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(Will be updated for Monday)
Friday was yet another slow holiday session for Nasdaq. There were no major catalysts and nothing new to spur selling, so the natural drift was slightly upwards.
The trader-induced anxiety about mad cow disease on Wednesday was clearly no longer an issue for the overall stock market.
Nasdaq volume was very light (529 million shares) due to the holiday-shortened session. Breadth was moderately positive, with 1.46 gainers for each loser. Another slow holiday session that tells us little about the market trend.
According to Thomson Financial I-Watch, institutional investors were net sellers of Intel (INTC), Applied Materials (AMAT), Micron (MU), Microsoft (MSFT), Xilinx (XLNX), Texas Instruments (TXN), but net buyers of EMC (EMC), HP (HPQ), and Solectron (SLR). Institutions were selling into the rally, but they tend to do that after buying recent dips, so there is no reason to expect the market to dramatically fall off a cliff any time in the near future. Trading volume was too light for the institutional trading to have much meaning.
The Wal-Mart (WMT) Weekly Retail Sales Update updated through December 24 indicated that sales are still tracking near the low end of its December forecast of 3-5% growth. This was a negative report. The company said that they “did see improvements in the last shopping days, but not enough to meet our original plan.” Greater demand for gift cards is hurting sales since they don’t count as sales until redeemed. The company said that gift card balances were up 20% over last year. The strongest product categories were pharmacy, electronics, toys, and outerwear, while women’s clothing and home furnishings were the weakest.
The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) registered a moderate decline, still near its recent high, and its six-month smoothed growth rate declined moderately sharply. This was a negative report, but continues to suggest reasonably strong growth in the months ahead. The growth rate has dipped noticeably since it peaked at the beginning of August, suggesting that growth will be more moderate in the coming months, but “more moderate” than the blazing 8.2% GDP growth in Q3 will still be quite strong. ECRI says that “we are going to see a fairly prosperous new year.” Note the use of the qualifier “fairly.” I suspect that “fairly” could range from 3.5% to 5.5% real GDP growth over the four quarters of 2004.
NOTICE: I am still using the “old” VIX even though CBOE began offering the “new” VIX on September 22nd. The old VIX is based on options for the S&P 100 index whereas the new VIX is based on options for the more popular S&P 500 index. I’m still investigating how to switch over to the new VIX and how that relates to historical data.
The old CBOE Market Volatility Index (VIX), which measures the level of anxiety in the market, rose by 2.17% on Friday to 16.47, which is in the lower half of the low anxiety (moderate complacency) zone (15 to 20). There was no obvious catalyst for higher anxiety, so maybe people wanted a little extra portfolio insurance going into the weekend while the alert level is at Code Orange. The bears will continue to beat their drums about the market being filled with the kind of excessive complacency that frequently presages a dramatic market decline. I wouldn’t bet the farm on that outcome, but it is a yellow flag.
The new VIX rose by 4.74% on Friday to 17.45. As with old VIX, there was no obvious catalyst for higher anxiety, so maybe people wanted extra portfolio insurance going into the weekend while the alert level is at Code Orange. The S&P 500 is sitting at a fairly lofty level, so people may simply want to protect those profits.
The Nasdaq-100 VIX (VXN) rose by 2.87% on Friday to 24.01.
The Nasdaq-100 After Hours Indicator had a positive tone for the Friday afternoon session, closing up 0.61 points. People remain rather confused as to which direction the market will head next.
The fed futures market pushed out the timeframe for the first two rate hikes as Dallas Fed President Robert McTeer reaffirmed that the Fed was serious about not raising rates for quite some time. McTeer said that inflation was still dormant and until it became a clear danger the Fed could maintain its current loose monetary policy. He put as crystal clear a meaning on the phrase “considerable period” as any Fed official has so far, saying that “When conditions change such that inflation looks to be a clear and present danger, then the considerable time is up.”
[12/27/03] The fed funds futures market suggests that the Fed will leave the fed funds target rate unchanged for the next few months, but possibly raise the fed funds target rate by a quarter-point in July or August, with another quarter-point hike in September or October. Fed funds futures are at best accurate no more than six weeks out, so those longer-term moves are purely speculative, at best.
The dollar fell modestly against the yen but rose moderately against the euro. The dollar is quite sound and no true investor should lose any sleep worrying about whether the dollar is ‘weak’ or ‘strong’ on any given day, week, month, quarter, or year.
NYMEX was closed on Friday due to the holidays.
