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us stock market, trade stock
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7/30/03 Investment House Alerts Report
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IH Alert Subscribers:
We apologize for the delay in the evening report. We have experienced serious technical difficulties this evening. Again we apologize for the delay.
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: BDY; CRAY
Trailing stops issued: None issued
Stop alerts issued: CSTL
MARKET SUMMARY
Slow action is just what the market needs.
Stocks were down all session but they were not down hard. Modestly higher futures prices failed early as the indexes quickly turned lower and stayed lower. There was, however, no heavy volume and breadth was quite modest. Indeed, the small and mid cap stocks managed to close positive by a fraction as the bell rang.
The range was remarkable again in its narrowness. Once again stocks went up and down all session, but they were taking baby steps. You could say the indexes ran in place but that connotes a lot of activity. The market was running about as fast as cold molasses as it ebbed and flowed and then managed a weak bounce up off the lows to close. As we said before, it might be boring right now, but the lower volume, tight range, and overall sleepy action is exactly what the market needs to set the foundation for another move higher.
THE ECONOMY
Mortgage refinancing rate plunges.
The market managed to perform in what we consider a very good manner even in the face of plunging new and refinance mortgage applications (-32.9% on the latter). The drop was sharp, but it is no surprise given the sharp rise in rates (from 5.25%ish to over 6%). That is a normal reaction to a sudden rise. Those that were looking to refi are going to wait and see what the bond market does. Remember, rates are still at historically low levels, and if the level out here and drop some that will entice some more refinancing once those sitting on the fence determine that may be the last chance they get. Still, the refinancing heyday is most likely over.
Money went back into bonds and not stocks Wednesday as the 10 year treasury rallied 30/32, a huge move. That was a sharp rally after tanking earlier in the week, but that was a drop in the bucket as far as rates are concerned. The big question is whether rates are responding to improving economic conditions or are jumping due to an unnaturally low level as the Fed tried to force them down. That is the analogy of the Fed holding a basketball under water and then losing control and it shoots higher. It is a little of both. Economic conditions are improving, and that means more demand for money in the future and thus yields rise. That natural tendency to rise is exacerbated by the Fed's manipulating the market. Whenever natural market forces are thwarted by regulatory action, pressure builds similar to water backing up behind an obstruction on a waterway. When a hole pops up and the water starts working on it, the trickle can become a torrent in a hurry.
Rising rates indicating an improving economy are a good sign. Surging rates because of regulatory interference is bad because it will no doubt overshoot equilibrium and could work to stall some of the economic recovery that is spurring the rise in the first place. Does that make your head ache? It is the same principle in reverse when the Fed was raising rates to fight inflation. It was trying to manipulate the markets and it killed them. It is trying to manipulate them again and its action could impinge or even kill off the recovery before it really becomes entrenched.
THE MARKET
The market action Wednesday as a whole looks to be just about picture perfect as far as we are concerned. The market needed a good rest and it is getting a really good rest. Not only is it getting some time off, it is using that time in a most productive manner. It is moving laterally on mostly lower volume and in a very narrow range. It has had opportunity to get riled up by earnings and economic data, but it has shrugged off both the good and bad news.
The latter is very interesting. Notice how when the market is rallying hard it simply ignores news that may be upsetting? When the market was trending lower, any news that had the color of a problem caused market upheaval. When a market is healthier it makes its own wake. Sure it will ebb and flow with the news story of the day, but the trend remains unchanged. That is exactly what happened Tuesday on the consumer confidence numbers. It ignored the Fed Beige Book Wednesday that said things were improving a bit. The market is doing its own thing, and that thing is a nice, tight, lateral, lower volume move.
