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world stock market, us stock market
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3/20/03 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Thursday: WFR
Buy alerts issued: JCOM; BLL
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
See Jon Johnson's comments on reverse stock splits in the April 1, 2003 issue of The Bottom Line Personal.
SUMMARY:
- Market refuses to give in, rallying from an early test of support.
- Jobless claims still over 400K, LEI falls, Philly Fed plunges as economy after the war still weak.
- Can the chips lead the market?
- Subscriber Questions
Seven days up as market continues a positive outlook.
Oil well fires, questions about Hussein's condition, continued air strikes, ground forces capturing sea ports, cities and airports in southern Iraq all seemed to aid the market Thursday. After an early dip to test support the indexes turned higher and never really looked back. Over a week of gains, but the action is slowing as volume continues to come in lighter along with the gains and breadth. The market cannot move up forever, but as of yet it refuses to move lower as it continues to look for a quick resolution in the war. So far the war is going well according to those in charge (would we expect to hear anything otherwise?), but it has yet to ramp up into a full assault. The 'softening up' phase continues ahead of a full-out attack, but one cannot help but think that our leaders are hoping for an internal collapse in Iraq.
THE ECONOMY
Jobless claims 'fall' to 421K.
They fell because the prior week was revised up to 425K from 421K. The 4-week average continues to tell the same story, rising yet again to 424,750, and continuing claims rose to 3.55 million from 3.48 million the prior week.
No question the job market is in the toilet. It won't get better until the economy gets better. That is simply the way it works. Right now, with even more announced layoffs this week (AMAT, GTW, et al), the job market is obviously not improving in the short term. It will take a surge in economic activity to do so. That is the vicious cycle many in Congress cannot come to grips with: you have to have a stronger economy to get more jobs. You have to put money back into the economy to get it going as investment capital is the economy's lifeblood. There is no investment currently, so Congress has to create incentives to do so. Right now what we are hearing is that many are getting cold feet, afraid of deficits. You have to spend money to make money; it just does not appear. Yet, this idea we just have to stay the course and hope things get better is a recipe for further recession and weakening of the U.S.
Leading Economic Indicators fall 0.4%, in line with expectations
This is a basket of 10 indicators that measure different areas of the economy, e.g., the stock market, consumer confidence, money supply, etc. It is supposed to provide a 6-month outlook for the economy. It has been up five straight months, and in February it fell as we expected given the turmoil leading up to a possible war with Iraq. Certainly the war is not going to give the economy a running start at a faster recovery.
Philly Fed regional report a stinker, but provides a ray of hope.
A -8.0 reading, plunging from 2.3 in February and the first contraction in the regional report since October. A 0.9 reading was expected, but the strength of the pre-war slowdown is surprising economists. It was no real surprise, however, as we reported a month back that the economy had come to a standstill ahead of the war. New orders tanked to -4.3 from 14. Employment continued its poor performance, falling to -8.8 from -0.9. The six-month outlook, however, was much brighter at 46.4 from 24.7. That tends to indicate that Philly manufacturers and producers are looking at the war as the obstacle holding them back. As this is really a sentiment report, that can be a positive sign once the war is put to bed.
Summary.
There is no real economic improvement, just the appearance of some hope that once this war is completed that there will be some pent up demand released to give the economy a jumpstart. It will need it with continued world outcry and animosity among allies, North Korea, continuing economic problems.
THE MARKET
The sellers did try to come in as expected when the actual war started. The indexes tapped at support, however, and started up, building on the recent gains and refusing to give in. It was not a powerful session with lower volume and modest breadth, but the solid recovery off the test of support was fairly impressive. Indeed the test was made early and the market never even looked at coming back to test again.
The market has posted 7 straight gains, and the timing was right for a pullback. While the market was still rising on lower though above average volume, some sectors had very good days, continuing to set up well for another leg higher, e.g., semiconductors, telecommunications, and some internets and transportation. They have been moving laterally the past three sessions, making their own consolidations along the lines of the general Nasdaq pattern. If they hold their gains and continue to move laterally they will have done there consolidation and be ready for the next leg up. Many of these stocks certainly look good, using Thursday to form up their patterns even better.
