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stock prices, stock market report
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10/18/04 Technical Traders Report
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Technical Traders Report Subscribers:
MARKET ALERTS
Targets hit alerts issued Monday: None issued
Buy alerts issued: BSTE; PLMD
Trailing stops issued: None issued
Stop alerts issued: GIVN
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:
- Stocks rebound but volume light as earnings response still tentative.
- SP500 approaching 50 day EMA, another step in its recovery attempt.
- Earnings start to shine a bit better after hours Monday.
Tentative rebound off support, but overall picture little changed by the close.
Friday's modest rebound from the prior selling continued Monday as stocks started soft but then found strength as the day progressed. Much more bullish price action than the prior sessions, but volume did not find the same strength as did stocks. Volume was solid moving through lunch, but it never was able to kick it in as the afternoon rally took hold. Thus SP500 had a hard time breaking through the 50 day EMA. Indeed, it made three tries but could not do the deed. It did avoid, however, selling off after that third try, something that often occurs after three swings (three strikes and you are out).
Stocks started ragged because the earnings coming out were ragged. MMM, a big broad manufacturing company and a general barometer of the economy much as is GE, reported basically weak earnings and was not inspiring regarding the future. LXK, the printer maker, reported good results but its outlook was not bright. That is a familiar story early in this earnings season: doing okay now but given tough comparisons from a strong 2003 and a slowing expansion, the future just is not as bright. Yes they can still grow earnings in a slowing expansion, but the growth rate is less.
Thus the more tepid response to earnings reports. If you are golden for the quarter and are strongly optimistic about the next then investors will be hot to buy. If you are so-so or miss, investors are hot to sell. As of yet there is no overall groundswell or rising tide lifting all stocks based on future earnings. Given the outlooks as described above, that is not surprising. After hours Monday, however, IBM and TXN provided a lift as both beat on earnings and revenues. TXN benefited from some tax benefits and lower operating expenses to held drive the current quarter higher, but it also mostly reiterated Q4 earnings at the 0.26/share expected, giving a range of 0.24 to 0.28. Revenue forecasts, however, appear lower with a range of $2.96B to $3.2B, less than the $3.209B consensus.
Even with this relatively modest guidance, the stocks were higher after hours. These are important stocks to the overall tech sector and they are large caps as well, impacting both NASDAQ and SP500. They will not carry the day alone, however, without a continued strong showing from more and more stocks. And there are going to be a lot more earnings hitting the tape every day for the next two weeks. The problem we foresee is the continued tepid guidance simply because of tougher comparisons and a slowing expansion.
THE ECONOMY
Earnings are front and center for the market, along with oil, Iraq, terror threats, the election; basically the usual entourage of worries that just seem to shift in order of importance based on where we are on the calendar. There is a lull in the economic data barrage that peaked last week. Frankly, given earnings season we doubt whether any economic data released would have much impact unless it was really strong or really weak.
Based on the latest data last week, the economy continues its expansion at a slower pace. There is some good consumer spending and there will be some more business capital investment this quarter ahead of the expiration of bonus expensing. That will help drive a decent economy to the end of 2004. After that the same problems exist, the primary being oil sapping buying power from both consumers and businesses. Regardless of efficient our economy is in using each barrel of oil, we still require a lot of oil to function, and prices have climbed a lot faster in the past six months than our efficiency levels in using them. In short, the price increases are not offset by more efficient use of each barrel. That means more pocket money going to gas and heating, and that does not add anything to the overall economy. After some important incentives to invest disappear at year end 2004, Q1 and Q2 2005 could be rather slow for the economy as the incentives will be gone and as businesses spent their money in a rush to take advantage of those expiring incentives.
THE MARKET
Last week the market held where it had to, avoiding lower lows on SP500 and NASDAQ. Monday the rebound effort continues, but it was no major surge. Volume was above average as the rebound continued, but it was still significantly lower than the last three sessions of last week when stocks experienced some selling pressure and on expiration Friday where volume typically rises.
