|
|
us stock market, trade stock
* * * *
11/25/03 Investment House Alerts Report
* * *
IH Alert 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 Tuesday: ONNN
Buy alerts issued: CYD; GGNS; VLGC; NVLS; TVIA
Trailing stops issued: None issued
Stop alerts issued: ASCA
MARKET SUMMARY
Unable to continue the gains after a big shopping spree.
The Monday blowout left the market winded. Stocks rallied ahead of potentially strong GDP, and the anticipation was correct. GDP surged well beyond expectations and consumer confidence rose over the 90 level that separates so-so from good. Very impressive, but the market seemed to yawn. The large cap indexes posted gains, but very lackluster. The afternoon gave rise to a rally, but that was sold rather unceremoniously in the last half hour. Volume rose slightly.
Breadth, however, was solid, coming in at 2:1 on NYSE. Looking under the camouflage of the large cap indexes, however, the small and mid-cap indexes gained 0.8%, easily outpacing the large caps. Thus the late selling was mostly a large cap phenomenon, and even with slightly higher volume, the market is still in decent shape for a resumed rise into the Thanksgiving holiday.
THE ECONOMY
GDP crushes expectations.
7.2% was considered very strong. How about 8.3%, the strongest growth since 1984? Does that date sound familiar? That is a couple of years after the Reagan tax cuts kicked in as part of his Emergency Economic Recovery Act where he slashed marginal tax rates and gave businesses incentives to start investing in America. Once again growth has surged shortly after a significant tax cut, the only significant cuts since those Reagan cuts in the early 1980's. Indeed, most of the intervening 20 years has seen tax hikes that ultimately, along with an over-reactive Fed, choked off the economic expansion. The only tax cut during the Clinton years was on capital gains, and wouldn't you know it, growth spurted (though at a much lesser rate given the marginal rate tax hikes) in certain areas as a result.
It was not just growth in consumption. That actually was revised lower to 6.4% from 6.6%. Business investment, the missing link for 3 years, surged to 14% from 11% originally reported. The business incentives are working to bring business spending to life. This is a huge surge. Back in Q4 2002 we saw less than 4% growth and were excited that it was showing a turn, finally showing a pretty strong reading. This recent number makes that look like greasy kid stuff. Profits shot up 10.6% (this is the first revision where profits are reported for Q3). That is a 35% growth over the past 12 months. About the only thing that was not super positive were inventories; they fell -$14B versus the -$35B previously reported. That is because, as we reported, the later September numbers were showing inventory rebuilding was occurring stronger than anticipated in the original report. Some saw that is stealing gain from Q4, but to us it simply shows the momentum is building at a faster pace.
Indeed. The last time GDP grew this fast was in 1984, two years after the Reagan cuts went into effect. The most important, incentive loaded tax cuts under Bush have kicked in much faster. Of course they had the lead in from the 2001 cuts to warm up the crowd, but the speed of the effect of these cuts impressed even the Fed as noted in recent statements by Fed governors. Of course Greenspan told Congress in his stuffy, 'I am in charge here' manner that tax cuts simply would not impact the economy fast enough to make a difference during the economic down cycle. Oops, once again Greenspan theory does not track reality. Heck, even Germany is referring to the 'American economic model' as showing how tax cuts work to stimulate economic growth. Coming from a country a step away from socialism that is high praise indeed.
November consumer confidence jumps over 90.
90 is considered the point of demarcation from so-so to good. The Conference Board said this was an impressive surge and put confidence in the lower 'good' range. The 91.7 reading easily topped the 85.0 expected and the 81.7 from October. The present situation jumped 13 points. The 'jobs hard to get' responses fell 4 points. Over the past 2 months this reading has dropped 6 points, a very large drop according to the Board. Expectations rose to 99 from 91.5, the largest reading in a year. It needs to be at 110 to 120 to really be considered strong, but the trend back up is clear.
Many were quick to point out that confidence and actual consumer results may differ. We have said that all along as confidence limped along but the consumer spent like crazy during the late summer and early fall, and even back in the Iraq war. What is important in this number is that it shows the trend in consumer emotions is turning back up well before coming close to the levels that would be associated with a failing economy.
As for the holiday season there were those also saying the confidence numbers did not prove a good shopping spree was set. They are right about the confidence numbers not being a good forecast, but they are wrong about the holiday season. We view this as a breakout season for the consumer after living in fear of 9-11 for two holidays. WMT is reporting sales in line. Our surveys are showing that the consumer, after two discount-house emphasized holiday seasons, are back to shopping at the malls and higher end stores. Luxury sales are strong. Decoration stores are having a hard time keeping stock on hand as consumers embrace 'dressing up' the house in holiday d cor again. That is what we are hearing from stores across the country.
THE MARKET
There were complaints the market did not respond favorably to the GPD and confidence numbers. Others noted the market move in anticipation of the numbers. We think that was the case as well, but we don't think that move is over. The employment report is out next Friday, and we think the market will continue the move generally higher between now and then, also in anticipation of better economic data.
