| 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 |
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Monday was another one of those days where the market is not quite sure what it wants to do. There was a moderate willingness to bet on the downside, but when the dust settled, there was a modest net gain for the day. People weren’t willing to bet heavily on the upside, but they were just as reluctant to bet on the downside. The ongoing, gradual inflows into stock mutual funds may have provided the tiebreaker that lead to the gain.
Due to low trading volume, Nasdaq activity seemed constrained by technical considerations. The 1948 level offered significant resistance. The 1930 level seemed to offer decent support.
Nasdaq volume was light (1.58 billion shares). Breadth was modestly positive, with 1.13 gainers for each loser. The market was in a holding pattern.
According to Thomson Financial I-Watch, institutional investors were net sellers of Sun (SUNW), but net buyers of Microsoft (MSFT), EMC (EMC), Cisco (CSCO), Oracle (ORCL), JDS Uniphase (JDSU), Applied Materials (AMAT), Intel (INTC), and ADC Telecom (ADCT). Institutions were clearly buying the dip, strongly suggesting that the market is not about to dramatically fall off a cliff any time in the near future.
There were no economic reports on Monday.
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, fell by 5.94% on Monday to 16.31, which is in the lower half of the low anxiety (moderate complacency) zone (15 to 20). People were relieved to see the market bounce a little. 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 fell by 3.22% on Monday to 16.54. New VIX is once again higher than old VIX.
The Nasdaq-100 VIX (VXN) rose by 1.85% on Monday to 27.55. People were more anxious due to Nasdaq’s tendency towards weakness rather than strength.
The Nasdaq-100 After Hours Indicator had a mostly negative tone for the Monday evening session, closing down 1.60 points. It’s not clear what spooked the traders. Texas Instruments (TXN) seemed to have good news, but something really spooked people shortly after 5:15 p.m.
[12/6/03] The fed funds futures market suggests that the Fed will leave the fed funds target rate unchanged for the rest of the year, but possibly raise the fed funds target rate by a quarter-point in May or June, or possibly not until 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 fell moderately against the yen and fell 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 rose very sharply, and is now slightly above the $32 “anxiety” level. The gain was nominally weather-related, but in reality it was probably mostly short-covering. There are no indications of any real shortage of crude oil. 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 modestly. 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.
[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.
According to a Reuter’s story, Merrill Lynch’s (MER) chief U.S. strategist, Richard Bernstein, on Monday reiterated his view that a slowdown in profit growth could hurt stocks in 2004 and warned that geopolitical events and new regulations for the financial industry might spook investors. Bernstein is calling for the S&P 500 index to finish 2004 at about 890, 17% below Monday’s close. His recommended asset allocation is 45% stocks, 35% bonds, and 20% cash. The story did not point out the severe conflict of interest that Bernstein and Merrill have: Merrill collects commissions and transaction fees for any stocks you might sell in your Merrill account. Also, they are a market maker, so they profit from the spread and the increased volatility should investors follow Bernstein’s advice and dump stocks.
[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 be on “Fed watch” for the FOMC meeting announcement due out at 2:15 p.m. Nobody expects a change in interest rates, but there is intense chatter about the text of the statement. Some people are passionately arguing that the Fed will (or should) drop the wording that indicates that “policy accommodation can be maintained for a considerable period.” There’s no good reason to drop it now and the intentions behind the statement won’t change as long as the recovery remains gradual, with employment growth still subdued.
My forecast for today is that Nasdaq will close in the range -40 to +50. Nasdaq came in at +11 on Monday, 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 292 days (1 year and 42 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, so the question is whether we hit 2,100 or 2,250 by the end of the year. 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 20 days off its 52-week intra-day high of 1,992.27 on November 7. Nasdaq is 4 days off its 52-week intra-day high of 1,996.08 on December 2. Nasdaq is 3 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 185 days. Nasdaq is 5 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 84 days old and 5 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 31 days old and 5 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 not fully recovered, 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 20 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 3 days old. It reached an intra-day low of 1,926.94 on Monday, December 8, a decline of 74 points or 3.70%. It may be 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 11 days old and 5 days off its closing peak. The fact that Nasdaq is 52 points off the intra-day peak for this new leg would suggest that this new leg may already be broken. Give it a couple more days before deciding for sure.
We have to invalidate the potential up-leg of the Nasdaq advance that started on Friday, December 5 with an intra-day low of 1,935.58 and a bounce of a mere 2 points into the close due to setting a new intra-day low of 1,926.94 on Monday, December 8. We now look for the start of a new up-leg.
We now have yet another potential up-leg of the Nasdaq advance starting on Monday, December 8 with an intra-day low of 1,926.94 and a bounce of 22 points into the close. We now wait for confirmation of this potential up-leg. We ignore Days 2 and 3 of the up-leg as long as a new intra-day low is not set. Then on Days 4 through 10 we look for a gain of at least 1% on volume higher than the previous day to signal confirmation.
The fact that Nasdaq is still 52 points off its recent 52-week intra-day high is a strong 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 may still be 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 73 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 November 21. The big wildcard remains mutual fund money flows – which were inflows of $2.6 billion in the most recent week, $2.1 billion the previous week, and $3.5 billion in each of the two weeks before that.
[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)
Updated: December 08, 2003 07:45:00 PM -0500
Copyright © 2003 John W. Krupansky d/b/a Base Technology