|
|
us stock market, trade stock
* * * *
10/15/03 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Wednesday: PDYN
Buy alerts issued: None issued
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:
- Again market cannot handle good news, reverses on sharp volume.
- Retail sales take a breather, August revised sharply higher, NY construction zooms.
- Market turns and distributes on the heels of attempted accumulation breakout.
- IBM fails to inspire investors after hours with in line report.
Another surge rolls over.
Intel's impressive earnings report had stocks revving the engine before the open. Retail sales showed a major August revision while the New York manufacturing report surged well beyond expectations. Good news aplenty, and the market gapped sharply higher, Nasdaq opening higher by 23 points. That, however, was the apex of the upside action. Sellers immediately moved in. All stocks were sold with smaller caps leading the way down. Chips held on given the Intel strength, but it was a token positive close as the major indexes sold off on rising, above average volume.
Nasdaq reversed and closed lower on strong trade along with the other indexes. Nasdaq gapped to the second upper channel it failed at in September, and rolled over. Once again good news led to an early rush into stocks only to see volume selling in response. While the market has yet to succumb to these sudden changes of heart and has maintained its uptrend, it is a definite struggle for stocks to make a strong upside move. It acts very tired as in short of buyers ready to step in and keep rolling the rock up the hill. Near term that is a problem for stocks trying to advance after scratching higher for two weeks.
THE ECONOMY
September retail sales take a breather, still solid.
Sales fell for the first time in 5 months, dropping 0.2% overall but +0.3% less autos, and coming in lower than consensus (-0.1% overall, +0.4% ex autos). Certainly some will jump on this as an indication that the child tax credits and mortgage refinancing money has been spent and we are looking for a slowdown, but as we discussed two weeks back, this is an annual pause during September to October that follows back to school and before the holidays kick in. Even with that, we are hearing that early October sales are running stronger than in September. This really could be the portent of a very strong holiday season. Indeed, real consumer spending was up 6.5% in August and September, and that gives a minimum of 5% GDP growth in Q3, and it will be higher with other areas of the economy kicking in as well.
We always talk about revisions being key with respect to the actual trend. August was revised from a 0.6% gain to a 1.2% gain overall and ex-autos. Again we see the revisions not just increased, but doubled over the prior report. When the revisions are big surprises, that means the strength is being underestimated and that the trend is really stronger than envisioned. Another thing to consider, historically a strong back to school season as reported by the retailers leads to a strong holiday season. We think the 4.7% year over year increase anticipated by the national retailers association is conservative.
New York Empire State Manufacturing index surges in October.
This is a relatively new report so it gets discounted as does the ISM services, though to a lesser extent. One commentator responded to it setting a record by saying since it was started in July 2001 of course it would set a record in any recovery. He also pointed out that it surged from May to June, but the national number was still below 50 during that time period. That type of dismissal, however, causes that sage and others to miss the big picture yet again. As we noted, the national number lags the regional reports, and it turned positive two months after the regions did. We can thus ignore that part of his commentary. Moreover, the key is the improvement and the rate of improvement. It will certainly move higher from here as the economy recovers. It is on a fairly blistering pace right now.
Manufacturing surged to 33.7 from 18.4. A measly 16.0 was all that was expected. Employment index was positive for the first time since May at 10.78 versus -0.92 in September. New orders surged to 34.8 from 13. Shipments 25.3 versus 17. Inventories fell to -13.73 from -4.59, a signal that they may be selling more than they are making at the current capacity use.
Yes the NY report is just one state out of 50, but it shows the kind of grassroots improvement in the business side of the economy. It has shown some fits and sputters as it started turning the corner, but now the missing link in the economy is starting to get its feet under it. As the politicians talk argue about the lost jobs, they are fighting the last war. The jobs are lost because of that horrid implosion from lofty heights triggered by the Greenspan and his henchmen who wanted less prosperity and more unemployment. The focus now should be on where we are going, and it is on track as we saw it back in the spring. The tax incentives on the supply side are working as businesses start to spend. That spending will increase as the year winds down as they take advantage of the incentives. That is when the jobs start to come, and indeed, they are already starting to turn up even ahead of schedule. With that background, does anyone really think that raising taxes on corporations and those small business owners making more than $100K per year is going to create jobs? That is basically what many candidates are saying they will do. It does not make much sense to us to cut off the very incentives that are bringing us back from the disaster the Fed and overambitious social planning caused.
