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us stock market, trade stock
Begin Part 2 of 2
THE MARKET
The indexes were unable to rally further today, the Dow and the Nasdaq testing higher but unable to hold much of the gains. The Nasdaq closed slightly positive as the Dow, S&P and SOX closed slightly down. Volume was solid but lower, good on the selling. The question is still how far back if at all the indexes will pull while they take a breather. The momentum is great, and the price/volume action has been solid. Thus we do not expect too far or too long of a pullback.
VIX: 25.10; +0.31. Volatility hit a high of 25.66 on the session, no rocket shot higher. The index is still in the middle of the 'normal' range and holding above the summer doldrums. With price/volume action behaving well, we focus more on that while we keep one eye here to let us know if there is too much complacency. 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 before this dip lower.
VXN: 48.39; +0.95. Hit 48.99 on the high, still not a huge spike, but it was not a wildly selling day. The index continues to hold above the summer range, a good sign all things considered. Again, however, this is a secondary indicator and it takes a back seat to price and volume. 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 after that ranged from 55 to 70. Another thing to consider; volatility levels back in January through March 2000 traded in a range from 55 to 60 before the Nasdaq's dive.
Put/Call Ratio (CBOE): 0.80 (+0.18). Jumping back up on a very modest day of selling. Option investors continue to bet on the downside after the market moves higher. What we have seen is slight drops as the market consolidates, not the plunge these option players are looking for. We really like to see it spike higher on mild selling. There is still a lot of belief that the rally cannot last, something clear when you see the parade of analysts on the tube stating that the market has to fall. The market is a lot like me; don't tell me I 'have' to do anything as I probably won't.
Nasdaq
Tried to get out of the blocks on some 'on the dips' buying, but it was not enough to maintain the session gains. Not unexpected, and not a bad day at all after the huge gain; the ability to come back after a couple of selling attempts (early and late) is a good sign. There was just not the landslide of buyers after two huge days.
Stats: +7.43 points (+0.4%) to close at 2054.27.
Volume: 2.213 billion shares (-20%). Volume was still solid and above average, but it backed off on the session as the Nasdaq could not push much higher. Better to see it back off a bit on this bit of rest, and then regroup for the next moves higher.
Up volume: 1.241 billion
Down volume: 941 million. The ratio narrowed substantially.
A/D and Hi/Lo: Advancing issues still lead, but shrinking to 1.32 to 1 (1.90 to 1 (1.72 to 1 Wednesday). Still not bad, but showing the slowing momentum from Tuesday's move.
New highs: 125 (-40)
New lows: 33 (+0)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Started soft and the rallied to 2065.69 on its high, closer to but still well below the upper channel at 2095. It simply ran out of gas. Still, it did not violate the session low (2037.64) when it sold lower later in the session before rallying 14 points to the close. It avoided a big reversal, one of the signs of the bear market. Instead it saw buyers come in twice to blunt selloffs. It still must deal with the upper channel now just over 2100 and the March 2000 closing down trendline now right at 2150. More likely it will come back and test this move, but the momentum it has shown leads us to believe it may not be a long or far consolidation.
Dow/NYSE
The Dow moved above its 200 day MVA and was looking somewhat promising after shaking off the dips, but it could not hold the move. Volume retreated on the session, just what we want on a slight pullback.
Stats: -15.15 points (-0.1%) to close at 10,099.14.
NYSE Volume: 1.452 billion shares (-18.4%). Above average and strong, but by far less than Wednesday's big rally volume. This is what we want on selling.
Up volume: 708 million shares.
Down volume: 739 million shares.
Downside shares show how the session was covered with molasses.
A/D and Hi/Lo: Advancers held onto a lead by their fingernails, at 1574 to 1539 or 1.02 to 1 (1.87 to 1 Wednesday). A sign of the day.
New highs: 140 (-23)
New lows: 32 (-3). Good to see new lows still falling on a down session.
The Chart: http://www.investmenthouse.com/cd/$indu.html
Could not keep the momentum going after clearing resistance at 9992. It rallied to 10,169.44 on the high, over the 200 day MVA (now at 10,139.09) but it failed to hold the ground. It was not a high-volume reversal though volume was still above average on the move. The failure to clear the 200 day MVA is significant, but after such a strong move, a little softness is normal. What we want to see here is the index hold close to the 200 day MVA and then rally over it on strong volume in relative short order. So far price and volume has been good, and we will watch it closely tomorrow; we don't want the volume on this initial failure at the 200 day MVA to turn into selling volume. We would love to see it hold above 9992 on any consolidation here.
S&P 500: The big caps did not even attempt to trade over the 200 day MVA (now at 1175), rising to just 1173.35 on the high. It turned and ran from there, dropping below Wednesday's close. Volume faded significantly on the session, and we want to see the index hold above the March 2000 down trendline (now roughly at 1155) and solid support at 1150. Then mount an assault on the 200 day MVA once again and clear it on high volume. We always have to keep an eye out for another attempt that fails and volume spikes higher. For now volume and price action remain solid, and that gives us more confidence in the few days of rest. We would be more confident, however, if it had broken that 200 day MVA.
Stats: -3.25 points (-0.3%) to close at 1167.10.
Volume: NYSE volume was still above average, but it fell on the selling to 1.452 billion shares (-18.4%). If there has to be selling, that is what we want.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Friday brings the much ballyhooed unemployment report and all of its accompanying statistics. The rate is expected to tick higher while the loss of non-farm payrolls is expected to shrink. Some seasonal jobs will help account for the drop no doubt.
