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us stock market, trend trading stock
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3/03/04 Stock Split Report Update
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Stock Split Report Subscribers:
Full reports issue Tuesday, Thursday and Saturday. Market summaries and choice plays for the next session are issued Monday and Wednesday.
MARKET ALERTS
Targets hit alerts issued Wednesday: None issued
Buy alerts issued: NUS; BR
Trailing stops issued: None issued
Stop alerts issued: ELAB
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:
- Stocks sell early but rally back as consolidation remains orderly.
- ISM services weaker, February retail sales surge.
- Working laterally on low volume is good, and somewhat boring at times.
Stocks post decent recovery, close flat.
Stocks are volatile but in a narrow range. Intraday they bounce up and down 2 or more times. Monday they closed at the highs, Tuesday at the lows, and Wednesday back to the highs, all with at least two intraday swings. It seems for every point gained or lost stocks run up and down 10 points in between. That is a result of the overall light trade and the fairly even match between buyers and sellers. Stocks get a bit high and a few sellers step in, just enough to overcome the low volume move higher. When stocks get knocked back a bit some buyers move in and they bounce higher.
This is occurring day to day and even intraday. As a result we see the indexes moving laterally in their consolidations. What is happening is that the up and down action is wearing out investors. They see stocks move higher similar to the Subscriber Question in the Tuesday report but then turn right back over. Day traders looking for 12 cents net per turn like it if they can get on the right side of the move, but trend investors looking for a quick turn get frustrated. We stick with solid volume/pattern stocks that are moving on volume and build positions for the next break higher and at the same time are still banking some good gain as most of the market continues sideways. Overall the action wears on investors, they lose interest and then are not prepared or positioned when the next move comes. They finally get in after 50% or more of the action is over, and then hang on after it ends.
For now the lateral move remains in control and mostly orderly. While volume has been mildly distributive, volume has turned below average on both up and down days, indicating no conviction either way. Quiet trading in a defined range is a sign of good consolidation. Thus far the earlier distribution has settled down and the market looks to be in the stage where it simply wears out investors. We expect there will be some 'scare them out' action as well, i.e., sharp jolts that add some fear on top of the boredom a lateral move generates. A disappointing Intel mid-quarter update Thursday after the close and a Friday jobs report that again misses the target could be one of those shocks. We are not anticipating a jobs miss of any size, but INTC may not provide the upside juice that some are looking for. That would be just some; SOX is not showing much life at all right now, at least to the upside.
THE ECONOMY
Retailers reporting some sizzling sales.
It is that time of month where same store sales and retail sales are released, and February looks to be a barnburner. Overall same store sales are expected to rise 5.7%, and that is the largest monthly gain since the survey began in 2000. The list of double digit gains is impressive both overall and for same store sales. Same store sales get the most focus because new stores tend to enjoy sales bursts that typically cannot be sustained. The sales were strong. COST +11%; SAKS 14%; PSUN 14%; ARO 18%; AEOS 15%. These belie the talk of a weakening consumer due to job worries. It is hard to ignore the power of the tax refunds that are coming and are anticipated by consumers. Sure jobs will have to turn up eventually, but we think they will appear long before the consumer runs out of gas.
ISM Services lower than expected but still expanding.
The February services index fell to 60.8 from 65.7 and lower than the 63.0 expected. That follows a dip in the manufacturing index as well, but both are still very solid, very much showing expansion. The other sub-indexes eased as well, but all still show expansion. Employment fell to 52.7 from 53.4, new orders dropped to 60.3 from 64.9. Things slowed a bit in February, but they are still expanding. Each month when some economic data softens alarmists come out and talk about a slowdown. The trend shows anything but a slowdown, and if you get bogged down in one month or one week you tend to get tripped up. Right now services and manufacturing are showing solid, sustained expansion, and there is not much indicating they will not continue the same growth.
We are still trying to understand the logic about raising taxes to promote job growth. Greenspan said it would not work and history shows it does not work. If you raise taxes and use that money to pay the unemployed to paint the Golden Gate bridge or paint stripes on the roads, you 'create' jobs, but once the work is done the jobs are over. Nothing was created; no ongoing jobs were made. In short, there was no investment in the economy that returns growth and jobs. Raising taxes will stall the recovery and create even greater deficits because there will be even less tax revenue to pay for the 'entitlements' that are a fixed and growing cost. Moreover, what job creation there is right now would be choked off as the incentives to invest in the economy are removed. As Greenspan correctly noted, tax cuts are needed to keep the economy growing to produce tax revenues, and even at 8% growth we still cannot meet the 'entitlement' obligations. That is where spending cuts come in to compliment lower tax rates. In DC, under democrat or republican, however, it would seem easier to build a bridge to the moon than pare back one funded program.
