|
|
us stock market, trade stock
* * * *
1/06/04 Technical Traders Report Update
* * *
Technical Traders Report Subscribers:
Tuesday and 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 None issued. Letting some good movers continue to run.
Buy alerts issued: HELX; ARXX; CALP; ADPT; MXIM
Trailing stops issued: None issued
Stop alerts issued: SLAB; AV; LOW; JBLU
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:
- Market starts slow, posts steady recovery, but sluggish.
- Economic data solid but less than expected.
- Volume has returned & for now it is showing the right action.
- Jobs report will be the focus for the rest of the week.
Sluggish though positive action following the big Monday run.
Similar to last week the market has started on a big upswing and is now trying to catch its breath and continue. Last week it ran out of steam but did not give in, setting up the next surge this week. Similar action thus far this week, but on much stronger volume. That gives some conviction to the drift higher during the holidays, and it really gives some comfort with respect to the NASDAQ breakout as it shows that the big money has come back and is buying technology stocks even after the breakout. In other words, they still like them at these higher prices.
It was not a great session, just solid. After the big Monday rush higher the market started soft. As we note over and over, soft starts after big runs the prior session are good. Market makers often need to replenish their inventories and start prices lower to get some sellers in the market. Once they get some sellers they can go ahead and let prices start rising again as they have their supplies restored and at a lower price. Buyers see the lower price and use it to open some positions, particularly those that feel they missed out on some of the action the prior session. Stocks start low then rally to the close. That is exactly the type of action you want to see to the upside.
Again it was a sluggish session. Buyers came back in, but it was not a rush back up. The entire session was a slow, steady move higher that finally pushed all indices positive in the last hour. Some last minute selling pushed DJ30 negative, and in a quirky selloff, the small cap indices tanked sharply as the market came to a close. NASDAQ, SOX and SP600, the leaders in the rally to the upside, were leading again up to the last 10 minutes before the small cap drop. As we noted Monday, it was good to see former leading indexes back in the game. All oars are rowing in the same direction right now even as the large cap cyclicals took a breather. Again that is the action you want to see.
THE ECONOMY
ISM Services miss the mark but are still solid.
Expectations after the stellar, excellent manufacturing number were high, but the services component could not produce the same huge numbers. 58.6 for December was below the 60.8 expected and the 60.1 in November. Lower yes, but hardly a major plunge. The service sector was the first to start the major recovery, hitting over 62 way back when the manufacturing index was still trying to break over 50. Thus after a torrid rush higher a modest retrenchment is fine.
At 58.6 this larger part of the business side of the economy is still expanding at a nice clip. New orders rose to 61.2 from 60.1. Order backlogs rose to 55.5 from 52.5. Employment sagged, however, falling to 54 from 54.9. Still positive, just a slower expansion in December as retailers got cold feet about the holiday sales season.
Challenger December jobs layoffs fall 6.5%.
Q4 is historically the heaviest in terms of layoffs, but the layoffs report from Challenger Gray shows promise. The numbers are still large when taken by themselves (93K versus 99.4K in November), but the trend is definitely improving. Again, given it was Q4, the slowing number of layoffs throughout the quarter was good news indeed. We will obviously know more on Friday with the December jobs report, but all signs are pointing toward a much better job creation picture.
Factory orders drop in November.
Q4 was definitely slower, another indication being factory orders falling 1.4% (-1.5% expected) after a 2.4% gain (revised from 2.2%) in October. Orders were down across the board with business orders, as measured by non-defense capital spending, down 5.1%. Not a great month, but again, the trend is still unequivocally positive, making November's pullback again look like a retrenchment as opposed to any trend change.
THE MARKET
Volume is back in the market this week. Monday was the biggest NASDAQ volume session in 7 months and the Tuesday volume was not far off that pace. Moreover, it was good action: slower early in the selling, stronger as NASDAQ rallied back for a positive close. While lower overall, the price/volume action is showing the right stuff: stronger on the upside sessions, lighter on the downside. Breakout stocks are showing good upside volume, indicating the money is moving into those stocks. The high volume on breakouts shows they want the stocks and are fighting each other to get them.
This is a nice affirmation of the NASDAQ breakout from its 3 month consolidation last week. As noted, even after the breakout, when the institutions came back to the market they were willing to buy into the stocks even after NASDAQ broke out. NASDAQ has many stocks that are still in their bases, coming up off of the lows to form the right side of the pattern. When NASDAQ takes a breather at some point in the next week or so, these stocks will form their handles and then be ready to breakout after NASDAQ completes its rest.
