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us stock market, trading system
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2/11/04 Stock Split Report Update
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Stock Split Report Subscribers:
Full reports issue Tuesday, Thursday and Saturday. Monday and Wednesday we issue a market summary and choice plays for the next session.
MARKET ALERTS
Targets hit alerts issued Wednesday: SLAB
Buy alerts issued: TASR; IRM; MSCC; LM
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. You can sign up for Stock Split Report alerts at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Volume returns on merger excitement, Greenspan cozying up to the market.
- Greenspan blesses baseball, hot dogs, Mom, apple pie, and the economy.
- Market leaders rally but take a back seat to a large cap day.
Volume surges on the prospect of continuing good times.
Investors received assurance from different sources that the economic and thus market expansion was not in danger. A big potential takeover of Disney by Comcast was announced before the open and had the analysts buzzing about the names involved, but investors were more focused on what it means for stocks in general: if CMCSA is ready to bite off this big fish then the outlook for the future looks quite good. The Fed chairman weighed in later with a very confident and almost gushing economic report. He said tax cuts were good, Congress' spending was bad, the economy was growing, jobs were coming, inflation was low, and rates were going to remain low as well.
While Comcast may have given Disney a bear hug, Greenspan gave the market a big wet kiss. The market loved both. It drifted tepidly higher early on, and then jumped when the Greenspan speech was released. It hesitated while he spoke, but when he concluded the question and answer period the market exhaled and shot higher as volume moved in. Greenspan had punched all of the right buttons and buyers responded not unlike Pavlov's dogs, at least with respect to large caps. Techs and the smaller caps did not participate with the same vigor, something of some concern but not worth crying over given the volume.
THE ECONOMY
Greenspan returns to his pro-growth roots. Too bad it took an implosion to do it.
The prepared statement was pretty much as expected, i.e., growth was solid, job growth would come, spending had to come down. The bonuses were tax cuts are good and working, interest rates were not rising (at least by the Fed) anytime soon, protectionism should be stopped in its tracks and reversed, and the foreign funding of the debt and current account was showing no signs of expanding into a problem.
This was vintage, pre-irrational exuberance Greenspan where he was content to leave things well enough alone unless there was a real problem. Of course, it is a lesson he had to learn twice, once in the late 1980's and again in the late 1990's. Each time he has 'got religion' once again, but too late to save the market and economy from his sins. Sure wish we could have sent him to a revival from time to time before he forgot what it was that made the economy a success he felt he had to squelch.
While in the late 1990's Greenspan was worried about irrational exuberance, Wednesday he all but said go forth and be irrational given the strong economic underpinnings. It was almost a pleasure to watch but for the ill feelings left over from the ludicrous campaign against prosperity he waged and won in the last 1990's. It is never good enough to burn someone's house down and then fish for compliments because you cleared a good building site for the next house. That will always hang over Greenspan's tenure, but of course, not in his mind.
In any event, Greenspan was upbeat and stuck to the script that the economy is in good shape despite repeated attempts by minority party members to paint the economic data in a dark light. Some northeastern and west coast representatives seem to think it is perfectly okay to tax those that work hard, have managed to garner some success, and have created jobs for others at excessive rates to pay for those who do not want to work. We have heard from sources that several feel a 70% upper tax bracket is not out of line. Before you say it could never happen to me, realize that they consider anyone making over $100K rich and worthy of a 70% tax rate. The market liked what it heard, and when Greenspan was finished talking it let out some pent up concern with a big relief buy.
The following is opinion. You are forewarned. In the country I was brought up in we were taught to work hard, get ahead, and not to forget about those who could not help themselves, providing for them through church or other charity or a one on one relationship. That is opposed to those who will not help themselves. That is a choice the latter make. You and I should not have to pay for those choosing not to participate in the economy. Unfortunately, there are many in Congress that cannot distinguish between those who are unable to help themselves and those who are unwilling to help themselves. There is a belief among the elite that there is some right to live off of others. Last time I checked, however, the Constitution set up a republic, not a socialist society. It was nice to see those representatives sputtering in response to Greenspan's answers, but it is also a chilling reminder that there are those in power who truly believe those that work hard and earn a little success because of it (and that includes all of us who make money in the stock market with our wits and guts) have to carry the load for those who game the system (e.g., collect fraudulent benefits) or just refuse to take part. When you realize that of those the government considers in 'poverty' and thus receive over 50% of all federal benefits, 46% own their own homes, 76% have air conditioning, 75% have one car, 30% own two or more cars, 97% have at least one color television, 62% have cable or satellite, and 25% have cell phones, you start to wonder if the system is working properly. The typical poor American has more living space than non-poor living in Paris, London, Vienna, Athens and other European cities. We obviously have a higher standard of living, but the problem is the less than 2% of the country that makes over 100K per year is deemed by many in Congress as how we pay for that standard of living. Just think how much better it would be if those that choose to live off the hard work of others actually contributed to the GDP? That is what we need to strive for.
