at 8000 to 8150 from the late January lateral move. Then 8250, the bottom of the October consolidation range.
Support: 7532, the July low, did in fact hold. The 7750 breach opens the door to test the low at 7197.
Economic Calendar
3-11-03
Wholesale Inventories, January (10:00): -0.2% actual, 0.2% expected, 0.8% December.
3-12-03
Trade Balance, January (8:30): -$43.5B expected, -$44.2B December.
3-13-03
Initial jobless claims (8:30): 418K expected, 430K prior.
Retail sales, February (8:30): -0.5% expected, -0.9% January.
Ex autos: -0.1% expected, 1.3% prior.
3-14-03
PPI, February (8:30): 0.6% expected, 1.6% January
Core PPI (8:30): 0.1% expected, 0.9% prior.
Business inventories, January (8:30): 0.2% expected, 0.6% December
Current account, Q4 (8:30): -$136.1B expected, -$127.0B Q3
Industrial production, February (9:15): 0.1% expected, 0.7% January
Capacity utilization, February (9:15): 75.7% expected, 75.7% January.
Michigan sentiment, preliminary, March (9:45): 78.0 expected, 79.9 February.
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End Part 1 of 3
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world stock market
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