|
|
us stock market, stock watch
* * * *
10/30/01 Stock Split Report
* * *
Stock Split Report Subscribers:
MARKET ALERT SERVICE
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertssr.htm
SUMMARY:
- Market fades on stronger volume as weak consumer confidence.
- Was the higher volume today necessarily bad?
- Momentum is down for now on this test of the low, but there is not a lot of 'tankage' in the stronger stocks.
- Consumer confidence in the tank.
- Team Trades
Volume moved higher after Monday's big price losses.
Monday saw big percentage drops price-wise, but volume was not correspondingly higher. Today volume joined in, giving the third clear distribution day in the past 10 sessions. From a textbook reading of price and volume action, that is right on the border of serious trouble for the indexes as far as further selling goes. Typically, three to five distribution sessions over 7 to 10 days spells trouble for any rally. With the Nasdaq breaking below its up trendline off of the September low, the one-two punch appears to have set the stage for more selling. Add in the Dow and S&P falling on much stronger volume, and the picture is not great for an immediate turn back to the upside.
The culprit? Today there were plenty more stories to hang the hat on. The new terrorism alert noted last night, downgrade of JNPR, some more anthrax cases, consumer confidence tanking. The market was soft at the open as expected, and then it tanked when consumer confidence hit lows not seen since February 1994. 85.5 was the actual number when 96 was expected and September was revised lower to 97. Present conditions fell to 107.6 from 125.4, and future expectations (6 months down the road) fell to 70.8 from 78.1. Not good news.
Still, the number of respondents stating they will take vacations in October rose while buying plans did not tank. Auto buying rose and homes just dipped slightly. It was not all carnage, but the market took it that way, gapping down and hitting its low over the next hour. It fought back, however, bouncing off support levels and rallying to shave the losses. It was never threatening to turn positive, but it did bounce off of the lows.
One thing to remember regarding consumer confidence. Remember when we said over a year ago that the Fed was focusing on the wrong 'indicator' when it targeted consumer confidence. As we noted then, history shows that consumer confidence does not fall until they start losing jobs. To talk of slowing consumers by raising short term rates was foolish or simply a ruse for its real motivations. Now that jobs are few and jobless lines are long, consumer confidence has finally been shaken. Will it lead the economy out of the doldrums? No. It never does. It always lags any recovery in (1) the stock market, and (2) the economy. The stock market starts pricing in better earnings long before they appear. Employers do not start hiring again until they see things getting better; they want to stay lean until they absolutely need the help. Accordingly, jobs don't start coming back in until the actual recovery. Consumer confidence is returned when there is no concern over jobs anymore. That does not happen until the jobs are stabilized and hiring starts, and that is the last peg. So, confidence may be down, but the real issue now is getting businesses back up and running so they can hire. Stimulus is very important right now.
Was today as bad as the gloom seemed to make it?
It was not a good day. We don't want to give the impression that it was; indeed, that would be hard to do. Still, there are some interesting points to note that shows it was not just a rollover to the dark side.
First is that notion that support did hold and delivered a bounce higher, pushing the indexes up to close well off the lows. The S&P held again above 1050, the Dow above 9000, the Nasdaq above 1630. Moreover, even though they sold on higher volumes, the point losses narrowed considerably over prior sessions, indicating that even though there was more action volume wise, selling was not as strong: buyers pushed the indexes up off of support and kept losses smaller. There were no buyers at all Monday given the huge point losses.
Despite all of the bad news, volume did not race higher. It was still below average on the Nasdaq, and the Dow and S&P were right at average. We don't ignore that there were more sellers in the market than buyers Monday and Friday, but Thursday's buying volume was much stronger, something that puts the action into perspective.
JNPR was downgraded, and it gapped lower, but then it rallied off of the low, refusing to break below the 18 day MVA. BRCM sold on stronger volume, but it too showed a smaller loss, holding above the 50 day MVA, and rallying a bit off the session low. In addition, BRCD and QLGC rallied higher on stronger volume, CSCO held above its 50 day MVA and managed a gain on the session, and some key semiconductor stocks such as SMTC sold back just a bit and only on light volume. It was no major slaughter of many of the stronger of the old line leadership that has been showing much of the strength of late.
