us stock market, stock watch

* * * *
12/06/01 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

THE PLAYS:

Good movers: PMCS, BORL, BRCD. AVNT continued to soar after news of its acquisition was out Tuesday. PRGS broke out of the rolling pattern yesterday and was able to add a quarter-point more today. MIL and ET continued breakouts but may be ready for a pullback, and CMOS broke resistance with volume blasting higher, but as that stock is up for three days can pull back as well. In other action, PLCM pulled back from its breakout, and LTD looked ready to blast off after yesterday's action but held for a small gain and a doji as volume fell back below average. QLGC looks ready to form a handle to its 5-month cup, in a move similar to that of KLAC, covered below.

LTD (The Limited--$13.94; +0.17; optionable): Retail: Apparel
http://biz.yahoo.com/p/l/ltd.html
STATUS: LTD still looks good in the pennant pattern despite the news from the Gap and even though it tried to break out Wednesday on strong volume and did not succeed. Thursday it pulled back with a tight doji price holding fairly steady and volume dropping back sharply to 1 million (avg. 2 million). The 10 day MVA continues to look firm after being tested on the low of 13.86; that support has been solid for 2 weeks in this pattern. Looking for a move up and breakout still; the 200 day MVA is ahead at 14.91, the down trendline (connects February and August highs) at about 14.80. Sales decreased 7% with the company comfortable with the current fourth quarter consensus earnings estimates. Target: 18
BUY POINT: Breakout: 14.56 on volume of 2.7 million or better. Stop: 13.54 (7%).
POSITION: Stock and/or January $12.50 calls to buy (LTD AV).

http://www.investmenthouse.com/ct/ltd.html

JAKK (Jakks Pacific--$24.13; -0.26; optionable): Toys & Games
http://biz.yahoo.com/p/j/jakk.html
STATUS: JAKK tested the breakout from its recent cup base, popped higher last Thursday and now is consolidating off the November high (25.38) in the current pullback. After yesterday's star doji and tap at the 10 day MVA, JAKK moved down to close with a doji at that support (23.84) with volume falling well below average to 136,500 (avg. 316,000). This low-volume pullback (perhaps) ending with a doji at support, and holding above previous November highs (prior to the breakout), suggest a move back up. May hold the 10 day MVA another day or so before making the move.
Solid money flow and buying. Target: 29.
BUY POINT: New high breakout: 25.50 on volume in the range of 435,000 or higher. Stop: 23.25 (7%).
POSITION: Stock and/or January $20 (UFF AD; 0 open interests).

http://www.investmenthouse.com/ct/jakk.html

KLAC (Kla-Tencor--$56.41; -0.55; optionable): Semiconductor
http://biz.yahoo.com/p/i/ibm.html
STATUS: A typical move for today for many stocks. A nice 2-day move up followed with today's doji on lower, below average volume (9.3 million; avg. 9.6 million). On the run KLAC almost completed a move up to the highs at the 60 range in its 6+-month base (a cup with a v-bottom that is part of a larger, 15-month base). However, with the market pulling back, the stock like many others that made some strong moves over the last 2-3 days, can pull back to test the move. In this case, KLAC can form a handle to this cup. The low at 55.55 tapped near possible support which can hold if the pullback is a short one. We will look for a good move up from there and breakout over Wednesday's high 57.60 for a renewed breakout. Money flow and relative strength are high. Target: 69. We can even look at a covered call sale here on existing positions, but we need to be careful.
BUY POINT: We want it to form a handle, and then clear 57.73 on volume in the area of 14.4 million. Stop: 53.69 (7%).
POSITION: Stock and/or January $50 or $55 calls to buy (KCQ AJ or AK).

http://www.investmenthouse.com/ct/klac.html

New:

