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7/25/2015 Investment House Report
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Targets hit: AMBA
Buy alerts: None issued
Trailing stops: TTPH
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
- Market cannot celebrate a return to good earnings.
- Gap and rollover is not good technical though not automatic death.
- Large cap indexes can still hold support if the mood strikes, while the small and midcaps struggle.
- Leadership remains in the same narrow groups as wannabes suffer setbacks.
- Overall the market looks to be in a protracted topping formation, but the big names have not bought into that just yet.
Once again a key stock index, NASDAQ, moved to a new high, and once again that key index reversed and coughed up the new high. Along with it, the other indexes that failed to follow NASDAQ to a new high are struggling with a very hard downside session Friday. Even before that session things were not pleasant for indexes such as the RUTX, SP400, and SOX, and Friday put them at least on the back foot.
SP500 -22.50, -1.07%
NASDAQ -57.78, -1.12%
DJ30 -163.39, -0.92%
SP400 -0.92%
RUTX -1.52%
SOX -1.99%
VOLUME: NYSE +4%, NASDAQ flat. Some distribution as volume remained well above average on both exchanges, indicating that the net is unloading of stocks.
A/D: NYSE -2.7:1, NASDAQ -3.1:1. The breadth shows the selling started taking down most areas of the market. Perhaps not breaking all sectors down, but they were under pressure.
THE MARKET
The leadership ranks tried to grow on the last move higher, but some of the new groups attempting to join the biotechs/drugs, big name NASDAQ, restaurants/fast food leaders failed in their efforts. Indeed, even the leadership groups were hit. Biotechs struggled in the wake of the BIIB warning. Fast food/restaurants took a hard punch. Big names also had some issues, but key big names not so much. More on that later.
Moreover, set the context: there were big earnings announced Thursday night from AMZN, SBUX, SWKS, V, JNPR. Futures surged on the news and they gapped higher, taking a lot of their countrymen with them. It looked to be another good, strong move to push those NASDAQ large cap big name leaders even higher.
CHARTS
Then it did not. The plug was pulled and the gaps were reversed on the big names. They didn't collapse, but they closed well off their highs. NASDAQ on the other hand, suffered a sharp drop from the 10 day EMA it was holding. Not an implosion there thanks to its new high; that allowed NASDAQ to hold its uptrend channel.
For the smaller cap indexes, however, the picture is not quite as pretty (or should I say is a bit uglier?) with SP400 midcaps showing a big rounded top, RUTX breaking the lower trendline from December, also with a topping (head and shoulders).
As for SP500 and DJ30, the large cap indexes look better, even if it is only in a relative sense. DJ30, it is at the bottom of its trading range, the lowest support in that range. SP500 put in a third top and has ripped lower, but it can still put in an bottoming pattern off of this.
SOX is the downside leader and after such a selloff you have to look at it for possible signs of bouncing. SOX is at a lower closing low off of the early June peak, but also at some larger support. It is quite oversold and appears as if it is trying to double bottom at that bigger support. If so, it will have a lot to prove on any move higher as there are gaps yawning below way back in October.
NASDAQ still in its channel with some solid leadership from the big name large caps. SP500 was down hard Friday but it is at support, is oversold, and can put in an inverted head and shoulders here at the low of potential right shoulder. DJ30 is at the lower range of support in its trading range and after four sharp downside sessions is oversold at that support. It has used this to bounce before. Long shot? Yes, but this market has made its highs off of long shots when it looked as if it was finally done.
So that is the upside scenario in terms of the indexes, what there is of it, but the last time I laid out the reasons the market could rally the market promptly tumbled. It was at a higher level, however, and not at the threshold of hell (to quote Clark Griswold from 'Christmas Vacation').
Take a look around you Ellen, we're at the threshold of hell!' --Clark Griswold, 'Christmas Vacation' (1989)
Of course the market did recover from that tumble just when it appeared to be breaking down. Again, it managed to turn a break lower into a false breakdown and rallied.
