|
|
us stock market, trade stock
* * * *
10/02/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Thursday: None issued
Buy alerts issued: AUDC
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:
- Hangover from Wednesday leads to sluggish trade.
- Nothing new on the jobs front, and that is a concern for Friday.
- Bounce off support loses even more steam as investors wait for the jobs report.
Dull session maintains status quo, limits opportunities.
Foreign markets were raging after the US Wednesday move, but the tail could not wag the dog as some pre-market commentary hoped. Futures were fading all morning and the market opened flat and then bounced around until a modest upside trend took hold for the session. Soft opens can lead to strong gains, but after the big move Wednesday, the market could not push forward. It was quickly winded, and drifted higher all session on lower volume and very modest breadth.
Many floor traders concluded it was a good session simply because the market did not reverse and sell off. That was definitely a start given the lower volume Wednesday rebound. At least investors, those that were in the market, were not too worried about the Friday jobs report. The acid test will be the jobs report and how the market responds starting Monday. Will it provide a higher volume rally that will indicate that the buyers are back after the broad rally to start the month? If the rally comes, this time we would really like to see the volume.
We have our doubts that it is ready to make such a move given the harsh treatment of leaders, but we also note that though money was leaving the market it is also rotating to other areas. Cyclical stocks, particularly the blue chip types (e.g., CAT, UTX) are moving on solid trade as well as some large financials. As money bailed from smaller leaders it was put to work in other areas, and that is a sign of some continued health in the market even as some leaders roll over. Again, there needs to be a strong and broad follow through session next week to show the buyers are really back in earnest.
THE ECONOMY
Jobless claims remain below 400K, coming in at 399K versus 386K the prior week. It was good to see claims did not race higher post-hurricane Isabel, though they still are not at the level that would indicate that the jobs picture has changed from one that is finding a bottom to one that is improving. That will take steady weekly claims at 380K or lower. The trend is obviously changing the past several months with the lows reaching down into the 380K range, but there has to be steady readings at those levels that drag the 4-week average (now at 403,500 from 408,500) well below 400K.
On the scale of job creation we believe we are approaching the point where there is suddenly a drop in jobless claims that translate into some job creation at year end. As noted earlier in the week, when the change comes it typically occurs rapidly after jobless claims hold steady. Then we are surprised by the change when it comes. We don't anticipate a positive surprise Friday as the jobless claims need to slide lower in October and November, down to that 380K range for several weeks. Then we will see a sudden improvement in the jobs numbers.
Of course, that all depends upon what jobs numbers you are looking at. As discussed at length the past two weeks, the home survey asks Americans if they have a job or not while the non-farm payroll numbers ask employers how many jobs they have. They are at odds with one another and the issue is which is correct. Old line non-growth companies have shed jobs because they can no longer grow earnings as they used to while there has been a surge of smaller businesses where those workers say to hell with it, I always felt I could do it better, and they head out on their own. No job at the old workplace, so nothing to lose. Moreover, the companies don't count temps and contract workers because they are not full-time employees. This is the fastest growing segment of the jobs market, it is growing at a pace over 100% greater than in 1992, and it is a huge, huge discrepancy in the jobs report. Unfortunately, the voices discussing this are lost in the din of politically based carping about how horrible the economy is.
Factory orders slide more than expected.
-0.8% versus -0.5% expected in August as transportation orders fell 2.3%, skewing the number. July factory orders, however, were revised higher to a strong 2%. Those upward revisions are the real proof in the pudding as they show things were really better than expected when all the numbers are in. Hard facts over conjecture mean a lot more.
THE MARKET
Thursday offered little with respect to where the market is going. The Wednesday move was broad but it was weaker to start with as volume was lower than on the selling sessions. Thursday the momentum carried it a bit higher but there was no significant trade to back it. The major indexes pushed past the 10 and 18 day MVA, but the action definitely slowed ahead of the Friday jobs report.
How the market responds to what we anticipate will be more job stagnation will tell more about the near term direction. Expectations are for more job losses and you would presume that anything close to expectations would spare the market from upheaval. There is that problem with unspoken hope, however, that always grows in anticipation of each psychologically important economic report. Something like the whisper number of a few years back regarding earnings. You expect one thing, hope for another, and then sell when expectations are met but the hope is in vain.