SHW (Sherwin-Williams--$27.90; -0.05; optionable): Materials & Construction
http://biz.yahoo.com/p/s/shw.html
STATUS: SHW broke out of a large ascending wedge/rolling pattern mid-November and immediately formed an ascending wedge. Volume has been up and down in the wedge, specifically 8 of 13 days have been on strong and above average volume, but we like the pattern. It is tightening up nicely and is well-formed, holding immediate support at the 10 day MVA (27.66), yesterday tapping just under the 18 day MVA (27). As volume fell back (1 million; avg. 600,000), the stock again tapped support after hitting the upper resistance (28.10). Showing huge money flow and decent volume. Target: 34
BUY POINT: Breakout: 28.36 on continued strong volume (minimum breakout volume is 810,000). Stop: 26.39 (7%).
POSITION: Stock and/or January or March $25 calls to buy (SHW AE or CE).

http://www.investmenthouse.com/ct/shw.html

SCIO (Scios--$28.70; +1.87; optionable): Drugs Wholesale
http://biz.yahoo.com/p/s/scio.html
STATUS: Breaking out of a cup with handle pattern (6.5 months) on good volume (1.4 million; avg. 789,000). Still within our 5% limit for buying on breakouts and looking ready to add more to this move. SCIO has huge money flow, and relative strength is breaking out. The stock formed this base at the peak of an uptrend dating from mid-2000. Target: 34
BUY POINT: Was 28.17 for the breakout. Remains a buy on this move up to 29.60. Stop: 26.75 (7% below a buy point at 28.75).
POSITION: Stock and/or January $25 calls to buy (UIO BE).

http://www.investmenthouse.com/ct/scio.html

Back On:

SERO (Serologicals--$21.05; +0.52; optionable): Biotechnology
http://biz.yahoo.com/p/s/sero.html
STATUS: SERO broke out of a double bottom base in May and now has formed a somewhat choppy cup with handle (6 months in length) after hitting a high at 25 at the start of the pattern. Currently it is trying to move up in the pennant that is serving as a handle on very low volume (down Thursday to 69,100; avg. 254,000), but we are looking for volume to really kick up to push SERO over Wednesday's high at 22. Previous high was from November at 21.50. Money flow and buying are excellent. Target: 27
BUY POINT: 22.13 on volume of 381,000 or higher. Stop: 20.58 (7%).
POSITION: Stock and/or January $17.50 calls to buy (QEO AW; low open interests).

http://www.investmenthouse.com/ct/sero.html

SUMMARY:
- Indexes run out of steam, but no damage done.
- Some type of consolidation, rest stop, or pullback appears to be next.
- INTC reports stronger processor demand while AMD announces higher than anticipated Q4 sales
- Factory orders soar, jobless claims drop, and productivity hangs in there.
- Retail sales: the rich get richer.
- Team Trades

No gas left today as market takes a rest.

The indexes were ambivalent at the open, selling down a bit and giving us that softer open. They then gathered strength and ran higher through lunch with the Dow clearing the 200 day MVA and the Nasdaq starting to flirt with its upper channel. The S&P, however, was never able to clear its 200 day MVA, and that was the anchor on the other indexes. They sold down for two hours to the session lows and then managed a weak rally before the Dow and big caps settled back to close near their lows. The Nasdaq managed to continue up toward the close an turn positive, but it was not much of a flourish. It is the strongest, however, and it showed that again today though it was muted.

Volume was lower on the Nasdaq and NYSE, but it was not piddling. The Nasdaq logged well over 2 billion shares, but up volume was still outpacing down volume though the gap narrowed considerably. NYSE volume was well off Wednesday levels, but it was still well above average as well, higher than most volume over the past month. Down volume outnumbered up volume. One of our concerns last night was a high volume reversal, and though today's volumes were not slouches, there was no reversal today. No real damage done as the indexes took a pause at the next resistance level.

Some sort of rest is due here, but how much will this market rest?

There is a definite air of investment as opposed to divestment right now. We are getting upgrades, companies are upping earnings estimates and beating estimates, economic news is snapping back sharply, and there is institution-quality buying volume. When the market puts its head down and wants to rally, it tends to run hard, take a couple of days rest where it just holds its ground more or less, and then rallies more. That is the sense we are getting now though we have to be very careful and not forget that the Dow and S&P are butting heads with some very important resistance at the 200 day MVA.

