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us stock market, trade stock
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11/11/03 Technical Traders Report Update
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Technical Traders Report Subscribers:
Tuesday and Thursday we issue a market update and choice plays for the next session. Full reports issue Monday, Wednesday and Saturday.
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: None issued
Trailing stops issued: IFLO; ARIA; NXG
Stop alerts issued: FCFS; INGP
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:
- Mild, low volume pullback to near support though tech, small cap leaders lag.
- Weekly retail sales jump prompting some upward revisions of holiday estimates.
- Stocks hold near support with semiconductors holding the line and posting a modest gain.
Stocks continue to slide but post modest losses on low volume.
The Friday reversal selling continued Tuesday as stocks continued to slide after cracking a new high then immediately failing. After an initial blowdown in the first hour, however, the downside eased and stocks moved laterally the rest of the session. A late selling bout was met with modest buying and stocks moved off their lows on the close.
With the bond market closed there was not much for stocks to trade off of and volume was low. Good weekly retail data surpassed expectations, but the market, much as us, was expecting it and did even give a quicker beat. The leading Nasdaq and the SP600 (small cap) index led the way lower (-0.7% each), but it was interesting to note that semiconductors were up on the session. The chip stocks have hardly sold back, and when they assume a leadership role as it appears they are doing, the often forecast moves for the rest of the market. With the mild pullback to the 18 day MVA and the chip stocks starting back up off the 10 day MVA already, the market could be ready to make the move back up from here without that deeper test toward the 50 day MVA. It could use the test, but the new money may not let it take the breather.
THE ECONOMY
Weekly retail sales post solid gains.
The Redbook and BTM/UBS weekly chain store sales reports hit Tuesday, and they were much better than expected. We stated a few weeks back that the Q4 estimates were too low. The data is bearing that out and the experts over at BTM/UBS have raised their Q4 sales projections again from 3% down to 2.5% and not back up to 4% year over year. You would think that these folks who have people on staff to do nothing but look at retail sales could have a bit better grasp of the landscape. Instead their projections bounce around like a rabbit on speed, reacting to each data point and their own view instead of seeing the facts for what they are and looking at the big picture.
The facts for the week: BTM weekly sales rose 1.2% following a 0.5% gain the prior week. Year over year sales were up a whopping 5.8%, prompting that increase in the holiday forecast. Redbook sales rose 4.1% year over year (after posting a 3.4% gain the prior week) though sales fell 2.9% in November versus October. All in all a solid and continued expansion of consumer sales long after many predicted the consumer's demise. You see the commercials about the power of cheese; well, this is the power of tax cuts and cheap money, a much more powerful punch.
Sentiment still rising.
Michigan sentiment is not out until Friday, but some other private polls are showing strengthening optimism for the second straight month. The IBD poll rose 2.6 points, its biggest jump since April when the major Iraq hostilities ended. Positive job market views helped, but ironically they might bump up unemployment near term as more workers re-enter the job market and have to wait awhile to find work. All in all it is good to see optimism increase though there is not a lot of correlation between the word and the actions of consumers. They are not liars, they just keep their options open. They also, however, have to eat, and we personally know of some that 'have to' shop.
THE MARKET
It was looking pretty ugly early on as stocks opened softer and then fell rapidly lower, undercutting the 18 day MVA, the rough demarcation between a very mild pullback and a more significant 50 day MVA test. They managed to bounce, however, and though they did not rally sharply higher, they did hold the line and move laterally the rest of the session. In the end there were several dojis right on the 18 day MVA, though Nasdaq closed just below its 18 day by a hair. Overall very mild selling on very low volume, indicating the sellers were in control but really had no numbers behind them.
This has the look of what some floor traders call a 'buyer's strike' where there are not a lot of sellers, just no buyers to hold stocks up or push stocks higher. Buyers were nibbling, however, on some semiconductor stocks. As noted, those tend to lead the market moves just as leadership stocks. That is something we were very aware of Tuesday as we watched stocks flirt with near support. After this mild pullback they could be ready to make the next move. In the bigger picture that is sooner than you would want to see for the longer term health of the market, but as we have said in the past, it is hard if not foolish to stand in the way of the market on principle.
