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world stock market, us stock market
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3/22/04 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: BWA; GGG; MOLX
Trailing stops issued: None issued
Stop alerts issued: VNWK
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. To subscribe to the Daily alert service you can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- World events pile up, provide excuse to continue to sell market.
- Starting to get worried about the economy, the next step in the correction.
- Another leg lower as market continues to seek bottom of this correction.
Market finding plenty of reasons to continue its selling.
What could have been a big market booster has become pretty much a joke, and with other serious world events, the 'cornered AQ' in Pakistan was pretty much forgotten Monday. We could not help but shake our heads when we heard that lo and behold there were tunnels leading from the compound where the terrorists had holed up. With the entire eastern side of Afghanistan honeycombed with tunnels in the mountains that was hardly a surprise to anyone keeping track of the story. Indeed we fully expected there would be an alternative escape route and that was why US troops were waiting on the Afghan side.
With all of the denials and official back peddling on who is or is not there juxtaposed against the very credible London report of the #2 AQ man being killed we conclude that certainly something significant happened. That significant question to be resolved is whether al-Zawahiri was allowed to wiggle away again or if he is on a slab somewhere while troops wait for DNA testing and try to figure out how to give Pakistan the credit and/or captured fighters are being interrogated to get what information they have before it becomes public knowledge they are alive and in Pakistan's or our hands. This is not unusual as announcements of significant captures have come weeks to months after the actual capture took place. Information is the key in the war on terror, and that often means keeping things quiet as long as possible. Or, maybe, according to one of my more liberal friends, they stuffed him in a cave where they are keeping Bin Laden prisoner, ready to trot them out at the right moment to make the largest impact. Whatever the situation, a lot of people were disappointed again with what appears to be another cry of wolf
That disappointment, however, was nothing compared to the assassination attempt in Taiwan timed with another national election and the Israeli rocket attack on the Hamas founder. The latter brought cries of revenge against Israel, revenge against the US, the gates of hell opening, dogs and cats sleeping together, etc. All of that was enough to push Asia and Europe lower, and the US went ahead and sold again after the late Friday bounce related to the possible al-Zawahiri capture/killing. After all, why speculate about someone being killed when there is so much of it ongoing all around the globe?
Using anything as an excuse to sell.
What the market got was a continued reason to sell, this time provided again by the world stage. The market remains skittish and most everything took a hit as the recent attempts to form a bottom were swept aside for now. The market is weak as it is on a correction and even last week still had not set a bottom. The overseas news upped the uncertainty ante, and that got the sellers involved again, pushing the market lower as it still tries to find a bottom in the correction.
Overall, the economic outlook remains positive with CEO optimism still growing and employment services seeing the turn in the jobs market. That coupled with continued strength in capital investment and profit growth bodes well for the continued economic expansion as long as CEO's and small businessmen and women are not quelled in their expectations by terror threats, uncertainty about future tax breaks, etc.
THE ECONOMY
Indeed, as we expected, doubts are forming even to the recovery. One economist on CNBC Monday hypothesized that job growth was normal given the GPD growth he claimed was overstated. He did not provide any empirical, direct evidence, just the circumstance that if the US economy was growing more than European and other economies, why was it not making the same or more jobs than those other economies? The Swiss cheese-like basis for the hypothesis left us wondering why it was even put on the air. As long as the methodology for calculating GDP is constant (it is), then we are comparing apples to apples with respect to other recoveries. You have to assume it is being calculated differently or is now substantially out of line with current conditions. That has not been shown to be the case.
As with other major economic changes, there are new and different types of jobs being created, and the workforce has to adapt, i.e. retrain, to work them. The non-farms payroll report measures jobs that are filled, not jobs that are available. The healthcare sector has thousands of unfilled jobs. These are skilled positions that so many seek but there are simply not enough trained workers to fill them. Thus they are not counted in the report.
There are a lot of young workers out there that trained for the dotcom era just to get out of college and have no jobs. A similar story happened back in the 1980's. In the 1970's oil was $35/bbl (a lot at that time) and believed to be heading to $100/bbl. The oil field was alive and getting stronger (anyone remember 'Urban Cowboy?' "My daddy does oil, and all that implies."). All across the country future petroleum engineers, geologists, etc. were studying furiously to get out and get in on the boom. They graduated just in time to see oil go to $15/bbl on the way to $9/bbl. Those new graduates had no jobs. Those in the industry, whether employed by the major companies or those that had struck out on their own, were without jobs or bankrupt. The ripple effects washed through the mortgage industry and the savings and loans as the boom turned to bust and the financial companies saw their collateral turn to junk and loans worth less than the paper they were printed on.
