us stock market, stock prices

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Tech Traders 5/01/01 Update
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Technical Traders Subscribers:

ONLINE SEMINARS: Technical Analysis I starts tomorrow night!!

Live, interactive web seminars. We can and will jump to the web to look at web sites, view the market and after hours sessions on eSignal on the Wednesday evening and Friday morning courses, and we can pull up and review any chart you want to take a look at!

Choose your courses (package discounts available) and choose your times (Wednesday evenings, Friday mornings, and Saturday mornings).

For more details and to sign up:
http://www.investmenthouse.com/signup1.htm

THE PLAYS

Continuing Plays: RECN is holding steady in its shakeout, COLM, WLSN and GENZ continued adding to their breakouts. Several stocks look good: DISH is similar to AHAA, covered below), and AA, SONC, BGEN, JNPR and EDS all look good.

NVDA (Nvidia--$91.08; +7.78; optionable (RVU): Semiconductor
http://biz.yahoo.com/p/n/nvda.html
STATUS: Blasted up off a test of its breakout (previous high is 88) on strong volume (7.8 million; avg. 4.5 million) and closing just under the intraday high of 91.30. The stock is in a 3-day run off the 10 day MVA (currently at 80.28), and looks ready to tack more onto this strong move. Initial target: Reached it when it hit 90, but as stated previously, we are letting this one run. Strong money flow and good buying.
BUY POINT: A buy on the breakout up to 94.63 on continued strong volume. Stop loss: 84.70.
POSITION: Stock and/or June $85 calls to buy (RVU FQ).

AHAA (Alpha Indus--$24.79; +0.22; optionable (GAK): Semiconductor
http://biz.yahoo.com/p/a/ahaa.html
STATUS: Showing a perfect star doji in the consolidation above support (10 day MVA, tested on the low of 23.61). Volume continued to drop lower below average (591,200), and after the test of support, the stock looks ready to make a run for the April high (28.40). Target: 200 day MVA, 31.81. Reported good earnings after the bell.
BUY POINT: Aggressive: Up from here on stronger volume. Stop loss: 23.05.
POSITION: Stock and/or August $20 calls to buy (GAK HD).

A formerly covered stock:

TFX (Teleflex--$48.89; -0.02; no options): Conglomerates
http://biz.yahoo.com/p/t/tfx.html
STATUS: On the report last week. The stock appears to have tested (support at the 10 day, on the low of 47.52) and closed near the high of 49.01, showing a doji after a 2-day pullback. Volume shot up to 209,400 (avg. 112,000), so the stock looks ready to roll. Target: $55-57.
BUY POINT: Over 49.70 on continued strong volume. Stop loss: 46.22.
POSITION: Stock.

New:

VAR (Varian Medical--$68.88; -0.02; optionable (VAR): Scientific & Tech Instr
http://biz.yahoo.com/p/v/var.html
STATUS: Holding above support (10 day MVA, 65.97) in a tight 4-day lateral consolidation on steadily decreasing volume (144,700; avg. 191,181). Looks ready to explode up on a strong volume surge. The stock in is a kind of wedging pattern that has upper resistance at the 70 level (tapped 3 of the last 4 days). Target: $78-81. Looks a lot like TTWO did before it blasted off today.
BUY POINT: Aggressive: Up from here on volume of 258,000 or better. Stop loss: 64.06 (just under the 18 day MVA).
POSITION: Stock and/or August $65 calls to buy (VAR HM; low open interests).

Either/Or (depending on the market):

OEX (Standard & Poors 100--$655.55; +10.08; optionable (OEY):
STATUS: As noted in the summary, could go either way. At resistance (April high is 657.26) on lower volume, 1.16 million (avg. 1.2 million). That's a classic signal of a weak move, and if the market begins to sell, we will look at playing the index on a move down to the 50 day MVA (628.10). Otherwise, on a move over the April high on stronger volume, the stock is a potential upside play.
BUY POINT: Upside: Over 657.26 on average or better volume. Stop loss: 611.25.
Downside: Aggressive: On a move down from here (or from 657) on strong market selling.
BUY POINT: Upside: June $560 calls to buy (OEY FJ). Put: May $660 puts to buy (OEY QL); please check with your broker for deltas.

