|
|
us stock market, top stock pick
* * * *
10/10/01 Technical Traders Report
* * *
Technical Traders Report Subscribers:
MARKET ALERT SERVICE
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
ONLINE SEMINARS:
To sign up or learn more click on the following link:
https://w1407.securedweb.net/investmenthouse/wk/ordercrs.php
Options You Can Use starts Wednesday, but is also Saturday morning. You can still sign up, but you need to do it now! You can take options, splits, and covered calls without the technical analysis series, and there is still time to sign up. Gain the knowledge to recovery losses and profit the most from this new bull market!
SUMMARY:
- It was two days to the rally, not three.
- Markets start soft and then spurt higher on stronger volume.
- Analysts still cautious and nervous.
- August inventories down in August, showing some signs of improvement before the attack.
- Team Trades
After the consolidation the indexes jump higher.
CNBC reported that none of the analysts and traders were expecting this rally. Well, with the limited cadre of 'regulars' in its bullpen that are relied upon for information, it is not surprising that the 'gene pool' of knowledge is somewhat stagnant. The problem: the traders they talk to, though experienced, are at the epicenter of the turmoil. They are in New York and witnessed the carnage first hand. As late as Tuesday evening, one of the financial reporters was relaying a story about how a broker in NYC could still see the rubble outside the window. It is tragic and touching, but it drives home a point: personal emotion gets in the way of investing. You need to see the crowd's emotion, but you need to control your own. Many, many of the analysts and traders appearing on the television are too close to the emotional ground zero.
Standing back a great distance, other market watchers were able to see what was going on: sentiment indicators spiking to all-time highs in some cases, a reversal, a follow through on strong volume and broad buying, breakouts, a lateral consolidation on low volume. We said Monday it would take 2 to 3 days to kick off the next leg. It took two. Watch the market and keep you emotions in check, at least when it comes to investing.
The right kind of rally.
The indexes started slower with early selling. They reached down toward, but did not break below, their recent consolidation lows. After a quick test of those levels, they were off and running. It may have caught some professionals by surprise, but it is what we were looking for because that is what the market was showing us.
After selling down on below average volume, the indexes posted strong price gains on rising, above average volume once again. Still not as high as last week's rally volumes, but it was just as we would want. Above average volume shows conviction for the direction taken. Any way you slice it, the buying volume has handily outpaced the selling volume, and it drove higher as the indexes jumped off of near-term support and plowed higher.
Analysts cautious still. Wall of worry is good.
Last night the put/call ratio jumped right back up, coming in at 0.97 on the CBOE. That shows that with each round of selling, investors are still nervous. Analysts are still nervous as well. After today's close with a solid gain on rising, above average volume, more than one analyst talking on the financial stations was still pessimistic. This analyst was not ready to give up on his pessimism until he saw consumer confidence rise. The belief was that consumers drive the economy, and until they came back, the economy and thus earnings would lag.
Well, consumers had been strong and confidence had been high until the massive job losses started at the end of 2000. Indeed, that is what we were saying all along as the Fed fought the 'runaway' consumer. It is a historical fact: consumers don't slow down or lose confidence until they are losing jobs. In fact, they did not. It is also a fact that consumers do not regain confidence until AFTER things start improving. It seems as if consumers suffering from a lack of economic confidence all come from Missouri: show me is their motto. They need to see economic improvement and feel the heat from job losses slacken before they get fired up again.
Yes, it is hard to shrug off the last 18 months and the pretty vicious bear market, but you cannot let those 18 months cloud your judgment or lead you to conclusions that are historically inaccurate. Listen to the market; when it gives you the signs and stocks start breaking out of good patterns, start to get back in. If they start to fail in those moves, then our stop points carry us back to cash. Right now the market is acting as it should for a new bull rally.
THE MARKET
After the weekend that started the attacks and the anthrax scare died down a bit, stocks were ready to move higher. There was not a lot of great news as the catalyst, but there was nothing to change investors' overall view that things are going to be better given the present set of circumstances. With that, the indexes that were coiled something like a spring broke higher today on stronger volume.
VIX: 33.46; -2.53. Volatility fell on a sharp rally in the S&P. Still above the 30 level that is considered to be the high end of the 'normal' range from 20 to 30.
