Sunday, June 04, 2017

The Daily, Part 1 of 3, 6-3-17

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6/3/2017 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued. Again, we could have taken more gain but stocks
were running.
Entry alerts: LLNW
Trailing stops: None issued
Stop alerts: None issued

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The REPORT SCHEDULE is as follows:

Market Summary Video, Plays and Play Videos, and Play Table with play
annotations will issue Wednesday, Weekend.

Monday a Market Summary video, new plays, play table annotations.

Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play table.

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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.


- More new highs as jobs report stinks, more gloom forecasts.
- Jobs report misses, internals again show structural collapse of US
employment markets.
- Most new jobs the past 10 years are nothing but fiction -- and low wage
hourly jobs.
- Divorced, for now, from economic reality, markets continue their rise.

Thank goodness employment is lagging, right? The May jobs report was
horrible. At least the ISM/PMI sentiment reports were stronger -- though it
apparently took a phone call to get the Chicago PMI people with the program
as that report, initially a miss, was revised to a beat just over an hour
later. What nerve to go against the 'everything is coming up roses' meme.
Good to see those in power straightened this out quickly enough.

The jobs report, however, could not be fixed. Don't get me wrong: it is not
an accurate portrayal of the US jobs, it is just that things are so
structurally wrong with the jobs market that this miss, as bad as it was, is
still a rosy fiction compared to the reality of the US employment markets.

Okay, with that scenario, stocks rallied. Futures rose solidly ahead of
jobs, took a hit on the numbers and fell back near flat ahead of the bell.
Oh yes, and there were plenty more gloomers out Friday, comparing NASDAQ to
1999 (again) among the other usual doom scenarios. With this rather
pathetic economic performance, that is understandable: what the heck is the
market pricing in at this juncture? The Fed having to back off from hiking
or even ease rates? The yield curve is getting rather stupid again, trying
to invert even as the economy is supposedly just peachy. Hey, the Fed is
there right, so let all the bad news come.

Whatever is out there negative, it didn't matter. Stocks rallied more or
less across the board with more new highs for everyone -- except RUTX and
SP400. They are still bridesmaids on this move.

SP500 +9.01, +0.37%
NASDAQ 58.97, 0.94%
DJ30 62.11, 0.29%
SP400 0.19%
RUTX 1.12%
SOX 0.99%

VOLUME: NYSE -14%, NASDAQ -6%. After a volume spike to end May, trade
dropped Thursday and Friday, falling below average to end the week.

A/D: NYSE +1.4:1, NASDAQ +2:1. How do you spell large cap led move?

This market is like the bumblebee: it should not be able to fly, but it
does. The buy the dip mentality is strong in this move. Engrained now over
8 years, this is a hard habit to break. Selloffs are followed with
recoveries. As sure as Pavlov's dogs salivated when they heard the dinner
bell, Bernake's/Yellen's invest-dogs buy when they see a dip, particularly
after it magically ceases right after a sharp plunge.

There is now also the FOMO syndrome, the 'fear of missing out' buying as
AMZN tops 1000 and other 'household names' hit new highs and drive the
indices higher. How many emails do you get from someone touting how to
become an overnight stock market maven? They know the FOMO mentality is out
there and are taking advantage of it. I remember back over Christmas 1999
at a get together with some of my family and others. Many people who knew
nothing about the stock market commented they had better get in on it
because everyone else was making money doing it. I knew at that point a
major blow off was coming, just had to keep the eyes open for when it showed
up. It did in March 2000.

As I have chronicled several times over the past few weeks, more than a few
times this market should have rolled over in terms of a technical picture.
Yet, there was buying that saved the market. The Plunge Protection Team
gets it started by jumping in on key breaks lower, and when the rest of the
players see the sharp break has been blunted, they move, in. Happened the
past three weeks with that big, nasty Wednesday plunge that suddenly
stopped, and started to climb back. Now, the indices are once again at new
highs after teetering on a breakdown. Magic.

And profitable. We did not bank any gain to end the week. Why do so when
the market just breaks higher again after a short pullback to test? Indeed
we see more upside plays in several of the big names developing even if
breadth is atrocious. We know the market is higher than it should be based
on economics and phony non-GAAP accounting numbers (as the most recent Q1
GDP report showed as profits actually FELL), but we prefer to make money on
the upside even in the purportedly dying throes of the long upside run.

