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us stock market, trading system
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3/31/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Monday: None issued
Buy alerts issued: None issued
Trailing stops issued: None issued
Stop alerts issued: ADI; LLTC
A little economic news, a little war news, some end of quarter shuffling equals another weak Monday.
The market seems to take all of its anxiety from the weekend out on Monday. For the second consecutive Monday the market posted significant point losses, this time on a strong volume increase. The action was quite poor intraday with a gap lower, a late rally attempt, hard selling into that rally attempt that spiked volume higher and closed the indexes below their intraday consolidation ranges. That weak intraday action is not a great signal for the struggling rally.
The market received a double blast. This week economic news actually received a reaction, with the Chicago PMI helping keep a lid on the market. It is worth noting, however, that much of the downside damage was done before the PMI was released. To the extent it foreshadows the national number, however, it dampened enthusiasm. Chips also hurt the action as February sales came in lower than expected. Then the cadre of retailers that report on a weekly basis stated that last week's sales were modest at best. Combined with the prospect of a longer and longer war, that was a enough to start the week down. Add to that the end of quarter where mutual funds and hedge funds were ready to take gains (Nasdaq was up over 1% heading into the session) to look good for the quarter postcards, and you had a rush toward the door.
The later point is worth noting. The NYSE A/D line was -1.4:1, Nasdaq -1.5:1, recovering from a -3:1 reading early in the session. The difference was the smaller issues that were down much less than the large caps. The indexes are dominated by the large caps and move as the large caps move. Most window dressing involves the big, household names, and thus there is no doubt that the Monday action involved some window dressing. The key word is some; there was still significant selling pressure beyond window dressing, and it was all the large caps could do to hang onto their 50 day MVA.
THE MARKET
The market showed its first distribution session of the rally Monday, i.e., selling on rising volume. For the first time in over two weeks sellers outnumbered buyers overall in the market. After a nice and orderly pullback to test support, things got uglier Monday with yet another gap down to start the week.
The economy is starting to exert its influence again as the war drags further, oil prices stay at $30 (even with coalition forces securing the northern Iraq oil fields). No end of the war means no near term surge in consumption and investment (whether that would happen with a short war is still a question mark). Again, about the only thing positive from this is the idea that there will be some pent up demand after the war winds down that results in a one-two punch of consumer and business consumption. Whether that will happen and whether it will be enough to jumpstart the economy are two big 'ifs.' Without a real economic package providing incentives to invest, the odds are les than 50-50.
You could say that Monday has a lot to do with quarter end window dressing, selling winners from the rally in order to lock in profits and 'look good' for the quarterly reports. You would be partly right, but it is hard to write off the higher volume selling just to that fact. There are still pressing economic problems, a falling dollar, disinvestment in the US, and other problems that outlast the war, and those intensify the longer the war drags on. Monday it was all the indexes could do to hang onto their key moving averages. The only thing that stopped the fall was the bell; futures continued lower and lower after hours. It was a weak session, and that after hours action shows there was no let up in the selling now that the quarter is in the book. The fact that oil remained over $30 even with coalition forces announcing control of the northern Iraq oil fields with no fires shows the negative sentiment in the market.
Market Sentiment
VIX: 33.37; +1.19
VXN: 43.05; -0.04
Put/Call Ratio (CBOE): 0.91; -0.40. Still strong level, but it has remained strong for much of the past few months.
Nasdaq
Gapped down to the exponential 50 day MVA, tapped the simple 50 day MVA on the low, and then managed to close at the 200 day MVA. It gave back a nice late rally, however, looking very weak on the close.
Stats: -28.43 points (-2.1%) to close at 1341.17
Volume: 1.573B (+16.4%). Stronger, above average volume, the strongest since the last rally day seven sessions back. That marks the first distribution day in the rally, and coupled with the strong point losses was not a welcome sign.
Up Volume: 367M (-1M)
Down Volume: 1.191B (+224M). All sellers Monday.
A/D and Hi/Lo: Decliners led 1.49 to 1. The selling was in the large cap names, indicating some window dressing activity. This was quite mild breadth compared to the prior Monday that showed -3.1:1. Another sign there was some shuffling that accounted for a big chunk of volume.
Previous Session: Decliners led 1.13 to 1
New Highs: 66 (-16)
New Lows: 55 (+31)
The Chart: http://www.investmenthouse.com/cd/$compq.html
During an intraday rally, Nasdaq broke to a new session high and hit 1357, the 1998 bear market low. That put the index down just 12 points. That was all the upside there was, however, as Nasdaq turned and fell 16 points to the close. As noted, the only thing that stopped the move down was the closing bell as Nasdaq broke through the bottom of the intraday trading range and thudded down to close right on the 200 day MVA (1342). The intraday action looked positive: an early test of the simple 50 day MVA (1335) and then a rather sharp bounce from there, a lateral trading range, and then the nice rally higher. That was what we had been looking for per the weekend report, but that was not to hold as the rally was used as a selling point. The harshness of the last hour selling is not a good indication for the index though it did hold the 200 day on the close. Another intraday test lower looks to be in the cards Tuesday, and as Nasdaq closed at the 200 day, the key will be if it can recover, rally, and hold the rally unlike Monday.
