|
|
us stock market, stock watch
* * * *
2/03/04 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Tuesday: MBT
Buy alerts issued: NSIT
Trailing stops issued: ALTI
Stop alerts issued: TUTS
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. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market continues to sidestep at support ahead of Friday jobs report.
- January layoffs less than typical.
- NASDAQ holding support as SOX approaches an important test.
- CSCO earnings fail to excite the after hours traders.
- Subscriber Questions
Another volatile session finishes flat.
Stocks were again up and down, but dancing around a relatively thin line with most indexes closing a fraction from flat. Volume again faded as stocks stepped laterally as NASDAQ and DJ30 continued to hold above their up trendlines. After the high volume selling, this low volume lateral move is decent consolidation action as NASDAQ tries to set up for a bounce up off of its trendline connecting the April and August and November lows. But for the long run from the March low to reach this point, the SP500 still greatly overextended even on this pullback, and SOX making (thus far) a weak attempt at retaking the 50 day MVA, we would be quite enthused about a test of the up trendline. As it stands we have to let the consolidation run its course and see if buyers are ready to return with force (i.e., volume). We see many stocks mirroring NASDAQ's pullback, ready to make the move. We are being patient to see if they actually deliver.
THE ECONOMY
ISM revisited.
Last night we noted that the 63.6 reported was the highest since December 1983. That, of course, is the highest in . . . 20 years. Yet another economic indicator flashes the strongest reading since the Reagan tax cuts that sparked the recovery that not only dug the US out of the 1970's hell of 20% interest rates, high unemployment, and other nasty symptoms of stagflation, but also induced the investment in the US that set the foundation for the 20 year expansion up to 2000.
For those who would claim that the tax cuts are not working, take note of history. These types of explosive gains are not seen in ordinary times but are the result of proper economic steps taken to recover from economic quagmires that typically result from too much governmental and Federal Reserve meddling. In the early sixties it was the Kennedy tax cuts; in the early eighties it was the Reagan tax cuts; at the start of the millennium it was the Bush tax cuts. The investment in the US by US citizens and companies these cuts generate lays the foundation for strong economic expansion that can run for years. There are always different wrinkles in each recovery, and this one is productivity and globalization and their impact on the return of jobs lost in the recession. While many jobs have sprung up overseas, this investment in the US will create new, high paying positions for US citizens in jobs that are in the new, cutting edge industries.
January Challenger jobs report much milder.
The headline number provides fodder critics as layoffs rose 117,556 (+26%). You have to put the number in the context of historical trends, however, as the number by itself is just a snapshot of the job scene. This number is quite mild for a January when historically layoffs spike. The head of Challenger indicated this number shows an improving job market given there was not the large surge in layoffs. Still, there has to be job creation, not just fewer layoffs. The latter is a precursor to the former, and we will know more Friday.
THE MARKET
You could rerun the Monday action and see if anyone noticed Tuesday. That is how slow the two sessions have been. Good, low volume consolidation action as noted, though there continue to be issues dogging the market, primarily how far it has run. An index can only make so many bounces up off the 50 day before it has to take a longer breather. We have to take that into account as the market moves forward, but we also know that the market can continue its move and overshoot the 'norms'. Thus we are being patient and letting the market show us if it will try another bounce or continue to slip laterally and consolidate the strong moves to this point. NASDAQ still remains in a good test of its fall consolidation and breakout, and we are looking to it to provide leadership. It, of course, has to deal with SOX which is struggling below the 50 day MVA.
Market Sentiment
VIX: 17.34; +0.23
VXN: 26.3; +0.49
VXO: 17.06; +0.19
Put/Call Ratio (CBOE): 0.70; -0.02
NASDAQ
Continues its lateral move over the up trendline, taking a breather on lower volume. Getting close to make or break time.
Stats: +3.06 points (+0.15%) to close at 2066.21
Volume: 1.862B (-3.36%). Volume fell below average for the second time this year, indicating an extreme lack of interest or nerve to get in the market by both buyers and sellers. Jobs report is looming bigger.
