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us stock market, trade stock
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4/19/04 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Target hit alerts issued Monday: MXT; LIFC
Buy alerts issued: ECOL; BIIB; IMGN; IRGI
Trailing stops issued: None issued
Stop alerts issued: PTNR; STG
SUMMARY:
- Techs, chips rebound nicely, but volume lags on an upside day.
- Leading economic indicators continue to show steady expansion ahead.
- 2003 leaders bounce, but move lacks force without the volume.
Decent rebound but another low volume Monday bounce.
The morning was choppy, but stocks hit their groove a half hour into the session with techs leading the way higher. The blue chips and large caps were following, but they never really found their footing this session. Despite that, stocks never sold back, managing to hold gains during a midday breather and then kicking it in once again in the last hour and one-half. Even a bit of cold feet in the last half hour gave way to a late bounce that solidified, as best it could, NASDAQ's move over its 50 day MA.
NASDAQ and SOX continued the bounce that started Friday, holding where they had to or else start an even further decline. The bounce lacked the volume that would show conviction in the move, however, so we cannot sit back with the comfort of knowing the big buyers were in the market snapping up stocks. Once again it was a session where individual stocks performed well on volume while most stocks moved on lower trade. Many solid stocks that were taking a breather bounced, but the volume was mixed. Again, it was a selective market for those stocks that attracted the volume. In short, it was good to see the rebound continue from Friday, but the lower volume continues to tell us that the breakout that is trying to build is not underway yet.
THE ECONOMY
Leading Economic Indicators for March head back up.
These indicators purport to read the future 6 to 9 months down the road with respect to the economy. February they were flat, one of the first months of no gain in the past 6. March was expected to show a 0.3% gain, and that is exactly what it delivered. This report measures 10 indicators. Six rose, four fell. Those falling, i.e., the ones that dragged the index lower, are interesting. They included the interest rate spread (widening) and stock prices. Of course interest rates have been all over the map given the rate hike speculation. As for stock prices, it is good to see the LEI down because of them; they are taking a breather and are doing so in overall decent fashion. If you have a negative indicator, this is the one you want to see given the current position of the market, i.e., trying to build for a breakout and not showing signs of a breakdown.
Again, interest rates are all over the map as traders guess when the Fed will raise rates. Greenspan speaks to Congress on Wednesday, and that should help clear things up. We know that sounds incongruous, talking of Greenspan clearing things up, but that is exactly what he and his Fed brethren are trying to do. They are going out of their way to say there won't be a rate hike until late summer. Greenspan won't be that explicit; he leaves that up to his henchmen. He will try to walk the line and say that rates will rise, but that the Fed is not fully comfortable with the growth. Translated, that means the Fed will raise rates when it sees a series of solid employment reports. That is what the Fed expects by the August meeting, that is what the Fed is trying to tell the market, and that is the earliest that a rate hike will come.
Bigger picture, the LEI continues its trend higher after taking a breather in February. We said before that Q1 GDP was stronger that anticipated and will be closer to 5 than 4. A one month flat reading from the leading indicators does not trump the other two months, the trend, or the solid growth the other economic reports show for Q1. The LEI is just taking that growth further down the road with another solid report.
THE MARKET
As noted NASDAQ cleared both the simple and exponential 50 day MA but could not do it with any strength as volume dropped off even lower than Friday's lower trade levels. SOX continued its bounce off the 200 day SMA and NASDAQ bounced off 2000 to continue its work on a possible reverse head and shoulders pattern, but without the volume the move provides little comfort that a new breakout is imminent. Of course the patterns themselves indicate there is more work to do, but we sure would like to see that price/volume action continue to improve with more and more up weeks as it works toward that point.
NASDAQ, SOX and the smaller caps were the leaders, but they were not powerful, influential, inspiring, etc. The large caps were not left out; SP500 and DJ30 are still in their patterns, just easing along Monday as SP500 continues putting together a shallow reverse head and shoulders pattern. As for individual stocks, there were leaders that were moving well off of their pullbacks, but they were not widespread as the breadth figures show. Moreover, their volume was problematic as well. In short about all you can say is that the indexes moved as they had to do with respect to price, still working on their overall bases.
Market Sentiment
VIX: 15.42; +0.48
VXN: 21.4; -1.15
VXO: 15.23; -0.44
Put/Call Ratio (CBOE): 0.67; -0.1
NASDAQ
Rebounded to close over the 50 day MA but on flagging volume. No breakout, no sudden conviction, just continuing the work on the base.
Stats: +24.69 points (+1.24%) to close at 2020.43
Volume: 1.688B (-10.24%). Contracting volume on the rebound, a familiar problem with the early portion of the late March rebound off the 200 day SMA. Volume did finally come into the index immediately ahead of and on the news of the March job creation, but that was just before the recent pullback. Maybe volume will build on a continuation move. As long as it shows up on the breakout move and remains good enough to maintain positive price/volume action, then we will be satisfied.
