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world stock market, us stock market
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12/17/03 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Wednesday: None issued
Buy alerts issued: VLGC; NGAS
Trailing stop alerts: None issued
Stop alerts: BCON; SATH; DPAC
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:
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SUMMARY:
- Running in place, NASDAQ manages to hang onto the 50 day MVA again.
- Holiday sales slow? Not according to our surveys.
- Same rotation action continues, semiconductors weaken further.
Markets trade up, trade down, finish flat.
The market is showing its volatility early in the week ahead of quadruple witching on Friday when just about all December options and futures in the financial markets expire. Stocks sold, rallied, sold, rallied, sold a bit, and finished rallying a bit. Volume was lighter and breadth modestly positive on NYSE and modestly negative on NASDAQ. At the close the indexes were on both sides of the flat line but holding close. It was the same story: large cap cyclicals and defensive stocks were positive while techs, chips, and smaller caps were negative. No one sector really rallied or really tanked though SOX lost 1.1%, by far the worst performer.
NASDAQ was again up and down, again busting the 50 day MVA, but it recovered yet again as well. It is putting in some effort to hold the 50 day, but with SOX still probing lower it is finding it difficult to make headway. SOX is back at some support at 475; if it can bounce there NASDAQ will get some lift. SOX is in a poor pattern, NASDAQ is trying to make a higher low but struggling, and the small and mid-cap indexes are going to have to clear the November interim highs or struggle along with NASDAQ. Meanwhile the blue chips and large cap indexes continue to thrive on the fat of the other stocks and indexes that led the move this far. The trend has not broken but action in the leaders is lackluster at best as they trudge sideways.
THE ECONOMY
Holiday sales called weak.
With Wal-Mart at the low end of its range again this week Jim Cramer is worried. East coast snow storms have other analysts worried. The consumer is apparently not buying at the low end. Perhaps the consumer is tapped out or sitting out the holiday season after spending beyond expectations when times were much worse. Perhaps with surging GDP, improved confidence, rising wages, and an upturn in jobs the consumer has suddenly got cold feet. In the world of research there is a theory that between two theories, the simpler is typically correct. Or perhaps the consumer, after two lean years of shopping at Wal-Mart, is stepping out to different stores this year.
Our surveys of retail stores and malls shows that crowds are heavy. Today we conducted spot polls in the south, southeast, southwest, and west. Our mall contacts said that crowds were very heavy during work hours. Our contacts at retailers are telling us that they are putting very little on sale. They have token sale tables, but they are using those minimally. There are the 'usual' sales that you see all year, i.e., marking down the clearance junk (e.g., the Buzz Lightyear gag underwear for Dad or last summer's shirts that were so loud even Uncle Buck wouldn't wear them).
In short, there is not much on sale. The past two years, particularly in 2002, the stores were running over each other to slash prices at the first hint of potentially slow sales. They were putting up new sales signs faster than Zippy or whoever that annoying Wal-Mart 'sunshine' price-cutter is. If sales are weak, why no rush to cut prices? Perhaps they are playing a game of chicken with the consumer, waiting to cut until the last minute and the consumer trying to hold out to the last minute. Again, however, our store and mall surveys show heavy crowds that are holding packages. It is pretty easy to conclude stores do not feel the need to cut prices, at least not yet. It is also clear that consumers are expanding their shopping well outside of WMT this year, and as we said before, the narrow focus on WMT does not fit the times. We predict that those areas hit by snowstorms will see a surge of buying this week.
Oil prices are too high.
Oil has risen $10 this year and now sits back over $33 per barrel. This 'stealth' move in energy prices has been masked by looking at the core CPI and PPI reports that supposedly show slight inflation to disinflation. Unfortunately, the economy runs on energy and we all have to eat at least once a day, Atkins diet or no. Oil prices are getting back to a level that starts to impact consumer discretionary spending. Natural gas prices have shot higher on the weather news, again cutting into consumer discretionary spending. These high prices also hit businesses as their energy costs rise, putting pressure on their bottom line if they cannot raise prices.
