ja a semana passada postei acho k dois updates diarios destes senhores, k ja veem defendendo este cenario ha algumas semanas e justificam porque (concorde.se ou nao); aki deixo mais um, k emitiram no fim de semana k talvez possa ajudar a compreender um pouco melhor o k se esta a passar!
xi osanto
This is Part 1 of your complimentary subscription to The Daily edited by
Chief Market Analyst Jon Johnson. Enjoy!
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* * * *
5/10/03 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Target hit alerts issued Friday: SCSS; SSYS (trailing stop, but it was
way past the original target). Let the rest run higher.
Buy alerts issued: MME; CTL; FFIV
Trailing stop alerts: SSYS
Stop alerts: OVRL; NXTL; RADA
To subscribe to the Daily alert service you can sign up at the following
link:
http://www.investmenthouse.com/alertdly.htm
SUMMARY:
- Market bounces as expected, salvaging the week.
- Senate tax package a mass of illogic which, based on senator comments,
is no surprise.
- Market well positioned to start the week with smart bounce off 10 day
MVA.
- Subscriber Questions
A nice way to end the week.
Nasdaq had set up well on the 10 day MVA along with the SP500, and after
two days of orderly pullback the indexes jumped up and never really looked
back. Volume was not great on this Friday so it was not robust (the new
'in' adjective) accumulation, but breadth was very impressive as all of
the indexes held at near term support and bounced with Nasdaq leading the
way with a 2% gain. Sometimes gut feelings as we had Wednesday, when the
result of a careful review of relevant indicators, are not just lunch
backing up on you.
As the week came to a close the parrots on television were quick to say
though the market closed higher on Friday, for the week the market was
basically flat. The conclusion was the action was not that great, just
another week in a trading range. Not really. We often say that we are
more interested in where a stock is finishing a session or a week than
where it started. That is why we often take positions in the last hour
and even half hour; it gives us a much better read of the action and what
the true support is behind a move. Same thing with the market.
Some examples. What if the market had surged at the first part of the
week, looking outstanding, and then collapsed the last two sessions to
close where it started? Compare that with this week where the market
started out slow, rallied solidly Tuesday to continue the prior Friday
breakout, tested back on lower volume, then rallied back up Friday. Which
scenario is better? Which sets the market up better for next week? The
rally and collapse shows the sellers won the week. The latter scenario
shows the buyers were ready to step right back in after a modest pullback
to support and pick up stocks when they were considered a better value.
Not only does that set the market up better for the following week, it
also shows the continued bullish action demonstrated during this rally.
In our view it was the rally acting as it has, just with less volume this
Friday. Most indexes, particularly Nasdaq, SP600 (small caps), and SP400
(mid-caps) are set up beautifully to take out this resistance level and
push higher.
THE ECONOMY
There are two big debates right now. First, what size tax package is best
and how to make it so all can sign off on it. Second, is the economy
really going to recover? A lot of airtime is spent on discussing each,
but maybe they are not all that important at this juncture. Why? Because
after all of the dissection, what really matters is how the market is
acting.
Is the economy going to recover?
Yes, it always does, but the question is when. It keeps getting pushed
back to the second half every year for the past three years. It is now
the second half of 2003. Twelve to 18 months back some smart people were
saying that this time the market would not rally until the economy
actually turned the corner. The market has rallied from the October low
when the economic outlook was really bad. It has not improved even though
the market has. The market foretold the economic collapse when it topped
in March 2000 and tanked. The good action now is indicating the economic
future may be a lot brighter than the current economic prognostications
suggest. Indeed, commodities have fallen, but they have hit the up
trendline and have moved up right along that trendline for the past month.
Commodities are very economically sensitive, and even with the drop in oil
prices (that accounts for most of the drop to the up trendline) they
continue to improve. Markets turn before the economic bottom has hit. If
this is the market bottom, that would certainly be the case with this
economy.
Senate tax cut package is a shell game.
The senate has burned a lot of oil and trees trying to compromise on the
tax cut package. The most recent compromise supposedly gets rid of
gimmicks and has won over moderate republicans. It allows some dividend
tax relief, but to get it the senate came with what it calls offsets. Now
most saw an offset as a spending reduction. What the compromise involved
was a shell game that trades one tax source for another one. US citizens
living abroad receive a tax break for the first $80K of income they make
because they also have to pay taxes in the country where they work. The
credit was created to make it equitable for US citizens to work abroad for
their US corporations and allow US corporations to compete overseas. The
senate saw that as a $32B piece of fruit for the picking. Instead of
looking for serious cuts in unnecessary spending, the Senate played an old
government accounting game: shifting tax burdens as it sees fit. It will
eliminate that credit in order to allow tax cuts elsewhere. In other
words, it has simply shifted the source of its tax revenues. There has
been no reduction in taxes, just a change of sources of tax revenue. If
the senate gets its way, those overseas will pay 70% to 80% in income
taxes on that first $80K. That means they will have less money to ship
home to those family members here in the US who spend that money just as
much as the rest of us. The net result: no real benefit from a
significant portion of the tax cuts. They propose to give some a tax
break while raising taxes for others. It will make more money for tax
lawyers and accountants, but it won't do anything for the economy.
