|
|
us stock market, stock trading site
* * * *
5/01/03 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: FWHT
Buy alerts issued: AMT; UTHR; GSPN
Trailing stops issued: None issued
Stop alerts issued: VOD
Buyers cautiously step in on the low and drive the indexes back up to highs.
No major breakthroughs, but unlike Wednesday, the indexes rallied toward the close and managed to hold their gains. Indeed, with just under 2 hours left they started an impressive run higher that had the look of a breakaway attempt. While that did not happen, the indexes did hang onto most of the recovery, putting in another session right at resistance on lower volume with a moderately positive advance/decline line.
It was a rough road as the economic news remains what you would call sluggish at best with rising jobless claims, weakening manufacturing, and slowing construction spending. Still as we have noted, the market does not take its longer term cues from economic reports that look to the past. There is an immediate effect such as the weak open Thursday, but then the market looks longer term. Right now it is still building in better times ahead.
The indexes are still at resistance as the recovery was not that strong. Nasdaq moved over the January high, but not far and without any volume. With the return to what has been the predominantly bullish intraday action it appears that the late Wednesday selling was indeed mainly month-end portfolio shuffling. This is helping transform this dance at resistance into a more positive light on Nasdaq and the SP500.
THE MARKET
Better intraday action with a weaker open and early selling turning into some buyside interest that pushed the indexes up to a better close. It was not a breakaway reversal as volume remained low, but it was another low volume session where the indexes hung on around near resistance. Combined with that return to better intraday action the indexes are turning a potential sow's ear into something much better.
While the price/volume action on the SP500 has not been perfect, it has been predominantly positive. The price/volume action on Nasdaq is clean as noted Wednesday. The lateral movement on predominantly lower volume with some lower intraday lows is forming up handles (lateral shakeouts of the easy sellers, a.k.a., weak holders). If this action continues for a few more sessions there could be a good upside breakout after these stocks that have run so far have a chance to take a breather and form up for the next move higher.
Wednesday the large caps came under some fire as they churned at resistance. At the same time the smaller caps posted solid gains, holding the overall market up. It was a case of one part of the market picking up the slack, particularly as fund managers did some month-end shuffling. Thursday the entire market recovered with Nasdaq (and not even really semiconductors) leading the way. One day does not turn the market, and with the return to better intraday action Thursday, the market showed it is trying to resume its accumulative posture. It is still not out of the woods; good patterns are only good if they yield strong breakouts. Just as Wednesday did not skewer the market, Thursday was not its savior. It did, however, put the lateral move in a better light. Now it has to finish the lateral move and provide that breakout higher.
Market Sentiment
VIX: 24.5; +0.73
VXN: 32.49; -0.18
Put/Call Ratio (CBOE): 0.85; +0.16
Nasdaq
Led the market after testing the 10 day MVA on the low and rebounding to post a gain.
Stats: +8.25 points (+0.56%) to close at 1472.56
Volume: 1.464B (-9.16%). Volume was off so it was not a key reversal or anything like that. It was a low volume selling session that picked up some buyside interest as the up/down volume ration indicates.
Up Volume: 989M (+379M)
Down Volume: 447M (-507M)
A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.29 to 1
New Highs: 154 (+7)
New Lows: 21 (-6)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq was the leader. It tested the 10 day MVA on the low (1450) and rebounded for a positive close. It did it with just minimal help from SOX (+0.2%) though it needed whatever help the chips gave. The pattern now very much resembles a cup with handle for the year, though the SP500 is really forming the better handle. The question is, if it does consolidate and provide a breakout, will that carry it past the December high (1522)? It might, but realize that it jumped out of the month-long consolidation only to run into resistance 50 points higher, not really a huge gain after a month of lateral action. Thus it could form up here and breakout for another 50 point move to put it basically at the December high. Not bad action at all though not a massive run higher from here. If the index does get to that December high or a bit higher, we will have to be on the lookout for the summer doldrums to start to creep into the picture.