There is no real end in sight to rising prices. Iraq is way overdue with its production, and the promise of that oil is not slowing down the price run. China is using a lot of oil and that is keeping a bid under the barrel. An expanding world economy always pressures oil prices. A falling dollar also has its impact because oil is traded in dollars. OPEC is certainly fretting over this; it has to charge more dollars to get the same value per barrel. Thus the falling dollar has another side effect, rising oil prices. It is a vicious circle: the weaker dollar buys less and it fuels rising prices because the sellers demand more dollars.
Not a lot of discussion on the impact of oil prices. There are some disquieting signals cropping up with the economy that remind us of the 1970's problems of high energy, high interest rates, high inflation. The seeds are there, but they are far from germinating; it would take a few years for them to really start to show problems. Rising energy costs have to be dealt with. Iraq oil has to start flowing freely, and then new reserves in Iraq need to be exploited. Otherwise we run into trouble with oil prices choking down growth in addition to the Bush policies outside of tax cuts that are doing that as well (e.g., tariffs, sliding dollar, rampant spending). Indeed, Bush does not mind seeing some higher oil prices as they help out his oil buddies just as the falling dollar helps out his buddies running multinational companies. The advantages help a few but hurt most of us. Tax cuts are an amazing growth starter, but if you use that growth as an excuse to try and get away with bad policies, you are creating trouble.
THE MARKET
The market gave no answers Wednesday, just kept up the same rotation seen the past month. NASDAQ continued to wander sideways while semiconductors suffer. No breakdown though the chips are threatening to do so and individual chips are doing so. This action maintains the uptrend as DJ30 and SP500 swap places with NASDAQ and the smaller cap indexes: all summer the large caps moved laterally, holding up but unable to breakout. At the same time NASDAQ and the small and mid-caps rallied higher. Now NASDAQ is stalled in a lateral move as the large caps break out and trend higher.
The latter is the holiday rally. Money is rotating to other sectors as fund managers want to keep money in the market. The next question is what happens after the first of the year. Will money shift back to growth stocks and allow the market to continue its move? These mature large cap companies cannot sustain continued market gains alone because they quickly become overvalued as their earnings just don't grow that fast. The leadership in expansions comes from stocks growing earnings better than 20% per quarter and can have their prices run up more.
For now NASDAQ struggles to hold on as SOX drops lower and the large caps rise further. Fund managers want to keep money in the market as long as possible up to year end.
Market Sentiment
VIX: 15.58; -0.35. Hit a 7 year low Wednesday, breaking below the lows in the recent two month trading range. This does not necessarily mean a lot in itself as volatility can remain low for long periods. Indeed, in 1993 to 1995 volatility was lower as the market, particularly DJ30 and SP500, moved laterally. SP500 was on the rise as volatility fell. The worst that happened was the market made the lateral consolidation that set the stage for the huge rally from 1995 to end the decade. Of course, that lateral move lasted two full years. Is the market coming to a point where it will again move laterally for an extended period as volatility seeks those prior levels (it ranged from 10 to 15), consolidate, and then move higher and thus rally volatility with it? That is a real possibility moving forward. If NASDAQ and the smaller caps have already made their post downtrend run and the large caps are finally getting some play time, the next move could be that long sideways move.
VXN: 25.12; -1.03
VXO: 15.35; -0.35
Put/Call Ratio (CBOE): 0.69; +0.01
NASDAQ
Broke below the 50 day MVA again and rallied back again but on anemic trade.
Stats: -2.96 points (-0.15%) to close at 1921.33
Volume: 1.512B (-17.01%). Volume backed off as NASDAQ held steady over the 50 day MVA. That is not real distribution and is not bad action from a volume standpoint.
Up Volume: 570M (-393M)
Down Volume: 929M (+84M)
A/D and Hi/Lo: Decliners led 1.22 to 1
Previous Session: Decliners led 1.04 to 1
New Highs: 85 (-1)
New Lows: 13 (-2)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Held the 50 day MVA (1917) after breaching it intraday. Showing another doji over that level, it is trying to set up for a bounce higher but SOX is heading the other way. SOX did find support at 475 from September and October tops. That is where it needs to hold or 450 is next. NASDAQ won't fair too well either if it fails there. Again that recovery kept NASDAQ in position to make a higher low and bounce higher in the uptrend. It will need chip help, however, and it simply does not appear that money managers are ready to return to techs at this point.
S&P 500/NYSE
Added a modest gain on lower volume, coming back to do so.
