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7/11/2015 Investment House Report
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Targets hit: None issued
Buy alerts: JACK
Trailing stops: None issued
Stop alerts: None issued
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- Stocks predictably surge on a supposed move closer to EU salvation, Chinese stock market rebound.
- China shuts down sellers and incredibly buyers return . . . for a 200 day SMA bounce.
- Jobless claims move up toward 300K
- Wholesale inventories rise but sales drop sharply. Half full? Half empty?
- Will the EU accept the Greek proposal that was just rejected by Greek citizens last weekend?
- Indexes rebound, some recover their ranges, growth struggles to do so.
- Good bounces, some leaders surging, more leaders needed.
- Another reversal on the cusp of a collapse? A market driven by outside influences needs the Greece deal, but Germany again is balking.
Greece cave, France new assertiveness toward Germany, and stocks surge anew on deal hopes.
Another 'deal' rally. Thursday night PM Tsipras issued the capitulation letter, France liked it and urged Germany to accept it. Everyone high-fived on a sure deal.
Stocks opened higher, sold off to the pre-market lows (though still easily positive), then climbed back to the upside through the close. A deal in the bag, shorts forced to cover ahead of the weekend. Sure the Greek parliament still had to vote on the deal and then the EU had to approve it, but the changes were believed enough to make a deal. Stocks held the gains.
SP500 25.31, 1.23%
NASDAQ 75.30, 1.53%
DJ30 211.79, 1.21%
VOLUME: Disappointing. NYSE -11%, well below average. NASDAQ -14% and well below average. Not the power needed to show a real surge with conviction. Perhaps just a Friday in the summer, but with all the grand news you would expect some better trade.
A/D: NYSE 3.8:1, NASDAQ 3.6:1. Those are some very good numbers.
So, is there a deal or not?
This time it is different, right? A new run at a deal, this time with the Greek PM Tsipras sending a capitulation letter to the EU, outlining basically the deal the Greek people rejected last weekend by over 63%. Many in the Greek parliament said they would not vote for the PM's offer, one that some are saying the PM knows the EU will reject.
Early Saturday the Greece parliament approved the capitulation.
Greece is also getting support for its offer from other areas. France is now cheerleading for Greece, finally stepping up to face Germany and its 'no nothing for the Greeks because it may impinge on bailouts in the future and we really don't like the Greeks anyway' position. Ironically, or not really when you think about it, a poll yesterday shows 79% of Greeks opposing Tsipras' offer.
There are of course other issues. Germany, regardless of France's involvement, is speaking through its Finance Minister and the rhetoric is the kind of feisty, indeed caustic, type we have come to expect. As for restructuring the Greek debt Mr. Schaeuble says "we know from the treaties that debt relief is not possible," and in any event "Greeks won't pay their bills . . . everyone knows they can't be believed." Wow, what a great union!
'I'm really a nice guy . . . '
Shauble then proposed a 5 year Greek exit "Grexit" with "humanitarian support." It is difficult on the limited information coming out to figure out just what he is proposing, but it looks like a five year push out the door, keeping the people form starving, but not forgiving debt or anything else. Hey, what are you supposed to do for people just earlier in the day you said could not be trusted? Make proposals that treat them that way. Of course, with these kind of 'union mates,' perhaps Germany should be thinking about what Greece does when it leaves the EU.
Tsipras: 'You're the only one who gets me, Vladimir.'
Putin: 'Oh, I will get you . . . '
Other EU countries are of course not as hard line but are not saying a deal is done. The EUC VP says the proposal is basically what was proposed to Greece (the one the Greek people rejected). The Netherlands says it is a step forward . . . but it has problems. Comments run the gamut though most outside of Germany are a bit more hopeful.
That is how compromise happens, i.e. both sides get a deal they don't want. Question is, is this what the stock market was pricing in on Friday?
China makes great strides in spurring, I mean, controlling markets as a good communist government should.