S&P 500/NYSE
The large caps gave up an intraday rally attempt as well, barely holding the simple 50 day MVA on the close.
Stats: -15.32 points (-1.8%) to close at 848.18
NYSE Volume: 1.368B (+13.27%). Sharp volume increase, returning to average for the first time in seven sessions. The first distribution session in the rally. That is not a death knell for the rally, but the large caps are at the put up or shut up level.
Up Volume: 292M (-244M)
Down Volume: 1.081B (+413M). Lots of sellers back in the market.
A/D and Hi/Lo: Decliners led 1.45 to 1
Previous Session: Advancers led 1.19 to 1
New Highs: 43 (-5)
New Lows: 56 (+24)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps were under pressure all session. They too rallied off the early low, consolidated, and then rallied toward the last hour. They too ran out of gas and gave all of that attempted rally and more back at the close. When the dust cleared the large caps were hanging by a thread at the simple 50 day MVA (847), testing below that level to 843 on the low. The large caps are at the point where they need to rally. It looks as if there will be another test lower Tuesday, and the key will be the ability to recover and hold the 50 day.
DJ30:
Nasdaq may have lost more percentage-wise, but DJ30 looked shaky, falling to the simple 50 day MVA (7999) and some price support at 8000. Volume on the Dow really jumped compared to the NYSE and Nasdaq as the largest large caps were really hammered with the quarter end shuffling. On the low (7929), DJ30 held the bottom of the January consolidation range. DJ30, as with the other indexes, is at the point where it has to hold to keep the rally practically alive. An intraday test lower is coming Tuesday from the looks the Monday intraday action. 7930 (Monday low) is one level to look at. If it falls to the next solid level at 7750, the Dow rally is in trouble. Nasdaq remains the key to the rest of the market.
Stats: -153.64 points (-1.9%) to close at 7992.13
Volume: 1.368B (+13.27%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
The market did provide that next test lower and was on the way to recovery but there were not enough buyers coming in to support the recovery. As a result, the nice bounce off the low was led to slaughter as the rally imploded, falling below the intraday consolidation range. That is weak intraday action, and the index futures were down even further after hours. Tuesday looks ready for an even lower test as the major indexes cling to the last real near support. As with Monday we will be looking for another test lower that tries to recover intraday. After Monday, the market has a lot more headwinds as the intraday action was weak.
The war action is positive if you can really describe war as positive. Coalition troops are taking important areas and are forcing the better Iraq forces to reallocate their strength to fill in for those taking big losses at the hands of the coalition forces just to the south of Baghdad. As discussed earlier, however, now that the idea of a longer war is becoming widely held, and that means that economic reports will also take on more significance as investors try to determine how the economy is performing during the war. Not that well, as we have discussed, and the hope is for a surge of pent up demand when it winds down as well as some real economic aid. Until then, reports such as the national ISM (released at 10ET) will start taking on their old importance.
The Chicago report had investors on edge, and there are downward ISM revisions based on that weaker than expected showing. Expectations for a weaker number have been built in and will be built in further at the Tuesday open. Thus a number that is in line or not that much lower might signal the end of the selling for the morning and start the bounce back up. Once again the key will be how the market responds to the early downside on top of the Monday loss. Monday had some window dressing action and volume associated with it. To keep the rally going the market needs to respond sharply to the Monday action.
When the late rally started to fail we closed some positions that were struggling below near support and that were selling on volume. Tuesday we will see where the market can bounce and how it handles the support levels when it tries to retake them. Monday they held the lower support on the close, and there needs to be some strong indication of upside interest or the rally is going to get gutted.
Support and Resistance
Nasdaq: Closed at 1341.17
Resistance: Exponential 50 day MVA (1350). 1357, the 1998 bear market low. The 10 day MVA (1370). The early November, March and early November highs (1420, 1426, and 1427, respectively). The January high (1467). The December high (1521).
Support: The 200 day MVA (1342). The January 2002/January 2003 down trendline at 1338. The simple 50 day MVA (1335). Some price support at 1300. 1261 (the February low) and 1250 is point where some lows have held.
S&P 500: Closed at 848.18
Resistance: The exponential 50 day MVA and the 18 day MVA (856). 868, the top of the January trading range. The bottom of the October consolidation range at 875. 200 day MVA (887). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: 850, the bottom of the January trading range, is trying to hold. The simple 50 day MVA (847). Price support at 825.
Dow: Closed at 7992.13
Resistance: The 18 day MVA (8082) and the exponential 50 day MVA (8084). The top of the January range at 8160. 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 simple 50 day MVA (7999). 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): 48.4 actual, 51.0 expected, 54.9 February.
4-1-03
Auto sales, March: 5.3M expected, 5.2M February
Truck sales, March: 6.8M expected, 6.9M February
ISM Index, March (10:00): 49.0 expected, 50.5 February.
Construction spending, February (10:00): -0.8% exected, 1.7% January
4-2-03
Factory orders, February (10:00): -0.7% expected, 1.5% January
4-3-03
Initial jobless claims (8:30): 410K expected, 402K prior.
