Brigitte
13.12.2000, 12:06
* * * *
12/12/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Indexes pause while waiting on the U.S. Supreme Court.
- Just a good, old-fashioned low-volume pullback.
- Subscriber Questions
- Team Trades
A holding pattern waiting for the U.S. Supreme Court.
Today the Court did not give a decision. There was much speculation as to
why it was taking so long, but the obvious reason to us received no press
on the day: the court is dealing with not only Monday's argument and that
case but the late filing by the Florida supreme court regarding the
previous opinion that the U.S. Court vacated. The Court is more than
likely wrapping all issues up in one opinion, and you can bet there is a
lot of discussion on how to handle it. So we get an opinion tomorrow.
With today's action, we can wait a day, but we do not want this to start
dragging out as well.
Again the analysts were saying today that the election was not really an
effect on the market. You know our opinion about that. Today we received
more evidence that the market is still being impacted by this drawn out
election. First, the market was on hold all day long waiting for the
decision: low volume, no real aggressive selling or buying, no hard
selling on earnings warnings. Second, after the close when the Florida
supreme court affirmed the two absentee ballot cases, leading stocks shot
up several points on the news before settling back down (presumably some
thought the U.S. Supreme Court had ruled).
The election is not the only reason for the selling, but it certainly
magnified the problems the market was dealing with. Indeed, now that the
Fed has calmed down and we see earnings warnings met without a lot of
blood-letting, the thing that is holding the market back is this bit of
uncertainty. Those who say that there are 'Bush stocks' and 'Gore stocks'
miss the issue: it is a view as to how friendly the next administration
will be to the market in the form of economic stimulus, not just specific
stocks. Further, we hear on television that 'most traders' are going to
sell on the ruling. We are not sure who the 'most traders' are, but the
market has yet to indicate investors or even 'traders' should sell on the
announcement.
Speaking of the market, we had a low volume pullback as expected.
Last night we noted that the indexes, particularly the Nasdaq, had enjoyed
a nice run over the last 8 sessions after tapping a low for the year and
was butting up against resistance. It was time for a pullback, and today
it gave us just what we asked for: lower volume on the market and in the
individual stocks as they fell back on some profit taking. The Nasdaq
held above what we see as interim support at 2890 to 2900 (closing at
2931.77) as did the Dow and the S&P 500. The major indexes continue to
show mostly good price/volume action that they have exhibited since the
big move last Tuesday and since Greenspan pronounced his change of heart.
While we still do not see a lot of great patterns that usually coincide
with the resumption of a bull run, we did see several leading stocks
pulling back on lower volume and showing good candlestick patterns or are
sitting back at interim support (e.g., JNPR, VRSN, BRCD, PMCS). These are
primed for a move back up when the indexes start back up.
The lack of cup with handle, double bottom and other such patterns that
usually accompany solid confirmations that lead to longer bull runs is
still a concern. The reason is along the lines of the Subscriber Question
from last night regarding overhead supply. With the election swoon, many
of the leaders took major hits in a short period of time. They have been
racing back up the past week, forming a 'V' bottom pattern. As they
approach the recent highs, those that bought in just as the stocks started
falling tend to bail out to get out 'even,' and that kills rallies as
sellers dump shares and supply outstrips demand. Cup with handle or
double bottom bases tend to occur over several weeks and in the process
weed out those sellers who are hanging on and hoping to get out even. As
time drags on they give up and sell out or they decide to just hang on
'for the long term.' That clears out the resistance to a stock that is
making a move up as it does not have to overcome a lot of extra supply as
holders drop shares as the stock recovers.
This run back up has happened fast as a lot of stocks turned on a dime and
shot right back up. There is overhead supply that could dampen any move.
There are also, however, different circumstances in the form of a
friendlier Fed (how friendly remains to be seen) and the prospect of an
administration that believes in tax cuts as economic stimulus. Moreover,
we had confirmation days on both the Nasdaq and the S&P 500; while not
guaranteeing success, they have shown that institutions are thus far
buying into this move. We have not had those factors to help the market
in a long time.