Fed Beige Book notes economic improvement.
By the way, the Fed noted that the economy was picking up in all twelve regions with stronger consumer spending and even manufacturing showing improvement. Thanks Fed for stating what we had already seen.
THE MARKET
This is the action we hate the most, that good news rush higher that reverses and sends stocks negative. When it happens after a strong run and near a natural resistance point it is even worse. The news may be good, but stocks are showing they have priced in a lot it already. Intel still managed a gain on the session based on its earnings, but the rest of the market could not hang onto its coattails.
Tuesday's accumulation session was met with a much stronger volume reversal. Unlike the prior gap and reversal last Thursday, the indexes finished down, unable to rally and hold any of the gains. Distribution on the heels of an attempted breakout on higher volume is a telltale sign of a market getting a bit tired. It has scratched hard on this 2 week run with volatile trade. It has been a struggle, never showing a follow through session to the rally that began with the month. With the IBM 'disappointment' after hours with it just meeting expectations, the indexes are set up for some deeper selling. Up to this point they have made modest pullbacks, correcting during the move higher ever since August. It will get a chance to show us if it still has what it takes to continue that action.
The action has all of the earmarks of trouble, but it has shown these signs before and shook them off. Thus we don't want to be alarmist and assume the sky is falling. These signs of struggle have not escaped our attention as chronicled in our nightly summaries, but if the trend continues you have to respect the trend. This action puts us on high alert once again, but the action Tuesday was not a breakdown, just a sign of a continuing struggle to move higher. It gives us an uneasy feeling for the near term and thus short term positions. We have moved up a lot of stop loss points to protect the trend.
Market Sentiment
VIX: 17.69; +0.32
VXN: 26.77; +0.28
Put/Call Ratio (CBOE): 0.67; -0.03. A drop, but it is noteworthy that the QQQ put/call ration is 2.0. For every call, two puts are being traded. There are a lot betting on downside, either speculation or those buying protection for long positions. This high level of bearishness regarding the techs is a contrary indication and can further squeeze those stocks higher as the year end approaches as new money chases performance.
NASDAQ
Big gap higher, bigger tumble to the close as volume spiked well above average. Still in the uptrend but reversed at the very top channel line.
Stats: -4.09 points (-0.21%) to close at 1939.10
Volume: 2.026B (+14.47%). Strong surge in above average volume, the strongest since last Thursday's gap and reversal as well. After the Tuesday accumulation session, a higher volume distribution reversal is typically a bad sign for a continued move without a test lower.
Up Volume: 947M (-345M)
Down Volume: 1.046B (+597M)
A/D and Hi/Lo: Decliners led 1.42 to 1. With the reversal and slightly lower finish, there was no real chance for declining breadth to ramp up.
Previous Session: Advancers led 1.69 to 1
New Highs: 415 (+12)
New Lows: 5 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Gapped to 1967, right at the second upper channel line and then rolled over on rising volume. It never even attempted a further rally after the gap higher. The selling was two-tiered as well. The initial plunge found some buyers, and the market moved up and then laterally for over 3 hours. Then the bottom fell out again. A modest late rally kept Nasdaq at the upper channel of the uptrend as the bell rang. A gap up to upper channel that reverses with such force typically indicates a trip back toward, even to, the lower channel line down at 1820. There is a lot of potential support above that including the 18 day MVA (1888) where the index could hold, make a higher low, and resume the move. Techs have shown amazing resilience, but after a struggle to move up to the new high it may be the point where earnings news has been embraced as much as it will be.
S&P 500/NYSE
Gap and reversal to close negative on rising volume. Managed a decent recovery off its low, however, holding the recent sharp uptrend.
Stats: +0.04 points (0%) to close at 1046.76
NYSE Volume: 1.46B (+17.69%). Rising, above average volume on the reversal, just as last Thursday. It held its ground then and is not in bad shape. If Nasdaq suffers further, however, SP500 is going to struggle further as well.
Up Volume: 515M (-187M)
Down Volume: 925M (+395M)
A/D and Hi/Lo: Decliners led 1.59 to 1. The smaller caps struggled early and all session, though the breadth was not disproportionately negative.
Previous Session: Advancers led 1.35 to 1
New Highs: 395 (-21)
New Lows: 7 (-1)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Gapped up to the August to September up trendline but tanked from there. Managed a decent bounce off the lows to close, holding comfortably above the 10 day MVA (1037) and the September high at 1040. Still maintaining a good uptrend with a reversal, but not one that sent it to the session lows. With the foundation of the summer consolidation still there, it can make a move down to the 18 day MVA (1031) and still find its legs for a higher low.
