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us stock market, stock watch
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12/02/03 Technical Traders Report Update
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Technical Traders Report Subscribers:
Tuesday and Thursday we issued a market update and a few choice plays for the next session. Full reports issued Monday, Wednesday and Saturday.
MARKET ALERTS
Targets hit alerts issued Tuesday: ALTI
Buy alerts issued: AMKR; MAXM; CAI; EVCI
Trailing stops issued: None issued
Stop alerts issued: None issued
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:
- Sluggish session on heels of strong gains.
- November layoffs fall sharply after October spike.
- Market pauses, waiting for Santa Clause to continue.
- Subscriber Questions
Continuation rally lacked volume and a sell program slapped it back.
The rally that got away. The market was trying to break its pattern of a strong move to a new high that gets sold into. It tried, but it couldn't do it. Stocks started soft but caught their feet, formed a bottom, and rallied mid morning to early afternoon in a classic 'soft early, strong late' continuation of the Monday gains. With two hours left, however, a sell program hit the market and sent stocks to session lows. They tried modest recoveries twice, but both failed. In the end the indexes posted modest losses on flat volume with the SP500 managing to hold its breakout over the November highs. Nasdaq made an intraday move over its recent highs, tested the move and bounced again. It looked like a decent test of the break over that level. It rallied but ran straight into sellers just below 2000. It could not hold the move. The small and mid-caps made only token upside attempts but stalled at the upper channel lines.
This has been the pattern of late, i.e., a big upside move followed by some immediate, Neville Chamberlain-like waffling. The results over the recent market history have varied from a modest pullback ahead of further rallying to more intense selling. While we have to be concerned with the smaller cap issues stalling some at the upper channel lines, the Tuesday action had the look of a pretty orderly day of rest after a good Monday rally. SP500 held where it needed to and the next sessions will tell us if the Monday move was a sign of more upside life or just another one day move that will have to be appeased, that is, consolidated, before the market can try again.
THE ECONOMY
Challenger jobs report shows fewer November layoff announcements, national ISM shows advances in hiring.
After the record jump in October you would hope November would be substantially lower. There were 43% fewer (99,452) versus Octobers 172K. Better news but hardly a sign of strength as some companies continue to shed jobs in order to contain costs. Mature companies find they are no longer growth companies, and after the recession find it unnecessary to ramp up the work force to former levels.
At the same time there is some jobs recovery even in manufacturing. The ISM released Monday showed a 51 reading versus the 47.7 from October that was in itself a nice improvement. A reading over 50 indicates expansion as opposed to just a slowing decline. Thus for the first time since September 2000, manufacturing companies are looking to add to the work force faster than they are reducing it. That has very positive implications for the jobs market much as the return of business spending in the economy: the weakest link is starting to swing positive. We have seen the dramatic results the return of business spending had on the economy, and we will see how much effect the positive jobs number has on the overall employment picture due out Friday.
THE MARKET
So this is Christmas.
Volume held basically steady as the market took a pause after the Monday surge. As noted, this is the pattern during the past several weeks: hit a new high then stall a bit. It looked as if the move would continued, but some sell programs took the wind out in the last two hours. Breadth was flat, volume was flat, and the indexes posted modest losses. While Nasdaq broke the November highs only to give them back intraday, the key to us was the action of the SP500 as it held its Monday break over the November peak.
The action can still be classified as a day of rest though we do have to keep a watch on the smaller cap indexes that are tapping against the upper channel line. Moreover, the airlines really look weak with some high volume reversals Tuesday. Summer receipts were up and there should be some strong travel over the holidays, yet they are peeling back. That is cause for some concern though the Dow transports still looks solid. Nasdaq has plenty of upside room to its channel line and the early 2000 double top levels around 2050. We believe Monday started the official Christmas rally (a.k.a., Santa Clause rally, ho-ho-ho rally), and we expect the market to overall trend higher toward Christmas. That would put Nasdaq more or less at the double tops from late 2001 and early 2002 (2054 to 2098). At that point we expect solid selling pressure, some of which has manifested itself as the index has trudged higher with the selling pressure that hits each time the indexes make new 52-week highs. The action won't be straight up; it has not been that way the past two months. Expect more of the step up for a couple of sessions then some selling to knock it back some, make a higher low, and then try again.
Market Sentiment
VIX: 16.27; -0.5
VXN: 26.72; +0.43
VXO: 16.42; +0.45
Put/Call Ratio (CBOE): 0.71; 0
NASDAQ
Nasdaq broke to a new 52-week high but could not hold the move to the close as it took a breather on slightly lower volume.
Stats: -9.75 points (-0.49%) to close at 1980.07
Volume: 1.823B (-1.34%). No distribution just as it was hard to call Monday an accumulation session. Volume was down, however, indicating that the pullback was milder as Nasdaq held over the November closing high.
Up Volume: 703M (-601M)
Down Volume: 1.109B (+612M). Pretty evenly matched. Downside volume spiked up as the selling pressure increased in the last two hours.
