us stock market, stock watch

Begin Part 2 of 4

Nasdaq

After trying to break over the December high on Wednesday, the index meandered on low volume. Friday was a significant point loss, but the index is still holding well above support. That does not mean a lot if volume selling re-emerges this week, but we note that many big names are not selling on high volume.

Stats: -24.78 points (-1.2%) to close at 2022.46.
Volume: 1.625 million shares (-7.7%). Well below average volume as the index sold once again on lower volume. This is what we want to see if there is selling, though the selling from a price standpoint increased to more uncomfortable levels.

Up volume: 422 million
Down volume: 1.1171 billion. Selling volume shot up, easily outdistancing buyers. Still, they were not the majority compared to the last week of action as the overall volume was down.

A/D and Hi/Lo: Decliners jumped ahead 1.4 to 1 (advancers led fractionally Thursday).

New highs: 103 (-3)
New lows: 18 (+2)

The Chart: http://www.investmenthouse.com/cd/$compq.html

Back below the December tops, testing down to the 10 day MVA (2024) on the close. It is still holding above the 18 day MVA (2005.90) and 2000, a level of some moderate support. After that there is not a whole lot until the conjunction of the 50 and 200 day MVA at 1938 and 1931, respectively. That level is also right in line with the November tops ranging from 1934 to 1941. So, there is a lot of support there if it is reached. The Nasdaq has somewhat double topped on the pattern, but it rallied to the recent high on strong volume and has backed off on lower volume other than Wednesday. That rally that was ready to the upside was not ready when it tried Wednesday, and now there is some uncertainty in the economic picture as investors were reminded on Friday by the Fed. It has yet to sell off on rising volume, and that maintains the current trend. We will have to watch how that uncertainty is resolved this week by watching the volume. Again, action similar to last week's occurred in November and the index bounced ahead to a nice gain. Things have changed a bit since then from the economic viewpoint.

Dow/NYSE

Down all sessions last week, moving back down below the 200 day MVA (10,102.80). It has given up the 200 day MVA for now and is approaching a test of the 50 day MVA.

Stats: -80.33 points (-0.8%) to close at 9987.53.
NYSE Volume: 1.223 billion shares (-6.6%). Volume slid lower and back below average on Friday, about the only good news for the Dow. Other than Wednesday, however, volume has been very contained on this pullback.

Up volume: 353 million
Down volume: 830 million.

A/D and Hi/Lo: Decliners led 1.4 to 1 after a dead heat Thursday.

New highs: 77 (-13)
New lows: 23 (+4)

The Chart: http://www.investmenthouse.com/cd/$indu.html

As noted, the Dow gave up the 200 day MVA (10,102.80) late last week, but it did so on volume much lower than when it broke above it the prior week. In the bigger picture that is good as it shows less sellers on the turn back down than on the move higher. Nearer term it does not mean the Dow won't settle back down to the 50 day MVA (9907.39) the same as it did in December after a nice run at that point. From there (9750) it made the recent run up to 10,300 before the current pullback. Price and volume action remains very solid other than the Wednesday distribution session. As noted last week, the index has averaged one a week since the rally started. If it does hold, it can make another run at the 200 day MVA and then resistance from 10,200 to 10,500; there is a lot of overhead there from the June through August consolidation that could keep trading on the Dow choppy.

S&P 500: Similar to the action on the Dow, but the big caps never made it over the December highs with any authority. They did, however, break over the 200 day MVA over a week ago before last week's selling down below that level (1167.11). Volume was light on the selling other than the Wednesday reversal day. It broke below the 1150 level (again) and is now moving to test the 50 day MVA (1139.83) just as the Dow did in December. If it can hold there, it will have made yet another higher low. Not a rocket ride, but continued building higher.

Stats: +1.41 points (+0.1%) to close at 1156.55.
Volume: NYSE volume fell back sharply on the action, a good resumption of the consolidation. 1.276 billion shares (-13%).

The Chart: http://www.investmenthouse.com/cd/$spx.html

THIS WEEK

Things start to get interesting this week (as if they were not last week with the Fed speeches, Enron, and the usual culprits) as earnings seriously get underway and some more serious economic reports hit the street (retail sales, CPI, inventories, housing starts, and Michigan sentiment). Companies continue to report better Q4 expectations, and as we noted last week, warnings have been way down from prior quarters and the same time last year. With the recent selling in the indexes, mostly on light volume, they are set up for some upside action if the earnings numbers do in fact come in stronger. We have been seeing upside surprises, and Friday showed more such upside guidance as software company AKLM raised its 2002 forecast, DELL is tracking to beat the street, RATL software is going to beat, Borders Q4 revenue will be above expectations as will Barnes & Noble. Some of the air was taken out of stocks and expectations of better earnings this past week with the indexes selling lower. That gives upside room to move when they start coming in.

