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3/14/2015 Investment House Report
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Targets hit: None issued
Buy alerts: DIA; RH
Trailing stops: None issued
Stop alerts: LNKD
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- Sloppy Friday sees DJ30, SP500 revert to old ways, relative strength in RUTX and SP400, and SOX post a gain.
- Dollar continues its surge, pushing more rotation.
- Near trend continues with money rotating from large caps to smaller caps.
- Michigan Sentiment shows a rare decline.
- Gallup Poll: Government dissatisfaction tops the list of US citizen gripes.
- Growth index patterns are not bad, but leadership took on some water the past week.
- FOMC 'no patience' meeting set for this week. Will the market now have patience?
Back to Tuesday as large cap NYSE indices give up gains, small and mid-caps lead.
Tuesday saw all indices fall, but SP400 and RUTX held their 50 day MA while SP500 and DJ30 plowed them under. Thursday all stocks advanced and DJ30 even recaptured the 50 day MA it just crashed. Looked as if they were back on the same page though RUTX and SP400 were really nice, gapping back through the gap lower Tuesday.
Friday it was back to Tuesday. DJ30 and SP500 gave up the goods, i.e. the bounce from Thursday that took DJ30 back up through the 50 day EMA. At the same time, RUTX and SP400, both of which sold early, filled that Thursday upside gap intraday and rebounded rather nicely. Large cap struggling on the stronger dollar (up again) while the smaller caps continued working on good patterns.
NASDAQ was lower but bounced off a 50 day EMA intraday test. SOX actually scored a gain, using that Thursday gap and reversal that tested the 50 day EMA in something of a slingshot effect, moving through the 20 day EMA on the close.
So, RUTX and SP400 leading (though lower), SP500 and DJ30 struggling (with a stronger dollar), NASDAQ hanging in there, and SOX trying to move up and lead with SP400 and RUTX.
SP500 -11.47, -0.55%
NASDAQ -17.71, -036%
DJ30 -130.75, -0.72%
VOLUME: NYSE +7.8%, NASDAQ scratching higher at +0.23%. Another day of distribution on the NYSE large caps. Not bad action on NASDAQ as it bounced off the 50 day EMA and recovered some lost ground.
A/D: NYSE -2.4:1, NASDAQ -3:2.
Yes, the large caps struggled again as the small and midcaps performed better. Another bout of strong dollar-itis.
What about that dollar? Broke the 1.05 barrier, closing at 1.0494 euro/dollars. Some say parity is coming soon (certainly looks easy to get there), others say an all-time low for the euro at $0.80 is a given before this is finished.
Of course that puts the hurt on the large caps that have fed so heavily on the weak dollar and the policies that allowed them to rake in big profits . . . most of which are left overseas thanks to our tax code . . and avoid any investment in the US outside of dividends, stock buy backs, and the occasional acquisition, funded of course, by the use of stock at inflated values.
The strong dollar is a grave danger . . . to my bonus structure.
And what are those corporations saying if they don't get a lower dollar? It will hurt . . . who? Certainly not the US consumer who gets virtually no benefit from those overseas profits. No investment, no new innovations, no new full-time, breadwinner jobs.
I have beaten that horse quite a bit of late, but with EVERY guest on every financial stations berating a strong dollar there has to be a counter voice.
Michigan Sentiment: A bit less exuberant
91.2 versus 95.8 expected, 95.4 February. Wow not heading up for once. What could be holding the consumer back? Realization that the decent jobs are not pouring fourth? Or maybe it is the anti-dollar talk convincing them things are not going to be good. Gasoline prices back up? Or maybe the oil patch workers in Michigan are voicing displeasure over good jobs lost.
They said gas prices were going lower!
Gallup Poll: What is important to Americans right now.
ISIS? National security? Budget deficit? No. Not even in the top 8.
Surely the economy? No, even that falls second to the number 1 concern.
Perhaps it is something that aggregates ALL of the concerns, frustration, and indeed, anger in the US:
Dissatisfaction with the government.
Spaces 2 through 7: Economy, Unemployment/Jobs, Immigration/illegal aliens, healthcare, terrorism, and education.
Hmmm. All areas over which the government now asserts primary control. No wonder government dissatisfaction, what many are now viewing as the cause of so many of our troubles, sits atop the list.
Rig Count: -67 on the week to 1125.
Fourteen weeks of decline and picking up speed. But - - production continues unabated. Of course we know why: producers trying to make what they can on their most recent wells drilled to get their money back before things really hit the skids, i.e. when the Cushing, OK storage facility is topped off and the oil has to go into the refineries to be processed. When that happens, oil goes to $30 or less from what our friends in the patch are telling us. So, produce as if there is no tomorrow (or at the legal limits set by the state) and get what you can while you can. They know what is coming and they want the cash in hand now versus prices $20/bbl less.