Up Volume: 719M (-44M)
Down Volume: 1.061B (+5M)
A/D and Hi/Lo: Decliners led 1.16 to 1. Basically flat, but noteworthy that breadth was modestly negative on a modestly positive session.
Previous Session: Decliners led 1.13 to 1
New Highs: 142 (-33)
New Lows: 7 (-3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
The setting: NASDAQ formed a 2.5 month lateral consolidation, making higher lows over the 50 day MVA and breaking out over resistance at 2000. It has come back to test the move, selling last week on sharp volume. That has subsided, and the stock is moving laterally over the up trendline and the breakout point. This is a nice test, holding where it needs to hold. We will see over the next week just how much it has left in it, but we do note that while SP500 was rallying higher, NASDAQ was consolidating its prior move and setting up for the next. It has made the initial move out of the pattern and is now testing. Again, it is in good shape to break higher, but it has SOX pulling at it.
S&P 500/NYSE
The large caps are also two-stepping laterally on lower volume, but they have barely sold at all. They are either tremendously strong or just plain foolish.
Stats: +0.77 points (+0.07%) to close at 1136.03
NYSE Volume: 1.478B (-6.34%). Lower though still above average trade. SP500 has edged higher the past two sessions but volume has edged lower. It is not accumulation, but it is no longer distributing. That is about all you can say about its action.
Up Volume: 645M (-235M)
Down Volume: 824M (+167M)
A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Advancers led 1.19 to 1
New Highs: 224 (-19)
New Lows: 4 (-2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
NASDAQ continues to hang onto its gains after a couple of high volume selling sessions last week. Is it a sign of strength or of foolishness, trying to hold at this level for another run? We view it as precarious at this level, one of the potential negatives for the market overall as SP500 holds at 11% over the 200 day MVA, leaving it little upside room before it would feel pressure again to correct. It is holding the 18 day MVA (1131), the only real support before the 50 day MVA (1099).
DJ30
Similar to its neighbors, DJ30 is moving laterally with volume dropping off, skirting along the 18 day MVA (10,510) and holding over its first and dominant up trendline (10,400). Very tight range, and the trendline is moving up to meet it. That sets the stage for a break higher if the blue chips are ready for it. Just letting it work laterally to see how it reacts to the trendline. It is in better shape than SP500 with respect to near support, a bit worse than NASDAQ regarding the time it has had to consolidate its gains.
The chart: http://www.investmenthouse.com/cd/^dji.html
WEDNESDAY
CSCO was being punched out after hours, down over $1 on its earnings that showed cracks in margins and overall business despite claims from CEO Chambers that there is no doubt the recovery is real. That was not sinking all tech stocks, but some of the market leaders in the network sector, a market leader itself, were boxed around in sympathy as well.
We will see how solid the NASDAQ test is Wednesday as it deals with the CSCO earnings. Factory orders and the ISM Services reports are released at 10:00ET, and if strong enough they could influence the market. The earnings will still hold the key near term, however, as investors know the economy is still expanding well, but are looking to company guidance to steer their near term investments. Thus the CSCO news will be a real test for the NASDAQ pullback to test its breakout. We can expect a gap lower as QQQ was trading down 0.25 after hours.
At this juncture we just need to be patient. The market moves in spurts in its trends, taking time out after the runs to regroup and set the stage for the next move. It is important to remember that the uptrends are still in place and the indexes and stocks overall have slowed the selling to a crawl. We could be in for a more protracted consolidation this time around given the long run to this point, but even with that we do not see a break in the overall trend.
Many stocks continue to hold support, and again, we have to be patient and let the market work through this pullback. We will err on the side of caution, particularly with option plays, in the event a longer consolidation develops from this. For now the volume selling has abated though we may see higher volume selling in NASDAQ Wednesday. Where NASDAQ is able to hold will be important along with how SOX responds to the 50 day MVA the rest of the week ahead of the jobs report.
Support and Resistance
NASDAQ: Closed at 2066.21
Resistance: The 18 day MVA (2083). The March/August up trendline at roughly 2086. The 10 day MVA (2086). The second peak in the December 2001/January 2002 double top (2100). First upper channel line at 2178. 2200 then 2300 represent tops from Q2 2001.
