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us stock market, trade stock
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3/24/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Monday: None issued
Buy alerts issued: None issued
Trailing stops issued: None issued
Stop alerts issued: None issued
Market primed for a pullback takes an emotional hit.
U.S. armor will be outside Baghdad on Tuesday, delayed from a Monday arrival only by the weather as a major sandstorm has hit the region. Fewer wells are on fire than thought over the weekend. There has been resistance but it is being easily overrun. Nonetheless, when reports of sad but inevitable casualties and POW's and lightly armed caravans dressed as civilians shooting at coalition troops were delivered, there was a big emotional hit. Senator McCain summed it up when he said that the imbedded reporters were good and bad; the bad is that it sets us all up for emotional lows following the highs. He was correct. Coalition troops have lost more personnel from the dangerous business of moving and flying heavy equipment than from enemy fire, yet the impression of hoax surrenders leading to coalition troop deaths and POW's being taken dashed unrealistic visions of no casualties. The big picture is still making solid progress; what us civilians are experiencing is the first taste of war and that has bad taste.
The big drop in sentiment gave the pullback, but it was not a nice, orderly fall. Sentiment swung hard and was on eggshells. Reports of an explosion near the US Naval fleet in Bahrain sent the indexes on a new selling spurt in the early afternoon after trying to hold at support. It turned out the knee-jerk response that it was terrorism was wrong as word hit a BBQ propane tank exploded. The story shows the sudden eggshell status of the market after an outstanding move higher over the prior week.
Shakeout.
It is never good to see a market getting jumpy at the first sign of bad news, but we view the action as a quick shakeout of those with only rose colored glasses. By that we mean those thinking things were going to go as they did from the first crossover from Kuwait. Again, the overall war effort is moving at lightning speed and the coalition has tremendous firepower it has not even tried to bring to bear. The bigger picture looks solid; getting there is going to be up and down and Monday was the part where some of that air was let out.
We view it as a shakeout (violent though it was) as volume was very tepid, back to those worried, pre-war levels. Stocks did not have any bids; when that happens prices drop even though there are relatively few sellers in the market. In other words, it was more because no one wanted to buy that caused prices to fall as opposed to waves of sellers piling into the market. Prices fall when there are no buyers. That is what happened Monday when the reality of war came to roost.
THE MARKET
1100 points up, 300 points taken back in one session. Up hard, down hard, etc. The market was running late in the week on a stream of good news. Short of a surrender on Monday there was going to be some let down. Unfortunately for investors, the news turned to the unsavory sort, deaths and POW's. That took the wind out of the action and gave those ready to sell a reason to pull the trigger. Volume was lower, however, as many of the recent solid movers held up quite well. The lower volume and holding near support indicates there was not widespread selling, just a definite lack of anyone willing to stick their necks out.
Holding near support and lower volume were about the only positives, though the recent strong movers holding above support was big. Breadth was very weak (-3.4:1) and the one-day point losses in the 3+% range can be enough to trigger further selling. The market is about to show how resilient it is or is not and whether there is still a belief that the overall war effort as far as open hostilities is going to be relatively quick (the wrap up and clean up could take months and months) and provide for a rebound in US consumer and business spending.
It will need 2 to 3 more days of rest in any event as it was primed for a pullback to start the week. If the Monday action was a shakeout, the steep loss will have to be steadied with some tamer moves on continued low volume. It seems there is a return somewhat to the pre-war jitters as far as volume: significantly lower as buyers sit on the sidelines. That will give time for the sandstorms in Iraq to subside and then the heavier activity will start with US troops meeting Republican Guard outside Baghdad. There has been heavy 'softening up' with nightly bombing of the RG; the hope is that will be quite effective in making the Third Cavalry's job easier. Iraqi's are not surrendering and dancing around. They see the TV on, they have the light on, they see Hussein on the air, and they see no indication yet anything is different from the first war. Hussein was around after the last one, and they are not taking the chance he won't be around after this one no matter what the 25 million leaflets say. We may be awed by the precision munitions, but the mere prospect of their use is not causing mass defections. Again, the Iraqi's have seen this before; even those wanting Hussein gone are not going to change anything based on the fireworks display. If they were convinced Hussein was dead, that is one thing. With him on the tube each night, pre-recorded or not, that is another. Thus, how the battle with the Republican Guard plays out will most likely be the next big sentiment impact for investors. Again, the weather is going to put that on hold for one to two days, giving some time for the market to consolidate if it will.
