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world stock market, us stock market
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4/09/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Wednesday: BLTI
Buy alerts issued: UOPX
Trailing stops issued: AMZN
Stop alerts issued: DCLK; NBTY
Market focuses on life after war, and the view was fuzzy.
Once again we witnessed historic events in the 'interesting times' the past 12 years have presented. In a scene somewhat reminiscent of the fall of the Berlin Wall, Baghdad citizens pulled down a 20 foot Hussein statue, symbolically throwing off the yoke of Hussein's oppression. They danced in the streets, danced on the statue, dragged the head through the square, threw flowers to marines, chanted 'Bush, Bush, Bush,' and generally celebrated their new liberty. The live shots of jubilant faces and warm embrace of US troops answered the questions regarding the purpose and appreciation of this mission. Even the Al Jazeera correspondent on the scene broadcast live that the Iraqi chant of 'long live Iraq' versus 'long live Saddam' was what citizens of other Arab countries should be chanting about their own countries lest they need to call the Americans to come in and 'fix' the situation. To us that is quite profound.
The market took due notice as trade almost halted during the first hour as the Hussein statue was scaled and then toppled. During that period the market drifted higher, Nasdaq nearing 1400 as it did. To the minute that the statue toppled, however, the market started to sell. DJ30 dropped 40 points in one minute, and the downtrend for the day was on. All indexes broke their near term support, and by the end of the session Nasdaq was hanging onto its 50 day MVA by its skin teeth while the DJ30 and SP500 managed to hold the 18 day MVA.
After the war, the economy is still the primary focus (as always) for the market. There was nothing to indicate a surge in US or world economic activity. The dollar was up on the US march into central Baghdad, but so was oil as US oil supplies were below expectation and Rumsfeld speculated the northern oil fields may be rigged for detonation. The typical daily march of bad news keeping investors nervous.
The action led to another session of distribution, the second such session in the past 8 sessions though you could consider Monday such a day as the market rallied early but then reversed and gave the entire move back. After peaking again Monday at the March high the action has been poor. Leading stocks stumbled some more Wednesday. They hardly collapsed, but many were selling toward support on rising volume. The indexes have not given back the rally, but they are acting as if that is what they want to do.
THE MARKET
As the war outcome firms more and more, the selling gains intensity. All major indexes underwent modest distribution as volume rose while the indexes sold lower. It was modest as volume remained below average, but it was the third session in the last 8 (counting the Monday intraday reversal) where selling occurred as the market sold. Nasdaq dumped to its exponential 50 day MVA while SP500 and DJ30 sold to the 18 day MVA, undercutting near support. All finished at their session lows, and indication that the downside was in control all session.
Now we had expected a pullback to roughly this level, and the volume, though higher, was still quite light. There was not massive dumping, but stocks did stumble all over themselves during the action. Those leaders that had fallen the past few sessions could not recover. Some that tried to recover sold off even more. Leaders all the way up such as AMZN, broke through their near support on volume surges. Others still held up, but we are seeing the ranks of the failing growing. That is a crucial sign. Many of these stocks could still hold their 50 day MVA and resume their moves. We were not in the mood to see if that was going to happen as we took the money off the table as they did. Many of these had already produced us nice gains given their moves, so we still had nice returns even as we closed them. Still, we would rather have that money in hand and get back in if they hold up at the 50 day MVA, versus riding then down to that level and maybe lower.
Again this distribution was not heavy, and the indexes may just have a modest pullback here once again in the mid-March to now trading range. We have moved up stop points and are ready to take gains off the table right away. The Nasdaq performance and the leading stocks are getting most of our attention. Nasdaq is already almost down to the recent lows in this range, and many leaders are fumbling around if not falling on stronger volume. Nasdaq tends to lead, and with earnings worries taking grip and semiconductors rolling over after a lower high, it needs to stage a dramatic recovery on volume.
Market Sentiment
VIX: 30.91; +1.32
VXN: 41.45; +0.53
Put/Call Ratio (CBOE): 0.74; -0.06
Nasdaq
Nasdaq was the leader to the downside, and this time semiconductors were not the worst culprit. Techs are already approaching the bottom of the trading range, selling on some higher volume as they test lower.
