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world stock market, us stock market
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11/20/03 Stock Split Report
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Stock Split Report Subscribers:
Thanksgiving Holiday Schedule:
The stock market will be closed Thursday November 27 and will close at 1:00ET Friday November 28. Reports will issue as usual Monday and Tuesday. Barring any major market event, the following is the report schedule for that week:
Monday and Tuesday: Normal reports issue
Wednesday: Market update, play tables
Saturday: Market update, highlight best plays for Monday, play tables
Alerts: Will issue as normal.
MARKET ALERTS
Targets hit alerts issued Thursday: None issued
Buy alerts issued: CLE; HOTT; GRMN
Trailing stops issued: Took some more gain off the table. GGP; COH; ECIL; COCO
Stop alerts issued: CRIS
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. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market shrugs off geopolitical concerns, but in the end the continued rally attempt failed.
- Jobless claims continue the trend lower, LEI doubles expectations.
- Hanging on, but barely.
- Subscriber Questions
Relief bounce tries to follow through but too much to worry about.
Terrorist bombs, a weaker dollar, threats of a trade war, options expiration Friday. Those have kept a lid on the market action of late, giving investors some reasons to sell and take some gains for the year. That is frustrating in light of the continued flow of good economic news, but in the bigger picture the market is holding up very well. If this kind of news hit at any time before March or April of this year there would have been devastation. As it is the market is in just a moderate pullback, testing the 18 day MVA.
Indeed, the market even tried to shake off the bad news and rally, moving positive mid-session in a continuation of the Wednesday bounce from the 50 day. The buying was not strong enough, however, and the market dynamic took over, turning stocks back to their session lows and beyond by the close. In the end there was a half day of rallying that ran out of gas. The relief bounce at the 50 day MVA may be over and the market may have some more testing to do. It did not, however, cave in on higher volume. Many stocks, leaders and also rans, are holding at near support, and that provides some backbone at this level even as some chip stocks that looked promising quickly turned around and solid through near support.
Thus the action is teetering on the edge of a further breakdown with chips and the SOX having a tough session and a failed 50 day MVA bounce in the back pocket. Stocks look good one session as they hold support and form up a good potential move (e.g., several semiconductor stocks) only to backslide the next. That action shows the buyers and sellers fighting it out at support, though it is more a scuffle than fight as low volume reigns. Again, a tired and somewhat indecisive market struggles to hold the uptrend so it can put together a holiday rally.
THE ECONOMY
Jobless claims fall again.
Weekly claims fell to 355K, better than the 365K expected. The prior week was revised up to 370K from 366K. We heard several comments grousing about how the number had been revised higher 51 out of 52 weeks the past year in an apparent attack on the numbers themselves. That is the erroneous focus on a specific data point as opposed to the trend. So what if the numbers are revised higher if the trend is very favorable? The trend is definitely lower as the 4 week average shows, falling yet again down to 367,250 from 376,250.
At this level the economy will produce about 150K jobs per month. That is solid and will put a dent in the unemployment figures. 200K per month, however, is what is really needed to put those that want to work back to work. With the continuing improvement in economic data and corporate bottom lines (e.g., CLE, JWM, HD, LOW, HPQ, etc.) it appears there will be jobs, and if the expansion continues there will be high paying jobs to boot. Now if we could just get our social programs in line to provide incentives for those who can work but won't even if a job is available, then we could really reap some reward from the economic recovery.
October leading economic indicators post a solid surge.
After backsliding to flat in September, this basket of 10 indicators that look 3 to 6 months down the road surged in October, traditionally a slower month for the economy. Expectations were for a 0.2% gain, but it was doubled up, indicating the economy, as we have repeatedly stated, is expanding into Q4, not slowing down. Q3 GDP is going to be near 8%, and Q4 won't hit that level, but the data indicate it is coming in stronger than the 4% projected. We think 6% to 6.5% in Q4.
That should continue into Q1 as businesses continue to come out of their spending shells and consumers get a $100B tax refund along with the monthly extra cash from lower mortgage payments and lower withholding from paychecks due to the lower tax rates. This gives the economy that 'sustainability' that so many question. Let them question it. There is a solid, grassroots upturn in business spending, and it is healthy to have skepticism. Remember, there is a cycle to market runs and economic runs. At first no one believes, then there is some acceptance with a lot of skepticism, then everyone believes, and finally, everyone thinks the faucet will never turn off. Right now we are in the second stage where a lot of skeptics still think the economic pop is transitory, based only on a one-time shot of refinancing and child tax credits.