Stats: +1.35 points (+0.13%) to close at 1076.48
NYSE Volume: 1.407B (-6.26%). Volume remained above average but slipped. Conviction remains a problem, but it has the upward momentum with money managers parking money in big names ahead of year end.
Up Volume: 752M (-174M)
Down Volume: 598M (+41M)
A/D and Hi/Lo: Advancers led 1.48 to 1. The A/D line is very quiet given the nice gain Tuesday. Without the smaller caps participating the move lacks breadth.
Previous Session: Advancers led 1.43 to 1
New Highs: 250 (+54). Hit a new 52-week closing high but new highs just schlepped higher, hardly an indication of strength.
New Lows: 11 (+4)
DJ30
Stats: +15.7 points (+0.15%) to close at 10145.26
Volume: 197 million versus 233 million
DJ30 hit a new 52 week high as well, continuing the run up the 10 day MVA (10,008) after breaking higher to start the month. Just as money chased tech stocks higher up through October, money is now chasing these moves ahead of year end. Managers are not taking money out of the market in basketfuls; they are moving some to more defensive, conservative stocks and taking a bit out of the action. DJ30 is in fine shape, with resistance at 10,259 to 10,353. Room to move up to there as money continues to chase the big names.
THURSDAY
Important economic data is released once more (jobless claims, LEI, Philly Fed). Again we are in the situation where bad news could hurt, good news probably won't help, at least in the sense of sparking NASDAQ and the small caps again. Good economic data could very well help the move in DJ30 and SP500 as they have moved higher regardless.
Volatility will still be present but starting to wane as Friday approaches. It used to be the last day of expiration week was the most volatile, but that has shifted out into the week. As we discussed Tuesday, there is not much to make NASDAQ stocks attractive at this juncture other than the index holding the 50 day MVA. That can spark some short covering, but money has been flowing out of the index to cyclical stocks.
This market continues to show choppy, toppy action as far as the leadership indexes and we continue to look for stocks set to or are break down. We also are looking at individual stocks that show the right technical underpinnings to move higher and make us money. This is a very stock specific time in the market, even more so than usual. If we don't see the action we need in our plays we are going to let them pass. The market is bucking with the NASDAQ and SOX threatening breakdowns. The small caps are still in good shape and provide many good patterns, but we continue to watch it closely with that lower high the past week.
Support and Resistance
NASDAQ: Closed at 1921.33
Resistance: The 18 day MVA (1934). Some price resistance at 1950. The March/August up trendline (1978). November high (1992), December high (2000). The January 2002 double top (2044 to 2099).
Support: The 50 day MVA (1917). 1875 to 1880 is the bottom of the November range.
S&P 500: Closed at 1076.48
Resistance: 1080 from February 2002 lows. The December to June upper channel line at 1084. 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: November high (1061.40-1064). The 18 day MVA (1064). The exponential 50 day MVA (1050). 1030 to 1032 (early September highs).
Dow: Closed at 10,145.26
Resistance: 10,259 (January 2002 high). 10, 353 from May 2002 high.
Support: The November high (9903). The 10 and 18 day MVA (10,008 and 9940). The October high (9850). The exponential 50 day MVA (9791).
Economic Calendar
12-15-03
NY Empire state index, December (8:30): 37.4 actual 35.0 expected, 41.14 November (revised from 41.0).
12-16-03
Consumer Price Index, November (8:30): -0.2% actual, 0.1% expected, 0.0% October.
Core CPI, November (8:30): -0.1% actual, 0.1% expected, 0.2% October.
Housing starts, November (8:30): +4.5% (2.070M actua), 1.914M expected, 1.980M October (revised from 1.960M).
Building permits, November (8:30): 1.874M actual, 1.901M expected, 1.973M October.
Current account, Q3 (8:30): -$135.0B actual, -$136.0B expected, -$139.4B Q2 (revised from )
Industrial production, November (9:15): 0.9% actual, 0.5% expected, 0.4% October (revised from 0.2%).
Capacity utilization, November, (9:15): 75.7% actual, 75.4% expected, 75.1% October (revised from 75.0%).
12-18-03
Initial jobless claims (8:30): 365K expected, 378K prior.
Leading economic indicators, November, (10:00): 0.3% expected, 0.4% prior.
Philly Fed, December (12:00): 25.0 expected, 25.9 November
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
us stock market
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