Thursday, November 13, 2003
Issue Contents:
| 08:30 | Good Morning Headlines and reaction. |
| 08:35 | Paul's Watch List Stock picks for intraday and swing trades. |
| 08:38 | [$VIX, Daily] CBOE Market Volatility Index Market Internals. |
| 08:40 | [$VXN, Daily] NASDAQ Volatility Index Market Internals. |
| 08:43 | [TYZ3, USZ3, Daily] Treasury Bonds and Notes December futures. |
| 09:02 | Daily Swing Trade Today's setups. |
| 09:20 | Economic Data Roundup A summary of today's key releases. |
| 16:16 | Active Trader Transcript Real time forum log. |
Today is going to be interesting. After a few days of relative calm in the market, we can feel the nervousness return as we read the headlines:
CHICAGO (Reuters) - Wal-Mart Stores Inc. on Thursday said a turnaround at its Sam's Club warehouse stores and strength abroad drove a 13.9 percent increase in quarterly profit, but results just missed Wall Street's loftier expectations.
NEW YORK, Nov 13 (Reuters) - Applications for U.S. home loans dropped last week to their lowest level in almost a year and a half, a trade group said on Thursday, as rising rates cut into demand for homes and mortgage refinancing.
LONDON, Nov 13 (Reuters) - Gold, currently trading around 7-1/2 year highs, will rely heavily on an ailing dollar in any move towards breaking psychological resistance at $400.00, but the market is on tenterhooks to see how the greenback will react to key U.S. economic data on Thursday, analysts said.
I always laugh when I read the headlines. The first one is a gimme. We know the market is priced for perfection but did analysts really expect Sam's Club to blow the lid off the projections? Com'on!
The second one is probably seasonal. How many people do you know who would buy a new house and move after Thanksgiving? Or maybe they have heard the Fed loud and clear:
VIENNA (Reuters) - Chicago Federal Reserve President Michael Moskow said on Thursday the central bank plans to keep interest rates low for a considerable period of time.
The third one is even more funny? Remember six months ago that the premise of gold going up was, of all things, DEflation?
Last, from WSJ.com:
U.S. crop prices are climbing as demand from China soars due to that country's production problems and rising population.
There we go, yesterday GM reported that it will export to China thousands of Cadillacs, Buicks and other GM vehicles valued at about $1.3 billion in 2004 and 2005, and today, the long suffering North American farmer may finally get relief, not from any "farm bills", but from actual demand from a billion hungry people. And higher prices too.
This is Paul's intraday and swing trade watch list for Thursday. He will review the setups for the Level 4 Active Traders at around 11AM Eastern.
BUY SCALPS:
- MEDI @ 25.14
SHORT SCALPS:
- AMAT @ 25.04
- BRCM @ 36.13
- DISH @ 32.71
- XLNX @ 34.49
Prices above are used as ALERTS to look for intraday entries. If you need additional ideas, don't forget that we have automated Stock Scan Lists as well.
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[$VIX, Daily] CBOE Market Volatility Index
$VIX Daily: With yesterday's big drop in the $VIX reading, the 5-day RSI downhooked from above 70 to produce a 1-3 day buy signal. Note that it was also a reversal off the top of the Bollinger Band. This short-term buy signal is within the context of what looks to be a weekly chart sell signal.
[$VXN, Daily] NASDAQ Volatility Index
$VXN Daily: We have the same story here on the NASDAQ, a 1-3 day move up projected by the $VXN reversal using on of the Connors $VIX reversal setups. This is also in taking place within the context of a divergence/pending sell signal on the weekly chart.
[TYZ3, USZ3, Daily] Treasury Bonds and Notes
This afternoon brings the 10-Year Note auctions, and we'll see what happens. So far, the triangles are still holding. Until something gives way, nothing has changed in our analysis, and what we have here is an ever-narrowing trading range.
VIENNA (Reuters) - Chicago Federal Reserve President Michael Moskow said on Thursday the central bank plans to keep interest rates low for a considerable period of time.
Today's big quote came from Moskow, letting the market know that it's "safe" to buy bonds. But perhaps people will get the message that the Fed is basically saying that they are going to allow inflation to take hold? Besides, we know there is inflation all around us, just not in the CPI.
TYZ3 Daily: Creeping back into the triangle?
USZ3 Daily: Creeping back into the triangle too. Nothing to do except small hit and runs. No trend until it leaves the congestion area.
Yesterday's setup in BRCM was not elected, as it went up as expected. In the meantime, when I update the indices, you'll see why I'm just a little reluctant to go long in a big way.
