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10/3/2015 Investment House Report
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Targets hit: None issued
Entry alerts: MXWL; NFLX; SINA; TSYS
Trailing stops: DXD
Stop alerts: None issued
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- Jobs plunge across the board, stocks fall then reverse.
- SP500 shows a follow through session, apparently liking the bad data.
- Stunningly bad data when things are supposedly so good the Fed can hike rates.
- Fed blames low participation on a lack of work ethic.
- Oh yes, and Factory Orders tank. Again.
- Leaders perform well, others trying to set up to also lead higher.
Quite the Friday. All eyes were on the Jobs Report and when it hit most averted their eyes in disappointment. Stock futures were up into the numbers, but on the woeful numbers from top to bottom to revisions, stocks tanked. Immediately. Hard. Bonds rallied, gold surged, dogs and cats thought about living together (from 'Ghostbusters').
Stocks opened just about on their lows after an absolutely abysmal jobs report that sadly matched the absolutely abysmal state of US manufacturing. The report was so bad the Fed initiated the blame game, pointing fingers at the guilty parties. Problem is, the Fed is such a poor marksman it missed the proper target, i.e. this Administration's anti-growth policies, and blamed the drop in participation rate on people who just did not want a job.
Khan: "Kirk, you're still alive, my old friend?"
Kirk: "Still 'old friend'. You've managed to kill just about everyone else, but like a poor marksman, you keep missing the target!"
Perhaps that is the case. As we have said all along, many are opting not to work versus working a menial job with a boss younger and with a thimble full of experience versus the 'lesser' employee. Get hassled at work or get benefits and work some side jobs for cash? You make the call.
Even if people are leaving the workforce because they don't want to work the kind of jobs the economy is producing, blaming them is like beating the dog when grandma passes gas; you take action but it does nothing to solve the problem.
"Whenever Mrs. Kissel breaks wind, we beat the dog." '10' (1979)
The height of the irony: today WMT officially announced the 450 layoffs rumored earlier this week, all management positions at the Arkansas headquarters. WMT is culling its breadwinner jobs to make way for more minimum wage jobs this economy creates, jobs it is now paying a little bit more for per hour. Again, beating the dog when grandma breaks wind. The problem is not too many good jobs, it is the economy producing no quality jobs and thus a continuing decline in real wages eviscerating consumer purchasing power.
No one but a handful of people are yelling the emperor has no clothes. Hundreds of millions of Chinese starved to death under the policies of Mao Tse Tung when he came into power via communist revolt. He refused to change his policies year after year after year until he finally took heed of his advisors, the ones he had not murdered, and altered some of his communist policies. Our emperor won't. He is fundamentally changing the US, and he is not going to stop as long as he is in office for another 14 months. Congress doesn't have the guts to stop him by using the funding powers so he will operate under executive fiat until he leaves office. Sadly that means we will have no significant economic improvement until he leaves and his policies are undone.
Okay, that sets the stage. You would think carnage. It was, but it was carnage that flushed out sellers and opened the door for the rally to continue.
In any event, stocks tanked on the open, bumped along opening levels for forty minutes then bounced. Bounced and never looked back. They rallied steadily to noon, worked laterally for two hours, then took off upside to race higher toward the close.
SP500 27.54, 1.43%
NASDAQ 80.70, 1.74%
DJ30 200.36, 1.23%
VOLUME: NYSE +10%; NASDAQ +3%. Not blowout, massive volume, but a steady increase in solid, above average trade as stocks rallied again. Good upside volume on the Tuesday reversal and Wednesday surge, a Thursday pause, then new solid volume Friday on the gains.
A/D: NYSE 3:1, matching Wednesday levels. NASDAQ 2.2:1, also matching Wednesday levels.
Why the reversal from carnage to nirvana? Technical, my dear Watson.
The move was set up ahead of time. Sentiment and internals hit extremes, some of the stock indices tested the prior lows, all bounced. Wednesday the rally started ahead of the news as we anticipated, Thursday a pause just before the release.
Then the news was out. Bad news was bad news at first, but then not. There was panic in the morning that ran out the rest of the sellers. When they were panicked out, the buyers returned. All but SOX tested below the Thursday low and closed above the Thursday high. Key reversal days though volume was less than blowout. Nonetheless another session that fought off selling and saw buyers return, this time with some gusto.
