No one in their right mind would sell stocks just because the NASDAQ Composite (COMPX) 1,960 -1% traded 2,000. Would they?
I sure has heck wouldn't have thought such a trade would have triggered an intra-day reversal that saw the NASDAQ Composite (COMPX) kiss the 2,000 level with a session high trade of 2,000.92, eventually see nearly a 40-point reversal take place in the matter of 3 hours and 20 minutes. But that's exactly what happened today.
I feel somewhat depressed, as I didn't see it coming, and intra- day reversal that took place just after the NASDAQ Composite (COMPX) traded 2,000, now sets the stage for a decline back to the WEEKLY/MONTHLY pivots, but view WEEKLY S1s and the formidable support levels.
WEEKLY/MONTHLY Pivot Matrix - $COMPX, $NYA.X, $TRAN
I've never placed the NASDAQ Composite ($COMPX), NYSE Composite ($NYA.X) 6,142.72 +0.05%, or the Dow Transportation Average ($TRAN) 2,939.51 +0.1% in a pivot analysis matrix, and perhaps I wish I had. I'd love to try and track every major index/sector in the matrix in each night's wrap, but time constraints simply don't allow. However, using the basic formula from a prior Ask the Analyst column on January 19, 2003 http://www.OptionInvestor.com/ask/ask_011903_1.asp I, and most likely you the trader/investor would have appreciated some observation that the NASDAQ Comp's WEEKLY R2, where the WEEKLY R2 can often be the upper-end of a weekly range and mark a point for institutional selling to provide liquidity to market participants, was also very close to the 2,000 level, where we could have been alert to some resistance.
One reason I wanted to also add the Dow Transportation Average ($TRAN) to a WEEKLY/MONTHLY matrix, is that in early November we saw the $TRAN see an intra-day test of a psychologically round 3,000 level on November 7th, and then trade back eventually see the TRAN trade back to as low as 2,837.42 by November 21 (10 trading sessions later). While the above table of WEEKLY/MONTHLY pivots is for current WEEK of trade and the month of December, I did go back and check levels for the TRAN for the week of November 3-7. That week, when the TRAN tested 3,000, its WEEKLY R2 was 3,008.54 and MONTHLY R1 was 3,011.24, so it would appear the PSYCHOLOGY was at play. However, the pullback low of 2,837.42 found technical support at a rising 50-day SMA, a MONTHLY Pivot of 2,743.81 and base of an upward trending regression channel.
As such, a focus of tonight's wrap will be the MONTHLY Pivots, and 50-day SMA's as levels of pullback support. Where investment theory that Transports will often lead a market move will also have us following up on the TRAN chart shown in prior wraps, where I feel the 50-day SMA and correlative WEEKLY S1 of 2,864 become key levels of intermediate-term support for the $TRAN.
In today's 01:00 PM EST intra-day update I posted the follow chart of the NASDAQ Composite (COMPX), where this chart was captured right at the 01:00 PM EST strike. I showed the chart with a conventional retracement overlaid from the early January 2002 relative high of 2,098.99 and early October 2002 low of 1,108.50.
NASDAQ Composite Chart - Weekly Intervals
Based on conventional retracement, I do feel a December/January "Santa Claus" rally is still at hand, with the major test being that the COMPX show support at 1,909.71. I'll quickly note that a decline from 2,000 to 1,909 would represent a rather modest 4.5% decline.
Here's a quick look at the NASDAQ Composite (COMPX), but this time with WEEKLY and MONTHLY Pivot retracement overlaid, where here too we may seem some correlation this week with 1,909, in the WEEKLY retracement.
NASDAQ Composite ($COMPX) Chart - Daily Intervals
Let me first say that I am NOT as convinced that institutional computers would be trading pivot levels in the NASDAQ Composite, but what the above chart does do is get our minds in a similar perspective as the SPX and NDX, where these baskets of stocks (SPX/NDX) will be bought and sold by institutional computers and greatly influence price direction.
In today's futures monitor, both Jim Brown and Keene Little (other analysts may have said something similar, but I saw Keene's message per one of Jim's earlier notes) commented at around 12:00 that NH/NL breadth was rather weak considering the major indices making new highs. This may have been one of the more telling comments that bullish leadership just wasn't what it should be. I quickly posted our NH/NL breadth measurements taken each day.
