|
|
us stock market, trade stock
* * * *
3/04/04 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Thursday: None issued
Buy alerts issued: VAR; ALVR; TTP
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:
- Wednesday rebound continues ahead of INTC, jobs report.
- Retail same store sales explode higher as consumers, small businesses buy.
- Market continues to show healthy price consolidation as volume has settles below average.
Retail helps set the pace as stocks continue low volume rebound.
Stocks started volatile again, but when techs joined retail stocks to the upside, stocks rallied to the close. Volume remained very light, falling below the already low Wednesday levels. Thus there was not a new surge of buyers, but short covering and positioning ahead of the INTC mid-quarter update and the Friday morning jobs report. Once again there has been a growing whisper that the jobs report will be much better than expected (though not nearly as optimistic as the past two months), and that has investors shifting around in anticipation.
The action really started with retail stocks, bolstered by just tremendous same store sales and projections for continued solid sales growth. That kept stocks afloat, but the action was again volatile up and down trade until the tech stocks decided to join, most likely spurred by that positioning ahead of the INTC update. That started the market on an upside trajectory that held through the close. Even with techs running higher, the real money action was scattered through the market. Retailers were strong, but not all retailers posted strong volume. In short, the market is still in the process of setting up for the next move; Thursday was not the start of that move. Maybe the Friday jobs numbers will be blowout and that will start the next breakout leg higher. A blowout number would almost be suspect, however, in that some key indicators such as overtime and average workweek have not ramped up.
THE ECONOMY
Retailers report soaring same store sales.
Wednesday night we reported some of the early same store sales results, and they were looking good. Thursday morning they came pouring in and they continued to impress. PCLE +25%, SHARP 20%, JOSB 34%, JCP 12%, CAC 18%, CLE 15%, CHS 28%. WMT reported 6.2%, much better than the 'high end' of the 3% to 5% range. Further, it raised the ongoing range to 4% to 6%. The biggest retailer is raising its expectations. That can't hurt. The list went on and on as retailers knocked the ball out of the park. Sure there were easy comparisons to last year, but the guidance was also outstanding. It is easy to cheer the numbers and move on, but there are some critical aspects that speak very, very well for the economy.
More than just sales: look at who is selling.
Even more important are the continued signs of business spending. Consumers have spent throughout the recession and recovery, and the extra tax refunds will insure further spending ahead. Business is what caused the recession, and it remains the key, particularly for jobs. There are some intriguing signs.
SPLS again reported huge earnings and attributed the gains to small business spending. Recall that back in the depths of despair during the lead in to the Iraq war how we picked up on SPLS' increased earnings. SPLS was talking about small business rising, and it was right on target. It is still talking about small business spending, and sees it increasing even more. Combine that with a 34% surge at JOSB, a company that sells primarily business clothes, and you have a very interesting picture developing.
Business spending continues to grow, and importantly, it is small businesses. That is where most of the jobs come from. Also, there are a lot of new small businesses that the federal reports are not yet picking up. Greenspan may believe that the non-farm number is accurate, but you also have to look at the time period. It is accurate in normal times, but in times such as these where we are emerging from a nasty business downturn, it is the sole proprietorships that take the lead, and the non-farm report does not pick those up. Period.
What about JOSB? Its sales are surging because people are needing business clothes. You don't buy a new suit to go to the unemployment office; old grey will do for that. If you are getting interviews or starting a new job, you need new clothes. This could be one of the sleeper indicators that is showing us that job growth is starting to move at a faster pace. We don't think it will show up this month, but we expect to see better overtime and workweek numbers, and that will set the stage for a big upside month in March or April.
All eyes on the jobs report.
As noted, the expectations for a stronger jobs report have started creeping back. You can see it in the market, and the market is hard to ignore. The dollar has rallied against the euro, and some have noted that part of this was in anticipation of the final economic peg to fall in place. The ISM employment index showed a very positive uptick following 4 months of expansion. The Challenger layoffs report was unexpectedly mild. The Wall Street Journal reports that interviews with CEO's indicates readiness to hire.
All of these indicate improving jobs numbers to come, but they don't necessarily imply the gains show up in the February report. Again, March, mostly likely April will show that big outsized month that will signal the kick off of serious job creation, at least as far as the non-farm number is concerned. There has already been strong job creation in smaller businesses that won't show up in the government numbers until tax returns are filed and the government realizes they are out there. Once the non-farm numbers come around the next couple of months and they continue through the summer, the jobs issue, as have the other economy issues, will be laid to rest.
