|
|
us stock market, trade stock
* * * *
11/13/01 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:
- Monday's telling action turns into powerful rally Tuesday.
- Cisco almost stalls the rally.
- Retail sales move higher for the week.
- IPO's finally back and doing well.
- Destined for a lethargic market?
- After celebration on good war news, stimulus is the thorn in the side ahead.
- Subscriber Questions
Two or so more days before the rally? Nah.
Just about every time we say the market needs another couple of days to really consolidate well before the next move up, it seems to jump out of the gates the following session. You can see and feel the pressure building when it is forming these consolidations, and all it needs is a trigger. Well, the Kabul cakewalk and the mounting evidence that Monday's tragic crash was a terrible accident and not terrorism both acted to jumpstart the market a day ahead of 'schedule.'
No problem; we were ready for it last night whether it was one, two, or three sessions away, and today's moves gave a smorgasbord of plays to invest in whether you liked the big techs still down in their patterns or the less well known issues that are in great patterns and are rolling up the earnings. Either way it was solid, though many of the big techs, though finishing up on the session, were off their highs.
Nasdaq volume strong, but NYSE average. Mixed signals still.
Volume was strong on the Nasdaq, turning over 2 billion shares. NYSE volume was up as well, but it still just managed an average session at best. There is no doubt that the Nasdaq is still the clear leader in this market, with most of the buying action occurring in technology despite all of the 'Caution: Stay Away' signs that the majority of analysts still have up on the Nasdaq.
Market internals were very strong on the NYSE and very solid on the Nasdaq. No equivocation there. Still, many of the big name techs that gapped sharply higher, though they rallied off their session lows after the CSCO news, still did not take out the opening price. That left a lot of doji's on the session in stocks such as QLGC, BRCM, PMCS, NVDA, RFMD and the like. As noted, much of the intraday action can be attributed to Cisco: after lunch John Chambers came out and said sales growth would be slow for 2 to 8 quarters (one half year to 2 years; gee, can you be more precise?) and that orders were (1) growing slightly, or (2) plateauing, depending upon which news headline you read.
That dropped the Nasdaq down to its gap up point where it caught itself, regrouped, and rallied up to close just off of the session high. That was a very bullish and powerful 22 point run in the last hour of trading. Indeed, all three major indexes (four if you count the SOX) sold off and then rallied home in the last hour. That is very bullish action as buyers once again stepped in on selling, even after a gap higher, and drive prices up through the close.
So overall it was a strong day with good up volume from the leading index. Still, the Dow and NYSE could not garner much buying volume once again, still acting as a drag on the Nasdaq's potential. Also, many of the big techs gapped higher, but that was the high for the session; the buyers were in early, then sellers took them down, but buyers managed to rally them back. Still, the inability to take the move beyond the gap up point creates some minor resistance. Nonetheless, there is still room to the upside after this lateral consolidation breakout, with the Nasdaq's upper channel at 1950.
Other good news helps the market.
Retail sales up again. It was not all war and terror news that helped out. Redbook announced weekly retail sales rose 1.7%, defying the idea that consumers have shut down. Indeed, everything we are seeing is telling us that consumers are buying. They may not be booking flights to Europe or planning on visiting Jerusalem over the holidays, but they are buying.
DRAM chip prices still rising. They were up again. Subscribers are passing along their information as well. One order for Dell desktops has been pushed back from November to January 2002. Why? Shortage of 2 gig chips. Sounds good for chips again. Thanks and keep the information rolling in!
IBD's own consumer and business confidence poll shows the same: people are taking care of business as usual whether that means traveling, buying, etc. The feeling is that there is a lot being done to turn the recession, and that will pay off. Our own surveys of subscribers tracks those views. Our subscriber base tends to be much better educated and informed and thus not an accurate cross section of the country, but it tells the story about those that make the economy work. Indeed, in our community we continue to see 'help wanted' signs everywhere. It is not just burger flipping at McDonald's either; skilled positions in industrial, mechanical, and other fields are in demand.
IPO's back at last. Today ABCO ran its IPO up the flag pole, and there were buyers. It rose $5.25 on the session from its opening price. The IPO market has been dead, and the health of the stock market and the economy can be gauged by IPO's. These new issues provide new leadership for the market as they often involve companies that are leading and developing new technologies. That keeps our economy in the technology forefront. It is a sign that there is money around to get these new companies off the ground, that we are innovating. Stimulus and the belief of an improving economy help drive the IPO market.
Is a lethargic market a necessity?
The conventional wisdom we continue to hear is that after the sharp rise and rapid decline (bubble and bubble bursting is how it is described) in stocks the best we can hope for is a market that struggles for months on end, unable to make significant headway. The proponents of this view cite past 'bubble' episodes that required long building periods afterward. What we hear over and over is how 'overvalued' stocks are. Hogwash.
