Sunday, January 27, 2013

Earnings Appear Good But Some Are Questioning Them

MARKET SUMMARY

- The move continues with an apparent reacceleration.
- Earnings appear good but some are questioning them.
- Took some gain, otherwise letting the rally ride, but just in case . . .

Impressive action yet again as stocks gained across the board. That early start higher did not turn into selling, or at least not that much selling; stocks dipped in the last 1.5 hours off session highs. A bounce in the last 10 minutes of trade erased much of that loss and indeed the midcaps, small caps, and DJ30 closed out the session at their highs.

SP500 8.14, 0.54%
NASD 19.33, 0.62%
DJ30 70.65, 0.51%
SP400 0.89%
RUTX 0.56%
SOX 1.27%

SP500 just managed to hang onto a move over 1500, but it was a pretty solid move. NASD is still below last week's highs hit as GOOG and AAPL rallied ahead of the AAPL earnings. DJ30, SP400, RUTX, DJ20, and SP500 all moved to even higher PBMH (Post-bear maarket highs). Indeed the move, after a big run already and after getting deep into earnings season, is extending beyond expectations.

Thus, while we did take some gain on some positions that were up but not surging and some that have earnings early next week, we kept most positions running. We looked at them again and again and decided that we were not going to totally start guessing at a market top. Sure it can turn over on Monday and start fileting stocks, but nothing thus far other than the length and size of the run and possible rendevous with history suggests it is running out of gas.

The internals were not that solid as volume fell 2.3% on NYSE and 9.8% on NASD. Breadth was decent on NYSE (1.5:1) but not great. NASD was less at 1.25:1.

Leadership, however, remains strong. AMZN exploded higher ahead of next week's earnings. EBAY jumped up again. SNDK rallied. CMI up, ACAD rallied 5%, QLGC surged (& purged a bit), PII rallied, SRPT looked to have made a definitive upside break as did SWI, DECK exploded higher. APC (energy) surged, GGC (chemicals) surged, TOL (homebuilders) surged.

Perhaps leadership reverses. Given the strength it more likely puts in a test, but we don't want to assume anything. We took some gain, let those running run, and we will keep reasonable stops and take gain at reasonable places. Strong run and we want to let a strong run work for us as long as it will.

OTHER MARKETS

Dollar fell hard: 1.3456 vs 1.33.76

Bonds slaughtered: 1.95% versus 1.85%

Oil flat: 95.88, -0.07

Gold finished a tough week lower again: 1657.00, -15.10


The headlines were mostly friendly. PG, KMB, HAL all beat on earnings. The EU showed higher confidence in Germany so the dollar sold. Bonds sold on the notion that the US and world economies are improving.

It would be nice, and perhaps they are. But of course there are lingering doubts:

Bond inflows jumped 8.5B in treasury funds and $2.3B in municipal bond funds. Stock outflows rose to $5.8B the past two weeks. Bonds are selling but flows surge. That selling may not last, but it does appear the market is sensing the Fed might have to throttle back on stimulus and thus the bond decline. If bonds continue to sell that in itself will put the brakes on inflows; investors get their statements and see some rather big drops in their investments and they will flee for their lives.

New Home Sales, December fell 7.3% though prices rose 13.3% year/year.

And what about earnings season? Goldman Sachs shows that while the big name companies are apparently hitting the ball well, many are driving out of bounds.

To wit: Goldman's halftime report for the season shows earnings down 6% from expectations heading into the season. If this holds that is a 1% improvement over Q4 2011 when Europe nosed over in a plunge downward, taking massive coordinated central bank manipulation to avert a total crash. That comparison makes things appear less rosy, but don't tell the market because as of Friday it could care less. It has the notion, and frankly you have to go with what the market believes, that things will get better. Have to love that optimism because . . . it is sure pushing our positions higher.

We are going to look at plays we can make off the earnings moves given we are half way in and some big names have reported good results and made strong moves; we love to play off those if we can. We are also going to look at some 'just in case' plays to the downside in the event the switch is thrown over the weekend and earnings upside turns into selling.

Have a great and blessed weekend.

NASDAQ
Stats: +19.33 points (+0.62%) to close at 3149.71
Volume: 1.829B (-9.86%)

Up Volume: 1.37B (+250M)
Down Volume: 529.22M (-381.83M)

A/D and Hi/Lo: Advancers led 1.25 to 1
Previous Session: Advancers led 1.25 to 1

New Highs: 206 (-13)
New Lows: 11 (+2)

S&P
Stats: +8.14 points (+0.54%) to close at 1502.96
NYSE Volume: 617M (-2.37%)

A/D and Hi/Lo: Advancers led 1.57 to 1
Previous Session: Advancers led 1.27 to 1

New Highs: 605 (-89)
New Lows: 64 (-1)


DJ30
Stats: +70.65 points (+0.51%) to close at 13895.98


Support and resistance

NASDAQ: Closed at 3149.71

Resistance:
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3134 is the March 2012 post-bear market peak
The 10 day EMA at 3130
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
The 2011 up trendline at 3062
3062 is the December 2012 prior peak
The 50 day EMA at 3060
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
The 200 day SMA at 2993
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1502.96

Resistance:
1539 from June 2007

Support:
1499 from January 2008
The 10 day EMA at 1485
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
The 50 day EMA at 1446
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
The 200 day SMA at 1396
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 13,895.98

Resistance:
14,022 from 7-07 peak

Support:
13,692 from 6-2007 peak
The 10 day EMA at 13,674
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
The 50 day EMA at 13,341
13,297 is the April 2012, prior post bear market high
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
The 200 day SMA at 13,048
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

January 28 - Monday
Durable Orders, December (8:30): 1.6% expected, 0.8% prior (revised from 0.7%)
Durable Goods -ex transports, December (8:30): 0.0% expected, 1.6% prior
Pending Home Sales, December (10:00): 0.0% expected, 1.7% prior

January 29 - Tuesday
Case-Shiller 20-city, November (9:00): 5.2% expected, 4.3% prior
Consumer Confidence, January (10:00): 65.1 expected, 65.1 prior

January 30 - Wednesday
MBA Mortgage Index, 01/26 (7:00): 7.0% prior
ADP Employment Change, January (8:15): 175K expected, 215K prior
GDP-Adv., Q4 (8:30): 1.0% expected, 3.1% prior
Chain Deflator-Adv., Q4 (8:30): 1.6% expected, 2.7% prior
Crude Inventories, 01/26 (10:30): 2.813M prior
FOMC Rate Decision, January (14:15): 0.25% expected, 0.25% prior

January 31 - Thursday
Challenger Job Cuts, January (7:30): 34.4% prior
Initial Claims, 01/26 (8:30): 345K expected, 330K prior
Continuing Claims, 01/19 (8:30): 3200K expected, 3157K prior
Personal Income, December (8:30): 0.7% expected, 0.6% prior
Personal Spending, December (8:30): 0.3% expected, 0.4% prior
PCE Prices - Core, December (8:30): 0.1% expected, 0.0% prior
Employment Cost Index, Q4 (8:30): 0.5% expected, 0.4% prior
Chicago PMI, January (9:45): 50.5 expected, 48.9 prior (revised from 51.6)
Natural Gas Inventor, 01/26 (10:30): -172 bcf prior

February 1 - Friday
Nonfarm Payrolls, January (8:30): 180K expected, 155K prior
Nonfarm Private Payrolls, January (8:30): 193K expected, 168K prior
Unemployment Rate, January (8:30): 7.7% expected, 7.8% prior
Hourly Earnings, January (8:30): 0.2% expected, 0.3% prior
Average Workweek, January (8:30): 34.5 expected, 34.5 prior
Michigan Sentiment -, January (9:55): 71.4 expected, 71.3 prior
ISM Index, January (10:00): 50.5 expected, 50.7 prior
Construction Spending, December (10:00): 0.5% expected, -0.3% prior
Auto Sales, January (14:00): 5.5M prior
Truck Sales, January (14:00): 6.5M prior



By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Sunday, January 20, 2013

Good Rally to Start Earnings

MARKET SUMMARY

- Stocks extend gains into the long weekend.
- A sense of economic recovery even as earnings, economic data remain at best mixed.
- January preliminary Michigan Sentiment continues . . . Decembers dive.
- But at least China is on the mend. Can't trust it as CAT found out, but on the mend.
- Europe is shockingly bad.
- Fed truly had no clue in 2007, showing it has always been, and always shall be, reactionary. Well, not always; Geithner leak to banks of Fed action was proactive. And illegal.
- After a big week of inflows a big week of outflows takes it all back.
- Indices punching new highs so many naturally wringing their hands over another market bubble. Never made any money wringing my hands.
- Good rally to start earnings. Riding the wave, taking some gain, watching for the change in sentiment.

