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us stock market, trade stock
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9/17/03 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: HBIO; SINA; BHE
Buy alerts issued: SRA; MND; ENCY; PLXT; SFE
Trailing stops issued: None issued
Stop alerts issued: 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. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market unable to carry through and break early September highs.
- Housing starts in line, weaken while permits rise.
- Nasdaq churns slightly as stocks pause after strong gain.
Rally attempt after softer open fails.
The SP500 was the market bell cow Wednesday, and when it twice tapped at resistance and twice failed to take it out, the market turned lower and could not get back up. After a strong break higher Tuesday on the heels of a nice pullback, stocks were winded. In choppy trade they posted slight gains only to give them back. No big money was ready to move in again and drive prices higher as they came back. Nasdaq tried a rally in the last hour and managed to bounce 7 points or so off the low, but it was no resurgence of buying activity that did it.
The pause after the Tuesday rally was not wholly unexpected, but it was down the list a ways. After stocks had pulled back to test the prior breakout, it appeared they had caught their breath and were ready for a more substantial move. They reached down Wednesday and not a whole lot was there to drive them higher. Instead a rally attempt failed and stocks found themselves drifting lower in the afternoon. Nasdaq closed down but off its lows on a slight volume increase while the other indexes, large cap and small, finished in the red as well.
There were no upside catalysts for sure. The housing and permits numbers were in line and would not have provided a spark in line or not. Instead there was the revisited issue of corporate governance type issues as the furor over Dick Grasso's pay package continued to grow. There is a definite lack of backbones with anyone involved in approving Grasso's pay package. In the current climate if you make a lot of money you are presumed to be on the take or somehow gaming the system, contract or not. There is talk of disgorging big chunks of the pay, etc. While you may have a problem with the amount, it should disturb everyone when we hear our leaders talking this way. If the ability to enter private contracts that do not involve illegality is undermined by the government, our economy and financial markets will be hurt much more than whatever damage, if any, Grasso's pay package caused. It is a hell of a lot of money, but it was approved and paid according to contract. Undermine the rule of law and we will see just how well the U.S. economy attracts the foreign investment so necessary to its continued advance. This issue was hanging over the market Wednesday, but the problem was not the governance issues everyone talked about. The market looks longer term, and this issue is nowhere near the Enron, WorldCom, Global Crossing caliber. The real long term issue is the sanctity of the rule of law and the ability to enter private contracts without government intervention that chilled the action.
THE ECONOMY
Housing starts slide 3.8% while permits rebound 4.8%.
Both reports were in line, and thus there was very little reaction to them. Housing continues to soften some but from already strong levels. It is not dropping off a cliff with higher rates that are, by historical measure, still quite low. Permits were down in July and that had some concerned, but we noted the permits had been volatile for over a year, bouncing up and down even as the housing market surged. Suffice it to say that the market remains in good shape though the big boom is over.
THE MARKET
The key theme today was overall lethargy after a solid Tuesday move. There were certainly strong moves yet again, but overall the action was very quiet. No big buyers stepping in when the index traded lower, no big sellers pushing stocks down. When the indexes made it to next resistance, there was no buyside interest to carry them higher. Nasdaq spun its wheels on rising volume, holding steady and unable to advance. When that occurs on higher volume after a run or at a resistance level that is called churning and indicates that some big money was unloading shares into the buying.
Churning is a form of distribution, and while it does not in itself mean a move has ended, when it occurs at resistance and right after an accumulation session it is not the best action. Nasdaq has shown a churning session early in the month and a couple of distribution sessions and still maintained the trend. Nothing comes easy for the market, but that is what keeps it moving higher. We have had our own healthy skepticism, but that did not keep us from moving into plays when the market said to do so, and we are a lot better off for having followed the market and not our own emotions. Now we will watch to see if stocks can continue the break higher from Tuesday. Looks good still, and after a test lower Thursday, it may be ready to try again.
Market Sentiment
VIX: 19.62; +0.31
VXN: 31.75; +0.09
Put/Call Ratio (CBOE): 0.74; +0.08. Stays strong as option players are ready to jump on the downside at the whiff of selling.
NASDAQ
Churned on a rise in volume, showing a doji right at the early September highs.
Stats: -4.15 points (-0.22%) to close at 1883.1
Volume: 1.907B (+5.77%). Volume ticks higher as the market holds basically flat. The relation of price and volume indicates some bigger money selling stocks.
Up Volume: 1.014B (-485M)
Down Volume: 868M (+597M)
A/D and Hi/Lo: Decliners led 1.05 to 1. Very modest, matching the action in the index itself.
Previous Session: Advancers led 2.18 to 1
New Highs: 330 (+47). As one subscriber correctly noted, the new highs on the Tuesday move were meager compared to when the market hit this level early in the month. What does that mean? The index is moving toward highs, but there is not much leadership outside the index big names if there is no surge in new highs. They are about half of what they were at that time. Any time you see some indication of strength lagging below where it was at the same price from an earlier time (e.g., money flow, relative strength, MACD peaks and valleys), that is a sign of a weaker move and could spell trouble. If the indexes can clear the September highs you would expect new highs to jump back up near 100 or more.
