|
|
us stock market, trend trading stock
* * * *
2/18/04 Stock Split Report Update
* * *
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: None issued
Buy alerts issued: SNUS; NUVO
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:
- Market slogs through again, continuing the back and forth action.
- Housing starts slip, same store sales strong.
- Stocks continue lateral move as NASDAQ suffers some distribution.
One day up, one day down.
At least, that is the way it seems of late. The market cannot get headway either direction as the buyers and sellers have no stamina. After big price gains Tuesday the indexes slid back, posting mild losses. SOX managed a gain on good earnings news from some semiconductors, but the impact was extremely narrow. Stocks moved down, moved up, and back down, wandering between near resistance and near support. This action indicates indecision, and is a classic consolidation character. As we have noted before, NASDAQ looks like a consolidation; SP500 and DJ30 more resembles a pause as they try to reload and move to new 52-week highs. We would like the action on the latter two much more if it was occurring at a lower level and not right at the recent highs.
It was not perfect action. Volume rose on NASDAQ as it posted a modest loss, indicating slightly more sellers were in the market. Technically it is distribution, but in the bigger picture the loss was marginal and the volume was still below average. Further, this is options expiration week and we will see volume move higher as positions are adjusted. With modest swings seen Wednesday, it is not really something to get al bent out of shape over. In the end Wednesday just continued the action the market has shown the past three weeks.
THE ECONOMY
Chain store sales strong.
Lots of love over Valentine's Day apparently as Redbook reported sales at major retailers jumped 5.2% year over year, stronger than the 4.4% increase the prior week. February sales are up 0.8% versus January. UBS Warburg reported a 1.4% increase over the prior week while year over year they soared 7.5%. Solid. Mild weather, spring merchandise, and Valentine's Day on Saturday were all cited for the increase, but we have said for some time that the tax refunds that are already starting show up hit wallets, that money would be spent. Thus the 'fading' stimulus is back to again, spurring consumer sales. We will also see increased corporate spending this year as well as some of the front-end loaded tax incentives are set to expire at year's end. That will prompt businesses to spend before the end of the year though most of that will show up in the second half. Again, however, the 'fading' stimulus is taking a long time to fade.
January housing starts post first decline in 5 months.
Starts fell 7.9% to 1.9 million annualized units (expectations were for 2 million). Housing starts were expected to fall anyway, but the 7.9% made a big headline. Weather was pretty atrocious in January whether it was rain, snow, bitter cold or some combination of all three. Starts were slowest in the Northeast and Midwest, so there is some truth to the weather impact. Building permits dropped 2.8% on an annual rate, more in line with expectations of what the housing market has ahead. We note, however, that permits run up and down like different flags on a French flagpole in WWII, so don't read too much into that; as in WWII, it is the outcome that counts.
The report rekindled the continuing debate about the housing market. Without a doubt the housing market will decline. It goes up, it goes down. It is an early cycle indicator in the normal circumstance, and it is clear the economy has been performing well for at least a year. It has had a perfect storm of events to help it. There was the stock market crash that prompted people to put money in their homes versus the market. Low rates allowed people to buy new homes or bigger homes. Low rates helped people that could not buy a house before get into their first homes. Second homes have boomed as boomers age and want a place to get away from it all (of course, it has to have high speed internet access, cable or satellite television, cell phone towers, Swedish massage). These have all created tremendous demand, the primary being low, low rates. It cannot go on at the record pace month after month. Is it over? We doubt seriously we will see a major decline as long as rates stay low. Thus we don't see it as 'over' in terms of 'bubble' or 'collapse' as some like to toss around to make good copy. We just won't see those records month after month after month.
THE MARKET
Sluggish is the best way to describe the Wednesday action as stocks hugged the flat line, trading on both sides before closing slightly lower. Modest downside breadth and modest though mixed volume made for a dull day. NASDAQ distributed slightly, but as noted above, the trade was still low and it is expiration week where volume tends to bump higher both directions.
We had a hard time finding anything we liked. Some chip stocks gapped higher on good news, but we typically don't like playing gaps, particularly in a market that is trying to consolidate at best or may be topping at worst. Better to let them fill the gap some first and see if they continue the move higher after that. Other stocks surged early but after sucking in all the unsuspecting investors they could, stocks ran out of gas and frittered around the rest of the session.
