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ML Capital Waterhouse Newsletter
Saturday 05/27/00
Friday Big Picture: The Market Failed To Bounce Back In Green. Funds Continue
To Outflow From The Stock Market. NASDAQ Can't Stop the Bleeding.
Market Commentary:
DOW -24.68 10299.24
NASDAQ -0.24 3205.11
S&P 500 -3.50 1378.02
Friday is the last trading day before the long weekend in observance of
Memorial Day. However, it seem that many investors had took their holidays
earlier and make the market look quiet in trading volume and cold in sentiment.
NASDAQ fell 0.24 point for 3205.11 index points at the close, and make it as
the lowest market closed point of the year. Loser versus gainer ratio is 23:16
in NASDAQ. Meanwhile, DOW slipped 24.68 points for 10299.24 index points. Loser
versus gainer ratio is 15:14. Overall, DOW loses 327.61 points in past five day
trading session.
In NASDAQ, Cisco (CSCO) gave up 1/8 for $54 3/8 at the close. Dell Computer
(DELL) slipped 2 1/8 for $41 5/8. Oracle (ORCL) fell 1/16 for $66 3/8.
Meanwhile, Intel (INTC) gained 2 1/2 for $117 11/16.
In DOW, Alcoa (AA) was the biggest seller. AA slipped 2 7/8 for $57 5/16.
Citigroup (C) slipped 7/8 for $57 11/16 while J.P. Morgan (JPM) gained 1 5/16
for $125 11/16. Goldman Sachs (GS) seem to have a tough day on Friday after
Merrill Lynch commented that GS might not meet the good earnings as the Street
forecast on Thursday. At the close, GS fell 3 1/8 for $69 7/8.
Agilent Technologies (A) will be included in S&P 500 index watch list,
substituting Nacco Industries (NC). Agilent slipped 3 points for $66. Sanmina
(SANM) also will be included in S&P 500 watch list, substituting Warner-Lambert
(WLA). SANM gained 3/4 for $57 3/16. WLA had been acquired by Pfizer (PFE). WLA
slipped 9/16 for $123 11/16.
Some economic reports released on Friday. U.S. orders for durable goods fell
6.4% in April, weaker than the Street estimate. However, personal spending
increased 0.4% and incomes increased 0.7% in April.
There are numbers of important economic reports due to released next week:
Tuesday: May consumer confidence
Wednesday: April new home sales
Friday: May employment report, one of the closely watch economic indicator
Increase in market interest rate continues to be the market's main issue and
bother the investors. Investors continue to watch more, and buy less. Many
technical researches had shown that the current market is in oversold
condition. So, when will this market recover from the oversold condition? One
of the indicator for that will the increase of trading volume of those 'elite'
or leading stocks, such Cisco (CSCO), Oracle (ORCL), Qualcom (QCOM), Rambus
(RMBS) and Juniphase (JDSU).
Looking back at this week trading especially the market momentum and trading
volume, we only have one word to describe the market: Weak. It seems that
investors are still under the shadow of Bear. In past five days trading, only
May 24 (Wednesday) when we witnessed three major indexes in green, in other
days, three indexes continued to fell or in red territory especially near the
market close. It showed that investors are afraid of holding their stocks
overnight, as they thought that the market had become more unpredictable. This
week, we witnessed the year's lowest point level for NASDAQ on May 23
(Tuesday). In past week's newsletter, we mentioned that 3300 level is very
important for NASDAQ. Without any exciting news or great earning reports that
can stimulate the market, NASDAQ can't defense its 3300 support level in May
23, and fell as low as 3164.55 point on that day.
Looking at the chart, we have a rebound near the close on Friday before the
long weekend. On Friday, about 3.00p.m., NASDAQ had traded near 3160 level
which is near intraday low, but then, it able to bounce back nicely to 3200
level at the close at 4p.m., and slipped only 0.24 points compared to
Thursday's trading. Meanwhile, about 3.00p.m., DOW was traded on intraday's low
at 10250 level, and bounce back to as high as 103020 level near the close. So,
does these bounce back before the long weekend mean something to us? First of
all, the technology-heavy NASDAQ is still down nearly 5.5% in this week
trading. The volume is light, only about 1 billion shares changed hand on
Friday. Looking at the way market reacts right now, it seems that investors
have chosen to stay at sideline, and have high fears on inflation. It makes the
market look so quiet if we take out the unwanted noises such as monopoly issue
by Microsoft and recent market interest rate hike. The big players are still
haven't start their 'shopping' yet. The monetary flows into the market are
still in red. According to statistic, in past week trading, a total of 7
billions Dollar continue to flow out from U.S. stock market. This mean more
people are leaving the market than entering the market right now. All these are
the main causes behind the market tumble.
Although the market is in red territory for the long weekend, we have to thank
God that give us a long weekend, so that investors can rest well and rethink on
what had happen to the market recently. Investors, especially the big players
will definitely doing some great deal of research and analysis in the long
weekend. The market has to know Fed's next move on market interest rate,
another hike or the hike is over. Right now, the market don't know the answer,
and seems that the market do not want to guess the answer this time. Therefore,
the sell-off activities continued to take place in the market. June is coming.
The Fed will meet again at the end of June, and investors will again close
watched Fed's decision on market interest rate. Only when the market has the
clear signal from the Fed, the sky will then look clear and market sentiment
will be bullish again. Meanwhile, investors especially individual investors had
lost their beloved bull, it take time to for them to build up the confidence
and optimistic level again. And that is not easy, especially individual
investors that been hit hard by recent margin calls.
Market continues to move in volatile. Trading volume continue to be light.
Investors who want to make the move should stay in cautious. All the
experience that we gained from our previous trading especially in recent months
will give us lots of guidance and hints. Let's wish for and grab good trading
opportunities in next quarter.
Good luck in your trade!
ML Capital Waterhouse Newsletter Editor
Stock Picks:
No picks for Tuesday, as numerous economic data due to released. Keep the cash.
But, we will put INSP, CTXS, KANA and EBAY in our watch list. We might play
them when the market direction is clear. Advanced traders can play these stocks
using their own entry and exit signal.
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Redistribution in any form is strictly prohibited.
Disclaimer: The newsletter is an information service only, and does not come
with a warranty of any kind, should you choose to interpret is as investment
advice. The information provided herein is not to be construed as an offer to
buy or sell securities of any kind. The newsletter picks are not to be
considered a recommendation of any stock. It is entirely possible that we may
at times buy, sell, or hold any of the securities covered on this newsletter.
Trading and investing can be a very dangerous venture for there may be a very
high degree of risk involved. Past results are not indicative of future
returns. Investors should always consult a qualified professional and conduct
their own research before investing.
