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us stock market, trade stock
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3/27/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: None issued. Again, letting some good moves continue.
Buy alerts issued: SCLN; IMDC
Trailing stops issued: None issued
Stop alerts issued: None issued
News stories questioning the war weigh on the trade, but the market holds its consolidation.
Questions about the length of the war, whether the coalition has enough firepower on the ground, and related concerns started the market lower and helped push oil prices back to $30/bbl. One thing we have noticed. The embedded reporters are fascinating to see, but the reports can be a bit distorted as the young reporters are not war seasoned. War is dirty work. There are breakdowns, mud puddles, storms, and accidents moving such heavy equipment even without any enemy encounters. If a vehicle gets stuck or one breaks down, we hear about it. Any firefight is classed as 'stiff resistance.' Because Baghdad did not fall in 5 days, the war will take months. A story in one newspaper complained soldiers are not getting enough sleep. They are providing great 'inside' views and we are not in any way belittling the effort all in Iraq are undertaking, but we need to remember that most of the reporters there are not trained in warfare. They are seeing just slices of the action, and they report what is the most interesting story in their day. It may be an isolated event, but it was the most interesting thing that happened. They are reporters, and the conclusions being drawn the past few days based on individual snippets of the action hundreds of miles apart are not necessarily what we want to hang our hats on as far as investing.
One other point. Remember after two weeks in Afghanistan how there were also questions about the war effort and how it would not work and needed to be redone? There were even calls for the removal of General Franks. Then a key city fell and everything fell into place inside a week. The plan was right, the plan worked. Even in Kosovo the early reports were that the air effort would not work alone. That too fell into place in short order. You have a good game plan, you stick with it and pound the other side in the guts, then they break down and you roll in.
That is all a fancy way of saying keep an eye on the big picture and look at what the market is showing. Thursday the market showed us another good consolidation session, testing support on the lows and rebounding to close basically flat. Nasdaq volume edged up, but the techs also gapped lower and rebounded from there. DJ30 and SP500 showed lower volume as they recovered to hold the 10 day MVA and showed nice 'hammer' dojis with tails. That means the sellers were ahead early, but the buyers came back in and drove prices back up for the close. In other words, buyers came back with more strength than the sellers. After a consolidation on lower volume that action is a signal flag to start watching for an upside move coming. Nasdaq continues to form the handle on its short double bottom while the other main indexes form their own lateral consolidations. On top of that, leading stocks continue to hold up, joined by more breakouts. That is positive action.
THE MARKET
Man does it sound gloomy from many of the pundits. Give them a huge run off the lows and they are upset each day the market does not post another gain. Several are saying the rally is over. As of yet, however, the market is not showing that.
The market continues to move laterally on much subdued volume. The indexes continue to hold support, rallying back from tests of that support when the next headline hits the wire. They are in accumulation patterns, particularly Nasdaq with its overall better technical underpinnings and its short double bottom that is forming its own handle. Coupled with that there are many leading stocks holding onto and extending gains. Other stocks, not waves but a steady flow, continue to breakout of their patterns as well. Those are attributes of a market that is working toward another move higher as opposed to teetering on the edged of another plunge lower. We may be wrong, but unless something serious goes wrong with the war effort, the war news will get better soon and that could trigger the next move higher.
Market Sentiment
VIX: 32.15; -0.04
VXN: 43.87; -0.07
Put/Call Ratio (CBOE): 0.79; -0.07
Nasdaq
Gapped below the 10 day MVA, but managed a nice recovery to close just slightly lower. Holding the nice handle to the double bottom.
Stats: -3.2 points (-0.23%) to close at 1384.25
Volume: 1.423B (+0.91%). Modest volume gain as Nasdaq gapped lower and recovered most of the session losses. That is not really bad price/volume action as buyers came back in to push the stock back up to near flat.
Up Volume: 615M (-194M)
Down Volume: 766M (+190M). Very even volume on a down day.
A/D and Hi/Lo: Advancers led 1.03 to 1. Advancers actually led on a down day, an indication of the lack of punch to the selling.
Previous Session: Decliners led 1.21 to 1
New Highs: 79 (+1)
New Lows: 35 (-7)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped below the 10 day MVA (1378), but on the low (1369) it held above the 18 day MVA (1363). At that point enough buyers came in to push the index to close over the 10 day MVA and just missing a positive finish. The action continues the handle to the small double bottom formed this year. Yes the index is still in a downtrend and yes there is still resistance overhead that has to be faced, but this is an accumulation pattern with many stocks performing quite well.