There is also the problem of just an outright miss on the numbers such as last month when expectations for job creation were crushed by 93K job losses. At least this time around expectations are for a 25K loss heading in. Given the recent distribution in the market this report has us concerned. The market has bounced back this week but the bounce has been on lower volume, failing to show real accumulation. There has been some rotation, but money was taken out of the market on a net basis the past two weeks, and another sharp disappointment would raise questions (political and otherwise) about when a jobs recovery will come. Remember, we said earlier this week that the nearer term might seem worse as economic reports take a rest and the jobs report does not show improvement. With childish impatience investors and economists lose sight of the economic progress just at the time the turn is upon them. Thus when the news hits they are often taken by surprise though the overall market trend continues to price in the better news to come. It is the short term swings that overshoot the trend on both the upside and downside based on the news of the day.
Thus we are concerned regarding the near term ability to maintain the rebound given the net distributive action. The real test for the market comes next week when we see if the market can hold the gains on this week's rally attempt and then follow through with a high volume gain. We would like to see more pattern development through October and then a break higher, and thus it looks a bit early to us for a new sustained rally. This market, however, has shown its own timetable for its moves, and if it gives us the follow through and good buy points, we will participate.
Market Sentiment
Volatility has edged higher but is still low and providing little indication as to market movement.
VIX: 20.8; -0.27
VXN: 31.25; -0.08
Put/Call Ratio (CBOE): 0.77; -0.02
NASDAQ
Edged over the 10 and 18 day MVA (1834, 1836) on lower, below average volume. Hardly an impressive move as the bounce off the 50 day MVA already seems to be losing some steam. Perhaps nervousness before the Friday jobs report put a lid on the action, but the rally has been on lower trade and that makes it suspect.
Stats: +3.97 points (+0.22%) to close at 1836.22
Volume: 1.619B (-11.88%). Even lower, below average volume on the second day of the attempt to resume the rally.
Up Volume: 852M (-420M)
Down Volume: 733M (+191M). A standoff with respect to volume.
A/D and Hi/Lo: Advancers led 1.24 to 1. Back down to miserly breadth levels.
Previous Session: Advancers led 2.36 to 1
New Highs: 173 (+36). Still weak new high creation, but it is just coming off the 50 day MVA.
New Lows: 10 (+6)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Momentum seemed to carry it higher and through the 10 and 18 day MVA. There is no significant resistance until 1860 to 1865 and then 1888 from the early September highs. Nasdaq has room to the upside, but we are still concerned regarding the downside with the 50 day MVA (1790) and the July intraday highs at 1776 needing to hold on any jobs related selling Friday. It is a good rebound start, but it needs more volume on upside moves. The pattern still has two higher peaks than the current price, and it looks as if Nasdaq would work laterally below 1888 and build more of a base before it is ready to make a really solid and sustainable move out of this range.
S&P 500/NYSE
Also cleared the short term MVA but on below average volume as well.
Stats: +2.02 points (+0.2%) to close at 1020.24
NYSE Volume: 1.259B (-15.79%). Lower, below average volume on the move higher as buyers really backed off. Wednesday volume was lower but not that much lower. Today looked more like a day where the buyers said 'we will wait and see what the jobs bring.'
Up Volume: 822M (-461M)
Down Volume: 419M (+210M)
A/D and Hi/Lo: Advancers led 1.53 to 1. Modest gains on a modest session.
Previous Session: Advancers led 4.69 to 1
New Highs: 245 (+67). Good new high creation as the small and mid-caps are doing okay.
New Lows: 5 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Cleared the 10 and 18 day MVA (1013 and 1014) as well but did it on low volume as well. Very similar condition to Nasdaq with the early September highs (1032) and the September high (1040) in the way and not a lot of buying behind the move thus far. Those will be formidable resistance points without a strong volume surge behind any gains. SP500 may rise to test those levels, but before it can break them we feel it will test lower one more time.
DJ30:
Stats: +18.6 points (+0.2%) to close at 9487.8
Blue chips were solid Thursday with cyclical stocks rallying well, but the index was unable to hold a break over resistance at 9500 as overall volume faded fast. DJ30 has made a series of resistance points for itself in this lateral move starting with 9500, then 9610, then 9686. As with SP500 we anticipate it will test toward the 50 day MVA (9361) or down to 9250 again before it is ready to make a breakout move unless there is a big, big employment surprise. There goes that hope again. Reality will most likely be otherwise.
