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world stock market, us stock market
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11/18/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: XLA; KEYN
Trailing stops issued: EGOV; NXTL; PLXT
Stop alerts issued: CORI; ZHNE
MARKET SUMMARY
No traction off 50 day MVA as stocks sink back to test support again.
While the Monday late rally off the 50 day MVA test indicated some upside life, Tuesday sapped it right back out. Sluggish trade all day turned into harder selling in the last hour as Nasdaq undercut the 50 day MVA on the close with volume ticking slightly higher for techs. Semiconductors started to rally Monday but then abdicated, leading to the downside Tuesday. It was not a total washout. Indeed, the action is similar to what Nasdaq showed at the end of September on that 50 day test. With most leading stocks in a test of support, however, it is an important juncture for the market. Can it muster another bounce off the 50 day after an already impressive 7 month uptrend after the April breakout?
Dollar weakens, market does the same.
The action was decent early with a good CPI report. That soured rather quickly, however, as the dollar started to sink. Indeed, the dollar posted its worst close versus the euro in 7 months. Weighing it down was the announcement of anti-trade textile tariffs announced by the US in a thinly veiled political move. The Bush boys like to talk free trade, but that is all they do. Steel tariffs and now textile tariffs are childish ways to affect trade results. All they do is drive up prices for all US consumers while trying to save a declining industry that is losing out for obvious economic reasons. Textiles reached its US zenith at the turn of the century (1900, that is), and has been on decline ever since. It is an industry of developing nations, yet to curry political favor Bush wants to raise prices for US consumers and tick off the rest of the world even more. Free trade is free trade; you don't seek free trade by putting up tariffs. We heard that in Viet Nam: "you have to burn it to save it" as the saying went back then. As Larry Kudlow put it, but for the tax cuts the Bush economic plan is very 'Nixonian,' and that is no compliment.
On top of the tariffs impacting the dollar, George Soros was out again bad mouthing the dollar. It is bad enough that he has a rabid, almost manic, political agenda to extract Bush from the presidency and would be willing to suffer global recession to achieve that end (after all, if you have $7B, what is another year or two of global suffering?) by dumping on the dollar at every opportunity. But now he is back dissing the dollar. He did that three months back, coming out on CNBC to announce to the world he, George Almighty, was shorting the dollar. Talk about pump and dump. Place your shorts and then ask to go on CNBC to tell the world that you are shorting it. And the SEC gets all worked up and accuses some poor bastard of insider trading when he heard a rumor from a fried of a friend and buys 100 more shares of stock than on his 'normal' trade. You have to ask just how well your tax dollars are being spent when you see this kind of inequity. When you see the mutual fund trades printed clear as day and showing after hours trading, when you see and hear clear signs of insider spinning, but the SEC, basking in the glow of the late 1990 market boom and the fees thousands of new IPO's are generating, elects to just let things run out of control and then later whines the tired old mantra of bureaucracies caught not doing their job: 'but we just don't have adequate funding.' Oh by all means, lets go fund them with a few hundred million more dollars now that the cows have left the barn so they can prosecute Martha Stewart for a momentary lack of judgment when she panicked and then beat up on some average Joes to show the world that yes, the SEC is back baby. Is there any wonder foreigners are starting to pull dollars out of US investments with this type of 'regulation.' This is more the type of actions we would expect in Russia. Of course, with the Patriot Act running out of control already, Putin may be calling Bush soon and asking if what he is doing is constitutional. How is that for role changing?
Mutual fund scandal starting to hurt as well as the market is too tired to fight it off.
It does seem that the mutual fund mess is starting to drag the market as well. It has been fending off the latest scandal that the federal government's watchdog agency missed (is there a better argument for more states rights than how Spitzer outflanked the SEC at its own job?), but now that the market is winded and tired, it is taking some body blows from the 'fiduciaries' entrusted with several trillion dollars courtesy of US citizens. The market looked as if it might walk on past this latest scandal, but with its resistance down and other problems vis- -vis the dollar's slide and the oil price spike on top of a 7 month 45 degree climb, it is taking on some water.
