Brigitte
22.11.2000, 12:11
* * * *
11/21/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
*
TONIGHT:
- Same old story: markets in limbo.
- Nasdaq hits a new intraday and closing low for the year while Dow and
S&P 500 test support and rebound.
- Markets try to give a holiday rally. They just may do it tomorrow and
Friday.
- Subscriber Questions
- Team Trades
*
Dow and S&P 500 chug upward while the Nasdaq swings back and forth.
*
One of the problems the Nasdaq and indeed the entire market is having is
that while the tech stocks are getting dressed down, the Dow and S&P 500
are holding their own pretty well. Indeed, the big cap index bounced off
support at 1335 and the Dow continued to hold above the 10,300 level, both
moving higher today on increased higher volume. Thus even though the techs
are under fire, the other indexes and their stocks are acting as refuge.
Money shifts out of techs into these stocks, and the sellers never get
shaken out, but remain ready to jump back into tech whenever it looks as
if a rally is starting. The techs start another rally as the defensive
sectors pullback. Then that tech rally is met with the sellers that
bought in on the previous rally attempt as they bail out. The cycle then
repeats. As of yet the decks have not been cleared where the last of the
weak holders are cleared out. Thus there are fresh sellers in each rally
attempt. Rallies need to be unobstructed as they start. Very, very few
tech stocks, traditional rally leaders, have the types of patterns that
are unobstructed by sellers (e.g., cup with handle, double bottoms, flat
bases). There have been several rally attempts that have failed, and that
leaves a lot of sellers ready to jump ship when they can get 'even' or at
least close enough to even. Right now the best patterns are in the drug
stocks, utilities and the like. These are not traditional rally leaders,
and the prospects of sustained rallies from these stocks is not high.
Thus we play them while the Nasdaq stews, knowing that they too are now
getting higher in price.
*
Thus, even though the Nasdaq hit a new closing and intraday low for the
year, we have the same old suspicions that the index is not ready to turn
up in a sustained manner. The Nasdaq has continued to snap one 'support'
level after another this summer and fall, first in a correction from its
incredible run, and then under the increasing pressure of Fed rate hikes.
Then a full bear market on the fear that future earnings could not
continue to grow with the Fed slowing the economy. Those same problems
are squashing every rally attempt: the Fed has not even changed its bias
as the economy has gained such speed to the downside that it looks to blow
right by the 'soft landing' turnoff and take the express route to
recession early next year. Tech stocks don't do well in that environment,
and thus the chances of a great bull run are not ripe just yet. Thus, we
play the defensive stocks, the tech relief rallies, and the selloffs after
those tech rallies conclude as we wait for the bear market to end.
*
Holiday Rally?
*
Despite the overall state of the Nasdaq, today we saw a few things that
lead us to believe we are going to get a bit of a holiday rally Wednesday
and Friday, perhaps even through part of next week. The latter may be
optimistic, but it is the time of year for hope. Specifically, we saw
several stocks making good moves. The optical sector was working today on
good volume based on a positive NT report. Cisco performed very well
today. PMCS looks as if it is trying to put in a bottom for a short term
rally. ADBE was up on higher volume, while SEBL showed a doji above its
200 day moving average. The biotechs also made a decent day of it, but
many of those stocks are right back at resistance and could face some
trouble. On top of that we have the Dow and the S&P 500 looking much
better.
*
Even though not all stocks could hold onto their early gains today, we
like what we see for the near term prospects. Of course with this market,
any adverse news can disrupt any attempted rally, but with the light news
schedule before the holiday and the fact that companies usually don't
announce much of anything around the holidays because no one is in the
offices, we have less chance of a news surprise.
*
We will be looking at some of the tech stocks that are in good places to
rebound or continue moves up. We will also continue to look at those
stocks that are in good patterns (utilities, insurance, food, healthcare)
and play the ones we like when we get the moves we are looking for. For
the techs, we have to take what we can get from them, content to log some
decent gains on a small rally and get out if things get iffy.
*
THE MARKETS
*
Overall market stats:
*
VIX: 28.93; -1.40. Volatility dropped back below 30 today on the early
strength in the Nasdaq and the ability of the other two major averages to
hold onto gains. While it spikes over 30, it has not shot to extremes,
indeed not even as high as it was when the Nasdaq hit, at that time, a
year low in late October. Today the Nasdaq hit a year low, yet volatility
fell. That tends to lend support that the index is not ready to mark a
rallying bottom.
