|
|
us stock market, trend trading stock
* * * *
8/05/03 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: CMVT
Trailing stops issued: Used some trailing stops to lock in nice gain. EVOL; CHMD
Stop alerts issued: AEOS
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Back down again and more than just a test.
- ISM services surges past expectations again.
- Techs distribute as large caps undercut support.
Selling turns broad late as SP500 snaps 50 day MVA.
The indexes spent all session testing the bottom of the trading range but in the last hour a small sell program that had started in the early afternoon was joined by more sell programs in the last hour that drove SP500 through the bottom of its range and the 50 day MVA. While Nasdaq did not undercut its 50 day MVA, its losses were, as usual, more severe on a percentage basis (-2.4%). That left Nasdaq, DJ30 and the other indexes sitting right on their 50 day MVA, Nasdaq selling off on a sharp increase in volume, though still below average on the session.
Interest rates were blamed again as bonds were roughed up again, but an Indonesian terrorist blast helped spike energy prices, another area that impacts the economy. It is feared that high interest rates and higher energy prices will stifle the budding recovery. We view this as a near term impact, but the market is your guide. Big picture it is still in good shape with a test of the 50 day MVA underway after a nice run, but near term it is involved in a serious test of its last surge higher with the overlays of rising bond and energy prices. That has things volatile near term.
THE ECONOMY
The economy continues to generate signs of a solid recovery while it continues to show a lagging job market. As we have discussed the past few weeks, that is the typical scenario in a recovery though it is also typical that there is much hand wringing about how the job market is not recovering, i.e., a 'jobless' recovery as you hear so much about.
ISM services shoots past expectations at 65.1.
June was solid at 60.6 and beat expectations, and July was very strong, again surging well past expectations. New orders came in at 66.9, almost 10 points higher than June. It is no secret that most of the US economy is services. That does not diminish the importance of the ISM and manufacturing at all; manufacturing is important as are those jobs. It is great to see the majority of the economy, however, leading sharply higher.
Again, this is another piece of the economic puzzle showing recovery. It joins expanding manufacturing, strong durables orders, strong factory orders, sharply higher business investment. Basically, the keys that were lacking during the long decline. Yes interest rates will impact housing, but housing cannot be your leading source of economic growth. It has done its job admirably and now money is shifting to business investment, that investment in America we talked about late last year.
That investment is finally starting to happen. It took some time to work off the excess, it took some cheap money, and it took some aggressive tax cuts to get it going. Regardless of what you hear, businesses are starting to invest because they have some real incentives to do so. That creates deficits short term as it did in the early sixties and early eighties, but the growth that it spurs creates a wave of tax revenues that overcomes those deficits (as it did in the sixties and the nineties) as long as Congress does not spend too much of the money. That is one reason it took until the nineties to get rid of the deficits; tax revenues exploded in the mid-eighties but when you spend $1.35 for every $1 taken in, it is hard to reduce deficits.
Those worrying about near term deficits do not take into consideration the growth effect they generate, but instead apply a dollar for dollar accounting process. No problem with that, just cut spending appropriately. Of course once something is appropriated it is sacred, so that route is not possible. That means the only way to ever get out of inevitable recessions is to grow your way out, and that requires stimulus and that requires deficits in the beginning. Would we rather have no deficits and the same poor economy we had in 2001? We would gladly trade a deficit near term for more jobs down the road, and that is what we are doing. After all more jobs means more tax revenues, more consumption (and thus more tax revenues), more investment (and thus more tax revenues), etc. Tax revenues pay for all of our programs, so the goal should be to increase tax revenues, and you do that buy investing in the country, not trying to hoard the few pennies in the Treasury (and they are pennies when compared to the cost of social security and whatever form of national healthcare is ultimately passed).
THE MARKET
After the failed breakout attempt last Thursday, the market has been on its heels, scrambling to hold the range but finding very tough going.. Stocks sold across the board but large caps earned special recognition as their index broke the 50 day MVA for the first time since March. That opens the door lower but the other indexes did manage to hold their 50 day MVA for now. That will change in the morning as CSCO gave a lackluster earnings report and was leading a further tech bashing after hours.
