|
|
us stock market, trend trading stock
* * * *
4/22/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Tuesday: None issued as letting stocks run further. Moved up some stops on those with wilder action, but hard to cut off moves in this run.
Buy alerts issued: FLML; IGLD; JNPR; MXIM
Trailing stop alerts: BMRN
Stop alerts: None issued
To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdly.htm
SUMMARY:
- Monday leaders were clearing a path for remainder of the market.
- Musings as Greenspan goes under the knife.
- Solid volume yet again helps wash away some distribution.
- Subscriber Questions
Leaders set the stage and the market follows.
We again noted in the pre-market alert that softer opens are not that bad as the market can build to a strong close. The futures were lower, and while that had the folks on the television fretting over selling, we were glad to see it. Too many of the distribution sessions started out strong and faded. With no real news to come and some decent earnings, we were glad to see a modestly softer open.
After 30 minutes the strength started to show as leaders continued their moves. They started dragging large cap stocks with them. Breadth went from flat to 3:2 to 2:1 then to 3:1 on the NYSE. Volume was very low on the early selling, and up until early afternoon the television personalities were talking about low volume. We noticed that as soon as the buying started volume started vaulting past Monday levels even in the first two hours. That was the result of a nice buy program that hit the market near the end of the first hour. When that program hit and volume jumped, buyers started hitting the market from all sides. If you were watching the tube only you would have thought volume on raced ahead at the close. It was there all day starting with the first rally of the morning.
Many items were given credit for the move. Earnings that are good but not great have helped push things along or, as we view it, at least not throwing logs in the road ahead of the rally that started in March. Then there was Bush responding that positively as to whether he would reappoint Greenspan if he was going to do it today. That was viewed as a positive given the old adage that the market favors certainty whether it is for the better or in the case of Greenspan with at least two recessions and stock market collapses to his credit, for worse. There was also the rumor that Hussein was captured. That falls in with the Bin Laden capture rumors of the past. All of these did not hurt the action, but they were not the reasons for that buy program hitting and others jumping on board. The buying started early and continued through the session. The market had its head down and was in rally mode.
THE ECONOMY
So Bush would reappoint Greenspan if he had to do it today. As we have seen with polling results, it is all in the question. 'Would you reappoint Mr. Greenspan if you had to do it today?' That is like asking one of those corporate executives 'did you purposefully loot the corporate coffers? Did you mean to steal?' Do you think they are really going to answer 'oh yes, I knew it was wrong but I just said what the hell, you only have one economic bubble caused by a misguided Federal Reserve in your life to take advantage of." What could Bush have possibly gained by saying 'no'? So Bush responded affirmatively knowing much can happen in 14 months.
Speaking of the Fed, we keep hearing talk of interest rate hikes from television analysts who watch the Fed rather closely. Some are saying hikes could come sooner than later, others are saying not until later, but nearly all seem to be missing the point. We said it last week: the Fed is monetizing the bond market in a big way, i.e., buying treasuries with printed money to keep interest rates low. Rates want to rise either because of a perceived economic upturn or stagflation's beginnings. The Fed is worried its race against time where it has bet on the consumer to keep spending until the businesses start buying again is threatened by interest rates that want to rise. Mortgage rates are ticking higher and dropping mortgage applications. If the housing market slows appreciably all there is left is the consumer. The Fed is trying to keep the consumer going by artificially holding rates lower.
Thus those proselytizing over the Fed's next move simply by guessing at the economy are not really looking at the big picture of the financial market. That makes a lot of what you hear quite dangerous. There is no way the Fed is going to raise interest rates when it is trying desperately to keep them lower for now. The Fed is not going to raise rates until it sees employment numbers pick up for 2 to 3 consecutive months. Otherwise it cuts against consumer confidence, the very thing the Fed is fighting to prop up.
Why is the Fed doing this and not just cutting rates? Again the answer is again confidence. No, not the Fed's, though Greenspan's ego is large even by historical standards set by some rather arrogant past Federal Reserve Chairmen. Indeed, when we heard he went into the hospital to correct part of his anatomy that had swelled we first thought it was hit head. The Fed is not cutting rates because it has the Fed Funds rate down to 1.75% already. It really wants to save any more cuts for a last ditch effort. If it chops rates further, that is very visible. It wants to keep everyone under the illusion that things are getting better. Cutting rates won't do that. It can, however, buy treasuries and have the same result (temporarily; too much money printing is inflationary in itself) while staying mostly out of the public eye. Just look at those on the television debating the next rate move without even addressing the Fed's bond market moves. As Gomer Pyle used to say, it makes you think.