Some like to style it holding your nose and buying. Of course it is not
that, at least if you are interested in really making money with a bit more
safety. You play the leaders in good patterns to stack the probabilities in
your favor. You buy when they are ready to move. You take reasonable
profits and let plays continue to work for you. In short, you play smart,
not blindly grabbing your proboscis and buying anything that moves.



So what about the jobs report? Was it really that bad? On the one hand,
yes. On the other hand, yes again. Will it make a difference to the out of
touch, economically ignorant, politically consumed 'leadership' in Congress?

Non-farm payrolls: 138K versus 185K versus 174K April (from 211K)

March revised lower by 29K, April by 37K. So much for the accuracy of the
ADP monthly jobs survey (designed to mimic the BLS report but showing 235K
in May); those folks should take a few weeks off then not come back to work.
Marc Zandi, the 'brain' behind they survey, included.

The rubber match was to the downside: 38K March, 174K April (from 211K),
138K May.
Past 3 months: 121K average, down from over 180K/month.

Unemployment rate: 4.3% versus 4.4% prior. Lowest since May 2001. Also
the greatest piece of fiction -- ever.

Participation rate, aka how the unemployment rate is so low: 62.7% versus
Not in the workforce surged 608,000 to 94.983M from 94.375M.
Those employed: -233K
Those unemployed: +133K
Prognosis: that is the wrong direction. Brilliant analysis.

Full-time Jobs: -367K! The largest jump in 3 years
Part-time jobs: +133K

Wages: 0.2% versus 0.2% April (from 0.3%). Year/year: 2.5%. Barely keeping
up with inflation.

Workweek: Steady at 34.4 hours. Not that surprising as the ACA acts as a
natural governor on any workweek increases.

The $64B question: how can unemployment be at 4.3%, 7M jobs supposedly
created, and wages are at the very best barely keeping up with historically
low inflation rates?

First, it is the jobs being produced. They are mainly in the low wage
areas. Minimum wage jobs made up 2/3 of ALL jobs produced in May!!
Manufacturing turned in at -1,000, the weakest of 2017. The rest of the
sectors were more of the same from prior months: heavy on the lower wage

That of course, is a function of the structural changes wrought by the
combined burden of our tax system, the massive number of new regulations
from the prior administration, the centerpiece of which is the ACA with its
mandated coverage for any employee working more than 29 hours per week. If
you want less of something, tax it. The 29 hour threshold for the insurance
mandate to kick in is a tax on any company employing workers that work more
than 29 hours in a week. Therefore, to avoid the tax, a company alters its
employee base to maximize return. That means more workers working less
hours. That means making full-time jobs part-time, and the data bears this
out. We are becoming predominantly a nation of part-time workers that work
for lower wages. Others don't work at all; almost 95M working aged people
find it is just fine to collect benefits and avoid the hassle of a low-wage,
high-frustration job. You can always work some cash-only jobs to make some
extra cash and come out ahead versus taking a low wage hourly job.

Second, there simply are not that many jobs as claimed being produced.
Various new studies of business and job trends in the US show that for at
least the past 10 years the US economy has lost more businesses than it has
produced. The trends are dramatically lower.

Economic Innovation Group Wall
Street Journal

As you know, most new jobs are historically created by smaller businesses
from startups to relatively new businesses. If there are fewer and fewer
businesses over time, it would make sense that there would be fewer and
fewer jobs emerging from those smaller businesses.

Not so, however, according to the BLS and its birth/death adjustment. That
adjustment tries to bridge the gap between established companies reporting
their jobs gains or losses and startups that are too new to show up on the
traditional government surveys.

But here is where more magic occurs. Unlike stock market magic, however,
where the gains are actually true, these are wholly made up by government

The chart of the government's claimed jobs created through business startups
shows a marked trend higher even as multiple studies of business 'births and
deaths' show marked trends lower in the number of existing companies. A
survey that is supposed to guestimate the number of jobs being created by
new startups is showing more and more jobs as there are fewer and fewer
businesses in existence to create those jobs. Are we supposed to believe
that these fewer businesses are creating 2, 3, 4 times the number of jobs
they historically create? With the ACA throwing road blocks in small
business employment expansion?

