|
|
us stock market, trade stock
* * * *
12/05/02 Investment House Alerts Report
* * *
IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: None issued
Buy alerts issued: None issued
Trailing stops issued: CREE; KLAC
Stop alerts issued: IMN; CDWC; WEDC
Indexes dip below the 18 day MVA.
For much of the session it appeared as if the indexes were going to hold at or near the 18 day MVA and try a move back up. Once again there was some solid economic news to gird the move higher. Just as it did Wednesday, however, what looked like it might happen did not and the would be rally never got past first base. In the end the markets gave up the attempt higher and closed below the 18 day MVA. Many stocks did the same thing.
The closes below the 18 day MVA and the faltering of many stocks that had led the move higher is a concern. Volumes, on the other hand, were a lot better. Index volumes faded sharply and individual stock volumes were for the most part lower as well. The A/D line was also just modestly lower. Both indicate there was no widespread share dumping. Overall the action still looks like a consolidation with the Dow, SP500 and SP600 looking quite solid but the Nasdaq running hotter to the downside as money rotates out of those stocks into other areas such as, once again, medical and drugs.
THE MARKET
The indexes could not hold the 18 day MVA on the close Thursday, something of a disappointment from a technical standpoint. It is not a kiss of death, but it was a perfect point to hold as it kept the indexes more or less above the prior high before the last run. As in early November, however, the indexes can undercut those former tops and still continue the rally. Also just as in early November, the SP500 has given back 50 points from its move up, the Nasdaq 100 points, and the Dow 400 points. If the same trend continues of stepping up after an undercut of the prior high, the indexes are well-poised to start the next move. Volume on the session lends some credence to that idea. The rising volume that showed itself Wednesday was gone Thursday as volume dried up. That indicates there were no heavy stock sellers. Instead the action was more like a shakeout right below the short term MVA on lower volume.
Of course that remains to be seen. A few leaders are struggling, tanking below their near term support. For the second straight session some of the upside leaders were closing below their 18 day MVA. That prompted us to close some positions with trailing stops and take the remainder of the position we held off the table while it still had some gain. The action suggests a continued consolidation, but two closes below the 18 day MVA makes a quick drop to the 50 day MVA if things to not improve. If it falls we saved some gain and can get back in at a good point at the 50 day MVA. If it does not fall we can look to get back in or look elsewhere as well; there are many good fish to skewer in this sea.
Rotation from technology.
Techs tend to run up hard and tend to fall harder. They are falling harder, but as the do, other sectors are bucking up a bit. Medical appliances, drugs, and related areas are making decent moves. Retail is holding up well, biding its time during this pullback. In other words, the money coming out of techs is not totally leaving the market (though some is with Morgan Stanley cutting stock allocations by 5%). Bonds are not the place to go; the yield curve indicates that, and a further recovery will only hurt bonds. Bill Gross of Pimco admitted as much. Moreover, where can you get a decent return right now? With the prospect of an economic recovery, stocks are the best bet, and this pullback still has the attributes of just a consolidation of a strong move.
Sentiment Indicators
VIX: 34.28; +2.14
VXN: 54.16; +0.61
Put/Call Ratio (CBOE): 0.89; 0. Holding at a high level, but has not budged the past three sessions. Would like to see a spike higher as the selling continued.
Nasdaq
Nasdaq undercut the 18 day MVA but on a sharp volume drop. It has pulled back far enough and needs to make its move now.
Stats: -19.6 points (-1.37%) to close at 1410.75
Volume: 1.472B (-22.08%). Sharp drop in volume to well below average. There was not a lot of selling even as the Nasdaq lost over 1%.
Up Volume: 407M (+130M)
Down Volume: 1.03B (-490M)
A/D and Hi/Lo: Decliners led 1.56 to 1. Still mild after the stronger down session Tuesday.
