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Begin Part 2 of 3
THE MARKET
More solid economic news interrupted Thursday's rest and consolidation; the market wants to take a breather, but the economy won't let it do so. As noted, the closes well off the highs on the S&P and Dow indicate that the market is a bit extended. Moreover, the strong Nasdaq rally while the leaders took another breather is an indication of the need for a bit of a rest. Still, there cannot be many complaints: economic news indicating the recovery is gaining strength and breaks through resistance on solid volumes are positives the market has not enjoyed since the test of the rally off the September bottom began in January. For now the market needs to continue that orderly consolidation or rest that it was trying to take on Thursday.
VIX: 21.61; -0.34. Still flat lining at the bottom of the 'normal' range. It is not falling as the market rises, indicating it has become somewhat disconnected at this point. We were amused Friday when some of the financial stations were reporting that the low volatility numbers may be a problem for a continued rally. All of the sudden? Volatility was low even when the rally started.
VXN: 41.62; -2.14. Falling further and further, but we note that it has hit 35 in the past while a rally still surged higher.
Put/Call Ratio (CBOE): 0.62; -0.03. Slight drop on gains in the indexes. Still well above the 0.4 level that is considered complacent.
Nasdaq
Cleared the 200 day MVA on stronger volume but stopped shy of breaking above resistance at the top of the November consolidation. Important moves made on strong volume. We will now need to see it hold them.
Stats: +48.04 (+2.4%) to close at 1929.67.
Volume: 2.058 billion (+8.5%). Volume surged once again, continuing its positive price/volume action on this rally. A higher volume break over the 200 day MVA is a good signal of buying.
Up volume: 1.690 billion
Down volume: 339 million. A strong surge of buying.
A/D and Hi/Lo: Advancing issues ran their lead to 1.76 to 1 (1.12 to 1 Thursday). While the A/D line has been performing well on the up sessions, it has yet to flash a 2:1 or better A/D line on the advance. Thus the move higher has not been as broad as the NYSE, but Nasdaq moves have been narrow in the past.
New highs: 154 (-6). Note that new highs fell on a strong surge higher. That indicates Friday's move did not have as much steam as it appeared.
New lows: 29 (+2)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Friday the 200 day MVA (1905.35) did not stop the index, but 1935 near the top of the November consolidation (1934 to 1941 at the highs) slammed the door three times, never letting the techs breakout above that key range that has acted as resistance and support. You cannot complain about the volume on the move as the Nasdaq tries to catch up with the Dow and S&P on the upside move. The advance has been narrower than we would like, but there is real buying ongoing. It has moved up roughly 200 points without a significant break, however, and it will need one. A break over 1941 on continued strong volume frees it up for a run up to 1980, possibly 2000, but any move from hre is in our view on somewhat borrowed time and will be consolidated. Still, we won't turn down the chance at profit when it is there.
Dow/NYSE
Make it five sessions of head banging at 10,600. Raced over that level but could not take out the intraday high of the summer 2001 consolidation. Without volume it was pushed back down. Still moving laterally as volume slacks off; that is just what we want to see on a consolidation in this tight range of 10,400 to 10,600.
Stats: +47.12 (+0.4%) to close at 10,572.49.
NYSE Volume: 1.421 billion (-6.9%). Volume did not rally with the index, and the lack of volume did not support the move. It remained above average on the move, but is backing off as it attempts to consolidate the recent moves. Normally on an upside move we do not like declining volume, but the fact that the index reversed its action intraday and finished well off the high makes the lower volume gain look much better than a high volume reversal.
Up volume: 855 million
Down volume: 540 million. Buyers tried to win the day and did, but they were not as powerful as in the past as volume ebbed lower on the attempted rally.
A/D and Hi/Lo: NYSE advancing issues continued to lead at 1.11 to 1, increasing the margin from 1.02 to 1, but well off the 2.4 to 1 and better readings earlier in the rally. Still, the move overall continues to be broad.
New highs: 216 (-57)
New lows: 12 (-1). New highs falling on an up day, a signal of a weakening move.
The Chart: http://www.investmenthouse.com/cd/$indu.html
The Dow still fights the top of the summer 2001 trading range, Friday rallying to 10663.83 on the high, just off of the intraday consolidation high of 10,670. The action emphasized the strength of the resistance, but it also shows that the move has to consolidate a bit more before it can make the break. It has four days of lower volume consolidation without giving up much ground. We want to continue to see it hold above the 10,400 level on the consolidation for the move up over the summer 2001 consolidation high.
