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world stock market, us stock market
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12/04/03 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Thursday: None issued
Buy alerts issued: GMR (kept an eye on it and saw the breakout)
Trailing stop alerts: None issued
Stop alerts: AEIS
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SUMMARY:
- Indexes test near support, rebound late ahead of jobs number.
- Weekly jobless claims stay within the trend, retail sales gains disappoint some.
- Test of support is made, and now jobs, Intel will direct the move.
- Subscriber Questions
Thursday tested your nerve, rallied late as a reward.
The action was the flip of Wednesday. Yesterday stocks rallied hard early then reversed and sold into the close. Thursday stocks continued that downturn with the leaders (techs, smaller caps) leading to the downside. SP500 tested but again managed to hold its November high (1064) while Nasdaq and the SP600 and SP400 tested their 18 day MVA and bounced. That was the test we were looking for, and buyers used it to move in and rally stock into the close in the last hour.
No doubt there was some buying interest ahead of the Intel mid-quarter update and the jobs report Friday. As noted before, in the recent history of the rally stocks tend to move up just ahead of anticipated good news. Intel did raise its midpoint and it did increase its estimates of gross margins, but it also took a 6 cent charge on a goodwill impairment matter. The stock dropped over $1 after hours, and other chip and tech stocks followed. If it was just the impairment issue, then you would not expect other techs and chips to sell given the nice increases in revenues and margins. As it is, it will be up to the jobs report to offset INTC unless the analysts decide things are fine. In reality it looks like an Intel story about an investment gone bad. Everything else looks good as NSM indicated with its earnings release.
In any event the market tested the near support and then rallied as anticipated. Though the Wednesday Nasdaq selling volume was not a good sign, the market took it in stride and held support. Buyers used the test to enter. The horse has been led to water and now we will see if it will drink. Again, it may need a good tasting drink from the jobs report to wash down the Intel news that was not sitting well on the techs after hours.
THE ECONOMY
Jobless claims rise but still within the trend.
365K versus 354K expected and 354K prior. A bump of 11K, but that does not take it out of the trend. Indeed, the 4 week average rose just slightly to 362K. That is well in the range that saw job creation begin back in September and is still holding out the reward of greater job increases in the November jobs report released before the open Friday.
High end retail sales performing better.
Last year we talked about the Wal-Mart glut, i.e., people just being sick of Wal-Mart. In the recession and market downtrend WMT was very popular because its huge buying power allowed it to sell its merchandise at discount prices. In a recession a discounter of basically staples and lower end merchandise performs well. As we have reported the past month, however, this year is a bit different. The higher end department stores are performing much better while WMT is not blowing everyone away. Its numbers are good, it just is not cornering the market on holiday sales. As we noted, consumers spent 2 years doing the WMT thing, and now they are ready to spend some more money. Sure the surveys say 30% or so are going to spend less, but when was the last time people did what they say? That is how the phrase 'talk a good game' came into being. They talk about being responsible and holding the line. They also talk about sticking to their diets during the holidays. Talk is cheap. Actions are where the gold is, and this year that is in the higher end stores and products as consumers treat themselves in the first good year of economic growth since 1999.
Thus when WMT reports in line and BBY does not report double digit sales for November they get hammered lower. Why? Because the conventional wisdom hacks that pose as retail analysts and spout their drivel on the financial stations think that if the same old names don't produce the same old results then something is wrong. No, something is changing, and that something is called consumer preferences. These analysts missed it two years back when they bellyached how the holidays were going to be miserable because only WMT and TGT were chalking up the big sales. Sales were not that much lower, they just shifted because consumers were more value conscious given the plunge in the stock market and the economy. Now they are into self gratification (so to speak) and some hints of good old avarice and are turning to the higher end to 'reward' themselves after two years of austerity. Kind of like the dieter that eats less at breakfast and lunch so he can really pack it in at dinner along with half a carrot cake. The point is that retailers are not suffering, it is just that the mix as to who is doing the most selling is shifting and the analysts are slow on the uptake again. Sales are good. Many retail analysts are not.
Steel tariffs sacked.