RUTX: Not the leader on the day but perhaps the best situated. Gapped lower Tuesday to the 50 day EMA, gapped right back through the gap Thursday. Friday the small caps sold back, but held the gap point and rebounded to cut the losses. Very nice action as the small caps benefit from the stronger dollar as investors and traders push money their way versus the large caps.
SP400: After gapping higher Thursday through the Tuesday gap point, the midcaps tested and filled the gap intraday, recovering a good chunk of the downside. Perhaps not as solid as RUTX, but similar action and better than the large caps.
SOX: Leader on Friday, The chips managed to recover the 20 day EMA after the Thursday gap lower that tested the 50 day EMA and the reversed to flat. Nice test and reversal followed by some more upside Friday. Not huge, now all-powerful, but the move works well.
NASDAQ: Fell to the 50 day EMA, still over the November peaks, holding that level Tuesday and Wednesday, bouncing Thursday, giving it up Friday but then rebounding to cut the losses. Not exactly a powerhouse, but holding where it needs to, actually consolidating.
DJ30: Maybe not horrid, but it has to prove it can make the upside move. Ugly crash Tuesday, held the line and rebounded through the 50 day EMA Thursday. Friday, it was in another sharp drop, but the late market bounce pulled at least one of its chestnuts out of the fire. Still closed below the 50 day MA, but at least it held the same lows for the week and bounced. Not in love with it as it looks a bit toppy considering that late December high. Picked up a few DIA put positions ahead of the close in the event the downside cranks up again Monday.
SP500: Same action as DJ30. Identical but for the large cap index never recaptured the 50 day EMA Thursday and never crossed it Friday. Otherwise basically the same.
SUMMARY: It looks as if money is not necessarily leaving the market, at least not wholesale. Volume is up on SP500 and DJ30 selling, but at the same time you see small and midcaps getting money pushed their way. When there is rotation, one area's high volume selling is another area's higher volume buying. Thus while we don't feel all that great about the SP500 and DJ30's prospects, there are very good upside plays in the small and midcaps. Chips remain leaders, and tech is not chopped liver. Bifurcated action, and while we like what we see in the small and midcaps, it is not blow me away kind of strength. Thus we play good plays but we also keep an eye on the overall market action.
Not as solid as Thursday by any means. Some great moves, but it was not the day for those ahead of the weekend.
Chips: The lone upside group so you would expect some decent action. NXPI was huge with a new 6+% upside surge. SWKS is still trending higher. AVGO is holding its gap, prepping for a new move.
Internet: Hanging in there. GRUB posted a new closing high on this move. VIPS tested lower but held the 10 day EMA on the close. WWWW is putting in a nice 10 day EMA test of the break higher off the 50 day.
Biotech: TXMD is still rallying. BIIB is a larger biotech and is making a 10 day EMA test.
Software: FLTX took a day off after a great run. SPLK is holding the start of a bounce from support. More work to do.
Stats: -21.53 points (-0.44%) to close at 4871.76
Volume: 1.815B (+0.23%)
Up Volume: 665.87M (-524.13M)
Down Volume: 1.15B (+512.13M)
A/D and Hi/Lo: Decliners led 1.53 to 1
Previous Session: Advancers led 2.53 to 1
New Highs: 101 (-22)
New Lows: 64 (+7)
Stats: -12.55 points (-0.61%) to close at 2053.4
NYSE Volume: 806.1M (+7.8%)
A/D and Hi/Lo: Decliners led 2.28 to 1
Previous Session: Advancers led 2.68 to 1
New Highs: 73 (-30)
New Lows: 119 (+70)
Stats: -145.91 points (-0.82%) to close at 17749.31
VIX: 16; +0.58
VXN: 17.55; +0.4
VXO: 16.88; +0.92
Put/Call Ratio (CBOE): 1.21; +0.16. Six consecutive sessions over 1.0, and seven of ten. Plenty of downside speculation to be a positive for the upside.
Bulls and Bears: Broke lower as expected in the selling. Not low enough but heading in the right direction.
Bulls: 53.46% versus 58.7% versus 59.5% versus 56.6% versus 52.5% versus 49.0%
After that rapid spike from 49% to 59.5%, backing down. A bit.
Bears: 14.1% versus 14.1% versus 14.1% versus 14.1% versus 15.2% versus 16.3%
Are you kidding me? This goes beyond stuck in the mud. Chronically low bearishness is bearish.
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.
58.7% versus 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 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): 2.12% versus 2.10%.
2.12% versus 2.11% versus 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%
Big rebound on the week to the 50 day EMA. Likely doesn't get further.
Oil: 44.89, -2.22. Breaking bad, heading back to the late January low 43.58.
