|
|
us stock market, stock prices
* * * *
9/16/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Tuesday: None issued. Again we were letting winning positions run with the market.
Buy alerts issued: ORCC; CKR; SPRT
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:
- Investors hear what they like from the Fed and stocks run.
- Consumer prices in check, Fed going to keep rates low.
- Volume climbs back over average as buying resumes. Not a blowout but market likes the regulatory climate.
- Subscriber Questions
Market drifts higher ahead of Fed, rallies after.
The last few Fed meetings have gone to a similar script: drift higher into the number and then a dip. Where from there has been another story. Tuesday it was up. A slight dip after the announcement gave the buyers the angle they wanted. Some buy programs hit, volume jumped, shorts covered. It was almost straight up the last hour and one-half as volume climbed and breadth reached early morning levels, easily topping 2:1.
There was still talk that volume was light, but volume was sharply higher and above average. It may not have been blowout, but it was once again the return of positive price/volume action: rising on up sessions, falling on down sessions. That helped the indexes the past week as they tested near support, gathered themselves, and then rallied on a solid volume surge. This was the first step, and the market was hitting on most cylinders.
THE ECONOMY
Fed speech is basically the same, but this time it is music to market ears.
The Fed made no change in interest rates and basically made no change in its statement. In sum it said the upside and downside risks were equal, how the risk of lower inflation remains the concern for the foreseeable future, and that the Fed would remain in its accommodative position. About the only change it made was to not that the labor market was weakening somewhat.
No big news there, but when you ladle on the Fed governor statements that explicitly state the Fed will not react to increased economic activity as it had in the past (or would expect), i.e., it is not going to jack up rates at the first sign of recovery, the market basically got a blank check. After this bust in the economy that the Fed caused, it may, just may, go back to the early Greenspan Fed that followed the financial markets with rates instead of trying to manage the economy with the mallets of interest rates and Fedspeak. That is precisely the type of free market attitude that is needed, the attitude that worked fantastically until the Fed started to think it was the cause of the prosperity and could actually control the economy's growth rate. It did control it, but in the usual manner: it crashed the market and the economy.
This was super news for the market. Whether or not you agree with the Fed and its actions of late, what it is saying and doing is creating a growth environment for stocks. It is telling us all that it is not going to get in the way of growth in the economy or appreciation in the equity markets. It is not, in other words, going to harpoon the recovery and create yet another bust.
Thus while the talk of overvaluation populates the conversations of the financial stations each afternoon, the market still moves higher. Why? Because value is relative and depends upon the circumstances. High P/E ratios in high interest rate, slow or negative growth environments are bad; when stocks are not growing sales and earnings there is no reason for prices to climb. They will do the opposite as we saw in the long downtrend. High P/E ratios when interest rates are low, the Fed is keeping them low, there is fiscal stimulus, disposable income is rising, investment is increasing, the economy is growing, and sales and earnings are starting back up are relatively not as important. People try to guess at what is fair value, but the market and stock movements rarely, rarely, rarely track these guesses as to value. Back in 1995 I bought another block of Dell when it broke out of a base and the P/E ratio was about 80:1. Dell ran from $22 to over $150 before it peaked on that move. All the while friends and brokers continually worried me over valuations. Seems I was calmer about my own investments than my brokers. The point is, in that environment there was growth ahead and stocks were in a growth mode. Instead of worrying over something the market itself was not concerned about, I let Dell run and split, run and split. In the end its earnings momentum peaked, and so did Dell. That is inevitable, but there is no reason to sell a stock because of some subjective feeling it was overvalued. Indeed, I would never have bought Dell if that was my concern.
THE MARKET
After resting at the 18 day MVA for the indexes found their footing and rallied on stronger, above average volume. Sure it was not blowout volume and there were some dismissing the action as short covering, but short covering is a necessary part of each rally, and frankly, there are not a ton of shorts in the market, at least not as many as there were back in March. The action was a mix: some covering, some buying, and some more buying as acknowledged by several floor traders who cited a few buy programs after the Fed announcement that helped shoot the indexes straight up.
