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us stock market, stock share
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7/21/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: ACS; ONXX
Trailing stops issued: NENG; HTCH; APOL; STX
Stop alerts issued: PGNX; SIGM
MARKET SUMMARY
Relief bounce in need of relief.
Friday the indexes bounced up from the prior selling but they did it on low volume. That volume indicated no real buyside push, just a bounce off support from the selling. Without buyers ready to step in with force yet the market turned right back down Monday with SP500 and DJ30 testing and hold near support and doing so on even lower volume. As with low volume buying, low volume selling shows a lack of commitment. That is what you want to see as stocks pullback and consolidate gains as that shows there are not many sellers, indeed not many participants overall. That means most of the players with the big money are still sitting and waiting for the next opportunity arises. Without share dumping you would anticipate that next opportunity to be to the upside unless the selling increases its pace significantly.
There were a few intraday rally attempts, but they found no real sponsorship, i.e., the waters were tested by some, but others were not taking the bait and following. The market would then fade back more on a lack of buyers than a surge of sellers. In the end the large cap indexes were resting just over near support. Nasdaq continued to lead the selling and broke through its 18 day MVA on the close. Nasdaq had led to the upside, however, had more to consolidate, and is doing just that. It is holding near the mid-June highs but that is tentative support. After all is said, the market is still consolidating its prior gains, holding support on lower volume as it does.
THE ECONOMY
Leading indicators for June rise 0.1%.
Lower than the 0.2% expected and much lower than the May 1.1% gain, but it was still a positive number and that indicates that there is still upside momentum 5 to 6 months down the road. Of course, everyone has been looking 'down the road' for the past three years in hope that recovery would be right around the corner. In the report 4 of the 6 indicators rose sufficiently to give the 0.1% overall gain. Importantly, the stock market rise was one of those factors. The Conference Board that puts the indicator together says that a rising stock market translates into consumer spending and that should help fuel the further recovery. Here they go again, citing the consumer as the key to the recovery. As noted over and over, the consumer has been more or less solid through a recession led by the business side. Thus banking on a recovery due to more consumer spending is like betting on a horse in a dog race; the horse is not even there to bet on.
THE MARKET
It was more of the same story: large cap DJ30 and SP500 sold on lighter volume but held the near support once again, thus continuing a nice consolidation. Nasdaq and the smaller caps sold harder, breaking below near support, also on lighter volume; after all, they ran up harder and faster, and as usual, the strongest runners dip harder as well when stocks start to pull back.
It was not the exact story, however. While the NYSE again sold on strong downside breadth, Nasdaq breadth improved. It was hardly a positive, but we like to take a look at internal cues to see if there is any momentum change. The Nasdaq breadth indicates that it was the large tech names that were selling as opposed all technology stocks. That indicates that though the large Nasdaq stocks that account for the index moves are selling harder, it is not epidemic among tech stocks. In other words, even though Nasdaq broke below the 18 day MVA on the close, not all Nasdaq stocks were breaking near support as well. A small observation at this juncture, but a signal that Nasdaq may find support without a more significant correction.
Indeed many stocks are performing much as are DJ30 and SP500, i.e., not breaking down but pulling back and forming new shallow bases as they consolidate gains and move more or less laterally. There are individual breakdowns on earnings news, but that is not tanking the rest of the market just as individual upside stories are not rallying the market higher. The majority of stocks are in consolidation mode, trying to put together new bases after strong moves up into mid-June. For now the lower volume moves are a positive building process. We say for now because consolidations are only as good as the action. If stocks start breaking through support on volume, particularly strong stocks, that is always trouble. Thus far they are putting together very decent consolidations overall with many stocks still setting up very nice patterns with the potential for good upside moves.
Market Sentiment
VIX: 22.12; +0.76
VXN: 33.07; -0.34
Put/Call Ratio (CBOE): 0.81; +0.20. Put/call ratio jumps back up on the next round of selling just as it did Wednesday. Still not at the upper 90's where it has shown short term bounces during this run higher as Nasdaq looks to pullback more and that would help push it up yet again.
Nasdaq
More hefty price selling as the large cap Nasdaq stocks sold thru the 18 day MVA to the mid-June tops. Still has more work to do before it is ready to set up a good next run.
Stats: -27.09 points (-1.59%) to close at 1681.41
Volume: 1.467B (-8.67%). Lighter volume on the selling indicating no buying interest and no surge in selling.
Up Volume: 363M (-670M)
Down Volume: 1.093B (+534M)
A/D and Hi/Lo: Decliners led 1.97 to 1. Lighter than recent selling sessions, this indicates there is some firming up as the index tests lower. It is not much to hang your hat on, just something to note as the move progresses.
