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5/2/2015 Investment House Report
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MARKET ALERTS:
Targets hit: None issued
Buy alerts: None issued
Trailing stops: JD
Stop alerts: None issued
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The REPORTS SCHEDULE is as follows:
Market Summary Video, Plays and Play Videos, and Play Tables with play annotations will issue Monday, Wednesday and the Weekend.
Tuesday and Thursday reports will contain the market summary, chart links to view the index charts, and updated play tables.
Access to all current videos will remain assessable each day using the play links in the reports.
If any market circumstances arise where we see additional plays we want to prepare for the next session, we will of course issue those plays regardless of the day of the week.
MARKET SUMMARY
- Friday rebound puts SP500 at Wednesday parity, NASDAQ and DJ30 up off of their pattern trendlines. Small caps and midcaps still struggle.
- SOX acting better, could be the swing vote.
- Atlanta Fed cuts Q2 forecast sharply.
- ISM holds steady.
- Construction spending tanks.
- The disconnect between Wall Street/DC and the middle class.
- Bulls surge back close to problematic levels.
- Path of resistance opens up to the downside, but the large caps can still hold on if they find a reason.
Friday posted its answer to the Thursday high volume selling. NASDAQ led SP500 and DJ30 higher with gains over 1%. All of these indexes held their trendlines and rebounded on the session, keeping their patterns intact for now. Volumes were lower, breadth was narrow. Some good setups, good moves, held where they had to.
SP400 and RUTX rebounded as well but with more modest recoveries. Thursday they broke their patterns and while up Friday, the moves came nowhere near fixing the damage. SP400 midcaps were better but the break lower was harsh as rotation, the blessing to small and midcaps in February, proves to be their bane now.
SOX led all with a 2.8% surge. It certainly needed it as SOX is in one wild pattern, sporting chip stocks in great patterns and chip stocks in some quite less than great patterns.
The move was in some cases violent. You get those in relief bounces, in markets uncertain of their direction. Thursday was the last day of April; sell in May, right? Perhaps some were getting a jump on the action. Friday was a new month. New money coming in? Not judging by the volume, but there was some buying. More this week as the new month money is put to work?
Leaders showed some violent moves as well. Some upside, some not. CYBR, LLNW, MNST, PCLN, SWN, YY, DGLY were strong. Some ignored the action, doing their own thing, e.g. AMZN; some software stocks come to mind as well, SPLK, VDSI. Others that were beaten up are trying to recover lost ground, e.g. retail.
There are many stocks in position to move higher if investors want to put some money to work. Software looks good, lots of quality semiconductors are in position. Energy. Metals. Quality patterns with stocks in position. The question is whether buyers come back o the market and put money to work, whether new money or money taken from other areas through rotational selling.
Thus we left plays that are holding patterns to work versus jumping out on the Friday bounce. Before Thursday a lot of the move was rotational. If that returns then we will see some areas gain, others lose. We have transitioned into new emerging areas, and indeed we have some plays this weekend looking to do the same while others are in stocks that are clearly leaders, went through a rough patch, and are in great position again. Oh yes, and some new downside as well. Hey, you can't bury your head in the sand.
SP500 22.78, 1.09%
NASDAQ 63.97, 1.29%
DJ30 183.54, 1.03%
SP400 0.89%
RUTX 0.65%
SOX 2.80%
VOLUME: NYSE -32%, NASDAQ -17%
A/D: NYSE, NASDAQ both 1.5:1. Quite tame for all the boisterous action. That shows the action is, still, in the larger cap stocks.
THE NEW, THE ECONOMY
There was news Friday, basically more of the same, i.e. disappointing, not showing any real sense of improvement or recovery, at least for most people. Indeed, the data shows slowing, and based upon some indicators such as levels of capital investment, tax receipts as a percentage of GDP, some are saying we are right now entering a new recession.
As noted, Friday didn't do much to dispel that.