NYMEX was closed on Friday due to the holidays.
[7/29/03] The relative calm continues. Investors should always be prepared to buy any dip caused by panicky reactions by traders to any incidents.
[7/29/03] The eerie calm continues. There may continue to be attacks or alleged attacks abroad, but the U.S. “homeland” may be relatively immune, at least for now. Investors should always be prepared to buy any dip caused by panicky reactions by traders to any incidents or rumors of incidents.
[7/29/03] As messy as the mopping-up phase of the war continues to be, great progress is indeed being made and there is little need for true investors to fret over the negative news that so captivates the media. Over time, the economic impact of the war will be a large net positive, even if there is some short-term negative impact.
[6/25/03] I have suspended my dollar-cost averaging investment plan since my exposure to the market is now about where I want it to be.
Trading during the coming week will remain lackluster due to the extended holiday period. Volatility will tend to be higher.
My forecast for Monday is that Nasdaq will close in the range -40 to +50. Nasdaq came in at +3.91 on Friday, slightly below the midpoint of my range of -40 to +50.
[12/20/03] Nasdaq appears to be stuck in a trading range, with upwards movement stymied by significant technical resistance at the 2,000 level, for now, until sufficient stock mutual fund inflows lift Nasdaq high enough to counteract negative trader and speculator sentiment. The good news is that this extended trading range will provide a significant support base once Nasdaq does break out above 2,000.
The confirmed bull market for Nasdaq that began on October 9, 2002 (and was confirmed on June 16, 2003) has run for 305 days (1 year and 55 days). The market now has a longer-term upwards bias despite near-term volatility. The path of the market through the end of the year is of course uncertain, but Nasdaq will most likely be moderately higher at the end of December than where it was at the beginning of November. Nasdaq should break above the 2,000 level fairly soon. The important thing is that we continue to see inflows into equity mutual funds while the economy, revenues, and earnings continue to incrementally improve.
Nasdaq is 33 days off its 52-week intra-day high of 1,992.27 on November 7. Nasdaq is 17 days off its 52-week intra-day high of 1,996.08 on December 2. Nasdaq is 16 days off its 52-week intra-day high of 2,000.92 on December 3. We need to track all three of these intra-day highs until Nasdaq manages to close above them for at least a couple of days. Technical traders will be chattering about Nasdaq establishing a “triple top”, a rather bearish sign, so we do need to give this a relatively severe yellow flag.
The confirmed up-leg for Nasdaq that began with the intraday low of 1,253.22 on March 12 has run for 198 days. Nasdaq is 18 days off its closing peak of 1,989.82 on December 1 for the up-leg and for the overall post-October 2002 bull market. That closing peak is also the current 52-week closing high.
The confirmed minor up-leg of the Nasdaq advance that started on Friday, August 8 with an intra-day low of 1,640.88 is now 97 days old and 18 days off its closing peak. This is a minor leg nested within the larger leg that started on March 12 which is itself nested in the larger advance that started on October 9, 2002.
The confirmed minor up-leg of the Nasdaq advance that started on Friday, October 24 with an intra-day low of 1,841.62 is now 44 days old and 18 days off its closing peak. This is a minor leg nested within the larger leg that started on August 8 which is itself nested in the larger advance that started on March 12. Multiple nested up-legs are a sign of deep strength in the market. This leg is still significantly broken, and it won’t be fully recovered until it closes above the previous peak of 1,976.37 for at least three days and sets a new closing peak at least 1% above that old peak (1,996.13).
The Nasdaq correction off the intra-day high of 1,992.27 on November 7 is now 33 days old. It reached an intra-day low of 1,878.07 on Friday, November 21, a decline of 114 points or 5.73%. It may be over, but we do need to see a new 52-week closing high above that old intra-day high.
We have a secondary correction off the intra-day high of 2,000.92 on December 3 that is now 16 days old. It reached an intra-day low of 1,887.46 on Wednesday, December 10, a decline of 113 points or 5.67%. It may be over or close to over, but we do need to see a new 52-week closing high above that old intra-day high.
The confirmed minor up-leg of the Nasdaq advance that started on Friday, November 21 with an intra-day low of 1,878.07 is now 24 days old and 18 days off its closing peak. The fact that Nasdaq is 28 points off the intra-day peak for this new leg indicates that this leg is still significantly broken, but not yet destroyed. Give it a couple more days before deciding for sure.
