The Week Ahead - Sunday August 25, 2002
--------------------------------------------------------------------------------
Closing prices week ending (8/23/02) vs week ending (8/16/02)
The Week That Was!
The DOW 30 has closed with more daily highs for 5 days after lows for 28 trading days
The Nasdaq closed back under the 1400 level after 2 days over it
The SPREAD closed back under the 572 support level after 2 days over it
This past week there were no new 52 week, or all-time, index highs.
No 52 week index lows expired this past week.
No 52 week index highs expired this past week. Last week we watched the 52 week high expire on the OEX (S&P 100). Two weeks ago we watched the 52 week high expire on the DJU (Utilities), OEX (S&P 100), the NY (New York) & the IXIC (Nasdaq).
The +2.58% gain on the week for the VL index vs the +1.24% gain on the 'NY' is telling us the bigger 'OTC' stocks are attracting more buyers than the 'blue chip' stocks for the second straight week.
The OTC stocks carried in the VL (the only part of the "SPREAD (NY vs VL)" with OTC stocks in it) are just the top OTC stocks (only a couple of hundred), because the majority of the stocks in the VL are listed on the NY, and none are the smaller caps. This means when the VL performs better than the NY it shows more buying in the top OTC stocks, or vice versa.
The Nasdaq index (1380.62) broke under the slight support level of 1400, 29 trading days ago and remained under until moving over 1400 on Wednesday and Thursday before backing a bit.
The next support level is slight at 1100, set early in 1996, followed by stronger support at 1000, set in the fall of 1995. This level may have to be tested before the bear party is over.
The low on the Nasdaq after the Attack on America, 9/11/01, was 1423.19 on 9/21/01. The close 3 weeks ago, 1206.01, 8/5/02, was the new 52 week low, taking out the previous low at 1228.99 set on 7/23/02. The last time under 1206 was a close at 1203.95 in late mid April of 1997.
The DOW 30 closed out the week (8872.96), up 94.90 versus last weeks gain of 32.61. The close on, 7/23/02, at 7702.34, is the new 52 week low. This level was last seen on 10/8/98, when the index closed at 7731.91.
The next DOW 30 support level comes at 7600 established in 1997 and last seen in late 1998. The index did see a low on the day at 7532.66, on 7/24/02, but did not close there. The next resistance level is at 9200.
There were no new DOW 30 highs this past week. The last time we saw a DOW 30 high was Proctor & Gamble (PG), on 6/22/02, and Philip Morris (MO) on 6/5/02.
DOW 30 stocks that have set a new high in the last 12 weeks (6/2/02) are Philip Morris (MO) & Proctor & Gamble (PG). Coca Cola (KO), was removed from the 13 week list 4 weeks ago. American Express (AXP), General Motors (GM) & Minnesota Mining. (MMM), were removed from the list 3 weeks ago.
The 52 week DOW 30 high expired this past week on Boeing (BA), Hewlett Packard (HPQ), JP Morgan Chase & Co. (JPM) & Merck & Co. (MRK).
Since June 1, 2002, the 52 week high expired on AT&T (T), Aluminum Company of America (AA), Boeing (BA), CitiGroup (C), Eastman Kodak (EK), Exxon Mobile (XOM), General Electric (GE), Hewlett Packard (HPQ), Honeywell International (HON), JP Morgan Chase & Co. (JPM), Microsoft Corp. (MSFT), Merck & Co. (MRK), United Technologies (UTX) & Walt Disney (DIS). This means the stock has not been able to climb to a new high in over a year. Once on this list it is easier to move up to a new high since, in many cases, the current market price has held and is now close to the previous high. This way any move up sets a new high.
American Express (AXP), Du Pont Co. (DD) & Home Depot (HD) were dropped from the list at the end of May.
--------------------------------------------------------------------------------
Forty eight weeks ago (9/21/01) was the end of the first full week of trading after the
Attack on America and the lowest point in the markets for almost three years.
The week ended with 7 indices trading higher than 9/21 vs 6 last week.
--------------------------------------------------------------------------------
The below figures are % change from year-end 2001
and cover this past week versus the week before.
There are 11 indices in negative territory this past week versus 11 last week and 11 the week before.
If we look at the VL, off -15.39%, a difference of +2.13% over last week, and the NY, off -14.32%, a difference of +1.05% over last week, we see the OTC stocks finding more buyers than the blue chips for the second straight week.
The difference between these two indices is the SPREAD. The SPREAD climbs when the VL is climbing faster than the NY, and falls when the VL falls faster than the NY. The SPREAD tends to lean more toward the direction of the Nasdaq, or we should say, the big OTC stocks.
--------------------------------------------------------------------------------
The below figures are the discount to the 52 week
high and cover this past week versus two weeks ago.
We have a total of 11 indices with double digit percentage discounts to the 52 week high vs 11 last week and 11 the week before. All the indices, except the DJI, XMI & NY are in bear market territory with a discount to the 52 week high over 20 percent.
