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world stock market, us stock market
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12/01/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: RWY
Buy alerts issued: VARI; AEIS; GGNS; TRPH (bonus); ALTI (bonus); OBAS (bonus)
Trailing stops issued: None issued
Stop alerts issued: TLAB
MARKET SUMMARY
Early rally fights off selling, surges to the close.
A weak Thanksgiving rally turned into a broad holiday rally Monday as buyers moved in across the board. The move was helped by word before the open that the Bush administration was going to remove the steel tariffs. That helped overseas markets and the US futures market. Stocks opened higher, rallied, but suffered selling mid-session and early afternoon. Just when it looked as if the sellers were going to get the upper hand, however, buyer returned and launched a 2 hour run to the close.
The move pushed the SP600 (small caps) and SP400 (mid-caps) to all-time highs. The SP500 rallied to a 52 week high, finally clearing the November highs. Nasdaq and DJ30 came close, but they are still just below the recent highs. Nasdaq was right up with the smaller issues in terms of the session gain, but it started lower. Not bad action at all with breadth solid as all levels of stocks moved well. Volume was up, but it was still at relatively low, average levels. Definitely no volume surge with big money piling in all at once, but there was some accumulation.
At the same time the smaller cap indexes, some of the market leaders, and the SP500 as well are reaching the top of their uptrend channels. We will have to watch how they respond to those resistance levels. They can run through them and start new trends higher. That would provide great short term returns but set up a harder fall. They can run through them a short way and then fall back into the trend. They can also turn back here, test again or make a higher low, and then continue the trend. None of those alternatives are really ugly, and with the apparent holiday rally underway, the market bias appears to be up in the absence of serious negative news.
THE ECONOMY
November national manufacturing soars.
The national ISM leaped to 62.8, easily outpacing the 58.1 expected and 57.0 from October. It is now in the range the services index has been running in for the past few months. This was a 20 year high in terms of the increase. Another 20 year high increase in an important indicator. This is a trend that not many are focusing on. This is critical, however, because it demonstrates the power of supply side economics. The last major supply side tax cuts took effect in 1992. That was the era that saw the boom in private sector investment, the technology explosion, and the resultant 20 year prosperity.
We are not saying the same is in store, but the facts are that we are not seeing levels of growth seen since those tax cuts. That investment induced by those cuts sets the foundation for economic expansion far beyond the normal cycle. That is why so many are underestimating the monthly economic data and how far this economy can expand. Just today Mr. Roach at Morgan Stanley was out again saying that the economy was 'borrowing from the future' and could not sustain itself. He also said this was the "most jobless recovery the US has ever been on." He is, of course, looking at his textbook to determine when the jobs should start coming as opposed to the real indicator, i.e., when the stock market bottomed and forecast an economic recovery. That is when the clock starts, and by historical standards, the job creation that started in September is 3 months ahead of the usual job creation timetable.
We don't mean to pick on Mr. Roach, but he is a convenient target because he is on CNBC at every opportunity and because he has been on the wrong side of the economy much of the way. In October 2000 he said that the Fed had to raise rates another 100 basis points after January 2001. Wrong. He has since pretty much bad-mouthed the recovery every step of the way, predicting last year a new recession would start as a result of the Iraq war. It seems that economists and analysts are either in the 'straight up from here' or 'living on borrowed time and going to crash' camps. Reality is in between. Even in the boom following the Reagan tax cuts where revenues shot higher, the market and economy surged, rested and fell back, surged, etc. What hurt was uncontrolled federal spending just as it is doing now. Thus you need to tune out the noise about the sky's the limit and the ground is rushing up to meet us and realize the economy is showing a dramatic recovery fueled by the same type of stimulus that set off 20 years of prosperity. Spending is the threat with the new multi-hundred dollar Medicare bill being just the latest example. Excess federal spending soaks up dollars that should be used by the private sector, and THAT is the ultimate downfall of economic expansions. The feds need to drastically curb spending, and with the booming recovery, the deficit would shrink away in huge chunks.
Steel tariffs to be eliminated.
Not enough credit for the Monday rally was given to the announcement the steel tariffs would be eliminated. The past three weeks there has been a legitimate concern that the Bush administration's penchant to trade tariffs for votes would result in a trade war. Monday the administration indicated it would remove those tariffs in the face of world angst about them. It can go to the steel states now and say 'we did what we could do, but the US cannot risk a worldwide trade war', not to mention that the impact has lessened with the tumbling dollar (though that was in part due to the Bush administration's own dollar policies. Maybe they hope they can get points for trying. Whatever the reason, the result was a market sigh of relief.
Holiday sales strong but not according to some analysts.
A record black Friday (+4.8% over 2002) and a strong Saturday (+6.1%) looked good but some analysts were complaining. WMT sold over $1B on Friday but with more stores opening that was not as much as analysts said it should have sold. They are missing the boat.