Market Sentiment
VIX: 35.2; +1.58
VXN: 46.36; +0.58
Put/Call Ratio (CBOE): 0.85; +0.22. Jumped right back up on the selling.
Nasdaq
Tried an early bounce, but there was no one to buy and the index slid lower and lower, falling to the 10 day MVA on the close.
Stats: -52.06 points (-3.66%) to close at 1369.78
Volume: 1.326B (-29.67%). Back below average for the first time in over one week, falling to the lowest since before the rally. This was an important aspect given the strong move up; the selling did not have much teeth despite the sharp point losses.
Up Volume: 111M (-1.083B)
Down Volume: 1.202B (+530M). Only sellers were out there, but overall they were lower.
A/D and Hi/Lo: Decliners led 3.12 to 1. It was -3.7:1 early on. Recovered, but that was a moral victory.
Previous Session: Advancers led 1.85 to 1
New Highs: 37 (-58)
New Lows: 52 (+14)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped lower after Friday's doji after the strong run higher. It made two feeble upside attempts higher, but they had no backing. By the close Nasdaq found the 10 day MVA (1373) and had to struggle to hold at that level. Still above the down trendline lat 1339 and the 50 day MVA (1345). Holding near 1350 over the next several sessions on lower volume would be the best action.
S&P 500/NYSE
The 200 day MVA did not come close to holding as the large caps turned and fell to the 10 day MVA as well.
Stats: -31.56 points (-3.52%) to close at 864.23
NYSE Volume: 1.293B (-28.25%). Lowest volume since before the rally started, falling well below average for the first time in 10 sessions.
Up Volume: 69M (-1.382B)
Down Volume: 1.211B (+845M). Simply no one willing to step in ahead of the selling.
A/D and Hi/Lo: Decliners led 3.51 to 1. 'Recovered' from -3.7:1. Again, without anyone willing to think about entering on the buyside, all stocks fell back.
Previous Session: Advancers led 2.27 to 1
New Highs: 16 (-65)
New Lows: 29 (-1)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Gapped down to open just below the 200 day MVA (892), and things did not get better. Stocks sold fast early, leveled, and then just slid lower and lower. Once again it was not overwhelming dumping, just a lack of anyone wanting to step in front of the selling. It managed to close off its low by a whopping 2.2 points, holding over the 10 day MVA (860). The 18 day (850) and 50 day MVA (854 exponential, 853 simple) all bunch up at 850. This would be a good place for the market to consolidate over the next few sessions.
DJ30:
Blue chips were below the 200 day MVA (8434) from the start, and slid all session. After the initial fall took them down over 200 points, the all-day malaise set in with all Dow stocks finishing lower as they slid down all session. After the propane tank scare rattled it to a new low, DJ30 bounced up some, closing off its session low by 30 points. It gave back some of its bounce late, but with a 300+ point loss you are starting to split some hairs. It held above the 10 day MVA (8125) on the close, sliding just below some support at 8250. Much lower volume than on the rally, but when you hang up 300 point losses, that catches the average person's attention. As with SP500, the 50 day MVA (8066 expo, 8060 simple) and 18 day MVA (8028) all bunch together right in the middle of the January consolidation range. Good place to hold if it will; with 300 point losses it does not take much time. Seriously, we feel much of the air was let out Monday after a lot was pumped in on good news before the weekend.
