|
|
investment help, Breakout test
* * * *
6/21/04 Investment House Daily
* * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Monday: None issued
Buy alerts issued: None issued
Trailing stop alerts: ULGX
Stop alerts: IPIX; LPNT
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/alertdly.htm
SUMMARY:
- Second straight weak close as market punts some decent gains.
- No real news in the economy, and the market is treating as such.
- Range bound market finds no buyers or sellers, but one showdown is approaching.
Modest but steady gains fade in last hour.
In a repeat of Friday stocks accumulated some decent gains most of the session only to give back a substantial chunk late. Monday they gave back all of the gains and more in a last hour and one-half that saw SOX drop a 1%+ move and SP500 fade once more after a break over 1135 resistance.
Once again there was no volume either on the early gains or the late losses. Volume fell well off pace after expiration Friday pumped trade up. Outside of Friday volume has remained as rage bound as stocks in general; this is another chapter of the textbook that demonstrates the link between volume and price movement. There were some scattered breakouts higher that showed good volume, but even many of those fell victim to the late selling and gave back sizeable portions of their intraday gains. Thus it was not all just a lack of volume as some good moves were hit by sellers as well.
The short of it is that stocks showed similar action as last week: DJ30 and the smaller caps holding over the down trendlines, SP500 trying to move over that resistance but fading again, and NASDAQ weighed down by SOX and threatening a break below support versus a break above resistance. SOX is trying to hold at some support near 450, and that may provide a boost for NASDAQ with a relief bounce from the selling as it has tried to bounce the past two sessions. Still a pretty big 'may' at this point with some serious overhead resistance facing SOX on any upside move.
THE ECONOMY
Very quiet on the economic front with no scheduled data release until Thursday. Oil fell slightly after rising late last week on pipeline attacks and the general 'weekend' premium that is built in ahead on fears something might happen before the next open. As with the market, much remains the same economically: energy prices softened but still high, economic gains still solid but showing signs of slowing. With the overlays of the Iraq handover, continued threats of a big terror attack at some point this summer, and the FOMC meeting to end the quarter, investors see no near term catalyst here either. They have yet to start factoring the resolution of the issues into prices ahead of time. That leads us to believe the handover date and the actual FOMC meeting date are not the time points the market sees as resolving these issues.
THE MARKET
The indexes continue riding the range without a lot of upside or downside pressure to push them beyond the current limits. SP500 continues to fail to take out the 2004 downtrend and NASDAQ has stopped challenging its downtrend the past several sessions. We wrote last week about SOX and its impact on NASDAQ, and once again NASDAQ is back down at the 200 day SMA. SOX has tried to find support at 450, bouncing from that level the past two sessions, but when it failed to hold the move, NASDAQ failed to hold its gains as well. SOX may indeed bounce from here and aid NASDAQ making a gain, but it has the 50 day EMA just below 475 and then the 200 day SMA at 488. Thus even if it can bounce and provide a lift to NASDAQ the concern is that it won't be lasting. In other words, we were looking for a bounce toward the April highs, and a bounce by SOX could help NASDAQ make that push. After that bounce, however, the upside will need something else to drive it. Thus far the summer sleep has come early, and finding a catalyst has been elusive.
Market Sentiment
Market sentiment has been taking a wrong turn of late with bulls starting to stampede over bears. Bearish advisors hit 55.7%, considered a bearish level. Bearish advisors fell to 17.5%; 20% is considered bearish. Thus investors are much to sanguine about the market's future. We think it could rise a bit higher, but not much further after that as it heads into what is already a slow summer. It has had a hard time doing even that with SOX struggling and dragging NASDAQ lower with it. These bull/bear readings are the latest indication of the struggle the market still has ahead of it to make a run above the April highs.
VIX: 15.26; +0.27
VXN: 19.73; -0.29
VXO: 14.63; -0.12
Put/Call Ratio (CBOE): 0.83; +0.03
NASDAQ
Received a boost as SOX was up over 1% intraday, but SOX failed and NASDAQ went with it, dropping back to the 200 day SMA.
Stats: -12.35 points (-0.62%) to close at 1974.38
Volume: 1.401B (-18.97%). Volume fell back into the range as well, dropping back below average and into the slow doldrums seen the past two months.
Up Volume: 427M (-503M)
Down Volume: 844M (+145M)
A/D and Hi/Lo: Decliners led 1.26 to 1
Previous Session: Decliners led 1.13 to 1
New Highs: 60 (-5)
New Lows: 44 (-29)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
A 9 point gain was turned into a 12 point loss in 1.5 hours as NASDAQ's intraday house of cards rally on low volume collapsed late. Once SOX lost its footing on its gain, NASDAQ did the same, and NASDAQ again finds itself at the 200 day SMA (1972) where it tested last week before a modest bounce that made a lower high below the 2004 downtrend (2001). It also failed to even try to a shot at 2000, the price resistance that stopped it last week. NASDAQ is struggling and a break below the 200 day SMA opens the door to 1900. From there it would have formed a descending triangle, and after a bounce up to test that drop and make another lower high, it would then be fighting to hold the bottom of the triangle at 1900.
Not a rosy scenario, but NASDAQ has shown little strength other than managing to hold the 200 day SMA for now. That is definitely an important point, but it needs to reverse the lower and lower highs and because the trend pushing it down. QQQ also suffered, falling below its down trendline but managing to hold at the 50 day EMA. Very low volume, so not anything like a major breakdown. QQQ is starting to feel the drag of SOX as well, however, after doing an admirable job of holding up in spite of that index. It will have to hold here at the 36 level to give some credence to an upside bounce toward 37.50.