Visa card sales were high. There is a lot of holiday spirit this year based on the surveys we are seeing and the ones our folds are conducting. This year WMT is not the key as it has been in the last few years where discounters won and everyone else lost. COH, TIF, NMG and other luxury goods manufacturers are doing quite well in a return to luxury buying. This is all part of the hidden pent up demand effect post 9-11 that we have been talking about. Sure discounters will make a ton of money this season, but they will not get all of the goodies as shoppers go back to more traditional stores to 'enjoy' shopping more. That is what we are seeing in our surveys before the holiday and what we were again hearing this past weekend.
THE MARKET
There was talk on the financial stations about a Santa Clause rally coming. This is it. It also has some 'January effect' thrown in there as well what with the strong showing from small and mid-caps. The modest volume and solid gains by small caps are characteristic of a holiday rally, and the small cap lead is a January effect 'effect'. No doubt there was some accumulation, but again there is not deep participation by the majority of institutions. It is a holiday rally in our view, and thus we accept it for what it is and participate, knowing we will have to be careful when the stocks and indexes start showing signs they are getting extended.
Indeed the are bumping up against the upper channel, at least as far as the small caps, mid-caps, and SOX. Those are leading indexes, so how they perform at those levels will be key to the rest of the market. Nasdaq still has room to run up to its channel, and thus we can see the other indexes continue to move up through their channel lines until Nasdaq reaches its own upper channel. At that point the market will give us its next signal regarding its direction.
Market Sentiment
VIX: 16.77; +0.45
VXN: 26.29; +0.66
VXO: 15.97; -0.74
Put/Call Ratio (CBOE): 0.71; +0.02. Edged higher on an up session. Indicative of the continued skepticism regarding this rally.
NASDAQ
A new closing 52-week high, but just missed clearing the November high as volume moved back up to average. Solid move on decent volume.
Stats: +29.56 points (+1.51%) to close at 1989.82
Volume: 1.848B (+162.49%). Volume gain impressive, but volume just made it back to average. No major volume surge on the gain, indicating that there is buying but just not a huge groundswell.
Up Volume: 1.304B (+786M)
Down Volume: 497M (+319M)
A/D and Hi/Lo: Advancers led 1.86 to 1. Solid though backed off from its 2.2:1 early reading. Decent but not in the league of the NYSE that was pushed higher by strong small and mid-cap gains.
Previous Session: Advancers led 1.42 to 1
New Highs: 462 (+243). Excellent surge in new highs.
New Lows: 10 (+1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
New closing high as it continues the move off of the 50 day MVA (1900), still in the mid-range of its uptrend channel. Plenty of room upside, but it is also 20% over its 200 day MVA (1659). When it hits 24% or so (2057ish), it starts to buck and pulls back. That level is also at the beginning of the January 2002 double top range. It is one of the leaders, and thus the market does have room to the upside still, but it will be up a couple of days, then testing back.
S&P 500/NYSE
Solid move, breaking through the November highs on rising though still below average volume.
Stats: +11.92 points (+1.13%) to close at 1070.12
NYSE Volume: 1.342B (+176.37%). Volume edged over average, actually the best in three weeks as buyers returned to large cap stocks in addition to the smaller cap issues.
Up Volume: 1.081B (+801M)
Down Volume: 246M (+53M)
A/D and Hi/Lo: Advancers led 2.74 to 1. Outstanding volume.
Previous Session: Advancers led 1.53 to 1
New Highs: 628 (+323). Excellent surge in new highs, topping the strong moves in June and September.
New Lows: 7 (+4)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Did not even need another test of the 18 day MVA (1050) before making the break over the November highs (1064) with a fair to decent volume surge. New highs topped 600, the first time in, well, a long time, surpassing the new highs in June, late August, and early September. The surge in smaller caps is a major contribution to the market rally, and now we see how it can fare at the upper channel at 1080.
DJ30:
Stats: +116.59 points (+1.19%) to close at 9899.05
Volume: 227M versus 162M. Best volume in two weeks and the second best in a month. Some nice blue chip gains as the industrial stocks enjoyed a nice session on economic news and the lessening chance of a trade war. The Dow made a new 52-week closing high but could not take out the November intraday high (9903). After making a higher low at the 50 day MVA (9671) the Dow is making a breakout from a 7 week lateral triangle. It managed to retake the March/October up trendline and has plenty of upside room to follow the other indexes higher.
TUESDAY
Economic data takes a breather Tuesday just as it seems economic data, after a two week hiatus, is starting to matter again to the market. In reality the market builds in expectations well ahead of the actual release, and if this move continues, we view it as telling us that the Q4 and Q1 data will be better than expected. In that sense the market is, as always, the true economic indicator.
