* * * *
2/07/02 Technical Traders Update Report
* * *
Technical Traders Report Subscribers:
MARKET ALERT SERVICE
Issued a target hit alert and took some more downside money off the table today with SMTC put hitting its target (+2.05 on the options).
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
SUMMARY:
- An early rally attempt ends in an afternoon selloff.
- Economic news continues to improve but that is not enough for now.
- Indexes heading toward a date with the next support level.
- Subscriber Questions
Rally attempt dies in the afternoon.
Through the morning the indexes were looking positive, bouncing once again from the near term support levels and then moving laterally near the session highs. After several days of selling and showing doji's at the bottom of the trading range, it looked as if the Dow and S&P were going to try to lead a little rally higher. Indeed, even when the Nasdaq and SOX started to run into trouble in the early afternoon the NYSE stocks were holding their own.
In the end, none of the indexes could hold on. The Nasdaq broke to a new post-rally low while the semiconductors, discussed last night, resolved a lot of questions to the downside. The overall index took a big hit falling 5% in a symbol of the tech weakness. CSCO's numbers did not inspire any tech buying.
At the same time, it did not inspire any really heavy selling. Volume on the Nasdaq and NYSE eased on the fall, a signal that after two days of share dumping the selling was slacking off a bit. That is about all that can be said, however. There has been no significant rally attempt that could hold for an entire session, and a lot of damage has been done to the big names. Even some of the smaller stocks were getting dumped on a bit today.
More and more it looks as if there might be some bifurcation in the market. The Dow and the S&P are trying to hold on at the 9600 to 9700 level and the S&P at 1080. As discussed below, they may attempt a rally to near resistance in the near term. The Nasdaq, however, is heading lower and lower. Today volume was down, but it does not show signs of bouncing yet as it undercut some potential support and closed on the low. It looks as if it is going to give a full 50% test of the rally (1750).
THE ECONOMY
The selling is occurring on the backdrop of decent economic numbers. Today saw yet further evidence that a recovery is underway though its strength is still the issue that trumps the market. As we said last night, the selling will stop when enough evidence mounts that the recovery is picking up speed and enough air has been taken out of the rally.
Jobless claims were 376,000 down 15,000 and below 400,000 for the fifth straight week. Remember, the 400,000 level is one that is considered a hallmark of recession. Jobless claims exploded over that level last year. Now they are backing off, and that is also reflected in the continuing claims tally that dropped 50,000 for the week. Now sometimes that is not the best reading, however, because we know that people drop off of the unemployment rolls after a certain period of time, so we need to see a continuing drop in continuing claims and. That is what we have been seeing.
WMT once again easily surpassed the analysts' prognostications, posting an 8.3% increase in its January same store sales. The consumer is still consuming just as he has been all along, boom time or recession. Yes, the consumer is looking to discounters as is always the case in a recession, but the consumer is still spending a lot of money. It has shifted from some retail sectors as noted, and those left high and dry are screaming of a consumption slowdown. No, it is more of a demographic change during a recession. The consumer is still 'surprisingly' strong as Greenspan just said a couple of weeks ago. It is business that has and is suffering.
THE MARKET
A repeat of Wednesday's action with the Dow and S&P holding recent support except for the Nasdaq undercutting. Volume was lower as well on the selling, taking some of the heat off the selling. Indeed, the Dow and S&P look as if they want to try at least a short term bounce here, but they looked that way Wednesday as well. Overall things remain the same: trying to hold the trading range, and the Nasdaq giving up the leadership role (at least to the upside) as it slides lower.
VIX: 27.68; -0.52. Volatility was actually down on the session for the S&P 100, indicating anything but a rally, or at least a stronger rally, is in the offing. These are not high levels. A move over 30 might be enough to turn things up from a correction, but it is not near that level and is not showing signs of doing so without more downside. So, maybe just a reflex bounce here.
VXN: 51.11; +2.05. Nasdaq volatility continues to rise, now moving 4 points above the top of the summer 2001 consolidation range. Perspective: in July 2001 it hit 60 on a spike higher. In September it ran into the nineties.
