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world stock market, us stock market
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2/25/04 Stock Split Report Update
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Stock Split Report Subscribers:
Full reports issue Tuesday, Thursday, and Saturday. Monday and Wednesday we issued a market summary and choice plays for the next session.
MARKET ALERTS
Targets hit alerts issued Tuesday: None issued
Buy alerts issued: FOSL; XTO; EVCI; VAPH
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:
- Lower volume relief bounce follows a week of selling.
- Greenspan turning a new leaf, speaking clearly, logically.
- Some positive sectors, but defensive plays dominate the good moves.
Stocks bounce, rising to near resistance on lower trade.
The market was ready for a rebound and set it up with the Tuesday action where NASDAQ undercut 2000 and managed to rebound. Some good earnings in chips and retail along with some upgrades helped provide a bit of lift for stocks. The market lifted higher, tried to sell off, but then posted a solid, steady rise through the close.
Breadth naturally improved and by the close was solid as small caps led the market higher. Volume lagged, however, and when SP500 tried to take out the 10 day MVA, it failed. It managed to break through this level in the last hour, but without the stronger trade could not hold it. There were definitely areas of strength as retail and energy broke to new highs and chips rebounded from the recent selling, and indeed breadth was much better. Most of the moves, however, were quite small in general. Thus great breadth but mediocre moves, all underscored by low volume. All attributes of a relief bounce after more than a week of selling.
THE ECONOMY
Where has this Greenspan been for the past 10 years?
While Greenspan will say he has always been stating Congress should cut its spending, and indeed he has mentioned this when appearing before Congress, he has never so explicitly and emphatically leveled with Congress that the spending has to stop. He has never been so clear that the so-called entitlements simply cannot be paid for no matter how robust the economy is. He has never clearly laid out that the 'easy' road of raising taxes to solve deficit problems would fail because the economy would slump and revenues would fall even further because of the economic drop-off.
This was all kryptonite for the democrats on the committee. One representative who just doesn't get it was flabbergasted that the 'ideal tax system' under Clinton that he erroneously assumed provided for the late 1990's surpluses was not the 'ideal' tax system now. Greenspan tried to explain the differences between then and now, but it was wasted breath. Greenspan added that tax rates should be periodically cut, not raised, to adjust for the 'bracket creep' that occurs over time. That went over well.
Congress was required to look in the mirror and did not like what it saw, but of course it was not going to take the blame. Greenspan kept hammering, however, noting that there are so many programs that look so good and are very desirable, but even if GDP was twice the current robust rate it would not be enough to pay for even what we have today. He said social security had to be changed for future recipients to give them time to adjust their savings plans, something Bush has been advocating all along. Again, this was hard for many to swallow and John Kerry said nothing would change under his administration. The inescapable fact is that things must change or we will face economic decline similar to Rome when Rome tried to provide everything for everyone in its empire.
This is important to investors: US has to meet its obligations.
This is serious for any investor to consider. Greenspan was clear it is not a deficit that is a problem, but the fact that the US will not be able to live up to its commitments to its citizens will have devastating effects on our ability to entice foreign capital to the US. If we are unable to pay our own citizens what is promised, foreign investors will have even less desire to invest in the US. You have to follow through with what you promise. The rule of law is what often separates the US and Europe economies from the rest of the world. This same theme carries over to obligations owed to citizens. It is all based on confidence; lose it and the entire economic fabric starts to unravel.
Just think of what it would do for US status in the world economy. Knowing that the US had the temerity to face head on the problems with entitlements and was willing to make the hard decisions in order to ensure economic strength and our citizens' standard of living. It is the ability to handle tough economic decisions in order to meet obligations that speaks volumes to the rest of the world.
THE MARKET
You could feel the relief in the airwaves as the market bounced after more than a week of selling. That is all it was, however, as volume remained light. There were some solid sectors such as retail where stocks were surging and posting new 52-week highs despite analysts who over the past two months have said run from retail as quickly as possible. These are the guys who are afraid of stocks that perform well. In a downtrending bear market, stocks that break to highs are targets for short sellers. In an uptrending market that is fueled by growth, stocks make higher highs. That is a fact. Retailers are pricing in the $100B in tax refunds not to mention the nice continuation in retail sales growth. The economy is expanding, and despite the consumer confidence reports, consumers are spending accordingly. That is fueling these gains.
Outside of retailers it was energy that truly enjoyed solid, volume gains. Semiconductors were much ballyhooed but they rose on light volume, simply bouncing back from the selling. That was the case for most stocks. Breadth was good but the price moves and the accompanying volume were less than inspiring. Thus the overall market showed a relief bounce after a week of selling. The sellers eased off after stocks had sold solidly, and that allowed a few buyers to push them generally back up. That is not typically how sustained rebounds begin.
Market Sentiment
VIX: 14.93; -0.97
VXN: 23.55; -1.13
VXO: 14.99; -0.83
Put/Call Ratio (CBOE): 0.77; +0.01. The ratio remained at a higher level even as stocks sold, an indication that there is still some hedging, some downside speculation even as the market bounces some.
NASDAQ
NASDAQ bounced after the test of 2000, but lacked a lot of volume punch. The 50 day MVA is still the near term objective on this bounce.
Stats: +17.54 points (+0.87%) to close at 2022.98
Volume: 1.714B (-17.31%). Significant shrinkage in volume as NASDAQ rebounded from the selling. Below average, and more importantly, lower than the prior selling sessions. It is important to look at the relative volume: it was lower on the up move than it was on all of the recent selling sessions. That tells you that there were vastly fewer buyers in the market Wednesday than sellers the prior week. NASDAQ will need volume to retake the 50 day MVA and 2050. Thus far it is not showing it on this move.
