|
|
world stock market, us stock market
Begin Part 2 of 2
Corrections to part 1
SOX: Puts should be SJX UH (September $540).
NASDAQ:
Big intraday swing from positive to negative emphasizes the index' downward bias near term. Economic news was better, but it was not enough right now. The indexes seem inexorably drawn toward the prior lows.
Stats: -34.65 points (-1.9%) to close at 1770.78.
Volume: 1.536 billion shares (+24.5%). Volume was stronger as anticipated now that summer vacation season is over, rising to average on the selling. It was stronger all session, but really increased its pace in the last two hours when the selling was on. Example: down volume led 1.18 billion to just 333 million upside shares. On a day that sported a 2% gain, to have selling volume so strong shows the selling really ramped up on the selling.
A/D and Hi/Lo: Declining issues jumped back into the lead at 1.57 to 1 (advancers led 1.27 to 1 Friday). New highs rose to 62 (+14) while new lows increased to 145 (+30).
The Chart: http://www.investmenthouse.com/cd/$compq.html
The Nasdaq bounced above its mid-August low (1817.70) on its high (1836.19), but it was just a bounce. The higher-volume reversal on no real negative news indicates that some institutions used the rally to dump more shares. If this is the mood of the majority of the institutional managers coming back from vacation, the Nasdaq could easily shed the remaining 8% and test its low this year at 1619.58.
Dow/NYSE:
200+ points up dribbles away to just a 45 point gain. Volume was up, but the early bullish action gave way to bears once again, so even a gain today was hardly solace. The Dow is fighting hard to hold near the 'hump' in its double bottom of March and April. Does not look as if it will hold, but the index is the strongest of the three (for what that is worth).
Stats: +47.74 (+0.5%) to close at 9997.49.
NYSE Volume: 1.172 billion shares (+23.5%). The second above average volume session in the last three. Unfortunately, Thursday's session was selling and today's session was a reversal well off of the intraday highs. Not bullish volume. Down and up volume were neck and neck at 591 million and 585 million, respectively.
A/D and Hi/Lo: NYSE advancing issues maintained their lead today despite the reversal at 1.11 to 1 (Friday was 1.24 to 1). New highs rose to 153 (+41) as new lows rose to 74 (+17).
The Chart: http://www.investmenthouse.com/cd/$dja.html
Another attempt to blow by 10,000 that failed. On the high (10,182.38) it appeared as if the Dow might be able to break through the bottom of its prior trading range, but the index was shoved back on hard selling in the last hour. The index is hanging on at the 'hump' level in the double bottom, but the action last Thursday and today (reversal) on high volume was very bearish. It gave a good shot at trying to break the downtrend, but it was thrown back again. It is still in a downtrend and looks as if it will test lower. Still, if the economic news can continue to improve, this index will most likely lead a reversal higher.
S&P 500: Action much along the lines of the Dow. The index rallied higher as we thought it might, but it slammed right into resistance on the high (1155.40) and then reversed to close a fraction lower. The action is a 'shooting star' doji, but on an index that is in a strong downtrend (and tested resistance and failed on its high), we don't put much faith in any reversal implications of a doji pattern, at least for an upside move, until it can show us more. It has continued the downtrend and from the volume action appears as if it will resume its test of the March low (1081.19).
Stats: -0.64 points (-0.06%) to close at 1132.94.
Volume: NYSE volume jumped to 1.172 billion shares (+23.5%) on a reversal day off of a high that tapped resistance. Not a strong upside move.
The Chart: http://www.investmenthouse.com/cd/$spx.html
Summary: We had the modest move up, a test of resistance on the Dow and S&P, and then they gave the day's moves back. As noted over the weekend, we were looking for the test of this resistance, and a subsequent move to further test the prior lows. The run to the resistance took just a day. We wanted the test of the lows to happen this week. Looks as if it is trying to meet that schedule. Economic news, for better or for worse, has been the catalyst to many moves over the past week. If there is enough hard selling to test the lows tomorrow and Wednesday, a better NAPM services number followed by a surprise in the employment report (though it is dated news) could combine to spur the turn we are looking for. It is getting close to the critical time. We will keep watching to see if all the pieces finally fall into place. The dollar, spurred by the appearance of a stronger economy, is going to be key as always.
TOMORROW
Productivity is out tomorrow, probably not a market mover. The NAPM services on Thursday and the employment report on Friday are stronger indicators. That allows the market to do its own thing tomorrow, and the bias is to the downside with the reversal action today. The majority of the institutions used the rally to sell into, and that most likely means a carry over into tomorrow.
What we are looking for is some really hard selling to continue. We would prefer to see it for two solid says on higher volume that gets the indexes down to their lows. The Dow and the OEX reversed as we thought they would, and started the first leg of the next put play. They are ready to break down again tomorrow below their recent lows for the next leg. We could see more solid returns to the downside come very quickly as we look at the same time to see if the prior lows hold. That is how it works with the downside: greed pushes the market slowly higher, but fear sends it down in plunges. Fast action but big profits.
What we have to keep an eye on support levels. Right now we are focusing more on the prior lows as where the indexes will make their real stand. On the S&P and the Nasdaq, there are not a lot of stopping points between the close and the lows. The Dow could still find something to hang onto before the lows, but as noted last week, it could catch up in a hurry. Just look at today's action: the Dow ran up over 200 points, hit the resistance we were looking to hold, and then retreated 190 points. That fast. It could fall 400 points in two days if the selling was intense.