In addition to the lateral move and its attributes, the index patterns are starting to look quite pretty. DJ30 has moved laterally and has edged up to the old high and drifted back ever so slightly on low volume. Same with SP500. The SP600 and SP400 (small and mid-cap) are also drifting laterally over the 18 day MVA with nice tight dojis. They even managed to close positive today, again showing that relative strength that is a real positive for this consolidation. These tight, low volume drifts indicate there is no real selling even after the indexes and stocks ran up to these levels. Investors are not dumping all of the stocks they bought on the way up (though individual earnings misses are being burned at the stake), but are content to hold them as some take profits. That is very healthy because it simply means that when those that are taking gains wrap up their business, there will be more demand than supply, and that is what makes stocks rise.
Market Sentiment
VIX: 20.72; +0.49
VXN: 30.86; +0.7
Put/Call Ratio (CBOE): 0.8; -0.21. Fell back after a big spike Tuesday, but still at a high level.
Nasdaq
Edged back on very low volume, holding the 10 day MVA on the close.
Stats: -10.46 points (-0.6%) to close at 1720.91
Volume: 1.529B (-10.91%). Very low trade as the market eased back. Below average still, and this action indicates the sellers are in the minority.
Up Volume: 511M (-246M)
Down Volume: 998M (+60M)
A/D and Hi/Lo: Decliners led 1.25 to 1. Modest declines.
Previous Session: Decliners led 1 to 1
New Highs: 195 (-32)
New Lows: 8 (-5)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq made a lower high this week, failing to move up to the July high at 1776. We do not view that as a huge negative at this point because the overall action speaks to a lateral move similar to the other large cap indexes. Lower volume, tight ranges, holding the near support. That is good action, particularly when you look at the run Nasdaq has made. It rang 30% from the lows for the year without much rest. It has not reversed in a cataclysmic selling orgy. It has not suffered any significant distribution. It is holding its gains and ignoring bad news as it continues to look down the road. An index that is stingy with its gains and ignores potentially damaging news is not an index that is in trouble. It is not sticking its head in the sand, but it is looking down the road still, holding up in anticipation of better economic news and times ahead.
S&P 500/NYSE
Basically unchanged on lower and continued below average volume. Holding the range very nicely as it continues the same low volume drift laterally.
Stats: -1.79 points (-0.18%) to close at 987.49
NYSE Volume: 1.355B (-4%). Volume backed off, remaining below average as the large caps drift laterally and slightly lower. No real selling, just quiet action, and that is what you want to see.
Up Volume: 537M (+90M)
Down Volume: 799M (-156M)
A/D and Hi/Lo: Decliners led 1.07 to 1. A standoff as you would expect.
Previous Session: Decliners led 1.6 to 1
New Highs: 139 (0)
New Lows: 33 (-23)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Another modest test lower (986) intraday and a small rebound to take it back up to near flat on the close. SP500 continues to work in a tight lateral range as well between 975 and 1015. The price/volume action has not been sterling, but it has not indicated dumping of stocks. The overall lower volume shows no conviction in selling, and as with Nasdaq, large caps are holding onto their gains, a quite bullish signal.
DJ30:
Stats: -4.41 points (-0.05%) to close at 9200.05
Volume: 1.355B (-4%)
We have noted this before, but DJ30 has the best looking consolidation among the large indexes. Very flat, very tight range, drifting back ever so slightly after a test of the top of the range last Friday. Wednesday it showed a tight doji that tapped the 18 day MVA on the low (9165) and rebounded modestly. DJ30 may just be ready to make the break higher and show the rest of the market the time is right.
THURSDAY
The economic data starts to flow again, and earnings reports jump back up Thursday as well. Jobless claims, advance Q2 GDP, and importantly the Chicago PMI will all have a shot at shaping the action. Investors will still be looking to Friday and the employment report, and that could put a lid on any Thursday rally attempt on some good economic data. That Friday employment data concerns us because two weeks of improving weekly jobless claims does not equal a reduction in unemployment and a bounty of new jobs. That is the big fly in the ointment in our view to what are some rally nicely set index patterns.