S&P 500/NYSE
Reached down to the 50 day MVA and then rallied back, continuing the nice, lower volume pullback.
Stats: -1.44 points (-0.16%) to close at 868.52
NYSE Volume: 1.204B (-7.51%). Much lower, below average volume as large caps continued their consolidation.
Up Volume: 559M (+116M)
Down Volume: 629M (-207M)
A/D and Hi/Lo: Advancers led 1.23 to 1. The index closed lower but the A/D line was positive.
Previous Session: Decliners led 1.28 to 1
New Highs: 38 (-7)
New Lows: 38 (+8)
The Chart: http://www.investmenthouse.com/cd/$spx.html
A reach down toward the 50 day MVA (856) reversed and closed over the 10 day MVA (864). After the strong run off the lows, SP500 continues the lower volume consolidation. Again, lower volume on this mild selling indicates that the sellers are fewer in number than the buyers during the move up. There are more sellers because the market sold, but there are more that are happy to sit on current positions and ride out this lateral consolidation. After those fewer sellers are done, then demand starts to outstrip supply and prices rise again. SP500 also showed a tight hammer doji, meaning it opened, sold off, then recovered to close where it opened (0.04 difference from the open and close prices). After a pullback that candlestick pattern alerts us to start looking for a move back up.
DJ30:
The blue chips also tested the 50 day MVA (8085) on the low (8104) and rallied back to close over the 10 day MVA (8173) once again. As with the SP500, DJ30 showed a doji on the session and that alerts us to start looking for an overall market rise. Still plenty of resistance overhead starting with the 200 day MVA (8412), but DJ30 also continues to work in an accumulation pattern with very positive price/volume action.
Stats: -28.43 points (-0.35%) to close at 8201.45
Volume: 1.204B (-7.51%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
Personal income and spending are released before the open, but they are for February and won't reflect what has happened the last month. If they are really weak that does not bode well for the March numbers and that could hurt as retailers have already said that there has been some (not a lot) impact as people stay home and watch war returns. Close to the projections and we don't expect much reaction. The final March Michigan sentiment is out at 10ET, and that may have some effect as well if the lowered war expectations erode the prior reading of 75.0. We don't expect much change, however.
We continue to see stocks in good patterns break higher on volume while other prior breakouts continue to move higher or form good consolidations of earlier moves. As the overall indexes consolidate, some leadership stocks always 'cheat' higher as money continues to be put to work. Today the indexes showed us dojis on the candlestick charts, and that alerts us for a move higher that could start Friday though it could wait to see what the weekend brings with the third infantry hitting the republican guard in the first real clashes between the two.
The next move by the indexes overall will see some of the bigger chip names that have been consolidating start their moves (e.g., MXIM, KLAC, ALTR, etc.). Those will be nice augmentations to the leader stocks that have been moving higher as they consolidated. We need to remain patient and see the volume coming in on the breakouts. If the market starts to run we can take some more aggressive early positions on those chips that can run like the wind when they start their moves.
Support and Resistance
Nasdaq: Closed at 1384.25
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 (1378). 1357, the 1998 bear market low. The 18 day MVA (1363). Exponential 50 day MVA (1350). The 200 day MVA (1344). The January 2002/January 2003 down trendline at 1342. The simple 50 day MVA (1343). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 868.52
Resistance: The bottom of the October consolidation range at 875. 200 day MVA (889). 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 (864). The exponential 50 day MVA (856), the simple 50 day MVA (850). The 18 day MVA (856). Price support at 825.
Dow: Closed at 8201.45
Resistance: 8250, the bottom of the October consolidation range and other index lows could act as resistance, but they have not held much water in either direction. 200 day MVA (8412). November and January highs (8800, 8870). December high (9044).
Support: The 10 day MVA (8173). The top of the January range at 8160. The exponential 50 day MVA (8085)and the 18 day MVA (8086). The simple 50 day MVA (8025). 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): 402K actual, 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: I wonder if the downgrade of a stock which is currently a buy on your list or with a buy already issued has any influence on your analysis. Could you as well indicate where I can find the MVA 18, 10 and 200 for a stock? Many thanks for your so interesting commentaries and analysis economical and political. I feel very sorry and ashamed that Europe does not follow and support entirely and without restrictions the US politics.