Once again, however, sellers were not able to run the table. In general, stocks have been doing one of two things: moving higher or holding steady. Each time the sellers move in and push stocks a bit lower, buyers see an opportunity. Not a lot of buyers, just some mutual funds or other managers that missed out on a lot of the move and want to get in any which way they can. They cannot trade after hours any more so they have to do it the old fashioned way, i.e., play catch up. They gamble that the other institutions will resume their buying soon as opposed to selling more. Thus far they have skated by as the market continues to move laterally and consolidate with DJ30 and SP500 rallying to new 52-week highs but stalling for now at the doorstep.
The up and down intraday action and slightly rising volume (on NASDAQ) are attributes of expiration week, and we can expect more of this action Thursday. Expiration Fridays have actually been pretty normal the past couple of months, i.e., the market moving with the trend after gyrating during the week. For now we are riding through this action the best we can, looking for those stocks that move with the backing of the big money as indicated by volume and accumulation. Right now those are becoming harder to find as the market works through this consolidation toward a critical point where it will either make the break or break down.
Thus far this consolidation has been rather painless in the sense that it is moving laterally without a hard sell off. We suspect that there will be more pain or at least fear before it is through. The early 2003 base was drawn out and saw a couple of sharp dips that convinced many it was a flash in the pan after the rally off the October low. That is the kind of doubt and incorrect certainty that leads to bottoms. Right now everyone is convinced the market goes higher from here. More pain is needed eventually. For now those fund managers that were caught remaining bearish too long as propping the market up on each dip.
Market Sentiment
VIX: 15.59; +0.19
VXN: 23.73; -0.14
VXO: 15.74; +0.18
Put/Call Ratio (CBOE): 0.78; -0.10. Running a bit contrary to the typical action (up on down days, down on up days), but it remains at the high end of the range. It is not flashing the high readings that would accompany the type of downside speculation that typically characterizes bottoming action.
NASDAQ
Volume climbed some as NASDAQ tapped the 18 day MVA on the low and rebounded to cut some losses as the index trades in a narrow range.
Stats: -3.88 points (-0.19%) to close at 2076.47
Volume: 1.797B (+10.24%). Volume edged higher though still below average as NASDAQ continues its lateral move in a narrow range. Technically distribution, but below average volume and an expiration week cause us to discount the action to a certain degree.
Up Volume: 768M (-413M)
Down Volume: 1.001B (+600M)
A/D and Hi/Lo: Decliners led 1.41 to 1. Matched the session, i.e., boring.
Previous Session: Advancers led 1.91 to 1
New Highs: 208 (-14)
New Lows: 7 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
NASDAQ traded in its range again, bouncing down from the second up trendline (now at 2090) on the high and up off the 18 day MVA (2071) on the low. The index was up and down three times but in a narrow range. There were a few more sellers in the action given the increased volume on the selling, but no one had the advantage. This continues the consolidation action, the slight distribution (higher volume selling) swinging the consolidation from clearly accumulative to somewhat neutral. What it means to us is that NASDAQ has more work to do as the buyers and sellers are very much evenly matched. So far it is holding well in the uptrend and over the 50 day MVA (2040), but again, at some point there will most likely be some sharper selling before this is all over. May not happen Thursday, however, as AMAT posted good earnings and BRCM upped its guidance after the close. Techs were higher after hours.
S&P 500/NYSE
Holding up well just below important resistance, trying to consolidate and set the next breakout.
Stats: -5.17 points (-0.4%) to close at 1151.82
NYSE Volume: 1.365B (-1.74%). Volume eased back ever so slightly, hardly enough to note the difference. Technically the price/volume action remains solid, rising on up sessions, falling on down sessions.
Up Volume: 453M (-634M)
Down Volume: 906M (+618M)
A/D and Hi/Lo: Decliners led 1.55 to 1
Previous Session: Advancers led 2.72 to 1
New Highs: 265 (-114)
New Lows: 3 (-1)
The Chart: http://www.investmenthouse.com/cd/^spx.html
After rallying to a new 52-week high over the past week, SP500 has also found itself in a lateral move, working sideways below a very key point for the index: the early 2002 double top that sent it crashing lower on its last down leg in the long downtrend (1160 closing, 1175 intraday). Given the significance of that top, SP500's action the past week is rather remarkable. It is spitting in the eye of that resistance, working laterally on some pretty decent price/volume action (mostly up volume on gains, mostly lower volume on down sessions). The trade shows very little selling in the large caps. After basically no rest the index looks as if it is trying to set up for a breakout over this key point. We note again, however, that a run to 1175 puts it 14% over its 200 day MVA (1032; the lateral move is letting it close some of the gap), and that SP500 has historically starting correcting at 15% over its 200 day MVA. When it moves past that sharply it is an oddity and the following selloff is usually harsher.