What I've also done in the above chart is post some various dates and NH/NL breadth for the NASDAQ Composite. While I don't chart/tally the daily results until the close, at the very top we can wee how Monday (453:10) was quite strong and matched a similar 11/07/03 (452:13) NH/NL breadth reading. However, yesterday's NH/NL breadth (411:10) tapered off a bit, and I'm impressed that Jim and Keene (maybe others) noticed some suspicious lack of bullish leadership mid-way through the session.
While these HIGH marks (in BLUE) give some relative high trade benchmarks to the NASDAQ Composite, note in RED the recent two relative low marks I've made for 10/24/03 and 11/21/03. While these are single day observations, where it took the "weakest" NH/NL breadth, I will want to track the very short-term 5-day average ratio of breadth in coming sessions, which I will want to compare to the recent little consolidation low from 11/18/03 to 11/21/03, where the 5-day ratio on 11/21/03 was 85.7%. This may be helpful should at some point we see the COMPX or QQQ/NDX for that matter, consolidate a low around the 1,925-1,930 zone of support.
Since we're on the subject of market internals, the very broad NASDAQ Composite Bullish % ($BPCOMPQ) saw a net loss of 0.01%, or roughly 3 stock to point and figure sell signals in today's trade. This very broad indicator of market internals is still "bull confirmed" at 72.58%. This bullish % indicator reached a high of 77.41% back on September 19, 2003, when the NASDAQ Composite was trading.... Hmmmm... 1,909.
Now I'm thinking... BE ALERT for SIMILAR TRADE to that found JUST AFTER 09/19/03. We might look for a continuation lower TOMORROW to the WEEKLY/MONTHLY Pivot, then a BOUNCE back on Intel's mid- quarter update to about COMPX 1,980.
But here is where I think the Transports then come into play.
Dow Transportation Average (TRAN) - Daily Intervals
MACD on the daily interval chart just crossed above its Signal today and for that to remain bullish, I could see how the TRAN really needs to hold above its 21-day SMA and the 2,925 level in our retracement. This could be tough, but a very good test for strength near-term as Stochastics are overbought (just like the major indices) and in the past have seen the TRAN take a breather. The BIG question is how much of a breather.
It is my thinking that the TRAN can not fall below its recent relative lows of 2,838, without the TRAN as a sector signaling more meaningful weakness as this would then have the TRAN making a lower high, but more importantly, a lower low.
Don't think there aren't some transportation related stock in the NASDAQ. Knight Transport (NASDAQ:KNGT) $24.00 +1.95% has traded back from its September highs of $28.00 and in mid-November slipped below its 200-day SMA of $24.22, where the 200-day SMA is currently rising at $24.47, but finds the 50-day SMA providing resistance in recent weeks and currently trends lower at $25.09.
While KNGT is not a component of the TRAN, ALEX, JBHT, NWAC, ROAD, USFC and YELL are.
Dow Industrials (INDU) Chart - Daily Intervals
A lot of bears were growling in the bear's den, I mean the futures monitor, once the INDU fell back below the 9,900 level. While a bull isn't necessarily laughing at the close, I still think the first sign of softening would be a decline back below 9,832. Still, it was General Motors (NYSE:GM) $45.54 +5.2% and Merch (NYSE:MRK) $43.63 +3.56% doing the bulk of today's work for bulls. Procter & Gamble (NYSE:PG) $96.81 -0.12% didn't come close to the psychological $100.00 level.
S&P 500 Index (SPX.X) Chart - Daily Intervals
I was more focused on the SPX today and noting how the futures were finding steady resistance at the 1,073.30 level that I was for NASDAQ Composite 2000.00. There was a flurry of computer buy programs today, which considering the number of buy programs on the 5-minute time interval, just didn't have much impact on the SPX itself. What the steady resistance in the futures has me thinking is there was some BIG hedging taking place, where futures were being sold against stock bought.
This evening on CNBC, I heard James Cramer mentioning that some of his contacts said there were some institutional hedges being initiated. This can create some near-term resistance, but will give importance to 1,051.20 as a more significant level of support.
NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals
The QQQ really shows some "leading weakness" as it relates to the WEEKLY Pivot levels, and perhaps the lack of "bullish leadership" as it is the only major index to not have been able to take out its early November highs. I would be looking for a bullish entry on the QQQ as outlined in the chart ahead of the Intel mid- quarter update. Other index traders SPX/OEX/INDU will want to monitor the currently weaker QQQ for support at its WEEKLY/MONTLY levels first, and if QQQ breaks below, then SPX/OEX/INDU traders begin to plan for tests of WEEKLY/MONTHLY levels.
I will post the Pivot Matrix with DAILY Levels in tonight's Market Monitor and in tomorrow morning's 09:00 Update.