Previous Session: Decliners led 1.45 to 1
New Highs: 65 (+14)
New Lows: 22 (-5). Fell on a down session. That tells a lot of the story: after reversing Monday and selling ever since, the fact that new lows fell on the fourth day of selling indicates there is no real breakdown occurring.
The Chart: http://www.investmenthouse.com/cd/$compq.html
Undercut the 18 day MVA (1425.10) on the close, finishing the session right at the Wednesday intraday low. Nasdaq has now pulled back just over 100 points from its high on the Monday reversal session (1521), the amount of pullback it gave in early November. Now there is no magic rule that is the limit of the correction on this leg, but indexes and stocks tend to follow the same proportions so to speak as they move up: roughly equal sized bounces and roughly equal size pullbacks. The move also puts Nasdaq right at (just below) the early November highs at 1420 to 1425. That is a good point to hold, and the lower volume and lack of dumping is an important part of the equation.
S&P 500/NYSE
Undercut the 18 day MVA as well but still looking good in its uptrend.
Stats: -11.03 points (-1.2%) to close at 906.55
NYSE Volume: 1.222B (-18.71%). Sharp drop in NYSE volume as well indicates the selling was more of a shakeout as the index hit near the next support.
Up Volume: 344M (-201M)
Down Volume: 880M (-86M)
A/D and Hi/Lo: Decliners led 1.45 to 1. Rather mild though up from Wednesday
Previous Session: Decliners led 1.08 to 1
New Highs: 23 (-1)
New Lows: 17 (-1). Fifth straight down session and only 1 new low. No breakdown.
The Chart: http://www.investmenthouse.com/cd/$spx.html
The doji Wednesday looked good, but there was no upside impetus to capitalize on that set up. Instead the large caps slumped to close just below the July, August and September interim highs (909 - 911). That still leaves the large caps in a decent looking pattern with the prospect of a higher low if the index can hold and turn at 900 where there is some price support and the 50 day MVA (899.75). Similar to the Nasdaq, SP500 has dropped 50 points from its Monday reversal high (954), the same pullback it made in early November after jumping out of the October consolidation. An intraday test toward the 50 day MVA may be all the large caps need to start the next leg.
DJ30:
The Dow also cracked the 18 day MVA (8678) on the close taking it lower for what looks to be a 50 day MVA test (8512). It can do that and still be more or less at the October high (8547) and make a higher low once again. As with the SP500, the Dow is in decent shape, still trending higher with volume pulling back significantly on the session. We expect a test of some sort toward the 50 day MVA now, a bit deeper but still well within control for the next leg up.
Stats: -114.57 points (-1.31%) to close at 8623.28
Volume: 1.222B (-18.71%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
After hours Intel failed to overwhelm the market with good news as it did not guide higher on its margins as many expected. It did focus revenues on the high end of the range, narrowing it to $6.8B to $7B, a very nice showing. Still the company did not provide much guidance, saying things were better but not much better. After an initial push higher in tech stocks they fell back late in the after hours session.
That leaves all eyes back on the employment report which will turn out to be mostly a non-event as far as the actual number. What we are looking for is a better than expected jump in the non-farm payrolls. Expectations are for 35K and we have been saying 75K to 100K is what we are looking for. The 100K is pie in the sky, but the improvement potential is there. We will know tomorrow and that may give the market some footing it has not had of late during this pullback: it was up and had priced in a lot of good news. Now it has given back the same amount it did in early November after that run and is ready for some more good news. There is still the Iraq designation/declaration/paper filled with useless words to come out on Friday (according to Iraq) or Saturday (the deadline), and that may keep some investors still on the sideline. A good employment number, however, might bust things loose back to the upside.
The pullback continues to look decent though moving lower than we ideally wanted. The selling intensity has not been great to begin with and it backed off Thursday. That does not mean it is going to jump right back up, and we were paring some positions today that were breathing hard below support. The rotation out of some techs is showing up in other sectors that are holding up and moving up such as medical, drugs and the like. They were favorites until the tech rally off the October low, and now that tech has been selling they are forming up nicely. Whether it is a lengthier rotation or not is unknown; many techs are still in very good shape so we do not think there will be complete abandonment of the sector. Indeed, we feel many will turn back up after this pullback.
