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us stock market, trade stock
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10/13/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued. Let RHAT run as it was flying.
Buy alerts issued: RETK; ANEN; MER; DGIN
Trailing stops issued: None issued
Stop alerts issued: PLT
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/alertttr.htm
SUMMARY:
- Market pushes higher, rising through Sept high on continued low volume.
- Fed's Moskow feels better about jobs, clearly implies Fed on hold for a long time.
- More money pushes stocks to new highs as drift higher continues.
- Subscriber Questions
Low holiday volume but indexes push through September highs.
New money continues to push into the market, some of that $3 trillion that has sat on the sidelines even as the market made its surge through the summer. Given the lack of any real selling, that new money pushes the indexes higher. It also helped that MOT announced a day early in response to an article that it was still having earnings troubles. Some software upgrades in the mix provided further upside fuel.
Volume was up on Nasdaq but still below average. No doubt those that are in the market are buyers right now, obvious as the market continues to rise. The lower volume indicates no real commitment on the move, just new money chasing gains heading into Q4. The action is similar to the fall of 1999 when the market just ran higher and higher with no rest stop. No complaints although the market did not give any real follow through session to the start of this last run two Wednesdays back. The new money just keeps things moving higher as the market drifts with its prevailing trend. During the long downtrend it would drift lower. In the current uptrend the drift is higher. There is no real news to change the trend so it remains in place.
What everyone is waiting to see is whether the actual earnings reports change anything. Expectations have fueled the move higher, and it is often the case that when expectations become reality, the allure is gone. The market is rising as earnings started to trickle in, and now we are going to see if this low volume ascent has any strength to it as that promise of better earnings becomes fact.
THE ECONOMY
Bittersweet irony as Chicago Fed governor Moskow talks up jobs.
The irony was clear, but we are not sure too many were aware of it. Mr. Moskow was on CNBC this morning discussing the recovery, monetary policy, fiscal policy, and the new CNBC offices. Moskow was somewhat upbeat about the jobs outlook, indicating that he saw improvement occurring. He also, however, saw job creation as the one thing that potentially could stall the recovery.
The CNBC economist was too busy gushing and sputtering as he bowed low to Moskow to really take him to task. Recall that Moskow was the FOMC member who said that unemployment needed to be higher in the US in order to prevent further overheating and inflation. This was part of the weak, unsupported rhetoric the Fed used to raise interest rates to battle inflation's shadow. In short, this fellow advocated raising interest rates to the point the economy slowed enough to put people out of work. What we said at the time, and what inevitably came to pass, is if you slow the economy enough to get unemployment high enough to get consumers to slow spending, you have basically thrown the economy into recession. Moreover, it did not even really slow the consumer but instead destroyed business investment that led to the job loss that got the unemployment rate higher as Moskow wanted.
So we have Moskow talking about jobs being the key to the recovery, the very jobs he so cavalierly said in 1999 needed to be eliminated. Now we are doing everything we can to create jobs to keep a recovery going after the Fed tried everything it could to end those jobs. Many like to argue that the Fed kept things from getting out of hand, but there is absolutely no empirical evidence that things were or were getting out of hand economically. Inflation was under control, consumers were consuming, businesses were investing, crime was down, poverty was down; basically we were enjoying great prosperity. Sure the new fangled industry involving the internet was getting way overheated, but do you think it would have been worse if the internet shakeout occurred by itself and the Fed had not purposefully crashed everything? Nets would have corrected for sure, but it may have been less catastrophic for the entire economy than the Fed's heavy boot on all of our throats.
Of course raking Moskow over the coals would not bring any jobs back, but damn it would have been nice to see. Moskow did say a few helpful things, though they hardly atoned for his prior sins. He noted that the tax cuts (both) were very well timed and have really helped the economy. That is ironic in itself as Greenspan was dead set against the tax cuts. Oops, wrong again. At least Greenspan's streak is in tact. Moskow also gave yet another clear indication that the Fed was going to sit on its hands for a long time to come when he said the economy would need several quarters of above trend growth (greater than 3.25% in the Fed's view) to gain enough momentum to create enough jobs to soak up all of those laid off and those new workers in the work force due to population growth. In short, the Fed is not going to do anything until it sees strong job creation.