Stats: -26.2 points (-1.89%) to close at 1356.74
Volume: 1.312B (+0.97%). Rising volume, though not much, on the selling that pushed the index to the 50 day MVA. There was no heavy dumping, just some greater turnover on news becoming fact in Iraq.
Up Volume: 184M (-195M)
Down Volume: 1.112B (+209M)
A/D and Hi/Lo: Decliners led 1.37 to 1. Still very modest downside breadth, another indication that the selling was not rampant.
Previous Session: Decliners led 1.25 to 1
New Highs: 67 (+1)
New Lows: 29 (-14)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq continued the downside action after the Monday reversal, closing right at the exponential 50 day MVA. The bottom of the recent range is 1336, and Nasdaq made no attempt at holding at the interims levels around 1375 that would be a good test. Nasdaq can ill afford a lower low here. The 200 day MVA (1338) is right at that low, backed up by the simple 50 day MVA at that same level. That is the point techs need to hold. The Monday reversal on good news was one trouble sign, the Wednesday selling on further good war news is another. The technical action continues to deteriorate.
S&P 500/NYSE
Made another try at the 200 day MVA early, but that was a salute to Iraq toppling Hussein. Once that was over the large caps started to sell down again.
Stats: -12.3 points (-1.4%) to close at 865.99
NYSE Volume: 1.273B (+5.53%). Stronger selling than Nasdaq though still below average volume. Distribution nonetheless, and after the higher volume Monday reversal, the resumption of volume selling is not a good upside sign.
Up Volume: 347M (-84M)
Down Volume: 924M (+147M)
A/D and Hi/Lo: Decliners led 1.24 to 1. Larger stocks sold more Wednesday, the opposite from the Tuesday action. This flip flopping, equal opportunity selling indicates no buyside conviction.
Previous Session: Decliners led 1.25 to 1
New Highs: 69 (+30)
New Lows: 25 (0)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Tried one more time at the 200 day MVA (8883), but the move was a wave in that direction. Stocks started falling as Saddam's statue toppled, and it did not let up until it closed on its low at the 18 day MVA. This is right in the middle of the mid-March to current trading range and a good place to hold if it is going to do so. The exponential and simple 50 day MVA are at 860 and 847 are the last bastions in this rally if it is going to hold, but it needs to hold at 860. With the recent double top and rising volume on the way lower, those odds are shrinking.
DJ30:
Similar to SP500, DJ30 rallied over the 200 day MVA (8354) and then sold back. DJ30 volume rose to above average levels as it undercut price support at 8250 and the 10 day MVA (8220). It is making the pullback and the next logical support levels are the 18 day MVA (8170) and the exponential 50 day MVA (8122), both right in the middle of the 8000 to 8250 trading range. DJ30 also needs to put in a higher low here to keep the rally looking solid. It sports the same near term double top with a reversal at the second high and higher volume selling as it moves lower. Those are not good signs of continued accumulation. Now that the fate in the war seems certain the market is certainly focused on the next array of problems ahead.
Stats: -100.98 points (-1.22%) to close at 8197.94
Volume: 1.273B (+5.53%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THURSDAY
The trade balance and jobless claims are out before the open as the market renews its focus on the economy. Not expecting much improvement in those numbers; employment is a lagging indicator in any event, and the economy is still heading down, not up. Sentiment is higher, but so is the savings rate. We are not sure that consumers are all that comfortable yet. Even if they are that is a necessary first step but not a complete one. The consumer did not keep the US out of recession and has yet to pull it out of recession. There is also no certainty about a tax cut as Congress has deferred that for a few weeks. That may be a good thing as the war will have wound down and Bush can work on individual senators personally. That still leaves the market facing near term uncertainty about policy with the backdrop of certainty regarding the continued economic lethargy in the current environment.
YHOO beat the street on earnings and revenues, giving some punch to tech earnings to go hand in hand with Alcoa's solid report last week. That starts the flood of earnings, and earnings are going to dictate the near term the market action. Then when the pattern of the quarter becomes apparent, the market will adjust toward the mean after the knee-jerk reaction subsides.