*
Put/Call ratio: 0.60; -0.16. The put/call ratio fell by yet another 0.16
as the Nasdaq hit a new low for the year. Again, as long as investors
feel they have refuge elsewhere, pessimism is not running higher and
higher.
*
NASDAQ: The techs tried higher territory, rising almost 50 points on the
high (2921.80), but it was a wild day with 80-point swings that in the end
wound up on the lower end of the day's range. Volume was heavier as the
index tried to make some positive headway. It was more of a fight between
the bulls and the bears than we have seen in a while. Again, we think
that the bulls may win out and get a bit of a thanksgiving treat starting
tomorrow.
*
Stats: Down 4.19% (-0.1%) to close at 2871.45, the closing low for the
year.
Volume: Volume was up on the selling, rising to 1.75 billion shares
(+1.6%). Normally we would say that was churning, but given the
candlestick pattern and some signs from strong stocks that they may want
to move up, we are taking it as a positive. Fold in that down volume
dropped to 998 million shares (about a 500 million share drop) and up
volume rose to 662 million (from 191 million), that shows there was much
more of a battle going on.
A/D and Hi/Lo: The A/D line was still down, but decliners fell to a 1.73
to 1 lead. New highs rose to 33 (+14) versus 438 new lows (+70).
*
The Chart: http://www.investmenthouse.com/ch/nasdaq.html
*
The Nasdaq was back and forth all day. The action along with the up and
down volume shows the bears were much more active. The daily chart showed
a loose doji on the candlestick chart after testing once again the lows
for the year (intraday low set just last Monday at 2859.39). It was
trying to reverse from this level. By that, we are not saying it is
trying to finally find bottom, just that the buyers were more active
(there have been no buyers for several days) and we are anticipating a
rally tomorrow and the half-day on Friday.
*
Dow/NYSE: The Dow was not the picture of strength as sold off over 70
points from its high in the last hour. Still, it had built a good chart
all day, rising, pulling back, then moving up again. Moreover, it tapped
lower early on (10,415.25), but did not threaten support. Moreover, it
moved up on expanding NYSE volume. It is by no means racing to a new
high, but it is not in real danger either. The fact that it turned back
up before testing 10,300 or even 10,350, and it did
11/21/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
*
TONIGHT:
- Same old story: markets in limbo.
- Nasdaq hits a new intraday and closing low for the year while Dow and
S&P 500 test support and rebound.
- Markets try to give a holiday rally. They just may do it tomorrow and
Friday.
- Subscriber Questions
- Team Trades
*
Dow and S&P 500 chug upward while the Nasdaq swings back and forth.
*
One of the problems the Nasdaq and indeed the entire market is having is
that while the tech stocks are getting dressed down, the Dow and S&P 500
are holding their own pretty well. Indeed, the big cap index bounced off
support at 1335 and the Dow continued to hold above the 10,300 level, both
moving higher today on increased higher volume. Thus even though the techs
are under fire, the other indexes and their stocks are acting as refuge.
Money shifts out of techs into these stocks, and the sellers never get
shaken out, but remain ready to jump back into tech whenever it looks as
if a rally is starting. The techs start another rally as the defensive
sectors pullback. Then that tech rally is met with the sellers that
bought in on the previous rally attempt as they bail out. The cycle then
repeats. As of yet the decks have not been cleared where the last of the
weak holders are cleared out. Thus there are fresh sellers in each rally
attempt. Rallies need to be unobstructed as they start. Very, very few
tech stocks, traditional rally leaders, have the types of patterns that
are unobstructed by sellers (e.g., cup with handle, double bottoms, flat
bases). There have been several rally attempts that have failed, and that
leaves a lot of sellers ready to jump ship when they can get 'even' or at
least close enough to even. Right now the best patterns are in the drug
stocks, utilities and the like. These are not traditional rally leaders,
and the prospects of sustained rallies from these stocks is not high.
Thus we play them while the Nasdaq stews, knowing that they too are now
getting higher in price.
*
Thus, even though the Nasdaq hit a new closing and intraday low for the
year, we have the same old suspicions that the index is not ready to turn
up in a sustained manner. The Nasdaq has continued to snap one 'support'
level after another this summer and fall, first in a correction from its
incredible run, and then under the increasing pressure of Fed rate hikes.