Moreover, it simply puts US corporations at a greater disadvantage
overseas, another inhibitor to economic activity. They will have to pay
employees more to get them to go overseas to do the corporation's
business. That cuts into the bottom line. The senate plan also causes
wage inflation through another government regulatory scheme. Instead of
fixing the problem, the senate has opted to do the usual, i.e., avoid
making hard decisions and punt.
THE MARKET
Very broad move after the two-day pullback pushed the indexes right back
up to the resistance and a good point for next week. Mid-week the poor
economic data and attempts to sell the market could not take it down. The
recovery was not big but the market did what it needed to do and what it
had set up to do.
In addition small and mid-caps recovered well off of their test of the
strong move. We have talked about those indexes the past two weeks, and
they are very important. At the end of the boom there were years of large
cap outperformance versus small caps as the large indexes rallied higher
and higher on narrow breadth. Small caps tend to perform in the early and
mid portions of an economic expansion. They tend to underperform as the
economic expansion grows long in the tooth and money starts to move to the
'safer' large caps. That is precisely what happened in the last half of
the 1990's when you could not give a small cap away while DELL, MSFT, CSCO
and company continued to suck in the money.
Small cap performance is a very nice attribute to this rally in addition
to the solid accumulation, breadth, and leadership. Some call the small
cap interest 'speculation'. We heard that Friday after the close yet
again. They are missing the underlying concept: small caps are performing
well not because there are a lot of retail investors in the market
speculating (that $2 trillion is still on the sidelines) on low priced
internets and techs as they were in 1999, but because big money is moving
into these stocks in anticipation of an economic upturn coming in the
second half of 2003. Many pundits are trapped in a bear market mindset
and see everything in that light instead of looking at the price/volume
action, accumulation, leadership, and other indicia of a healthier market.
We have discussed how this rally has different attributes from other
rallies in the long downtrend as it has, contrary to what many pundits
say, taken its time by rallying then consolidating for a substantial
periods, then rallying again as opposed to a sharp run straight up that
fizzles out.
Market Sentiment
Friday continued the overdone debate over whether this was a new bull
market or just another bear market run. There are a lot of bulls and
there are a lot of bears on television and in investment houses. It is
clear, however, that just as in all serious rallies after long term
selling, the retail investor, the average person on the street, is still
very skeptical. Money is starting to flow back to mutual funds but it is
still a relative trickle. The indecision about what is actually happening
keeps retail investors as confused as many of the pundits who act on their
feelings or pet indicators that may or may not work in all market
conditions. That is why we stick to the nuts and bolts: price/volume
relationships, leadership, breadth.
VIX: 22.04; -1.65
VXN: 32.09; -1.2
Put/Call Ratio (CBOE): 0.82; -0.16
Nasdaq
Bounced off of that doji on the 10 day MVA smartly though did not attract
a lot of volume as it continued the breakout of the cup with handle it
started the Friday before.
Stats: +30.46 points (+2.04%) to close at 1520.15
Volume: 1.561B (-3.29%). Volume contracted slightly though still above
average. One of the few up sessions where volume did not rise on a gain.
That is not a negative, just not an indication of accumulation Friday.
Up Volume: 1.212B (+926M). Those in the market were all buyers as
evidenced by the up to down volume.
Down Volume: 331M (-976M)
A/D and Hi/Lo: Advancers led 2.21 to 1. Excellent volume as once again
upside breadth far exceeds downside breadth when the market falls.
Previous Session: Decliners led 1.56 to 1
New Highs: 148 (+12)
New Lows: 19 (+6)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Nasdaq gapped up from its 10 day MVA test, and never threatened negative
territory as it rallied to a 2% gain. It again is right at the December
intraday high at 1522, the point it needs to beat to establish a confirmed
uptrend. Volume was not there to push it Friday, but the action was a
good test and confirmation of the breakout from the cup with handle the
prior Friday. The action for the week was solid with a breakout test and
rebound. This week will tell more of the tale as to whether Nasdaq will
continue the rally or consolidate this move, but the ability to test the
breakout and then rally is very health action and it could rally to 1550
to 1560 before coming back on a more sustained test of 1522.
S&P 500/NYSE
As with Nasdaq, SP500 rallied off the 10 day MVA after testing last
Friday's breakout from the cup with handle.
Stats: +13.14 points (+1.43%) to close at 933.41
NYSE Volume: 1.298B (-1.96%). A slight drop in already below average
volume. It was not an accumulation session on par with the prior moves.
Block trades remained heavy, however, showing solid institutional action.