S&P 500/NYSE
Tested lower and then posted a nice recovery to close flat. Another session of lateral action below resistance, this time with improved price/volume action.
Stats: -0.62 points (-0.07%) to close at 916.3
NYSE Volume: 1.378B (-16.06%). Volume dropped as the large caps held their ground after fighting off early selling. No churn, no distribution, just back to a lateral move below resistance once more. Makes the higher volume Wednesday really look like month-end shuffling.
Up Volume: 651M (-212M)
Down Volume: 729M (-38M)
A/D and Hi/Lo: Advancers led 1.09 to 1. Still managed to lead on a down session.
Previous Session: Advancers led 1.5 to 1
New Highs: 131 (-1)
New Lows: 10 (-5)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps tested below the 10 day MVA (908) intraday, but rallied back well. They even turned positive in the last hour before fading slightly at the close. This action continues the pattern over the last week of moving laterally below resistance at 925 to 935 (January highs) with some lower intraday lows. Other than the higher volume churn Wednesday on the month-end, the action has been a classic handle formation to a cup that started forming at the first of the year. As with all such patterns, however, it has to deliver the goods, that is, a nice volume breakout over 925 so it can try to make the December high at 955.
DJ30:
The blue chips continue to struggle along, still in the ascending triangle and struggling to break through the March high at 8522 marking the top of the pattern. It tested the 18 day MVA on the low (8340) then rallied back to the top of the range. DJ30 is not leading, it is waiting for the other indexes to drag it along.
Stats: -25.84 points (-0.3%) to close at 8454.25
Volume: 1.378B (-16.06%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
The employment report has all eyes, and there is little chance of the report providing any positive news. The best case scenario founded in reality is that things did not get worse. With many on the street expecting things to be worse than expected, status quo may be viewed as a positive. Confusing? Just assume that there will be some disappointment and the continued lament about a jobless recovery and the like. If the market is truly looking beyond the current economic situation it should take the news more or less in stride, i.e., selling down and then recovering intraday or over the next few sessions.
The market still stands on the edge of the next move. It is truly making a series of steps higher with few huge runs straight up other than the initial move off the March low. There is a lot of overhead supply and resistance levels that make the climb a struggle. Trying to recover for a 3-year bear market and a pernicious downtrend is not easy work. Accumulation has returned to the market and there are many leaders continuing to move higher. Indeed, many of our stocks have hit targets but we are letting them work higher still, not wanting to cut off their moves higher. This slower stair step higher keeps anxiety higher and keeps that wall of worry in place. It prevents a massive run higher that all of the sudden has exhausted the ready cash, has everyone concerned about valuations, and is easy fodder for short sellers. The action has appeared to be choppy, volatile and unprofitable to many former investors, and that is keeping them on the sidelines. As we have seen, however, if you look in the right places there are many rewarding stocks.
We will continue to look at those newly emerging leader candidates as well as those already on the report that are moving into good position for the next move higher. The market is at another stage where it is trying to build for another move higher. So far on balance the action remains positive for another try higher, but there is some resistance, some selling at these levels. We will be patient again and let the stocks make their moves and then we make our moves. After this next run, however, we will need to consider the potential drag of summertime starting late May to June. The market action will slow volume wise, and if there is a spurt up into June that will most likely be the extent of a summer rally before the traditional struggle in July and then the dips of September and October. Just something to keep in mind with respect to the big picture.
Support and Resistance
Nasdaq: Closed at 1472.56
Resistance: The January high (1467) was cracked again Thursday, but still has not been totally broken. The December high (1522).
Support: The 10 day MVA at 1449. The 18 day MVA (1440). The March and August highs (1426 and 1427). 1400 is some price support. The exponential 50 day MVA (1392).
S&P 500: Closed at 916.30
Resistance: 925 to 935 (November and January peaks). 954 (December intraday high).
Support: September 2000/March 2002 down trendline (912) is trying to hold. Price tops at 911 (July). The 10 day MVA (908). March and April highs (896 and 905). The 200 day MVA (879). The bottom of the October consolidation range at 875 down to 868, the top of the January trading range. The exponential 50 day MVA (879).