A good move but not a perfect move. More leaders will be needed, but this action buys them time to build their patterns along the lines of what we discussed this past week. While they build those patterns some solid stocks surged ahead, e.g. AMZN, PCLN, NFLX, SIMO. Even GOOG got in on the move, muscling right back into the leadership group. More are needed, but this was a start.
The jobs report was gruesomely painful, like being forced to watch back to back episodes of 'Designing Women' for days on end. Like listening to our President tell us abject nonsense as to why yet another year is closing and the economy is still crap, why the jobs created are for all intents and purposes the temp jobs high school kids worked. It was that bad.
Even the headline numbers could not be fudged, and the prior headline numbers that were previously written higher were revised back down.
Non-Farm Payrolls: 142K versus 205K expected versus 136K prior (from 173K). July was revised to 223K from 245K. In all, -59K jobs for those two months.
Unemployment Rate: 5.1% versus 5.1% versus 5.1%. But this doesn't even matter anymore because of the most key statistic, those in the workforce.
Hourly earnings: 0.0% versus 0.2% expected versus 0.4% prior (from 0.3%).
Actually they were negative but rounded up: -0.01 to $25.09 from $25.10.
Aggregate earnings: -0.2% (workweek plus hourly earnings)
Weekly earnings: Fell to $865.61 from $868.46
Average workweek: Back down. 34.5 versus 34.6 expected versus 34.6 prior. Seems that increase that Mark Zandi was crowing about was just a one-week blip. Kind of like Zandi's overall accuracy in predicting jobs, the same record the Phillips Curve Keynesians have in predicting economic activity.
PARTICIPATION: 62.4% from 62.6%. Those out of the workforce increased 579K to . . . 94.6M, a level not seen since October 1977 in, of course, the Carter years, the other time we had a socialist in office. And I am saying that rather nicely.
Where the jobs are and are not: a new month, but the same story. Of course.
Professional and Business: +31K
Wholesale trade: -4K
Insult to injury: September saw +21K waiters and -9K manufacturing workers. Since 12/2007 the US has added 1.5M waiters and bartenders and lost 1.4M manufacturing jobs.
Factory Orders flashing recession signal
Factory Orders, August: -1.7% versus -1.0% expected versus 0.2% prior (from 0.4%)
Year/year: -15%! The tenth straight year/year decline. This is the longest non-recession string of losses ever seen. But, of course, perhaps they are NOT outside of a recession?
Inventories to shipments: 1.35. This is knocking on the door of recession. Indeed, in 2008 the US was already in recession when the figure was 1.25.
All indices gapped lower, all but SOX gapped below the Thursday low. After an hour they started to rebound and they rallied to midday, consolidated, then sprinted to the close. All closed over the Thursday high. Volume up. Solid shakeouts and reversals, and yes, SP500 showed a follow through session, a bit earlier than we anticipated.
SP500: Broke hard to the downside early session, undercut the Thursday low but held over the weeks' lows (as it should to keep the rally attempt alive), then rushed upside to a solid gain on rising, above average, but not huge volume. That is a reversal session and a follow through session to the rally that started Tuesday, all rolled into one. All the elements are in place: A dive lower in August that shot sentiment and internal readings to bottoming levels, a test of the prior low to form a double bottom, MACD putting in a higher low, a reversal Tuesday, a rally on some volume Wednesday, a reversal and follow through Friday. The stage is set for a new uptrend. Now just add leaders.
NASDAQ: Gapped lower, sold below the Thursday low, reversed sharply to close at the session high, filling the gap lower from Monday. NASDAQ did not, as previously opined, need to test the prior low thanks to others doing the work for it, as well as having some leaders that refused to sell off.
DJ30: Also reached below the Thursday low on the early test, reversed to close at the week's highs. Held the early September lows on this test, holding well above the August low. Nice reversal.
RUTX: Nice session, gapping lower, selling down to the Tuesday low, then reversing sharply. Took out the late August lows on the recovery. Nice lower low and reversal, a.k.a. a false break. The market and the economy really need RUTX to make this rally work.
SP400: Same pattern as SP500, reaching almost to the week lows, reversing upside to a strong gain. Nice double bottom reversal.
SOX: Gapped lower, held above the Thursday low, reversed to close at the week's high. SOX is another index that did not fully test the August low, but again, not all indices have to.
A lot of stocks moved higher, a lot of stocks doing so were roughed up and look to simply be in rebounds from their selling. In other words, they are showing bounces but are not coming out of good consolidation patterns or rebounding off of key support. There are leaders, however, and other stocks in the process of good patterns. The question that will be answered over the next two weeks is whether there are enough to keep the rally going and whether others form up to follow.