The pattern in this move has been a strong rally followed by 2 to 3 sideways sessions before resuming the move higher. In some cases it has slipped right back after the move. The strong breadth makes this move appear more solid and thus able to continue higher before taking a rest, something entirely plausible given it can test the upper channels on the smaller cap indexes after a bit higher run, take a breather, then start back up. We were buying some strong volume moves today, and we will continue to look for similar moves Tuesday as a solid volume breakout is the best insurance when entering any move.
Support and Resistance
Nasdaq: Closed at 1989.82
Resistance: November high (1992). The January 2002 double top (2044 to 2099).
Support: The 10 and 18 day MVA (1944, 1937). The March/August up trendline (1933). The September high (1913). The 50 day MVA (1905). 1875 to 1880 is the bottom of the week's range.
S&P 500: Closed at 1070.12
Resistance: 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: November high (1062-1064). The 10 and 18 day MVA (1053 and 1050). The exponential 50 day MVA (1039). 1030 to 1032 (early September highs).
Dow: Closed at 9899.05
Resistance: The November high (9903). The March/September up trendline (9910). 10,000.
Support: The October high (9850). The 10 and 18 day MVA (9768 and 9854). The exponential 50 day MVA (9671). 9686 (September high; 9659 intraday). 9588 the early September highs. 9500 (June 2002 lows) is the top of the summer range.
Economic Calendar
12-01-03
ISM, November (10:00): 62.8 actual, 58.1 expected, 57.0 October.
Construction spending, October (10:00): 0.9% actual, 0.5% expected, 0.6% September (revised from 1.3%).
12-03-03
Productivity, Q3 revised (8:30): 9.2% expected, 8.1% prior.
ISM Services, November (10:00): 64.0 expected, 64.7 October.
12-04-03
Initial jobless claims (8:30): 354K expected, 351K prior.
12-05-03
Non-farm payrolls, November (8:30): 150K expected, 126K October.
Unemployment rate, November (8:30): 6.0% expected, 6.0% October.
Hourly earnings, November (8:30): 0.2% expected, 0.1% October.
Average workweek: 33.8 expected, 33.8 October.
Factory orders, October (10:00): 2.2% expected, 0.5% September.
Consumer credit, October (2:00): $5.0B expected, $15.1B 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.
PLAYS:
New plays:
Upside:
Play Date: 12/01/2003
AMKR (Amkor Technology--$21; +1.48; optionable): Semiconductor, integrated circuit
http://biz.yahoo.com/p/a/amkr.html
STATUS: Flat base breakout. AMKR has moved through a 5 month trading range between 14 and 20, making the breakout move from that range Monday on surging, above average volume. Excellent 8 to 3 accumulation in the 5 month pattern (8 up price weeks on rising volume to 3 down price weeks on rising volume). Relative strength broke out on the move, a good indication the move has strong support. Making a strong volume breakout and looking to move in on a further solid volume gain.
Volume: 3.465M Avg Volume: 1.626M
BUY POINT: $21.12 Volume=2.4M Target=$25.35 Stop=$19.41
POSITION: QEL CD - Mar. $20c (63 delta) &/or Stock
http://www.investmenthouse.com/ci/amkr.html
Play Date: 12/01/2003
IMOS (Chipmos Technologies--$8.21; +1.34; no options): Chip equipment
http://biz.yahoo.com/p/i/imos.html
STATUS: 18 day MVA test. IMOS broke out of a 21 month base in early November, surging to 8 as it basically doubled on the breakout run. It has come back to test the 18 day MVA (6.77) on very low volume in its first test of the breakout. Holding at the 18 day MVA is where it should hold on the breakout test. Looks like a successful test as Monday IMOS shot higher as volume resumed its surge. It closed at a new all-time high (came public 2 years back), and that gives it room to run higher without any overhead supply. Relative strength broke out and money flow is surging. Looking to pick it up here on a further move.
Volume: 1.601M Avg Volume: 258.136K
BUY POINT: $8.32 Volume=387K Target=$10.38 Stop=$7.72
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/imos.html
Play Date: 12/01/2003
MAXM (Maxim Pharmaceuticals--$7.56; +0.44; no options): Drugs
http://biz.yahoo.com/p/m/maxm.html
STATUS: Reverse head and shoulders. Monday MAXM was moving toward a breakout from its 3 month base. Volume was higher, moving toward average as it made the move up off an 18 day MVA (7.06) test, a good place for it to hold as it formed the right 'shoulder' to the base. Solid 3 to 1 accumulation in the pattern and relative strength making the breakout. Looking for more volume on the move.
Volume: 144.141K Avg Volume: 151.59K
BUY POINT: $7.72 Volume=227K Target=$9.45 Stop=$7.18
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/maxm.html
End part 1 of 2
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world stock market
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