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us stock market, stock watch
Begin Part 2 of 2
THE MARKET
It was a struggle today, but all three indexes turned off of the lows and rallied to the close on stronger, though not blowout, volume. Resistance was not conquered; they will need a shot of volume to do it. They may get it tomorrow with IBM's and INTC's comments: chips were really rallying after hours, and futures are sharply higher. Again, this may be the juice that shoots the indexes over this near term resistance.
VIX: 35.22; -2.14. Volatility opened lower and moved lower most of the day, particularly when the indexes rallied late. Still in the high end of the range where it has been residing for a long time.
VXN: 64.01; -2.23. Hit 67.52 on the selling, but then gave it back when the index started to rally in the last half of the session. Still in the high end of the range as well.
Put/Call Ratio (CBOE): 0.70; -0.18. Put buying ebbed on today's rally, though it remains at a high level. As noted last night, option buyers are still skeptical of the rally. As we have noted before, that is good for rallies.
Nasdaq
The best move of the day (+1.5%) on stronger, above average volume. It stalled at the 50 day MVA twice, once early and once late. It may get the muscle to overpower it with the semiconductors tomorrow.
Stats: +25.76 (+1.5%) to close at 1722.07.
Volume: 1.844 billion shares (+16.4%). The index moved higher with a bit more authority, and the volume moved back above average as well. 1.312 billion upside shares versus 490 million downside shares. This continues the very good price/volume action of this rally that continues to show accumulation. It now needs more volume to spring it solidly past resistance.
A/D and Hi/Lo: Advancing issues moved higher at 1.51 to 1 (1.06 to 1 Monday). New highs rose to 47 (+14) while new lows fell to 41 (-6).
The Chart: http://www.investmenthouse.com/cd/$compq.html
Perched right below the 50 day MVA (1723.77) on the close, bouncing down from that level early in the session and then unable to blow through that level as it moved sideways in the last half hour of trading. This is obviously a key level; it has been a long time since the index has traded definitively above this MVA. It is some key resistance and it thus needs to clear it with some force. We would have preferred another day of lateral movement to consolidate more. With the positive reaction to earnings after hours, it may simply be ready to move up from here with the support of the semiconductors. Lots of good patterns to base the move on.
Again, still support at 1670, and then at the gap point (1649.55).
Dow/NYSE
Continuing within its consolidation, rising today on rising though below average volume with new lows below 40 for the fifth consecutive session. It is again looking to spring higher above the high in this recent consolidation. IBM will almost single handedly bolt it out of the consolidation tomorrow morning, and INTC and MSFT probably won't hurt it.
Stats: +36.61; +0.4%) to close at 9384.23.
NYSE Volume: 1.204 billion shares (+17%). Rising on the up session, though still below average. Still good price/volume action. Up volume led 778 million to 401 million shares.
A/D and Hi/Lo: Advancing issues moved back in front at 1.73 to 1 (decliners led 1.01 to 1 Monday). Not a bad day at all, and we are looking for better numbers on the next big move which should be soon. New highs rose to 60 (+14) while new lows rose to 36 (+2). This is the fifth consecutive session where new lows closed below 40. According to Dow theory, that means a sustained rally is coming.
The Chart: http://www.investmenthouse.com/cd/$indu.html
Rallied on stronger volume as it banged around inside of its consolidation range. It needs to break out of this range, the top at 9432.04, and then it has to cross the 50 day MVA at 9532.98. The first is easy and it will do it on IBM alone. The latter is still 150 points away; easily reachable on a big rally, but will it then carry through? If this is the start of another strong move up, we should get 2 to 3 days of rallying to carry it higher, and that may allow it to get far enough ahead of the 50 day MVA to use it as support for the next consolidation. The high of the prior consolidation is 9187.37; we don't think we are going to see that.