There is still that resistance to keep in mind. Thus far NASDAQ is ignoring it, SP500 still has plenty of room. NASDAQ could run up to the top of the resistance, take a breather and let its stocks finish their bases, and then break higher. We have expected more of a test at this level, but we will let the stocks show us if that is a correct expectation or not. Thus far it is setting up well. The indexes will be ready to take a pause at those levels; what they do from there tells the story. Right now they don't have the look that they will run like scared dogs when they get there.
Market Sentiment
Bob Pisani on CNBC was talking of the 'collapse' of volatility Tuesday after the close. He was lamenting how 'traders' cannot make money when there is lower volatility. He is talking about those that make money when others trade; they take a piece of each deal much as explained to Eddie Murphy in 'Trading Places.' For the rest of us that are buying into this volatility, we kind of like the lower levels. Option prices are lower because the volatility component is lower. That makes it tougher to sell options, e.g., selling naked puts or naked or covered calls and make money because the premiums are lower. For us that is about the only negative in the lower volatility right now.
VIX: 16.73; -0.76
VXN: 22.76; -1.13
VXO: 15.34; -1.37
Put/Call Ratio (CBOE): 0.57; -0.11
NASDAQ
Started slower, turned positive, and finished near the high. Solid trade though a bit lower.
Stats: +10.01 points (+0.49%) to close at 2057.37
Volume: 2.278B (-3.88%). Another solid volume session though not the accumulation shown Monday. Continued strong volume in repeated sessions, despite coming in slightly lower, is still good overall action.
Up Volume: 1.432B (-242M)
Down Volume: 826M (+209M)
A/D and Hi/Lo: Advancers led 1.28 to 1. Was never extreme to the downside even at the open. It improved all session as NASDAQ continued its rise to the close.
Previous Session: Advancers led 1.99 to 1
New Highs: 355 (+11). Again, hardly impressive compared to the summer numbers or the NYSE recent new high list.
New Lows: 8 (+4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Added to the Monday breakout continuation as tech stocks were in the lead yet again. The return of NASDAQ to the leader board has helped the overall market. Cyclical stocks were stretched and they took a breather Tuesday. While they did that the tech stocks continued their advance, working on their bases and continuing breakouts or rebounds from Monday. This is what NASDAQ did all the way up, and it is healthy for the market that money has returned. NASDAQ has passed the first top of early 2002 (2048) and is working on the next at 2100. It has made a good push higher. Another two sessions of gains and it would be in the zone where it would need a breather, particularly with the 2100 level right there to work on it. As noted above, if it can continue its healthy action after the breakout and ease back on lower trade, holding much of its gains, the next wave of stocks would finish their bases and be ready to breakout. Thus far NASDAQ is showing little fear of this level, and we will see if it continues.
S&P 500/NYSE
Modest gain as it too came back from the early selling on solid trade. A bit extended, but a solid uptrend.
Stats: +1.45 points (+0.13%) to close at 1123.67
NYSE Volume: 1.49B (-4.92%). Another good volume session though lower than Monday. Upside volume has definitely returned as the money funds came back this week buying stocks. There was good volume when SP500 broke higher in mid-December as well. A lot of accumulation has been ongoing in the uptrend.
Up Volume: 778M (-410M)
Down Volume: 688M (+318M)
A/D and Hi/Lo: Advancers led 1.09 to 1
Previous Session: Advancers led 2.07 to 1
New Highs: 494 (-126)
New Lows: 4 (-4)
The Chart: http://www.investmenthouse.com/cd/^spx.html
SP500 has increased the pace of its uptrend over the past 6 weeks as it extends its October breakout from the summertime lateral consolidation. You always have to be wary of accelerations in an ascent after a stock or index has already posted solid gains. That can indicate a rush to get in by those feeling they have been left out. The price/volume action on the strong advances has been as it should be, and that indicates there is still accumulation. If we start seeing churning or distribution over several sessions as the index stalls out, that indicates some selling as big money is moving out of the shares. What you want to see is an easy pullback on lower volume to consolidate the move. Thus far SP500 continues on an accumulation stage as it moves up toward the double top peaks of early 2002 at 1150 to 1175 peaks of the early 2002 double top.
