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12/17/03 Technical Traders Report Update
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Technical Traders Report Subscribers:
Thursday we issue a market summary and a few choice plays for the next session. Full reports issue Monday, Wednesday and Saturday.
MARKET ALERTS
Targets hit alerts issued Thursday: None issued
Buy alerts issued: ATVI; OMCL
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:
- Broad market rally as NASDAQ, SOX join Dow, SP500.
- Philly Fed shows meaningful increase in employment.
- Techs join Christmas rally as chips rebound, but a lot of tech moves were rebounds toward resistance.
Stocks surge with hardly a downbeat all session.
In one of those rare moves, stocks rallied almost non-stop Thursday. They opened higher out of the gate, NASDAQ crossed the 18 December 2003, and they never looked back. There was a 2 hour lateral move mid-session, but the indexes showed no signs of giving back the gains, breaking out to the upside in the last hour. The volatility of the prior sessions this week melted away under the barrage of upside ticks. No major explosion higher, just a steady, uninterrupted rise to the close.
Volumes were up over the puny Wednesday trade. NASDAQ failed to hit the pre-Wednesday trade levels while NYSE did a fair job. Excellent NYSE breadth as smaller caps joined the move but were they were not the leaders. NASDAQ breadth was solid as well though at lower levels. There was very little wrong with the rally as volatility died off, leaving nothing but upside net as shorts covered tech positions and investors again bought cyclical stocks. This helped embattled chip stocks recover toward the support they broke; that will be the real test for tech stocks the next few sessions.
THE ECONOMY
Philly Fed regional manufacturing report clubs expectations.
32.1 actual versus 25 expected and 25.9 in November. New orders jumped 21 points to 41.8, the highest in 23 years. Great news for the future, and it was joined by a surge in the employment sub-index, rising to 21.9 from a meager 3.3 reading in November. This is a more accepted report than the NY Empire State index issued Monday, but both show the same type of strong production and manufacturing growth indicative of a continued expansion as opposed to a slowdown that so many are fearing. Indeed, the industrial production numbers reported Tuesday show that business production is increasing at a faster and faster rate. Recall that this is the part of the economy that was sorely lacking even as the consumer spent during the long downturn. We have seen the results when the business side starts consuming as well. The consumer may be a bit tired, but he is not out by a long shot. This is a strong 1-2 punch that is really putting some pop into the expansion.
Weekly jobless claims tumble.
Claims fell to 353K from 375K the prior week (revised down from 378K). This beat expectations and dropped the 4 week average to 361,750. Those are levels that indicate there is roughly 150K new jobs or more per month created in the reported non-farm payrolls. Continuing claims, however, continued to rise up to 3.39 million. While there are fewer layoffs, there are still many that cannot find the job they want yet. They can take some heart in that it is still early in the cycle.
Leading Economic Indicators show 0.3% rise, in line with expectations.
This is a basket of economic measures that are thrown in a pot, stirred, and then a reading is taken. They look 3 to 6 months down the road, and they have been expanding through the year though they hit a dry spell late summer and early fall. They are now surging the past three months with October revised to a 0.5% gain for the 0.4% originally reported.
Looking closer, however, the components that held the index lower are important ones. Money supply contracted again, a continued problem the past three months even as the Fed claims it is following an easy money policy. Rates can be zero, but if the Fed does not put the money into the economy there won't be money available. Simple, but it is being overlooked right now. We saw what the lack of good money supply can do back in 2000 and even when the Fed was cutting rates; the rate cuts meant nothing because the Fed limited the money supply tightly. Not until the Fed pushed billions into the system and the tax cuts unlocked billions more did we see economic recovery begin. Non-defense capital goods orders and manufacturers' new orders for consumer goods were also down. These are all important because they pertain to the real problems the economy experienced during the collapse and aborted recovery attempts. They need to continue to improve or the recovery starts to stall.
THE MARKET
Money stopped rotating to the large cyclical and defense stocks Thursday. Instead of rotating it simply went to all stocks. Techs and semiconductors led the way, large caps were next, and the smaller caps brought up the rear. They were all up, however, and that shot breadth higher. Volume was higher as well, though the Wednesday trade was quite light. Again NYSE volume was, relatively, stronger than NASDAQ volume. That often indicates the fluff has been wrung out, and the market has indeed responded as if that was the case.
There were not a lot of breakouts. The large cap cyclical stocks have been rallying for a week, and they added to gains and breakouts already made. Indeed, they are getting closer to resistance and will need a breather, particularly on DJ30 as it soars to a 19-month high. The small and mid-caps continued their rebounds off the 50 day MVA, logging some solid gain after a weak Wednesday bounce. They continue to hold the uptrend and are now making yet another bounce in that trend.
Many technology and chip stocks rallied, but many of the moves were rebounds from some hefty selling the prior 2 to 3 weeks. Chip stocks are a good example as many rallied back to near resistance levels but did not recover those levels. They will be important to watch once more as they do probe those resistance levels as SOX managed to hold over support at 475 and rebound, setting up what could be a short double bottom, i.e., two lows with the second low slightly undercutting the prior low on the first dip. Overall they are still in very precarious patterns (CERN, VSEA, AMD, SLAB, SSTI), but there are some that are solid (e.g., TXN, XLNX, MCHP). This bounce may prove to have something more to the upside as they did correct back significantly the past week, but they will have to break up some nasty looking topping patterns to continue the moves. We saw them bounce well just a week ago and look to be ready to rally, but were slammed back down with the Monday reversal.
