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trend trading stock, stock trading site
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9/15/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued. Let SINA, ARTG and others run.
Buy alerts issued: PRSF; CYTO; ARTG
Trailing stops issued: None issued
Stop alerts issued: SPIL
MARKET SUMMARY
No buyside interest Monday, but it was not a bad session.
More Monday upgrades with IBM, AMAT and KLIC getting the nod before the open, though none of them performed well on the session. WMT stated it was at the high end of the September sales plan. The economic data on whole was positive. The market tried to make something of it, but was at best undecided as early gains failed and the indexes bounced up and down for an hour before settling into a day long downtrend.
Each rebound attempt was met with selling as the indexes could not maintain any traction. The large cap indexes were putting together another decent attempt at a late upside rally, but that was splashed in the last hour with a late round of selling. Nasdaq was the hole in the boat, trending lower all session and dragging the other indexes back when they tried to bounce.
The action, however, was not bad as Nasdaq held the 10 day MVA on lower volume while DJ30 and SP500 again tested and held their 18 day MVA. All of this was on low volume and was another session of consolidation over near support, attempting to make a higher low and set up the next upside attempt.
THE ECONOMY
Regional manufacturing continues to improve as Empire state report tops estimates.
September activity in the New York region easily topped expectations with an 18.35 reading and swamping the August showing (10.0) as well. Any reading above zero indicates expansion, and once again we see the various regional indexes gaining momentum even as the consensus economists expect slowdowns. Of strong interest was the hours worked index that rose to its highest level since July 2001 when the survey began.
Small business sentiment jumps.
Seems the idea among economists is similar to weather forecasters: play it safe. Assume solid growth cannot maintain its pace just as a weather forecaster on the Gulf coast throws in a 20% chance of rain each afternoon in case a sea breeze blows in. Instead they should be looking at the data, data such as the recent small business survey that shows soaring optimism among the main job creating machine in the economy.
The most recent NFIB (National Federation of Independent Business) survey of small business shows sentiment at an all-time, hitting levels not seen since the survey started in 1986. Nine of the 10 points covered in the survey showed solid gains. Capital spending is up. The outlook on employment is up (3 months ago there was an 8% increase in the employment outlook; this quarter there is a 14% increase). Sales are increasing and profits are increasing as well. It is not just cost cutting anymore, but true growth in the top line is starting to occur. That is generating optimism and capital spending even if the main concern is still the longevity of the recovery (the 'pinch me I think I am dreaming' syndrome).
This is more evidence that the jobs data provided by GE, GM, IBM, etc. and reported in the monthly jobs report are out of sync with what is happening in this recovering economy. Indeed, the NFIB spokesman said exactly that as he discussed the jobs picture and the reports we receive each day on the woeful problems.
Industrial production edges higher in August, revised higher for July.
The meat is in the revisions, and while production crawled higher by 0.1% (0.2% expected), the July number was revised to 0.7% from 0.5%. Capacity utilization came in steady at 74.6%, in line with expectations. Production of durables was dragged down by a 2.6% decline in the output of vehicles and parts, and that was caused in part by the power outage. Business equipment production was strong, however, rising 0.5% while non-durables production rose 0.2%. Again we see steady improvement in areas that have lagged or contracted during the long decline. It is important not to overlook this continuing trend as the data comes in month to month.
Wholesale inventories fall, sales surge.
In one of the most overlooked reports of the session, wholesale inventories for July fell 0.1% (-0.2% expected). Some view the lack of inventory building as bad news, but it really is a positive. First, inventories are counted as GDP. They have been falling for yet GDP is rising. That shows the GDP growth is real growth and not just excess inventory stacking up. Second, lower inventories in an improving economy means even more production of goods will be coming down the pipe. Third, wholesale sales are surging, showing their strongest increase in 4 months. With inventories falling and sales rising, it does not take long before production ramps up even more.
THE MARKET
The market did not go anywhere, but given the low volume and its continued hold over support, that was not bad. The intraday action was not the more bullish rally from early weakness, but things never got out of hand Monday as the indexes tested the 10 and 18 day MVA and held on low volume.
There was even early leadership as internet stocks jumped higher on strong volume. We characterize the action as early leadership because it may just be that the internets are starting to move ahead of the rest of the market. They have been leaders ever since the October low, and leaders tend to move ahead of the rest of the stocks, another attribute that gives them the moniker of leader.
The indexes continue to settle back over the near term support at the top of the summer trading ranges or the short term MVA. Volume remains low, indicating little selling of stocks as they settle back from the recent highs. Despite the daily talk of valuation regarding technology stocks and the fact that it is September (the worst month on average for stocks, but it is not always a bad month for stocks), stocks continue to hold their own. No great advance, no great breakout, but a rather orderly pullback to support that has held and is allowing the indexes to take a breather.
Market Sentiment
VIX: 20.25; 0.00
VXN: 32.93; +0.25
Put/Call Ratio (CBOE): 0.66; -0.24
NASDAQ
Steady downtrend all session, unable to gain any traction but managing to hold the 10 day MVA on light volume.
