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world stock market, us stock market
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3/29/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Friday: None issued. Still letting some good moves continue.
Buy alerts issued: None issued
Trailing stops issued: None issued
Stop alerts issued: VRTY; MBT
Week of downbeat news keeps market under wraps.
From the prior week's highs to the different perspective of last week, the market received a daily stream of less upbeat news. After exploding higher for a week immediately preceding and during the early war stages, the market needed a rest as we indicated last weekend. It started with a thud lower, but that was most of the fireworks as the market then drifted sideways the rest of the week on very subdued volume akin to that experienced in the pre-war jitters.
Despite the more depressing reports and allegations of 'months not weeks,' ill conceived strategy, lack of firepower, lack of local support, etc., the market held its losses in check with the Monday loss amounting to the damage for the week. That kept the indexes holding above near support and still showing excellent price/volume action, i.e., generally up on up days and lower on down days. Along with the stinginess with the gains, the good price/volume action is very important because it shows that there were more investors willing to hold the positions taken during the rally as opposed to those bailing out on the news. It is a matter of supply and demand: if more investors want to hold onto positions versus sell them, stocks will hold up. When that majority decides it is time to buy some more stocks, that will push prices higher once more.
Again we point out the almost uniquely American mindset regarding war. We are impatient having adopted technology with a full embrace and thus used to receiving information or pretty much whatever we want immediately. Thus the incredibly impressive military feats are unjustly overshadowed by some unexpected and relatively minor issues in the big stage of the war. The stories that receive the most coverage and discussion are those questioning strategy, not those detailing the fastest deployment of lethal firepower in the world's history. As noted Thursday, that happened in Afghanistan and in Kosovo before that. That is part of our psyche for whatever reason. It does bring to mind an old military saying, however: amateurs discuss strategy, professionals discuss logistics. We definitely fall in the former category, but are hopefully smart enough to know when to stop speculating.
THE MARKET
Emotional highs to lows based on the war pictures. Live war shots beamed into homes around the world has put the world on a rollercoaster ride. One poll indicated that not only were the soldiers tired, but the war coverage was wearing out TV viewers as well.
Even with the emotional tennis match, the market managed to hold its ground, dropping back but holding near support. Indeed, the market has held more of its gains made on the emotional run higher than it has lost on the emotional move lower.
It is not all emotional trade, however, though emotion is ruling the market. More correctly, emotion is ruling the market commentators. Friday the talk was all about how the market is trading on headlines. That is true to a certain extent, but it is not running back and forth on the stories to the same extent it does when it is floundering in one of its steep downtrends. Intraday the market moves up and down on the stories, but overall last week was really positive consolidation action. That action usually occurs when the pundits are negative; if the market is not moving up it is obviously on its last leg. Indeed yet another analyst at a brokerage house said to sell into any war rally. Seems there was a war rally before last week, and if you were going to sell into it, this week was the one to do it.
Yet, volumes were lower on the down sessions as stocks made normal pullbacks to the short term MVA, testing those levels all week on the lows. That indicates that there were not many sellers in the market, certainly much fewer in number than the buyers on the previous move higher. As an indication of that, solid stocks mostly held up, some even moved higher while others continued very nice pullbacks. On top of that, Thursday the NYSE and Nasdaq A/D lines were positive while the market was down and Friday the NYSE A/D line did it again. That is a sign of underlying strength as mid-caps, small caps and even several large caps traded higher. Very modestly higher, but higher. That action belies a lot of the negative market views.
As always it is not without a few hitches. Not all stocks held up as a few leaders ran into trouble and broke through support on strong volume. That is always a caution flag when the bottom falls out on some leaders as the market tries to consolidate. Not many are doing this so no use to hit the sell button as the overall market action is solid. This week will be the time, however, for the market to start back up or it risks running out of gas.
Market Sentiment
VIX: 32.18; +0.03
VXN: 43.09; -0.78
Put/Call Ratio (CBOE): 1.31; +0.52. A lot of activity in puts as shorts bought some positions and closed positions ahead of the weekend. The uncertainty of war and the
Nasdaq
Techs led the downside, but volume was lighter and the 18 day MVA held again. A good place, almost a necessary place, to mount the next run.