S&P 500:
Very similar action to the Dow. It has broke over the 200 day MVA (1150.37) and is now attempting to consolidate the move up off of 1075 where it double bottomed. Its resistance is the double tops from December and January (1170 and 1176.55) that roughly mark the bottom of the summer of 2001 trading range. Friday it made a run at them, hitting 1172.76 on the high before reversing. It still closed positive, but well off that intraday high where it found resistance. Again we anticipate the S&P to test down toward the 200 day MVA as it consolidates the move off of 1075 (almost 100 points) for the next run at resistance. After forming the double bottom with handle and breaking out, the S&P is now finishing up the consolidation with a cup with handle. There is still a lot of overhead on up to 1250, but the breakout over the twin tops looks very doable with the improved economic conditions.
Stats: +6.77 (+0.6%) to close at 1164.31.
Volume: NYSE volume backed off once more to 1.421 billion (-6.9%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
THIS WEEK
After last week there is even more economic news, but it starts taking a back seat. Wholesale inventories, retail sales, business inventories, PPI, and Michigan sentiment. Not the same heavy hitters, but important. After such a big week, however, there may be economic news saturation.
The indexes showed some signs of wear Friday even with the gains. They have run far and will need a rest. They started on Thursday but got another injection of economic excitement Friday.
We expect this week to continue the consolidation that is working on the Dow and S&P and that tried to start on the Nasdaq. Thus far it has been orderly when the pullbacks have come with volume contracting.
As the Dow and S&P have started to consolidate we are seeing individual stocks do the same after making good moves and others finally starting to shape up. With the major indexes looking as if they are going to continue to consolidate their moves further, we need to remain patient, let the stocks set up and then make their moves.
Support and Resistance
Nasdaq: Closed at 1929.67
Resistance: Broke the 200 day MVA and is now at the top of the November consolidation at 1934 to 1941. After that is 1980 (the December gap up point) and some minor resistance at 2000. Then the January top at 2098.88.
Support: The 200 day MVA just broken Friday (1905.35). 1875 has acted as support in the past and represents the bottom of the November consolidation range. After that, not a lot of room before 1800.
S&P 500: Closed at 1164.31
Resistance: The December high (1173.62) and the January high (1176.97). That point also marks roughly the lows of summer 2001 consolidation that runs up to 1240.
Support: 1150 and the 200 day MVA (1150.37). After that, 1125 is the hump in the double bottom, and the simple 50 day MVA (1127.78) and exponential 50 day MVA (1124.62) are converging. 1100 has acted as support as well.
Dow: Closed at 10,572.49
Resistance: The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high), is still holding tough for now. 10,800 represents some resistance. That is followed by resistance at 11,000 on its way to the May 2001 high at 11,345.72.
Support: 10,400 has been providing support, followed by the January high at 10,300. Then the 200 day MVA (10,023.74) and 10,000. The 50 day MVA (10,025.41) is joining up at that level.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
3-11-02
Wholesale Inventories, January (10:00): -0.5% versus -0.6%.
3-13-02
Retail Sales, February (8:30): 0.3% versus -0.2% prior.
Retail Sales, ex-auto, February (8:30): 0.4% versus 1.2% prior.
3-14-02
Business Inventories, January (8:30): -0.4% versus -0.4% prior.
Initial Claims, 3/9 (8:30): 376K versus 376K prior.
Export Prices ex-ag., February (8:30): 0.1% versus 0.1% prior.
Import Prices, ex-oil, February (8:30): 0.1% versus 0.1% prior.
Current Account, Q4 (8:30): -$101.5B versus -$95.0B prior.
3-15-02
PPI, February (8:30): 0.1% versus 0.1% prior.
Core PPI, February (8:30): 0.1% versus -0.1% prior.
Industrial Production, February (9:15): 0.2% versus -0.1% prior.
Capacity Utilization, February (9:15): 74.3% versus 74.2% prior.
Mich. Sentiment-Prel., March (9:45): 93.0 versus 90.7 prior.
SUBSCRIBER QUESTIONS
Q: Can you please tell me what web site I can go to that will tell me the volume & A/D line during the trading day on the NYSE and Nasdaq?
A: On the web you can get very current data on volume and advancers versus decliners at http://quote.yahoo.com/mo.
