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world stock market, us stock market
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12/29/03 Technical Traders Report
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Technical Traders Report Subscribers:
Market closed Thursday. Summary reports issued Wednesday, New Year's Eve.
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MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: QGENF; THER; HRLY
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 advance clears near resistance on low volume.
- NASDAQ breaks out of range, but is it ready? Holiday rally does not seem to care.
Stocks start higher, finish strong.
Lack of a terror attack, no mad cow madness, and some comforting words from Homeland Defense Secretary Ridge started stocks off solidly and allowed them to finish strong as opposed to the fade from an intraday consolidation that we saw Friday. Stocks surged on the close, buoyed by some upbeat words from Ridge (but no lowering of the terror alert status given New Year's this week), as volume actually jumped (more like bumped higher given the low overall trade) as stocks rallied.
Volume was weak all session, but breadth was stellar. Friday the small caps took the lead from NASDAQ as the former leading indices were taking turns leading the market late in the week as the large cap cyclical indices took a breather. Monday all stocks were working as the former leaders (NASDAQ, small cap SP600, and SOX) set the market's pace. With those back in the hunt and indeed with NASDAQ and the small caps breaking to new highs, the market swarmed higher. The return of small caps and techs pushed the NYSE A/D line over 3:1. Huge move higher, but no trade to really convince anyone it was for real. At this point, however, in a light volume holiday rally that question is not the primary one, at least not one that is being addressed much. That is the next question when reality returns after the first of the year and NASDAQ, SP500, and DJ30 face the tremendous overhead supply at 2100, 1175, and 10,600 respectively. Those levels will provide a lot of headwinds for the market even as NASDAQ tries its breakout from this 3 month range.
THE MARKET
Wendy's and McDonald's reported no appreciable drop in sales over the weekend and that as much as anything had a positive impact on stocks. We are trying to hook up with a local 4-H member to pick up a good steer on the cheap during this drop in cattle prices, but with the returning confidence the window may be closing rapidly. With no terror attack and no major issue re mad cow, even the tanking dollar was again overlooked. At some point over the next three months we are looking for a real snap back correction in the dollar versus euro that will get the shorts screaming. It may not be long term unless it is caused by the Treasury stepping in with a quick purchase of dollars, thus letting the rest of the world know the floor has been reached. That would indeed set the floor, and unless there was a major drop off in US economic activity, it would be a pretty solid bottom.
The most notable aspect of the session other than all of the former leading indices back in the lead was the NASDAQ breakout over 2000. That moved techs out of their 12 week lateral consolidation over the 50 day MVA. Volume was pitiful, but pitiful volume is about all you can expect during this 'in between' week. It was punctuated by some solid volume moves here and there and some definite improvement in major techs, i.e., turns off the bottoms of patterns by the worst offenders in the selling while others that held up well started moving up toward a breakout.
The market is kind of in between right now: cyclical stocks have run well and were at it again Monday after a brief pullback; tech stocks have been consolidating for three months and are trying to turn back up though many are still a long way from completing any type of solid base that would set the stage for another major run higher. That is one thing that keeps us leery of a NASDAQ run here so close to such major overhead supply. There are stocks in good position, however, and they can start moves from here while the others continue to form up their bases and then provide the next wave of moves higher. That is the way NASDAQ and the market moved up in 2003, with wave after wave of fresh breakouts hitting the market. NASDAQ has been rather impressive in its lateral consolidation, but you have to keep your eyes on the horizon an that resistance at 2100 when gauging how strong the move has to be to crack that level. There is room to run, but all of the indexes will have to deal with that overhead supply as they move forward. We will play the strong breakouts as the pop up, but we will also be ready to lock it down if the indexes hit that overhead supply and stall.
Market Sentiment
VIX: 17.09; -0.36
VXN: 23.73; -0.28
VXO: 16.04; -0.43
Put/Call Ratio (CBOE): 0.53; -0.04. Falling off the table as fewer bet against the rally. Not at a danger point yet, but it has rarely forayed into this level during the run as healthy doubt of the rally remained high. If it drops down near 0.35 we need to be very cautious with upside positions.
NASDAQ
Broke out from its 12 week triangle though volume was hardly reassuring.
Stats: +33.34 points (+1.69%) to close at 2006.48
Volume: 1.42B (+167.29%). Don't be fooled; remember, half day on Wednesday and Friday. Volume was still way below average on the break higher.
Up Volume: 1.099B (+777M)
Down Volume: 274M (+76M)
A/D and Hi/Lo: Advancers led 2.34 to 1. Impressive breadth as technology stocks rose across the board, though that does not mean they are all in good buying positions.
Previous Session: Advancers led 1.46 to 1
New Highs: 312 (+191). A jump in new highs, but still not impressive for an index that is breaking out of a 3 month consolidation.
New Lows: 4 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Surged over resistance at 1992 and the psychological barrier at 2000 (there was much rejoicing), closing at the session highs. An excellent price move though volume during this holiday week did not show the conviction that would convince you the big money is buying with the intent to hold longer term. No doubt a few big institutions and hedge funds are driving this rally, but they are not in the numbers to indicate long term commitment versus just taking part in the year end rally. This is the breakout move we discussed the past week, and it clears the path for a higher run up to 2048 to 2100 where it double topped in early 2002. That may not stop it, but we would be very surprised if NASDAQ powered through that level on the first try. The consolidation has been solid with NASDAQ holding its gains in a sign of strength. Again, that sets up a rally to the double top range, but it does not mean it is able to break that level.