A continued ramp higher as earnings announcements surge, sporting mixed results.

When the market wants to move it moves regardless of the news. News can drive the action for sure. There are times, however, the market puts its head down and rallies even with less than great news. Sure all news eventually catches up with the market, but if a story is not immediately threatening, it can be ignored until a later time when the desire to rally ebbs.

Thus even though earnings are very much mixed (GE, MS beat nicely while INTC, AXP miss badly) and the economic data is shockingly mixed 4 years into a 'recovery,' stocks have it in their mind to continue the rally off the mid-November low. More than that they are breaking to new post-bear market highs.

It appears that once again a sense of economic recovery is present and helping drive stocks higher. Not to mention $85B/month from the Fed, and as we learned at the end of the week, some repo liquidity injections from the Fed as the regional manufacturing report misses were released.

It is a sense of recovery given the jobless claims dove lower from their 370Kish levels as well as improvement in housing numbers. Recall there was a sense of recovery in early 2011 and early 2012. Recall that both times the data did not really support the 'hope springs eternal' sentiments of a populace tired of facing bad economic action. Recall last week we showed Goldman Sach's chart detailing how the economic data reported is setting up exactly as it did the prior two years. Add onto that the 'just in case' excuses for poor economic performance in the future: Storm Sandy, Fiscal Cliff, the US Flu.

Sure there are those who believe, just as in early 2011 and just as in early 2012, that the economy is going to recover this time. It can and I hope it does. There are signs housing has bottomed and is trying to improve. Some on CNBC are talking about how strong our big corporations are . . . just as they did in 2011 and 2012. Yes they are making money; they are the only ones doing so. They are still not hiring, still not spending. Query: WHY ON EARTH hire anyone unless you simply cannot conduct business without the hire, if you have to buy a hefty priced insurance policy for them OR pay a hefty fine if you don't? Indeed, many of the big names, as seen the past two weeks, are back to laying off the hired help.

But . . . not hiring helps the bottom line, and the results thus far are good enough for a market that wants to rally and a Fed doing what it can to help that rally and further create that wealth effect it wants. Funny, the big companies have made billions in profits as a result of Fed and Administration policies, yet there is not much of a wealth effect. There is that first of the year hope by many that things will get better, but without substance that hope has faded the prior two years. At least the big names are keeping their money and THEY feel wealthy and their actions help the US economy limp along at 1.5% to 2% economic growth. That, coupled with the Fed liquidity, is enough to keep the stock market rallying as the action shows.

Indeed, Friday SP500, RUTX, SP400 all moved to new post-bear market highs. DJ30 moved to a closing high though just missed a new post-bear market high of its own. SOX faded Friday thanks to INTC's devolution, but it made an important move on the week, breaking through the August and September twin peaks. All in all another strong market week as the indices, without the help of many big name NASDAQ stocks, forge higher in the new year.

SP400 5.04, 0.34%
NASDAQ -1.29, -0.04%
DJ30 53.68, 0.39%
SP400 0.27%
RUTX 0.27%
SOX -0.46%


OTHER MARKETS

Dollar: 1.3321 versus 1.3376 versus euro. The dollar recovered some ground lost the prior week, making it to the 50 day EMA it gapped below two Fridays back. The dollar is chopping around below the 200 day SMA, the November and the early January high. It is trying to get out of a right shoulder to a year long head and shoulders pattern. Maybe it pulls off the recovery but the pattern is quite bearish. I was watching an old favorite show from 1974, 'The Eiger Sanction' with Clint Eastwood, George Kennedy, Jack Cassidy and others. Eastwood played your typical college professor/mountain climber/black market art buyer/assassin. A Pissarro is offered to him for $10,000. It was black market, but that still seemed very inexpensive by today's standards. I am told that the painting today would go for $1M to $4M and Pissarro is considered undervalued at those prices given his importance to the impressionists.


It's one of the better collections in the neighborhood . . .

The point: The dollar has lost HUGE value post-Volker (he was Fed chairman during the early Reagan years) as the Fed started, first in the early 1970's with the monetization of the oil crisis and then with Greenspan after Volker left, to print money at each economic bump. Our dollar is worth so little today compared to just 35 years ago and the Fed is still printing each month.


Bonds: 1.84% versus 1.88% 10 year Treasury. Bounced right back up after tanking on Thursday. All over the map as bond investors try to figure out what the Fed is doing with its repos, etc., and frankly the bond market is just tangentially driven by the whims of investors outside the Fed.


Gold: 1687.40, -3.40. A good week for gold and indeed a good two weeks, but all it could do was make the 50 day EMA. It has failed here the prior three attempts, and Thursday and Friday it was bumping the 50 day EMA and failed to hold breaks through it. Hanging in and still a good overall upside pattern.


Oil: 95.56, +0.07. Oil cleared resistance to start the year, drifted higher, and started to ramp Thursday and Friday. Now at the August 2012 interim high just before the September peak at 100. Perception of China recovery, weaker US dollar, stronger oil.


THE NEWS

January Michigan Sentiment an encore of December's weakness.

Michigan Sentiment, Preliminary January (9:55): 71.3 actual versus 75.0 expected, 72.9 prior




Can you feel the anger?

What is going on in Michigan? Auto industry rebirth. Center of the nation's recovery? I know, it is not just Michigan citizens in the survey, but it is fun to style it so. The facts are not fun, however.

Biggest miss in 7 years.

Lowest reading since November 2011.

Holding the losses after plummeting the prior month. Where is the enthusiasm at the start of our President's new term? Hope may be a good thing, but it only goes so far.


But China is there to rescue our export economy.

Friday China's GDP was reported at 7.9%, topping the 7.6% expected. Industrial production topped expectations as well. Surely all is well. Surely we can trust China now that everyone challenged its results. It will now be forced to report clean numbers. You bet.

Export data questioned, loan creation virtually at a standstill. Empty cities. New buildings, never occupied, crumbling and falling down. Not exactly Great Wall quality.

The stock market has rallied 19.5% since early December, topping the 15% failed rally in early 2012, the last significant upside move. It looks as if it has turned though still well below the downtrend's down trendline. A darn good turn, however.

But, ask CAT about Chinese trustworthiness (as you ask yourself about CAT's due diligence). After hours Friday CAT warned that a company it bought in China was basically a total write off, cutting half off of CAT's Q4 earnings. Why? In a Hewlett-Packard like move, it appears CAT bought a basically worthless company that supposedly engaged in systematic year after year lying about its results. It is taking a $580M charge. If it is not Chinese hackers, Chinese spies here on visas, it is, apparently, intentional fraud. Oh, but you can still believe China's economic numbers.


EU Data gets worse and worse.

Remember the move 'Armageddon' when Bruce Willis' drilling crew was given a physical by NASA? Bear, played by the sadly now deceased Michael Clarke Duncan, was given his test results: "Your triglycerides are high and your bad cholesterol is shockingly bad."


'Check out this, baby'

Well, the EU data is not just bad, it is shockingly bad. It continues to top expectations . . . to the downside. Seems economists still think things are as bad as they can get. They are not.

Friday more bad news on a week of bad news. Spain's Industrial Orders -1.5% versus +2.5% same time last year. Italy chimed in with -0.5% versus +2.0% expected. How the heck they came up with POSITIVE expectations is a bit nutty itself, but it is just another case of hope disconnected from reality.

Any wonder why Germany wants its hands on its gold?


Geithner tips off banks of Fed action back in 2007?

After the Fed released its August 2007 conference call transcript along with a lot of other Fed transcripts, some shocking stories are coming out. The most shocking: outgoing Treasury Secretary Geithner, while on the FOMC and the New York Fed President, tipped off large banks of the initial Fed action the day before the action was taken.

According to the transcripts, all on the Fed agreed that the action should be kept quiet and the banks not told ahead of time. Geithner even said as much on the record.

But on 8/16 as the market was diving in its second SP500 30 point loss in short order, suddenly at 2:00ET futures rallied and SP500 surged 50 points in one hour. After the market close the Fed had another teleconference before the next day when the Fed would announced its action. That transcript reveals the following exchange:

Mr. Lacker: Vice Chairman Geithner, did you say that [the banks] are unaware of what we're considering or what we might be doing with the discount rate?

Vice Chairman Geithner: Yes.

Mr. Lacker: Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.

Late last week as the NYT and other papers carried the story, Lacker told the NYT "my understanding was that President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives."