Up Volume: 1.021B (+681M)
Down Volume: 274M (-698M)
A/D and Hi/Lo: Advancers led 2.91 to 1. Outstanding breadth as up upside
breadth continues to trounce downside breadth.
Previous Session: Decliners led 1.24 to 1
New Highs: 222 (+36)
New Lows: 3 (0)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Two Friday s back the large cap index broke up and out of a cup with
handle that had formed this year. It rallied sharply Tuesday on strong
volume and then tested back to the 10 day MVA on lower volume. Friday it
resumed the move up. This is very good action, indicative that the SP500
will try to move through resistance at 935 (January high) and take on the
December intraday high at 954 before a more prolonged consolidation.
DJ30:
The blue chips have still been unable to put much mileage on the breakout
from its ascending triangle, but after a test of the prior breakout, they
held the break and started back up Friday on rising though still below
average volume. The blue chips actually put on some volume, helped by
multinational corporations benefiting from a weakened dollar. That weaker
dollar helps this out for awhile, but it will need to strength at some
point for the overall market. In any event, the Friday move was what the
Dow had to do, and now we see if it can put on more volume as it moves
higher.
Stats: +113.38 points (+1.34%) to close at 8604.6
Volume: 1.298B (-1.96%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
THIS WEEK
Friday was helped by some upbeat comments from the Intel president
indicating China business had not slowed and that a chip recovery would
occur this year. Man, we have heard that from Intel before. For the past
two years Intel has thought a recovery was coming in the second half. It
was wrong both times and it paid for it by ramping up production in
anticipation of demand. At least it put its money where its mouth was,
but it just goes to show that its track record for predicting business
activity in its own industry is not very good. The market bought into it
again, literally, and enjoyed a solid session.
This week it is back to serious business. Earnings are all but over with
the exception of Dell. It will be a time to focus on economic reports
once again as well as the status of the tax package. We can only hope on
the latter point that our senate leaders do not choose to squander a great
opportunity to make a difference long term for the US workers and
entrepreneurs. They are hell bent on blowing the chance, and it is very
frustrating for those that provide the investment dollars and hard work to
make the economy happen. We can roar back and be great again or we can
muddle through.
Regional manufacturing reports will give the latest heartbeat on industry
along with production and capacity utilization. The consumer's pulse will
be measured with retail sales, housing starts, and Michigan sentiment for
May. We are not expecting any monumental changes that will show the
recovery is here. The economy can muddle through for several more months
before things really start to improve. If Congress can get together on a
serious tax package that really has some tax cuts that will stimulate
business we could see a real turn in corporate investment. As long as tax
cuts are put off or incrementally implemented, however, investment is put
off as well. That is a hard fact of economics that our leaders need to
grasp. Implement tax incentives in full immediately if you want real
impact.
The market is still at a critical point even with the test of the breakout
and the Friday recovery. There needs to be more volume upside to breakout
and put some cushion between any move and former resistance. The further
the move through resistance, the more chance that it will act as support
on the test of the breakout. That is what we want: a strong breakout and
rally higher, then a test/consolidation that holds the former resistance
as a support level. That proves up the breakout over resistance, and in
the case of Nasdaq, a hold at that level and subsequent move back up
confirms the new uptrend as Nasdaq would have clearly broken the string of
lower and lower highs that marked the long, ugly downtrend.
That is what is at stake coming this week. Despite the rally we see many
stocks that are ready to make a breakout, are just starting to make the
break, or have tested back on a prior breakout and are moving up again.
That helps provide some fuel to help the indexes move higher despite many
saying the move has topped out. The more that say the move has peaked,
the better the chances it has more room to run. If it does we look at
Nasdaq 1250 to 1260 as the point to watch.
Support and Resistance
Nasdaq: Closed at 1520.15
Resistance: The December intraday high (1522). 1575, May 2002 closing
lows.
Support: The August 2001/January 2002 down trendline (1499). The 10 day
MVA at 1490. The 18 day MVA (1468). The January high (1467). The March
and August highs (1426 and 1427). The exponential 50 day MVA (1417).
S&P 500: Closed at 933.41
Resistance: 935 (November and January peaks). 954 (December intraday
high).
Support: The 10 day MVA (923). The 18 day MVA (913) and price tops at 911
(July). September 2000/March 2002 down trendline (908). March and April
highs (896 and 905). The 50 day MVA (890) and the 200 day MVA (882). The
bottom of the October consolidation range at 875 down to 868, the top of
the January trading range.
Dow: Closed at 8604.60
Resistance: November and January highs (8800, 8870). December high
(9044).
Support: 8522 and 8520, the March and April twin peaks. The 10 day MVA
(8520). The 18 day MVA (8462). The 200 day MVA (8321). 8250, the bottom
of the October consolidation range and other index lows is some support.
by www.investmenthouse.com
OSanto
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