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us stock market, trade stock
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9/20/04 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: CME; MRVL
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:
- Volume settles down as NASDAQ, large caps cannot follow SOX lead.
- SOX breaks over 50 day MA, may be ready to take the lead.
- FOMC set to hike rates again as investors look for word it is ready to call it quits.
NASDAQ once again fails to take out downtrend but hangs onto near support.
With a semiconductor upgrade, NASDAQ and SOX were the early leaders. NASDAQ started negative but caught stride, posting an 11 point gain as it broke through the 2004 down trendline. SOX was up out of the gate, rallying 3% and breaking through the 50 day EMA.
This was in contrast to DJ30 and SP500, suffering from CL's very weak outlook in the consumer products sector. DJ30 continued a recent slide lower, but did manage to hold the 50 day EMA on the close. SP500 managed to hold the 10 day EMA, keeping its lateral consolidation move intact.
While SOX held fast, NASDAQ once more could not hold the break over the January/April 2004 down trendline. After clearing the September high midmorning it lost buyers and spent the rest of the session giving back that 11 point gain. It managed to hold near support once more, and it is still being squeezed between the down trendline and that support.
Volume was lower so despite the modest losses there was no distribution. Thus the indexes continue to consolidate last Mondays break higher, holding support as they move more or less laterally. The significant change Monday was SOX breaking through its 50 day EMA. Now we see if it can step up and take a leadership role and actually help out the other indexes.
THE ECONOMY
Not much happening Monday on the economy other than oil rising further on supply concerns after Ivan and with another of the many Yukos' warnings. Yukos did stop shipments to China, an important development, and it did not help that US inventories were down last week.
All things considered, oil continues to trade mostly on fear of shortages. The big news was when Yukos' CEO was thrown in jail and it was fined billions. Oil recovered from that. Then there were storms threatening production in the Gulf. Oil recovered from teh early ones, and once the workers get back out to the rigs it will most likely recover from that as well. In short, while there are any number of bad things that can still happen to impact prices, we have seen some pretty bad actions and the price has recovered. Short term a price over $40/bbl is not good for the economy. It has shown the propensity to settle back down, however, once the immediate scare subsides.
THE MARKET
SOX could turn out to be the key for this rally. The index made a lower low this month as the rest of the market rallied, but then rebounded, helping renew the rally in the rest of the market. While that move was most likely a lot of short covering and just a little longer term buying, SOX held a test of the 18 day EMA and then resumed the upward move with a break through the 50 day EMA Monday.
The rest of the market was not ready to follow SOX. The large caps and particularly consumer related stocks had to deal with CL's warning, and that dampened enthusiasm in one of the stronger sectors of late. NASDAQ gave a dry run of breaking through its 2004 down trendline, but it was not game for holding the move either. None of the indexes, however, broke down. They just faded into the sunset of the session on lower volume, even managing to rebound off the lows late in the session.
The ability to hold support even when some more bad news hit (oil was up again in addition to the CL warning) and SOX' moving through the 50 day EMA may spell more relief for this rally. The 'last' issue confronting the market near term is the Fed and what its plans are with interest rates. Most everyone (though there are always the dissenters) agrees the Fed is going to hike 25 basis points Tuesday, and that is what the Fed Funds futures contract is telling us. Within a week of a meeting it is pretty much dead on.
The key of course is whether the Fed hints that it is through with its series of automatic rate hikes at each FOMC meeting. Greenspan has acknowledged inflationary pressures have subsided, and some other Fed members have hinted the Fed may be through with the automatic rate hiking. Unfortunately, we doubt very seriously that the Fed will give such a clear directive to the market. If it does this in any way the language will be open to more than one interpretation. That alone, however, may be enough for the market: the possibility the Fed is going to lighten up would be a change that could embolden the buyers. That is particularly good for tech as those stocks are perceived to be quite sensitive to rate hikes. The chips started to move off their lows when Fed officials hinted they would entertain ceasing the automatic rate hikes. If they get some more language to that effect that could really boost the rally. Of course, the Fed will likely disappoint those hoping for a message of reprieve. How it handles disappointment at this support level is key.
Market Sentiment
VIX: 14.43; +0.4. Hovering near 14 after a big spike higher intraday.
VXN: 20.56; +0.43
VXO: 13.78; +0.23
Put/Call Ratio (CBOE): 0.92; +0.09
NASDAQ
Rallied over the 2004 down trendline and the September high intraday, then faded once more as it continues the squeeze play.
Stats: -2.02 points (-0.11%) to close at 1908.07
Volume: 1.575B (-4.83%). Trade slipped from Friday expiration but was still above average. Given the index gave up some ground after reversing from a new September high, the lack of stronger trade was a better sign (no high volume reversal). Indeed volume slipped in the afternoon as the index was selling after it showed a solid surge in early trade as NASDAQ rallied.
Up Volume: 763M (-251M)
Down Volume: 720M (+114M)
A/D and Hi/Lo: Decliners led 1.42 to 1
Previous Session: Advancers led 1.03 to 1
New Highs: 85 (-53)
New Lows: 39 (+7)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
After a slow start NASDAQ rallied to a new September high (1921.50), clearing the January/April down trendline (1913) in the process. Volume was solid early, giving the move some credence. When it tried to test the move over lunch, however, a good test broke down abruptly. NASDAQ was down the rest of the session, but volume faded as it sold, indicating there were few overall sellers. By the close NASDAQ was back below the down trendline but still holding 1900 (1894 is the gap up point), the near support that is squeezing it toward the down trendline. It is going to make the break soon.
With SOX breaking through its 50 day EMA (396.41), NASDAQ may get the support it needs to break higher through the down trendline. SOX followed through on its early September jump off of the 2004 lows. With it back over its 50 day, it could be ready to lead NASDAQ higher.