How much did he make off of his apparent tip to top bankers?

This is incredible. It was not enough that we had to bail out the banks but our trusted officials who you would think have a fiduciary duty to the citizen's they are supposedly acting for tips them off to Fed action ahead of everyone else. Oh yes, the market surged when the announcement was made, giving those who got in, and they got in big, the afternoon before made an even bigger killing.

How screwed up are we now? Do you think this is isolated to the Fed. Congress, the executive branch, countless agencies and departments with millions of employees. And we cannot find ONE DIME TO CUT FROM THE BUDGET for waste or fraud? Unbelievable.


So much for the inflows.

Well, I guess it is fitting, then that the record inflows from two weeks back into stock funds was mostly bank deposits; that is what we are hearing. To add insult, the past week the inflows reversed to $4.2B in outflows. The net that went into US stock funds: $286M.


TECHNICAL SUMMARY

Internals.

NASDAQ
Stats: -1.29 points (-0.04%) to close at 3134.71
Volume: 1.865B (+7.25%)

Up Volume: 957.36M (-352.64M)
Down Volume: 820.92M (+404.73M)

A/D and Hi/Lo: Advancers led 1.1 to 1
Previous Session: Advancers led 2 to 1

New Highs: 150 (-9)
New Lows: 8 (-1)

S&P
Stats: +5.04 points (+0.34%) to close at 1485.98
NYSE Volume: 941M (+46.57%)

A/D and Hi/Lo: Advancers led 1.84 to 1
Previous Session: Advancers led 3 to 1

New Highs: 516 (-88)
New Lows: 46 (-11)


Dow
Stats: +53.68 points (+0.39%) to close at 13649.7



THE CHARTS

SP500. Putting a bit more emphatic stamp on the break to a new post-bear market high. Volume surged, but it was expiration so take that for what it is worth. At this point we enjoy the ride higher. Note MACD still lags; just note it and watch how the financials are working as the week wears on.


NASDAQ. Could not join the party, but it did fill the Thursday gap higher and recovering to flat. 3175 is next resistance then the post-bear market high at 3197, just 63 points away.


Russell 2000/SP400. New high here as well. Funds still engaged in the January effect.

SP400 midcaps showed the same action as the small caps, solidifying the break to a new high and a subsequent rally.


SOX. Faded on the day but just testing the Wednesday and Thursday run past the August and September peaks. Solid still and frankly down because if INTC.


DJ30/DJ20. Moved to a new closing high post-bear market and is just 12 points higher. MACD is rising and could take out that at the September peak. We will see. Not bad action, after all, given INTC.

DJ20. Sold early in the day, but yes another new high.

Summary: NASDAQ remains a laggard but just about everything else, including many tech stocks, are rallying through old resistance. Money is moving into the market still, big investors are happy enough with earnings, and continued liquidity does not hurt. Riding the run for now, watching to see if signs of a midseason earnings sentiment shift starts developing.


LEADERSHIP

Big names. AAPL was down a bit more but clinging to 500; indeed closing at 500 on the button. GOOG is broke below the 50 day EMA; earnings are Tuesday. Thought about a new play, may still do it, but might get a better setup after as it could put in a double bottom at the 200 day SMA or something like that. EBAY held the Thursday gap; that is about all.

Financial. Back to the upside, at least for the most part. MS gapped up on huge earnings. GS was strong again. BAC is still testing but it is setting up a nice consolidation.

Drugs/Medical. Still mixed as some of the big movers early in the week gave more back, e.g. ARNA. SNSS looks as if it wants to join the party now. BMRN was still great.

Retail. BONT ran again. COH is putting in gains. CHS is trading in a range, recovering last week. WSM didn't recover from its gap lower.

Industrial machines. CMI working well. CAT getting slaughtered Friday; well, it was down 1.5 points.


THE MARKET

SENTIMENT INDICATORS

VIX: 12.46; -1.11
VXN: 14.17; -0.9
VXO: 12.14; -1.28

Put/Call Ratio (CBOE): 0.75; -0.04


Bulls versus Bears

Bulls: 51.1% versus 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6 versus 41.5% versus 45.7% . On the run and heading toward that September peak that preceded a market decline. Still quite similar to the pattern in September when the market started a two month selloff, so bears watching. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7% versus 27.7% versus 25.5%. Fading but not cutting into new ground on the downside, matching the low set four weeks back. As with the bulls, it bears watching. Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


TUESDAY

Monday is a MLK holiday. Closed.

There are two schools out there. Those wringing their hands over another bubble, this one in the market. New highs ALWAYS bring out this crowd. Sure there are economic issues, sure many citizens in the country still don't have any money to invest, and it sure doesn't look as if things will get any better.

But I can say I never made money wringing my hands over what others or I was worried about. The funds have money, the institutions have free Fed money, and that is being put to work. Maybe they are all buying assets that will plunge in value. If that happens we will see indications of that ahead of time. For now, as William O'Neil once famously said, if the market wants yellow dresses versus perhaps better made red dresses, don't fight it, go with the yellow dresses. That is a gross paraphrase but it clearly states the point: if the big money is buying, find what they are buying and get to the counter.

Thus even with the indices hitting new post-bear market highs, indeed in part because they are, we will continue to look for more upside as it presents itself. As long as there is leadership in position to run the rally has life. The key for us and new plays to enter is finding stocks that are still in position to move higher versus extended and needing a rest. There are both kinds out there, and we found some solid ones for next week.

Earnings make things a bit more dicey. We like playing after earnings, but we also have plays that can make us good money before their results are announced in February or March. We are looking at both now and as more reports are made we will have more of the post-earnings plays to make.

Earnings not only matter as to the stock's immediate reaction, but also in the market's overall move. Thus far the buyers willingly overlook any issues with earnings results; they want to rally stocks. Often the initial earnings move gets reversed at some point or at least sold some. An eye has to be kept on any changes in the market, i.e. if stocks start to falter overall even as some decent results are announced. Another layer to earnings season making it all the more touchy.

For this week there are some more plays we really like that we will look at for entries. If the market continues the run we will still look to take some gain. New highs on the indices beg to take some gain, and on a further push take some more gains, banking part of the profits on the plays because we know there will be a pullback, either just to test or something more virulent if sentiment turns over.


Support and resistance

NASDAQ: Closed at 3134.71

Resistance:
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3134 is the March 2012 post-bear market peak
The 10 day EMA at 3112
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high
3062 is the December 2012 prior peak
The 2011 up trendline at 3057
3042 from 5/2000 low and several other price points
The 50 day EMA at 3046
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
The 200 day SMA at 2992
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1485.98

Resistance:
1499 from January 2008
1539 from June 2007

Support:
1475 is the September 2012 high
1471 is the October 2012 intraday high
The 10 day EMA at 1470
1466 is the September 2012 closing peak and rally closing high
1441 is a short term down TL from the September 2012 peak
1440 from November 2007 closing lows
The 50 day EMA at 1438
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
The 200 day SMA at 1394
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 13,649.70

Resistance:
13,557 to 13,662
13,653 is the September 2012 high
13662 is the October 2012 intraday high
13,668 from 12-2007 peak
13,692 from 6-2007 peak
14,022 from 7-07 peak

Support:
The 10 day EMA at 13,497
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 50 day EMA at 13,260
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
The 200 day SMA at 13,033
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

January 18 - Friday
Michigan Sentiment, January (9:55): 71.3 actual versus 75.0 expected, 72.9 prior

January 22 - Tuesday
Existing Home Sales, December (10:00): 5.10M expected, 5.04M prior

January 23 - Wednesday
MBA Mortgage Index, 01/19 (7:00): 15.2% prior
MBA Mortgage Purchas, 01/19 (7:00)
FHFA Housing Price I, November (9:00): 0.5% prior

January 24 - Thursday
Initial Claims, 01/19 (8:30): 355K expected, 335K prior
Continuing Claims, 01/12 (8:30): 3200K expected, 3214K prior
Leading Indicators, December (10:00): 0.5% expected, -0.2% prior
Natural Gas Inventor, 01/19 (10:30): -148 bcf prior
Crude Inventories, 01/19 (11:00): -0.951M prior

January 25 - Friday
New Home Sales, December (10:00): 387K expected, 377K prior


By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Sunday, January 13, 2013

Stocks Pause Friday, Reflect on Gains

MARKET SUMMARY

- Stocks pause Friday, reflect on gains, economics, ahead of earnings season.
- Small and midcaps slow their leadership move, contemplate their rise and massive margin requirement increases.
- Economics and US markets: who is more important, China or US?
- So this is our recovery: jobless claims spike to end the year, layoffs again on the rise.
- Hard to blame Bush so find something else: Sandy, Fiscal Cliff, and . . . the flu?
- Q4 GDP revisions slashed by everyone. Poor iPhone 5 even gets the blame.
- Goldman economic momentum chart setting up just as in 2012 and 2011.
- Spain joins the list of those proving higher taxes lower output.
- Stock mutual fund inflows second largest on record. Turning away from bonds or is this already suggesting a top?
- Despite the issues, stocks remain in very good position to continue higher. Still factoring in $85B/month?

