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us stock market, trend trading stock
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3/26/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Wednesday: None issued. Letting good stocks work for us still.
Buy alerts issued: BWS; NBTY
Trailing stops issued: None issued
Stop alerts issued: OSTK
Back and forth session finishes on the down side.
The market was up and down all session, holding right at the flat line level and gyrating up and down depending upon the most recent news story. Bombs hit civilian area in Baghdad: down. Troops kill hundreds of Iraqi forces in battle: up. 100 tanks break free from Basrah: down. UK let them escape so the could be blasted (and were being blasted) by coalition airpower: up. Senate passes budget still heavy in pork, and $350B light in tax incentives: down. It finished on the last story with indexes finishing down about a half percentage point.
Despite the emotional rollercoaster ride resulting from the war headlines the market held up well in another day of mild, lower volume consolidation. There was no major bad or good news; that would impact the market much more. For now the indexes are acting somewhat resilient and forming the type of lower volume consolidation they need to form after the big run and after the big point dump lower Monday.
While the indexes tread water, many individual market leaders moved ahead. Many of our existing positions posted more solid gains as other stocks in good patterns moved out to join them. That is always a positive sign of the strength of the market when leaders continue to outperform the market and new breakouts come in to join them even as the overall market works laterally.
THE MARKET
Another consolidation session on some lower, below average volume as the indexes hold steady over the 10 day MVA, continuing the solid price/volume action that indicates no heavy selling. After the strong move higher and the quick drop Monday when the market let out some of the war euphoria, the action continues positive. Holding at these levels is what it needs to set up for the next move. As noted, the indexes have been helped by the continuing leaders still rallying and new breakouts joining their ranks.
The action does not end the downtrends, does not change the market character in the bear market, but it does continue the pattern of accumulation that can lead to further upside both near term and longer term. For example, the SP500 is still below the down trendline formed by the September 2000 high to the January 2002 high (now near 932). DJ30 is also still below more than one down trendline sprouting from the series of highs beginning with January 2000. Moreover, they are below down trendline of some descending triangle patterns that formed off of the August, December and January highs. On the other hand, you can view DJ30 also in an accumulation pattern, a broad reverse head and shoulders base from July 2002 to the present. A breakout from that base would simultaneously break it out of the descending triangle. Thus, there are competing forces at work.
Nasdaq is in better shape but not surging without resistance. It made a higher high in November and December, breaking the August high and a string of lower highs. It is working on an even more significant move over the December and January highs, and that will be significant. It still will have some old down trendlines to wrestle with, but such a break over those highs would be quite significant as the techs would have embarked on, of all things, an uptrend.
Looking at DJ30 is too narrow a view. SP500 is better, and the New York Composite is broader. They are all in the same general trend as outlined above. If they are going to have a chance to break that trend it will be the relative strength leader, i.e., Nasdaq, that will again do the heavy lifting. Nasdaq has to maintain its leadership and make those higher highs. That would be the sign of a healthier market. The war is going well but not quickly, the economy is still lethargic (at best), and economic aide is being slashed by nervous leaders in Congress. Many obstacles to a healthy market, but as noted earlier in the week, noteworthy bottoms often start in what look to be the worst of times.
Market Sentiment
VIX: 32.19; -0.47
VXN: 43.94; -1.06
Put/Call Ratio (CBOE): 0.86; -0.08. Remains high showing a bit of nervousness in the market.
Nasdaq
Moved laterally in a very tight range over the 10 day MVA as volume fell.
Stats: -3.56 points (-0.26%) to close at 1387.45
Volume: 1.41B (-1.26%). Volume continued to back off on the lateral move, again coming in right at average levels.
Up Volume: 809M (-317M)
Down Volume: 576M (+361M)
A/D and Hi/Lo: Decliners led 1.21 to 1. Very modest A/D line after the strong positive showing on the way up.
Previous Session: Advancers led 1.85 to 1
New Highs: 78 (+22)
New Lows: 42 (+9)
The Chart: http://www.investmenthouse.com/cd/$compq.html
For the third session after Friday high Nasdaq moved laterally over the 10 day MVA (1377), trading in a very tight range (14 points). It was led up and down by each news headline, but it was a narrow range that saw no real fall lower and occurred on lower volume. This pattern is looking more like a nice lateral consolidation (handle) on the short, 3-month double bottom that formed off the February and March lows. While there is still significant overhead resistance at 1425 (recent and August high), 1470 (January high) and then 1521 (December high), this lateral consolidation is what Nasdaq needs to do to prepare for an attempted move through those levels.