If the Friday numbers put the lid on a breakout attempt we would expect a move to the low end of the range and then an attempt to hold and continue the lateral move.
In that background we will continue to take positions in good stocks as the arise. Right now we are building positions in stocks that break higher when and if we see them. Not a ton of them, but a few here and there. These can be those new leaders in the next move and are just getting a head start.
Support and Resistance
Nasdaq: Closed at 1720.91
Resistance: 1740 is first resistance. 1760 (May 2002). 1800.
Support: The 18 day MVA (1710). 1700 (Feb 2002 low). 1685 (June intraday high) and June closing highs (1677 to 1645). The exponential 50 day MVA (1650). 1600 to 1595 (June 2002 closing high). The mid-May high (1554).
S&P 500: Closed at 987.49
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 (976) and 965 (August 2002 peak). The mid-May high (948) and 935 (November and January peaks).
Dow: Closed at 9200.05
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 (9161). 9000 is some psychological and price support that has held previously. The 50 day MVA (9015). 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): 76.6 acutal, 85.0 expected, 83.5 June.
7-30-03
Fed Beige Book (2:00): Showing improvement but business capital investment still weak.
7-31-03
Initial jobless claims (8:30): 400K expected, 386K prior.
Q2 advance GDP (8:30): 1.5% expected, 1.4% Q1.
Chicago PMI, July (10:00): 53.8 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): 10K 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): 90.5 expected, 90.3 preliminary.
ISM Index, July (10:00): 51.9 expected, 49.8 June.
Construction spending, June (10:00): 0.4% expected, -1.7% 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 Wednesday: AMEV; CELL; CRAY; GPRO; KFY
New Plays:
Play Date: 07/30/2003
AVCI (Avici Systems--$7; +0.01; no options): PC networking
http://biz.yahoo.com/p/a/avci.html
STATUS: Cup w/handle. AVCI has formed a nice little 2 month cup with handle sporting nice 3 to 1 accumulation (3 up weeks on rising volume to 1 down week on rising volume). Monday the stock exploded higher on huge volume and has tested the breakout on lower volume, holding the move. Excellent accumulation with storng money flow and a relative strength breakout supporting the move. This little pullback to form a short handle to the base is a very good test.
Volume: 54.1K Avg Volume: 86K
BUY POINT: $7.35 Volume=129K Target=$9 Stop=$6.84
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/avci.html
Play Date: 07/30/2003
SIE (Sierra Health Services--$26.25; -0.31; optionable): Health care plans
http://biz.yahoo.com/p/s/sie.html
STATUS: Testing the breakout. SIE exploded out of a 12 month cup with handle base just 5 sessions back on a huge volume breakout. A very solid base with 14 to 6 accumulation set the stage for this breakout. That is very strong accumulation and relative strength broke out as well in support of the move. Very nice test and looking for a move over the recent highs to enter.
Volume: 1.012M Avg Volume: 467K
BUY POINT: $27.12 Volume=700K Target=$32.55 Stop=$25.22
POSITION: SIE LE - Dec. $25c (63 delta) &/or Stock
http://www.investmenthouse.com/ci/sie.html
Play Date: 07/30/2003
TSAI (Transaction Sys Architects--$10.5; +0.74; optionable): Technical & system software
http://biz.yahoo.com/p/t/tsai.html
STATUS: Cup w/handle. Ready to make the breakout from a very nice 9 month base sporting excellent 11 to 4 accumulation. The 7 week handle is solid, using the 50 day MVA (9.34) as support as it made some intraday lower lows to shake out the last sellers. Wednesday TSAI was surging on strong volume, heading for the breakout. Looks very nice.
Volume: 377.735K Avg Volume: 160K
BUY POINT: $10.72 Volume=240K Target=$12.88 Stop=$9.84
POSITION: TQR IB - Sept. $10c (66 delta) &/or Stock
http://www.investmenthouse.com/ci/tsai.html
End part 1 of 2
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us stock market
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