That leaves the market in something of a near term jumble as the competing forces fight out the short term direction. It is still in the uptrend rally from the March low, but that rally has been pushed back into the middle of the interim trading range making it less desirable to run out and buy a wide basket of stocks. In this environment the focus is on individual strong stocks or individual weak stocks that are breaking down as the overall market is not showing a clear and established trend.
In this environment we are going to be quick to take gains off the table. No use in holding on to the bitter end to see if something turns back up or down. Just take the gain, let the action settle down, and get back in if you want that stock or get into another one you like better. We are fortunate that many of the plays have built in some good gains and even the trailing stops are providing some nice gain.
Support and Resistance
Nasdaq: Closed at 1356.74
Resistance: The 18 day MVA (1371). The 10 day MVA (1376). 1400 is some new resistance. The early November, March and early November highs (1420, 1426, and 1427, respectively). The January high (1467). The December high (1521).
Support: The exponential 50 day MVA (1357) and 1357, the 1998 bear market low. The 200 day MVA (1338) and the simple 50 day MVA (1338). The January 2002/January 2003 down trendline at 1323.
S&P 500: Closed at 865.99
Resistance: 868, the top of the January trading range. The bottom of the October consolidation range at 875. 200 day MVA (883). Then price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: The 18 day MVA (866) and the exponential 50 day MVA (860). 850, the bottom of the January trading range. The simple 50 day MVA (847). Price support at 825.
Dow: Closed at 8197.94
Resistance: The 10 day MVA (8220). 8250, the bottom of the October consolidation range and other index lows is some resistance. 200 day MVA (8354). November and January highs (8800, 8870). December high (9044).
Support: The 18 day MVA (8170). The top of the January range at 8160. The exponential 50 day MVA (8122). The simple 50 day MVA (7994). Price support at 8000 (bottom of January trading range) and then again at 7750.
Economic Calendar
4-7-03
Consumer credit, February (2:00): $1.5B actual, $3.0B expected, $12.3B January (revised from $13.2B).
4-8-03
Wholesale inventories, February (10:00): 0.3% actual, 0.2% expected, -0.1% January.
4-10-03
Trade Balance, February (8:30): -$42.4B expected, -$41.1B January.
Initial jobless claims (8:30): 425K expected, 445K prior.
4-11-03
PPI, March (8:30): 0.3% expected, 1.0% February.
Core PPI (8:30): 0.0% expected, -0.5% February.
Retail sales, March (8:30): 0.6% expected, -1.6% February.
Retail sales ex-autos: 0.4% expected, -1.0% February.
Michigan sentiment, April prelim (9:45): 79.0 expected, 77.6 March.
SUBSCRIBER QUESTIONS
Q: I wonder why you don't talk more often about the "big" tech names. Why don't you, once a week or so, analyze stocks like Intel or Dell and tell the move we could make?
Can we ask for a specific analyze?
A: We try to focus on stocks that can make us money, either in a short term move up or down, or a longer term move that we can buy into and let run for us. Stocks such as INTC, MSFT and other big, household tech names can make us money in the former category, i.e., shorter term moves up or down, but as for longer term gains their abilities are dubious. The leaders in a prior market run often find it hard to lead in the next run. That happened after the 1960's, then after the 1970's. Many of those household names are no longer around, and those that are have never become market leaders again that could generate the returns they formerly did.
Why do they languish? Well, they were the technology or innovation leaders of their time, they were young and growing rapidly, riding the wave of the technology or improved system that they developed. Small and nimble, they grew earnings and sales at impressive rates as the economy snapped up what they had to offer. It was new and useful; people wanted it. When the economic surge they rode ahead of wanes, their products have become saturated in the economy. They do not grow at the same pace, turning from growth stocks to maybe income stocks (e.g., MSFT with its paltry dividend) if they are fortunate enough to survive. Thus the technology leaders of the 1980's find their markets saturated and growth prospects limited. Dell grows because it grinds up its competition; that is excellent management, but it is gaining in a shrinking pie, a fish getting bigger in a smaller pond. That is why it is branching out into printers, servers, and anything else it can think of.