New Lows: 4 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Doji right below the early September high (1888.65) as Nasdaq hit 1894.74 on the high but fell back. Volume climbed as Nasdaq ran in place. That can indicate a problem and raises the specter of the feared double top pattern that can be a catalyst to downside action. That remains to be seen. Much like a good upside pattern, until there is a breakout from that pattern it remains unproven. But for the higher volume this would simply be a pause after a good rebound on volume Tuesday. The volume ticking higher makes the call more difficult, but that is the hallmark of this market and this index. There continue to be valuation worries, September worries, economic worries, etc., all creating that wall of worry to climb. We anticipate Nasdaq to test lower early Thursday and then try a run through this level. It needs to make the break sooner than later as it has already had its breather and now needs to run if it is going to move higher near term.
S&P 500/NYSE
Same story for the large caps, spinning their wheels at the early September high, but volume was lower, indicating no big money dumping.
Stats: -3.35 points (-0.33%) to close at 1025.97
NYSE Volume: 1.318B (-3.71%). Volume edged back as stocks of all size on the NYSE took a breather.
Up Volume: 612M (-539M)
Down Volume: 668M (+461M)
A/D and Hi/Lo: Decliners led 1.05 to 1. Very modest downside breadth, but this is almost an exact match to the price action and thus no surprise.
Previous Session: Advancers led 2.61 to 1
New Highs: 192 (+19)
New Lows: 13 (0)
The Chart: http://www.investmenthouse.com/cd/^spx.html
SP500 twice tapped at near resistance at 1032 and both times retreated. It never threatened near support at 1015 as spent most of the session trying to break above the flat line. In the end it managed a small rise off the session lows to close. While it was unable to carry further on the Tuesday rebound move, it was a session where it held its place on low volume, keeping well positioned for a further move higher. As noted Tuesday, it is coming off a good consolidation and testing the breakout from that level. It has plenty of rest. If it is going to make a further move you would expect it to do so rather quickly.
DJ30:
Stats: -21.69 points (-0.23%) to close at 9545.65
The blue chips showed the same action, stalling just below the early September highs (9609) and fading back slightly. Very small loss but the aggregate volume on the Dow 30 was higher and slightly above average. DJ30 did clear an important point at 9500 on Tuesday and held well above that in the Wednesday trade. A test of 9500 that holds, followed by a break over the early September highs on stronger volume would put a lot of issues to bed.
THURSDAY
Initial jobless claims, Leading Economic Indicators, and the Philly Fed will make this session much more interesting that Wednesday. In addition there is the resignation of Grasso this evening, and that could remove some of the pall on the market Wednesday.
The quick rebound from the test on decent volume should yield a breakout over the September highs in the near future if the market is going to make more headway without stumbling around for another few weeks. It has had all the rest it is going to get without a deeper pullback, and if it cannot make the move over the next session or two it obviously needs more rest.
We expect it to follow through on the Tuesday move this week, but you should always be careful of expectations and the market. In short, it pays to be skeptical at all times, demanding good moves to enter, taking partial gains along the way, and then exiting if stocks break support or the trend. The Tuesday move was solid and on breadth. The Wednesday action was mixed with some selling on a slight volume increase on Nasdaq. There are still those ready to pull the plug, but thus far the market keeps to its trend, and as noted, that concern in itself helps keep the market surpassing expectations.
Thursday we are looking for a further test lower early unless there is some really positive jobs news. That would be a stretch, so we are looking for a softer open and then we will watch for buyers to move in and try to take the indexes over the early September highs. Again, the market has set up for this move. If it does not take it soon that is an indication of a lack of committed buyers to push it higher from here. Nasdaq is still 24% over its 200 day MVA as it is more extended than SP500 and DJ30. Still, it is the leader, and if it does not go, the others have a harder time. This market has been one that has moved in unison. Thus we will be watching Nasdaq closely the next two sessions to see if it can break the September highs and with what force it makes the move.
Support and Resistance
Nasdaq: Closed at 1883.10
Resistance: 1889 (early September highs). 1930 - 1935.
Support: 1860 to 1865. The 10 day MVA (1856). The 18 day MVA (1823). The August high 1812 and 1814 held Thursday. 1776 the July high.
S&P 500: Closed at 1025.97
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 (1015). The exponential 50 day MVA (999) and 975 (December 1997 peak). 965 (August 2002 peak).
Dow: Closed at 9545.65
Resistance: 9609 (early September highs). 9735.
Support: 9500 (June 2002 lows) is the top of the recent range. The 18 day MVA (9461). 9361 the July intraday high down to 9353. The exponential 50 day MVA (9310). 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): 1.820M actual, 1.830M expected, 1.892M July (revised from 1.872M).
Permits, August (8:30): 1.886 actual, 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.
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