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The modest rally on Tuesday was rather tentative and lackluster ahead of the Intel (INTC) quarterly report after the close, but Nasdaq set yet another 52-week closing high (1,943.19).
Nasdaq closed only 14 cents off its intra-day high, which is a good sign.
Traders tried their darnedest to push the market down on Tuesday, but they failed. There was a modest amount of negative sentiment in the pre-market, leading to a 3-point decline on the open. Nasdaq fell another 7 points in the first 20 minutes of trading, but the modest selling pressure petered out and Nasdaq trended up for the rest of the day, although it wasn’t until 1:45 p.m. that Nasdaq was finally positive again. This ‘failure’ to break the back of the advance is a positive sign.
There may have been a little ‘real’ buying to keep upwards pressure on the market. It could also have been short-covering ahead of the Intel report by weak-willed shorts.
Volume was light (1.74 billion shares). Breadth was moderately positive, with 1.69 gainers for each loser. The light volume and modest point gain prevent us from drawing any strong conclusions about the rally on Tuesday.
According to Thomson Financial I-Watch, institutional investors were net sellers of Intel (INTC), Sun (SUNW), ADC Telecom (ADCT), Cisco (CSCO), Oracle (ORCL), JDS Uniphase (JDSU), Applied Materials (AMAT), and Brocade (BRCD), but net buyers of EMC (EMC). Institutions were selling into the rally, but they tend to do this after buying recent dips, so there is no reason to expect a dramatic market decline any time soon.
The Kansas City Fed Manufacturing Survey for September registered a sharp rise in production, to its highest level in recent years, and indicating moderate growth in the manufacturing sector in the tenth Fed district. This was a positive report. Of particular note is that “capital expenditures rose above year-ago levels for the first time in three years.” The rate of growth of shipments rose sharply. The rate of growth of new orders rose sharply. The other good news is that employment has expanded for a third consecutive month, and at a faster pace. The average workweek expanded for a third consecutive month, and at a faster pace, which is a harbinger of future hiring. The six-month production outlook did decline slightly, but is still quite optimistic. Expectations for capital spending were unchanged, but still pointing to improvement. The only real negative is that prices for raw materials rose (but at a slower pace) while prices for finished products fell (but at a slower pace), which means downwards pressure on profits.
The Richmond Fed Manufacturing Survey for September registered a moderately sharp decline, erasing all of the August gain, and is now indicating a moderate contraction in the manufacturing sector in the Richmond Fed district. This was a moderately negative report, but was somewhat due to the effects of Hurricane Isabel. Shipments contracted moderately sharply. New orders continued to contract, and more sharply. The backlog of unfilled orders contracted but at a moderately slower pace. Employment continued to contract rather sharply, and at an even sharper pace. The six-month shipment outlook rose modestly and is still reasonably positive. The good news was that the six-month orders outlook improved modestly and is still reasonably positive. The six-month backlog outlook rose moderately sharply. Unfortunately, the six-month employment outlook continues to forecast contraction, but only very modestly. This report covers the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.
The BTM/UBSW Weekly Chain Store Sales Snapshot registered a moderate decline (0.5%) compared to the prior week. This was a negative report, but after an outsize gain last week, and there is a lot of volatility. Sales were up a decent 5.3% over a year ago. The report blamed warmer weather for the weekly decline, but also notes that electronics sales picked up. Sales for the month are expected to be up 3.5% over a year ago.
The weekly Reuters Instinet Redbook Sales Average report registered a moderately sharp rise in chain store sales (1.2%) for the two weeks ended October 11 compared to the same weeks in September. This was a positive report. Sales at major retailers were up 3.6% for the week ended October 11 compared to a year ago (they were up 3.1% a week ago).
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 slightly positive report, but the index is simply bouncing up and down in a narrow range with no trend. There was a 2% gain in how consumers feel about their own finances and a 1% gain in how consumers view the buying climate, but a 1% decline in the consumer view of the overall economy. 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. Please note that there is no clear and indisputable link between consumer confidence reports and future consumer spending.
The CBOE Market Volatility Index (VIX), which measures the level of anxiety in the market, rose by 0.31% on Tuesday to 19.39, which is modestly below the top end of the low anxiety (moderate complacency) zone (15 to 20). There was no significant change in the anxiety level. People were biding time (slightly impatiently) waiting for the Intel quarterly report. 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 Nasdaq-100 After Hours Indicator had a very positive tone for the Tuesday evening session, closing up 7.86 points. People were quite pleased to see Intel blow past the consensus estimates for Q3 earnings and revenues, as well as the outlook for Q4.
[10/15/03] 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 April. 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 moderately against the yen and rose moderately sharply 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 fell moderately, but is still moderately above 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 rose moderately. 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.
I half agree with the White House when they say that “The American people are not getting the full story about the progress we are making in Iraq” and complain that the national news outlets have ignored good news in Iraq in favor of stories on the ongoing violence there. It’s absolutely true that the media has an obsession (if not compulsion) to focus on violence, scandal, and anything else that attracts viewers, and an extreme disinterest in anything that is, well, boring. Repairing schools, hospitals, roads, power lines, sewers, soccer fields, and oil facilities is definitely boring, and hence has little appeal for “Big Media”. That said, the White House is clearly trying to do their own spin on the ‘news’ to try to subvert criticism of administration policies and planning and the sluggish pace of resolving the remaining security issues. My other complaint is that the White House is simply doing a lousy job of getting the information out to begin with. They used to publish regular status reports on the CENTCOM web site, but now they are quite sporadic and lacking in detail. And finally, tongue-in-cheek, the media is not giving the administration credit for the incremental progress they are making in compromising on the policy changes needed to gain full UN support.
[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.
People will react to the Intel quarterly report and position for other upcoming reports. The reaction could be a nice rally, or we could get another huge run-up in the pre-market and morning trading followed by a huge bout of profit-taking.
My forecast for today is that Nasdaq will close in the range -40 to +50. Nasdaq came in at +10 on day, moderately above 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 255 days (1 year and 4 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.
Nasdaq set a new 52-week intra-day high of 1,943.33 on October 14. The previous intra-day high was 1,940.97 on October 13. The fact that Nasdaq managed to close above the previous intra-day peak and close to the new peak is a positive sign.
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 146 days. Nasdaq is at its closing peak of 1,943.19 on October 14 (previous peaks were 1,933.53 on October 13, 1,915.31 on October 10, 1,911.90 on October 9, 1,909.55 on September 18, 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 46 days old and at 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.
Wednesday, October 1st 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. Friday was Day 3 and we saw a really nice gain, but it doesn’t matter since that was another one of the days on which the market tries to find its feet before we really see a confirmation. Monday was Day 4, but the point gain and volume were too meager to constitute a confirmation. Tuesday was Day 5, but the moderate point gain and moderate volume were not enough to signal a confirmation. Wednesday was Day 6, but Nasdaq backtracked. Thursday was Day 7, but the closing point gain was somewhat short of 1%. Friday was Day 8, but the gain was too meager. Monday, October 13 was Day 9, but the gain was less than 1% and volume was too anemic. Tuesday, October 14 was Day 10, but the gain was also less than 1% and volume was still light. 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. Since we’ve blown through 10 days without confirmation, the potential up-leg was really nothing more than a reversal of the recent mini-correction and a continuation of the up-leg that started on August 8. We now reset the clock and begin looking for the next up-leg.
Tuesday, October 14 was Day 1 of a potential up-leg, with Nasdaq closing well above the intra-day low of 1,922.82. Today will be 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.
[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 14, 2003 07:32:45 PM -0400
Copyright © 2003 John W. Krupansky d/b/a Base Technology