It was enough to push SP500 up to the 50 day EMA, but no further as it made three attempts at that near resistance. NASDAQ bounced nicely and rallied into the close. Breadth was decent as well. An admirable afternoon rally, but it lacked punch, dogged by those same problems impacting the economy as outlined above. The market is said to climb a wall of worry; it has a high wall right now, and it is still capable of pulling off another up leg here if it can make these higher lows stick on NASDAQ and SP500. That would basically be the election rally many have talked about. If it gets some volume traction the move could carry beyond that toward year end given that Q3 GDP is looking to come in significantly higher than expected. Beyond that we will have to see how the forward looking economic indicators shape up toward year end as to how far a year end run can push into 2005.
Market Sentiment
VIX: 14.71; -0.33
VXN: 20.72; -1.08
VXO: 14.69; -1.2
Put/Call Ratio (CBOE): 0.77; -0.11. The market started a bounce on those 3 consecutive closes above 1.0. As of yet stocks have not shown overall strength in response, but it is still recent since those closes.
NASDAQ
Extended the move off the 50 day EMA, easily making a higher low. Could have used more volume to cement the move.
Stats: +25.02 points (+1.31%) to close at 1936.52
Volume: 1.521B (-7.97%). Above average volume but lower than expiration Friday and the selling volume Wednesday and Thursday. As noted, with the lower volume, the bounce did not cement the higher low off the 50 day EMA.
Up Volume: 1.212B (+415M)
Down Volume: 266M (-451M)
A/D and Hi/Lo: Advancers led 1.46 to 1. NASDAQ led the market, but it was a large cap move with NDX leading the way. There are fewer large cap techs, thus the narrow breadth reading. That also smacks of some short covering at the 50 day EMA.
Previous Session: Advancers led 1.45 to 1
New Highs: 82 (+28)
New Lows: 62 (-3)
The Chart: http://www.investmenthouse.com/cd/^ixq.html
Took basically a week, but NASDAQ found some traction at the 50 day EMA (1900) and rebounded on some solid though lower trade. It held at the key price support at 1900 and the 50 day, leading the rest of the market. It too is heading toward another showdown of import at the 200 day SMA (1962) and the January/June 2004 down trendline (1960). Those are what stopped the last NASDAQ rally attempt, and if NASDAQ is going to lead beyond this bounce, it has to clear those levels with a bit of authority.
NASDAQ 100 put on the best show, clearing the 200 day SMA with a solid move. QQQ volume was solid though lower and also below the Wednesday reversal selling volume.
SOX posted a modest gain but not before selling intraday to 375, barely holding the late September lows. It rebounded to close at session highs and still holding a higher low as well. It is in position to bounce, but it is not really in a position to lead unless it gets some powerful help from TXN and if IBM's contribution to the chip market (chips for Apple Mac's) and other chip stocks reporting this week.
S&P 500/NYSE
If at first you don't succeed, try, try again. SP500 tried three times but could not take out the 50 day EMA. Not a bad session, but not the breakthrough it needed.
Stats: +5.82 points (+0.53%) to close at 1114.02
NYSE Volume: 1.378B (-16.38%). Volume was lower as SP500 sold early in the session, a good indication as it showed no major surge in selling again. When the buyers came back, however, volume failed to surge and show they had clearly taken control from the sellers. It certainly was not enough to push through important resistance at the 50 day EMA.
Up Volume: 734M (-243M)
Down Volume: 603M (-33M)
A/D and Hi/Lo: Advancers led 1.2 to 1. Breadth was modest on NYSE as well as the small caps lagged the market. As with NASDAQ, the action primarily involved large cap stocks and after a hard round of selling as seen the prior week, that often indicates some short covering as the large cap, very liquid and readily shorted stocks are covered after a round of selling. Certainly breadth was no equal to Friday.
