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This is Part 1 of your complimentary subscription to The Daily edited by
Chief Market Analyst Jon Johnson. Enjoy!
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5/13/03 Investment House Daily
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Investment House Daily Subscribers:

MARKET ALERTS:
Target hit alerts issued Tuesday: VSTA
Buy alerts issued: FLSH; SFNT
Trailing stop alerts: None issued
Stop alerts: None issued

To subscribe to the Daily alert service you can sign up at the following
link:
http://www.investmenthouse.com/alertdly.htm

SUMMARY:
- Some higher volume churn crops up again.
- Trade gap widens on continued spike in energy prices.
- Internals remain positive, leaders still in good shape.
- Subscriber Questions

Old issues rise up along with analyst valuation concerns.

Coordinated car bomb attacks on US interests in Saudi Arabia and analyst
valuation downgrades set the market tone Tuesday. Terrorism is a
continued threat that will be hard to completely eradicate, and the
bombings were a reminder that enemies of our way of life remain and
continue to plot against us. Merrill Lynch was out again with more
valuation downgrades, picking on the semiconductor sector in general and
several stocks in particular.

On top of that the market had bounced from the breakout test, putting in
two solid gains. After such a strong move the negative news turned the
market sluggish. The indexes managed to hold their support and rally
slightly in the last hour, but volume did increase on the NYSE and Nasdaq,
showing some churning in the major indexes after a solid bounce higher.
This was the first true distribution session on Nasdaq (higher volume
selling), but it was more of a high volume churn (rapid turnover of
shares) than dumping. Churning can be a precursor to heavier
distribution, but with the good internals, up/down volume ratio, and
leader performance, this action did not raise a lot of red flags. The
Nasdaq has churned on higher volume twice in the past two weeks (but did
not close lower) and has continued its move. The action has us on alert
and watching leaders more carefully, but it was not a disaster by itself.

THE ECONOMY

The trade deficit rose, the tax cut size is still a question mark, and
retail earnings were both better and worse. On top of that a new consumer
confidence poll showed a third week of backsliding after the war. A lot
of undercurrents Tuesday, but still the same story: some hopeful signs
overshadowed by continued overall cloudy weather.

The trade deficit is something of a little known concern. It measures the
amount of dollars flowing into the US versus out of the US. The March
spike in oil prices helped push this report to the second highest on
record. There are many competing problems with a large trade gap.

It pressures the currency, thus pushing the dollar lower. The reason is
concern about a trade gap that gets too wide. Historically that has been
at about 5% of GDP. That level has been a trigger point in the past for
further and sharper currency declines as concerns about the ability to
service the debt cause liquidation of investments in the country sporting
the large gap. That is the big deflationary argument championed by those
fearing a big trade gap. Take out that spike in oil prices, however, and
the gap was not the hand-wringing disaster some make it out to be.

At the same time there are some positives. The trade gap cheapens US
goods to the rest of the world, a benefit to US manufacturers. As the
dollar falls that ultimately boosts the US exports and thus trims the
trade gap that pressures the dollar lower. It is a circular relationship
that causes different results depending upon what stage in the process you
are in. Right now it is still in the downward pressure stage. The
benefit of a lower dollar on exports is a limited positive, however, as
the results are not that dramatic for an economy that is 70% service
oriented. Further, despite how we hate the slow US economy, the rest of
the world is weaker. Even without the increased oil spike, the trade gap
was still strong. The US consumer is still hungry for foreign goods;
despite the flagging confidence, US consumers still outspend their
counterparts.

THE MARKET

The market was going to start lower with the lower futures given the
bombings and analyst downgrades, not to mention the two strong upside
sessions. As we indicated in the pre-market alert, it looked as if the
action would be sluggish in the morning and the key would be a rally
later. The market did show some of the same positive character exhibited
in the rally. It rallied up before hitting support, putting in a much
better show in the late morning than anticipated. It could not hold that
move, but after a retest of the session lows it managed a late bump
higher. Decent price action though not stellar as the last rally attempt
fell short of turning the indexes positive.

It was a near miss as the major indexes closed down 0.5% or less (Nasdaq,
SP400, SP500 all closed down 0.1%) as the late bounce turned up short. As
noted, the volume indicates some high turnover in stocks. That is not a
sell signal, but it does underscore some indecision as there were as many
sellers as buyers after the buyers were clearly in control Friday and
Monday.

The internals were interesting. Nasdaq A/D was positive. Nasdaq up to
down volume was positive. Even on the NYSE the A/D line was basically
flat as the indexes finished lower. The selling was not widespread.
Indeed, given the fact that they held up well in the face of the Saudi
bombings and valuation downgrades is a good indication on top of the solid
internals.

