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world stock market, us stock market
TONIGHT:
- Indexes feeling their way along with some good signs and bad signs.
- Jobless claims top 400,000 as IMF says U.S. need to cut rates more.
- Tomorrow: waiting for that break higher or lower on decisive volume.
- Subscriber Questions.
- Team Trades.
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THE SUMMARY
A quiet market the past few sessions.
The indexes are really going nowhere this week. The Dow and S&P 500 rose on higher volume, a good sign, but they also bounced down from some resistance levels hit intraday on the high. The Nasdaq showed its second distribution day in the last three sessions, normally indicating that a rally is weakening. On the other hand, volume is holding almost flat over the past three sessions as the Nasdaq has moved sideways on rather languid action. We are talking increases and decreases of volume of 1% or so. That is not showing us definitively one way or the other where it is going. It is showing us that the bulls and the bears are in a standoff right now. The fact that the index is holding on above support during the fight is positive action.
The Dow and S&P 500 both turned in gains on a rise in volume. Not much of a rise in volume, however, just as on the Nasdaq. Volume is holding in a tight range as well on the NYSE. Moreover, both the Dow and S&P 500 tapped at resistance on the high (10,766 and 1248.30) and pulled back sharply. The rise on increasing volume was bullish; the pullback from support was not. Just as the Nasdaq, the bulls and bears are in a struggle.
Overall assessment: lower volume, lateral movement above support as exhibited on the Nasdaq is generally bullish. There have been some decent breakouts this week, and that is a sign the bulls are active. Until we get the move in the index or the stocks we are looking at, however, we need to be patient. That is why last night we were talking about protecting short term positions if the stocks bounced higher, but started to fade. The Dow and S&P 500 tried to make their moves today. They did a halfway job: a good half early, a bad half late as they were unable to hold onto their highs. The rising volume on a close off of a top can mean some trouble, especially when that intraday top was at resistance. The Nasdaq action seems positive, the Dow and S&P 500 not so clear. On any of those indexes, however, there is going to be another clear move soon from the way they are acting. We will see the move and make the plays accordingly.
THE ECONOMY
Jobless claims topped 400,000 for the first time in 5 years when they were at 428,000. Consensus was 390,000, and we felt that would be light. The four week moving average rose to 394,500 from 383,750. These are considered recession levels, but the key is that they are still trending higher, showing no signs of weakness. The layoffs keep coming, more today from GLW and others, and that continues to push the number higher each week.
Still, most economists think we will escape recession. The numbers looked promising in January and even February, but not now. Housing remains strong. It is quickly becoming the last bastion of hope now that the consumer is falling off and retail sales with it. There was an uptick in early April in retail sales, and that offers some hope, but the jobs piling up are acting as a big counterbalance to any euphoria over Fed rate cuts and a bounce in the stock market. Houses have to be filled with furniture, however, and that helps. We hope the trend holds, but permits for new homes is down the last two months. That means fewer being built; if there is no inventory of new homes, that means home sales will drop off simply because there won't be any as fewer will be built.
The ECI rose 1.1% to a 4.5% annual rate. That was at expectations, but it is a pretty high rate and has some concerned. We don't really buy that 'wage-led inflation' argument that the Fed was pedaling while it hiked rates. We don't think it really bought it either but just used it as a reason to raise rates. You have to remember: in the first quarter of 2000 wage gains rose 1.3%, more than 2001. High, but not horrid.
IMF: Remember over a hear ago when the IMF said the U.S. had to raise interest rates in order to slow down the economy. The reasoning was that it was too overheated and was in danger of dropping sharply and thus acting as a drag on other world economies. Watch what you ask for. They got their wish: rate hikes AND a sharp drop in the U.S. economy that is in fact hurting the rest of the world economies. Now that vaunted group of thinkers is saying the Fed must cut rates more aggressively to get the U.S. economy going again. Gee. Maybe we are wrong about another 100 basis points of cuts. If the IMF says it is necessary, then we should at the very least do nothing if not raise rates. That is a stretch of course, but these jokers are the biggest reactionist, short-sighted, self-enamored buffoons in all of finance.
