Our daily stock market commentary and views on the economy and geopolitical events are posted weekdays and Saturday by 12:30 a.m. EST.
[ Market Activity | Economic Reports | Anxiety (VIX) | After Hours | Fed Futures | Dollar | Oil | Gold | Geopolitical Situation | Terrorism | Iraq | Books | Reform | Telecom | Technology | Miscellaneous | My Investments | Outlook for Today | Bottom Line | Economic Outlook | Tech Stock 'Safe' Signal | Resources | Disclaimer | Archive | Charts | Adages | Glossary | Lore | Search | Payment - Please! | Contact Us ]
Thursday’s trading was mostly “wait and see” idling after a big gain on Wednesday. The good news was that there wasn’t any significant profit-taking. It was a better day than the skimpy gain (3.97 points) suggested. Nasdaq opened down 3.31 points and traded up roughly for the rest of the day. Nasdaq closed 12.58 points above the intra-day low (reach first shortly before 10:00 a.m. and then again shortly after noon.) Traders tried their darnedest to push the market down, but it simply would not stay down. It’s always a good sign when the market opens with a negative bias but then turns around and moves higher.
The 1840 level seemed to offer Nasdaq some significant resistance and the 1825 level seemed to offer some support.
Volume was light (1.60 billion shares). Breadth was modestly positive, with 1.24 gainers for each loser. The light volume tells us not to attach too much significance to the day’s trading.
According to Thomson Financial I-Watch, institutional investors were net sellers of EMC (EMC), Microsoft (MSFT), Nokia (NOK), and Intel (INTC), but net buyers of Sun (SUNW), Cisco (CSCO), Oracle (ORCL), JDS Uniphase (JDSU), and Nortel (NT). It was a mixed day, but there was a fair amount of buying the dip, which strongly suggests that the market is not about to dramatically fall off a cliff any time soon.
The Unemployment Insurance Weekly Claims report registered a moderate rise in initial claims – but still under 400K (albeit barely) for a second consecutive week – and a moderate rise in continuing claims. This was a mixed, but somewhat negative report, but note that it includes some claims that were delayed by Hurricane Isabel. Unadjusted initial claims declined slightly to 300K, moderately below the year-ago level of 319K – and well under 400K. The 4-week moving average of initial claims declined modestly but is still modestly above 400,000, but moderately below the level of a year ago. Unadjusted continuing claims declined modestly and are now only modestly above the level of a year ago. The 4-week moving average of continuing claims rose modestly, and is still moderately above the level of a year ago. Initial claims have not been safely enough below 400K to challenge the implication that payroll employment may not be growing very much at all (even though overall, household employment probably continues to grow). Unemployment won’t fall significantly until the economy begins to grow at a faster pace. The insured unemployment rate (2.9% or 2.4% unadjusted) is modestly better than during the same week in 1992 when the economy was recovering from the last recession (3.1% or 2.5% unadjusted). Initial claims were not consistently below 400K in 1992 until October. Initial claims are modestly lower than in the same week in 1992 (399K vs. 409K), and moderately lower than in 1992 once you strip off the dysfunctional seasonal adjustment (300K vs. 315K.) The talk about continuing claims being at or near a 20-year high is a complete red herring (true, but irrelevant) since it is the insured unemployment rate (see three sentences back) that is important and covered employment has risen by over 20% since 1992 alone. The bottom line is that although the labor market is lackluster, it’s not in too bad shape and not getting seriously worse.
The Factory Orders report for August registered a moderately sharp decline in both new orders and shipments, a moderate rise in unfilled orders, and a modest decline in inventories. This was a mixed, mostly negative report, but the numbers were actually reasonably positive when the dysfunctional seasonal adjustment is stripped off. The rise in unfilled orders is a healthy sign for the future. Shipments for nondefense capital goods fell sharply, even ex aircraft. New orders for nondefense capital goods fell sharply, and fell moderately sharply ex aircraft. Shipments for computers fell very sharply (9.6%), new orders rose sharply (3.2%), and unfilled orders rose sharply (3.4%). Shipments for semiconductors were up very sharply (21.1%). Please note that there tends to be a lot of monthly volatility for orders and shipments, primarily since few customers buy durable goods on a nice, smooth monthly cycle.
From Tuesday, after the close: The weekly ABC News/Money Magazine Consumer Comfort Index registered a slight rise to -19 from -20 (out of a range from -100 to +100). This was a positive report. There was a 1% gain in how consumers view their own finances and no change in how they view the overall economy or the buying climate. Consumer confidence may still be in somewhat of a limbo state as everyone waits to see what happens next in the economy, the workplace, and the stock market – and wondering what’s really going on in Iraq (or even California or Washington). Please note that there is no clear and indisputable link between consumer confidence reports and future consumer spending.
After the close: AMG Data Services reported that for the week ended Wednesday, October 1, $2.2 billion flowed out of equity mutual funds. This was a negative report. $66 million flowed out of taxable bond funds. $48.6 billion flowed out of money market funds, the largest outflow on record. $183 million flowed out of municipal bond funds, the eleventh consecutive week of outflows. $173 million flowed into international and global debt funds, accounting for some of the downwards pressure on the dollar.
