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world stock market, us stock market
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5/13/03 Technical Traders Report Update
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: FLSH; MED
Trailing stops issued: None issued
Stop alerts issued: PCNTF; BCGI
You can sign up for Technical Traders Report alerts at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- Some higher volume churn crops up again.
- Trade gap widens on continued spike in energy prices.
- Internals remain positive, leaders still in good shape.
- Subscriber Questions
Old issues rise up along with analyst valuation concerns.
Coordinated car bomb attacks on US interests in Saudi Arabia and analyst valuation downgrades set the market tone Tuesday. Terrorism is a continued threat that will be hard to completely eradicate, and the bombings were a reminder that enemies of our way of life remain and continue to plot against us. Merrill Lynch was out again with more valuation downgrades, picking on the semiconductor sector in general and several stocks in particular.
On top of that the market had bounced from the breakout test, putting in two solid gains. After such a strong move the negative news turned the market sluggish. The indexes managed to hold their support and rally slightly in the last hour, but volume did increase on the NYSE and Nasdaq, showing some churning in the major indexes after a solid bounce higher. This was the first true distribution session on Nasdaq (higher volume selling), but it was more of a high volume churn (rapid turnover of shares) than dumping. Churning can be a precursor to heavier distribution, but with the good internals, up/down volume ratio, and leader performance, this action did not raise a lot of red flags. The Nasdaq has churned on higher volume twice in the past two weeks (but did not close lower) and has continued its move. The action has us on alert and watching leaders more carefully, but it was not a disaster by itself.
THE ECONOMY
The trade deficit rose, the tax cut size is still a question mark, and retail earnings were both better and worse. On top of that a new consumer confidence poll showed a third week of backsliding after the war. A lot of undercurrents Tuesday, but still the same story: some hopeful signs overshadowed by continued overall cloudy weather.
The trade deficit is something of a little known concern. It measures the amount of dollars flowing into the US versus out of the US. The March spike in oil prices helped push this report to the second highest on record. There are many competing problems with a large trade gap.
It pressures the currency, thus pushing the dollar lower. The reason is concern about a trade gap that gets too wide. Historically that has been at about 5% of GDP. That level has been a trigger point in the past for further and sharper currency declines as concerns about the ability to service the debt cause liquidation of investments in the country sporting the large gap. That is the big deflationary argument championed by those fearing a big trade gap. Take out that spike in oil prices, however, and the gap was not the hand-wringing disaster some make it out to be.
At the same time there are some positives. The trade gap cheapens US goods to the rest of the world, a benefit to US manufacturers. As the dollar falls that ultimately boosts the US exports and thus trims the trade gap that pressures the dollar lower. It is a circular relationship that causes different results depending upon what stage in the process you are in. Right now it is still in the downward pressure stage. The benefit of a lower dollar on exports is a limited positive, however, as the results are not that dramatic for an economy that is 70% service oriented. Further, despite how we hate the slow US economy, the rest of the world is weaker. Even without the increased oil spike, the trade gap was still strong. The US consumer is still hungry for foreign goods; despite the flagging confidence, US consumers still outspend their counterparts.
THE MARKET
The market was going to start lower with the lower futures given the bombings and analyst downgrades, not to mention the two strong upside sessions. As we indicated in the pre-market alert, it looked as if the action would be sluggish in the morning and the key would be a rally later. The market did show some of the same positive character exhibited in the rally. It rallied up before hitting support, putting in a much better show in the late morning than anticipated. It could not hold that move, but after a retest of the session lows it managed a late bump higher. Decent price action though not stellar as the last rally attempt fell short of turning the indexes positive.
It was a near miss as the major indexes closed down 0.5% or less (Nasdaq, SP400, SP500 all closed down 0.1%) as the late bounce turned up short. As noted, the volume indicates some high turnover in stocks. That is not a sell signal, but it does underscore some indecision as there were as many sellers as buyers after the buyers were clearly in control Friday and Monday.
The internals were interesting. Nasdaq A/D was positive. Nasdaq up to down volume was positive. Even on the NYSE the A/D line was basically flat as the indexes finished lower. The selling was not widespread. Indeed, given the fact that they held up well in the face of the Saudi bombings and valuation downgrades is a good indication on top of the solid internals.