Market Sentiment
VIX: 35.26; -0.92
VXN: 48.48; +0.28
Put/Call Ratio (CBOE): 0.56; -0.18
Nasdaq
Tested just below the intraday lows of the prior two sessions and then moved up to close just over 1400, the highest close of the rally.
Stats: +5.7 points (+0.41%) to close at 1402.77
Volume: 1.578B (-7.94%). Lower though still above average volume.
Up Volume: 948M (+205M)
Down Volume: 592M (-337M)
A/D and Hi/Lo: Advancers led 1.23 to 1. Modestly positive breadth that matched the session.
Previous Session: Advancers led 1.06 to 1
New Highs: 59 (-5)
New Lows: 45 (+5)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq completed its third day of lateral moves where techs tested lower and then rallied to close higher or basically flat. That is lateral action looking very much like a handle formation after the 8-week double bottom that formed using the February and March lows (1250) as bottom of the pattern. Many of its important components, particularly the semiconductors, are forming their consolidations and are getting closer to a point where they an attempt a leg higher. We would prefer to see the other indexes doing the same, but remember, Nasdaq led the move up as it held up better than the other indexes as it did not approach its prior lows before starting this move. Thus it would be logical for it to continue the lead. Looking at patterns of key components it could do just that. We also note that money flow into Nasdaq overall is now at a strong positive divergence, i.e., at this price level money flow is as high as it was at the December and January highs, and it continues to move higher even as the index moves laterally.
S&P 500/NYSE
The large caps tested down to the top of the January consolidation and then bounced back to finish flat.
Stats: +1.81 points (+0.21%) to close at 875.84
NYSE Volume: 1.439B (+1.37%). Volume edged higher on the NYSE on the recovery, not bad action, but not a volume surge.
Up Volume: 848M (-59M)
Down Volume: 543M (+39M)
A/D and Hi/Lo: Advancers led 1.39 to 1. Breadth kept positive on an attempt to sell off early and then the recovery. Early it was quite negative at -2:1. The recovery was a good sign.
Previous Session: Advancers led 1.18 to 1
New Highs: 51 (+14)
New Lows: 19 (-11)
The Chart: http://www.investmenthouse.com/cd/$spx.html
SP500 tested much lower early (859), right at the top of the January consolidation range. That also put it immediately above the simple 50 day MVA (855). From there it found clear support in that it jumped up and never came close to testing that level again; there was a clear upside bias at that support. The recovery was nice, but it puts the large caps right back at 875 resistance. It has not consolidated laterally as has Nasdaq, and with the 200 day MVA (892) close at hand, it is going to have to take a breather at one of these levels.
DJ30:
Very similar action to SP500, testing down to the top of the January consolidation range (8150) on the low (8130) resulted in a quick and clear bounce that never looked back. It managed to put a bit more distance above resistance at 8250, but not nearly enough to separate it from that level. As with SP500, it has the 200 day MVA (8445) still immediately overhead. After an 850 point move it will have to take a breather at one of these levels. If Nasdaq powers higher, however, it could drag the others along with it. Indeed, IBM and MSFT are setting up good consolidations to start the next move higher.
Stats: +21.15 points (+0.26%) to close at 8286.6
Volume: 1.439B (+1.37%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
Economic data out tomorrow is the CPI (consumer prices) before the open. We have seen producer prices rise the past two months, but we doubt that will have passed through to consumers yet. The one area that will impact the report is energy; prices are falling now, but this report won't take that into account.
With little economic data, the market will again be driven by the war, the move up to this point, and the weekend. Will there be some selling ahead of a weekend? Thus far things have gone well, but there will be more information on the four burning oil fields in southern Iraq coming out and north Iraq will start to heat up with the U.S. flying through Turkey to start operations there.
Most likely the big push will start sometime this weekend. Before that we expect some continued 'softening' fire as US intelligence waits to see if it can get some more information regarding the location of Hussein and his henchmen and make another attempt at taking off the head of the snake. If that happens the war is effectively over. They were close at getting him Wednesday, and you can bet they would dearly love another shot and send in everything plus the kitchen sink.