THE MARKET
The indexes cleared some important near term resistance with Nasdaq doing a bit more as it also did away with the old August high that it sparred with since breaking over it in November. Much stronger volume across the board accompanied (NYSE volume outpaced Nasdaq volume) by impressive breadth. The SP600 and SP400 (small and mid-cap indexes) broke solidly over their 200 day MVA. This was a session that did not completely wipe away the faltering price/volume action, but it stomped the hell out of it as institutions started buying on the early dip and kept it up all session.
SP500 is right at some resistance at 911, but with all of the indexes (save the DJ30) over their recent highs, the next area of concern is the December and January peaks. If Nasdaq clears those it will have reached a significant milestone in its recovery. In a way it is kind of sad to think that Nasdaq clearing 1521 is significant given that it peaked at 5132, but you have to play with the cards you have, make lemonade out of lemons, etc. As we said many months back, Nasdaq does not have to make it back to 5000 for all of us to make a lot of money. The nice moves we are enjoying now on our plays are doing that just fine. All we need to do is stay focused on what the market is telling us and take advantage of what the market is gives us.
Market Sentiment
It was kind of disturbing Tuesday listening to the professional guests on the financial shows talk about how investors were regaining confidence in the market, how it was performing well, etc. Just when you hear this kind of nonsense you can bet there is some froth forming. The breakout Tuesday was significant, but this is a market recovering from a serious wipeout, and putting the pieces back together is a longer process. We have seen how it spurts ahead and then teeters on collapse only to continue the rally. That was the action when there was a lot of pessimism. While the market action is the primary indicator, we are keeping a watch over this psychological aspect.
VIX: 23.51; -0.76
VXN: 33.65; -1.84
Put/Call Ratio (CBOE): 0.88; +0.17
Nasdaq
A high volume move over interim resistance but key resistance nonetheless. Leading the market higher.
Stats: +26.99 points (+1.89%) to close at 1451.36
Volume: 1.6B (+27.49%). Another strong shot of upside volume, much stronger than the recent distribution attempts.
Up Volume: 1.27B (+614M)
Down Volume: 312M (-242M)
A/D and Hi/Lo: Advancers led 2.08 to 1. A very solid, broad advance.
Previous Session: Advancers led 1.15 to 1
New Highs: 138 (-9)
New Lows: 30 (-1)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Important break over the near term resistance at 1425 to 1430 on volume. Accumulation volume, i.e., rising volume on up sessions, is again taking over the market. It was very evident Tuesday as volume shot higher as the market started its move after the early selling. We anticipated that Nasdaq would try to take a breather, but it had nothing to do with that. It is now focusing on the next resistance levels set by the January high (1467) and the December high (1522). That would be 177 points form the low that started this move. One would expect it to take a breather when it gets near that point. For now tech stocks are in the lead and are under accumulation.
S&P 500/NYSE
Breakout from its ascending triangle on some impressive volume helps solidify the return to accumulation.
Stats: +19.36 points (+2.17%) to close at 911.37
NYSE Volume: 1.623B (+46.93%). NYSE volume actually surpassed Nasdaq volume. Nasdaq is considered the speculative index and typically has higher volume because of the added trading. This NYSE volume is an indication of some serious accumulation underway.
Up Volume: 1.388B (+772M)
Down Volume: 246M (-239M)
A/D and Hi/Lo: Advancers led 2.84 to 1. Powerful breadth as the mid and small cap indexes decisively cleared their 200 day MVA.
Previous Session: Advancers led 1.27 to 1
New Highs: 202 (+66)
New Lows: 20 (+6)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Broke from its 5-week ascending triangle on an excellent volume surge. We said a breakout opened the door to 911, and SP500 kicked it in and ran there in one session. 911 represents and old top from July 2002 that has acted as some resistance since that time as well as a down trendline connecting the August 2002/December 2002/January 2003 highs. It may take a breather here, but the action really heats up ahead, however, from 925 to 935 (January high at 935) on up to the December high (954). Unlike Nasdaq, SP500 has yet to break the series of lower highs as it never took out its August top (965). Taking out this down trendline will be an important step, but just a step toward breaking the trend of lower and lower highs.
DJ30:
DJ30 did not make the breakout from its own 5-week ascending triangle, though it was a strong move up after testing the 18 day MVA on the low (8264). To break from the pattern and clear the near resistance it needs to move over 8522. That then opens to door to 8800 (early November high) and 8870 (the January high). It is a long road to move down, and it will rally and consolidate, rally and consolidate if it keeps going. The blue chips are following; with Nasdaq and SP500 in the lead, that is okay for now.
Stats: +156.09 points (+1.87%) to close at 8484.99
Volume: 1.623B (+46.93%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
No scheduled economic reports once again, but earnings were again taking the lead after hours. EBAY was down $1.53 during the regular session but then beat the street and guided higher; that reversed the move and EBAY was trading up $3 from the close as the evening session wrapped. Futures were up on the news.