If there was ever fake news, this is fake data and thus fake news. These
smart, intelligent, politically unbiased public servants are writing monthly
works of fiction that make sense nowhere in the real world. And of course
we pay them for this. All for the sake of keeping the status quo in place
so the huge government bureaucracy can justify its existence. It is so
huge, so pervasive, so engrained that nothing other than literally shutting
down entire branches of government or at least reducing staff by 90% will
result in any meaningful change. And, as we have seen, if a President even
questions the status quo the government behemoth quickly circles the wagons
and starts screaming impeachment just as sure as the snowflakes on US
campuses squeal for safe spaces lest they have to hear something that would
upset their fantasy land paradigm of socialist Utopia -- as their teachers
surely ignore the utter devastation of the people of Venezuela in the
collapse of that socialism paradise.



DJ30: Starting here not because DJ30 performed the best, it did not, but it
did put in a clean new all-time high, its first of this run. DJ30 just
grazed over the March high on a closing basis Thursday, cleared all former
highs, intraday or otherwise, Friday. Good volume on the break higher.

NASDAQ: Accelerating upside with a gap and rally to the close though volume
backed off to barely above average. After a 3-day pause waiting for the 10
day EMA to catch up, NASDAQ resumed its run Thursday and Friday.

SP500: Volume faded to just above average here as well, but trade is much
improved on this new break higher. Similar to NASDAQ, SP500 paused to let
the 10 day EMA catch up then took off Thursday and Friday to a pair of
higher highs.

SOX: Did not put in the same test as the large cap indices, got a big balky
Wednesday with a gap higher that failed, but then managed a Friday upside
gap and closed out at a higher post-2000 high. Has not taken the rest of
the other indices and thus may be a bit more extended on this move. SOX does
tend to march by a bit different drummer -- that is what makes it such a
good indicator for the rest of the market -- so it can take a breather while
the rest of the market rallies as it was out in front and moving higher
while the other indices rested.

SP400: Put in a credible move on the prior highs but came up short.
Thursday was a huge move to get it within striking distance. Friday it
cleared the April highs but fell short of the March 1 all-time high. It
then faded to close with a modest gain. Tested the top of the range, now
this week we see how it reacts to that, i.e. either a roll back over or
another challenge.

RUTX: Similar to SP400 midcaps, RUTX, surged Thursday, again Friday, but
faded the Friday gains. It touched the early March high but the late April
peak is the all-time high, and it did not come near that. Same as SP400,
have to see how the test plays out this coming week.


FAANG: After flattening out on the week and not providing any lift even
when NASDAQ rallied, e.g. on Thursday, Friday FANG was back in front. AMZN
over 1000. FB, AAPL, NFLX all broke higher from their short lateral
consolidations. GOOG was up but still in its recent lateral range.

Semiconductors: AVGO gapped up on earnings and with its 8.5% gain it led
the chips higher. NVDA, the leader to this point, put in its own short test
last week. MU put in a higher high along with SWKS and SIMO. Others still
look good for a new break higher: QRVO, PXLW. AMBA, SMTC are trying to
recover after they had good moves higher pushed back.

China: Somewhat volatile as usual, but holding the patterns. NTES coming
off a 20 day EMA test. CTRP still looks good to break higher. SINA still
testing its last move, setting up the next, SOHU doing the same.

Restaurants: Fast food still solid enough with WEN at a higher high, SONC
testing some, while DRI and YUM power higher once more.

Financial: BAC was down again Friday but off the lows that held near the
March/April lows. JPM fell on the week as well, holding the line to close
the week. C remained stronger of the 3, holding the 50 day EMA and bouncing
Friday. GS is just below the April and May lows.

Metals: Time to keep an eye on them as they are trying to bottom over the
past month. FCX, AKS, SCHN, AA, CENX.

MISC: MNST starting to break higher out of its consolidation. PYPL
continues to a higher high. SQ in a nice 1-2-3 test of its own.


