Nervous Ahead of Government Funding

MARKET SUMMARY

- Nervous ahead of government funding, mixes Fed-speak has investors pausing for the week.

Going to do something a bit different today. A brief market update (not much changed Friday) but then a discussion of how to be more successful in the market. There are issues I see in most all novice or intermediate traders, indeed experienced traders, that a quick refresher will help overcome. But first, the market.

Market pauses ahead of weekend ahead of government funding deadline.

Friday showed a session where investors/traders/fund managers/computer programs contemplated more wrangling over the weekend about a government shutdown ahead of the Tuesday 'deadline.' As if Tuesday is December 21, 2012 when the world was supposed to end. That is okay; wrangling, posturing, and brinkmanship is what we do in a republic versus having edicts issued from on high. Okay, we DO have edicts issued from on high, but we do have a Constitution that prevents that. We just aren't following our Constitution. Sadly, not a new development.

The indices handled it fairly well. Started lower but managed to fight back and recoup much of the losses. SOX was not so sanguine, gapping below the 10 day EMA and the near trendline.

SP500 -6.92, -0.41%
NASDAQ -5.84, -0.15%
DJ30 -70.06, -0.46%
SP400 -0.38%
RUTX -0.39%
SOX -0.79%

Overall, however, it was something like sitting on your hands ahead of the weekend as we listened to more chest beating and faux piousness from our 'leaders' in DC on both sides of the aisle over the government funding. Of course there was also Fed-Speak, and particularly rambling, incoherent Fed-speak at that from Mr. Evans. Evans gave the old 'we may taper in 2013 but we may taper in 2014' misdirection. Just adding more credibility to the Fed all the time!

Perhaps the market is simply riding it out, waiting for a brokered deal. If one doesn't develop it might be time for the market to take that test that pushes NASDAQ from the upper trendline back to the 50 day EMA as in August.

Maybe. Some say a failure to fund leads to a 1.4% decline in Q4 GDP. Of course, starting to get a handle on runaway spending starts putting the US on the path to turning away from an ever surging debtor nation, but that is the big picture that the stock market no longer looks at.

There certainly are still a lot of leaders that look very good indeed, leaders that have thus far weathered the 'horrid' 6 out of 7 days lower on SP500. You have heard it before on the financial stations, if the market is not going up every day something is terribly wrong. Looking at the patterns of the leaders and the indices, I don't see that. SOX is a bit worrisome after Friday with its small gap lower and it tends to lead moves, but again, leadership remains solid.


We ended up not buying anything as a lot of stocks turned off their intraday highs substantially, and frankly, if nothing is done over the weekend, and I doubt it will, there will be the same opportunities next week ahead of the Tuesday deadline.

End result: we plan to hang in and ride through the hot air turbulence emanating from DC the best we can. Leaders are holding up very well, and until that changes character the market is doing what it has to do in the face of the periodic Money Madness in DC. Okay, so it is not periodic but every day when you have a $17T debt, the IRS has $67M missing from what it has already taken from us for the healthcare Act, a food stamp recipient picking up sushi and lobster using his 'SNAP' card. But, of course, there is no room for cuts because as Ms. Pelosi puts it, the cupboard is bare. With that kind of scenario nothing meaningful will happen OTHER THAN a shutdown.


THE MARKETS

OTHER MARKETS
Dollar: 1.3522 versus 1.3483 versus 1.3521 10 year

Bonds: 2.62% versus 2.64% versus 2.61% 10 year

Oil: 102.87, -0.16

Gold bouncing up and down: 1338.50, +14.90


MARKET INTERNALS and STATS

NASDAQ
Stats: -5.83 points (-0.15%) to close at 3781.59
Volume: 1.675B (-6.27%)

Up Volume: 733.34M (-436.66M)
Down Volume: 910.63M (+301.21M)

A/D and Hi/Lo: Decliners led 1.56 to 1
Previous Session: Advancers led 1.47 to 1

New Highs: 104 (-36)
New Lows: 17 (-1)

S&P
Stats: -6.92 points (-0.41%) to close at 1691.75
NYSE Volume: 562.5M (+4.36%)

Up Volume: 786.13M (-823.87M)
Down Volume: 2.13B (+1.01B)

A/D and Hi/Lo: Decliners led 1.97 to 1
Previous Session: Advancers led 1.68 to 1

New Highs: 86 (-58)
New Lows: 86 (+3)


DJ30
Stats: -70.06 points (-0.46%) to close at 15258.24



SENTIMENT INDICATORS

VIX: 15.46; +1.4
VXN: 15.65; +1.29
VXO: 14.68; +1.18

Put/Call Ratio (CBOE): 0.94; +0.24


Bulls and Bears:

Clearly diverging again with bulls running higher and bears falling, just as the market makes a turn for the worse. Similar action in June.




Bulls: 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Diving below the early July, late June levels. 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.

Background: 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

Today a quick overview of some points to make you better at your stock investing and trading and perhaps overcome some obstacles that are holding you back.

I often see three main areas that hold people back from becoming a good investor and/or trader in any market, stock or otherwise.

1. Logic: Trying to apply your own logic to what a stock should do versus what the market is telling you a stock should do.