Then you have the other stocks on the reports, those in the good patterns, that did not join in the selling. The vast majority of those held up very well, either continuing their rises or pulling back lightly on light volume. What can you draw from that: the recent leadership is not collapsing despite the bad news and the gloom on the financial reporting.
So what is next?
Again we cannot discount today as actually a good day; it was not. It was just not as bad as it was made out to be as there were signs that things were not as bad as some reported. JNPR was said to have been 'hammered,' but it was down a point, about 4%, and it was on the rise after hours.
The momentum is definitely still to the downside after the indexes rallied up to resistance, peaked over them, and then sold off. We were anticipating the Nasdaq to start to sell a bit, and the Dow and S&P, two tag alongs, turned and followed. The indexes are starting to test real support now, and this is where the rubber hits the road as far as this test of the September lows. We see some signs they want to hold at these levels, but it is too early to tell if that will happen. So, our strategy is simple: we are going to ride the downside index puts taken last Thursday and today as we wait for the market to finish this test and start the next move back up. If we are correct, the recent leaders (both old line techs and the stocks in solid patterns) will still be in good shape and simply have consolidated some gains or put finishing touches on their bases. They will be ready for more upside when the selling stops, and they will be the best movers when it starts again.
In other words, we are going to keep it simple. Despite all of the gloom today over the economic numbers and the anthrax, we are still confident of the market bottom barring something very, very far outside of expectations. The fact that everyone is starting to understand that the war won't be over by simply dropping ordinance will also help; the initial disappointment will be priced in, and then things can move higher. All of that had been going on the past few sessions.
THE MARKET
The Nasdaq sold down to support and then rallied to cut its losses in half. It could be preparing to try to find the bottom, but it needs help eventually from the Dow and the S&P, and they are not looking too great.
VIX: 35.15; +2.76. A big jump, the biggest since October 12. It is still below the tops for October (38.56 range), but it is ratcheting back up quickly on this selling. That is a better signal; note that the index hit 36.28 on the high before the move higher later in the session.
VXN: 63.41; +3.12. Another 3+ point day gain after hitting 65.94 on the high (up almost 6 points on the selling). Still well off the highs over 90 back in September and the 72.06 reading in mid October, but getting back into the higher end of the range it has been in since September.
Put/Call Ratio (CBOE): 0.91; +0.16. Another strong move back up, making a total of 0.38 in the past two sessions. Put activity has soared this week, showing that there is still a lot of belief the market is going to head down before it goes back up. This is an indication it is getting very close to playing out this selling fit. We would love to see a close over 1.0 tomorrow, but we bet we do not get it. What we will most likely see is some early selling down to support levels once again, maybe undercutting Tuesday's lows, and then a rally.
Nasdaq
Led the way down with a 1.9% loss on higher volume, but as noted above, there are some positives. We anticipate further selling on the open down to support and then an attempt at rallying.
Stats: -32.11 points (-1.9%) to close at 1667.41.
Volume: 1.793 billion shares (+8.2%). 1.673 billion shares (-16.2%). Rising volume, but still below average. A distribution day, the third in the past 10 sessions and a sign of potentially more selling ahead. Volume was still lower, however, than the buying volume last Wednesday and Thursday. Relative volume is important as well. Down volume led again at 1.331 billion shares to 446 million upside shares.
A/D and Hi/Lo: Decliners slipped in their lead to 1.81 to 1 (1.90 to 1 Monday). New highs fell to 36 (-15) as new lows rose to 66 (+45). Not the action we want to see in new lows as they continue to expand on each round of selling; that indicates that stocks may not be all sold out just yet.
