|
|
world stock market, us stock market
* * * *
9/22/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Monday: NERX
Buy alerts issued: None issued
Trailing stop alerts: ASPT
Stop alerts: TGT
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:
- Currency issues gap market lower and stocks only modestly bounce late.
- Indexes hang onto support as volume backs down.
- This test of near support sets the stage for the near term action.
Consensus on currency is not what world markets wanted.
If it isn't broken, don't fix it. A simple rule of thumb but regulators the world over are, of course, smarter than markets. The Fed thought it was smarter than the markets when it raised rates purportedly in an attempt to stave off yet to appear inflation. It was so smart it crashed economy, the first indication of which was the plunging stock market. It did such a thorough job we had arguably the worst bear market since the Great Depression. Monday the world equity markets made it clear they don't like what they heard from the G-7 economic conference. Sure it sounds good when they all agree to let market forces determine currency values, but most everyone in the market looks through that general statement to what really happens: they call it market forces and then take whatever actions they think necessary to make the market forces do what they want them to do. It is actually code for more regulation.
The world markets are just now coming around with Japan showing real recovery level gains. It sliced off 4% Monday, its worst loss since immediately following the 9-11 attacks. The rest of the world markets were selling as well in disapproval. They had been recovering despite the supposed problems of China tethering its currency to the dollar. It seems the 'free' economies are trying to impose their will on other economies via the 'free market.' It is a protectionist move spawned by the furor over jobs that cost $25K/year in the US that move to China where they cost $1500/year. Seems the free market is working as it usually does, i.e., moving jobs according to cost efficiency. The actions of the G-7 are one part in what we think will be more protectionist actions by the Bush administration to try to stem the flow of jobs. Bush has been good and bad on the economy. Good to give incentives to invest in the U.S., bad in then setting up protectionist policies that contravene free markets and the very investing in the country that it seeks.
You can debate the merits of an action up and down on both sides, but the best read of any action is how the markets respond. The world market voted 'no' on the consensus reached because it does not believe the free market will really be allowed to work. The basic idea is a concern that the US' and its market forces view of a strong dollar will allow the dollar to weaken. That will cause interest rates to rise and overall lessen the desirability of investing in US projects. That sends home even more dollars as dollars are converted to other denominations for investment in other countries, and the decline only worsens.
The root question, however, is how strong is the economy in the country you are investing in. People put money into an economy because it has good growth prospects along with stability, rule of law, and all the other characteristics of strong and safe investing. Thus regardless of the strength of the currency in absolute terms, the real attractant to investment is the economic strength and opportunity. At this stage of the world economy, the US is one of the very desirable investment choices. If the world economy continues to recover others will join the list of most desirable as well. Thus the key is what the economic future holds for a country as opposed to the relative strength of the dollar. Remember, the dollar is still relatively very strong even after the decline in 2002. Indeed, the weakening dollar from very strong levels helped start the US recovery.
Wal-Mart still at top of plan.
While there was no scheduled economic data released, WMT issued its weekly guidance and again maintained it at the top of its 3% to 5% range. It specifically noted that the blackout had not interfered with its sales. That is very encouraging when a loss of power in the Midwest shows no impact on the largest retailer.
THE MARKET
There was no more upside to Nasdaq as some outside forces intervened on an otherwise solid move up from the breakout test. Indexes gapped lower and fell to near support. They managed to hold and bounce some toward the close, but they shaved very little from the losses piled on for the session. Breadth was terrible as small and large caps sold together. Indeed, the SP600 is struggling with a slightly lower high than its early September high. It was good to see stocks hold mostly at support along with the indexes, and volume backed off on the selling. There were very few buyers in the market Monday, but at least the sellers were fewer in number than on the buyers last week.
Was this the start of the September dip? The action certainly reversed from last week's steady rise on solid volume. It was also, however, the Monday following the quarterly quadruple witching, and the last two (now three) such sessions have been pretty ugly. Again, it was good to see the indexes hold at support on lower volume. That shows no share dumping. In other words many of the institutions that were buying just last week were still holding onto stocks even with the selling. It was not a positive day by any stretch, but key underlying themes to the market's rise continued to show up (holding support, lower volume selling). The point loss was large, however, and the indexes will have to pull it together after a pretty serious downside gap to keep those ready to sell just because it is September from going ahead and pulling the trigger and starting some more serious selling.
Even with the selling there were continued strong movers. Internet stocks such as SINA, SOHU, NTES, etc. moved higher even with supposed valuation concerns hitting other stocks. Upside opportunity is still in the market even when it pulls back as the overall trend is still up.
Market Sentiment
VIX: 19.65; +0.58
VXN: 27.94; -1.8
Put/Call Ratio (CBOE): 0.75; +0.07
NASDAQ
Gapped lower, undercut the 10 day MVA, but then recovered that level with a late bounce. Volume backed off on the selling.
Stats: -31.08 points (-1.63%) to close at 1874.62
Volume: 1.73B (-9.26%). Dipped close to average on the gap down, indicating that there were fewer sellers Monday than buyers last week. That was about the only ray of sunshine on the session that was ugly from the start.
Up Volume: 365M (-521M)
Down Volume: 1.324B (+330M)
A/D and Hi/Lo: Decliners led 1.93 to 1. This is a vast improvement over the almost -4:1 ratio early in the session.
