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world stock market, us stock market
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10/27/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: ADVP; SOX; GISX
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:
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SUMMARY:
- Lazy bounce off the 50 day MVA as market not quite ready yet.
- Home sales strong, retail season off to a strong start, Buffet tries to talk up his investments again.
- Setting up for a bounce higher as leading small caps and techs are stirring again.
Stocks bounce but hesitate as they continue to prepare for the next move.
A strong start whipped up by three merger announcements (BAC buys FBF, UNH buys MME, ATH buys WLP) was mitigated as the early buyers accumulated some positions and then backed off to wait for the next shot of good news. Gains were on lower volume but outstanding breadth. After the 50 day MVA test, the action shows that the buyers are still there and are accumulating stock in the leaders (smaller caps and techs), but are just not yet ready to make the big commitments.
It did not help that the FOMC meets and delivers its next missive Tuesday. Further, the GDP numbers come out Thursday, and investors may just want to make sure that the Q3 was as good as claimed. We doubt, however, that investors will wait for that actual figure to come out. The market is showing it is ready for another rebound, using the 50 day MVA as support, and typically it starts to make its move before the next round of data is confirmed. It rallied up to earnings, sold some when strong earnings became fact, but managed to comfortable hold support.
THE ECONOMY
Housing market posts record sales as momentum continues.
Despite higher interest rates, new and existing home sales remains solid. Indeed, existing home sales were up another 3.6% and again at record pace. Existing home sales edged down 0.2%, but that was better than expected. What a lot of analysts are getting caught by is the rise in rates that are still, however, much lower than the long term average. That continues to drive sales, particularly when it looks as rates might move higher; that gets the fence sitters to move. Sure refinancing drops off when rates rise because the ability to wrest additional advantage is lost. The rest of the market remains 'robust.'
This is another sign that confidence remains higher than polls indicate. If you are willing to sit down and sign on the dotted line(s) and thereby obligate yourself to years of payments, you have to believe that things will at least remain as good as they are now.
Shoppers out in force.
Cooler weather is sending shoppers out to complete Halloween shopping and to get an early start on holiday shopping. Spot checks at malls found surprisingly full parking lots and shoppers making purchases, not just looking. Flooding in the northwest and fires in California may impact sales in those areas as those poor people have other more critical worries at hand, but the activity appears to show shoppers ready to spend on the holidays and are willing to buy now as opposed to waiting for the last minute sales.
As with airline travel and vacations, it seems as if consumers are weary of holding back since 9-11 and want to celebrate. Of course this makes the debt mongrels bark even louder as they view consumers as thoughtless dimwits addicted to an instant gratification habit. Yes consumer debt is at high levels, but it is measured on an aggregate basis. As discussed over the weekend with the national deficit, the more people you have as consumers as well as higher incomes and increased disposable income, there is going to be more debt. The issue is at what level does it become too much. If the economy rolls over, then that new debt becomes too great a burden and there is a crash as the debt issue spirals to other areas. Anything is possible but we highly doubt the crash in the consumer that some anticipate. Right now the holiday season looks to have already started, and it looks as if it is going to surpass the estimates.
Buffet bets against the US.
For the first time in his 72 years Warren Buffet says he is owning currency from other countries because he fears the US trade deficit will lead to further softening of the dollar and ultimately unwinding of foreign investments in the US. Buffet is a shrewd investor and one finds it hard to disagree with him in that area. The past few years after turning 70, however, Buffet has become much more political. He speaks out about estate taxes, tax cuts, property taxes, expensing stock options. Buffet used to say nothing about anything except at his annual shareholders meeting where he would make nice with his investors; they didn't care what he said because he has made them wealthy. Talk about playing to a friendly crowd.
As he has aged, however, he has definitely felt the urge to influence social policy, and he has blatantly attempted to influence the market with respect to his holdings. After buying up a ton of insurance companies and then having 9-11 hit, he took every opportunity to state that another horrendous terror attack was going to occur in the US without a doubt as he pushed for that terror insurance bill. That bill would help his companies survive another attack by making the federal government the ultimate insurer and it would also immediately prop up their stock prices. While there has been no subsequent terror attack here, it did have the desire effect of removing that liability from his companies and they have performed quite nicely.
