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9/10/03 Stock Split Report Update
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Stock Split Report Subscribers:
On Monday and Wednesday we issue a market summary and choice plays for the next session. Full reports issue Tuesday, Thursday and Saturday.
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: MATK; SOHU; SINA
Trailing stops issued: MRVL; DHR
Stop alerts issued: TSA; CCMP; KSWS; SNPS
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:
- SP500, DJ30 distribute again, giving back their breakouts.
- Good news of the sort that helped spur the rally helps ignite some selling on Wednesday.
- Market sells broadly across the board but nothing unusual at this juncture.
Pullback begins in earnest.
One to two weeks ago the news released by XLNX and TXN would have been embraced. TXN noted a strong rebound in demand and said that end demand was rising. It also narrowed its guidance to the very top of the prior range. XLNX offered a similar story. As with many things in life, timing is everything, and the market had already made strong moves on similar stories from INTC and others and was getting stretched thin. Much as a junkie requires more and more or purer and purer drugs to gets his fix, an extended market needs better and better news to keep piling on the gains. Give it the same news over and over and the buzz wears off and a hangover can start. Right now the market is experiencing a rather minor hangover after a strong run in Nasdaq, small and mid-caps.
The market opened lower as Asia and Europe were down on the news, and it only made a token mid-day bounce before really rolling over in the afternoon session. As usual there were more than a few reasons to pin on the selling, the most notable being a 'new' Bin Laden video that was most likely filmed in March or April according to the early reports. Conveniently released the day before 9-11 in an obvious taunt. With the strong rally already showing signs of weakness for the past week, the proximity of the tape to 9-11 was enough for many to decide it was time to close the checkbook and wait until 9-12. Thus selling picked up in the last 2 hours of trade and the indexes closed the book near session lows. The story simply gave investors ready to sell (judging by the market action the past week) a firm reason to do so.
Even though SP500 posted its second consecutive distribution session there was no major sell off as of yet. Nearly all the major indexes are testing at or just above their 18 day MVA after busting through the very near support. The 18 day MVA is one level stocks or indexes use as support in a solid uptrend. The indexes are there in two days. Optimists can say the pullback has already made the majority of its move. Maybe, but the market is still distributing, and as long as it is doing that there is more potential downside.
THE MARKET
Nasdaq and semiconductors to the major beating (-2.6%, -5.3%), but small and mid-caps were not far behind (-1.9%, -2.1%). Market breadth demonstrates the weakness with Nasdaq decliners swamping advancers almost 3 to 1, NYSE decliners doubling up on advancers. The upside was in a narrow band mostly related to drugs, biotech, medical and internet, and money was moving into those plays with some force as it rotated out of techs and just about everything else.
Volume was mostly under control and coming in a bit lighter than Tuesday until the mid-day bounce rolled over. Volume started ramping higher, notably so on NYSE, providing the second consecutive distribution selling, i.e., selling on rising volume. That indicates there are more sellers than buyers in the market: the market sold off so there were more sellers; the stronger volume shows that there were more sellers or buyers than the prior session.
Early in a pullback, particularly after a strong run, it is not uncommon for volume to ramp higher as the market or a stock starts to fall. Stocks typically sell on higher volume when they first start to correct back to form a new base. After that the volume starts to back off as most of the sellers have done their thing. Thus a couple of higher volume selling sessions down to a solid support level are not a major source of concern for the market overall. If those sessions turn into 3, 4 or more, and push through a key support level without a quick recovery, that can be a problem.
Thus far the market is making its initial drop toward support. After such a strong move on Nasdaq and SP600 what the market is showing now is not out of the norm. What we don't want to see is a lot of stocks breaking major support or their trends; for now some are doing that but that is the minority. On the last pullback the market turned right back up as SOX took a very short holiday. We would be surprised if the rebound was as fast this time around. Nasdaq is still over the 18 day MVA near 1800 and the July high is at 1776. It appears a test of those levels will occur, and the rest of the market will be on hold while Nasdaq makes that test. It is interesting to note that the QQQ (Nasdaq 100) is already at the 18 day MVA and selling on very high volume. That is an index to watch.
VIX: 21.26; +1.58
VXN: 33.16; +2.78
Put/Call Ratio (CBOE): 1; +0.17. The put/call ratio certainly spikes quickly on selling, indicating that many are looking at downside activity. This is a contrary indicator, and a few readings on the close over 1.0 as some more selling occurs would indicate a bounce back up.
NASDAQ
Big price drop, but lower volume. Still above the 18 day MVA, but the Nasdaq 100, the 100 largest caps on the index, is beating a faster and stronger retreat.
Stats: -49.62 points (-2.65%) to close at 1823.81
Volume: 2.011B (-10%). Still a 2B day, but lower volume on the selling. After two distribution sessions, it was good to see the volume back off even though the index posted its largest loss in weeks. That indicates the selling was not an out and out dumping of tech shares.
Up Volume: 262M (-661M)
Down Volume: 1.737B (+444M). Volume may have been lower, but the action was almost all to the downside.
A/D and Hi/Lo: Decliners led 2.94 to 1. This is pretty ugly. No one wanted tech stocks on Wednesday.
Previous Session: Decliners led 1.43 to 1
New Highs: 124 (-181)
New Lows: 9 (+6)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Gapped lower again, falling through some support at 1865 to 1860 as it sheds some of that froth generated as Nasdaq moved 25% over its 200 day MVA (1509). It is still over the 18 day MVA (1808), the next logical support level on what we expected to be a stronger test. We would not be too surprised to see it break that level to test the July highs (1776) and even a tap toward the 50 day MVA (1738). Overall the selling was broad but on lighter volume. The biggest techs were being dumped Wednesday, at least as measured by the QQQ, and in the long downtrend, that was typically a signal of further selling. Thus the breach of the 18 day MVA on this pullback would not be a surprise if the QQQ breaks its 18 day MVA (33.11, tapped on the session low and closing at 33.27). We also note, however, that the NDX (the full strength Nasdaq 100 index) sold on lower volume as did the overall Nasdaq.