Quiet end to a decent week as investors get their arms around all of the news.

With debates raging about end runs around the Constitution on the debt ceiling and the second amendment and a very backend loaded week in terms of market impacting data, it is easy to see why investors took a timeout Friday to try and get a handle on just what is going on. The fact that earnings season starts in earnest toward the end of the coming week was all the more reason to throttle back and try to get a better look at what is on the road up ahead.

Small and midcaps rethinking their gains?

A good move early in the week saw some shifts as it drew to a close. Small and midcaps are the clear leaders of this rally. As discussed before, not so much due to a belief that the economy is going to surge (after all, small business sentiment is negative for the next six months as NFIB reported Tuesday) but more of a January effect where funds buy them because they can produce bigger percentage gains. With Interactive Brokers raising margin requirements to 100% for buys of stocks with market caps of $250M or less, however, their leadership slipped to end the week with large cap indices performing better Thursday and arguably Friday. That begs the question: if small and midcaps slow, will the larger caps take their place?

China expanding again? Will it make as big a difference?

That question likely depends upon the economics of China, even more so than the US. Much was made last week and also the prior week about China's recovery. It is always a crapshoot believing what China says. Communist governments are, despite what many want to believe, not trustworthy. Seems we have forgotten in a short span of history how terrible they are. So the debate is always about whether you can trust the data. Export data is verifiable, however, and Thursday China reported a large jump to 31.6B versus the 20.1B expected, up 14% year/year. Along with the Shanghai 17% stock rally the past 5 weeks that reversed off a new selling low on this leg, this is evidence that things are improving in China.

It is said that as China goes we all go. True, China sucks up a lot of resources and equipment to manipulate those resources. The big factor in the future, however, is whether the Chinese people start to consume their wealth. That is how the rest of the world will benefit, i.e. as exporters to China. Sadly, we have WILLINGLY converted our economy under this administration to one that is a seller to a growth country versus being a growth country as we once were. We have conceded we are European, a supplier to those who make the wealth.

I said early on in the Obama administration that this was the obvious conclusion from the economic steps we were taking. He SAID he wanted us to be an exporter nation, as if that was a great thing. The US has always made its own wake. We consumed a lot, we created a lot, we drove technology. Countries lined up to sell us goods. Now we are one of those lining up to sell goods to growth countries such as China, India, and Brazil.



If you are not in the lead on technology and trying to grow it, you will not create the plum jobs. Look at what we are doing: funding old technology in windmills, trains, and in solar panels that are made the same way they were, basically, 20 years ago.


Tilting at the wrong things?

We cannot compete with China labor in making the same old solar panels. We have to be at the next level, creating the BREAKTHROUGH solar or hydrogen technology, not trying to out-produce China at making old products.
Our most heralded company now focuses on making a cell phone a bit better. Old technology as well. Phones have gone from bulky to minute, and are now expanding in size again, trending toward the tablets.



It is not new technology really for the devices, just better manufacturing. The real technology driving it? The wireless networks: as they get better they can provide more data for the devices. Without the wireless the devices don't matter. The IRONY is, the US is BEHIND the rest of the world in cell technology and has been for years. Call it the FCC.

We are no longer as focused on creating the next technologies, but instead are gearing up (or should that be gearing down) to produce goods for those countries that are going to create the next major breakthroughs. It doesn't have to be this way, but under this group of leaders and with the massive debts we have accumulated, it is FORCING us down this road.

So, the question asked in the above headlines, is it China or the US economy that matters more, sadly is China as a result of the current leadership's intent or incompetence placing servicing China's economy or competing in areas we cannot and should not compete above our economy leading the world as it has always done.

Despite claims of ongoing economic recovery, six years out from the start of this depression our economy is in real trouble. President Obama likes to compare himself to Reagan and Lincoln. I hate to be accused of being too negative again, but there is no morning in America. 11 score and 17 years since our founding we have not found another Lincoln, and Reagan's ideals are quickly fading.


Win one for the gipper, will you boys?

The Action Friday.

Futures were flat and sluggish, but that allows the buyers an opening if they want it. Friday they didn't want it. With small and midcaps undecided bids were scarce and a flat open turned into some early selling. Stocks bottomed, however, after the first hour and managed a slow, steady, slow recovery to the close. The large cap indices fared better as they had on Thursday, but nothing was lighting up the scoreboard though you could say SOX sank a few shots with a half percent gain.

SP500 -0.07, -0.0%
NASD 3.87, 0.12%
DJ30 17.21, 0.13%
SP400 -0.01%
SOX 0.54%
RUTX -0.05%


OTHER MARKETS

Dollar 1.3366 versus 1.3252 euro. A day after the ECB decided to leave rates unchanged the dollar was crushed. After bouncing up to the 200 day SMA and trying to bounce a higher low off the 50 day EMA, the greenback gapped sharply lower. Did the ECB get the drop on the Fed? Remember, I said earlier this week the US should RAISE rates now. China's stronger economy diminished its likelihood of stimulus, Europe is not cutting, and that leaves the US to just start talking about higher rates. It started that with the FOMC minutes, but it is a long, long, long way from any change in policy. Thus with a weakening US economy once more (jobless claims, layoffs, GDP going to be lower), the dollar has but one way to go.

Bonds. 1.87% 10 year versus 1.89%. Rallied back a bit more after the butt-kicking it received two weeks back. The idea was the Fed would have to raise rates or more likely back off its QE. The crappy US economic numbers and the slew of GDP downgrades Friday changed that outlook just a bit.

Gold. 1660.40, -17.60. After a great break back above the 200 day SMA Thursday the dollar was up to its old tricks, fading back below that important level Friday. Not a collapse but more of the same indecision and weakness at a key level. Still in the pattern, however, and that keeps it in good position to rise.

Oil. $93.56, -0.26. No real movement but a bit more volatile. Tapped the 10 day EMA on the low and recovered most of the decline. The action kept oil in its lateral move the past two weeks after breaking back above the 200 day SMA. REMARKABLY inelastic to the supply builds as it holds its break over a key level.


THE NEWS

Economic data pointing to another disappointing flop into summer?

Jobless claims are on the high side of 400K for the past four weeks. Layoffs are being announced with new vigor as FDX cans 5K, NYT drops 700, DIS says it is looking at layoffs, Boeing is cutting some and looking at others.

Other numbers are not as easy to read, mainly because they are so distorted by either unprecedented uncertainty in what is going on making the adjustments wild stabs in the dark or flat out intentional skewing in an attempt to bolster confidence.

We have tried our best to report the 'real' numbers, pointing out the strange occurrences when a negative retail sales number is adjusted to positive or when the actual jobs created is negative or a fraction of the final adjustment. That can happen, but when the adjustments are factors of 10 from the same month in prior years or are suddenly positive this year when negative for the same month for a decade, confidence in the numbers declines.

Confidence declines. We know how small and midcap stocks have led the rally through the first half of last week. At the same time the NFIB small business confidence survey still sags, showing businesses with no faith in the next six months. They are not engaged in capital investment, not just small caps but ALL caps, and without that, there are no new jobs.

GDP downgrades

The real data, even as the monthly reports improve, just prompted a raft of downgrades to the US Q4 GDP.

Goldman is the high water mark still: 1.3% from 1.8%
JPM: 0.8% from 1.5%
Royal Banc Scotland: 0.7% from 1.5%
Nomura: 1.3% from 2%


Who, or more accurately at this point, what, do you blame?

The blame? Take your pick. I know, I know, everyone automatically, in jest or not, says 'Bush.' Well, normally you would be right, but after four years it is getting harder for even that old theme to hold up. After all, it did its job and got the President through the election. Now he needs a new shtick.