Now he is telling everyone he is buying foreign currencies because he doesn't like the fact that the US is running a trade deficit, one that is improving because of the falling dollar. Five years ago you would not have known about this until the company was forced to release its financial data. Now Buffet is offering it up front. Of course he does not say what currency he is buying, but the net effect is to potentially hurt the dollar more and make his investments improve. At least he did not pull a George Soros move and sell short the US dollar then go on CNBC and Bloomberg and tell the world he was selling the dollar so he could make a quick, well, buck. No, Buffet was not that blatant, but he was quick to step up to the microphone to tell everyone what he was doing, something that you would not have heard an iota about before Buffet tried to start influencing social policy and at the same time help his investments.
Expensing stock options is another one of his attempts to mold the market to his liking. He never has invested in technology, and it upsets him that start-ups don't expense the options they give out to attract the talent they need to come up with the technologies that make all of our lives and other businesses so much more profitable. Many of these don't have profits in the traditional sense of KO or other Buffet investments, and it galls him to see them attract investment dollars as he feels they are not comparing apples to apples with his traditional companies. If we want to choke off start-up businesses and limit our ability to compete internationally even more than our tax system and other regulations already do, then lets go ahead and require expensing of options. Buffet's investments will attract more dollars from the investment pool and he will be happy again.
This is not an attack on Buffet, but it is a reminder that he is not the benevolent father figure for the market and the economy that people attribute to him. He is in the market to make money and now he has this social aspect to his actions and statements as well. Why would he have agreed to assist the Terminator but in order to seize the opportunity to push his views with respect to the largest state (economically) in the country and thus the rest of the country? Thus when we hear he is investing in other currencies for the first time, perhaps that is also part of the torch passing at Berkshire Hathaway: the new managers that will take Buffet's place want to expand the investment parameters, and what better time to do it but while Buffet is still there to bless the move. That keeps confidence up after the inevitable changeover. It also helps Buffets' investments because he and his prot g s know that investors and presidential wannabes are fixated on what he has to say about the market and the economy. When the 'oracle' speaks, many rush in, but they don't necessarily know where they are going. We suppose that is why Buffet is always smiling.
THE MARKET
Buyers again showed some life though it was limited. We anticipated it might take another session or two of testing near the 50 day MVA before the indexes regained their legs, and it looks as if the market is doing that in decent shape. Volume was lighter on the gain, but breadth was outstanding as the small cap index led the market gains, followed by the other leader (Nasdaq). As noted last week, leaders start to lead before the rest of the market moves. Smaller issues, internets, and some chips (TXN, NSM) were moving, and that is a positive sign for a move higher after this 50 day MVA test concludes.
Market Sentiment
VIX: 18.05; +0.34
VXN: 26.12; +0.67
Put/Call Ratio (CBOE): 0.64; -0.15
NASDAQ
Gapped higher, tested the 18 day MVA, but could go no further as volume baked well off pace.
Stats: +17.32 points (+0.93%) to close at 1882.91
Volume: 1.525B (-22.22%). Below average volume on the gain, indicating that though buyers were in charge, there were not that many in the market. That indicates it is still trying to gather itself to try a stronger move off the 50 day MVA.
Up Volume: 1.097B (+562M)
Down Volume: 393M (-986M)
A/D and Hi/Lo: Advancers led 1.91 to 1. Nice breadth indicating there is ongoing accumulation, but at this point it is spotty. There are very few sellers, however.
Previous Session: Decliners led 1.51 to 1
New Highs: 193 (+88)
New Lows: 10 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Gapped higher and tested at the 18 day MVA (1896) on the intraday high. No volume and so it was unable to break through that near resistance. It is trying to make another higher low over the 50 day MVA (1849) and the March/August/September up trendline (1845). A higher low is always a positive, but it will need to generate some upside volume as it moves higher through the 18 day MVA as it has the September high (1914) that could conceivably act as resistance and set up a somewhat toppy pattern if it fails there. Not bad action as it prepares to attempt the next bounce off of this support level.
S&P 500/NYSE
Rallied over the 10 day MVA on the high but then gave up almost all of the move on lower though still above average trade.
Stats: +2.22 points (+0.22%) to close at 1031.13
NYSE Volume: 1.357B (-4.22%). Volume backed off but remained above average as the large caps tried to break the 18 day MVA and the September highs but backed off. Not bad given it reversed most of the gains.
Up Volume: 862M (+379M)
Down Volume: 482M (-439M)
A/D and Hi/Lo: Advancers led 2.07 to 1. Outstanding breadth as the smaller issues led the move once again.
