|
|
us stock market, trade stock
* * * *
8/14/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Thursday: CRAY
Buy alerts issued: CHRD
Trailing stop alerts: None issued
Stop alerts: None issued
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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdly.htm
SUMMARY:
- Market drifts higher on low volume, decent news.
- Jobless claims remain below 400K for fourth straight week.
- More of the same summertime, range trading doldrums
- Market may open later given northeast power outage.
Steady drift higher but again no power.
Stocks had some more decent economic data with jobless claims below 400K and the Producers Price Index showing a slight rise and thus dispelling more deflation worries. It was not a move based on those reports, however, as the market sold off early after the news had been released and had to climb its way out of negative territory to post small gains. There was an afternoon news flash regarding the capture of a key Al Qaeda leader and that popped stocks higher, but they gave that news-related move right back before again starting that slow drift higher.
The action is classic trading range action. Maddeningly low volume, up one day and down the next, and ignoring news while it holds within the range. While frustrating, it is overall good action. The market rallied off the October low with a big move then consolidated that first big rally with a 3 month correction. That first correction is often deeper as it really tests that initial move. Since then the market roared higher with Nasdaq leading the way, taking very little time for rest. It is now taking that rest, currently a full two months of lateral movement that is working through that strong March to June run. While it is trying to make a higher low this week, a positive development, it has more work to do before it is ready to continue the rally. As we are in mid-August and have the historically worst month for stocks still ahead in September, there is indeed more to work through over the next 3 to 4 weeks.
At the close Nasdaq was at near resistance at 1700, DJ30 was right at the breakout point in its range, and the SP500 had moved back up to the simple 50 day MVA. More of the same, and overall that is not bad action. It is not exciting and is not popping off target alert after target alert, but it is setting the foundation for the next move as the commentators play financial station bingo either stating the market is saying the economy is rolling back over due to various issues or stating that all is well and to buy, buy, buy. Neither are totally correct. The market is working through this right now as it should. Some stocks will emerge as continuing leaders and new leaders, while others fail. We think this is good action that will lead to a break higher, and we are focusing on the leaders and those showing leadership traits so we focus our money on those that will make us the most as opposed to a shotgun approach.
THE ECONOMY
Jobless claims edge higher but score fourth week below 400K
398K versus 393K expected, but it was the fourth consecutive sub-400K week. Continuing claims fell and the 4 week average dropped to 394,250 (from 398,500), the lowest since mid-February.
As we have noted on several occasions, sub-400K readings do not mean the job market has turned. The job losses have to decline on a net basis before you can look for job growth. Companies still have one more round of planned layoffs to implement, and that could push the weekly claims higher. That just depends on when the cuts are made and whether other sectors of the economy produce jobs. In other words, some tech companies could lay off some workers, but if service companies continue to hire, the net effect may be nil. In short, the numbers show improvement as companies are laying off fewer workers, but that is not the same as companies being net hirers on the whole.
It is interesting to read some of the commentary from individuals with 'economist' in their titles to their jobs. In discussing whether the economy had turned the corner one such economist noted that since there was still no real job growth or job creation (we assume he was looking at the July data) it was premature to say the economy was recovering. He noted that without meaningful job growth the consumption increase may not be sustainable. Dubious conclusions all around. First, jobs don't lead the economy; the economy leads jobs. Jobs are the last to go in a downturn and the last to come back in an upswing. Thus just looking at the jobs numbers, this economist would be very late in any call that the economy had turned. Second, if jobs held steady, would there necessarily be a decrease in consumption as he implies? July sales swelled before any tax cut money hit consumer pockets and with the economy losing jobs. Sure if no new jobs were created for another year the consumer would be impacted, but to draw any conclusions beyond that is shortsighted.
In summary, with respect to jobs and jobless claims remember this: jobs always lag the economy whether it is going up or down. The past 6 weeks have shown the first really decent economic data with respect to improving conditions since the economy topped in 2000 (they may have been at higher levels, but they were in decline at that point; now they are showing improvement). In the history of economic recoveries it thus makes sense that jobs are not magically appearing just as the economic data starts to improve. Job losses are declining, and given the size of the workforce today, they are at levels that indicate the job market hemorrhage has stopped. It now takes a few months for job creation to show up.
