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us stock market, trend trading stock
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11/24/03 Technical Traders Report
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Technical Traders 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 Monday: None issued
Buy alerts issued: JNPR; NKE; NOVL; MVSN
Trailing stops issued: None issued
Stop alerts issued: NMGC; SOX
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:
- Expiration over, markets make a move.
- Floodgates open for economic data.
- Seasonality, as the holiday shopping, starts early.
- Subscriber questions
Stocks rally early, gain strength late.
Last week there was little interest in buying stocks as volume was low while worries regarding the dollar, terrorism, and the trade balance were tagged as reasons for the weakness. With the indecision and low volume, market makers could direct some of the action, keeping the major indexes within a narrow range. With expiration out of the way there was no governor on the action. When buying interest showed up, bids were allowed to rise. After two down weeks stocks were ready to try the upside, and when there was no real resistance they rose smartly. Buying begot more buying, and soon a solid rally was underway.
No news, no changes from last week, just a new week with a relief bounce in the dollar spurring the early action. What is ahead is a passel of economic data, and after a period of underperformance in light of good economic data, the market appears ready to price in some more gains ahead of the next good data.
Stocks were certainly doing that Monday, breaking back over near resistance and off the 50 day MVA on rising volume and impressive breadth. The move was not limited to large caps or small caps or any area. Buying was solid across the board, and that is always an indication of institutions, the big money, buying into stocks as small cap, mid-cap, large cap, index, tech, biotech and other funds buy into their specialties. Though volume was not massive, it is always good for the upside when the institutions are back to accumulating shares after a dip that did not show a ton of distribution, i.e., higher volume selling.
THE ECONOMY
WMT gave its weekly update and sales were on track for, you guessed it, the 3% to 5% growth range anticipated. Retail sales are off to a great start for November, even before 'black Friday', and the cold weather is helping drive more sales as people get 'into' the holiday spirit.
As noted, it appears after a month of solid economic news and earnings were treated with a 'so what' that the market may be ready to price in the next round of economic data. With Q3 final GDP heading toward 8% and Q4 looking good with the inventory building that started late in Q3, the October data coming out this week should be solid and give the first real indication that the Q3 activity continued into Q4 even during seasonally slower October. As the flood of data hits Thursday, this move ahead of the data indicates solid numbers ahead.
THE MARKET
Not dead yet despite the length of the run.
A trend wants to stay a trend just as an object in motion wants to remain in motion (except for my body when I am out for my run, possibly the only exception to that immutable rule of physics). When SP500, the go to average for holding support of late, held the 50 day MVA and bounced, the rest of the market was bouncing as well, moving back over near resistance and resuming the uptrend. It was not a stellar accumulation move, and we can find many reasons to nitpick, such as declining volume overall as the run higher gets quite old, but with the trend holding and stocks making sharp rebounds off of support, who wants to fight it.
The action shows the market still wants to rise in its trend for now. It as not just a relief bounce as volume did increase. It was not a resounding affirmation of the trend as volume was still below average. Momentum, seasonality, money chasing gains. Seems the market bends but does not break before the buyers come rushing back in to pick up on the gains in the trend ahead of the holiday season. Again, we really don't want to stand in the way of that action but instead take what the market is giving.
Market Sentiment
VIX: 17.44; -1.54
VXN: 27.07; -2.01
VXO: 17.15; -2.74
Put/Call Ratio (CBOE): 0.65; -0.15
NASDAQ
Gapped higher and closed near the high, back in the trend on rising volume.
Stats: +53.26 points (+2.81%) to close at 1947.14
Volume: 1.799B (+10.62%). There was some accumulation as volume posted a solid gain. It still remained below average, however, in rather typical holiday fashion. There was accumulation with the gain on rising volume, but the trade was not the resounding vote of confidence you would like to see. Of course, things rarely line up perfectly when the market moves.
Up Volume: 1.475B (+569M)
Down Volume: 308M (-356M)
A/D and Hi/Lo: Advancers led 2.5 to 1. Outstanding breadth as stocks across the board were rallying well.
Previous Session: Advancers led 1.22 to 1
New Highs: 249 (+129)
New Lows: 20 (+1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Just as it gapped down last Monday, Nasdaq was gapping up this Monday, filling the downside gap. It does not look like a gap fill that is simply a test and then a continuation of the gap. The breadth was strong and volume, though below average, was stronger. There was definitely some overall buying ongoing after the consolidation last week. Thus Nasdaq makes its sixth bounce up off support in this uptrend following the April breakout. It did not make another dip as we thought it might before continuing the move. It is back in the uptrend channel and over the 50 day MVA (1895). It is old, and while it may not be improving with age as far as technical underpinnings, it still acts fresh with this next bounce up from its most serious test of the uptrend to date.
S&P 500/NYSE
Doji on the 50 day MVA Friday, sharp bounce on some rising volume as SP500 once again acted as the bottom side strength for the market. Solid move up through the short term MVA after making a higher low. Very solid.
Stats: +16.8 points (+1.62%) to close at 1052.08
NYSE Volume: 1.303B (+4.27%). Volume rose as well, but it too was also below average. The rising trade shows there were more buyers in the market, but they were not overwhelming the market
Up Volume: 1.101B (+372M)
Down Volume: 185M (-319M)
A/D and Hi/Lo: Advancers led 2.93 to 1. Excellent breadth as SP500 resumed its move off of its 50 day MVA.