THE MARKET
You can tell the consolidation is working as those anchors on the financial stations start showing frustration by the up and down lateral move. We are starting to hear how NASDAQ has broke down, SOX has broken down, and DJ30 is in for a 10% correction. This is the kind of talk that starts cropping up as frustration starts working on them.
Right now this is pretty benign. It could get worse, and as we have said we expect it will get worse, but the action to this point is under control. NASDAQ rallied back from its fall below the 50 day MVA. SOX could not muster the rebound, but it is still above its February lows. It has made some lower highs, but you know, in bases stocks make lower highs as well. If they hold roughly at support while avoiding a lot of distribution, that is a normal base. At this juncture it is a stretch to say a breakdown has occurred. NASDAQ threatened one just over a week back, but it rebounded to hold support at 2000. If it breaks that level on strong volume that is another story. We expect it to test 2000 again, but for now the consolidation is just that.
Perhaps it is the frustration of wanting to see something happen that promotes these calls. SOX has something of a head and shoulders pattern forming again, but it often starts forming this pattern. It has not broken down, however. We have said it many times before, but patience can be an investor's best friend. See the move, see it tested, see how it reacts to the test. If the move is for real there will be much more upside or downside from the test. In short, the market is not showing any breakdown at this point; to the contrary it has caught itself after some distribution and is continuing the consolidation just as it should after the initial distribution that starts the move.
Market Sentiment
VIX: 14.55; -0.31
VXN: 23.09; +0.67
VXO: 14.61; +0.01
Put/Call Ratio (CBOE): 0.71; 0
NASDAQ
Sold sharply below the 50 day MVA early but managed to get almost all of it back as once again the market continues to trade in a range.
Stats: -6.29 points (-0.31%) to close at 2033.36
Volume: 1.822B (-3.1%). Volume fell further below average on a loss. It could have been worse but NASDAQ turned and cut its losses. No volume on the rebound, however, an indication that buyers did not swarm back in on the reversal.
Up Volume: 811M (+227M)
Down Volume: 956M (-323M)
A/D and Hi/Lo: Decliners led 1.02 to 1. Matched the action.
Previous Session: Decliners led 1.6 to 1
New Highs: 141 (-70)
New Lows: 9 (-1)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
The opposite of Tuesday as NASDAQ sold early then rebounded to close. It tried to retake the exponential 50 day MVA (2038) late, but faded slightly on the close. All in all just another day that shows the fight between the buyers and sellers. It is more of a shoving match than a fight, however, as volume has backed way off on these moves. If we were seeing high volume pitches back and forth there would be real reason put on a parachute and look for good landing spots. As it is right now it looks as if NASDAQ will go down to test the 2000 level again during this consolidation, but the action right now does not indicate it is going to tumble sharply to that level, and once there, that it will break sharply below that level.
S&P 500/NYSE
Tested below the 18 day MVA and posted a low volume gain. Still showing that tenacious resilience.
Stats: +1.93 points (+0.17%) to close at 1151.03
NYSE Volume: 1.323B (-10.55%). Volume backed off to below average again. Not bad on the early dip below the 18 day MVA, but also not showing there was a rush to buy or accumulation on the rebound.
Up Volume: 641M (+109M)
Down Volume: 654M (-277M). Dead heat
A/D and Hi/Lo: Decliners led 1.04 to 1. Another dead heat, but showing that the move was not that strong as decliners led on the advance.
Previous Session: Decliners led 1.29 to 1
New Highs: 224 (-144)
New Lows: 5 (0)
The Chart: http://www.investmenthouse.com/cd/^spx.html
The large caps continue their 6 week lateral move, showing no inclination to give in after hinting at that a week back. It has shown weakness but then quickly righted itself. Wednesday was a microcosm of that action as the index undercut the 18 day MVA (1145) but then reversed and posted a modest gain on the session. No burst of buying as volume was weak, but no indication of any weakness. It is hovering below the January highs and 2002 double top high (1960), trying to set up for another breakout.
