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us stock market, trade stock
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8/25/03 Stock Split Report Update
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Stock Split Report Subscribers:
Monday and Wednesday we issue a market recap and choice plays for the next session. Full reports issued Tuesday, Thursday and Saturday.
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: None issued. Some were getting there but we opted to wait.
Trailing stops issued: COCO; BEBE; DADE
Stop alerts issued: RNT
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:
- Market sells but refuses to sell off, showing resilience.
- WMT, Existing home sales stronger than expected, but energy prices starting to threaten recovery.
- Market fights off urge to sell in a historically tough week.
Early follow through selling leads to slow, steady recovery.
Monday morning they were jumping on the bandwagon. Several upgrades of Intel and its chief rival AMD were posted after Intel's comments Friday that things were picking up. Fearing it had been too strong in its statement, however, Intel's CEO partially backtracked over the weekend, stating it was 'too early to suggest it is a total turnaround.' That did not seem to discourage the analysts, however, as the CEO also said he hated coming out with the Friday statement before the mid-quarter update, but sales were just too good not to let shareholders know. JPM went further, increasing its forecasts for PC until sales. WMT raised its August guidance again, up to 4% to 6% from 3% to 5%; that was the second headline news from WMT in as many weeks. On top of that existing homes sales beat expectations with 5% increase to a record high. A veritable bounty of good news.
The market shrugged it off and sold for the first two hours. It found near support with DJ30 and SP500 holding the 18 day MVA and the small and mid-caps holding the 10 day MVA. From there they moved up. Hard to call it a bounce; just a slow steady climb into the close. It tried to sell off once more, but it made a higher low and pushed back up to finish. The large caps even managed a slight gain. There was no volume on the selling, and breadth was just modestly negative. This was not nearly as bad as it could have been after the Friday reversal.
It was not all great action. Many stocks continued to fall below support levels they just broke. Others, however, bounced off near support and moved up just as the indexes. Almost all of the major indexes sold early, held near support, then managed to move back up, showing doji's on the close. They look poised to make a bounce higher and continue the breakout attempts from last week before that Friday reversal. It will have to prove it, however, and we continue to keep our stop targets relatively tight moving forward.
THE ECONOMY
Wal-Mart boosts August forecast.
Strong back to school sales are helping boost sales to the strongest level in over a year as WMT puts out its second piece of good news in a week. Retail sales are doing very well right now with surveys of WMT, BBY, TGT and other major retailers showing crowded parking lots and most customers buying something. WMT is seeing the price tag of each purchase rising as well. Target has yet to release where it stands in August, and we all want to see what is going on outside of WMT. Still, it is rather clear that consumers are spending money from the tax cuts and other sources, letting their wallets tell the real story versus the sentiment indicators that have show significant drops in present situation economics. Once again consumer sentiment polls are more of a case of watch what I do versus listening to what I say. We will get to see more of this Tuesday as the Conference Board releases its August confidence survey.
Existing home sales jump 5%.
This part of the market comprises 80% of all home sales. Thus when some say the new home sales are more important we always knit the eyebrows a bit. They are important for purchases of new appliances and some furniture, but new homes do not have a monopoly on that business; most families that move take the opportunity to junk old appliances and furniture and put some new pieces in the new home. With 80% of the market, you don't want to overlook this.
The increase put the annualized units at 6.12M, the all-time high. The average price of a house moved up to $182K. These are strong numbers, and most housing market watchers believe the rising rates pushed most of the fence sitters into action; that certainly jibes historically. Others speculated that this represents the peak of the housing market. We agree with both assertions, but that does not mean an immediate retracement is coming. The housing market can drift laterally and lower quite a bit before it would show any signs of appreciable slowing.
Gasoline, oil continue to slink higher and threaten recovery as Bush administration sleeps.
Behind the good economic news is the rise in oil and gasoline prices. Oil is back at $32/bbl as all of that Iraq production slated to go back on line shortly after the war has gone nowhere. The US has a big job in Iraq on all fronts, but it took on the task to handle them when it went to war. Thus it is no excuse blame civil unrest, terrorism, etc. There has been an almost complete failure to get the money line for Iraq (oil) flowing again. Repeated sabotage and other problems have kept the oil off the market and helped drive prices higher. In our view this is inexcusable. The benefits of putting enough manpower in country to get the task done efficiently and quickly outweigh the near term cost. As it is the effort has dragged on and on and the markets are reading it as a failure, hence the rising oil prices. It is a shame the post-war action is not as upfront and decisive as the military campaign. Maybe it is, but based on what we see and hear from Iraq that is not the case.