The point is not to scare anyone (if that is possible at this point), but just to discuss the possibilities. The bias is still down for the moment, and the action can be fast to the downside, and then reverse just as fast. That is why when we hit the targets (upside or down) on the plays and we see them stall, we get out, no questions asked. Tomorrow we anticipate more selling; we do not anticipate a reversal back to the upside until perhaps Thursday. It depends upon how severe the selling is. We are looking to play that move to the downside once again.
There is always a dichotomy in the market: just as one group of stocks fall, another rises. Today we had solid upside moves that held their ground and did not give back any gains. From the reports, SCTC, ESCM, MHK, HNZ, JKC, ASW, SON, KR, BLL were all solid upside plays and triggered solid buy alerts. We are going to get our 10% from them if we can and then move on unless they keep up strong momentum. There were also the trading plays that ran well such as the DJX and OEX calls that ran right up to resistance as anticipated and then reversed. We got head faked on PPDI and the QQQ as they hit the buy points and then turned on us. On the downside RYAAY, MTON, MSCC, OSIP, FEIC, PSFT and TMPW from the reports all gave strong downside alerts and started the moves we wanted. The point: there are a bundle of plays out there either way. If we get a PPDI as we had today (a roller that started up and then broke below its trading range) we cannot let it hurt us too bad. It held at old support and its 200 day MVA, and it may at a minimum test the bottom of the prior trading range, allowing us to get out with minimal damage.
Support and Resistance Levels
Nasdaq: Closed at 1770.78.
Resistance: 1817 (mid-August low). 1935 to 1940 stopped the last move higher. Much higher in the range, 1985 to 2013 is pretty congested.
Support: 1750 is next in line, but there is not a lot of support there. The low is 1619.58.
S&P 500: Closed at 1132.94.
Resistance: 1150. Then 1165 to 1170. 1183 is next, then 1200.
Support: The low is 1081.19.
Dow: Closed at 9997.49
Resistance: 10,000 may act as resistance. Then 10,120 and 10,200. After that, 10,400. 10,600 is strong resistance.
Support: 9775 to 9800 is potential support. The low is at 9106.54.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
9-4-01
Auto Sales, August (8:30): 6.1M versus 6.1M prior.
Truck Sales, August (8:30): 7.1M versus 7.3M prior.
Construction Spending, July (10:00): -0.1% actual versus 0.0% expected and -0.7% prior.
NAPM Index, August (10:00): 47.9% actual versus 43.2% expected 43.6% prior.
9-5-01
Productivity-Revised, Q2 (8:30): 2.0% versus 2.5% prior.
9-6-01
Initial Claims, 9/1 (8:30): 395K versus 399K prior.
NAPM Services, August (10:00): 49.1% versus 48.9% prior.
9-7-01
Nonfarm Payrolls, August (8:30): -50K versus -42K prior.
Unemployment Rate, August (8:30): 4.6% versus 4.5% prior.
Hourly Earnings, August (8:30): 0.3% versus 0.3% prior.
Average Workweek, August (8:30): 34.2 versus 34.2 prior.
Wholesale Inventories, July (10:00): -0.2% versus -0.2% prior.
SUBSCRIBER QUESTIONS
Q: We have received a number of emails forwarding 'doomsday' scenarios of late, asking us for our opinion. We wrote on this not too long ago, but the questions keep coming. The basic premise is that things are so broken they cannot be fixed, that there has to be a massive flushing of the system that will take years and years to recover from if the former levels can ever be attained at all. We receive many of them directly as well. Many but not all are basically advertisements for newsletters that will tell you to short the market and buy gold because the world as we know it is coming to an end. They often contain enough kernels of fact to make them compelling, and indeed, in a flagging stock market and an economy in recession, this is the sex that sells.
We have always read about everything we can get our hands onto. The last time I saw such a proliferation of these types of newsletters and claims was back in 1991 to 1993 during that recession. The claims back then are about the same as those now: the current cycle is just a symptom of a system that is in dire trouble and is heading for ruin. Statements such as 'there will be blood in the streets' and the like were taken as truths. The system simply could not continue without major upheaval that would send most to the poorhouse for life. Then the U.S. defied that 'logic' and continued its economic boom. After ten years we are back in a recession (a cycle that has gone from three years to 10 years apparently), and the talk is once again how the system is unsustainable, we are on a path to destruction that we cannot alter, that life as we know it will be different forever, etc.
We are not saying this is impossible. Anything can happen with the right mistakes and disasters. Our point is simply that this is the same story that appeared 10 years ago and another 10 years before that. We literally know of people who believed what they read, sold a lot of their assets, bought gold, and have suffered ever since, waiting for the 'inevitable' collapse. This is basically what many are advocating in essence. If it ever does happen, of course they will be there saying they were right. It only took 10, 15 or 20 years to be right, but they got there. Well, we are all going to die someday as well. That I know I am right about. Timing, as always, is everything.
Think back. How many major economic upheavals have their been where things were as bad as many of these people are predicting it will get? In recent history I can count 1. Sure it could happen again. Do we plan on it happening, selling our assets on the idea that it might? Not me, at least not based on what I see now by a long shot. The doomsayers are much more visible now, and I take that as another sign that things are not different this time, and indeed, things may just be getting better.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
Investment House subscribers are offered a special from eSignal for those interested in a realtime service. Contact:
Jeff Whitney
Account Executive
800-322-1875
Office hours 6:30-3:30 PST
www.esignal.com
Good Investing!
Jon L. Johnson and the Technical Traders Team
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
|
world stock market
us stock market
|