As we said just days ago, discussing valuations right now is somewhat foolish. We are at an earnings trough; of course valuations seem high on any rally when earnings are hitting their lows. You cannot, cannot ignore the stimulus that has been pumped into the economy and the extremely low inflation and interest rate environment. In past bubble episodes (if they were really 'bubbles' at all), the usual scenario was inflation and rising interest rates (other than the Great Depression, and as much as the doomsters like to harp on it, we are not anywhere near a great depression level). That is not the case at all right now. Indeed, we have all the ingredients that made the 1980 to 2000 prosperity possible: no inflation, low interest rates, and the glimmer of real tax incentives to promote investment in what makes the U.S. great: our own inventiveness. These are powerful forces in a free enterprise system, something Japan did not unleash when it had the chance. Japan tried to government spend its way out of its mess, and that did not provide the incentive to create or invent. It did not provide incentive for private citizens and businesses to spend or invest in the country.
Another aspect that is overlooked: the powerful baby boomer demographics that the U.S. still has. Japan's population has a big hole in it. It lost so many young men and boys in WWII that it had a baby bust after WWII as the U.S. had a boom. Japan's economy stumbled just as its population split: older Japanese past their prime and others too young to be the backbone of the economy. It simply had no demand to drive the economy past the slowdown, and it spiraled downward.
Again, our baby boomers still have a good 10 to 15 years ahead of them. They have a lot of earning capacity, and they will still have lots of money to plow into investments. With interest rates next to nothing, where will they put their excess funds? Back into the U.S. in the form of stock market, real estate, and other similar investments. They are still planning for retirement; they are going to live longer. They will need the 10% average annual gains to get there (writing that is kind of surreal as 10% is what we want per month at least), and that means back to the market.
That money parked in money markets is real ($2.2 trillion or more), and it is being dragged into the market bit by bit. In addition, the monthly disposable income will go into the market; these folks are rebuilding their retirements. It might take them another 6 months or so, but they are going to finally put more into the market. Their financial 'advisors' will finally say 'you have to get in' after the market is up 50% or more. That is good: we don't want all the money in at once. We want it to come in bit by bit, keeping the market rising. We make great returns while that happens.
No it is not a necessity in our view that the market goes nowhere for months and months as the conventional wisdom parrots squawk. When the market was rallying, it was in large part because of the U.S. demographics that were producing tremendous amounts of goods and services, generating tremendous wealth at the same time. That was purposefully hamstrung by the Fed. After the crash, the stimulus is back to jumpstart this machine again. The demographics are still there; it is a shame we lost two years and a lot of headway and the lead we had, but the earnings and buying power is still there. If the right steps are made, i.e., getting the right stimulus passed, we have another 10 to 15 years of 'above the curve' growth ahead of us. That is tremendously exciting, and it flies in the face of those that think inside the box.
THE MARKET
A strong move on the Nasdaq with great internals all around, but the Dow and S&P could only generate average volume. There is still upside momentum, however, as stocks race out of the lateral consolidation, but we have to watch the resistance levels that they are rushing up to. So far the market has shaken off all negative news; still, the best approach, the healthy approach, is to continue to approach with caution and keep our heads, looking for the best entry points and avoiding the urge to chase the bus.
VIX: 28.58; -2.68. Volatility dropped sharply after a sharp rise Monday. A strong day leads to a drop in volatility. It is back below 30, and is near the lows since September 11. For perspective as to where it is now, volatility ranged from 20 to 22 during the summer (very low, very complacent), and then spiked over 55 when the market re-opened after September 11. Since then it has ranged from 28.19 to 38.
VXN: 55.94; -3.05. Volatility tanked on the strong gap higher as would be expected. Quite a range, down from Monday's high of 63.14. Still in the higher end of the range. For perspective, in the summer it ranged from 43 to 47 on the lows. After the re-open it was up to 93 intraday, and has since ranged from 55 to 70.
Put/Call Ratio (CBOE): 0.58; -0.23. Put activity tanked on the strong upside session. No need for puts today. After jumping to 0.81 Monday on the close, a pretty sharp drop. But, the index jumped higher quickly, showing the market is still jumpy.
Nasdaq
Sharp gap higher, test of the gap point, then a rally back up to the session highs on strong volume. A solid move out of the lateral consolidation.
Stats: +51.98 points (+2.8%) to close at 1892.11.
Volume: 2.188 billion shares (+37%). Whopping volume, above average again on a strong upside day. 1.748 billion upside shares to 424 million downside shares. More upside, less downside action as the buyers came out in force. Could not top last Thursday's reversal volume, but a strong buyer signature today.
A/D and Hi/Lo: Advancers led 1.85 to 1 (1.003 to 1 Monday). Solid action. New highs jumped to 68 (+28) as new lows fell to 31 (-19).
The Chart: http://www.investmenthouse.com/cd/$compq.html
Okay. Gapped higher and did look back, testing the move twice, once early and once in the last three hours. That test was worrisome, but then the buyers did what the buyers in bull runs do: they took advantage of the selling and stepped in at a perceived buy point and rallied the market on strong volume. The upper channel is at 1950. There is some resistance at 1934 to 1940 from prior price lows and highs in March, April, July and August. Those set this level as some resistance to clear. Another level to clear; nothing new about that, however.
This has already been quite a run, but this is the first move out of the lateral consolidation. As the next level of resistance we are watching, 1950 is it as it is the upper channel. The index can always clear that level as it did in mid-October before it fell back. There is lots of momentum on this move, and it could climb to 2000.