FRIDAY
Jobs, jobs, jobs, Arnold, jobs, Rush, jobs, jobs. That is pretty much the order of the stories on the financial channels Friday evening. Obviously the market is keying on the September jobs report, specifically the non-farm payrolls. Weekly jobless claims, average workweek, and overtime, however, are indicating any job creation would be a surprise. Indeed, the surprise would almost be questionable given the almost complete lack of any other indication that the big companies that are surveyed are actually hiring. And of course, therein lies another one of the rubs against the non-farm payroll survey of employers: the big companies downsize in bad economic times and many never rehire the bulk of those workers. It is the smaller companies with new ideas, methods and technologies that need the workers and provide the new jobs. It is the same old story of growth being key in a recovering economy or stock market: those companies that are in the growth areas grow while the old guard, the former leaders are no longer growth companies and thus spend most of their time managing and trying to hang onto what they have.
That ranting against the darkness does not change the picture for tomorrow, however. If jobs come in about as expected at -25K there should not be much disappointment. The market may not rally on the news as the hope factor puts a lid on any move heading into the weekend. If the market can basically hold its ground on lower volume, that would be good lead in to next week when we look for a follow through to this rally attempt. If there is another big miss we will see the gloomsayers take hold as discussed earlier in the week, and that can run stocks lower near term. We remained concerned about this and will continue to look at downside positions, many of which rallied modestly Wednesday and Thursday up to resistance, putting in a position to fade quickly if the market is disappointed.
The market still has to deal with the distribution sessions as it has yet to put on an accumulation session to counter. Some leaders were making comebacks Thursday while others are still struggling. Overall the outlook is good with few earnings warnings indicating a good round of earnings ahead and a very solid economic recovery continuing. Again, it is the short term action and whether the market is ready to advance meaningfully from here without more consolidation on the heels of that distribution that concerns us, not the longer term trend. We would need to see renewed buying power this coming week for the indexes to break the highs on the current bounce.
Support and Resistance
Nasdaq: Closed at 1836.22
Resistance: The 18 day MVA (1836). 1860 to 1865. 1889 (early September highs). 1930 - 1935. Then 2000 to 2050.
Support: The 50 day MVA (1790). The July high (1776). The March/August up trendline (1784).
S&P 500: Closed at 1020.24
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 top of the summer range at 1015 and the 18 day MVA (1014) offer some modest support. The exponential 50 day MVA (1005). 975 (December 1997 peak). 965 (August 2002 peak). 961, intraday lows in the summer range.
Dow: Closed at 9487.80
Resistance: 9500 (June 2002 lows) is the top of the recent summer range). 9609 (early September highs) make act as some resistance. 9735. 9800 (April and May 2002 lows).
Support: 9353 (top of summer range) and the exponential 50 day MVA (9361). 9250 to 9236, the early June intraday high. 9077, the August 2002 interim top. 9000, the bottom of the summer range.
Economic Calendar
9-29-03
Personal income, August (8:30): 0.2% actual, 0.3% expected, 0.3% July (revised from 0.2%.
Personal spending: 0.8% actual, 0.8% expected, 0.9% August (revised from 0.8%).
9-30-03
Consumer confidence, September (10:00): 76.8 actual, 80.5 expected, 81.7 August (revised from 81.3).
Chicago PMI, September (10:00): 51.2 actual, 57.0 expected, 58.9 August.
10-1-03
ISM Index, September (10:00): 53.7 actual, 55.0 expected, 54.7 August.
Construction spending, August (10:00): 0.2% actual, 0.4% expected, 0.2% July.
10-2-03
Initial jobless claims (8:30): 391K actual, 395K expected, 386K prior (revised from 381K).
Factory orders, August (10:00): -0.8% actual, -0.5% expected, 2.0% July (revised from 1.6%).
10-3-03
Non-farm payrolls, September (8:30): -25K expected, -93K August.
Unemployment rate, September: 6.2% expected, 6.1% August.
Hourly earnings, September: 0.2% expected, 0.1% August.
Average workweek, September: 33.7 expected, 33.6 August.
ISM Services, September (10:00): 63.0 expected, 65.1 August.
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
trade stock
|