We are going to start Friday in the same mode: watching to see how the employment data is received and how the indexes treat the next support. After a week of down sessions they are certainly primed for a move back up. The question is whether the move will have any substance to it. We will be wary of a stronger open that is based on so-so data or futures; it would have be blow out economic news to get us to bite on that kind of move. If the numbers are not driving a big open we will watch for a test of support in the typical choppy morning action; taking positions on a quiet Friday ahead of major international news is not our favorite. Friday's are typically quieter volume wise, but as we have seen in the past, Friday is no impediment if the big money wants to buy. In short, if the moves are there to the upside we will take them. As we said, the market is definitely poised for a move up after a selling all week. The key will be how much power there is behind the move.
Support and Resistance
Nasdaq: Closed at 1410.75
Resistance: The August high at 1427. The 18 day MVA at 1426. The 10 day MVA at 1441 may be some resistance. Price resistance at 1500 and the 200 day MVA (1488). 1574, the May low, is next.
Support: 1400 is soft support. The 50 day MVA (1368). 1357.09, the October 1998 bear market low. July, August, and September interim highs at 1345.
S&P 500: Closed at 906.55
Resistance: The 18 day MVA (914.78). 921 is some price resistance. The November high at 925.66. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high.
Support: July, August and September interim highs at 909 to 911 have not been totally broken. The top of the late October consolidation range at 899. The 50 day MVA (899.35). The September 2000/May 2001 downtrend line at 864. The March down trendline at 852. 850 to 855 (the October 1997 and Q2 1998 lows).
Dow: Closed at 8623.28
Resistance: The 18 day MVA (8678). The late July and early September interim high at 8726 to 8762.14 (8745 closing). The 10 day MVA (8733) is possible resistance. Top of the July, August, & September interim highs at 8762. The early November high at 8800. A range of resistance from 9000 on up to 9050.
Support: The exponential 50 day MVA (8512). The October high at 8500. Then 8250.
Economic Calendar
12-02-02
Auto sales, November: 5.5M expected, 5.2M prior.
ISM index, November (10:00): 49.2 actual, 51% expected (up from 49.5), 48.5 prior.
Construction spending, October (10:00): +0.3% actual, 0.0% expected (up from -0.2%, +0.6% prior.
12-04-02
Productivity (revised), Q3 (8:30): 5.1% actual, 4.5% expected, 4.0% prior.
ISM Services, November (10:00): 57.4 actual, 54 expected, 53.1 prior.
Factory orders, October (10:00): 1.5% actual, 1.7% expected (revised up from 0.9%), -2.4% prior (revised from -2.3%).
12-05-02
Initial jobless claims (8:30): 355K actual, 374K expected, 368K prior (revised from 364K).
12-06-02
Unemployment rate, November (8:30): 5.8% expected, 5.7% prior.
Non-farm payrolls, November (8:30): 35K expected (revised up from 13K), -5K prior.
Workweek: 34.2 expected, 34.1 prior.
Hourly earnings: 0.3% expected, 0.2% prior.
Consumer credit, October (2:00): $7.1B expected, $9.9B prior.
SUBSCRIBERS' QUESTIONS
Q: Please advise if your use of stop loss orders are for the closing price (the closing price is below the stop) or are in place to be triggered at any time the price falls below that stop.
A: Very good question. In most instances we use what we call soft or mental stop points. That is, in most situations we do not set a stop loss order into the system but instead keep up with the stock's trade during the day. The reason we do that is even though stocks have definite support levels, those can be undercut intraday. We establish stop points below those levels in order to eliminate as many false alarms as possible, but the market trades on emotion and it almost always overshoots the mark. Thus you can see the support but then a stock will undercut it intraday on an emotional selling binge and then make a dramatic recovery. If you have a stop in the system you can get a poor trade just to see the stock rebound.