Tired is a good way to describe it. When Home Depot blows out earnings but loses ground on the day, that is tired. When economic report after economic report comes in better, in some cases much better, than expected yet the market just runs in place, that is tired. When Mark Haynes yawns off camera (yes, you can hear the rather disgusting inhale and exhale) 7 times in one half hour interval during 'Squawk Box', that is tired.
Yet, to count out the market just yet is risky. It has not clearly broken down, and while there is some urge to take gains and be happy after a good run and some leadership sectors are in trouble (e.g., internets), there is also new money that wants to get in on the action ahead of year end and ride any seasonal move. That has kept the market moving thus far, and while it has yet to enter with force on this pullback, the uptrend is still in place and many leaders are holding support. The market can spend a few days at the 50 day MVA as it decides what it is going to do. It is weaker and winded from the long move, but it has not cracked yet. It is not getting any help from Washington with tariffs and talk of a several billion dollar entitlement plan getting closer to passing, but it has not broken down. It is getting the look, however, of a market that has priced in a lot of the recovery at this point.
THE ECONOMY
Consumer prices roughly in line.
Prices were flat overall (+0.1% expected), up 0.2% ex autos and food (0.1% expected). That was roughly in line and shows, overall (in the aggregate, looking at prices as a whole, and other clich s) that there is no significant price pressure showing up YET in what consumers pay. Again it was the items that hit closest to home that were rising: clothing, medical care, education and even housing rose. Cars and computer prices fell. While we are hard on our computers and even our house, we don't have to go to the store once a week to buy a new one to replace what we have.
The year over year numbers truly show little overall, repeat overall, price increases. A 2% rise over the past 12 months and a 1.3% core rise in the same period is close to the 37 year low set in September (1.2%). Medical costs have soared 3.7% over the past year.
Ah, medical costs.
To import or not to import, that is the question. Actually it is not. Drugs developed in the US are sold or licensed overseas. Overseas governments demand lower pricing to allow the drugs to be sold to their populace and the makers agree. No problem because they have the US population to underwrite the cost of the R&D. We say we hate subsidies, but the way the global market for drugs is set up, there is a 'natural' subsidy created and it is paid for by the US consumers. The rest of the world wants the miracle drugs (though their medical systems dole them out with an eyedropper and only to those worthy of them) but does not want to pay for them. Someone has to or else there would be no wonder drugs (or a damn sight fewer of them) because there would be no incentive to spend the billions to develop them. Fortunately for the rest of the world the US is the most powerful economy there is and we generate a standard of living high enough to pay for them. With the US being the police force for the world as well, however, it cannot continue. It simply cannot pay for it.
Thus the importation issue is not the solution. If we want less research and fewer innovations that we have so come to rely on to increase our lifespan by 15 years in less than 30 years, then go for the imports. If we want to maintain the pace of innovation and the world wants to keep the new drugs coming as well there will have to be a more open market for drug companies to spread out the cost among its clientele. That means free trade, but you have the Bush administration pissing off every other country on earth with respect to its own definition of 'free.' There are times and places to play John Wayne. There are times and places when you need to dance like Fred Astair. It makes negotiations difficult when you punch a fellow in the nose about steel or textile imports and then try to get him to share some costs with you. In any event, it looks as if we will apply another band aid to a serious problem and put it off for another 10 years until it is really serious.
THE MARKET
Tough going near the 50 day MVA As that Teutonic tramp in Blazing Saddles put it, 'I'm tired, tired of playing the game, ain't it a crying shame, I'm so tired.' That should be the market's lament at this point. Seven months straight up off the April breakout and it is back at the 50 day MVA for its fourth literal (and close to fifth) test of that key support. They are coming more frequently as well. During the early part of the run Nasdaq waved at the 50 day MVA in May and June, but it was not until early August it actually tested it. Then another almost 2 months before the late September test. Then in late October. Now in mid-November. While it made a nominal new high on the last bounce, it covered less upside ground on this surge. Shorter trips, more frequent stops. Sounds like my father.