Another thing to consider is not that the market failed to react to the economic data, but that reaction was trumped by the passage of another multi-hundred billion dollar entitlement program. After the success of the tax cut incentives in jumpstarting the economy, you would think lawmakers would use incentives to get adults to save for themselves and their children to save for them as well in order to pay for drugs. Give people a $2000 tax credit for saving $2000 in special accounts earmarked for drug expenditures for their parents and grandparents as well as themselves and you would have a wave of saving to pay for these costs. The cut in tax revenues would not cost the government anything because the government would not be creating another new program to suck away dollars from the economy. You would have the savings rate rise. You would encourage the return of responsibility. You would encourage investment in America. There will certainly be those that would not take advantage of this, but we should worry about those that cannot as opposed to those that will not. Those we have to help. Those that can help themselves should. In any event, the market took pause at the birth of another huge entitlement program that will be with us for a couple of decades before it goes bankrupt, a program that will take more money from the economy, the very economy that creates the prosperity that allows us to have these prescription drugs that help in so many areas.
As for the market action, the small and medium caps dominated the action though that was barely noted in the market recaps. These smaller stocks tend to do well at the start of a new year as the winners from the prior year are replaced with the growth stocks for the coming year. That 'January effect' seems to occur earlier and earlier, and the strength of smaller caps vis- -vis the market overall indicates the move is starting. Actually, it is more a continuation of the strong small cap move all year that has helped lead the market higher. After a pullback to test the 18 day MVA, they were back on the buy list for many investors, big and small. That bodes well for a continued rally after the Tuesday pause.
Market Sentiment
VIX: 16.71; -0.73
VXN: 25.99; -1.08
VXO: 16.29; -0.86
Put/Call Ratio (CBOE): 0.62; -0.03
NASDAQ
Aimless after the 2.8% Monday gain, and that wandering led to selling late that pushed it just negative.
Stats: -4.1 points (-0.21%) to close at 1943.04
Volume: 1.858B (+3.32%). Volume edged the Monday trade though it was still modest overall. Just as Monday showed modest accumulation, the Tuesday pullback showed modest distribution. Basically it was a wash ahead of the holiday, and the broad buying Tuesday was indicative of the market bias.
Up Volume: 1.08B (-395M)
Down Volume: 741M (+433M). Note that up volume led down volume even though the index closed negative. That is a positive sign that there really was very mild to no real distribution.
A/D and Hi/Lo: Advancers led 1.44 to 1. Advancing issues led decliners, another indication that the action was very mild to the downside.
Previous Session: Advancers led 2.5 to 1
New Highs: 317 (+68)
New Lows: 16 (-4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Just was not ready to continue the move after a 2.8% sprint Monday. Volume edged higher and back to average as the tech stocks spun their wheels for the session and gave back the gain in a late sell off. That was the more negative price/volume action, but as noted, up to down volume was positive as was the breadth. In short, it looked as if techs were just winded. With the holiday and seasonality seeming to be taking effect, it is looking like a breather before a further rise.
S&P 500/NYSE
Was rallying well again but then suffered the same late session selling, just managing to hold onto a slim gain on rising volume.
Stats: +1.81 points (+0.17%) to close at 1053.89
NYSE Volume: 1.324B (+1.6%). Volume was up as large caps posted a small gain but the small and mid-caps put in very respectable gains given the big Monday surge. Thus while it looks something like churning on the SP500, the other indexes indicate some modest accumulation.
Up Volume: 918M (-183M)
Down Volume: 399M (+214M)
A/D and Hi/Lo: Advancers led 2.15 to 1. Very solid breadth yet again as the small and mid-caps continued to rally for a second straight session.
Previous Session: Advancers led 2.93 to 1
New Highs: 320 (+80)
New Lows: 7 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Rallied to 1058, just below the November highs (1063) before falling back late in the session for a modest gain. Volume rose but was still below average. The action was the same as Nasdaq, but managed to hold a slight gain as opposed to giving it all back. May come back to the 18 day MVA (1045) and then rise on into and beyond Thanksgiving.
DJ30:
Stats: +16.15 points (+0.17%) to close at 9763.94
Volume: 174M versus 192M.
Volume slide back as DJ30 hit 9800 on the high and fell back for a modest gain. It needs to break through 9850 to break up that potentially toppish pattern forming over the past 7 weeks. Potentially is the word. It is still making higher lows off of the 50 day MVA (9652), but it may need a test of the 18 day MVA (9726) again as it did Tuesday before it managed to rebound with that slight gain. Heading into an important level, but again, DJ30 has been a follower, taking the lead form the other indexes.
WEDNESDAY
A full session, but also the day before Thanksgiving, a traditionally light volume day that often delivers solid gains. It is also loaded with economic data that has been pushed up to accommodate the holiday. Spending, durable goods, jobless claims, Michigan sentiment, Chicago PMI are all on tap for the morning.