Market Sentiment
VIX: 22.03; +0.61
VXN: 32.84; +0.26
Put/Call Ratio (CBOE): 0.67; -0.09
Nasdaq
Showed its first distribution session in the rally, but it was rather mild. Still, after the strong run it puts us on alert that there may be some pullback here after the breakout, test, and then rally up from that test.
Stats: -1.72 points (-0.11%) to close at 1539.68
Volume: 1.856B (+4.26%). Volume was stronger and remained above average. It was higher on this churn session than on the two rally days. That is not the best indication of continued accumulation, but it was hardly a clear cut case of institutions deciding to lighten up on stocks.
Up Volume: 1.118B (-343M)
Down Volume: 721M (+421M). Up volume managed to outpace down volume even on a churning down session.
A/D and Hi/Lo: Advancers led 1.09 to 1. Advancing issues still were in the lead. It was not such a dramatic downside session.
Previous Session: Advancers led 1.75 to 1
New Highs: 189 (-17)
New Lows: 6 (0)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Started lower, rallied over the Tuesday close to hit 1548.59 on the high. That is right at the lower portion of the range of potential resistance we have noted (1550 to 1560, then 1570 to 1578 from the June 2002 high and the May 2002 low). The turn back from that level on rising, above average volume is a caution flag. If the market cannot recover Wednesday and is selling on some stronger volume we will look at closing some more option positions as well as other stocks that are showing rising volatility.
S&P 500/NYSE
Stalled out at the Monday high, fading back slightly on rising, average volume.
Stats: -2.81 points (-0.3%) to close at 942.3
NYSE Volume: 1.385B (+1.95%). Volume edged up to average as the large caps churned after the strong move up off of the breakout test.
Up Volume: 664M (-496M)
Down Volume: 717M (+513M). Very close action, mirroring the trade in the index.
A/D and Hi/Lo: Decliners led 1.02 to 1. Very mild A/D line, a further indication of light selling pressure.
Previous Session: Advancers led 2.33 to 1
New Highs: 206 (-84)
New Lows: 7 (+3)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps were unable to build on the Tuesday move, hitting 947.51 on the intraday high, just over the Monday high, and then falling back on some rising, average volume. It is close to that 954 December intraday high that marks the next resistance. With the higher volume churn the index might have made its move toward that level and needs some consolidation time. Clearly there were not a lot of buyers ready to step in and propel the index higher, at least to the close, when it again tried to take out 947. The action is still solid, but sluggish given the world events. Wednesday will give us a better picture.
DJ30:
The blue chips opened lower and never turned positive, unable to crack 8750. Volume fell well off pace on the selling, the Dow now showing some better price/volume action even as the other indexes showed some churning; kind of a role reversal. The blue chips are more or less following the other indexes, and we look for the 10 day MVA (8580) to offer support.
Stats: -47.48 points (-0.54%) to close at 8679.25
Volume: 1.385B (+1.95%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
Retail sales are out before the open, and the reports from same store sales are mixed as they have been for the past few months. Retail sales, however, include more than just same store sales; it is the whole spectrum and that means those high energy prices from April are still going to be in the figure. Even with those, the numbers are expected to fall significantly. That gives some room for an upside surprise that could deliver some upside impetus to trade.
Even if a positive surprise occurs, we doubt it would drive the market really hard. Chip stocks were struggling all session, and the AMAT numbers after the close did not help as chip stocks sagged a bit more. It will be important to see how SOX performs Wednesday after breaking over the December and May highs Monday. If it can hold near 350 that would be very positive. There are many doubters about the chips right now, and if it can hold in the 340 to 350 range and maintain the breakout, that would be very significant.
The churn Tuesday has us ready to take it easy going into Wednesday, being as patient as possible and letting stocks and the indexes show us their intentions at this point. There were still some good upside breakouts Tuesday as the market pulled back, and we will continue to look to those if the market shows resilience after an early test lower on the AMAT news. The market is trying to continue the move, but it is also starting to struggle just a bit as the higher volume churn showed. We will be patient and let it work through this spot of uncertainty given the realization that yes terrorism is still out there.
There is enough talk about the market having come too far to fast, and it may need to work through that for another session or more. We did not see anything in the leaders Tuesday that alarmed us about the market action, and on many plays we have the luxury of a large gain already built into the stock. Right now it is important to let the plays come to us and show us the good volume couple with a good move.