It took the Reagan tax cuts and the investment boom that followed to create the new jobs. But that was not enough. Those that were now unemployed had to retrain to work in those jobs that were in that new fangled personal computer field (and all that implies). We hate to repeat, but history repeats, and it is the same circumstance now. There are jobs being created, but people are looking for their old jobs back. They are not all coming back by a long shot. I had to retrain, thousands and thousands of others similarly situated had to retrain. We did not look to the government to provide the jobs or give us the retraining; we went out and did it (indeed one of my favorite jokes at the time was no one in Washington was crying because an out of work oil worker couldn't make his Mercedes payment). It wasn't easy, it wasn't fun, it wasn't what we wanted to do. It was something we had to do in order to get the good jobs that were available.
THE MARKET
The silver linings in the Monday action were plating, not solid silver. SOX broke the 200 day MVA and managed a modest rebound toward that level but could not reclaim it. NASDAQ undercut its recent lows, wiping out the rather weak rebound attempt last week, though it did managed to hold over the 200 day MVA and the next support level. That was about the extent of the good news.
There were still signs of extreme behavior in the works, but when compared with the price/volume action and the breach of support, they were not controlling the action. Nasdaq volume jumped as it sold while NYSE volume was just about flat; NYSE volume had been rising as a percent of NASDAQ volume a sign that the selling is reaching a peak. Now with the undercut of the recent range and NASDAQ selling accelerating, it is clear the market is still in search of a bottom on this drop down the left side of the correction. The distribution on NASDAQ indicates it has more testing to do, and the 200 day MVA looks likely. At this rate, however, it does not take long before the market becomes oversold on the heels of the recent weak rebound.
Market Sentiment
VIX: 21.58; +2.43
VXN: 27.15; +1.16
VXO: 21.43; +2.27
Put/Call Ratio (CBOE): 0.97; -0.06. Fell on a pretty rough session. The action still shows a strong bias toward puts, a continuing belief that more downside is ahead as option players and institutional hedging increases action in puts.
NASDAQ
Tapped near the 200 day MVA on the low and managed a modest rebound as volume shot back up.
Stats: -30.57 points (-1.58%) to close at 1909.9
Volume: 2.001B (+21.03%). The first 2 billion session day in two weeks, and it occurred on a big down session. There was a rebound off the lows, but the predominant action was downside with down volume crushing up volume. As noted, the NASDAQ volume is running significantly higher than NYSE volume again, indicating that NASDAQ is not through selling.
Up Volume: 242M (-160M)
Down Volume: 1.743B (+521M)
A/D and Hi/Lo: Decliners led 3.81 to 1. Over 5:1 downside at one point before the midday bounce. Again, breadth is getting extreme, but that is a secondary indicator and does not trump the price/volume action.
Previous Session: Decliners led 1.56 to 1
New Highs: 40 (-42)
New Lows: 39 (+21)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Gapped lower and then broke below the next potential support level at 1900, trading down to 1897 on the low. Managed a late session rebound that reclaimed 1900. Buying at that level or short covering? With NASDAQ approaching the 200 day MVA, you can bet there will be shorts covering positions as they anticipate a bounce at that point. As noted over the weekend, the 200 day is an important level of institutional support. SOX broke through its 200 day and could not recover even as it rebounded. We typically give a stock or index a session or two to rebound and recover from such a breach. We will see how SOX responds, and how it does may have a lot to do with how NASDAQ responds to its 200 day MVA test. We anticipate NASDAQ to reach down toward that level (1886) and then try a rebound once more. Finding support for the bottom of the correction at the 200 day, however, seems a bit pat. To really put the scare into investors an undercut would more do the trick as that would bring in a rush of sellers, and that often is what flushes out the pipes so to speak.
S&P 500/NYSE
Gapped down and traded up and down as it tried but failed to hold the recent support at 1106.
Stats: -14.34 points (-1.29%) to close at 1095.4
NYSE Volume: 1.448B (+0.76%). Volume edged slightly higher, but given the hard fall the volume was hardly noteworthy. Trade remains below average as the large caps renewed their selling and undercut recent support. Technically another day of distribution, and with the index in weak shape we cannot ignore them. They indicate a sell off down to 1075ish before this is over, an 8% drop.
Up Volume: 116M (-224M)
Down Volume: 1.32B (+247M). Very strong downside action.
A/D and Hi/Lo: Decliners led 3.41 to 1. As with NASDAQ, it was much worse earlier, over 4:1 to the downside. When the small caps and large caps join hands and sell, the breadth can get really ugly.