AMZN and DELL were potential short candidates, but as we look at them again today, I think I'll pass.
AMZN Daily: The reason for passing on this one is that for all we know, the buyers are back in force after doing one of those big huge retracements to the 50-day MA. We've seen a lot of these, and buyers have shown up every time. If one is not careful and get short, there is the possibility that it opens gaps up above what they always call the "downtrend line" thereby making risk control in terms of a stop loss extremely difficult. If anything, we will have AMZN now on the intraday watchlist on the buy side, in case it wants to make a run for it.
There were a number of stocks on yesterday's list that were in the do or die position and they went up on command to save the day: AMAT, CSCO, SMH, BEAS. We are interested in these on the intraday 10- to 15-minute timeframes now, if they can continue upwards to test the upside targets.
AMAT Monthly: Note that the upside target that has been exceeded by virtually all the top traders has yet to be hit on this one. Perhaps the masses coming in for the cheapies will push this one up.
AMAT Daily: A move to the upside after a relatively large retracement over two days. The upside target is a test of last Friday's high.
CSCO Daily: Same sort of situation as AMAT, and it had to hold after a rather nasty look couple of candles, even though we "know" it's supposed to be a bull flag. Upside target is a test of last Thursday's high, the one made on the earnings.
SMH Daily: Retracement gets it's target.
BEAS: Trying to bounce, but without the oomph of the other picks.
TODAY'S PLAN is simple. If I didn't want to buy the bull flags yesterday because of the nasty looking candles made on the pullback, I'm not going to do a swing trade now to try to get the "breakout" above last week's high. We can do this by trading the intraday charts, off the 10- or 15-minute timeframes.
I will go over the major indices and form a strategy off that. Its interesting to note that there is a lack of really good looking patterns right now across the board, mainly because we know for sure that a large number of weekly charts have extreme ADX readings on the high side, making me a big more "chicken".
MBA Purchase Applications at 375.4
Econoday reports: The Mortgage Bankers refinancing index fell to a 10-week low, dropping 10 percent to 2084.2 in the week ended November 7. The purchase index was also down, falling 7 percent in the week to 375.4 and toward the low end of its year-long range. The market index, a wider barometer of mortgage applications, fell 9 percent to 626.0 -- its lowest level in more than a year.
Jobless Claims 366,000
Econoday reports: Initial jobless claims rose to a level of 366,000 in the week ended November 8, up 13,000 and near consensus. Initial claims have now held below the key 400,000 level for six straight weeks, a trend consistent with growth in the nation's payrolls. The four-week average fell to a two-and-a-half year low, down 6,000 to 375,250.
Trade Deficit -$41.3 Billion
Econoday reports: Exports were up 2.8 percent led by semiconductors and other capital goods, consumer goods, and food products. The dollar's decline has lowered the cost of U.S. made goods, making them more competitive overseas. Imports soared 3.3 percent as demand picked for automobiles, parts and engines, capital goods such as semiconductors and computer equipment, and consumer goods including televisions and other electronic products.
WASHINGTON (Reuters) - The U.S. trade deficit widened in September to $41.3 billion, as the strengthening U.S. economy propelled imports from China and the rest of the world to record levels, the government said on Thursday.
Import Prices +0.1%
Export Prices +0.3%
Econoday reports: Import prices for capital goods fell 0.5 percent, the sharpest decline in a year. Lower prices for computer and telecom equipment drove the decline. On the higher side was a 0.6 percent rise in prices for cars and parts. The Labor Department said the rise was driven by model-year changeovers and the decline in the value of the dollar.
Export prices rose 0.3 percent in October compared with a 0.4 percent rise in September. Year-on-year export prices are up 1.4 percent. Agricultural prices rose sharply for a second month, up 2.5 percent in October. Soybeans, meat and cotton led the increase. Nonagricultural exports rose 0.1 percent vs. a 0.1 percent decline in September.
Ten-Year Note Auction 4.360%
Econoday reports: The awarded yield is 2 basis points higher than the prior auction in September, offering a signpost of the bond market's limited reaction to two months of strong economic data.
The bid-to-cover a was moderate 1.90, about average on the year's five 10-year auctions. The coupon is 4.250 percent, the same coupon on the September and August issues.
The auction rounds out an unusually successful quarterly Treasury refunding, one helped by its pint-size $57 billion total. Given widening budget gaps, the Treasury will likely have to test the credit waters deeper in February's refunding.
Real time forum log.
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