Sunday, December 18, 2016

The Daily, Part 1 of 3, 12-17-16

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12/17/2016 Investment House Daily
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- With a lot to ponder, the stock indices spend last week moving laterally,
assessing where they are.
- Inflows are running, mostly to ETF's, of course after a big market surge.
- Yellen, Republicans appear to want to stand in the way of Trump fiscal
- Lots of reasons for market to sell, including lots of bulls. Also, there
are a lot of leaders.

The stock market spent the week assessing its situation. Sitting on top of
1.5 month moves that had RUTX, DJ30 and SP400 at their peaks rather extended
in terms of their 200 day SMA. The election result generated a lot of
excitement for economic expansion and 'reflation' trades soared first,
taking other areas with them later. Some struggled thanks to TT's (Trump
Tweets), e.g. defense and drugs, but even those are not down for the count.

SP500 -3.96, -0.18%
NASDAQ -19.69, -0.36%
DJ30 -8.83, -0.04%
SP400 -0.18%
RUTX -0.16%
SOX -1.00%

VOLUME: NYSE +120%, NASDAQ +30%. Quite the quadruple witching session.

A/D: NYSE 1.3:1, NASDAQ -1.2:1

The economic excitement and market moves snowballed into more enthusiasm.
Last week saw $21B inflows into stock funds, mostly ETF's as $31B moved into
ETF's overall. Investors like to play the index game though those can be
the least performing of the funds -- outside perhaps Gartman's . . . ?
Okay, cheap shot.

Inflows are surging as stocks are sitting on top of a 6 week run, a move
without a lot of rest. Moreover, bullish investment advisors moved to
59.6%, now fully in the range of readings that have, over as many years as
you want to count, resulted in market corrections. Okay, a few pullbacks
versus corrections, but typically a correction of some sort results from
readings of this sort at some point hence.

On top of the market centric stories, the political aspects came home to
roost so to speak. The FOMC made the bold move of hiking the Fed Funds rate
25BP for the second time in 13 months and promised an additional 3 hikes in
2017, really clamping down on runaway economic mediocrity in America. This
rapid fire rate hiking (when the 10 year is at 2.59%) surely puts the market
at risk, right?

It wasn't just the Fed threat of an ever so slight slowing of the stimulus
IV drip, but the politicians (those outside the Fed, that is) that had to
get their face time in front of the cameras to justify to us why they
deserve better healthcare than the piece of junk system we are forced to buy
into (no, I am not bitter), not to mention free haircuts, workout
facilities, insider trading privileges (to offset the cost of selling out to
special interests), and the license to lie with impunity.

Paul 'Cybil' Ryan met with Trump a few weeks back and his grass roots
conservative Tea Party personality appeared and gushed pro Trump. When he
slinked back to DC, the 'we cannot ever win an election without agreeing to
unlimited immigration and pandering to every special interest group'
personality appeared as he slow-danced cheek to cheek with Senate curmudgeon
Mitch McConnell as they complained about the deficit.

The congressional bookend twins.

Ah, once again when it suits them they talk of harmful deficits. Where were
these rapscallions when they could have stopped the Obama budget last year?
They were practicing the renowned French tactic of turning and running,
ironically reversed in the movie 'Monty Python and the Holy Grail' when
Arthur and his knights fled the French taunting with the battle cry, 'Run

In any event, despite the Trump transition promises and the stock market
surging in anticipation of infrastructure spending, fiscal stimulus, and
regulatory rollbacks, the politicians are loathe to relinquish their power
and thus, when they get back in the pack they take on their old
characteristics of defending the group against any chance they lose their

Okay, what does that long description of the market climate mean? The rally
is facing its first real test. Hope for expansion, real economic expansion
thanks to growth policies and a rollback of economic strangling policies,
versus the establishment resisting change AND market physics. The market is
assessing the threats, thus working laterally on the week.

I would say that the unholy wedding of Ryan and McConnell holds little
threat. If they see populist support for Trump policies the 'shucks, we were
just kidding' explanations will immediately issue just as they did during
Reagan's tenure. The Fed? Yes, it can be a real problem but the lucky
thing for Trump is the Fed is so far behind the curve it will have to really
work at killing off any real economic success.

That leaves the market's success in rallying as its own worst enemy.
Bullishness at levels that have set off past corrections and sharp advances
that surpass the safe margins above the 200 day SMA that force gravity to
take effect combine to suggest the market will need some kind of test,
typically more than it has shown of late with the weeklong lateral moves.