The Bush administration cited changing economic conditions as reason for canceling the 3 year tariffs ahead of schedule. The Bush spokesman said that while the administration of course wanted to avoid a trade war, the EU threatened sanctions had 'nothing' to do with the decision. Maybe not, but the timing sure made it look like it. Why not just say that while they did not factor into the decision that the tariffs had done their job they did factor into the timing as there was no reason to risk retaliation on tariffs that you were set to remove anyway? That is honest and it avoids the expected 'yea, right' that rolls off your lips when you hear the threatened retaliation had nothing to do with the repeal just days before the retaliatory sanctions were to be imposed.
The repeal ticked off the steel industry, but we also note that several of the steel stocks rose. Amazing what a recovering global economy can do for commodity prices as opposed to regulation in the form of tariffs. The dollar is down, the world economy is up, and thus so is demand for US steel. Now that is some rocket science.
THE MARKET
The market did what it had to do, test the near support. From there it could head lower or it could make a rebound attempt. Thursday it tried the rebound, bouncing sharply in the last hour. Much better action than the dying in the last hour and falling off a cliff as it did Wednesday. Did it wipe away the Wednesday distribution on Nasdaq? The lower volume rebound did not answer that question; it just set the market up for a continued breakout run if it gets the right news.
The Intel news does not look like the right news as it was clubbed after hours along with many chips and techs. That leaves the jobs report out before the open. Better be around 200K non-farm jobs created if it is going to offset what looks to be personal problems for Intel that the rest of the market is trying to make its own. That is another way of saying that at least part of the market is still looking for reasons to sell. This rally continues in the uptrend, but it is getting harder and harder to move stocks to the upside and then hold onto the gains. They are giving back a larger percentage on the pullbacks after the rallies, and that is always a sign of a bit of weariness in a move.
Still, stocks can continue to trend higher in the holiday rally, posting some solid though not spectacular gains by Christmas and New Years. As noted Wednesday, the Nasdaq reversal that session did not take it out of the uptrend or cause Christmas to not come down in Who Ville. The fact that the indexes held near support and rebounded Thursday shows there is still life in the uptrend. It is just not as easy, the gains are not held as well as early in the move. We reiterate that if stocks do continue the move as we anticipate, they will be near the early 2002 double top area, and that will put a lot of pressure on the market's advances as that overhead supply hits full force. As noted before, that supply is already influencing the action at these lower levels. Perhaps it will be worked off by the time the indexes make it to that level. That is a tough bet and we will have to see how the market responds as the indexes move into that range.
For now we have the SP500 holding the breakout over the November highs for three sessions, the leading indexes testing their 18 day MVA, and all rallying up off of those levels. SP500, the recent backbone of the market, needs to extend the breakout from here if the holiday rally is to have any strength.
Market Sentiment
VIX: 16.3; -0.33
VXN: 26.81; -0.53
VXO: 16.56; +0.26
Put/Call Ratio (CBOE): 0.72; -0.14
NASDAQ
Tested the 18 day MVA and the up trendline and rallied back on lower though solid volume. Licklog time for Nasdaq just as with SP500.
Stats: +8.55 points (+0.44%) to close at 1968.8
Volume: 2.115B (-6.27%). Lower but still strong volume as the index sold off, tested support, and rallied sharply back. That is what you want to see.
Up Volume: 1.09B (+143M)
Down Volume: 988M (-256M). Up volume edged down volume when the index turned to buying in the last hour.
A/D and Hi/Lo: Decliners led 1.15 to 1. Decliners still led even as the index turned positive. Not an affirmation of a strong reversal.
Previous Session: Decliners led 1.82 to 1
New Highs: 152 (-147)
New Lows: 7 (-3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Trying to make a higher low as it holds the 18 day MVA (1946) and the up trendline (19.42) and rebounding on solid trade. That is what it needed to do if it was going to continue the uptrend after failing to take out the November high (1992) on a closing basis and make a new high. That was the most recent sign of weakness, along with the high volume Wednesday reversal. Now it is time, the stage is set, for Nasdaq to take out that November high and move on to a higher high and move up toward the top of the range into the New Year. That is in line with the early 2002 double top range from 2050 to 2100. Unless there is a big change, it looks as if that is going to be the point where this run from April is consolidated.
S&P 500/NYSE
Held the breakout over the November high again and then rallied on rising volume. Now that is what the bulls ordered.