The Chart: http://www.investmenthouse.com/cd/$compq.html
The techs sold below the up trendline coming off of the September low, its first time below that line since the bottom. The breach of that line on slightly higher volume indicates there could be more selling, especially when combined with the third distribution day in 10 sessions. Still, the index closed well off of its early session low (1646.30), holding above the October 10 close prior to the gap up (1626.26) and even closing above the gap up point on October 11 (1649.55). It finished the session 21 points off of the low, a solid recovery. The higher volume after a tap down to support and a recovery is decent action as noted above. It may not continue higher immediately; it may test that support again. We are going to look for that and then see if it can hold and then start back up from there tomorrow with some buying. Remember, we said we would be surprised if it was able to rally back today; it tried to start, and we think it will do it at some point this week.
Dow/NYSE
The Dow tried to rally off the low and managed to do so, but it was not as strong a move up as the Nasdaq off of its low. Indeed, it gapped lower, tanked, and rallied with little conviction. It is looking for more downside for the put plays.
Stats: -147.52 points (1.6%) to close at 9121.98.
NYSE Volume: 1.307 billion shares (+17%). A significant gain in volume, though still below average and less than last week's rally volume. Still, it is the third distribution day in the last ten sessions, and the Dow had more downside momentum. 1.082 downside shares (1.117 billion total shares Monday) to a mere 216 million upside shares. Heavy downside action, but not huge. There were no buyers at all.
A/D and Hi/Lo: Decliners increased their lead to 2.2 to 1 (2 to 1 Monday). New highs fell to 28 (-8) as new lows rose to a whopping 90 (+32). Not good again on either front. Really terrible internals. It was not a good day for the Dow and NYSE.
The Chart: http://www.investmenthouse.com/cd/$indu.html
The Dow gapped lower and fell on rising, average volume. That was the bad news. It is pretty bad news, but there is some good news. It held above support at 9000 (the low was 9065.59) and rallied 56 points to the close. It was not a strong rally off the lows, however, as opposed to the Nasdaq's move off of its lows. The Dow held above support, but it is going to at least test the 9000 level, most likely tomorrow, on this selling bout. If it breaks there, it could hold at 8900, but 8700 to 8500 is more likely. It is not helping the Nasdaq, but that is okay if they are all going to sell back a bit more. It can sell off hard and then get it out of its system. Indeed, that is what we think it is doing.
S&P 500: The S&P action was similar to that on the Dow. It tested support at 1050 on the low (1059.79) and managed to move up from that level on the close. It still finished a lot closer to the low than the prior close. Volume on the NYSE jumped 17%, but the recovery off the low was not strong enough; no reversal. The 1050 has been a strong support level on the way up, but it is going to be seriously tested tomorrow and Thursday. 1038 may give it passing support, but it is not strong. If the selling continues hard, 998 is not out of the question. It looks as if the S&P and Dow are going to sell off more over the next few sessions than the Nasdaq. That is not surprising given that the techs have been stronger since the September lows.
Stats: -18.51 points (-1.7%) to close at 1059.70.
Volume: NYSE volume moved up significantly to 1.307 billion shares (+17%). More distribution, and more downward pressure over the next two sessions.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Nothing really good in the form of news after hours that could move things higher tomorrow. Intel's conference call was very broad with not many specifics. "Worst slowdown ever seen," etc. Kind of the John Chambers of Cisco comments we saw last year. Tomorrow we get the first reading on Q3 GDP, and it is expected at a minus 1%. That will not put the market in a good mood. The Chicago PMI hits thirty minutes into the session, and if it tanks along the lines of the consumer confidence report, it will not help the market.
So, not much to bring about any upside tomorrow. Indeed, we are not really looking for any just yet. This is the test of the prior low, and the Dow and S&P were picking up steam on the downside today. Again, tomorrow will be softer on the open in all probability. We want to see another test of 9000 on the Dow, 1050 on the S&P, and 1630 on the Nasdaq. We don't expect the Dow or the S&P to hold intraday on those levels. The Nasdaq might.