At some point you would think the mutual fund mess would start impacting the market as investors grow cautious about what is going on with their money. Rationally, however, it is clear that any shenanigans in the past are not occurring now for fear of being completely vilified in the ongoing investigations and really putting everything at risk. The ongoing investigations are similar to the market: they are already history even before the lawsuits are filed. While there will be repercussions in the form of rule changes, fines, possible jail time, etc., the actions causing the uproar are history. It is safer now to invest in mutual funds than any other time. That is the rational view, however, and many times the average investor is not rational. At worst it should cause movement of funds around the mutual fund players, but that could cause problems as funds sell stocks to meet redemption demands. That would cause short term pressure but then that money would be put back to work.
Thus far, however, there has been little reaction in the market overall. Perhaps the apathetic trade in the light of good economic numbers is the manifestation of the concern, but in reality this looks just like a pullback after the last run higher in the trend. It is still testing back but showing signs it is close to finishing the pullback.
Market Sentiment
VIX: 17.54; -0.08
VXN: 26.55; +0.06
VXO: 18; +0.05
Put/Call Ratio (CBOE): 0.96; +0.05. Continued to edge higher as the market pulled back. As noted Monday, it is reaching the level that has triggered upside rallies in the current uptrend.
NASDAQ
Three days of selling, and it could not quite hold the 18 day MVA though it rallied back after selling on some low volume.
Stats: -10.89 points (-0.56%) to close at 1930.75
Volume: 1.64B (-7%). Volume has fallen for three consecutive sessions since the index rallied on strong trade last Thursday. That is an indication that there are fewer sellers in the market overall than buyers, but the buyers have stopped buying for the moment.
Up Volume: 552M (+93M)
Down Volume: 1.069B (-219M)
A/D and Hi/Lo: Decliners led 1.85 to 1. Was -3:1 early on but improved as the index 'rallied' back and semiconductors improved.
Previous Session: Decliners led 2.09 to 1
New Highs: 132 (-157)
New Lows: 18 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq continued the pullback that started Friday after making a new 52-week high. The Friday reversal was on lower volume, and volume has trailed off this week on each selling session. Tuesday the point loss backed off as well, but it still closed below the 18 day MVA (1934). Next support is the September high (1913 intraday, 1909 closing) above the 50 day MVA (1885). Techs and small caps led the selling, but again it was mild overall, and semiconductors were starting to move higher. A loose doji on the Tuesday close is another indication the downside action is slowing, but it is not definitive. About all you can say at this point is that the selling is mild and normal in a pullback off the upper reaches of the uptrend channel. The chips rallying indicate there are some buyers stepping in at this level, so we are ready to move in if we see further moves on volume.
S&P 500/NYSE
Gave back just a fraction on very low trade, showing a doji at the 18 day MVA. That is not bad action in a very mild pullback that is holding over several support levels.
Stats: -0.54 points (-0.05%) to close at 1046.57
NYSE Volume: 1.152B (-5.12%). Well below average trade indicates significant selling.
Up Volume: 427M (+92M)
Down Volume: 710M (-168M)
A/D and Hi/Lo: Decliners led 1.46 to 1. Very modest downside breadth.
Previous Session: Decliners led 1.84 to 1
New Highs: 102 (-114)
New Lows: 16 (+4)
The Chart: http://www.investmenthouse.com/cd/^spx.html
SP500 tapped 1062 Friday and fell back. It has slipped to the 18 day MVA (1046) on very low trade. Tuesday it showed a very tight doji at that level on the candlestick chart (open and close prices almost identical). That indicates that the sellers that were in the lead and pushed the index lower were no longer controlling the action; it was more of a standoff. It does not mean a rally back up is a given, but it is an indication of that when combined with the other factors of low volume and holding at support. It is not just the 18 day MVA but the September high (1040). As noted Monday, it is trying to make a stand at this level though the 50 day MVA (1032) is not far below. Either way the index will be in good shape to continue the move as it has not rallied sharply off of the 3 month summer consolidation. As of yet there has not been a lot of rotation into large caps while Nasdaq and the small caps have come under pressure, and thus no real continued rally. It thus appears the market will rally when Nasdaq and the small caps are ready. If the chips continue the move up they started Tuesday, then Nasdaq and the rest of the market will follow.