Stats: -307.29 points (-3.61%) to close at 8214.68
Volume: 1.293B (-28.25%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
Consumer confidence and existing home sales are out at 10ET, and while they will receive some attention, war news continues as the headline. With it appearing that Hussein is alive, there is not going to be an early surrender. His faithful are heartened, those fearing him won't let it show and won't abandon him. Even if he is dead, the perception in and around Iraq is that he is not; if the perception is there, so is Hussein. That means the Republican Guard divisions have to be subdued, and that most likely means completely taking them out. Unsavory and a lot of work though air bombardment is a great US asset. With the perception in the region (or reality) that Hussein is alive, shock and awe and simply showing up at the outskirts of Baghdad (though the latter will be a surprise to Iraqi citizens there) are not going to work. That has led the Pentagon to suggest a 40-45 day war now.
The war will get a lull, at least from US operations, as this rain, hail, and sand storm moves through the region the next two days. Iraq may make raids under the cover of the weather, but the big offensive will be the US' to make. The worst thing that could happen from our view: the Republican Guard retreats into Baghdad under cover of the storm. With Hussein alive and his troops in his city, we are in for a long event.
During the lull the market will have a chance to collect itself. As noted, the jerk lower on lighter volume was a reaction to the first bad news following a series of positive stories. We tend to think that was a shakeout and we are looking for the market to test lower but to hold up in the range of the 50 day MVA. It may trade above or below that level, but we are looking for it to hold in that area. The market needs that, and if the overall war picture does not worsen (that is, in the form of these same depressing news stories), a positive outcome from the meeting with the RG will help the view regarding the war, though there is intelligence that if we move through the RG, they are ordered to use chemicals. That is a big psychological move, but our troops are better equipped for a chemical attack than the Iraqis. Again, overall the war effort is going well. There have been and will be adjustments to strategy made on the fly to counter the Iraq small arms strategy.
The light volume Monday had us sitting fairly tight. Low volume selling that holds support is what you expect after a strong run. The size of the point loss Monday is an eye opener, but if the action was an initial shakeout on bad news, things should stabilize. We are going to be watching those stocks that were moving well in the rally to hold their near support on lower volume. That will provide the best look at the market. Today they were down, but fell on lower volume and held above that support.
Some are saying a dip at the open Tuesday is a buying opportunity. We are going to be watching to see if the stocks hold their support. We would prefer to see an up session on much stronger volume, however, before we go flying back in with new positions. With the type of move the market is making and given the nerves regarding the war, patience is an ally.
Support and Resistance
Nasdaq: Closed at 1369.78
Resistance: August and November highs (1423, 1420). The August 2002 high (1427). The January high (1467). The December high (1521).
Support: The 10 day MVA (1373). 1357, the 1998 bear market low. The January 2002/January 2003 down trendline at 1349. The 18 day MVA (1354). The 200 day MVA (1345). Exponential 50 day MVA (1345). The simple 50 day MVA (1342). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 864.23
Resistance: The bottom of the October consolidation range at 875. 200 day MVA (892). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: Price support at 868 from top of January range has not been broken totally. The 10 day MVA (860). The simple 50 day MVA (854), the exponential 50 day MVA (854). The 18 day MVA (850). Price support at 825.
Dow: Closed at 8214.68
Resistance: 200 day MVA (8433). November and January highs (8800, 8870). December high (9044).
Support: 8250, the bottom of the October consolidation range and other index lows has not been totally broken. The top of the January range at 8160. The 10 day MVA (8124). The simple 50 day MVA (8066). The exponential 50 day MVA (8060). 8000 and the 18 day MVA (8028). Price support at 7750 and 7532, the July low.
Economic Calendar
3-25-03
Consumer confidence, March (10:00): 63.0 expected, 64.0 prior.
Existing home sales, February (10:00): 5.85M expected, 6.09M prior.
3-26-03
Durable goods orders, February (8:30): -1.0% expected, 2.9% prior.
New home sales, February (10:00): 928K expected, 914K prior.
3-27-03
Initial jobless claims (8:30): 415K expected, 421K prior.
Q4 Final GDP (8:30): 1.4% expected, 1.4% prior.
3-28-03
Personal income, February (8:30): 0.2% expected, 0.3% prior.
Personal spending, February (8:30): -0.1% expected, -0.1% prior.
Michigan sentiment final, March (9:45): 75.0 expected, 75.0 prior.
