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world stock market, us stock market
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5/02/01 Investment House Daily
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Investment House Daily Subscribers:
TONIGHT:
- Nasdaq gaps over resistance, tests it, and the powers ahead.
- Dow and S&P tread water on the close, but moved well of intraday tests of lows.
- Volume solid all around, and that is good because there is key resistance ahead.
- Economic numbers help the market as they show the good and the bad again.
- Team Trades.
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THE SUMMARY
Nasdaq delivers a strong day.
The techs have not given up yet. Volume jumped today as the index gapped over interim resistance and powered ahead. It faded in the last hour as sellers came in, but then recovered over 12 points in the last 15 minutes as buyers used the selling to enter even more positions. It was not all roses, however, as the index opened 37 points higher but fell 30 points from that open to test 2175. That level roughly matches the recent top in April, and it was enough to send the index sharply higher on a 57 point run to the high before some late profit taking. Volume surged 34% on the rally. A very nice day of positive price and volume action. It still did not take out 2250, however, and that keeps us alert.
Dow and S&P 500 churn on higher volume.
The Dow was looking decent, opening higher, but then it quickly fell off the table. It found support at 10,800 (above 10,750), and rallied positive again. The late selling took it negative, and though it tried to bounce, it had too far to come. Thus it was down 0.2% on higher volume. The S&P 500 sported similar action, and it was just able to crawl positive on the close. Both the Down and the big caps, however, were unable to put a dent in resistance at 11,028 and 1270, respectively. They were getting close and volume was up, but they churned right at that level. That means buyers and sellers were evenly matched, neither one able to get the upper hand.
We wanted to see the big volume punch it through resistance, not churn at resistance. The doji's on the candlesticks right at resistance coupled with the higher volume session indicate a possible pullback to once again test some lows before another shot back up. We do find it encouraging that they both fought there way back up to resistance at the close. Now we have to play the game again with them as to whether they can finally push on through or pullback for a session or two.
Volume very solid.
Volume was solid as noted. On the Nasdaq it was good volume, i.e., strong volume coupled with a solid move higher. On the Dow and S&P it is not as clear. It is good they were able to fight up off of the lows and close in the upper half of the day's trading range. It was bad the high volume tested resistance and failed to get through. That can lead to further selling, and thus we will continue to look at DJX and OEX downside plays for aggressive trades. We had them today intraday, and they could provide us a full day or two after what we saw on the charts today.
The strong volume is what is needed to break resistance. But, it needs to be upside volume. It was on the Nasdaq today, but on the NYSE up and down volume was evenly matched. It showed how the buyers and sellers had lined up one against the other in a standoff. It truly was a churn on the NYSE today.
THE ECONOMY
Some big numbers hit the market today with positive impacts, but some are once again being misread.
Factory orders jumped 1.8% (1.4% expected) in March while February orders were revised up to a -0.1% drop versus -0.4% originally reported. The big jump as with durable goods orders, was in transportation, up 24.8%. Without that component, orders fell 1.2% as electronics, factory machinery and non-durable goods fell. Still, orders were up; the work was done. That contributes to the economy.
The Fed Beige Book came out and it was very subdued about the economy. It noted that almost all districts reported a slow pace of economic activity. The Fed also cited layoffs still being a problem and was thus not so worried about any wage pressures. It further mentioned how energy prices continue to increase. Here is where some are taking their eye off the ball. Just as in October when Greenspan voiced concern over higher energy prices, he was not saying they were inflationary, but that they would negatively impact consumer demand. That is what the Fed is saying here: higher energy costs are acting as a tax on the consumer and the economy, not that they will spark inflation. It is GOOD that the Fed is noting this; maybe others in our government will do the same and drop some of the ridiculous fuel taxes we are suffering. This sentiment was echoed by Fed governor Perry who talked today about his concern over energy prices impacting the economy's ability to recover. This was a very concerned Fed, and as we said, the Fed is going to keep dropping rates until the U.S. is well into recovery and the chairman's reputation is saved. By the way, the market read it right and moved higher when the report was released.
Speaking of energy, the API reported rising inventories of gasoline and crude oil. That sent both of those prices down a bit. The reason for the loosening in supply is that they are completing the switch from heating oil production to gasoline. It always takes some time and this year the problems were exacerbated by the posturing we had last summer and fall with OPEC and the west. That has been resolved, but it caused ripples in the refining process as refiners' schedules were disrupted, and those ripples continue to work through the economy. There would have been no capacity problem if there had been no saber rattling. Refiners are lean, but there are enough plants to meet demand without outside forces at work. No refiner wants idle plants; that is poorly spent money. When the world governments start trading barbs that interrupts supply and schedules, and it takes awhile for it to work through the economy. We pay for that.