THE ECONOMY
More earnings warnings today from Eastman Kodak, Compaq Computer, General
Motors and some other smaller fish. No real surprises there as EK said it
would have problems and the PC and auto industries have already seen
several players announce warnings already. GM was a bit more than most,
however, as it is discontinuing the Oldsmobile line altogether and laying
off workers as well. Even in this time of lowered earnings expectations,
companies are still managing to come in below those lowered estimates.
Ah, a slowing economy. What fun.
On top of that, the newest NAPM survey showed that most manufacturers
expect slower times ahead. There is less enthusiasm about 2001 from the
last survey in May 2000. They continue to state that very few producers
can pass along cost increases, namely energy, to customers. Thus they
have less profit margin and less to invest in the future. These things
definitely build on each other.
Tomorrow we get the retail sales figures for November. The are expected to
rise 0.1% from October mainly based on November containing the start of
the holiday shopping season. It will not reflect the recent softness in
holiday sales, but we do know that the post-Thanksgiving weekend was not
all that great. Expect lackluster sales in line with the 0.1% increase
anticipated.
THE MARKETS
Gave us what we expected with the selling on light volume as the indexes
encountered resistance in the form of their down trendlines. While many
are scared from the previous failed rallies, we view this as normal rest
given what we have seen, and still think that the market has upside
momentum. It may not last to a new high, but we have the looks of a rally
into Christmas if the election is resolved and the Fed does what it needs
to do.
Overall market stats:
VIX: 28.28; +1.77. Volatility was up substantially today on the swings
in the market to the downside given the continued wait on the U.S. Supreme
Court. We like the fact that it continues to hover in the upper twenties
as that means continued anxiety.
Put/Call ratio: 0.71; +0.14. More options buyers today on the selling,
jumping the ratio higher. As with the VIX, we like that the ratio rises
quickly when there is some selling as this too shows anxiety and that
investors are still worried.
NASDAQ: Sold back as expected, falling on lower volume and holding above
support. That is about as good as you can have it when an index has to
sell. Many leaders were in good shape on the day as well, setting up for
a move back to the upside when the election is decided. The last thing
you want to see right after a confirmation is high volume selling; we have
not had that yet, and we don't feel as if we will get it unless something
unexpected happens.
Stats: Down 83.33% (-2.8%) to close at 2931.77.
Volume: 1.921 bil
12/12/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Indexes pause while waiting on the U.S. Supreme Court.
- Just a good, old-fashioned low-volume pullback.
- Subscriber Questions
- Team Trades
A holding pattern waiting for the U.S. Supreme Court.
Today the Court did not give a decision. There was much speculation as to
why it was taking so long, but the obvious reason to us received no press
on the day: the court is dealing with not only Monday's argument and that
case but the late filing by the Florida supreme court regarding the
previous opinion that the U.S. Court vacated. The Court is more than
likely wrapping all issues up in one opinion, and you can bet there is a
lot of discussion on how to handle it. So we get an opinion tomorrow.
With today's action, we can wait a day, but we do not want this to start
dragging out as well.
Again the analysts were saying today that the election was not really an
effect on the market. You know our opinion about that. Today we received
more evidence that the market is still being impacted by this drawn out
election. First, the market was on hold all day long waiting for the
decision: low volume, no real aggressive selling or buying, no hard
selling on earnings warnings. Second, after the close when the Florida
supreme court affirmed the two absentee ballot cases, leading stocks shot
up several points on the news before settling back down (presumably some
thought the U.S. Supreme Court had ruled).
The election is not the only reason for the selling, but it certainly
magnified the problems the market was dealing with. Indeed, now that the
Fed has calmed down and we see earnings warnings met without a lot of
blood-letting, the thing that is holding the market back is this bit of
uncertainty. Those who say that there are 'Bush stocks' and 'Gore stocks'
miss the issue: it is a view as to how friendly the next administration
will be to the market in the form of economic stimulus, not just specific
stocks. Further, we hear on television that 'most traders' are going to
sell on the ruling. We are not sure who the 'most traders' are, but the
market has yet to indicate investors or even 'traders' should sell on the
announcement.
Speaking of the market, we had a low volume pullback as expected.