That is unfortunate but now a matter of fact for the market. Many stocks were closing near support at the 50 day MVA and they will be tested in the morning on the heels of the CSCO numbers. The small and mid-cap indexes were testing the 50 day MVA as well. The SOX is still holding above that level, but chips lost their favored status some Tuesday, diving lower at the close with the rest of the market.
Any way you cut it the market is showing near term stress from the long run and jitters over interest rates, energy prices, and anything else that it can think of. The market needs to work through this and stocks need to continue their basing action to set up the next moves. We will see how strong they are as they test the 50 day MVA and whether this will be a matter of a few weeks or take the market through September.
We expect a fast dip in the morning. The telling action will be how well the indexes recover from the selling. There has not been a lot of distribution to this point and the volume has been below average on a daily basis. That does not mean, however, that the market won't sell near term, just that there is no major share dumping. The latter means that it will recover as long as selling volume does not surge, but the recent action indicates near term the market is not ready to turn and surge higher.
Market Sentiment
Volatility continues its slow rise, but is still nowhere near a level that would indicate an end to the recent weakness is at hand.
VIX: 24.11; +1.46
VXN: 34.23; +1.58
Put/Call Ratio (CBOE): 0.95; +0.02. Continues to hang out at the high end of the range, indicating a lot of folks playing the downside. That tends to be a contrary indication but on this current selling the spikes to .95 or so have not yet led to a rebound. That indicates there is more near term weakness.
Nasdaq
Weak all session and led each new down leg. It managed to close over the 50 day MVA, but volume was up as it sold.
Stats: -40.56 points (-2.37%) to close at 1673.5
Volume: 1.764B (+11.62%). Volume jumped higher but was still below average as techs sold. It was a clear distribution session, i.e., a session where big money was selling some stock ahead of the CSCO numbers.
Up Volume: 392M (-552M)
Down Volume: 1.361B (+747M)
A/D and Hi/Lo: Decliners led 2.01 to 1. All session the A/D line was modestly weaker (-1.3:1), but then the bottom fell out in the last hour as breadth matched the late selling.
Previous Session: Decliners led 1.44 to 1
New Highs: 99 (-11)
New Lows: 9 (-5)
The Chart: http://www.investmenthouse.com/cd/$compq.html
After a doji at the 18 day MVA, Nasdaq wasted no time breaching that level again, this time with no late rebound. It closed just over the 50 day MVA (1659) as volume rose. It has now made a lower high below the July high (1776) and has violated the June closing high at 1677. It is still at a level it could hold, but the hard thud down to the 50 day MVA, its first visit since April, indicates it is not just giving that level a quick kiss. The index needed a rest, and now it looks as if it will get one a bit longer than the nice, quiet drift laterally implied. It still has a lot of support here and all the way down to 1600. Wednesday it will undercut the 50 day MVA on the open. If it recovers over that level it can continue the consolidation around that support. If not it is going to take longer to work through this pullback.
S&P 500/NYSE
The most dramatic move of the large indexes in that it undercut the 50 day MVA and is suspended below former support and the next support level.
Stats: +0.12 points (0%) to close at 965.46
NYSE Volume: 1.312B (+2.03%). Volume edged higher or was a hair lower depending upon what service you choose to use. In any even t it was very low volume and hardly qualifying as distribution.
Up Volume: 209M (-389M)
Down Volume: 1.085B (+408M)
A/D and Hi/Lo: Decliners led 2.19 to 1. Modest downside breadth mushroomed late in the session.
Previous Session: Decliners led 1.78 to 1
New Highs: 44 (-22)
New Lows: 73 (-31)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Sold down to the Monday low and this time did not rebound. It is still above the early July low (962), and could technically be considered in the range, but the violation of the 50 day MVA with such ease makes that simply some fine hair splitting. Next support is fairly decent at the mid-May and late May highs (953 to 946), a point that is also near the early December high. That was the point we were originally looking for pullback to in early June, but the index kept on moving higher. It got a bit extended, and now it looks ready to let that air out and test that level.