Last night we talked of more tax relief, specifically capital gains, on the way, and today a bill was introduced reducing the holding period to 6 months from one year and excluding 50% of the gains from the tax. It is a good start. It needs to have no holding period and 100% exclusion and effective now. That would take care of helping the investment dearth right now. Today.
THE MARKET
Overall market stats:
VIX: 27.77; +0.18. Volatility was up and down with the S&P today, but it closed flat as did the index. Again, it is not showing us much now, but could be indicating some selling when coupled with the price and volume action at resistance we saw today.
VXN: 63.90; -1.56. Continues to fall on the Nasdaq's rise. Not unexpected, and indicates a possible pause at resistance at 2250 on the Nasdaq.
Put/Call ratio (CBOE): 0.55; -0.09. Total option activity rose to 1.558 million (1.055 million Tuesday).
NASDAQ: Rallied on solid volume, and the index surged midday after pulling back to almost flat. Good bullish action.
Stats: Up 52.36 points (+2.4%) to close at 2220.60. Another solid 2% gain.
Volume: 2.582 billion shares (+34%). A giant, above average volume move as up volume came in at 1.878 billion shares (almost all of Tuesday's volume) and down shares came in at 519 million. Strong price/volume action on a good upside move.
A/D and Hi/Lo: Advancing issues increased the lead a bit, 1.63 to 1 (1.56 to 1 Tuesday). New highs rose to 157 (+37) while new lows fell to 19 (-9).
The Chart: http://www.investmenthouse.com/cd/$compq.html
Volume matched the good price action (had good price action but no volume Tuesday) as the Nasdaq gapped over the April interim high (2202.86), tested the closing prices, and then rambled back up. Some late selling took a bit of luster off a great day, but the index was moving higher when the closing bell rang. This action was mirrored by the stocks leading the charge: high volume and strong moves over resistance. The Nasdaq has to deal with 2250, but it appears to be building strength with this very impressive move today.
Dow/NYSE: The Dow made a run at resistance, but could not take it out. Some work still to do, but the Dow has been good at head fakes all spring; it looks dead and then just runs up.
Stats: Down 21.66 points (-0.2%) to close at 10,876.68.
Volume: NYSE volume jumped on the action to 1.345 billion shares (+13.8%). A third day of distribution on the Dow as it was unable to break resistance. It tried to make a good show of it but failed. Up volume was 684 million to 649 million on the downside. That shows the standoff at resistance, and this very likely means some weakness as the buyers could not assert themselves on the high volume and take out resistance.
A/D and Hi/Lo: Advancing issues still led, but by just 52 (1.03 to 1; 1.6 to 1 Tuesday). New highs fell to 105 (-8) as new lows fell to 13 (-3).
The Chart: http://www.investmenthouse.com/cd/$dja.html
Again, unable to break resistance at 11,028 (10,939.20 on the high), the Dow shrank back to close negative on higher, above average NYSE volume. Today was more of a classic reversal signal, though the fact that it tried to make a run back up late in the session belies some of the negative aspects. It finished the last hour heading mainly lower, and we may see that carry over into tomorrow's action. We would prefer another run at 11,000 first to see if it will fail again, but man, you cannot have a perfect world. Today's churning on higher volume may send it back down now to the 200 day MVA (10,616.37) or on down to 10,500 to 10,400. When an index fails to break over resistance and turns on higher volume, it usually seeks the next lower strong support level. The Dow has surprised us time and again this year, but we have to look at the numbers, especially with short term positions. We are looking at DJX options still for a further move down.
S&P 500: The big caps fought back to positive on the close, making it a technical positive day with a 'gain' in price on rising NYSE volume. But as we saw with the Dow, that is semantics; it churned at resistance (1270) after trading at a high of 1272.93. It went nowhere basically as the buyers and sellers duked it out. It is sitting right on top of previous closing tops in late February and early March, but it cannot take out that intraday high at 1272.76 on February 27 just yet. It may need to retest the 10 day MVA (1240.00) or the 50 day MVA (1220.19) before trying again, but we would not be surprised if it held at the recent top (1253.69) and rallied from there. Again, however, there have been three distribution days, i.e., where the sellers are selling in higher volume. We need to take care of short term positions and watch for further selling on high volume in our longer term big cap positions. This is one we are looking at for a downside play on further selling.
Stats: Up 0.99 points (0.08%) to close at 1267.43.