2. Patience: Letting a play come to you versus chasing it. Once in a play, having the patience to let a play work for you as long as all of the reasons for entering the play remain.

3. Money management: Letting winners run: Taking partial profits, having the confidence in your plan to let it work for you. There are other parts that we will discuss in other installments.


Logic

I often see a newer or even experienced investor complain that a stock is not moving versus another stock in a category even though the company in the lagging stock is purportedly a better company.

This is a losing mindset. The market is the aggregation of all investor insight, biases, prejudices, intelligence, etc. It is still dominated short term and even longer term by emotions. Greed is powerful, but fear is the master. Greed causes people to buy late. Fear causes people to panic out of otherwise perfectly good patterns and action.

William O'Neill has a good analogy comparing yellow dresses to red dresses. The yellow dresses are believed to be of less quality by an investor versus the red dresses. The investor cannot believe the market will continue to ignore the red dress maker so he buys the red dress stock. The yellow dress stock, however, simply continues to outperform, rallying while the red dresses go, at best, nowhere.

This also happens after a big selloff. Stocks set up good patterns and start to break higher. Your eyes see it but your gut and weary mind just don't want to believe it. That is when you have to step in and just do it. Back in early 2009 AMZN gapped upside. No one seemed to care; too beat up from the huge market selloff. We saw the gap and played it as AMZN broke higher from the gap. PCLN sold off hard in mid-2010 and many bailed on it, saying the big run was over. We saw it set up at support and when it moved higher we bought into it despite many badmouthing the stock. That was at $188.43, and this past week PCLN broke 1,000, the first stock to break 1K. What about NFLX? HLF? Hated because they could not possibly support the prices, or so the pundits would say. We kept buying NFLX when it told us to do so via its pattern. We made tons of money on NFLX on its runs that were not supposed to happen.

The point: for some reason perhaps unknown to us, the market wants the yellow dresses or is just ready to make a turn. It may make no sense, but buyers want the yellow dress stock. If the market, based upon the patterns and the action, tells you one stock is favored and another is not, don't try to be smarter than the market. Pick your entry when it presents itself. Buy when a stock says 'buy me,' not solely because a stock's fundamentals look good. It has to have a good pattern so we can optimize the use of our funds on stocks that are moving, not sitting. Or even worse, stocks are moving and WE are sitting.


Patience

Investors, particularly traders, want to make money, and they want to make money now. That is good; don't sit on your funds. You have to have your line in the water to catch fish. You have to be on the hunt, gun or bow loaded, for when the prey reveals itself. But, you have to let the play develop.

Don't shoot your gun when your quarry is in the deep woods. Don't cast before you are in position. Wait until the play is ready to buy. Let it show the break you are playing. As I say often, they are just pretty pictures until the move starts. Let it start so you know the pattern is working, the stock saying 'buy me.'

Further, don't be late. Don't chase the bus. If you miss your turn, don't jerk your car across traffic and risk a wreck. Be patient. Often a stock will come back to you or give you a shot to enter after a breakout. If you miss a breakout and let a stock run a bit then move in, you might get a bit more upside but then the stock tests. You can get turned upside down in a routine test of the move if you are not patient. Miss one buy, keep it on the watch list, then when it sets up again, you can still catch a breakout run on the first test, etc.


Let your winners run

When I was learning to trade and invest, I used to roll my eyes and audibly snort every time I heard a mentor or some other expert say let your winners run. What an idiotic concept I would think. Of course you would do that. But I never would.

First, I didn't really know what it meant. 10%? 20%? What is a run? Second, I just didn't have the right mindset to do it. I would pick the right play, get the right entry, then after a strong burst higher started to fade I would get very anxious, particularly with options and their limited life, and sell out. Then after a test the stock would continue higher and double the gain I took. Worse, I would not be right on another trade (you will be wrong many times and still be a great, money making trader) and by not letting my winners run as far as they would, I would eviscerate my profits.

Time and some very good mentors helped me over this. There are many techniques to overcome this problem, but the simplest to me is partial profits. Pick a logical initial target as part of your play selection, based on pattern, Fibonacci, etc. as well as the right risk/reward ratio (more on this another time), and when your stock gets there, take some profit.

SOME profit. A half. A third. Bank it. Then, let the rest of the play run. Typically you have recouped most, all, or in excess of your initial investment. The pressure is off. You can let the stock test and set up again for the next run. As long as the pattern holds up and all signs point to a continued move, you let it work. This also has elements of patience in it as well. BUT, when the initial gains are made, you will be surprised at how easy it becomes to let the rest of your position work for you.

You will also be surprised at just how far your winners will run for you once the pressure is off and you let them run. Then you worry about when to take the next gain. That is at the next logical target in the form of resistance, Fibonacci, etc. that actually acts as some resistance. Take another PART of your gain, then let the rest run. You will let that run until the stock turns and the trend breaks. In other words, just as a stock told you to 'buy me,' it will tell you to now 'sell me.'


Ultimately it is a combination of confidence. Confidence in your play picks, your entries, your targets, your analysis of the ongoing play, confidence in your plan. That way you see 50% to 70% option gains turn into 150%, 200%, 300% option gains. Stock as well. PCLN, NFLX are not typical gains, but you can easily see 20%, 30%, 50% gains on those as well.