So, you find the first disaster that comes along. Nature helps with Sandy that is credited for ruining October (of course it hit with just a couple of days left in the month) and all of November. Never mind the surge in sales ahead of the storm on the entire Eastern seaboard and the massive cleanup afterward that is employing thousands. I know this story. I have seen it many times. After Ike people from all over the country descend to get some work. Now even more so given the horrid economic times. They are called derogatory names, e.g. carpetbaggers, storm chasers, etc., but they are simply seeking work where it is available. They manage to find jobs, help alleviate the carnage, and add to the economy. So blame Sandy? Really? In ALL past storms they always say there is a boom afterward that more than negates any adverse impacts. I dare say that has at least happened here. But, we are finding scapegoats here. I know, before you say Bush again get over it; even the administration is looking elsewhere.

Second, there was the Fiscal Cliff; that has to be good for at least December. I mean no one apparently did business in Q4 if you hear the stories reported. There was a slowdown but it was not a screeching halt. Retail sales were hit. Toys 'r' Us reported that December US sales were down 1.9% versus +1.2% in 2011. International sales fell 4.1% versus a rise of 5.1% in 2011.

Friday Joe LaVorgna of Deutsche Bank proclaimed it was the iPhone 5 that stole Christmas. Recall the JPM analyst who said the iPhone 5 would boost US GDP by 0.5% during the quarter? Well Mr. LaVorgna is saying that IMPORTS of iPhone 5's from where they are made in China worked to lower GDP because imports are subtracted from GDP. But don't worry, we are all so much more productive because of the iPhone 5, right? That of course is sarcasm, harkening back to the argument about so little being invented that would ADD to our rise in economic power; as noted above, most of what we have 'invented' in the past 10 years has been game boxes, music devices, and variations of the cell phone. Oh, yes, wind turbines; gee those haven't been around for . . . centuries.

Third, we have January's numbers that are expected to degrade. The blame for the January is already circulating: the flu.



CNBC and others are reporting that the darn flu could hamper the economy yet further. Six years out from the start of this depression and the economy is so weak we are blaming the flu? How many times have we had serious flu epidemics in the US and it was not even a pimple on the economy? Maybe because this is such a PATHETIC excuse for a recovery that they are saying something such as the flu could mess with its junk.

Of course the hysteria is ramping. I may live to eat these words, but comparing this to the 1918 Spanish influenza outbreak in WW1 is a bit absurd at that point. 100 million people worldwide died from that outbreak spawned in large part due to the war concentrating so many people in such deplorable conditions. I know times are bad, but really?



Think of it this way: the typical flu season peaks in late January or early February. It is now January 12. This one started five weeks early and by November was already severe and widespread in the South and Southeast. Yet we didn't hear about it until the past couple of weeks. Caught napping? Not as bad as reported, but very worthy of making into an excuse? At this point folks, I don't know if anyone with an inquisitive mind can take without question anything the government is saying.

So there you have it. A triumvirate (or a quad if you include the iPhone 5) of non-Bush factors found to explain the hideous economy we face. The truth of the matter: bad fiscal policies, bad monetary policies, overregulation, big government, anti-free enterprise, and anti-entrepreneur policies and actions continue to keep us mired in this depression.

Don't forget your taxes. France, the UK, and now Spain won't.

Oh yes, and don't forget the taxes set to hit soon. New Obama taxes are already here. Pelosi, Reid, and Obama all say that taxes will have to be raised again as part of the debt ceiling deal. Expect higher taxes on firearms and ammunition.

Goldman has another GDP model out that concludes that 3.5% of 2013 GDP could be wiped out by the recent tax hikes.

Does the Goldman study have any real world relevance? Sure. History is awash with examples of higher taxes stunting growth. But we don't have to go back to ancient times, look at the past few years, indeed, the past few months.

The UK implemented a 10% surtax on the rich. Revenues fell within 6 months. Tax repealed. At least the Brits were smart about it.

France raises taxes on the 'rich.' The 'rich' leave, tax revenues fall. France threatens to take retaliatory action against any that leave with a massive tax. We hear the US is contemplating the same. That is one of the latter stage steps of tyranny: cut off the retreat people want to take after your policies drain their wealth and their desire to stay.

Now it is Spain's turn. Spain passed an additional 3% VAT increase in September 2012. It just reported industrial production fell 7.2%, the biggest decline since 1993.


'Cause and effect my sweet.' The Frenchman from the Matrix trilogy.

The last Goldman study.





You can see that the hits/misses on economic reports and the absolute numbers are set up exactly as they have been the prior two years. Maybe this time is different. Maybe the new Treasury head and the Fed can figure it out. But . . . back in the 1990's when we had the budget surpluses, it was because of no spending coupled with the huge economic boom that continued because of a reduction in the capital gains tax even as marginal rates were raised that led to those surpluses. We don't have a boom thanks to current policies and we don't have big spending reductions. What is the secret plan to end the malaise?


TECHNICAL SUMMARY

Internals.

Stats: +3.87 points (+0.12%) to close at 3125.63
Volume: 1.752B (+1.15%)

Up Volume: 1.18B (-40M)
Down Volume: 545.39M (+21.42M)

A/D and Hi/Lo: Decliners led 1.03 to 1
Previous Session: Advancers led 1.38 to 1

New Highs: 142 (-30)
New Lows: 12 (0)

S&P
Stats: -0.07 points (0%) to close at 1472.05
NYSE Volume: 572M (-11.86%)

A/D and Hi/Lo: Advancers led 1.05 to 1
Previous Session: Advancers led 2.07 to 1

New Highs: 359 (-108)
New Lows: 40 (-9)


Dow
Stats: +17.21 points (+0.13%) to close at 13488.43


THE CHARTS

SP500. After a nice Wednesday and very good Thursday, the large caps paused as the entire market tried to digest all of the news hitting right before the weekend. Given the uncertainty, that they closed upside shows there is still upside bias. A new closing high for the SP500 post-bear market and a good initial break after the lateral consolidation that tested the prior high.


NASDAQ. Gapped lower but recovered to flat on Friday, holding the Thursday break from the lateral consolidation. NASDAQ is still below the October and September highs. Techs improved but are not surging to the leader board.


Russell 2000/SP400. Edged higher all week with good Wednesday and even Thursday moves. Large caps caught up on Thursday, however, and on Friday the small caps lagged by just a bit.

SP400 midcaps rallied Wednesday and again Thursday but the other indices matched its move. Friday was a standstill session, sizing up the new margin requirements and all the other news. Solid, trending higher, but a bit indecisive right now.


SOX. The leader Thursday and Friday with a gap and then a run. About 5 points off the August and September highs (408 intraday, closed at 395). Coming to life a bit.


DJ30/DJ20. Nice end to the back half of the week as the Dow came off the 10 day EMA and hit a new rally high. 13,600 is next real resistance and slowly working its way there.

DJ20. Doji after a strong two weeks to the upside. A bit of rest would be, as they say, normal.

Summary: Slowed at the end of the week trying to digest all of the late-hitting news. Small and midcaps are reacting to increased margin requirements and the possibility of perhaps more brokers doing the same. No fade, just slowed down and the large caps caught up. Broke higher after the week of lateral movement, but not convincing. Overall, however, the upside bias remains because even with indecision Friday the market held its gains.


LEADERSHIP

Big names. AMZN is solid, consolidating its big move. EBAY is consolidating nicely ahead of its Wednesday earnings. GOOG rested but it has steadily moved higher. AAPL is trying to put in a higher low at 520.

Financial. Good week for most then taking Friday off. JPM looked great. C is holding the 10 day EMA as it trends steadily higher.

Retail. Struggling across the board as ANN broke down and PNRA was hit. CHS fell from its consolidation. Not all are down but most. PII is still strong, rallying 1.2% Friday. Very problematical post-Christmas.

Technology. A good week with CTXS, STX, SNDK, ATML and others sporting solid moves. Not out in front as a group but some key names are performing very well for us.

Drugs. Very interesting as money started to flow their way. ARNA remains very intriguing. SRPT is setting up again.


THE MARKET

SENTIMENT INDICATORS

VIX: 13.36; -0.13
VXN: 15.87; -0.21
VXO: 13.32; +0.03

Put/Call Ratio (CBOE): 0.72; -0.06


Bulls versus Bears

Bulls: 51.1% versus 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6 versus 41.5% versus 45.7% . On the run and heading toward that September peak that preceded a market decline. Still quite similar to the pattern in September when the market started a two month selloff, so bears watching. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7% versus 27.7% versus 25.5%. Fading but not cutting into new ground on the downside, matching the low set four weeks back. As with the bulls, it bears watching. Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

One of the key areas to watch this week are the RUTX and the SP400. They backed off to end last week and how they respond will tell of their character. A normal test is fine. We will watch.

Other areas: technology has improved as noted. If it continues, solid. Drugs are also interesting; money started their way and watch to see if it continues.

