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us stock market, stock watch
Begin Part 2 of 2
Overall market stats:
VIX: 32.48; +3.52. The strongest jump in months as volatility spiked higher on the S&P's move closer to its lows. A solid move, but to put it in perspective, the VIX hit 41.99 back in March before that bottom was set. In other bear markets it has taken readings of 50 to 60 for a lasting turn. Getting there, but not there yet.
VXN: 62.01; +3.28. Nasdaq volatility climbed sharply once again, but as with the VIX, it still has work to do to get to a turning point. In April it hit 83.56 on that turn in the market, another 21 points. This is one of the reasons we keep saying that not all of the indicators have lined up. We always watch the primary indicators (price and volume, leading stocks) the closest, but you want to see confirmation in the secondary indicators along historical norms. They are not there yet.
Put/Call ratio (CBOE): 0.98; +0.01. Once again knocking at the door but not going in. The index cannot break over and hold the 1.0+ close. We probably need two more big spikes that close over 1.0 that roughly coincide with major spikes in volatility to give a solid signal of a good rally.
Sentiment indicators are secondary. They can show signals of what to expect when they reach extremes. They do not replace primary indicators such as price and volume, especially when the sentiment indicators are mixed as they are now.
NASDAQ:
MSFT gave it 5 minutes of life before it rolled over and sold off once more. Volume was solid, but it did not increase on the selling. The Nasdaq is right at the last level where it could pause before running down to the low.
Stats: -53.37 (-3%) to close at 1705.64.
Volume: 1.888 billion shares (-3%). The selling was strong, but the volume was lighter. We want to see selling volume jump higher as investors rush toward the exits. Down volume was impressive at 1.645 billion shares (1.3 billion Wednesday) versus 223 million upside shares (7 to 1). That is lopsided action, but we still want to see overall volume rising, indicating that everyone is getting in on the selling.
A/D and Hi/Lo: Declining issues zoomed ahead to 2.3 to 1 (1.75 to 1 Wednesday). New highs held steady at 48 (+0) as new lows rose again to 95 (+51). The internals are horrible, and that is a good sign; we want to see negative extremes to weed out the sellers and leave plenty of upside room when a rally starts.
The Chart: http://www.investmenthouse.com/cd/$compq.html
Closed at a new low since April, holding above its last low that it spent some time at before the April low (1619.58). The Nasdaq is in an incredibly steep decline that started the first of August. Today's move made the slope of descent even greater. Oversold? Yes, but it can get even more oversold and we hope it does. It is just 86.06 points off of its April low, a level that can be reached in a day (it tanked 109 points the day before the April bottom). We would prefer to see the test on a day other than Friday, but you cannot always call the shots the way you want them. What we look for is a tap at or below the April low and then a reversal and close near the high of the trading range on far and away the largest volume in months. Again, if we get an INTC bounce, we will look to sell it if we get selling after an early bounce and again later in the session if the bounce holds into the afternoon; setting up downside for Monday.
Dow/NYSE:
The Dow closed below serious support today, setting the stage for more selling after three sessions of lukewarm gains.
Stats: -192.43 (-1.9%) to close at 9840.84.
NYSE Volume: 1.322 billion shares (-5.6%). Volume was strong, but softer than Wednesday's selling. 1.109 billion downside shares versus 215 million upside shares. Clearly selling; what we want to see is massive selling volume.
A/D and Hi/Lo: NYSE declining issues jumped up the lead to 2.11 to 1 (1.5 to 1 Wednesday). New highs fell to 70 (-25) as new lows jumped to 165 (+39). As with the Nasdaq, internals are bad. Extremes are good.
The Chart: http://www.investmenthouse.com/cd/$dja.html
9885 snapped today as the Dow closed below the floor it was trying to establish. This move after three sessions of small upside gains opens the door for a move down to 9600 as a first level where it might try to hold the line. That is not much support, and it could easily fall farther toward the low of 9106. Now INTC and MSFT are Dow components, and their news may team up for an early rally. We will see if 9885 stops it or the recent highs near 10,000. If they do, we look to play the downside.
S&P 500: A massive breakdown on the big cap index that started Wednesday and followed through today. We were looking for a possible rally to the upside after the two doji's, but the index used all of its upside energy trying to recover. The buyers were overwhelmed, and the index is making hasty tracks toward its low at 1081.19 (just 25.21 points away). It is looking at a full test and undercut right in the face. INTC and MSFT could lead to a pop in the morning, maybe into the afternoon. We are looking for that as another opportunity to play the index down to the low or beyond.