ISM services, March (10:00): 52.5 expected, 53.9 February.
4-4-03
Non-farm payrolls, March (8:30): -40K expected, -308K February
Unemployment rate, March (8:30): 5.9% expected, 5.8% February
Hourly earnings (8:30): 0.2% expected, 0.7% February
Average workweek (8:30): 34.2 expected, 34.1 February
SUBSCRIBER QUESTIONS
We had many requests this weekend for email addresses, etc. to congressment, the White, House, and just aboue every other government agency. Here are some of the web sites you can go to for names, telephone numbers, emails, etc. I have found that calling and discussing your views and then following up with an email or letter (and telling them you are sending one as a follow up) is quite effective. It is hard to move a mountain the size the federal government has grown to, but the only way our system works is for us to get involved and demand our representatives actually represent us and demand that they actually do what they said they were going to do.
http://www.house.gov/
This is good to get you into the U.S. House of Representatives.
http://www.senate.gov/
Gets you to your senator.
http://www.whitehouse.gov/president/
The President's home page.
http://www.whitehouse.gov/news/usbudget/states/index.html
How the proposed budget FY2003 impacts your state. Does not, however, get into the pork projects.
http://www.alec.org/meSWFiles/pdf/ShowMeTheMoney2.pdf
Interesting reading on how states can cope with the current budget problems.
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.
THE PLAYS:
New:
Play Date: 03/31/2003
FLR (Fluor Corp.--$33.68; -0.58; optionable): Technical services
http://biz.yahoo.com/p/f/flr.html
STATUS: Testing the 18 day MVA. FLR broke out of a short cup with handle (9 weeks) 3 weeks badk and is now making its first test, pulling back to the 18 day MVA (32.63) last Thursday and rebounding sharply. It is now holding the 10 day MVA (33.55), moving laterally the past week as volume has faded each session. Accumulation during the base was excellent at 5 up weeks on rising volume to 0 down weeks on rising volume. Has held up extremely well in the selling.
Volume: 465.7K Avg Volume: 473.863K
BUY POINT: $34.32 Volume=711K Target=$39.45 Stop=$31.98
POSITION: FLR GF - July $30c (83 delta) or FLR GG - July $35c (43 delta) &/or Stock
http://www.investmenthouse.com/ci/flr.html
Play Date: 03/31/2003
SPLS (Staples--$18.33; -0.18; optionable): Office supplies, etc.
http://biz.yahoo.com/p/s/spls.html
STATUS: Testing the 50 day MVA. SPLS has formed a short base following a failed base from May 2002 to December 2002. Not really a failed base but the formation of the current 4-month pattern when the other base could not make a strong move. This has been a nice, orderly pullback on mostly lower volume following the early March surge higher. Accumulation is positive at 4 to 3, and money flow is outstanding moving up higher even as the stock pulls back. Monday showed a tight doji that reached down toward the simple 50 day MVA on the low (17.77) and then rallied back on rising, above average volume. Looking for a move over the 10 day MVA on even stronger trade.
Volume: 4.59M Avg Volume: 3.854M
BUY POINT: $18.84 Volume=5M Target=$22 Stop=$17.52
POSITION: PLQ FW - June $17.50c (67 delta) &/or Stock
http://www.investmenthouse.com/ci/spls.html
Play Date: 03/31/2003
UCOMA (United Globalcom--$3.05; 0; no options): Cable TV
http://biz.yahoo.com/p/u/ucoma.html
STATUS: Cup w/handle. Looks to be forming a brief handle to its 4-month base that shows solid accumulation at 6 up weeks on rising volume to 0 down weeks on rising volume. Money flow is surging up ahead of the stock. The past two sessions it has struggled to get over 3.20, and that is our point to enter if it gives us the volume surge on the breakout.
Volume: 788.361K Avg Volume: 461.136K
BUY POINT: $3.25 Volume=875K Target=$4.48 Stop=$2.97
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/ucoma.html
Continuing plays that look ready:
Play Date: 03/18/2003
DKS (Dicks Sporting Goods--$22.91; +0.36; no options): Sporting goods
http://biz.yahoo.com/p/d/dks.html
STATUS: Double bottom w/handle. DKS is still working on the handle to its 4-month pattern. It has held more or less above the 18 day MVA (22.36) the past week, and Monday it moved up off that level on rising though still below average volume. It is trying to edge higher, and the base is a good one.
Volume: 100.2K Avg Volume: 156.227K
BUY POINT: $23.81 Volume=225K Target=$28.42 Stop=$21.94
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/dks.html
Play Date: 03/22/2003
SRNA (Serena Software--$15.99; -0.12; optionable): Business software
http://biz.yahoo.com/p/s/srna.html
STATUS: Cup. Very nice, orderly pullback during the formation of its 4-month base. It is working on building the right side of the base, making a slow, easy lower volume pullback as the market sold. Monday it showed another tight doji right on top of the 10 day MVA (15.91) as volume edged higher. SRNA has held up well, enjoys good accumulation, and money flow is still racing up ahead of the price.
Volume: 320.879K Avg Volume: 412.318K
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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