Friday saw more 'progress' in stabilizing Chinese markets as Shanghai rose 5.2%. The Chinese SEC is 'suggesting' to companies that they take action to support their stocks such as buybacks, employees shareholder programs, etc. That is how Yahoo and CNBC style it. Other sources report more of the story, i.e. that the companies are REQUIRED to submit in two days reports on how they WILL support their share prices. Ah, the stick versus the carrot. Also, the Chinese police are hot on the trail of tracking down those enemies of the state who actually sold shares in Petrochina and other state companies into the close on 7/8, thus undermining the PBOC's efforts at propping them up with liquidity. You can't have a controlled market if all don't do the state's bidding. Criminals.
With such a heavy hand, who would buy? Someone. The Shanghai exchange rallied another 5.2% Friday, continued the Thursday rally. That exchange hit the 200 day SMA on the Wednesday close, showing a doji. The government implemented even more controls to make buys safe. After all, if no one can sell your stocks and you are a small investor, you can buy with one of the best 'Fed puts' ever devised. So, the smaller players jumped back in and rallied stocks off the technical support.
Think about it. The PBOC injecting massive amounts of liquidity. Big stake shareholders cannot sell for 6 months, state pension funds cannot sell until further notice, and short sellers are being hunted down as criminals. Over 70% of the stocks are in a 'no sale' condition for the big holders and players. What small investor WOULD NOT buy like crazy, knowing the big players could not sell out from under you. Buy, buy, buy, ride the surge, then sell it all when it shows signs of stalling. Printing money.
What do you bet that a lot of the professionals have opened individual accounts so they can take advantage of this situation? You can pass all the regulations you want and still there will be ways around them. The desire to do better is a powerful inventive force.
Of course how long a market can stand even with such a setup is problematic. You know it will end; at some point all of the small guys will be in and the big players won't want to buy right now because they cannot sell for quite some time. Or, say they DO buy. Their money will run out as well at some point unless margin requirements are reduced further and further, allowing more share accumulation.
At some point it ends because you can only do so much to keep a market going when the economy is not. It is, of course, as I have written often, a run by the Chinese government to keep the masses happy and away from social unrest, i.e. revolt. The Chinese economy is suffering from likely the most massive bubbles in history, competing with the US' entitlement bubble. The Chinese government is desperate to walk the fine line that keeps them in control and the masses appeased. It won't, however, last. The Chinese have had the taste of freedom, and eventually, no matter what the communist government does or how much it tries to ease, communism cannot exist with freedom. The system will fail as the Chinese people will naturally seek true freedom.
US jobless claims quietly rise close to 300K
297K versus 276K versus 282K prior (from 281K).
Perhaps this is nothing, but other economic indications have recently quickly deteriorated.
Wholesale Inventories rise, sales fall in May.
Wholesale Inventories, May: 0.8% versus 0.3% versus 0.4% April.
This is one of those half full, half empty reports. If the economy is ramping, as is the hope right now, more inventories signals manufacturers and wholesalers are confident and want to have goods on hand to meet those coming sales. If the economy is weak, then rising inventories mean less sales and inventories piling up, unwanted and unsold.
This report appears to be a mix.
Wholesale sales: 0.3% versus 0.9% expected vs 1.7% April.
Year/year sales: -3.4%. Impressively bad.
Now the mixed part. Nondurables are fine. 1.2% increase and sales rose 0.7%. very solid. One of the reasons cited for the increase in inventories, however, is higher prices in petroleum products causing less consumption. Good and bad but over all good.
Durables inventories is a bigger issue. They rose 0.6% (from 0.1% April) while sales fell 0.1%. Rising inventories on falling sales means no buyers and inventories starting to stack up.
Yen and yang. Not terrible in itself; you have off months. When combined with other weaker data just recently, not a good picture for the end of Q2.
SP500: After bouncing around the March lows for three sessions SP500 jumped back over the 200 day SMA and up to the May and June lows. Solid recovery to the bottom of the range. Volume, however, was weaker, falling well below average. Held the spring lows and is bouncing. Still a less than flattering pattern for the upside. I guess about all you can say is it is hanging in there, and with a supposed Greece deal it is still at two month lows. Maybe this is simply the bottom of this selloff; every such selloff has been a buy. Still, the pattern overall is not lovely.
