Monday, March 25, 2013

Cyprus Worries Off Again on Friday

MARKET SUMMARY

- On again, off again Cyprus worries off again on Friday.
- Word of agreement on Cyprus spurs added upside late in the session and in the after hours trade. But there is no agreement.
- Consumer stocks rising, industrial stocks guiding lower: who wins?
- Texas wants its gold at home.
- Stocks held where needed to and bounced, but don't like NASDAQ or the small and midcaps failing to lead when the US consumer is supposedly stronger.

Okay so stocks were down Thursday after the Wednesday upside move off the 1-2-3 pullback. That should be enough right? No face plant, no broken indices (though some stocks look broken), so just walk off the pain and get back in the game. That is exactly what they did, indeed from very early in the pre-market.

Stocks bounced right back from the Thursday sharp drop, again using the 20 day EMA as support. Volume fell 1% on NYSE and 9% on NASD as the large cap indices led the bounce while the small and midcaps lagged. Not a banner day internally, but there have been worse on an upside move. Hey, in a funny money, liquidity lifts all boats market you don't need volume, at least in terms of shares, just large volumes of printed cash to make the markets go round.

SP500 11.09, 0.72%
NASD 22.40, 0.70%
DJ30 90.54, 0.63%
SP400 0.33%
RUTX 0.25%
SOX 1.14%

OTHER MARKETS

Dollar weaker: 1.2996 versus 1.2906. Down just modestly on the day but still trending up the 10 day EMA and approaching the July highs. A serious upside move continues as money that was moving out of Europe ahead of Cyprus (I guess NO ONE in Europe knew that Cyprus was going to happen, right?) has pushed the dollar in an impressive 2 month run.

Bonds rallied, somewhat strange: 1.91% versus 1.93%. Why the hell should US bonds rally if the US economy is so strong? Oh, I guess those industrial company warnings and weak guidance along with the European implosion is pushing money into US treasuries. Good thing because no one here seems to want them right now.

Oil rallied: 93.71, +1.26. As on again off again as the Cyprus issue as it works laterally at the 50 day EMA, still trying to make the decision to break higher toward 100 or break lower toward 85.

Gold sold: 1606.10, -7.30. Struggled on the session but up on the week. Darn well should be with Cyprus ready to implode and then the rest of Europe. Hell, TEXAS wants its gold back. A bill has been filed in the Texas legislature to bring it home from New York due to a severe lack of trust. Possibly also a secession movement. If you hear about the Texas government buying 1.6B rounds of ammunition you know something is up. Of course, as with Homeland Security, the story will simply be denied.


Cyprus still an issue, but not that much for US markets.

During the session there was darn little news. Cyprus updates on the half hour as usual, rumors of a resolution at hand helped jump the market up late and indeed after hours. But, alas, they were just rumors as no solution is yet ironed out and the Monday 'deadline' set by the ECB still looms. Indeed, one proposed plan has Cyprus still confiscating bank accounts, in some cases by 70% as it looks at taking 25% of what it considers the 'larger' accounts, i.e. those above the insured level. Nice.

That was 'hanging' over the market but US stocks certainly didn't seem to mind. Indeed stocks, as on Wednesday, ignored foreign issues and looked to the domestic arena, loving earnings from NKE, TIF, and even DRI, a stock that gave the most lackluster report but didn't bother this market as it was bid higher over 1%.

The action definitely skewed toward the large caps. Don't like that as much but hard to complain about the advance. Well, okay. I will complain some. No small/midcap participation of any meaning. Weak volume. Weak breadth (1.5:1 NASD, 1.7:1 NASD). Several areas were weak as the breadth indicates. The move just was not as strong as they have been in terms of participation.

Now that does not mean the advance cannot continue. At this point almost nothing has stopped the rise as even what many are calling Europe's Lehmann Brothers (Cyprus) hit but only caused a modest ripple in the US, i.e. a very normal test of the last move higher. As noted above, there is lots of money pushing into US stocks from here in the US and from overseas thanks to Cyprus . . . and the general crappiness that is the European Union economic condition.


Consumer stocks earnings versus industrial stocks warnings.

What appeared to drive this market Friday and indeed Wednesday was earnings. You had to look at them just right with some selective cognitive recognition to see how things were that much better, at least enough to drive stocks higher. It was as if investors were using some good earnings (earnings that would not have been viewed positive just a month or two back) as an affirmation of a decision already made to invest.

How so? This past week FDX, ARG, CAT and other industrials gave terrible outlooks on top of what many large cap industrial stocks said in their Q1 earnings. With these comments that March is looking at bad or worse than February, that lowered guidance appears to be coming true.

On the other hand there are a few consumer stocks have reported decent results and are heralded as great or reasons to buy. But are they? NKE missed on revenues. DRI was in line and reported weak sales. Nonetheless it was up Friday. In last earnings season these reports would have been used by investors to wipe their feet. Now with the new money hitting the market, these rather serious issues are viewed as just temporary setbacks surely to be overcome. Hmmm.

Recall back when the industrials were reporting good results (compared to the prior few years) on the export economy? Easy to do when you get major stimulus and tax breaks AND the rest of the world was not sliding toward the abyss. At the time the pundits on the financial stations crowed about how strong the US was as evidenced by these companies selling goods overseas, not here at home.

Now the industrial earnings look to be rolling over given the guidance and now the warnings they have as the actual numbers come in.

So you have consumer stocks reporting results viewed as strong right now but that would not have impressed many last earnings season. We believe that the driver is the perceived improvement in the housing market with some better pricing providing the consumer with some much needed confidence boosting.

Our worry is the consumer, currently buoyed by recovering home prices, rolls over as well as the big companies won't be spending either (FedEx cut its cap-ex by $300M) and that means any signs job creation was improving (and that is darn little really) will end. That would mean the current consumer led recovery the market loses that reason for rallying. These retail earnings as it is are not that strong; again, a month ago the revenue misses would have caused selloffs in the stocks.

Of course this is a worry right now and not reality. Stocks are rising as investors find whatever issues there are with the earnings, they are not enough to blunt the money flowing to the stock market from various sources eager to put money in the US and to take part in the market rally overall.

So on the day we took some gain on a few positions, both upside and downside. That is the way this market is as it shows some broad divergences in performance. Several possible buys played footsy with the buy points so we opted to wait and let them show they are serious about holding the move after the weekend.


TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: +22.4 points (+0.7%) to close at 3245
Volume: 1.645B (-0.9%)

Up Volume: 929.78M (+371.16M)
Down Volume: 712.5M (-417.5M)

A/D and Hi/Lo: Advancers led 1.46 to 1
Previous Session: Decliners led 2.16 to 1

New Highs: 122 (+22)
New Lows: 17 (+4)

S&P
Stats: +11.09 points (+0.72%) to close at 1556.89
NYSE Volume: 549M (-7.11%)

A/D and Hi/Lo: Advancers led 1.79 to 1
Previous Session: Decliners led 1.92 to 1

New Highs: 706 (+442)
New Lows: 464 (+438)


DJ30
Stats: +90.54 points (+0.63%) to close at 14512.03


THE CHARTS

SP500. The Wednesday bounce didn't last but neither did the Thursday selling. SP500 bounced off the 20 day EMA. The late February selloff was 4 sessions. This one is 5, not counting Friday if it is the start of the recovery.


NASDAQ. Up off the 20 day EMA as well though low volume here as well. Not nearly as strong as SP500 and others and NASDAQ is a worry heading into next week. Very choppy compared to the other indices and that is not good after a run upside.


