TrendVue :: Archive

Tuesday, March 2, 2004
Issue Contents:

07:41	This Morning Headlines and the Dollar.
07:48	Market Sentiment CBOE equity put/call ratio analysis.
07:52	Market Internals $VIX, $VXN, high/low statistics analysis.
08:05	Intraday Strategy DJ, TY, US, SP, NQ.
08:06	The Swing Trader Update open positions.
08:50	The Swing Trader Today's stock picks.
09:21	Focus on RIMM Technical update.
09:58	Un-Real Estate Condomania!
16:16	Active Trader Transcript Real time forum log.
17:28	Economic Data Summary of today's releases.
17:33	Volume Leaders NASDAQ and NYSE.
17:43	The Day Ahead U.S. market calendar for Wednesday.
17:53	Stock Index Strategy $INDU, DIA, $SPX, SPY.
18:05	Stock Index Strategy $NDX, QQQ, $SOX, SMH.
18:08	Forex Strategy EURUSD, USDJPY, GBPUSD, USDCHF, EURJPY, USDCAD.
18:11	The Sector Investor Focus on $HGX.

This Morning

Yesterday's Forex Strategy involved looking for an upside move on the USDCHF and a downside move on EURUSD. As of this morning, the USDCHF has reached target while the EURUSD is close to it.

Financial reporters can now toss in their two cents, guessing at what could be spurring the move.

Dollar Buoyed by US Jobs Optimism, Maintains Gains.

LONDON, March 2 (Reuters) - The dollar headed towards last week's four-week high on the euro and gained versus the yen on Tuesday, buoyed by optimism that U.S. jobs data later this week may show sturdier improvement over past months' figures.
Dollar bulls have taken heart about the U.S. labour market after the jobs component of a February U.S. manufacturing index released on Monday gave its highest reading since 1987.
Later on Tuesday, a U.S. job cuts report from outplacement firm Challenger, Gray & Christmas will garner market attention, with investors looking for additional signals of improvement in the labour market -- so far the weak link in U.S. recovery.
"Lots of people have latched on to (Monday's) employment component and are suggesting that Friday's non-farm payrolls data may be slightly more upbeat than first thought," said Mark Henry, currency strategist at GNI in London.
By 1113 GMT the euro had slipped 0.4 percent on the day to $1.2395 , not far above Friday's four-week low of $1.2370.
The dollar had gained 0.6 percent on the yen to 109.65 yen , not far below a 109.83 three-month high set last week.
It was also 0.7 percent higher on the Swiss franc and 0.5 percent stronger on the day against the British pound .
Federal Reserve Chairman Alan Greenspan talks about the current account at 1730 GMT and his comments will be closely watched for any clues to the timing of higher interest rates.

RATE DEBATE
Interest rate expectations in the euro zone and the United States are set to be a key determinant of euro/dollar direction this week.
Jobs growth is a significant factor in the Fed's consideration about when to raise U.S. interest rates from one percent -- their lowest since 1958 and one reason why the dollar has been under continuous selling pressure for months.
Dollar bulls hope a strong reading in Friday's payrolls data will give the U.S. currency a boost, helping it build up recent gains that took it up from record lows set at $1.2927 only two weeks ago.
"Clearly the market is a little bit more upbeat about the dollar than it has been," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez in London.
"Today's (Challenger) data may be secondary but it will be watched. If we see improvement in job cuts it will be a positive sign for payrolls."
On the other side of the coin, recent business confidence and inflation data out of euro zone economies indicate euro strength is starting to weigh on the pace of economic recovery.
The European Central Bank meets on Thursday. The market does not expect it to lower the cost of borrowing this week but there is jitteriness over potential surprises and what ECB President Jean-Claude Trichet may say at his regular news conference scheduled for Thursday.
Unemployment in the euro zone held steady at 8.8 percent in January. Retail sales in the bloc's biggest economy, Germany, showed a rise of 3.1 percent on the month in January but fell by one percent on the year while in France consumer confidence fell unexpectedly in February.
In Japan, the Nikkei share average <.N225> hit a 21-month high but it failed to boost the yen, with some market players suspecting the Japanese authorities may have been in the market.
Japan has sold at least 10 trillion yen ($92 billion) this calendar year to prop up the U.S. currency and prevent yen strength from eroding its export-led recovery.
The Bank of Canada is expected to cut its main rate to 2.25 percent from 2.5 percent. The greenback was up a quarter of a percent on the Canadian dollar at C$1.3409.