S&P 500: The big caps tapped close to the 50 day MVA on its high (1101.66; 50 day MVA at 1104.45) early in the session, sold off to Monday's closing price, then rallied in the afternoon. The move was on rising NYSE volume, but it was not huge volume. It appears the index was testing the resistance. As with the Nasdaq, we would have preferred another quiet day and then an explosive move, but with IBM and INTC after hours, it appears as if it will get an early jumpstart over this resistance as well as the April closing low resistance at 1103.25 and a down trendline from the two August tops. A lot of resistance, but the time looks right.
Stats: +7.56 points (+0.7%) to close at 1097.54.
Volume: NYSE volume rose to 1.204 billion shares (+17%). Not above average volume, but it continues the good price/volume action we have seen since the bottom.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
As noted, IBM got things rambling after hours, and INTC did not hurt. This had things pretty rowdy after hours as chip stocks ran higher. Again, we could get a pretty big open tomorrow; the key as always is to watch for where the index holds when it sells back. If they move over resistance levels on the open, we would like to see them hold there on any test. After that, we look to the prior closing price to hold them. We do not have a lot of fear that any solid move up will lead to selling; that is not the character of the market right now. There has been solid buying on each dip, not selling on each rally. That is a major change of character from just three weeks ago.
Greenspan speaks for the first time in a while tomorrow when he addresses Congress on the economic impact of the 9-11 strike. Remember, at first Greenspan said to wait 10 days before doing anything. Then he came out a bit later and said the economy needed fiscal stimulus of 'at least $100 billion.' It is now way beyond those ten days, and we have a feeling that Mr. Greenspan is going to come before our representatives and say 'guys, you need to get something done, and you need to get it done now. Ten days is not 30 days.' Hopefully they will get the message with Greenspan and our urging.
So what do we do? There are so many stocks that are setting up good patterns just as they said they would be doing. They are forming their patterns, they are completing them, they are breaking out. We will most likely see the indexes gap higher tomorrow without some major adverse occurrence overnight. On gaps, we usually let them make the initial run, then come back to test that support that may have just been broken or the gap open point or the prior close, and if it holds, we start taking positions on the bounce back up. Those are our three primary points of attack, but if it is a really strong move, the pullback may not make it back that long; thus we will also look at some partial positions on the first pullback if it does not reach those levels before it turns. If it takes off, we have some positions; if it pulls back to fully test those levels, we can average in at better pricing.
There are so many negative on the market. The primary reason? They don't see the economic recovery coming fast enough to justify stock prices. How do they know? We can look at historical valuations to get somewhat of a handle on things, but those are never the same from recession to recession. They are not; we looked it up. To us, it is enough that the market is in an accumulation phase; the collective of all investors is buying stocks. We believe the market knows more than analysts; it sure did when it was selling off in 2000 and 2001. Now that every hedge fund manager is negative on the market and most analysts are likewise, are they suddenly correct that the market will continue lower? The market is not going along with them for now; it could always fold, but we always follow the market and what it tells us directly. It has flashed all of the historical signs of a new rally; the analysts are still smarting from third degree burns in the bear market. They have finally turned bearish and they are not going to flip-flop quickly.
So, don't let the negative talk get you down. Take solace in looking at the stocks we have been getting into; they are performing well. As one seminar attendee put it after the technical analysis seminars, after losing 75% following his broker, he now understands how things work and is up 25% already. Follow what the market tells us and follow the rules.
Support and Resistance
Nasdaq: Closed at 1722.07.
Resistance: The 1700 level may be giving way, but it must clear the 50 day MVA at 1723.77. If it can beat 1750, it has some room to ramble.
Support: 1670 has been holding as closing support. Then there is 1650. 1641 is the top of the prior consolidation, and 1630 is after that.
S&P 500: Closed at 1097.54.
Resistance: The former closing low still remains intact at 1103.25. The 50 day MVA is at 1104.45. After that, there is 1124 (prior consolidation level) and 1150 (also price consolidations).