VXN: 66.19; -0.07. Edging down every so slightly after hitting 69.14 on the high during the morning selling. Nasdaq 100 volatility did not drop commensurate to the gain in the index.
Put/Call Ratio (CBOE): 0.73; -0.24. Dropped sharply on the strong rally, but still very much in the high end of the range. Friday's and Tuesday's close just below 1.0 indicates that investors are still nervous at any selling. Worry is good for rallies.
Nasdaq
Took the hardest hit Tuesday, but posted the strongest gain today on a sharper increase in volume. It blew through the recent closing tops, closing above the April intraday low but still below the April closing low. Techs continue to perform well, and the greater volatility is pretty much the norm for this index.
Stats: +56.07 points (+3.6%) to close at 1626.26.
Volume: 1.857 billion shares (+21.7%). Stronger, above average volume on a resumption of the rally. 1.581 billion upside shares (volume Tuesday was 1.526 total) to 264 million downside shares. This is the type of price/volume action we have seen since the market bottomed and followed through. It shows continued accumulation of stocks.
A/D and Hi/Lo: Advancers led 1.96 to 1 over decliners (decliners led1.47 to 1 Tuesday). Again, stronger ratios on the upside versus the down days. Bullish action. New highs fell to 45 (-4) and new lows fell to 88 (-21).
The Chart: http://www.investmenthouse.com/cd/$compq.html
On its low the Nasdaq hit 1558.81, just above the 1550 level acting as near term support after it made its breakout of the small ascending wedge 6 sessions ago. The move cleared the April intraday low at 1619.58, and is just over 12 points from the April closing low at 1638.80. The move today was nice, but the Nasdaq needs to break through that low and then take out the bottom of the gap down at 1695 to 1700. One step at a time, however. It still has not cleared the intraday high touched last Thursday at 1641.56, just above that April closing low.
Dow/NYSE
The Dow cleared its resistance, and it finally appears it has put enough distance between the close and the March low at 9106. That tightening spring sprung today.
Stats: +188.42 points (+2.1%) to close at 9240.86.
NYSE Volume: 1.292 billion shares (+5.2%). Not an explosion of volume, but it did push volume back above average on another session of buying. In the last six weeks, NYSE volume has traded at below average levels just three times. Up volume was solid at 1.075 billion shares versus 221 million to the downside. As with the Nasdaq, this is accumulation volume: up on rally days, down on selling sessions. The above average action shows more conviction behind the move up as opposed to the lower volume on the selling during the consolidation.
A/D and Hi/Lo: Advancers led 2.58 to 1 (decliners led 1.07 to 1 Tuesday). New highs rose to 72 (+21) as new lows fell to 47 (-25).
The Chart: http://www.investmenthouse.com/cd/$indu.html
The coiled spring bounced higher today as the Dow cleared the highs in its recent consolidation, closing near its session high (9252.90). That puts it well above the 9106 March low, finally burning that bridge for now. It still has to contend with the March closing low at 9389.48 as next resistance, but that is a nice problem to worry about. There is also the 50 day MVA right above 9500, so that whole 9400 to 9600 level will be tough. Rally and consolidate, rally and consolidate. There may be a test of the low to come, but for now there is buying going on. As we have said before, use resistance to take some profits and use stop points to protect gains. If a test comes, we will have some profit banked and will be moving into cash at that point.
S&P 500: Split the difference with a 2.3% gain as the big caps shrugged off Microsoft's woes, rallying without that big cap. On the low it tested 1052.70, just above the 1050 level we were looking at to hold as support and the 10 day MVA (now at 1058.74 after today's close). It just missed the intraday high at 1084.12 before the consolidation, and it closed just below the March intraday low of 1081.19. The closing low in the March and April double bottom is 1103.25. The 50 day MVA is at 1106.24. Thus, the S&P still must clear this last 20 to 25 points or so before it has a little room up to 1150. It looks like a good start to do just that today.
Stats: +24.24 points (+2.3%) to close at 1080.99.