Stats: -14.65 points (-1.06%) to close at 1369.6
Volume: 1.351B (-5.02%). Volume edged back Friday as Nasdaq continued to move lower in a test of the near term support.
Up Volume: 368M (-247M)
Down Volume: 967M (+201M)
A/D and Hi/Lo: Decliners led 1.13 to 1. Still very modest downside breadth, much narrower than the 1% drop would indicate. Breadth continues to be modest on this pullback.
Previous Session: Advancers led 1.03 to 1
New Highs: 82 (+3)
New Lows: 24 (-11)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq again sold to the 1369 level that acted as the bottom all week since the Monday dump lower. Nasdaq spent the week moving laterally, holding 1369 on lower volume, fighting off the ups and downs (mostly downs) from the war. It held above the 18 day MVA (1364), the point you would expect it to hold for its next move higher. Nasdaq has now spent the last week or so working on a handle to its short, 2.5 month double bottom pattern off the February and March lows. Looks good, but it is time for it to make the next move or it runs the risk of falling from the handle.
S&P 500/NYSE
After testing the 18 day MVA on the Thursday low, the large caps managed to hold the 10 day MVA on flat volume.
Stats: -5.02 points (-0.58%) to close at 863.5
NYSE Volume: 1.208B (+0.35%). Volume edged up, basically flat and still below average volume. Very nice action.
Up Volume: 536M (-23M)
Down Volume: 668M (+39M)
A/D and Hi/Lo: Advancers led 1.19 to 1. On a down day advancers again led the session. It was not all downside as large cap drugs did well and small and mid-caps also performed relatively well.
Previous Session: Advancers led 1.23 to 1
New Highs: 48 (+10)
New Lows: 32 (-6)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Large caps held at the 10 day MVA on the close, right at the lows for the week. A lower volume pullback holding for now where it needs to, the SP500 is in good position to start the next move higher if it is going to do so. The action has been rather textbook for a solid rally: up on strong volume, continued buying later in the rally, and now a lower volume pullback to near term support. It may test down to the 18 day/50 day MVA again (856), but it needs to reverse and post a gain on stronger volume.
DJ30:
The industrials continued to edge lower, again testing the 18 day and 50 day MVA (8092, 8088) on the session low (8105). This point also marks the closing highs of the mid-January consolidation range. That was hit earlier in the session and the Dow managed to move up from there to close. Not saying that was a strong upside move, but it again held where it needed to on some really low DJ30 volume. This is the level the blue chips need to make the next upside move from if they are going to do it. The table is set and the question is whether anyone will come to eat. MRK, WMT, IBM, JNJ, HD, MMM, JPM, PG, CAT, C all look pretty decent and could help lead things back up.
Stats: -55.68 points (-0.68%) to close at 8145.77
Volume: 1.208B (+0.35%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THIS WEEK
We were looking for this weekend to give some real action in the Iraq war (needs a better name along the lines of Desert Storm) as the weather has cleared up, the troops are getting all supplied up, and the bombing increased in intensity Friday. But late Friday there was a report of a 4 to 6 day pause in the forward advance of ground forces (not air power) while supply logistics were worked out. As a strictly amateur, it looks also as if they are going to let the Fourth Infantry Division offload in Kuwait and make its way up as well to provide more firepower. After all, it was expected that the Fourth would be on the ground from day one as well.
Thus that attack of Republican guard that we have been looking for may not happen this weekend. That does not mean the action at Basrah won't continue or the pressure on the irregulars won't increase. This is a pause in the forward push while the clean up of the south continues along with a strong air campaign. That could help with Baghdad anyway if the south cities fall. In Afghanistan it took one city to fall and then the rest 'dominoed' after it (probably the only time the domino theory ever worked). It is not exactly the same story in Iraq, but with humanitarian aid starting to offload from ships one of the promises is being kept (humanitarian aid). Strong progress taking out the Republican Guard and opening the road to Baghdad would also help get civilians on the US side after feeling abandoned 12 years ago. Those would help the market, but it now looks as if that may not be happening this weekend.