^ 04.03.02 07:41 #

Market Sentiment

The CBOE equity put/call ratio was .554. No extreme readings to report today.

^ 04.03.02 07:48 #

Market Internals

We reported yesterday that both $VIX and $VXN pushed down into the lower Bollinger Band while the 5-day RSI went under the 30-line. With the broad indices, particularly the S&P 500, heading toward the upper edge of the patterns, the first upside target, we are on the lookout for Connors VIX Reversal setups right here.

^ 04.03.02 07:52 #

Intraday Strategy

There's not much to add to comments made in the Stock Index Strategy for the Dow, S&P and NASDAQ futures.

In yesterday's trading, a killer spike reversal developed on the TY and US on release of the 10AM economic number. It's a 20-day high, and the upper edge of a wedge-like formation on the daily chart.

While the shooting stars formed in yesterday's trading is apparent to everyone, the fact that this candlestick has formed in an area around a previous swing high is important. We want to know if sellers who showed up at the yellow dotted line will come back again. On a swing trade basis, a decisive break of Monday's low will signal a move to the first downside target, the lower edge of the wedge.

^ 04.03.02 08:05 #

The Swing Trader

First, let's update the last two swing trades still in action.

ETR/Entergy reaches Point B within the alloted time. The next upside target, as outlined in the Handbook, is a test of the 2/03 swing high of 60.20. From my experience, unless the trend from the next timeframe up is extremely strong, the probability of reaching the second target is lower than the odds of reaching Point B.

Since we cannot know in advance what it's going to do, traders who are happy with the trade can either take profits on target, or they can tighten up their stop losses at this point. My suggestion is that since ETR formed a doji (indecision) at a former swing high (potential resistance point), pulling up the stop loss to a place such as Monday's low is probably the sensible thing to do.

HAL/Haliburton continues to move up, and all stop losses should now be above the 2/17 swing high of 31.87.

^ 04.03.02 08:06 #

The Swing Trader

ADCT is a cheapie with volume. The surprise for this one would be to pop up for a day to test the gap overhead. Probably best for hit and run scalping for pennies off a 10-minute chart, or enter a swing trade on break of Monday's high on an intraday basis. The initial stop loss for a swing trade should be Monday's low.

One of the reasons we monitor the cheapies is that people tend to come back to the old names when the market gets frothy. Even though this is a weekly chart of BEAS, we should be on the lookout in case of a sudden upside breakout. The key number is last week's high at 14.29.

BRCD is another example. IF the broad market indices go to new highs and we get another round of buying panic, things like this could see a few good days of price gain and volume.

CL is probably the last thing on your mind for swing trading, but the fact is that the Dow and S&P are very strong indices, and at this late stage in the game, fund managers know that they cannot get fired for buying "real" stocks that pay dividends.

CSCO is set up similar to ADCT. It's been in a downtrend for a while now, but should it put in a higher swing low on test right here, there is a hit and run swing trade opportunity on the buy side, on break of Monday's inside day high. We would only take this trade home if CSCO can close above the 2/23 high of 23.90. Initial stop loss should be Monday's low. Remember, anytime we see inside bars and small range bars, think "whipsaw" and "tight stops".

Weekly ERTS chart looks like BEAS. Big triangle creeping toward the upper edge and potentially a breakout candidate. What we are looking for is a move to the upper edge, and then get on board a pattern on the daily chart, rather than to put a buy stop just above the upper edge and hope for the best. For all we know, it hits the upper edge, fakes and then moves back down towards the lower edge. There might be some options straddles that can used for potential breakouts, but I am not the expert in this area.