Volume: NYSE volume rose back above average to 1.292 billion shares (+5.2%). Not a huge rise in volume, but again it shows accumulation.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Last night we said the indexes looked ready and it was just a matter of a day or two to get a move higher. Patience is always the key, letting plays come to you. Turns out it was just a day and the market started up solidly with many good breakouts (e.g., NECN, PEP, KKD, WMT, RSEP, RNDC, ISIP, DAP, OEX, DJX). The good patterns in individual stocks and good consolidations in the indexes set up the move.
After hours tonight there was some decent earnings news as YHOO met expectations, RBAK showed a narrower than expected loss, and DNA had an upside earnings surprise. All of those stocks were rallying after hours even though Nasdaq futures were slightly down.
Tomorrow we have the weekly jobless claims numbers before the open. Jobless claims have been shooting higher and with the layoffs announced, they will go even higher. It does not all happen at once, however, as layoffs are announced and then put into effect over time (and some not at all as companies don't want to layoff trained employees unless the absolutely have to). We may see some weakness from those numbers early on, but remember the pattern of this rally when the market is climbing: early weakness is used as an entry point for institutions looking to pick up their stocks at better prices.
It still remains a market of patience. We like what we see, but investing is methodical: watch the patterns form, keep an eye on the overall market, and when stocks make their moves to clear resistance, we start taking positions. It is a time we can be as picky as we want; makes those stocks earn our money.
Right now the market is under accumulation by institutions. There is a lot of talk about a test coming. It may happen, it may not. It for sure will not be a straight ride higher; there are too many questions about the economy and the war that could take turns either way. As long as the action remains as it has, we can catch stocks as they breakout and ride them up and then let them test near term support levels (the 10 or 18 day MVA) and bounce from there. As long as the price/volume action remains solid we are not as worried about letting a stock come back to test support in its usual manner. When we see volume increase significantly on selling, however, we will take profits. We can be assured the market will move higher and also pullback as we saw late last week and this week. As it makes its way out of the bear we will have many opportunities to profit. As long as the price/volume action is good, we can ride positions, but if that changes, take profits and ask questions later. We can and will get back in when the time is right.
Support and Resistance
Nasdaq: Closed at 1626.26.
Resistance: The high in the current pattern is 1641.56 (intraday last Thursday). 1619, the intraday April low, was cleared today, but it is not a lock. 1638 is the closing low, and it held the index back last week. It has rested now and is taking aim at that level. Then there is the bottom of the gap down at 1670.
Support: 1550 has held for now. Then 1530, the intraday high of the little wedge it just broke out of may act as support. Again, that is where we would expect it to hold. Below that, 1459 has held on a closing basis. The lows of the 1998 bear market, 1419 closing and 1357 intraday.
S&P 500: Closed at 1080.99.
Resistance: The former lows are still the level to beat. Those are 1081 (intraday) and 1103.25 (closing). Then 1124 (prior consolidation level) and 1150 (also price consolidations).
Support: 1050 has held for now. The 10 day MVA is at 1058.74 and the 18 day MVA at 1060.87; again, those will help the 1050 level out. After that, again 1017 to 1020. 1000 acted as support as well on the prior test. After that, 960 (one of the lows in the 1998 double bottom). The other low in that pattern is 925.
Dow: Closed at 9240.86.
Resistance: Finally cleared the March intraday low at 9106. Now it is taking aim at 9389, the April closing low, and from there up to 9500 represents resistance.
Support: 9106 should help hold now. Before that, however, we would look to the top of the recent consolidation at 9140 to 9150. After that, 8900 and then 8700 is next where it held before.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
10-10-01
Wholesale Inventories, August (10:00): -0.1% actual versus -0.3% expected and -0.9% prior (revised from -0.7%). Better than expected, showing that before the attack inventories were still declining, something very much needed.
10_11-01
Initial jobless claims (8:30): 505,000 versus 508,000
Export prices, September (8:30): -0.3% prior.
Import prices, September (8:30): -0.4% prior.
10-12-01
Producers Price Index, September (8:30): 0.0% expected versus +0.4% priorl
Core PPI (8:30): +0.1% expected versus -0.1% prior.
Retail sales, September (8:30): -0.7% expected versus +0.3% prior.
Retail sales, ex-auto (8:30): -0.5% expected versus +0.5% prior.
Michigan sentiment, October prelim (10:00): 75.7 expected versus 81.8 prior.
End Part 1 of 2
|
us stock market
top stock pick
|