DJ30
Moving laterally as well, holding over the 10 day MVA (10,636) and below 10,740 as volume fades the past two sessions. It too is looking at a 52-week high near the top of its uptrend channel (10,770), and it too is getting to a point above its 200 day MVA (9598) where it starts to struggle (currently 11% over that level). Nonetheless it is still in its uptrend and moving with some decent price/volume action as it works laterally over the 10 day.
Stats: -42.89 points (-0.4%) to close at 10671.99
Volume: 164 million versus 170 million Tuesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
The Producers Price Index is getting pushed back because it is not ready. That leaves leading economic indicators and the Philly Fed as the main economic reports (jobless claims fail to inspire much market attention these days) Thursday. AMAT beat earnings and revenues handily after the close and BRCM upped its guidance. Techs were rallying after hours.
That may hold over to the morning as once again NASDAQ will take a shot at 2085 and the other indexes will take a look at a new 52-week high. Once more we will see if good news moves stocks higher but fails to take them out of the range. We still think NASDAQ has more work to do, indeed the whole market, before it can make a sustained move higher. That does not mean they won't try as that new money flowing into funds it pressed into service.
One thing we are noticing is fewer and fewer solid patterns to work with, something that we noted a month ago. We are still finding solid plays as money moves to different parts of the market. On a day such as Wednesday, there was not much to move into. Sure there were gaps higher on news, but the action overall was slow as stocks continue to work on new bases and set up for the next attempt higher.
Thus our focus will be, well, focused on stocks showing good accumulation and good patterns. Sounds like a broken record, but the market dictates it. We will be careful of an early jump higher on the earnings news. This market has been sucking investors in early with moves higher, then leaving them out to dry as the tide goes out. It is not moving in great swings, just back and forth volatility. We have been primarily looking at which stocks can survive the sell off after the early surge higher and show volume. Those stocks have the buyers supporting them even as the rest of the market falls off. Sure they will pullback some, but if they can hold intraday support and start to rebound again, those are the stocks we are interested in because bigger money is interested in them.
Support and Resistance
NASDAQ: Closed at 2076.47
Resistance: The second up trendline (2090). The March/August up trendline at roughly 2124. The January high at 2150. 2200 then 2300 represent tops from Q2 2001.
Support: The 10 and 18 day MVA (2070, 2071). The March/December up trendline (2055). The exponential 50 day MVA (2040). The simple 50 day MVA (2037). Below this the November and December peaks at 1975 to 1990.
S&P 500: Closed at 1151.82
Resistance: The January high (1155). Next is 1160 (the closing) and 1175 (intraday), the high in that double top that spanned late 2001, early 2002.
Support: 1150, the first top in early 2002. The 10 day MVA (1147). The 18 day MVA (1142). 1125 is some minor support. The 50 day MVA (1118). 1106 is a May 2002 top and represents some early 2001 lows.
Dow: Closed at 10,671.99
Resistance: The January high (10,705). Upper channel line (10,770). 11,000 is roughly 15% above the 200 day MVA. Then some price tops at 11,300.
Support: The 10 day MVA (10,636). The 18 day MVA (10,597). 10,545 is the March 2003 up trendline. The exponential 50 day MVA (10,407). 10,353 from May 2002 high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
2-17-04
NY Empire State Index, February (8:30): 42.05 actual, 36.4 expected, 38.85 January (revised from 39.22).
Industrial production, January (9:15): 0.8% actual, 0.7% expected, 0.0% December (revised from 0.1%).
Capacity utilization, January (9:15): 76.2% actual, 76.2% expected, 75.8% December.
2-18-04
Housting starts, January (8:30): 2.000M expected, 2.088M December.
Building permits, January (8:30): 1.910M expected, 1.953M December.
2-19-04
(Delayed) Producer Price Index, January (8:30): 0.4% expected, 0.3% December.
(Delayed) Core PPI: 0.1% expected, -0.1% December.
Initial jobless claims (8:30): 352K expected, 360K prior.
Leading Economic Indicators, January (10:00): 0.5% expected, 0.2% December.
Philly Fed, February (12:00): 35.0 expected, 38.8 January
2-20-04
Consumer price index, January (8:30): 0.3% expected, 0.2% December.
Core CPI: 0.1% expected, 0.1% December.
End part 1 of 2
|
us stock market
trend trading stock
|
