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Strategies & Market Trends : IPO and Other Stock Plays -- Ignore unavailable to you. Want to Upgrade?

To: david777 who wrote (12341)	5/9/2005 9:28:41 PM
From: david777	Read Replies (1) \| Respond to of 13331

THE MARKET: Despite the modest low volume rise Monday, the indices are still setting up something of a handle to their short double bottom bases, trying to shake out the pessimists and then continue the move higher. The market complexion changed with the higher volume fight, rally and follow through. That has set the stage for a higher move, and now the market is taking its time, and attempting to set up the next break higher. In a rising market that is typically how it is done: a series of pauses followed by some quick moves higher. The action repeats as long as the price/volume action remains generally positive, i.e. higher on the upside and lower on the downside. So far it is doing that in the very recent history. Now some will read this as a call for a continuing surging bull market. Well, there has not been a surging bull market since 2003. The market has risen since the end of 2003, but it has been mostly a walk laterally with the recent selling giving back nearly all of the late 2004 rally. Indeed without that post-election run the market has gone nowhere for a year and one-half. We still have a lot of doubts about the ability of the economy to handle all being asked of it right now: ongoing armed conflicts that will likely grow in geography; rising demands from entitlements; lack of investment in by the US in the US; a Fed that is going to raise rates into rising oil prices just as it did in the 1970's, and of course the higher oil prices themselves. Thus if the market does post a strong rally, that means that some seriously positive things about the economy. Thus far we have not seen a strong rally, just a recovery off of some harsh selling; there is a ways to go for this to be really strong. Again, the market has not been strong for a year and one-half. Even with those doubts we still have to watch what the market does as the big money makes its moves. We are not going to change the market because we think the economy has big problems or is really strong; that is insignificant. What is important is what the big money is doing now. That is evidenced by the volume on the moves and what the leaders are doing. Right now there is some solid buying ongoing in the market and leaders are performing reasonably well. It still has to make the next move after this sidestep test, and there is serious resistance immediately overhead. Given the action, however, the market is telling us to watch for another break higher. We are not suggesting that this move is going to take it to new 2005 highs; we still think it will need a test of the recent low. Still, it is showing good action for now as it climbs back up a very serious wall of worry out there. MARKET SENTIMENT Bulls versus Bears: Bulls: 43.5% last week, down from 44%. Bears: rose to 30.4% from 29.7%. That puts bears right at the level hit in August 2004. That August date is important because that is when NASDAQ, SP500, SP600 bottomed and rallied to the end of the year. VIX: 13.75; -0.3 VXN: 18.37; +0.79 VXO: 12.61; -0.69 Put/Call Ratio (CBOE): 0.84; -0.23 NASDAQ Techs rallied up toward the 50 day EMA, continuing the recent climb, but volume did not follow it yet. Stats: +12.32 points (+0.63%) to close at 1979.67 Volume: 1.51B (-2.52%). Lower volume as NASDAQ posted a gain. This is not the best action as we want to see the move continue once more on strong trade to show the buyers are returning again. The Monday volume was not necessarily an indication of weakness, just a lack of any conviction as the index still sets itself to take on some serious resistance. Up Volume: 951M (-16M) Down Volume: 529M (-24M) A/D and Hi/Lo: Advancers led 1.72 to 1. Decent breadth as NASDAQ was one of the stronger sectors, by a shade, in the market. Previous Session: Advancers led 1.1 to 1 New Highs: 52 (+6) New Lows: 75 (-10) The Chart: The Chart: investmenthouse.com^ixq.html NASDAQ moved higher, stretching its move in the last hour as it closed in on the 50 day EMA (1983). In doing so it moves through the bottom of the late March/early April consolidation (1974). Without the volume that move is not that significant. For the next move to have any meat to it the upside move needs much stronger trade, above average would be preferred. NASDAQ held the test of the 'hump' in the recent short double bottom and now is trying to forge new recovery ground. Lots of overhead to break through here at this key level. NASDAQ 100 showed a similar low volume advance toward the 50 day EMA (1466) and into the recent trading range from early April. It really does not make a clean break until it clears 1500, and that may just be about all it has on this move if it can muster the strength to clear the immediate resistance that includes the 200 day SMA (1482). SOX held the 18 day EMA on the low and managed a modest gain, bringing up the rear. Still has a ways to go to even make the 50 day EMA (404) and then the 200 day SMA (407) and price resistance at 410. Lots of overhead and we doubt that SOX will provide us any real leadership as stocks attempt the next move higher. SP500/NYSE Large caps were one of the leaders, moving through the 50 day EMA and closer to the early April high that it needs to clear to really show some character change. Stats: +7.49 points (+0.64%) to close at 1178.84 NYSE Volume: 1.363B (-0.39%). Low volume once more as SP500 basically moves laterally along the 50 day EMA, setting up for a break higher. Good action, the best in the market. Up Volume: 1.444B (+633M) Down Volume: 397M (-429M) A/D and Hi/Lo: Advancers led 2.14 to 1. With small caps leading breadth was solid. Previous Session: Decliners led 1.07 to 1 New Highs: 102 (+24) New Lows: 29 (-6) The Chart: investmenthouse.com^spx.html Not a bad price session though volume was very low once more. The key was the continuation of the low volume lateral move above the 10 day EMA (1167) and below the 50 day SMA (1179). Approaching the key April high (1192); a break over that solidifies the character change with a higher high. That may be all it gets on this move before needing that test. This move, however, is thus far showing good credentials with respect to price/volume action and leadership. The small cap SP600 rallied to the 50 day EMA (315.49); there is also price resistance at that level as well as 320 to 325 (50 day SMA at 319). Lots of resistance for the maligned small caps as they move with the rest of the market and try to shake off the hard early April selling. A move up to 325 would take a lot of gas, and we will be wary as it approaches 320. Thus far it is still showing signs of further upside along with SP500. DJ30 DJ30 is working laterally on very low volume below the 200 day SMA (10,382) and the 50 day EMA (10,401). Same formation of a handle to the small double bottom. Trying to set up a break higher to test the top of the April range (10,557). It is showing the lateral movement we were looking for, and now it will have to deliver midweek. Stats: +38.94 points (+0.38%) to close at 10384.34 Volume: 204 million shares Monday versus 230 million shares Friday. The chart: investmenthouse.com^dji.html