Big Names: AMZN powered higher on rising, above average volume. PCLN gapped lower and reversed on rising volume. NFLX broke through the upper trendline of its wedge on rising, above average volume. GOOG looks to have righted the ship. AAPL is still a question as is BWLD and SBUX. CMG could flip to an upside play soon.
Chips: MLNX surged. MCHP has a very nice pattern. CY sports a nice double bottom. MXWL surged upside. SIMO looks super. Many of the AAPL related chips are still so-so, e.g. BRCM, SWKS, QRVO.
Industrials: Examples of stocks bouncing but not much more. CMI, CAT, TEX.
Financial: Took a hit but reversed, though still negative on the day. JPM, WFC. MA did managed a positive close as it still trades in its range and on lower volume. The lowering of rate hike odds post-jobs did not help these stocks as much.
Energy: CVX broke to a higher high in its consolidation; a possible nice trade. APC bounced off the late August lows. PTEN ditto. HAL helped its cause though a so-so pattern.
China stocks: SINA surged through the 200 day SMA. ATHM surged through the 50 day EMA. CTRP and even more so SOHU look interesting.
Software: Some interesting action. VDSI still looks good but want more volume. CYBR might be able to show something. Others are still struggling: SPLK, PANW. CALD shows a very interesting 50 day EMA test.
Stats: +80.69 points (+1.74%) to close at 4707.78
Volume: 2.129B (+3.04%)
Up Volume: 1.79B (+836.06M)
Down Volume: 383.99M (-756.01M)
A/D and Hi/Lo: Advancers led 2.16 to 1
Previous Session: Decliners led 1.37 to 1
New Highs: 16 (-2)
New Lows: 204 (0)
Stats: +27.54 points (+1.43%) to close at 1951.36
NYSE Volume: 1.1B (+10%)
A/D and Hi/Lo: Advancers led 2.97 to 1
Previous Session: Decliners led 1.05 to 1
New Highs: 10 (0)
New Lows: 266 (+92)
Stats: +200.36 points (+1.23%) to close at 16472.37
VIX: 20.94; -1.61
VXN: 23.71; -1.87
VXO: 22.17; -1.51
Put/Call Ratio (CBOE): 1.09; +0.12
Recent history: 22 of 32 sessions at or over 1.0. Has done its work for a bounce.
Bulls and Bears: Now it is official: bears moved above 35%, the 'official' bullish indicator for bears. Further, the bulls/bears crossover continued and drove further, down for bulls, up for bears.
Bulls: 24.7 versus 26.0
Bears: 35.1% versus 30.2%
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.
26.0% versus 26.8% versus 25.7% versus 27.8% versus 31.6% versus 37.7% versus 40.2% versus 42.2% versus 43.3% versus 49.0% versus 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%
Background: This is the lowest since the 2008 and 2009 market plummet.
30.2% versus 26.8% versus 27.9 versus 26.8% versus 22.5% versus 18.4% versus 18.6% versus 17.5% versus 17.5% versus 15.6% versus 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%
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. Getting close.
Bonds (10 year): 1.98% versus 2.04%. Bonds gapped higher through the 200 day SMA measured by the TLT but faded to close below that level. Still rallying as a rate hike becomes not much more than a glimmer.
Historical: 2.04% versus 2.05% versus 2.05% versus 2.09% versus 2.17% versus 2.11% versus 2.15% versus 2.14% versus 2.20% versus 2.13% versus 2.20% versus 2.30% versus 2.28% versus 2.17% versus 2.18% versus 2.23% versus 2.18% versus 2.19% versus 2.13%
Euro/$: 1.12106 versus 1.1190. Surged then faded to a narrower gain.
Historical: 1.1190 versus 1.1167 versus 1.1254 versus 1.1254 versus 1.1206 versus 1.1223 versus 1.11715 versus 1.11325 versus 1.12004 versus 1.13010 versus 1.14077 versus 1.13068 versus 1.1268 versus 1.1317 versus 1.1338 versus 1.1278 versus 1.1217 versus 1.12093 versus 1.1148 versus 1.1122 versus 1.1220 versus 1.1299 versus 1.1216 versus 1.1180 versus 1.1243 versus 1.1413
$/JPY: 119.91 versus 119.86. Big reach lower early but recovered to flat, still in the 6 week lateral range.
