|
|
world stock market, top stock pick
* * * *
Tech Traders 1/2/00 Market Summary
* * *
Technical Traders Subscribers:
Continuing Plays:
MMM (Minnesota Mining & Mfg--$119.19; -1.31; optionable (MMM)): Tested the 10 day MVA on the low of 117.50, moving up from there Tuesday as volume broke just above average (2.3 million). The stock looks ready for a move up from here on stronger volume. MMM reached a new all-time closing high of 121.94 Thursday. High money flow and high relative strength.
BUY POINT: Aggressive: Up from here on continued rising volume. New high: Over 122 on continued rising volume.
POSITION: Aggressive: Stock and/or April $115 calls to buy (MMM DC). New High: Stock and/or April $120 calls to buy (MMM DD).
http://www.investmenthouse.com/ct/mmm.html
(Click to view the chart)
BEC (Beckman Coulter Inc--$41.81; -0.13; optionable (BEC)): The scientific and technical instruments stock continues to test lower support (10 day MVA at 40.86) as it did Friday, moving up to close nearer its intraday high (42) on stronger volume (340,100; just below average). BEC is trying to break out of the handle of its cup base (breakout point of 42.01), and looks ready to move up on a surge in volume. High relative strength.
BUY POINT: 42.01, on volume of 510,000 or better.
POSITION: Stock. February $40 options had insufficient open interests (too illiquid for this stock).
http://www.investmenthouse.com/ct/bec.html
(Click to view the chart)
MEL (Mellon Financial Corp--$48.31; -0.88; optionable (MEL)): Pulled back on lower volume (1.46 million; avg. 1.8 million) to sit on support of an up trendline (connects October and November lows). Look for a bounce back up from here if the stock doesn't test the 50 day MVA at 47.46 again (as it did Tuesday on the low or 47.69). The trendline has been the launchpad for decent runs in October and December.
BUY POINT: On a move up from here (or 47) on rising volume.
POSITION: Stock and/or March $45 calls to buy (MEL CI).
http://www.investmenthouse.com/ct/mel.html
(Click to view the chart)
New Plays to look at:
BAX (Baxter International Inc--$89.63; +1.32; optionable (BAX)): The health services stock moved up from a Friday doji on a jump in volume (1.6 million; avg. 2 million). The stock is trying to break from a short base that began to form when the stock was hit with a downgrade October 19. Previous basing high is 90.25, a price the stock just beat on the intraday high of 90.44. Buying is excellent and relative strength high.
BUY POINT: Over 90.44 on volume of 3 million or better.
POSITION: Stock and/or February $90 calls to buy (BAX BR).
http://www.investmenthouse.com/ct/bax.html
(Click to view the chart)
STI (Suntrust Banks Inc--$61.81; -1.19; optionable (STI): Money Center Banks
STATUS: Pulled back toward support (10 day MVA at 60.76) as volume dropped just below average (983,800), in the handle portion of the stock's 7-month cup base. Closed on a doji on the move down. Look for a further test of the moving average, but then expect a move up in the handle for a breakout. STI shows strong money flow, high relative strength, and good buying.
BUY POINT: Aggressive: On a move up from 61 on rising volume. Breakout: 64.51, on volume of 1.5 million or better. Remains a buy on a breakout up to 67.74.
POSITION: Stock and/or April $60 calls to buy (STI DL).
http://www.investmenthouse.com/ct/sti.html
(Click to view the chart)
Puts: Be ready to get out of these plays quickly if necessary.
PMCS (Pmc-Sierra Inc--$67.44; -11.19; optionable (SQN)): Moved below its December low (68.41) on stronger volume, suggesting a continued fall, but watch for possible support at the 65 level, near the December 1999 high (65.13). That is a bit far out, and on heavier volume the stock can break that level to a move down to the 57 range, top level of a consolidation from the previous month (November 1999). Keep an eye out for 57 support.
BUY POINT: On a move down from here on continued rising volume.
POSITION: February $70 puts to buy (SQL NN).
http://www.investmenthouse.com/cd/pmcs.html
(Click to view the chart)
BRCM (Broadcom Corp--$76.13, -7.87; optionable (RDZ)): Electronics: Semiconductor, Integrated Circuits
STATUS: Moved further from its 10 day MVA (92.18) on stronger volume (8.7 million; avg. 9.6 million). The December low is at 74.75, and on a move below that price, the stock can sell down to 64. That is the 1999 October high, and is a bit far out, but the only possible support level other than the December low.
BUY POINT: On a move below 74 on continued rising volume.
POSITION: February $75 puts to buy (RDZ NO).
http://www.investmenthouse.com/cd/brcm.html
(Click to view the chart)
THE SUMMARY:
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
TONIGHT:
- No buying today as stocks sell across the board.
- More lousy economic news hurts stocks but increases the odds of early Fed intervention.
- Subscriber Questions
- Team Trades
A new year and a new low.