Dow/NYSE
Blasted out of the lateral consolidation. It generated more volume, but still it was average at best.
Stats: +196.58 (+2.1%) to close at 9750.95.
NYSE Volume: 1.350 billion shares (+34.2%). Volume jumped on the buying, but it came below average. Accumulation, but not massive. The buying volume was impressive, however, at 1.116 billion shares (more than total volume Monday) versus 224 million downside shares.
A/D and Hi/Lo: Advancing issues swamped decliners 2.4 to 1 (decliners led 1.04 to 1 Monday). A very, very broad rally on the NYSE. New highs spiked to 118 (+41) as new lows dropped to 27 (-4).
The Chart: http://www.investmenthouse.com/cd/$indu.html
We have to say it again: blasted out of the lateral consolidation, clearing last Thursday's high. Technically, it has no resistance up to 9992. We wish volume had been better, but as we said before, if we waited for perfection, it could be a long wait.
S&P 500: The big caps broke out of their lateral consolidation as well, clearing resistance at 1124 and now moving in on 1150, another level of prior consolidations. The upper channel is at 1155. These moves tend to be anywhere from 2 to 4 days upside before they consolidate again. With resistance so close overhead, perhaps three sessions on this move.
Stats: +20.76 points (+1.9%) to close at 1139.09.
Volume: NYSE volume surged, but was still below average at 1.350 billion shares (+34.2%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Tomorrow we get the first real economic reports of the week, retail sales. With weekly sales continuing to rise and hearing from retailers that shoppers are coming back better than expected, they will be higher than the -1.6% reported in September. That kicks off an active end of the week, with the Philly Fed out on Thursday and the CPI Friday. Also to consider is options expiration on Friday, though that has not inspired much action either direction though volumes have been picking up on these Friday s once again after being very quiet in the summer.
Today started a solid move up out of the most recent consolidation. There is a lot of upside momentum that could take the Dow to 10,000 and the Nasdaq to 1950 to 2000 on this move. Some of that momentum was tempered after hours with techs suffering some profit taking on some earnings announcements. NTAP announced good earnings, beating the street and affirming next quarter, but it was down $1.40 after hours.
So, there may be some downward pressure at the open after such a strong upside move, but that is pretty normal. Remember, when stocks rally to the close we often see some weakness the next morning either on natural profit taking or with the help of some market makers pushing the bid and ask down to get a few sellers to replenish the market maker's supply of stock. We like weaker opens that give way to buying. It shows that buyers are still coming into the market to buy, and it gives us a chance to catch stocks on better moves: breaking up through the buy point on a solid move as opposed to wild gaps over those levels.
We see the indexes rising through some point on Friday, testing resistance at the above levels and then perhaps some selling or profit taking Friday on options expiration. There were many betting against the market, and those positions will be squared Thursday and Friday before expiration. We could see some volatility, but the momentum for now on this breakout is to the upside.
We have to keep an eye on the stimulus package progress. After the good feelings about the terrorist war settles down, the focus will be back on what we are doing to ensure the recovery. Stimulus is an important part of the equation. The war happiness will run out of steam (if no other great news, e.g., Bin Laden's capture) about the time the market hits its resistance levels. If wrangling gets out of hand, we will have to watch selling volumes on the pullback very closely.
Support and Resistance
Nasdaq: Closed at 1892.11.
Resistance: 1930 to 1940. Upper channel at 1950, but it could trade up to the 200 day MVA at 2000.
Support: 1800 has been holding on the close. The up trendline is now at 1795. The 50 day MVA is 1747.89. 1700 to 1680 has been acting as some support.
S&P 500: Closed at 1139.09.
Resistance: 1124 (prior consolidation) was cleared today. 1150 is after that (price consolidations). The upper channel is at 1155. The 200 day MVA is at 1191.54.
Support: 1124 (prior consolidations). Then 1103 and the 50 day MVA at 1100.99. The up trendline is now at 1090. Below that 1050 has been very solid.
Dow: Closed at 9750.95.
Resistance: Blew past 9600, and is now facing some resistance at 9870. The real resistance is 9992 to 10,000.
Support: 9500 is the first real level of support. The 50 day MVA is at 9470.84. The up trendline is now at 9375, quite a ways down. 9000 has held very well, and if this move fails it could see that level again.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
11-14-01
Retail Sales, October (8:30): 2.0% versus -2.4% prior.
Retail Sales ex-auto, October (8:30): 0.2% versus -1.6% prior.
11-15-01
Business Inventories, September (8:30): -0.3% versus -0.1% prior.
Initial Claims, 11/10 (8:30): 475K versus 450K prior.
Philadelphia Fed, November (12:00): -25.0 versus -27.4 prior.
11-16-01
CPI, October (8:30): -0.1% versus 0.4% prior.
Core CPI, October (8:30): 0.1% verus 0.2% prior.
Industrial Production, October (9:15): -0.9% versus -1.0% prior.
Capacity Utilization, October (9:15): 74.7% versus 75.5% prior.
End Part 1 of 4
|
us stock market
trade stock
|