Then a full bear market on the fear that future earnings could not
continue to grow with the Fed slowing the economy. Those same problems
are squashing every rally attempt: the Fed has not even changed its bias
as the economy has gained such speed to the downside that it looks to blow
right by the 'soft landing' turnoff and take the express route to
recession early next year. Tech stocks don't do well in that environment,
and thus the chances of a great bull run are not ripe just yet. Thus, we
play the defensive stocks, the tech relief rallies, and the selloffs after
those tech rallies conclude as we wait for the bear market to end.
*
Holiday Rally?
*
Despite the overall state of the Nasdaq, today we saw a few things that
lead us to believe we are going to get a bit of a holiday rally Wednesday
and Friday, perhaps even through part of next week. The latter may be
optimistic, but it is the time of year for hope. Specifically, we saw
several stocks making good moves. The optical sector was working today on
good volume based on a positive NT report. Cisco performed very well
today. PMCS looks as if it is trying to put in a bottom for a short term
rally. ADBE was up on higher volume, while SEBL showed a doji above its
200 day moving average. The biotechs also made a decent day of it, but
many of those stocks are right back at resistance and could face some
trouble. On top of that we have the Dow and the S&P 500 looking much
better.
*
Even though not all stocks could hold onto their early gains today, we
like what we see for the near term prospects. Of course with this market,
any adverse news can disrupt any attempted rally, but with the light news
schedule before the holiday and the fact that companies usually don't
announce much of anything around the holidays because no one is in the
offices, we have less chance of a news surprise.
*
We will be looking at some of the tech stocks that are in good places to
rebound or continue moves up. We will also continue to look at those
stocks that are in good patterns (utilities, insurance, food, healthcare)
and play the ones we like when we get the moves we are looking for. For
the techs, we have to take what we can get from them, content to log some
decent gains on a small rally and get out if things get iffy.
*
THE MARKETS
*
Overall market stats:
*
VIX: 28.93; -1.40. Volatility dropped back below 30 today on the early
strength in the Nasdaq and the ability of the other two major averages to
hold onto gains. While it spikes over 30, it has not shot to extremes,
indeed not even as high as it was when the Nasdaq hit, at that time, a
year low in late October. Today the Nasdaq hit a year low, yet volatility
fell. That tends to lend support that the index is not ready to mark a
rallying bottom.
*
Put/Call ratio: 0.60; -0.16. The put/call ratio fell by yet another 0.16
as the Nasdaq hit a new low for the year. Again, as long as investors
feel they have refuge elsewhere, pessimism is not running higher and
higher.
*
NASDAQ: The techs tried higher territory, rising almost 50 points on the
high (2921.80), but it was a wild day with 80-point swings that in the end
wound up on the lower end of the day's range. Volume was heavier as the
index tried to make some positive headway. It was more of a fight between
the bulls and the bears than we have seen in a while. Again, we think
that the bulls may win out and get a bit of a thanksgiving treat starting
tomorrow.
*
Stats: Down 4.19% (-0.1%) to close at 2871.45, the closing low for the
year.
Volume: Volume was up on the selling, rising to 1.75 billion shares
(+1.6%). Normally we would say that was churning, but given the
candlestick pattern and some signs from strong stocks that they may want
to move up, we are taking it as a positive. Fold in that down volume
dropped to 998 million shares (about a 500 million share drop) and up
volume rose to 662 million (from 191 million), that shows there was much
more of a battle going on.
A/D and Hi/Lo: The A/D line was still down, but decliners fell to a 1.73
to 1 lead. New highs rose to 33 (+14) versus 438 new lows (+70).
*
The Chart: http://www.investmenthouse.com/ch/nasdaq.html
*
The Nasdaq was back and forth all day. The action along with the up and
down volume shows the bears were much more active. The daily chart showed
a loose doji on the candlestick chart after testing once again the lows
for the year (intraday low set just last Monday at 2859.39). It was
trying to reverse from this level. By that, we are not saying it is
trying to finally find bottom, just that the buyers were more active
(there have been no buyers for several days) and we are anticipating a
rally tomorrow and the half-day on Friday.
*
Dow/NYSE: The Dow was not the picture of strength as sold off over 70
points from its high in the last hour. Still, it had built a good chart
all day, rising, pulling back, then moving up again. Moreover, it tapped
lower early on (10,415.25), but did not threaten support. Moreover, it
moved up on expanding NYSE volume. It is by no means racing to a new
high, but it is not in real danger either. The fact that it turned back
up before testing 10,300 or even 10,350, and it did