At some point this bear market will end and the new MSFT's, DELL's, etc. will lead it higher. Do we have to do intense research to understand which esoteric technology will be the leader and thus propel the stock to the market lead? No, we can watch the stock's action; the market will sniff out those that have what it takes technology-wise, management-wise, etc., basically finding those companies that have it all. They will emerge as the market leaders and we can see them in the growing sales and earnings and how the market starts shoving them higher. There will be false starts, but at some point those leaders will take off and run again such as CSCO and company, riding their new technology and its incorporation into the economy. We don't have to figure it out; the market will. Look at Apple and Microsoft. Apple had better hardware and software and could have been the dominant operating system today (and we would all have less computer-related stress). It made the wrong management decisions, however, and was never the leader it could have been. Enter MSFT and DELL. One captured the software market, the other the hardware and dominated.
So, while we do look at those stocks form a trade perspective, we don't really see them as long term must haves. They are not going to double, triple and quadruple anymore; they don't have the earnings and sales growth to justify it.
As for other stocks, we stand ready to analyze any stock a subscriber wants us to look at.
SEMINARS ON CD
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:
Good moves: SCLN
New:
Upside:
Play Date: 04/09/2003
ABTL (Autobytel--$3.98; +0.09; no options): Internet services
http://biz.yahoo.com/p/a/abtl.html
STATUS: Testing the 18 day MVA. ABTL broke out of a flat 3.5 month flat base in mid-March on excellent volume, powering up to 4. The past week it has pulled back to test the 18 day MVA (3.70) and then powered back up Wednesday on rising, above average volume. Solid accumulation with money flow again leading the stock price higher.
Volume: 237.918K Avg Volume: 139.272K
BUY POINT: $4.05 Volume=209K Target=$5.08 Stop=$3.71
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/abtl.html
Play Date: 04/09/2003
RMBS (Rambus--$15.57; -0.11; optionable): Semiconductors
http://biz.yahoo.com/p/r/rmbs.html
STATUS: Cup w/handle. Unlike most semiconductors, RMBS has held up very well, forming the current 9-week base showing excellent 4 to 0 accumulation. After blasting higher last week on strong volume, RMBS has pulled back this week on very low, below average volume, holding much of the gain. It may take another session or two to form the lateral, low volume shakeout and then move higher. We want to see strong volume as it breaks over recent resistance.
Volume: 1.483M Avg Volume: 4.531M
BUY POINT: $17.08 Volume=6.8M Target=$20.49 Stop=$15.88
POSITION: BNQ HC - Aug. $15c (64 delta) &/or Stock
http://www.investmenthouse.com/ci/rmbs.html
Downside:
Play Date: 04/09/2003
CAH (Cardinal Health--$56.55; -1.61; optionable): Wholesale drugs
http://biz.yahoo.com/p/c/cah.html
STATUS: Put. Coming under pressure after failing to take out resistance at 60 once again just three sessions back. It started back down, Wednesday breaking through the 50 day MVA (56.81) on a sharp surge in volume, with trade moving back above average. Money flow is leading the way lower.
Volume: 3.772M Avg Volume: 2.921M
BUY POINT: $55.96 Volume=3.5M Target=$52 Stop=$57
POSITION: CAH QL - May $60p (-70 delta)
http://www.investmenthouse.com/ci/cah.html
Play Date: 04/09/2003
PPDI (Pharmaceutical Product Dev.--$24.79; -0.91; optionable): Medical labs
http://biz.yahoo.com/p/p/ppdi.html
STATUS: Put. These medical appliances, labs, and related sectors are starting to suffer. PPDI rallied to the 50 day MVA near 28 and failed. It tried to hold the 200 day MVA (25.73) Tuesday, closing on that level. Wednesday that level gave way on much stronger, above average volume. Looking to ride PPDI down near last summer's lows from 20 to 22.
Volume: 925.203K Avg Volume: 735.727K
BUY POINT: $24.58 Volume=950K Target=$21.55 Stop=$25.94
POSITION: PJQ QE - May $25p (-49 delta)
http://www.investmenthouse.com/ci/ppdi.html
End Part 1 of 2
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world stock market
us stock market
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