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3/11/2015 Investment House Report
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Targets hit: None issued
Buy alerts: SPR
Trailing stops: BWLD; JD
Stop alerts: None issued
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- And the small caps, midcaps lead.
- Dollar effect: large cap indices sell, money rotates to smaller cap indices.
- China economic data fades again, raising hope for stimulus in a bailout world.
- Did the Fed wait for a worldwide recession to hike?
- DJ30, SP500 still in limbo, NASDAQ still has room to test, RUTX and SP400 trying to hold the 50 day EMA. As of course, did DJ30 and SP500.
- Leaders move higher, others set up. Watching to see if leaders can lead higher.
Wednesday saw a lot of nothing in terms of the large cap index moves, but there was some life for the small and midcaps as well as some real substance in several leaders.
SP500 -3.92, -0.19%
NASDAQ -9.85, -0.20%
DJ30 -27.55, -0.16%
VOLUME: NYSE -8.5%, NASDAQ -2.2%
A/D: NYSE 1.3:1, NASDAQ 1.3:1
The dollar was up once more, really up versus the euro pre-market, but futures were up. How can that be when Tuesday we were informed that stocks were lower because the dollar was too strong? Perhaps because that is not the reason.
China? Data was weak with Industrial Production at 6.8% versus 7.9% prior. 6.8% sounds pretty good, but it was the worst reading for China since the great financial crisis. Weaker China surely means more stimulus is on the way and even with the dollar surging, a weak China is worth some S&P futures gains.
The world has become a place where mistakes is rewarded with money. If a bank makes poor loan decisions or focuses on segments that do not produce, it gets handouts to avoid closing. Homeowners buy way too much house and cannot afford the payments as soon as the economy hiccups the slightest bit, then scold the banks for lending and force them to forgive principal and lower mortgage repayment. The government pumps billions into student loans, prices surge in textbook inflation, costs to students balloon accordingly for a 4-year degree, students cannot find a job thanks to the horrid recovery the government has fostered . . bail them out by forgiving the loans. A government over-taxes businesses and individuals, overspends that money, the economy slows, so massive bailout.
That is why the market gets excited over poor economic news: more likelihood of stimulus and we all know that stimulus inflates stock prices. Now a contrast to that is the current situation in the US. The Fed has kept rates at 0% once again for a long, long time. It started feeling the uneasiness of being at 0% rates if another economic slowdown rolled in. So it started talking rate hikes and the basis for it hiking. Now it has talked itself into a corner and will have to raise rates. That is okay because the Fed WANTS to raise rates in order to get some arrows back in the quiver for the next crisis.
Fed moving too late?
Problem is, some say the next crisis is upon us. Peter Schiff stated Wednesday that the Fed had plenty of opportunity to move rates back up over the past year, but it refused to act. It took the slow course and now that it is ready to act it is facing, in Schiff's view, a new world recession. Waited too long so now what? Go back to QE?
What about that large cap/small cap split Wednesday?
In the afternoon we heard commentary from some about the strange action that saw the small caps and midcaps moving nicely higher while the large caps traded negative. Was it really strange action?
Of late I have written a bit about the stronger dollar and how it really benefits the US and most citizens even if those working at the big multinational companies moan about how a strong dollar is an economic negative.
What indices hold the most multinationals? Large cap. What companies are mostly hurt by a still soaring dollar? Large cap. Given that, Wednesday money moved to the small cap and midcap areas.
How poetic. The large multinationals squeal their earnings will be lower thus hurting the economy and of course the stock market. It has been a rather obvious pander to get the government to act, to bail them out perhaps? Tuesday it was working as we noted the White House weighed in, worried the dollar would hinder economic growth.
Then the market responds by . . . rotating money to those areas that benefit from a stronger dollar.
So just how bad is a rising dollar to the US? It allows domestic companies with clientele mostly in the US to buy raw materials cheaper, to have cheaper energy sources (denominated in dollars after all), and goodness gracious, maybe even some foreign investment seeking a country with an appreciating currency versus a world attempting to race to the bottom of the currency pond.