Put/Call Ratio (CBOE): 0.85; -0.14. Dropped on a day that was marked by a rally attempt that failed. The late selling is what kept it on the high side. Still not giving a signal that a rally could be at hand, though as with the VIX, high levels indicate increased fear that may be able to spark a relief move. As for a longer term move, it is not there right now.
Nasdaq
Leading to the downside with the help of the SOX that burrowed 5% lower, the techs undercut 1800 and are looking right at a 50% retracement in the 1750 range. The Nasdaq has given up its upside leadership role.
Stats: -30.60 (-1.7%) to close at 1782.11.
Volume: 1.998 billion (-4%). Volume backed off just a hair on the session, avoiding a technical distribution day. Still above average volume on the continued selling, however. Lower volume was little consolation given the previous selling and the break below near term support.
Up volume: 534 million
Down volume: 1.444 billion. Fewer upside buyers even with the early rally attempt.
A/D and Hi/Lo: Declining issues still led but slipped to 1.53 to 1 (1.96 to 1 Wednesday).
New highs: 54 (-7)
New lows: 90 (-18)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Tested 1800 early on and looked as if it may try to make a stand with a rally up to 1824, but then a weak attempt to take that session high out at 1:00CT failed and turned into a steady 37-point sell off the remainder of the session. The Nasdaq broke below 1800, not a hard support level as noted last night, and took aim on 1175 and the gap point at 1745. The 50% retracement is right at 1750. The Nasdaq is just a sad song away from that level. It would be a good place to find support with that gap up point close at hand, but as of today the Nasdaq showed no signs of slowing its fall. If the Dow and S&P do manage a bounce, they may drag the Nasdaq with them, but it is no longer a leader at least concerning attempts to hold the line on selling. There are clearly more tech shares being sold, something that was not happening in the earlier stages of the correction. Now that it is a full-fledged retracement mode, we just continue to play the trend on the index and the big names until it shows signs it is trying to put in a reversal. Even then we only close our downside plays and watch to see if it can follow through on the reversal attempt.
Dow/NYSE
The Dow was positive most of the session, but it faded in the stretch as well after it looked as if it would make its own wake regardless of the Nasdaq. It did not work out that way, but it did manage to close in the same general range it has held the entire week, showing yet another loose doji. It may try a reflex bounce soon.
Stats: -27.95; -0.3% to close at 9625.44.
NYSE Volume: 1.421 billion (-15%). Another day of above average volume, but once again it was declining, indicating that the share dumping continues to subside as the Dow attempts to hold this level yet again.
Up volume: 766 million
Down volume: 651 million. Up volume took the lead for the first time in many sessions. This is another indication that there is a change of tide on the Dow/NYSE. It is a shift in the wind, not a change of seasons, however.
A/D and Hi/Lo: NYSE decliners dropped to 1.2 to 1 (1.7 to 1 Wednesday).
New highs: 78 (0)
New lows: 74 (-18)
The Chart: http://www.investmenthouse.com/cd/$indu.html
After going toe to toe for the prior two sessions, the buyers pulled ahead of the sellers, running the index up to 9743 on the high (just under 9750 potential resistance). In the afternoon, however, the sellers came back in and drove it to close just below the open. After two sessions of loose doji's today showed a 'shooting star' doji: at the bottom of a selling range this candlestick pattern can indicate a move back up coming. The tenacious holding at this level adds to the chance of a reflex bounce. Problem is, where will it rally to? It has tested 9750 three straight sessions, but if it rallies that won't stop it. We look higher to the 50 day MVA (9834.72 exponential; 9916.43 simple) to 10,000 range for that bounce. If it fails to make that move, there is 9500 below waiting with open arms.
S&P 500: A similar pattern as the Dow. The big caps tested toward 1075 the past three sessions, today showing a shooting star doji on the candlestick pattern, closing right above 1075. Holding at potential support, lower NYSE volume, a shooting star doji. As with the Dow this indicates an attempt at a rally up in the downtrend that started with the January top, the second of the tops on this rally. Where does it run? 1100 is immediate resistance, but as with the Dow, that first level won't stop it. The down trendline is at 1112. Then there are the price consolidations at 1125, and that is buttressed by the 50 day MVA (1127.29). A 45 to 50 point run may be all it can muster on a rebound, unless this test of 1075 marks a sea change with investors. With low volatility levels and poor price/volume action, that will have to be proven with a reversal and a follow through on high volume. Of course, it will need stocks rallying out of good bases. Not a lot of those to choose from in the big caps.