Dow: Closed at 8454.25
Resistance: 8522 and 8520, the March and April twin peaks. November and January highs (8800, 8870). December high (9044).
Support: The 10 day MVA (8424) held on the Wednesday low. The 18 day MVA (8370). The 200 day MVA (8309). 8250, the bottom of the October consolidation range and other index lows is some support.
Economic Calendar
4-28-03
Personal income, March (8:30): 0.4% actual, 0.4% expected, 0.2% February (revised from 0.3%).
Personal spending, March (8:30): 0.4% actual, 0.6% expected, 0.1% February (revised from 0.0%).
4-29-03
Employment cost index, Q1 (8:30): 1.3% actual, 0.8% expected, 0.7% Q4.
Consumer confidence, April (10:00): 81.0 actual, 70.0 expected, 62.5 March.
4-30-03
Chicago PMI, April (10:00): 47.6 actual, 48.5 expected, 48.4 March.
5-1-03
Auto sales, April: 6.0M expected, 5.5M March
Initial jobless claims (8:30): 448K actual, 432K expected, 461K prior (revised from 455K).
Productivity, prelim. Q1 (8:30): 1.6% actual, 2.0% expected, 0.7% Q4 (revised from 0.8%).
ISM index, April (10:00): 45.4 actual, 47.0 expected, 46.2 March.
Construction spending, March (10:00): -1.0% actual, 0.2% expected, +0.2% February (revised from -0.2%).
5-2-03
Non-farm payrolls, April (8:30): -58K expected, -108K March.
Unempolyment rate, April (8:30): 5.9% expected, 5.8% March.
Hourly earnings, April (8:30): 0.2% expected, 0.1% March.
Average workweek, April (8:30): 34.2 expected, 34.3 March.
Factory orders, March (10:00): 1.2% expected, -1.5% February.
SUBSCRIBER QUESTIONS
Q: I'm a little confused about one thing. The report is recognizing the bullish chart action and adding to that the (not quite) extreme sentiment readings from the P/C ratio. But, it seems to me, that the (definitely) extreme reading from the VIX is being overlooked. I find it hard to feel comfortably bullish while the VIX is sitting at 24. Wouldn't this very low VIX reading create a bearish view from a technical contrarian perspective?
A: The VIX is not being overlooked. It is something we are watching but it is not something that leads our decision process. The VIX is a sentiment reading and as such it is a secondary reading. It develops the picture that accumulation, price/volume action, and leadership stocks are showing us. Secondary indicators can give extreme readings and signal action could be changing. The VIX can do that, but in its history it does not always do that. If the market is under accumulation and leaders are leading, we defer to that. The low VIX reading is something that keeps us cautious about this move, but it is not going to keep us out of the move. VIX peaked on the latest move higher in mid-March at 40. High but not extreme. The market has rallied steadily as VIX has fallen. It is now down toward the low end of the 'normal' range of 20 to 30. It has been lower in 1999, 2000, 2001, 2002. It has had lows lower than where it is now for every year before 1999 since it was tracked.
Now that the index has enjoyed a nice rally up to this resistance and the VIX is down in the lower end of the 'normal' range it suggests that there could be some trouble. But with sentiment indicators it is all relative; it is very hard to gauge what level will be the important level 'this time.' As noted, it has been much lower in the past as the market still climbed higher. With sentiment indicators you have to look at them all. Bulls/bears, put/call, short interest ratio. Last week the bullish advisors fell while bulls climbed as well as short interest rising. Those are in opposition to the VIX. This week the bulls gained ground while bears lost ground, but they are not at extremes yet. Short interest is still hanging in there. If all of the secondary indicators start pointing to extremes, then we really examine the primary indicators of market health, i.e., accumulation, price/volume action, and leadership, closely. Is there a sign of cracking? As you are aware we have been concerned lately about the inability to clear the January high on Nasdaq as well as some price churning. The lower VIX reading underscores this action a bit more, but it is not enough alone for us to say the end is coming.