Volume: NYSE volume rose 1.345 billion shares (+13.8%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Jobless claims before the open and then NAPM services at 10:00. The big number is jobless claims, and then the employment report on Friday. Jobless claims topped 400,000 last week, and there seems to be no near term end in sight. What we are looking for now is where they top out. A lower number would be a relief, but that won't change the 4-week moving average's march higher.
As for impact on the market we don't think it will be much. After all, the market seemed to like the Fed's Beige Book, although that was more because the Fed seemed to be continuing to openly recognize the slowing economy and the need to protect against further deterioration. Actual bad numbers are always more sobering.
The Dow and S&P 500 will tell the more interesting story tomorrow from our point of view, though the Nasdaq is still very much in the center of the fray. The Dow and S&P 500 churned at resistance today; the key will be whether they pullback on lighter volume or heavier volume, or do one of the classic reversals of late and jump right over resistance. Today the buyers and sellers fought to a standstill on the NYSE, Dow and S&P; either one could take the lead. With three distribution days in the past seven days, we MUST be on the watch as to whether our short term plays hit resistance (or did today) and start to fall. It is still too early to just forget about them. We will utilize stop rules and protect gains if we have to.
The Nasdaq showed a lot of power today with many big names moving up on strong volume. Cisco was given the nod as the reason, but the move was widespread. Moreover, note that the Nasdaq 100 was up just 43 points to the overall Nasdaq gain of 52 points; the big names were not the only movers. The Nasdaq has to break over 2250 in our book, and it needs to do it on continued above average volume. If it does it, 2500 and 2750 are well within sight.
We cannot, however, just think things are just perfect. It does have to crack over 2250 where it bounced up from in December and January and then tried to hold in February and March but failed. If it powers up above 2250 and reverses on high volume, we may need to take care of positions Friday; we are going to follow our short term positions with trailing stop losses just to be careful. We have some good gains, why risk them if the Nasdaq needs more of a breather after a 30+% move?
Again we are looking at the breakouts, the tests of breakouts, and the momentum plays such as stock splits. The list of breakouts from the plays we have been following is impressive. We go over that to be sure just what the market is telling us. For the vast majority the breakouts have been holding, and that is a good sign. Still, on short term plays, if they have hit our target and start to get weak, we prefer to bank the gain. Longer term we may do the same thing if we just are not sure. It is always a good rule to bank it if you are not certain if you would want to enter the trade at the point it is now if the price/volume action is getting a bit questionable.
Support and Resistance Levels
Nasdaq: Closed at 2220.60.
Resistance: 2250. After that we are upping resistance levels to 2500 based on the strength of today's move.
Support: 2202 (interim highs in April). The 50 day MVA and 10 day MVA have converged at 2088.42. After that, 2000.
S&P 500: Closed at 1267.43.
Resistance: 1270.
Support: The 10 day MVA is at 1240.04. 1233.96. The 18 day MVA is 1222.04. The 50 day MVA is at 1220.19.
Dow: Closed at 10,876.68.
Resistance: Real congestion remains from 10,750 to 10,900. Then 11,028.
Support: 10,700 the previous April top, may act as some support on any selling. The 200 day MVA and the 10 day MVA are converging still (10,616.37 and 10,667.28, respectively). That may prove to be support, but after that it may be 10,500 (18 day MVA is at 10,498.56) or 10,400 if this distribution we have seen picks up steam.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
4-30-01
Personal Income, March (8:30): 0.5% actual versus 0.5% expected and 0.3% prior.
PCE, March (8:30): 0.3% actual versus 0.2% expected and 0.3% prior.
Chicago PMI, April (10:00): 38.9 actual versus 40.0 expected and 35.0 prior.
5-01-01
Auto Sales, April (0:00): 6.4M versus 6.4M prior.
Truck Sales, April (0:00): 7.5M versus 7.7M prior.
Construction Spending, March (10:00): 1.3% actual versus 0.2% expected and 0.9% prior (revised from 0.6%).
NAPM Index, April (10:00): 43.2 actual versus 44.0 expected and 43.1 prior.
5-02-01
Factory Orders, March (10:00): +1.8% versus 1.4% expected and -0.1% prior (revised from -0.4%).
5-03-01
Initial Claims, 4/28 (8:30): 390K versus 408K prior.
NAPM Services, April (10:00): 50.2 versus 50.3 prior.
5-04-01
Nonfarm Payrolls, April (8:30): 25K versus -86K
Unemployment, April (8:30): 4.4% versus 4.3% prior.
Hourly Earnings, April (8:30): 0.3% versus 0.4% prior.
Average Workwee, April (8:30): 34.2 versus 34.3 prior.
End Part 1 of 2
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world stock market
us stock market
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