Up Volume: 1.192B (+286M)
Down Volume: 509M (-648M)
A/D and Hi/Lo: Advancers led 1.8 to 1
Previous Session: Decliners led 1.24 to 1
New Highs: 103 (+16)
New Lows: 9 (-9)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
After reversing at some support at 2000 Tuesday NASDAQ continued higher, moving back toward the 50 day MVA (2037). From there to 2050 it runs into resistance. It bounced where it needed to at 2000, the top of the October to December consolidation. That gives this move more credence than just another run of the mill bounce. Moreover, it is in the early stage of a potential double bottom: high at 2150, solid to near 200, bounced, and then undercut that first low slightly with the Tuesday move. If it can rebound and take out the February high on volume, voila, double bottom breakout. It will have to attract a low more volume, however, to make it work. Further, double bottoms, particularly short ones, are typically measured by fear; it is a 'scare them out' as opposed to 'wear them out' consolidation. There has been little fear on this move. It needs more fear, more time, or a combination of both to be set for the next rally.
S&P 500/NYSE
Tried to break the 10 day MVA but gave it back on some lighter trade.
Stats: +4.58 points (+0.4%) to close at 1143.67
NYSE Volume: 1.343B (-11.82%). Similar to NASDAQ, lighter volume on this bounce as opposed to the selling the prior week.
Up Volume: 947M (+323M)
Down Volume: 381M (-495M)
A/D and Hi/Lo: Advancers led 2.02 to 1. Excellent breadth as the small caps were leading the market, continuing their bounce off of the 50 day MVA.
Previous Session: Advancers led 1 to 1
New Highs: 130 (+11)
New Lows: 6 (-6)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Continues to hold up remarkably well as it continues to work laterally over the short term MVA (10 and 18 day MVA) the past 5 weeks. Little change in the pattern, unable to hold a slight break of the 10 day MVA (1144) to the close. Volume faded as it rallied, but SP500 is in no real danger. At this level, however, even with the lateral move, it still has little room to run upside before it would need a pullback. It continues to be chained somewhat by the success of NASDAQ and the SOX.
DJ30
Nothing spectacular, just the continued 5 week lateral move along 10,600 and the short term MVA as it works in its range from 10,400 to 10,700. Holding up extremely well even as volume fell back below average on the upside move after three sessions of higher volume selling. It is not giving in, but again, its next significant move higher is tied to NASDAQ finishing its consolidation and making its next move.
Stats: +35.25 points (+0.33%) to close at 10601.62
Volume: 194 million versus 230 million Tuesday. Volume remains tilted slightly negative with higher volume selling last week and lower volume buying this week.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
Thursday the economic news starts to get interesting again with durable goods. Friday preliminary Q4 GDP and the Chicago PMI are headliners. GDP is going to be important, but we also have to remember that the early iterations leave out key components that are not available until later. Thus it typically undershoots the final number.
Those have the potential to push the market one way or the other incrementally, but not change the current consolidation pattern significantly (unless GDP comes in at 8%). What we anticipate is the consolidation continuing with NASDAQ rebounding to test he 50 day MVA or a bit higher and then turning back down. The price/volume action has not been conducive to accumulation that precedes the next break higher. It has been higher on down sessions and lower on up sessions, action that shows stocks are still being sold overall.
Thus we anticipate the market will continue the rebound to test resistance, the key focus being on NASDAQ and SOX as they both move up to test the 50 day MVA (SOX at 512.73). We expect them to fail somewhere around that level. Again, both NASDAQ and SOX have potential double bottoms set up based on the price pattern, and they could breakout if volume surges back in. As noted, however, the current price/volume action shows selling of stocks, not accumulation, at least overall; there are also areas where there is accumulation ongoing.
We are going to watch the rebound and let it set up some downside positions if it continues on lower volume. There continue to be upside plays that are showing solid accumulation and volume moves. We will continue to sniff those out as we patiently wait for this rebound to play out.
Support and Resistance
NASDAQ: Closed at 2022.98
Resistance: The 50 day MVA (2038). The 18 day MVA (2050). The March/December up trendline (2070). The second up trendline (2107). The March/August up trendline at roughly 2141. The January high at 2150. 2200 then 2300 represent tops from Q2 2001.
Support: 2000 provides some support from the October/December consolidation. Below this the November and December peaks at 1975 to 1990. Some support at 1900.
S&P 500: Closed at 1143.67
Resistance: The 10 day MVA (1144). 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: 1125 is some minor support. The 50 day MVA (1123). 1106 is a May 2002 top and represents some early 2001 lows.
Dow: Closed at 10,601.62
Resistance: The 18 day MVA (10,602). 10,615 is the March 2003 up trendline. The 10 day MVA (10,617). The January high (10,705). Upper channel line (10,790). 11,000 is roughly 15% above the 200 day MVA. Then some price tops at 11,300.
Support: The exponential 50 day MVA (10,444). 10,353 from May 2002 high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
2-24-04
Consumer confidence, February (10:00): 87.3 actual, 92.0 expected, 96.4 January (revised from 96.8).
2-25-04
Existing home sales, January (10:00): -5.2% (6.04M) actual, 6.27M expected, 6.47M February.
2-26-04
Initial jobless claims (8:30): 345K expected, 344K prior.
Durable goods orders, January (8:30): 1.4% expected, 0.3% December.
New home sales, January (10:00): 1.075M expected, 1.060M December.
2-27-04
Preliminary GDP, Q4 (8:30): 3.8% expected, 4.0% first reading.
Michigan sentiment, final (9:45): 94.0 expected, 93.1 prior.
Chicago PMI, February (10:00): 63.5 expected, 65.9 January.
End part 1 of 2
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world stock market
us stock market
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