DJ30
Stats: -5.41 points (-0.05%) to close at 10538.66
Volume: 191 million versus 221 million
Struggling a bit at 10,500 as the blue chips, after a strong surge Monday, took a breather. Volume backed off, falling below average as the Dow rested. That is precisely the action you want to see. DJ30 is starting to bump into that range of resistance from 10,600 to 11,000. That does not mean the door is slammed at 10,600 and it struggles the entire way higher. It can knife deep into that range before it runs into trouble. As with SP500, DJ30 has increased the tempo of its rise the past 6 weeks, but it too is showing good price/volume action as it makes this run (rising volume on up sessions, lower volume on down sessions). As it is now just over its upper channel line (10,490) it is going to face some selling. As with the large cap index, we watch the price/volume action as it makes its periodic pullbacks. Volume has been solid on the surge higher, and we want to see it ease on the pullbacks or the nowhere days such as Tuesday. For now it is solid.
http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
No economic reports scheduled for Wednesday, but we are going to see earnings start hitting before the open. There have been a few warnings and some upside revisions, but have you noticed how quiet the preannouncement season has been? Rumor is YHOO is going to post some strong earnings. Internets have suddenly come to life this week, most likely in anticipation of those YHOO earnings. Warnings are way down. The economy is way up and still expanding. Earnings drive stock prices. The market has been putting two and two together, as usual, and that has sparked this NASDAQ breakout and the strong run in SP500 and DJ30.
It would be nice to see a breather ahead of earnings, but it does not look as if that is going to happen. If stocks continue to run up ahead of earnings that typically leads to weakness on the earnings: expectations are built in ahead of the number, and when speculation becomes fact money is taken off the table. That could indeed be the pullback that occurs after a further run up into the earnings reports. You want to see that pullback, that profit taking, on lower volume that holds support. That sets up a later breakout. Reactions to earnings results varies, but earnings drive stock prices. If they are good, guidance is strong, and the economy stays strong, any pullback on the news will be relatively short lived or otherwise modest in depth.
With the Friday jobs report getting closer, the market will start looking that way. After a good surge Monday and a modest follow up Tuesday, another session to session and one-half of modest gains stalls in wait of the jobs report and the AA and YHOO earnings that kick off earnings season. Great jobs numbers will help the market near term. Once that wears off it will be ready for a breather. We have been moving into quite a few positions this week, and we will be tapering our action the rest of the week as the move gets extended. There are many stocks still in very nice patterns that we will watch and participate in if they make the breakout. Several chips are setting up well; chips overall are getting to a make or break position. Given the move this far we would prefer to see a run a bit further and then a pullback to take a breather. Overall the action is positive as the indexes head to those significant levels from early 2002 and before.
Support and Resistance
NASDAQ: Closed at 2057.37
Resistance: The January 2002 double top (2044 to 2099).
Support: The March/August up trendline (2018). December high (2000), November high (1992). The 10 day MVA and the 18 day MVA (2006, 1986). The 50 day MVA (1947).
S&P 500: Closed at 1123.67
Resistance: 1150 to 1175, the early 2002 double top.
Support: The 10 day MVA and the 18 day MVA (1107, 1096). 1106 is a May 2002 top. 1100 represents some early 2001 lows. 1080 from February 2002 lows. November high (1061.40-1064).
Dow: Closed at 10,538.66
Resistance: 10,600 (March 2002 peak) starts the swath of overhead supply that runs up to 11,000.
Support: 10,490 (upper channel line). The 10 and 18 day MVA (10,405 and 10,294). 10,353 from May 2002 high. 10,259 (January 2002 high). The exponential 50 day MVA (10,023).
Economic Calendar
1-05-04
Construction spending, November (10:00): 1.2% actual, 0.5% expected, 1.1% October (revised from 0.9%).
1-06-04
Factory Orders, November (10:00): -1.4% actual, -1.5% expected, 2.4% October (revised from 2.2%).
ISM Services, December (10:00): 58.6 actual, 60.8 expected, 60.1 November.
1-08-04
Initial jobless claims (8:30): 345K expected, 339K prior.
Wholesale inventories, November (10:00): 0.5% expected, 0.5% October.
Consumer credit, November (2:00): $5.0B expected, $0.9B October.
1-09-04
Non-farm payrolls, December (8:30): 148K expected, 57K November.
Unemployment rate, December (8:30): 5.9% expected, 5.9% November.
Hourly average earnings, December: 0.2% expected, 0.1% November.
Average workweek, December: 33.9 expected, 33.9 November.
End part 1 of 2
|
us stock market
trade stock
|
