|
|
us stock market, trade stock
* * * *
10/21/03 Technical Traders Report Update
* * *
Technical Traders Report Subscribers:
On Tuesday and Thursday we issue market summaries and a few choice plays for the next session. Full reports issue Monday, Wednesday and Saturday.
MARKET ALERTS
Targets hit alerts issued Tuesday: RETK
Buy alerts issued: CVM; EVCI; BLRI; MANU
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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- TXN provides tech boost, but stocks overall remain sluggish.
- Economy takes its seasonal breather.
- Volume increases as indexes try top of the range again, churn a bit.
- Subscriber Questions
Surge never materializes as semiconductor good news not contagious.
TXN was up sharply as were a few other broad line semiconductor makers, but the advance diminished in size and intensity outside of that rather limited circle. It was enough to hold Nasdaq comfortably positive along with some smaller caps, but the rest of the market struggled to hold positive all session. DJ30 was unable to do so and SP500 had to rally back from a late selling attempt to hold a slight closing gain.
The indexes remain camped out at the top of their recent range, thus far unable to make the move higher but also avoiding a deeper sell off that has tried to take hold on and off the past two weeks. If they consolidate in this narrow range and show somewhat accumulative action as on Tuesday, that would be very bullish once earnings are digested and investors are comfortable with the future. For right now there is still enough uncertainty between the companies demonstrating strong earnings and guidance and those with solid current earnings but still pensive about the future to keep the market on hold. As noted, that beats a hard sell off but makes it harder to enter positions right now.
THE ECONOMY
Economic activity cools some but no reason to get flustered.
We already heard commentary along the lines of 'I told you the economic upswing could not last' as the LEI were lower and same store sales slipped fractionally this week. The slight slowdown is more of a pause than any retrenchment as activity remains robust. Before this started we noted that the October period is seasonally slow whether economists admit it or not. It is the time after the back to school season and before the holiday season, and consumers sit back, catch their breath, and let the checkbook cool off before plunging into holiday sales. It is very important to recall that the back to school season was the best in several years and that retail sales remain strong even during October with many retailers saying Halloween sales are strong. When consumers open the wallet and spend heartily on Halloween you know they are feeling better than they have. In short, this is a seasonal pause that refreshes, and even during this 'pause' retail sales are still solid on a relative basis.
Weekly chain store sales cool, remains solid year over year.
Both BTM/UBS Warburg and Redbook report sales for the week were flat to a bit versus the prior week (0.0% versus -0.5% prior week for UBS; +1.2% Redbook) and down slightly year over year (+4.6% versus 5.3% prior week; +3.5% versus +3.6%). Again, these are not bad results at all, and the decline for a month that is seasonally 'off' is slight. The consumer is basically still consuming well even during this pause.
THE MARKET
We never got the chance to see what kind of guts the market has at this stage, at least not in the sense of another gap higher and how it responded to that move. The TXN and chip news helped chips, but it did not spread out over the market. Instead the action was rather slow and steady with the indexes mostly posting gains on a slight volume increase. Call it accumulation or call it a bit of churning, the market is holding onto gains and avoiding selling off as it tries to determine what to do about earnings.
Earnings are pushing stocks up and down individually each day, but that is not pushing the indexes one way or the other. After a good run right up to the very first earnings announcements, earnings have been good enough to hold the market gains, but are not providing the extra oomph to breakout over the top of the range. Given that some stocks are being blowtorched on their earnings announcements, the ability to hold the gains indicates that many stocks are beating expectations handily enough to make up for those that have the nerve to match estimates and not provide a glowing outlook.
Having pushed right up to resistance and holding, the opportunity to participate further is becoming more limited though there is hardly a dearth of opportunity. Many stocks continue to form up into good patterns and breakout, but many stocks are also in the same situation as the overall market: rallied, holding gains, but having a hard time making further headway. If the market does not sell back, it will need to continue this lateral consolidation move and then try the breakout again. That is actually bullish activity, but it means continued patience to let it set up and make the move.
Market Sentiment
VIX: 16.55; -0.49
VXN: 24.35; -0.43
Put/Call Ratio (CBOE): 0.7; +0.08
NASDAQ
Again Nasdaq is butting up against the first upper channel line in the uptrend, continuing the move off of the 18 day MVA test on rising, average trade. The higher low is good, but it has to make the next breakout move to change the character from stagnant to more upside.