A: Analysts typically downgrade stocks for reasons that have little to do with the facts relating to the stock but more on their gut feelings about valuation or what might or might not happen regarding sales or earnings. When the market is suffering in a downtrend, that can have deleterious effects on a stock; it can fall and have a hard time recovering. It can also be basically ignored. In short, we don't get all bent out of shape with analyst calls (as annoying as they may be), but watch to see how the stock performs. If it tanks it may be some time before it can recover. A bounce up to resistance may be all it gives and the best exit point after a downgrade. If it holds up with little damage, we let it alone because the market is ignoring the analyst call and the market is what we prefer to listen to. Take KLAC. Earlier in the week an analyst downgraded it, saying its channel checks showed that business may be slowing down. It tested below the 10 day MVA, but then rallied back that same session and has since continued its consolidation at the 10 day. Thus we still like the action, maybe even more as the reaction to the downgrade shows that there are some steadfast holders of the stock at the 38 level.
As for locating the actual moving averages for stocks, Stockcharts.com allows you to enter 2 moving averages on the chart and charts the MVA and gives you the actual price level of that MVA.
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THE PLAYS:
Good moves: AGIX; APOL; CNCT; IMDC; SCLN
New:
Play Date: 03/27/2003
$OEX (S&P 100 options--$441.01; -1.06; optionable):
http://biz.yahoo.com/p/$/$oex.html
STATUS: Testing the 18 day MVA/BO. After the strong surge off of the bottom at 400, OEX is taking a breather on lower and lower, below average volume. Thursday the SP100 tapped down at the 18 day MVA (435) and then rallied back to close over the 10 day, showing a tight doji with tail. Sellers pushed it down, but buyers came back in to rally it back up. We are on alert that this could signal the next leg up is coming.
Volume: 1.2M
BUY POINT: $446 Volume=1.5M Target=$472 Stop=$439
POSITION: OXB EI - May $445c (49 delta)
http://www.investmenthouse.com/ci/$oex.html
Play Date: 03/27/2003
L (Liberty Media--$9.96; -0.13; optionable): Cable TV
http://biz.yahoo.com/p/l/l.html
STATUS: Cup w/handle. Working through a nice 4-month base showing solid 5 to 2 positive accumulation. It has spent this week working back to the 10 day MVA (9.80) on mostly lower, below average volume as money flow continues to rise ahead of the stock. Nice pattern and we are going to wait for L to make the move.
Volume: 4.351M Avg Volume: 6.264M
BUY POINT: $10.22 Volume=9.4M Target=$12.25 Stop=$9.58
POSITION: L GB - July $10c (55 delta) &/or Stock
http://www.investmenthouse.com/ci/l.html
Play Date: 03/27/2003
MSCC (Microsemi--$11.45; +1.15; optionable): Semiconductor integrated circuits
http://biz.yahoo.com/p/m/mscc.html
STATUS: Breakout. MSCC is deep in its long correction, but has moved well off of the lows down at 5. It broke out in early March from an ascending triangle, and after a solid move it worked laterally again the past two weeks below resistance at 11. Thursday MSCC broke over 11 on a strong, above average volume move. We are looking at this as a momentum play up to the middle of the range back from last summer's consolidation. Every once in awhile you can find these momentum plays to make us money.
Volume: 820.317K Avg Volume: 381.636K
BUY POINT: $11.52 Volume=572K Target=$14 Stop=$10.64
POSITION: QMS FB - June $10c (72 delta) &/or Stock
http://www.investmenthouse.com/ci/mscc.html
Play Date: 03/27/2003
NKE (Nike--$52.21; +0.15; optionable): Sportswear, equipment, etc.
http://biz.yahoo.com/p/n/nke.html
STATUS: Testing the breakout. NKE rallied up sharply on strong volume as it broke out of a 4-month trading range earlier this month. It is now testing that strong move, coming back to the 10 day MVA on the Thursday low (51.35) and bouncing back up. We are looking to trade this at this point up to the July high as an initial target, but it could continue to rally to 60 or even 62.50.
Volume: 1.17M Avg Volume: 1.376M
BUY POINT: $52.94 Volume=2.1M Target=$57.45 Stop=$50.45
POSITION: NKE GJ - July $50c (65 delta)
http://www.investmenthouse.com/ci/nke.html
Continuing plays that look ready:
Play Date: 03/25/2003
MWD (Morgan Stanley--$40.44; -0.07; optionable): Investment brokerage
http://biz.yahoo.com/p/m/mwd.html
STATUS: Testing the 200 day MVA. MWD has moved laterally this week on top of the 200 day MVA, testing it on the low again Thursday (39.78) and recovering to show a doji on rising though still below average volume. Very nice money flow leading the price ahead. Financials are holding up well and MWD looks ready for the move.
Volume: 4.43M Avg Volume: 4.927M
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
End Part 1 of 2
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