Earnings. The early batch is of course mixed, but they are showing some top line revenues beats that were missing in Q3. That is encouraging. That said, however, many are expecting a disappointing season.

Money always talks. This past week bond flows started to lose money and stock mutual funds, domestic and international, saw big inflows. $4B into domestic, $3.6B into international. A very good, big week.

The bond grip on funds may be cracking and investors are looking, likely belatedly, at stocks. Stocks are at new post-bear market highs in terms of SP500 and the small and midcap indices and NOW retail is coming around?

Often is the case that when the retail investor gets committed, the top is in. It will, however, take awhile for the retail investor to shift from bonds to stocks and the influx of new money will help maintain an upside market bid as it occurs.

There is also the notion that all that money kept bonds running much longer than many smart people thought. Bill Gross' funds lost millions and millions because he bet the bond run was over, but that money just kept pushing it higher and higher.

Thus, even if the switch does ultimately mark the top of this stock rally, it could take months for that to manifest in a reversal and the market can rally nicely higher in the interim.

Thus we could see more of the 'normal' action of late, i.e. a bid to stocks that at times ebbs on the news, but returns when it senses the timing is right. Earnings may provide the catalyst to take some gains back; stocks have rallied nicely ahead of them. After that, however, with the Fed's $85B/month and a stream of money out of bond funds, there would be quite the upside impetus remaining to push stocks higher again.

In addition, stocks remain in very good position with more patterns setting up to move higher. The problem: earnings. Patterns can set up nicely but then if the market gets wind that the gist of the season will be misses or disappointments whether top line misses or some other issue, it could take those patterns and sell them and then set back up.

Thus we are still picking stocks for plays that have earnings far enough out to make money before the announcement or have already announced. More of the latter will of course emerge over the next few weeks and frankly we prefer playing them after earnings as the news has hit and the stocks have made the initial move that we can then play off of with much better risk/reward probabilities for us.

Lots of sub-currents flowing to end the week and more are ahead. With good setups, however, we like what it is showing. We will watch earnings reports for the plays, managing the positions ahead of time to take some gain, pare down, or otherwise limit exposure if we have not already taken some off the table.



Support and resistance

NASDAQ: Closed at 3125.64

Resistance:
3134 is the March 2012 post-bear market peak
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
The 10 day EMA at 3088
3076 is the late April 2012 high
3062 is the December 2012 prior peak
The 2011 up trendline at 3050
3042 from 5/2000 low and several other price points
The 50 day EMA at 3029
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
The 200 day SMA at 2992
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1472.05

Resistance:
1471 is the October 2012 intraday high
1475 is the September 2012 high
1499 from January 2008
1539 from June 2007

Support:
1466 is the September 2012 closing peak and rally closing high
The 10 day EMA at 1457
1441 is a short term down TL from the September 2012 peak
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
The 50 day EMA at 1429
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
The 200 day SMA at 1393
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 13,488.43

Resistance:
13,557 to 13,662
13,653 is the September 2012 high
13662 is the October 2012 intraday high
13,668 from 12-2007 peak
13,692 from 6-2007 peak
14,022 from 7-07 peak

Support:
13,413 from the late September 2012 low
The 10 day EMA at 13,363
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 50 day EMA at 13,194
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
The 200 day SMA at 13,024
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

January 8 - Tuesday
Consumer Credit, November (15:00): $16.0B actual versus $10.6B expected, $14.1B prior (revised from $14.2B)

January 9 - Wednesday
MBA Mortgage Index, 01/05 (7:00): 11.7% actual versus -10.4% prior
Crude Inventories, 01/05 (10:30): 1.314M actual versus -11.1M prior

January 10 - Thursday
Initial Claims, 01/05 (8:30): 371K actual versus 364K expected, 367K prior (revised from 372K)
Continuing Claims, 12/29 (8:30): 3109K actual versus 3200K expected, 3236K prior (revised from 3245K)
Wholesale Inventories, November (10:00): 0.6% actual versus 0.2% expected, 0.3% prior (revised from 0.6%)
Natural Gas Inventories, 01/05 (10:30): -189 BCF actual versus -135BCF prior

January 11 - Friday
Trade Balance, November (8:30): -$48.7B actual versus -$41.8B expected, -$42.1B prior (revised from -$42.2B)
Export Prices ex-ag., December (8:30): -0.2% actual versus -0.8% prior (revised from -0.7%)
Import Prices ex-oil, December (8:30): -0.1% actual versus -0.2% prior
Treasury Budget, December (14:00): -$0.3B actual versus -$1.0B expected, -$86.0B prior

January 15 - Tuesday
Retail Sales, December (8:30): 0.2% expected, 0.3% prior
Retail Sales ex-auto, December (8:30): 0.3% expected, 0.0% prior
PPI, December (8:30): 0.0% expected, -0.8% prior
Core PPI, December (8:30): 0.2% expected, 0.1% prior
Empire Manufacturing, January (8:30): 2.0 expected, -8.1 prior
Business Inventories, November (10:00): 0.3% expected, 0.4% prior

January 16 - Wednesday
MBA Mortgage Index, 01/12 (7:00): 11.7% prior
CPI, December (8:30): 0.0% expected, -0.3% prior
Core CPI, December (8:30): 0.1% expected, 0.1% prior
Net Long-Term TIC Fl, November (9:00): $1.3B prior
Industrial Production, December (9:15): 0.2% expected, 1.1% prior
Capacity Utilization, December (9:15): 78.5% expected, 78.4% prior
NAHB Housing Market , January (10:00): 48 expected, 47 prior
Crude Inventories, 01/12 (10:30): 1.314M prior

January 17 - Thursday
Initial Claims, 01/12 (8:30): 370K expected, 371K prior
Continuing Claims, 01/05 (8:30): 3100K expected, 3109K prior
Housing Starts, December (8:30): 889K expected, 861K prior
Building Permits, December (8:30): 905K expected, 899K prior
Philadelphia Fed, January (10:00): 5.2 expected, 4.6 prior (revised from 8.1)
Natural Gas Inventories, 01/12 (10:30): -189 BCF prior

January 18 - Friday
Michigan Sentiment, January (9:55): 75.0 expected, 72.9 prior


By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Monday, January 07, 2013

Bullard Acknowledges Fed's Money Printing Ways

MARKET SUMMARY

- Fed officials do some quick explaining of the FOMC minutes.
- Fed's Bullard glibly acknowledges Fed's money printing ways.
- Non-Farm Payrolls rise and so does unemployment rate. Don't worry, unemployment stimulates employment (a.k.a. the Larry Summers exit theory).
- Small caps and midcaps bounce right back to the lead.
- Big move, could rest, but many look ready to move still.
- AAPL remains a drag, but other leaders look very ready to push the market higher.

Stocks shake off FOMC QE gaffe with the help of a money printing gaffe.

Thursday closed out the session on shaky ground as the FOMC minutes more than hinted QE would end at some point in 2013. When it ends depends upon which 'some' of the three groups of 'some' referenced in the minutes is in control. I have a feeling that none of the groups of some include Bernanke, but the market likes to view things in the worst light and thus struggled through the session.
Friday the news was a bit better (I suppose; none of the news is great) as more economic data hit (e.g. the jobs report) and the Fed engaged in some fancy footwork as two Fed heavy hitters explained how the minutes in no way suggested QE was going to end anytime soon.

It was enough to calm Thursday's nerves and allow stocks to rise. Futures were lower, modestly so, but they grew into the open and chugged steadily higher all session. A last hour bid pushed stocks nicely higher but then sellers entered on the back half of that hour and took away that surge. That took some luster off the day but it still left the indices higher overall.

SP500 7.10, 0.49%
NASD 1.09, 0.04%
DJ30 43.85, 0.33%
SP400 0.75%
SOX 0.04%
RUTX 0.76%

Not a bad result given the market was rattled by the Fed Thursday as noted. Indeed, SP400 midcaps and the Russell 2000 small caps pushed further to new all-time highs as SP500, the Friday leader of the large caps, gets closer to matching a 5 year high itself, led again by financial stocks. Not a bad result to a very strong week, aided of course by the Monday 'let's make a deal' surge and the Wednesday 'we have a deal' surge.

Was that most of the year's gain right there? Could be. The economy is still crappy no matter what terms or reference points you look at, there is still the debt ceiling and entitlement 'fight' ahead (not sure it will be a fight this time), and as we found out Friday AFTER the close, the CBO erred in its assessment of the deficit impact of the 'fiscal cliff deal': it does NOT add $4T to the deficit over 10 years. It adds $4.6T to the debt. Glad that is cleared up.