Market Sentiment

VIX: 22.03; +0.61
VXN: 32.84; +0.26

Put/Call Ratio (CBOE): 0.67; -0.09

Nasdaq

Showed its first distribution session in the rally, but it was rather
mild. Still, after the strong run it puts us on alert that there may be
some pullback here after the breakout, test, and then rally up from that
test.

Stats: -1.72 points (-0.11%) to close at 1539.68
Volume: 1.856B (+4.26%). Volume was stronger and remained above average.
It was higher on this churn session than on the two rally days. That is
not the best indication of continued accumulation, but it was hardly a
clear cut case of institutions deciding to lighten up on stocks.

Up Volume: 1.118B (-343M)
Down Volume: 721M (+421M). Up volume managed to outpace down volume even
on a churning down session.

A/D and Hi/Lo: Advancers led 1.09 to 1. Advancing issues still were in
the lead. It was not such a dramatic downside session.
Previous Session: Advancers led 1.75 to 1

New Highs: 189 (-17)
New Lows: 6 (0)

The Chart: http://www.investmenthouse.com/cd/$compq.html

Started lower, rallied over the Tuesday close to hit 1548.59 on the high.
That is right at the lower portion of the range of potential resistance we
have noted (1550 to 1560, then 1570 to 1578 from the June 2002 high and
the May 2002 low). The turn back from that level on rising, above average
volume is a caution flag. If the market cannot recover Wednesday and is
selling on some stronger volume we will look at closing some more option
positions as well as other stocks that are showing rising volatility.

S&P 500/NYSE

Stalled out at the Monday high, fading back slightly on rising, average
volume.

Stats: -2.81 points (-0.3%) to close at 942.3
NYSE Volume: 1.385B (+1.95%). Volume edged up to average as the large
caps churned after the strong move up off of the breakout test.

Up Volume: 664M (-496M)
Down Volume: 717M (+513M). Very close action, mirroring the trade in the
index.

A/D and Hi/Lo: Decliners led 1.02 to 1. Very mild A/D line, a further
indication of light selling pressure.
Previous Session: Advancers led 2.33 to 1

New Highs: 206 (-84)
New Lows: 7 (+3)

The Chart: http://www.investmenthouse.com/cd/$spx.html

The large caps were unable to build on the Tuesday move, hitting 947.51 on
the intraday high, just over the Monday high, and then falling back on
some rising, average volume. It is close to that 954 December intraday
high that marks the next resistance. With the higher volume churn the
index might have made its move toward that level and needs some
consolidation time. Clearly there were not a lot of buyers ready to step
in and propel the index higher, at least to the close, when it again tried
to take out 947. The action is still solid, but sluggish given the world
events. Wednesday will give us a better picture.

DJ30:

The blue chips opened lower and never turned positive, unable to crack
8750. Volume fell well off pace on the selling, the Dow now showing some
better price/volume action even as the other indexes showed some churning;
kind of a role reversal. The blue chips are more or less following the
other indexes, and we look for the 10 day MVA (8580) to offer support.

Stats: -47.48 points (-0.54%) to close at 8679.25
Volume: 1.385B (+1.95%)

The Chart: http://www.investmenthouse.com/cd/$indu.html

WEDNESDAY

Retail sales are out before the open, and the reports from same store
sales are mixed as they have been for the past few months. Retail sales,
however, include more than just same store sales; it is the whole spectrum
and that means those high energy prices from April are still going to be
in the figure. Even with those, the numbers are expected to fall
significantly. That gives some room for an upside surprise that could
deliver some upside impetus to trade.

Even if a positive surprise occurs, we doubt it would drive the market
really hard. Chip stocks were struggling all session, and the AMAT
numbers after the close did not help as chip stocks sagged a bit more. It
will be important to see how SOX performs Wednesday after breaking over
the December and May highs Monday. If it can hold near 350 that would be
very positive. There are many doubters about the chips right now, and if
it can hold in the 340 to 350 range and maintain the breakout, that would
be very significant.

The churn Tuesday has us ready to take it easy going into Wednesday, being
as patient as possible and letting stocks and the indexes show us their
intentions at this point. There were still some good upside breakouts
Tuesday as the market pulled back, and we will continue to look to those
if the market shows resilience after an early test lower on the AMAT news.
The market is trying to continue the move, but it is also starting to
struggle just a bit as the higher volume churn showed. We will be patient
and let it work through this spot of uncertainty given the realization
that yes terrorism is still out there.

There is enough talk about the market having come too far to fast, and it
may need to work through that for another session or more. We did not see
anything in the leaders Tuesday that alarmed us about the market action,
and on many plays we have the luxury of a large gain already built into
the stock. Right now it is important to let the plays come to us and show
us the good volume couple with a good move.

