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world stock market, us stock market
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6/05/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: ZMH; SINA; HTCH; PKI; UTHR
Buy alerts issued: HPOL; BIO
Trailing stops issued: None issued
Stop alerts issued: None issued
Comeback shows buyers still ready, particularly with small caps and drugs.
Some say the market is on drugs, wondering how investors can buy into the market with current valuations and the economy. True or not, investors, and we are talking institutions, vigorously snapped up drugs, biotechs and smaller caps. While the large cap indexes struggled to fight off negative territory, the smaller issues were out in front all session. As we have said before, small cap leadership is an early signal of economic improvement to come. It is not always accurate as seen in late 2001 and early 2002 when small caps were performing better only to fall off. With a lot of stimulus in the pipeline in the form of tax cuts, rate cuts (more to come), and some Fed bond buying, however, the big money has been betting on an economic recovery starting late last year. This is a make or break move. Either the economy will recover given all the stimulus in the market, or it will fail again and then the entire world will be in deep recession and deflation.
It was a slow start with the jobless news and Microsoft's Balmer sending a 10-page intra-company 'memo' about how challenging the times were and how Linux was going to make a further run at MSFT's dominance. Sources say the 10-pages sent to employees was the Reader's Digest condensed version, cut down from 50 pages of rambling. Factory orders were weaker, and that doused more water on the action. As typical in this market, however, stocks fought back. Actually, it was the large caps that had to fight as the small caps performed well all session. If it was a drug or a biotech it was bought Thursday. Nonetheless, the indexes managed to recover and post gains. Good intraday bullish activity once again.
Bigger picture the large cap indexes ran in place with SP500 posting a slight gain on rising volume while Nasdaq posted a gain on lower volume. Once more the large cap indexes are showing a bit of churn, but that has yet to stall the move. Indeed it seems as if the indexes do their correcting intraday, selling down only to recover, or moving higher intraday and then fading back but holding onto some gain. What this shows it that there are still buyers at these levels, and as we have said, even if the market seems a bit extended, it is hard to fight the tape. If the big money still wants to buy, it will push the market higher. With the hot action in drugs, biotechs and small caps, it appears they still want to buy as they again overcame disappointing economic and corporate news to rally to the close.
THE MARKET
It was a struggle for the large caps, but he market continued its move higher. Leadership stocks continued to lead as ADVP, AVP, BBBY, SINA, BGEN, SCSS, HTCH, BCR, CECO, FLSH, BRCM; OVTI; NVDA, MME, UTHR, etc. posted solid gains. Smaller caps were the clear leaders, and many of those were drugs and biotechs. SP500 managed to scratch out a gain on rising volume, but Nasdaq posted a gain on declining (though still quite strong) volume.
The large caps continue to struggle higher even if each session is not a thing of beauty. That keeps us looking for when this rally will need a deeper correction, but it is still bringing in the buyers as money rotates to different sectors with no money leaving the market. The SP500 and DJ30 both showed dojis on the close, a potential topping signal. They have shown those before after a nice rally higher, and it has been a false signal or at least the pullback was very short lived as buyers moved back in after just a bit of weakness. They continue to show a bit more volatility intraday and day to day, a sign of a pullback coming, but in comparison to the strength of the buying that action is rather anemic.
As it is the big indexes are still right at potential resistance points (SP500 and DJ30) even as the smaller cap indexes power higher. With leadership moving ahead on volume it is hard to fight that tape as we have said. The moves in the drugs and biotechs were explosive. They were too explosive with stocks gapping higher $5 (and we are not talking about IMCLE, DNA or others that have a lot of news). One thing we have liked about this rally is that it would move up orderly, then consolidate that move in an orderly fashion, and start up again. Right now it is running hard to the upside without any rest and stocks are starting to jump wildly higher. There is some reason for concern, but for now it is still surging with just one distribution session. It needs a nice, orderly pullback, and we would not be surprised to see it start over the next week.
Market Sentiment
VIX: 23.12; +0.64
VXN: 34.53; +1.52. Nasdaq volatility continues to rise as the index does as well. That is a hint of choppiness in this move.
Put/Call Ratio (CBOE): 0.64; -0.12
Nasdaq
Gapped lower at the open but rallied to close on the high yet again though volume did not surge.
Stats: +11.36 points (+0.69%) to close at 1646.01
Volume: 2.476B (-2.63%). Volume backed off but was still strong, moving up well as the index recovered late.
Up Volume: 1.479B (-392M)
Down Volume: 966M (+330M)
A/D and Hi/Lo: Advancers led 1.58 to 1. Breadth was not that solid, indicative of the large cap tech struggle.
Previous Session: Advancers led 2.21 to 1
New Highs: 327 (+16)
New Lows: 5 (+2)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq continues its upward track over the 10 day MVA (1589), still moving higher on solid volume as it logs 150 points in the past two weeks. It has shown it can run 200 points a leg on this move, and it is paying little heed to the 200 day MVA at this point. It is struggling a bit with the Monday distribution day and more intraday volatility, but the big money keeps moving into new areas that continue to boost the index.