DJ30: Undercut the March lows as well marking the bottom of the four month range, but Friday recovered those lows and the 200 day SMA. Volume stunk here as well, coming in well below average. For now, held where it had to and bounced.
NASDAQ: Early week NASDAQ touched the early May lows and rebounded. Lower below average volume for the first time in three sessions. Still a technically ugly pattern, still showing another bear flag as it did to end June and start July. That one failed, this one is on low volume.
RUTX: Gapped below the channel lower trendline Wednesday, gapped back up above it Friday. Maybe the channel holds yet another time and RUTX rallies back up to the 1300+ range (closed at 1252). It is at the 50 day SMA on lower volume, sporting a somewhat bearish pattern similar to NASDAQ. It was struggling in May, however, and rallied to a higher high. If the dollar strengthens with the Fed's aid or not, RUTX will have something to help it along.
SP400: Undercut a rather clearly defined range Wednesday and could not recover it Thursday. Friday, a gap back above the bottom of the channel. Not bad. SP400 is the one to watch this week along with SP500.
SOX: Gapped upside Friday but even a 1.9% gain did not change a thing in terms of a weak pattern. Ugly gap and selloff last week continued the selling after a brief bear flag respite the prior week. Three big weeks downside, three short bounce weeks in between. Now likely another little bounce then we see if there is another rollover.
While most stocks were up Friday, the recent leaders that underwent some issues before the capitulation letter Thursday night did a very good job of moving up from good patterns. Volume was lacking in many moves but not all. A bit of a test early week and perhaps we get some entries.
Biotech/Drugs: Some good comebacks, some surprises. KITE bounced nicely as did TTPH. HZNP gapped upside to a higher high. BRLI is in a sweet breakout test. BIIB was hammered on its head of R&D jumping ship to a biotech startup. GILD is interesting as a new play as well.
Software: Jumping back into the mix big time. PANW made another solid move, pushing our positions higher. SPLK gapped upside for a second session. FEYE still looks good. BLKB continues higher. Some sported great volume, e.g. PANW, others did not, e.g. BLKB. Still others, e.g. CYBR, have somewhat bearish near term patterns.
Restaurants/Food: JACK posted a good start to the move. CMG continued a massive break upside. BWLD is up to the 200 day SMA though on perhaps some questionable volume. Everyone loves pizza and PZZA broke to a new high Friday.
Financial: Nice recoveries but still with some issues to prove. JPM gapped through the 50 day MA. BAC gapped over the 200 day up to the 50 day MA. WFC is showing a bear flag move back up to the 50 day MA. V made it to the 50 day SMA. Decent but not a clear pattern.
Stats: +75.3 points (+1.53%) to close at 4997.7
Volume: 1.561B (-13.86%)
Up Volume: 1.32B (+345.1M)
Down Volume: 255.14M (-611.7M)
A/D and Hi/Lo: Advancers led 3.63 to 1
Previous Session: Advancers led 1.74 to 1
New Highs: 78 (+38)
New Lows: 67 (-28)
Stats: +25.31 points (+1.23%) to close at 2076.62
NYSE Volume: 738.8M (-10.71%)
A/D and Hi/Lo: Advancers led 3.82 to 1
Previous Session: Advancers led 1.39 to 1
New Highs: 49 (+27)
New Lows: 58 (-44)
Stats: +211.79 points (+1.21%) to close at 17760.41
VIX: 16.83; -3.14
VXN: 17.92; -2.4
VXO: 17.77; -3.7
Put/Call Ratio (CBOE): 1.02; -0.14. Eleven straight sessions over 1.0. As noted before, plenty of days of high put action to help fuel a bounce and indeed the market is bouncing.
Bulls and Bears: What do you know? Bulls fade further and help spark a market move upside. Bears hold steady. Still too far apart for any real surge, but you have to like how the bulls fell off the highs and ARE trending lower off of the early May high that came close to matching the highs from March.
Bulls: 44.8% versus 49.5% versus 51.6% versus 45.5%
Bears: 15.6% versus 15.4% versus 15.4% versus 16.5% versus 16.5%
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.
