|
|
world stock market, stock watch
* * * *
3/25/03 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued. Let IMCL, other good plays run.
Buy alerts issued: GSOF
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:
- Faltering start helped by news of Shiite revolt in Basrah.
- Confidence low, housing starts down, and Senate moves anti-growth, voting to cut economic package in half.
- Modest rebound on slightly higher volume as market tries to consolidate after Senate vote.
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 ECONOMY
Confidence cruddy as expected.
March confidence numbers hit further weak levels at 62.5 (64.8 in March). That was better than expected but it is poor. There are those saying confidence will jump after the war, but confidence is weak and the prior numbers have been equally weak. Those low numbers were 'economy' numbers as opposed to the now 'war' numbers. It goes to show that the economy remains the big concern, not the war. The war does not help the economy in that there has been a very pronounced pre-war slowdown, but that is still the economy. The war ends, people feel better, but they also realize that the economy in fact worse off because of the 2-month pre-war slowdown.
Existing home sales fall 4.3%.
One pundit said after the close 'heck, existing home sales were better than expected.' Yes, they were, but when you are expecting a drop and the 'better than expected' number was still negative (and follows prior declines), you see something of the picture. Moreover, the report was better than expected just by a whisker, well within the statistical margin of error that wipes away so many 'better than expected' reports when the next report comes out. Suffice it to say that the housing market (existing home sales are 80% of that market) continues to fade from its strong run and it won't provide the same support it did in 2002, particularly now that mortgage rates are starting to creep higher.
Senate steps backward in helping the economy.
Too many of our leaders hold incorrect assumptions about the economy. The two primary myths are that existing programs are sacred and that the budget is static (i.e., one dollar in tax cuts equals one dollar less in tax revenue). These are fundamental, even colossal, misunderstandings about how an economy works.
The first is seen again and again: any existing government program is not up for discussion when it comes time to make decisions about the budget. If it is in existence it is sacred and will not be included in discussions about 'cutting' the budget.
No, the only 'program' that is open for such discussion is the tax rate citizens pay, and it is typically a one-way ticket up. That brings up the other misconception. Lawmakers see a tax cut as taking money from what they want to spend on (e.g., the Cowgirl Hall of Fame, or the Grammy Foundation) with no replacement. They see a tax dollar kept by a taxpayer due to a tax cut as the government's money that has been taken away. They see it in dollar for dollar terms, ignoring empirical evidence (facts) that those dollars, given the current tax rate, will be used to invest in the economy. Just as we all learned about the leverage effect of money when a bank was able to take someone's savings and lend it to another for a building, new business, etc., these dollars that stay in the earner's hands leverage much more than $1 in growth in the economy.
After voting down the amendment that would cut the economic plan by $350B last week, another vote was held (how many votes do you get on an item?) where one senator was absent and another jumped to the other side. The measure passed based on the argument about 'how can we pay for war' with a tax cut? The unstated part of that question is also 'how can we pay for all of our existing projects that we refuse to reduce during war and recession?'
Those supporting the amendment do not understand, or they do understand but are playing the typical politics game. Once the war is over we will have the same stagnant economy with the same problems confronting it as before the war, only with another $100B or more drained from tax revenues. As it is the economy is so weak that current tax revenues cannot prevent a deficit even without the war or tax cuts. The economy MUST grow to create tax revenue. If it holds steady it won't be enough. Problem is, it WON'T hold steady because we are very much at risk of a second recession in the ongoing economic meltdown. The economy has to grow to increase tax revenues, but with small businesses imploding right and left and just about 0% business investment continuing, there is not going to be much growth. Thus tax revenues will shrink even more as more and more businesses that make up the tax base close their doors. What the senators are doing is what Japan did: pare back stimulus, go slow and conservative, and otherwise hope things would take care of themselves. Following Japan's lead into our own depression is not what is in the long term interest of the country.
The market continues to show this. There has been a nice war rally, but in the big picture the market is still in a downtrend. The market has yet to forecast an economic upturn. Maybe this is the rally that is going to do that, but a lot of this was a war premium rally as the market was sold off ahead of the war. The market was also counting on some serious stimulus from an economic package, stimulus that is looking lean at this point. Remember, the Senate republicans promised the entire package just last week to match what the House had already passed. That is now in serious jeopardy. The market also has to deal with higher oil prices that were up 75% over the prior 12 months, enough of a move historically to cause a recession, particularly in an already weak economy (that is what most pundits that think otherwise are leaving out of their equation). The market has given a war rally and that is somehow being translated into an 'all clear' for the economy. That is a horribly wrong conclusion to make, but one that our senators are willing to be our economic prosperity on. It is also a conclusion and strategy that Japan followed.
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.
SEMINARS ON CD
There is an incredible wealth of knowledge, years of experience, and 'how to' plans of action in these seminars. As one graduate put it, "I had no idea how little I knew about market direction and the reasons behind it until I took your course." Our graduates over the past year and one-half have made the bear market in stocks their own private second bull market because they learned how to and when to enter the downside and make dramatic profit from what most investors dread. Have the knowledge to take advantage of any kind of market as well as the confidence to act when you see the action unfold. We cover it all from trends, to accumulation/distribution, patterns, stocks, buying and selling options naked, covered, or creating spreads. Go to
http://www.stockseminarsonline.com
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
|
world stock market
stock watch
|