We are sick of the question that is now asked of each person appearing on television now regardless of their background: is the market overbought? Remember just a couple of months ago it was 'has the market put in a bottom?' It is the question o' the week. The question that is not asked in response but should be is 'in what sense?' The market has rallied well off of the bottom, but it is a mere shadow of where it was 20 months ago. Even if that was an aberration in price, it is still down more than 50%. In that sense it is not necessarily overbought.

Are they talking about the last two rally sessions? After a 7+% surge over two days it is pretty clear that the Nasdaq needs to take a breather, but that does not mean it will roll over and tank. The buying momentum is strong and the Santa Clause rally and January Effect is happening now. There have been trillions of dollars on the sidelines looking for the chance to get back to work. That adds to the momentum as those dollars are put to work in a good rally. We may see some more of what we saw today: lower volume treading water as the indexes catch their breath for another move up. 'tis the season to rally, and there is an awful lot of money being put to work.

We are looking for maybe another sidestep tomorrow; after all, there has been a massive rally on the Nasdaq and SOX this week, and a little more softness may occur before the weekend.

INTC and AMD add holiday cheer after hours.

Intel raised Q4 revenue guidance as expected, and then it also said processor demand was better than expected. Surprise? Not really. Remember when Intel told us three and four months ago that Q4 was going to look better? No surprise today really, but it was still good news. With certain analysts hell bent on talking the stock down at any chance it was nice to see it report things were decent and the stock receiving a nice pop.

AMD, Intel's direct competitor, beat INTC to the punch tonight when it stated that it sees higher than anticipated sales in Q4 and revised its revenue estimates upward by as much as 10%. The stock jumped on the news, and it may continue the nice breakout over resistance at $15 it enjoyed on Wednesday. After hours it sure looks that way with the stock trading at 17.80 after closing at 16.25.

THE ECONOMY

Factory orders soar. The orders jumped 7.1%, a huge move from September's -6.5%. It was reported that the actual number was a 'small gain' over expectations of 6.7% to 7%. Hold the phone. Just this past weekend expectations were for +1.0%. They were revised higher as more and more economic news came in this week showing strong snapbacks post 9-11. Expectations less than a week ago were for almost no gain; they have been adjusted higher during the week. This was a huge gain and a real surprise in reality, just as all the economic news this week has been.

Jobless claims fell again for the fourth week in a row, dropping 18,000 to 475,000. There is some numbers shuffling here, however, as prior claims were revised up 5,000. So, it was a decline of 13,000; still not bad, but you have to watch those number jugglers. The big news: continuing claims fell once again, dropping 349,000, the biggest decline since 1983. That is the third week in a row they have been dropping, and a sign that even as we hear about additional layoffs, the unemployed are starting to get some jobs. Not all of them are jobs, however, because some are dropped from the rolls after a certain period of time. Still, the number is a continuation of a recent trend of fewer continuing claims.

Productivity fell to 1.5% for Q3 from 2.7% prior. Yes it dropped, but you have to look at previous recession periods. Usually in recessions productivity falls off the table. This time around it is holding up quite well. Historically, a 1.5% to 2% productivity increase is well above average. Even as the U.S. has been in recession the past 4.5 quarters (by our count; we announced last fall the U.S. was in recession), productivity is not tanking. Use of all of that technology spending is helping.

Retails sales lukewarm overall with a 1.9% year over year gain in November. That had investors cool to retailers, but not to all. As we have been seeing, the same retailers are doing well at the expense of the others: WMT, HD, LOW, PIR, BBBY, BBY, CC, KSS, COST, ROST, TJX, APPB, RI. These are the retailers that are doing well as department stores, apparel stores, and other traditional retailers see major sales declines (e.g., the Gap down 25%). On the way back from the grandparents' this week you could not help but notice the clusters of these stores and restaurants in key locations. They are dominating the U.S. retail market. Their sales are going up far more than the average.

End Part 1 of 2

us stock market
stock watch