That said, the market put in another lateral move as it assesses the lay of
the land. Thus, there is already some ongoing consolidation. Per the
bullishness, however, that is likely not enough of a give back, and you
would anticipate a deeper bit to the selling. That is one reason we took
quite a bit of gain 2 weeks back all of that week, i.e. in anticipation of
this week's reassessment lateral slide.

The question is timing. Sentiment indicators tend to front run the market
action, and it can be a week, a few weeks, a couple of months before the
gravity turns them back over. That is one reason we didn't just wholesale
dump everything. There can still be a test/rest as seen last week and a new
break higher before any more serious selling starts. Thus we let good
patterns that remained good continue to work.

There are MANY very good patterns out there in current leading sectors and
in areas that are looking to become or are becoming leadership groups. When
it is all boiled down, it is leadership and its ability to continue setting
up, rallying, consolidating, then rallying some more that keeps a move
alive. Sentiment can get to extremes and stay at extremes for quite some
time before a market finally decides to give in.

Thus, we have some new solid upside plays on the report for this week.
Nothing yet suggests a big rollover in technical terms other than the
percentages above the 200 day SMA. Even so, some indices still have plenty
of upside to work with before they reach extreme levels (e.g. NASDAQ,
SP500). After this week of sideways movement many of the early market
leaders are in position to resume their runs and there are new contenders
coming to the fore to possibly take their shot at moving higher. If they
show the moves, all of our speculation about market tops, extended indices,
political headwinds is just that, speculation.



SP500, DJ30, and NASDAQ spent last week mostly working laterally, at least
they did after the Tuesday upside surge to higher highs. Not much change
for SP500 and DJ30 as they hold near new highs, working laterally, very
similar to prior lateral consolidations in the current move higher.

NASDAQ is less extended than the other two large cap indices and its move
last week is very similar, i.e. a lateral move, holding the Tuesday move to
a new high, waiting for the 10 day EMA to catch up. That is typically
bullish action, i.e. holding a gain, consolidating above near support.

RUTX and SP400 spent the week forming a 10 day EMA test similar to the late
November test that led to the most recent leg higher. Wednesday the selling
looked too sharp, but Thursday and Friday they slowed the selling and held
the 10 day EMA. Still a bullish trend, it is just their moves put them well
above the 200 day SMA. If all want to rally, however, these two are in good

SOX: Broke to a higher post-2000 high Thursday, continued upside Friday,
but then flipped rather sharply negative. Still holding the trend, but a
second Friday where SOX started higher only to give it up.


Some of the first leaders in the rally are pressured, e.g. metals, retailers
(though the latter are more late comers), industrial equipment, suggesting
that some are buying into the notion the infrastructure and stimulus may not
be a sure thing.

Metals: It is said economic gains have a copper roof. FCX did not break
higher from its pennant, instead breaking down last week. Steel is hanging
in, e.g. AKS, STLD, but there are stocks in the group struggling, e.g. SID,

Industrial Equipment: CMI, CAT sold on the week but UTX, MMM, TEX are
holding in.

Retail: Box stores clobbered, e.g. JWN, DDS, M, KSS. Specialty not as bad,
e.g. KIRK. Some apparel makers are struggling, e.g. DECK, LB.

Chips: A good week but not a great Friday. XLNX surged only to give a
chunk back. AMAT did the same. SLAB is testing the 20 day EMA after
pushing to a higher rally high. AMD also posted a nice week, surged Friday,
then gave up that move and a bit more. Overall still solid.

Oil: Definitely some issues on the week. APC tested back to the 10 day EMA
and looks solid. HAL is in a 2.5 week lateral move after hitting a higher
rally high. CWEI jumped midweek off the 50 day EMA after a tough 4 weeks.
LGCY still looks good to move higher. Service companies struggled but is
setting up, e.g. PKD, PDS, ESV. Others are setting up, lots of them.

Financial: UP and down the past week as they try to consolidate prior moves
and set up the next. BAC, C, JPM, GS.

Telecom: Some interesting patterns setting up, e.g. SWIR, VIP, MBT, CIEN.

