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us stock market, trade stock
Begin Part 2 of 2
THE MARKET
Overall market stats:
VIX: 25.96; +0.17. Up slightly as the S&P rose. Not much here as it is right in the middle range between 'low' and 'high' volatility.
VXN: 59.67; +0.05. Held the flat line as well, it too in the mid-range levels.
Put/Call ratio (CBOE): 0.71; -0.03. Not much change today on a small gain in the indexes. Still, however, it is at the high end of the range, and it wasted no time getting there when the selling started earlier in the week. Today's upside action did nothing to quell the demand for puts. Overall, option activity dropped to 960,400 (1.388 million Wednesday) in a much quieter day.
NYSE Short Interest: Short interest continues to march higher as the shorts are trying to put an end to this rally. Wednesday it closed at 4.91, easily its high for the past several months. We like more bets being placed against the market, but we need to see price/volume action improve after the recent distribution.
NASDAQ: A fairly weak bounce did not change a lot today.
Stats: Up 25.99 points (+1.2%) to close at 2110.49.
Volume: 1.833 billion shares (-7.6%). Volume was below average as a rise in the market could not attract more buyers than the recent number of sellers. Up volume led 1.226 billion to 587 million downside shares. Not the kind of volume we wanted to see on a move higher, though some individual issues put together gains on some impressive volume.
A/D and Hi/Lo: Advancing issues edged back into the lead today at 1.42 to 1 (decliners led 2.52 to 1 Wednesday). Another sign that while the move up tried, it was no comparison to Wednesday's selling. New highs rose to 126 (+25) while new lows fell to 38 (-9).
The Chart: http://www.investmenthouse.com/cd/$compq.html
The bounce was nice, but let's look at it. The Nasdaq faded at the close after trying to rally, and that is not a good sign. The positive finish helped, but it was not a saving grace necessarily. We also note on the daily chart that the Nasdaq tapped the 50 day MVA on its high (2140.97; 2140.45 is the 50 day MVA). It took three fast shots at it and then rolled over. We often see a breach of a support level (50 day MVA), then a low volume test or tap at that level followed by further selling. It is not easy to break right back over a resistance level. The failure to do so today was not a good sign. Makes today's action look more simply like a reflex bounce before a bit more selling. If it sells, we are still looking down to the 1995 to 2005 level.
We could be wrong, however, as we did note several stocks that performed well today and could lead higher. Great if it happens. Based on what we see in the 'numbers', however, we cannot just get all excited and start buying. We still like the outlook down the road; it is just the short term that is worrisome at this point as we saw a shift in the up price/volume action and saw some more breakouts fail. Still, just as many or more are still holding firm or moving up. It remains an index of plays, and they are both to the upside and downside.
Dow/NYSE: The Dow rose, but it too bumped its head at resistance and fell back.
Stats: Up 39.40 (+0.4%) to close at 10,911.44.
Volume: NYSE volume edged down ever so slightly as the index moved higher. 1.151 billion shares (-0.6%). Statistically a dead heat, so not really a bad day on the Dow, but not a great day either. Certainly not enough to wipe away Wednesday's distribution day. Up volume led 785 million to 349 million shares.
A/D and Hi/Lo: Advancing issues snaked out a narrow lead at 1.47 to 1 (declining issues led 1.78 to 1 Wednesday). New highs rose to 110 (+28) as new lows fell to 22 (-15).
The Chart: http://www.investmenthouse.com/cd/$dja.html
The Dow took a shot at 11,000, rising to 10,978.96 on its high. It met resistance at the 18 day MVA as well at 10,982.92. Too much for the Dow today and it pulled back to the close but still finished positive on volume that equaled Wednesday's selling volume. A mixed picture, but the overriding one at this point is the break below 11,000 Wednesday and the inability to retake that ground today. It needs to do so tomorrow or otherwise we most likely have some more downside ahead at least toward 10,750. We can play that move if it materializes and make some good short term downside profit.
Now, let's look at the bigger picture. The Dow made a strong move out of the March low and broke over the down trendline connecting the January 2000 all-time high with the September 2000 top. It raced almost vertically after it tested the breakout over that downtrend in early May. Now it has pulled back and is ready to test that trendline it broke. That line is really close to the 10,800 to 10,750 level. That is one reason we keep harping on the 10,750 level. If the Dow can hold above this trendline and start back up on stronger volume, that is great. We wanted to see it hold above 11,000 of course as the strongest point of support, but this is another important level that the index is testing.
S&P 500: The big caps did what we though unlikely, i.e., holding at 1250 and the 50 day MVA and bouncing up a bit from there. It was not a powerful move, but NYSE volume equaled Wednesday's selling volume (the highest on this leg down other than the session the selling started), and that support did hold. Did not get us into the OEX put play, but that is okay. Tomorrow we are basically going to watch what the S&P does as a pretty good proxy for the overall market: if it cannot hold its 50 day MVA, we cannot expect a lot of upside in the short term, i.e., the next week. If it falls through here, 1200 is the best level of support although the simple 50 day MVA is rising to meet a down trendline at 1225 that could combine to form some support.
Stats: Up 7.74 points (+0.6%) to close at 1255.82.