Previous Session: Advancers led 1.49 to 1
New Highs: 240 (+118)
New Lows: 9 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
A higher low as SP500 held the 50 day MVA (1036) and rallied on stronger volume. That is exactly the action you want to see, and it roughly continues the formation of the ascending triangle from the past two months. Nice surge off of the support, the move that it had to make for the trend to continue. Now it looks to the November highs (1064), and there we will see how strong the season is.
DJ30:
Stats: +119.26 points (+1.24%) to close at 9747.79
Volume: 192M versus 209M
Regained the 50 day MVA (9648) and the 18 day MVA (9722), but it was tagging along with the rest of the market as volume contracted back to below average. A solid price gain but the technical underpinnings were thin. It has to break through the October high (9850) and the November high (9903) to avoid a somewhat toppish pattern, but with the rest of the market pulling it along it will follow.
TUESDAY
GDP and consumer confidence are out Tuesday and could add some additional fuel to the move though the Monday rally was in anticipation of the news. After a strong move higher to get the bounce up and running, the pattern has been for more modest moves thereafter as the rebound continues. Thus we do not expect continued massive gains on this move though the seasonal pattern often provides some of the best gains of the year in the Thanksgiving week. Thus we focus on resistance levels to gauge the move and how it is holding up.
After expiration, the market was free to move and it resumed the trend. We never try to set the trend; we are admitted followers, but followers that look ahead, see where things look likely to go, and then move in when the move is being made. Monday many of our positions moved very well and we also took new positions on some good moves. We would have liked to see more volume, but in a holiday week Monday was not bad.
With the big jump Monday we were moving into positions, and we will take more if we see solid moves out of good patterns or rebounds off of support. Many stocks were doing that Monday and will continue to do so. Volume will be an issue as it was Monday, but as long as a stock is not too extended (5% or so off a breakout or support level), it is still game. There are many of those out there, but the window will close pretty rapidly as the rebound continues and the indexes move toward the upper end of the ranges.
Thus we will be shopping again Tuesday as well, and after a strong surge there may be some softness before the move resumes. That would be the best action as it would set up buy points better and let buyers rest then come back into the market. That is one of the surer entry points and one of our favorite ways to start the trading day.
Support and Resistance
Nasdaq: Closed at 1947.14
Resistance: 1975 is some resistance. November high (1992). The January 2002 double top (2044 to 2099).
Support: The 18 day MVA (1923). The March/August up trendline (1918). The September high (1913). The 50 day MVA (1895). 1875 to 1880 is the bottom of the week's range.
S&P 500: Closed at 1052.08
Resistance: November high (1062). The December to June upper channel line at 1080. 1080 from February 2002 lows. 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: The 18 day MVA (1044) and the 10 day MVA (1044). The exponential 50 day MVA (1036). 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 9747.79
Resistance: The October high (9850). The November high (9903). 10,000.
Support: The 18 day MVA (9722). 9686 (September high; 9659 intraday). The exponential 50 day MVA (9648). 9588 the early September highs. 9500 (June 2002 lows) is the top of the summer range.
Economic Calendar
11-25-03
GDP, 1st revision Q3 (8:30): 7.6% expected, 7.2% prior. May not show up in this report, but the final revision that takes into account all inventories should be near 8%.
Consumer confidence, October (10:00): 85.0 expected, 81.1 September.
Existing home sales, October (10:00): 6.53M expected, 6.69M September.
11-26-03
Personal income, October (8:30): 0.4% expected, 0.3% September.
Personal spending, October (8:30): 0.0% expected, -0.3% October.
Durable goods orders, Octiber, (8:30): 0.7% expected, 08.% September.
Initial jobless claims (8:30): 360K expected, 355K prior.
Michigan sentiment revised (9:45): 94.0 expected, 93.5 prior.
New home sales, October (10:00): 1.13M expected, 1.15M September.
Chicago PMI, November (10:00): 56.5 expected, 55.0 October.
Fed Beige Book (12:00)
SUBSCRIBER QUESTIONS
Q: For your daily support/resistance levels that you give are you using simple moving average or exponential moving average on your 18, 30, 50 days? Or do you go back and forth?
A: This is a good question, one we receive from time to time.
We tend to use the exponential moving averages on the 10, 18, and 50 day time periods but at times may switch to using a simple moving average, especially on the 50 day, depending upon what is the current trend for support/resistance in the market, or for a particular stock. In the case of the 50 day moving average, we have seen the Nasqaq track truer to either one or the other, and while we will use one for actual support/resistance levels, we keep the other as another frame of reference.
Exponential moving averages place more weight upon the later moves in the time period than the earlier moves. We use exponential on our short-term moving averages (10 and 18) since we use them as indicators for short term plays and want to see the latest trend in movement the best we can. We found that the 18 day exponential moving average is often a much more accurate indicator of shorter term support for stocks moving out of solid patterns than other moving averages. For the longer term moving averages (50 and 200), we use simple moving averages where each day in the period is weighted the same. This tends to smooth the line out more, showing us the true longer term trend. The 50 day moving average is one that we tend to switch from simple to exponential and vice versa more often than the 200 day, which generally remains a simple moving average.
We want to buy where the big money is buying, and if it is at the exponential 50 day, then we will shift with that trend, ever trying different references and focusing on the ones that work for us at any given time. We cannot doggedly follow the 'old rules', because the market is dynamic place shaped by volatility and changing attitudes, and we need to adapt to it while keeping our overall principals in sight.
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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us stock market
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