Spring Break! - Daytraders Hit the Beach?
It's either that, or the OIN seminar currently happening here in Denver kept the high volume traders away from their PC's! How else do we explain the glaring lack of volume? All kidding aside, only 885 mln shares traded hands today on the NYSE, while the NASDAQ registered its lowest volume so far this year trading just 1.38 bln shares. What are we to make of this? Probably just a slow day thanks in small part to the OPEC meeting taking place in Vienna, Austria.
In case you are wondering, there's no resolution yet among OPEC members as to how much of a production increase is in store. However, there is plenty of conflict as Saudi Arabia and Kuwait have agreed in principle to raise production by 1.5 - 1.7 mln barrels per day while Iran, who has older equipment and higher production costs, wants no increases at all. According to analysts, Iran is already cheating, thus any "above board" production hurts Iran in the wallet. Anyway, it's already a foregone conclusion that there will be production increases, agreed to or not, above board or not. But don't look for reduced prices at the gas pump anytime soon even though oil prices seek to stabilize in the $25 range over the next few months. Suppose oil stocks suffered? Only slightly. 'Nuff said.
Microsoft (MSFT -7.63, 104.06) was today's early casualty on news that settlement talks broke down when the DOJ rejected MSFT's latest proposal. It seems that turning over source code to vendors for the purpose of imbedding applications into the operating system isn't enough for the DOJ. That helped the Dow remain in the red along with help from the oil, financial, and drug stocks. Helping to balance things out, IBM (+6.25, 126.88) and Hewlett Packard (HWP +3.81, 146.19) made nice advances, the former on an upgrade from Neutral to Outperform by Morgan Stanley Dean Witter before this mornings open. Not only that but IBM and Quest (QWST +5.50, 52.00) agreed to spend $2.5 bln on each other in a zero cost exchange valued at $5 bln. - neat trick; here's how it works. Q receives $2.5 bln from IBM for 25% of the space in Q's 28 data centers serviced by Q, while IBM receives $2.5 bln from Q to set up and manage the centers - net cost, $0.
Morgan Stanley took the opposite view on DLJ (-9.56, 56.75), downgrading it to Neutral from Outperform. While DLJ was a casualty, the whole sector joined in the profit-taking from last month's runup, dragging down American Express (AXP -5.13, 150.50), Goldman Sachs (GS -9.31, 112), and Morgan Stanley (MWD -5.81, 90), plus most of the on-line brokers too. Yes, even NITE, our current call play, lost $2.06 to close at $57, though volume remained low. It just goes to show that even strong stocks can't escape the gravity of a down sector. "These things have been white-hot; they're just hosing them down a little bit, cooling them off," noted a J.P. Morgan analyst.
In the "where'd he come from?" department, some of you probably noticed Alan Greenspan live from Capitol Hill. He wasn't on any schedule of economic events and his presence probably caused the mid-afternoon dip. Fortunately, the live testimony dealt with issues of aging related to Social Security and Medicare (which probably explains some weakness in the drug stocks). Though he stuck strictly to the script, the uncertainty of the ensuing Q&A always causes jitters in the market. He did however note that he saw "no significant threat" of inflation (yet) from oil pricing pressures. In the end, it was thankfully a non-event.
MSFT, OPEC, Greenspan, and financials should have really moved the market, but all proved to be inconsequential in today's market.
For all the headlines, the Dow lost 86 points to close at 11,025 on low volume of 885 mln shares. In short, the Dow remained flat and directionless for most of the day, registering 13 stocks up for every 17 down. 88 new highs bested 49 new lows, but down volume exceeded up volume by 38%. While we can't read much from today's action, it's safe to say that a breather from a 1400 point run in 9 trading days is acceptable. Roughly 11,200 is providing current overhead resistance. We saw a few bounces today around 11,000, which provides current support, but doesn't appear very strong. Tomorrow will be telling.
NASDAQ, buoyed by (what else) tech stocks traded in just a 76- point range. We can't swear it's a record, but it probably ranks in the top 5 narrowest of trading ranges this year. The volume on the other hand set a new record low of the year at only 1.38 bln shares. 23 decliners beat out every 19 advancers. However 119 new highs beat out 66 new lows and up volume by 27%. For the lack of volume, support remained at 4950. 4900 is the next level of support. Like the Dow, after nearly a 600 point run in the last five days, a breather is due, and we can't be disappointed in today's lack of action. We don't think it portends a reversal, but we wouldn't be surprised to see another day or two of weakness before picking up again. Remember Jim's prediction of NASDAQ 6000 by April 15? The market has its work cut out for itself.
On the positive side, 5000 is acting as overhead resistance while the lows have been getting higher over the last 13 days. Anybody recognize that pattern? It's an ascending pennant, which usually portends a breakout to the upside. But that won't happen on wimpy volume. If it does, start looking for the exit because that will be a clue that bulls are running out of steam. On the other hand, we are moving into the heart of earnings season (April). Last week's liquidity injection of $13 bln into mutual funds won't hurt either along with the end-of-the-month window dressing. Those three are pretty powerful together and may provide the horsepower to send the NASDAQ in search of new highs.
There you have it. Economic news will be mostly noise this week with consumer confidence figures tomorrow, new home sales on Wednesday, and GDP and initial job claims on Thursday. Since we are at a critical moment on both the Dow and NASDAQ, you may want to hold off placing any trades until you see a clear direction. You can always make a profit in an up or down market, but sideways will eat into your trading capital. Remember that old Wall Street saying: Never short a dull market. Wait for a direction. Be selective in your plays, and remember to sell too soon.