SOX looks ready to test 425 again as it plunked down on the 18 day MVA to close. It is interesting to note that relative strength on SOX barely made a new high on the rally the past week, the relative strength line forming something of a double top. That relative strength double top can indicate further selling even if the index itself does not show such a clear pattern.
S&P 500/NYSE
Gapped lower and sold to the 18 day MVA, giving up the breakout. Volume was a bit more serious as large caps test back into the prior range.
Stats: -12.25 points (-1.2%) to close at 1010.92
NYSE Volume: 1.498B (+9.99%). Big jump in trade as the big money dumped large caps stocks and other stocks as well. Two consecutive distribution sessions makes the 18 day MVA look like thin support.
Up Volume: 278M (-59M)
Down Volume: 1.222B (+200M)
A/D and Hi/Lo: Decliners led 1.99 to 1. Pretty ugly downside as small and mid-caps sold harder than the large caps. When the backbone of the rally sells, stocks will find it hard to move.
Previous Session: Decliners led 1.59 to 1
New Highs: 90 (-105)
New Lows: 10 (+7)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps are testing the 18 day MVA (1010) already after breaking below the top of the consolidation range at 1015. The break back down opens the door to more selling, particularly with the big jump in volume on the move lower. The 50 day MVA (994) is roughly mid-range and a good point to hold if it is going to make a stand. As with Nasdaq, the higher volume on the initial selling is not that troubling, but it will have to back down as it works lower to indicate the bigger waive of selling is over and stocks can start to build back.
DJ30:
Stats: -86.74 points (-0.91%) to close at 9420.46
Volume: 1.498B (+9.99%)
Undercut the 18 day MVA but managed to rebound to hold it. That is better action as most of the indexes closed right on the lows. It does not mean a whole lot at this stage, however, as it is very early in the pullback and DJ30 was unable to hold the breakout from the range at 9500. Volume was up but just average on the Dow. The selling has been on mostly moderate volume for the Dow and thus we would not anticipate a major drubbing. It is not typically the leader in this market however, and many money managers are concerned about chasing cyclical stocks right now, thus limiting its ability to lead. Looks as if it will try to make a stand between the 18 day and the 50 day MVA at 9268.
THURSDAY
The second anniversary of 9-11 tomorrow, and while investors may have some nerves about what might occur, when it is over there could be some relief in order. Nasdaq saw volume already decline on the selling, and another deep test lower could spark a relief rebound if nothing happens Thursday. More than likely though this is just one factor in the pullback, and a few of sessions to the downside as in the last pullback may not be enough to reset Nasdaq for another push higher being it just hit 25% over the 200 day MVA, struggled, and is now pulling back.
Despite the Wednesday selling there were still areas of strength as some money rotated to biotech, drugs, and internets with some impressive volume gains. That shows there was serious big money at work to pick up these stocks that have been forming solid bases as Nasdaq and the techs rallied. We are going to keep looking for those.
As for current plays, many are flirting with, right above or right below stop points. If a stock plunked down to a support level and held, we were inclined to leave it alone. If it broke support and was starting toward the next level lower we were inclined to close it out. We may see an intraday test lower Thursday and a rebound attempt late in the session. We will have to see how that pans out and what kind of buyside volume moves in to decide if it is worth buying into. We would like to see the pullback last on into next week, slowing its descent and lower the volume, and turning back up at the July highs to move laterally a big longer or start the next leg.
That is the wish list and there are no guarantees on this. The market, however, is still solid and though in need of a pullback, is not showing wholesale dumping. The time of the year and the proximity with 9-11 cause more trepidation than usual, but the action remains solid for now as the pullback really begins.
Support and Resistance
Nasdaq: Closed at 1823.81
Resistance: 1860 to 1865 tried to hold a bit on the way down, but was not a major level. 1930 - 1935.
Support: The August high 1812 and 1814. 1836 (10 day MVA) and the 18 day MVA (1808). 1776 the July high.
S&P 500: Closed at 1010.92
Resistance: The top of the range at 1015 could pose some resistance. 1050.
Support: June closing high at 1011. The 18 day MVA (1010). The exponential 50 day MVA (994) and 975 (December 1997 peak). 965 (August 2002 peak).
Dow: Closed at 9420.46
Resistance: 9500 (June 2002 lows) is the top of the recent range. 9735.
Support: The 18 day MVA (9429). 9361 the July intraday high down to 9353. The exponential 50 day MVA (9268). 9250 to 9236, the early June intraday high.
Economic Calendar
9-8-03
Consumer credit, July (3:00): $6.0B actual, $5.0B expected -$0.4B June.
9-9-03
Wholesale inventories, July (10:00): 0.0% actual, 0.0% expected, 0.0% June.
9-11-03
Initial jobless claims (8:30): 400K expected, 413K prior.
Trade balance, July (8:30): -$40.5B expected, -$39.5B June.
9-12-03
PPI, August (8:30): 0.3% expected, 0.1% July.
Core PPI: 0.1% expected, 0.2% July.
Retail sales, August (8:30): 1.5% expected, 1.4% July.
Retail ex-Autos (8:30): 0.8% expected, 0.8% July.
Michigan sentiment, September (9:45): 90.4 expected, 89.3 August.
SEMINARS ON CD
http://www.stockseminarsonline.com
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End part 1 of 2
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