The CBOE Market Volatility Index (VIX), which measures the level of anxiety in the market, rose by 0.18% on Thursday to 22.05, which is in the lower half of the moderate anxiety (low complacency) zone (20 to 25). VIX spiked up to 22.75 on the open as the market looked set for a bout of profit-taking. VIX rose as high as 23.04 shortly before 11:00 a.m. VIX did begin to trend downwards around 2:30 p.m., but people were a little more anxious due to the failure of the market to build substantially on Wednesday’s gain.
The Nasdaq-100 After Hours Indicator had a positive tone for the Thursday evening session, closing up 1.37 points. The general tone of the after-hours news flow seemed reasonably positive.
[10/3/03] The fed funds futures market suggests that the Fed will leave rates unchanged for the rest of the year, but possibly raise rates by a quarter-point in July. 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 rose modestly against the yen and 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.
The price of oil rose sharply, and is now only modestly below the $30 “comfort” level. In any case, the price of oil continues to be relatively well-behaved and no true investor should lose any sleep worrying about it.
The price of gold fell moderately sharply. In any case, there is nothing about the current price of gold that should give any true investor any reason to lose any sleep.
[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.
Wednesday: For the week ending Wednesday, October 1, the Pentagon reports that 1,186 fewer reservists are on active duty, for a total of 169,279. This was modest decline. The Army, Air Force, and Navy showed decreases in the number of reservists on active duty, but the Marines showed an increase. The headcount has declined by 55,249 or 24.6% from the peak of 224,528 on May 1st. Reserves on active duty have been below 200,000 for 11 consecutive weeks.
[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.
I was out of town Monday through Thursday to attend a venture capital conference in Boston. I’ll try to write up some comments for Saturday after I get caught up.
[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.
The monthly employment situation report will be the primary focus of the market today. Employment has been fairly flat, and even gains as much as 300,000 or losses of 300,000 are still statistical noise. So, it’s absolutely silly for the market to react strongly to numbers in the range +/- 300K, but traders will get excited even by gains or losses as skimpy as 50,000 or even 10,000. Also, it’s important to also look at the payroll number stripped of the fluky seasonal adjustment and to look at the household survey data as well. The hourly and weekly pay also will be of interest. The length of the workweek does matter, but can go down if overtime goes down due to additional hiring or it can go up if companies use more overtime to avoid hiring more people. The growth of temp workers is a leading indicator of future employment. The biggest wildcard in this process will be the adjustments to the August numbers which could make the headline September numbers look great or terrible.
Traders and short-term speculators will tend to close out positions (or at least hedge them) in advance of the weekend when anything can happen.
Nasdaq is still quite ‘oversold’ on a short-term technical basis. This argues for more of a bounce, but says nothing about the timing.
My forecast for today is that Nasdaq will close in the range -40 to +50. Nasdaq came in at +4 on Thursday, slightly below the midpoint of my range of -40 to +50.
The confirmed bull market for Nasdaq that began on October 9, 2002 (and was confirmed on June 16, 2003) has run for 247 days. The market now has a longer-term upwards bias despite near-term volatility. The path of the market through the early fall is completely uncertain, but Nasdaq will likely be higher at the end of October. The important thing is that we continue to see inflows into equity mutual funds while the economy, revenues, and earnings continue to incrementally improve.
The confirmed up-leg for Nasdaq that began with the intraday low of 1,253.22 on March 12 (and was confirmed Monday, March 17) has run for 139 days. Nasdaq is 10 days off its closing peak (1,909.55 on September 18 – previous peaks were 1,888.62 on September 8, 1,868.98 on September 4, 1,852.90 on September 3, 1,841.48 on September 2, 1,810.58 on August 29, 1,800.18 on August 28, 1,782.13 on August 27, 1,777.55 on August 21, 1,761.11 on August 19, and 1,754.82 on July 14) for the up-leg and for the overall post-October 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 38 days old and 10 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. This leg is now rather ‘limp’, and will be so until it sets a new closing high,
We are now in a minor correction off the September 18th 1,909.55 closing high. Wednesday was Day 1 of a potential up-leg, with Nasdaq closing well above the intra-day low of 1784 (approximately). Thursday was Day 2, but it doesn’t matter what happens on days 2 and 3 as long as a new low is not set. On days 4 through 10 we look for a confirmation of the new up-leg with a 1% gain on higher volume than the previous day.
One economist wrote that “This is a precarious time for the economy.” That’s complete nonsense. Sure, plenty of people would agree with him, but nothing could be further from the truth. The simple fact that the economy is not stuck in a deep recession is testament to the fact that the deep strength of the U.S. economy is not given the credit it deserves. Sure, we continue to “struggle” at a below-par rate of growth and employment continues to be disappointing, but mostly that’s because we’re continuing to work through the remaining “overhang” of weak businesses that need restructuring. The point is that we’ve been able to work through so many issues and still manage to grow. Sure, we have further to go, but we are making good progress even if slower than many people would like.
[8/19/03] The latest economic data continues to support the thesis that the U.S. economy is solidly into a gradual, zigzag, underappreciated, stealth recovery. What’s different lately is that there is now a slowly rising chorus of people basically saying “You know, this economy does seem to be improving and faster than we thought.” The recovery hasn’t been and won’t be as sharp as for a ‘traditional’ recovery, but will end up being far more durable and sustainable. The two key factors driving (or slowing for now) the pace of the recovery are the ongoing process of shutting down or restructuring ‘problem’ businesses and the pace of the formation of new businesses.
[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)
Updated: October 03, 2003 02:01:47 AM -0400
Copyright © 2003 John W. Krupansky d/b/a Base Technology