Stats: +15.76 points (+0.82%) to close at 1940.9
Volume: 1.746B (+12.56%). Volume was up and right at average as semiconductors attracted buying interest. Slight accumulation but Nasdaq is also banging against the upper channel line; the higher trade and continued struggle at that level can also mean some churning, i.e., higher volume turnover where big money is unloading some shares at the top of the range. So far the action appears positive, but the daily price/volume action needs to improve.
Up Volume: 1.23B (+318M)
Down Volume: 498M (-115M)
A/D and Hi/Lo: Advancers led 1.37 to 1. Better breadth but still mediocre.
Previous Session: Advancers led 1.04 to 1
New Highs: 239 (+47)
New Lows: 6 (-4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq used the semiconductor news to continue the rally off the 18 day MVA (1904), a move that has made a higher low and is picking up volume as it continues the rebound. The higher low is a positive development as it held the September highs and that moving average and bounced. That shows buyers ready to enter again at an even higher price. That will have to translate into a breakout over the near upper channel to the uptrend (1955). When it tried that last Wednesday it reversed and gave back the move. Thus far earnings have not been able to break it out though they have been good enough to hold it up. We don't think it is ready to make the move, but again, we have to let the market show us its hand.
SOX managed to breakout to a new recent closing high Tuesday on the TXN news, closing near the session high. This along with the small cap index and even DJ30 could help pave the way for Nasdaq and of course SP500 as those two have struggled with near resistance while these other indexes move higher or are set up well to make such a move.
S&P 500/NYSE
Again held just below the 1050 level as it tried to continue the 18 day MVA bounce. This is the level it has to break, but it will need something more to get buyers to pull that duty.
Stats: +1.35 points (+0.13%) to close at 1046.03
NYSE Volume: 1.452B (+25.04%). A sharp increase in volume to well above average levels, the best in 5 sessions. The gain was negligible, indicating the index was churning or running in place. When you do that, all you get is tired. In the market's case it often means that big money is moving out of positions. The key will be how SP500 deals with the 1050 resistance.
Up Volume: 778M (+112M)
Down Volume: 660M (+174M)
A/D and Hi/Lo: Advancers led 1.28 to 1. But for the smaller caps breadth would have been negative for the NYSE.
Previous Session: Advancers led 1.26 to 1
New Highs: 232 (+66)
New Lows: 7 (-5)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Continued the move up off the 18 day MVA (1036) on strong trade, but showing a doji (a close near where the index opened). That can indicate a change in momentum, but it means more when a stock or index has trended sharply in one direction and the signal appears right what could be the top or bottom. Here there has been a test of the 18 day MVA and a bounce; not as clear. In any event, the key for SP500 is the 1050ish level. This higher low over the 18 day MVA could set the stage for the move, but the 1050 resistance is formidable. As with DJ30, SP500 has the summer consolidation range to support it, and thus could make the breakout stick if it occurs. As of yet, however, it has been unable to hold any attempt.
DJ30:
Stats: -30.3 points (-0.31%) to close at 9747.64
DJ30 is set up nicely to make the next move. It rallied to 9850 last Wednesday, and instead of reversing and falling hard, it managed a nice, easy pullback to the 10 day MVA (9722). That leaves it sitting well above the September high (9686) and the summer consolidation range, perfectly positioned to break higher toward that magnet that is 10,000. Tuesday volume jumped above average as the index traded in a tight range. DJ30 could actually team up with SOX to provide some leadership on the next move higher.
WEDNESDAY
No scheduled economic data, but a ton more earnings announcements. After hours AMZN, BSX and other reported. The earnings reports are falling into broad but key groups: those upping guidance for the future and those failing to do so. It is clear that the economy is improving and CEO's are acknowledging that when absolutely necessary, but many are still very conservative or cautious about giving optimistic guidance, particularly for 2004. Examples include EBAY and AMZN. The knee-jerk market response is to sell, but then the stocks make a comeback. Is it because there is a real and rational concern for the future? Yes and no. After any economic slump, particularly one so bad for businesses, there is caution. Throw in the corporate scandals, shareholder lawsuits, and salary issue on top of that and you have a climate that fosters extreme caution. Thus even as the economy posts some of its best GDP growth in years there is caution at the top for fear of saying the wrong thing.