DJX (1/100 Dj Indu--$108.98; +1.63; optionable (DJV):
STATUS: Same as OEX. At resistance (just over 109), moving up on lower volume ((1.16 million; avg. 1.2 million). On a move back down from 109 in market selling, the stock can drop back to 106 for a quick and aggressive play. Below that is the 50 day MVA at the 103 level for a target in strong selling.
BUY POINT: Upside: Over 110 on volume in the range of 1.6 million or better. Stop loss: 102.30. Downside: On a move down from here (or 109) on stronger, selling volume.
POSITION: Upside: June $108 calls to buy (DJV FD); check with your broker for deltas in the morning. Put: June $110 puts to buy (DJV RF). Deltas unavailable at the time of this writing. Please check with your broker in the morning.

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THE SUMMARY
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TONIGHT:
- Stocks start weak and move higher midday in classic bullish action.
- Volume lighter overall, but key stocks breaking out on higher volume.
- Is this the beginning of the bull or the end of the bear?
- Manufacturing still slumping, auto sales weaker, but construction remains strong.
- Subscriber Questions.
- Team Trades.

The indexes showed a classic bullish pattern today: flat to lower open, some indecision or softness early on, and then a solid, steady rise on through the close. The action was most pronounced on the Nasdaq where that index opened lower, tested the 50 day MVA (2083.03) in the first hour, and broke over its opening price 2.5 hours later. That set the foundation for a rally that lasted the rest of the session. As the session wore on, the rally became more entrenched. Very positive price action.

Volume lower.

Volume on the Nasdaq and the NYSE contracted on the gains as the indexes continue to show mixed price and volume action. Overall the Nasdaq and NYSE showed good price/volume action as the rally began. Over the past week there has been some weakening of that action as the Nasdaq showed two very mild distribution days as the index moved sideways on below average volume. It then showed accumulation on Monday as the Dow and S&P 500 sold off on higher, though still below average volume.

The low volume has been livable while the Nasdaq moved sideways, but now that it is trying to break over the recent high at 2202.86, it has to have some institutions start into some serious buying; otherwise it will run into trouble at that resistance point. Likewise for the Dow as it moves up to its most serious level of resistance, the 11,000 level. It needs buyers at that point. Volume the past week on this move up has dropped. Likewise on the Nasdaq. The S&P 500 is at resistance right now and it too has made it to that level on low volume. Without institutions stepping up to the plate they will have difficulty.

Some continuing good signs: key, quality stocks continue to break out of some good bases. Today we saw THQI and TTWO explode out of bases. NVDA raced ahead again on climbing volume after successfully testing its breakout. ACS shot higher on heavy volume, extending its breakout as did WLSN. There are several more solid bases in waiting (e.g., EDS, EBAY), and other stocks testing the breakout and preparing for another move (KMP, SONC, etc.), consolidating after breaking support (e.g., SEBL) or moving up over key resistance (e.g., BRCD, MERQ). There is a lot of action occurring on very solid volume as institutions move into stocks as they breakout of sound bases or clear resistance. In the absence of overall volume as the Nasdaq tries to move higher out of this low volume consolidation, these stocks look to be the predecessors of a more intense move up just as we were seeing the Nasdaq 100 stocks lead the moves down before the overall market started to tank

Where do we stand right now?

We have talked of bear markets and how they tend to proceed. They tend to move in patterns just as stocks tend to move in patterns: shorter have two legs, longer have three legs. The move out is often preceded by a sharp rally and then one final plunge lower. We have brought this up during the past month in order to keep us hones and to not let our emotions get carried away. After a 12-month bear market, the first real rally that appears to have some legs can turn into another test of the lows.