Support and resistance

NASDAQ: Closed at 3781.59

Resistance:
3799 is the September 2013 high.
3808 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
The 10 day EMA at 3761
3742 is the November 2012 up trendline
3694 is the August high and the post-bear market high.
The 50 day EMA at 3663
The July 2013 intraday high at 3625
3573 is the August 2013 low
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3391
The 200 day SMA at 3372
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high


S&P 500: Closed at 1691.75

Resistance:
1710 is the August 2013 peak.
1730 is the September 2013 peak

Support:
1687 is the May high and post-bear market high
1698 to 1700 are the July and August interim highs
1685 is the mid-August 2013 upper gap point
The 50 day EMA at 1675
1657 is the late August upper gap point
1656 is the December 2012 up trendline
1654 is the June 2013 peak
1627 is the August 2013 low
The 200 day SMA at 1590
1576 from October 2007, the prior all-time high
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows


Dow: Closed at 15,258.24

Resistance:
15,318 is the June closing high
15,542 is the May 2013 intraday high
16,659 is the August 2013 peak

Support:
The 50 day EMA at 15,243
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
The 200 day SMA at 14,657
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation


Economic Calendar

September 27 - Friday
Personal Income, August (8:30): 0.4% actual versus 0.3% expected, 0.2% prior (revised from 0.1%)
Personal Spending, August (8:30): 0.3% actual versus 0.2% expected, 0.2% prior (revised from 0.1%)
PCE Prices - Core, August (8:30): 0.2% actual versus 0.1% expected, 0.1% prior
Michigan Sentiment -, September (9:55): 77.5 actual versus 77.3 expected, 76.8 prior

September 30 - Monday
Chicago PMI, September (9:45): 53.7 expected, 53.0 prior

October 1 - Tuesday
ISM Index, September (10:00): 55.1 expected, 55.7 prior
Construction Spending, August (10:00): 0.4% expected, 0.6% prior
Auto Sales, September (14:00): 5.6M prior
Truck Sales, September (14:00): 7.0M prior

October 2 - Wednesday
MBA Mortgage Index, 09/28 (7:00): 5.5% prior
ADP Employment Chang, September (8:15): 170K expected, 176K prior
Crude Inventories, 09/28 (10:30): 2.635M prior

October 3 - Thursday
Challenger Job Cuts, September (7:30): 56.5% prior
Initial Claims, 09/28 (8:30): 315K expected, 305K prior
Continuing Claims, 09/21 (8:30): 2825K expected, 2823K prior
Factory Orders, August (10:00): 0.3% expected, -2.4% prior
ISM Services, September (10:00): 57.4 expected, 58.6 prior
Natural Gas Inventor, 09/28 (10:30): 87 bcf prior

October 4 - Friday
Nonfarm Payrolls, September (8:30): 183K expected, 169K prior
Nonfarm Private Payrolls, September (8:30): 180K expected, 152K prior
Unemployment Rate, September (8:30): 7.3% expected, 7.3% prior
Hourly Earnings, September (8:30): 0.2% expected, 0.2% prior
Average Workweek, September (8:30): 34.5 expected, 34.5 prior

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Some Selling Was Expected After the Run

MARKET SUMMARY

- After reaching new highs in spite of taper and Syria, after a relief spurt some selling sets in. Expiration or something more?
- Four week rally, laggard indices selling harder along with some leaders.
- Bullard tries to put the kibosh on the no taper party.
- AKS lowers guidance, DRI (Red Lobster, etc.) misses big but has a secret plan, while CTAS (uniforms) guides higher.
- HD dumps 20K workers on public exchanges. WAG, Trader Joe's do the same.
- Some selling was expected after the run, and it was expiration and an S&P rebalance, but some leaders show sharper selling than you like to see.
- Monday is the third day of the test and will tell more of the story as for a as its depth.

Market had all of the good news it could take on this leg.

Four weeks upside from what looked to be a rollover . . . except for NASDAQ. As you recall, NASDAQ held its 50 day EMA and the July gap higher. That stand at support turned the tide and a month later almost all of the indices hit new highs or new post-bear market highs (SP400 was the notable laggard, missing by a fraction).

With the FOMC 'no taper' the market continued the run with a sharp spurt higher. This was, however, after 3.5 weeks of upside. Larry Summers was knocked from the running. Market moved higher. Syria was taken off the front burner when Russia pounced on an offhand statement from Secretary of State Kerry, pushing Russia back into prominence in the Middle East when it had none. Market moved higher. Then the FOMC topped all expectations with a non-action.

That left nothing to anticipate in the near future. Earnings are coming, but the meat is still three to four weeks away. With the run already in the bank that is an awful long time to glide higher on momentum in anticipation.

Then throw in the old 'what the Fed giveth the Fed can taketh away' scenario. Friday morning Mr. Bullard stated the economy was not all that fragile, that the no taper decision was a close call, and that there is really no difference between no taper and $10B in taper. Okay, that is understandable given everyone (and yes even those now saying 'oh we felt there could be no taper decision all along') felt there would be some kind of taper announced. It was the final comment, however, that really rattled the stock market: there could be a press conference after the October FOMC meeting, implying there may be something that needs explaining, say a taper?