The frequency of the failures, however, tends to wear out an uptrend. As the Tour de France winds down, it provides a good analogy. Some riders continually attack on the mountain stages, but if they cannot make the gap and make it hold, they eventual wear out, blow up, and fade back into the grupeto.
That is the concern after Friday saw some serious breaks lower from the laggard indexes. When you consider how commodities have collapsed, industrial machinery is collapsing, rails and trucks reversing a bottoming attempt -- basically all parts of the industrial complex are struggling hard -- you get the sense the foundation is crumbling out from below the economy and of course that would mean the stock market.
After that barrage of downside, it certainly appears the indexes are oversold at least near term. If DJ30, NASDAQ SOX, and even SP500 can muster a bounce off of this support the real story is how the move holds.
LEADERSHIP
Leadership remains pretty much the same, and as the market action indicates, that is not necessarily a good thing. Many leaders sold in the overall market weakness, but most remain in quite good shape. Of course they had good runs and a little selling doesn't damage their patterns. More selling . . . well that is another matter.
Big Names: AMZN gapped sharply higher on earnings but gave up 50 points of a 97 point move. EBAY gapped higher but gave it back, though it is still in a very nice test. SBUX gapped upside on its earnings then reversed most of the move. Still trending up the 10 day EMA. NFLX spent the week testing, ending Friday in a pennant/flag over the 10 day EMA. FB gapped higher on the day after getting close to the 10 day EMA Thursday.
Biotechs: BIIB, after already falling Wednesday and Thursday, opened the floodgates Friday with its warning, and that hurt some biotechs, selling in sympathy (a.k.a. fear). CELG gapped lower but no big deal after its move. GILD tumbled to the early July low. TTPH broke the 20 day EMA and we exited. KITE sold but is holding over support. XON is not even at the 10 day EMA. BRLI tested after its nice Wednesday and Thursday surge. Some selling for sure but overall holding up quite well.
Restaurants/Fast food: JACK was sold for a second session but light trade. It held the 20 day EMA on the low. CMG unscathed. BWLD Gapped to a doji at the 200 day SMA, still holding the 200 day SMA. CAKE is fine, testing its Thursday upside gap from a nice consolidation. PZZA in a normal test but heading lower. DPZ is breaking down. SONC is breaking lower.
Financial: Testing but holding up. JPM at the 20 day EMA in a test after hitting a higher high. BAC in a nice 10 day EMA after its breakout and surge. V gapped upside though it did sell off some of its gain. Regional banks, a mainstay in the prior run, are testing back, some breaking support such as the Southwest banks and their oil relationship.
Tech: Some turns in progress? SNDK, after a series of gaps lower, now shows a big gap upside. NMBL is holding up well in a lot of market turbulence. JNPR gapped out of a pullback.
MARKET STATISTICS
NASDAQ
Stats: -57.78 points (-1.12%) to close at 5088.63
Volume: 1.945B (-0.08%)
Up Volume: 460.53M (-402.15M)
Down Volume: 1.54B (+420M)
A/D and Hi/Lo: Decliners led 3.12 to 1
Previous Session: Decliners led 2.16 to 1
New Highs: 53 (-62)
New Lows: 246 (+76)
S&P
Stats: -22.5 points (-1.07%) to close at 2079.65
NYSE Volume: 892.2M (+3.96%)
A/D and Hi/Lo: Decliners led 2.68 to 1
Previous Session: Decliners led 2.16 to 1
New Highs: 34 (-58)
New Lows: 411 (+99)
DJ30
Stats: -163.39 points (-0.92%) to close at 17568.53
SENTIMENT INDICATORS
VIX: 13.74; +1.1
VXN: 15.85; +1.69
VXO: 14.32; +1.63
Put/Call Ratio (CBOE): 1.41; +0.38. Second close over 1.0 after 8 sessions below and 11 above before that. Jumped right back up.