THE MARKET
The key ingredient to any move finally returned Wednesday as volume surged after Greenspan left the microphone with only positives and no threat of imminent danger in the form of rate hikes or budding inflation. It was not clear if he would wait until the threat was imminent or actually manifested itself before he acts, but it was clear he is not ready to act anytime soon.
The leadership was in the large caps. SOX posted the strongest gain (+1.9%), but the stars were the large caps on the heels of the potential DIS/CMCSA takeover. DJ30 surged 1.2%, SP500 +1.1%, but the prior leading NASDAQ and small caps lagged, up just 0.7% and 0.6%, respectively. This may prove to be a chink in the move, but as all indexes rallied on sharply stronger trade, and given the large cap takeover deal driving a lot of the action, it is understandable that the large caps would take the lead for the day.
DJ30 and SP500 closed at multiyear highs as NASDAQ moved back up into its uptrend channel and the small caps rallied to match their post-downtrend highs. After sessions of languishing volume, the return to accumulation is welcome, particularly as several indexes move to new highs. That shows us that investors are willing to buy even at higher levels given the expected economic conditions. That indicates they are willing to buy at new highs because they feel there is still unmet potential in the economy and that stock prices can still rise in anticipation of that potential. That makes this more than just a high volume day.
Market Sentiment
In the current market climate, the volatility is not telling us much. The put/call ratio remains at the higher end of the range, something it has done most of the rally. That has been a reminder of the continued anxiety about the rally following the harsh downtrend.
VIX: 15.39; -0.55
VXN: 23.53; -0.97
VXO: 14.88; -0.67
Put/Call Ratio (CBOE): 0.68; -0.04
NASDAQ
Volume finally turned the corner, surging above average as NASDAQ moved further through the short term MVA and near resistance.
Stats: +14.33 points (+0.69%) to close at 2089.66
Volume: 2.202B (+31.57%). Surged above average and over 2 billion as suddenly tech stocks looked to be better values. They were apparently not that good at the 50 day MVA some 50+ points back. That is the power of economic forecasts, and Greenspan helped foster that.
Up Volume: 1.369B (+320M)
Down Volume: 796M (+251M)
A/D and Hi/Lo: Advancers led 1.5 to 1. Breadth remained modest as volume surged.
Previous Session: Advancers led 1.72 to 1
New Highs: 266 (+49)
New Lows: 2 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ continued its rise off the 50 day MVA (2035), this time garnering strong volume. As noted, it appears that techs stocks are a better value now than at the 50 day MVA as more investors moved in. By investors we mean big institutions; only they can move the market and put together such impressive trade. NASDAQ is moving off the 50 day MVA, but it is also lagging a bit. Not much, but it did not have the force behind it that the Dow and SP500 had. Perhaps it was simply the large cap day to shine given the DIS threatened takeover. Perhaps it is still rather overbought. In any event, it held the breakout from the October to December trading range and tested the 50 day MVA at the same time, and has now attracted a lot of volume on the move back up. That is a pretty good scorecard, and we would not be surprised to see NASDAQ overtake the others and resume market leadership, especially with SOX holding the rebound over its 50 day MVA and jumping higher Wednesday.
S&P 500/NYSE
New 52 week high on surging volume as SP500 never corrected much. It is 12.5% over its 200 day MVA, not giving it much room to the upside before it hits its historical level where it starts to correct.
Stats: +12.22 points (+1.07%) to close at 1157.76
NYSE Volume: 1.694B (+22.21%). Tremendous volume surge following the modest accumulation Tuesday. DIS traded 115M shares (9M average). To put that in perspective, DJ30 traded 160M shares Tuesday. Solid surge as the large caps moved to a new 52-week high, a sign that buyers were not hesitating to move in as the index moved to a new high.
Up Volume: 1.329B (+474M)
Down Volume: 347M (-179M)
A/D and Hi/Lo: Advancers led 2.35 to 1. Impressive breadth as stocks rallied across the board.
Previous Session: Advancers led 1.92 to 1
New Highs: 448 (+132). Pretty decent new highs list as the index hit a new high. Pretty impressive though not blowout.
