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world stock market, us stock market
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11/03/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: ARIA; IDXC; TRPH
Trailing stops issued: None issued
Stop alerts issued: ORBK; ESPR
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:
- Another month starts with buyers stepping in.
- National manufacturing continues expansion as construction booms to record level.
- Techs flirt with a breakout at the top of the range while small and mid-caps steam to all-time highs.
New month, new money.
As with the start of October, November's first trading day yielded solid gains on some solid trade, at least on Nasdaq. Overseas markets celebrated the US economic gains and some solid PMI numbers in Europe, and the dollar also enjoyed gains on the strength of the economy. The US markets picked up on that bias and all rallied well, breaking over some key resistance areas. It was again a cumulative effect of the grand economic data, a stronger dollar, and more new money coming into the market to chase gains and in anticipation of future economic gains, particularly in employment.
The market leading indexes scored the big gains. Nasdaq, SOX, SP400, SP600 all broke to new highs, the small and mid-cap indexes hitting new all-time highs. Having escaped September and October with nothing more than 50 day MVA tests, it seemed investors were ready to embrace the next three months which are historically the best for the SP500. Lest we get too entranced by such statistics, remember that the usual seasonal dips did not appear the last two months. Still, that new money continues to enter and chase stocks to get a piece of the gains.
Other than the market moves and the economic data, there was other news. The most recent accusations involving mutual funds trading for their own benefit as well as NYSE specialists doing the same has given regulators more fodder for more regulation. No argument that the late 1999 stock boom created an environment where otherwise decent people found themselves doing indecent things to make a few more rather meaningless dollars in the grand scheme. Those people are finding themselves being tossed out of the business for what amounts to pocket change just when things are improving again. The market, however, has shrugged this off. Is it simply immune to this type of news after the corporate scandals, CEO compensation and other issues? More likely it is the clear fact that instead of being in recession and heading lower, the economy and stock market are now healthy. When you are sick you respond poorly to more trouble. When you are full of vim and vigor you can take the occasional cold in stride.
THE ECONOMY
ISM posts 4 straight 50+ month, poised for a 'very positive' year end as Europe shows lifesigns.
The steady stream of excellent economic reports provides further elixir to stocks. The October national ISM beat estimates with a 57.0 reading, well ahead of the expected 55.9 and September's 53.7. The employment index improved to 47.7 from 45.7, but that still shows decline. The other sub-indexes were solid. New orders hit 64.3 from 60.4. Production hit 62.6 from 57.3. Inventories rose to 44.5 from 42.7, an indication that there may be some inventory replenishing ongoing at the start of Q4 as the Q3 GDP number implied would have to occur.
To put this levels in context, while the ISM was struggling below 50, the ISM services index moved over 50. When it started to hit its stride a few months back the sub-indexes were showing these big 60+ numbers as well. In short, the national manufacturing sector is really picking up steam, moving in sync with the rest of the economy.
Over the weekend we discussed the dollar in regard to a global economic recovery. We suggested that many economies were poised to follow the US' rise. Back before the bear market started and the economic meltdown followed, we were writing as to how the Fed was aiding and abetting setting up the downfall that had pretty much been baked into the cake. In a sad repeat of history, the Fed chased away prosperity as it did in the 1920's and replaced it with millions of jobs lost, businesses bankrupt, and a world-wide recession. (Those new to the service would possibly find the parallels between the Fed's actions in the late 1990's and the central banks' actions in the late 1920's as fascinating as we did. If interested, let us know and we can post some of the analysis from those reports that drew the shocking parallels.). We stated that as the US economy goes, so goes the world economy. Why? Because the world economies had become so dependent upon US consumption that they had transformed their economies as primarily providers of consumables for the US.
When the US went into recession the rest of the world either followed or was already there. Now that the US has surged up out recession the past year we suddenly see the European manufacturing numbers post upside surprises. They are not yet the kind of gains the US is showing, but again the rest of the world typically follows the US, even after this latest recession.
Construction spending hits record pace.
September construction blew away estimates (0.2%) with a 1.3% surge. That was not the biggest percentage gain in a month, but it was the largest on a dollar basis. Moreover, August was revised upward to 0.7% from 0.2%. As usual private residential construction was strong, but there was also a turn in the nonresidential sector. Much as with the consumer versus business demand problem, the construction sector has been skewed to residential construction. September saw a 2.5% gain in private nonresidential construction. Office building construction rose 1.5% while manufacturing unit construction jumped 5.1%. These strong numbers suggest a long-awaited turnaround in the nonresidential construction market may be underway.