Stocks were moving higher into the open and looked pretty darn decent. Then the Bullard comments hit the wires and the gains were gone. Thursday sure had the look of a market that ran a long way, got another big piece of news but then just got tired. Friday that look became reality as the indices gave back some of the move, particularly the last spurt that was Wednesday.

As we discussed Thursday, some indices were more impacted than others. DJ30 dove and SP500 and SP400 followed it with 3/4 to 1% losses. The leaders on the move higher - - NASDAQ, RUTX, and SOX - - held the line much better with 1/4 to 1/2% losses. Some leaders moved higher, some held the line. A lot of stocks that looked solid came under heavy fire Friday with losses that were more than you want to see in just a second day of testing. Thus the question still remains whether the laggards drag everything lower with them or whether, as in August, NASDAQ et al can hold the line and thus hold the market from spinning lower.

SP500

Not that anything major changed Friday in terms of the environment. Sure Bullard talked of a 'possible' press conference in October. Hell, it is 'possible' that Bernanke decides to call a special press conference as well. It is the likelihood that will occur that is important. The Fed, Bernanke specifically, said the Fed could taper and then always backtrack if things got out of hand. The Fed HAS NOT said that it will call a special meeting in order to accelerate the taper. That is just not going to happen.

What would cause it to happen? Unemployment suddenly dropping to 6.5%? I say that won't happen, but heck, if many more people leave the workforce then that becomes a reality. I also said the Fed would certainly taper on Wednesday. There you go. In any event, a meaningless reality in terms the jobs market being stronger, but a form of reality nonetheless.

So, Friday saw some sharper selling than you want to see in a second day of a pullback, but it was not market-wide. It was quad expiration and a S&P rebalance. Volume shot higher as stocks were shuffled. That exaggerated the moves. The third day following the Wednesday surge will tell you more about the character of the test, and thus far NASDAQ, SOX, and RUTX look very solid in their fade. A lot of people are once again talking about the market rolling over. No doubt it was ready for and will test. It always does.


Don't flatter yourself. I was following her . . . I always do . . .

Again, the question is normal test or rollover? The market was ready to dive in August. It sold but it recovered to new highs. Again, there are still $85B reasons per month not to tank. Sure it will test but will it roll with that kind of scratch still moving in? Will Bullard control the FOMC's October decision? Not. So we see how it holds early next week and that tells much of the story heading into earnings season.


THE NEWS

Bullard spoke, the upside broke, at least for the session. Egged on by quad expiration and the S&P rebalance no doubt. Other stories, meaningful ones, are out there.

Earnings: Yes the season is approaching but there are early birds (or laggards) announcing.

The Bad:
AKS (steel) guides Q3 lower.

DRI (Olive Garden, Red Lobster): 0.50 versus 0.73 expected. Revenues missed as well. But . . . management says it has identified an area that will allow it to cut expenses and turn things around. Must be shrimp month.


The Good:
TIBX (software) beat on the top and bottom lines

CTAS (uniforms): Reported in-line results, but it upped its Q3 guidance. An important stock in our opinion as it shows customers spending more on new uniforms, willing to release some money to replace tattered togs. CTAS had struggled but the increased guidance suggests something is stirring. Positive.


The Worrisome:

HD sends 20K to the public insurance exchanges. WAG and Trader Joe's do the same. These join UPS in sending 10,000 spouses onto the public exchanges.

Keep your healthcare plan if you want? How? When you provide the incentive for companies to DUMP their healthcare plans thanks to surging costs, there is no insurance to keep. Of course anyone who has looked at the law before, or as Nancy Pelosi and most of Congress did, after it was passed, you know that is the plan, i.e. making it so costly that the only economic choice is to go on the public exchanges.


Nothing wrong with the healthcare bill, however.

Friday the House voted to defund the Affordable Care Act in the continuing resolution, one of the just two opportunities Congress has to impact spending (the other is the debt ceiling). Too costly, killing jobs, jacking up healthcare costs were some of the cited reasons.

Then at the White House carnival barker Carney said 'there is no data showing the economy is losing jobs because of the Affordable Care Act.'


No 'data' showing any jobs lost under the Affordable Care Act.

I guess that depends upon your definition of 'data.' Cleveland Clinics said today that it was cutting jobs BECAUSE of the cost of the act. DRI has said the same. Dozens of companies are on record saying this is the case. Indeed, the VERY ARGUMENT those seeking and receiving waivers from the Federal government on implementation is that if the Act applied to them they would have to cut jobs.

This goes into the category of hyper-technical language such as the old 'I did not have sexual relations with that woman.' Okay then, what is the definition of . . . you get the point.


Of course I had sexual relations with that woman.

Healthcare costs soaring when we know they can go lower.

If you think the Act is working even after the exemptions, the dumping of plans, etc., look at the costs: costs we spend on healthcare, including insurance, is now up to $9,000 per person, young or old. The President told us our average costs would be -$2500. He made a scrivener's error: that should have been +$2500.