After a big upside week can we expect more Friday? This market has changed its stripes so to speak from what it was just two months ago. Instead of selling when there was no real catalyst, this market now rises when there is no real catalyst. Actually there is a catalyst, it is just not the news of the day that most financial news sources focus on: a massive slowdown and coming recession pushed stocks lower during the bear while a coming recovery based on selloffs, rate cuts and stimulus is pushing them higher.
The economists cannot figure it out; they are always behind the curve as a whole. Back in September and October of 2000, Roach over at Morgan Stanley called for 100 basis points in rate hikes for early 2001. He missed the coming slowdown that was evident all around him in the rapidly slowing economy. Right after the Fed cut rates the first time he declared a recession. We were already in one given the two quarters of massive slowing in GDP. Tonight he was saying there would be a pop up and then a further slowdown next year. Of course, no interviewer calls him on it; he is free to ad lib as necessary without having to worry about history. Again, listen to the market and look at history. Amazing signposts there.
Tomorrow we are not holding our breath for a lot. After a big move, unless there is some really favorable news out there. INTC had some pretty good news and was up big after hours, but it trailed off as the late session wore on. That may be the session tomorrow. What we want to see on any weakness is that lower volume without big point losses. The indexes were very stingy with their gains during the recent consolidation they just blew out of, and given that the Dow and S&P have not taken out the 200 day MVA, we do not want them to fall too far from those levels; we want plenty of steam in the move when they take them on again so they can break over them on big volume and hold the moves.
For short term positions, if we get another run up to the 200 day MVA on the Dow and S&P and the Nasdaq rallies toward that upper channel again but fails, we will close them out and take the nice profit. We don't want time to start eating away our profits on our options.
Support and Resistance
Nasdaq: Closed at 2054.27.
Resistance: The upper channel at 2102 and the closing price March 2000 down trendline at roughly 2150.
Support: One place we can look at is the gap up point at 1980; that is always possible. Below that is the 200 day MVA at 1944.73, just above another support level at 1940. That looks pretty solid. The up trendline is down near 1910.
S&P 500: Closed at 1167.10.
Resistance: Still fighting the 200 day MVA at 1175. Then the middle of the March and April double bottom at 1183.85. The upper channel is right at 1200.
Support: The down trendline is right at 1155, and 1150 represents some prior price consolidations. After that is 1125, a level of prior consolidations. That is backed up by the 50 day MVA at 1122.
Dow: Closed at 10,099.14.
Resistance: The 200 day MVA at 10,139.09. Then the upper channel at 10,270. The September 2000 down trendline is running at 10,325 or so. From 10,200 to 10,300 the index has some pretty tough resistance.
Support: 9992 may now hold as support as it was so pesky on the way up. Then the up trendline is at 9825.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
12-3-01
Auto Sales, November (8:30): 6.8M versus 7.8M prior.
Truck Sales, November (8:30): 7.9M versus 9.8M prior.
Personal Income, October (8:30): 0.0% actual versus +0.1% expected and 0.0% prior.
Personal Spending, October (8:30): 2.8% actual versus 1.9% expected and -1.6% prior (revised from -1.8%).
NAPM Index, November (10:00): 48.8 actual versus 41.9% expected and 39.8% prior.
Construction Spending, October (10:00): +1.8% actual versus -0.5% expected and -0.4% prior.
12-5-01
NAPM Service, November (10:00): 51.3 actual versus 43 expected and 40.6 prior.
12-6-01
Initial Claims, 12/01 (8:30): 485,000 actual versus 488K expected and 493K prior (revised from 488K).
Productivity Rev., Q3 (8:30): 1.5% actual versus 2.6% expected and 2.7% prior.
Factory Orders, October (10:00): 7.1% actual versus 1.0% expected and -6.5% prior.
12-7-01
Nonfarm Payrolls, November (8:30): -210K versus -415K prior.
Unemployment Rate, November (8:30): 5.6% versus 5.4% prior.
Hourly Earnings, November (8:30): 0.2% versus 0.1% prior.
Average Workweek, November (8:30): 34.0 versus 34.0 prior.
Consumer Credit, October (3:00): $1.5B versus 3.2B prior.
TEAM TRADES
I had been watching OCLR closely. Why? In our seminars we talk about stocks that build one base, breakout, hold above the pivot point on the next base, and then form another base to breakout of. Well, OCLR was one of those, and it had the prettiest cup with handle pattern forming over the past 5 months. It had pulled back in its handle, testing lower and lower with volume dropping each day. Then BOOM. Today it exploded up past the pivot point. It all happened in the first 10 minutes. What to do? We watched to see if it was going to come back and test the move, but it did not. So, we liked the pattern so much, we went ahead and entered a partial position, looking to see if we would get a further test later in the session to add more positions. It never happened. The stock did not sell back, but it did not take off either. We ended up not adding anymore positions for the session, deciding to see if we get a test tomorrow. If it holds and starts back up we will look at completing the buy.
WEDC is a stock that we had looked at before, and it pulled back to the 50 day MVA three sessions ago, forming a short double bottom on that moving average since early November, and started up off that level Wednesday. That got us interested and today it took off over the middle hump on a big volume surge. A nice breakout from a rather inexpensive semiconductor stock. We stepped in at 6.50 (no options), and we will look for more positions when it clears the November high at 7.45 on continued strong volume.
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http://www.investmenthouse.com/1questions.htm
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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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