Chips sales jump 17% in October.
The SIA reported the strong jump in sales, the biggest monthly increase since 1990. Sales of chips are a very good economic barometer. Chips go into just about every device made today. When chip sales are up that is a good indication of the economic recovery. It is important to note, however, that chip sales are measured in dollars, not units. Back in 2002 we noted that chip unit sales were jumping sharply. A glut of chips due to the recession and the resultant low prices made it appear as if fewer chips were being sold. At the time we reported that the increase in unit sales was a harbinger of an improving economy. Sales in dollars are up now because there is even more demand and more pricing power. That makes the chip stocks happy as margins improve (e.g., Intel's 60% margins anticipated for Q4). When the chips are up, the economy and market are typically up, and that is what we are seeing.
THE MARKET
There was no waiting for a further pullback. The Thursday reversal and the slight dip Friday to end the month were all it took to give new money an opening to jump into. That money moved into the leadership indexes: techs, chips, small caps, mid-caps. All indexes, however, posted gains, breaking over the October highs and plowing into new 52-week highs, other all-time highs. Nasdaq volume was solid, NYSE lagged. It was a day that received glowing reviews on television, but the lower NYSE volume made it no clean sweep. The October highs were cleared but now the SP500 and Nasdaq still have to deal with the trendlines at the top of their channels. All in all, however, the market continues a strong uptrend with stocks breaking out of consolidations and to new highs where there is little resistance to slow them given the new money chasing them higher. The lower volume on SP500 and DJ30, however, indicate that they will struggle at the next resistance.
Market Sentiment
VIX: 16.55; +0.45
VXN: 25.38; +0.49
VXO: 17.09; -0.06
Put/Call Ratio (CBOE): 0.63; -0.49
NASDAQ
Surged out of the gates, paused, then rallied at the close on higher volume in a fashion typical of a healthy index.
Stats: +35.49 points (+1.84%) to close at 1967.7
Volume: 2.099B (+13.81%). Strong surge, clearing that 2B share level again on an upside session. That indicates investors, big investors, were out accumulating tech shares once again.
Up Volume: 1.542B (+535M)
Down Volume: 534M (-256M)
A/D and Hi/Lo: Advancers led 2.01 to 1. Excellent breadth as accumulation started again. That is exactly what you want to see.
Previous Session: Decliners led 1.07 to 1
New Highs: 508 (+212). New highs surging as Nasdaq took out the October highs. This is exactly what we wanted to see as the number tops those in August and in September. That indicates renewed strength.
New Lows: 12 (+3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Cleared the October high (1966.87) by a hair, taking out that resistance on stronger volume. It has not made the definitive break, but the action was excellent. It still has upside on this move to the two channel lines, the first at 1976, the second at 2005. The high volume break without the need for a further test back indicates Nasdaq could easily find those levels again before requiring another test back toward the trendline. Indeed, in a healthy market that is the action we would expect. The Thursday reversal was a curveball, but Nasdaq hung in there and looks as if it may have knocked out another hit in this rally.
S&P 500/NYSE
Blasted past the October high with ease but did not attract a lot of volume on the move. The lower volume on a gap higher is not exactly the powerful move we wanted to see without more of a pullback to set it up.
Stats: +8.3 points (+0.79%) to close at 1059.02
NYSE Volume: 1.348B (-6.6%). Declining, average volume on the break higher put some tarnish on the moves by Nasdaq, small cap and mid-cap indexes.
Up Volume: 1.025B (+262M)
Down Volume: 318M (-336M)
A/D and Hi/Lo: Advancers led 2.31 to 1. Once again outstanding breadth on the move as the small and mid-caps powered to all time highs.
Previous Session: Advancers led 1.26 to 1
New Highs: 526 (+236). Excellent new highs as the leading smaller caps broke to all-time highs.
New Lows: 0 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Gapped higher and rallied to the close, but unlike Nasdaq, volume backed off for the second straight session after spiking on the Thursday reversal. It easily cleared the October high (1053.79) and has the December/June upper channel line ahead (1064) as next resistance. That channel line has been rather solid resistance since June as SP500 made a steady move. Unless volume picks up it will have trouble with this trendline. The one positive, and it may be a stretch, is that SP500 is not the leading index on these moves, but it is a broad index. Keeping a very close eye on it as it approaches the resistance.