Last night we noted that the indexes, particularly the Nasdaq, had enjoyed
a nice run over the last 8 sessions after tapping a low for the year and
was butting up against resistance. It was time for a pullback, and today
it gave us just what we asked for: lower volume on the market and in the
individual stocks as they fell back on some profit taking. The Nasdaq
held above what we see as interim support at 2890 to 2900 (closing at
2931.77) as did the Dow and the S&P 500. The major indexes continue to
show mostly good price/volume action that they have exhibited since the
big move last Tuesday and since Greenspan pronounced his change of heart.
While we still do not see a lot of great patterns that usually coincide
with the resumption of a bull run, we did see several leading stocks
pulling back on lower volume and showing good candlestick patterns or are
sitting back at interim support (e.g., JNPR, VRSN, BRCD, PMCS). These are
primed for a move back up when the indexes start back up.
The lack of cup with handle, double bottom and other such patterns that
usually accompany solid confirmations that lead to longer bull runs is
still a concern. The reason is along the lines of the Subscriber Question
from last night regarding overhead supply. With the election swoon, many
of the leaders took major hits in a short period of time. They have been
racing back up the past week, forming a 'V' bottom pattern. As they
approach the recent highs, those that bought in just as the stocks started
falling tend to bail out to get out 'even,' and that kills rallies as
sellers dump shares and supply outstrips demand. Cup with handle or
double bottom bases tend to occur over several weeks and in the process
weed out those sellers who are hanging on and hoping to get out even. As
time drags on they give up and sell out or they decide to just hang on
'for the long term.' That clears out the resistance to a stock that is
making a move up as it does not have to overcome a lot of extra supply as
holders drop shares as the stock recovers.
This run back up has happened fast as a lot of stocks turned on a dime and
shot right back up. There is overhead supply that could dampen any move.
There are also, however, different circumstances in the form of a
friendlier Fed (how friendly remains to be seen) and the prospect of an
administration that believes in tax cuts as economic stimulus. Moreover,
we had confirmation days on both the Nasdaq and the S&P 500; while not
guaranteeing success, they have shown that institutions are thus far
buying into this move. We have not had those factors to help the market
in a long time.
THE ECONOMY
More earnings warnings today from Eastman Kodak, Compaq Computer, General
Motors and some other smaller fish. No real surprises there as EK said it
would have problems and the PC and auto industries have already seen
several players announce warnings already. GM was a bit more than most,
however, as it is discontinuing the Oldsmobile line altogether and laying
off workers as well. Even in this time of lowered earnings expectations,
companies are still managing to come in below those lowered estimates.
Ah, a slowing economy. What fun.
On top of that, the newest NAPM survey showed that most manufacturers
expect slower times ahead. There is less enthusiasm about 2001 from the
last survey in May 2000. They continue to state that very few producers
can pass along cost increases, namely energy, to customers. Thus they
have less profit margin and less to invest in the future. These things
definitely build on each other.
Tomorrow we get the retail sales figures for November. The are expected to
rise 0.1% from October mainly based on November containing the start of
the holiday shopping season. It will not reflect the recent softness in
holiday sales, but we do know that the post-Thanksgiving weekend was not
all that great. Expect lackluster sales in line with the 0.1% increase
anticipated.
THE MARKETS
Gave us what we expected with the selling on light volume as the indexes
encountered resistance in the form of their down trendlines. While many
are scared from the previous failed rallies, we view this as normal rest
given what we have seen, and still think that the market has upside
momentum. It may not last to a new high, but we have the looks of a rally
into Christmas if the election is resolved and the Fed does what it needs
to do.
Overall market stats:
VIX: 28.28; +1.77. Volatility was up substantially today on the swings
in the market to the downside given the continued wait on the U.S. Supreme
Court. We like the fact that it continues to hover in the upper twenties
as that means continued anxiety.
Put/Call ratio: 0.71; +0.14. More options buyers today on the selling,
jumping the ratio higher. As with the VIX, we like that the ratio rises
quickly when there is some selling as this too shows anxiety and that
investors are still worried.
NASDAQ: Sold back as expected, falling on lower volume and holding above
support. That is about as good as you can have it when an index has to
sell. Many leaders were in good shape on the day as well, setting up for
a move back to the upside when the election is decided. The last thing
you want to see right after a confirmation is high volume selling; we have
not had that yet, and we don't feel as if we will get it unless something
unexpected happens.
Stats: Down 83.33% (-2.8%) to close at 2931.77.
Volume: 1.921 bil