Stats: -9.33 points (-0.5%) to close at 1845.7
Volume: 1.466B (-14.56%). Big drop in volume ahead of the Tuesday FOMC meeting, but we doubt that was the catalyst as the Fed has made its intentions clear. Volume was below average and the lowest of the month.
Up Volume: 569M (-239M)
Down Volume: 887M (+3M)
A/D and Hi/Lo: Decliners led 1.13 to 1. No pernicious downside activity.
Previous Session: Advancers led 1.27 to 1
New Highs: 242 (+73)
New Lows: 8 (+4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq tested near resistance at 1860 to 1865 on the open (1862 on the high), tried that level again an hour later and failed to take it out. That short double top sent the techs lower and when a mid-day rebound failed well below the highs it slid lower all session, holding twice at the 10 day MVA (1841). Volume fell below average for the first session in September, an indication that there was no big money selling as Nasdaq tested close support. Despite the distribution two weeks back and the concern over tech valuations, the action is very orderly as the market takes a breather.
Nasdaq broke out of a cup with handle base in April and ran up to 1776, making 4 bounces up the short term MVA before coming back to test the 50 day MVA (now at 1751). From that test it has rallied again up the short term MVA, now making its second test. Indexes behave much as do stocks, and that means Nasdaq has a potential two to three more bounces up off of the short term MVA on this run. It is not a guarantee, but it is well within the norm to make such a move.
S&P 500/NYSE
Another low volume test of near support. It could not break higher, but it did not come close to breaking down.
Stats: -3.82 points (-0.38%) to close at 1014.81
NYSE Volume: 1.135B (-7.65%). Volume continued to work lower below average Monday. There was no accumulation Wednesday or Thursday on those up sessions, but there was no distribution Monday as the index sold lower. Nice, quiet action on a quiet test of the top of the range.
Up Volume: 395M (-321M)
Down Volume: 730M (+232M)
A/D and Hi/Lo: Decliners led 1.22 to 1. Very modest selling.
Previous Session: Advancers led 1.48 to 1
New Highs: 131 (+24)
New Lows: 8 (-5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps have moved laterally the past four sessions, holding over the 18 day MVA (1011) as it continues to test the top of the 2.5 month summer trading range. The index made the breakout in early September and has come back to test that breakout on low volume. This is a pattern we look for in our stock plays, and thus there is promise in the SP500 action despite the distribution early last week. We want it to continue to hold the 18 day MVA and then advance on stronger volume. SP500 is set for a rally; it just needs the trigger.
DJ30:
Stats: -22.74 points (-0.24%) to close at 9448.81
Volume: 1.135B (-7.65%)
Similar action to the SP500, the DJ30 is sitting on top of the 18 day MVA (9437) after testing that level on the session low and rebounding a bit. The difference is that DJ30 is below the August highs at 9500 and will have to break through those on any upside move. It too showed two distribution sessions last week, but checked up at the 18 day MVA and near the top of its summer trading range. It is set to move, but it will take more to break it loose given the resistance at 9500.
TUESDAY
In the weekend report we said we wanted rising volume and leadership off the 18 day MVA. No strong upside buying emerged to push stocks higher off that level, but no sellers emerged either. Some leadership did show up as internets, one of the early leadership groups from the October low, surged up on strong trade. With the indexes drifting back for another test of near support on low volume and showing no new distribution, the question is whether they will follow the leadership that is trying to point the way.
Many stocks are still in good position to rally, just as the indexes are in good position to rally. The horse has been led to water and now we see if it can drink. The FOMC has a one-day meeting Tuesday with results at 2:15ET. While there is little unexpected that will come from the meeting, the lower volume indicates some investors are waiting for a reason to step back in. Last FOMC meeting there was a modest rally into the announcement, and after another early test of the near support we may see the same action Tuesday.
Again, we see stocks in good position to break higher if the buyers are ready. Good patterns indicate overall accumulation, but you have to see the catalyst, the breakout on volume, for the pattern to warrant a buy. As always we find the stocks ready to make the move and then we see if they make it. Leaders often make their moves before the overall market, and we saw some of that today. There are others ready to join them and allow the indexes to rally off of near support and beyond the summer consolidation range.
Support and Resistance
Nasdaq: Closed at 1845.70
Resistance: 1860 to 1865 stopped the index Monday. 1930 - 1935.
Support: The 10 day MVA (1841) held Monday. The 18 day MVA (1820). The August high 1812 and 1814 held Thursday. 1776 the July high.
S&P 500: Closed at 1014.81
Resistance: 1030 to 1032. Then 1050.
Support: The top of the range at 1015 is weaker support but holding for now. June closing high at 1011 and the 18 day MVA (1011). The exponential 50 day MVA (997) and 975 (December 1997 peak). 965 (August 2002 peak).
Dow: Closed at 9448.81
Resistance: 9500 (June 2002 lows) is the top of the recent range. 9735.
Support: The 18 day MVA (9437). 9361 the July intraday high down to 9353. The exponential 50 day MVA (9289). 9250 to 9236, the early June intraday high.