Bulls and Bears: Bulls bounce right back up to the recent highs, just about, following the prior week's move higher. Now they can fall again. Bears, of course, were still flat line.
Bulls: 49.0% versus 43.7% versus 44.8% versus 49.5%
Bears: 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% 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.
Bulls: 49.0%
43.7% versus 44.8% versus 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.
Bears: 15.6%
15.6% versus 15.6% versus 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.
OTHER MARKETS
Bonds (10 year): 2.27% versus 2.27%. Big week for bonds though Friday was something of a wash. Moved to a higher high on the week, topping the early July high.
Historical: 2.27% versus 2.32% versus 2.34% versus 2.37% versus 2.34% versus 2.35% versus 2.35% versus 2.40% versus 2.44% versus 2.42% versus 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/$: 1.0977 versus 1.0992. Modest test to the 10 day EMA on the week, testing the prior surge upside.
Historical: 1.0977 versus 1.0927 versus 1.0944 versus 1.0927 versus 1.0825 versus 1.0836 versus 1.0880 versus 1.0946 versus 1.1005 versus 1.0999 versus 1.1157 versus 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
Oil: 48.14, -0.31. Continuing lower down the 10 day EMA. No life in oil.
Gold: 1085.50, -8.60. Big doji Friday as gold holds at the Monday intraday low and rebounds off it. Trying to set up an oversold bounce.
$/JPY: 123.79 versus 123.89. Nice easy 10 day EMA test after the surge back upside. Still below the June high but testing the initial recovery, setting up a run at that high.
Historical: 123.89 versus 123.96 versus 123.88 versus 124.31 versus 124.07 versus 124.13 versus 123.78 versus 123.38 versus 123.42 versus 122.76 versus 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
MONDAY
Again the stock indexes find themselves in a more bearish stance, having failed another bounce attempt. That is fine; the market has rallied, failed, rallied failed, and it keeps coming back. As noted, however, that can erode the trend that has been in place for quite some time.
After the sharp week of selling and with NASDAQ at its trendline, the Dow at the bottom of its range, an oversold bounce should try to form. There are still some excellent leaders testing, putting in good patterns for entries. Biotechs tested, some of the big names, restaurants, financials. How they rebound will tell a good part of the story and again, how some of the potential new sectors trying to form up, e.g. techs, telecom, will tell the state of the market.
Overall, given the repeated sharp selloffs after new index highs, the split in the market to mostly large cap NASDAQ leadership, the out and out dives in many stocks and commodities tied directly to economic activity, the upside situation is just does not appear that bullish. Of course it has looked that way before and rallied right back.
Again, watching how the leaders react shows the prognosis. For clarity, however, it will take a pretty major sea change in leadership to give the market the kind of fresh blood it needs to sustain a broad move.
So for now we continue to look at what is working. That brings you to the big names that rallied well and are testing. If they give the buy signal, we will play them to be in what continues to work. Same with the other leadership groups: if they bounce right back and can hold the moves, showing that Friday was some sympathy selling, they can get some of our money as well.
We have some good downside positions working along with some good upside. After this selloff there is likely a bounce. Again, we can make money on that if the market puts in the kind of bounces it has in the past. After it fizzles, we see where it does, if it weakens at a lower point, then the downside bias grows even more.
Indeed, if I have to speculate, and I must, I must, even though that certainly means nothing as it is the market that makes the decisions not my speculation, I would say this is the response to the end of the Fed's 6+ year reign of stimulus.
Ever since QE ended in October 2014 the market volatility increased, the moves became shorter and choppier (look at October to early 2015), and then morphed into a trading range. Nominal new highs were met, but immediately sold. The move flattened into the trading range and now there are sectors breaking to lower lows. The rise tried to resume out of October, did for awhile, topped out into a trading range, and started putting in lower lows on the downside, one index after another. If the large cap indexes break here, the market will have to then find a new range.