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THE PLAYS:
New:
Play Date: 03/24/2003
BWS (Brown Shoe Co.--$28; -1.23; no options): Footwear
http://biz.yahoo.com/p/b/bws.html
STATUS: Testing the breakout. BWS made a big breakout of the 10-week base Friday, a base showing solid accumulation at 3 up weeks on rising volume to 1 down week on rising volume. Following the Friday breakout BWS pulled back on lower, average volume, holding the breakout over 28 on that move. It was caught in the general downdraft Monday, but sold back on lower volume. Great money flow and accumulation supporting the move, and a good test is a good entry point.
Volume: 147.5K Avg Volume: 134.863K
BUY POINT: $28.55 Volume=200K Target=$34.25 Stop=$26.55
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/bws.html
Play Date: 03/24/2003
FDX (Federal Express--$55.46; -1.8; optionable): Air delivery when it positively, absolutely has to be there
http://biz.yahoo.com/p/f/fdx.html
STATUS: Cup w/handle. Working through an 11-week cup base and now looks to be forming a handle. Accumulation in the base is excellent at 5 up weeks on rising volume to 1 down week on rising volume and money flow is shooting higher. Volume swelled as FDX rallied from the Low in the base at 48 just as it should during the formation of the right side of the pattern. Now it is pulling back on much lower volume the past two sessions. We are going to be patient, let the handle form over the next few sessions, and then catch it on a breakout over the handle high as it clears that resistance.
Volume: 2.066M Avg Volume: 1.495M
BUY POINT: $57.55 Volume=2.2M Target=$66 Stop=$53.52
POSITION: FDX GK - July $55c (55 delta) &/or Stock
http://www.investmenthouse.com/ci/fdx.html
Play Date: 03/24/2003
NBTY (NBTY, Inc.--$18.6; -0.33; optionable): Drugs
http://biz.yahoo.com/p/n/nbty.html
STATUS: Cup w/handle. NBTY ran up from the 200 day MVA at 16 last week, forming the right side of its somewhat asymmetrical 11-week base. Accumulation is excellent at 3 up weeks on rising volume to 1 week on rising volume. The stock pulled back Monday fractionally on lower, below average volume, and money flow is running higher even as NBTY looks to be forming its lateral shakeout before breaking through that resistance at 19 from the recent highs.
Volume: 420.813K Avg Volume: 526.954K
BUY POINT: $19.12 Volume=790K Target=$22.94 Stop=$17.78
POSITION: NBQ FW - June $17.50c (69 delta) &/or Stock
http://www.investmenthouse.com/ci/nbty.html
Continuing plays that look ready:
Play Date: 03/17/2003
APPB (Applebees Intl.--$27.3; -0.94; optionable): Fern bar
http://biz.yahoo.com/p/a/appb.html
STATUS: Testing the breakout. APPB broke over resistance 6 sessions back on a solid volume surge where volume rallied above average for three sessions to the breakout. It continued the move, peaking Friday. It is now testing back, with the 10 day MVA at 27. It hit 27.16 on the low as volume trailed off to below average on the pullback. Looking for a test lower to 27 or even toward the 18 day MVA at 26.50. On the bounce back up on volume it is ready.
Volume: 529.232K Avg Volume: 771.045K
BUY POINT: $27.05 Volume=1.1M Target=$32.45 Stop=$25.16
POSITION: AQB HE - Aug. $25c (72 delta) &/or Stock
http://www.investmenthouse.com/ci/appb.html
Play Date: 03/04/2003
GSOF (Group 1 Software--$16.26; +0.71; no options): Application software
http://biz.yahoo.com/p/g/gsof.html
STATUS: Cup w/handle. Still working in the handle to the 10-week base, showing a nice volume spike Monday as GSOF gapped up, tested back down, and then rallied back up again. We like these volume surges on up sessions, and GSOF has a few of them in the handle. Continued excellent money flow.
Volume: 162.92K Avg Volume: 104.681K
BUY POINT: $17.05 Volume=164K Target=$20.55 Stop=$15.86
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/gsof.html
End Part 1 of 2
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