DJ30:
Stats: -18.74 points (-0.19%) to close at 9737.79
The blue chips edged just below the 18 day MVA (9751) similar to Nasdaq, falling on a similar very light volume session. It continues to hold over the up March/September up trendline and the September high (9686 intraday, 9659 closing). As with SP500, it is holding over near support and showing a doji (though not as tight) over that support. Clearly there is not much selling, just a lack of buying. It remains in good position to move higher but has been a follower up to this point.
WEDNESDAY
No schedule economic data but retailers are in the process of announcing earnings and there are already upside reports that show the stocks are already performing well ahead of a holiday season that is supposed to be the best in three years. That is putting some energy in the market under the cover of the low volume and lazy movement. As noted, semiconductors were moving back up already, and insurance stocks continue to look solid as well. There is movement underneath the surface that may very well erupt to the upside without a further test lower.
We have spent the past two sessions doing very little. Again, there are times to hit it hard and times to step back and wait for the plays to set up. We have been waiting to see how the indexes handle near support. If the movement in the chips and retail turns out to be the harbinger of the next bounce (along with a rising put/call ratio), there are stocks set to move and we will again move into them if we see the volume. That will be the key; the selling has been on lighter volume, and we want to see the rebound on strong trade once again. That will show us that the buyers are taking back control and are stronger. With just a pullback to the 18 day MVA versus the 50 day MVA, seeing the strong upside trade is important so we don't get sucked up into a headfake higher that turns over.
Many of the plays are back at the 18 day MVA, holding that near support and are in position to bounce. We are looking at some of those for new positions along with other stocks that have used this pullback to work on finishing their bases. Again we want to see some good volume on any moves to show the buyers are back in after this rather short and modest pullback.
Support and Resistance
Nasdaq: Closed at 1930.75
Resistance: The 18 day MVA (1934). October high (1967). The near top of the channel (2000). The second, higher channel hit in September is at 2025. Then 2050 to 2075, the early January 2002 double top.
Support: The September high (1913). The 50 day MVA (1885). 1860 to 1865. The March/August up trendline (1880).
S&P 500: Closed at 1046.57
Resistance: October highs at 1054. The December to June upper channel line at 1069. 1080 from February 2002 lows. 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: 18 day MVA (1046). 1040, the September highs. 1030 to 1032 (early September highs). The exponential 50 day MVA (1032). The top of the summer range at 1015. 1010 the early September highs. 975 (December 1997 peak).
Dow: Closed at 9737.79
Resistance: The 18 day MVA (9751). 9800 (April and May 2002 lows). The October high (9850). 10,000 is the candle that attracts the moth.
Support: 9686 (September high; 9659 intraday). The exponential 50 day MVA (9619). 9588 the early September highs. 9500 (June 2002 lows) is the top of the summer range.
Economic Calendar
11-13-03
Trade balance, September (8:30): -$40.5B expected, -39.2B August.
Initial jobless claims (8:30): 364K expected, 348K prior.
11-14-03
PPI, October (8:30): 0.2% expected, 0.3% September.
Core PPI: 0.1% expected, 0.0% September.
Retail sales, October (8:30): -0.2% expected. -0.2% September.
Retail sales ex-auto (8:30): 0.2% expected, 0.3% September.
Industrial production, October (9:15): 0.4% expected, 0.4% September.
Capacity utilization, October (9:15): 75.0% expected, 74.7% September.
Michigan preliminary sentiment, November (9:45): 91.3 expected, 89.6 October.
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
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