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us stock market, trade stock
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11/12/03 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: NMGC; TLAB; ANT
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:
- Broad rebound as chips, techs, small caps resume leadership.
- Corporate optimism improves all of the sudden.
- Volume rises as stocks rally off near support.
Three mild down sessions give way to broad rally.
The techs and small caps led to the upside, and after hitting a new high this month, led to the downside. SP500 was not leading, but it has acted as an anchor point, at least on the downside. While Nasdaq undercut the 18 day MVA Tuesday, SP500 held firm and set up the move back up. Sure it had help from the chips and small caps, but we want to build its confidence.
In any event, breadth was impressive, the best in weeks and volume rallied on the upside day. That continued the solid price/volume action of late, rallying on up days, falling on down days. That is indicative of accumulation though volume overall this month has dropped off from October. Thus there is not that overall market participation seen in September and October as the market rallied higher. There are more buyers than sellers as new money is put to work, but not all are convinced that the move has legs. That keeps us looking for stocks that move on strong volume as that means the buyers that are in the market are focusing on those stocks making it less likely they will suddenly turn on us. All in all, no complaints.
THE ECONOMY
Suddenly the economy looks brighter to some holdouts.
We all have heard the chant from CEO's: woe is me, woe is me, woe is me. Indeed, even as economic data showed definite improvement CEO's glumly stated they did not see improvement, and that kept many others outside the corporate offices second-guessing what the facts were showing. As we and others noted, CEO's are a pessimistic group regarding recoveries in normal times, and with the heightened scrutiny after corporate scandals they are even more circumspect with their views regarding the future.
That was last week. This week suddenly the clouds are clearing and the flowers blooming. Okay, we exaggerate. There have been admissions of improvement as far back as September when Office Depot, Staples, Wal-Mart (Sam's Club) and others that cater to businesses reported things were really taking off. John Chambers of Cisco was very positive in his earnings report last week. This week GE's CEO said things were getting better, as GE said 'we feel it every day.' AMD, Intel's main 'rival', said its chip sales would increase 20% in 2004 over 2003 levels. The topper was the admission by Wall Street firms that they were hiring. That is almost scary. That typically means the rebound is well underway.
Phantom recovery remains for some.
It is a recognition of what the market told us starting October 2002 and again in April 2003. That is one reason the market has been stumbling around of late. It has priced in the news and typically needs to rest after everyone else realizes that a recovery is actually ongoing. It is very good to see the business chiefs get on board as they were oft-cited by critics of the tax cut spurred expansion (that is kind of catchy) as an indication that there was no real recovery. It is the same mindset that we heard late in 2002 and early 2003 about how the market was still X% off of its highs and so there was no recovery. With that thinking there could be no recovery until Nasdaq was back at 5000. We all know that is bunk; you don't go from recession to where you were before the downturn in one step. Moreover, you can have a lot of gain and prosperity on the way back up.
I guess the next step is to worry when more and more buy into the recovery as that optimism shows the move is maturing. It can take years to mature, but the cycle is typical: uncertainty (the beginning), optimism (maturing), euphoria (peaking). Optimism is turning, but there are still vast portions of the US that feel there is no recovery because they have not seen the jobs yet. That tells us it is not mature: jobs come, employment falls, people get fat and happy again, they start feeling it will never end, then it ends. Not close to that yet.
THE MARKET
The chips were tipping the market's hand Tuesday as they started back up while the rest of the market was still pulling back or at least not posting gains. Wednesday they continued higher and the rest of the market followed, positing the best gains in three weeks and taking back almost if not all of the recent selling. It usually works the other way: the market scratches and claws its way up only to toss it in the dumpster in a quick session or two to the downside.
That price surge along with the rising volume and the excellent breadth make this a very nice rebound. Sure it does not show the power of the moves in September and October, but it is a continuation of the market's trend where there is stronger buying than selling. The lack of overall strength relative to earlier in the move is something to watch closely: markets and stocks can still move higher with fewer buyers as long as the outnumber sellers, and after a long run that often means the trend run is getting played out. That is what we are very cautious about here. We are not sitting it out doing the Chicken Little, but it certainly keeps us wary. It can continue to run through the new year as is loses momentum, so we don't bail out just because we see the moves showing less power. If they start hiccupping on strong volume and wider swings in price, then we get really concerned and very defensive. Thus far it is still moving up as there are more buyers than sellers.
Market Sentiment
VIX: 16.75; -0.79
VXN: 25.55; -1
VXO: 16.99; -1.01
Put/Call Ratio (CBOE): 0.8; -0.16. After closing in on a 1.0 close (0.96 Tuesday), the market rallied back. Again that level triggered the upside move in this current upleg.
NASDAQ
Undercut the 18 day MVA Tuesday and then surged back over the September high on rising, average volume. A solid reversal.
Stats: +42.36 points (+2.19%) to close at 1973.11
Volume: 1.875B (+14.32%). Nice volume surge on the rebound after a picture-perfect pullback on very light trade. Still, volume was not blowout, just rising back to average and well off the pace earlier in the month when 2B+ upside days were posted. Not as much power on the upside.
Up Volume: 1.664B (+1.112B)
Down Volume: 194M (-875M)
A/D and Hi/Lo: Advancers led 2.96 to 1. Outstanding breadth.