THE MARKET
Financial stocks, internets, and retailers were showing solid volume leadership ahead of the jobs report. After the report we will now see if rest of the market is ready to follow. Certainly DJ30, SP500, SP600 and SP500 are ready to move further, but the question is whether NASDAQ and SOX are ready.
A quick look at the chart indicates that NASDAQ is not through with its consolidation. It has tapped 2000 on the low and rebounded, and is now moving laterally along the 50 day MVA on low, below average volume. This is very good consolidation action, but the pattern needs more work.
Now looking at history, there are some interesting things to consider. We went back and looked at the history of new bull markets, trying to get a better handle on what kind of action is more typical, what action is atypical. The rally by NASDAQ (72%) is not all that atypical, especially given the decline (74%). Of course, 74% of 5000 (3700) is a lot more than 72% of 1108 (798). Thus the rebound is not out of proportion to the decline.
With respect to corrections or pullbacks experienced by indexes and NASDAQ in particular in new bull markets, historically they have ranged from 4% to 7%. On the lows of the recent selling, the pullback was 7.5%. Thus the pullback has been sufficient in historical terms to set the stage for another breakout. That does not mean, however, it is ready for the next breakout. It may not sell much lower or it may not undercut the February low (1991) by much, but NASDAQ appears to have at least another 3 to 4 weeks to work through the base. That does not mean it holds down here; it can jump up to the prior high and then form a handle for two or more weeks before making the breakout.
It is very good to see volume settling down in a very low range. In good bases you want to see volume dry up at the bottom, then start to swell as it moves up to form the right side of the pattern. From the first February low to Thursday, 14 of 21 sessions have been on below average volume, and the past 7 straight have been on below average trade. The action is definitely settling down in a positive way. Now Bob Pisani will bemoan the low trading volume, but he is buddy-buddy with floor traders. They make their living off of volume because that means more trades. Our floor traders do the same thing. You simply have to consider the source. Low volume in a consolidation is a very good thing. The way volume is shaping up now is a good thing for the market because it is showing stocks building their bases for the future breakout. Remember, however, we will hear a lot of moaning about failed rallies, the inability to move forward, lost momentum, weakening technicals, etc. as the base continues. We look forward to hear those comments because they mean the consolidation is working just as it should.
Market Sentiment
VIX: 14.4; -0.15
VXN: 22.5; -0.59
VXO: 14.71; +0.1
Put/Call Ratio (CBOE): 0.71; 0
NASDAQ
Back over the 50 day MVA as it continued the Wednesday rebound on continued low volume.
Stats: +21.75 points (+1.07%) to close at 2055.11
Volume: 1.811B (-0.59%). Volume was just a hair lower, but still well below average once again as NASDAQ posted a gain. While not the best price/volume action, as noted above, volume has settled down consistently below average, just as you want to see at the bottom of a consolidation.
Up Volume: 1.246B (+435M)
Down Volume: 460M (-496M)
A/D and Hi/Lo: Advancers led 2.02 to 1. A consistent and very good theme has developed here: upside breadth is excellent while downside breadth on down days has been basically flat. With volume settling down below average, the breadth indications are starting to bolster the positive aspects of this base.
Previous Session: Decliners led 1.02 to 1
New Highs: 196 (+55)
New Lows: 5 (-4)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Moved back over the exponential 50 day MVA (2038), faltering just at the simple 50 day MVA (2059). It looks to have started the lateral move after setting the bottom near 2000. Volume has dried up to consistently below average as it works roughly along the 50 day MVA. We are not saying it won't sell back down and test the February low (1991) or even undercut it slightly as it continues its base, but the action is starting to indicate the parameters of the base are being set. Now it just needs to get a bit more tedious for investors with some more time and a jolt or two lower to ratchet up the frustration.
S&P 500/NYSE
SP500 has made another lower low and is back up to the high. Wednesday we noted it was setting up for a breakout, and this higher low has formed up the ascending triangle.
Stats: +3.84 points (+0.33%) to close at 1154.87
NYSE Volume: 1.263B (-4.56%). Moved up again on lower volume as it continues forming its base. Price/volume action could be better: two lower volume moves up on the heels of a stronger volume move down Tuesday.
Up Volume: 792M (+151M)
Down Volume: 436M (-218M)
A/D and Hi/Lo: Advancers led 1.66 to 1. Not as clearly predominant to the upside as NASDAQ.
Previous Session: Decliners led 1.04 to 1
New Highs: 315 (+91). Has not broken to a new high but firming up nicely. If it breaks out this should shoot higher. At least, if we want an indication of a good breakout.