S&P 500/NYSE
Scratched out a tough gain on some rising volume with that late recovery, but still fighting resistance.
Stats: +3.9 points (+0.4%) to close at 990.14
NYSE Volume: 1.678B (+5.66%). Another volume surge as the large caps recovered from selling and posted a gain. That is quite good price/volume action as buyers stepped back into the market on the early dip.
Up Volume: 1.146B (-219M)
Down Volume: 533M (+312M)
A/D and Hi/Lo: Advancers led 1.65 to 1. The smaller issues provided the backbone as the large caps were mixed.
Previous Session: Advancers led 3.32 to 1
New Highs: 528 (0)
New Lows: 1 (-3)
The Chart: http://www.investmenthouse.com/cd/$spx.html
A negative open that tested 975 on the low led to a rebound back to 990. 990 to 1000 represents some resistance, and the index did struggle some Thursday as it approached that level. Again, it is hard to fight the tape, and a break higher opens the door to 1050 though we do not look at it being a straight run. A pullback to the 10 day MVA (964) at some point in the next week is what we expect, most likely after a tap at 1000.
DJ30:
Struggling again at the last near term highs it has to take out, the December high (9043) and the August high at 9077 (intraday). The blue chips showed a hanging man doji at that level, and that has presaged slight pullbacks for the Dow on its run. It is following the other indexes, however, so we are not looking at this as a signal as to what Nasdaq or SP500 will do. The Dow has been unable to get all 30 working in sync, and that has kept it lagging.
Stats: +2.32 points (+0.03%) to close at 9041.3
Volume: 1.678B (+5.66%)
FRIDAY
The hallowed employment report is out before the open, and while the economy is in no position to create jobs, if the non-farm payroll loss is less than the 30K expected it could have a positive impact. That would be a shell game, however, as the weekly claims remain woeful. We are not anticipating any upside surprise; the potential for surprise is to the downside.
That could set the market back when combined with Intel's lukewarm mid-quarter update. It has thus far been able to fend off bad news in favor of future growth expectations. After a strong move higher a really bad non-farm number could finally give the market reason to give back some of the gains. As of yet the market has only shown hints of weakening; certainly moving against the tape has not been the thing to do. We have been conservative in what we are entering and we have been taken some partial gains as they present themselves, letting the rest run with the market, but we continue to move in when the stocks make the moves we are looking for.
The market is due for a test and we think there will be on in the coming week, either a minor pullback as we have seen or a more prolonged test of the gains. We will thus continue to be cautious about what we enter, not being too rash to move in early in all of the hype but waiting to see how volume builds and whether moves hold up toward the close. We are systematically tightening up stop loss levels, particularly for option plays, but nothing overly dramatic as we want to give leaders room to test and resume their moves. This is all part of normal investing, however, and not as a result of the move thus far and its need for a rest. We will continue to move into stocks making good moves, take some gains when solid moves push to the initial targets, and cut away any breakdowns. At this point in the rally we have some luxury built in as many stocks have trailing stop loss points at or above the initial target. That is a nice cushion to have and a benefit of playing leading stocks.
Support and Resistance
Nasdaq: Closed at 1646.01
Resistance: 1640 (20% over the 200 day MVA) is something we need to keep in mind. 1700 (Feb 2002 low).
Support: 1595 (June 2002 closing high). The 10 day MVA at 1588. 1573 (May 2002 closing low). 1567, the mid-June intraday high. The 18 day MVA (1560) and the he May high (1554). The December intraday high (1522). The exponential 50 day MVA (1490). The January high (1467).
S&P 500: Closed at 990.14
Resistance: 990 to 1000. Then 1050.
Support: 975 (December 1997 peak). 965 (August 2002 peak). The 10 day MVA (964). The 18 day MVA (952). The mid-May high (948). 935 (November and January peaks). The 50 day MVA (922).
Dow: Closed at 9041.30
Resistance: December high (9044). The August high (9077). 9500 (June 2002 lows).
Support: January high (8870). The 10 day MVA (8856). November high (8800). May high at 8743. The 18 day MVA (8761). 8522 and 8520, the March and April twin peaks. The 50 day MVA (8541). The 200 day MVA (8336).
Economic Calendar
6-02-03
Auto sales, May: 5.4M expected, 5.4M April
ISM Index, May (10:00): 49.4 actual, 48.5 expected, 45.4 April
Construction spending, April (10:00): -0.3% actual, 0.2% expected, -1.0% March
6-04-03
Productivity, revised Q1 (8:30): 1.9% actual, 2.0% expected, 1.6% prior.
ISM services, May (10:00): 54.5 actual, 52.0 expected, 50.7 April
6-05-03
Initial jobless claims (8:30): 442K actual, 421K expected, 424K prior.