The issue is whether the news will help the market as opposed to the mediocre reaction Tuesday to the GDP number. Again we anticipate the market to rise over the next week in anticipation of the jobs report next Friday. Thus there may not be any big surge on the news, but after a possible test back to the 18 day MVA on the SP500 and DJ30 early, a rise into the Thanksgiving holiday and Friday.
Some positions we took today came back on us some but still held support. Others rallied well. We anticipate them to hold support and continue the move over the next week. This little breather or side-step in the market Tuesday kept many stocks in good shape. Several will show solid volume when they move just as they did today. Those are the easy ones. Others will move well but on mediocre volume. Those historically strong stocks that make good price moves on lower volume are the ones we are more likely to take a position on. Often we take a partial on those, see how it moves, and then take more positions on the next good buy point. That way we move more money into a winning stock, focusing our investments on stocks that are performing well, thus leveraging our returns even further.
Support and Resistance
Nasdaq: Closed at 1943.04
Resistance: 1975 is some resistance. November high (1992). The January 2002 double top (2044 to 2099).
Support: The 18 day MVA (1925). The March/August up trendline (1920). The September high (1913). The 50 day MVA (1897). 1875 to 1880 is the bottom of the week's range.
S&P 500: Closed at 1053.89
Resistance: November high (1062-1064). 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 (1045) and the 10 day MVA (1046). 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 9763.94
Resistance: The October high (9850). The November high (9903). 10,000.
Support: The 18 day MVA (9726). 9686 (September high; 9659 intraday). The exponential 50 day MVA (9652). 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): 8.2% actual, 7.6% expected, 7.2% prior.
Consumer confidence, October (10:00): 91.7 actual, 85.0 expected, 81.7 September.
Existing home sales, October (10:00): -4.6% (6.35M) actual, 6.53M expected, 6.68M 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)
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.
THE PLAYS:
Good movers Tuesday: DJO; EGHT; GGNS; ONNN; SCON; VLGC
New Plays:
Upside:
Play Date: 11/25/2003
FLDR (Flanders Corp.--$5.67; -0.07; no options): Environmental filters
http://biz.yahoo.com/p/f/fldr.html
STATUS: Double bottom w/handle. FLDR is starting to form a handle, a lateral move in a relatively tight range, to its 11 week base that is forming over the 50 day MVA (5.26). Accumulation in the base is a solid 4 to 2 (4 up weeks on rising volume to 2 down weeks on rising volume). Money flow is moving higher as price consolidates laterally. Monday volume shot higher as FLDR started to move toward a breakout. It stalled and ocntinued the handle. Solid pattern, and with these we just wait for it to finish its handle and then provide a breakout on strong trade.
Volume: 73.477K Avg Volume: 107.363K
BUY POINT: $6.05 Volume=150K Target=$7.85 Stop=$5.57
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/fldr.html
Play Date: 11/25/2003
FSII (FSI International--$6.1; +0.21; no options): Chip equipment
http://biz.yahoo.com/p/f/fsii.html
STATUS: Flat base. Bouncing up off of the 50 day MVA (5.65) in a 6 week flat base that formed over that level after breaking out from a 7 month base that took up most of the year. Accumulation in the short pattern is an outstanding 4 to 0 (4 up weeks on rising volume to 0 down weeks on rising volume), and volume shot higher Tuesday on the NVLS news. Money flow is surging up ahead of price and relative strength is ready for a breakout and show the breakout is solid. Ready to move in on a continued strong volume move.
Volume: 1.109M Avg Volume: 247.09K
BUY POINT: $6.22 Volume=400K Target=$7.75 Stop=$5.82
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/fsii.html
Play Date: 11/25/2003
MRVC (MRV Communications--$3.91; +0.46; no options): Semiconductor integrated circuits
http://biz.yahoo.com/p/m/mrvc.html
STATUS: Ascending triangle. MRVC is ready to move again. We made some money off of it as it broke out of its June to August base, and now it has formed a 9 week triangle showing strong 4 to 1 accumulation. Surging money flow and a relative strength breakout as volume shot higher on the Tuesday stock breakout. Looking super and we are looking to move in on a further volume move.
Volume: 8.642M Avg Volume: 1.35M
BUY POINT: $4.01 Volume=2M Target=$5.05 Stop=$3.71
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/mrvc.html
Play Date: 11/25/2003
PDII (PDI, Inc.--$28.81; +2.58; optionable): Sales & marketing for biopharmaceuticals.
http://biz.yahoo.com/p/p/pdii.html
STATUS: Flat base breakout. Breaking out of a 13 week flat base that formed over the 50 day MVA (24.26). Big volume as it broke out Tuesday in an overall quiet market. Money flow surging, relative strength is breaking out with the stock. Accumulation is an outstanding 5 to 0, setting the foundation for a strong move higher.
Volume: 613.874K Avg Volume: 166.181K
BUY POINT: $29.02 Volume=275K Target=$34.85 Stop=$26.99
POSITION: PKU DF - Apr. $30c (55 delta) &/or Stock
http://www.investmenthouse.com/ci/pdii.html
End part 1 of 2
|
us stock market
trade stock
|