Historical: 119.86 versus 120.07 versus 119.76 versus 119.64 versus 120.58 versus 120.30 versus 120.19 versus 120.00 versus 120.36 versus 119.996 versus 119.82 versus 120.46 versus 120.49 versus 120.34 versus 120.58 versus 120.73 versus 120.39 versus 119.98 versus 119.04 versus 120.15
Oil: 45.54, +0.52. Modest gain, still in the 6 week lateral range the same as the dollar/yen. Again, it is interesting how well oil held up on a large inventory build, but of course that was offset by a dramatic rig count decline reported Friday.
Gold: 1136.60, +23.90. That is a big move, reaching well below the week's lows down to the mid-September lows then reversing and powering through the 50 day EMA. Higher low, strong upside break.
ISM clings to expansion by 0.2. Factory Orders bomb. Jobs Report massively disappointing though the President talks as if things are great if Congress would just get rid of spending limits so the federal government could spend more and more. Then the economy would grow. As if the Fed with a $4T balance sheet of spending, the federal government trillions in debt despite taking record amounts of taxes from citizens is not enough spending.
The economy is not great, is not healthy, but the question is how will the market react? Typically the market forecasts economic action. If it recovers and continues moving back up to higher highs it is either forecasting better times OR more Fed action. Not just failure to launch rate hikes, but Action, e.g. new QE. If the economy continues to spiral lower the Fed may have no choice. Perhaps the market is considering that as its reason to rally. Of course in times gone by during QE, each time a program ended the market stalled and rolled over and did not recover UNTIL new QE was announced. In other words, this would be the first QE anticipatory rally for the market.
All of that is interesting and fun to debate. As for what we do with our trades and investments, however, it is all academic. What we act upon is market action and leadership.
The market has shown the action. It has done what is necessary to put in a bottom in terms of sentiment, internals, and now technical action. There are some leaders that have started the move and are Friday showed the way higher again. Others are starting to follow and still others are in the process of setting up. If enough can come along, the confirmed rally has some legs. The market needs plenty of new leadership wannabes forming up to sustain rallies. As noted before, the leadership is still somewhat thin, but it is now improving.
We booked some good gain on the week in a few downside positions. Then we picked up some good upside on the week: SIMO, AMZN, PCLN, SLAB, TSYS, SINA, MXWL, NFLX. We have some really great stocks in good position, some leading already, others moving up to shoulder in on leadership. A good start.
We will continue looking for more stocks that want to lead. Some of the big names look good, some of the chips look good, some China stocks look good. That works as they started the move and you want to see them continue contributing. At some point, however, others need to show up. Energy again is trying to set something in motion. Even LPX in materials has set up a double bottom.
Better though a lot more is needed as the move progresses. If it doesn't show up, as soon as the initial leaders finish their moves the overall move ends, sometimes abruptly.
For now the move shows good action in many ways. In addition to the plain old double bottom tests by SP500 and SP400, the intraday action Tuesday and Thursday, coming back from selling in the face of bad news, and the same action Friday, magnified in force and the level of news, is solid recovery action.
We plan on putting money to work on quality leaders making good moves just as we have done. This is the first try at a rally with all elements in place since the August selloff. Even with all the criteria met, still enter quality and not all your money at once. Start working in on solid plays making good moves. If the move is going to continue to new highs, we will get many opportunities to put money to work at very good entry points.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4707.78
4751 is the January 2015 lower high
4774 is the January high
4811 is the November 2014 peak (intraday)
4815 is the December 2014 prior market peak
The March lows at 4843 and 4825
The 50 day EMA at 4826
4837 is the late August 2015 rebound high
4910 is the July 2015 low
4912 the mid-April China dip
The 200 day SMA at 4917
The June low at 4974
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
4636 is the early September 2015 low testing the recovery from the August selling.
4631 is the October 2014 upside gap point
4614 is the September 1 intraday low
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 2014 low is giving way
4506 is the August 2015 selloff closing low
4370 to 4300 (March 2014 peak to June gap point)
4185 to 4130 (May 2014 gap point to October 3014 low)
4292 is the August 2015 intraday low
S&P 500: Closed at 1951.36
1972 is the December 2014 low
The 50 day EMA at 1987
1989 is the last August closing high
1991 is the July 2014 high
1994 is the late August recovery peak
2011 is the September prior all-time high
2046 is the July 2015 closing low
2062 is the January 2015 lower high
The 200 day SMA at 2063
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
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
1913 is the early September 2015 closing low testing the bounce from the August selling
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.