New Lows: 6 (+4)
The Chart: http://www.investmenthouse.com/cd/^spx.html
After an abbreviated test to 1125 that held well above the 50 day MVA (1113) the large caps are attracting volume as they move to a new high. As noted, that shows confidence the move can continue even after the new high. Historically SP500 starts to correct when it hits 15% above its 200 day MVA (1028), so there is not a lot of upside room if you base it on that standard. That would put the move up to near 1182, right over that 1175 double top range from 2002, a pretty logical place to take a rest, particularly after what would be a pretty phenomenal run from the late November 50 day MVA test. As for the nearer term prospects, after the Wednesday surge that follows a pretty strong 4 sessions, there may be some weakness or a test of the move as SP500 has hit its late January high (1155).
DJ30
Volume surged, but again, DIS traded 115M shares (over 12 times its average) on the Comcast offer. In one move DJ30 cleared the late January high (10,705) and closed at the upper channel line in its uptrend. That is where it stalled out (sort of) during December as it was unable to move above that level. It continued to move up, just slower and in step with that upper channel. A modest correction to the up trendline, and in less than a week it is back at the upper channel. It is just over the highs from March 2002 that were the peak points in the head and shoulders pattern that set off the last leg in the downtrend. It showed some strength clearing that 10,675 peak, but it has not broken entirely free. As with SP500, no real correction or consolidation, and it also has to deal with its upper channel that has held it in check. Not necessarily a bad position to be in as it simply shows its continued strength in the uptrend. It too, however, is 12.5% above its 200 day MVA (9555), and it has the same track record as SP500 as far as when it starts to struggle and correct. That gives it to 11,000 for 15%, and that is another resistance point in this big range of resistance from 10600 to 11,300.
Stats: +123.85 points (+1.17%) to close at 10737.7
Volume: 278 million versus 160 million Tuesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Tough act to follow, but it will try. Important retail sales results are out before the open, and we know that January same store sales were surprising due in part to the use of gift cards. With expectations flat, there is room for an upside surprise. The burst of volume gives the market further upside momentum, but often after a big surge the market has a slight hangover that needs some rest. As noted in the market section, while SP500 and DJ30 may be a bit overextended, they have room to run up to the next logical resistance before they hit the 15% level at which they historically start to correct. That sets the stage for further upside though there may be a day of rest or at least a morning of rest before it continues.
Good to see the upside volume return. Now we want to see the techs and small caps to start exerting their leadership again. Small caps were ahead of the curve Tuesday and are approaching the top of their channel. As with the large caps, they still have further room to move. While the market has more room upside, after Greenspan's comments it is in a state approaching euphoria: there is nothing that is going to go wrong soon and daddy has given us the car keys with a full tank of gas. That can get dangerous, but we will take advantage of the room to the upside, doing our trade mark: taking what he market is giving.
Support and Resistance
NASDAQ: Closed at 2089.66
Resistance: The March/August up trendline at roughly 2110. The January high at 2150. 2200 then 2300 represent tops from Q2 2001.
Support: The second up trendline (2078). The 10 and 18 day MVA (2069, 2071). The March/December up trendline (2038). The exponential 50 day MVA (2035). The simple 50 day MVA (2029). Below this the November and December peaks at 1975 to 1990.
S&P 500: Closed at 1157.76
Resistance: The January high (1155) may still cause it to take pause after the big surge. Next is 1175, the high in that double top that spanned late 2001, early 2002.
Support: 1150, the first top in early 2002. The 10 day MVA (1141). The 18 day MVA (1136). 1125 is some minor support. 1106 is a May 2002 top. 1106 represents some early 2001 lows. The 50 day MVA (1113).
Dow: Closed at 10,737.70
Resistance: Upper channel line (10,750). 11,000 is 15% above the 200 day MVA. 11,300.
Support: The January high (10,702). The 10 day MVA (10,585). The 18 day MVA (10,552). 10,512 is the March 2003 up trendline. The exponential 50 day MVA (10,360). 10,353 from May 2002 high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
2-09-04
Wholesale inventories, December (10:00): 0.6% actual, 0.3% expected, 0.5% November.
2-12-04
Business inventories, December (8:30): 0.3% expected, 0.3% November.
Initial jobless claims (8:30): 345K expected, 356K prior.
Retail sales, January (8:30): 0.0% expected, 0.5% December
Retail ex-autos (8:30): 0.5% expected, 0.1% December
2-13-04
Trade balance, December (8:30): -$40B expected, -$38B November
Michigan sentiment, February preliminary: (9:45): 103.3 expected, 103.8 January
End part 1 of 2
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us stock market
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