Some use VIX as their investing guide. As it is in large part sentiment we put it in the secondary indicator category. It is an important secondary indicator, but it takes a back seat to the actual nuts and bolts of the action in the market. It is good to be skeptical at all times when dealing with the market as that keeps you out of trouble in most cases. If all of the secondary indicators start flashing red lights and the indexes and leading stocks start to stumble, the indicators are speaking loudly.
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:
New:
Upside:
Play Date: 05/01/2003
DCTM (Documentum--$18.41; +0.02; optionable): Application software
http://biz.yahoo.com/p/d/dctm.html
STATUS: Cup w/handle. After a strong move off of the March low to complete the cup, DCTM has moved laterally the past two weeks to put the finishing touches on 5-month base. Accumulation is solid at 7 to 4, and DCTM has some solid credentials. Looking for a nice breakout.
Volume: 518.599K Avg Volume: 1.191M
BUY POINT: $18.98 Volume=1.8M Target=$22.85 Stop=$17.65
POSITION: QDC GW - July $17.50c (77 delta) &/or Stock
http://www.investmenthouse.com/ci/dctm.html
Play Date: 05/01/2003
INSP (Infospace--$12.89; +0.4; no options): Internet information
http://biz.yahoo.com/p/i/insp.html
STATUS: Testing the breakout. INSP has moved through a 4-month base showing excellent 8 to 1 accumulation as it moved through the pattern. It broke higher in early April on a strong volume surge, but immediately fell back for a full test of the breakout move. It has moved laterally and higher back up to 13 the last 4 weeks. Thursday it rallied on strong volume, moving past resistance at 13 but giving that breakout back on the close. Looking for another move higher on continued strong volume.
Volume: 1.242M Avg Volume: 374.5K
BUY POINT: $13.32 Volume=562K Target=$17.45 Stop=$12.25
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/insp.html
Play Date: 05/01/2003
SHRP (Sharper Image--$20.3; +0.55; optionable): Gadgets for sale
http://biz.yahoo.com/p/s/shrp.html
STATUS: Cup w/handle. SHRP is moving through a 6-month base, forming a handle the past three weeks in a pattern that shows good 6 to 4 accumulation. Money flow is well ahead of price and is moving up as SHRP moves laterally in the handle over the 18 day MVA (19.58). Thursday SHRP showed a strong volume surge as it moved up in the handle. Retail and consumer oriented stocks are forming up well and we are looking for a breakout from SHRP.
Volume: 344.308K Avg Volume: 195.385K
BUY POINT: $21.45 Volume=293K Target=$25.25 Stop=$19.95
POSITION: SAU HD - Aug. $20c (58 delta) &/or Stock
http://www.investmenthouse.com/ci/shrp.html
Continuing plays that look good:
Play Date: 04/16/2003
IDBE (ID Biomedical--$7.77; +0.36; no options): Diagnostic drugs
http://biz.yahoo.com/p/i/idbe.html
STATUS: Reverse Head & Shoulders. After a quick test of the 18 day MVA (7.35) IDBE started back up on stronger volume. Still in the nice 3.5 month base and looking for a strong breakout.
Volume: 251.895K Avg Volume: 222.622K
BUY POINT: $8.04 Volume=376K Target=$10.88 Stop=$7.48
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/idbe.html
Play Date: 04/23/2003
VTAL (Vital Images--$13.57; +0.55; no options): Medical appliances
http://biz.yahoo.com/p/v/vtal.html
STATUS: Breakout test. VTAL moved out of its 15-month base (accumulation at 19 to 8) in late March, blasting higher on strong volume. It has started up from the test of that breakout on strong volume, but has moved laterally over the 10 day MVA (13) the past week. Thursday volume ramped up as VTAL moved off that level. Looks ready for the next leg.
Volume: 187.887K Avg Volume: 93.725K
BUY POINT: $13.72 Volume=150K Target=$16.55 Stop=$12.76
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/vtal.html
End Part 1 of 2
|
us stock market
stock trading site
|
