from a newsletter...
sounds like tomorrow is going to be a whippy, whack em, smack em day, <g>
I think I'll clear out under my desk, just in case I need to take refuge from the storm LOL
THE MARKETS
More selling, but on lighter volume. That does not mean the market will
recover tomorrow. To the contrary we have to deal with the MSFT earnings
warning that looks to be tanking the market after hours. Many said today
that the market was way oversold, but it will remain that way unless
investors feel better about the future. If it holds at 2600 it could
bounce up for another rally. If it bounces but fails to hold and turns
back at resistance, it will take the Fed to bring it back to life. That
is a lifeline not many are expecting to get, but if we don't get it there
is nothing to drive the markets higher other than another reflex bounce.
Overall market stats:
VIX: 28.27; +1.40. Volatility moved higher, but not sharply so on
today's selling. As we noted last night, of late it has been needing a
reading of 34 or so intraday to spark a turn in the market. We may get it
tomorrow with the MSFT warning, but the selling thus far after hours,
while strong, does not appear that devastating. Perhaps selling both
Friday and Monday before the Fed meeting will drive it to those levels.
Put/Call ratio: 0.97; +0.26. We get this from the CBOE each day, and we
have to admit the huge rise in the ratio makes us wonder if the data is
correct. If it is, this indicator is at the threshold of showing us a
turn; when the ratio closes over 1.0 it has consistently indicated a
market turn. It seems a bit out of whack with the rest of the sentiment
indicators today, however.
NASDAQ: The techs tried to bluff everyone early on, but there was really
no doubt watching the morning activity that any attempted rally would
fade. Watching the market intraday you could just see it in a malaise
that was going to lead to selling as the session drew toward the close.
That is exactly what happened. The only good thing that can be said was
that volume was lower. The MSFT warning after hours, however, tarnished
that silver lining.
Stats: Down 94.26 points (-3.3%) to close at 2728.51.
Volume: 1.774 billion shares (-13%). Down volume destroyed up volume,
1.501 billion shares to a mere 220 million.
A/D and Hi/Lo: Declining issues increased their stranglehold on advancers
2.17 to 1. New highs fell to 35 (-9) versus new lows at 211 (+45).
The Chart: investmenthouse.com
The techs continued their now-common retreat from the down trendline that
started in early September. That line has now been tested three times,
and each test has resulted in failure. It is sitting right on top of
support at 2700, but that will be taken out in the morning with Nasdaq
futures down over 60 points now. The big question will be whether 2600
will hold. If selling continues on strong volume, expect the market to
continued down on Monday and test 2500 to some degree. That would be just
in time for some salvation from the Fed on Tuesday, but as we said before,
it needs to be something tangible.
Dow/NYSE: The Dow tanked, trying to undercut 10,600 on its low
(10,615.84), but then rallying a bit off of that level. Volume was tepid,
and that is again the silver lining for the index. But, MSFT is also on
this index, and it will get to throw its weight around to the downside
tomorrow to join the bruised up financials. When the financials are not
doing well (BAC, JPM) we cannot expect the market to race much as
financials usually lead the market. Usually we say as they were leading
in the spring but the market got slaughtered. It goes back to watching
price and volume.
Stats: Down 119.45 points (-1.1%) to close at 10,674.99.
Volume: NYSE volume slipped back below average to 1.053 billion shares.
Down volume was 659 million shares versus 356 million to the upside.
A/D and Hi/Lo: NYSE decliners strengthened a bit to 1.43 to 1. New highs
fell to 105 (-5) versus 77 new lows (+12).
The Chart: investmenthouse.com
The Dow is suffering the same fate as the Nasdaq, turning down at its down
trendline connecting the September and November highs. It made a really
gallant effort to breakout of the range on Wednesday, but when that failed
on higher volume, the risk was to the downside and it really was flirting
with disaster today. Lower volume saved it for the session, but tomorrow
may be a different story volume-wise. For now it has held at 10,600, but
it was not convincing. If it is pressured further, it could easily slip
below that support and hit 10,300 again, and it could do that by Monday,
setting up a bounce if the Fed performs as it should.
S&P 500: The big caps took another hefty tumble but on lighter NYSE
volume. Little consolation as the index popped potential support at 1360
like a dried out Thanksgiving turkey wishbone as it plunged downward off
of its down trendline that, you guessed it, connects the September and
November highs. The index held just above potential support at 1335, but
that won't hold with the pressure the index is facing tomorrow with MSFT.
It won't hold on the open, but it can touch down lower and bounce.
Stats: Down 19.06 points (-1.4%) to close at 1340.93.
Volume: NYSE volume slipped back below average to 1.053 billion shares.