Internet: Trying to make some moves, e.g. LIVE, LLNW. YNDX in a good


Stats: -19.69 points (-0.36%) to close at 5437.16
Volume: 2.708B (+29.95%)

Up Volume: 1.37B (+100M)
Down Volume: 1.84B (+1.027B)

A/D and Hi/Lo: Decliners led 1.17 to 1
Previous Session: Advancers led 1.5 to 1

New Highs: 179 (+4)
New Lows: 42 (-31)

Stats: -3.96 points (-0.18%) to close at 2258.07
NYSE Volume: 2.2B (+120%)

A/D and Hi/Lo: Advancers led 1.3 to 1
Previous Session: Advancers led 1.28 to 1

New Highs: 121 (+17)
New Lows: 68 (-57)

Stats: -8.83 points (-0.04%) to close at 19843.41


VIX: 12.2; -0.59
VXN: 13.23; -0.98
VXO: 11.58; -0.47

Put/Call Ratio (CBOE): 0.91; +0.06

12 of 35 sessions over 1.0 on the close. Saw a modest rise in put option
action on the week.

Bulls and Bears: Bulls continued marching to 60, now just 0.4 away. 60 to
65 have signed off on many a market correction since 1998. Bulls are
effectively there, suggesting that the 'tired' indices look that way for a

Bulls: 59.6 versus 58.8

Bears: 19.2 versus 19.6

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: 59.6 versus 58.8
58.8 versus 56.3 versus 55.6 versus 51.0 versus 42.9 versus 41.7 versus 47.1
versus 42.9 versus 46.1 versus 46.7 versus 45.2 versus 44.6 versus 49.0
versus 52.5 versus 55.9 versus 56.7 versus 56.2 versus 54.3 versus 52.9%
versus 53.9% versus 54.4% versus 52.5% versus 47.1% versus 41.6% versus
47.5% versus 45.9% versus 47.3% versus 45.4% versus 35.4% versus 40.2 versus

Bears: 19.2 versus 19.6
19.6 versus 22.3 versus 21.6 versus 23.5 versus 25.7 versus 24.3 versus 23.1
versus 23.8 versus 23.1 versus 22.8 versus 23.1 versus 24.3 versus 22.6
versus 22.8 versus 20.6 Versus 20.2 versus 20.0 versus 20.9% versus 21.2%
versus 21.6% versus 23.3% versus 24.7% versus 24.5% versus 23.8% versus
23.2% versus 23.5% versus 23.8% versus 23.7% versus 24.0% versus 21.7%
versus 21.6% versus 21.7 versus 20.6% versus 21.7% versus 27.8% versus 27.8%
versus 28.9% versus 27.8% versus 30.3% versus 35.4%


Bonds (10 year): 2.59% versus 2.59%. Bonds around the world are still

Historical: 2.59% versus 2.52% versus 2.473% versus 2.475% versus 2.471%
versus 2.40% versus 2.349% versus 2.39% versus 2.396% versus 2.394% versus
2.454% versus 2.388% versus 2.30% versus 2.31%. versus 2.36% versus 2.355%
versus 2.317% versus 2.30% versus 2.34% versus 2.297% versus 2.219% versus
2.22% versus 2.23% versus 2.14% versus 2.077% versus 1.867% versus 1.83%
versus 1.778% versus 1.81% versus 1.797% versus 1.827% versus 1.83% versus
1.85% versus 1.84% versus 1.791% versus 1.76% versus 1.76% versus 1.73%
versus 1.75% versus 1.74% versus 1.74% versus 1.766% versus 1.80% versus
1.746% versus 1.78% versus 1.723% versus 1.72% versus 1.74% versus 1.72%
versus 1.69% versus 1.622% versus 1.60% versus 1.56% versus 1.569% versus
1.56% versus 1.584% versus 1.62%

EUR/USD: 1.0459 versus 1.0415. Tough back end of the week for the euro.

Historical: 1.0415 versus 1.05094 versus 1.0636 versus 1.06326 versus
1.05586 versus 1.06140 versus 1.07745 versus 1.07194 versus 1.07614 versus
1.06638 versus 1.06631 versus 1.0601 versus 1.0649 versus 1.05699 versus
1.066 versus 1.05910 versus 1.05519 versus 1.0672 versus 1.06265 versus
1.0587 versus 1.0650 versus 1.07026 versus 1.0725 versus 1.07492 versus
1.0858 versus 1.08898 versus 1.09398 versus 1.10186 versus 1.10327 versus
1.11406 versus 1.11059 versus 1.11020 versus 1.10560 versus 1.09646 versus
1.09860 versus 1.08963 versus 1.0895 versus 1.08793 versus 1.08793 versus
1.08851 versus 1.0928 versus 1.0971 versus 1.0977 versus 1.10217

USD/JPY: 117.941 versus 118.257. Big surge post-FOMC for the dollar,
continuing the move upside.