S&P 500/NYSE
Took the downtrend again and then gave up the downtrend again. No volume, no strength, but pinching off in the handle to its 4 month base.
Stats: -4.72 points (-0.42%) to close at 1130.3
NYSE Volume: 1.124B (-24.78%). Volume fell way off the table after expiration, hitting levels below last week's upside sessions. Thus there was no distribution, just a complete loss of bids in the afternoon that led to the prices falling.
Up Volume: 453M (-448M)
Down Volume: 655M (+81M)
A/D and Hi/Lo: Decliners led 1.09 to 1. Swung for 1.3:1 advancers to decliners by the close.
Previous Session: Advancers led 1.27 to 1
New Highs: 132 (-12)
New Lows: 33 (+11)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Once again SP500 cleared 1135 on the high (1138) and then gave it up. The trendline remains roughly at 1134 - 1135 as SP500 retests the 10 day EMA (1130) where it found support last week. Overall SP500 remains in a nice and tight lateral move in what has become a handle to its 4 month base. While it continues to fail at taking out the 2004 downtrend line it is not breaking down. NASDAQ is being hurt by SOX, and we are watching to see if NASDAQ starts to hurt SP500. Thus far it has not, and it is still setting up for an upside move. As with NASDAQ, the key is how far it can carry on such a move. The April high is at 1150, standing right in the way, follow by the 2004 closing highs at 1157. Not a lot of upside without a real change in the volume to give it the push to break through these levels. Thus far the market has not shown there is any impetus to send it higher. It is set up to receive some news that sends it higher, however.
DJ30
Gave back the Friday gain with volume dropping back below average as it did. DJ30 held the 10 day EMA (10,355) again on the low as it too works on its lateral move that is shaping up into something of a lateral handle similar to SP500. These parts of patterns are where the undecided are shaken out or 'frustrated' out as the market goes nowhere. This move keeps DJ30 over the down trendline (10,025) and working well toward an upside move at the April high (10,570).
Stats: -44.94 points (-0.43%) to close at 10371.47
Volume: 175 million versus 300 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
Well, looking at the calendar there is not a whole lot to drive the market Tuesday that was not there Monday. No scheduled economic data, the Fed is going into more of a 'quiet' time ahead of the FOMC meeting, earnings yet to start cranking up. At the same time the Middle East, particularly Saudi Arabia, has everyone wondering what will happen, not to mention the Iraq handover. It will take place, but what will change when it does, at least as far as security and enforcement of the government's decisions?
With those questions the market is still grinding it out, holding onto a lateral move. There is some distress as shown in NASDAQ with it falling back to the 200 day SMA once again, feeling the weight of SOX. The market is waiting for some catalyst, unable to continue the move higher in the uncertainty of what may happen and the vacuum of news.
The action is definitely the type that frustrates investors of all sizes with its on again, off again sessions, all sandwiched in a narrow range. When that gets to a point where enough give up, a breakout can follow. Judging from the bulls versus bears polls, however, not all are calling it quits yet. We are still looking for an upside break this week that is actually able to hold the downtrend and allow for an advance toward the April highs. If that does not come the market may not be able to provide the move with earnings on the horizon. Unlike other earnings seasons, we feel this one will be more of a downer for investors as they will be focused on guidance; earnings may still be solid, but we are anticipating guidance to continue to be the sticking point.
That leaves us looking at breakout tests, breakouts, and other stocks at support ready to bounce. We will use these to capture any break higher, but don't plan on staying around too long as the indexes approach the April highs and start to struggle. If they march right on through, beautiful; we will let them continue to move. We are not counting on that, however, as this summer looks a lot like typical summers that experience a run into the July earnings and then start to falter.
Support and Resistance
NASDAQ: Closed at 1974.38
Resistance:
2000 is the top of the late 2003 base.
2001 is the January/April down trendline.
2024 is the June high.
2050 represents some prior price points and has stopped NASDAQ the last time it tried that level.
April high is 2080.
2089 is the February closing high. 2112 is the early January high.
Support: The 50 day SMA (1973). The 200 day SMA (1972). 1925 is some support. 1900 to 1890. The April lows (1880, 1878).
S&P 500: Closed at 1130.30
Resistance: The March/April down trendline at 1134.
1142 is the June high.
The April and January highs (1150 to 1155).
Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support: The 10 day EMA (1130).
1125.
The 50 day EMA (1121) and the 50 day SMA (1119).
1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100.
The 200 day SMA (1094).
Dow: Closed at 10,371.47
Resistance: Late April peaks (10,478 to 10,512).
10,570 is the early April high.
Price consolidation at 10,600 level.
10,747 is the February high.
Support: The 10 day EMA (10,355).
The January/April down trendline (10,325).
The 50 day EMA (10,272) and SMA (10,255).
Price support at 10,250.
The 200 day SMA (10,130).
March low (10,007). 9900-9850.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 24
Durable Orders, May (08:30): 1.6% expected and -3.2% prior
Initial Claims, 06/19 (08:30): 340K expected and 336K prior
Help-Wanted Index, May (10:00): 40 expected and 38 prior
New Home Sales, May (10:00): 1120K expected and 1093K prior
June 25
GDP-Final, Q1 (08:30): 4.5% expected and 4.4% prior
Chain Deflator-Final, Q1 (08:30): 2.6% expected and 2.6% prior
Michigan Sentiment-Rev., June (09:45): 95.0 expected and 95.2 prior
Existing Home Sales, May (10:00): 6.50M expected and 6.64M prior
End part 1 of 3
|
investment help
Breakout test
|