Stats: +4.99 points (+0.47%) to close at 1069.72
NYSE Volume: 1.471B (+3.68%). Volume posted a nice gain as the large cap index advanced off the breakout point, continuing the breakout. That is precisely what you want to see on a continuation of the breakout move.
Up Volume: 738M (+129M)
Down Volume: 719M (-64M)
A/D and Hi/Lo: Decliners led 1 to 1
Previous Session: Decliners led 1.15 to 1
New Highs: 235 (-237)
New Lows: 5 (-3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Nice test of the November high (1064-1062) on the low and a surge into the close. Not quite a new closing high (that was Monday at 1070), but the improving upside volume looks super for a continuation of the move. With flat breadth and declining small and mid-caps, it was the larger gap cyclical stocks that led the way (AA, MMM, UTX, IP). Techs have been week the past three sessions as the profit takers and some real sellers moved in. Money rotated into the big cyclical stocks. That shows that the money from selling techs is not leaving the market completely, but found a temporary home in the cyclical stocks. We have seen this many times in this rally: techs take a few days, a week, even more rest, other stocks buck up as they get some of that money, then the techs 'get right' and money moves right back into the leaders. Again, SP500 is holding the market in line as the rest of the indexes work through some selling.
DJ30
Stats: +57.4 points (+0.58%) to close at 9930.82
Volume: 217M versus 222M
Finally managed to clear the November highs on the close. DJ30 held up fairly well on the session on the back of the cyclical stocks and the IBM and INTC recoveries. The index is back in the uptrend channel and looking pretty solid as it rides the SP500's coattails.
FRIDAY
It is all about jobs, though Intel will have its impact. After hours Intel was down even with stronger margins and a much higher revenue range. We will see if analysts can come to the front and actually articulate the difference between INTC's good will charge versus its rising guidance. Late in the post-market session INTC was trying to edge higher during the conference call (it started 1.5 hours after the 'update' was released).
Both jobs and the Intel spin will be out before the open so we will have a look at how the market is going to trade early on. The market put itself in good position to continue the rally with SP500 actually continuing its breakout on stronger trade and the leading indexes testing back and holding their near support. We anticipate it to overcome Intel and continue the move given that the charge Intel will take is Intel specific. We don't expect a blowout session though it could start stronger on a 200K jobs report.
Thus we will have to exercise care with new positions. If the indexes are set to jump sharply on good jobs news we face a big dilemma: jump right in or let it rally and test? Given the indexes are set up to rally, if they show strength pre-market we will be inclined to take some partial positions on an early move and then add to them if there is a successful intraday pullback and test or at some later date as the opportunity arises.
Support and Resistance
Nasdaq: Closed at 1968.80
Resistance: November high (1992). The January 2002 double top (2044 to 2099).
Support: The 10 and 18 day MVA (1956, 1946). The March/August up trendline (1943). The September high (1913). The 50 day MVA (1912). 1875 to 1880 is the bottom of the week's range.
S&P 500: Closed at 1069.72
Resistance: The December to June upper channel line at 1083. 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 (1060 and 1055). The exponential 50 day MVA (1042). 1030 to 1032 (early September highs).
Dow: Closed at 9930.82
Resistance: 10,000. 10,259 (January 2002 high).
Support: The March/September up trendline (9926). The November high (9903). The October high (9850). The 10 and 18 day MVA (9824 and 9792). The exponential 50 day MVA (9696). 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): 9.4% actual, 9.2% expected, 8.1% prior.
ISM Services, November (10:00): 60.1 actual, 64.0 expected, 64.7 October.
12-04-03
Initial jobless claims (8:30): 365K actual, 354K expected, 354K prior (revised from 351K).
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.
SUBSCRIBER QUESTIONS
Q: That was a good question about the SOX and I really liked your reply listing the individual stocks which comprise the index. I have owned many of the stocks from time to time although presently I do not own any of them. Do you know of an ETF which is made up of the SOX? Rather than betting on individual stocks, it may be good to bet on the overall index (when the time is right).
A: We like to play options on the SOX. It is volatile and the options are pretty expensive. There is the SMH (Semiconductor Holders Trust) that covers the semiconductors and is traded on the AMEX much like the QQQ. You can buy the shares and/or options on them.
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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world stock market
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