The late, high-volume buying spurt on Friday afternoon did not bear out this morning as stocks opened flat to down and then started selling, and selling and selling. Some tried to hold off, but those that did only waited until the last two hours before they too sold down hard. Tech stocks were not singled out as selling was across the board. Perhaps some capital gains were being taken on year 2000 winners in addition to the usual tech selling. Volume was lighter on the Nasdaq, but the key stocks on Friday's late rise were singled out by downgrades before the open today. Those stocks sold on heavy volume today, indicating that the tech sector is not ready to stage any type of meaningful rise at this time. When stocks continue to be punished based on an analyst downgrades, they still have a lot of work to do before they are ready to move up. As for the sudden selling in what have been the 'safe' sectors (for capital gains reasons or not, we cannot know for sure just yet), that is another good reason to maintain strict sell rules in this market as we have seen too many good gains turn over on us.
Once again we see another rally attempt and weak confirmation day on the Nasdaq tossed aside in another wave of selling that quickly wiped out 5 sessions of building. We can hardly call it an aberration given that this has happened ever since the Nasdaq tried to rally after the May 2000 low. Still, there are potentially competing forces at work. The January effect that actually started in the last week or so of December has the underpinnings to be strong: lots of money on the sidelines, more money coming into 401k accounts, and stocks that have been really knocked around the previous nine months. That sounds like a good equation for a nice January rise. On the other side, however, there is the fear of earnings that are just around the corner with possibly more warnings this week and an economy that just seems to slow as each day progresses (e.g., today's December NAPM report).
Fear and the Fed will help.
The medicine at this point is the Fed. When the major indexes finish down for a year in which the Fed raises interest rates, they have managed double digit gains the following year if the Fed initiated rate cuts. That is a pretty good track record, and that goes to our argument that markets are built on future expectations, not past earnings. As long as the Fed acts fast enough and forcefully enough to satisfy investors (and pump up the money supply and actually get things moving economically), they have been willing to invest. At this point, however, with the daily economic news detailing a rapidly slowing economy, investors need action; hope is a scarce commodity right now.
That too is a good thing, once again drawing on the perversity of the stock market. The market plays on investor emotion; how many times have you seen things get so bad you just decide to get out, and almost at that minute the market turns? It amplifies your fears, and that overwhelms reason. When fear hits peak levels markets turn, especially when they have help. We have to recognize that. Today was a downer. A new year starts with more across the board selling that pushes the Nasdaq to a new low for the year. That stinks. What we need to do at this point, however, is keep calm and recognize that we have help on the way despite the worries over earnings to be announced over the next three weeks and the glum economic news. Hey, we all knew this was coming; we have been saying this for the past six months at least. Now the Fed may cut rates as soon as Friday given today's horrible NAPM report and the slew of remaining economic news coming out this week. The VIX shot back up today as well. Fear and the Fed on our side. Not a bad combination. Pick your entry points, take small gains, and cut losses fast on our trades in the interim as we wait for the Fed to act and leading stocks to right themselves before we commit more money to the market. Don't succumb to the fear; recognize it and beat it back. Then keep sharp on what stocks are shaping up well or recovering from some profit taking to start the year. We are still banking on a good year sooner than later as techs have been clobbered down to incredibly low levels and we have a Fed that is going to be on our side. Again, that is a good combination for some stellar profits ahead.
THE ECONOMY
NAPM hits lowest level in almost ten years. The National Association of Purchasing Managers index thudded to 43.7% in December after expectations of 47.1 and a November reading of 47.7. July 2000 was the last time the NAPM was at 50 or better, an indication of an expanding economy. A reading of 42.2 is considered a recession-level reading; indeed, the NAPM reading for December was the lowest since April 1991 when the U.S. was just starting to pull out of recession.
Keeping that 42.2 level in mind, not that the new orders element of the report came in at 42 (48.4 in November); the production index was 42.4 (49.6 in November); the employment element was 42.8 (46 in December). Those are some pretty nasty numbers. The one rise was not a good one: prices paid rose from 56.6 in November to 61 in December. That is an indication of possible inflation to come. Again, we have not seen inflation show itself at all until the Fed started raising rates and choking off supply by curtailing investment in the economy. Only recently have we seen demand start to slacken; it remained strong even as production fell flat on its face. That is where the imbalances came from. Without investment in the supply side of the economy, goods and services could not keep up with demand that was not falling until recently. That is where we get some inflationary pressure, and that is the fault of the Fed.
How the currencies reacted. The Fed Funds futures contract jumped from a 32% probability of an interim FOMC meeting to a 40% probability on the news. That is good news. The Euro jumped again against the dollar as the dollar weakened further. Those long-time readers know that a strong dollar is key to keeping inflation at bay. When the U.S. dollar is strong and U.S. workers can purchase greater quantities of goods and services with the same number of dollars, there is no pressure on wages to rise. The slowing U.S. economy has weakened the dollar and made investing in other economies more attractive. Funds flowing from the U.S. weakens the dollar as dollars are sold in favor of that other currency. That is not good for the U.S. The Fed has opened Pandora's Box by fiddling with what was a very healthy, very efficient economy. It crashed the stock market, trimmed $4 trillion in wealth from U.S. retirement accounts, severely damaged the U.S economy, and threatened the world economy by chasing supposed inflation. As we know now, it was not inflation at all that was driving the Fed. It was the rest of the world wanting to keep up with the U.S. and maintain the 'order' of the globe as the Fed and the other central banks see it.
End Part 1 of 2
|
world stock market
top stock pick
|