Thus while there are still problems with techs and chips, there is still a desire for larger caps and cyclical stocks. This week a particular affinity for energy stocks has appeared this week as oil prices and natural gas prices rise. We may see the tech bounce fade yet again over the next session or two to the cyclical stocks benefit as money rotates to them once more. As noted, however, they too will have to face some profit taking soon as they have rallied sharply and are approaching resistance.
Market Sentiment
VIX: 16.16; +0.58
VXN: 24.53; -0.59
VXO: 16.25; +0.90
Put/Call Ratio (CBOE): 0.65; -0.04
NASDAQ
Two dojis at the 50 day MVA give way to a rally, but volume does not match the point gain.
Stats: +34.85 points (+1.81%) to close at 1956.18
Volume: 1.724B (+14.04%). Gained in trade over Wednesday's low volume session, but was below the prior volumes in the week. The surge in price should have seen a larger surge in volume to indicate real buying strength. That stronger trade is really in NYSE where volume once again was very strong on a relative basis.
Up Volume: 1.432B (+862M)
Down Volume: 274M (-655M)
A/D and Hi/Lo: Advancers led 2.11 to 1. Excellent breadth as most stocks joined the upside.
Previous Session: Decliners led 1.22 to 1
New Highs: 131 (+46). Very weak new highs, but with the index coming off the 50 day MVA after two weeks of selling this is not surprising.
New Lows: 17 (+4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Easily cleared the 18 day MVA (1936), making a modestly higher low and thus maintaining the uptrend. It is still below the March/August up trendline, indicating the trend has weakened. That is obvious given the action this month with the first serious break of the uptrend and the SOX breach of its trend as well. It is now trying to move back into that trend and make a new high over the early December tops (1989, 2000). Not sure it is going to do that. Not sure it is going to make much more headway on this move but run into some real resistance from here to 1985.
S&P 500/NYSE
Impressive move on the best volume in two months as the large caps continued their run into the holidays.
Stats: +12.7 points (+1.18%) to close at 1089.18
NYSE Volume: 1.56B (+10.86%). Good volume and better on a relative basis than NASDAQ as NYSE volume was above average and the best in over two months.
Up Volume: 1.328B (+576M)
Down Volume: 209M (-389M)
A/D and Hi/Lo: Advancers led 2.95 to 1. Excellent breadth as the small and mid-caps, while not surging, were posting solid gains. Very much as we saw last week when then smaller caps joined in but then failed.
Previous Session: Advancers led 1.48 to 1
New Highs: 452 (+202). Solid jump in new highs but not at the same level from early fall. As noted, however, this is the holiday move, and holiday moves are never perfect, they just happen. After it is over is another question.
New Lows: 7 (-4)
DJ30
Stats: +102.82 points (+1.01%) to close at 10248.08
Volume: 218 million versus 197 million
Surged to a 19 month high in its second triple digit gain in three sessions. It is really stretching the breakout now as energy stocks join the general cyclical stock rally. DJ30 hit 10254 on the high, closing in on some resistance from prior price points at 10,259 to 10,353. Still room for another solid move and then it will need to take a breather after 4 weeks of pretty much uninterrupted gains off the 50 day MVA.
FRIDAY
The quadruple witch finally arrives, but most of the fireworks will already be over in terms of volatility as seen on Thursday. The market rose in the lack of position shuffling, continuing its uptrend as buyers chase the momentum of the large cap cyclical and defensive stocks. Money was also put into NASDAQ stocks and semiconductors, but it looks as if that was more short covering than the buying seen in the other large caps. That money may dry up and once again turn to the large cap cyclicals even more as early as Friday after an early attempt at a follow through.
Volume on expiration Fridays has been higher the past two months. Thus we are expecting a lot of trade. We will be watching the SOX and semiconductors closely. We expect the rally to sputter even though it is closing in on Christmas week. They may stall and do more of a drift than sell off, but the patterns are still in disarray and it is hard for them to sustain moves, particularly if the action was, as we suspect, mostly some short covering Thursday after the stocks had sold hard for two sessions. Stocks that are selling will show these bounces back up just as breakout stocks sell back to test support before resuming the run.
Thus we are looking for an early follow through attempt but are going to watch for chips to run into some trouble at resistance (simple 50 day MVA is 497) and stall. If the large caps make an early strong run we anticipate that will also lead to profit taking ahead of the weekend. Not expecting anything serious, but such a move will lead to volatility and some desire to take some money off the table before another try next week ahead of Christmas.
Support and Resistance
NASDAQ: Closed at 1956.18
Resistance: Some price resistance in the 1950 range has not been totally broken. The March/August up trendline (1980). November high (1992), December high (2000). The January 2002 double top (2044 to 2099).
Support: The 18 day MVA (1936). The 50 day MVA (1918). 1875 to 1880 is the bottom of the November range.
S&P 500: Closed at 1089.18
Resistance: 1100 represents some early 2001 lows. 1150 to 1175, the early 2002 double top.
Support: The December to June upper channel line at 1084. 1080 from February 2002 lows. November high (1061.40-1064). The 18 day MVA (1067).
Dow: Closed at 10,248.08
Resistance: 10,259 (January 2002 high). 10, 353 from May 2002 high.
Support: The 10 and 18 day MVA (10,052 and 9972). The November high (9903). The October high (9850). The exponential 50 day MVA (9809).
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): 353K actual, 365K expected, 375K prior (revised from 378K).
Leading economic indicators, November, (10:00): 0.3% actual, 0.3% expected, 0.5% October (revised from 0.4%).
Philly Fed, December (12:00): 32.1 actual, 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 2
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