DJ30:
Stats: -149.72 points (-1.63%) to close at 9036.32
Volume: 1.312B (+2.03%)
DJ30 looked the best when it was trying to break higher and now it still looks best as it is remains in its range and above the 50 day MVA. That may not mean a whole lot if the market rolls over, but stocks such as CAT and MMM continue to hold their gains and look quite strong. While techs and small caps are getting the air let out these stocks continue to show strength, and that bodes better for the Dow. They need to hold on as the Dow does not have a lot to hold it up until 8850 to 8750. It will be more immune to the CSCO related selling than the other indexes, and we will keep a close eye on the Dow as it trades around the bottom of its range Wednesday.
WEDNESDAY
No scheduled economic news Wednesday, though it has made little difference to the market what the story has been lately as stocks are intent on giving back some of the strong gains and consolidating for the next move. Tuesday was a new chapter in that effort as what had been holding as some solid support gave way. That opens the door lower and we will see if stocks walk through it. They definitely started to change the character of the consolidation Tuesday and how stocks trade at the 50 day MVA will key us in more on the new parameters of the continuing consolidation.
There are still stocks that are holding up quite well but as noted the chips lost some of their luster. They had held up well until the last hour when they were dragged lower. No major breakdowns, but chips were falling back in their ranges. When most sectors start to get taken lower that indicates more consolidation to be done as the prior range is broken and requires setting up a new range and working through that level.
That typically means more time before the next leg in the trend is ready. There will still be stocks to play upside and downside, but the big trends that we prefer to play are on hold now and we get more conservative in our play participation. We will still look at a lot of plays as usual, and we will be even more selective in entering them. We could have taken several positions today, but there was no rush with this market and in these times you need to exercise restraint. That goes for both upside and downside as the market is not currently in a clear trend either way.
There are still some nice looking plays out there that we will be looking at, but again, we will want everything right before we jump. The market is at a point where it is still finding its way near term, still putting in the groundwork for the next move and we are not going to rush it. We will continue play maintenance on current plays. Many were testing support Tuesday at the 50 day MVA or otherwise with not a lot of major breakdowns. Again, that will be tested tomorrow and if stocks break lower and cannot recover we will have to close them out.
There will be a test lower after the CSCO earnings. We will watch where it turns and if it rebounds. There has already been selling to this level. Often there is selling in anticipation as there has been here, and then the event occurs and everybody is thinking things are heading even further down. That is what happens with the violent break lower, but then there is a sharp rebound. We are going to be watching that carefully Wednesday and not be too hasty in acting. In the market you often find that you get a second chance. It may not be the perfect chance, but it is a better point to act than right at the event.
Support and Resistance
Nasdaq: Closed at 1673.50
Resistance: 1700 (Feb 2002 low). The 18 day MVA (1709). 1740 is first resistance. 1760 (May 2002). 1800.
Support: 1685 (June intraday high) and June closing highs (1677 to 1645) are trying to hold on. The exponential 50 day MVA (1659). 1600 to 1595 (June 2002 closing high). The mid-May high (1554).
S&P 500: Closed at 965.46
Resistance: 975 (December 1997 peak). The 50 day MVA (977). 1003, the early June closing high. June closing high at 1011. The June intraday high at 1015. Then 1050.
Support: 965 (August 2002 peak). 951 (late May high) to the mid-May high (948). 935 (November and January peaks).
Dow: Closed at 9036.32
Resistance: The 18 day MVA (9155). 9236, the early June intraday high to 9250. 9353, the June high. 9500 (June 2002 lows).
Support: The 50 day MVA (9035). 9000 is some psychological and price support that has held previously. 8980 is the neckline in the short head and shoulders pattern. January high (8870). The mid-May high at 8743
Economic Calendar
8-04-03
Factory Orders, June (10:00): 1.7% actual, 1.5% expected, 0.3% May (revised from 0.4%).
8-05-03
ISM Services, July (10:00): 65.1 actual, 58.0 expected, 60.6 June.
8-07-03
Productivity, Q2 (8:30): 4.0% expected, 1.9% Q1.
Initial jobless claims (8:30): 395K expected, 388K prior.
Wholesale inventories, June (10:00): 0.0% expected, -0.3% May.
Consumer credit, June (2:00): $6.0B expected, $7.3B 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.
End part 1 of 3
|
us stock market
trend trading stock
|