THE MARKET
Stocks from all industries were up as the buyers that were in the market stocked up on all brands so to speak. It is the kind of breadth you like to see (at least on Nasdaq) on a follow through. New highs perked up as well as all of the major indexes (less the SOX) moved higher, breaking through the September highs and holding over them on the close. Volume was poor on the session and stocks had to rally back in the afternoon to keep things respectable. Volume was held lower buy the Columbus Day holiday, however, and it was good to see the afternoon bring in buyers as opposed to sellers. All in all it was another solid upside session in the current lower volume rally, but it was hardly a session that confirmed the resurgence of the rally that started two Wednesdays back.
We have been anticipating a pullback, but each time the market looks ready to head back down the new money comes in and pushes it right back up. It is a classic case of new money chasing performance at each opportunity. The last opportunity appears to have been a two day lateral move below the September highs. In any event the indexes broke that barrier; given the volume, nudged past them might be a better description. Many stocks were moving well, however, and some on solid trade even on a holiday lightened session. That was encouraging and we moved into some positions breaking higher on excellent to moderate volume.
Nasdaq is still at the upper channel, volume is still low, and the market continues to rise. The low volume leaves it subject to upset if something unexpected happens, e.g., earnings disappointments in the form of misses or just in line results. The market has rallied up to earnings season on expectations and lower volume. Hard to fight the new money pushing stocks up, but we are keeping an eye on the door just in case.
Market Sentiment
VIX: 17.55; -0.9
VXN: 26.77; -0.85
Put/Call Ratio (CBOE): 0.62; -0.31
NASDAQ
Edged further over the September high and the upper channel as the below average volume edged higher.
Stats: +18.22 points (+0.95%) to close at 1933.53
Volume: 1.501B (+2.26%). Volume crept higher as techs moved to a new post-crash high.
Up Volume: 1.008B (+161M). Everyone that was there was a buyer.
Down Volume: 454M (-106M)
A/D and Hi/Lo: Advancers led 2.26 to 1. Huge early breadth (3+:1) fell back but the late surge made a very respectable breadth figure.
Previous Session: Decliners led 1.15 to 1
New Highs: 375 (+155). Good surge as Nasdaq broke to a new recent high, but no huge swell.
New Lows: 7 (-5)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq moved further past the September high (1913.74), clearing the near upper channel as it did. Not a powerful surge but once again Nasdaq continues higher. Not only Nasdaq but most of the market as well. Absent from the move was the SOX which tried to make a new high but fell off the intraday move (475.28) to close with a 0.46 gain. It stalled right at the prior high (473) as the rest of the market moved higher. The absence of the SOX is always a problem if it does not come around. It will need to do what Nasdaq et al just did, i.e., break through that high. It was a bit pensive ahead of INTC.
S&P 500/NYSE
New closing high though fell back again from resistance at 1050 on low volume.
Stats: +7.29 points (+0.7%) to close at 1045.35
NYSE Volume: 1.041B (-5.43%). Low, below average volume as the large caps continued their run up of the 50 day MVA.
Up Volume: 779M (+232M)
Down Volume: 249M (-293M)
A/D and Hi/Lo: Advancers led 2.52 to 1. Impressive breadth as small caps, mid-caps, large caps, transports, and most others made new highs.
Previous Session: Advancers led 1.21 to 1
New Highs: 484 (+207). Nice gains across the market.
New Lows: 2 (-5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Nice session as SP500 hit a new 52-week high, clearing some September resistance and continuing the impressive move off the 50 day MVA. Impressive in gains though it has not shown great power. Monday it tapped next resistance at 1050 (1048 on the high) and backed off. The move is flattening out after the initial surge off the 50 day, but it is trying to start the next leg higher. We would like to see volume move in Tuesday when the holiday is over. The August up trendline it broke in late September is at 1050 along with next resistance. That is the next obstacle to beat.
DJ30:
Stats: +89.7 points (+0.93%) to close at 9764.38
The blues broke to a new closing high as well though index volume fell to 166 million from 181 million. Still well below average as was the rest of the market, but again, it is hard to fight the move with all of the money moving in. It is knocking at the door of next resistance at 9800 as it moves toward the psychological magnet and barrier at 10,000. That level is a draw, but when stocks get there it acts as a barrier.
TUESDAY
The low volume move keeps us concerned as the market heads deep into earnings. Those in the market right now are buyers, but they are not at the level to withstand any big disappointments. Again, that always keeps you concerned as a market technician.
While it is good to remain cautious when the volume is not pushing stocks higher, to ignore those stocks moving well and on solid volume is self defeating in making money in the market. Not all moves are perfect, and the market moves in ways that set it up for potential failure only to escape as this market has done over and over in the uptrend with new money continually coming in. All during that there are stocks that set up good patterns and breakout on solid trade. Those continue to be our focus as always as the safest hedge against a market that moves higher on lower volume.