Gold: 1150.60, +1.60. Second doji just over the early November low. Looks like a place to bounce.
$/JPY: 121.43 versus 121.28 versus 121.50 versus 121.80 versus 121.60 VERSUS 120.72 versus 120.14 versus 119.71 versus 119.74 versus 120.179 versus 119.63 versus 119.48 versus 118.86
Nice flag test of the 10 day EMA. Setting up the next move.
Euro/$: 1.04.94 versus 1.0635 versus 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
Exploding higher yet again, breaking the important 1.05 level. Just a one-day oversold pause? Seems that way.
The FOMC meets next week with a decision Wednesday. To be or not to be . . patient. The consensus is the Fed removes patient. Makes sense to us. Yellen said a couple of meetings to do away with it, and if she wants to keep her slip of tongue 6 months after QE ends, take out patient now, hike in April.
That the Fed may lose its patience was a purported issue for the market the past week. The stronger dollar was supposedly another issue for stocks. The two are, of course, related. While the rest of the world devaluates on top of prior devaluations, the US is actually talking raising rates, thereby instantly making the dollar more desirous. Add to that the US economy is not nearly as crappy as all the others, you get a stronger currency.
So, how does the market react? A good and bad move, sweet and sour, whatever you want to call it, last week saw some good days, some weak days, and some bifurcation. Thanks to the dollar, money rotated from the large caps to the smaller cap areas. Rotation is healthy for the market, but we are not 100% convinced this leads to significant higher highs.
RUTX looks to be a lock at a new high. That means beware. NASDAQ is holding the 50 day EMA, looks good to bounce. SOX bounced again. Take out SP500 and DJ30 and the market prospects are pretty solid. Put them in and they are still decent. Rotation is good as noted, but not sure this one is 100% of the money raised from selling large caps is getting put back into the market in other areas.
Friday saw some pattern degradation, e.g. ATHM, GNRC, QIWI, Z. Some. Still many are setting up: they had the week to test and set back up given the market chop. With money rotating, we definitely have plays setting up and will play them if they show the breaks, but at the same time you have to keep an eye on all the market. If too much bifurcation between large caps and smaller caps takes place, that impacts the market's ability to rise.
What would be best is to see the smaller caps lead, NASDAQ and SOX (both growth) perform well, and SP500 and DJ30 follow along. Maybe grudgingly, but following.
The market reacts adversely to Fed rate hikes. It anticipates them, struggles with the thought, then sells some on the news. Typically, however, they come back. The question is when. No one knows that. All we can do is watch where the money goes, what stocks it pushes into leadership, and go with that flow.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4871.76
The 10 day EMA at 4907
5008.57 is the March 2015 post-bear market high
5132.52 is the 3/2000 all-time high
The 50 day EMA at 4828
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 4579
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 2053.40
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
2111 is the lower trendline from 11/2012
2119.59 is the all-time high
2175 is the December 2012 up trendline
2011 is the September prior all-time high
The 200 day SMA at 2003
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 17,749.31
The 50 day EMA at 17,830
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 17,268
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 13 - Friday
PPI, February (8:30): -0.5% actual versus 0.3% expected, -0.8% prior
Core PPI, February (8:30): -0.5% actual versus 0.1% expected, -0.1% prior
Michigan Sentiment, March (10:00): 91.2 actual versus 95.8 expected, 95.4 prior
March 16 - Monday
Empire Manufacturing, March (8:30): 8.8 expected, 7.8 prior
Industrial Production, February (9:15): 0.3% expected, 0.2% prior
Capacity Utilization, February (9:15): 79.5% expected, 79.4% prior
NAHB Housing Market , March (10:00): 56 expected, 55 prior
Net Long-Term TIC Fl, January (16:00): $35.4B prior
March 17 - Tuesday
Building Permits, February (8:30): 1070K expected, 1053K prior
Housing Starts, February (8:30): 1040K expected, 1065K prior
March 18 - Wednesday
MBA Mortgage Index, 03/14 (7:00): -1.3% prior
Crude Inventories, 03/14 (10:30): 4.512M prior
FOMC Rate Decision, March (14:00): 0.25% expected, 0.25% prior
March 19 - Thursday
Continuing Claims, 03/07 (8:30)
Initial Claims, 03/14 (8:30): 294K expected, 289K prior
Continuing Claims, 03/07 (8:30): 2420K expected, 2418K prior
Current Account Bala, Q4 (8:30): -$105.0B expected, -$100.3B prior
Philadelphia Fed, March (10:00): 7.2 expected, 5.2 prior
Leading Indicators, February (10:00): 0.2% expected, 0.2% prior
Natural Gas Inventor, 03/14 (10:30): -198 bcf prior
End part 1 of 3
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