It is our understanding also that Baghdad residents are being told to leave the city, indicating that an assault will start soon after the RG are engaged and hopefully soundly routed. With Iraq troops seen unloading 55 gallon drums while wearing full chemical protection gear, things could still come to a head even with a pause and have a direct impact on market direction.
There is some big economic news out this week, and it starts right off the bat with the Chicago PMI. Then the ISM index (manufacturing sentiment), factory orders, services, and the much heralded employment report. Other than factory orders these are mostly March reports, a time when the war worries were peaking along with the economic slowdown ahead of potential war. We are not getting our hopes up too much for upside surprises though the gloomy outlook has been high and the economists may overshoot to the downside as they did last week. Unless there is great progress in the war this weekend and early in the week, economic news will still take a back seat. Once the war outcome and timetable becomes clearer (and that will most likely be when there Baghdad is surrounded and there is an end somewhat in sight), then economic data will be more important. We all know, however, that March was slow ahead of the war. It may take the preliminary April reports before investors feel they are getting numbers that are closer to the true state of the economy.
The market moves in spurts whether moving up or down. It blasted off the March lows for a nice pre-war rally. It is resting now after the strong move. That requires patience as it sets back up. If it gets the right news it is ready for the next run higher, and that is when we are quick to pick off stocks as they start their next breakouts or move up off support for new or added positions. It requires some discipline, some patience, to wait and then take what the market gives. We have several stocks that are trading above their original target points, and we have tightened up the stops on positions because the market is at a point where it needs to move up or start to fade yet again. If it makes the move and stocks start to rebound and breakout, we will again move in.
Now we also need to understand how the market works at these important inflection points. While it may use this level as the point to bounce, indexes and stocks often test even lower in a final shakeout and then start the next leg higher. There is some herd instinct that flushes out those ready to sell in a big move down, and that is coupled with some market maker price manipulation to get some better prices for the next move higher. That is why at these points we are not too quick to hit the buy or sell button. If there is no major negative news story that precipitates the test lower, we often practice a bit more patience and see if the bounce comes after the early test lower. I hope I have explained this well enough. In short, if there is a test below the recent lows, we won't immediately bail out of positions. We will let it try to bounce through the morning and see where things are going to close. Often there is a final quick test lower before the next move starts.
Support and Resistance
Nasdaq: Closed at 1369.60
Resistance: The early November, March and early November highs (1420, 1426, and 1427, respectively). The January high (1467). The December high (1521).
Support: 1357, the 1998 bear market low. The 18 day MVA (1364). Exponential 50 day MVA (1351). The 200 day MVA (1342). The January 2002/January 2003 down trendline at 1340. The simple 50 day MVA (1337). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 863.50
Resistance: The bottom of the October consolidation range at 875. 200 day MVA (888). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: Price support at 868 to 850 from the January trading range. The 10 day MVA (864). The exponential 50 day MVA and the 18 day MVA (856). The simple 50 day MVA (849). Price support at 825.
Dow: Closed at 8145.77
Resistance: The 10 day MVA (8168). 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 (8405). November and January highs (8800, 8870). December high (9044).
Support: The top of the January range at 8160. The 18 day MVA (8092) and the exponential 50 day MVA (8088). The simple 50 day MVA (8013). Price support at 8000 (bottom of January trading range) and then again at 7750 and 7532, the July low.
Economic Calendar
3-31-03
Chicago PMI, March (10:00): 51.0 expected, 54.9 February.
4-1-03
Auto sales, March: 5.2M expected, 5.2M February
Truck sales, March: 6.8M expected, 6.9M February
ISM Index, March (10:00): 48.9 expected, 50.5 February.
Construction spending, February (10:00): -0.4% exected, 1.7% January
4-2-03
Factory orders, February (10:00): -1.0% expected, 1.5% January
4-3-03
Initial jobless claims (8:30): 415K expected, 402K prior.
ISM services, March (10:00): 52.0 expected, 53.9 February.
4-4-03
Non-farm payrolls, March (8:30): -50K expected, -308K February
Unemployment rate, March (8:30): 5.9% expected, 5.8% February
Hourly earnings (8:30): 0.3% expected, 0.7% February
Average workweek (8:30): 34.2 expected, 34.1 February
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End Part 1 of 2
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world stock market
us stock market
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