THE MARKET
As we said, the action is quiet, and you hate to bet against a market that is quiet. You hate to bet on it either, especially coming out of this bear market. See the moves first.
Overall market stats:
VIX: 29.57; -1.70. Volatility cracked below 30 again, one of its few sojourns below that level this year. It reflects the calm action on the market as the bulls and the bears try to figure out who is stronger before the next move.
VXN: 78.42; -0.07. This time the Nasdaq falls and volatility falls; that is counter to what we would usually expect. But then again, the action is very tame relative to the past few months, and volatility is still at the top of the range. Nervousness even as the index trends sideways a bit.
Put/Call ratio (CBOE): 0.58; -0.10. The put call ratio is trading in a narrow range as well not showing us much of anything. Option activity was 1.118 million on the CBOE. It too reflects the quiet market.
NASDAQ: Looking decent even though selling down on slightly higher volume. Very quiet.
Stats: Down 24.92 points (-1.21%), to close at 2034.88.
Volume: 2 billion shares (+1.2%). Again, nearly a virtual dead heat. Up volume was 643 million shares to 1.354 billion downside shares. An almost perfect flip-flop from Wednesday's action.
A/D and Hi/Lo: Advancing issues surprisingly maintained the lead but fell to 1.23 to 1. That is very positive: the A/D line is slightly rising on this lateral move. More stocks going up than down even as the overall index moves sideways. New highs rose to 119 (+19) as new lows rose to 48 (+3).
The Chart: http://www.investmenthouse.com/cd/$compq.html
The Nasdaq tried to rally off of Wednesday's gain, but after opening just above the 50 day MVA (2078.15), but it could not hang on, tanking late in the session 45 points. That is not overly bullish action; it is the flip of Wednesday's action. Almost everything was the flip of Wednesday other than breadth. The index is truly moving sideways until the bulls or the bears can stake their claim. Right now we tend to favor the bulls on this one, and are looking for those upside breakouts when it starts higher. It is over some pretty decent support at 2000 from some prior tops and sideways action, as well as the 10 and 18 day MVA (2019.87 and 1984.08, respectively). This is where we want it to stand and jump on higher volume.
Dow/NYSE: Tried to make a run as well, but ran into overhead resistance.
Stats: Up 67.15 points (0.6%) to close at 10,692.35.
Volume: NYSE volume rose on the move to 1.278 billion shares (+6%). Up volume was 896 million shares versus 372 million to the downside, holding roughly the same as Wednesday.
A/D and Hi/Lo: Advancing issues were in front again 1.75 to 1 (2.08 to 1 Wednesday). NYSE A/D line is trying to start back up after flattening out. It needs to. New highs rose to 177 (+56) versus a decline in new lows to 18 (-6).
The Chart: http://www.investmenthouse.com/cd/$dja.html
The Dow cleared the 200 day MVA (10,615.71) on the open, tested it, and rallied higher. It peaked a lunchtime, however, and gave up half its move from there to the close. The stock rammed into resistance on its high (10,766.98) and tumbled back down. It was able to hold above 10,500, and we will see if the higher volume indicating net buyers holds sway over the index. Closed off the high on rising volume are not the best pattern, and that gives us a bit of pause, and one reason we were cautious on short term positions. The index is still overall in good shape, but as noted last night, this is a critical time as the sellers are trying to make a move on the markets.
S&P 500: The big caps tried to mirror the Dow, and did hit resistance on the high (1248.38) and came tumbling down, giving up 14 points of what was a strong move. The turn down was really before the index met the really heavy stuff at 1260; that can mean that the move is weaker than the prior one, but the indexes simply are not giving a clear signal one way or the other. On a day to day basis, the fall from the intraday high is not good; overall, however, the pattern remains solid as hit holds above its breakout point of the double bottom formed February to April, and is trying to form and breakout of a handle to that pattern.
Stats: Stats: Up 5.77 points (+0.5%) to close at 1234.52.