This creeping tax increase via oil and gasoline prices can work to choke off some of the economic expansion. Higher prices means more disposable income going to the oil and gas producers; it does not make more of what we need in economic production. Gas prices rose by 15 cents in the week, the highest on record. It is ridiculous that an administration that sees the necessity of low cost money and the importance of tax cuts and incentives to spur economic growth would allow oil prices to move higher when it controls the ability to put millions of barrels per day on the market if it would just bring the resources to bear to accomplish the task. It really makes one wonder whether the Bush ties to oil is so great it blinds clear thinking with respect to the relationship between economic growth and energy prices. We need lower energy prices to foster economic recovery. Exxon posted record profits last quarter when oil was $6 less than it is now; Exxon does not need $30/bbl oil to make money. If it does not fall soon, the recovery fostered by tax cuts and incentives is going to be at risk, and then those deficits won't be reduced. The only way out is growth, and rising energy prices are the bane to fragile growth.
THE MARKET
The continuation of the selling did not last through the morning as the indexes held near support and managed to edge back and recover most of the losses. Volume was lower, downside breadth was modest, and most of the indexes showed dojis on the candlestick chart just over support. This action puts some mixed signals out there for investors as the market works into what is one of the worst weeks for stocks, the last week of August.
We have all heard about how September is really the worst month for stocks, not October when many market bottoms have been put in after some rather dramatic drops to that point. September may be the worst month, but the last week in August is one of the toughest weeks for stocks as drops in the range of 5% have been common in the past.
The reversal from the breakout attempt and slide back into the trading range last week is a reversal indication. The market tested the rare air and turned tail back to the safety of the trading range. When we have seen that in this consolidation and in times past; reversals just as a market is breaking out is not good action.
Monday the market could have given up, but it did not. It showed resilience, holding at near support (the 18 day MVA on the Dow and SP500, the 10 day MVA on the small and mid-cap indexes). Many individual stocks tested near support, tested below that level and some stop points, but then recovered well on the close. In other words, stocks sold early, tested support, and then recovered as the sellers lost out. Then there is the conventional wisdom that says the market sells at this time of the year. Many are saying that and expecting a pullback. The market rarely does what the many are saying.
Nonetheless, the action Monday was not a groundswell of buying support. Given last Friday when it tried the breakout but failed and the time of year, this market is going to have to prove it can make the move and then make it stick.
Market Sentiment
VIX: 20.32; +0.05
VXN: 29.34; -0.13
Put/Call Ratio (CBOE): 1.21; +0.30. The ratio spiked higher on some very mild selling. That is a good indication for short term bounces, but at this point the market needs a good breakout on volume, not just a bounce.
NASDAQ
Sold early but managed to hold near support and recovered with a nice doji on low volume.
Stats: -1.01 points (-0.06%) to close at 1764.31
Volume: 1.124B (-34.26%). Volume was extremely low on the pullback, good action after the Friday reversal as sellers could not capitalize.
Up Volume: 439M (-240M)
Down Volume: 655M (-365M)
A/D and Hi/Lo: Decliners led 1.34 to 1. Very modest downside breadth.
Previous Session: Decliners led 1.98 to 1
New Highs: 119 (-190)
New Lows: 12 (+3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq remained in its range, still unable to move over the July high (1776). It did hold in the range at near support from 1750 to the 10 day MVA (1741), tapping 1752 on the low. The candlestick chart was a doji, and a doji at support can indicate a move back up. That would be some feat after the Friday reversal. As we said, it will have to make the breakout on strong volume if it does.
S&P 500/NYSE
Trying to make a higher low at the 18 day MVA, showing a doji at that point.
Stats: +0.65 points (+0.07%) to close at 993.71
NYSE Volume: 948.993M (-26.64%). Volume fell off the map as the index tested slightly lower and then managed a slight gain. No heavy selling.
Up Volume: 355M (+22M)
Down Volume: 576M (-391M)
A/D and Hi/Lo: Decliners led 1.44 to 1. Very modest decline.