This is being made out to be, just as was the 1991 recession, the worst recession since the Great Depression. It was not fun (it never is; any job lost is too many, but try telling that to the Fed), but it was not the worst. Temporary hiring is surging with more expansion and more hires than in the 1992 'jobless' recovery even as claims are made that this is a worse recovery in terms of jobs. Just as each generation ages and views the next crop of youngsters as the wildest by far ("we may have been a bit wild, but we never did that"), each recession is considered the worst by those living through it. We need to put things into perspective and recognize the economic signs that are there just as we recognized the market signs that were there in October and again in March when the market rallied, and then confirmed the rally with leaders breaking out in abundance. There are plenty of skeptics. There always are. They are a necessary part of the process.
THE MARKET
Ralph Bloch said it right last night when he lamented the difficulty in writing about and trading in the current market. It is hard to say a lot about this market. Once you accept the premise that it is working in another lengthy consolidation as in March, it becomes a matter of waiting and watching for the opportunities that arise in the interim while we wait for the bigger breakout move.
DJ30 again sits poised for a breakout, but from the action show the past two weeks there are not enough investors to really provide a meaningful high volume move that you could put a lot of faith in. It could make the move but still be mostly alone as Nasdaq and SP500 are still mired in the middle of their trading ranges. As noted, the big picture looks good with the indexes moving in a 2 month lateral or flat base (Nasdaq is not quite as nice) that thus far has been mostly orderly though it had that hiccup last week.
Again, DJ30 is on the verge of a breakout, but we heard from the floor traders, checked it out ourselves, and then heard on CNBC as well that there was a lot of action in September options, purportedly selling as customers were heading out on vacation for the last part of August. The conclusion being drawn is that they were closing out positions and would not be back until September and thus the slow action could last at least through the end of the month. Friday is August option expiration, and it is early as the month started on a Friday. That gives another two full weeks until the end of August, making the September expiration 5 full weeks. Given that two weeks of the 5 are in August, if you are taking a late summer vacation it is not a bad idea to close positions or roll them out given a large chunk of the expiration month will be over by the time you return.
That is just another indication that the action continues the slow summer drift within the range continues. After looking quite shaky a week back with breaches of the 50 day MVA and the bottom of the trading ranges, stocks have recovered nicely. No great volume, just a continuation of the consolidation action.
Market Sentiment
VIX: 20.51; -0.11
VXN: 29.27; -1
Put/Call Ratio (CBOE): 0.7; -0.08
NASDAQ
Held the 18 day MVA and started higher but volume remained anemic.
Stats: +13.73 points (+0.81%) to close at 1700.34
Volume: 1.312B (-10.06%). Volume was still well below average and lower on the move up. No accumulation, just drifting higher.
Up Volume: 839M (+80M)
Down Volume: 451M (-232M)
A/D and Hi/Lo: Advancers led 1.55 to 1. Most techs were rising but not much conviction.
Previous Session: Advancers led 1.08 to 1
New Highs: 161 (+17)
New Lows: 8 (-3)
The Chart: http://www.investmenthouse.com/cd/$compq.html
After testing the bottom of the range last week Nasdaq has rebounded back to resistance at 1700 on the Thursday close. The move pushed it over the June highs at 1686 but it does not break up the somewhat toppy pattern formed after the July high. It would be good to see Nasdaq break through 1700 and then trade in a range over that level for the next few weeks to set up the next move. At this juncture it is not in a great position to start a rally, but as long as it continues to consolidate we will be ready to move into leaders because the breakout can come at any time.
S&P 500/NYSE
Holding the exponential 50 day MVA on the low and bouncing on low volume. Still good action in the consolidation, and it is not bad that it is trying to make a higher low this week.
Stats: +6.48 points (+0.66%) to close at 990.51
NYSE Volume: 1.178B (-1.42%)
Up Volume: 776M (+254M)
Down Volume: 389M (-282M)
A/D and Hi/Lo: Advancers led 1.59 to 1. Modest breadth, indicative of the action in the session.
Previous Session: Decliners led 1.29 to 1
New Highs: 165 (+6)
New Lows: 49 (+21)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Continues its rather nice flat 8 week base with a nice recovery after breaking below the exponential 50 day MVA (978) last week. Volume has been no great shakes on the recovery, but the large caps are holding the 50 day on the low, making a higher low at that level. This is exactly what the index needs to set up the next move, though it does try the patience. Next resistance is at 1000 to 1003, support at 975. We expect SP500 to continue the range for now.