With no scheduled news Monday, the main impetus will be analyst comments and the market's momentum. As noted above, it appears that the Dow and S&P are in for a test of their 50 day MVA as they did in December. Positive earnings reports may act as the trigger to get things moving back to the upside. Overall the price/volume action remains good even if there is some more uncertainty economically. The market sensed a bit of that last week, and we will know more this week when we see how the indexes handle their 50 day MVA and the associated volume. The economic forces discussed above are not immediate effects; yes Greenspan rekindled some fears that had died down. Perhaps they will wake us up to do the right thing for the economy, but in the short term we will not see the effects of any Japan-style problems other than the uncertainty regarding the recovery that has been reinjected. That may be a good thing if fear rises again; the market has been getting too complacent and bears getting too rampant.

Support and Resistance

Nasdaq: Closed at 2022.46.
Resistance: The index set some new bars for itself. The December intraday high remains unconquered (2065.69), but it now also has the January intraday high at 2098.88. The up trendline is at 2135. Then 2250 to 2300. Again, there is not a lot of specific resistance.
Support: The 18 day MVA (2005.90) and 2000 represent the next level of potential support. The March 2000 down trendline is right at that level as well. the we look down to the 50 day MVA (1938.19) is right in the middle of a range of support from 1934 to 1941 (the tops of the November consolidation).

S&P 500: Closed at 1145.60.
Resistance: We would say 1150, but that has been broken so many times it is weak. After that the 200 day MVA remains the key resistance level at 1167.11. Then the December high at 1173.62 followed by the hump in the March double bottom at 1183.35.
Support: The 50 day MVA at 1139.83 is the next level. It is just above prior price consolidations at 1125 that acted as good support in prior tests.

Dow: Closed at 9987.53.
Resistance: The 200 day MVA is still the level to cross once again (10,102.80). then the early January highs at 10,300. Again, 10,280 to 10,300 has acted as the tops recently for the index. The entire 10,200 to 10,500 is the trading range from June to August 2001 and represents resistance. The down trendline from January 2000, the all-time high, is moving right at 10,500. The up trendline is at 10,515.
Support: The 50 day MVA at 9907.39. After that, 9.750 is some support and then 9500 is solid support.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

1-15-02
Retail Sales, December (8:30): -1.1% versus -3.7% prior.
Retail Sales ex-auto, December (8:30): 0.0% versus -0.5% prior.

1-16-02
CPI, December (8:30): 0.1% versus 0.0% prior.
Core CPI, December (8:30): 0.2% versus 0.4% prior.
Business Inventories, November (8:30): -0.5% versus -1.6% prior.
Industrial Production, December (9:15): 0.0% versus -0.3% prior.
Capacity Utilization, December (9:15): 74.6% versus 74.7% prior
Fed's Beige Book (2:00)

1-17-02
Initial Claims, (8:30): 395K versus 395K prior.
Housing Starts, December (8:30): 1.610M versus 1.645M prior.
Building Permits, December (8:30): 1.570M versus 1.595M prior.
Philadelphia Fed, January (12:00): 0.0 versus -12.6 prior.

1-18-02
Trade Balance, November (8:30): -$28.5B versus -$29.4B prior.
Michigan Sentiment-Preliminary, January (9:45): 89.6 versus 88.8 prior.

THE PLAYS: As indicated, we see potential trouble for some sectors (specifically retail and construction, but there are others), and we are going to be ready to take money off of the table on certain stocks if we get downside action (see the individual write-ups below).

At this point, we have seen a lot of stocks on the report make great moves, but frankly they have run their course. Many showed good runs and are either showing signs of breaking down or are just not showing any buy side action, and as we saw with the regional banks last spring and the health service companies in the fall, that can lead to distribution. We are not interested in buying into these stocks at this point, and are going to drop them until they form up better. We will of course keep an eye on these plays. They are: FLIR, SLM, STJ, TJX, BMS, SONC, TRDO, XL, FDC, SRCL, GTK and IGT.

We have kept those plays that have recently hit buy points, discussing the progression of the play as usual (e.g. BBY, BBBY, APPB).

BONUS PLAYS: MOGN, KEA, MCRS and SVM are still in good position. This weekend we have a mix of upside and downside plays.

CLKB (Clark/Bardes Holdings--$26.00; -0.18): Life Insurance.
http://biz.yahoo.com/p/c/clkb.html
STATUS: Insurance is starting to look better now that 9-11 shaking out. CLKB has formed a cup with handle since hitting a high of 33.30 last July. After making its way up from 18 and over its 50 day MVA (currently 23.96), CLKB formed a nice handle which produced a breakout a week ago. Volume was not very solid on the move, but the stock has held up well, testing the breakout and forming another handle-type consolidation. After dropping back Thursday CLKB showed a tight doji Friday over the support of its 10 day MVA (25.85), with volume remaining very low at 19,700 (average 102,000). Setting up well for another solid move, but we want to see some volume kick in. The breakout high was 27.45, and on a move over that level we are targeting 31.
BUY POINT: From here: Over 26.50 on above average volume. Stop: 25. Breakout: 27.57 on volume of 150,000. Stop: 25.64 (7%).
POSITION: Stock only.