The surge pushed the indexes right back up to their recent September highs. If this is a real buying bounce and a continuation of the run up the short term MVA for the Nasdaq and a successful test of the breakout on DJ30 and SP500, those levels should prove to be little trouble. The breadth was impressive, the volume solid, and the gains eye popping in some instances. You can find fault with it, but heck, we could find fault with Bo Derek in '10' or in Nadia Comaneci's Olympic performances if we wanted to be stubborn. That would not, however do us any good. The move was what the market needed, and the next step is to clear those recent highs.
Market Sentiment
VIX: 19.31; -0.94
VXN: 31.66; -1.27
Put/Call Ratio (CBOE): 0.66; 0
NASDAQ
Up off the 10 day MVA on a nice surge of above average volume. Some impressive moves across the board as the smaller issues joined in.
Stats: +41.55 points (+2.25%) to close at 1887.25
Volume: 1.803B (+22.98%). Not on par with volume that started the month, but an excellent increase as the index moved up off of near support in the test of the recent run higher. Volume swelled after the FOMC decision.
Up Volume: 1.499B (+930M)
Down Volume: 271M (-616M)
A/D and Hi/Lo: Advancers led 2.18 to 1. Best upside breadth since early in the month.
Previous Session: Decliners led 1.13 to 1
New Highs: 283 (+41)
New Lows: 5 (-3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Monday we discussed how stocks and indexes run up the 10 and 18 day MVA after making breakouts. After a week long test of the short term MVA Nasdaq was moving higher again and on stronger, above average volume. Its next resistance is the September highs (1888.65) to 1900, then 1945, some former price tops. The really big barrier is the twin peaks near 2050 from December 2001 and January 2002. Of course if it makes it that far on this run it will be moving forward and then testing, forward and then testing. In other words more of what we have seen. That is how a market moves, i.e., in a series of advances and smaller losses. That allows Nasdaq to rally and then work off the excesses as it did the past three weeks as it shows more volatile action, dips back to support, and then rallies after the fluff is taken out. Nasdaq will still have to make these internal corrections as it moves higher because it will again get ahead of itself and need to test. We are still not totally comfortable with the lack of a real consolidation similar to SP500 and DJ30, but the market's action is the final decision on how we proceed. The Tuesday action was a good resumption of the move higher after an orderly pullback.
S&P 500/NYSE
Nice action, rallying off the 18 day MVA in a breakout test, moving ahead on rising, above average volume.
Stats: +14.51 points (+1.43%) to close at 1029.32
NYSE Volume: 1.368B (+20.59%). Nice surge and above average for the session. Definitely shows buyers returning though not in a stampede.
Up Volume: 1.151B (+756M)
Down Volume: 207M (-523M)
A/D and Hi/Lo: Advancers led 2.61 to 1. Excellent breadth as all stocks joined in the move. This gives much more credence to the move.
Previous Session: Decliners led 1.22 to 1
New Highs: 173 (+42)
New Lows: 13 (+5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
A solid advance off of the 18 day MVA (1013) on volume. The action makes this look very much like the successful breakout test that we discussed in the Monday report where SP500 based laterally for 2.5 months, broke higher, tested that move, and has now made a higher low at support followed by a break higher. It still needs to clear the recent September highs (1033), but it has started from a good technical pattern and it should be able to do that. The large caps have put in the rest, have shown some accumulation, and are now attempting to make the breakout in earnest. Stellar breadth gave it the attributes of a solid follow through session.
DJ30:
Stats: +118.53 points (+1.25%) to close at 9567.34
Volume: 1.368B (+20.59%)
DJ30 broke over the August highs at 9500 on rising though still below average volume for the Dow 30. Thus it was not as powerful as the other indexes, but it was the move it needed to make. It has the early September highs (9610) to clear, but it is getting help from DJ20 (the Dow transports) as well. The transports are ready to break to a high and could move over the May and June 2002 tops. That would go a long way in supporting DJ30 on a further advance.