Previous Session: Advancers led 1.07 to 1
New Highs: 246 (-136)
New Lows: 1 (-3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq did not have a chance to continue its nice advance and bounce a couple more sessions as extra-market forces intervened and gapped it to lower. It traded around the 10 day MVA (1873) and tapped at near support (1865) twice on the session low. It managed a modest bounce off of that double bottom late in the session, but it was no groundswell of strong buying. It is still very much in the uptrend from March, and even a test of the 18 day MVA (1850) would not be disastrous as long as lower volume continues. The market has to work through what this G-7 'consensus' means, and if it does so on lower volume that is a positive as the big money mostly holds onto its stocks while it works through the possibilities. Nasdaq gapped lower 9 sessions back on lower volume as well and was able to recover after holding the 18 day MVA. If it is to maintain this current round of bounces up the short term MVA, it will have to hold at the 18 day MVA. Indeed, we anticipate that it may test toward the 18 day intraday Tuesday.
S&P 500/NYSE
Large caps were sold along with all other stocks, but they too tested support and rebounded some as selling volume turned well below average.
Stats: +0.07 points (0%) to close at 1022.82
NYSE Volume: 1.239B (-14.7%). Below average volume on the selling, another indication that the selling was not the out and out dumping of stocks.
Up Volume: 237M (-423M)
Down Volume: 1.001B (+229M)
A/D and Hi/Lo: Decliners led 2.64 to 1. Well over -4:1 early in the session.
Previous Session: Advancers led 1.22 to 1
New Highs: 109 (-177)
New Lows: 8 (+1)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Gapped lower and sold to the 18 day MVA (1020) and the June intraday highs (1015) where it managed a modest rebound. Modest is the word as it closed well in the lower quarter of the session range. Volume really contracted on the pullback, however, back to pre-September levels. The point loss was strong but the volume and the hold at support were solid positives. It has not made a lower high but can hold this support level and rebound and still have made a higher high and a higher low, the definition of an uptrend.
DJ30:
Stats: -109.41 points (-1.13%) to close at 9535.41
The blue chips suffered a similar fate, falling to test the 18 day MVA (9503) on the low and rebounding slightly to close. DJ30 volume contracted to below average as it tested support at 9500 (the August intraday highs). Decent action given the size of the price losses, and as with SP50, it is in position to make a higher low again if it can digest this news and move back up from here.
TUESDAY
Still no scheduled economic news for Tuesday, but as seen Monday that does not necessarily mean there won't be any economic sensitive news hitting the market. The Fed governors have been very active lately and we could hear more from them. And of course there is the earnings warnings possibility. Thus far, however, the ratio of positive to negative is running 7:1. Pretty good showing thus far, but the ratio does not mean much when a big name comes out and says it isn't going to make it.
More immediate is how the market responds to the Monday session. Intuitively the negative argument regarding a weaker dollar does not hold, at least at these dollar levels. The dollar is still relatively strong to where it has been in the past. Moreover, the weaker dollar did in fact help the US economy last year as it helped the big multinationals start propping up earnings. No doubt that is what emboldened the Bush administration to further pursue the 'strong but market force based' dollar policy. A little can go a long way, however, and we fear the administration may try to push more trade protections as the election campaign heats up and opponents tout a long list of anti-market plans. The market never likes the idea of increasing regulation.
Thus you can almost see the market mulling the issue Monday as it sold, but sold on lower volume. There was immediate selling in response, but most were ready to hold onto positions until they figure out just what this really means. With many stocks holding near support on lower volume, we may get a few buying opportunities as solid stocks test and then move back up on stronger volume. We took some money off the table Monday as some stocks broke lower through near support. Some rebounded, some did not. When this kind of news hits, we prefer to err with too much caution than let the stocks breaking near support turn into big downside moves. Many, many stocks held support and bounced or slightly undercut support to rebound well. That is another indication that there was not just a dumping mindset in the market. We may get another test lower in the morning session Tuesday, and we will see then if the indexes and the stocks can rebound as buyers step back in or if they roll over for a deeper test.
Support and Resistance
Nasdaq: Closed at 1874.62
Resistance: 1889 (early September highs) is a point to watch. 1930 - 1935. 1975 is roughly 150 points on this 18 day MVA bounce. Then 2000 to 2050.
Support: The 10 day MVA (1873). 1860 to 1865. The 18 day MVA (1850). The August high 1812 and 1814 held Thursday.
S&P 500: Closed at 1022.82
Resistance: 1030 to 1032 (early September highs) may act as some resistance. After that 1050. Then 1080 from February 2002 lows. 1100 to 1150, the early 2002 double top.
Support: The 18 day MVA (1020) and the top of the range at 1015. The exponential 50 day MVA (1003) and 975 (December 1997 peak). 965 (August 2002 peak).
Dow: Closed at 9535.41
Resistance: 9609 (early September highs) make act as some resistance. 9735. 9800 (April and May 2002 lows).
Support: 9500 (June 2002 lows) is the top of the recent range along with the 18 day MVA (9503). 9353 (top of summer range). The exponential 50 day MVA (9344). 9250 to 9236, the early June intraday high.
Economic Calendar
9-25-03
Durable goods orders, August (8:30): 0.6% expected, 1.0% July.
Initial jobless claims (8:30): 410K expected, 399K prior.
Existing home sales, August (10:00): 6.07M expected, 6.12M July.
New home sales, August (10:00): 1.11M expected, 1.165M July.
9-26-03
Q2 GDP, final (8:30): 3.1% expected.
Michigan sentiment, final for September (9:45): 89.2 expected, 88.2 prior.
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
|
world stock market
us stock market
|