Volume: NYSE volume was up at 1.278 billion shares (+6%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Friday and the GDP. Will it be negative? It is going to be close. But for the housing market and some hefty government spending it would most likely be to the minus side. Everyone knows it is going to be low, and we don't expect a major surprise. Therefore it may be somewhat of a nonevent as several of the economic indicators have been (though housing did seem to spark things on Wednesday).
With the tame action the previous three sessions, we are not sure we will see any fireworks on Friday that will give us any definitive move before the weekend. But, pressure builds in lateral moves as we have seen on the Nasdaq, and the break up or down can occur at any time. A good catalyst either way is all it needs.
VRSN after hours reported another quarter of record, blowout earnings. They continue to perform way beyond expectations. The stock was up after hours, but that is about the only one we could see. We suppose we should be happy about the action: we were concerned that investors would start dumping stocks halfway through earnings season. There is some selling pressure on the Nasdaq, but as we have said, it is relatively mild; no dumping of shares.
Again, we view this as a positive that it is holding above support on relatively flat, below average volume. The Dow and S&P 500 are still in good shape overall in their patterns. The close off the intraday high today could send them lower in the near term to re-test some support, but at this juncture we are looking for the strong signal that appears to be building. At this juncture anything can happen, but the action still remains on the bullish side to us. Patience is the key; let the plays develop and then act. There is no hurry to the next bull leg if it is coming. When we see the stocks we are following make their move, we act. Until then we are patient and disciplined. If things turn down and start breaking support, we act to the downside. So many people are expecting that drop (the high VXN, the daily commentaries on the tube), it may not come. When people were watching for that bottom it sure was elusive. Now they are conditioned to watch for the drop, and it just might not happen.
Support and Resistance Levels
Nasdaq: Closed at 2034.88.
Resistance: 2250, then 2290 to 2300. It is very congested in this range (thicker ice).
Support: 10 and 18 day MVA (2019.87 and 1984.08, respectively). Then 2000.
S&P 500: Closed at 1234.52.
Resistance: 1265 to 1270.
Support: The 10 day MVA is at 1214.72. 1200 is a possibility after that (the 18 day MVA is at 1200.80).
Dow: Closed at 10,692.35.
Resistance: Real congestion from 10,750 to 10,900.
Support: 10 day MVA is at 10,455.50. 10,300 to 10,250 after that, but it did not hold on the way up.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
4-24-01
Consumer Confidence, April (10:00): 109.2 actual versus 113.0 expected and 116.9 (revised lower from 117.0).
4-25-01
Durable Orders, March (8:30): +3.0% versus 0.5% expected.
Existing Home Sales, March (10:00): +4.8%.
New Home Sales, March (10:00): +4.2% (a record).
4-26-01
Initial Claims, 4/21 (8:30): 408,000 versus 390,000 expected.
Employment Cost Index, Q1 (8:30): 1.1% actual versus 1.1% expected.
Help-Wanted Index, March (10:00): 71 versus 71 prior.
4-27-01
GDP-Adv., Q1 (8:30): 0.9% versus 1.0% prior.
Chain Deflator-Adv., Q1 (8:30): 3.0% versus 1.9% prior.
Mich Sentiment Rev., April (10:00): 89.0 versus 87.8 prior.
SUBSCRIBER QUESTIONS
Q: What time do institutional buy/sell programs kick in?
A: There is not set time, though they often are most active at the open and at the close. That is why we see the heaviest volume of the session in those two hours. Much of the morning action has to do with the futures and the spread between the futures contracts on the indexes and the actual prices of the indexes. It gets pretty complicated, but if the spread between the price of the index and the price of the futures is greater than fair value, it is more attractive to buy the index and thus the programs drive the market higher. If the spread is less than fair value, programs sell the index and buy the contract, and the index falls. Now some programs buy certain stocks in baskets when they hit certain values, and sell them at other values. Thus they can kick in at any time.
TEAM TRADES
No team trades to report today as some of our analysts took the day off and the others did not see the moves they wanted in their favorite plays. That is a quiet market.
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End Part 1 of 2
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world stock market
us stock market
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