Again, it is good that there are still a lot who do not believe. The economy started to recover at the end of 2002. The market anticipated it and bottomed. No one believed it was happening even though we reported an increase in business spending in Q4 and a stronger retail season than anticipated. No one believed in any recovery, however, until late summer 2003. At that point the market had already put on quite a show. We are still in the sweet spot of economic recovery, the point where there is a lot of growth as activity rises off the mat and jumps, providing those big gains.
THE MARKET
SP500 held support at the 50 day MVA early, and that sparked an upside rally that pushed Nasdaq and others back over the 50 day MVA and up to test next resistance. At that point the shorts stopped covering and the smattering of buyers stopped buying. Again the ledge crumbled away and stocks slid back down, giving back the session's gains as well as the Wednesday bounce. That put Nasdaq back below the 50 day, but right where it has traded the past three sessions. SP500 was back to the 50 day MVA. Basically, all indexes and many stocks are right back at resistance. Now the question: the lady or the tiger?
As noted, there is a middleweight boxing matching taking place at the 50 day MVA. No heavyweight title, just some lightweights trading jabs. Both look rather anemic. Problem is, the upside has to deliver the knockout blow to advance. The downside can just trade blows and wear the upside down and it will win. In short, there has to be a big surge in buying to avoid dipping lower.
Given all of the news, the market is doing a decent job of holding its own. Nasdaq is below the 50 day MVA but the candlestick pattern is not bad. Many leading stocks are holding near support on lower trade just as the indexes are doing, and most all are moving on lower trade. In short, there is a consolidation effort ongoing at the 50 day MVA. If the indexes can hold here in the face of the negatives it is focusing on right now (dollar, trade, terror), once the news becomes old hat, the market can start pricing in the economic recovery once more.
One of the problems is the SOX. It is tipping toward a 50 day MVA test of its own. If that occurs the rest of the market will be under some serious downside pressure though SOX is less than 25 points from that support level. After a low volume bounce Wednesday, the turn back down was not inspiring though not unexpected.
Market Sentiment
VIX: 19.48; +0.68
VXN: 30.49; +0.53
VXO: 20.2; +0.75
Put/Call Ratio (CBOE): 0.8; -0.07. The ratio is not moving up as much as you would like to see on this gyration, indicating there is some more pressure needed to shake out the last sellers at this level.
NASDAQ
Back down below the 50 day MVA, but holding the range it has traded in for the past week.
Stats: -17.73 points (-0.93%) to close at 1881.92
Volume: 1.799B (-0.38%). Continued the string of lower volume sessions, holding steady at the low end of the daily trading ranges. Trying to consolidate.
Up Volume: 534M (-599M)
Down Volume: 1.245B (+581M)
A/D and Hi/Lo: Decliners led 1.61 to 1. Still very modest breadth on both downside and upside sessions.
Previous Session: Advancers led 1.42 to 1
New Highs: 124 (+4)
New Lows: 15 (-14)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Tapped at the 10 day MVA (1917) on the high (1916), but had no volume and could not hold the move. Turned, sold, and gave up the 50 day MVA (1893) yet again. Managed to hold the 1880/1875 level, the lows of the week on again lower trade, and that keeps it in the ballpark for a recovery. It showed a hammer doji on the candlestick pattern, and that can suggest a turn back up after a selloff. At this point it is just a suggestion; the index has made a long run, is tired, but is trying to consolidate near support. Consolidation is just what it needs. Thus far the sellers have not been able to push it lower but Nasdaq needs something very positive to break it higher this week and overcome the near term downside weakness attributable to the uneasiness regarding trade and the dollar. Overall the longer term prospects remains solid with a nicely expanding economy.
S&P 500/NYSE
Tapped at the 18 day MVA and then gave it all back and more down to the 50 day MVA once again.
Stats: -8.79 points (-0.84%) to close at 1033.65
NYSE Volume: 1.282B (-2.17%). Volume backed off as it found the 50 day MVA again.
Up Volume: 361M (-484M)
Down Volume: 922M (+464M)
A/D and Hi/Lo: Decliners led 1.59 to 1. Modestly higher downside breadth that indicated, along with the light volume, no heavy selling.
Previous Session: Advancers led 1.49 to 1
New Highs: 123 (-16)
New Lows: 13 (+2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps have an affinity for the 50 day MVA (1035), unable to advance past the 10 or 18 day MVA, but not blowing out to the downside through the key 50 day. It is certainly not the best action to repeatedly test that level; mother always told us about hanging out in bad neighborhoods. As with Nasdaq, it is trying to hold and consolidate on lower volume, but thus far it generated a weak bounce that immediately failed. Low volume is its ally at this stage, but something has to change to bring the buyers back in or it makes a test toward that 1025 level. It tried the short term MVA, and instead of blowing through them it turned tail and ran. That is not entirely accurate. It turned and strolled back to the 50 day MVA.