Support: 1084 is the high in the prior consolidation, and it has already held on a closing basis. After that the closing tops in that consolidation at 1070 to 1072. 1050 has been solid prior to that during the consolidation.
Dow: Closed at 9384.23.
Resistance: The April closing low at 9389. 9500 is also tough and it is backed up by the 50 day MVA at 9532.98.
Support: The high in the prior consolidation at 9187.37, and it has held intraday. The consistent prices in that consolidation are at 9115 to 9120.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
10-15-01
Business Inventories, August (8:30): -0.1 actual versus -0.3% expected and -0.5% prior.
10-16-01
Capacity Utilization, September (9:15): 76.5% actual versus 75.6% expected and 76.4% prior (revised from 76.2%).
Industrial Production, September (9:15): -1.0 actual versus -0.7% expected and -0.7% prior (revised from -0.8%).
10-17-01
Housing Starts, September (8:30): 1.490M versus 1.527M prior.
Building Permits, September (8:30): 1.46M versus 1.56M prior.
Greenspan speaks to Congress re 9-11 attack economic impact.
10-18-01
Initial Claims, 10/13 (8:30): 468K versus 468K prior.
Philadelphia Fed, October (10:00): -13.4 versus -7.3 prior.
10-19-01
Trade Balance, August (8:30): -28.4B versus -28.8B prior.
CPI, September (8:30): 0.2% versus 0.1% prior.
Core CPI, September (8:30): 0.2% versus 0.2% prior.
Treasury Budget, September (14:00): $29.0B versus $65.7B prior.
SUBSCRIBER QUESTIONS
Q: You had mentioned the ARMS index a few weeks ago, as having a good track record for predicting market bottoms, then I haven't seen your conclusion of what actually happened. Could you comment?
A: The Arms Index has a couple of ways to read the market, the primary being a close over 1.50 indicating a significant bottom in 4 to 20 days after the signal is flashed. The indicator is simply another means of viewing market fear and anxiety and finding a 'capitulation' bottom. What happened this time around was interrupted by the events on September 11. Even if the Arms Index flashed the signal, it could not predict what happened after that signal was given. What did happen was other sentiment indicators that we follow all flashed reversal levels, some at levels never recorded before (e.g., put/call ratio). Those indicators all lined up at reversal levels, then the market rallied and gave multiple follow throughs with the A/D ratio at 2+ to 1, 3+ to 1. In addition, stocks started breaking out, and they are continuing to form up patterns so others follow in the breakout footsteps. The Arms Index may have been telling us this was coming anyway without the attack, but we are not sure you can honestly say it predicted this bottom.
TEAM TRADES
RE: Another split report stock was looking ready to rumble to a new high. Stocks on the split report are great performers; they would not be there otherwise. This insurance stock had taken a plunge on the attack, and then rallied 30 points to make it back to its base. Then it moved sideways for two weeks right at the old high; that is what you like to see after a strong move from a solid stock at the previous high. Volume backed off considerably in the lateral move, throwing out a huge spike six sessions ago as it remained in the consolidation. As discussed in the seminars, that is a 'get ready' spike; we look for big volume spikes in consolidations where the stock does not move. Buyers are coming in to scoop up the stock as fast as sellers are selling it. They won't let it fall.
RE hit the buy point about 10 minutes into the session and we issued an alert. After the alert was issued, we entered an order, but it was missed as we were a bit late (getting that alert out first). It ran to 76.75, and then it started to come back. As we teach in the seminars, even intraday stocks come back to test the breakout, and RE came right back toward the breakout point of 75.62 (0.13 above the high). The stock came right back down to test 75.60. Just as on Monday, we anticipated this and had entered a limit order to buy above the breakout point. The stock settled slowly down to the breakout point, triggered the order, then moved higher. Three hours later it cleared the session high, and in the last hour it raced ahead. We love this method of buying in an improving market.
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:
Ray Fitzgerald
Account Executive
800-322-0940
Office hours 6:30-3:30 PST
rfitzgerald@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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