| 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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Wednesday was a very slow day. There was very little economic data and not that much business data to get traders excited. Word of an isolated case of SARS got the day started on a negative note. Stock mutual fund money flows are still too light to have any real noticeable effect on the market on a daily basis, so lack of excitement translates to a negative bias.
Nasdaq closed down 3 points, but rose 11 points from its intra-day low. Traders were having a field day, but the bottom line is that there was little real selling, or buying.
Nasdaq volume was very light (1.50 billion shares). Breadth was moderately negative, with 1.22 losers for each gainer. This trading session was not particularly noteworthy, except for its deadness.
According to Thomson Financial I-Watch, institutional investors were net sellers of Oracle (ORCL), Microsoft (MSFT), and Applied Materials (AMAT), but net buyers of Sun (SUNW), Intel (INTC), Nortel (NT), Nokia (NOK), Lucent (LU), and Cisco (CSCO). Institutions were buying the dip, strongly suggesting that the market is not likely to dramatically fall off a cliff any time in the near future.
The weekly Mortgage Bankers Association (MBA) Mortgage Application Survey for the week ending December 12 registered a sharp rise in applications, with a sharp rise in applications to purchase and a sharper rise in refinancing. This was a positive report, but there does tend to be a lot of volatility and the winter storms had depressed activity in the previous week. Nonetheless, demand for buying homes is still quite strong, even if well off recent highs.
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 2.23% on Wednesday to 15.35, which is only modestly above the lower end of the low anxiety (moderate complacency) zone (15 to 20). People were a little relieved that Nasdaq bounced back from weakness. 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 2.20% on Wednesday to 15.58.
The Nasdaq-100 VIX (VXN) fell by 3.94% on Wednesday to 25.12.
The Nasdaq-100 After Hours Indicator had a mixed, but mostly positive tone for the Wednesday evening session, closing down 0.18 points. People are mostly clueless as to where the market will head next.
There is only a modest expectation of a rate hike in June. July is more likely, followed by another quarter-point hike in September. But all of that assumes that the economy really bounces back strongly by then.
[12/12/03] 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 June or 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 was unchanged 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 well above the $32 “anxiety” level. The weekly inventory reports showed a moderate decline in crude inventory levels. 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 sharply. Part of this rise was probably due to the SARS report. 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.
For the week ending Wednesday, December 17, the Pentagon reports that 886 more reservists are on active duty, for a total of 178,514. This was a modest increase. The Army, Navy, and Marines all showed decreases in the number of reservists on active duty, but the Air Force showed an increase. The headcount has declined by 46,014 or 20% from the peak of 224,528 on May 1st.
[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.
True investors need not be alarmed by the news of one SARS case. This so-called “outbreak” is not a big deal at all and the authorities are really on top of the situation, but traders and speculators do love to take this kind of news and blow it up all out of proportion to its true significance. Investors should continue to focus on the longer-term business outlook and ignore short-term market fluctuations that are driven by knee-jerk reactions by short-term market participants.
[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 weekly jobless claims report could move the market. The claims numbers have a lot of volatility and there tends to be a late-year seasonal uptrend in the underlying, unadjusted initial claims, but given the current state of the economy, anything could happen. That said, I do believe that there is a gradual downtrend underway as the economy is on a gradual uptrend.
The Philadelphia Fed manufacturing report could move the market.
Nasdaq is still somewhat oversold on a short-term technical basis, so we should see a bounce soon, assuming no really bad news crops up and assuming that stock mutual fund money flows don’t head south.
My forecast for today is that Nasdaq will close in the range -40 to +50. Nasdaq came in at -3 on Wednesday, moderately 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 299 days (1 year and 49 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 27 days off its 52-week intra-day high of 1,992.27 on November 7. Nasdaq is 11 days off its 52-week intra-day high of 1,996.08 on December 2. Nasdaq is 10 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 192 days. Nasdaq is 12 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 91 days old and 12 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 38 days old and 12 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 27 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 10 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 18 days old and 12 days off its closing peak. The fact that Nasdaq is 80 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 potential 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 6 days old and 3 days off its closing peak of 1,949.00 on December 12. The intra-day peak for this up-leg was 1,979.78 on December 15. 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. Monday was Day 4 with a decline of 31 points plus a decline of 61 points off the intra-day high, but the intra-day low for this leg still stands. Setting a new intra-day high for the leg and then closing very sharply off that high is a clear yellow flag. Tuesday was Day 5, but the gain was too small to be confirmation. Wednesday was Day 6 with a modest decline, but the intra-day low for the leg remains intact. Thursday will be Day 7.
The potential 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 2 days old and 1 day off its closing peak of 1,924.29 on December 16. The intra-day peak for this up-leg was 1,927.09 on December 16. 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. Wednesday was Day 2 with a modest decline, but the intra-day low for the leg remains intact. Thursday will be Day 3.
The fact that Nasdaq is still 80 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 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 45 points of decline before a true correction might be indicated. Note that we’re still 43 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 $1.8 billion in the most recent week, $2.6 billion in the previous week, $2.1 billion in 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 17, 2003 07:30:30 PM -0500
Copyright © 2003 John W. Krupansky d/b/a Base Technology