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world stock market, stock watch
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3/25/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Tuesday: None issued. Letting good stocks run.
Buy alerts issued: GSOF; PKI
Trailing stops issued: None issued
Stop alerts issued: None issued
Good news fuels rebound but loses its punch with Senate voting to cut economic aid.
The market looked better before the open, but it was stutter-stepping in the first hour, unable to capitalize on the pre-market positive tone. The economic news at 10ET took even more wind from stocks. It did find its footing above the next support, however, and started a nice bounce. That bounce accelerated as news came from Iraq about a civilian uprising in Basrah that Iraqi soldiers were using mortars to quell. British forces used artillery fire to squash the mortar fire, and the UK are entering Basrah to assist the civilians. The Dow rallied 115 points, the SP500 15 points on the highs.
Volume was on the rise but at 2:30 news hit the Senate voted yet again on the amendment to cut the economic package in half and this time it passed. The market started an hour-long slide, managing to recover some of the losses in the last half hour to keep the gains respectable. Market reaction is a key barometer of economics. It pays to listen, but Washington does not tend to understand the correlation. Overall, the market put in a respectable showing, indeed a much needed positive showing, after the large point losses Monday.
THE MARKET
A return to the war rally as investors somewhat got it out of their systems with the Monday flushing on lower volume. The market was already moving higher before any real meaty war news hit the ticker, so we did like the action. Volume was higher on the indexes, and that is good price/volume action. It was low volume, but not bad as the market tries to work off the hangover from the big run higher and the plastering Monday.
We are hearing a lot of people saying the economy is not as bad as people think or as bad as it looks. All of the sudden there is this feeling that the good times are coming. Danger, danger. The economy is in dire jeopardy of a second recession: oil up 75% in 12 months, already weak economy, pre-war business and consumer slowdown, war time retail slump, terrorism costs, North Korea problem, economic package getting axed. Those are just a few of the highlights.
What these people are feeling are some oats from the war rally. We wrote how the market was building in a nice war premium that would be unleashed when the war started. That has happened. That is making people feel things are better than they are. This is a nice rally, but for now all we can say is that it is a rally off the lows that were hit in anticipation of the war.
The market forecasts the economy. As of yet it has not been able to hold a break out of the downtrend. Nasdaq came close last week, but it is the only one close right now. It is the leader, and until it again can make a higher high by moving over that January high (and really the December high), the downtrend stays in place and the economic outlook remains cloudy with a growing chance of recession (particularly with a gutted economic package).
That does not mean this rally cannot be the one that ended the bear market, or at least this phase of it. Most all rallies of historical significance, i.e., those that change the trend, start when things look just about as bad as it can get. The world stage is dominated by war, terrorism, backbiting allies, new and old nuclear threats, recession (and in Japan's case, depression); in short, pretty bleak.
That is why we have to watch what stocks and indexes are doing, what they are telling us, and be willing to accept when there are strong moves that historically indicate the stage is set for a more sustained move. Even after the Monday drop, volume was lighter and stocks held in their patterns. The market bounced Tuesday on stronger volume and excellent breadth. May just be a war rally (for now that is what it is), but that can turn into something bigger. There are a lot of headwinds to overcome that do not appear to be addressed by the economy at this time. We will look to see if the market leads, however, because the market always leads economic recoveries.
Market Sentiment
VIX: 32.66; -2.54
VXN: 45; -1.36
Put/Call Ratio (CBOE): 0.94; +0.09. Continued to rise after jumping on the Monday selling. Those jumping in on the downside Monday were closing out a lot of put positions today.
Nasdaq
Held the 10 day MVA and started back up on rising, though still below average volume.
Stats: +21.23 points (+1.55%) to close at 1391.01
Volume: 1.428B (+7.67%). Solid increase in volume though volume remained below average and along the lines of pre-war volumes.
Up Volume: 1.126B (+1.015B)
Down Volume: 215M (-987M)
A/D and Hi/Lo: Advancers led 1.85 to 1. Not as strong as on the NYSE, and we would have preferred to see that 2:1 breadth on this move. Not bad for a consolidation session, however.