Thus, we tend to view stop points on the close as opposed to intraday. If has stock has tested below the stop and then rallies back close to support we will let it ride to see if it can recover. If a stock breaks support or a trendline and is going to close below it for a session but is otherwise a strong performer we will give it a day to recover. Stops are guidelines. They are like good teenagers: they are usually good but sometimes they get a bit unruly just to come back in line. Give them a little rope to come around as long as the market is behaving as it should. If they don't do so you drop the hammer.
ONLINE SEMINARS LIVE OR NOW ON CD!!
There is an incredible wealth of knowledge, years of experience, and 'how to' plans of action in these seminars. As one graduate put it, "I had no idea how little I knew about market direction and the reasons behind it until I took your course." Our graduates over the past year and one-half have made the bear market in stocks their own private second bull market because they learned how to and when to enter the downside and make dramatic profit from what most investors dread. Have the knowledge to take advantage of any kind of market as well as the confidence to act when you see the action unfold. We cover it all from trends, to accumulation/distribution, patterns, stocks, buying and selling options naked, covered, or creating spreads. Go to
http://www.stockseminarsonline.com
and look for the link to the CD seminars or the next live series dates where you can learn and ask questions from the comfort of your home without having to incurr costly travel expenses and time away from work, costs and time that very few can deduct from their taxes. This is Jon Johnson's internet site for online seminars and they get you up to speed on how to deal with up or down markets. Hope you check it out.
THE PLAYS:
NEW PLAYS:
CPHD (Cepheid--$6.01; -0.08; no options): Scientific & Technical instruments
http://biz.yahoo.com/p/c/cphd.html
STATUS: Testing the breakout. We saw CPHD make the breakout and have been looking for an entry point ever since. It is finally giving a test of the breakout, pulling back on lower volume after the move from its 4.5 month base showing positive accumulation at 6 accumulation weeks to 5 distribution weeks. It never formed a handle on the breakout, and now it is taking a necessary rest. This is where we look for the entry point. This sector has been performing well, one of those quieter sectors that is getting a lot of money.
Volume: 158.42K Avg Volume: 292.954K
BUY POINT: $6.35 Volume=500K Target=$8.32 Stop=$5.52
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cphd.html
ICOS (Icos Corp.--$30.5; -0.15; optionable): Drug manufacturer
http://biz.yahoo.com/p/i/icos.html
STATUS: Testing the breakout. Drugs have been performing better, and ICOS broke over its 200 day MVA 2 weeks back on some strong volume. It peaked near 32 and is now testing the breakout, pulling back to the 10 day MVA on the close and showing a doji. Accumulation since March solid at 8 up weeks on rising volume to 6 down weeks on rising volume. These stocks look a lot like the semiconductors before they made their moves. Rotation at work.
Volume: 516.918K Avg Volume: 1.048M
BUY POINT: $31.45 Volume=1.2M Target=$38 Stop=$29.25
POSITION: IIQ DF - April $30c (60 delta) and/or Stock
http://www.investmenthouse.com/ci/icos.html
MDCO (The Medicines Company--$16.01; +0.01; optionable): Drug manufacturer
http://biz.yahoo.com/p/m/mdco.html
STATUS: Testing the breakout. We are taking another look at MDCO. It tanked out of a handle formation in mid-November but then exploded higher for the breakout. The past three weeks it has moved laterally over the 10 day MVA (16), the last two weeks on very low volume. Accumulation is excellent at 11 accumulation weeks to 3 distribution weeks. Very strong money flow. Just waiting for the breakout of this lateral consolidation.
Volume: 165.737K Avg Volume: 581.772K
BUY POINT: $17.05 Volume=800K Target=$20.55 Stop=$15.35
POSITION: MQL DV - April $12.50c (64 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/mdco.html
End Part 1 of 2
|
us stock market
trade stock
|