THE PLAYS:
Good Movers:
Targets hit Friday: ITG (50), KLAC (70)
Trailing Stop Advisory: RJR (65)
Stop Advisory: RECN (26.39)
Removed to a watchlist unless otherwise indicated:
ESST ($24.99; -0.12): Broke out of the double bottom with handle Wednesday but couldn't move higher on stronger volume. Will test 24 as volume falls back. A hold.
CMX ($17.84; +0.28): Hit the buy point for the cup with handle breakout (18.10) but pulled back despite rising volume. Still has support at the 18 day MVA (17.36). A hold.
GDW ($63.68; -0.96): Hit the buy point at 65.10 early in the week (ascending wedge breakout) but tested back below the 18 day MVA on some selling (above average volume) Friday. Closed at its up trendline (Jan/Feb lows) so if it breaks, a sell for short term positions.
VLY ($35.12; +0.09): Hit the original buy point of 34.40 on the 50 day MVA bounce, and now is consolidating laterally. Does not look bad here, but we would prefer a test back to the 18 day MVA (34.50) for taking new positions.
ROH ($38.70; -0.74): After breaking from the flat base then giving a nicer move on the test, sold back on higher volume to the 18 day MVA, falling out of the 2-day lateral move. Not a positive move, though the stock may hold for further consolidation ahead of another bounce
PZB ($22.93; -0.12): Sold below the 18 day MVA for a test of the 50 day MVA; higher volume bounced it back up but the stock closed below the resistance. Not bad, though, if it can hold up here. See the 3-06 report for buy point and other details.
LTD ($17.90; +0.19): Still holding above the up trendline after breaking support of the 18 day MVA that was supporting the ascending wedge. Not a bad pattern if it can hold, and volume was low Friday after a high volume hammer doji Thursday (3-06).
WOR ($14.90; -0.18): Pulled back below the buy point (15.30) for the shallow cup breakout, just below the 18 day MVA on rising, above average volume. A bit too low in the test and a sell for short term positions if it falls further.
PH ($54.08; +0.08): Topping out after the last 18 MVA bounce, the test of the breakout from its ascending wedge. Can pull back to the 18 day for another bounce, and on the way down can consider selling April $50 calls for a move to the support (51.10 Friday) or closer at 52.
CARS ($22.25; +0.21): Broke out of the ascending wedge and keeps drifting up, but has not had good volume on the move up (decreasing). It is setting up for a pullback eventually, but keeps moving higher. A hold for now or can close positions here at the top of the run.
LOGI ($45.23; +0.23): Testing the nice 2-day move off its 18 day MVA (Friday and Monday) but not getting anywhere on above average volume all week (excepting Friday).
Will likely test the 10 day MVA (43.71).
FDX ($60.30; +0.70): Had a nice run after breaking out of the ascending wedge. Now is testing the move, but showed a big volume spike Friday. Could pull back toward the 18 day MVA (57.50), but like that volume spike.
RTN ($38.20; -0.69): Still holding support at the 18 day MVA in the pennant, but having trouble in the pattern (some selling the last 2 days). Buy point if it can hold on remains at 40.10.
WSTC ($29.05; -0.05): Looking for a pullback to test the 28 range after the last 18 day MVA bounce, ahead of a move back over the breakout high (29.18).
BLC ($23.75; +0.57): Broke out of the flying plateau mid-week and continued higher on strong volume. Letting it run for now.
COTT ($17.86; +0.03): Still holding the 18 day MVA on very low volume after a volume spike. Buy point remains 18.50 for another bounce.
CHD ($30.72; +0.12): Holding aggressive positions taken at 31.50 for the 18 day MVA bounce play. Showed lower, below average volume and a tight hammer doji at support. Looks good.
SXT ($21.65; +0.10): Still keeping the buy point at 22.15 for the breakout from the cup with handle. Is holding above the 10 day MVA support and showing the wrong price/volume action, but can still give the breakout.
MAS ($28.25; -0.10): Also a hold for positions taken at 28.70 in the test of the breakout. A bit higher volume (but low) Friday for the small loss, but the stock continues to hold above recent support at 28.
ACDO ($48.93; -4.57): Dropped. Sold off below the 50 day MVA on news of FDA approval of a competitive drug before it had a chance to break out.
UOPX ($37.15; +0.98): Dropped. Broke out of the cup with handle but sold back to the 50 day MVA by Thursday, well below the buy point. Bounced back above the 18 day MVA Friday.
IBC ($24.98; +0.21): Rolling pattern. Made a quick move back over the 50 day MVA and Friday held right at the 18 day MVA. A positive move, but there are better patterns.
End Part 2 of 3
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