Volume: NYSE volume fell ever so slightly to 1.151 billion shares (-0.6%). That matches the selling volume.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Unless the indexes get some spark under them they are going to finish the week below critical resistance levels that they broke through less than 3 weeks (2 weeks in some cases) ago. That is never good for a continued upside move, and if we see it happening we are going to position ourselves during the session for downside moves as we expect more negative analyst news on Monday as well as some company warnings from perhaps ORCL. We could see ORCL warn tomorrow. The company may have saved a billion dollars using its software, but times are not great for ORCL from what we can tell. There are others in its sector that are lean, fast and growing. Anyway, we will be looking for some downside action for Monday, especially if the indexes make another run at resistance but then fail.
The market will be moved by the economic news tomorrow as well. The jobs report always garners a lot of headlines, but more important as we said earlier are construction and the NAPM. The way the market is, if these are weaker than expected the market could rise on the theory that the Fed will be at it aggressively again in June and perhaps beyond. We would prefer to see stronger numbers, stronger than expected but not blowouts. That gives the investor confidence in the future without fanning that irrational fear that if the Fed stops after 250 or 275 basis points that stocks will just fall flat. That might, just might turn the tide and spark a rally higher. That is a tall order given how the indexes finished the session. But it may have help from NVLS and its positive statement about the future. We will see.
Still, we have upside and downside plays on the report. We were getting the moves from LLL and other plays from last night, and we partially closed some of our put positions today when there were some bounces up off the low. We will put more of those out tomorrow, however, if we see the market failing again at the end of the session and try to carry that over to Monday and either take our gains then or let them run if the market is selling.
As for upside plays, we have a real eye on SEBL, ADVS and those that showed strength above and beyond every other stock that made a so-so move higher today. And then there are those that are still in good patterns and just itching for a move up. We are also looking at rolling SCMR and AVCI again either as simple rolling stocks or as rolling covered call plays. There are many to choose from still.
Support and Resistance Levels
Nasdaq: Closed at 2110.49.
Resistance: 50 day MVA is at 2140.45. Then 2232 and 2250. After that, 2328 where it stopped this last time.
Support: 2050 and then 1995 - 2005.
S&P 500: Closed at 1255.82.
Resistance: 1270? 1315.93 is the recent high it needs to plow back through. After that there are some price consolidations at 1325 from February and October of 2000 and the summer of 1999.
Support: 1250 is still trying to hold. After that, possibly 1230 from some previous price bottoms. If that gives on strong volume, 1200 is more likely.
Dow: Closed at 10,911.94.
Resistance: 11,000. Then 11,400 to 11,450. The old high at 11,750.28 is looking pretty far away.
Support: 10,750. 10,400 to 10,500 not out of the question at this point.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
5-29-01
Personal Income, April (8:30): 0.3% actual versus 0.3% expected and 0.5% prior.
PCE, April (8:30): 0.4% versus 0.3% prior.
Consumer Confidence, May (10:00): 115.5 actual versus 110.3 and 109.2 prior.
5-31-01
Initial Claims, 5/26 (8:30): 419,000 actual versus 407,000 expected and 411,000 prior (revised up from 407k).
Chicago PMI, May (10:00): 38.7% actual versus 40.0% expected and 38.9% prior.
Help-Wanted Index, April (10:00): 63 actual versus 66 expected and 66 prior.
6-01-01
Auto Sales, May: 6.4M versus 6.4M prior.
Truck Sales, May: 7.0M versus 7.0M prior.
Nonfarm Payrolls, May (8:30): -25,000 versus -223,000
Unemployment Rate, Mate (8:30): 4.6% versus 4.5% prior.
Hourly Earnings, May (8:30): 0.3% versus 0.4% prior.
Average Workweed, May (8:30): 34.3 versus 34.3 prior.
Construction Spending, April (10:00): 0.3% versus 1.3% prior.
NAPM Index, May (10:00): 43.5% versus 43.2% prior.
TEAM TRADES
FCEL: A stock split pre-announcement stock, FCEL had a dramatic run up from March, breaking out of a cup with handle pattern in early may and shooting to $90. Then the Senate problems, and with earnings coming, it sold back down to the breakout. Well, today we were anticipating a split announcement after the close and there was nothing other than the big run into the earnings to explain the selling. So we were looking for positions today before the close to try and get in, capture the announcement, and then ride the move higher and either take some quick gains or see fi the stock could mount another move up to $90.
After a decent day where the stock rose $7 intraday, it started to fade in the last hour. When we see that, no rush at all. Just let it pull back and we will jump in right before or right after the close. FCEL dropped and dropped, down from 78 to 74. It bounced a bit with about 20 minutes to go, but we did not bite. We usually always wait for that last minute to take positions. The stock was going to close at around 74, but we wanted to trade in our account that allowed after hours trades and we got in at the 73.10 level as it kept on falling immediately after the close. Then came the announcement and a better than expected earnings report. The stock jumped to 76.50, and was almost at 77.50 last we saw. This stock can scream and we are looking for a move into the 80's tomorrow.
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Good Investing!
Jon Johnson and the Tech Traders Report Staff.
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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