Previous Session: Decliners led 1.34 to 1
New Highs: 195 (+88)
New Lows: 10 (0)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Rallied over the 10 and 18 day MVA (1035, 1034) on the intraday high (1034), but could not hold the break over near resistance. It also faces the September high (1040) in sort of a one-two resistance punch. As with Nasdaq, however, it is making a higher low over the 50 day MVA (1021). It just was not ready to make the move, still needing to consolidate a bit longer over the 50 day MVA. It is sluggish after MSFT's earnings, and the void is being filled by the smaller issues.
DJ30:
Stats: +25.7 points (+0.27%) to close at 9608.16
After the MSFT plunge Friday, volume backed way off, coming in below average (193M versus 297M). While DJ30 managed to rally to the 10 day MVA (9655) on the high, it could not hold the move and faded to post a modest gain. That move also took it to a test of the September high (9686), and without any volume to push it, the blue chip index could not make the break. Holding over the 50 day MVA (9520) and trying to make a higher low as with the other indexes. Looks as if it is preparing to make the next move higher, but it looks to be a follower as the smaller caps and techs start to lead the way higher.
TUESDAY
Earnings are still hitting the wire but the economic data is again coming to the forefront. After hours SINA posted some strong gains; down early but then raced back up. Durable goods orders are out at 8:30. There will be fuel for the market, but the FOMC is meeting and reports at 2:15ET. That is expected to be non-news, but investors are interested to see what the Fed says about the recovery underway and if it says anything regarding interest rates. It will most likely acknowledge the ongoing recovery with a positive sentence or two and also note the continued fragility as well as softness in the employment picture. Interest rates? Nothing more than it remains in an accommodative stance.
The action thus far still suggests the market is trying to set up for another move up off the 50 day MVA though it may not be ready to do so until Wednesday afternoon as it starts to look toward the Thursday morning GDP report. The market typically moves ahead of important news, and if it can provide a volume move ahead of the number, that is a good sign. We anticipate that the leadership stocks will continue the initial moves up ahead of the rest of the market just as they were doing Friday and Monday. That is where our focus lies and we were pleased Monday to see current positions continue to rise as well as new buys.
It may take Tuesday and a good part of Wednesday before the market can get its feet on terra firma and start a volume break higher. The leaders are starting to move, but they will need the rest of the indexes to move up in at least a backup role.
Support and Resistance
Nasdaq: Closed at 1882.91
Resistance: The 18 day MVA (1896). The September high (1913). The near top of the channel (1959). The second, higher channel hit in September is at 1978. Then 2000 to 2050, the early January 2002 double top.
Support: 1860 to 1865. The 50 day MVA (1849). The March/August up trendline (1845).
S&P 500: Closed at 1031.13
Resistance: The 18 day MVA (1034) and 10 day MVA (1036). 1040, the September highs. 1054 (October highs) and 1061 (the August/September up trendline). 1050 and 1080 from February 2002 lows. 1100 to 1150, the early 2002 double top.
Support: 1030 to 1032 (early September highs) is still not totally broken. The exponential 50 day MVA (1021). The top of the summer range at 1015. 1010 the early September highs. 975 (December 1997 peak).
Dow: Closed at 9608.16
Resistance: The 18 day MVA (9642) and the 10 day MVA (9655). 9686 (September high) may act as some resistance. 9800 (April and May 2002 lows) pushed it back again. 10,000 is the candle that attracts the moth.
Support: 9588 the early September highs continue trying to hold. The exponential 50 day MVA (9520). 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
10-27-03
Existing Home sales, September (10:00): +3.6% (6.69M actual), 6.30M expected, 6.47M August.
New home sales, September (10:00): -0.2% (1.145M actual), 1.125M expected, 1.150M August.
10-28-03
Durable goods orders, September (8:30): 1.0% expected, -1.1% August.
FOMC meeting (2:15): Results typically at 2:15ET. No change in interest rates expected. Fed will see continued improvement in econmic activity.
10-30-03
Initial jobless claims (8:30): 385K expected, 386K prior.
Employment Cost Index, Q3 (8:30): 0.9% expected, 0.9% prior.
GDP, Advanced, Q3 (8:30): 6.0% expected, 3.3% Q2.
Help wanted index, September (10:00): 38 expected, 37 August.
FOMC minutes (2:00)
10-31-03
Personal income, September (8:30): 0.2% expected, 0.2% August.
Personal spending, September (8:30): -0.1% expected, 0.8% August.
Michigan sentiment, revised for October (9:45): 89.5 expected, 89.4 in September.
Chicago PMI, October (10:00): 55.4 expected, 51.2 September.
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http://www.stockseminarsonline.com
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End part 1 of 3
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world stock market
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