Previous Session: Decliners led 1.85 to 1
New Highs: 250 (+118). Not a new high on the index, but close, and there was no new high bonanza to go along with the gain. That is another sign that the move was not as pretty underneath as it was on its face. Gee, another beauty is only skin deep example?
New Lows: 16 (-2)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
After an undercut of the 18 day MVA (1938) Tuesday techs rallied back sharply, clearing the September high (1913 intraday, 1909 closing) on rising trade. Never made it back to test the 50 day MVA (1888), and that can be read as a sign of strength (a higher low) or an index that will run out of gas soon. The last time it tested the 18 day MVA as opposed to the 50 day in this run from March it did not stake out much new ground, failing at the upper channel line. If more volume and new highs start pouring in as it continues the rally it could make that move up to 2050 or so where the double top from early 2002 formed. First things first. The first channel line is at 2002, the second at 2028ish. It would not take a lot of upside sessions for Nasdaq to test those levels.
S&P 500/NYSE
Did the best job of telegraphing the move with a nice, tight doji Thursday and a blast higher Wednesday.
Stats: +11.96 points (+1.14%) to close at 1058.53
NYSE Volume: 1.319B (+14.5%). Volume jumped, but was still below average on the rebound off the 18 day MVA.
Up Volume: 1.103B (+676M). Huge upside volume.
Down Volume: 205M (-505M)
A/D and Hi/Lo: Advancers led 3.31 to 1. Very impressive breadth as the small and mid-caps resumed their upward march. Without them the breadth numbers are mediocre even on good days.
Previous Session: Decliners led 1.46 to 1
New Highs: 246 (+144). As with Nasdaq, a paltry number of new highs given the indexes are approaching 52-week highs.
New Lows: 10 (-6)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Three day pullback, tight doji, solid rebound. A higher low as well, typically an indication of strength as buyers step in even before an index can reach the prior pullback low as the fight to get to stocks at a lower, 'bargain' price. With this index, however, how much strength involved remains to be seen when SP500 tests the recent tops at 1059 and 1061 from earlier this month as well as the upper channel line at 1069. The index has a very nice consolidation behind it over the summer months, but it has not yet fared well at making and holding new highs. Looks as if it will have another chance to take a new high and this time hold it. The higher low gives it a better chance, but it needs still improving trade behind it.
DJ30:
Stats: +111.04 points (+1.14%) to close at 9848.83
Bounced off of the March/September up trendline (9730) and rallied toward resistance at 9850 (October high). Still has to deal with the recent highs (9903), but if it clears this 9850 to 9900 level on stronger trade it has a clearer shot at a run to 10,000 which would be just a day away from 9900 on any kind of buying. Volume was higher (188M) but that was still well below average. It too has struggled with success, reversing from new highs twice this money already. Third time may be the charm.
THURSDAY
Getting back to economic data with the weekly jobless report and the trade balance. Retailers will also be reporting their sales ahead of the Friday retail sales report. Lots of emphasis on that as the holiday season is getting some upgrades from analysts after, gee, the data keeps getting stronger.
In addition there will be reaction to the AMAT earnings that were mostly positive with revenues beating expectations and new orders at 21% versus the 10% expected. There were some numbers that investors were wrestling with after hours. It moved up late in post-market trading, but how it trades tomorrow was unclear in the aftermarket. DELL announces after hours Thursday, and as we noted it was not pumping the sales at this quarter end as it was before it reported last August. That means it will report some pretty solid numbers. The key will be what Michael Dell says regarding business sales as he has personally said he did not see the pickup.
Wednesday was a solid session even if it did lack the overall power of prior moves in the uptrend. Again, that is a possible indication the move is getting quite mature. SP500 and DJ30 have more potential upside simply because they have not rallied as well as the leading indexes. There is always that rotation we discussed this past week, but it has not arisen yet. Gold stocks were moving as gold surged, but that is not a real rotation of money. Indeed, the market sagged when the leading techs, chips, and small caps were selling, then roared when investors moved back into them Wednesday.
We will continue the game plan, moving into those stocks coming off tests of support and those breaking out from solid patterns after the pullback put the finishing touches on their bases. All the while we will watch closely how the indexes react once again to new high territory. They have had a hard time dealing with success, but at the same time they have not rolled over and crashed after reversing at the new highs. Balking at new highs but making higher lows and rallying right back for more. All in all not a bad scenario, but one that keeps you on edge.
Support and Resistance
Nasdaq: Closed at 1973.11
Resistance: November high (1992). The near top of the channel (2002). The second, higher channel hit in September is at 2028. Then 2050 to 2075, the early January 2002 double top.
Support: October high (1967). The 18 day MVA (1938). The September high (1913). The 50 day MVA (1888). 1860 to 1865. The March/August up trendline (1886).
S&P 500: Closed at 1058.53
Resistance: 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: October highs at 1054. 18 day MVA (1047). 1040, the September highs. 1030 to 1032 (early September highs). The exponential 50 day MVA (1033). The top of the summer range at 1015. 1010 the early September highs. 975 (December 1997 peak).
Dow: Closed at 9848.83
Resistance: The October high (9850). 10,000 is the candle that attracts the moth.
Support: 9800 (April and May 2002 lows). The 18 day MVA (9761). 9686 (September high; 9659 intraday). The exponential 50 day MVA (9628). 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): -$40.2B 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 3
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