49.5% versus 51.6% versus 45.5% versus 47.4% versus 51.5% versus 47.5% versus 51.5% versus 48.5% versus 50.5% versus 50.6% versus 47.5% versus 52.5% versus 57.4% versus 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.
15.4% versus 15.4% versus 16.5% versus 16.5% versus 15.8% versus 14.9% versus 15.8% versus 13.9% versus 13.9% versus 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%
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): 2.42% versus 2.31%. Gapped lower, right back down near the bottom of the range. Yellen says there will still be a rate hike this year. Market acted as if it believed it.
Historical: 2.31% versus 2.206% versus 2.26% versus 2.29% versus 2.38% versus 2.42% versus 2.34% versus 2.364% versus 2.48% versus 2.40% versus 2.37% versus 2.40% versus 2.36% versus 2.26% versus 2.35% versus 2.32% versus 2.32% versus 2.36% versus 2.39% versus 2.39% versus 2.48% versus 2.433% versus 2.388% versus 2.40% versus 2.31% versus 2.37%
Euro/$: 1.1157 versus 1.1032. Dollar faded against the euro but is holding the 50 day EMA, testing after a nice run higher.
Historical: 1.1032 versus 1.11069 versus 1.1099 versus 1.1055 versus 1.1082 versus 1.1054 versus 1.1131 versus 1.1243 versus 1.1205 versus 1.1199 versus 1.1170 versus 1.1341 versus 1.1344 versus 1.1372 versus 1.1339 versus 1.1243 versus 1.1284 versus 1.1254 versus 1.1268 versus 1.1325 versus 1.1277 versus 1.1288 versus 1.1119 versus 1.1241 versus 1.1272 versus 1.1144 versus 1.0922
Oil: 52.82, +0.04. Collapsed on the week, working laterally into Friday. Ugly break, trying to stem the damage.
Gold: 1163.00, +4.20. Trended lower all week, keeping the trend from the prior week intact. Still, gold tested a key support level on the early week lows and held. Thus far.
$/JPY: 122.76 versus 121.29.
Historical: 121.29 versus 120.66 versus 122.46 versus 122.51 versus 123.04 versus 123.115 versus 122.43 versus 122.497 versus 123.82 versus 123.63 versus 123.88 versus 123.69 versus 123.37 versus 122.66 versus 122.91 versus 123.415 versus 123.39 versus 123.38 versus 123.41 versus 122.64 versus 124.31 versus 124.44 versus 125.50 versus 124.35 versus 124.26 versus 124.12 versus 124.81 versus 124.10 versus 123.85 versus 124.12 versus 124.15 versus 123.11 versus 121.53
Friday priced in a Greek compromise and deal. The Greek parliament caved along with its PM. The rest of the EU is either totally against (Germany) or sees the offer as some progress with still a lot of work to do (everyone else). Debt restructuring remains a huge issue. Oh, and the Greek people? No one cares what they want. That pretty much tells them what they should do, but then again, all around the world, including the US, the government is not doing the will of the people and/or not following the laws for governance set out in their founding. So who then really cares about the Greek people?
Not the markets. They want harmony in the EU regardless of what the citizens think. We will have to see how the markets trade on Sunday and how the US futures react. It is not going to be an easy ride to a deal but there is progress from last Sunday with the Greece referendum rejecting the deal that Tsipras submitted to the EU Thursday night.
There are some very good patterns in the leadership groups we are looking at, also some downside if the market rethinks the Friday move. I think the big takeaway is that there is progress toward a deal and it looks as if the government wants a deal. It could get interesting as the Greeks are protesting in anger over the PM's "Vote no, but I don't really mean it" referendum call. You can sympathize: you ask us to tell you what we think, we do, then you do the opposite 'for our own good.' What happens if they take to the streets with violence?
Whoa there fella. That is getting way out there. Progress toward a deal is good, perhaps not enough to further push stocks but allowing them to hold the gains with perhaps a bit of consolidation and then more upside.
Recall, while SP400 and SP500 are somewhat back in their ranges/channels, most of the indexes bounced but have not overcome the selling just ahead of the Friday upside whoosh. In that light, just holding the Friday gain may not be enough. It beats the heck out of rolling over of course, but if the perceived resolution of one of the big issues confronting stocks does not reverse them, you have trouble.
