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world stock market, us stock market
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5/13/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Tuesday: SEPR; VSTA
Buy alerts issued: FLSH; MED; SFNT
Trailing stops issued: None issued
Stop alerts issued: BCGI; PCNTF
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 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.
THE PLAYS:
Good movers Tuesday: BBA; BRCM; DRIV; FLSH; MED; MRGE; NSCN; NSM; NTES; RTIX; SEPR; SINA; SSYS; UCOMA; UNTD; VSTA
New:
Play Date: 05/13/2003
AGEN (Antigenics--$10.5; +0.63; optionable): Biotechnology
http://biz.yahoo.com/p/a/agen.html
STATUS: Cup w/handle. AGEN is in the process of breaking out of the 3-week handle to its 5.5 month base. Accumulation is solid at 4 up weeks on rising volume to 1 down week on rising volume; an excellent foundation for a further advance. Money flow has been moving up well ahead of the price, and the move Tuesday was on a strong shot of above average volume. Looking for some more volume as AGEN finishes the breakout.
Volume: 402.396K Avg Volume: 278.318K
BUY POINT: $10.58 Volume=417K Target=$12.75 Stop=$9.84
POSITION: QHL IB - Sept. $10c (64 delta) &/or Stock
http://www.investmenthouse.com/ci/agen.html
Play Date: 05/13/2003
KOSP (KOS Pharmaceuticals--$22.49; +0.19; optionable): Drug manufacturers
http://biz.yahoo.com/p/k/kosp.html
STATUS: Testing the breakout. KOSP exploded out of a 5.5 month cup base in late April, never stopping to form a handle. Sometimes that happens when the buyside interest is very strong as a stock comes off the bottom of its pattern. It is now testing back, forming the handle its pattern did not have as it tests the 18 day MVA on the Tuesday low (20.70) and rallies back on continued above average volume. Accumulation is solid at 5 up weeks on rising volume to 2 down weeks on rising volume. Strong money flow, and strong relative strength. We like successful breakout tests as that 'proves up' the breakout, showing that buyers are ready to come back in and buy once again as the stock pulls back on short term profit taking. We are looking for a continued move up from here on strong volume.
Volume: 897.443K Avg Volume: 235.772K
BUY POINT: $22.94 Volume=400K Target=$27.48 Stop=$21.33
POSITION: KQW HX - Aug. $22.50c (56 delta) &/or Stock
http://www.investmenthouse.com/ci/kosp.html
Continuing plays that look good:
Play Date: 05/07/2003
ALT (Alteon--$4.15; 0; no options): Drug manufacturers
http://biz.yahoo.com/p/a/alt.html
STATUS: Cup w/handle. ALT is still working through the handle to its 16-month base showing accumulation of 17 to 9 in the large base. Over the past 9 weeks while in the handle to the larger base, it has formed a double bottom with handle, now moving laterally over the 10 day MVA (4.05), tapping at that level on the intraday lows. Volume surged Tuesday as ALT was unchanged on the close. That indicates the stock is building pressure, crouching for the breakout. Excellent money flow is moving up ahead of price. We just wait for the breakout.
Volume: 291.6K Avg Volume: 121.727K
BUY POINT: $4.36 Volume=188K Target=$5.45 Stop=$3.97
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/alt.html
Play Date: 05/01/2003
SHRP (Sharper Image--$21.48; +0.98; optionable): Yuppie gadgets
http://biz.yahoo.com/p/s/shrp.html
STATUS: Cup w/handle. SHRP is showing solid volume as it starts the breakout move from its 6.5 month base. Retail is a mixed bag, but specialty retailers are starting to show some leadership in the group and in the market. Solid money flow is leading the way higher and we are looking to enter on another strong move higher.
Volume: 515.28K Avg Volume: 216.954K
BUY POINT: New: $21.85 (orig. $21.45) Volume=293K Target=$25.75 Stop=$19.95
POSITION: SAU HD - Aug. $20c (58 delta) &/or Stock
http://www.investmenthouse.com/ci/shrp.html
End part 1 of 2
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world stock market
us stock market
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