WEDNESDAY
Housing starts and permits out before the open, but these are not the market movers they used to be as it is rather accepted that the housing market is slowing down. After such a strong move how the indexes reaction at the September highs will tell us more, but as discussed above, they should not prove too great an impediment. That does not mean the indexes will power right past them Wednesday or Thursday as if they were not there. They could very well run up to that level and walk sideways a session or two and then move higher. With the solid Tuesday move you would prefer to see them break right on through, rally, and then come back to test that level.
Tuesday the market gave us basically what we were looking for, i.e., the successful test of the break higher. Now we anticipate a test of the early September highs and some resistance there that gives way. The big issue ahead for stocks will be when the index comes back to test that breakout. Once again we need to see that hold on lower volume, etc. Let's not get too far ahead, however. Good move off support and it should provide a break over the September highs over the next couple of sessions.
Support and Resistance
Nasdaq: Closed at 1887.25
Resistance: 1930 - 1935.
Support: 1860 to 1865. The 10 day MVA (1850). The 18 day MVA (1827). The August high 1812 and 1814 held Thursday. 1776 the July high.
S&P 500: Closed at 1029.32
Resistance: 1030 to 1032. Then 1050.
Support: The top of the range at 1015 is weaker support but held on the last test. June closing high at 1011 and the 18 day MVA (1012). The exponential 50 day MVA (998) and 975 (December 1997 peak). 965 (August 2002 peak).
Dow: Closed at 9567.34
Resistance: 9735.
Support: 9500 (June 2002 lows) is the top of the recent range. The 18 day MVA (9451). 9361 the July intraday high down to 9353. The exponential 50 day MVA (9300). 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% actual, 0.4% expected, 0.2% July.
Core CPI: 0.1% actual, 0.2% expected, 0.2% July.
FOMC meeting results (2:15): Fed Funds rate held steady at 1%. Risks of upside/downside in the economy roughly equal. Main focus is potential for rate of inflation dipping too low for the foreseeable future and thus Fed will remain accomodative.
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)
SUBSCRIBER QUESTIONS
Q: Is watching the Bid and Ask Size ie. 20 x 30 intraday helpful or not, and if it is please explain the best way to use it, if not, why. Your making a believer out of me. It really is possible for the little guy to make money in the Stock market even with all the questionable (dishonest) things that happen. Your the best mentor I have ever had. Hope to meet you in person some time.
A: Yes, you can make money in the stock market by learning what the important signposts are. Your question is a good one, and we will go into detail in more Subscriber Questions over the next few weeks. Basically what you are looking at is the amount of stock that is for sale versus that amount that buyers want to buy. The size is the amount of stock that is being offered or bid as a particular price. The 'best' price from each is ast the stop of the list on a market depth screen along with the size for each price. The action occurs quickly, and it takes quite a bit of observation to finally get a feel for the ebb and flow.
The neat thing about looking at this is that it shows you if there is a lot of supply for a stock at a certain price. Lets say a stock hits the buy point but the volume is questionable; could be better but is not bad. You go over and look at the market depth (e.g., Nasdaq Level II or the like) and see a lot of supply at a price right above what your buy point. That does not happen a lot because we are looking to buy when a stock clears a resistance point, but it can always pop up. You may not wan to step in and buy right then if the volume is not there because you could move in, enjoy a small rise, and then see that supply hit the street and push the price back down. Now if the stock can recover and continue the move, then you have some strength there. If you see a lot of buyers lining up versus supply for sale, the stock could be ready for a strong move. If it has hit the buy and volume is still just so-so, we may go ahead and enter some positions on this stock even with volume not quite where we want it.
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 3
|
us stock market
stock prices
|