S&P 500/NYSE
Same story, holding over the 10 day MVA in a lateral move on lower volume.
Stats: -4.79 points (-0.55%) to close at 869.95
NYSE Volume: 1.302B (-1.73%). Another lateral session on lower, below average volume.
Up Volume: 443M (-662M)
Down Volume: 836M (+611M)
A/D and Hi/Lo: Decliners led 1.28 to 1. Modest downside action that matched the small loss.
Previous Session: Advancers led 2.6 to 1
New Highs: 45 (+5)
New Lows: 30 (+2)
The Chart: http://www.investmenthouse.com/cd/$spx.html
SP500 again ran into resistance at 875 on the session high (875.80) but could not make a move over that level. In the end the large caps finished basically mid-range for the session, managing to hold above the 10 day MVA (863) on the low (866.47). Doing what it needs to do at this point, digesting the big move off the March low on while holding above near support at the 10 day MVA and the 50 day MVA (856 exponential, 851 simple).
DJ30:
Struggling at 8250 resistance, but as with the other indexes, holding over the near support at the 10 day MVA (8166) as volume drops below average on the move. That continues the very good price/volume action seen the past three weeks. The bigger picture regarding trendlines, etc. was discussed above. For now DJ30 is doing what it needs to do, consolidating the strong upside move with more buyers than sellers in the market.
Stats: -50.35 points (-0.61%) to close at 8229.88
Volume: 1.302B (-1.73%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
It is easy to see the war emotions playing on some commentators. On the war rally up there were historic moves being made. When the new week came and the market let out some air and started to consolidate, some of those same commentators are now seeing problems in the market the past three days as it moves laterally, holding near support on low volume. "Risk down to 1300 or the March lows" on Nasdaq one ominously proclaimed. It may happen if a really bad news story hits, but that would hurt any market. The current action does not indicate such a fall is imminent. You have to keep the emotions in check. It is not easy to do, particularly with minute by minute war news. We always have to sit down, let the emotions cool, look at what is happening as if we had $0 invested, and then devise a game plan.
What that game plan is telling us at the present is the market is not showing distribution, meaning there are relatively more buyers than sellers in the market, as it works to digest that big move up off the March low. While this may just be a war rally that ultimately fails, right now the market has shown solid accumulation, good resilience, and many solid breakouts holding and moving higher while more breakouts join in the move. That is a sign of health right now, and when the market is showing you healthy action you have to act on it. It is hard to buck emotions brought out by three years of selling, but you have to divorce yourself the best you can and do what the market is showing. That requires you to cut and run if it starts distributing, but you are in place and reaping the benefits of the moves if the move proves to have legs.
Thus we are continuing to watch those breakouts on volume (there were a few more today again) and those stocks that have made strong moves and are providing subsequent entry points (tests of the breakout or early tests of the short term MVA). Those are providing the most sustained upside action and we will continue to pick them off as they provide entry points. When stocks continue to breakout and rally after the moves, that is a very positive sign for the market as it means money is still being put into the market even as it moves laterally. We aim to take advantage of those moves.
Support and Resistance
Nasdaq: Closed at 1387.45
Resistance: The early November, March and early November highs (1420, 1426, and 1427, respectively). The January high (1467). The December high (1521).
Support: The 10 day MVA (1377). 1357, the 1998 bear market low. The 18 day MVA (1361). Exponential 50 day MVA (1349). The 200 day MVA (1344). The January 2002/January 2003 down trendline at 1344. The simple 50 day MVA (1340). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 869.95
Resistance: The bottom of the October consolidation range at 875. 200 day MVA (890). 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 (863). The exponential 50 day MVA (855), the simple 50 day MVA (851). The 18 day MVA (855). Price support at 825.
Dow: Closed at 8229.88
Resistance: 200 day MVA (8419). November and January highs (8800, 8870). December high (9044).
Support: 8250, the bottom of the October consolidation range and other index lows is still trying to hold. The 10 day MVA (8167). The top of the January range at 8160. The exponential 50 day MVA (8081)and the 18 day MVA (8073). The simple 50 day MVA (8038). Price support at 8000 and then again 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): -1.2% actual, -1.5% expected, 1.9 prior (revised from 3.3%).
New home sales, February (10:00): -8.1% (854K) actual, 928K expected, 914K prior.
3-27-03
Initial jobless claims (8:30): 420K 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): -0.2% expected, -0.1% prior.
Michigan sentiment final, March (9:45): 75.0 expected, 75.0 prior.
SUBSCRIBER QUESTIONS
Q: Could you please tell me if you take into consideration price gaps in your technical analysis and if you are of the opinion that gaps always have to fill on a certain period of time.