So, we have a market with a history of snatching upside out of what appears to be trouble. We have indexes that are in trouble and the upside will have to snatch victory again. There are also quality, tried and true leaders that rode out the bad weather and put themselves in position to rally. PANW, restaurants/fast food, biotechs/drugs, even a chip or two. Then there are the downside setups, and of course we will be ready for those as well.
Oh yes, and there is a TON of economic data next week: Retail Sales, several PMI reports, PPI, Industrial production and capacity, Housing starts, PPI. Then there is the big news outside of geopolitical issues, earnings. AA started things off last week and of course things start getting busier each of the next few weeks.
Information overload? Yes. But, stick to patterns and the overall market moves as your guide. For now we wait for the Australian and Asian markets to open Sunday to get a better read on the markets' reaction.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4997.70
5008.57 is the early March 2015 post-bear market high
The 50 day EMA at 5025
The lower trendline is at 5037
5042 is the March 2015 high
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
The June low at 4974
4912 the mid-April China dip
The March lows at 4843 and 4825
4815 is the December 2014 prior market peak
The 200 day SMA at 4815
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.
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 2076.62
2076 is the all-time high from November
2079 is the intraday all-time high from November
The lower channel line at 2086
The 50 day EMA at 2092
2094 is the December 2014 high, the prior all-time high
2115 is the late March lower high
2119.59 is the February intraday prior all-time high
2126 was the April prior all-time high
2135 is the May 2015 all-time high
2062 is the January 2015 lower high
The 200 day SMA at 2056
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 17,760.41
17,923 is the January 2015 lower high
The 50 day EMA at 17,904
17,991 is the early December interim
18,104 is the December high
18,200 to 18,206 (late March lower high)
18,289 is the March 2015 high, the prior all-time high
18,351 is the May 2015 all-time high
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The June low at 17,715
The 200 day SMA at 17,699
The March low at 17,604
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
July 10 - Friday
Wholesale Inventories, May (10:00): 0.8% actual versus 0.3% expected, 0.4% prior
July 13 - Monday
Treasury Budget, June (14:00): $51.0B expected, $70.5B prior
July 14 - Tuesday
Retail Sales, June (8:30): 0.3% expected, 1.2% prior
Retail Sales ex-auto, June (8:30): 0.5% expected, 1.0% prior
Export Prices ex-ag., June (8:30): 0.7% prior
Import Prices ex-oil, June (8:30): 0.0% prior
Business Inventories, May (10:00): 0.2% expected, 0.4% prior
July 15 - Wednesday
MBA Mortgage Index, 07/11 (7:00): 4.6% prior
PPI, June (8:30): 0.3% expected, 0.5% prior
Core PPI, June (8:30): 0.1% expected, 0.1% prior
Empire Manufacturing, July (8:30): 3.5 expected, -2.0 prior
Industrial Production, June (9:15): 0.2% expected, -0.2% prior
Capacity Utilization, June (9:15): 78.1% expected, 78.1% prior
Crude Inventories, 07/11 (10:30): 0.384M prior
July 16 - Thursday
Continuing Claims, 07/04 (8:30)
Initial Claims, 07/11 (8:30): 283K expected, 297K prior
Continuing Claims, 07/04 (8:30): 2275K expected, 2334K prior
Philadelphia Fed, July (10:00): 12.0 expected, 15.2 prior
NAHB Housing Market , July (10:00): 59 expected, 59 prior
Natural Gas Inventor, 07/11 (10:30): 91 bcf prior
Net Long-Term TIC Fl, May (16:00): $53.9B prior
July 17 - Friday
CPI, June (8:30): 0.3% expected, 0.4% prior
Core CPI, June (8:30): 0.2% expected, 0.1% prior
Building Permits, June (8:30): 1275K prior
Housing Starts, June (8:30): 1123K expected, 1036K prior
Building Permits, June (8:30): 1150K expected, 1275K prior
Michigan Sentiment, July (10:00): 96.5 expected, 96.1 prior
End part 1 of 3
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