I really cannot cry for the large cap companies that have had it so incredibly good for the entirety of the 'recovery.' Free money at the start, 0% interest rates for any further needs, a Fed actively inflating their stock values so the officers can give themselves bonuses and salary increases as stated in their employment contracts, using that free and easy money to buy back stock to further enhance their take home pay. I know their stock prices will suffer, but look what is happening: money is rotating to the smaller cap areas that might FINALLY prosper. Oh, and rotation IS a healthy sign for a market.
NASDAQ: After an early move higher, NASDAQ reversed and moved lower, Still heading towards the 50 day EMA, 38% Fibonacci, December high. It had a chance to make a move higher and it did not.
SOX: Rallied early as well but could not hold a move over the 20 day EMA. Reversed, managed to hold a gain, but as with NASDAQ, did not change its sag toward its 50 day MA and 38% Fibonacci retracement (the former is 10 points away, the latter 5 points.
SP400: A very decent bounce off the 50 day MA. Of course SP500 and DJ30 posted 50 day EMA bounces Monday after the Friday selling and see where that got them. Would have been nice if NASDAQ finished its pullback with the SP400 and RUTX at their 50 day EMA, but not the case Wednesday. Nice bounce from where you would expect it to bounce, and that was good, but it was not all that impressive. Well maybe it was impressive given the large caps, but it didn't change the situation that much.
RUTX: This is a good looking bounce as with SP400, and the same questions arise. Can it hold or is it an SP500/DJ30 like false move, a bounce that sets up the 50 day EMA crash? If SOX and NASDAQ test and hold, RUTX has better odds of holding this level even if it undercuts it during the session.
SP500: After torpedoing the 50 day MA Tuesday, SP500 didn't even make it up to the 50 day EMA, didn't even try. A modest wave at moving higher then rolled over. Now, this was not a massive decline; had those on Friday and Tuesday. There is not much, however, to suggest that just because SP500 didn't continue to sell as hard as it did Tuesday that the pullback is over. It is caught in no-man's land of its own.
DJ30: Bounced from a lower open but stalled just below 17,750 and slipped back to a modest loss. As with SP500, the Dow is in no-man's land, below the prior peaks, below the 50% Fibonacci retracement, and looking for a place to land.
With the big caps down, look at some of our positions and plays ready to enter that are up: AAOI, AKAM, ALK, GRUB, KE, QRVO, SWKS, SUNE, TXMD, VIPS, WWWW.
Holding up well: BDSI, FLTX, FSLR, LNKD, MTSN.
Industrial Machinery: Hanging in. CAT still holding the double bottom. DE faded but in a good pattern. TEX holding the 50 day EMA.
Chemicals: Some nice patterns, some nice tests. ASH is great at the 50 day EMA. AGU is near the 20 day EMA with a couple of doji. Not all are great: CF, MON.
Chips: NXPI is still working on an excellent gap test. Getting ready for a new play. SWKS went on the SP500, still solid. MTSN nicely testing the 20 day EMA. MLNX bouncing off the 50 day EMA . SUNE surging. AAOI looks locked and loaded.
Retail: Some interesting action. KIRK surged up through its 50 day MA. JWN is in a decent 50 day EMA test. COST didn't stick its move. ROST has held its upside gap. TJX is cracking its 50 day EMA.
Internet: Some life. WWWW is working well. VIPS surged too. GRUB holding up well. WUBA.
Stats: -9.85 points (-0.2%) to close at 4849.94
Volume: 1.771B (-3.29%)
Up Volume: 974.14M (+629.85M)
Down Volume: 848.71M (-671.29M)
A/D and Hi/Lo: Advancers led 1.32 to 1
Previous Session: Decliners led 3.09 to 1
New Highs: 61 (+11)
New Lows: 89 (-12)
Stats: -3.92 points (-0.19%) to close at 2040.24
NYSE Volume: 780.5M (-8.42%)
A/D and Hi/Lo: Advancers led 1.34 to 1
Previous Session: Decliners led 2.68 to 1
New Highs: 40 (+19)
New Lows: 113 (-13)
Stats: -27.55 points (-0.16%) to close at 17635.39
VIX: 16.87; +0.18
VXN: 18.42; +0.4
VXO: 17.64; +0.39
Put/Call Ratio (CBOE): 1.11; +0.02. Fourth consecutive 1.00 session, 5 out of 8. Getting to the level that can support a bounce. Not an indicator that means just by itself, but a piece of the puzzle.