Previous Session: Decliners led 3.12 to 1
New Highs: 56 (+19)
New Lows: 33 (-19)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Tested below the 10 day MVA (1375) on the low (1369.32) and then posted a solid session. Volume was up on the gain, continuing the very good price/volume action. You could almost (almost) say Nasdaq is forming a handle to its short double bottom pattern it formed this year. That is what Nasdaq needs to do after the big Monday point loss. Many Nasdaq stocks held their patterns, and a few lateral movement sessions would be the best action. The key for Nasdaq will be to take out the December high (1467.35) and then the December high (1521.44). The downtrend those points from is at 1425; that would be a first good move toward breaking over those levels. If a strong volume move over 1425 occurs, the chance of breaking those levels improves.
S&P 500/NYSE
Tapped the 10 day MVA on the low and rallied on some rising volume. Not bad.
Stats: +10.51 points (+1.22%) to close at 874.74
NYSE Volume: 1.325B (+2.47%). Nice surge in volume. Though still below average, the price/volume action remains very good.
Up Volume: 1.105B (+1.036B)
Down Volume: 225M (-986M)
A/D and Hi/Lo: Advancers led 2.6 to 1. Excellent breadth on the recovery. Buyers were back in the mix.
Previous Session: Decliners led 3.51 to 1
New Highs: 40 (+24)
New Lows: 28 (-1)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Held the 10 day MVA on the low (863) and bounced on some solid volume. The rising volume on an up session indicates again that there are overall more buyers in this market than sellers. SP500 is right back at some resistance at 875, but the big point to cross will again be the 200 day MVA (891). That is followed by price resistance at 911 and then 925, etc. Still a lot to do, and the large caps have to clear those levels to be in the same league as Nasdaq, i.e. having already broken over a prior high.
DJ30:
Blue chips were up over 100 points before the senate got out the carving knife. Blue chips had to hustle to keep from turning negative, putting in the weakest performance of the major indexes. They managed to hold the 10 day MVA (8152) on the low (8180) and rally from there as volume edged higher. Blue chips are in the same pattern as the large caps, below the 200 day MVA (8426) again and have yet to break one of the prior lower highs. Such a move would signal a change in character to go along with the rally from the March low. They did maintain their reverse head and shoulders pattern which is an accumulation pattern, but they still have to break over that January high (8869) as a first major step to change the overall longer term negative character.
Stats: +65.55 points (+0.8%) to close at 8280.23
Volume: 1.325B (+2.47%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
Durable goods and new home sales on tap, but investor eyes will be on two things: the war and what is going on in Basrah as well as outside Baghdad (will the storm have let up?), and what the Senate does in its final vote on the budget package (yes there will be another vote; perhaps the third time is the charm). Either of these, and now, particularly the latter, will have important impacts on investor views. Reconciliation of the bill between the houses will have to take place, but the economy needs the full force of the plan for any hope of success.
The Tuesday action was very positive. The market caught its fall and actually bounced on some better volume. It was still below average, so it may be able to perform that consolidation it needed. That is good, building action for the next advance.
During this period we will continue to see stocks move out of their patterns. There are always leaders that move out ahead of the rest of the pack as the larger group of stocks continues to consolidate. Today there were some moves on stronger volume though most hitting toward buy points needed more volume. We are going to continue to focus on those stocks as the market continues its consolidation. Again, they will tend to lead the rest of the market as we look for a Nasdaq break over 1425 and then 1470 as key, key moves for the market.
Support and Resistance
Nasdaq: Closed at 1391.01
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 (1374). 1357, the 1998 bear market low. The January 2002/January 2003 down trendline at 1346. The 18 day MVA (1358). Exponential 50 day MVA (1348). The 200 day MVA (1344). The simple 50 day MVA (1341). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 874.74
Resistance: The bottom of the October consolidation range at 875. 200 day MVA (891). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: Price support at 868 from top of January range. The 10 day MVA (862). The simple 50 day MVA (855), the exponential 50 day MVA (852). The 18 day MVA (853). Price support at 825.
Dow: Closed at 8280.23
Resistance: 200 day MVA (8426). 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 10 day MVA (8152). The simple 50 day MVA (8049). The exponential 50 day MVA (8075). The 18 day MVA (8054), then 8000. Price support at 7750 and 7532, the July low.