S&P 500/NYSE
A brief lateral move and it was off and running again, clearing near resistance.
Stats: +13.59 points (+1.24%) to close at 1109.48
NYSE Volume: 1.044B (+195.22%). As with NASDAQ volume surged, but it was also still well below average as it did. Volume has been excellent on the move higher, so this is not that disconcerting given the 'in between' week.
Up Volume: 947M (+706M)
Down Volume: 104M (-4M)
A/D and Hi/Lo: Advancers led 3.28 to 1. Tremendous positive breadth.
Previous Session: Advancers led 1.83 to 1
New Highs: 642 (+309). Excellent surge in new highs as the small caps joined the large cap advance. New highs swelled to levels not seen in months. Of course, SP500 has now run almost 75 points from late November; there should be some new highs after a week of hitting new 52 week high after another.
New Lows: 13 (+3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Surged through resistance at 1100 and 1106 with ease. As noted over the weekend, those were not major and the index now has some room to continue the move after a brief pause last week. The real resistance starts at 1150 on up to 1175 as the peaks of the early 2002 double top. This resistance is nowhere near as long or thick as that facing DJ30, but it represents a top from back in 1998 as well. Combined with the DJ30 and NASDAQ resistance as well, it becomes more formidable. SP500 did not take much rest before launching this move, so it can again become quickly extended and need another pullback. The trend, however, not only remains in tact but it has steepened.
DJ30
Stats: +125.33 points (+1.21%) to close at 10450
Volume: 156 million versus 49.5 million
The smallest of pullbacks before surging Monday past some resistance at 10,353. DJ30 has been on a juggernaut run off of the 50 day MVA, now way back at 9923. DJ30 is extended and getting more so, but the momentum of cyclical stocks is attracting additional year end buying. If the market is going to continue higher there will ultimately be a switch back to growth stocks and the momentum will slow. We anticipate that in January, and the NASDAQ breakout over 2000 is an indication that there are others already looking back toward growth. All of the indexes, however, have to deal with what appears to be serious overhead supply and resistance that is now much closer at hand. For DJ30 that starts roughly 150 points from the Monday close at 10,600. DJ30 spent over 2 years in a range from 10,500ish to 11,000. Tremendous overhead supply that the blue chips will find hard to break through.
TUESDAY
The Monday burst higher through near support continues the holiday rally after a brief pause on the large cap indices and a continued positive NASDAQ consolidation. Light volume momentum is carrying stocks higher though NASDAQ has built up a solid base to rally off of. Some of its stocks are near 52-week highs while others are bottoming in their bases. The fact it is starting a breakout even as many of its key stocks are still just in the bottom or middle of their bases is indicative that there is some depth behind the move; i.e., it has a backlog of stocks that will be ready to breakout and fill the void left by those that get out of the blocks earlier.
But for the low volume and the near overhead supply/resistance, the NASDAQ break higher would be a great buttress or addition to the large cap cyclical move. It would ultimately lead to the demise of the cyclical move if it continued, but short term it is a great hand in glove fit. At this stage, however, it is still momentum given the low volume. Monday we were issued alerts and moving into those stocks that were showing volume moves (not all were showing huge volume, but they were moving well on strong relative volume) and scanning for others doing the same and issuing alerts on those as well. During this momentum phase in the market below that near resistance, looking for stocks with solid accumulation and solid trends or patterns gives our positions more staying power if the upside move softens.
There are many stocks coming off of 50 day MVA tests or otherwise completing nice little bases that can give us some relatively quick gain ahead of any overhead supply problems down the road. We may have to shorten our targets based on the market action and take gain off the table and close other positions if the indices slam into that level and reverse. Ahead of that the action will be as it ahs been, run ahead, fall back, then run ahead. This momentum run typically lasts until right the first part of the week after New Years, so we keep an eye on the cyclical big caps as they move into that time period.
Support and Resistance
NASDAQ: Closed at 2006.48
Resistance: The January 2002 double top (2044 to 2099).
Support: November high (1992), December high (2000). The March/August up trendline (2002). The 18 day MVA (1955). The 50 day MVA (1930). 1875 to 1880 is the bottom of the November range.
S&P 500: Closed at 1109.48
Resistance: Minor resistance at 1115. 1150 to 1175, the early 2002 double top.
Support: 1100 represents some early 2001 lows and 1106 from a May 2002 top. 1080 from February 2002 lows. The 10 day MVA and the 18 day MVA (1090, 1081). November high (1061.40-1064).
Dow: Closed at 10,450.00
Resistance: 10,600 (March 2002 peak).
Support: 10,353 from May 2002 high. 10,259 (January 2002 high). The 10 and 18 day MVA (10,262 and 10,155). The exponential 50 day MVA (9923). The November high (9903).
Economic Calendar
12-30-03
Chicago PMI, December (10:00): 62.0 expected, 64.1 November.
Consumer confidence, December (10:00): 91.8 expected, 91.7 November.
Existing home sales, November (10:00): 6.33M expected, 6.35M October.
12-31-03
Initial jobless claims (8:30): 350K expected, 353K prior.
End part 1 of 3
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world stock market
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