More than a 10 percent discount to the 52 week high is "one" definition of a correction.
More than a 20 percent discount to the 52 week high is "one" definition of a bear market.
--------------------------------------------------------------------------------
The below figures are the discount to the all-time high
compared to this past weeks close.
More than a 20 percent discount to the all-time high is another definition of a bear market.
Using this definition all indices are currently in bear market territory except the XMI with less than a 20 percent discount, or a correction status (over 10% and less than 20%).
--------------------------------------------------------------------------------
The markets finished higher on mostly negative news
This past week we heard the Conference Board (news) tell us it's U.S. index of leading economic indicators (news) fell 0.4 percent in July, following a fall of 0.2 percent in June and the biggest fall since a drop of 0.6 percent last September. The blame goes to a less confident consumer and corporate cheating.
The coincident index, which measures economic trends right now, increased 0.1 percent in July after climbing 0.3 in June.
The lagging index, a measure of past trends in the economy, increased 0.1 percent in July following a fall of 0.3 in June.
We heard that the International Strategy & Investment Group tell us it's weekly U.S. company survey index fell to 43.2 in the week ended Aug. 16 from 43.8 in the week before. The blame went to softer retail sales.
The four-week average, a more reliable index, fell to 43.8 from 44.3. Zero is the weakest and 100 the strongest possible reading in the index.
We heard the Commerce Department (news) tell us the U.S. trade deficit increased 8.1 percent in the first half of the year, while the total deficit for June fell from its record level set in May, .
The trade gap, which measures the difference between imports and exports, totaled $206.01 billion for the first six months of the year, an increase of $15.52 billion from the same six months in 2001.
The June deficit of $37.16 billion was down from the record set in May at $37.84 billion and came in about at what the market expected. The total number for June made the second quarter the three highest monthly trade deficits ever. Nice job GW!
We heard the Commerce Department (news) tell us 2nd quarter online retail sales increased by 3.7 percent to $10.24 billion, following a fall of 11.6 percent to $9.88 billion in the 1st quarter. The government began separately tracking e-commerce sales in the fourth quarter of 1999.
The e-commerce part of total retail sales was off in the second quarter for the first time since the second quarter of last year, falling to 1.2 percent from 1.3 percent in the first three months of the year.
We heard The Labor Department (news) tell us first-time jobless claims fell to 389,000 in the Aug. 17 week from a revised 391,000 the week before. Economists had been looking for a lower 386,000.
The four-week moving average increased 5,750 to 388,350 last week.
The number of workers remaining in line held at 3.52 million in the week ended Aug. 10.
--------------------------------------------------------------------------------
The Week Ahead
The markets ended the week higher with the Dow 30 making it over the 9,000 level, first time since July 9, 02, and the Nasdaq index made it back over the 1400 level, after staying under it since July 8, 02.
It is always a welcome sign to see the major indices break over century levels, or thousands in the case of the DOW 30. Now we need to see if another attempt to close over these levels will come early on the week.
The 9000 level on the DOW 30 is not a resistance level, but the 9100 is and a close over 9100 would be a near term positive. The Nasdaq has resistance around 1450 with lighter pressure at 1500. It would be a strong positive if we could see the Nasdaq climb over the stronger resistance at 1680.
The problem is the close on the final day of the week was down. This could mean the markets have run out of steam and will fall further. The only thing wrong with this theory is that the markets have rallied on basically lower volume than normally needed to climb so far, so quick. Barring any real negative news, there is no reason why the markets should do anything different over the near term.
We could blame this strength on a plan old summer rally. Up until the last day of the week, the negative news had dried up, helping the consumer feel a bit more confident.
On Friday we got hit with news that Citigroup Inc. (C) was under investigation after a newspaper report said New York State's attorney general has widened the probe of Citigroup's brokerage unit, and that federal regulators have expanded their investigation in AOL Time Warner Inc. (AOL) to include deals with bankrupt communications giant WorldCom and AT&T.
This was probably the main reason for the sell off on Friday. We could also look to profit taking by investors that may feel the markets may have topped out and may be heading lower. If the markets are really in a summer rally, we could see strength early on the week, bringing the markets back to test levels again.
The problem is the markets are still bearish and we are simply in a bear market rally. Once it runs out of steam it may possibly fall hard and fast. Unfortunately, it is just as hard to pick the top of a market as it is to pick a bottom.
With the showing strength lately we may consider this a positive sign for the near term and if we don't get hit with another big scandal, we might expect the markets to resume climbing. There are still many problems with the economy, and there are still too many stocks too high priced, to give the rally any real legs.
A "best guess" is we have not seen the bottom yet, but this does not mean the markets can't still climb higher. Factors in the way are a possible war with Iraq, too many Americans still out of work and corporations not expanding. These problems will come back to haunt us before long, plus the possibility of a war is an unknown.