Unless the market gets some really great news we would expect it to range trade Friday. Many chip and telecom stocks are setting up well and are ready to move on good news. They can always break at any time, but after the entire market has managed to rise for the week we would expect them to wait it out until after the weekend before trying another breakout.
Support and Resistance
Nasdaq: Closed at 1402.77
Resistance: August and November highs (1423, 1420). The January high (1467). January high (1521).
Support: 1357, the 1998 bear market low. The January 2002/January 2003 down trendline at 1351. The 200 day MVA (1347). The simple 50 day MVA (1343). Exponential 50 day MVA (1341). The 10 day MVA (1359) and the 18 day MVA (1344). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 875.84
Resistance: Price resistance at 868 from top of January range is being broken. The bottom of the October consolidation range at 875 is still being tested. 200 day MVA (893). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: The simple 50 day MVA (855), the exponential 50 day MVA (852). The 10 day MVA (849). The 18 day MVA (843). Price support at 825.
Dow: Closed at 8286.60
Resistance: 200 day MVA (8446). November and January highs (8800, 8870). December high (9044).
Support: 8250, the bottom of the October consolidation range and other index lows. The top of the January range at 8160. The simple 50 day MVA (8071). 8000 and the exponential 50 day MVA (8041). The 18 day MVA (7945). The 10 day MVA (8011) and price support at 7750. 7532, the July low.
Economic Calendar
3-18-03
Housing Starts, February (8:30): -11% (1.622M) actual, 1.728M expected, 1.822M January
Building permits, February (8:30): +0.4% (1.786M) actual, 1.745M expected, 1.779M January
FOMC one-day meeting (1:15): No rate change, no bias or risk statement.
3-20-03
Initial jobless claims (8:30): 421K actual, 410K expected, 421K prior.
Leading economic indicators, February (10:00): -0.4% actual, -0.4% expected, -0.1% January
Philly Fed, March (12:00): -8 actual, 4.0 expected, 2.3 February
FOMC minutes (2:00): Fed was not certain in January what was going on. As if it is now.
Treasury Budget, February (2:00): -$96.3B actual, -$98.0B expected, -$76.1B January
3-21-03
CPI, March (8:30): 0.5% expected, 0.3% February
Core CPI (8:30): 0.2% expected, 0.1% February
SUBSCRIBER QUESTIONS
Q: What is the difference between a stop order and a stop limit order? When is it preferable to use the stop order, instead of a stop limit order?
A: A stop lossorder is a sell order to sell a stock or option at a certain price. When the stock or option passes through the stop order price and a trade is made, the order is triggered. For example, if you have a stop loss order at 24.94 but the stock gaps below or moves through 24.94 with no trades (such as when there are no bids to buy at 24.94), the stop order becomes active and it is executed at the next trade price. That price can be well below your stop loss price of 24.94. That is one of the major shortcomings of a stop loss; it becomes a market order if no trades are made at the stop loss price but a trade is made below that price. That can hurt.
A stop limit order is a stop order where you are saying I will sell at a specfic price, but I won't sell at a lower price. Thus if the stock falls through the stop limit price without a trade but a trade is then made below that level, the stop limit order won't be triggered. The stock would have to move back up to the stop point and a trade made to trigger that sale. That is one reason we prefer stop limits in most situations where we are just setting a stop loss for a bit of protection. That way if there is a gap lower we can decide what we want to do instead of getting a call from the broker or a 'sold' confirmation in our online accounts before we can act. Many times a stock that gaps lower will test the move. It may not rally all the way back but it can give us a better exit point. The stop limit allows you the ability to make that decision in those situations where the stock tanks on you and bounces. With a stop loss order you are out, usually at the lowest price of the session.
About the only time I use a stop loss order is when I want to get rid of the stock if it falls below a certain price and am willing to risk a gap below my stop price. Usually that means a very liquid stock that is not as easily subject to manipulation and trades constantly with narrow spreads.
SEMINARS ON CD
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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.
End Part 1 of 3
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world stock market
us stock market
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