DJ30:
Stats: +57.34 points (+0.59%) to close at 9858.46
Pushed past the October high (9850), galloping along with the rest of the indexes. Well, galloping is a stretch. It moved higher with a modest gain on lower, below average volume. Volume has dropped off the table for the blue chips after last Thursday. It was not a powerful move, falling 40 points off of the session high on the close. You want to see volume ramp higher on a break over the resistance point. As it is, DJ30 has rallied off the 50 day MVA but is losing strength as volume declines a week after the move began.
TUESDAY
No scheduled economic news Tuesday, and not many earnings reports as Cisco is not out until Wednesday. That leaves the market without the usual steady stream of data to guide it. Thus we look for how the dollar trades (has been rising versus the yen) and how the indexes react to the next resistance levels after edging past the October highs Monday.
The leaders were solid and have room up to the upper channels. We will see if DJ30 and SP500 act as anchors or just go along for the ride. We think some make too much of the failure of SP500 to rally sharply on volume just as some are making too much of the move higher for Nasdaq and friends. The market is in an uptrend. New money continues to enter the market and is put to work chasing the leaders higher and on volume. It won't rally upside forever, and indeed will typically find resistance at the upper channel lines. That gives the indexes more upside room to run on this break higher and the momentum it generated, but we doubt stocks will just continue to run straight up. They will hit the trendlines and then endure some profit taking before continuing the trend. Given the time of year the test may not be all the way back to the trendline or the 50 day MVA, but we will have to see how they react.
You see the idea. The market is in an uptrend. You can swear against it or you can praise it mightily, but in the end it will act as markets act in trends: rally to the upside trend and then come back and take a breather either at the near resistance (e.g., 18 day MVA) or all the way to the lower trendline. Nasdaq has been on a steady climb up the 50 day MVA since March. It is going to need a breather and consolidation, and most likely that will happen on a move up to 2050 or so. Before it reaches that level it will have moved up and down in the trendline just as it has been doing. Thus we feel we have some more room up to the first and probably the second upper channel line before it needs to pullback once more. That gives us more upside room, but we are not going hog wild after anything that moves. We will continue to pick stocks that have the good entry points to move into. That way we don't get stocks so extended and fall right back on us if the market cuts off its move a bit early.
Support and Resistance
Nasdaq: Closed at 1967.70
Resistance: The near top of the channel (1976ish). The second, higher channel hit in September is at 2000ish. Then 2000 to 2050, the early January 2002 double top.
Support: October high (1967). The 18 day MVA (1915). The September high (1913). 1860 to 1865. The 50 day MVA (1866). The March/August up trendline (1865).
S&P 500: Closed at 1059.02
Resistance: The December to June upper channel line at 1064ish. 1050 and 1080 from February 2002 lows. 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: 1054 (October highs). The 10 day MVA (1045) and the 18 day MVA (1041). 1040, the September highs. 1030 to 1032 (early September highs). The exponential 50 day MVA (1026). The top of the summer range at 1015. 1010 the early September highs. 975 (December 1997 peak).
Dow: Closed at 9858.46
Resistance: 10,000 is the candle that attracts the moth.
Support: The October high (9850). 9800 (April and May 2002 lows). The 10 day MVA (9750). The 18 day MVA (9709). 9686 (September high). 9588 the early September highs. The exponential 50 day MVA (9570). 9500 (June 2002 lows) is the top of the summer range.
Economic Calendar
11-03-03
ISM Index, October (10:00): 57.0 actual, 55.9 expected, 53.7 September.
Construction spending, September (10:00): 1.3% actual, 0.4% expected, 0.7% August (revised from 0.2%).
11-05-03
ISM Services, October (10:00): 63.4 expected, 63.3 September.
Factory Orders, September (10:00): 0.6% expected -0.8% August.
11-06-03
Productivity, Q3 (8:30): 8.5% expected, 6.8% Q2.
Initial jobless claims (8:30): 380K expected, 386K prior.
11-07-03
Non-farm payrolls, October (8:30): 65K expected, 57K September.
Unemployment rate, October (8:30): 6.1% expected, 6.1% September.
Hourly earnings, October: 0.2% expected, -0.1% September.
Average workweek: 33.8 expected, 33.7 September
Wholesale inventories, September (10:00): 0.2% expected, -0.2% August.
Consumer credit, September (3:00): $5.3B expected, $8.2B 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
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world stock market
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