Previous Session: Decliners led 1.6 to 1
New Highs: 71 (-55)
New Lows: 29 (+18)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Gapped below support at 1106 but then retook that level. In the end (indeed by lunch) it could not hold that level and tumbled below 1096, the next support. It managed its own bounce off of 1089, and that was good enough to take it right back up to 1106. That hardly provides a lot of confidence, however, as this gap lower starts the second down leg for SP500 in this correction. NASDAQ ahs already had three and Monday looked to be starting number 4. If NASDAQ goes on to test the 200 day MVA fully, SP500 goes down to 1075. Then it is up to NASDAQ as to whether the market makes its turn there.
DJ30
The blue chips dove lower as well on continued strong volume after failing Friday at the 10 day MVA. As with SP500, they are embarking upon their second leg lower in the correction. Tapped 10,000 on the low and managed a lukewarm rebound. 10,000 is psychological support, but it is not more than that. True support is closer to 9850 near the October and November highs. The 200 day MVA is just 50 points below that. If you are making the trip and that landmark is just a short distance further, why not take it in? Again, how NASDAQ trades at its 200 day will tell much of the story for the rest of the market.
Stats: -121.85 points (-1.2%) to close at 10064.75
Volume: 249 million versus 262 million Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
No economic reports are scheduled and we have not heard of any new attacks or assassination attempts scheduled, so the market may have to work on its own a bit. After hours The Limited raised its March sales and Q1 earnings guidance. The Limited's solid outlook will likely have limited impact on the market overall, however. There is a lot to overcome. After showing some signs it wanted to stem the selling over the past week, all it took was some more world unrest to start the selling again. It was showing signs of getting stretched extreme, and with the Monday action it is starting to do it again, but with that new leg lower it has to go through the process of testing again.
We still expect NASDAQ to make a trip toward the 200 day MVA on this selling. How it responds there and how the SOX is able to recover its 200 day MVA will set the stage for the rest of the market. SP500 and DJ30 do not have to sell as far; they did not rally as far as NASDAQ. SP600 and SP400 (small and mid-caps) are a bit different, having just made their first significant breaks lower. They have been as strong as NASDAQ on the move higher, and they have not made commensurate moves (-6% SP600). SP600 has support at 270, but given its 45 degree rise from March 2003, that is a miniscule drop.
All in all, we still look at NASDAQ and SOX and how they trade at the 200 day to set the pace for the rest of the market. NASDAQ was showing signs of getting sold out and then was pushed lower on world events. This drive lower may be the final purging or shakeout for the pullback, at least for this leg. We still think it should undercut its 200 day MVA to have maximum effect, but that might not occur on this decline and may occur on a second test lower that acts as the final shakeout. Either way we look for NASDAQ to test lower toward the 200 day MVA and then try another rally from there.
Support and Resistance
NASDAQ: Closed at 1909.90
Resistance: 1940. The 10 day MVA (1959). 1990 to 2000, the top of the late 2003 base. The exponential 50 day MVA (2010). The simple 50 day MVA (2047).
Support: Mixed tops and bottoms at 1900. The 200 day MVA (1886).
S&P 500: Closed at 1095.40
Resistance: 1106 is a May 2002 top and represents some early 2001 lows. The 10 day MVA (1117). Price resistance at 1125. The exponential 50 day MVA (1125) and the 18 day MVA (1125). The simple 50 day MVA (1137). The January high (1155). Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support: The lower end of the range 1100 to 1096 is trying to hold. 1075 to 1070 from the December consolidation.
Dow: Closed at 10,064.75
Resistance: The 10 day MVA (10,250). The 18 day MVA (10,335). The exponential 50 day MVA (10,397). September/November up trendline (10,460).
Support: 10,000 to 9900-9850. 9859-9855 is the next real support
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
3-24-04
Durable goods orders, February (8:30): 1.5% expected, -2.3% January.
New home sales, February (10:00): 1.1M expected, 1.106M January.
3-25-04
Initial jobless claims (8:30): 338K expected, 336K prior.
GDP final, Q4 (8:30): 4.1% expected, 4.1% preliminary.
Chain delflator, Q4 (8:30): 1.2% expected, 1.2% preliminary.
Help wanted index, February (10:00): 39 expected, 38 January.
Existing home sales, February (10:00): 6.12M expected, 6.04M January.
3-26-04
Personal income, February (8:30): 0.3% expected, 0.2% January.
Personal spending, February (8:30): 0.5% expected, 0.4% January.
Michigan sentiment revision, March (9:45): 93.5 expected, 94.1 preliminary.
End part 1 of 3
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world stock market
us stock market
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