DJ30:
Stats: -9.93 points (-0.1%) to close at 9803.05
Not nearly the dramatic reversal as shown by the other indexes as the blue chips show a doji on very strong index volume (245M versus 182M Tuesday). That typically signals a pullback after a nice two week run, but not the reversal as on Nasdaq. A test of near support at the 10 day MVA (9679) or the 18 day MVA (9613) would be more in order to consolidate the solid move higher.
THURSDAY
More economic data with weekly jobless claims, CPI, Philly Fed, and industrial production, all significant reports, hitting the street. All of that may take a back seat to the IBM numbers that matched earnings expectations. The stock was getting clobbered after hours, down $3. QQQ was dropping as well, and after the higher volume reversal, techs will be under pressure at the open. We will see how the analysts spin it in the morning, but it indicates trouble given the after market treatment.
IBM's harsh pullback after hours illustrates what we discussed two nights back, i.e., how two weeks of rallying, of scratching out gains, can be reversed in short order when the buying runs dry and the buyers turn to sellers and join with the other sellers. The fear side is always stronger than the greed side, and the stutter step nature of this last rally without a follow through session only underscored that buyers were pensive, lacking the strength they had in August and even September.
With that in mind we have pulled our stops up as a precaution. Again, the market has shown us this action before during its run higher only to right itself and continue its upwardly mobile ways. This reversal on good news MO, however, has become a bit more recurrent, and that action erodes the foundation of the move. Two weeks of incremental gains to the upper channel of the uptrend without showing a strong follow through session leaves the market open to at least some profit taking. We will see how the indexes and leading stocks respond to pullbacks to the 10 or 18 day MVA, watching volumes closely. That is, if this market even tries a pullback. That continued push of money into the market has been holding it higher even as the moves became more of a struggle.
As for new positions we will have to go on a stock by stock basis. The overall market appears extended, but again, that new money does not act rationally. It is chasing performance toward the end of the year, and any dip would give funds an opening to enter again. Again that is not rational action, but it is what the market has been showing on each minor pullback. Thus the market is laboring and looks to fall back some here, but we would not be surprised to see a rush back into stocks to put that new money to work. Much like 1999 we do not like this scenario that much, but we are not going to let our disfavor with that action keep us from making money off of it.
Support and Resistance
Nasdaq: Closed at 1939.10
Resistance: The top of the channel is just below the close (1940). The second, higher channel hit in September is at 1975. Then 2000 to 2050, the early January 2002 double top.
Support: 1915ish, the September high. The 10 day MVA (1908) and the 18 day MVA (1888). 1860 to 1865. The 50 day MVA (1828). The March/August up trendline (1818).
S&P 500: Closed at 1046.76
Resistance: 1055 (the August/September up trendline). 1050 and 1080 from February 2002 lows. 1100 to 1150, the early 2002 double top.
Support: 1040, the September highs acted as support Wednesday. 1030 to 1032 (early September highs). The 18 day MVA (1031) and the top of the summer range at 1015. The exponential 50 day MVA (1015). 975 (December 1997 peak).
Dow: Closed at 9803.05
Resistance: 9800 (April and May 2002 lows) has been cracked. 10,000 is the candle that attracts the moth.
Support: 9686 (September high) may act as some support. The 10 day MVA (9679). The 18 day MVA (9613). 9500 (June 2002 lows) is the top of the recent summer range. The exponential 50 day MVA (9462). 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% actual, -0.1% expected, 1.2% August (revised from 0.6%).
Retail sales, ex Auto (8:30): 0.3% actual, 0.4% expected, 1.2% August (revised from 0.7%).
NY Empire idex, October (8:30): 33.7 actual, 16.0 expected, 18.4 September.
Beige Book (2:00): Shows improvement in consumer and business activity in all 12 districts.
10-16-03
Initial jobless claims (8:30): 385K expected, 382K prior.
CPI, September (8:30): 0.2% 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): 15.6 expected, 14.6 September.
10-17-03
Housing starts, September (8:30): 1.827M expected, 1.820 August
Permits, September (8:30): 1.835M expected, 1.886M August.
Michigan sentiment, October (9:45): 88.2 expected, 87.7 September.
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
|