Bulls and Bears: Will be interesting to see how the selling has impacted bulls after they tickled the key 60% level.
Bulls: 58.7% versus 59.5% versus 56.6% versus 52.5% versus 49.0%
Okay, a bit of a fade even as the remnants of the upside were still around. Still too many bulls and too few bears, and this is still a negative for the market.
Bears: 14.1% versus 14.1% versus 14.1% versus 15.2% versus 16.3% versus 16.3% versus 17.4%.
Stuck in the mud.
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.
59.5% versus 56.6% versus 52.5% versus 49.0% versus 53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5% versus 49.5% versus 51.5% versus 53.4% versus 56.5% versus 56.4% versus 55.5% versus 54.6% versus 47.0% versus 35.3% versus 37.8% versus 45.5% versus 47.5% versus 48.0% versus 52.5% versus 57.6% versus 56.1% versus 52.5%
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
14.1% versus 14.1% versus 15.2% versus 16.3% versus 16.3% versus 17.4% versus16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% versus 14.8% versus 13.9% versus 13.8% versus 14.9% versus 14.8% versus 15.1% versus 16.3% versus 18.2% versus 17.3% versus 14.1% versus 15.1% versus 15.3% versus 15.2% versus 14.1% versus 13.3% versus 15.1% versus 16.2%
Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.
Bonds (10 year): 2.11%
2.13% versus 2.20% versus 2.245% versus 2.11% versus 2.12% versus 2.12% versus 2.08% versus 1.98% versus 2.04% versus 1.96% versus 1.98% versus 2.06% versus 2.09% versus 2.11% versus 2.08% versus 2.14% versus 2.03% versus 1.99% versus 1.98% versus 1.99% versus 1.95% versus 1.94% versus 1.81% versus 1.77% versus 1.78% versus 1.68% versus 1.67% versus 1.76%
Another upside session to the 20 day EMA. Still looks like a relief bounce but there is that island reversal.
Oil: 48.21, -0.19. Holding at the low from two weeks back. If it does then the Tuesday dive lower is not that horrid a move.
Gold: 1150.62, -9.50. Still diving, now almost at the early November low.
$/JPY: 121.50 versus 121.80 versus 121.60 VERSUS 120.72 versus 120.14 versus 119.71 versus 119.74 versus 120.179 versus 119.63 versus 119.48 versus 118.86 versus 118.95 versus 118.78 versus 119.08 versus 119.04 versus 118.70 versus 119.34 versus 118.83 versus 118.915 versus 120.26 versus119.48 versus 118.62 versus 118.987 versus 117.56 versus 117.21 versus 117.58 versus 117.52 versus 117.40 versus 118.30
Testing the big move from last week into Monday. No signs of selling off.
Euro/$: 1.0546 versus 1.0700 versus 1.0829 versus 1.0849 versus 1.1030 versus 1.1079 versus 1.1175 versus 1.1182 versus 1.1197 versus 1.1195 versus 1.1362 versus 1.1337 versus 1.1385 versus 1.1379 versus 1.1366 versus 1.1398 versus 1.14 versus 1.1390 versus 1.1409 versus 1.1294 versus 1.1315 versus 1.1324 versus 1.1318 versus 1.1474 versus 1.1387 versus 1.1481 versus 1.1336 versus 1.1290 versus 1.1318 versus
This is wild. Another surge upside, straight up the past two weeks after the breakout. About to get overdone near term for a test.
Jobless claims and February retail sales are on tap as well as reaction to the most recent US bank stress tests. All but two passed. Much rejoicing. I feel so safe.