The confirmed minor up-leg of the Nasdaq advance that started on Wednesday, December 10 with an intra-day low of 1,887.46 and a bounce of 17 points into the close is now 12 days old and 2 days off its closing peak of 1,974.78 on December 23. The intra-day peak for this up-leg was 1,979.78 on December 15. The fact that we continue to close below the intra-day peak for the leg remains a yellow flag.
The confirmed minor up-leg of the Nasdaq advance that started on Tuesday, December 16 with an intra-day low of 1,901.66 and a bounce of 24 points into the close is now 8 days old and 2 days off its closing peak of 1,974.78 on December 23. The intra-day peak for this up-leg was 1,974.78 on December 23. I’ll continue to refer to it as a weak up-leg until it closes a solid 1% above the 1,974.78 closing level, which will be close to the 2,000 level.
The fact that Nasdaq is still 28 points off its recent 52-week intra-day high is a yellow flag and suggests that Nasdaq still hasn’t broken out of its near-term ‘consolidation’ phase. That does not mean that a full-blown correction is necessarily likely. We are still in a short-term trading range. There may have been as much as 125 points of ‘trading froth’ at the peak, so we could see up to another 97 points of decline before a true correction might be indicated. Note that we’re still 71 points above the starting level of the most recent confirmed minor up-leg that started on December 16.
[12/27/03] The big wildcard remains stock mutual fund money flows – which were inflows of $1.3 billion in the most recent week and $1.9 billion, $1.8 billion, $2.6 billion, $2.1 billion, $3.5 billion, and $3.5 billion in the preceding weeks.
[11/5/03] The latest economic data continues to support the thesis that the U.S. economy is solidly into a gradual, zigzag, underappreciated, stealth recovery. The Q3 GDP report certainly convinced a lot of people that the economy is stronger than previously thought, but the cynics continue to promote the idea that the recent strength was almost solely due to short-term fiscal stimulus. I disagree. I believe that the economy would have been reasonably strong without the stimulus (ala Q2) and that we will see incremental improvement (compared to Q2) over the next four quarters. Some people will be shocked or raise alarm when Q4 comes in ‘weaker’ than the ‘artificially sweetened’ Q3, but there is no reason for alarm. That’s part of the zigzag process. The two key factors driving the pace of the recovery will continue to be the ongoing process of shutting down or restructuring ‘problem’ businesses and the pace of the formation of new businesses which will create new jobs.
[9/1/03] Our Tech Stock ‘Safe’ Signal is still stuck at 0.00 (no safety) since none of the big tech companies are even hinting that they are seeing any significant improvement in demand. There does seem to be some sense of stabilization and a modest hint of improvement, but no clear and decisive indication of a dependable ramp up in revenues and earnings.
[5/25/02] DISCLAIMER: I cannot and do not offer any recommendations of stocks to buy or sell. I may on occasion discuss companies that I am considering or myself have bought or sold, but the reader must do their own research before making their own purchase or sale decision. It is never a good idea to buy a stock just because someone else tells you to or even merely mentions a company in a favorable light.
Jack Krupansky -- The Unrepentant Optimist (Click here for Jack's Bio)
| NOTICE: I regret to inform you that I will probably no longer to be able to
provide this column on a daily basis after the end December, possibly even
sooner. I may occasionally provide commentary, but not on an regular,
daily basis. Hopefully I will be able to resume daily service at some
point. The web site and archive will remain at least through May.
Click
here if you wish to be notified by email if and when service resumes. Basically, I have been living off capital for the past four years (stock profits from "the boom"), but my capital burn rate for my living expenses has significantly exceeded my rate of return, even for the past year. The result is that I regretfully will be forced to seek a full-time "normal" job and hence I will be unlikely to be able to devote the five or more hours that go into this column every day. I had hoped that the market would bounce back more strongly so that my return would exceed my burn rate, but that didn't happen and I had burned through too much of my capital base by the time the market did start to take off in October 2002. I had also hoped that I would be able to build interest in this site via word of mouth, and that really didn't happen either. I would have to have ten times as many readers and have each of them pay the full suggested rate to make the site financially viable on its own. There is simply too much competition in the investment newsletter/web site business to expect that kind of interest. My thanks to all those loyal readers who have paid for their usage of the site. -- Jack Krupansky -- still The Unrepentent Optimist - 12/6/03 |
Updated: December 26, 2003 05:55:53 PM -0500
Copyright © 2003 John W. Krupansky d/b/a Base Technology