|
|
us stock market, stock watch
Begin Part 2 of 2
THE MARKETS
Stocks were hit with some apparent capital gains selling (the year 2000 winners) and a downgrade of one of the hallowed areas of technology, networking. EMC was a target along with NTAP, VRTS, and others. The sympathy selling was widespread and heavy as AMCC, JNPR, BRCD, CSCO and others involved in networking were slammed. Dane Lewis at Robertson Stephens sees a slowdown in this area because information technology departments of corporations are supposedly going to put off purchases until the second half of the year. True or not, these tend to be self-fulfilling prophecies, and the stocks were crushed. 20% losses were the norm in these stocks today. 20%. One joke today was 20% sure is not what it was last spring where a 20% loss on BRCD would have cost $60. Today that was a mere$17 or so. Hilarious.
The Nasdaq selling was on lighter volume overall, but big name stocks were hammered. The Dow and S&P 500 sold on rising volume. Thus we have distribution in the key tech stocks and on the leading index. Not a strong combination to start the new year. At this point we have to see where the recent leaders in the market end the profit taking and start back up. They could be struggling for the limelight, however, if the Fed cuts rates and tech stocks start to recover. Don't expect a rip-roaring, non-stop recovery. It will be good news, but it will more or less coincide with earnings warnings. Most likely we will see the Fed rate cut help those stocks that can show good earnings, i.e., JNPR, AMCC, GLW and the like. Those are the leaders in revenues and earnings, and those will most likely lead with the first good news from the Fed and solid earnings reports. Our portfolio of leaders all exhibit great earnings and revenue growth, and will be the leaders when the Fed acts and they report good earnings.
Overall market stats:
VIX: 34.20; +3.97. Volatility spiked higher as all three major indexes hit the skids on the first trading day of the year. The index climbed solidly just as the indexes sold solidly. That is the inverse relationship between stocks and volatility. This level has led to small rallies in recent history, but we are not expecting things to jump out of the gates tomorrow as the indexes are just coming off of a small rally attempt. The fact that it jumped back up so fast is a good sign for a turn, but we may get some more selling first.
Put/Call ratio: 0.79; +0.12. Crawling back up, but this indicator has not shown much pop even with the apparent widespread bearishness out there. It has been reliable in the past, and we are looking for a 1.0 or better close. At this rate, the Nasdaq will have to hit 2000 before it registers a reading of that level.
NASDAQ: Lower volume, but heavy selling on the key stocks. The index tapped a new 52-week low today (2273.07), a level not seen since March 1999. That is almost two years of work tossed aside in 9 months. The ugly gets uglier. Again, with the slaughter and the Fed coming to help, a few good earnings reports from leaders will reassure investors that even in a bad fourth quarter the leaders were leading in earnings and revenues again.
Stats: Down 178.66 points (-7.2%) to close at 2291.86.
Volume: 1.938 billion shares (-23.4%). We like to see volume fall on selling, but as indicated, key stocks were hit hard on high-volume selling. That is not good. Down volume was 1.448 billion shares versus 398 million upside shares.
A/D and Hi/Lo: Decliners took back the lead, 1.4 to 1. New highs dropped to a mere 52 (-83), but new lows fell as well to 131 (-141). The falling new lows on such a down day is a back door positive: if there are fewer new lows on continued selling, that means the majority of the selling has been done.
The Chart: http://www.investmenthouse.com/ch/nasdaq.html
A new intraday 52-week low (2273.07) and a new closing low as well (2291.86). There is not much to say about this chart. It is a chart of an index in a downtrend that it cannot shake. The Nasdaq started to give us a test of the 2200 level today, and it may do it again tomorrow. We almost (almost) wish it would just go ahead and crash down to 2000 in a fear-selling binge that would flush the market out. As one of our staff says, it would either make it or break it. Since things have been broken for awhile, our bet is that it would make it.
Dow/NYSE: The Dow was sold off as well, but it was not the technology issues that were the main culprit (INTC was up, MSFT flat, and IBM down a fraction). Maybe locking in capital gains early as some were saying. In any event it fell on rising volume that was almost back to average.
Stats: Down 140.70 points (-1.3%) to close at 10,646.15.
Volume: NYSE volume rose to 1.106 billion shares (+7.2%). Down volume topped up volume 824 million to 254 million shares.
A/D and Hi/Lo: NYSE decliners edged advancers 1.28 to 1. New highs fell to 185 (-134) and new lows fell as well to 28 (-12).
The Chart: http://www.investmenthouse.com/ch/djia.html
The Dow held at 10,600, right at its 50 day moving average and the bottom of the 10,600 to 10,900 range that it has bounced around in. It could easily crack this level and fall back to test 10,300 on further selling momentum. Volume was higher, but it still came in below average. Nonetheless, the fall has been on stronger volume than last week's rise.
S&P 500: The S&P 500 sold back sharply, testing support on its low (1276.05). 1270 has acted as some support in the past, and it bounced off of that level right at the close today. On the recent plunge, however, it knifed right through that level to a new low for 2000 (1254.07). As with the Dow, it is selling on stronger volume than it rose on. That is not the healthiest price/volume action, and it does not bode well for this level holding.
Stats: Down 37.01 (-2.8%) to close at 1283.27).
Volume: NYSE volume rose 7.2% to 1.106 billion shares.