We gave up on the bull flag on GMST after it took too long, but it's a cheapie that is finding buyers. If you are trading intraday, watch the 10-minute chart for buy setups in case this upswing can get to the upside target of the 2/13 high of 7.84.

HET had been a breakout pick, and this is a prime example of a tiny fake break in one direction, and then off it goes in another direction. Another reason we don't use the edges of the pattern to enter buy or sell stops like most other traders.

That's it for today. I hope to be fully up to speed on this new format by tomorrow.

^ 04.03.02 08:50 #

Focus on RIMM

RIMM passed the century mark in yesterday's trading. As we take a look at the weekly chart, we find that the ADX is now at 77. No matter how you slice it, no matter how good it looks right now, this one is extremely vulnerable to an Extreme ADX Spike Reversal.

Looking at the monthly chart, we can peg resistance in the 104 area overhead. If you are invested or are trading RIMM, it's time to make sure that you have risk control procedures implemented.

^ 04.03.02 09:21 #

Un-Real Estate

If there was ever a time when a picture is worth a thousand words, this is it. The only other time I have ever seen grown-ups sleep in a lineup outside overnight was in 1980 -- one block down the street -- at the Bank of Nova Scotia Vancouver Main Branch, waiting to buy their ounce of gold at the top.

As you read the article, you can detect every element found in the Enthusiam phase of the Justin Mamis sentiment cycle. Of course, the buyers of gold became bagholders, but at least they paid for the shiny stuff with cash. I wonder how many people in this lineup were being mindful that it takes 25 YEARS to pay off the debt they will take on, not to mention the fact that the risk for them down the road is upward pressure on interest rates. We won't spoil their fun, I guess.

Going, going, gone!
New record set when 494 Yaletown condos snapped up in one day

VANCOUVER, February 29 (The Province) - Just when home buyers thought real -estate demand couldn't get any higher, the market decided to take another hike up Mount Everest.

Just ask Babak Shahbazi (Teresa: he is pictured above), who slept next to about 150 other prospective buyers on Georgia Street Friday night so he could be among the first to purchase a Yaletown Park condo.

"We weren't planning on coming last night," said the 36-year-old realtor, who was vying for a one-bedroom suite that won't even be completed until December 2006. "We were driving by and saw everyone lining up and then said, 'OK, we have to do it.'"

By 7 p.m. yesterday, 494 of the 608 units were sold, totalling $123 million in sales, said project marketer Bob Rennie, who had pizza delivered at midnight to those waiting on the street.

"This is crazy," said Rennie, known as Vancouver's "Condo King," who sold $274 million worth of property last year -- the North American record. "It's absolutely the most [I've sold in a day], maybe the most in the city."

Andy Paterson, 54, who was first in line on Friday at 1 p.m., was glowing 21 hours later when he finally bought a two-bedroom suite, which were priced between $269,900 and $399,900.

"It's just that I've seen property go up in Europe and people seem to think it's not going to get any higher here but it's going to," said the longshoreman, who immigrated from Britain in 1971.

The situation in the Interior is similar, said Mike Cadieux of Prudential Kelowna Properties.

"We don't really have adequate supply for the number of buyers that are out there. Inventory is low in all the neighbourhoods and, of course, the buyers are out there because the cost of money is really cheap," he said. "It's getting stupid out there, prices are going up because of it."

Dale Quist, also of Prudential Kelowna Properties, said property near Big White is being snapped up by people from around the globe.

"It's extremely active up there," he said. "We have a shortage of listings and, of course, that's forcing the prices up."

And with new mortgage rules to come into effect tomorrow, demand is expected to surge even more. Canada Mortgage and Housing Corp. is now allowing buyers to source the five-per-cent downpayment from credit cards, lines of credit or personal loans rather than their savings.

"It will free up an enormous amount of first-time buyers", said Sheila Francis of Re/Max. "The pressure is really on the market . . . People are just waiting for new listings to come up but we've got very few listings."

Mortgage broker Debbie Twitchell said the change is expected to benefit those who have a steady income but can't accumulate a downpayment quickly because their money is tied up in paying rent. While low interest rates have been tempting prospective buyers (the Bank of Canada is expected to cut rates again this week), high demand has also been making bidding wars common practice.