Stats: -3.34 points (-0.3%) to close at 1080.17.
Volume: NYSE volume edged lower again to 1.421 billion (-15%), a good sign on the attempt at trying to move back up.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Friday of a down week. It is getting to the point of being oversold, and the Dow and the S&P are trying to show signs of life. The only scheduled economic news is wholesale inventories, important, but most likely not going to move the market. If it is intent on a rebound, it won't stop it.
Today was really a slow session for us as the indexes banged around in the range before heading lower. We closed some puts when the targets were hit in the early selling as we did not want to ride short term positions back up. That looked to be the smart play until the late selloff. Still, we would not have gained much more by hanging on, and with the Dow and S&P looking as if they were trying to toe the line yet again, no regrets.
From here it looks as if the Dow and the S&P (and perhaps the Nasdaq) will try a reflex move up to test either the recent down trendlines or other resistance points that have held in the recent past. We will watch the caliber of the rally, i.e., volume and how good stocks handle resistance to determine if it is anything more than just a reflex bounce in a continuing test of the September bottom. We are going to try to play some of the moves higher on the Dow and S&P; somewhat aggressive. There are also some downside tech plays still looking good, the SOX included (aggressive). Things will move back up and set up for the next moves as well. Take what the market gives. After some intense selling, expect a bounce back. We will play a few of those moves and see how it sets up for the next clear move with the trend.
Support and Resistance
Nasdaq: Closed at 1782.11.
Resistance: 1875 to 1900 is the bottom of the November consolidation and the recent downtrend that started in January. The 50 day MVA is at 1919.59 and the 200 day MVA at 1936.29. The 1934 to 1941 range represents the top of the November consolidation. After that we look at the simple 50 day MVA (1959.08) that stopped the index in late December.
Support: 1800 provided no support; it was weak at best. There is some support near 1775 (still weak) and then the November gap up point is 1745. 1750 would be a 50% retracement. Support at that level looks to be anywhere from 1700 to 1750.
S&P 500: Closed at 1080.17.
Resistance: 1100 could try to stop it on the way back up. Then there is the recent down trendline at roughly 1112 and the price consolidations at 1125. The 50 day MVA is right there at 1127.29. 1150 is after that, with the simple 50 day MVA (1137.42) right below that.
Support: 1080 continues to hold on a closing basis; thin, but gaining importance. A range of support from 1075 to 1050, the 1050 level holding twice in October. That is right at the 50% retracement (1060).
Dow: Closed at 9625.44.
Resistance: 9691 to 9750 represent the bottom of the November, December and January range. The 50 day MVA (9834.72) is right at the down trendline at that started off of the January high. The simple 50 day MVA (9916.43) is right after that, just below the 9992 to 10,000 level from price consolidations. Then the 200 day MVA (10,091.73). The January high at 10,300 level is last.
Support: 9500 is the next level, and it held on the intraday low last week. After 9500 there is a very congested trading range from 9125 to 9500. A 50% retracement is 9181.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
2-04-02
Auto Sales, January (time not supplied): 6.0M versus 5.2M prior.
Truck Sales, January (time not supplied): 6.8M versus 7.8M prior.
2-05-02
ISM Services, January (10:00): 49.6 actual versus 51.8 expected and 54.2 prior.
Factory Orders, December (10:00): +1.2% actual versus 1.0% actual and -3.3% prior.
2-06-02
Productivity-Prel., Q4 (8:30): 3.5% actual versus 3.0% expected and 1.1% prior.
2-07-02
Initial Claims, 2/2 (8:30): 376K actual versus 395K expected and 390K prior.
Consumer Credit, December (15:00): $9.0B verusus $19.9B prior.
2-08-02
Wholesale Inventories, December (10:00): -0.5% versus -1.1% prior.
End Part 1 of 2
|