Support: The lower peak in the January 2002 double top (2044). The secondary up trendline (2055). The exponential 50 day MVA (2029).
S&P 500: Closed at 1136.03
Resistance: The 10 day MVA (1135). 1150, the first top in early 2002, was broken but then held. Next is 1175, the high in that double top that spanned late 2001, early 2002.
Support: The 18 day MVA (1131). 1106 is a May 2002 top. 1106 represents some early 2001 lows. The 50 day MVA (1105).
Dow: Closed at 10,505.18
Resistance: The 18 day MVA (10,510). The 10 day MVA (10,528). Upper channel line (10,685). 11,000. 11,300.
Support: 10,400 is the March 2003 up trendline. 10,353 from May 2002 high. The exponential 50 day MVA (10,299).
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
2-02-04
Personal Income, December (8:30): 0.2% actual, 0.2% expected, 0.3% November (revised from 0.5%).
Personal Spending, December (8:30): 0.4% actual, 0.4% expected, 0.5% November (revised from 0.4%).
Construction spending, December (10:00): 0.4% actual, 0.8% expected, 0.5% November (revised from 1.2%).
ISM Index, January (10:00): 63.6 actual, 64.0 expected, 63.4 December.
2-04-04
ISM Services, January (10:00): 60.0 expected, 58.0 December.
Factory orders, December (10:00): 0.2% expected, -1.4% November.
2-05-04
Productivity, Q4 (8:30): 3.0% expected, 9.4% Q4.
Initial jobless claims (8:30): 340K expected, 342K prior.
2-06-04
Non-farm payrolls, January (8:30): 165K expected, 1K December.
Unemployment rate, January (8:30): 5.7% expected, 5.7% December.
Hourly earnings, January (8:30): 0.2% expected, 0.2% December.
Average workweek, January (8:30): 33.8 expected, 33.7 December
Consumer Credit, December (3:00): $7.3B expected, $4.0B November.
SUBSCRIBER QUESTIONS
Q. I get frustrated when . . . a recommendation . . . gaps way up at the open or quickly breaks past 5% above its pivot while I'm not looking. Any recommendations how to cope with this phenomena? Perhaps best to wait for a pullback to the pivot?
A. This situation can be frustrating indeed. We have a method of dealing with it, at which you hint in your last question. While it's unfortunate to see such a gap up on the open on a stock you really want to get into, sometimes it's inevitable due to news from the previous afternoon or events that occurred after the normal market close, e.g., earnings news. We don't like jumping into stocks that race ahead or gap up right as the gates open because at that point in the session it is hard to say what character the day will develop. At the open the market makers/specialists and investors are still trying to determine just what value should be put on the stock vis- -vis the news. We know that the market typically overshoots on both sides (up and down), so we really don't like jumping in at the open unless it is very, very good news that has staying power, such as the company coming out ahead of earnings and upping its guidance and saying very bullish things. In any case we have learned to exercise patience. Refraining from entering any positions that gap up sharply for the first one-half hour of trading is a general rule of thumb. Often when a stock races out right off the bat, it will pull back and take a rest. If it does so, catching at a support level on the intraday pullback (e.g., the gap up point or the prior closing price) followed by a bounce back up from there is often a good entry point on these plays if the market is still solid and is continuing its upward move.
The above deals with watching intraday action. If you are unable to watch a stock intraday (or don't want to; there is nothing wrong with that), then the best course is to see where it is as the end of the session approaches. If it has been able to hold the break higher, preferably after a test, we will often move in with at least a partial position. If it's beyond 5%, wait for it to pull back and catch support at the short term moving averages or the breakout point and then bounce higher from there. These breakout tests are great places to enter positions either the first ones on the stock or additional positions. You want to see it hold and start back up with some good volume, and then move in. On the reports we keep you posted on the status of such action as in tests of breakouts, bounces from support, etc. It may take a day or two to gain support for a move back up, but as noted, it can be almost as favorable or even more favorable an entry point as the original breakout because the test 'proves up' the breakout.
End part 1 of 3
|
us stock market
stock watch
|