Earnings were expected lower. The early series of bottom line beats, top lines misses has for many devolved into bottom line and top line misses, or just a lot of top line whiffs. Friday showed some better action than other days this past week as SWKS, GILD, CVS, FEYE, NWL, MCO, CVS, and V all beat on the top and bottom. Of course the storied miss was LNKD and its 20% plunge on its miss.
Atlanta Fed: This is the region that almost nailed the Q1 number, calling for 0.1% versus the 0.2% reported. Now Atlanta is calling for a 0.8% Q2, slashing its forecast similar to Q1. Not so much the weather after all, unless beautiful spring days and a few showers are now an inhibitor to economic activity in the US. Perhaps we are just a bunch of wussies now who cannot handle a bit of cold weather or rain? I mean the mid 1980's suffered horrendous weather but the economy grew at 4+% in Q1. Hmmm. Perhaps there is something else at work here?
ISM: 51.5 versus 51.9 expected versus 51.5 prior. Hey, at least it was still positive.
Construction Spending, March: -0.6% versus 0.4% expected versus 0.1% prior (from -0.1%). Hey with the revision maybe it will rise to -0.5%! Silver linings, right?
I could go into detail on just how bad these are but I would be repeating the same story of the past several months. Weak Q1, virtually no improvement in Q2 and no weather to blame.
An exchange on Charles Payne's show on Fox Business Friday sums up the disconnect in our country, economically speaking. Sadly, the economy is just ONE of the disconnects we currently suffer.
A very proper, subdued guest, the epitome of Wall Street, described how stocks should continue to rise after the week's hiccup because the economy was posting solid growth. One of the panel asked how he could say that given Q1 showed just 0.2% growth. Mr. Wall Street responded growth was averaging 3% before Q1, jobless claims were lower, etc. The usual talking points we hear from DC and those pushing the recovery story.
At that point Charles jumped in and said that people all across America were throwing tomatoes at their TV sets because this was the kind of 'Ivory tower' nonsense spouted every day that only underscores the total lack of understanding of the real economy that the majority of Americans are experiencing.
High stock prices caused by Fed liquidity creation and stock buybacks using the money the Fed created are not signs of economic prosperity. They were hoped to FACILITATE the return of economic prosperity, but that has not occurred for massive numbers of Americans.
Just ask the 93.5M out of the workforce. They are vilified by some as not wanting to work, choosing to live off of others. As a taxpayer I am frustrated by that as well. As a parent saving for and paying for three college educations, our own private healthcare plan, etc., I don't enjoy seeing 60% of my gross taken by taxes.
Yet many people, thanks to the Great Recession and the Great Non-Recovery would LOVE to have a job comparable to the one they lost but they just are not there. Instead, they are making a rational economic decision, either consciously or unconsciously, choosing the course that obtains the maximum benefits for the effort. They can collect benefits from many government programs, work some side jobs for cash (and thus not taxed or at least taxes are not paid), and can come out with more disposable income than someone at a minimum wage hourly job and not have the aggravation of working at that job. What would YOU do?
Some say we should offer vocational training to get these people the skills needed for jobs in this economy. The problem is we have established a web of overlapping benefits nets that pay people NOT to go educate themselves. As long as we pay people not to work, they will make the rational economic decision not to work, collecting benefits and doing side jobs for cash.
Of course the answer to this problem (and it is a problem for the government in terms of taxes lost) is the movement to ban cash. If there is no cash all transactions are reported. That is the IRS' wet dream as well as that of those wanting to know everything about all of us every hour of day. Talk about your loss of freedom. Game, set, and match.
Anyway, all of this just points out the continuing economic issues, the possibility of a coming or arriving recession, and how right now there is simply NO ONE doing anything to solve the problem. Indeed, the additional policy actions in progress, e.g. unfettered immigration, are only going to exacerbate the problems.
And what is the Fed to do? We are worried about rate hikes. The Fed can't hike rates substantially. If it does, our debt explodes. We already have the US citizen taxed just about to the max. Any further taxes and the incentive to invest, work, earn, diminishes even more as there is less 'make' for the risk you take.