QMDC (Quadramed--$10.48; -0.02): Software.
http://biz.yahoo.com/p/q/qmdc.html
STATUS: QMDC has formed a 22-month cup within a much larger base. It broke out of a handle in mid-December (after one failure), and after consolidating a bit made a very strong run up at the beginning of this month. It has approached the left side highs in the pattern (11), hitting 10.75 before pulling laterally the last week in another handle-type consolidation. It is behaving well, showing lower volume and holding support, Friday tapping the 10 day MVA (9.94) at its low on volume of 462,600 (average 466,000). Looks good, and we are watching for another surge out of this consolidation. Very strong money flow and buying. Target: 13.
BUY POINT: Breakout: 10.87 on volume of 700,000. Stop: 10.11 (7%).
POSITION: Stock only.

ASL (Ashanti Goldfields--$3.99; +0.01): Gold mining.
http://biz.yahoo.com/p/a/asl.html
STATUS: As noted in the summary, gold is making moves; serious moves. ASL broke out from its 5-month cup with handle pattern in late December, but promptly pulled back off of that strong move. It held support, however, maintaining above its prior handle highs and its 10 day MVA (3.93). ASL gapped up and reversed on big volume Thursday, but again held support, showing a doji after again tapping the 10 day, moving on much lower volume of 96,200 (average 71,300). We are looking for it to continue to hold and make another move on its breakout high (4.30, over the left side high at 4.18). Excellent money flow. Target: If it can take out the breakout high, 4.70.
BUY POINT: Over 4.05 on increased volume. Stop: 3.80.
POSITION: Stock only.

COHR (Coherent--$34.47; -0.53): Scientific & Technical Instruments.
http://biz.yahoo.com/p/c/cohr.html
STATUS: Made a strong move last week back over its 200 day MVA (33.34), trying to complete its cup pattern (August high on the left side at 39.50). The stock is deep in its base, but looking good on this move, showing excellent volume on the climb, and excellent money flow and buying. It showed a topping sign Wednesday with a 'tombstone' doji, and then followed through by pulling back. It appears to want to hold support, however, as Friday it gapped down but held fast with a 'shooting star' doji on increased volume (233,500; average 198,000). Looking for the stock to hold here and make another move, and we could get a bounce. Target: If it can take out the recent high of 36.39, initially watching the left side high at 39.50.
BUY POINT: From here: A bounce over 35.25 on increased volume. Stop: 33. Over the recent high: 36.51 on increased volume. Stop: 34.
POSITION: Stock and/or February $30 calls to buy (HRQ BF).

ACF (Americredit--$25.04; -2.97; optionable): Credit Services.
http://biz.yahoo.com/p/a/acf.html
STATUS: ACF had recovered a bit from its fall from its August highs over 60 to the November low at 14, steadily making it way back up to a recent high of 33. However, it peeled back going into earnings, and with the announcement it was hammered, dropping on huge volume Friday (10.5 million; average 2.52 million). We could see a test back up toward 26 from here, but on a drop we are looking at a put play with a target of 20, back in the range of its late-2000 highs.
BUY POINT: From here: A drop through 24.50 on continued strong volume. Test: After testing the 26 range, a drop through 25 on continued strong volume.
POSITION: February $30 puts to buy (ACF NF).

MIL (Millipore--$55.88; -0.94; optionable): Scientific & Technical Instruments.
http://biz.yahoo.com/p/m/mil.html
STATUS: MIL fell out of a double bottom with handle pattern at the beginning of this month (handle range at 60), and after holding on at the 200 day MVA (57.65) for a few sessions it gave up that support Thursday. Volume picked up (279,500; average 276,600) Friday as the stock tested the 200 day but then dropped back, taking out Thursday's low. MIL has some support here from April-July lows, but we are looking for it to take those levels out and drop on increased volume toward a target of 50 (double bottom lows).
BUY POINT: A drop through 55 on increased volume.
POSITION: February $60 puts to buy (MIL NL).

CTEC (Cholestech--$19.33; -0.67; optionable): Medical equipment.
http://biz.yahoo.com/p/c/ctec.html
STATUS: CTEC has fallen back hard after its nice run that took it from 8 to 27.50 in August through early December. After tanking back through its 50 day MVA (20.40) in December but recovering, the stock fell again, catching support near its December low (16.70) before trying another bounce. This time, however, CTEC could not get back over the 50 day, hitting up near that level the past four sessions in a short consolidation. Friday it dipped back again, but volume remained low at 200,600 (average 151,500). CTEC does not look like it can make a move up from here, and we are looking for the resistance to push it down hard, through its recent lows and down toward the 14 level (200 day MVA at 12.78).
BUY POINT: A move below 19 on above average volume.
POSITION: February $22.50 puts to buy (UBC NX).

End Part 2 of 4

us stock market
stock watch