Will it be enough to continue the move at this point? After strong breakouts you want to see the move continue for another session or two before taking a breather. The earnings news is still placating the market and keeping the buyers in the market, but the earnings will not keep the market moving higher indefinitely. As we have noted before, the market tires of earnings after awhile, moving up early when they are better than expected, but then giving back some of the gain as the earnings season drags on, the saturation level is hit, and the news has been priced into the market.
A jump higher in the morning as the futures indicate (at least this evening; change in futures is the one constant with futures) is not something we want to jump into right off the bat. We prefer those softer opens that we saw Tuesday as they build into strength. Gaps higher after strong moves typically are not the best to buy into. If the move is very strong it can gap and run even further before finally taking a rest at some point in the future, but we will need to see some good patterns breaking out to entice us into many more positions. They are still out there even with the good move already (breakouts come in waves), but we don't want to get spread too thin. We caught this move well, and on a further spurt higher in the morning we will be looking at taking some profit on plays that have run well, particularly option plays.
There were some problems with the Tuesday action as the smaller internet stocks, leaders of late, underwent selling late in the session. They were moving higher on strong volume and then hit the wall ahead of the EBAY earnings. Perhaps EBAY will spark them again. They tend to move hard, drop hard briefly, and then continue the move. We will see if they can hold support, regroup, and move ahead again. That is what leaders do.
Support and Resistance
Nasdaq: Closed at 1451.36
Resistance: The January high (1467). The December high (1521).
Support: The March and August highs (1426 and 1427). 1400 is some support (10 day MVA is at 1405). The 18 day MVA (1392). The exponential 50 day MVA (1370).
S&P 500: Closed at 911.37
Resistance: Price tops at 911 (July) and 925 to 935 (November and January peaks).
Support: March and April highs (896 and 905). 200 day MVA (880). The bottom of the October consolidation range at 875 down to 868, the top of the January trading range. The 18 day MVA (880) and the exponential 50 day MVA (868). 850, the bottom of the January trading range. The simple 50 day MVA (854). Price support at 825.
Dow: Closed at 8484.99
Resistance: 8522 and 8520, the March and April twin peaks. November and January highs (8800, 8870). December high (9044).
Support: 200 day MVA (8321). 8250, the bottom of the October consolidation range and other index lows is some resistance. The 18 day MVA (8270). The top of the January range at 8160. The exponential 50 day MVA (8179).
Economic Calendar
4-21-03
Leading economic indicators, March (10:00): -0.2% actual, -0.1% expected, -0.5% February (revised from -0.4%).
4-24-03
Durable goods orders, March (8:30): -1.0% expected, -1.6% February.
Initial jobless claims (8:30): 425K expected, 442K prior.
4-25-03
Advance Q1 GDP (8:30): 1.9% expected, 1.4% Q4
Michigan sentiment, revised (9:45): 84.0 expected, 83.2 prior.
Existing home sales, March (10:00): 5.70M expected (annualized), 5.84M February.
New home sales, March (10:00): 900K expected, 854K February.
SUBSCRIBERS' QUESTION
We receive a continuous stream of great email questions and we put as many as possible in the newsletter while others we answer individually. Please be patient as we will get to them. In the meantime keep the questions coming.
Q: Is there any more to it than experience and common sense in trying to figure the day's volume early in the day? When your "price buy" is hit I look for "volume buy". Who the hell knows if the percent of completed market day volume will correlate to an equal percent of total days volume? It seems to me that the inability to judge volume from one minute to the next is why you have to do homework on the stock which you obviously do. I check the volume and price activity of the sector when I've been able to collect samplings of that particular sector which I have recently attempted to do. That seems to help a lot on the obviously sector oriented stocks like oil, financials, dot coms etc. Any suggestions?
A: There is no way of knowing for sure regarding actual day-end volume totals as volume surges in the first hour and then in the last hour. In many instances when a stock breaks out over resistance it is accompanied by a surge of volume that puts it well down the road to the target volume. Those are the easy ones. Many times volume is solid but not near the target. In those instances if the move is clearly solid, i.e., not jumping back and forth, wandering in nervous trade, we will take a partial position early and then see where volume is later in the session. If it is solid we can complete the buy toward the close. We can even complete it at a later session when the stock gives us another entry point. In any event we usually wait and let the stock work through the morning chop before moving in unless there are other circumstances at play such as a stock in a really great pattern than we want when it makes its first move. In this market we will often wait until the last hour of the session to see how our stocks are closing; that gives us a much better view of price and volume. As the rally has strengthened we have moved into stocks a bit quicker, but if in doubt we will pass. We did that on a couple today that maybe we should have bought, but we decided to wait. Sometimes we miss a really good mover, but in this market we have seen too many times low volume upside moves that are pushed violently down; this market is still quite unforgiving.
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.
End Part 1 of 2
|
us stock market
trend trading stock
|