What we will be watching for is in the last hour to see what the close is going to be and on what volume. The Nasdaq tried to reverse today, but it could not get there. Monday we did not think it would. We do believe the Dow and S&P will continue to fall with more vigor. As we noted last week, they are the drag on the Nasdaq as they have shown no strength. The Nasdaq may hold out, but if they really tank, the Nasdaq has to follow to certain degree. Again, we saw the strongest of the recent gainers hanging on much better: the former tech leaders (e.g., BRCD, QLGC, JNPR, BRCM, SMTC, MSCC) and the stocks that have been outperforming all along. Not many of the report stocks took a big hit today, and that indicates there is not widespread dumping, just a lack of buying as the indexes digest the move off the bottom. Will the volume increase over the buying volume last week, showing that the sellers are truly out to dump? That is the question we will continue to watch.
Tomorrow we plan to be low key. We have taken some put positions and we will let them ride. We have upside positions on stocks that are still holding up well. We are going to watch the indexes and see where they try to turn, where they fail, what the volume is. We are going to be patient; we are biding our time until they bottom. Then we close out the puts and start to play those upside positions again. As we have seen these give us a lot of upside in a short period of time. If it rolls back over our stops keep us in the money as it did this time on those that started to sell off. We think after this test, however, we get as good or better a ride higher. Until it shows us something different, that is our game plan. Simple, but based on what the market is telling us beyond a cursory glance.
Support and Resistance
Nasdaq: Closed at 1667.41.
Resistance: The up trendline is roughly 1685. The 50 day MVA is at 1717.54. Then 1750 followed by 1800 to 1830 (former minor highs and lows). Then 1930 to 1940.
Support: 1700 did not hold nor did 1685. 1630 (close prior to gap) held intraday. 1649.55 (gap up point) held on the close and more or less intraday (low at 1646).
S&P 500: Closed at 1059.79.
Resistance: The former closing low in the prior double bottom at 1103.25. The 50 day MVA at 1097.16. After those levels there is 1124 (prior consolidation level) and 1150 (also price consolidations).
Support: 1050 is the real support, and it held intraday. It will be severely tested over the next two sessions. After that is 998.
Dow: Closed at 9121.98.
Resistance: 9165 did not hold on the way down, but it is a point of prior consolidation that could hold it back on a move back up. The 50 day MVA at 9459.19. Then 9500. 9870 to 9992 are the next levels of resistance where the index moved right before the September plunge and where it found resistance in the middle of its March and April double bottom pattern.
Support: The 9120 level, the closing points in the early October consolidation, held on Tuesday's close. How strong? Not stellar with the downward momentum. The real test will be at 9000. 8900 might try to hold, but 8700 down to 8500 is after 9000.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
10-29-01
Treasury Budget, September (14:00): $35.4B actual versus $29.0B expected and $65.7B prior.
10-30-01
Consumer Confidence, October (10:00): 85.5 actual versus 95.9 expected and 97 prior (revised from 97.6).
10-31-01
GDP-Adv., Q3 (8:30): -1.0% versus 0.3% prior.
Chain Deflator-Adv., Q3 (8:30): 1.7% versus 2.1% prior.
Chicago PMI, October (10:00): 43.0% versus 46.6% prior..
11-01-01
Auto Sales, October (8:30): 6.0M versus 5.7M prior.
Truck Sales, October (8:30): 7.5M versus 7.1M prior.
Personal Income, September (8:30): 0.1% versus 0.0% prior.
PCE, September (8:30): -1.0% versus 0.2% prior.
Initial Claims, 10/27 (8:30): 503K versus 504K prior.
Construction Spending, September (10:00): -0.7% versus -1.1% prior.
NAPM Index, October (10:00): 44.0% versus 47.0% prior.
11-02-01
Average Workweek, October (8:30): 34.0 versus 34.1 prior.
Nonfarm Payrolls, October (8:30): -300K versus -199K prior.
Unemployment Rate, October (8:30): 5.2% versus 4.9% prior.
Hourly Earnings, October (8:30): 0.3% versus 0.2% prior.
Factory Orders, September (10:00): -5.0% versus 0.0% prior.
End Part 1 of 4
|
us stock market
stock watch
|