Economic Calendar
9-15-03
Business inventories, July (8:30): -0.1% actual, 0.0% expected, 0.0% June (revised from 0.1%).
Current account, Q2 (8:30): -$138.7B actual, -$138.2B expected, -$138.7B Q1 (revised from -$136.1B).
Industrial production, Aug. (9:15): 0.1% actual, 0.3% expected, 0.7% July (revised from 0.5%).
Capacity utilization, Aug. (9:15): 74.6% actual, 74.6% expected, 74.6% July (revised from 74.5%).
9-16-03
CPI, August (8:30): 0.3% expected, 0.2% July.
Core CPI: 0.2% expected, 0.2% July.
FOMC meeting results (2:15)
9-17-03
Housing starts, August (8:30): 1.830M expected, 1.872M July
Permits, August (8:30): 1.800M expected, 1.800M July.
9-18-03
Initial jobless claims (8:30): 410K expected, 422K prior.
Leading economic indicators, August (10:00): 0.4% expected, 0.4% July.
Philly Fed, September (12:00): 18.0 expected (revised from 15.1 after the NY report), 22.1 August.
FOMC minutes (2:00)
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.
THE PLAYS:
Good movers Monday: ARTG; BDY; CYTO; EBAY; GLFD; LUV; NTOP; SINA; SKWY
New Plays:
Upside:
Play Date: 09/15/2003
IVIL (Ivillage--$2.5; +0.06; no options): Internet information provider
http://biz.yahoo.com/p/i/ivil.html
STATUS: Cup w/handle. Internets were the leadership group Monday, and though IVIL did not breakout, it was moving higher in its pattern on strong volume. It is in the handle of a nice 9 week base that is showing solid 4 to 2 accumulation (4 up price weeks on rising volume to 2 down price weeks on rising volume); that indicates the stock was being accumulated as it corrected back to form the current pattern. Money flow is surging up ahead of price and relative strength is ready to make a breakout with the stock price, a good indication of the stock's strength.
Volume: 367.26K Avg Volume: 200.454K
BUY POINT: $2.66 Volume=335K Target=$3.38 Stop=$2.31
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/ivil.html
Play Date: 09/15/2003
NUVO (Nuvelo--$2.88; +0.41; no options): Diagnostic substances
http://biz.yahoo.com/p/n/nuvo.html
STATUS: Cup breakout. Drugs, medical appliances and diagnostics are solid sectors. NUVO just blasted from a 3.5 month cup base Monday, rallying on a strong volume surge. Accumulation in the base is an outstanding 7 to 0, accompanied by surging money flow and a relative strength breakout. Volume was very low and well below average in at the bottom of the base that spanned two months and held the 50 day MVA (2.08) as support while it worked laterally. Volume then swelled on the move up to complete the base. This is very good price/volume action, just what it should be in the base. Looking to move into positions on a continued move on this breakout.
Volume: 1.095M Avg Volume: 317.772K
BUY POINT: $2.94 Volume=477K Target=$3.75 Stop=$2.55
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/nuvo.html
Play Date: 09/15/2003
ORCC (Online Resources--$6.56; +0.11; no options): Internet software and services
http://biz.yahoo.com/p/o/orcc.html
STATUS: Cup w/handle. ORCC is working in a 10 week base, working laterally the past two weeks to form a handle over the 18 day MVA (6.16). This is the point where the stock frustrates those that bought at the high right before the stock started to fall into the base. They see the rally back up, but see it stall. They sell in frustration. Accumulation in the base is a strong 3 to 1 with solid money flow leading up ahead of price. Monday ORCC gapped higher on stronger volume but could not move further. Volume was better but still below average. It is right at the breakout point, but it may fall back to the 10 day MVA (6.29) before rallying to a breakout on strong volume.
Volume: 56.7K Avg Volume: 112.5K
BUY POINT: $6.78 Volume=165K Target=$8.51 Stop=$6.35
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/orcc.html
Downside:
Play Date: 09/15/2003
KRON (Kronos--$53.55; -1.78; optionable): Business equipment (modern time clocks, etc.)
http://biz.yahoo.com/p/k/kron.html
STATUS: Put. KRON was performing very well, forming a nice base from June. It did not give the strong breakout, however, and until a stock makes a strong break and proves up the base it can fail. KRON did that, falling through the 50 day MVA (54.92) Monday on a strong volume surge. That strong volume on a move through an important support level indicates big money was getting rid of the stock. It may bounce up to test the 50 day again before falling further as it did rebound off of the session low (52.59). That is our favorite entry point: some rush in to try and grab a 'bargain' but not as many as were dumping it on high volume. If it makes it up to the 50 day on lower volume and fails, that is a great entry point. We will look for positions on a further fall, and then add positions on a rebound to test the 50 day.
Volume: 350.518K Avg Volume: 152.727K
BUY POINT: $53.34 Volume=200K Target=$49.55 Stop=$54.55
POSITION: KUE VK - Oct. $55p (-60 delta)
http://www.investmenthouse.com/ci/kron.html
End part 1 of 2
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