DJ30:
Stats: -71.04 points (-0.73%) to close at 9619.42
Very similar action, rallying to the short term MVA (18 day MVA at 9730) and then rolled over to again close below the 50 day MVA (9644). Unlike the other two indexes, DJ30 volume rose (206M versus 192M). It has shown two distribution sessions in the last three trading days. Thursday it was HPQ and the techs that helped that distribution. It looks weaker than the others, but the SP500 has been the anchor as far as support, and it is still at the 50 day MVA.
FRIDAY
Expiration Friday is finally here, and once that is over the market may be set to make a move out of the range it set this week. The low volume is letting the market makers hold things in check between the large call and put open interests that bracket the week's trading range. Unless some major geopolitical issues again arise, and perhaps even if they do, Friday could again be volatile but still trade roughly within the weeks' range.
The week has been one with good economic news and worrisome world news (terror attacks, weak dollar, trade posturing). The conflict has kept the buyers and sellers, at least those that are in the market, fighting to a standstill. There is some downside bias as the market is tired and sluggish after a long run and the chips are leaning toward a test of the 50 day MVA themselves.
It does not look like a major breakdown in progress, however, and even a test of the 50 day MVA by the SOX as well is not a meltdown. Indeed if that were to happen we suspect there would be a raft of bargain hunters jumping in all over the chips, particularly given that the INTC CEO was out again Thursday talking of increased demand and the prospect of a good 2004. It may not happen Friday, but we will be patient and if it does occur over the next few sessions we will be ready to jump on it and some choice chip stocks that have held up well on this pullback.
Thus we expect similar up and down action Friday, more or less in the week's trading range. Many positions are holding up at support on low volume, just what you want them to do on a test. They may not make the move Friday, but are set to bounce once the market digests the recent concerns regarding the dollar. We will continue to watch the trend closely and for further signs it is breaking down, namely a higher volume sell off from the Thursday close along with similar action in leaders such as chip stocks. We are not necessarily going to load up on the downside as we believe there will be a seasonal return to buying even if there is a quick shakeout to the downside from here.
Support and Resistance
Nasdaq: Closed at 1881.92
Resistance: The March/August up trendline (1907). The September high (1913). The 18 day MVA (1923). 1975 has turned into some resistance. November high (1992).
Support: The 50 day MVA (1893) is cracked but not totally broken. 1875 to 1880 is the bottom of the week's range. 1860 to 1865. 1800.
S&P 500: Closed at 1033.65
Resistance: The 18 day MVA (1045) and the 10 day MVA (1044). November high (1062). The December to June upper channel line at 1079. 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 9619.42
Resistance: The exponential 50 day MVA (9645) is trying to hold. 9686 (September high; 9659 intraday). The 18 day MVA (9730). The October high (9850). The November high (9903). 10,000.
Support: 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): +2.9% (1.96M) actual, 1.850M expected, 1.905M prior (revised from 1.888M).
Building permits, October (8:30): +5.9% (1.973M) actual, 1.855M expected, 1.86M September.
11-20-03
Initial jobless claims (8:30): 355K actual, 365K expected, 370K prior (revised from 366K).
Leading Economic Indicators, October (10:00): 0.4% actual, 0.2% expected, 0.0% September (revised from -0.2).
Philly Fed, November (12:00): 25.9 actual, 30.0 expected, 28.0 October.
SUBSCRIBER QUESTIONS
Q: Could you please explain how you know about the quantity of put and call options on the QQQ and why the market makers want to stave off rally attempts?
A: You can find the open interest of puts and calls on the QQQ, OEX, and any stock or other index at several places on the web. One is www.pcquote.com. You can get a quote on options and it will show you the open interst as well for each strike and for each month. When looking for potential impediments to market or individual stock moves close to expiration, look at the current month and the call and put options that bracket the current price. Look for the big open interests. Those are the strikes that could act as an impediment.
We say could because it is hard for any individuals, even acting as a group, to hold the market tide back if there is a strong surge of interest in either direction. News, positive or negative, could push it past those levels and the market makers could not stop it.
Why would they want to do that? Because market makers take on huge amounts of risk in order to provide liquidity to the market. They are not just matchmakers, they move in and buy in their own account then turn and sell. Or they sell and then turn and buy. If things slow they are theoretically supposed to step in and buy or sell to get things moving. Again, they are taking on great risk and though they try to stay as neutral as possible, they are often on the side against the majority of open interests as they are there to help make and provide a market. Thus, if they can spread a little loving influence when things are slow, they will try to do so and keep the expiration close at levels where they will come out ahead by virtue of where the indexes close. In other words, their call and put positions work to cancel out any loss if there is no big price swing. That is why we see some pretty strange trade at times on expiration as investors try to roll out of posititions to give themselves more time and market makers attempt to stay market neutral.
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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