These are heavy drags on the economy and thus the stock market. The economy CANNOT grow enough to pay off $16.4T in current debt and $50T to $100T of promised additional debt. As the President likes to say, the math doesn't work. Although he obviously failed math given he believes we cannot cut our way to balance but have to raise taxes to do so. Mr. President, we could confiscate (not tax, but outright take) all the wealth in the country and not pay the promises made. That is not a tax problem but a spendthrift problem.



Back to the Fed. After the market was thoroughly spooked Thursday by a public relations gaffe when the Fed released its minutes that actually discussed an economy without massive quantitative easing, it was out in a very planned response Friday.

Indeed, the Fed appeared so intent upon calming the markets that the explanations went too far. Mr. Bullard and Mr. Lacker (the latter being the most hawkish on the FOMC and thus adding credibility to the backtrack) explained to CNBC's chief economist Steve 'think inside the textbook' Leisman that the economy was simply not that great (how reassuring!) and that the Fed was going to have to keep the stimulus going for the foreseeable future. Of course they all agreed great care must be used in spending the money we have to which Leisman said "you have a lot of dollars . . . you get to print them." Bullard, a bit too casually, replied "Aah, indeed we do."


"You want some money Steve? I have the printer in my trunk."

Of course this is exactly what Chairman Bernanke told Congress the Fed could not and would not do. But then again, it is all semantics. Printing and buying your own treasuries is denied as printing money, but the effect is $85B more in the system each month right now.

Even today, a 'new' idea for the Treasury to mint a $1T platinum coin and then borrow against it at the Fed was seen as a rational way to avoid the debt ceiling and maintain the 'full faith and credit' of the US without any lengthy battle. Of course the only way such a coin would be viewed as worth anything would be the promise to back it with $1T worth of platinum. The problem is, to date in the history of the world, 16 tons of platinum has been mined. At $1557/ounce value, it would take 18,000 tons of platinum to back a $1T platinum coin and give it any value.

As you can see, it is a stupid idea in terms of 'funding' the debt. It only continues the charade that the dollar or $1T coin is backed by anything. It is simply a mechanism to use to try and avoid a fight with Congress about the debt ceiling. Hey, if you pretend the problem is not there no one will care, right? At least not the US electorate that is happy to be blind to our financial problems until that day they run out of other people's money.







Jobs beat but unemployment rate rises.

After the Bullard comments the jobs data makes more sense, i.e. the unemployment rate rose despite rising jobs. How so? Remember Bernanke pointed out 6.5% unemployment as a marker for withdrawing QE. How appropriate unemployment ticked higher to 7.8% from 7.7% even as jobs created topped expectations.

Nonfarm Payrolls, December (8:30): 155K actual versus 150K expected, 161K prior (revised from 146K)
Nonfarm Private Payrolls, December (8:30): 168K actual versus 145K expected, 171K prior (revised from 147K)
Unemployment Rate, December (8:30): 7.8% actual versus 7.7% expected, 7.8% prior (revised from 7.7%)
Hourly Earnings, December (8:30): 0.3% actual versus 0.2% expected, 0.3% prior (revised from 0.2%)
Average Workweek, December (8:30): 34.5 actual versus 34.5 expected, 34.4 prior

You cannot have employment falling if the Fed is going to be successful and devalue our currency to the point debts can be paid. Seems illogical but it isn't: The economy is not growing fast enough and cannot grow enough to pay down the debt and it certainly won't grow enough with the big government policies in place and that are going to stay in place. It has to be through devaluing our currency. So, it is okay for unemployment to rise so it can continue the process, as Bullard stated, by printing more money.

Oh, and by the way, lest you think the rate is just made up (well, actually it is), consider the following. First, there are 28.7M citizens on disability. How can an economy be healthy with that many people unable to find jobs, have run out of unemployment, and use disability to get by. Further, the jobs growth was AGAIN all centered in the 55 to 69 demographic group. The 18 to 29 age group suffers unemployment at 11.5%!! Go to college, study hard, get a degree, don't worry about $100+K of debt, and . . . stay unwillingly unemployed.

Reminds me of the old Billy Joel song 'Allentown':



Well we're waiting here in Allentown
For the Pennsylvania we never found
FOR THE PROMISES THE TEACHERS GAVE
IF WE WORKED HARD
IF WE BEHAVED.

SO OUR GRADUATIONS HANG ON THE WALL
But they never really helped us at all
No they never told us what was real
Iron and coke, chromium steel

And we're waiting here in Allentown.
But they've taken all the coal from the ground
And the union people crawled away . . .

But not to worry. Labor Secretary Solis told us in her rounds on the financial stations that despite tens of millions still out of work either collecting unemployment, disability, or nothing, the extension of unemployment benefits will save us all.

Yes, she played the tired line, saying that thanks to the extension of benefits 'millions and millions' of jobs were saved, using the old 'unemployment leads to employment' argument that prompted Obama's first economic advisor Larry Summers to get the hell out of Dodge lest his reputation be sullied by what was going to be the weak, pathetic recovery we have suffered through. Ms. Solis stated that for every dollar of unemployment benefits $2 of economic activity results. That is an old Keynes theory that of course does not hold up on reality. If that were the case, let's all sit back, collect unemployment dollars, spend them, and enjoy twice the economic strength we have now.

Oh, but that ignores the reality that the money has to come from SOMEONE ELSE who actually IS productive and is making the economy work. TRANSFERRING money from one person to another CREATES NOTHING. Again, if it did then the $6+T the President spent in his first term would have produced over $12T in economic activity. It obviously did not because we are still $6T+ more in debt than we were. Yes, the math just doesn't work, but if you don't know what you are talking about you don't even know you look the fool. Of course the anchors on the financial stations never called her on any of this so it was all an exercise in further 'dumbing down' the debate.


I don't know nuthin', I just praise Obama and collect my $199K salary.



Let's Not Forget the Debt Ceiling and those pesky Entitlement cuts!

Even with worries already rising regarding the debt ceiling and promised (a.k.a. nonexistent) entitlement cuts, stocks still managed gains. Perhaps it was the knowledge that our nation's leaders are already hard at work resolving those issues.


The President, Harry Reid, and John Boehner take a break from debt ceiling/entitlement cut negotiations. Hey, if Pelosi can Photoshop, why can't we?



OTHER MARKETS

Dollar. 1.3073 versus 1.3066. Surged again, moving through the 200 day SMA on the high but could not hold it, reversing just below the November recovery peak. The dollar surged Thursday on the thought of taking back QE. Yes it was up Friday, but that sure looks like a possible reversal.

Bonds. 1.92% versus 1.89% 10 year. The 10 year lost more ground, but overall bonds, as shown in the chart, reversed and held the September low. Ready for a relief bounce after getting hammered on the week with a deal, the FOMC minutes. Friday the Fed-speak helped most bonds recover, but not the 10 year, at least not yet.

Gold. 1648.80, -25.80. Gold was bombed again, gapping below the 200 day SMA and selling below the late December lows. Then came Bullard and Lacker, and gold recovered off its low. Yes still a heavy loss but bouncing back as the threat or fear of losing QE was back-burnered for now.

Oil. 93.09, +0.17. Oil sold to the 200 day SMA but then recovered as the dollar lost its early surge. That kept oil above the 200 day SMA it broke through on Wednesday on the Cliff deal. Still some resistance at 94.50, but not insurmountable.


TECHNICAL SUMMARY

Internals.

NASDAQ
Stats: +1.09 points (+0.04%) to close at 3101.66
Volume: 1.743B (+0.14%)

Up Volume: 1.18B (+308.04M)
Down Volume: 529.49M (-370.97M)

A/D and Hi/Lo: Advancers led 1.77 to 1
Previous Session: Decliners led 1.09 to 1

New Highs: 135 (-4)
New Lows: 6 (-6)

S&P
Stats: +7.1 points (+0.49%) to close at 1466.47
NYSE Volume: 573M (-10.47%)

A/D and Hi/Lo: Advancers led 2.74 to 1
Previous Session: Advancers led 1.1 to 1

New Highs: 398 (-34)
New Lows: 40 (-11)

Dow
Stats: +43.85 points (+0.33%) to close at 13435.21


THE CHARTS

SP500. Started flat, then a steady, albeit unspectacular move higher to close near session highs and indeed at a new post-bear market closing high. It missed a new high by 8 points. Financials led the move and thus led SP500 higher.


NASDAQ. AAPL sold off and thus NASDAQ was hampered, closing flat. Tight doji, however, and holding its move past the August consolidation. 3140ish is next resistance, and as long as it holds the gap that is reachable.