THE MARKET
CHARTS
NASDAQ: Up off the 50 day EMA and lower trendline to its three month pattern. The breakout to a new closing high was rejected, and now NASDAQ is trying to hold and resume the upside. It held its 2015 trend, bouncing where it had to. Friday was nothing more. NASDAQ is in the position it has to show it can resume the move; a breakout rejection is not a light thing. Ask RUTX. There are very good stocks on NASDAQ in very good position, and money has rotated from the smaller caps to large caps. If that continues NASDAQ can prosper with AMZN, SBUX, etc. But, as I said, it has to show it.
SP500: Held the lower trendline of its three month pattern as well, bouncing to recover all of the Thursday loss. While it is in somewhat of the same position as NASDAQ, giving up a higher high, the pattern suffered less damage. Okay, fine. It still has to show it can recover and break higher again. As with NASDAQ, rotation to larger cap stocks will help.
DJ30: The same action, rebounding off the lower trendline in the pattern. Low volume here as well.
SP400: Rebounded to the 50 day SMA after the Thursday gap lower and subsequent selling. SP400 broke its ascending pattern to the downside and the burden switches to the upside to show it can stop the selling.
RUTX: Gapped through the 50 day MA Thursday, selling to the early March gap zone. Rebounded Friday, but ever so modestly. Certainly didn't convince anyone the rotation-induced selling in the small caps is finished. If there is a decent bounce toward the 50 day EMA perhaps it can provide a good downside entry.
SOX: Wild as the March wind, the April showers, and now the May storms? After gapping lower and selling off from a higher high two weeks back, SOX gapped upside and blasted through the 50 day EMA to the 50 day SMA. Volatile and still perilous pattern, but you can see some form taking shape, and you can see some very good patterns in semiconductor stocks. If SOX can recover and rally back toward that high, NASDAQ can pull it off as well.
LEADERSHIP:
Thursday's selling had stocks selling, stocks rallying, stocks ignoring the market. Friday's buying had stocks selling, stocks rallying, stocks ignoring the market.
Software: Had a mix of all. CYBR was up. RHT, SPLK, VDSI did their own thing, setting up their moves.
Internet: While social stinks (LNKD, TWTR), 'regular' internet is performing. LLNW took off upside. YY rallied almost 6%. GOOG showed a doji with tail and perhaps is getting sold out.
Semiconductors: Some very nice setups in the making. DGLY (electronics) jumped 8.6%. NXPI, SWKS, FSL LRCX, MLNX, and SIMO are setting up well, some better than others.
Retail: Stocks that were hammered used Friday to post a modest bounce. Others that have weathered the selling look ready for action or were already moving. AMZN showing a very nice pattern. SBUX started to bounce. PCLN up again.
Energy: SWN, RIG showed solid action on the week along other oil and oil related stocks.
Metals: Another good week, keeping the breakaway gains going. SID rebounded off a 10 day EMA test midweek. FCX enjoyed its seventh straight upside session Friday. SCHN was off Friday but a pause in a good move.
MARKET STATISTICS
NASDAQ
Stats: +63.97 points (+1.29%) to close at 5005.39
Volume: 1.818B (-16.89%)
Up Volume: 1.32B (+825.34M)
Down Volume: 509.82M (-1.25B)
A/D and Hi/Lo: Advancers led 1.48 to 1
Previous Session: Decliners led 3.23 to 1
New Highs: 43 (-10)
New Lows: 75 (-22)
S&P
Stats: +22.78 points (+1.09%) to close at 2108.29
NYSE Volume: 743.3M (-32.43%)
A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Decliners led 3.27 to 1
New Highs: 46 (+7)
New Lows: 41 (-13)
DJ30
Stats: +183.54 points (+1.03%) to close at 18024.06
SENTIMENT INDICATORS
VIX: 12.7; -1.85
VXN: 15.07; -1.44
VXO: 12.96; -2.21
Put/Call Ratio (CBOE): 0.97; -0.08
Bulls and Bears: Bulls surge, bears fall right back down.