But when I thought my father had run out of gas he could always surprise me. Thus with Nasdaq slightly undercutting the 50 day MVA (along with DJ30) and SP500 hanging on by a thread, we are very cautious about the downside prospects but also know seasonal factors and the outstanding underlying economic improvement could trump the worries over the dollar and send the market bouncing higher. It is struggling for sure, but it is also still in its uptrend and we don't see a lot of breakdowns from leaders though there are some key slumps. Chips stocks tried to lead Monday, but they failed Tuesday and slumped with the likes of KLAC breaking its 50 day MVA while INTC, TXN, NVLS and others plunged through their 18 day MVA. The latter is not a breakdown, but it is indicative of the need for a deeper test, and that is one reason we are very wary of the action at this juncture and why we have been closing positions if they threaten a close below their support.
Market Sentiment
Volatility as measured by the VXN has broken over the 50 day MVA, something it has done on four occasions in the past four months. Each one of those breaks lasted about 5 sessions and marked an interim low in the Nasdaq where Nasdaq tested the 50 day MVA and the rebounded. If that pattern holds it suggests a rebound in rather short order. It is true, however, that such a pattern usually gets 4 to 5 turns before it breaks down.
VIX: 19.11; +0.51
VXN: 29.65; +1.84
VXO: 19.9; +1.08
Put/Call Ratio (CBOE): 0.76; -0.08
NASDAQ
Closed below the 50 day MVA and the March/August up trendline by a hair as volume edged higher. More sellers at a key level.
Stats: -27.86 points (-1.46%) to close at 1881.75
Volume: 1.922B (+2.51%). Volume rose, particularly in the last hour as the selling strengthened.
Up Volume: 494M (+52M)
Down Volume: 1.298B (-99M)
A/D and Hi/Lo: Decliners led 1.6 to 1. Real no heavy overall selling, indicating a lot of the move was in the bigger names that make up the most of the index movement.
Previous Session: Decliners led 2.22 to 1
New Highs: 149 (+18)
New Lows: 18 (-8)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Nasdaq moved down to test the 50 day MVA again as we thought it might, but volume moved higher as it breached that level and the up trendline. That indicates sellers are edging in at this key level. Higher volume here is not necessarily a bad thing, but unlike Monday the market sold to the close without buyers rescuing it. It can trade at this level another day or so, but then it has to make its move. It did this in August, but that was three 50 day MVA tests back. It is a bit more saddle worn now, making shorter hops, but the trend is in tact. If that breaks down it can find 1850, even 1800 (former highs and lows) in short order. It is winded, it is hanging on, but it has not broken its trend. That could change by 10ET Wednesday,
S&P 500/NYSE
Right back to the 50 day MVA but volume fell as the large caps took the majority of the beating.
Stats: -9.48 points (-0.91%) to close at 1034.15
NYSE Volume: 1.304B (-1.42%). Volume backed off on the test. That is what you want to see on selling, a modest silver lining.
Up Volume: 393M (+157M)
Down Volume: 911M (-151M)
A/D and Hi/Lo: Decliners led 1.41 to 1. Very modest decliners given the point loss. It was the big cap issues that were selling the most.
Previous Session: Decliners led 2.33 to 1
New Highs: 141 (+54)
New Lows: 12 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Thumped the 50 day MVA (1035), slightly undercutting that level on the close as volume backed off slightly. After a short, low volume double top to start the month, SP500 has found the 50 day MVA. It has now spent two sessions trading around that level. It will now rebound or fail. Volume has remained low all month and notably so on this pullback. That indicates no real dumping of large caps shares and has not undermined the prior consolidations. Key level and now it shows us whether it continues the run here or slips into the deeper correction it needs. 1030 is a level it could tap on a quick test lower, shakeout or scare out the last sellers, and then rally.