Stats: +62.11 points (+0.29%) to close at 21206.29

Stats: +58.97 points (+0.94%) to close at 6305.8
Volume: 1.83B (-6.15%)

Up Volume: 1.13B (-350M)
Down Volume: 646.77M (+198.19M)

A/D and Hi/Lo: Advancers led 2.06 to 1
Previous Session: Advancers led 3.02 to 1

New Highs: 344 (+121)
New Lows: 39 (0)

Stats: +9.01 points (+0.37%) to close at 2439.07
NYSE Volume: 865.2M (-13.48%)

A/D and Hi/Lo: Advancers led 1.4 to 1
Previous Session: Advancers led 4.57 to 1

New Highs: 339 (+76)
New Lows: 27 (+7)


VIX: 9.75; -0.14
VXN: 12.91; +0.22
VXO: 9.02; -0.13

Put/Call Ratio (CBOE): 0.82; -0.18

Bulls and Bears: As is often the case, after the BIG drop in bulls May 23,
they continued lower last week only to see stocks break higher. Bears rose
as well, posting a strong move for another week, also just in time to see
the market rally.

Bulls: 50.0 versus 51.9

Bears: 19.2 versus 18.3

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: 50.00 versus 51.9
51.9 versus 58.1 versus 58.7 versus 58.5 versus 54.7 versus 51.9 versus 56.3
versus 55.8 versus 49.5 versus 56.7 versus 53.4 versus 57.7 versus 63.1
versus 61.2 versus 61.8 versus 62.7 versus 61.8 versus 58.2 versus 60.6
versus 58.6 versus 60.2 versus 59.8 versus 59.8 versus 59.6 versus 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

Bears: 19.2 versus 18.3
18.3 versus 17.1 versus 17.3 versus 17.9 versus 17.9 versus 18.3 versus 17.5
versus 18.3 versus 18.1 versus 17.3 versus 13.75 versus 17.3 versus 16.5
versus 17.5 versus 17.6 versus 16.7 versus 17.6 versus 17.5 versus 17.3
versus 18.3 versus 18.4 versus 19.6 versus 19.6 versus 19.2 versus 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


Bonds: 2.154% versus 2.21% 10 year. Gapped over the 200 day SMA on the
jobs news and held the move.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.21%
versus 2.20% 2.26% versus 2.255% versus 2.252% versus 2.287% versus 2.254%
versus 2.233% versus 2.229% versus 2.223% versus 2.32% versus 2.34% versus
2.34% versus 2.393% versus 2.401% versus 2.394% versus 2.381% versus 2.354%
versus 2.322% versus 2.289% versus 2.322% versus 2.30% versus 2.31% versus
2.33% versus 2.275% versus 2.236% versus 2.234% versus 2.21% versus 2.15%
versus 2.248% versus 2.232% versus 2.264% versus 2.30% versus 2.36% versus
2.37% versus 2.34% versus 2.33% versus 2.34% versus 2.33% versus 2.35%
versus 2.40% versus 2.41% versus 2.382% versus 2.418% versus 2.376% versus
2.40% versus 2.41% versus 2.40% versus 2.43% versus 2.463% versus 2.50%
versus 2.529% versus 2.502% versus 2.602

EUR/USD: 1.12811 versus 1.12181. Euro breaks to a higher high against the
dollar, clearing the late May highs.

Historical: 1.12181 versus 1.12547 versus 1.11768 versus 1.11810 versus
1.12148 versus 1.12240 versus 1.11868 versus 1.12390 versus 1.11916 versus
1.23077 versus 1.10985 versus 1.11557 versus 1.10862 versus 1.09833 versus
1.09328 versus 1.08655 versus 1.08671 versus 1.08843 versus 1.09286 versus
1.09994 versus 1.09086 versus 1.08923 versus 1.09284 versus 1.090984 versus
1.08987 versus 1.08691 versus 1.09093 versus 1.09358 versus 1.08449 versus
1.07255 versus 1.07255 versus 1.07188 versus 1.0717 versus 1.07304 versus
1.06431 versus 1.06138 versus 1.0671 versus 1.06068 versus 1.05984 versus
1.05906 versus 1.0645 versus 1.06760 versus 1.06804 versus 1.06702 versus
1.06584 versus 1.06855 versus 1.07546 versus 1.0815 versus 1.08640 versus
1.07894 versus 1.07670 versus 1.07920 versus 1.08117 versus 1.0748 versus
1.07395 versus 1.07710 versus 1.0732 versus 1.06070 versus 1.0636 versus
1.06746 versus 1.06746 versus 1.05384 versus 1.0566 versus 1.05764 versus
1.06266 versus 1.05214

USD/JPY: 110.446 versus 111.595. Bombing lower to a lower closing low on
this selloff from the early May high at 114.4.