Bulls: 57.4% versus 52.5% versus 50.5% versus 50.4% versus 54.5% versus 56.6%
Huge jump right back to the levels from late February/early March that saw the market struggle in March and April.
Bears: 13.9% versus 15.2% versus 13.9% versus 14.2% versus 14.2% versus
Dam broke but then fill back in with backwash rubble. Right back down as the Fed-induced lack of bears holds.
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.
Bulls: 57.4%
52.5% versus 50.5% versus 50.4% versus 54.5% versus 55.6% versus 52.0% versus 53.6% versus 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% versus53.4% versus 56.5%
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
Bears: 13.9%
15.2% versus 13.9% versus 14.2% versus 14.2% versus 14.1% versus 14.3% versus 14.1% versus 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.
OTHER MARKETS
Bonds (10 year): 2.11%. Plunging to the 200 day SMA and just over the early March low. Again, bonds don't appear to believe the Fed is putting off rate hikes despite still crappy economic numbers.
2.04% versus 2.05% versus 1.99% versus 1.92% versus 1.92% versus 1.94% versus 1.98% versus 1.91% versus 1.86% versus 1.86% versus 1.89% versus 1.88% versus 1.90% versus 1.93% versus 1.95% versus 1.95% versus 1.89% versus 1.89% versus 1.90% versus 1.86% versus 1.91% versus 1.86% versus 1.93% versus 1.96% versus 1.95% versus 2.01% versus 1.92% versus 1.87% versus 1.91% versus 1.927% versus 1.97% versus 1.95% versus 2.06% versus 2.09% versus 2.10% versus 2.12%
Euro/$: 1.1215. Held steady Friday after the weeklong selloff after breaking the 50 day EMA.
1.1220 versus 1.119 versus 1.0982 versus 1.0885 versus 1.0862 versus 1.0824 versus 1.0722 versus 1.0733 versus 1.0738 versus 1.0801 versus 1.0768% versus 1.0681 versus 1.0655 versus 1.0570 versus 1.0654 versus 1.0782 versus 1.0819 versus 1.0939 versus 1.0950 versus 1.0872 versus 1.0759 versus 1.0752 versus 1.0833 versus 1.0898 versus 1.0890 versus 1.0973 versus 1.0925 versus 1.0946 versus 1.0811 versus 1.0648 versus
Oil: 59.11, -0.43. Backed off modestly Friday, but bounced off the session low, holding the breakout from the double bottom with handle pattern.
Gold: 1174.20, -8.00. Volatile week, ending on the low from last Friday. Gold has a hard time maintaining gains if the Fed is not going to raise rates.
$/JPY: 120.16. Breaking through the 50 day SMA as the dollar rallies off the bottom of the 1.5 month range.
119.41 versus 119.02 versus 118.45 versus 119.10 versus 118.91 versus 119.53 versus 119.90 versus 119.66 versus 119.26 versus 119.12 versus 119.03 versus 119.18 versus 119.39 versus 120.12 versus 120.20 versus 120.64 versus 120.15 versus 120.32 versus 119.48 versus 119.73 versus 119.72 versus 119.94 versus 120.11 versus 119.086 versus 119.167 versus 119.405 versus 119.72 versus 119.705 versus 120.02 versus 120.855 versus 120.04 versus 121.34 versus 121.39 versus 121.43 versus 121.28 versus 121.50 versus 121.80 versus 121.60
MONDAY
This week is Jobs Report week, but the resolution to the current market volatility may find itself before that report. With NASDAQ, SP500, DJ30 attempting a bounce off the lower trendlines in their patterns, by Friday you would think stocks find their path.
Right now the market is split with the small caps and midcaps under severe pressure as money rotates out. The large caps held the lower trendline and are attempting to bounce. Even with the Friday move higher, the much lower volume than the selling on Thursday tells you they still have to prove they can rally back from new highs on NASDAQ and SP500 that were squandered.
