|
|
us stock market, stock trading information
* * * *
1/14/02 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
SUMMARY:
- Greenspan effect lingers on the market.
- Volume moves higher, but it is not a slaughter given the negative talk.
- See stocks setting up for a move higher.
- Economy: Not saying the end is here, but that we are backtracking on what was done right in 2001.
Greenspan speech lingers.
European markets struggled Monday on the heels of the Greenspan speech that confirmed what the Fed presidents had said all week: signs were better but the economic recovery stands on the edge of a knife (apologies to 'Lord of the Rings' fans). European investors realize that as the U.S. goes, so they go.
They did not get much help. Merrill moved 10% of its portfolio from equities to bonds and Prudential followed up with its 'underweight technology' advisory. Those were the big downside words Monday, and they combined with the Greenspan hangover to push the market lower yet again. If nothing else, they made a good excuse to continue selling as opposed to stepping into the breach with buy orders.
Some of the reasoning we heard was what we have heard all along, i.e., that stocks had run too far. Others voiced concern that earnings may not provide any boost at all, that stocks were priced too high for even increased expectations to keep them at current levels when the numbers were released. This latter seems to be the real issue. After earnings have been stomped and expectations undercut again and again, investors are a bit nervous about the imminent earnings season and whether stocks really will meet those heightened expectations. One thing a rational person can say about that: after such an earnings led slaughter over the past year and one-half, companies would not be going public ahead of earnings with increased expectations if they were not going to at least make those higher numbers. There is no way they would open themselves up to that kind of liability.
Now that we have some selling going we are hearing from all of those with a negative perspective on the market. They are finally getting an audience for their point of view after a few months of upside action and the upside commentary. We are not complaining too much; the put plays have worked out quite well over the past week. Anyway, hearing the bears talk is not unusual, and it is actually good for the upside in the long run. It injects some more uncertainty into the market, keeps some money on the sidelines for later use, and allows stocks to drift back a bit more. Volume was up a bit, but it was hard to say there was much dumping going on when INTC, AMD, MU, AMAT and other big names were higher on higher volume.
Volume does move higher on the down session.
Volume did in fact rise on the selling, the second distribution day in the past 4 sessions. In six straight selling sessions, however, selling volume has been very heavy. It has not equaled the buying volume in the previous rallies higher. That is good from an overall standpoint as it shows the lack of mutual fund dumping of shares and thus gives a very high probability of a strong bounce back when the selling reaches its limits.
There was not a whole lot of dumping going on though several recent leaders were hit hard (NVDA as anticipated sold to its 50 day MVA; GNSS, a leading chip stock, and EMLX a leading PC peripheral stock were thumped). BRKS, LRCX, SEBL and ORCL, however, settled slightly lower on light volume. We are not saying no selling went on; it did, and it has us concerned with the indexes undercutting their 50 day MVA's. After six sessions of selling, however, selling volume overall has been light.
Good news tried to thwart economic worry drag, but investors have earnings cold feet.
There was a lot of good news, but it was a day that good news was not holding much sway. SSB gave CHKP the nod that it will meet its earnings and signal increased business. Lehman Brothers raised several software names (ARBA, LGTO, BOBJ). Dan Niles upgraded MU to a buy from a market perform, saying that DRAM price increases were sustainable. BAC raised PALM to a buy. OSIS upped its own earnings estimates and zoomed.
There was a lot of positive news, but the economic questions have come home to roost a bit right now as we anticipated a few weeks back at the death of the stimulus package. What has happened? There were many increased earnings expectations based on company releases, improving economic numbers, and improving prices in some components (DRAM chips). Those increased expectations were built into stock prices. Now with no stimulus package and the Fed questioning the recovery (though it is clear the Fed was talking to the bond market; did you refinancers check those long term rates today?) some of that pricing is being backed out ahead of earnings in a classic sign of cold feet.
YHOO and INTC report tomorrow after the close, and that may start to price some positives back into the market. Lets not forget that negative warnings are way down from prior quarters and are running over 50% less than same time last year. We also hear a lot of companies 'comfortable' with expectations. That is code meaning many will beat those estimates. Things are going to be better; the negative talk now is questioning if things will be good enough. With the selling ahead of the numbers, a lot of the fluff has already been taken out, and it has been done so in a rather orderly fashion. Stocks are ready to start to move higher on the earnings.
Many stocks set up to rally or dump.
That theory will be put to the test soon. Sixteen percent of the S&P reports this week, and over 100 report tomorrow. It is time to see those good numbers come in.
Look at some key stocks. They are at what we call the 'lick-log' time. IBM has quickly dumped to the 50 day MVA, a key, key level of institutional support. Volume spiked up today as it undercut that level but then rebounded to close above the average on the close. That is what you want to see: volume rise on an undercut that pushes the stock higher to close over that level; that indicates institutions came in and were buying to drive it higher.