That is improved price/volume action, but when the really turns on higher
volume, it usually has to tap the lows before it turns back up. That has
been the market's history this year.
The Chart: investmenthouse.com
TOMORROW
The CPI is out before the open, and even if prices plunge (0.2% gain
expected), we don't expect the markets to move up much if at all.
Everyone knows there is no inflation and a rapidly slowing economy. The
issue is whether the Fed will take real action on Tuesday. Until then
there is not much to push it higher unless there is some groundswell that
the Fed is going to cut rates. We heard one Johnny come lately
commentator say tonight the chances for a cut were 50-50, adopting our
position that a 25 basis point cut would be a great, if only symbolic,
shot in the arm to the market.
With the Nasdaq futures down 57 or so points after hours (bouncing around,
but at much lower levels), we are looking for a firm beating on the open.
The issue will be how far it will go just tomorrow. For the last three
weeks, Fridays have been days where the market tried to reverse things.
Perhaps a sharp selloff will bring stocks roaring back up off of a low at
2600 or so, but we doubt the volume will be there to warrant anything
other than short-term trading the leading techs. If we see any morning
bounce fail, if we see techs hitting resistance levels and stalling, we
will be looking to play them down further (BRCM, NEWP) the volatile
leaders get hammered the most. We will look at playing those stocks that
just keep on moving up despite the market, e.g., LH, SWY on the SSR.
Patience is the rule, picking the plays we like the very best and taking
some money and moving on with put plays and picking up breakouts of
patterns that are still showing us bullish looks. They are out there, we
just have to wait for the move, setting buy points above the breakout and
keeping stop losses in place on those purchases. Fortunately, most of the
best looking patterns are in healthcare, drugs, etc., and those have had
strong chart patterns versus the carnage we see on the tech side of the
aisle.
For downside, again look for an attempted rally up after the gap down at
the open. When that rally fails at or close to some resistance (maybe
former support), that is the time to make the downside play. With our put
plays we will tell our brokers what we are looking for, i.e., what we
think resistance will be, and if the move back up stalls at that point, we
will have instructions to buy a specific put or to call us and tell us
that the scenario is working out. On the upside, when the stock breaks
out and hits the buy point, that is the trigger. We will use buy stops or
have our broker call us when his or her alarm goes off on the breakout.
Try to keep it simple in times such as these. Know where you want to
enter, what the target to the downside is (and thus where you want to
exit), and execute. Don't risk all of your capital on any trade at this
point in time. We like to focus our trades to just a few stocks, throwing
significant chunks of money at them. Right now when things are volatile,
common sense says to back off and chip away at gains. There won't be a
lot of home runs, but that is okay. When NEWP, BRCD, JNPR, CIEN et al hit
bottom and start up as they did two weeks ago, we can jump aboard and skim
the middle of that move as well.
Support and Resistance Levels
Nasdaq:
Resistance: 3000, but that seems far away at this point. 3100 to 3200 is
resistance as well. After that, 3525 to 3535.
Support: 2700, the gap point, is struggling to hold, and we don't think
it will in the morning. If not, 2600 looks like support. Below that is
2500, then 2000 to 2200.
S&P 500:
Resistance: 1375, the down trendline.
Support: 1335 will try to hold, but it most likely will test 1300 and
perhaps 1270 to 1280.
Dow:
Resistance: 10,900 stopped the Dow cold again. 10,800 has been holding
the index back as well.
Support: 10,600 is hanging on, but barely. Then 10,300. Below that is
10,000.
Weekly Economic Calendar (All times Eastern). The figures are the
consensus expectations, not ours.
12-14-00
Producer Price Index for November (8:30): 0.1% versus 0.4% prior.
Core PPI (8:30): 0.1% versus -0.1%.
Initial jobless claims for prior week (8:30): 352,000 previous.
Business inventories for October (8:30): 0.3% versus 0.1% prior.
Current Account for third quarter (10:00): -$113.7 billion versus -$106.1
billion prior.
12-15-00
Consumer Price Index for November (8:30): 0.2% versus 0.2% prior.
Core CPI (8:30) for November (8:30): 0.2% versus 0.2% prior.
Industrial production for November (9:15): 0.2% versus -0.1% prior.
Capacity utilization for November (9:15): 81.9% versus 82.1% prior.
SUBSCRIBER QUESTIONS
Q: Is there any way that the expiration of options this week has anything
to do with the NASDAQ being down and in fact nothing is really going to
happen till Monday???
A: Expiration on Friday usually leads to more volatility in the markets
and if there are excessive short or long positions in stocks, that can
move the price in that direction on expiration. It will play a factor
tomorrow, but with the negative sentiment there will not be any short
squeezes that we can foresee. |