Support and Resistance

Nasdaq: Closed at 1539.68
Resistance: Some potential resistance at 1550 to 1560. 1570 to 1578
(June 2002 closing low, May 2002 high).
Support: The December intraday high (1522). The 10 day MVA at 1507. The
August 2001/January 2002 down trendline (1497). The 18 day MVA (1482).
The January high (1467). The March and August highs (1426 and 1427). The
exponential 50 day MVA (1426).

S&P 500: Closed at 942.30
Resistance: 954 (December intraday high). 965 (August 2002 peak).
Support: 935 (November and January peaks). The 10 day MVA (929.54). The
18 day MVA (919) and price tops at 911 (July). September 2000/March 2002
down trendline (905). March and April highs (896 and 905). The 50 day
MVA (894) and the 200 day MVA (882).

Dow: Closed at 8679.25
Resistance: November and January highs (8800, 8870). December high
(9044).
Support: 8522 and 8520, the March and April twin peaks. The 10 day MVA
(8579). The 18 day MVA (8510). The 200 day MVA (8326).

Economic Calendar

5-13-03
Trade Balance, May (8:30): -$43.5 actual, -$41.0B expected, -$40.4B April.

5-14-03
Retail sales, April (8:30): 0.4% expected, 2.1% March
Retail ex Autos (8:30): 0.2% expected, 1.2% March.

5-15-03
New York PMI, May (8:00): -11.5 expected, -20.4 April
Initial jobless claims (8:30): 430K expected, 425K prior.
PPI, April (8:30): -0.5% expected, 1.5% March.
Core PPI (8:30): 0.0% exected, 0.7% prior.
Business inventories, March (8:30): 0.2% expected, 0.6% February
Industrial production, April (9:15): -0.3% expected, -0.5% March
Capacity utilization, April (9:15): 74.6% expected, 74.8% March.
Philly Fed, May (12:00): -6.0 expected, -8.8 prior.

5-16-03
Housing starts, April (8:30): 1.750M expected, 1.780M March
Building permits, April (8:30): 1.700M expected, 1.692M March
CPI, April (8:30): -0.1% expected, 0.3% March
Core CPI (8:30): 0.1% expected, 0.0% March
Michigan sentiment preliminary, May (9:45): 87.5 expected, 86.0 April.

SEMINARS ON CD

http://www.stockseminarsonline.com

This is Jon Johnson's own site devoted exclusively to seminars designed to
teach you what you need to know about the stock market and stock movement
and how to take advantage of those moves without incurring the usual high
costs of travel and related expenses usually associated with seminars.

SUBSCRIBER QUESTIONS

Q: Hi! I have a question. I am new at investing at stocks. I have an
account with Ameritrade. I have AXL stock. Last week the stock was up to
over $25.00 a share. I wanted to put a stop at $24.50, below the previous
day low. Ameritrade would not let me place a stop at $24.50. Ameritrade
said I had to place a stop below the bid price which was $19.00 a share.
I don't understand this. The stock was worth over $25.00 a share, but I
can't sell it at that price. I would have to sell it at $19.00 a share.
I also don't understand the asking price. The asking price was $98.00 a
share. If I wanted to buy more stock, why can't I buy it at $25.00 a
share instead of $98.00 a share?

A: For those not familiar with AXL, here is some background. The stock
broke over its 200 day MVA three weeks back and did rally to over $25. It
has since pulled back, but it is holding the 10 day MVA right at 25. It
was not trading for $19 or $98 per share.

No doubt you were attempting to put in your stop order after or before the
regular session. AXL is a NYSE stock, and what happens with these stocks
after hours is that the specialist sets bogus bid and ask prices. For
example, at this writing the stock is showing a bid of 0.01 and an ask of
99.72 while the stock closed at 24.95. Ameritrade does not allow you to
base your stop loss on the last sale but on the bid currently listed.

There is a way around this but it involves using stop limits and buy
limits versus a stop loss or buy stop. The limit says you are willing to
sell at the price specified but not lower. In other words, if you set a
stop limit and the stock gaps down below that price, you won't get stopped
out on the first trade. You would only sell if the stock moves through
your stop and trades at that price. This may or may not be what you want,
but it would allow you to set the stop if Ameritrade allows stop limits
still.

As for upside buys, you could set a buy limit at the price you want to buy
the stock at. We do this quite a bit on stocks we want to buy and are
confident about the volume. Say we see a stock moving on solid volume
early and heading toward the breakout but we don't want to have to watch
the screen all day. We set the buy stop and go about our business. If
the stock hits the buy point and is traded, we are executed.

by www.investmenthouse.com