DJ30:
Stats: -86.67 points (-0.89%) to close at 9624.16
The blue chips also undercut the 50 day MVA (9643) on the close, doing so on rising, above average volume. That is the second distribution session in three as the Dow gives up a decent looking pattern. We were wanting to see lower volume selling to this point to act as a shakeout, i.e., a low volume test that gets rid of the last sellers. The rising volume, however, indicates more and more sellers are joining, that the test lower is not just a mop up job but has opened a new vein of sellers that does not appear to be ready to dry up just yet. We will see where a quick test of 9600 (early September high) takes it.
Stats: -57.85 points (-0.59%) to close at 9710.83
WEDNESDAY
Housing starts and building permits before the open, but those will hardly be market moving what with dollar concerns, tariffs, and mutual funds. This is the critical session, the rubber match so to speak, at the 50 day MVA. One day it rebounded, the second it turned back and closed right at that level. Now can it rebound again as it did in August or is it too tuckered out and ignores the seasonal upside factors just as it ignored the downside seasonal influences in September and October?
The larger cap issues are already putting in their votes as NDX, OEX and others closed handily below their 50 day MVA. They may come back up to kiss those levels in a rebound move, a rather typical response, and then they will either breakout or continue the breakdown. Even with this pullback there are not a ton of leading stocks in great buying positions, indicating further consolidation is needed. That does not necessarily mean it starts this week; markets can continue to get overextended before finally giving up.
We anticipate a test lower by DJ30 and SP500 to price support just below the 50 day MVA. From there a rebound to test the 50 day breach. That test will show us the direction of the market near term ahead of the holidays. A further blow down this week through Thanksgiving may not be out of the question, but again, we will see how a rebound to test the 50 day MVA fares.
One thing to keep in mind: though volume did tick higher Tuesday it was still relatively low versus September, October and even the first week of November. That means there is not a lot of selling ongoing, and after a quick break below the 50 day MVA it could rally right back as new money is put to work. The action was not pretty Tuesday, but it was not an out and out stock dumping session.
Support and Resistance
Nasdaq: Closed at 1881.75
Resistance: The 50 day MVA (1893). The March/August up trendline (1904). The September high (1913). The 18 day MVA (1931). 1975 has turned into some resistance. November high (1992).
Support: 1860 to 1865. 1800.
S&P 500: Closed at 1043.63
Resistance: The 18 day MVA (1047) and the 10 day MVA (1048). November high (1062). The December to June upper channel line at 1078. 1080 from February 2002 lows. 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: The exponential 50 day MVA (1035). 1030 to 1032 (early September highs). The top of the summer range at 1015. 1010 the early September highs. 975 (December 1997 peak).
Dow: Closed at 9624.16
Resistance: 9686 (September high; 9659 intraday). The 18 day MVA (9749). The October high (9850). The November high (9903). 10,000.
Support: The exponential 50 day MVA (9645) is not completely broken. 9588 the early September highs. 9500 (June 2002 lows) is the top of the summer range.
Economic Calendar
11-17-03
Business inventories, September (8:30): 0.3% actual, 0.0% expected, -0.4% August.
NY Empire Index, November (8:30): 41.0 actual, 27.0 expected, 34.10 October (revised from 33.7).
11-18-03
CPI, October (8:30): 0.0% actual, 0.1% expected, 0.3% September.
Core CPI: 0.2% actual, 0.2% expected, 0.1% September.
11-19-03
Housing starts, October, (8:30): 1.850M expected, 1.888M prior.
Building permits, October (8:30): 1.855M expected, 1.875M September.
11-20-03
Initial jobless claims (8:30): 365K expected, 366K prior.
Leading Economic Indicators, October (10:00): 0.2% expected, -0.2% September
Philly Fed, November (12:00): 30.0 expected, 28.0 October.
11-21-03
Treasury Budget, October (2:00): -$72.5B expected, -$54.1B September.
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
us stock market
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