Does it have to be this way? We erred in this country when we went from insurance to cover catastrophic events such as accidents and serious illness to insurance covering everything down to a sore throat. The mantra 'insurance will pay for it' jacked up the number of unnecessary tests and procedures. The fear of lawsuit added more.

What if insurance wasn't there to pay for every little sniffle? Then you would have to be a smarter patient. You wouldn't rush in when your kid had a cold or a sore throat likely from allergies. If strep was running in your school then you would have it checked but if not, use some common sense.

Look at Lasik eye surgery. It is not covered by most insurance as it is considered an elective choice versus glasses or contacts. Indeed many people don't have coverage for their vision correction needs. That add on is very expensive per dollar received. When Lasik was first introduced, costs easily exceeded $10,000. Costs have decline approximately 70%, however, while the technology has improved dramatically. With no insurance buffer to maintain higher prices, companies are forced to compete for business. Consumers are forced to do more research and homework, but by golly, they make better decisions. Voila.


Lasik prices down 70% as insurance doesn't cover it and companies have to, oh my, compete.

It can happen in healthcare in general. HSA's are great ways to insure for the big problems and cut costs. The Healthcare Act does all it can to make them unattractive, e.g. eliminating deductibility of non-prescription drugs and healthcare items. So what do the consumers do now? They get their doctors to write prescriptions for basic over the counter items. Senseless to have to do this, but where there is a regulation, there is a way around it. Unintended consequences, eh?

But when HSA's are allowed to work you get a smarter patient who discusses healthcare plans of action with the doctor, participates in the plan, and can actually negotiate better prices. That is precisely what my family does. You would be surprised the 'fat' that are in the prices quoted by doctors. It reminds me of buying an auto and negotiating down from the sticker price (or up from the dealer's cost). If you are informed, and you find it pays to be informed both in savings and in a better healthcare plan, it is a great and empowering thing.

Alas, try to tell that to our government that thinks we, the people of the most inventive and productive country on earth (at one time), are too stupid to understand healthcare when we virtually invented the technology revolution. Only a government could have that hubris.




THE MARKET

OTHER MARKETS
Dollar fell: 1.3518 versus 1.3527

Bonds: 2.74% versus 2.75% versus 2.69% 10 year.

Oil faded some more: 104.67, -1.72

Gold reverse surged: 1332.60, -36.90


INTERNALS AND STATS

NASDAQ
Stats: -14.66 points (-0.39%) to close at 3774.73
Volume: 2.371B (+34.64%)

Up Volume: 1.1B (+102.08M)
Down Volume: 1.57B (+818.18M)

A/D and Hi/Lo: Decliners led 1.15 to 1
Previous Session: Decliners led 1.19 to 1

New Highs: 188 (-48)
New Lows: 17 (-4)

S&P
Stats: -12.43 points (-0.72%) to close at 1709.91
NYSE Volume: 1.183B (+82%)

A/D and Hi/Lo: Decliners led 2.57 to 1
Previous Session: Decliners led 1.41 to 1

New Highs: 215 (-310)
New Lows: 94 (-18)


DJ30
Stats: -185.46 points (-1.19%) to close at 15451.09


THE CHARTS

NASDAQ: Again found the upper channel line tough to cross, faded slightly. Volume surged but that was expiration and S&P rebalancing. NASDAQ has struggled at the upper channel line; noted it before, but what else are you going to say? The question is whether it goes all the way to the 50 day EMA again. Leaders were split on the session. Still very solid, but this is why we have been taking some gain on the way to these highs.

SOX: Rolled back from the break to the new post-bear market high on the week. Holding right at the July intraday highs, the prior high. Still looks solid, but it is just the second day of the test. The 10 day EMA is another 4 points lower and a logical point to test. There are, of course, a pair of gaps higher that are out there, lurking.

RUTX: Nice, easy fade, hardly giving up any ground. Looks like a leader, and with stocks such as CTAS raising guidance, that is a positive for the small caps.

SP500: Falling, a big more than you want but not an out and out gutting. Back at the late July/early August high. Nothing extraordinary thus far, just testing the move. Has some room to give still. It won't hold the old high but it can test the 10 day EMA, another 10 points lower. It can also test much further and still put in a higher low and continue the uptrend. So, again, that is why we take gain on the way and look go bank more if this is not just a 1-2-3 test.

DJ30: The last to catch up, and as we opined, one of the first drop hard. We picked up some DIA puts in the event it wants to do a crash course in crashing.

SP400: Not bad at all. Yes it was the goat and failed at a new high but the decline was not morbid and perhaps the small caps will help it.


LEADERSHP

Vastly varied. A day that saw some move higher, many take another moment to rest, but many falling quite hard.

The up: NFLX, AMZN, PCLN, GOOG, XOOM, FB, ERII, EBAY. Some powerful, some so-so.

Taking a breather: VIPS, DDD, YY, YNDX, WWWW, TSRO, AFOP, SBUX, LVLT, BMRN, GILD.