Previous Session: Decliners led 2.2 to 1
New Highs: 55 (-194)
New Lows: 12 (-6)
The Chart: http://www.investmenthouse.com/cd/^spx.html
When you consider that the large caps never made it out of their range, never topping the June and July high at 1015, falling back was not such a blow. Indeed, with the large caps holding over the 18 day MVA (991) on the close and showing a doji on the session, they could put in a higher low here and be in good position for a breakout. This was one of the scenarios discussed before the breakout and reversal last week on DJ30 and Nasdaq. The large caps are positions well for a move higher, but they also lagged the other indexes and that is why they were not making the same breakout move last week.
DJ30:
Stats: -31.23 points (-0.33%) to close at 9317.64
Volume: 948.993M (-26.64%)
The blue chips showed the same action as the other large cap indexes, tapping lower intraday and then rebounded toward the close. The index was unable to turn positive by the close, but it did cut its losses after testing the 18 day MVA (9293) intraday. DJ30 is more in the position of Nasdaq, having made the breakout attempt and then failed to hold it Friday. DJ30 is still just inside the top of its range (9353 to 9361), and if it holds here it makes a higher low and can try another breakout move. After last week's failure we need to see strong volume and see it hold the move heading into the close.
TUESDAY
The economic data ratchets up a bit with durable goods orders out before the open and new home sales and consumer confidence at 10ET. Economic data did not seem to impact the market all that much Monday, and given this is the week before Labor Day next Monday, volume will most likely remain low. Thus the chance of a strong breakout, the type with strong volume that would be convincing, is not that likely. That does not mean the market cannot move up from here regardless of the failed breakout Friday, it just means that it will have to prove any move with a real surge that holds the gains.
Given that strong volume is most likely not going to show up, we have to be disciplined in approaching any plays. Individual stocks can still make strong moves even if the market does not. Moreover, if the market does make another weak bounce higher, that simply sets up some more downside plays on a fall back into September. Thus we are going to have to focus on those stocks that are moving on volume and are not extended. Several are testing near support, and if we get good enough trade and the market is running we can venture some positions. As for the downside, we are going to continue to let them set up and test the recent breaks of support. Again, a bounce higher would help set those plays up better when things roll back over.
The market has yet to show the Friday reversal was just a blip in a continuing move higher right now. It is bucking that reversal and the time of the year. Doesn't mean it cannot move up, it just has a tougher road. If it does move higher, we want to pick the cherries that are there but not push any positions that are not showing the strength we like to see. As for existing positions, many flirted with their stops, undercutting them slightly but then rebounding. If they can close over that support that is fine. If they start heading into the close below support, that is when we shut them down as the door to further downside is open. Again, we would rather err on the side of caution given the reversal last week and the time of the year.
Support and Resistance
Nasdaq: Closed at 1764.31
Resistance: The July intraday high (1776). 1800.
Support: 1760 (May 2002) is some support down to 1740. The 18 day MVA (1726). 1700 (Feb 2002 low). The exponential 50 day MVA (1684). The lower end of the June closing highs (1677 to 1645) held on the last test.
S&P 500: Closed at 993.71
Resistance: 1003, the early June closing high, is being tested now. June closing high at 1011. The June intraday high at 1015. Then 1050.
Support: The 18 day MVA (991). The exponential 50 day MVA (982) and 975 (December 1997 peak). 965 (August 2002 peak). 951 (late May high) to the mid-May high (948).
Dow: Closed at 9317.64
Resistance: 9353, the June intraday high up to 9361 the July intraday high. 9500 (June 2002 lows).
Support: The 10 day MVA (9335) is trying to hold. The 18 day MVA (9293). 9250 to 9236, the early June intraday high. The exponential 50 day MVA (9153).
Economic Calendar
8-25-03
Existing home sales, July (10:00): 6.12M actual, 5.90M expected, 5.83M June.
8-26-03
Durable goods orders, July (8:30): 1.0% expected, 2.3% June.
Consumer confidence, August (10:00): 79.6 expected, 76.6 July.
New homes sales, July (10:00): 1.15M expected, 1.16M June.
8-28-03
Q2 GDP (8:30): 2.9% expected, 2.4% previously reported.
Initial jobless claims (8:30): 390K expected, 386K prior.
8-29-03
Personal income, July (8:30): 0.3% expected, 0.3% June.
Personal spending, July (8:30): 0.8% expected, 0.3% June.
Michigan sentiment revised, August (9:45): 90.4 expected, 90.2 first reported.
Chicago PMI, August (10:00): 56.0 expected, 55.9 prior.
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
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us stock market
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