Up Volume: 1.277B (+731M)
Down Volume: 391M (-920M)
A/D and Hi/Lo: Advancers led 1.29 to 1
Previous Session: Advancers led 1.07 to 1
New Highs: 115 (+30)
New Lows: 21 (0)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Back over the 50 day EMA and SMA, continuing the rebound off 1990ish, the November and December tops. This was the last area to hold above the 200 day SMA (1921), and it continues the formation of the base and a potential reverse head and shoulders where the shoulders use the 1990 - 2000 level as the support. Accumulation continues in the base, a very good sign ultimately for an upside breakout. The action Monday does not suggest it is ready to do that yet, and the nearer term issue is whether it continues to move higher in this pattern or it tests down to the 200 day SMA. Again, either way it continues its base; holding here and building to a breakout would be a sign of strength nearer term and let those stocks that are holding up well at near support loose to start a new strong run.
S&P 500/NYSE
Continues to hold at the 50 day MVA, working on its shallow reverse head and shoulders base.
Stats: +1.21 points (+0.11%) to close at 1135.82
NYSE Volume: 1.191B (-19.94%). Significantly lower, below average volume Monday, but not a big deal as SP500, SP600 hold over the 50 day MA.
Up Volume: 593M (-371M)
Down Volume: 586M (+71M). Dead heat, reflecting the action on the index.
A/D and Hi/Lo: Decliners led 1.02 to 1. Another dead heat.
Previous Session: Advancers led 2.71 to 1
New Highs: 115 (+9)
New Lows: 35 (-16)
The Chart: http://www.investmenthouse.com/cd/^spx.html
A modest bounce as SP500 continues to hold over its 50 day EMA (1128) after testing and holding that level last week. The disappointing aspect thus far is that volume, after jumping higher on dojis at the 50 day, has not ramped up on the move off this level. This important support level is one that you want to see buyers en masse enter. Still, the pattern maintains building the 12 week shallow reverse head and shoulders base. Accumulation has turned positive over the past week, with up price weeks on rising volume edging down price weeks on rising volume by a week. That is a positive turn and starts to lend support to NASDAQ's accumulation.
DJ30
A modest loss but on low, below average volume and holding a test of the 50 day EMA (10,394) on the low and rebounding to close. The pattern is not as defined as on SP500, but it is holding up well as that small double bottom with handle pattern continues to form.
Stats: +1.21 points (+0.11%) to close at 1135.82
Volume: 173 million versus 234 million Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
No economic data hits the street tomorrow, and no doubt investors will have one eye out for Greenspan's testimony to Congress on Wednesday. After hours there was some decent economic news, NSM announced a stock split, but the semiconductor book-to-bill ratio fell to 1.10 in March versus the 1.13 estimate. Revenues were still $1.20B, 5% over February's $1.14B and 40% higher year over year. The action was mixed in the late trade, reflecting the mixed news.
Right now the market continues to build its pattern, working steadily on setting up for a breakout. That is one reason we are interested in reports such as the LEI that is lower because the market has been selling. That helps promote pessimism about the market, pessimism we feel is unwarranted given the positive accumulation (money is moving into stocks, just quietly as they work more or less laterally). Don't get us wrong; the pessimism is something we like to see when the market is building a base for a subsequent breakout. Part of base building is weeding out those that are getting frustrated and are ready to bail out anyway. Stocks have to shift into the hands of those ready to hold longer term, and the base helps do that as the big money quietly accumulates the stock that the frustrated sellers are getting out of. As long as the accumulation continues to build and as long as the leaders hold their support, this is solid action for the market.
The low volume move Monday makes us a bit wary. Last week Monday was slightly higher but volume was lower, and that set up a cascade lower to the next support level. NASDAQ is still at an important level and the bounce Monday did not change the complexion where we anticipate an imminent breakout. We are still cautiously accumulating positions as well as good stocks show solid volume moves; if the pattern continues and stocks breakout from here, those will be leaders in the move and we will have a head start in the run.
Thus we continue to look for good patterns and solid accumulation and pick off those that move on solid volume. At the same time we cull those that cannot cope, cannot hang on to support. Earnings season is always full of winners, losers, and those that tag along. Overall most are in the first and second category with the implosions being relatively few.
Support and Resistance
NASDAQ: Closed at 2020.43
Resistance: The exponential 50 day MA (2013), the simple 50 day MA (2015), the 18 day MA (2016) are breaking, but have not given up. 2050 represents some prior price points. Breakout from the pattern is 2080. 2089 is the February closing high. 2112 is the early January high. 2154 is the January high.
Support: 1990 to 2000, the top of the late 2003 base. Some prices from the recent March consolidation attempt (1943). The 200 day MA (1921). Mixed tops and bottoms at 1900.
S&P 500: Closed at 1135.82
Resistance: Again, the simple 50 day MA (1134) and the 10 day MA (1133) have not been totally broken. 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 exponential 50 day MA (1128), just over 1125, holding on the close Wednesday and Thursday. 1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100. 1075 to 1070 from the December consolidation.
Dow: Closed at 10,437.85
Resistance: The simple 50 day MA (10,447). Price consolidation at 10,600 level. September/November up trendline (10,655). 10,747 is the February high.
Support: The exponential 50 day MA (10,394) continues to try and hold. 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.
4-19-04
Leading economic indicators, March (10:00): 0.3% actual, 0.3% expected, 0.0% February.
4-21-04
Fed Beige Book (2:00)
4-22-04
Initial jobless claims (8:30): 335K expected, 360K prior.
4-23-04
Durable goods orders, March (8:30): 0.7% expected, 2.5% February.
End part 1 of 3
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