"Last year, easily 50 per cent of [my clients] just fizzled out, they just gave up," said Maggie Chandler of Chandler Realty Ltd. "They couldn't handle what they had to do to be successful so they just stepped out and said 'Well, I'll wait until things settle down.' But unfortunately when things settle down, the prices are going to be way higher."

Many buyers are wondering if the prices will go down soon, but Ward McAllister, president of the Urban Development Institute, predicts demand will keep rising because of resumed confidence in the economy, a growing population and a lack of supply.

"You look at all those cranes and condos being built and they're predominantly pre-sold," he said.

For demand to equal supply, there needs to be a six-month standing inventory. "But right now, there's less than two weeks of inventory," said Ward.

^ 04.03.02 09:58 #

Active Trader Transcript

Real time forum log.
Click on the title above to expand this document.

^ 04.03.02 16:16 #

Economic Data

ICSC-UBS Store Sales 0.0%

(Econoday.com) - Retailer sales were unchanged in the week ended Feb. 28 compared with the prior week, but year-on-year sales were up a sharp 7.9 percent, according to the International Council of Shopping Centers/UBS report. The ICSC-UBS seasonally adjusted index stands at 438.1, well above the average January level of 428.

Redbook +1.2%

(Econoday.com) - Retailer sales rose a sharp 1.2 percent in February compared to January and were up a strong 5.3 percent compared to February 2003, according to Redbook. Year-on-year sales in the Feb. 28 week rose 5.8 percent. The report said February turned out to be a success for retailers, helped in part by milder weather and heavy spring promotions.

Bank of Canada -0.25%

(Econoday.com) - The Bank of Canada once again lowered its key interest rate by 25 basis points. The Bank's policy making interest rate is now 2.25 percent. Inflation is not a problem with the core inflation rate at 1.5 percent and employment continues to grow. But other sectors of the export driven economy are being impacted by the strong Canadian dollar against the U.S. dollar.

In its statement, the Bank said that "Information received since the Bank's last interest rate announcement has been broadly consistent with the economic outlook presented in the January Monetary Policy Report Update. As expected, core and total CPI inflation in January moved significantly below the 2 percent inflation target. While external demand has been slightly stronger and final domestic demand in Canada slightly weaker than expected, the Bank's outlook remains, on balance, unchanged.

In this context, today's decision to provide some additional monetary stimulus was taken to support aggregate demand and to return inflation to the target by the end of 2005. The Bank will monitor closely the evolution of external and domestic demand and the pressures on inflation, as the economy adjusts to global changes."

Challenger Job-cuts Report 77,250

(Econoday.com) - Challenger reported 77,250 job cut announcements for the month of February, a 34.3 percent drop from January levels and a 44.1 percent drop from February a year ago. Challenger job-cut announcements need to be viewed cautiously since the data are not adjusted for seasonal variation. Layoff announcements did decline in February for the past three years. Nonetheless, the February 2004 levels are at their lowest in six months, suggesting that perhaps labor market conditions are beginning to improve.

4-Week Bill Treasury Rate 0.960%

(Econoday.com) - An unusually large offering size hurt results in Tuesday's 4-week auction. The bid-to-cover ratio for the giant $22 billion auction was a very weak 1.61 vs. 2.50 in last week's $19 billion auction. The high rate was 0.960 percent, a sharp 2-1/2 basis points above last week and the highest rate this year.

Motor Vehicle Sales 7.6M Light Trucks 5.4M Cars

(Econoday.com) - Domestic cars were sold at a 5.4 million unit rate in February, up 3.8 percent from January's 5.2 million unit selling pace and in line with expectations. Automakers posted healthy gains across the board in February relative to January. Among the majors, Ford and Chrysler posted declined from year ago levels, but most of the other car manufacturers increased their selling pace.

Light trucks were sold at a 7.6 million unit rate in February, down 2.6 percent from January's 7.8 million unit selling pace, and significantly lower than predicted by economists. All the major manufacturers posted healthy gains from the previous month and most were also higher than a year ago. But the reduced selling rate for light trucks is likely disappointing to manufacturers since profit margins are higher for light trucks and SUVs. All in all, the February selling pace was exactly the same as January with a less profitable mix (more cars, less trucks).