Earnings pick up the pace Tuesday, and if volume does not start moving in on the upside the move will run out of gas when earnings become old hat or there are some disappointments. We will continue to look for stocks that are not extended and making their breakouts or moves off of tests. Those extended momentum plays are the ones that hurt the most when low volume market moves run out of gas. May not happen; may get a big shot of volume post-holiday. Either way we look for those ready to move.
Support and Resistance
Nasdaq: Closed at 1933.53
Resistance: 1930 - 1935 is being tested along with the top of the channel at 1938. Then 2000 to 2050.
Support: 1889 (early September highs). The 18 day MVA (1875). 1860 to 1865. The 50 day MVA (1819). The March/August up trendline (1815). The July high (1776).
S&P 500: Closed at 1045.35
Resistance: Then 1050 and 1080 from February 2002 lows. 1100 to 1150, the early 2002 double top.
Support: 1040, the September highs may act as some support. 1030 to 1032 (early September highs). The 18 day MVA (1027) and the top of the summer range at 1015. The exponential 50 day MVA (1013). 975 (December 1997 peak). 965 (August 2002 peak). 961, intraday lows in the summer range.
Dow: Closed at 9764.38
Resistance: 9800 (April and May 2002 lows).
Support: 9686 (September high) may act as some support. The 18 day MVA (9565). 9500 (June 2002 lows) is the top of the recent summer range. The exponential 50 day MVA (9434). 9353 (top of summer range). 9250 to 9236, the early June intraday high.
Economic Calendar
10-15-03
Retail sales, September (8:30): -0.2% expected, 0.6% August.
Retail sales, ex Auto (8:30): 0.4% expected, 0.7% prior.
NY Empire idex, October (8:30): 15.0 expected, 18.4 September.
Beige Book (2:00)
10-16-03
Initial jobless claims (8:30): 390K expected, 382K prior.
CPI, September (8:30): 0.3% expected, 0.3% August.
Core CPI (8:30): 0.1% expected, 0.1% prior.
Industrial production, September (9:15): 0.4% expected, 0.1% August.
Capacity utilization, September (9:15): 74.8% expected, 74.6% August.
Philly Fed, October (12:00): 16.4 expected, 14.6 September.
10-17-03
Housing starts, September (8:30): 1.834M expected, 1.820 August
Permits, September (8:30): 1.828M expected, 1.886M August.
Michigan sentiment, October (9:45): 88.5 expected, 87.7 September.
SUBSCRIBER QUESTION
Q: Hi, Being a newer subscriber, I'm still very much in learning mode. In a case like TSCO where there are several plays, the latest has a buy point = 35.28. I'm tempted to buy when the price drops lower seemingly satisfying one of the earlier play's buy points. Is this sensible logic or should one only buy at the most recent play's buy point? Love the news letter, especially the long term perspectives and market wisdom. Keep up the outstanding work!!
A: Thanks for the great compliments. You present a good question. Typically it isn't a good idea to move in on a play too far after the fact; that is, after the designated buy or pivot point has been met. Once the stock has hit the assigned buy point and rallied higher, if it comes back near that price again, too many variables such as volume, pattern, support levels, etc. can have changed, thus potentially changing the look of the play. If we missed the buy, or didn't miss it but want to add to our current position, we will check those variables (e.g., price/volume on the way back down, money flow, relative strength), re-evaluate the play and see if a new entry point is feasible and go from there. If it is we will put it on the report as another or new buy point.
The same rules hold for buying into a position when the stock has moved beyond the original buy point. Subscribers often ask if it is feasible to enter a position perhaps a day or two after the stock hit the buy point and rallied. The approach is the same: we place our buys in order to move in at the optimal time, to maximize the gain. If not the stock might have run too far, thus falling back right after getting in. If that happens one must decide whether to let it fall further and test support, or just exit, and that isn't the best situation to be in. We prefer instead to see if the stock, after its initial move up (or down, if it is a downside play), comes back to test the nearest support. If it does and makes the right move on good volume, then that's a potentially good entry point, but not always depending on how it move up and how it moved down.
We use technical analysis as our prime method for determining the movement of a stock. This is back-dropped by the action of the overall market and other information such as earnings, but analyzing a stock's pattern and its price movement in conjunction with volume is our most powerful tools. Our best bet is to find stocks in solid patterns, determine the proper buy point with target volume, and use that information to buy into a position. After that, the re-evaluation process must begin all over again to see if new entry points can be found.
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
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