Got kicked (or at least look heavy): AAPL, BZH, ATK, NEM (gold), LNKD, HLF, UBNT


Bud (John Travolta): What happened to your face?
Sissy (Debra Winger): Got hit
Urban Cowboy, 1980



SENTIMENT INDICATORS

VIX: 13.12; -0.04
VXN: 12.97; -0.8
VXO: 12.95; -0.26

Put/Call Ratio (CBOE): 1.05; +0.29


Bulls and Bears:

Clearly diverging again with bulls running higher and bears falling, just as the market makes a turn for the worse. Similar action in June.




Bulls: 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Diving below the early July, late June levels. 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.

Background: 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

No data Monday but it is a pretty full week with Consumer Confidence Tuesday, Durable goods, new home sales, GDP third revision, personal income and spending, and Michigan sentiment.

Earnings warning season is upon us as well as we saw Friday when Blackberry warned earnings would be way off and it was laying off 40% of its staff worldwide (4500 workers). A great phone and legacy is going to be history. That new phone is something else; it was just too late to the market and the moment had passed.

This week will tell the story of a short 1-2-3 pullback to test the Wednesday surge upside or a more sustained pullback of several percent. The last two times NASDAQ played around with the upper channel line it was spanked lower. In August it was the 50 day EMA that caught it. It could easily do that again. Doesn't have to, but it is the pattern thus far even with $85B/month. Of course there were threats of taper that started and extended the selling, but it is still a very technical pattern and reacted to natural resistance and support levels.

Is it likely a 1-2-3 pullback? Not really. It will show more Monday and then Tuesday after the third day. Look at stocks you may want to sell calls on, stocks that moved to the 127% Fibonacci extension and are ready to roll back to the prior peak are great call sale opportunities.

With the fade we will look at some downside as well in the event it turns into a more extended decline, e.g. NASDAQ falling to the 50 day EMA again. As noted, picked up some DIA puts on the day in the event the Dow wants to dive.

At the same time, if this is going to be a more modest fade then some leaders will be testing and setting up for new moves. Have to watch for that as well. Many were just taking a day off again, posting modest or now losses. Those that hold the line will be ready to pop if it is just a short pullback. If it is longer you have to see which ones hold the line and also watch for bases in others to finish forming.

As you can see, it is early in the test so how deep is the question. No one knows for sure, so that is why you simply take actions to stack the deck in your favor. We took some good profits on the way up, we can sell some calls and play some downside on a fade, and of course look for opportunity to set up on the upside. After all, there are still $85B reasons per month for the leaders to continue to lead.

Have a great evening!


Friday is quadruple expiration for September. We banked our last September option gain Thursday, selling CAMP options for a decent gain (50%) though not what we wanted when the play started. Not bad for a 'failure' of sorts.

The session could be a bit up and down given expiration, but the key for us is how the lagging indices hold up (DJ30, SP400) and if they put any pressure on the leaders. NASDAQ, SOX, RUTX still look solid. A few days of testing is no issue for them and lets the market work off the froth from Wednesday. Still good stocks in position to move, but of course fewer in number now versus when the move started 3.5 weeks back. Duh.

Indeed, after hours Warren Buffett told CNBC that the market was 'fairly valued' at this point (17x earnings on average). Of course that doesn't mean growth stocks don't get much, much more levered than that, but it tells you that some big money is a bit cautious at this juncture with new highs popping last week.

Cautious and things are a bit fluffed up near term, but there is also $85B/month still out there with no timetable for pulling back. Indeed Bernanke made it sound as if nothing would be trimmed (tired of using taper) until employment and perhaps other markets get substantially better.


Support and resistance

NASDAQ: Closed at 3774.73

Resistance:
3795 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
3694 is the August high and the post-bear market high.
3727 is the November 2012 up trendline
The 50 day EMA at 3638
The July 2013 intraday high at 3625
3573 is the August 2013 low
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3380
The 200 day SMA at 3353
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high


S&P 500: Closed at 1709.91

Resistance: Just how far it gets over the 200 day SMA

Support:
1710 is the August 2013 peak
The 10 day EMA at 1698
1687 is the May high and post-bear market high
1698 to 1700 are the July and August interim highs
1685 is the mid-August 2013 upper gap point
The 50 day EMA at 1670
1657 is the late August upper gap point
1654 is the June 2013 peak
1627 is the August 2013 low
The 200 day SMA at 1583
1576 from October 2007, the prior all-time high
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows


Dow: Closed at 15,451.09

Resistance:
15,542 is the May 2013 intraday high
16,659 is the August 2013 peak

Support:
15,318 is the June closing high
The 50 day EMA at 15,227
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
The 200 day SMA at 14,603
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation


Economic Calendar

September 24 - Tuesday
Case-Shiller 20-city, July (9:00): 11.5% expected, 12.1% prior
FHFA Housing Price I, July (9:00): 0.7% prior
Consumer Confidence, September (10:00): 80.0 expected, 81.5 prior

September 25 - Wednesday
MBA Mortgage Index, 09/21 (7:00): 11.2% prior
Durable Orders, August (8:30): 0.4% expected, -7.4% prior (revised from -7.3%)
Durable Goods -ex transports, August (8:30): 0.9% expected, -0.8% prior (revised from -0.6%)
New Home Sales, August (10:00): 416K expected, 394K prior
Crude Inventories, 09/21 (10:30): -4.368M prior