A: There is an old adage that all gaps have to be filled. In many cases they are filled shortly after the gap is made, e.g., after a gap to the upside and the initial surge there can be a test back to fill the gap and test the breakout (and to the downside as well). It does not always occur, at least not a full and complete fill of the gap. When a stock makes a big breakout and it is mostly gap, I always get a bit uneasy about jumping right in, particularly when the stock gaps higher and basically goes nowhere further during that session. If a stock gaps up just a bit over the prior close and then continues to run, I am not nearly as worried about the gap being completely filled. In that light it is more a question of the size of the gap and the action intraday following the gap as opposed to all gaps being treated the same way.
We took a look at gaps in the indexes over several decades a year or so ago in response to a claim that 'all gaps are filled.' There were some gaps filled over the past three years as the Nasdaq, for example, has traded down to 1996 levels. It took quite awhile for those gaps to be filled however. If you waited for the fill, you would have missed a run of about 3000 points or so. The gaps were filled, but it took a might long time. There was a gap off the October low in Nasdaq. There were several gaps on the further move up from there. Recently there was a gap off of the March low. Do they have to be filled? Some are not filled, some are not filled for years. So, do you avoid a play or run because of a gap? We don't unless we don't like how the gap looks as described above. Good question.
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.
THE PLAYS:
Good moves: AMZN; APOL; DCLK; UNTD; UOPX
New:
Play Date: 03/26/2003
FFIV (F5 Networks--$14.35; +0.55; optionable): Internet software
http://biz.yahoo.com/p/f/ffiv.html
STATUS: Ascending triangle. Internet is again hot (e.g., UNTD), and FFIV has shown some excellent volume the past two sessions as it moved off its 50 day MVA (13) and approaches the breakout point in the 4-month pattern. Accumulation in the base is solid at 4 up weeks on rising volume to 2 down weeks on rising volume. Coupled with that is the strong money flow that is leading the stock price higher. Looking for a continued strong move on continued strong volume.
Volume: 1.066M Avg Volume: 386.454K
BUY POINT: $14.55 Volume=600K Target=$17.45 Stop=$13.53
POSITION: FLK GV - July $12.50c (72 delta) &/or Stock
http://www.investmenthouse.com/ci/ffiv.html
Play Date: 03/26/2003
MATK (Martek Biosciences--$28.93; +1.08; optionable): Biotechnology
http://biz.yahoo.com/p/m/matk.html
STATUS: Cup w/handle. You can view this as a larger cup w/handle base starting last April with this year's action being the handle, or a second cup w/handle starting this year that MATK is in the process of breaking out. MATK tested the 10 day MVA (27.11) Monday and started the move up. Wednesday it broke out on a strong volume surge. Either way you slice it, big base or little base, it is a strong move and we are looking to get on board with it.
Volume: 735.271K Avg Volume: 283.409K
BUY POINT: $29.15 Volume=425K Target=$34.25 Stop=$27.05
POSITION: KQT FF - June $30c (47 delta) or KQT FE - June $25c (80 delta) &/or Stock
http://www.investmenthouse.com/ci/matk.html
Continuing plays that look ready:
Play Date: 03/20/2003
CMVT (Comverse Technology--$11.9; +0.22; optionable): Telecommunications
http://biz.yahoo.com/p/c/cmvt.html
STATUS: Cup w/handle. Still moving laterally over the 10 day MVA (11.44) the past week on falling volume. Accumulation in the 4-month base is 4 to 2, and CMVT has held up very well during the market pullback. Primed for a breakout on the next market move up.
Volume: 1.649M Avg Volume: 2.441M
BUY POINT: $12.11 Volume=3.5M Target=$14.55 Stop=$11.26
POSITION: CQV GB - July $10c (81 delta) &/or Stock
http://www.investmenthouse.com/ci/cmvt.html
Play Date: 03/08/2003
MME (Mid-Atlantic Medical--$39.23; -0.27; optionable): Healthcare plans
http://biz.yahoo.com/p/m/mme.html
STATUS: Cup w/handle. MME is now forming a lateral handle the past four sessions, moving below 40 and above the 10 day MVA (38.41). It is in a 5-month base and after another two sessions or so it should be ready, but given the pattern, we want to be on alert for a strong volume breakout.
Volume: 266.8K Avg Volume: 456.136K
BUY POINT: New: $39.94 (orig. $38.8) Volume=725K Target=$43.75 Stop=$37.35
POSITION: MME FG - June $35c (67 delta)
http://www.investmenthouse.com/ci/mme.html
End Part 1 of 2
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us stock market
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