Factory orders, April (10:00): -2.9% actual, -1.8% expected, 2.2% March.
6-06-03
Non-farm payrolls, May (8:30): -30K expected, -48K April
Unemployment, May (8:30): 6.1% expected, 6.0% April
Hourly earnings, May (8:30): 0.2% expected, 0.1% April
Average workweek, May (8:30): 34.2 expected, 34.0 April
Consumer credit, April (2:00): $2.2B expected, $0.9B March
SUBSCRIBERS QUESTION
Q: This market does not want to rest. What are the odds of a blow off top here?
A: Very timely question. The blow off top is something we cover in the seminars. In a nutshell, it occurs after a good run has already been logged. Then in a dramatic rise a stock (usually seen in individual stocks) shoots ballistically higher, sometimes adding as much as 50% in value as it runs straight up. The action is punctuated by a high volume session that is typically the highest volume of the entire move. What is happening is investor psychology gone wild. The stock has become a 'got to have' stock. A rush of late comers run in to buy it. It shoots higher. Volume surges as the early buyers sell to the new buyers; the smart money is using the high demand to unload the stock. Once the early buyers are gone, a big part of the demand for the stock is gone as well. It crashes as fast as it rises, often giving back the entire move.
Can it happen with the market overall? Any market can crash if it rallies too far with no real correction. Most recent example: 1999 when Nasdaq rallied 80% straight up. Are we there with this market? Some would say this is madness given PE ratios, the economy, lack of real capitulation. At this point, however, we don't see it there yet. More likely is another longer pullback other than a few sessions to consolidate the strong move. Probably not as deep and long as December to March, but it needs more rest, and we think it will happen here in June.
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:
Good movers Thursday: A few. ADVP; AETH; AMCC; BGEN; BIO; CELG; CHIR; HPOL; LGTO; MED; MRGE; OVTI; RHAT; RMBS; SCSS; SINA; STX; TALK; UTHR; WPI
New Plays: We already have a few biotechs and drugs on the report. Here are a few more solid ones.
Play Date: 06/05/2003
BMRN (Biomarin Pharmaceuticals--$13.32; +1.79; optionable): Drugs
http://biz.yahoo.com/p/b/bmrn.html
STATUS: Cup w/handle breakout. Thursday BMRN benefited from the drug and biotech buying, making the breakout from its 17-month cup with handle base. The long base shows solid 18 to 6 accumulation. The 2-month handle formed along the 50 day MVA (11.33), and it showed solid accumulation as well (3 to 1). The breakout was solid, and BMRN is still a buy at this point. After such a strong breakout it may test back early, and on a resumption of the move that would be a good entry point.
Volume: 1.594M Avg Volume: 758.5K
BUY POINT: $13.36 Volume=1.1M Target=$16.15 Stop=$12.42
POSITION: NUR JV - Oct. $12.50c (64 delta) &/or Stock
http://www.investmenthouse.com/ci/bmrn.html
Play Date: 06/05/2003
CRIS (Curis--$3.1; +0.47; no options): Biotechnology
http://biz.yahoo.com/p/c/cris.html
STATUS: Ascending Triangle. CRIS blasted from a 4-month flat base in April, consolidated, and then exploded higher to 3.25 in two sessions. It has spent the past 6 weeks forming the current triangle, using the 18 day MVA (2.62) as the support as it makes the series of higher and higher lows below the top of the pattern at 3.25. During the base accumulation is positive at 2 to 1 after a nice foundation was set in the 4-month flat base. We like the triangles that follow breakouts from bigger bases; it is a very good consolidation pattern that often leads to further stronger moves. Money flow is outstanding, and Thursday CRIS was up on the strongest shot of volume since the late April move. Looks ready for the breakout.
Volume: 1.796M Avg Volume: 766.454K
BUY POINT: $3.27 Volume=1.1M Target=$4.25 Stop=$2.98
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cris.html
Play Date: 06/05/2003
IDPH (Idec Pharmeceuticals--$40.94; +2.38; optionable): Biotechnology
http://biz.yahoo.com/p/i/idph.html
STATUS: Reverse head & shoulders. IDPH is moving higher after a breakout and test of its 6-month base. Accumulation in the base was solid at 7 up weeks on rising volume to 4 down weeks on rising volume. The breakout was on strong volume, the test on lower volume, and Thursday the move back up was on strong volume. This is exactly the price/volume action you want to see in a breakout. Thursday it was no doubt the beneficiary of the general love affair with biotechs, but we like that it can rally to the November high and hit our target. In other words, it does not have to break any new ground to give us our gain.
Volume: 8.49M Avg Volume: 3.982M
BUY POINT: $41.28 Volume=6M Target=$46.38 Stop=$38.39
POSITION: IDK JH - Oct. $40c (60 delta) &/or Stock
http://www.investmenthouse.com/ci/idph.html
End part 1 of 2
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world stock market
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