September 26 - Thursday
Initial Claims, 09/21 (8:30): 325K expected, 309K prior
Continuing Claims, 09/14 (8:30): 2775K expected, 2787K prior
GDP - Third Estimate, Q2 (8:30): 2.5% expected, 2.5% prior
GDP Deflator - Third Revision, Q2 (8:30): 0.8% expected, 0.8% prior
Pending Home Sales, August (10:00): -2.3% expected, -1.3% prior
Natural Gas Inventories, 09/21 (10:30): 46 bcf prior

September 27 - Friday
Personal Income, August (8:30): 0.4% expected, 0.1% prior
Personal Spending, August (8:30): 0.2% expected, 0.1% prior
PCE Prices - Core, August (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Final, September (9:55): 77.3 expected, 76.8 prior

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Market Handles Friday the 13th

MARKET SUMMARY

- Market handles Friday the 13th, rumor of Summers to be names next week, less than great data for a modest gain.
- Retail worry: CEO's not seeing 'it' 4 years into the recovery.
- With 95% of wealth going to the upper 1%, no wonder retailers are worried, retail sales weak.
- Plenty of leadership keeps stocks higher overall.
- Still to come: FOMC and taper, more Syria, debt ceiling debate

Rumor mill, data strike early.

Japan's Nikkei news reported that Obama was ready to name Lawrence Summers Fed Chair as early as this coming week post-FOMC meeting. This 'news' outlet is known to start rumors to see the reaction. In a half hour the US reacted, renouncing any such notion.

There was more. PPI was stronger than expected (0.3% versus 0.2%) though the core was again at 0%. No rise in prices outside of what you need the most: housing, education, food, fuel. So, go ahead and buy another phone, TV, PC and just don't eat, go to work, or have enough education to use the new devices.

Oh, but retail sales showed that no one really wants to buy much of anything.

Retail Sales, August: 0.2% actual versus 0.4% expected, 0.4% prior (revised from 0.2%)

Retail Sales ex-auto, August: 0.1% actual versus 0.3% expected, 0.6% prior (revised from 0.5%)

Retail Sales ex-auto and gas: 0.1%

Indeed, retail CEO's are starting to express concern about this recovery. Friday, Sealed Air's CEO commented that four years into a recovery it doesn't feel like one: "We are in the fourth year of the recovery and it doesn't fell like a recovery. Because it's the first time ever that things, four years with a recovery, are feeling so iffy."

The retail sales don't show any swelling strength, and when you look at how the Administration's policies have impacted wealth distribution, it is no wonder the consumer is just not that strong. 95% of the wealth gain from 2009 to 2012 when to the top 1% of US citizens. Instead of creating solid, high quality traditional jobs as the US economy has always done, the policies from Obamacare to EPA have molded our workforce into a part-time, low-wage, government-dependent mass. Their answer to the changes their policies have wrought: tax the money back from those that received the money thanks to their actions to pay for more of the same programs. What did Einstein say about the definition of insanity?

In any event, even with the glum numbers, the FOMC and taper to come next week, the debt ceiling debate heating up, stocks did just fine Friday, bouncing back modestly after testing Thursday. It won't hurt come Monday that the US and Russia struck a deal on Syria's chemical weapons. Perhaps enough positives to offset the unknowns re the Fed?

Michigan Sentiment - Preliminary, September (9:55): 82.0 expected, 82.1 prior



Maybe they are not unknowns at this point. Most commentators Friday who know anything at all said the Fed HAD to taper or else lose all credibility. $5B would be enough; just to show everyone that yes things were still good enough to taper. The market expects it at this point.


Friday, as noted, it seems stocks had it figured. Stocks started up modestly, gave up the move, but then rose steadily (and slowly) to the close. No frills, just modest gains on lower volume in response to the Thursday weakness. Not bad, not great, just keeping a modest test going just fine.

SP500 4.57, 0.27%
NASDAQ 6.21, 0.17%
DJ30 75.42, 0.49%
SP400 0.22%
RUTX 0.52%
SOX 0.45%

Volume faded 11% on both NASDAQ and NYSE.


THE MARKET

OTHER MARKETS
Dollar: 1.3304 versus 1.3303 euro. Down on the week in a test, but then broke the 200 day SMA. Could not recover it Thursday or Friday despite intraday attempts.

Bonds: 2.89% versus 2.91% 10 year. All week bouncing in a narrow range voer support. Holding the line, waiting on the Fed and how much it will taper.

Oil: 108.21, -0.39. Selling to the 20 day EMA early in the week then walking laterally along that level the rest of the week. Still looks solid enough.

Gold: 1308.80, -21.50. Rough week for gold as it sold below both 50 day MA, unable to keep the nice reversal looking so nice.