SP500 looks weak. DJ30 looks weak. No-man's land. RUTX at the 50 day MA. SP400 at the 50 day MA. Not bad but need help. NASDAQ closing in on the 50 day EMA and the 38% Fibonacci retracement. SOX is already at a key level the November/December peaks. If NASDAQ helps it likely holds. Not in bad shape but not at that bounce point right now.
So, might not be ready to try a bounce. Some great leadership out there moving higher, others testing and in position to move higher. Question is, are the indices. RUTX, SP400 are and NASDAQ will be shortly. Basically where they were Tuesday and the session didn't do all that was needed to finish setting up. Of course they have to fend off SP500 and DJ30 that look as if they are in the middle of continued selling. Still looking for which side wins, but NASDAQ has to get to the point where it can put in a legit attempt at a move.
Actually making some money on upside positions, and that is a positive as it shows the market selling is not that severe, but they are the minority. Need to see those stocks in good patterns start making moves as well. Some leaders are stirring, moving upside. Others are set up well to move higher. That is always a good sign: leaders should move out early and start to lead. Will the rest follow, however? Just be ready to act, and we are.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4849.94
The 10 day EMA at 4919
5008.57 is the March 2015 post-bear market high
5132.52 is the 3/2000 all-time high
The 50 day EMA at 4823
4816 is the 38% Fibonacci retracement of the February run
4815 is the December 2014 prior market peak
4811 is the November 2014 peak (intraday)
4774 is the January high
4751 is the January 2015 lower high
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
The 200 day SMA at 4572
4566 is the lower gap point from late October
4563 and 4567 are the January lows
4547 is the December low
4486 is the July 2014 high
4372 is the March 2014 high
The August low at 4321
4316 is the lower gap point from October 2014
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
S&P 500: Closed at 2040.24
2062 is the January 2015 lower high
The 50 day EMA at 2066
2076 is the all-time high from November
2079 is the intraday all-time high from November
2094 is the December 2014 high, the prior all-time high
2108 is the lower trendline from 11/2012
2119.59 is the all-time high
2173 is the December 2012 up trendline
2011 is the September prior all-time high
The 200 day SMA at 2002
1991 is the July 2014 high
1972 is the December 2014 low
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
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
1775.22 is the October prior all-time high
Dow: Closed at 17,655.58
The 50 day EMA at 17,831
17,923 is the January 2015 lower high
17,991 is the early December interim
18,104 is the December high
18,289 is the all-time high
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,256
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,736 is the penultimate all-time high from May 2014
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
16,341 is the May low
16,334 is the August 2014 low
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,855 is the October 2014 low
15,739 is the December 2013 low
March 10 - Tuesday
JOLTS - Job Openings, January (10:00): 4.998M actual versus 4.877M prior (revised from 5.028M)
Wholesale Inventories, January (10:00): 0.3% actual versus -0.1% expected, 0.0% prior (revised from 0.1%)
March 11 - Wednesday
MBA Mortgage Index, 03/07 (7:00): -1.3% actual versus 0.1% prior
Crude Inventories, 03/07 (10:30): 4.512M actual versus 10.303M prior
Treasury Budget, February (14:00): -$192B expected, -$193.5B prior
March 12 - Thursday
Initial Claims, 03/07 (8:30): 306K expected, 320K prior
Continuing Claims, 02/28 (8:30): 2421K expected, 2421K prior
Retail Sales, February (8:30): 0.4% expected, -0.8% prior
Retail Sales ex-auto, February (8:30): 0.6% expected, -0.9% prior
Export Prices ex-ag., February (8:30): -1.0% prior
Import Prices ex-oil, February (8:30): -0.7% prior
Business Inventories, January (10:00): 0.1% expected, 0.1% prior
Natural Gas Inventor, 03/07 (10:30): -228 bcf prior
March 13 - Friday
PPI, February (8:30): 0.3% expected, -0.8% prior
Core PPI, February (8:30): 0.1% expected, -0.1% prior
Mich Sentiment, March (10:00): 95.8 expected, 95.4 prior
End part 1 of 3
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