DJ30. Very similar to SP500, just at the 10 day EMA versus the 20 day EMA.


SP400. Up off the 10 day EMA but lagging in terms of the move. Not convincing at all on the day, but the trend is still very much in place.


Russell 2000 small caps. Identical to SP400 and not instilling a lot of confidence.


SOX. Very volatile as NASDAQ. SOX is holding the lower up trendline so it is making a stand, but with NASDAQ questionable and the small and midcaps not bouncing with strength it is quite problematic.


SUMMARY: The Friday action was skewed toward the large cap NYSE stocks. The other indices were up but their gains were not convincing and some patterns are troubling, e.g. NASDAQ. Friday did not ensure the upside continues.


THE MARKET

SENTIMENT INDICATORS

VIX: 13.57; -0.42
VXN: 13.88; -0.36
VXO: 13.24; -0.72

Put/Call Ratio (CBOE): 0.92; +0.06

Bulls versus Bears

Mix in a bit of selling and the bulls fell back below 50. Bears were not so easily swayed, basically holding steady. Still elevated and closer to levels that are a bit frothy but stil off the highs on this move hit before the February selling.

Whatever was lower bears and raising bulls the prior week gave up for this week as the bulls surged and bears flopped. Not at extremes on the bulls but moving that was fast while the bears a very near an extreme and that is not good for the market. So in terms of some psychological indicators the market is getting toppy.



Bulls: 47.4% versus 50.00% versus 44.2% versus 46.3% versus 48.4% versus 52.6% versus 54.7% versus 54.3% versus 53.2% versus 51.1% versus 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6. Over the September 2012 level. Last time the market hit that level SP500 corrected 9% over the next two months. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%. Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

Big week of data starts Tuesday: Durables, New Home sales, Confidence, GDP Q4 final, Chicago PMI, Personal Income and Spending. On top of that, Monday is the deadline imposed by the EU for Cyprus to come up with a new plan. Now the conventional wisdom suggests Cyprus takes a big chunk of citizen property in the form of bank deposits and savings and uses those as the sacrificial offering to Germany and the other northern EU countries.

The not so conventional wisdom (I guess that would be the unconventional wisdom) we think might happen is an Iceland where basically Cyprus decides to be the next (after Iceland) European or close to European nation to go its own way versus be forever entombed as a lower class country in the EU. That would mean it would cut contracts, slash and burn. That means citizens and businesses in Cyprus would still bear the brunt of onerous cuts and reforms. BUT, and this is the thing that makes it alluring, it would be its own country again and have the hope of growth and prosperity down the road. If it goes the EU route it pays the same or more and is enslaved. Think of it as tax credits: you have to pay the money either in taxes or you can buy something for yourself that you need with that money. You still have to spend it but at least you get something you needs. That is a powerful incentive and some in Cyprus are talking about it. Will they have the willpower and the ability to convince the masses?

While the US markets appeared to shake off the Cyprus issues late in the week, the NASDAQ pattern is not good and the small and midcaps are lagging. The trend is still in place so perhaps there is nothing to worry about. There are still good patterns in position to move higher if the money is there.

Ah yes, the money. Don't be fooled about recovery driving this. Yes there is some wealth effect from home prices firming and better economies in certain states. But overall there are problems with industrials and that is very worrisome. The consumer can drive things, but not if jobs don't at least hold steady. Jobs are what ultimately drives consumer actions. With weak guidance and lack of capital investment forecasts, if that turns to reality there won't be jobs growth.

So, it is up to the money staying and investors willing to put it to work. The US has been saved by the fact the rest of the world is so bad, and right now that certainly looks to be the continuing theme. That may right the patterns in NASDAQ and SOX and get the small caps and midcaps back in the game.

PROBLEM IS: WHY are the midcaps and small caps suddenly lagging the move IF the domestic economy is improving. They should be out in front leading. That remains very worrisome (along with restaurant numbers). The question is whether it trumps the money.

Thus far it has not and thus we continue to look at more upside. At the same time we look to some additional downside plays because of the issues and the simple fact that we have made some great money on our downside plays even as the market rallied. That shows not all is well everywhere but again, it has not kept the market from rising and we will see if it can continue to overcome issues with the aid of massive liquidity.

Support and resistance

NASDAQ: Closed at 3345.00

Resistance:
3261 is the recent March high
3304 is the upper channel line for the November 2012 to present uptrend
3321 from April 2000
3401 is the May 2000 closing low

Support:
3227 is the April 2000 intraday low
The 20 day EMA at 3221
3197 is the September 2012 post-bear market high
3171 is the October intraday high
3177 is the November 2012 up trendline
The 50 day EMA at 3176
3134 is the March 2012 post-bear market peak
The 2011 up trendline at 3134
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
3062 is the December 2012 prior peak
The 200 day SMA at 3044
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1556.89

Resistance:
1564 is the recent March peak.
1576 from October 2007, all-time high
1587 is the upper trendline in the channel

Support:
1556 from July 2007
The 20 day EMA at 1542
1539 from June 2007
1531 is the recent high
The November up trendline at 1518
The 50 day EMA at 1512
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
The 200 day SMA at 1430
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 14,512.03

Resistance:
14,715 is the upper channel line for the trend off the November low.
9.0% above its 200 day SMA, still leaving DJ30 room to run before it gets too top heavy on this run and has to test.

Support:
The 20 day EMA at 14,330
14,198 from the October 2007 high
14,149 is the February 2013 high
The 50 day EMA at 14,043
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
The November up trendline at 13,881
13,784 is the late February 2013 closing low
13,692 from 6-2007 peak
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
The 200 day SMA at 13,308
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012


Economic Calendar

March 26 - Tuesday
Durable Orders, February (8:30): 3.8% expected, -4.9% prior (revised from -5.2%)
Durable Goods -ex transports, February (8:30): -0.2% expected, 2.3% prior (revised from 1.9%)
Case-Shiller 20-city, January (9:00): 7.5% expected, 6.8% prior
Consumer Confidence, March (10:00): 66.9 expected, 69.0 prior
New Home Sales, February (10:00): 426K expected, 437K prior

March 27 - Wednesday
MBA Mortgage Index, 03/23 (7:00)
Pending Home Sales, February (10:00): 2.0% expected, 4.5% prior
Crude Inventories, 03/23 (10:30): -1.314M prior

March 28 - Thursday
Initial Claims, 03/23 (8:30): 338K expected, 336K prior
Continuing Claims, 03/16 (8:30): 3040K expected, 3053K prior
GDP - Third Estimate, Q4 (8:30): 0.3% expected, 0.1% prior
GDP Deflator - Third Estimate, Q4 (8:30): 0.9% expected, 0.9% prior
Chicago PMI, March (9:45): 56.5 expected, 56.8 prior
Natural Gas Inventor, 03/23 (10:30): -62 bcf prior

March 29 - Friday
Personal Income, February (8:30): 0.8% expected, -3.6% prior
Personal Spending, February (8:30): 0.6% expected, 0.2% prior
PCE Prices - Core February (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Final, March (9:55): 72.4 expected, 71.8 prior



By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Monday, March 18, 2013

No High Yet For SP500

MARKET SUMMARY

- The string is broken, no high yet for SP500. Pestilence surely to follow.
- Greenspan says no irrational exuberance. Time to get worried?
- Solid NY PMI, Solid Industrial Production and Capacity, but Michigan Sentiment fades and gets the blame.
- The pullback wasn't much of a pullback even with massive expiration volume.
- May get some better entries this week but saying the trend is over doesn't make it so.

Queue the locusts . . .

You know, last week there were locusts in Egypt and Israel for the first time in decades, rising out of Africa and swarming crops. Maybe that was a foreshadowing of Friday's loss in the stock market that broke the string of upside gains? Of course there is a bit of sarcasm there, but with so much attention on daily gains you would think the failure to make a new gain jeopardizes the rally itself.


The horror . . . the horror . . .

The calls for the rally's end have been daily and multitudinous. How long could it go on, how long could those wanting to get in and those who are short endure the move? Maybe they received a bit of a respite Friday as the stock market closed lower for the day. Certainly was not much of a break, however, as the losses were minimal.

SP500 -2.53, -0.16%
NASDAQ -9.86, -0.30%
DJ30 -25.03, -0.17%
SP400 -0.15%
RUTX -0.06%
SOX -1.66%

Ding Dong the streak had ended. Now surely there will be a pullback so everyone can enter and be happy. Ironic, isn't it? Everyone always wants the market to go up, but when it did this time it seemed no one was really happy about it. I read that most hedge funds have underperformed the SP500 this year, caught short literally I suppose, and thus the gnashing of teeth as the market continued moving higher and they had that sinking 'missing the bus' feeling.

But whether they get a modest pullback to use to enter or a deeper and sharper correction post-Friday is very wide open. Indeed it is wide open even if they will get any more pullback than the modest losses Friday showed. The losses were mild and again the small caps were market relative strength leaders. Despite the downside in the market overall, the small cap strength is a longer term positive and belies to a certain extent any notion of a big selloff coming.

Further, much of what we heard ignored some decidedly better economic data on the week. Jobless claims are still not great and are still questionable week to week, but last week's number was not notably misreported and the 365K/week average appears to have been broken. Friday showed some other solid reports as well as the New York PMI beat at 9.2 (6.5 expected); even though lower than the prior 10.0 reading, it is expanding. On top of that Industrial production rose 0.7% versus 0.4% expected (0.0% in January) while capacity jumped to 79.6% from 79.2%, topping expectations.

Who should be blamed for this loss?

No, no, the last report out on the day was the one everyone pointed to and blamed for the loss: Michigan Sentiment preliminary for March dropped to 71.8 when 77.6 was expected and recorded in February. Higher gasoline prices (Thursday's Retail Sales report showed half the gains in retail sales were thanks to higher gasoline prices), higher payroll and Obamacare taxes, and yet, the sequestration and the rather absurd claims made regarding its effect as well as the White House closing are what appear to have spearheaded the decline.

Surely locusts, famine, and plague will follow. Certainly the gloomier blogs were all over the sentiment number, suddenly giving it credence as an economic harbinger that they have never attributed to it before. Industrial production? Not that important. Capacity? No one even cares about that. You get the idea. It was somewhat grim.

But if the pundits are to blame sentiment for the market decline, then should you not blame the causes for that decline? And if you are going to find fault with the causes of the decline, are you not indicting the polices that led to the causes that led to the sentiment decline? Indeed, are you not then indicting the Administration and its policies that fanned higher gasoline prices, the taxes it demanded be increased, and its exaggeration of the sequestration's effects? I don't know about you, but I for one am not going to stand here while these pundits bad mouth the leaders of the United States of America.


Otter defends Delta House at the student court in 'Animal House.'

Of course that is absurd (in some respects; the blame DOES lie with our leaders and their policies), but it makes the point: sentiment is not to blame for the market fall. It was ripe and faded a bit. Not much of a fade at that.


OTHER MARKETS:

Dollar: 1.3053 versus 1.3008. Stronger overall US data but the dollar weakened and fell to close below the 10 day EMA for the first time this year. Not a major break, but a bit of a change in the steady trend higher.


Bonds: 1.99% versus 2.03% versus 2.02% versus 2.02% versus 2.06% versus 2.05% versus 2.00% versus 1.94% 10 year. Bonds rallied as if the economic data was bad on Friday. Still trending lower but a sharp bounce.


Oil: 93.45, +0.42. 93.03, +0.51. Cracked above the 50 day EMA but nothing definitive. Trying to work back toward 100 and the scale is tipped in that direction, but not decided just yet.


Gold: 1592.60, +1.90. Still bumping its head at the 20 day EMA, unable to move through.


TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: -9.86 points (-0.3%) to close at 3249.07
Volume: 2.174B (+32.56%)

Up Volume: 784.99M (-285.01M)
Down Volume: 1.57B (+1.005B)

A/D and Hi/Lo: Decliners led 1.2 to 1
Previous Session: Advancers led 2.02 to 1

New Highs: 226 (-20)
New Lows: 15 (+1)

S&P
Stats: -2.53 points (-0.16%) to close at 1560.7
NYSE Volume: 1.234B (+108.8%)

A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 2.13 to 1

New Highs: 514 (-127)
New Lows: 67 (-3)


DJ30
Stats: -25.03 points (-0.17%) to close at 14514.11

BREADTH: Back to flat as you would expect.

VOLUME: Huge volume as it appears the market saved it all up for expiration versus spacing it out during the week. The shorts were waiting until the last minute to see if they could get a better deal. They didn't.


THE CHARTS

SP500. So close to a new high, but was not happening Friday. Modest decline, still trending higher up the 10 day EMA and still room to the upside to the upper channel line. It has done this move before, e.g. in January and February. The big volume spike? Ignore the volume behind the curtain at least for Friday; all expiration as the rally continued and the shorts had to do something.


NASDAQ. Down but also easily holding the trend up the 10 day EMA. Still room to the upside of the channel. Some big names are acting as a drag but some techs are trying to push NASDAQ.


DJ30. Close to bumping the upper channel on Thursday then backed off to close modestly lower Friday. Nice run still in progress despite the horrific 0.17% loss.


SP400. So it took a day off? Still working steadily up the 10 day EMA.


Russell 2000 small caps: Virtually flat with a doji, easily holding the 10 day EMA and still with room to run. The small caps showed leadership to the upside last week as well as relative strength Friday. Good for the market and the economy.


SOX. Busted in the chops but there are still some chips that are looking very good despite the SOX and its domination by a few big names. Even with the 1.66% loss SOX is still trending higher in the middle of its channel.


SUMMARY: A bit of a loss that broke the upside string, but it was indeed just a bit of a loss. The indices are all trending higher though they are in the upper half or higher of their uptrend channels. DJ30 is close and the other large cap indices are closing in. The small and midcaps, however, have some catching up still to do, and they were providing the leadership later in the week so they may finish closing the gap this week. The market is due a test at some point, but based upon the action so far, it is not really showing it is ready to test. I suppose you could try and extrapolate from SOX; it does tend to lead downside, and thus you simply use good stops and don't try to buy everything in the market.


LEADERSHIP

Big names. A flip in this category. AAPL broke upside through its 20 day EMA while AMZN, GOOG struggle for a change.

Technology. A good week though soft Friday. STX, SWI, VSH look good and some more chips such as MLNX and ASML are set up well.

Energy. Some good moves and others setting up , e.g. CRR, DWSN, OII. Still like how MPO is setting up.

Drugs/Healthcare. A good week for many stocks such as CELG while others are setting up, e.g. AMGN, VRTX, SNSS.

If techs decide to start leading this market gets some serious upside going.



THE MARKET

SENTIMENT INDICATORS

VIX: 11.3; 0
VXN: 12.03; -0.3
VXO: 10.97; -0.28

Put/Call Ratio (CBOE): 0.85; +0.12

Bulls versus Bears

Whatever was lower bears and raising bulls the prior week gave up for this week as the bulls surged and bears flopped. Not at extremes on the bulls but moving that was fast while the bears a very near an extreme and that is not good for the market. So in terms of some psychological indicators the market is getting toppy.



Bulls: 50.00% versus 44.2% versus 46.3% versus 48.4% versus 52.6% versus 54.7% versus 54.3% versus 53.2% versus 51.1% versus 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6. Over the September 2012 level. Last time the market hit that level SP500 corrected 9% over the next two months. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%. Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

Lighter on the economic data this week but there are housing starts and existing home sales along with Philly Fed and . . . an FOMC rate decision. After the minutes from the last meeting, you can expect that Wednesday's statements will be closely scrutinized. If anything looks amiss the market is primed to give back ground in its channel.

Ahhh. There it is. I said it. When the market gives back ground here, it does so inside its channel. Look at the index charts: they are all nice steady trends higher. Any selling, unless it is an out and out gutting that drives straight downside, occurs in the context of those channels.

The question you have to know for yourself is whether you let positions or some positions to the upside remain if the market starts to fade further. The channel is not huge but it is big enough to get uncomfortable riding all positions on a test. Typically we keep some of the really strong patterns (as long as they hold up well) and get rid of some that were problematic or had performed but then stumbled. We can pick them up at the bottom of the channel if it holds.

Of course this is not a prediction the indices roll over this week. There are still many great setups out there and sectors that have new stocks on the move whether from energy or chips to healthcare to tech many stocks are still finding money pushed their way and are in accumulation patterns or are breaking higher even as some stocks test. That has been the strength of this move, and we will see if it continues and can keep pushing stocks higher and thus the indices to and through or along their upper channel lines.

If that does not happen we can enter some more downside with some DXD and others to play any channel fade. The irony of the past week is that we banked some very good downside gain even as the market continued upside.

Now if the coming week starts soft we will watch leaders and the emerging stocks and see what kind of entries they provide. If they do not set up then the market likely continues its test. A bit more softness for a day or two won't hurt, and as long as the patterns hold, that kind of dip can lead to some really good entry points as the trend continues. Just because some are jumping on Friday as some kind of tell as to the market's next move, all Friday was for now is a pause in a nice trend higher


Support and resistance

NASDAQ: Closed at 3249.07

Resistance:
3294 is the upper channel line for the November 2012 to present uptrend
3321 from April 2000
3401 is the May 2000 closing low

Support:
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high
The 50 day EMA at 3162
3156 is the November 2012 up trendline
3134 is the March 2012 post-bear market peak
The 2011 up trendline at 3132
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
3062 is the December 2012 prior peak
3042 from 5/2000 low and several other price points
The 200 day SMA at 3033
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1560.70

Resistance:
1576 from October 2007, all-time high
1580 is the upper trendline in the channel

Support:
1556 from July 2007
1539 from June 2007
1531 is the recent high
The November up trendline at 1509
The 50 day EMA at 1507
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
The 200 day SMA at 1424
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 14,539.14

Resistance:
14,610 is the upper channel line for the trend off the November low.
Now 9.7% above its 200 day SMA, still leaving DJ30 room to run before it gets too top heavy on this run and has to test.

Support:
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
The 50 day EMA at 13,948
13,784 is the late February 2013 closing low
13,692 from 6-2007 peak
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 200 day SMA at 13,254
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

March 15 - Friday
CPI, February (8:30): 0.7% actual versus 0.5% expected, 0.0% prior
Core CPI, February (8:30): 0.2% actual versus 0.2% expected, 0.3% prior
Empire Manufacturing, March (8:30): 9.2 actual versus 6.5 expected, 10.0 prior
Net Long-Term TIC Fl, January (9:00): $25.7B actual versus $64.2B prior
Industrial Production, February (9:15): 0.7% actual versus 0.4% expected, 0.0% prior (revised from -0.1%)
Capacity Utilization, February (9:15): 79.6% actual versus 79.4% expected, 79.2% prior (revised from 79.1%)
Michigan Sentiment, March (9:55): 71.8 actual versus 77.6 expected, 77.6 prior

March 18 - Monday
NAHB Housing Market , March (10:00): 48 expected, 46 prior

March 19 - Tuesday
Housing Starts, February (8:30): 910K expected, 890K prior
Building Permits, February (8:30): 924K expected, 904K prior (revised from 925K)

March 20 - Wednesday
MBA Mortgage Index, 03/16 (7:00): -4.7% prior
Crude Inventories, 03/16 (10:30): 2.624M prior
FOMC Rate Decision, March (24:30): 0.25% prior
FOMC Rate Decision, March (14:00): 0.25% expected, 0.25% prior

March 21 - Thursday
Initial Claims, 03/16 (8:30): 345K expected, 332K prior
Continuing Claims, 03/09 (8:30): 3065K expected, 3024K prior
FHFA Housing Price I, January (9:00): 0.6% prior
Existing Home Sales, February (10:00): 5.00M expected, 4.92M prior
Philadelphia Fed, March (10:00): -3.0 expected, -12.5 prior
Leading Indicators, February (10:00): 0.5% expected, 0.2% prior
Natural Gas Inventor, 03/16 (10:30): -145 BCF prior


By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Sunday, March 10, 2013

Stocks Try to Give Up Gains

MARKET SUMMARY

- New post-bear market highs all around (less SOX) after an iffy start.
- Stocks try to give up gains post-jobs report but even that dip is used to buy as the latecomers are diving in.
- Jobs report trounces expectations, but that doesn't make it great: more people leave the workforce (pushing that number to a record) than get jobs.
- Denying the facts?: pundits' excitement over market new highs has them slobbering over economic data that is worse than what was reported same time last year, and we know how 2012 went.
- Nine days into the rally, looking for some better entry points this coming week, but even without a test there are still some decent buys out there as liquidity rules.

Up again after trying to throw it away early in the day.

It was jobs Friday and jobs as well as the unemployment rate (7.7%) handily beat expectations. Good news to the headline readers, but the interesting aspect is that futures were up and up big from very early in the morning, hours before the jobs report. When the news came futures jumped then dropped, trading in a choppy fashion into the open but to be fair, holding some post jobs report gains.

Then the market opened, higher of course, and stocks plunged as the morning gains were lost. Poof. We expected some profit taking on a good number and a surge, but not from the opening bell.

It happened so fast, however, that it was out of the system before the crowd really got going. And yes, with the bond market selling off it is clear that retail investors left that building and are pushing and throwing elbows as they try to get through the stock market's doors.



By 10ET the selling ended and that early intraday dip was used as a buying opportunity. Talk about wanting to get into stocks.

Two reversal bars on the low and stocks were off to the upside, jumping back to the early morning futures highs, testing at lunch, and then sprinting to the close in the afternoon. Sellers did return . . . in the last ten minutes of trade, but didn't change the outcome. No harm, no foul.


No harm, no foul, eh Ted? ('Something About Mary')


SP500 6.92, 0.45%
NASDAQ 12.28, 0.38%
DJ30 67.58, 0.47%
SP400 0.87%
RUTX 0.85%
SOX 0.13%

Volume was trending up on NYSE, down on NASDAQ, identical to Thursday, but then NYSE volume faded and they were both down for the session. Breadth not bad, a bit better at 2:1 on both NYSE and NASDAQ.

With the bond market diving, it would seem the holdouts from the twice-burned last generation of retail investors that found refuge in the bond market for years have turned away from debt investing and are now committed to the stock chase. Four years late, but just in time to drive the market absurdly high before it tops.


OTHER MARKETS

Dollar: 1.3011 versus 1.3105 euro. Gained some ground on the euro as you would expect, really ramping in the dollar index, moving to a new rally high.


Bonds: 2.05% versus 2.00% versus 1.94% 10 year. Still in full submersion mode, gapping below the January/February lows. The former retail bond buyers are retail bond sellers. Flee, flee for your lives . . . !




Oil: 91.95, +0.39. Oil actually moved higher for the week, bouncing, sort of, off the 200 day SMA and the 61% Fibonacci retracement. Up but not impressive.


Gold: 1576.90, +1.80. Gold traded sharply lower pre-market, but interestingly gold recovered from its lows and showed a very tight doji, tapping just over the February selloff low. Still looks as if gold is ready to bounce.


THE NEWS

Jobs report gives those wanting it a warm feeling. Great for the stock market, but let's keep a reality check in terms of the economy.

Nonfarm Payrolls, February (8:30): 236K actual versus 165K expected, 119K prior (revised from 157K)

Nonfarm Private Payrolls, February (8:30): 246K actual versus 178K expected, 140K prior (revised from 166K)

Unemployment Rate, February (8:30): 7.7% actual versus 7.9% expected, 7.9% prior

Hourly Earnings, February (8:30): 0.2% actual versus 0.2% expected, 0.1% prior (revised from 0.2%)

Average Workweek, February (8:30): 34.5 actual versus 34.4 expected, 34.4 prior




Certainly looks like improvement . . .

Improvement from where is the question. Compared to Q4 and its GDP of 0.1% as of the second revision as well as the January revision of the non-farm numbers DOWN 38K, yes the number looks better. But are they worthy of the game-changing, economy saving praise heaped upon them Friday?

As they say in the old NFL commercial, you make the call.

The rate of jobs growth is at an 18 month low.

At this rate it will take until 2017 to reach pre-recession levels.

Labor force participation fell to 63.5%, the lowest since 1981. That was a deep recession. Here we are supposedly 4 years out from when the recovery started and jobs participation is at the lows of the 1981 deep recession?

89.3M people are not in the labor force, a record.

More people left the workforce than jobs created: 236K non-farm versus 296K moving out of the labor force.

Only 58.6% of US citizens are working versus 60.6% when President Obama took office versus the 20 year average of 63%.

Yet, even with so few working, there are four applicants for every job even with a record number of workforce dropouts.

Long-term unemployed rose 90,000 and up 1M since June 2009 when the recovery officially began.

The economy remains 3M jobs below where it was at the prior peak. In real terms, factoring in population growth the deficit is almost 10M.

January and February 2012 jobs created: 311K and 271K
January and February 2013 jobs created: 119K and 236K

A 'better' report with year over year data falling and all of the other issues in the report? Hate to be a downer, but spin is spin and reality is reality.


'Denying the Facts.' Good to see economic pundits are as loony as Senator McCain.

Rick Santelli put it well following the February jobs report amid the afterglow from the likes of Austan Goolsbee and Jared Bernstein: are we that far down in the hole that we can't normalize rates after this "great" jobs report? The answer is no we can't because yes we are.


A subdued Rick Santelli takes on the economic soothsayers.

The glowing reports about the February jobs report would make you think we have hit nirvana. There was talk that now the Fed's liquidity, juicing as some call it, is spilling over into the economy, and the jobs report is some proof of that. After the close Friday I even heard one analyst from Cabot saying that to not accept the jobs report and other economic reports of late as proof of recovery is to 'deny the facts.'

Whoa there oh respected and praiseworthy giants from the pundit class. Just what facts? As seen in the discussion of the jobs report, jobs to start 2013 are WORSE than the start of 2012.

ISM? January was lower than last January (53.10 versus 53.70). February posted a beat year/year, but the reads from early 2011 to the fall of that year easily trumped the current data. Heading in the wrong direction, not the right direct.

The same can be said for regional reports. New York PMI was -7.78 in January versus 12.12 in 2012. February turned positive to 10.04, but that was a far cry from the 18.31 from February 2012.

GDP growth is a mixed batch at best. 0.1% Q4 versus 4.1% Q4 2011.

So at the risk of being accused of living in denial, I will simply note that the vast majority of the recent data points classified as 'clearly showing recovery' are BELOW the levels hit at the same time 2012.

So we are guaranteed a recovery this time with subpar data points compared to year over year reads and with companies guiding lower for the current quarter and 2013? Yes it may look better given we are coming off a flat at best Q4 GDP, but that does not automatically chalk these gains up as guarantors of an economic recovery, boomlet, or whatever you want to call it.

What makes these numbers that are lower than the year over year numbers better this time? What dynamic has changed to elevate worse numbers to better numbers? The trend is AT BEST mixed. The trend since 2010 is lower as that year was the peak in the recovery. Is it merely time?


Play it Sam. Play 'As Time Goes By.' (Casablanca, one of the best of all time)

The Answer: the belief that weaker data is better data smacks of euphoria over the market coming to life in a big way as retail investors finally make their way to the stock market, clearly giving up bonds as bond yields spike. Many of these pundits likely don't even KNOW the data is worse because they never check, just shoot from the hip.

Indeed, the pundits appear almost amorously aroused by the stock market moves, and as is sometimes the case, they are not thinking with the right . . . well let's just say they are not thinking clearly. Lower data is not better data unless you are looking for continued free money in the form of Fed liquidity. Indeed in 2011 and 2012 worse data led to worse economic times. Seems simple. It may be different this time, but that is always a tough argument. The clearer explanation is getting too emotional over data that is better because things were so bad in Q4. They are failing the first part of Casey Kasem's motto: keep your feet on the ground.



TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: +12.28 points (+0.38%) to close at 3244.37
Volume: 1.596B (-3.86%)

Up Volume: 1.02B (-80M)
Down Volume: 543.16M (-20.18M)

A/D and Hi/Lo: Advancers led 2.11 to 1
Previous Session: Advancers led 1.53 to 1

New Highs: 258 (+66)
New Lows: 10 (-2)

S&P
Stats: +6.92 points (+0.45%) to close at 1551.18
NYSE Volume: 628M (-0.63%)

A/D and Hi/Lo: Advancers led 1.99 to 1
Previous Session: Advancers led 1.46 to 1

New Highs: 585 (+182)
New Lows: 55 (+17)


DJ30
Stats: +67.58 points (+0.47%) to close at 14397.07

BREADTH: Improved even more to 2:1 on both NYSE and NASDAQ. Good to see and of course aided by the small and midcaps putting in gains in excess of 0.8%.

VOLUME: Down on both NASDAQ and NYSE, considerably below average on NASDAQ. As noted before, they both got the volume when they needed, i.e. when they broke to new rally highs.


THE CHARTS

SP500. Nice break higher after two lateral sessions, still moving higher in the channel. Volume might be sliding, but the momentum is pushing SP500 to the top of the channel. The financials helped out the large caps this past week. Whatever works.


NASDAQ. Gapped upside to a new rally high and even filled the gap with that quick morning dip. Volume is weaker to end the week, falling below average Thursday and Friday. Weakening but not stopping NASDAQ. Now can it try for a new all-time high? Sure - - in another 1900 points. Just riding higher for now on the back of GOOG.


DJ30. Another day, another new high. This is the one whipping everyone into a froth as it moves higher on low, below average volume. Doesn't seem to matter; liquidity is driving it higher and higher.


SP400. Finally a new post-bear market high again, and of course that pushes the midcaps to an all-time high as well.


Russell 2000 small caps: Gapped to a new post-bear market high with more authority. The small caps have caught up.


SOX. Edging a bit higher but no new post-bear market high here, just following along. No issues, at least nothing that the others don't have, e.g. lower MACD.


SUMMARY: Nine days into the rally off the 50 day EMA, new post bear market highs for the indices we follow except SOX. MACD is lower on the new price highs but it is turning upside, trying to follow the indices. Money is pushing into the market and stocks are again proving they can rally farther than you would think. Not the best risk/reward at this point but the market is finding leadership from a lot of areas. It may want to come back and test some this coming week but already some leaders took a breather and are in position or darn close to break higher once more.


LEADERSHIP

Big names. GOOG is already in a nice lateral move and setting up for the next move. AMZN ditto. AAPL might even put in a move of its own. EBAY showed a doji with volume, perhaps ready for an ABCD move.

Financials. Mixed but really added to the SP500 gains for the week. C is at a new rally high with a strong move off the 50 day EMA. BAC was rejected from a new high but looks decent. MA looks a bit sloppy but V is still setting that handle for a new upside break.

Industrial machinery. DE still trying to set a move off the 50 day EMA. Decent but there are better patterns. CAT is still working at its 200 day SMA. Trying but not making the move with the rest of the market.

Semiconductors. KLAC still solid, BRKS in a flat consolidation. Others bounced on the week, e.g. XLNX, but could not take out the prior highs. Improved but not a big leader category.

Energy. Stepping up a bit more with HAL continuing higher off the 50 day in services. OII in the same group looks interesting as well. DO may try a 200 day SMA bounce in offshore drilling. NBL in the independents bounced off its 50 day EMA. Improved as a group.

Drugs/Healthcare. Still testing the recent moves and setting up again, e.g. SNSS, NKTR. ARAY may try to come off its 2 month selloff as MACD is rising. CELG is running higher yet again.

Retail. LULU looks ready to bounce a la DECK. PII appears ready to resume the upside in its channel.


THE MARKET

SENTIMENT INDICATORS

VIX: 12.59; -0.47
VXN: 13.72; -0.51
VXO: 11.62; -0.37

Put/Call Ratio (CBOE): 0.9; +0.07

Bulls versus Bears

The strange case of a market rise and yet lower and lower bullishness. After hitting a peak of 54.7% 5 weeks ago, bulls have faded with each gain in the market. The skepticism of the run that started over a month back was fueled by the late February sharp decline, and the recovery this past week has not changed animal spirits much. The bears were more sanguine, holding at 21.1% for the fourth out of five weeks. They appear uncertain about the move but not ratcheting up their worries. This is something of the old wall of worry, and that, in the world of sentiment and its inverse indicators, a good thing.




Bulls: 44.2% versus 46.3% versus 48.4% versus 52.6% versus 54.7% versus 54.3% versus 53.2% versus 51.1% versus 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6. Over the September 2012 level. Last time the market hit that level SP500 corrected 9% over the next two months. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%. Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.













MONDAY

The big news on the jobs report is out and it was widely perceived as very good news. It was, at least in terms of 2013 and Q4 2012, as the economy is recovering out of that sharp slowdown to end 2012. As for the macroeconomic picture, it is not that great as the numbers are lower year over year (not only in the jobs report) and more people dropped out of the labor pool than got jobs. High praise indeed.

The point is, some big news is out of the way. It was palatable to the market, even evoking some excitement. Earnings season, even though it just ended it seems, has a month before it gets into warnings season. The Fed is squarely on board even with 7.7% because Bernanke and company said it would take until 2015 to get unemployment down to 6%, apparently even if everyone leaves the workforce in wholesale numbers to take advantage of all of the benefits out there a person can get versus having to work for it.

Sad truth is, you can do darn little and have as much disposable income as someone working and making $69K per year and receiving no benefits. That backwards incentive is one of the problems as to why the economy is not recovering. If there is no incentive to work then a person is less likely to work, taking benefits that tap those who are working and creating. Ultimately, as Margaret Thatcher so famously put it, this kind of socialism fails because it runs out of other people's money. Too bad Greece, Spain, Italy and others, including the UK, did not listen.


I miss the iron lady. I am sure the UK does as well.

But I digress. There is news this coming week with retail sales, industrial production, and some regional PMI's (okay, just one), and there no doubt will be more from China and its efforts to withdraw liquidity and fight its own version of the currency war as well as from Europe and its ongoing hapless struggles. On a relative basis, however, it will be hen scratch compared to the recent calendar.

So the market is on its own. It has from here to QEternity despite the jobs report, it has a diving bond market shooing out the last retail investors, and it ahs those retail investors looking at the stock market as a bus that is leaving the station. Thus you get the kind of move that actually accelerated on Friday a bit as stocks continue to find money on each dip. As seen Friday, that can be an intraday dip given the surge off that initial gap and flop.

Seems everything is in gear for a continued move higher as even after 9 days of this particular rally leg there are still stocks setting up to lead the next move. That is the effect of money continuing to move into the market: leaders are already off to the races so money looks for other areas to move into. The funds try to buy slowly so you still see stocks that are not on the retail buyer's hot list setting up patterns. They break higher and a new wave helps push the market. As long as the money comes, wave after wave of different areas hit. Even now some 'names' everyone likes that led earlier are consolidating a bit for a new move even as the market rallied, e.g. GOOG and AMZN. Thus you see household names moving as well as the not so well known.

What could be more perfect right? I guess not much. But, that is when you need to be a little cautious as the late Casey Kasem used to say at the end of his American Top 40 broadcast: 'keep your feet on the ground but reach for the stars.' Not bad advice and he obviously followed it himself. Translated into market terms, realize this is a liquidity rush. The Fed has led it for years and finally the twice-burned generation of investors that swore off stocks after 2000 and 2008 have no choice: massive declines in bond values and associated losses force them out of that market to look for retirement funds. All that is making any return is . . . stocks. So here they come again, hoping the third time is the charm. Don't fear the reaper, right?


The Blue Oyster Cult classic

Well, they may have to dance with stocks again, but that doesn't mean don't have a healthy respect for this action. Corrections can still come, but as we noted just before that sharp February drop and as it started, these liquidity driven markets can sell sharply and on high volume just as happened in February, and then bounce right back. We cited Thanksgiving 1999 in that historic NASDAQ run to over 5000 as an example. This run may not have that kind of power, but the money is there and the response to the selling was the same: buy more please.

Dangerous but profitable run, holding the tiger by the tail. It will have its ups and downs, but what you do in this market is look at some good stocks that keep getting money thrown at them, e.g. GOOG, AMZN, PII as part of what you buy along with less well known stocks that have great patterns and can return you large percentage gains. These may be less well known stocks but they are not unknown dogs either. Money is seeking returns. Some will stay with the stodgy slow movers. Some will stay with the big names. A lot will seek what are considered 'undervalued' areas and push them up. We identify those buy looking at bases in stocks that didn't move as much as the early leaders or stocks that sold down to key support in trading ranges and are showing signs they want to move. These last groups can yield very larger returns, nicely augmenting the big name gains we make.

So, even after 9 days up you look for opportunity. Friday we were not chasing because there were stocks still setting up, some big names such as GOOG and AMZN, and they suggest there could be some anti-climatic action this coming week, a bit of softness before a new move. That of course allows them to finish setting up and then when they make the move, everything goes again. We just need to be ready with good plays in hand when that happens.


Support and resistance

NASDAQ: Closed at 3244.37

Resistance:
3280 is the upper channel line for the November 2012 to present uptrend
3321 from April 2000
3401 is the May 2000 closing low

Support:
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high
The 50 day EMA at 3143
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
The 2011 up trendline at 3121
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
3062 is the December 2012 prior peak
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
The 200 day SMA at 3022
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1551.18

Resistance:
1556 from July 2007
1576 from October 2007, all-time high

Support:
1539 from June 2007
1531 is the recent high
1499 from January 2008
The November up trendline at 1498
The 50 day EMA at 1496
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
The 200 day SMA at 1418
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 14,397.08

Resistance:
Now 9% above its 200 day SMA, still leaving DJ30 room to run before it gets too top heavy on this run and has to test.

Support:
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
The 50 day EMA at 13,806
13,692 from 6-2007 peak
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 200 day SMA at 13,195
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

March 5 - Tuesday
ISM Services, February (10:00): 56.0 actual versus 55.4 expected, 55.2 prior

March 6 - Wednesday
MBA Mortgage Index, 03/02 (7:00): 14.8% actual versus -3.8% prior
ADP Employment Change, February (8:15): 198K actual versus 150K expected, 215K prior (revised from 192K)
Factory Orders, January (10:00): -2.0% actual versus -2.2% expected, 1.3% prior (revised from 1.8%)
Crude Inventories, 03/02 (10:30): 3.833M actual versus 1.130M prior

March 7 - Thursday
Challenger Job Cuts, February (7:30): 7.0% actual versus -24.5% prior
Initial Claims, 03/02 (8:30): 340K actual versus 350K expected, 347K prior (revised from 344K)
Continuing Claims, 02/23 (8:30): 3094K actual versus 3100K expected, 3091K prior (revised from 3074K)
Trade Balance, January (8:30): -$44.4B actual versus -$43.0B expected, -$38.1B prior (revised from -$38.5B)
Productivity-Rev., Q4 (8:30): -1.9% actual versus -1.6% expected, -2.0% prior
Unit Labor Costs -Rev., Q4 (8:30): 4.6% actual versus 4.2% expected, 4.5% prior
Natural Gas Inventories, 03/02 (10:30): -146 bcf actual versus -171 bcf prior
Consumer Credit, January (15:00): $16.2B actual versus $12.8B expected, $15.1B prior (revised from $14.6B)

March 8 - Friday
Nonfarm Payrolls, February (8:30): 236K actual versus 165K expected, 119K prior (revised from 157K)
Nonfarm Private Payrolls, February (8:30): 246K actual versus 178K expected, 140K prior (revised from 166K)
Unemployment Rate, February (8:30): 7.7% actual versus 7.9% expected, 7.9% prior
Hourly Earnings, February (8:30): 0.2% actual versus 0.2% expected, 0.1% prior (revised from 0.2%)
Average Workweek, February (8:30): 34.5 actual versus 34.4 expected, 34.4 prior
Wholesale Inventories, January (10:00): 1.2% actual versus 0.2% expected, 0.1% prior (revised from -0.1%)

March 12 - Tuesday
Treasury Budget, February (14:00): -$205.0B expected, -$237.7B prior

March 13 - Wednesday
MBA Mortgage Index, 03/09 (7:00): 14.8% prior
Retail Sales, February (8:30): 0.5% expected, 0.1% prior
Retail Sales ex-auto, February (8:30): 0.5% expected, 0.2% prior
Export Prices ex-ag., February (8:30): 0.5% prior
Import Prices ex-oil, February (8:30): 0.2% prior
Business Inventories, January (10:00): 0.4% expected, 0.1% prior
Crude Inventories, 03/09 (10:30): 3.833M prior

March 14 - Thursday
Initial Claims, 03/09 (8:30): 350K expected, 340K prior
Continuing Claims, 03/02 (8:30): 3103K expected, 3094K prior
PPI, February (8:30): 0.7% expected, 0.2% prior
Core PPI, February (8:30): 0.2% expected, 0.2% prior
Current Account Balance, Q4 (8:30): -$112.3B expected, -$107.5B prior
Natural Gas Inventories, 03/09 (10:30): -146 bcf prior

March 15 - Friday
CPI, February (8:30): 0.5% expected, 0.0% prior
Core CPI, February (8:30): 0.2% expected, 0.3% prior
Empire Manufacturing, March (8:30): 6.5 expected, 10.0 prior
Net Long-Term TIC Flows, January (9:00): $64.2B prior
Industrial Production, February (9:15): 0.4% expected, -0.1% prior
Capacity Utilization, February (9:15): 79.4% expected, 79.1% prior
Michigan Sentiment, March (9:55): 77.8 expected, 77.6 prior



By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Sunday, March 03, 2013

Incomes Plunge on Tax Maneuvering

MARKET SUMMARY

- Low to high action returns as stocks over come a weak start but cannot push out of the recent range.
- Distribution on the week, but indices held support and recovered some ground.
- Incomes plunge on tax maneuvering, Construction Spending plunges.
- China and Europe remain weaker.
- As with 2011 and 2012, so many reasons for stocks to correct.
- Unlike 2011 and 2012, Bernanke has QE in place and says it is going to stay.
- Someday a major tumble will come as a result of all of this, but not now. For now, watch out for DC taking your retirement accounts 'for your own good.'

Stocks closed out the week and started the month with a mixed session as the midcaps and semiconductors lagged, but the large cap indices were able to sequester some gains. Note how smoothly I worked that into the opening line. Stocks held their ground on the week, despite the obvious desire to test, as Bernanke promised the money was here to stay. Stocks, similar to the sequester, may not feel the impact of the money in a week, two weeks, three weeks, or even a month. But it is there, working on the market.

SP500 3.52, 0.23%
NASD 9.55, 0.30%
DJ30 35.17, 0.25%
SP400 -0.41%
RUTX 0.40%
SOX -0.36%

After squandering a nice gain Thursday, stocks posted low to high action, overcoming a soft start.

Volume fell once again on the upside: -5% NASD, -8% NYSE

A/D: weak at 1.3:1 NASD, 1.2:1 NYSE.

NASDAQ
Stats: +9.55 points (+0.3%) to close at 3169.74
Volume: 1.848B (-4.99%)

Up Volume: 1.18B (+170M)
Down Volume: 676.75M (-318.16M)

A/D and Hi/Lo: Advancers led 1.33 to 1
Previous Session: Decliners led 1.05 to 1

New Highs: 108 (+3)
New Lows: 38 (+18)

S&P
Stats: +3.52 points (+0.23%) to close at 1518.2
NYSE Volume: 645M (-7.99%)

A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.02 to 1

New Highs: 221 (-70)
New Lows: 59 (+11)


DJ30
Stats: +35.17 points (+0.25%) to close at 14089.66

Did the session change anything? Not really. Technically the indices are still chopping around in a 1.5 week lateral move after peaking, suffering some sharp distribution, but managing to hold the trend (for most indices) on the week's lows. The session helped the patterns a bit, stretching the move laterally and trying to build a consolidation shelf to calm things down in an attempt to extend the move higher.

Despite the distribution on the week stocks held the line at support, and that is the key feature of the week.

GOOG provided the leadership for NASD, AAPL did not. AMZN is trying to set up. Homebuilders were blase, industrial machinery ditto. Retail had some bright spots from DECK and BBY, while M and some friends set up decently. Some biotechs and medical stocks rallied, e.g. SNSS, CELG, BABY, BMRN. This group suddenly revived.

Still some leadership holding and emerging in this market chop. Choppy action allows stocks to set up and there are those using the chop to do just that.