WMT has once again pulled back to its 50 day MVA as well. It did that in November and December, and both led to nice bounces higher. WMT is sort of the poster stock for the economic recovery in some ways. It was supposed to have a crappy Q4 and holiday season, but it had a great one. The information coming out for January is also strong. Yet, the stock has pulled back since the first of the year. It is primed to move higher once again. If it does not, it could be a signal that indeed the economic recovery is not going to be as good as anticipated. Reason: if the strongest retailer cannot muster institutional support at a key level, institutions are not going to hang onto other stocks, and the market is a very good longer term barometer of the economy as we saw starting in the spring of 2000.
THE ECONOMY
Over the weekend we discussed some of the problems shaping up with the economy, namely the backtracking on prior tax cuts and non-government spending stimulus and how that posed problems for the U.S. We are big believers in history because we keep seeing it repeated as our leaders make the same mistakes that were made in the past, but they convince themselves that things are different this time. We know how that story ends. We are concerned that after starting the right moves for the right reasons, they are now backsliding for the wrong reasons. The result could be very detrimental to all of our lives for years to come.
We do not want to confuse that longer term perspective, however, with the shorter term selling we have seen of late. This selling is more of a realization that more immediate term market pluses may not be as strong, i.e., no immediate stimulus coming and the Fed's 'don't get too excited just yet' speeches last week. The Japan issue, if it occurs, will unfold over a longer period. Remember, we are going to see improved earnings this quarter judging solely upon the fewer earnings warnings and the increased upside warnings. The question will be if enough air was taken out in the recent selling to allow stocks to move higher.
THE MARKET
The Dow and S&P 500 closed down just below their 50 day MVA on higher, average volume. That makes six straight sessions of selling for the Dow and 5 out of six for the S&P. In six sessions, there have been two on higher volume. Not massive dumping, but it is a concern. Three or four quick sessions on higher volume is a problem. As noted above, however, we see INTC, AMAT, SEBL and others in good position to bounce in the near term. Whether it will be a resumption of buying will depend upon the volume. Right now we have not seen a lot of volume selling, and a rebound on strong volume would again show that the buyers are continuing to push stocks higher for now. The put/call ratio spiked to 0.88 today, and during this rally that has usually led to a turn up by the indexes.
Secondary indicators: Volatility and the put/call ratio are sentiment indicators. They are thus contrary indicators (typically moving inversely with the market) and are most useful at extreme levels. They take a back seat to price and volume, but they can give us a heads up or a caution flag so to speak ahead of time. That is why we keep an eye on them.
VIX: 25.06; +1.08. Up on the selling but not sharply higher. Over the past two sessions volatility has risen 2 points, nowhere near the 2.50 to 3 point spikes one sees when there is a lot of fear. Still not at high enough levels to say a sustained turn is coming right now in and of itself.
VXN: 49.51; +1.14. Finally broke a bit higher, but still trades just slightly above the summer consolidation range near 47. As with the VIX, it is not that significant a gain.
Put/Call Ratio (CBOE): 0.88; +0.20. Nice pop in the put/call ratio, and when it has spiked to this level in the past during the rally off of the September 11 bottom the indexes have turned up the next session.
Nasdaq
Sold back below 2000, landing at the March 2000 down trendline on the close as volume rose to average levels. Even with the selling, we see some key Nasdaq stocks holding their own: INTC, AMAT, ORCL. Looks as if we could get a bounce; the key is the upside volume.
Stats: -31.72 (-1.6%) to close at 1990.74.
Volume: 1.801 billion shares (+10.8%). Back to average on the selling, the second session in four of distribution, i.e., higher volume selling of stocks. Again we note that the volume on the downside has not been running away.
Up volume: 420 million
Down volume: 1.367 billion. Up and down volume roughly the same as Friday with the gains on the selling volume.
A/D and Hi/Lo: Decliners really shot up to 2 to 1, the largest downside ratio in over a month.
New highs: 96 (-7)
New lows: 26 (+8)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Undercut the 18 day MVA (2004.31) and checked up at 1979.94 on the low, recovering to hold at the March 2000 down trendline. It is the last of the major three to hold above its moving averages, though the SOX is holding up above the 50 and 200 day MVA as well (1940.25 and 1931.62, respectively). Overall the index has suffered a reversal and a pullback, but it is still above its prior consolidation range and as noted above, we see some big names that look ready to bounce. There needs to be some impetus for a bounce with volume. Perhaps earnings will help deliver a bounce with more punch. With two sessions of selling on higher volume there needs to be stronger upside volume on any bounce to show there is still life here.
Dow/NYSE
Sold from 10,300 intraday last week to close right at the 50 day simple MVA (9892.99; exponential at 9906.77) on rising, average volume. It is being hurt by the continuing IBM woes.
Stats: -96.11 points (-1.0%) to close at 9891.42.
NYSE Volume: 1.243 billion shares (+1.6%). Volume edged higher on the selling, a technical distribution day, but again, not wild dumping of shares. It is still overall contained on this pullback, but showing signs of strain.
Up volume: 333 million
Down volume: 919 million.