^ 04.03.02 17:28 #

Volume Leaders

These are the top 50 NASDAQ and NYSE volume leaders. We will review this list overnight along with the stocks on the usual watchlist to see if there are any swing trade opportunities for tomorrow. We hope to add the results from our own SwingScanner starting tomorrow.

ADCT

AMAT

AMCC

AWE

BIOM

BRCD

CNXT

CORV

CPN

CSCO

DELL

ELN

EMC

FON

GLW

GMST

INTC

JDSU

JNJ

JNPR

LOOK

LVLT

MAMA

MOT

MSFT

NXTL

ORCL

PCS

PFE

SBC

SCON

SEPR

SIRI

SNDK

SUNW

TSM

TWX

TXN

TYC

WMT

WYE

XOM

YHOO

^ 04.03.02 17:33 #

The Day Ahead

Wednesday, March 3, 2004

7:00AM MBA Purchase Applications
9:00AM Chicago Fderal Reserve Bank President Michael Moskow addresses the Milwaukee Small Business and Investment Development Conference.
10:00AM ISM Non-Manufacturing Survey
2:00PM Beige Book
4:30PM U.S. Treasury Secretary John Snow speaks at a moot court event at the George Washington University School of Law, in Washington.

For earnings highlights, please see tomorrow's WSJ Earnings Calendar.

^ 04.03.02 17:43 #

Stock Index Strategy

Nothing new to report since yesterday in terms of analysis. We're basically waiting to see some price action to confirm or disprove the presence of sellers near the recent swing highs. What was interesting was the spike in volume today, particularly on the SPY. Intraday, the $SPX failed on test of yesterday's high and closed poorly, and in the next post, you can see that the $NDX did even worse.

Given that we are close to some sort of $VIX Reversal sell signal on the daily chart, we have to be mindful that this may have been it, and if sellers come out, we will have to get aggressive on a push to the downside, particularly at the "neckline" below.

On a swing trade basis, traders are going to be looking for breakout conditions on the $SPX after today's inside day, marked by the yellow bar. Bullish traders will attempt to go long on break of Tuesday's high while bearish traders will attempt to go short on break of Tuesday's low. Again, we first watch for whipsaw, as we are inside a big congestion pattern. Fingers crossed that we can finally get a breakout.

^ 04.03.02 17:53 #

Stock Index Strategy

Yesterday, we noted for both the $NDX and $SOX, resistance overhead was in the form of the 20-day EMA, the 50-day MA and the "downtrend" line. Intraday, the NASDAQ futures flirted above Monday's high for a big before breaking down, and this set up a big reversal day on the daily chart. This sort of price action tells us that there are willing sellers out there, and it is going to take a big push from some catalyst to get it moving on the upside.

If nothing comes to save the day, the path of least resistance is probably downward at this point. We note that volume was up today, just like the SPY and DIA.

^ 04.03.02 18:05 #

Forex Strategy

Well, that's why we call it the "stealth" move, one bar that sets up the breakout. As discussed yesterday, the move was bound to come, and there are always these small stealthy spots where we can attempt to capture a decent swing trade.

It was the best day the Dollar has had in a long time, and while traders were enjoying their rewards, the media speculated about the "cause", because the masses were left standing, asking the age old question, "What happened?"

There are no swing setups in any of the six currency pairs today. After the big expanded range bars on the EURUSD and USDCHF, I might play a setup on the 60-minute chart in case of immediate continuation.

^ 04.03.02 18:08 #

The Sector Investor

Tomorrow will be the first installation of The Sector Investor. Since we featured un-real estate today in our commentary, naturally we should start at -- what else -- the PHLX Housing Sector and some of the component stocks.

Have a good and safe evening from all of us at TrendVue.com.

^ 04.03.02 18:11 #

Tuesday, March 2, 2004Issue Contents:

Monthly Archives

Tuesday, March 2, 2004
Issue Contents: