Monday, June 23, 2014

Indices Hold Gains for the Week

MARKET SUMMARY

- Stocks mull FOMC further, close with modest expiration gains.
- Indices hold gains for the week.
- Leaders test some, rally some, still look solid.
- Plenty of stocks still in position to follow the market leaders that started the move.
- NASDAQ, RUTX still have to bury resistance.

Stocks started modestly higher, tried to give it up midday pretty much as expected, then started back upside into the close, notching a gain. Not much of a gain, no stamp of verification the upside is here to stay, but a decent low to high move after sellers took their shot in the morning.

SP500 3.39, 0.17%
NASDAQ 8.71, 0.20%
DJ30 25.62, 0.15%
SP400 0.25%
RUTX 0.37%
SOX 0.23%

Volume surged on expiration: +103% NYSE, +35% NASDAQ

A/D 1.3:1 NYSE, NASDAQ

I say sellers, but not many are getting in front of this move even now after 5 weeks to the upside.


CHARTS:

NASDAQ: Up on the session and on the week, but that puts NASDAQ facing its post-bear market high from March (4372), just four points away. That is always a concern. Good move to get there and are investors willing to keep pushing, forging into new highs? Good test before last week's run measured the high so it does have the strength to move through. This week will tell us more, but it does have some big names that can contribute to the upside when they start to rebound.

RUTX: A gain on the week and Friday as well, a move that took RUTX past its January peak. That puts RUTX about 7 points over that high; a very good initial break and improves the probabilities that it holds the move. Still can test before it continues much further; it is after all up six straight sessions.

SP400: Up off the 10 day EMA and a new high on the week. Still plenty of room inside the channel and working well. Not extended.

Sp500: More new highs on the week as SP500 rises, fades, rises fades. MACD breakout as well.


LEADERSHIP:

There was a lot of up and down in leaders and some big volume as well. This quad witching expiration had some volume behind it as positions were shuffled ahead of expiration and the new month. In the end the upside again prevailed with those modest gains.

Leaders were up and down, but we note several putting in nice tests such as STX, TRLA, VIPS, FB, CAVM, RVBD, YY. That opens the door wide for a rebound next week in these stocks. Leaders with nice, low volume, lazy market pullbacks. Very nice combination for gains, and we will be looking at some of these boys again as vehicles to the upside in a renewed rally.

There are also great stocks in position to follow those leaders' footsteps. CRTO, NMBL, LIVE, etc. We are looking at these as well.


OTHER MARKETS

Euro/Dollar: Dollar recovered a bit of ground, holding the 50 day EMA in this two week test of the last run.

1.3600 versus 1.3603 versus 1.3592 versus 1.3545 versus 1.3573 versus 1.3539 versus 1.3551 versus 1.3531 versus 1.3545 versus 1.3589 versus 1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.3633 versus 1.3603

Dollar/Yen: Rebounded some after the Wednesday and Thursday losses after failing at the 200 day SMA.

102.059 versus 101.9595 versus 101.9335 versus 102.13 versus 101.955 versus 102.055 versus 101.735 versus 102.0370 versus 102.335 versus 102.5305 versus 102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775


Bonds: Rebounded from the ugly gut punch selling Thursday, back over the 50 day EMA.

10 year: 2.61% versus 2.63% versus 2.60% versus 2.65% versus 2.60% versus 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66%


Oil: 106.81, +0.76. After the test oil started to bounce just as the pattern said it would. Higher prices on the way again.

Gold: 1316.60, +2.30. Added a bit more after the Thursday surge and break back over the 200 day SMA and the early May high.


MARKET STATISTICS

NASDAQ
Stats: +8.71 points (+0.2%) to close at 4368.04
Volume: 2.454B (+34.54%)

Up Volume: 1.52B (+618.77M)
Down Volume: 1.14B (+238.68M)

A/D and Hi/Lo: Advancers led 1.34 to 1
Previous Session: Decliners led 1.23 to 1

New Highs: 129 (0)
New Lows: 38 (+8)

S&P
Stats: +3.39 points (+0.17%) to close at 1962.87
NYSE Volume: 1.115B (+103.47%)

A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Advancers led 1.34 to 1

New Highs: 291 (+39)
New Lows: 15 (+7)

DJ30
Stats: +25.62 points (+0.15%) to close at 16947.08


SENTIMENT INDICATORS

VIX: 10.85; +0.23
VXN: 12.27; -0.24
VXO: 9.07; -0.15

Put/Call Ratio (CBOE): 0.78; +0.1


Bulls and Bears:

Bulls faded but nothing significant, still holding over 60: 61.4%, still effectively at 5 year highs.

Bears slid a bit more, taking the opposite side of the bulls move, falling below 17: 16.3%

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 61.4%
62.6% versus 62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 16.3%
17.2% versus 17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: 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

I am celebrating my birthday today and this weekend. When you get to be around 50 you take some time celebrating. Not to mark time, but to forget??? Will focus on the plays as outlined above given they are setting up nicely. Yes bullishness is high and VIX is low (you hear THAT about every hour on the financial stations), but the patterns continue to look very good. As for the economics, the political scene, and the market overview, this weekend I am going to not worry about those items and just focus on the leaders and leave the economics, a frighteningly fertile area for carping and complaining, for another day.

Thanks for understanding!




SUPPORT AND RESISTANCE

NASDAQ: Closed at 4368.04

Resistance:
4372 is the March 2014 high
4416 is the lower November 2012 trendline

Support:
The 10 day EMA at 4331
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4227
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
The 200 day SMA at 4077
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low


S&P 500: Closed at 1962.87

Resistance:

Support:
1920 is the December 2012 up trendline
The 50 day EMA at 1907
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1869 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The 200 day SMA at 1818
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point


Dow: Closed at 16,947.50

Resistance:
16,970 is the June 2014 all-time high
17,104 is a lower trendline off the 11/2012 low

Support:
The 20 day EMA at 16,790
16,736 is the penultimate all-time high from May 2014
The 50 day EMA at 16,636
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 16,072
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

June 23 - Monday
Existing Home Sales, May (10:00): 4.65M prior

June 24 - Tuesday
Case-Shiller 20-city, April (9:00): 12.4% prior
FHFA Housing Price I, April (9:00): 0.7% prior
New Home Sales, May (10:00): 433K prior
Consumer Confidence, June (10:00): 83.0 prior

June 25 - Wednesday
MBA Mortgage Index, 06/21 (7:00)
Durable Orders, May (8:30): 0.6% prior (revised from 0.8%)
Durable Goods -ex tr, May (8:30): 0.3% prior (revised from 0.1%)
GDP - Third Estimate, Q1 (8:30): -1.0% prior
GDP Deflator - Third, Q1 (8:30): 1.3% prior
Crude Inventories, 06/21 (10:30)

June 26 - Thursday
Initial Claims, 06/21 (8:30)
Continuing Claims, 06/14 (8:30)
Personal Income, May (8:30): 0.3% prior
Personal Spending, May (8:30): -0.1% prior
PCE Prices - Core, May (8:30): 0.2% prior
Natural Gas Inventor, 06/21 (10:30)

June 27 - Friday
Michigan Sentiment - Final, June (9:55)


By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

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

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Sunday, June 15, 2014

Pullback is Nothing Horrid at the Present

MARKET SUMMARY

- The test continues with some howls starting though the pullback is nothing horrid at the present.
- Weak into the open, tries to recover, then flops in the afternoon.
- Holding near support, leadership as well.
- Retail sales disappoint. Thank goodness for revisions.
- Iraq situation devolves, oil spikes, gasoline to follow to $4/gallon. Another wildcard is identified.
- Likely not decisions on Friday given the weekend.

Full moon. Friday the thirteenth. Solar flares. Al Qaeda taking over Iraq. Father's Day weekend. Stocks up. Neither snow nor rain nor heat nor gloom of night keeps stocks from rising. It can stop the mail, but apparently not the market. Thus even with the potential perils preceding the paternal celebrations this weekend, stocks posted gains.

SP500 6.05, 0.31%
NASDAQ 13.02, 0.30%
DJ30 41.55, 0.25%
SP400 0.26%
RUTX 0.28%
SOX 0.99%

Volume dipped: NYSE -10.4%, NASDAQ -7.8%. Friday, summer ahead of Father's Day. But it did dip on an upside session, so you know the buyers were not pushing to get in ahead of the weekend.

A/D: Up with the indices, but unsurprisingly light. NYSE 1.3:1, NASDAQ flat.

I would say it was a routine pre-semi holiday weekend in the summer, but there was a flurry of volatility at the open and very much so in the last hour. Futures were down early but managed a decent recovery. Momentum carried into the open and stocks turned positive after an initial half hour of selling the open. A long 4 hour lateral move then a break sharply higher to start the last hour. Breakout then a reversal. 25 minutes later the gains from Noon to that break upside were trashed and then some. Once more, however, stocks rebounded and traded right back up near the session's trading range highs and closed out the day. Yes, a bit of intraday volatility to spice the session.

HEADING INTO NEXT WEEK . . .

The action left the indices with modest gains. After 1-2-3 pullbacks on RUTX, SP400, SP500, and 1-2 fades on NASDAQ and DJ30, the bump higher makes it look as if they are ready to rebound after the test: Nice break and trend higher, cleared to higher highs, testing in a short flag. Textbook position to continue the move.

Perhaps they will and there are plenty of leaders in position to help the cause. Definitely a solid contender for the next move in this market. At the same time I am not convinced Friday was the start of a rebound from this dip, at least one that makes the progress you want, i.e. higher highs. I feel the coming week will see more testing. Maybe the Iraq issues resolve over the weekend, but the odds of that are about as good as seeing John McCain celebrating Father's Day at a cross-dressing bar in South Beach. Geez, the thought alone just makes me kind of queasy.

There is likely more testing and that is not necessarily a bad thing. Should not be too much more, however, before resuming the move if the indices are going to rally once more with SP500 taking a hot at the 2000 level.

All in all the indices definitely did nothing to hurt themselves, they make pretty pictures on this pullback, but this week they will have to really show the move. Gee, the FOMC is on deck with its next policy meeting results and there are rumors/worries it will pull an 'irrational exuberance' trick of some sort. Rumor and speculation of course, but the Fed has voiced dismay over the lack of concern in the stock market.


THE MARKET

CHARTS

SP500: Pulled its own 1-2-3 fade on the week, coming off a three week rally to 1950, tapping at the 20 day EMA and holding over the 38% Fibonacci retracement, then rebounding Friday. MACD put in a higher high on this leg, indicating no shifting momentum. Looks pretty textbook as noted, but would not be surprised to see some more testing early next week as a final shakeout. Given all of the issues on the market, not a bad showing, but not convincing.

NASDAQ: Another test of the 10 day EMA. Thursday NASDAQ dropped to that near support and held, Friday it gapped higher then bounced off of the 10 day EMA on an intraday test. Good action, second day of testing and holding the 10 day EMA. Compared to SP500, it looks as if NASDAQ is closer to being there. Held the 10 day EMA late May/early June on the last test, and if it holds here and bounces, a good indication the run continues.

DJ30: Fell to the 20 day EMA Thursday with a two day flop. Friday a bounce on stronger volume thanks to INTC's guidance increase. Could be ready, but as noted Thursday, it has liked falling to the 50 day EMA on its tests.

SOX: Still moving higher, with barely a pullback at all on the week. More like a pause here and there. Gapped upside Friday to a higher high yet again. Showing a doji, and after a big run that always raises some questions, but it has gapped to doji four times prior on this rally alone. Moving higher, holding the trend, good for the market.

RUTX: Now this is more like it when talking pullbacks. Strong break off the 200 day SMA started two weeks back. Rallied into Monday, tested Tuesday to Thursday, holding the 10 day EMA on the low. Friday a doji with tail, tapping the 10 day EMA on the low and bouncing. Classic action, showing a doji with tail tapping the 38% Fibonacci retracement. This one looks ready to go.

SP400: Similar to RUTX, the midcaps rallied through Monday, tested Tuesday to Thursday, started back up Friday. The test brought SP400 back to the 10 day EMA and the breakout point over the early March/early April twin peaks. Breakout, test, in position. Looks solid, now we see if it can make the bounce.


LEADERSHIP

Big Names: The stocks of repute that led the last move up mostly spent the week testing, and there are some very good looking tests in progress.
NFLX is working on a six-day lateral move over the 10 day EMA.
GOOG tested on the week and Friday put in a nice doji with tail at the converging 50 day and 20 day EMA.
TRIP is in a five-session flag holding at the 10 day EMA for three sessions.
AAPL is a bit heavy after its split.
VIPS is in a nice 1-2-3 pullback to the 10 day EMA. Excellent.

Internet-based: The group remains very nice.
FB broke out Tuesday but could not advance, fading to a doji at the 10 day EMA Friday.
Z enjoyed a great week, breaking upside Wednesday and holding the move into the weekend.
TRLA enjoyed an excellent upside week, breaking resistance along the way.
YELP exploded higher Friday with a gap over the 200 day SMA and other resistance.

Electronics/Chips: INTC set the pace with its raised guidance.
CAVM: Excellent week, testing a good move, bouncing off the 10 day EMA.
OVTI: Moved to a new high rally high Wednesday.
Still a leadership group.

Drugs/Healthcare: Still showing up great as it continues its recovery.
AMRI broke higher and held the move into the weekend.
CLDX has made the turn, holding a very nice flag.
BIIB still in a nice handle to its cup.

Energy: A great week on top of good moves, of course led by the Iraq issue.
APC blasted off Wednesday.
OAS took off the back half of the week.
ATHL, PXD, SYRG and many more enjoyed strong moves.


OTHER MARKETS

Euro/Dollar: Up on the week, down to end it, but dollar higher overall and bumping at the top of the range.

1.3539 versus 1.3551 versus 1.3531 versus 1.3545 versus 1.3589 versus 1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.3633 versus 1.3603

Dollar/Yen: Sold on the week, busted the 200 day SMA Thursday, bounced modestly Friday.

102.055 versus 101.735 versus 102.0370 versus 102.335 versus 102.5305 versus 102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775


Bonds: Held the 50 day EMA after selling off to that level the prior week. Started to bounce Thursday, held the move Friday, as the Iraq situation went from bad to worse.

10 year: 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66%


Oil: 106.85, +0.31. Surged on the Iraq issues, continued Friday, but gave up most of the move by the close. Key move: breakout over 105.

Gold: 1274.10, 0.00. Recovery week after the beating it took through the beginning of June. Back up to the bottom of the April through May range.


MARKET STATISTICS

NASDAQ
Stats: +13.02 points (+0.3%) to close at 4310.65
Volume: 1.728B (-7.79%)

Up Volume: 1.11B (+467.65M)
Down Volume: 608.12M (-641.88M)

A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 1.81 to 1

New Highs: 62 (-8)
New Lows: 21 (+4)

S&P
Stats: +6.05 points (+0.31%) to close at 1936.16
NYSE Volume: 472M (-10.44%)

A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Decliners led 1.38 to 1

New Highs: 95 (-9)
New Lows: 13 (+5)

DJ30
Stats: +41.55 points (+0.25%) to close at 16775.74


SENTIMENT INDICATORS

VIX: 12.18; -0.38
VXN: 13.61; -0.24
VXO: 11.22; -0.37

Put/Call Ratio (CBOE): 0.77; -0.03


Bulls and Bears:

Bulls slowed the climb but climbed to a new 5 year high: 62.6%

Bears a bit lower but in a familiar range: 17.2%

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 62.6%
62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 17.2%
17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: 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.


THE NEWS

Producer Prices fade away according to the Fed.



Year/year: 2.0 versus 2.4% expected versus 2.1% prior
Core year/year: 2.0%

Down but still some pretty strong prices year/year. Not much to say here. Dropping prices is good, but the Fed views that as bad as it views inflation as a good thing. But the Fed should take heart: year/year numbers are still strong despite a one-month backtrack.


Michigan Sentiment, June Preliminary: 81.2 versus 82.9 expected versus 81.9 prior.

Not the gain anticipated, missing by the widest margin in 18 months. You know what? Who cares? As noted the last Michigan Sentiment report, at these levels the indicator means nothing. It is mired in mediocrity. Hmm. As the economy is mired in mediocrity perhaps this is representative.

What DOES mean something in sentiment terms is the newly released CEO Economic Sentiment Index. It limps in at 49.1, below the 50 expansion/contraction line, stuck at 2014 lows.

One CEO said his company is "concerned about the retail demand environment, and a little less bullish than earlier I the year due to a slower housing market, some inconsistency at retail, and an economy that's not quite as robust as expected."

Retailers in the survey complained of lower traffic and needing to continue promotions in order to drive sales.

The Q2 bounce is slipping away, just as it has done every year of the recovery but 2010. That is damn depressing.


MONDAY

Pre-market Friday we were perusing the headlines on the financial sites, blogs, etc., watching the futures and stock action. We traded notes on what we were seeing and what we all noticed were the comments about trouble ahead. Not the Tepper 'I'm nervous' comments, but similar.

CNBC reported a 'pro' as saying the rally is in the 'late innings.' Cramer said 'something unexpected may be imminent.'

Well, we are no fan of picking market tops or bottoms, but I did throw out there that if SP500 made it to 2000 that might very well be the top of this run. 1950 was the top for many 2014 S&P500 predictions. Hit that this past week. 2000 started to get some talk. Came under some pressure, sold back, then the talk about late innings, trouble lurking.

There could be problems for sure. There always can be problems. As for the unexpected but imminent, well, Iraq came unexpectedly but stocks really shrugged it off. Certainly no dive lower, just a test after a good run higher. The Fed is on tap for next week, and as I noted early week, it definitely could provide a Greenspan 'irrational exuberance' moment given its lamenting how its own actions caused market complacency. Begging the question, of course, what the hell did it think it was going to cause with its policies?

Perhaps Cramer was thinking of the Fed and that most would not expect the Fed to rattle investors' cages. Other than that, however, the statement struck me as particularly asinine. How do you expect something unexpected? If that is your criteria you should never invest.

This is the kind of 'noise' that I discuss in a free seminar I am giving next Thursday. It is the speculation, the gut feelings of the 'pros' as uttered on the financial stations. Smart traders/investors have fallen prey to this. They think they are immune to it, but when the action gets fierce and the emotions are raw, those words are there and they can cause you to not believe what you see.

And what is out there to be seen? A few things of note.

NASDAQ was forming a head and shoulders. It broke it up. SP500 was putting in a double top. Broke it up. SP400 had a double top in place. It broke out under two weeks back. SOX had set a head and shoulders pattern. It blew past the head and hasn't even looked back.

ALL OF THOSE PATTERNS formed during the March to May selling. On the DAY Tepper said he was nervous, the indices bottomed and we bought into GOOG, AAPL, PCLN, TRIP, VIPS, etc. We were watching the patterns of leaders. They were forming bullish patterns.

So of course that leads us to now and the key aspects: not what the 'pros' are saying, but what the patterns are telling us.

We went through the leadership above. There are very good pullbacks in progress that look to be setting up the continuation of rallies: STX, GOOG, TRIP, VIPS, BIIB, TEN, NFLX, FB, QIWI. There are stocks coming off rounded bottoms, ready to make their moves, e.g. RVBD, DHRM, MANH, CLDX, QIHU.

Many different sectors, many different stages of moves. Similar to the May 15 bottom but different given the participation and that some stocks have rallied well. In May people were almost panicking over a modest pullback. Now they are seeing ghosts and fearing the unknown. Similar and thus promising.

Yes the Fed can rip the market. It gives as it has for five years, and it takes when it thinks it has done too much. It is the market's Sybil, and it has to be respected because it can change personalities on you at any time.

Indeed, we respect the possibility of a Greenspan moment so much, we are considering just paring back positions in terms of their size when talking solid plays working well, and eliminating plays that are just not performing. Staying with the many strong plays we have, culling the plodders, but still looking for positions in the many solid stocks that used this past week to set up new moves and thus new entry points for us to make money. Don't want to let a fear of the 'unexpected' keep us sitting on our hands when stocks are saying 'buy me.' You won't necessarily lose money if you do nothing, but the opportunity cost of not acting when stocks are saying act is huge. You have to make the plays when they are there.

Happy Father's Day!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4310.65

Resistance:
4372 is the March 2014 high
4397 is the lower November 2012 trendline

Support:
4289 is the July 2000 recovery high
The 10 day EMA at 4292
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4200
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4059
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.


S&P 500: Closed at 1936.16

Resistance:

Support:
1913 is the December 2012 up trendline
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 50 day EMA at 1897
1860 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
The 200 day SMA at 1810
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point


Dow: Closed at 16,775.74

Resistance:
17,047 is a lower trendline off the 11/2012 low

Support:
16,736 is the penultimate all-time high from May 2014
The 20 day EMA at 16,731
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 50 day EMA at 16,582
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 16,021
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

June 13 - Friday
PPI, May (8:30): -0.2% actual versus 0.2% expected, 0.6% prior (no revisions)
Core PPI, May (8:30): -0.1% actual versus 0.1% expected, 0.5% prior (no revisions)
Michigan Sentiment, June (9:55): 81.2 actual versus 82.9 expected, 81.9 prior

June 16 - Monday
Empire Manufacturing, June (8:30): 12.8 expected, 19.0 prior
Net Long-Term TIC Fl, April (9:00): $4.0B prior
Industrial Productio, May (9:15): 0.5% expected, -0.6% prior
Capacity Utilization, May (9:15): 78.9% expected, 78.6% prior
NAHB Housing Market , June (10:00): 46 expected, 45 prior

June 17 - Tuesday
Housing Starts, May (8:30): 1028K expected, 1072K prior
Building Permits, May (8:30): 1050K expected, 1080K prior
CPI, May (8:30): 0.2% expected, 0.3% prior
Core CPI, May (8:30): 0.2% expected, 0.2% prior

June 18 - Wednesday
MBA Mortgage Index, 06/14 (7:00): +10.3% prior
Current Account Bala, Q1 (8:30): -$97.8B expected, -$81.1B prior
Crude Inventories, 06/14 (10:30): -2.596M prior
FOMC Rate Decision, June (14:00): 0.25% prior

June 19 - Thursday
Initial Claims, 06/14 (8:30): 313K expected, 317K prior
Continuing Claims, 06/14 (8:30): 2638K expected, 2614K prior
Philadelphia Fed, June (10:00): 13.4 expected, 15.4 prior
Leading Indicators, May (10:00): 0.5% expected, 0.4% prior
Natural Gas Inventor, 06/14 (10:30): 107 bcf prior

End part 1

The Daily, Part 1 of 3, 6-14-14
Current Issue


Report Archive | Previous page
* * * *
6/14/2014 Investment House Daily
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MARKET SUMMARY

- The test continues with some howls starting though the pullback is nothing horrid at the present.
- Weak into the open, tries to recover, then flops in the afternoon.
- Holding near support, leadership as well.
- Retail sales disappoint. Thank goodness for revisions.
- Iraq situation devolves, oil spikes, gasoline to follow to $4/gallon. Another wildcard is identified.
- Likely not decisions on Friday given the weekend.

Full moon. Friday the thirteenth. Solar flares. Al Qaeda taking over Iraq. Father's Day weekend. Stocks up. Neither snow nor rain nor heat nor gloom of night keeps stocks from rising. It can stop the mail, but apparently not the market. Thus even with the potential perils preceding the paternal celebrations this weekend, stocks posted gains.

SP500 6.05, 0.31%
NASDAQ 13.02, 0.30%
DJ30 41.55, 0.25%
SP400 0.26%
RUTX 0.28%
SOX 0.99%

Volume dipped: NYSE -10.4%, NASDAQ -7.8%. Friday, summer ahead of Father's Day. But it did dip on an upside session, so you know the buyers were not pushing to get in ahead of the weekend.

A/D: Up with the indices, but unsurprisingly light. NYSE 1.3:1, NASDAQ flat.

I would say it was a routine pre-semi holiday weekend in the summer, but there was a flurry of volatility at the open and very much so in the last hour. Futures were down early but managed a decent recovery. Momentum carried into the open and stocks turned positive after an initial half hour of selling the open. A long 4 hour lateral move then a break sharply higher to start the last hour. Breakout then a reversal. 25 minutes later the gains from Noon to that break upside were trashed and then some. Once more, however, stocks rebounded and traded right back up near the session's trading range highs and closed out the day. Yes, a bit of intraday volatility to spice the session.

HEADING INTO NEXT WEEK . . .

The action left the indices with modest gains. After 1-2-3 pullbacks on RUTX, SP400, SP500, and 1-2 fades on NASDAQ and DJ30, the bump higher makes it look as if they are ready to rebound after the test: Nice break and trend higher, cleared to higher highs, testing in a short flag. Textbook position to continue the move.

Perhaps they will and there are plenty of leaders in position to help the cause. Definitely a solid contender for the next move in this market. At the same time I am not convinced Friday was the start of a rebound from this dip, at least one that makes the progress you want, i.e. higher highs. I feel the coming week will see more testing. Maybe the Iraq issues resolve over the weekend, but the odds of that are about as good as seeing John McCain celebrating Father's Day at a cross-dressing bar in South Beach. Geez, the thought alone just makes me kind of queasy.

There is likely more testing and that is not necessarily a bad thing. Should not be too much more, however, before resuming the move if the indices are going to rally once more with SP500 taking a hot at the 2000 level.

All in all the indices definitely did nothing to hurt themselves, they make pretty pictures on this pullback, but this week they will have to really show the move. Gee, the FOMC is on deck with its next policy meeting results and there are rumors/worries it will pull an 'irrational exuberance' trick of some sort. Rumor and speculation of course, but the Fed has voiced dismay over the lack of concern in the stock market.


THE MARKET

CHARTS

SP500: Pulled its own 1-2-3 fade on the week, coming off a three week rally to 1950, tapping at the 20 day EMA and holding over the 38% Fibonacci retracement, then rebounding Friday. MACD put in a higher high on this leg, indicating no shifting momentum. Looks pretty textbook as noted, but would not be surprised to see some more testing early next week as a final shakeout. Given all of the issues on the market, not a bad showing, but not convincing.

NASDAQ: Another test of the 10 day EMA. Thursday NASDAQ dropped to that near support and held, Friday it gapped higher then bounced off of the 10 day EMA on an intraday test. Good action, second day of testing and holding the 10 day EMA. Compared to SP500, it looks as if NASDAQ is closer to being there. Held the 10 day EMA late May/early June on the last test, and if it holds here and bounces, a good indication the run continues.

DJ30: Fell to the 20 day EMA Thursday with a two day flop. Friday a bounce on stronger volume thanks to INTC's guidance increase. Could be ready, but as noted Thursday, it has liked falling to the 50 day EMA on its tests.

SOX: Still moving higher, with barely a pullback at all on the week. More like a pause here and there. Gapped upside Friday to a higher high yet again. Showing a doji, and after a big run that always raises some questions, but it has gapped to doji four times prior on this rally alone. Moving higher, holding the trend, good for the market.

RUTX: Now this is more like it when talking pullbacks. Strong break off the 200 day SMA started two weeks back. Rallied into Monday, tested Tuesday to Thursday, holding the 10 day EMA on the low. Friday a doji with tail, tapping the 10 day EMA on the low and bouncing. Classic action, showing a doji with tail tapping the 38% Fibonacci retracement. This one looks ready to go.

SP400: Similar to RUTX, the midcaps rallied through Monday, tested Tuesday to Thursday, started back up Friday. The test brought SP400 back to the 10 day EMA and the breakout point over the early March/early April twin peaks. Breakout, test, in position. Looks solid, now we see if it can make the bounce.


LEADERSHIP

Big Names: The stocks of repute that led the last move up mostly spent the week testing, and there are some very good looking tests in progress.
NFLX is working on a six-day lateral move over the 10 day EMA.
GOOG tested on the week and Friday put in a nice doji with tail at the converging 50 day and 20 day EMA.
TRIP is in a five-session flag holding at the 10 day EMA for three sessions.
AAPL is a bit heavy after its split.
VIPS is in a nice 1-2-3 pullback to the 10 day EMA. Excellent.

Internet-based: The group remains very nice.
FB broke out Tuesday but could not advance, fading to a doji at the 10 day EMA Friday.
Z enjoyed a great week, breaking upside Wednesday and holding the move into the weekend.
TRLA enjoyed an excellent upside week, breaking resistance along the way.
YELP exploded higher Friday with a gap over the 200 day SMA and other resistance.

Electronics/Chips: INTC set the pace with its raised guidance.
CAVM: Excellent week, testing a good move, bouncing off the 10 day EMA.
OVTI: Moved to a new high rally high Wednesday.
Still a leadership group.

Drugs/Healthcare: Still showing up great as it continues its recovery.
AMRI broke higher and held the move into the weekend.
CLDX has made the turn, holding a very nice flag.
BIIB still in a nice handle to its cup.

Energy: A great week on top of good moves, of course led by the Iraq issue.
APC blasted off Wednesday.
OAS took off the back half of the week.
ATHL, PXD, SYRG and many more enjoyed strong moves.


OTHER MARKETS

Euro/Dollar: Up on the week, down to end it, but dollar higher overall and bumping at the top of the range.

1.3539 versus 1.3551 versus 1.3531 versus 1.3545 versus 1.3589 versus 1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.3633 versus 1.3603

Dollar/Yen: Sold on the week, busted the 200 day SMA Thursday, bounced modestly Friday.

102.055 versus 101.735 versus 102.0370 versus 102.335 versus 102.5305 versus 102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775


Bonds: Held the 50 day EMA after selling off to that level the prior week. Started to bounce Thursday, held the move Friday, as the Iraq situation went from bad to worse.

10 year: 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66%


Oil: 106.85, +0.31. Surged on the Iraq issues, continued Friday, but gave up most of the move by the close. Key move: breakout over 105.

Gold: 1274.10, 0.00. Recovery week after the beating it took through the beginning of June. Back up to the bottom of the April through May range.


MARKET STATISTICS

NASDAQ
Stats: +13.02 points (+0.3%) to close at 4310.65
Volume: 1.728B (-7.79%)

Up Volume: 1.11B (+467.65M)
Down Volume: 608.12M (-641.88M)

A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 1.81 to 1

New Highs: 62 (-8)
New Lows: 21 (+4)

S&P
Stats: +6.05 points (+0.31%) to close at 1936.16
NYSE Volume: 472M (-10.44%)

A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Decliners led 1.38 to 1

New Highs: 95 (-9)
New Lows: 13 (+5)

DJ30
Stats: +41.55 points (+0.25%) to close at 16775.74


SENTIMENT INDICATORS

VIX: 12.18; -0.38
VXN: 13.61; -0.24
VXO: 11.22; -0.37

Put/Call Ratio (CBOE): 0.77; -0.03


Bulls and Bears:

Bulls slowed the climb but climbed to a new 5 year high: 62.6%

Bears a bit lower but in a familiar range: 17.2%

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 62.6%
62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 17.2%
17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: 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.


THE NEWS

Producer Prices fade away according to the Fed.



Year/year: 2.0 versus 2.4% expected versus 2.1% prior
Core year/year: 2.0%

Down but still some pretty strong prices year/year. Not much to say here. Dropping prices is good, but the Fed views that as bad as it views inflation as a good thing. But the Fed should take heart: year/year numbers are still strong despite a one-month backtrack.


Michigan Sentiment, June Preliminary: 81.2 versus 82.9 expected versus 81.9 prior.

Not the gain anticipated, missing by the widest margin in 18 months. You know what? Who cares? As noted the last Michigan Sentiment report, at these levels the indicator means nothing. It is mired in mediocrity. Hmm. As the economy is mired in mediocrity perhaps this is representative.

What DOES mean something in sentiment terms is the newly released CEO Economic Sentiment Index. It limps in at 49.1, below the 50 expansion/contraction line, stuck at 2014 lows.

One CEO said his company is "concerned about the retail demand environment, and a little less bullish than earlier I the year due to a slower housing market, some inconsistency at retail, and an economy that's not quite as robust as expected."

Retailers in the survey complained of lower traffic and needing to continue promotions in order to drive sales.

The Q2 bounce is slipping away, just as it has done every year of the recovery but 2010. That is damn depressing.


MONDAY

Pre-market Friday we were perusing the headlines on the financial sites, blogs, etc., watching the futures and stock action. We traded notes on what we were seeing and what we all noticed were the comments about trouble ahead. Not the Tepper 'I'm nervous' comments, but similar.

CNBC reported a 'pro' as saying the rally is in the 'late innings.' Cramer said 'something unexpected may be imminent.'

Well, we are no fan of picking market tops or bottoms, but I did throw out there that if SP500 made it to 2000 that might very well be the top of this run. 1950 was the top for many 2014 S&P500 predictions. Hit that this past week. 2000 started to get some talk. Came under some pressure, sold back, then the talk about late innings, trouble lurking.

There could be problems for sure. There always can be problems. As for the unexpected but imminent, well, Iraq came unexpectedly but stocks really shrugged it off. Certainly no dive lower, just a test after a good run higher. The Fed is on tap for next week, and as I noted early week, it definitely could provide a Greenspan 'irrational exuberance' moment given its lamenting how its own actions caused market complacency. Begging the question, of course, what the hell did it think it was going to cause with its policies?

Perhaps Cramer was thinking of the Fed and that most would not expect the Fed to rattle investors' cages. Other than that, however, the statement struck me as particularly asinine. How do you expect something unexpected? If that is your criteria you should never invest.

This is the kind of 'noise' that I discuss in a free seminar I am giving next Thursday. It is the speculation, the gut feelings of the 'pros' as uttered on the financial stations. Smart traders/investors have fallen prey to this. They think they are immune to it, but when the action gets fierce and the emotions are raw, those words are there and they can cause you to not believe what you see.

And what is out there to be seen? A few things of note.

NASDAQ was forming a head and shoulders. It broke it up. SP500 was putting in a double top. Broke it up. SP400 had a double top in place. It broke out under two weeks back. SOX had set a head and shoulders pattern. It blew past the head and hasn't even looked back.

ALL OF THOSE PATTERNS formed during the March to May selling. On the DAY Tepper said he was nervous, the indices bottomed and we bought into GOOG, AAPL, PCLN, TRIP, VIPS, etc. We were watching the patterns of leaders. They were forming bullish patterns.

So of course that leads us to now and the key aspects: not what the 'pros' are saying, but what the patterns are telling us.

We went through the leadership above. There are very good pullbacks in progress that look to be setting up the continuation of rallies: STX, GOOG, TRIP, VIPS, BIIB, TEN, NFLX, FB, QIWI. There are stocks coming off rounded bottoms, ready to make their moves, e.g. RVBD, DHRM, MANH, CLDX, QIHU.

Many different sectors, many different stages of moves. Similar to the May 15 bottom but different given the participation and that some stocks have rallied well. In May people were almost panicking over a modest pullback. Now they are seeing ghosts and fearing the unknown. Similar and thus promising.

Yes the Fed can rip the market. It gives as it has for five years, and it takes when it thinks it has done too much. It is the market's Sybil, and it has to be respected because it can change personalities on you at any time.

Indeed, we respect the possibility of a Greenspan moment so much, we are considering just paring back positions in terms of their size when talking solid plays working well, and eliminating plays that are just not performing. Staying with the many strong plays we have, culling the plodders, but still looking for positions in the many solid stocks that used this past week to set up new moves and thus new entry points for us to make money. Don't want to let a fear of the 'unexpected' keep us sitting on our hands when stocks are saying 'buy me.' You won't necessarily lose money if you do nothing, but the opportunity cost of not acting when stocks are saying act is huge. You have to make the plays when they are there.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4310.65

Resistance:
4372 is the March 2014 high
4397 is the lower November 2012 trendline

Support:
4289 is the July 2000 recovery high
The 10 day EMA at 4292
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4200
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4059
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.


S&P 500: Closed at 1936.16

Resistance:

Support:
1913 is the December 2012 up trendline
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 50 day EMA at 1897
1860 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
The 200 day SMA at 1810
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point


Dow: Closed at 16,775.74

Resistance:
17,047 is a lower trendline off the 11/2012 low

Support:
16,736 is the penultimate all-time high from May 2014
The 20 day EMA at 16,731
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 50 day EMA at 16,582
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 16,021
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

June 13 - Friday
PPI, May (8:30): -0.2% actual versus 0.2% expected, 0.6% prior (no revisions)
Core PPI, May (8:30): -0.1% actual versus 0.1% expected, 0.5% prior (no revisions)
Michigan Sentiment, June (9:55): 81.2 actual versus 82.9 expected, 81.9 prior

June 16 - Monday
Empire Manufacturing, June (8:30): 12.8 expected, 19.0 prior
Net Long-Term TIC Fl, April (9:00): $4.0B prior
Industrial Productio, May (9:15): 0.5% expected, -0.6% prior
Capacity Utilization, May (9:15): 78.9% expected, 78.6% prior
NAHB Housing Market , June (10:00): 46 expected, 45 prior

June 17 - Tuesday
Housing Starts, May (8:30): 1028K expected, 1072K prior
Building Permits, May (8:30): 1050K expected, 1080K prior
CPI, May (8:30): 0.2% expected, 0.3% prior
Core CPI, May (8:30): 0.2% expected, 0.2% prior

June 18 - Wednesday
MBA Mortgage Index, 06/14 (7:00): +10.3% prior
Current Account Bala, Q1 (8:30): -$97.8B expected, -$81.1B prior
Crude Inventories, 06/14 (10:30): -2.596M prior
FOMC Rate Decision, June (14:00): 0.25% prior

June 19 - Thursday
Initial Claims, 06/14 (8:30): 313K expected, 317K prior
Continuing Claims, 06/14 (8:30): 2638K expected, 2614K prior
Philadelphia Fed, June (10:00): 13.4 expected, 15.4 prior
Leading Indicators, May (10:00): 0.5% expected, 0.4% prior
Natural Gas Inventor, 06/14 (10:30): 107 bcf prior


By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

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

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Sunday, June 08, 2014

Jobs Decent, But Some Saying 'Strong', 'Great'

MARKET SUMMARY

- Jobs decent (read mediocre), but some saying 'strong', 'great.' Jobs, as beauty, is in the beholder's eyes.
- How strong jobs? Earnings? Companies?
- Still plenty of leaders, some new and some recycled, in the market, providing upside impetus.

Mediocre data continues, but in the new normal, mediocrity is 'strong' or 'great.'

Yes the jobs report was out and it was down but close to expectations. As I noted Friday in the alerts, it was decent. Decent is a nice way of saying mediocre. The jobs market has feet of clay, unable to make any moves and certainly has no traction.

Yet the adjectives describing the report were much more glowing. Heck even Investor's Business Daily headlined 'strong' jobs report. Wow, when IBD accepts mediocre as strong there is indeed a new normal where we accept crap as gold. Or at least as in China, tungsten. Yes, someone bought a cargo container of gold and when it arrived it was found to be loaded with something that was, while not worthless, nowhere near the value of what it should have been. The jobs numbers are not worthless, they are just nowhere near where they should be.

217K versus 220K versus 282K (from 288K).

Unemployment rate: 6.3% versus 6.4% expected, 6.3% prior.

Participation held at that record low 62.8%. Racing back to the jobs market, eh?


Certainly it was not a blast upside in new jobs as many had expected (read hoped for) after the harsh Q1 weather. Larry Kudlow made this clear as he summed it up in the numbers: based upon year/year average hourly earnings the jobs market was no change from Q1.

Indeed, things got worse. While April held out a glimmer that jobs quality was improving, May dispelled that with more than half of the jobs (116K) coming from the lowest paying, education and health, Leisure and hospitality, and Temporary help services.

All jobs recovered?

Much news was made of finally recovering all the jobs lost in the Great Recession. That is a terribly misleading statistic because it does not account for the new people entering the workforce since the recession started. That, however, is not the real problem.

Where the jobs are: As noted before, the all-important age 24 to 54 groups are still over 2M jobs LESS THAN where they were in 2007. The most powerful earners as a group are still well below their peak level.

For every jobs produced, 1 person has left the workforce. Thus, since 2007, the total number of jobs is unchanged, but 12.8M people have left the workforce during that 2007 to 2014 period. Over 92M working aged citizens are STILL OUT OF THE WORKFORCE.

92M out of work force
9.8M unemployed
27.2M part-time workers
Total: 129M not employed or underemployed versus 118.7M full time jobs. What a recovery!

We have a permanent non-working class in our country that is 40% of the entire population. How can this be considered even a weak recovery given that statistic?

If that is a representation of what is considered strong, we truly are Europe and also Japan. That is mediocre just as GDP is mediocre, wages are mediocre, etc. The devastation to small business and accordingly the middle class (through the jobs and wealth created with startups) is almost complete.


Moreover, are the companies we hear about as 'strong' on CNBC, Bloomberg, etc. really that strong? While Q1 was seen as a throwaway because of the weather, as just discussed, the May jobs report saw not surge. Recall April was up to 288K but that was believed to be due to some deferred hiring in Q1. That did not continue and thus Q2 could be a repeat.

Look at Q1's earnings: -3.4% overall on SP500, falling from $28.25 to $27.32. These are supposedly the strong companies, but they are not all that strong are they? Stock buybacks have kept prices high. Now mergers and acquisition speculation is keeping prices high. Earnings are down, REVENUES continue to miss more than hit, yet stock prices are rising, aided by buybacks and still loose monetary policy.

I don't want to say it is totally smoke and mirrors, but a common sense look at the numbers from when our economy was truly 'strong' versus now and you see the media is trumpeting mediocrity.


"I had a vision that a great country built upon this place would forget how it became great and would decline as it accepted worse and worse economic growth as inevitable. A shame really. Now, I will give up the fort to the French. Why? Because the great country in my vision sure the hell wasn't France! Ha! To the pub then."

The 'gray hair' British general in 'The Last of the Mohicans' confided in his subordinate officers that he would have never believed a British commander would not come to the aid of another British regimen. Similarly I never thought, particularly after we recovered so sharply post-1970's, that we would ever forget what our economy can really do when unleashed. It appears we have truly abandoned the one who brought us to the dance.

Is it any wonder, as reported Thursday, that CNN found that most US citizens asked believe the American Dream is now dead?



THE ACTION

Stocks did not seem to mind that much. Flat going into the number, futures jumped upon its release and traded sideways to the open. When the bell rang, stocks rallied into midday. A four hour lateral move to the close held the gains.

SP500 8.98, 0.45%
NASDAQ 25.17, 0.59%
DJ30 88.17, 0.52%
SP400 0.60%
RUTX 0.98%
SOX 0.48%

Volume: NYSE -5%, NASDAQ -15%

A/D Still nice: NYSE 2.8:1, NASDAQ 2.5:1

The upside continued into the weekend with no hits of selling as the indices spent the week knocking down some resistance.


THE MARKET

CHARTS

NASDAQ: Continued the break above the January peak. Not a bad at all, converting the potential head and shoulders into what looks like a cup with handle from March. Not a ton of volume, but volume hasn't scared anyone on any of the rallies.

RUTX: Russell came to life on the week, exploding off the 200 day SMA Thursday, moving out of a 9 week inverted head and shoulders. Continued the move higher Friday. Ironically, RUTX has the January high to worry about now, the same one NASDAQ moved through.

SOX: Two weeks upside reasserted SOX as a market leader. Solid rally, gapping to a tight doji Friday.

SP500, DJ30: More upside, renewing the move with Thursday's strong run, adding more Friday.

SP400: The midcaps came to life last week along with the small caps. Broke higher Wednesday from its lateral move, then the big Thursday rally. Halfway up in the channel.


LEADERSHIP:

Technology not bad: STX, AKAM

Big names: Some good, some not quite ready. NFLX up on the week but looks winded with a doji. GOOG broke higher Thursday, added some Friday. AAPL enjoyed a strong week but is tired as well, gapping upside then reversing the move Friday. Overall quite solid.

Internet/Internet based: VIPS posted a great week. TRIP outstanding. BIDU surged Friday. TRLA breaking higher. FB still in great position to do the same.

Energy: Improved on the week, e.g. PXD, SYRG, CRR.

Drugs/Healthcare: Seeing lots of improving patterns, e.g. ILMN.


OTHER MARKETS

Euro/Dollar: Tested the 20 day EMA on the low, bounced, holding the move over the early April peak. Trading in the top half of the range after the big May bounce off the bottom of the range.

1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.633 versus 1.3603 versus 1.3593 versus 1.3635 versus 1.3632 versus 1.3654 versus 1.3687 versus 1.3704 versus 1.3170 versus 1.3698 versus 1.3716 versus 1.3713 versus 1.3702 versus 1.3754 versus 1.3853 versus 1.3914

Dollar/Yen: Tested the 50 day EMA on the low, bouncing upside. Nice test of the move higher and ready to continue upside.

102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775 versus 101.7435 versus 101.985 versus 101.98 versus 101.80 versus 101.37 versus 101.2895 versus 101.40 versus 102.65 versus 101.49 versus 101.52 versus 101.84 versus 102.27 versus 102.15 versus 101.73 versus 101.81 versus 101.53 versus 101.73 versus 101.68 versus 102.11


Bonds: Gapped upside then faded back to flat. Still stuck at the 50 day EMA test.

10 year: 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66% versus 2.62% versus 2.60% versus 2.59% versus 2.59% versus 2.61% versus 2.59% versus 2.67% versus 2.69% versus 2.70% versus 2.67% versus 2.68% versus 2.69% versus 2.73% versus 2.71% versus 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79%


Oil: 102.67, +0.08. Holding the test over the 50 day EMA, trying to put in a higher low in the middle of the trading range.

Gold: 1252.70, -0.50. Gold couldn't add anything to the Thursday bounce from the selloff.


MARKET STATISTICS

NASDAQ
Stats: +25.17 points (+0.59%) to close at 4321.4
Volume: 1.614B (-14.87%)

Up Volume: 1.11B (-230M)
Down Volume: 470.14M (-95.77M)

A/D and Hi/Lo: Advancers led 2.52 to 1
Previous Session: Advancers led 3.62 to 1

New Highs: 153 (+30)
New Lows: 24 (-22)

S&P
Stats: +8.98 points (+0.46%) to close at 1949.44
NYSE Volume: 530M (-5.19%)

A/D and Hi/Lo: Advancers led 2.87 to 1
Previous Session: Advancers led 3.44 to 1

New Highs: 356 (+60)
New Lows: 8 (-10)

DJ30
Stats: +88.17 points (+0.52%) to close at 16924.28


SENTIMENT INDICATORS

VIX: 10.73; -0.95
VXN: 13.21; -0.45
VXO: 10.27; -0.88

Put/Call Ratio (CBOE): 0.92; +0.17

Bulls and Bears:

Big jump in bulls, back up to the level that triggered selloffs. 62.2% versus 58.3%

Bears hold the line: 17.4% versus 17.3% versus 18.3% versus 19.4%

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 62.2%
58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 17.4%
17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: 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 is out in terms of economic data. This coming week retail sales on Thursday area the big news. Can the consumer continue spending in these economic conditions? Friday saw consumer credit surge as consumers put a lot more debt on their cards. Half full or half empty? Half full: they are confident enough to spend it. Half empty: they have NO CHOICE but to use the plastic to get by.

For now the stock market takes everything as a positive. Thus the new breaks higher last week with NASDAQ, RUTX, SOX up but not extended just yet. SP500, DJ30 are up three weeks; they appear extended.

Of course extended stocks or indices can continue extending those gains. Moreover, in a healthy rally, stocks come in waves with different groups or sectors pushing to the front out of quality patterns that set up while other stocks are moving. Indeed, this weekend we see biotechs, drugs, and other healthcare setting up patterns again along with the other leaders still bringing in new solid plays, e.g. electronics/chips, technology.

So many people are convinced the market is at a top yet the patterns in many stocks in many sectors suggest that is not the case. Solid, 'ordinary' stocks such as AKAM and STX broke sharply higher last week, joining the big names and others leading. As long as new stocks come to the fore and push higher, the rally has legs. It may seem illogical, but near term in the market an individual's logic has little to do with market moves.

That being the case, we will continue to take gain when it presents itself on our positions taken earlier in the rally, and we will also continue to move into stocks that present solid moves out of solid patterns.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4321.40

Resistance:
4372 is the March 2014 high
4384 is the lower November 2012 trendline

Support:
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4173
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4042
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.


S&P 500: Closed at 1949.44

Resistance:

Support:
1907 is the December 2012 up trendline
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 50 day EMA at 1887
1855 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
The 200 day SMA at 1802
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point


Dow: Closed at 16,924.28

Resistance:
16,995 is a lower trendline off the 11/2012 low

Support:
16,736 is the all-time high from May 2014
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 50 day EMA at 16,525
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 15,973
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

June 6 - Friday
Nonfarm Payrolls, May (8:30): 217K actual versus 220K expected, 282K prior (revised from 288K)
Nonfarm Private Payr, May (8:30): 216K actual versus 230K expected, 270K prior (revised from 273K)
Unemployment Rate, May (8:30): 6.3% actual versus 6.4% expected, 6.3% prior
Hourly Earnings, May (8:30): 0.2% actual versus 0.2% expected, 0.0% prior
Average Workweek, May (8:30): 34.5 actual versus 34.5 expected, 34.5 prior
Consumer Credit, April (15:00): $26.8B actual versus $15.0B expected, $19.5B prior (revised from $17.5B)

Wholesale Inventories, April (10:00): 0.3% expected, 1.1% prior
JOLTS - Job Openings, April (10:00): 4.014M prior

June 11 - Wednesday
MBA Mortgage Index, 06/07 (7:00): -3.1% prior
Crude Inventories, 06/07 (10:30): -3.431M prior
Treasury Budget, May (14:00): -$138.7B prior

June 12 - Thursday
Initial Claims, 06/07 (8:30): 315K expected, 312K prior
Continuing Claims, 06/07 (8:30): 2638K expected, 2603K prior
Retail Sales, May (8:30): 0.7% expected, 0.1% prior
Retail Sales ex-auto, May (8:30): 0.4% expected, 0.0% prior
Export Prices ex-ag., May (8:30): -1.2% prior
Import Prices ex-oil, May (8:30): 0.0% prior
Business Inventories, April (10:00): 0.4% expected, 0.4% prior
Natural Gas Inventor, 06/07 (10:30)

June 13 - Friday
PPI, May (8:30): 0.2% expected, 0.6% prior
Core PPI, May (8:30): 0.1% expected, 0.5% prior
Michigan Sentiment Preliminary, June (9:55): 82.9 expected, 81.9 prior


By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

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

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Sunday, June 01, 2014

NASDAQ, SOX Still a No-Decision at Key Resistance

MARKET SUMMARY

- Stocks indecisive Friday, but rally back from midday weakness.
- NASDAQ, SOX still a no-decision at key resistance. Heck, throw in DJ30 as well.
- Leadership pausing, some already in good position to break back up.
- Spending fails to show a Q2 rebound. Indeed it flips negative for the first time in a year.
- Chicago PMI solid thanks to autos.
- Gasoline consumption reported down 75% from peak.
- Now we see if the leaders can pull NASDAQ, SOX through resistance.

Friday did not answer any questions about resistance, or at least nothing definitive. NASDAQ is still right at the January peak and SOX is still bumping the April peak while SP500 continues to press on with yet more new highs.

Stocks started sloppy but hardly under pressure. Midday, however, the pressure arrived and shoved stocks down hard. Some firings, er, layoffs in the Obama Administration appeared to rattle the market. Maybe it was not so much the resignations/firings but the notion that the VA is just ONE of the many massive bureaucracies in the federal government. You would think that one charged with caring for our veterans would have people doing it as a labor of love. Perhaps they are; perhaps this is just more proof that huge government is bad for everyone with its waste and corruption. Perhaps that had a sobering effect on investors. Nah. It should, but that was not it.

In any event, stocks recovered in the afternoon session. They didn't get back to positive across the board, but for the most part they got pretty darn close. That at least showed some character as stocks did not dive after a decent rally upside and indeed came back from some selling.

SP500 3.54, 0.18%
NASDAQ -5.33, -0.13%
DJ30 18.43, 0.11%
SP400 -0.18%
RUTX -0.49%
SOX 0.11%

Volume: +8% on both NYSE and NASDAQ. Don't take much from that excess volume (back above average on NYSE) as it was rebalance time and that rushed volume higher late.


THE MARKET

CHARTS

The week was something of a draw. Tuesday a solid upside session to start the shortened week. Wednesday a stall or pause, Thursday the upside resumed though likely before stocks were ready (at least across the board), and Friday it was back to resting, more or less.

NASDAQ: Slipped back below the January peak after closing above that level Thursday. Until it clearly breaks it and puts it out of our misery that January high is important. Thursday's slight break on lower volume was nothing to hang a hat on. With the big names that led NASDAQ to the January high taking a breather or at least slowing their ascent, it is no surprise that NASDAQ stalled at this level. Some of those stocks are ready to go yet again, e.g. GOOG. Others are just now taking a breather (e.g. TRIP, PCLN, AAPL) so NASDAQ needs to find some more drivers or wait for these others to finish their pause/test/rest or whatever they intend after the rally to this point.

SOX: Great run to the April peak and then three days this week testing it. Not selling, just slowing its move and working laterally. Good enough, but as noted earlier, the action is indeterminate whether it will hold and continue or stall out. Recall MACD, while moving back up, is still lagging considerably behind the price move.

SP500: New session, new price high. Volume surged but there was a lot of NYSE rebalancing ongoing.

DJ30: Similar to SOX as the Dow approaches the mid-May all-time high, still below it, still showing lagging MACD.

RUTX: Down the most of any index on the Friday session, but still in a good consolidation as it tested the 50 day EMA and held. Again, a very good consolidation in place, and the Russell has itself in position to hold and resume the move.

SP400: Cruised higher into Tuesday then started to stutter, but no issues. The midcaps simply slid slightly higher up the trendline recaptured on the Tuesday gap and run. Not bad positioning, and if RUTX and the small caps can pull off the consolidation and continue upside, SP400 likely goes with them.


LEADERSHIP:

Basically a day where the leaders paused or continued their pause after good upside moves.

Techs: Some decent moves, e.g. STX, RVBD, but at this stage there are a lot of stocks with good moves under their belts so the session was slower.

Big names: A lot of pauses: PCLN, TRIP, AAPL. GOOG is in a great pullback and NFLX continued upside yet again.

Chips/Electronics: Mostly took the day off though OVTI exploded higher on its earnings beat, letting us bank some almost 200% gain on the options. AFFX, KLIC and others are in nice pullbacks.

Social, internet-based: Took a breather, e.g. FB, TRLA, Z

Energy: Very mixed. After starting a bounce post-pullback, many stalled, e.g. AXAS, OAS, TPLM. HAL and SLB (service companies), however, managed nice gains.



OTHER MARKETS

Euro/Dollar: Broke through the 200 day SMA Wednesday, faded to test through Friday, still a solid move and in the upper half of the range.

1.633 versus 1.3603 versus 1.3593 versus 1.3635 versus 1.3632 versus 1.3654 versus 1.3687 versus 1.3704 versus 1.3170 versus 1.3698 versus 1.3716 versus 1.3713 versus 1.3702 versus 1.3754 versus 1.3853 versus 1.3914 versus 1.3928 versus 1.3878 versus 1.3875 versus 1.3865

Dollar/Yen: Up Friday after fading on the week. in the lower half of the range.

101.7765 versus 101.775 versus 101.7435 versus 101.985 versus 101.98 versus 101.80 versus 101.37 versus 101.2895 versus 101.40 versus 102.65 versus 101.49 versus 101.52 versus 101.84 versus 102.27 versus 102.15 versus 101.73 versus 101.81 versus 101.53 versus 101.73 versus 101.68 versus 102.11


Bonds: Flat Friday after a big upside Wednesday gap. Testing back after another surge higher in the continuing uptrend up the 20 day EMA.

10 year: 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66% versus 2.62% versus 2.60% versus 2.59% versus 2.59% versus 2.61% versus 2.59% versus 2.67% versus 2.69% versus 2.70% versus 2.67% versus 2.68% versus 2.69% versus 2.73% versus 2.71% versus 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79%


Oil: 102.75, -0.65. Faded to the 20 day EMA to test the run to the top of the range. Holding at some support for now but could easily roll back down given the top of the range held again.

Gold: 1246.00, -10.30. Harsh week for gold even as the gold commercials on the radio predict $2000/oz gold this year. Broke below the prior lows in the test that formed since early April and still has not found bottom on this decline.


MARKET STATISTICS

NASDAQ
Stats: -5.33 points (-0.13%) to close at 4242.62
Volume: 1.808B (+8.46%)

Up Volume: 734.28M (-395.72M)
Down Volume: 1.06B (+526.39M)

A/D and Hi/Lo: Decliners led 1.55 to 1
Previous Session: Advancers led 1.43 to 1

New Highs: 71 (-13)
New Lows: 31 (+3)

S&P
Stats: +3.54 points (+0.18%) to close at 1923.57
NYSE Volume: 527M (+8.21%)

A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Advancers led 2.04 to 1

New Highs: 202 (+2)
New Lows: 71 (+9)

DJ30
Stats: +18.43 points (+0.11%) to close at 16717.17


SENTIMENT INDICATORS

VIX: 11.4; -0.17
VXN: 13.77; -0.07
VXO: 10.56; -0.29

Put/Call Ratio (CBOE): 0.89; +0.17


Bulls and Bears:

Bulls are up yet again, moving ever closer to that level that upended the runs upside in January. 58.3% versus 57.2% versus 55.1%

Bears fade again: 17.3% versus 18.3% versus 19.4%

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 58.3%
57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 17.3%
18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: 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.


THE NEWS

As usual, the good, the bad, the irrelevant. Incomes in April were the smallest gain in a year while spending turned negative for the first time in a year as well. On the other hand, Chicago PMI surged to 65.5 (along with prices and declining employment). Michigan sentiment May final was 81.9; the irrelevant.

Income, April: 0.3% versus 0.3% expected versus 0.5% March.
Smallest rise in a year and well off the March level when all of that bad weather buffeted the nation. So we made less money in a month that was supposed to show a rebound with people getting back to work?

Spending, April: -0.1% versus 0.2% expected, 1.0% March (from 0.9%).
You would think that surely spending would surge as Americans emerged from the forced hibernation, as hungry for consumption as a bear emerging from its winter slumber. Yet spending DECLINED for the first time since April 2013, and the drop from 1.0% in March to -0.1% was the largest since September 2009. First month of Q2 and its supposed 4% GDP growth. You have to wonder if GS, after raising its Q2 GDP forecast following the horrid -1% tally in the second Q1 iteration, is reconsidering already.


PCE: Despite changing calculations to avoid showing inflation, the PCE is starting to show . . . inflation.

0.2% as expected versus 0.2% in March.

Year/year: 1.6%, the largest increase since 3/2013. Seems everything is rising except for wages.


Chicago PMI, May: 65.5 versus 60.3 expected versus 63.0 April.

Strongest reading since 3/2011. Very solid, screaming upside. Could it be . . . autos? Sure it can! We learned this past week that GM ramped up production for its Cadillac ELR even though it is not selling worth a flip. It costs more than Tesla yet gets far less electric mileage. We read reports of new autos stockpiled all over the US and indeed the world, parked in open spaced (not car lots) because there is even too much inventory to cram down on dealers. Of course autos fall in Chicago's Midwest region . . .

Still, it was a good overall report as long as autos are not the root of the growth: if they are and inventories are indeed so massive, it cannot last. For now, however, as with all things economy, the attitude seems to be don't look too deep and discover there are real problems.

New orders: 70.2 versus 68.7 April
Employment: fell to 54.6 from 57.8.
Prices: Exploded higher to 66.8 from 55.2. Inflation anyone?


Scary Statistic of the Week: Gasoline usage is 75% off of its peak from 1998. Sure there are more efficient cars out there now, but not enough on the road and not efficient enough to account for a 75% reduction in consumption.

My opinion? We never really recovered from the recession that started at the end of the Clinton administration and ran into Bush 2. Bush had some decent policies but some bad ones as well, and they worked at cross purposes, undermining the recovery. Then there was Medicare Part D (prescription drugs) and that burden on top of all the wars.

Much of the rebound was built on Greenspan keeping rates low forever, Congress ignoring the housing issues (remember Dodd, Frank, etc. and their comments about the housing market and Schumer's threats against lenders if they did not make sub-prime loans?), and Bush complicit in wanting everyone to have a house whether they could afford it or not. In retrospect it was a grand Ponzi scheme. Where was the money coming from?



Then Obama took over and everything was blamed on capitalism when it was government and quasi government entities keeping money artificially high and rates artificially low in an attempt by government to provide everything to everyone. Obama took that to a new level. At least Bush allowed business to thrive and thus we had jobs and the taxes to pay for a lot of it. A partially real economy.



Obama attacks business, has wiped out the small business sector, and in so doing has decimated the middle class while further enriching the very high end. Five years of a recovery and the US sees more businesses closing than opening. Most of the wage gains in the 'recovery' are actually transfer payments, i.e. taxes taken from those who benefitted the most from the policies that favor the huge corporations, the very wealthy (ironic, isn't it, given Obama claims to be the champion of the small guy?), and those in the middle class lucky enough to still have decent jobs, and given to the lower end of the socioeconomic scale. Unfortunately and sadly, that lower end continues to grow as the numbers of people out of the workforce and the unemployed is staggering, fully one-third of the population. 20% of the US households have NO ONE with a job.

With one/third of the population out of the workforce and out of work, 20% of households with no jobs at all, inflation surging in food, gasoline, and housing (rents, home prices), weekly wages falling in a fifth year of recovery, the 24 to 54 age demographic still down 2.3M jobs from pre-recession levels, $1.3T in unpaid student loans because graduates cannot find jobs, it is no wonder gasoline usage is down.

Another statistic that shows the sad state of the US 'recovery' that is not. Just as the Bush recovery never really got the US back on track of the Reagan/Clinton economic expansion, the Obama recovery has only kept the US from falling over the brink, and I am not sure that is such a good thing as that would at least clear out the dead wood. Since 2000 the US has been in decline, and the past 5 years that decline has accelerated. Think of it as the PMI reports where they are in contraction but just not contracting at as fast a rate.

Thus when I hear those analysts and guests on the financial shows discussing how the economy is finally recovering, how the long drought in the economy is ending, I realize they are talking hopes and wishes, not facts. The economy is better than it was in 2008, but that is no claim to fame, like a basketball team losing by just 30 points instead of its usual 50 points. As things are going, as a nation we will be the first generation in modern times to hand our children a lower standard of living. The even sadder thought is that we also hand them no hope for anything better.


NEXT WEEK

Friday we did not do much but we did hedge a bit. CAT and AIRM are in bearish patterns, they broke lower, we picked up some put options. On the week we added to some good upside positions and banked some nice gain on those taken as the rally got underway, e.g. IDCC, PCLN, OVTI, YELP, TRLA, Z. Other positions are close to the targets, and on a renewed push next week we can bank some more.

Overall the rally looks to be in good shape what with RUTX testing nicely, SP400 more or less doing the same, and SP500 moving to higher and higher highs. Still some serious unanswered questions, however, from NASDAQ and SOX, and those are the issues to be resolved next week. Good action to this point, stalling for now at the prior highs, but with big names still looking very good and providing a lot of support.

It is Jobs Report week and the associated drama that entails. Before that, however, there is the ISM, construction, factory orders, the Fed Beige Book . . . plenty to keep investors occupied as stocks test the run in the relief rally.

Yes, still a relief rally to this point even with new highs on SP500. Low volume, lagging MACD, still serious resistance for growth indices. Counter that with some good action on RUTX and SP400, trying to set up a next leg in the rally.

We will watch how the initial leaders test, how the next wave is setting up, and be ready with buys if they show up. The rally is still in relative disdain pretty much everywhere, and that is not bad if the patterns continue to set up. That is exactly what they did when this move started three weeks back, and if they do it again, so be it.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4242.62

Resistance:
4246.55 is the January 2014 peak. Key level.
4277 is the March lower gap point
4289 is the July 2000 recovery high
4361 is the lower November 2012 trendline
4372 is the March 2014 high

Support:
The 50 day EMA at 4152
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4025
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.


S&P 500: Closed at 1923.57

Resistance:

Support:
1902 from early May was the intraday all-time high.
1901 is the December 2012 up trendline
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
The 50 day EMA at 1877
The December and January highs at 1848
1848 is the lower trendline from 11/2012
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
The 200 day SMA at 1796
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point


Dow: Closed at 16,717.17

Resistance:
16,736 is the all-time high from May 2014
16,951 is a lower trendline off the 11/2012 low

Support:
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
The 50 day EMA at 16,464
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 15,931
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

May 30 - Friday
Personal Income, April (8:30): 0.3% actual versus 0.3% expected, 0.5% prior
Personal Spending, April (8:30): -0.1% actual versus 0.2% expected, 1.0% prior (revised from 0.9%)
PCE Prices - Core, April (8:30): 0.2% actual versus 0.2% expected, 0.2% prior
Chicago PMI, May (9:45): 65.5 actual versus 60.3 expected, 63.0 prior
Michigan Sentiment -, May (9:55): 81.9 actual versus 81.4 expected, 81.8 prior

June 2 - Monday
ISM Index, May (10:00): 55.6 expected, 54.9 prior
Construction Spending, April (10:00): 0.7% expected, 0.2% prior

June 3 - Tuesday
Factory Orders, April (10:00): 0.5% expected, 1.1% prior
Auto Sales, May (14:00): 5.3M prior
Truck Sales, May (14:00): 7.5M prior

June 4 - Wednesday
MBA Mortgage Index, 05/31 (7:00)
ADP Employment Change, May (8:15): 200K expected, 220K prior
Trade Balance, April (8:30): -$41.3B expected, -$40.4B prior
Productivity-Rev., Q1 (8:30): -2.5% expected, -1.7% prior
Unit Labor Costs, Q1 (8:30): 4.8% expected, 4.2% prior
ISM Services, May (10:00): 55.5 expected, 55.2 prior
Crude Inventories, 05/31 (10:30): 1.657M prior

June 5 - Thursday
Challenger Job Cuts, May (7:30): 5.7% prior
Initial Claims, 05/31 (8:30): 310K expected, 300K prior
Continuing Claims, 05/24 (8:30): 2650K expected, 2631K prior
Natural Gas Inventor, 05/31 (10:30): 114 bcf prior

June 6 - Friday
Nonfarm Payrolls, May (8:30): 220K expected, 288K prior
Nonfarm Private Payrolls, May (8:30): 230K expected, 273K prior
Unemployment Rate, May (8:30): 6.4% expected, 6.3% prior
Hourly Earnings, May (8:30): 0.2% expected, 0.0% prior
Average Workweek, May (8:30): 34.5 expected, 34.5 prior
Consumer Credit, April (15:00): $15.0B expected, $17.5B prior


By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

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

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