Historical: 111.595 versus 110.909 versus 111.086 versus 111.217 versus
111.828 versus 111.678 versus 111.835 versus 111.076 versus 111.534 versus
111.271 versus 111.584 versus 111.167 versus 112.414 versus 113.074 versus
113.749 versus 113.349 versus 113.759 versus 114.263 versus 113.771 versus
113.217 versus 112.683 versus 112.495 versus 112.782 versus 112.779 versus
111.793 versus 111.524 versus 111.197 versus 111. 177 versus 111.234 versus

Oil: 47.66, -0.70. Oil is now testing the March lows. At least it held
them Friday and bounced up off the lows.

Gold: 1280.20, +10.10. Breaking higher on the week, now pushing toward
that April peak at 1296.


The new month is already here, earnings reports are all but over, GDP, ISM,
Jobs Report -- the heavy hitters -- are all in the barn. What next?

Talk of the Fed not being so tough, for one. Yes that has already started
with pictures of a perplexed looking Yellen gracing many news sites.
Perhaps, just perhaps, the mentality about the strength of the economy is
changing. The question is, will the meme change enough so there is a
general cry to do something about it?

No doubt there are millions and millions of Americans who have not felt the
anything relating to a recovery. Those people are where they were during
the great recession. They, however, have been ignored in favor of
statistics such as non-GAAP big corporate earnings and the BLS' business
birth/death adjustment that shows millions of jobs and flies in the face of
study after study after study showing that there are but a fraction of those
claimed jobs actually created. Indeed, the math says that OVER 90% of those
'adjusted' jobs NEVER materialized.

Again, will these facts show the recovery has no clothes, that reforms must
be made such that the tax, healthcare, and regulatory reform will be
re-energized? One can only hope so for the sake of the millions of retirees
who earn 0% on their savings, those who lost quality full-time jobs in the
recession and are forced to work at a minimum wage hourly job, and all of
the young people eagerly learning in their chosen field only to find out
when they graduate all they get is a huge bill, an image of an H1-b visa
holder taking their job at less than half the pay, and a cot in mom and
dad's basement.

Of course, what the economy needs is not necessarily what the market needs
in these 'new normal' times where the market is fed by the Fed and the
profits of the top handful of companies dominating the indices. I have seen
this before. It is great for making money while it lasts. The problem is,
it never lasts and when it breaks there is a tremendous price to pay.

For now, however, the same theme continues, and we will play that theme.
Indeed, this week it looks as if the FAANG will be back in vogue for some
more plays and gains. We already have AAPL and AMZN, and will look to add
more. There are definitely still good patterns in non-FAANG stocks and we
are making money on them and will continue looking at them to do more for

Have a great weekend!


NASDAQ: Closed at 6305.80


6205 is the late May all-time high
6170 is the recent all-time high
The 50 day EMA at 6037
5996 is the recent May 2017 low
5937 is the all-time high from April
5915 is the tops of the March to April 2017 range
5910 is the lower gap point from mid-April
The 2016 trendline at 5899
5800 from the February consolidation lows
5661 is the late January upper gap point
5601 is the January lower gap point
The 200 day SMA at 5588
The November prior all-time high at 5404
5340 is the September and October 2016 twin peaks
5287.61 is the September 2016 high
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
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

S&P 500: Closed at 2439.07

The 2016 trendline at 2444

2406 is the all-time high from May 2017
2401 is the March 2017 all-time high
The 50 day EMA at 2382
2352 is the recent May 2017 low
2348 is the April 2017 lower gap point
2329 is the March and April twin lows
2322 is the March 2017 low
2319 is the 78% Fibonacci retracement
2301 is the late January 2017 high
2298 is the late January 2017 high
2282 - 2280 from January 2017
2277.53 is the December 2016 high
The 200 day SMA at 2268
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
2175 is the June 2016 high

Dow: Closed at 21,206.29


21,169 is the March 2017 all-time high
The 50 day EMA at 20,833
The 50 day SMA at 20,811
20,553 is the lows of the week of May 15
20,547 is the lower gap point from late April 2017
20,412 is the March 2017 low
20,400 is the mid-April 2017 low.
20,126 is the January 2017 intraday high
20,101 is the late January closing high.
19,994 - 19,999 (early January high, upper gap point from late January
19750 is the lows of the December/January range
19,732 is the January 2017 low
The 200 day SMA at 19,683
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

End part 1 of 3
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