The Chart: http://www.investmenthouse.com/ch/sp500.html
THIS WEEK
The week did not start as we planned as some strong selling came in to start of the new year. Many were saying this was capital gains selling (didn't we just get the end of tax selling?), but in any event there were key stocks selling on high volume and leading stocks of late sold on high volume as well. That took us out of the gameplan and now we have to see how stocks recover. The tech stocks still were rocked on bad news indicating they need real help from an external source, e.g., the Fed. Will investors come back to the 'defensive' sectors again (drugs, healthcare, food, and even financial) after Tuesday's round of selling? That at least will give us some better entry points for those stocks that have just gone up and up.
But we do have to consider that there may soon be a rotation into beaten down sectors. Perhaps the selling of the healthcare and drug stocks today was not all capital gains selling, but some money coming free in anticipation of a Fed rate cut and the help that gives to beaten down sectors (e.g., technology) and the financials, a traditional place for money to go when the Fed starts cutting rates. We need to stay alert to signs of rotation when there are potentially major inflection points. The start of a series of Fed rate cuts is such an inflection point. If these stocks continue to sell and do so on stronger volume, that is something we need to watch. First, we don't want to be jumping in on stocks selling on rising volume to try and get a good entry point. Whenever a stock pulls back we prefer to see it on lower volume, and we always want to wait for it to move up. Second, it usually means that big money, i.e. institutions are leaving the stock and looking elsewhere.
So, we are still looking at those stocks in good patterns (e.g., BEC), those defensive stocks that have shot up and have pulled back a bit on lower volume (though mindful of the potential that this is a change in the market), good pre-split plays and good pre-announcement split plays. Of course, we are also looking at some downside plays on those stocks and sectors that look to be ready to sell even further. Such are the times.
After today, tomorrow's open is a question mark. Nasdaq futures were about 22 points ahead of fair value and S&P futures were 7 points above fair value at the time of this writing. We need to watch any positive open with a jaded eye, easy enough to do after the past 10 months. An early move up can allow for some downside positions on those stocks that roll over after the morning rise. We will continue to watch for breakouts on those stocks that held their pattern even through today and those defensive sector stocks that bounce up off of support and start to move up if those sectors start to show overall life again.
Support and Resistance Levels
Nasdaq:
Resistance: 2550 to 2600. Then there is 2750. The down trendline is at 2750.
Support: 2200 down to 2000.
S&P 500:
Resistance: 1335. Then 1350 to 1360. The down trendline is at 1360.
Support: 1270 is possible support. 1254.07 is the 2000 low.
Dow:
Resistance: 10,900 to 11,000.
Support: 10,600, then 10,300. After that, 10,000.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
1-2-00
NAPM index for December (10:00): 47.1% versus 47.7% prior.
1-3-00
Chicago PMI for December (10:00): 43.5% versus 41.7% prior.
1-4-00
Initial jobless claims (8:30): 350,000 versus 333,000 prior.
Factory orders for November (10:00): 1.0% versus -3.3% prior.
1-5-00
Non-farm payrolls for December (8:30): 133,000 versus 99,000 prior.
Hourly earnings for December (8:30): 0.3% versus 0.4% prior.
Unemployment rate for December (8:30): 4.1% versus 4.0% prior.
Average workweek for December (8:30): 34.3 versus 34.3 prior.
New home sales for November (10:00): 925,000 versus 928,000 prior.
SUBSCRIBER QUESTIONS
Q: When you say "position stock or option", are you saying stock purchase on cash and\or margin when dealing with stock? Also, so much of your newsletter deals with options i lose confidence when thinking about purchasing on margin. I understand your 8% rule and I guess a cash or margin purchase would follow these same guidelines. Would you please clarify your advice on this matter. Thanks.
A: When we refer to taking a position with stock and/or a specific option, we mean the position can be taken with stock, with options, or with both if the investors so desires. When the market is good we do use margin. When the market starts to turn worse, i.e., leading stocks breaking down and higher volume selling, we start weaning positions off of margin, either selling positions as they break trendlines or support levels or by infusing some more cash into the accounts or both. Keeping strict sell rules pretty much takes you off margin automatically when trouble starts. Right now we are making no margin purchases everything is cash, no credit. The market will have to improve dramatically for us to start venturing into margin positions again.
Q: On last weekend's report you referenced large volume spikes in certain key stocks right before the close. Where can I find this information on real time volume information? Do you subscribe to a chart service where you are able to watch the volume on each of these stocks? I am unable to see volume spikes with my software on my watch list. Thank you for the help
A: We were all watching trades on time and sales and on live charting that tracks volume on eSignal, a realtime quote service. There are many realtime services available that provide a free trial period, e.g., DTN. Investment House subscribers receive a reduced rate from eSignal. For information please contact the following representative.
Genevieve Tsamoudakis
Account Executive
Data Broadcasting Corporation
800-322-1617
gtsam@dbc.com
Office hours 6:30-3:30 PST
www.esignal.com
TEAM TRADES
Today the gameplan was trashed early on, and we did not take advantage of a beautiful day to short the market, at least playing the QQQ or OEX options to the downside. Sometimes you get too married to a position or way of thinking and do not react quickly enough. Still, I for one was not in a daytrading mood today (felt a bit under the cold weather we are experiencing) and let the chance go by. Sometimes when you are not mentally ready to make a play, it is best not to do it. We were prepared for some longer term entry points today if we got the chance, and this was just not the day. Indeed, we were stopped out of several positions we had initiated during this last rally attempt, some with gains, some with a slight loss. That is how you take on this market: stick to the gameplan where you can, be flexible, and don't lose nice gains or let small losses become big losses.
Good Investing!
Jon Johnson and the Tech Traders Report Staff.
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.
|
us stock market
stock watch
|