A/D and Hi/Lo: Decliners led 1.11 to 1
Previous Session: Advancers led 1.86 to 1
New Highs: 411 (-51)
New Lows: 10 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Made it to 1996 on the high, tested the break over the November high (1992), held, and started back up. That looked great, but within 15 minutes it was met with a sell program that took it back down. It immediately popped higher again, but once more the sellers moved in and this time it could not hold. It is holding over the November closing high (1976). Looks like it is taking a breather after a move off the 50 day MVA, and after another breather Wednesday could be ready to go again without much more decline. If it does fade more we look for the 10 day MVA (1951) to hold the line.
S&P 500/NYSE
Struggled all session, but managed to hold the break over the November high.
Stats: -3.51 points (-0.33%) to close at 1066.62
NYSE Volume: 1.376B (+2.48%). Volume edged up late as the sell programs hit the market. That indicates some churning once again right after it made a new high. Again that is a familiar theme, but the volume was not huge and did not indicate a big reversal.
Up Volume: 585M (-496M)
Down Volume: 779M (+533M). Fairly evenly matched. The late sell program tipped it to the downside.
A/D and Hi/Lo: Decliners led 1.01 to 1
Previous Session: Advancers led 2.74 to 1
New Highs: 528 (-100). Still a solid showing.
New Lows: 4 (-3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps were struggling from the bell, never really threatening a positive close. Key to us was how it held around the November high (1064-1062) it just broke on Monday. Three tests lower induced a rebound though the last one was only 5 minutes ahead of the close. The index churned again after making a new high, but it held the breakout. We are looking for another slight dip lower Wednesday, maybe slightly undercutting the November highs, and then an attempt at a rebound and test that upper channel running right at 1080.
DJ30
Stats: -45.41 points (-0.46%) to close at 9853.64
Volume: 218M versus 227M.
DJ30 again failed at 9900, right at the November high (9903), falling back in the afternoon sell program, but on lower volume. Still in something of an ascending triangle that has made higher lows up the 50 day MVA (9679), but has again failed right at the breakout and after a strong volume move pushed it right to that point. Another test lower could take place and still leave the pattern intact, but it will need to make the breakout from there before it pinches too far into the point. When a stock or index does that it runs the risk of falling down out of the pattern.
WEDNESDAY
Productivity out before the open followed by ISM services at 10ET. Neither will be market movers ahead of the Friday jobs report. Ahead of the jobs report the market is looking at the dollar again. That may lead to some continued weakness early Wednesday, but ahead of the Friday jobs report we are anticipating the market to price in some of the anticipated gains in jobs as it has done prior to other recent economic reports. Then when the report hits there could again be some selling into the news, and the market continues its halting trend higher in its holiday rally. There is not big updraft, just a continued trend higher that could start running out of steam as Christmas approaches. Within that trend there are some strong moves begin made (e.g., ALTI), and we will continue to focus on those as this gradual holiday rally trudges on.
Support and Resistance
Nasdaq: Closed at 1980.07
Resistance: November high (1992). The January 2002 double top (2044 to 2099).
Support: The 10 and 18 day MVA (1951, 1942). The March/August up trendline (1937). The September high (1913). The 50 day MVA (1908). 1875 to 1880 is the bottom of the week's range.
S&P 500: Closed at 1066.62
Resistance: The December to June upper channel line at 1081. 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 (1056 and 1052). The exponential 50 day MVA (1040). 1030 to 1032 (early September highs).
Dow: Closed at 9853.64
Resistance: The November high (9903). The March/September up trendline (9910). 10,000.
Support: The October high (9850). The 10 and 18 day MVA (9784 and 9754). The exponential 50 day MVA (9679). 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.
Q: When you talk about the semiconductors showing leadership [], is there some site or place where a person can go to see the group of stocks that comprise the semiconductor group? In other words, if we are trying to hitch our wagon on the semiconductor move up, where should we focus to locate the individual stocks within this group? Thanks a lot for your response.
A: The SOX is made up of 16 semiconductor stocks representing all facets of the semiconductor sector (e.g., chip equipment, memory chips). Current stocks included in the index are a 'whose who' of the semiconductor world:
KLAC
MXIM
NSM
NVLS
LLTC
XLNX
BRCM
INTC
TXN
STM
ALTR
TER
AMAT
AMD
MOT
MU
TSM
LSI
Even though it is an index, it is a narrow index made up of the largest semiconductor stocks. Thus it is more of a large cap index though many in the chip sector, large and small, move together. We love playing the SOX because when chips start a move it is eady for them to rattle off 40 points or more over a few sessions. They are volatile, however, and you have to be ready to cut and run fast if they start to move against you. Right now we would prefer to see the index test back to the 10 or 18 day MVA and then start a new run. That would take out the fluff from the run the past week and give it some room to maneuver higher.
There is a wealth of information on the PHLX site: http://www.phlx.com/products/sox.html#contract
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 2
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