A/D and Hi/Lo: Decliners increased their lead to 1.52 to 1 (1.4 to 1 Friday).
New highs: 90 (-13)
New lows: 42 (-20)
The Chart: http://www.investmenthouse.com/cd/$indu.html
After hitting a post 9-11 intraday high at 10,300, the index has sold down below the 200 day MVA (10,104.73), landing on the 50 day simple moving average today (9892.99; right below the exponential at 9906.77). This is the last stop before 10,750 (some soft support) and then 9500. Going down that far? The index is still at a major support level and has not undercut prior lows on this rally. Volume is not shooting higher on the selling. How stocks such as WMT and IBM react at their 50 day MVA's will speak volumes as noted above. We may see that undercut tomorrow, but we expect a move higher after it does. Index may finish higher tomorrow after such a move.
S&P 500: The big caps could not hold either 50 day MVA on the close (1139.78, exponential). That is never good; that old broken ice analogy. Once the ice is broken, it is easier to fall. Similar to the Dow it is still above the prior lows on and above some strong support at 1125. The pattern right now is a double top that is trying to sell down on stronger volume. We will most likely see a test of the 1125 support. The March 2000 down trendline is just above that level at 1127. As with the Dow, we will most likely see the index move further below the 50 day MVA tomorrow before a rally is attempted to close it at or above that level.
Stats: -7.19 points (-0.6%) to close at 1138.41.
Volume: NYSE volume edged slightly higher on the selling to 1.243 billion shares (+1.6%), but it is still below the prior buying volume.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
The Dow and S&P are in fact testing their 50 day MVA as anticipated in the weekend report. We have had some great put plays in the reports and we will most likely get some more downside tomorrow morning as the downward momentum continues from the close. That may be all this downside move gives us, however, as we have seen many key stocks holding their own in the selling. An intraday test lower will most likely be the point to go ahead and close some put positions and covered call positions in anticipation of at least an interim bounce.
Retail sales are out in the morning. They are expected to be better, but not stellar overall. If better than expected, the morning downturn may not be as severe, but we will send out a pre-market alert to give that last minute perspective heading for the open.
The first step of the action for the week has transpired, i.e., the test of the 50 day MVA. Now we see if WMT, IBM, NVDA, the Dow, the S&P 500 can turn it back upside on strong volume at this point. The mood has shifted to a more negative bias, but we see the volume not racing higher on the selling and we see the put/call ratio jump back up on today's action. The rising anxiety has triggered more upside action during this rally. We also have earnings starting in earnest tomorrow. The stage is set for a rally if investors are willing to take the ball and run with it. We think there is a good enough prospect for the bounce that we will be closing out some downside puts and covered calls on early selling.
Support and Resistance
Nasdaq: Closed at 1990.74.
Resistance: Potentially 2000. The December intraday high remains unconquered (2065.69), and it now also has the January intraday high at 2098.88. The up trendline is at 2150. Then 2250 to 2300.
Support: The March 2000 down trendline held on the low today at 1980, now at 1970. Then there is the 50 day MVA at 1940.25, right at the support range of the tops of the prior consoidation at 1934 to 1941 (the tops of the November consolidation).
S&P 500: Closed at 1138.41.
Resistance: 1150 is some resistance in conjunction with the 18 day MVA (1151.23). Above that is the 200 day MVA at 1167.10. Then the December high at 1173.62 followed by the hump in the March double bottom at 1183.35.
Support: The 50 day MVA is roughly holding right now (1139.78). Below that is 1125, good support, and the March 2000 down trendline is 1127.
Dow: Closed at 9891.42.
Resistance: 10,000 could act as some psychological resistance, but the 200 day MVA is still the level to cross (10,104.73). Then the early January highs at 10,300 are tough. 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.
Support: The 50 day MVA at 9906.77 is trying to hold on. Below that 9.750 is some support. 9500 has proved solid on this entire rally.
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.
SUBSCRIBER QUESTSIONS and TEAM TRADES
Due to some data loss as we were preparing to send out the reports, we do not have tonight's questions and trades. We apologize and will have more tomorrow. If we can recover the data we tonight we will send them later.
THE PLAYS:
Good movers: PPG dropped again as it broke support on stronger volume (put). Other stocks on the report are on the verge of making good moves, or started moves today. TTN closed right above our target, the 200 day MVA for the put. If it bounces we can close the play.
Previously covered: HD fell through its 18 day MVA on rising volume, clearly selling and may drop to the 50 day MVA at 48. AWRE took a dive below the 18 day MVA on strong selling; can fall to the 200 day MVA at 7. MFLO closed below its 18 day MVA on selling; it is a nickel below that level and looks ready to drop to the 13.50 range. SUPG closed just under its 50 day MVA on some selling. More positively, IOM was up from the 50 day MVA on strong volume, holding above the 18 day MVA. It lost the ascending wedge pattern Friday, but looks good on this action.
End Part 1 of 2
|
us stock market
stock trading information
|