Economic Calendar
3-25-03
Consumer confidence, March (10:00): 62.5 actual, 62.0 expected, 64.8 prior (revised from 64.0).
Existing home sales, February (10:00): -4.3% actual (5.84M), 5.80M 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: 03/25/2003
IOM (Iomega--$11.55; +0.03; optionable): Computer data storage (Zip drives, etc.)
http://biz.yahoo.com/p/i/iom.html
STATUS: Cup w/handle. IMN is working on the handle to its 7-month base that shows solid accumulation at 7 up weeks on rising volume to 4 down weeks on rising volume. Money flow is moving up ahead of price, showing a strong positive divergence, i.e., it is much stronger at this lower price than it was in September when IOM was at 13. Notice how computer hard drives and related equipment are doing better? Looks nice and looking for a strong breakout on volume.
Volume: 81.6K Avg Volume: 174.772K
BUY POINT: $12.02 Volume=260K Target=$14.45 Stop=$11.18
POSITION: IOM FB - June $10c (80 delta) &/or Stock
http://www.investmenthouse.com/ci/iom.html
Play Date: 03/25/2003
MWD (Morgan Stanley--$40.63; +0.41; optionable): Investment services
http://biz.yahoo.com/p/m/mwd.html
STATUS: Double bottom w/handle. MWD blasted over the 200 day MVA (39.74) two sessions back, and is now testing that move on lower and lower volume. It has tapped the 200 day MVA the past two sessions and recovered. Accumulation is solid at 5 to 3 in the 3.5 month base and money flow is shooting up ahead of the stock price. We really are looking at options on this one but stock will work as well.
Volume: 5.343M Avg Volume: 4.807M
BUY POINT: $40.85 Volume=7M Target=$46.75 Stop=$37.99
POSITION: MWD GH - July $40c (58 delta) &/or Stock
http://www.investmenthouse.com/ci/mwd.html
Play Date: 03/25/2003
OCR (Omnicare--$25.98; +0.9; optionable): Drug stores
http://biz.yahoo.com/p/o/ocr.html
STATUS: Cup. You can call the current 2.5 month cup pattern a handle to a 7.5 month cup base running from June to mid-January. Whatever you call it, accumulation since January is excellent at 3 up weeks on rising volume to 1 down week on rising volume. Money flow is moving up ahead of the price. Looking for a move over the Friday high. Volume was starting up Tuesday, and we want to see it continue on the move through the buy point.
Volume: 496.1K Avg Volume: 496.227K
BUY POINT: $26.34 Volume=625K Target=$30.25 Stop=$24.75
POSITION: OCR FE - June $25c (66 delta) &/or Stock
http://www.investmenthouse.com/ci/ocr.html
Continuing plays that look ready:
Play Date: 03/20/2003
MXIM (Maxim Integrated--$38.75; +0.25; optionable): chips
http://biz.yahoo.com/p/m/mxim.html
STATUS: Cup w/handle. Reached down to test right at the 18 day MVA on the low (37.50) and rallied back to move over the 10 day MVA on rising, above average volume. Money flow continues its strong move up ahead of price. MXIM is one of those that can run when it gets started.
Volume: 9.166M Avg Volume: 7.795M
BUY POINT: $40.12 Volume=10M Target=$44.95 Stop=$37.31
POSITION: XIQ EG - May $35c (72 delta) &/or Stock
http://www.investmenthouse.com/ci/mxim.html
Play Date: 03/22/2003
SRNA (Serena Software--$16.39; +0.53; optionable): Software
http://biz.yahoo.com/p/s/srna.html
STATUS: Cup. This one keeps intriguing, up again Tuesday on rising though still below average volume. Money flow is shooting up ahead of the price. Looking for a strong volume breakout.
Volume: 399.812K Avg Volume: 396.818K
BUY POINT: $16.48 Volume=700K Target=$19.75 Stop=$15.28
POSITION: NHU HC - Aug. $15c (67 delta) &/or Stock
http://www.investmenthouse.com/ci/srna.html
End Part 1 of 2
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