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us stock market, trade stock
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7/28/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: ATYT
Buy alerts issued: AMEV; NTN
Trailing stops issued: None issued
Stop alerts issued: None issued
Stocks continue to muddle through earnings season.
Foreign markets were up as much as 2% when US stocks opened for trade, but there was absolutely no enthusiasm for equities even with another round of better than expected earnings before the open. At the same time there was no enthusiasm for selling them either as the indexes fought to a standoff at the close. Fought is the wrong word. It implies a pitched battle. While the indexes did move back and forth with the regularity of a tennis volley there was no pitched battle. There was a definite lack of enthusiasm as they slogged up and down and finished mostly flat.
Indeed, if not for a solid showing from small caps, chips, and wireless, the usual suspects in a tech rally, the close would have been all red. Again, even that would not have been anything bad as volume was extremely light and the A/D line was flat to modestly positive. It was good to see the small caps back on board, but we hesitate to call them leaders Monday simply because good manners dictate we do not embarrass any particular group. In other words, being a leader Monday is not much of a compliment.
There were some solid individual moves, however, something typical even in consolidations. While not many, we did snag some positions that were making good moves with good trade. Nothing major, just opening positions and positioning ourselves for the next move higher when the consolidation is over.
THE MARKET
Thus far that is exactly what the market is showing, i.e., a consolidation in a narrow range as volume mostly goes on holiday. Earnings have come and are still coming, and while much of the results have been better than expected, it has not been enough to send the indexes higher. It is an individual story. If the news is very good stocks benefit a lot. If it is a miss or, and we hate to say it, the 'whisper' was for more than what was reported, the stock gets the wood put to it. Everything else kind of mills around within the range with those exceptions that just build their bases and breakout on their own timetable. Those are the stocks worth watching and the ones we continue to focus on.
So, we have a market that remains in its consolidation with Nasdaq finding some new intraday resistance at 1640 and DJ30 unable to clear the top of its range that it threatened Friday (though on low volume). The action leads some to argue that the move has met its end. The nuts and bolts of the move, e.g., price/volume, leadership) do not suggest that is the case. Volume was even lower than Friday, indicating that there was no real accumulation on Nasdaq and no distribution on SP500 and DJ30. Just more of the summertime consolidation that has taken hold. That is not a bad thing at all, and indeed, it is the best thing the market could do for the longer term. For now the action remains healthy overall as the market attempts to get back into the rally and consolidate, rally and consolidate mode. That provides for solid foundations for further gains as leaders build their bases and then breakout to lead things higher.
Market Sentiment
As one subscriber put it, the VIX is now a teenager. That puts a good name on it as it has worked in the low twenties for months. More on this in subscriber questions
VIX: 19.93; -0.01
VXN: 30.4; +0.36
Put/Call Ratio (CBOE): 0.68; +0.01
Nasdaq
With chips, networkers and wireless stocks leading the overall tech index posted a lower volume gain. No resistance broken, no major changes.
Stats: +4.66 points (+0.27%) to close at 1735.36
Volume: 1.542B (-3.02%). Further below average on the gain, a sign there was no accumulation. Volume remains subdued in a more summer-like manner.
Up Volume: 899M (-126M)
Down Volume: 560M (+9M)
A/D and Hi/Lo: Advancers led 1.55 to 1. Much better than NYSE, but still no sign of strength. With the action, none was expected.
Previous Session: Advancers led 1.41 to 1
New Highs: 250 (+65). New highs still managed to put in a good show.
New Lows: 11 (+1)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped higher and ended up just a shade higher from there as Nasdaq found intraday resistance at 1740. It traded in a narrow range all session, unable to make serious headway even though chip stocks were noticeably stronger. Nasdaq tested the range lows (1685 to 1677) last week and has moved back into the middle of the move and below the consolidation high at 1776.
S&P 500/NYSE
Finished lower but very low volume and a negligible close lower. A slow session where the large caps found no bid to take them over near term resistance.