1872 is the September 2015 test low of the August low
1867 is the August 2015 low
1862 is the October 2014 closing low
The December and January highs at 1848
1829 us the October 2014 intraday low
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 16,472.37
16,506 is the March 2014 peak
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high
16,665 is the late August 2015 closing high. Key, key level.
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. Key level.
16,736 is a prior all-time high from May 2014
The 50 day EMA at 16,738
16,933 is the September 2015 recovery peak
16,946 is the June 2014 peak
16,970 is the June 2014 former all-time high
17067 is the December 2014 low
17,068 is the early July 2014 peak
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
17,515 is the early July closing low
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to July trading range.
The 200 day SMA at 17,626
June low at 17,715
The March low at 17,786
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
15,942 is the September 2015 low testing the August low
15,855 is the October 2014 intraday low
15,372 is the February 2014 closing low
15,370 is the August 2015 intraday low
14,803 is the October 2013 low
September 28 - Monday
Personal Income, August (8:30): 0.3% actual versus 0.4% expected, 0.5% prior (revised from 0.4%)
Personal Spending, August (8:30): 0.4% actual versus 0.3% expected, 0.4% prior (revised from 0.3%)
PCE Prices - Core, August (8:30): 0.1% actual versus 0.1% expected, 0.1% prior
Pending Home Sales, August (10:00): -1.4% actual versus 0.5% expected, 0.5% prior
September 29 - Tuesday
Case-Shiller 20-city, July (9:00): 5.0% actual versus 5.0% expected, 4.9% prior (revised from 5.0%)
Consumer Confidence, September (10:00): 103.0 actual versus 96.0 expected, 101.3 prior (revised from 101.5)
September 30 - Wednesday
MBA Mortgage Index, 09/26 (7:00): -6.7% actual versus 13.9% prior
ADP Employment Chang, September (8:15): 200K actual versus 200K expected, 186K prior (revised from 190K)
Chicago PMI, September (9:45): 48.7 actual versus 52.9 expected, 54.4 prior
Crude Inventories, 09/26 (10:30): 3.995M actual versus -1.925M prior
October 1 - Thursday
Challenger Job Cuts, September (7:30): 93.2% actual versus 2.9% prior
Initial Claims, 09/26 (8:30): 277K actual versus 270K expected, 267K prior
Continuing Claims, 09/19 (8:30): 2191K actual versus 2242K expected, 2244K prior (revised from 2242K)
ISM Index, September (10:00): 50.2 actual versus 50.6 expected, 51.1 prior
Construction Spending, August (10:00): 0.7% actual versus 0.5% expected, 0.4% prior (revised from 0.7%)
Natural Gas Inventor, 09/26 (10:30): 98 bcf actual versus 106 bcf prior
Auto Sales, September (17:00): 5.6M prior
Truck Sales, September (17:00): 8.5M prior
October 2 - Friday
Nonfarm Payrolls, September (8:30): 142K actual versus 205K expected, 136K prior (revised from 173K)
Nonfarm Private Payr, September (8:30): 118K actual versus 200K expected, 100K prior (revised from 140K)
Unemployment Rate, September (8:30): 5.1% actual versus 5.1% expected, 5.1% prior
Hourly Earnings, September (8:30): 0.0% actual versus 0.2% expected, 0.4% prior (revised from 0.3%)
Average Workweek, September (8:30): 34.5 actual versus 34.6 expected, 34.6 prior
Factory Orders, August (10:00): -1.7% actual versus -1.0% expected, 0.2% prior (revised from 0.4%)
October 5 - Monday
ISM Services, September (10:00): 58.0 expected, 59.0 prior
October 6 - Tuesday
Trade Balance, August (8:30): -$44.5B expected, -$41.9B prior
October 7 - Wednesday
MBA Mortgage Index, 10/03 (7:00): -6.7% prior
Crude Inventories, 10/03 (10:30): 3.995M prior
Consumer Credit, August (15:00): $19.5B expected, $19.1B prior
October 8 - Thursday
Initial Claims, 10/03 (8:30): 275K expected, 277K prior
Continuing Claims, 9/26 (8:30): 2205K expected, 2191K prior
Natural Gas Inventories, 10/03 (10:30): 98 bcf prior
FOMC Minutes, 9/17 (14:00)
October 9 - Friday
Export Prices ex-ag., September (8:30)
Import Prices ex-oil, September (8:30)
Wholesale Inventories, August (10:00): 0.0% expected, -0.1% prior
End part 1 of 3
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