DJ30
After reversing Tuesday, DJ30 was selling again Wednesday, but as with the SP500 the blue chips found support and reversed for a modest gain. It held over the simple 50 day MVA (10,540), and that gave it support on the rebound. It continues its 9 week lateral move in a range from 10,400 to 10,750. Tuesday it showed some distribution and it might be trying to form a more bearish pattern, but still much too early to call that.
Stats: +1.63 points (+0.02%) to close at 10593.11
Volume: 188 million versus 215 million Tuesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
THURSDAY
The economic reporting heats up with factory orders and productivity. Productivity has been in a renewed spotlight given the jobs picture and its purported role in keeping hiring lower. Greenspan has said it will need to fall off to get big job creation going, but no one is expecting a big fall off as companies are still putting a lot of the systems acquired in the late 1990's and early 2000 to use.
Those are a warm up for the Intel mid-quarter update after the Thursday close and then the jobs report Friday morning. Most investors are waiting to see the outcome of those. We are hearing that INTC may disappoint with its outlook, but that is rank rumor thus far. As far as jobs, there is still some speculation that at upside surprise of 200K or more will hit; we have no doubt it will at some point, but it would definitely be a surprise if it occurs Friday. If the data we are reviewing is accurate, the overtime and workweek are not high enough to show big job gains in the traditional sense. Of course, with contract workers making up a larger and larger portion of 'new hires,' it is going to be hard for the traditional measure of non-farm payrolls to show big jumps without very telltale signs of more overtime and a much higher average workweek.
If INTC disappoints appreciably and job creation is week then we could see a quick test of the recent lows. SOX may give a serious test if INTC disappoints. It is the index closest to a breakdown and thus we do have to keep an eye on it. We are short the index right now so we do believe it has more downside but not catastrophic.
There may not be a whole lot of action Thursday ahead of those two events. We will still look at the potential new plays, but also the continuing plays to see if we they provide the kind of moves and entry points we can take advantage of to position us for Friday and beyond. We are not looking for day trades but continue to move into stocks that are showing the right stuff as far as pattern and price action, either upside or downside, so we can take advantage of the next move with the trend for that stock as well as the market overall.
Support and Resistance
NASDAQ: Closed at 2033.36
Resistance: The exponential 50 day MVA (2037). The simple 50 day MVA at 2057. The March/December up trendline (2086). The second up trendline (2130). The March/August up trendline at roughly 2152. 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 1151.03
Resistance: The January high (1155). Next is 1159 (February highs) and 1160 (the closing) and 1175 (intraday), the high in that double top that spanned late 2001, early 2002.
Support: The 18 day MVA (1145). 1125 is some minor support, bolstered by the 50 day (1128). 1106 is a May 2002 top and represents some early 2001 lows.
Dow: Closed at 10,593.11
Resistance: The 10 day MVA (10,609). 10,665 is the March 2003 up trendline. The January high (10,705). Upper channel line (10,800). 11,000 is roughly 14% above the 200 day MVA. Then some price tops at 11,300.
Support: The simple 50 day MVA (10,540). The exponential 50 day MVA (10,473). 10,353 from May 2002 high.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
3-01-04
Personal income, January (8:30): 0.2% actual, 0.5% expected, 0.3% December (revised form 0.2%).
Personal spending, January (8:30): 0.4% actual, 0.4% expected, 0.5% December (revised from 0.4%).
Construction spending, January (10:00): -0.3% actual, 0.3% expected, 0.6% December (revised from 0.4%).
ISM Index, February (10:00): 61,4 actual, 62.0 expected, 63.6 January.
3-03-04
ISM Services, February (10:00): 60.8 actual, 63.4 expected, 65.7 January.
Fed Beige Book: Economy expanding the past two months but employment growth is still weak.
3-04-04
Initial jobless claims (8:30): 345K expected, 350K prior.
Productivity (revised), Q4 (8:30): 2.7% expected, 2.7% prior.
Factory orders, January (10:00): -0.6% expected, 1.1% December.
3-05-04
Non-farm payrolls, February (8:30): 125K expected, 112K January.
Unemployment rate, February (8:30): 5.6% expected, 5.6% January.
Hourly earnings, February (8:30): 0.2% rise expected, 0.1% rise January.
Average workweek, February (8:30): 33.8 expected, 33.7 January.
Consumer credit, January (3:00): $5.0B expected, $6.6B December.
End part 1 of 2
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us stock market
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