OTHER MARKETS
Dollar stronger yet again, topping a strong week: 1.3029 vs 1.3087 euro.

Bonds rallied yet again post-Bernanke: 1.85% vs 1.88% 10 year

Oil sold hard, falling to the 200 day EMA: 90.68, -1.37

Gold faded modestly: 1572.60, -5.50. Trying to bounce off a possible double bottom.


ECONOMIC DATA:

Personal income tanked: -3.6% vs -2.4% expected. Biggest decline in 20 years as citizens prepped for the tax hikes (end of Bush, new Obama) by early dividends, taking bonuses early, etc. That is what happens when taxes are going up.

ISM: 54.2 versus 52.4 exp, 53.1 prior. Not bad on top of Chicago.

Construction Spending, January: -2.1% vs 0.5% exp, 1.1% December.

Michigan Sentiment: 77.6 vs 76.3 exp.

China PMI fell to 50.1, the lowest in 5 months. China would rather have some slowing than the inflation it is feeling so it withdrew money from the system and is willing to live with it.

Europe showed more weak data even if the German and France PMI beat (50.3 and 43.9, respectively).


NEXT WEEK

To sum up the week there was more distribution and rather weak upside. With the insider selling (record 50:1 selling to buying ratio last month), the size of this run that equals the past two extended upside move, the market looks winded. That is the technical look.

Yet, the indices held where they needed, bounced (some), and are moving laterally as they try to set up a new upside move. Mr. Bernanke assured us all the QE was here to stay regardless of what others on the FOMC say. The economic data was warmer but also cold, enough, however, to keep the notion of slow, stumbling growth.

Obvious tensions. Unlike 2011 and 2012, there is no ending of one QE program and waiting for the start of another. Bernanke says the money is there and will be there. More than that he says the unemployment rate will not fall to 6% until 2015. He all but said the money was going to be there until that time . . . or at least for a long time.

Thus the market has money without question, unlike 2011 and 2012. It will of course still have to test, and it is doing that now. After this test/consolidation, it will want to put that money into the market and thus continue the gains.

So, we will look for the test to end and before it does there will be leaders setting up. Those are the ones to focus on because they are in the patterns, preparing for the next move. We keep tabs on them, know the play we want to make, and then when they move, make the play.

It may appear strange with so many issues, truly bad issues, facing the world and the US, we look for the market to rise. As stated earlier in the week, the bad time will come unless the US radically changes its course. History promises this and it is not different this time. Until that time is hit, however, markets can rise and rise on printed money just as they did in Rome and in other powers that became impoverished or disappeared by virtue of devaluation and debt. Keep your eyes on your retirement accounts; the government certainly is and more in DC are talking about how they can be 'used' to shore up US finances and 'guarantee protected' returns to the owners (or really former owners, right?).

Until then, we look for those stocks setting up as they are the next leaders to join those who were out in front on this move. Of course if the current leaders tests and set up new entries, who are we to not participate in that?


Support and resistance

NASDAQ: Closed at 3169.74

Resistance:
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
The 50 day EMA at 3125
3104-3112 from August and mid-October peaks.
The 2011 up trendline at 3109
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
3062 is the December 2012 prior peak
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
The 200 day SMA at 3013
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1518.20

Resistance:
1531 is the recent high
1539 from June 2007

Support:
1499 from January 2008
The November up trendline at 1491
The 50 day EMA at 1486
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
The 200 day SMA at 1412
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 14,089.66

Resistance:
14,149 is the February 2013 high
14,198 from the October 2007 high

Support:
14,022 from 7-07 peak
The 50 day EMA at 13,728
13,692 from 6-2007 peak
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 200 day SMA at 13,161
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

February 26 - Tuesday
Case-Shiller 20-city, December (9:00): 6.8% actual versus 6.5% expected, 5.4% prior (revised from 5.5%)
FHFA Housing Price Index, December (9:00): 0.6% actual versus 0.4% prior (revised from 0.6%)
New Home Sales, January (10:00): 437K actual versus 383K expected, 378K prior (revised from 369K)
Consumer Confidence, February (10:00): 69.0 actual versus 62.0 expected, 58.4 prior (revised from 58.6)

February 27 - Wednesday
MBA Mortgage Index, 02/23 (7:00): -1.7% prior
Durable Orders, January (8:30): -3.5% expected, 4.3% prior (revised from 4.6%)
Durable Goods -ex transports, January (8:30): 0.2% expected, 1.0% prior (revised from 1.3%)
Pending Home Sales, January (10:00): 1.0% expected, -4.3% prior
Crude Inventories, 02/23 (10:30): 4.143M prior

February 28 - Thursday
Initial Claims, 02/23 (8:30): 344K actual versus 360K expected, 366K prior (revised from 362K)
Continuing Claims, 02/16 (8:30): 3074K actual versus 3150K expected, 3165K prior (revised from 3148K)
GDP - Second Estimate, Q4 (8:30): 0.1% actual versus 0.5% expected, -0.1% prior
GDP Deflator - Second Est., Q4 (8:30): 0.9% actual versus 0.6% expected, 0.6% prior
Chicago PMI, February (9:45): 56.8 actual versus 54.0 expected, 55.6 prior
Natural Gas Inventories, 02/23 (10:30): -171 bcf actual versus -127 bcf prior

March 1 - Friday
Personal Income, January (8:30): -3.6% actual versus -2.4% expected, 2.6% prior
Personal Spending, January (8:30): 0.2% actual versus 0.2% expected, 0.1% prior (revised from 0.2%)
PCE Prices - Core, January (8:30): 0.1% actual versus 0.2% expected, 0.0% prior
Michigan Sentiment -Final, February (9:55): 77.6 actual versus 76.3 expected, 76.3 prior
ISM Index, February (10:00): 54.2 actual versus 52.4 expected, 53.1 prior
Construction Spending, January (10:00): -2.1% actual versus 0.5% expected, 1.1% prior (revised from 0.9%)
Auto Sales, February (14:00): 5.6M prior
Truck Sales, February (14:00): 6.5M prior

March 5 - Tuesday
ISM Services, February (10:00): 55.4 expected, 55.2 prior

March 6 - Wednesday
MBA Mortgage Index, 03/02 (7:00): -3.8% prior
ADP Employment Change, February (8:15): 150K expected, 192K prior
Factory Orders, January (10:00): -2.2% expected, 1.8% prior
Crude Inventories, 03/02 (10:30): 1.130M prior

March 7 - Thursday
Initial Claims, 03/02 (8:30): 350K expected, 344K prior
Continuing Claims, 02/23 (8:30): 3100K expected, 3074K prior
Trade Balance, January (8:30): -$43.0B expected, -$38.5B prior
Productivity-Rev., Q4 (8:30): -1.6% expected, -2.0% prior
Unit Labor Costs -Rev., Q4 (8:30): 4.2% expected, 4.5% prior
Natural Gas Inventories, 03/02 (10:30): -171 bcf prior
Consumer Credit, January (15:00): $12.8B expected, $14.6B prior

March 8 - Friday
Nonfarm Payrolls, February (8:30): 165K expected, 157K prior
Nonfarm Private Payrolls, February (8:30): 178K expected, 166K prior
Unemployment Rate, February (8:30): 7.9% expected, 7.9% prior
Hourly Earnings, February (8:30): 0.2% expected, 0.2% prior
Average Workweek, February (8:30): 34.4 expected, 34.4 prior
Wholesale Inventories, January (10:00): 0.2% expected, -0.1% prior



By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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