But, as we have also been emphasizing each night in each report, you have to invest with your head based on what the market is showing you now. If the numbers are there you take positions on the leading stocks as they make their moves. To hold back fearing a potential fall is not investing with your head but based on emotion that 12 months of bear market engrained. We have been seeing the moves in stocks such as NVDA, GENZ, ACS, THQI, TTWO, WLSN, etc., and that means it is time to get in. Fearing a bull trap (where the bulls get caught in a final test of the lows) and thus not entering investments when the signals are there is like forever putting off buying a computer because they are only going to get faster and cheaper.

The on again, off again volume we have seen the past week is a signal of potential trouble after a good start higher in early April. We have said for the past week that when the indexes started to move out of the consolidation (the Nasdaq in particular), it needed to come on strong volume. It has not yet, though Monday's move was not bad. The leaders are putting up good volumes; the rest of the market has to follow. At this point that is the one factor that has started to erode, but it is one of the most important.

So, as the indexes approach resistance (the Dow and S&P 500 are there while the Nasdaq is trying to take on an interim top), if they do not make a convincing break on high volume they could, and we repeat could, start to roll over. Both the NYSE (Dow and S&P 500) and the Nasdaq have shown two very mild distribution days each the past week as the first signs of trouble on this move. If they reverse at resistance on higher volume, then we have to take action in closing out short term positions and seeing where this thing shakes out. That does NOT mean the rally will be over, but that would be the third distribution day in a week; that is a danger sign and it is best to view that from the sidelines if you are interested in bullish positions if it starts to slide on higher volume. The indexes have NOT done that yet so don't get in a panic. Just keep an eye on volumes and know the resistance levels in the indexes and in the stocks you own. Take action as necessary if you see a reversal off the intraday highs on high volume. If we see that we will close out our short term positions and then assess our longer term ones. That is the cost of stepping in when the numbers show you it is time; you have to be ready to step back out if the numbers start to show there is more selling coming. With stocks such as GENZ, NVDA, WLSN and the like, we believe it is worth it; otherwise we would just be watching and wishing.

THE ECONOMY

The NAPM was higher than last month (43.2), but lower than expectations (44). Manufacturing improved for the second month, but it is still far from expanding; it is contracting at a slower rate. Now that is a confidence builder. New orders were up a hair as was production, while exports were lower and employment was down for the seventh month in a row to 38.1. That along with the weekly jobless claims show where all of that confidence has gone.

Autos were down double digits, coming in weaker than expected. It just seemed implausible that they would maintain the record pace given the tremendous surge in jobless claims and the very low confidence. This is one of the sectors that was showing strength, and now it is fading. That leaves housing and construction.

Construction spending rose a higher than expected 1.3% when it was expected to rise a mere 0.2% as compared to the previous month's 0.9% gain (revised up from 0.6%). As noted, this is one of the holdouts in the economy; indeed, it is a major holdout. If businesses and individuals are still willing to commit dollars to longer term projects, the view toward the future must be decent. Indeed, this will positively impact the first quarter GDP number when it is factored in.

FFF contract. Now that we are 14 days away from the May 15 FOMC meeting, we can start looking at the futures contracts for an idea of what it is showing us. Right now there is a 50% factor built in for a 50 basis point cut on 5-15. The 25 basis points is a lock. After that, the June contract is pricing in another 25 basis points at that meeting. That is too far away right now for this to be accurate. As we move inside 10 to 12 days before the May meeting, however, the contract is very accurate. We will see how it responds moving forward. We think there will be another 50 basis points at this juncture. There is still too much weakness in manufacturing and in the consumer, and jobless claims continue to rise. Moreover, energy prices remain very strong. That is just too much strain on a recovering economy. Thus we feel the Fed will slice another 50 basis points off and then kick back and see how it goes from there.

Tax cut. Well, it is not what anyone wanted, but that is often the sign of the best compromise: when no one leaves the table happy the deal was a true compromise. Unfortunately it was not sold as an upfront economic relief package so some real good could come of it right now. Still, it is an insurance policy for the future as lower marginal rates are a good start. If we can later (in a year) add a slash in the capital gains rate to say 0%, that would be a real legacy for our children and grandchildren. We will have helped ensure prosperity to come. The market liked it, and that was one of the catalysts for the move. It could have been more; it could have been less.

End Part 1 of 2

us stock market
stock prices