Previous Session: Advancers led 1.42 to 1
New Highs: 124 (+18)
New Lows: 11 (0)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq failed to hold the 18 day MVA but did find some support at the mid-June closing high (1677). The selling was led by the big names that move the index, but Nasdaq still has more work to do as it works to consolidate the sharp move up in early July as it was not able to put together a bounce up off of the Friday doji over the 18 day MVA. It needs to start flattening out the pullback along the lines of DJ30 and SP500 after this initial push down takes back some of that 150 point run earlier in the month. It has given back roughly half of the move and the early June closing highs at 1650 would be a good place to start flattening out. The 50 day MVA (1627) is a good backstop for that level.
S&P 500/NYSE
Continues the consolidation, working over the 50 day MVA on volume that started to back off.
Stats: -14.52 points (-1.46%) to close at 978.8
NYSE Volume: 1.208B (-10.55%). Volume was down Friday and it fell even further Monday as the market sold. That is what you want for a market that is working in a consolidation, and it is better action after SP500 was selling on some rising volume Tuesday and Wednesday last week.
Up Volume: 253M (-846M)
Down Volume: 955M (+701M)
A/D and Hi/Lo: Decliners led 2.92 to 1. Still some heavy downside breadth that is outpacing upside breadth. The decline in small and mid-caps is showing up in the breadth numbers after they helped push the numbers higher while they were advancing.
Previous Session: Advancers led 2.1 to 1
New Highs: 63 (+2)
New Lows: 26 (+11)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Stalled at the 18 day MVA (990.84) Friday on the lower volume bounce, and had no stomach to push higher. Large caps fell back, tapping the 50 day MVA on the low and bouncing slightly at the close. The move tested price support at 975 as well as the 50 day (971.60) as SP500 continues to move laterally between 975 and 1015. The pattern is not that pretty with a double top trying to form, but if the price/volume action continues to improve (down on down days, up on up days) the index has a better chance of holding. Right now it is doing what it needs to do, and we just need to be patient and let it work.
DJ30:
Stats: -91.46 points (-1%) to close at 9096.69
Volume: 1.208B (-10.55%)
DJ30 again held up the best, aided by strong gains from MMM on its earnings report (+6.17) even as MRK fell to the 50 day MVA (-1.95). Similar to SP500 the blue chips continue to work laterally over near support at 9000 while holding thus far easily above the 50 day MVA (8954). As noted over the weekend, this consolidation started while Nasdaq was making its early July run. It was a laggard at the time, and now it appears to be ahead of its time as Nasdaq is struggling to make the July breakout stock as it falls back to test the early June highs. DJ30 needs to continue the same lateral action and build the foundation for the next move higher.
TUESDAY
Light on the economic data, heavy on earnings as most of the SP500 will have reported by the end of the week. Earnings are helping specific stocks and hurting specific stocks while the overall market is sliding but not tanking. After hours Monday some earnings from TXN was helping buck the downtrend along with NVLS and ALTR, all in the chip sector and all with decent earnings. The market has yet to respond overall to earnings reports though Nasdaq has been selling harder than others most likely because it rallied upside harder than others.
With Nasdaq falling through the 18 day MVA, the odds of a rapid bounce faded. Still there were some buyers moving in over the last hour to test the waters, though not in significant numbers as volume was not racing higher as they did. There could be an attempt to rally on the TXN earnings news, but Nasdaq is not in real position to mount any sustained move and the other indexes could use more time as well.
This does not mean things are falling apart. Many stocks are forming their own nice consolidations or bases as they too work laterally and slightly lower. Some are just starting to pullback while many others are well into building solid bases. Many are already there and may break higher on their own. We will continue to look at those a potential new leaders as they are moving ahead of other stocks, but we also will be conservative moving into those as the best buying is when the rest of the market sets up as well after the near term sellers are shaken out during the consolidation. The point is that many stocks continue to look just fine even as they work laterally. Several plays have fallen into consolidations of their own, and we have been paring those positions in favor of others that are ready to make their move now as opposed to riding through a longer consolidation.
Tuesday we will be wary of any move higher overall as the market as a whole is not ready for an extended move. As with Monday there will be stocks that break out of some great patterns on great volume. We will focus on those as we let the rest of the market work through its consolidation. It is important to note that stocks overall are not breaking down to the downside, but are moving into consolidations that could last several weeks. This is what the market did on its move up off the October low and it is something we wanted the market to continue.