DJ30:
Stats: +38.8 points (+0.42%) to close at 9310.56
Volume: 1.178B (-1.42%)
The blue chips continue to show the best action, boosted by their cyclical components. The chart shows a nice saucer to flat base with three sessions holding over the 18 day MVA (9196), making a higher low. This is a continuation of the good consolidation, and a few more days of lateral movement at this higher low sets up another breakout possibility that would have more chance of sticking. It still ahs the Nasdaq and SP500 in less than prime position to try a break higher, however, and the timing for a breakout is a bit early. As with the other indexes, we will be ready for leaders making breakout moves, but we are not sitting on the edge of the seat waiting for all the major indexes to start surging higher the next week or two. Resistance is close at 9353 to 9361
FRIDAY
Big day for economic news and it will be interesting to see if the market now looks to economic data to take its direction. During a consolidation stocks tend to ignore data as we have seen. Thursday they showed a slight inclination to start reacting to it again. As they get ready to make the next move they will show more influence and then make a break.
There will be the New York PMI before the open as well as the CPI and industrial production. That is followed by the Michigan sentiment survey 15 minutes into trading. There will be plenty of important economic data to test whether the market is starting to think about the economy again. There is also the DELL earnings, however, and those had that stock lower after hours along with other big techs trading down marginally.
Thus the market will be able to take its choice of direction. It has been quite stable this week given that Friday is option expiration. Expiration can lead to more volatility, but that typically occurs earlier in the week of expiration. Given that things have been quiet and that there will most likely be fewer traders as it is a late summer Friday, there could be larger swings. We are not expecting much action even with this expiration given the very low volume Thursday. Stocks may move up and down, but volumes with respect to the moves will most likely be light.
That will make finding the few gems that do move with solid backing a bit easier. You can always scan the market for stocks moving on volume, but the key is whether they have set up the move with a good foundation, i.e., showing good accumulation (or distribution on downside), the right price/volume action, pattern, money flow, relative strength, etc. It is frustrating to be ready to make the plays but then have to sit and watch because volume is too low or the intraday action is not good. That is the nature of the market given the consolidation and the time of year. Better to act with patience and restraint during these times and be ready for those stocks that move well ahead of the overall market and for the eventual breakout.
There is a possibility that the market will open late Friday given the post-close power outage. If power is not restored fast enough they will most likely delay Nasdaq trading until the NYSE is ready to go. We may have a very abbreviated Friday session.
Support and Resistance
Nasdaq: Closed at 1700.34
Resistance: Right at 1700 (Feb 2002 low). 1740 is next resistance. 1760 (May 2002). 1800.
Support: The 18 day MVA (1689). The exponential 50 day MVA (1661). The lower end of the June closing highs (1677 to 1645) held on the last test. 1600 to 1595 (June 2002 closing high). The mid-May high (1554).
S&P 500: Closed at 990.51
Resistance: The simple 50 day MVA (989) is not totally broken. 1003, the early June closing high. June closing high at 1011. The June intraday high at 1015. Then 1050.
Support: 975 (December 1997 peak) and the exponential 50 day MVA (978). 965 (August 2002 peak). 951 (late May high) to the mid-May high (948). 935 (November and January peaks).
Dow: Closed at 9310.56
Resistance: 9353, the June intraday high, 9361 the July intraday high. 9500 (June 2002 lows).
Support: 9250 to 9236, the early June intraday high. The simple 50 day MVA (9149). The exponential 50 day MVA (9080). 9000 is some psychological and price support that has held previously. January high (8870). The mid-May high at 8743
Economic Calendar
8-12-03
FOMC meeting results (2:15): No rate change, bias neutral but leaning toward the risk of disinflation.
8-13-03
Business inventories, June (8:30): 0.1% actual, -0.1% expected, -0.3% May (revised from -0.2%).
Retail sales, July (8:30): 1.4% actual, 1.0% expected, 0.9% June (revised from 0.5%).
8-14-03
PPI, July (8:30): 0.1% actual, 0.1% expected, 0.5% June
Core PPI: 0.2% actual, 0.1% expected, -0.1% June
Initial jobless claims (8:30): 398K actual, 393K expected, 396K prior (revised from 390K).
FOMC minutes (2:00)
8-15-03
NY Empire State PMI, August (8:00): 19.7 expected, 22.6 July
CPI, July (8:30): 0.2% expected, 0.2% June
Core CPI: 0.1% expected, 0.1% June
Industrial production, July (9:15): 0.2% expected, 0.1% June
Capacity utilization, July (9:15): 74.4% expected, 74.3% June
Michigan sentiment, August (9:45): 91.5 expected, 90.9 July
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 2
|
us stock market
trade stock
|