This is of course not the first time stocks have struggled in their long run, but there are some economic issues thrown into the mix around the world and the US as well, and thus even if this is not a major, end of stimulus with no economic support to hold the market up kind of selloff, the action is definitely less robust to the upside.
Here is how I summed up the action late in the Friday session:
Not trying to sugar coat the selling. There is damage being done but the same leaders are holding on. They are down in sympathy but are overall holding up.
It looks like some kind of end of week dump here. If it lets up, the leaders jump back up. Of course if the selling barrage continues next week the leaders are left circling the wagons and might get cut down. I note that FB and ULTA continue to toy with the buy points even heading into the close. Indeed stocks are trying a late rebound as they usually do after getting hammered on a session.
Looked at our positions, some such as JACK are worrisome in the harder drop, but are holding support and bouncing a bit. Not the time to assume all is lost. Never like these reversals, but then again, the indexes are trading in ranges and are still in the ranges in the large cap cases and are at support for the smaller and midcaps (SP400 at the 200 day MA and March low).
Not getting too lathered up on this move though not loving it for the upside. Watching how the key stocks hold support, deciding if we want to jettison JACK with a modest gain or see if it can rebound from the 20 day EMA tap. In short, not planning on major position changes.
As always, take what the market gives, play what works. That is why we are still looking at the big name leaders because they are indeed still working. We have seen this before, and if they want to lead, so be it. We will play them.
Have a great weekend.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5088.63
Resistance:
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5150-5160 is the June peak range
5164 is the June prior all-time high
The upper trendline at 5260
Support:
The 50 day EMA at 5066
The lower trendline is at 5066
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
The June low at 4974
4912 the mid-April China dip
The 200 day SMA at 4849
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
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 2079.65
Resistance:
The lower channel line at 2092
The 50 day EMA at 2098
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
2130 is the June 2015 peak
2135 is the May 2015 all-time high
Support:
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 2063
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 17,568.53
Resistance:
The June low at 17,715
The March low at 17,718
The 200 day SMA at 17,748
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The 50 day EMA at 17,909
17,923 is the January 2015 lower high
17,991 is the early December intraday high
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
Support:
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's February to present trading range.
17,515 is the early July closing low
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
July 24 - Friday
New Home Sales, June (10:00): 482K actual versus 550K expected, 517K prior (revised from 546K)
July 27 - Monday
Durable Orders, June (8:30): 3.0% expected, -2.2% prior (revised from -1.8%)
Durable Goods -ex tr, June (8:30): 0.5% expected, 0.0% prior (revised from 0.5%)
July 28 - Tuesday
Case-Shiller 20-city, May (9:00): 5.6% expected, 4.9% prior
Consumer Confidence, July (10:00): 100.0 expected, 101.4 prior
July 29 - Wednesday
MBA Mortgage Index, 07/25 (7:00): 0.1% prior
Pending Home Sales, June (10:00): 1.0% expected, 0.9% prior
Crude Inventories, 07/25 (10:30): 2.468M prior
FOMC Rate Decision, July (14:00): 0.25% expected, 0.25% prior
July 30 - Thursday
Initial Claims, 07/25 (8:30): 271K expected, 255K prior
Continuing Claims, 07/18 (8:30): 2200K expected, 2207K prior
GDP-Adv., Q2 (8:30): 2.6% expected, -0.2% prior
Chain Deflator-Adv., Q2 (8:30): 1.5% expected, 0.0% prior
Natural Gas Inventor, 07/25 (10:30): 61 bcf prior
July 31 - Friday
Employment Cost Index, Q2 (8:30): 0.6% expected, 0.7% prior
Chicago PMI, July (9:45): 50.5 expected, 49.4 prior
Michigan Sentiment -, July (10:00): 94.0 expected, 93.3 prior
End part 1 of 3
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