Stats: -25.34 (-2.2%) to close at 1106.40.
Volume: NYSE volume was again above average, but lower at 1.322 billion shares (-5.6%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Employment numbers are out before the open, and unemployment is expected to tick higher to 4.6% while non-farm payrolls rise to 50,000. Widely followed, but widely inaccurate in telling us anything about where the economy is today. Employment lags the economy both up and down. If it is a surprise for the better, it could combine with the MSFT and INTC news for a decent run higher.
From our perspective, the market is not ready for a real move higher right now, at least one that lasts. There is not enough fear; we know that will bring in more emails about how negative investors are, but we are looking at averages and indexes that quantify fear levels and give historical levels where turns occur. To get the market rebounding for good without more fear on strong selling, the economic news would have to be very good indeed.
We have not seen that the past two weeks. We have seen continued improvement in some areas and disappointments in others; that is typical of an economy that has most likely seen its worst times. The question is, when does the move higher start? Nothing coming from companies indicates it is time, though companies are always more negative about how things are than reality. The fact that CSCO, MSFT, and INTC see some decent signs is the start. The improvement in the NAPM is a big plus. At some point it is all going to come together and the market will reverse sharply on strong volume and then follow through on that move a week later with another big gain on very heavy volume. It is getting close.
Until then we have to get to that point. The indexes have been selling hard. They are oversold by most accounts, but they need to get more oversold. We have been wanting continued selling without a relief rally in between to release the pressure on sellers. We want high anxiety so to speak. We want to see Bob Pisani standing on the NYSE floor shaking his head saying 'this is awful' with no mention that it may be capitulation.
Tomorrow we are looking for two moves: a bump higher on the open that carries for a half hour to an hour or maybe even into the early afternoon. S&P futures are up 3.50 and Nasdaq futures up 16 after hours on the INTC news. We simply do not think that will last. Then we look for the second move, and that is back down. The Dow may turn at 9885 or somewhere before 10,000. The OEX may try 572 before failing. Unless something really bizarre happens, things are not ready for a sustained rally just yet, and we will use the upside to reload for more downside action.
Support and Resistance Levels
Nasdaq: Closed at 1705.64.
Resistance: 1750. 1817 (mid-August low), then the down trendline at 1840. 1935 to 1940 stopped the last move higher.
Support: 1700 is the last mild support before the low at 1619.58.
S&P 500: Closed at 1106.40.
Resistance: 1125. Then 1150, followed by 1165 to 1170.
Support: The low is 1081.19.
Dow: Closed at 9840.84
Resistance: 9885, followed by 10,000. Then 10,120 and 10,200. After that, 10,400. 10,600 is strong resistance.
Support: 9775 to 9800 is potential support. 9600 may also try. 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): 2.1% actual versus 2.0% expected and 2.5% prior.
9-6-01
Initial Claims, 9/1 (8:30): 402K actual versus 395K expected and 405K prior (revised from 399K).
NAPM Services, August (10:00): 43.5% actual versus 49.1% expected and 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: How can I get an intraday quote of the VIX?
A: eSignal and other real time services provide this. The information is also available on the web. If you have an online account, you can get the quote (symbol is usually $VIX) with the online broker. You can also get it at http://www.astrikos.com/public/vixwatch.html
TEAM TRADES
AMGN: Well, we have been looking at biotechs as potential long plays that could last more than a couple of days. We bought some AMGN back in May, got a $7.50 move out of it, and then sold it late and only made $4 on it; better than if we had held on, however, as the stock dropped over $12 from where we sold. It has been fighting its way back, and today it made the move we were looking for on above average volume. It was a strong volume move, but not a big gain. Still, AMGN tends to make a couple of big moves in two days, then move laterally before continuing. We are catching it on the move out of its lateral consolidation of the past two weeks.
As for the details, it was not really a mind bender. The stock made a big move early, but we were waiting for the initial surge to end. The stock reversed course almost $2, found support at 64.50 (nothing special about that level), and then ran back up toward the buy point (65.92). At 12:05 it hit the buy point once again, and the alert was sent. The volume was good (92% of average) and it was moving against the market as anticipated. The buy was made (stock), and the stock moved sideways the rest of the session. It dropped 50 cents in the last half hour, but overall, we like the move and are looking for two strong moves higher where we will more than likely take some profits on part of the position.
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
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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.
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us stock market
stock watch
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