Stats: -2.16 points (-0.22%) to close at 996.52
NYSE Volume: 1.287B (-6.15%). Very slow trade as large cap issues edged slightly lower.
Up Volume: 650M (-402M). A dead heat that reflects the action in the index.
Down Volume: 625M (+290M)
A/D and Hi/Lo: Decliners led 1.16 to 1
Previous Session: Advancers led 1.9 to 1
New Highs: 184 (+41)
New Lows: 36 (+20)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Right at some natural resistance at 1000 that is more psychological than real. The next step is 1003 and then 1011 to 1015, the recent June and July intraday highs. A very quiet, steady lateral move for 7 weeks, mostly lower volume, a tightening range. These are all attributes of a very nice consolidation. As of yet, however, no indications as to when it might make the breakout.
DJ30:
Stats: -18.06 points (-0.19%) to close at 9266.51
Volume: 1.287B (-6.15%)
Ping pong action all session and the bell rang as DJ30 was moving higher. It finished more or less in the middle of the range for the session and still near the upper reaches of its 7 week consolidation (high at 9353). Blue chips have enjoyed more life given their weighting in industrial and cyclical stocks, but they will need their technology components to form up and move higher as well to make the breakout. Thus far this is a very nice lateral move but it could easily slip back toward the lows in the pattern near 9000.
TUESDAY
At 10ET consumer confidence is reported, and that always has some market moving potential, particularly as the market has been pricing in an economic recovery. While the consumer is not the key to the recovery, it is necessary to it and many focus only on this when viewing whether an economic recovery can make it. We think it will edge past expectations given the perception of economic improvement. After all, there are more in the job market now trying to find jobs, and that indicates improved optimism. As one subscriber seeking employment noted, however, seeking employment in this market is a discouraging process at this point.
We don't think even a strong confidence number will break the indexes out of their ranges; that would be good news to the market but they are still entrenched in the lateral move and Nasdaq could use more lateral time. It could use it, but as we always say, the market has its own timetable and all we can do is make note of what all the indicators are saying and get ready for the next move. Right now we keep seeing good patterns develop and break higher. Those are often the leaders in the next move, so what we are doing is seeking those out and starting positions as they make the moves we are looking for. If the consolidation continues to pan out and then breaks out to the upside, we have stocks that have been ahead of the move and can catch the wave much like a good surfer catches the big waves just right.
Support and Resistance
Nasdaq: Closed at 1735.36
Resistance: 1740 is cropping up as some resistance. 1760 (May 2002). 1800.
Support: 1700 (Feb 2002 low). The 18 day MVA (1706). 1685 (June intraday high) and June closing highs (1677 to 1645). The exponential 50 day MVA (1643). 1600 to 1595 (June 2002 closing high). The mid-May high (1554).
S&P 500: Closed at 996.52
Resistance: 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 (975) and 965 (August 2002 peak). The mid-May high (948) and 935 (November and January peaks).
Dow: Closed at 9266.51
Resistance: 9236, the early June intraday high to 9250 is cracked but is being tested. 9353, the June high. 9500 (June 2002 lows).
Support: The 18 day MVA (9151). 9000 is some psychological and price support that has held previously. The 50 day MVA (9000). 8980 is the neckline in the short head and shoulders pattern. January high (8870). The mid-May high at 8743
Economic Calendar
7-29-03
Consumer confidence, July (10:00): 85.0 expected, 83.5 June.
7-30-03
Fed Beige Book (2:00)
7-31-03
Initial jobless claims (8:30): 400K expected, 386K prior.
Q2 advance GDP (8:30): 1.7% expected, 1.4% Q1.
Chicago PMI, July (10:00): 53.7 expected, 52.5 June.
8-01-03
Personal income, June (8:30): 0.3% expected, 0.3% May.
Personal spending, June (8:30): 0.4% expected, 0.1% May.
Non-farm payrolls, July (8:30): 5K expected, -30K June.