Russell 2000/SP400. Another solid session off the Thursday continuation doji, another new high. The children are indeed leading, not testing back at all. After this big week, likely a test toward the old high (864.70 closing), but wasn't showing that on Friday.

SP400 midcaps put in another all-time high again with a solid move of their own. Very solid week, showing now problems, but after such a move a bit of backfilling is normal.


SOX. As with NASDAQ, a doji, going nowhere. But, that is not bad as SOX holds its gap higher as well.


DJ30/DJ20. Modest gain but closing near the session high though well off the closing highs at 13,600. Hey, pretty solid action.

DJ20. Still running and closing in on a post-bear market high of its own at5628 (closed at 5534).

Summary: After taking a day off on the FOMC worries, the same leading indices led higher again with the SP500 coming along better. NASDAQ is a worry but for now it is following.


LEADERSHIP

Big names. Again sloppy. AAPL posted a second down session after gapping upside Wednesday but was unable to hold all of that move. EBAY was up, holding where it needed to but nothing great. Ditto AMZN. GOOG was the performer, making us a lot money on the week and we banked some Friday.

Financial. Strong all week and on Friday. C, BAC, and JPM. Strong.

Retail. More trouble. LULU gapped below the 50 day EMA and glad we got out after the gap and reversal Wednesday. ROST is pretty interesting after its gap through resistance. Many others are struggling though hanging on, e.g. M, JWN.

Technology. Still some interesting, still some struggling. FFIV is volatile but interesting. KLIC is in a nice test. SNDK looks very interesting. RAX as well, and ADTN is heading upside.

Industrial: CAT is holding that big Wednesday gap as is CMI, TEX and DE. Not in buy position, but good moves supporting the overall market move.

Transports. Truckers look good as JBHT and ODFL sport new rally highs. ABFS continues its trend reversal. KSU in rails is surging to a rally high. Even airlines are rallying, e.g. DAL, LUV.



THE MARKET

SENTIMENT INDICATORS

VIX: 13.83; -0.73
VXN: 15.51; -1.6
VXO: 13.8; -0.21

Put/Call Ratio (CBOE): 0.82; -0.02


Bulls versus Bears

Bulls: 47.8% versus 46.8% versus 45.7% versus 43.6% versus 39.3% versus 37.2% versus 38.3% versus 43.6 versus 41.5% versus 45.7% . Bumping 50% level, getting more confident but still off the late September peak. It is similar to the pattern in September when the market started a two month selloff, so bears watching. Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.



Bears: 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7% versus 27.7% versus 25.5%. Holding flat even as the market surged. Not buying it quite yet as it hovers right at the last September lows. As with the bulls, it bears watching. Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

Quite the week and it was a short one. But there was the anticipation of the deal and then the 'deal' itself. Gee, sounds like a Grisham novel. Just read 'The Broker,' and wonder why I finished it. Typos, glaring grammatical errors, unending descriptions of Italy (uses 'ancient' to describe the places multiple times in one paragraph), unending Italian lessons, a major plot miss, and then after endless, boring descriptions of the towns, a short, fast ending with many untied threads. If he had submitted it under a pseudo name it would have never made it to print. But, I digress.

Okay. The biggest opening week for a year in, well, years. With such big moves the market is primed for a test next week, right? It always is after these kind of moves, but if you look at individual stocks, many are not overbought at all. Yes they gapped upside on Wednesday, but just because a stock gaps does not mean it immediately sells back. Indeed on strong moves a stock will gap several times before ultimately rolling over after the run is out of gas and then corrects and fills the gaps.

Thus we will continue to look for the upside positions as many remain set up well to continue the move. Remember, rallies occur in waves. Some rise first and then rest while others complete their patterns and step up to lead. STX, SNDK, EBAY, CTRP and many others still have a lot of room to run.

A rally lives by its leadership. This market still shows plenty of leadership in position to move, even with AAPL flopping around like a carp on hot pavement, and thus we still look for upside.


AAPL gasps carp-like, struggling to regain its cache.

Of course you never get too cocky. Good moves are tested and many of these stocks can test a bit more before moving further upside. Doesn't mean a selloff, just means you have to be patient, let them finish setting up, and when they break upside, move in.

A key will be NASDAQ and its ability to hold its Wednesday gap. It has struggled since, but it has not given up ground. It needs to finish the test this coming week and provide some leadership in the continuing move. Again, AAPL is a major problem given its market weight. It is taking GOOG to neutralize AAPL's weakness, and GOOG does look good. Perhaps NASDAQ can overcome AAPL in numbers as other NASDAQ stocks make the move.

Have a great weekend!



Support and resistance

NASDAQ: Closed at 3101.66

Resistance:
3104-3112 from August and mid-October peaks.
3134 is the March 2012 post-bear market peak
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3101 is the August 2012 high
3037 is the October low
3090 is the mid-March interim high
3076 is the late April 2012 high
3062 is the December 2012 prior peak
The 2011 up trendline at 3045
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
The 50 day EMA at 3011
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
The 200 day SMA at 2991
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1466.47

Resistance:
1466 is the September 2012 closing peak and rally closing high
1471 is the October 2012 intraday high
1475 is the September 2012 high
1499 from January 2008
1539 from June 2007

Support:
1445 is a short term down TL from the September 2012 peak
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
The 50 day EMA at 1422
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
The 200 day SMA at 1391
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 13,435.21

Resistance:
13,557 to 13,662
13,653 is the September 2012 high
13662 is the October 2012 intraday high
13,668 from 12-2007 peak
13,692 from 6-2007 peak
14,022 from 7-07 peak

Support:
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 50 day EMA at 13,145
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
The 200 day SMA at 13,017
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

January 2 - Wednesday
MBA Mortgage Index, 12/29 (7:00): -12.3% prior
ISM Index, December (10:00): 50.7 actual versus 50.5 expected, 49.5 prior
Construction Spending, November (10:00): -0.3% actual versus 0.5% expected, 0.7% prior (revised from 1.4%)

January 3 - Thursday
MBA Mortgage Index, 12/29 (7:00): -10.4% actual versus -12.3% prior
Challenger Job Cuts, December (7:30): -22.1% actual versus 34.4% prior
ADP Employment Chang, December (8:15): 215K actual versus 140K expected, 148K prior (revised from 118K)
Initial Claims, 12/29 (8:30): 372K actual versus 365K expected, 362K prior (revised from 350K)
Continuing Claims, 12/22 (8:30): 3245K actual versus 3200K expected, 3201K prior (revised from 3206K)
Natural Gas Inventor, 12/29 (10:30)
FOMC Minutes, 12/12 (14:00): Everyone agreed QE should be cut back or eliminated at some point in 2013
Auto Sales, December (14:00): 5.6M prior
Truck Sales, December (14:00): 6.5M prior

January 4 - Friday
Nonfarm Payrolls, December (8:30): 155K actual versus 150K expected, 161K prior (revised from 146K)
Nonfarm Private Payr, December (8:30): 168K actual versus 145K expected, 171K prior (revised from 147K)
Unemployment Rate, December (8:30): 7.8% actual versus 7.7% expected, 7.8% prior (revised from 7.7%)
Hourly Earnings, December (8:30): 0.3% actual versus 0.2% expected, 0.3% prior (revised from 0.2%)
Average Workweek, December (8:30): 34.5 actual versus 34.5 expected, 34.4 prior
Factory Orders, November (10:00): 0.0% actual versus 0.5% expected, 0.8% prior
ISM Services, December (10:00): 56.1 actual versus 53.5 expected, 54.7 prior
Natural Gas Inventor, 12/29 (10:30): -135 BCF actual
Crude Inventories, 12/29 (11:00): -11.12M actual


January 8 - Tuesday
Consumer Credit, November (15:00): $10.6B expected, $14.2B prior

January 9 - Wednesday
MBA Mortgage Index, 01/05 (7:00)
Crude Inventories, 01/05 (10:30): -11.1M prior

January 10 - Thursday
Initial Claims, 01/05 (8:30): 366K expected, 372K prior
Continuing Claims, 12/29 (8:30): 3200K expected, 3245K prior
Wholesale Inventories, November (10:00): 0.1% expected, 0.6% prior
Natural Gas Inventories, 01/05 (10:30): -135BCF prior

January 11 - Friday
Trade Balance, November (8:30): -$41.8B expected, -$42.2B prior
Export Prices ex-ag., December (8:30): -0.7% prior
Import Prices ex-oil, December (8:30): -0.2% prior
Treasury Budget, December (14:00): -$86.0B prior



By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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