That means money rotating their way from the smaller caps and some new money as well. There are good patterns in many sectors ready for a move higher, looking for a catalyst. Giving up new highs is not the best catalyst. It would thus appear the path of least resistance is down without some more money heading toward stocks.
The wildcard, as is often the case, is SOX. Its pattern has improved, and we kept finding a preponderance of chip stocks in good position heading into next week. SWKS, NXPI and others are in great shape. Just need a catalyst.
Yes, there looks to be sufficient leadership for the market to resume the upside. At the same time there is clear selling/dumping of stocks the past week. We have upside and downside plays, and have more upside and downside on this report. We will just let the market show us which way it will take it after that Thursday break lower. If they buyers are still willing, the leaders will show it. If not, we close the upside that cannot hang on, and play more downside.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5005.39
Resistance:
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
Support:
4951 is the January to April pattern trendline
The 50 day EMA at 4944
4912 the mid-April China dip
The March lows at 4843 and 4825
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
The 200 day SMA at 4683
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
4563 and 4567 are the January lows
4547 is the December low
S&P 500: Closed at 2108.29
Resistance:
2115 is the late March lower high
2119.59 is the February intraday prior all-time high
2126 is the April new all-time high
2156 is the lower trendline from 11/2012
Support:
2094 is the December 2014 high, the prior all-time high
The 50 day EMA at 2087
2079 is the intraday all-time high from November
2076 is the all-time high from November
2062 is the January 2015 lower high
The 200 day SMA at 2027
2011 is the September prior all-time high
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 18,024.06
Resistance:
18,104 is the December high
18,206 is the late March lower high
18,289 is the all-time high
Support:
17,991 is the early December interim
The 50 day EMA at 17,933
17,923 is the January 2015 lower high
17,863 is the lower trendline from January to April
17,748 is the mid-April China margin selloff
The March low at 17,620
The 200 day SMA at 17,449
17,351 is the September 2014 all-time high.
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
ECONOMIC CALENDAR
May 1 - Friday
ISM Index, April (10:00): 51.5 actual versus 51.9 expected, 51.5 prior
Construction Spending, March (10:00): -0.6% actual versus 0.4% expected, 0.1% prior (revised from -0.1%)
Michigan Sentiment -, April (10:00): 95.9 actual versus 96.0 expected, 95.9 prior
May 4 - Monday
Factory Orders, March (10:00): 2.1% expected, 0.2% prior
May 5 - Tuesday
Trade Balance, March (8:30): -$40.0B expected, -$35.4B prior
ISM Services, April (10:00): 56.4 expected, 56.5 prior
May 6 - Wednesday
MBA Mortgage Index, 05/02 (7:00): -2.3% prior
ADP Employment Chang, April (8:15): 189K expected, 189K prior
Productivity-Prel, Q1 (8:30): -1.9% expected, -2.2% prior
Unit Labor Costs - P, Q1 (8:30): 4.2% expected, 4.1% prior
Crude Inventories, 05/02 (10:30): 1.910M prior
May 7 - Thursday
Challenger Job Cuts, April (7:30): 6.4% prior
Initial Claims, 05/02 (8:30): 280K expected, 262K prior
Continuing Claims, 04/25 (8:30): 2300K expected, 2253K prior
Natural Gas Inventor, 05/02 (10:30): 81 bcf prior
Consumer Credit, March (15:00): $16.0B expected, $15.5B prior
May 8 - Friday
Nonfarm Payrolls, April (8:30): 213K expected, 126K prior
Nonfarm Private Payrolls, April (8:30): 205K expected, 129K prior
Unemployment Rate, April (8:30): 5.4% expected, 5.5% prior
Hourly Earnings, April (8:30): 0.2% expected, 0.3% prior
Average Workweek, April (8:30): 34.6 expected, 34.5 prior
Wholesale Inventories, March (10:00): 0.3% expected, 0.3% prior
End part 1 of 3
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