The timing is a bit awkward; a lateral move for 4 weeks takes the market into August. From there it could post another rally but then has to deal with the traditionally weak September and October. We will keep that in mind, but as always we will let the market show us when the moves are ready as we will see early leaders start to breakout of nice bases on strong volume. Until then we will look for those that breakout on strong volume and at the same time tend to positions that are basing. Some we will be content to let base, particularly those that have already made us a nice gain that we have taken and additional positions are working on their next bases. When they do breakout, we move in with more positions and further build our position with money the stock has already made us. That is how we built into MSFT, DELL, CSCO in the 1980's and 1990's, EBAY in the late 1990's and again the past year, TSCO over the last two years, etc. The idea is to take gains in these in option play sand some stock plays, then let the rest work for you and build to the next breakout where we buy in yet again. That way we focus on the winners and winnow out the others that cannot hold their moves.
Support and Resistance
Nasdaq: Closed at 1681.42
Resistance: The 18 day MVA (1696). 1700 (Feb 2002 low). 1760 (May 2002). 1800.
Support: 1685 (June intraday high) and June closing highs (1677 to 1645). The exponential 50 day MVA (1627). 1600 to 1595 (June 2002 closing high). The mid-May high (1554).
S&P 500: Closed at 978.80
Resistance: The 18 day MVA (990). 1003, the early June closing high. June closing high at 1011. The June intraday high at 1015. Then 1050.
Support: 975 (December 1997 peak). The 50 day MVA (971) and 965 (August 2002 peak). The mid-May high (948) and 935 (November and January peaks).
Dow: Closed at 9096.69
Resistance: 9236, the early June intraday high to 9250. 9352, the June high. 9500 (June 2002 lows).
Support: The 18 day MVA (9108) is not totally broken. 9000 is some psychological and price support that has held previously. 8980 is the neckline in the short head and shoulders pattern. The 50 day MVA (8955). January high (8870). The mid-May high at 8743
Economic Calendar
7-21-03
Leading economic indicators, June (10:00): 0.1% actual, 0.2% expected, 1.1% May.
7-24-03
Intial jobless claims (8:30): 415K expected, 412K prior.
7-25-03
Durable goods orders, June (8:30): 1.2% expected, -0.4% May.
Existing home sales, June (10:00): 6.00M expected, 5.92M May.
New home sales, June (10:00): 1.111M expected, 1.157M May.
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 Monday: ACS; ONXX; RINO
New Plays:
Downside:
Play Date: 07/21/2003
FLS (Flowserve--$17.1; -2.08; optionable): Manufacturing
http://biz.yahoo.com/p/f/fls.html
STATUS: Put. FLS crashed through the 50 day MVA (18.18) Monday on soaring volume ahead of its Tuesday earnings announcement. The stock fell out of a flat 7 week base in the process. We are looking for it to test up toward 18 before the announcement, and want to catch it on the fall back down from there.
Volume: 1.482M Avg Volume: 354K
BUY POINT: Test of 18 then $17.25 on the way back down. Volume=525K Target=$14.45 Stop=$18.45
POSITION: FLS UW - Sept. $17.50p (-52 delta)
http://www.investmenthouse.com/ci/fls.html
Upside:
Play Date: 07/21/2003
CELL (Brightpoint--$17.74; +2.37; no options): Wholesale electronics
http://biz.yahoo.com/p/c/cell.html
STATUS: Cup w/handle breakout. CELL is blasting out of a 4 month cup with handle base on a strong volume as a court dismissed all shareholder lawsuits. Accumulation in the base is a solid 5 to 2 (5 up price weeks on rising volume to 2 down price weeks on rising volume). Earnings are out Monday July 28, but we really like the move ahead of the news. We will look at partial positions from here and then on any test of 16 that holds and rebounds.
Volume: 449.916K Avg Volume: 138.954K
BUY POINT: $17.88 Volume=225K Target=$21.45 Stop=$16.63
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cell.html
Play Date: 07/21/2003
MDCC (Molecular Devices--$17.48; +1.05; optionable): Scientific & technical instruments
http://biz.yahoo.com/p/m/mdcc.html
STATUS: Cup w/handle. MDCC reported solid earnings Friday and Monday received a big upgrade. That news has surged volume the last two sessions and is pushing MDCC toward a breakout from its 8 month cup with handle base. Accumulation in the base is an excellent 10 to 4 (10 up weeks on rising volume to 4 down weeks on rising volume) with surging money flow showing a strong positive divergence (higher at this price than it was at a higher price in December). It closed off the high Monday (18.22), but the base is solid. Just being patient and letting MDCC provide the breakout that sticks to the close.
Volume: 364.789K Avg Volume: 134.772K
BUY POINT: $18.35 Volume=275K Target=$22.12 Stop=$16.96
POSITION: MCQ JW - Oct. $17.50c (54 delta) &/or Stock
http://www.investmenthouse.com/ci/mdcc.html
End part 1 of 2
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