Historical: 118.257 versus 117.397 versus 115.038 versus 115.058 versus
115.20 versus 114.23 versus 113.325 versus 113.993 versus 113.601 versus
113.52 versus 113.945 versus 114.19 versus 112.685 versus 112.44 versus
111.835 versus 113.14 versus 112.445 versus 111.129 versus 110.809 versus
110.905 versus 110.240 versus 109.07 versus 108.164 versus 107.455 versus
106.621 versus 106.814 versus 105.192 versus 101.286 versus 104.386 versus
103.112 versus 102.96 versus 103.350 versus 104.042 versus 104.798 versus
104.710 versus 105.305 versus 104.412 versus 104.2110 versus 104.331 versus
103.83 versus 103.99 versus 103.99 versus 103.602 versus 103.892 versus
103.815 versus 104.201 versus 103.634 versus 103.690 versus 103.698 versus
103.95 versus 103.159 versus 103.984 versus 103.381 versus 102.807 versus
102.035 versus 101.326 versus 101.143 versus 101.322 versus 100.55

Oil: 52.95, +2.05. After giving up the breakout, oil held the 20 day EMA
Thursday then gapped and rallied back to the week's closing high Friday.
Impressive as oil did try the bounce upside we opined about on Thursday.

Gold: 1137.40, +7.60. Ugly gap lower Thursday post-FOMC, modest Friday
recovery, but gold has been . . . hammered.


NASDAQ: Closed at 5437.16


The November all-time high at 5404
The 2016 trendline at 5385
5340 is the September and October 2016 twin peaks
The 50 day EMA at 5310
5287.61 is the September 2016 high
The 50 day SMA at 5285
5271.36 is the August 2016 intraday prior all-time high
5231.94 is the 2015 all-time high
5170 is the October intraday low.
5162 is the early November peak, 5176 is the December intraday peak
5100 from the April peak and early May peak
The 200 day SMA at 5061
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
4920 is the lower gap point from mid-October 2015, the January 2016 lower
gap point
4916 is the mid-November 2015 low
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high

S&P 500: Closed at 2258.07


The 10 day EMA at 2246
The 2016 trendline at 2225
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
The 50 day EMA at 2192
2175 is the June 2016 high
The 50 day SMA at 2174
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
The 200 day SMA at 2125
2120 is the June 2016 peak
2119 is the September 2016 low; February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
2079 is the intraday all-time high from November 2014
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
2011 is the September prior all-time high
1995 is the September 2015 recovery peak
1991 is the July 2014 high

Dow: Closed at 19,843.41


The 10 day EMA at 19,664
The 20 day EMA 19,407
The 50 day EMA at 18,952
The 50 day SMA at 18,730
18,669 is the August 2016 all-time high
18,595 is the July 2016 peak
18,351 is the prior all-time high from May 2015
18,288 from March 2015
18,262 is the upper gap point from the Monday gap lower.
18,247 is the August 2016 low
The 200 day SMA at 18,172
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,992 is the early September low
17,978 is the November 2015 peak
17,960 is the October intraday low
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.


December 21 - Wednesday
MBA Mortgage Index, 12/17 (7:00): -4.0% prior
Existing Home Sales, November (10:00): 5.50M expected, 5.60M prior
Crude Inventories, 12/17 (10:30): -2.600M prior

December 22 - Thursday
GDP - Third Estimate, Q3 (8:30): 3.3% expected, 3.2% prior
GDP Deflator - Third, Q3 (8:30): 1.4% expected, 1.4% prior
Initial Claims, 12/17 (8:30): 256K expected, 254K prior
Continuing Claims, 12/10 (8:30): 2018K prior
Durable Orders, November (8:30): -4.5% expected, 4.8% prior
Durable Orders, Ex- , November (8:30): 0.2% expected, 1.0% prior
FHFA Housing Price I, October (9:00): 0.6% prior
Leading Indicators, November (10:00): 0.1% expected, 0.1% prior
Personal Income, November (10:00): 0.3% expected, 0.6% prior
Personal Spending, November (10:00): 0.4% expected, 0.3% prior
Core PCE Price Index, November (10:00): 0.1% expected, 0.1% prior
Natural Gas Inventor, 12/17 (10:30): -147 bcf prior

December 23 - Friday
Michigan Sentiment -, December (10:00): 98.2 expected, 98.0 prior
New Home Sales, November (10:00): 573K expected, 563K prior

End part 1 of 3
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