NASDAQ 100/QQQ rallied back toward the 200 day SMA on the intraday high, but gave up the move as it continues to move laterally below that key resistance level. As with NASDAQ overall, it needs to make this break over important resistance.
S&P 500/NYSE
Large caps were under pressure from the start with CL and UL warning. The finished the session lower, but volume was down as well, and they held the recent lateral range.
Stats: -6.35 points (-0.56%) to close at 1122.2
NYSE Volume: 1.192B (-16.22%). Volume fell back below average on the selling; if you are going to have selling, lower volume is best. Overall, price/volume action remains decent (up on gains, down on losses) with the exception of that distribution last Wednesday.
Up Volume: 465M (-398M)
Down Volume: 719M (+157M)
A/D and Hi/Lo: Decliners led 1.47 to 1.
Previous Session: Advancers led 1.12 to 1
New Highs: 144 (-40)
New Lows: 23 (+9)
The Chart: http://www.investmenthouse.com/cd/^spx.html
Still working laterally below the 1125 to 1130 near resistance yet holding above the 10 day EMA (1121) as near support and the 200 day SMA (1116) and March/April 2004 down trendline (1117) as the next solid support levels. Volume fell below average as SP500 tapped 1120 on the low. It is once again moving laterally, its second such move of the month. This is a more common pattern this month after the initial surge off the August lows was pretty much straight up. It is still holding its gains and trying once more to set up for the next leg higher, testing 1130 resistance three times the past week. If it can survive the warnings and still hold up as it has, it could turn the corner higher here if SOX and NASDAQ do the same.
It is still hard to really warm up to the SP600 pattern. Yes it has enjoyed a very nice run since mid-August, moving almost straight up with just one lateral move to end August. The index is now moving laterally at the March and late April tops. A critical level for SP600; if it fails here that sets up a right shoulder to a 5.5 month head and shoulders base. It is a big pattern, and if SP600 fails it has some significant downside. To this point it has held up very well, and if NASDAQ and SOX break higher it probably will get the support it needs to carry higher. We don't want to ignore the pattern, however, when considering all market moves.
DJ30
Suffered with the CL warning, failing just below the 200 day SMA (10,291) and fading to test the 50 day EMA (10,180) on the low. Volume was lower but still above average and outside of Fridays expiration volume, right in line with the highest volume this month. It has give up the early September break higher. This is where it needs to hold if it is going to move back up; it looks like it will get some help from the other indexes.
Stats: -79.57 points (-0.77%) to close at 10204.89
Volume: 222 million shares Monday versus 295 million shares Friday.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
SOX is starting to change the market's complexion. With its break through the 50 day EMA Monday, it has provided a follow through session to the move off of the September low. We are still cautious of this September move given that NASDAQ is still fighting key resistance and the small caps have run far and are at an important point in a bigger bearish pattern. Nonetheless we cannot ignore the continued move in semiconductors as well as the expanding leadership.
Tuesday may see SOX testing the 50 day EMA ahead of the FOMC meeting. Stocks tend to trade quietly ahead of that meeting, moving higher on rising volume then getting a bit shaky before the actual announcement. We feel there is a bit more riding on this statement than the prior two simply because there is the idea spreading that the Fed may be done with its rubber stamp rate hikes at each scheduled meeting. Thus a rise into the announcement and no change in the statement (with a 25 basis point anticipated hike) would set stocks up for some dipping after the meeting.
We are watching several chips that have rebounded to the 50 day EMA to see if they can continue moving higher or stall out. There are other chips that mimicked the overall SOX action Monday, breaking through the 50 day EMA. Those are very interesting, and if joined by those testing their 50 day, potentially a rally leader.
After hours some solid earnings reports were released. ADBE beat the street handily and was up sharply. PLMO crushed estimates and shot higher, but then fell as its estimates fell short of expectations. Once again expectations are the anchor on the market. Several warnings in name stocks and lackluster guidance have hampered the market's ability to break higher the past week. Of course, the indexes have not broke down either, a key factor. Instead, they have moved laterally in a fairly tight range. Again, SOX could be the tipping factor for the current rally.
Support and Resistance
NASDAQ: Closed at 1908.07
Resistance:
The 2004 down trendline at 1913
The 200 day SMA at 1966
Support:
1894 is the gap up point.
The 18 day EMA at 1879
The 50 day EMA at 1878
The 50 day SMA 1858
The October 2002/March 2003 up trendline at 1857
July 2003 highs at 1755
S&P 500: Closed at 1122.20
Resistance:
1125 was key price support and though pierced, it has not given in.
1130 is proving to be some resistance.
1142-1146 are the June highs.
The April and January highs (1150 to 1155).
1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support:
The March/April down trendline at 1117.50
The 200 day SMA at 1116
The 18 day EMA at 1116
The 50 day EMA at 1108
1096 to 1100 represent price support.
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1062 - 1058 from November 2003
Dow: Closed at 10,204.89
Resistance:
The 200 day SMA at 10,291
Late April, June peaks at 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 50 day EMA at 10,180
The 50 day SMA at 10,120
9783 to 9793, the August lows.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
September 21
Housing Starts, August (8:30): 1930K expected and 1978K prior
Building Permits, August (8:30): 1985K expected and 2066K prior
FOMC Meeting (2:15): Expecting a 25 basis point hike with no change in bias.
September 23
Initial Jobless Claims, 9/18 (8:30): 338K expected and 333K prior
Leading Economic Indicators, August (10:00): -0.2% expected and -0.3% prior
September 24
Durable Goods Orders, August (8:30): -0.3% expected and 1.6% prior
Existing Home Sales, August (10:00): 6.65M expected and 6.72M prior
End part 1 of 2
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