Thus we get the lukewarm guidance for periods beyond Q4. Most all companies are buoyant regarding Q4, but they simply don't want to get caught making glowing predictions and getting stung. There is another aspect as well. During the go-go years of 'whisper numbers' and all of that nonsense companies were caught in the box of having to produce stronger and stronger earnings reports even as the economy was slipping back down the slope. It was a game that the officers were ultimately going to lose. Many still remember that (those that are not unemployed, under indictment, or under lock and key) and want to keep that scenario from developing again. Thus they are managing expectations for the future, and if that means a short term pullback in stock price so be it because they can then surprise everyone by upping guidance when the numbers are certain and at earnings time as well.
Thus we are getting some retrenchment from stocks such as EBAY and AMZN that are not providing glowing '04 guidance, but that may simply provide a good entry point after the initial pullback.
From this continued attempt to take out the near resistance we see some strength emerging. SOX breaking to a new high, DJ30 in a simply great position to rally, and the small caps starting to show some leadership again. They will have to prove it, but the ability to hold the gains is a sign of strength as the indexes consolidate at high levels. We will continue to look at the upside plays ready to break higher from here as our primary investment focus given that there are still many plays forming up well and there appears to be some positive leadership patterns taking hold in the indexes.
Support and Resistance
Nasdaq: Closed at 1940.90
Resistance: The near top of the channel (1955). The second, higher channel hit in September is at 1975ish. Then 2000 to 2050, the early January 2002 double top.
Support: 1915ish, the September high. The 18 day MVA (1904). 1860 to 1865. The 50 day MVA (1843). The March/August up trendline (1844).
S&P 500: Closed at 1046.03
Resistance: 1054 (October highs) and 1058 (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. The 18 day MVA (1036). 1030 to 1032 (early September highs). The top of the summer range at 1015. The exponential 50 day MVA (1019). 975 (December 1997 peak).
Dow: Closed at 9747.64
Resistance: 9800 (April and May 2002 lows) pushed it back again. 10,000 is the candle that attracts the moth.
Support: The 10 day MVA (9722). 9686 (September high) may act as some support. The 18 day MVA (9665). The exponential 50 day MVA (9505). 9500 (June 2002 lows) is the top of the recent summer range. 9353 (top of summer range). 9250 to 9236, the early June intraday high.
Economic Calendar
10-20-03
Leading Economic Indicators, September (10:00): -0.2% actual, -0.1% expected, 0.4% August.
Treasury Budget, September (2:00): $26.4B actual, $25.0B expected, $42.5B August.
10-23-03
Initial Jobless Claims (8:30): 385K expected, 384K prior.
SUBSCRIBER QUESTIONS
Q: How does one determine that there is accumulation in a particular stock as opposed to distribution if the only indicators are price and volume? How does one know that there is strong cash flows or institutional buying?
A: One of the most important things to understand in the market is where the big money is moving whether that be into or out of a stock in particular of the indexes in general. The big money tries to accumulate shares quietly as in during a long price base, but there are times it moves in fast and is clearly present, e.g., on a breakout. But we also want to know if the big money is moving into a stock before that breakout because that can be critical in whether the breakout succeeds or fails.
There are telltale signs when an institution is buying or selling ('institutional footprints in the sand'). One of the primary sources is simply looking at how price action and volume relate to one another each session and over a series of sessions. In the most basic sense, when the market rises on overall higher volume and falls on lower volume it shows there are more net buyers than sellers in the market. This also happens with individual stocks. We can tell over a series of weeks if institutions are net buyers of stocks or net sellers (we look at this extensively when evaluating a price base such as a flat base, double bottom, cup w/handle, etc.). We also compare relative volume on up sessions and down sessions; it is not enough to simply note that volume was higher on one session without looking at that volume relative to the previous move and indeed, the previous week. Was it higher on this buying day than on the previous sessions of rising volume when the market was selling?
Beyond just price and volume we have to look at where stocks or indexes close in the trading range intraday, how they close on a weekly basis, how the volume and price compare after a run higher or lower, the number of block trades, summaries of what the mutual funds are buying and selling, etc. Again, we look at several factors to determine this, but overall price and volume interaction is the key. It is not rocket science. It is simply sitting down and looking at the evidence that is there but pulling it together to make sense of it all. It does take a bit of work, but anyone can do it. We cover it in detail in our Technical Analysis seminars, and when you see it you suddenly realize what is going on in the market.
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 2
|
us stock market
trade stock
|