Unemployment rate, July (8:30): 6.3% expected, 6.4% June
Hourly earnings (8:30): 0.2% expected, 0.2% June
Average workweek (8:30): 33.8 expected, 33.7 June
Michigan sentiment revised, July (9:45): 90.7 expected, 90.3 preliminary.
ISM Index, July (10:00): 51.5 expected, 49.8 June.
Construction spending, June (10:00): 0.4% expected, -1.7% May.
Q: On Friday the VIX became a teenager BUT the index's did not make new highs. Does the divergence make the VIX even more valid? The chart shows this divergence in 1/03, 3/02 and 7/01 and a few months later tells the rest of the story.
A: We have been watching the VIX as well, and its move below 20 is noteworthy as is the divergence noted. It has us watching the nuts and bolts of the market closely, namely price/volume action and leadership. We have looked at VIX and historic results for years, and our conclusion is that while it is definitely something to watch, it is not something we can use to time the market or, in more direct words, it is not something that we typically use to move in and out of stocks on. It is something we use to spot bottoms, and its track record is pretty good. It is something that can spot slowdowns or tops, but that is not so direct a correlation. The VIX has kept us watching the price/volume action and leaders closely all the way on this rally. It calls for a heightened review of what we consider primary indicators. Thus far they are decent, but if the distribution starts, the low VIX underscores any breakdown.
The consolidation right now is very good, even better than one would expect after such a run. The divergence and result you noted earlier in this year was a consolidation as well. The market could very easily fall into one that deep, but that was the first pullback after a rally off a bear market low. That usually is a deeper retracement, and that is what the market showed us. This one could very easily hold up at higher levels despite the VIX. Ultimately the indexes will have to deal with the typical September to October slowdown, consolidation or not.
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: AMEV; ATYT; HPOL; MKSI; NTN; SINA; SWIR
New Plays:
Play Date: 07/28/2003
IMA (Inverness Medical--$20.53; +0.44; no options): Scientific & technical instruments
http://biz.yahoo.com/p/i/ima.html
STATUS: Cup w/handle. You can call this an ascending triangle of sorts as well, but regardless of the name, the base sports excellent 8 to 2 accumulation (8 up weeks on rising volume to 2 down weeks on rising volume). It tried a breakout two weeks back but turned back to form this handle that held the 18 day MVA (20.04) on the low. It started up Monday on an excellent volume surge. Looking for a continued surge on volume to break it out. This is a very solid industry group.
Volume: 217.8K Avg Volume: 75.727K
BUY POINT: $21.42 Volume=115K Target=$25.72 Stop=$19.92
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/ima.html
Play Date: 07/28/2003
MCTR (Mercator Software--$2.23; +0.08; no options): Business software
http://biz.yahoo.com/p/m/mctr.html
STATUS: Testing the breakout. Broke out of a 6 month flat base two weeks back on a huge volume surge. The base accumulation is outstanding at 7 to 0. Relative strength broke out on the move and money flow is huge. Looking for MCTR to start back up from here for a nice gain.
Volume: 305.372K Avg Volume: 244.454K
BUY POINT: $2.45 Volume=367K Target=$3.35 Stop=$2.28
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/mctr.html
Play Date: 07/28/2003
XOMA (Xoma LTD--$6.95; +0.55; optionable): Biotechnology
http://biz.yahoo.com/p/x/xoma.html
STATUS: Reverse head & shoulders. Working through a 7 week base that is working on the tail end of a nine month cup base. The current pattern shows excellent accumulation at 4 to 0. Monday XOMA was shooting higher on strong volume as it and DNA reported positive study results on their psoriasis drug. This is working to break the stock out and with this strong move we are going to look fo rpositoins to capture the further run higher.
Volume: 2.442M Avg Volume: 977.09K
BUY POINT: $7.15 Volume=1.5M Target=$8.68 Stop=$6.65
POSITION: MBU KU - Nov. $7.50c (45 delta) &/or Stock)
http://www.investmenthouse.com/ci/xoma.html
End part 1 of 2
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