Previous Session: Advancers led 2.16 to 1
New Highs: 117 (+18)
New Lows: 48 (-13)
The Chart: http://www.investmenthouse.com/cd/^spx.html
It was a volatile session for the large caps. They clearly did not have the backing the large cap NASDAQ stocks had as insurance lawsuit worries lingered along with big cap manufacturing concerns given the MMM earnings. Three tries at the 50 day EMA (1114.44) failed to yield a breakout over that level, but that did not lead to a rollover into the close. Good to see a test of 1101 hold again, and a modest silver lining in that SP500 held its gains into the close. That had some short covering characteristics, and certainly the pattern is not that enticing; it has to clear 1130 and keep going to avoid a small head and shoulders trying to form the past 7 weeks.
The small cap SP600 tested the 50 day EMA again on the low (287.12) and rebounded to post a modest gain. It has tested back to the 50 day, a support level that should hold if it is to continue being a leader.
DJ30
The blue chips had the typical problems of late, i.e. a big name blue chip reporting some form of bad news. That fell upon MMM Monday. It was a credit to the index that it fought off the selling and closed modestly higher. It undercut the recent October low intraday, but it has already done the damage by undercutting the September low (9988) last week. It has held the May lows at 9900, but it has a long way to go to get back on track.
Stats: +22.94 points (+0.23%) to close at 9956.32
Volume: 227 million shares Monday versus 317 million shares Friday. That lower volume was even with MMM traded at almost 7 times normal volume.
The chart: http://www.investmenthouse.com/cd/^dji.html
TUESDAY
Still no significant economic data for Tuesday, but again, earnings are the key right now. Even oil is not that big of an issue, at least day to day. Why? Because it is not altering its course much, just steadily trending higher. That is definitely a problem longer term, but day to day it is just another factor weighing on the overall action. Only if oil really moves one direction or another will it have a notable, specific impact on the market that day.
Tuesday is going to see another flood of earnings in addition to the two big names Monday. With SP500 tentative at the 50 day EMA and DJ30 in poor condition, leadership is trying to emerge in technology, a thought that sends many fund managers running. After this pullback in energy, metals, and basic materials, they will more than likely be ready to resume leadership roles as well.
For the most part, there are stocks in many sectors that are in good shape, but it is a stock by stock situation. As noted above, there is no tide lifting all boats. That makes sense as the expansion continues to slow. In such a market we look for the leaders that are setting up for new breaks higher and we also look for those stocks that are emerging from some selling and are in a good risk/reward position, i.e. where we can move in with logical support near at hand.
Support and Resistance
NASDAQ: Closed at 1936.52
Resistance:
October gap up point at 1952.
The 200 day SMA at 1962.54
January/late June down trendline at 1960
Price resistance at 2050
Support:
September high at 1921.
The low of the September range at 1900
The 50 day EMA at 1900
September gap up point at 1894
The October 2002/March 2003 up trendline at 1892
S&P 500: Closed at 1114.02
Resistance:
The 50 day EMA at 1114.44
The 200 day SMA at 1120
1125 to 1130 is prior price resistance, and 1128 is the September closing high.
The March/June down trendline at 1127
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 50 day SMA at 1109
September low at 1101
1096 to 1100 represent price support.
May low at 1084 (closing) to 1076 (intraday).
1080 (May and July lows).
1064 (August low).
Dow: Closed at 9956.32
Resistance:
9980 to 10,000.
The 10 day EMA at 10,023
The 50 day EMA at 10,121
The February/June 2004 down trendline at 10,240
The 200 day SMA at 10,285
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:
9900 is some support from the May and July lows is trying to hold.
9783 to 9793, the August lows.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 19
Housing Starts, September (8:30): 1950K expected and 2000K prior
Building Permits, September (8:30): 1950K expected and 1969K prior
CPI, September (8:30): 0.2% expected and 0.1% prior
Core CPI, September (8:30): 0.2% expected and 0.1% prior
October 21
Initial Jobless Claims, 10/16 (8:30): 345K expected and 352K prior
Leading Economic Indicators, September (10:00): -0.1% expected and -0.3% prior
Philadelphia Fed, October (12:00): 18.0 expected and 13.4 prior
End part 1 of 3
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stock prices
stock market report
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