We still may need to see a test of the 7600 level, then possibly the 6600 before prices will be in line with value. On the other hand, the OTC market is ripe with bargains, but a testing the 1000 to 1050 level would simply make the bargains a bit better.
Expect the markets to still have more room to the upside over the near term. If in a bargain stick with it awhile longer, if not wait for the next sell off before climbing in. On the other hand, a real bargain can move anytime and this is really the kind of market we have right now. Stick with the individual stocks and avoid a choice based on the industry.
This is the kind of market where the smaller companies and the newer companies may be the better place to be. Small stocks tend to move on their own and not so much with current events. A choice small stock is a great way of making up for a big loss on a big stock. If the move is a good one, the smaller stock will climb at a greater percentage, therefore allowing a faster recovery from the big loss.
The concept does work. The problem is in finding the best and the correct stock to move into. Look for a stock with a great story, because with small stocks the story is what makes the stock move..
Continue to look for stocks near the lower end of the trading range with strong daily volume, and growing revenue, for the best bargains.
Two Very Important Rules To Follow
"BUY LOW"
"HAVE PATIENCE"
We always need to remember that the best holding period for taxes is one year so if we feel a favorite will be quite a bit higher in a year we might want to consider it now. A good bargain is good in any market.
--------------------------------------------------------------------------------
Be sure to visit "Monthly Gains & Losses for a look at the
past 'monthly' performance on the indices going back to 1994.
Clicking on the "Index Gains & Losses" will take you there!
Be sure to visit our "Spotlight Futures for a look at
metals, oil and currency futures updated weekly.
Clicking on the "Spotlight Futures" will take you there!
The weekly 'Favorite' "Stocks to Watch" has been moved to a new page.
Clicking on the "Stocks To Watch" will take you there!
--------------------------------------------------------------------------------
"If in the right stock, at the right price,
the market direction will mean little!"
A "best guess" is that the markets will continue higher this coming week. There is still many negatives in the economy, and the markets, so continue to use caution and stick with value stocks for safety. Stay with PUTS to protect profits. Choose wisely!
I am J.R. Budke and this is my opinion!
MEMBER LIST
Click here to join our list and receive stock information via E-mail
There is no charge to be a member of the Stocks in the Spotlight
J.R. Budke was a stock broker since 1981, an options principle since 1982 and a branch office manager since 1987. He is currently inactive as a stockbroker as of 12/31/99. J.R. writes some of the articles and opinions for the Stocks in the Spotlight. The stories and stocks found on this site, or any "Stocks in the Spotlight" written material, are the opinions of J.R. Budke, unless other wise stated, and should not be considered as advice. You should not purchase any stocks solely on the opinions found on the "Stocks in the Spotlight's" web site or in any of its written material. You should also be aware that options are not for everybody and carry a high degree of risk.
The "Stocks in the Spotlight" provides information only, this is not meant to be a recommendation to buy or sell the profiled security, nor is this an offer to buy or sell the security. The publishers of "Stocks in the Spotlight" are not investment advisors and are not acting in any way to influence the purchase or sale of the security. Before purchasing or selling any security profiled, it is encouraged and recommended that you consult a stockbroker or other registered financial advisor. The reader must understand that the companies we select may involve a high degree of investment risk. Potential investors must understand that they may lose all or a portion of their investment due to the risk involved. Some of the stocks covered on this page may be sponsors to the Stocks in the Spotlight and may have contributed money, or stock, for advertising programs. You should be aware that the Stocks in the Spotlight could make money on some of these sponsor companies if the stock moves higher.
Please read our complete disclaimer
| Quotes &News | Market Comment | Research Reports | Spotlight Futures |
| The Trend | The DOW 30 | The SPREAD | The Week Ahead | 2000 vs 2001 |
| Past Special Situations | Past Spotlight Stocks | Past Closer Look |
| Questions & Comments | Indices Gain/Loss | Favorite Links |
| Home | Site Map | About the SITS | Disclaimer |
| Search Our Site |
| Join our Member List |
THE CENTER STAGE
| Current Up-Date | Closer Look Stock | Special Situation |
| Stocks To Watch | The Family Showcase | Market Talk | Spotlight Stock |
SERVICES
| Advertising | Web Promotion | Web Page Design |
The recommendations and updates in this week ahead may include "forward- looking" statements as that term is defined in the Private Security Reform Act of 1995, & therefore are subject to various risks & uncertainties. There can be no assurance that actual results, business conditions, business developments, losses & contingencies, and local & foreign factors will not differ materially from those suggested in the "forward-looking" statements as a result of various factors, including market conditions, competition, advances in technology, acquisitions, potential litigation, personnel changes, capital availability, and all sorts of other factors. Do not make investments based on the material provided in this article. Investors should not make decisions based on any of the material featured here without first consulting with their brokers and/or financial advisors.
thespotlite.net |