Support and Resistance
Nasdaq: Closed at 1539.68
Resistance: Some potential resistance at 1550 to 1560. 1570 to 1578 (June 2002 closing low, May 2002 high).
Support: The December intraday high (1522). The 10 day MVA at 1507. The August 2001/January 2002 down trendline (1497). The 18 day MVA (1482). The January high (1467). The March and August highs (1426 and 1427). The exponential 50 day MVA (1426).
S&P 500: Closed at 942.30
Resistance: 954 (December intraday high). 965 (August 2002 peak).
Support: 935 (November and January peaks). The 10 day MVA (929.54). The 18 day MVA (919) and price tops at 911 (July). September 2000/March 2002 down trendline (905). March and April highs (896 and 905). The 50 day MVA (894) and the 200 day MVA (882).
Dow: Closed at 8679.25
Resistance: November and January highs (8800, 8870). December high (9044).
Support: 8522 and 8520, the March and April twin peaks. The 10 day MVA (8579). The 18 day MVA (8510). The 200 day MVA (8326).
Economic Calendar
5-13-03
Trade Balance, May (8:30): -$43.5 actual, -$41.0B expected, -$40.4B April.
5-14-03
Retail sales, April (8:30): 0.4% expected, 2.1% March
Retail ex Autos (8:30): 0.2% expected, 1.2% March.
5-15-03
New York PMI, May (8:00): -11.5 expected, -20.4 April
Initial jobless claims (8:30): 430K expected, 425K prior.
PPI, April (8:30): -0.5% expected, 1.5% March.
Core PPI (8:30): 0.0% exected, 0.7% prior.
Business inventories, March (8:30): 0.2% expected, 0.6% February
Industrial production, April (9:15): -0.3% expected, -0.5% March
Capacity utilization, April (9:15): 74.6% expected, 74.8% March.
Philly Fed, May (12:00): -6.0 expected, -8.8 prior.
5-16-03
Housing starts, April (8:30): 1.750M expected, 1.780M March
Building permits, April (8:30): 1.700M expected, 1.692M March
CPI, April (8:30): -0.1% expected, 0.3% March
Core CPI (8:30): 0.1% expected, 0.0% March
Michigan sentiment preliminary, May (9:45): 87.5 expected, 86.0 April.
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.
SUBSCRIBER QUESTIONS
Q: Hi! I have a question. I am new at investing at stocks. I have an account with Ameritrade. I have AXL stock. Last week the stock was up to over $25.00 a share. I wanted to put a stop at $24.50, below the previous day low. Ameritrade would not let me place a stop at $24.50. Ameritrade said I had to place a stop below the bid price which was $19.00 a share. I don't understand this. The stock was worth over $25.00 a share, but I can't sell it at that price. I would have to sell it at $19.00 a share. I also don't understand the asking price. The asking price was $98.00 a share. If I wanted to buy more stock, why can't I buy it at $25.00 a share instead of $98.00 a share?
A: For those not familiar with AXL, here is some background. The stock broke over its 200 day MVA three weeks back and did rally to over $25. It has since pulled back, but it is holding the 10 day MVA right at 25. It was not trading for $19 or $98 per share.
No doubt you were attempting to put in your stop order after or before the regular session. AXL is a NYSE stock, and what happens with these stocks after hours is that the specialist sets bogus bid and ask prices. For example, at this writing the stock is showing a bid of 0.01 and an ask of 99.72 while the stock closed at 24.95. Ameritrade does not allow you to base your stop loss on the last sale but on the bid currently listed.
There is a way around this but it involves using stop limits and buy limits versus a stop loss or buy stop. The limit says you are willing to sell at the price specified but not lower. In other words, if you set a stop limit and the stock gaps down below that price, you won't get stopped out on the first trade. You would only sell if the stock moves through your stop and trades at that price. This may or may not be what you want, but it would allow you to set the stop if Ameritrade allows stop limits still.
As for upside buys, you could set a buy limit at the price you want to buy the stock at. We do this quite a bit on stocks we want to buy and are confident about the volume. Say we see a stock moving on solid volume early and heading toward the breakout but we don't want to have to watch the screen all day. We set the buy stop and go about our business. If the stock hits the buy point and is traded, we are executed.
End part 1 of 2
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world stock market
us stock market
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