New Lows: 2 (-3)
The Chart: http://www.investmenthouse.com/cd/^spx.html
As noted Thursday, SP500 has been building for a breakout, and the ability to shake off the Tuesday distribution session and hold the 18 day MVA (1146) has set up the ascending triangle pattern even better. Higher lows along the 18 day MVA below a constant top at 1160. This pattern builds pressure for the breakout from below as buyers move in faster and faster and the overhead supply is eaten away each time it tests the high. It is at the breakout point. We have felt that NASDAQ would hold it back, and as NASDAQ has not completed its base, it could still act as a drag. NASDAQ could, however, break higher and form the right side of the base as SP500 breaks out, then when SP500 tests the move, NASDAQ could then form its handle. Both could then move up together. Sounds somewhat like a perfect scenario, but stranger things have happened as we have seen with the October 2002 bottom. We talked about a 'perfect' scenario then, and that is pretty much the way it worked out. The market is setting up for another such event here, and a strong jobs report, a surprising jobs report, could break SP500 out and start the chain reaction.
DJ30
Holding over the simple 50 day MVA (10,546), tapping it on the intraday lows the past two sessions and then rebounding to close basically flat. It still has that lower high to start the month, but it is not making a lower low either, and volume has fallen off as it holds support. It could go either way, but with SP500 and NASDAQ holding up and forming up well, not to mention the continued solid action in the smokestack stocks, we doubt it will tank.
Stats: -5.11 points (-0.05%) to close at 10588
Volume: 161 million versus 188 million Wednesday.
The chart: http://www.investmenthouse.com/cd/^dji.html
FRIDAY
Again the jobs report looms as the major piece of economic data. All others have fallen into place and show a strong recovery, the strongest in 20 years as we have seen levels not hit since the early 1980's when those tax cuts spurred the kind of strong investment in the US we are seeing today. Until the jobs do fall in line, the rest of the accomplishments are overlooked. One by one each complaint about the economy has been put to rest, and this final one will find the same fate. It most likely won't be tomorrow, however.
We would love to see it. SP500 is poised to make a breakout from a bullish pattern. NASDAQ can rally from here and show it has set the bottom in its consolidation, then spend a couple of weeks moving laterally to form the handle as SP500 tests its breakout, and then both can head higher. A strong jobs report might just do that.
The higher probability is a solid, in line report for this month that keeps the market building its consolidation. NASDAQ stocks have further work to do on their patterns similar to NASDAQ overall, and another few weeks would do it well. INTC disappointed after hours as it lowered the mid-range of its revenue projections. This was more or less expected, but the stock was trading lower after hours. It was not taking, however, and neither were other chip stocks. The early action depends on the jobs report, but if it is inline, the INTC news might pressure some stocks early but that gives buyers the opportunity to move in and pick up some positions on the pullback.
We will have to see how the market is playing out the jobs report, but we are not going to look for a lot of downside plays because we don't think the news will set off any serious selling that would take the indexes out of their ranges. We are continuing to look for stocks that have set up good patterns and are ready to be the early leaders and build positions in those as they provide strong moves. That way we are ready and in good positions as the market makes its breakout, and we watch the profits pile up as others rush in to buy our stocks.
Support and Resistance
NASDAQ: Closed at 2055.11
Resistance: The simple 50 day MVA at 2059. The March/December up trendline (2088). The second up trendline (2138). The March/August up trendline at roughly 2156. The January high at 2150. 2200 then 2300 represent tops from Q2 2001.
Support: The exponential 50 day MVA (2038). 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 1154.87
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 10 day MVA (1149). The 18 day MVA (1146). 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 10,588.00
Resistance: The 10 day MVA (10,605). 10,675 is the March 2003 up trendline. The January high (10,705). Upper channel line (10,815). 11,000 is roughly 14% above the 200 day MVA. Then some price tops at 11,300.
Support: The simple 50 day MVA (10,546). The exponential 50 day MVA (10,478). 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 actual, 345K expected, 352K prior (revised from 350K).
Productivity (revised), Q4 (8:30): 2.6% actual, 2.7% expected, 2.7% prior.
Factory orders, January (10:00): -0.5% actual, -0.6% expected, 1.8% December (revised from 1.1%).
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.
PPI, January (time not supplied): 0.4% expected, 0.3% December.
Core PPI, January: 0.1% expected, -0.1% December.
End part 1 of 3
|
us stock market
trade stock
|