STATS AND INTERNALS

NASDAQ
Stats: +6.22 points (+0.17%) to close at 3722.18
Volume: 1.45B (-11.37%)

Up Volume: 837.38M (+360.1M)
Down Volume: 585.65M (-454.35M)

A/D and Hi/Lo: Advancers led 1.51 to 1
Previous Session: Decliners led 1.78 to 1

New Highs: 103 (-28)
New Lows: 16 (+4)

S&P
Stats: +4.57 points (+0.27%) to close at 1687.99
NYSE Volume: 505M (-11.87%)

A/D and Hi/Lo: Advancers led 1.68 to 1
Previous Session: Decliners led 2.03 to 1

New Highs: 113 (-79)
New Lows: 113 (-11)

DJ30
Stats: +75.42 points (+0.49%) to close at 15376.06


THE CHARTS

SP500: Up on the week, closing it out with a sideways move Thursday and Friday. Solid early week, continuing the rally off the lower low in late August. Good run, so far a nice easy test, still a lot of resistance to push through at 1695 to 1700 and then the prior high. Working for now.

NASDAQ: Strong early week move pushed NASDAQ to a new high. Then testing Wednesday to Friday, tapping the November trendline on the low and rebounding. Very solid.

DJ30: Just one day off for the Dow last week, finishing strong. Just below the May closing highs and in prime shape to set up a right shoulder to a head and shoulders pattern. Thus far not showing signs of slowing.

SP400: Gapped upside Tuesday then worked laterally the rest of the week. Filled the gap early August after clearing the May high. Good recovery, but still major resistance from here to 1243, then again the high at 1261.

RUTX: Gapped higher Tuesday along with the other indices, then working laterally to complete the week. Matched the July high and measuring the August high at 1064 (closed at 1054). Nice flag, and that can lead to a nice upside break.

SOX: A nice week as well, gapping upside Tuesday to almost match the July peak, then an easy 1-2-3 test into the weekend. Measuring the move toward the high. Might take a few days to do it, but looks good.


LEADERSHIP

Many sectors are contributing. Telecom, energy, technology, biotech, internet. We are going to look at some more internet, e.g. a new play on YY, still looking at MELI. As for telecom UBNT looks solid.

This fade after the last leg higher is allowing some good movers to set up once more as noted above. Others that are not leaders yet are turning things around after forming rounded bottoms. AGU, FALC and others could provide new support for a continued market move.

Despite the issues facing the market, notably the Fed taper next week, stocks are being accumulated and those not making runs yet can, as noted provide the next wave of upside moves.
































SENTIMENT INDICATORS

VIX: 14.16; -0.13
VXN: 14.7; -0.05
VXO: 13.91; 0

Put/Call Ratio (CBOE): 0.77; -0.09


Bulls and Bears:

Bulls improved slightly, bears declined slightly as would be expected with the market gains. Slowing the moves a bit after big breaks.




Bulls: 37.1 versus 38.1% versus 43.3%. Diving below the early July, late June levels. 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 23.7 versus 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.

Background: 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

FOMC meeting and a decision on the taper amount. $5B minimum, $20B max. Likely in the $5 to $10B/month range. Germany elections. Debt Ceiling debate. More economic data starting off fast with Empire Manufacturing, Industrial Production, Capacity Utilization.

The deal on the Syrian chemical weapons likely helps, but there may be some standing around until Wednesday. Stocks rallied well last week then tapered the move somewhat themselves to end the week with their lateral moves, holding the gains as they rest and test the last run.

The nice thing about waiting around some is it allows some tests to set up better and other stocks to put some touches on their bases. Then if the market likes what it hears, or more accurately, hears what it expects, e.g. $5 or $10B in taper, then the market is set to continue higher and take aim on those prior post-bear market or all-time highs as the case may be.

As good plays continue to develop, we will focus on those and be ready when they make a break. Remember, leaders tend to start their moves ahead of the rest of the market as seen on the last leg higher.

Have a great weekend!


Retail sales for August, Michigan Sentiment September preliminary, and PPI are up for Friday. Then there are the worries about what could happen over the weekend with Syria. There is another issue. The data has been so far off to be virtually meaningless. Is it a smokescreen to confuse the return of decline? The government has no one to blame but itself. If it puts out such divergent and incomplete statistics then investors and others start to wonder.


Support and resistance

NASDAQ: Closed at 3722.18

Resistance:
3773 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
3694 is the August high and the post-bear market high.
3699 is the November 2012 up trendline
The July 2013 intraday high at 3625
The 50 day EMA at 3610
3573 is the August 2013 low
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3372
The 200 day SMA at 3334
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high


S&P 500: Closed at 1687.99

Resistance:
1687 is the May high and post-bear market high
1698 to 1700 are the July and August interim highs
1710 is the August 2013 peak

Support:
1685 is the mid-August 2013 upper gap point
The 50 day EMA at 1661
1657 is the late August upper gap point
1654 is the June 2013 peak
1627 is the August 2013 low
1576 from October 2007, the prior all-time high
The 200 day SMA at 1575
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows


Dow: Closed at 15,376.06

Resistance:
15,542 is the May 2013 intraday high
16,659 is the August 2013 peak

Support:
15,318 is the June closing high
The 50 day EMA at 15,154
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
The 200 day SMA at 14,538
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation


Economic Calendar

September 9 - Monday
Consumer Credit, July (15:00): $10.4B actual versus $13.0B expected, $11.9B prior (revised from $13.8B)

September 10 - Tuesday
JOLTS - Job Openings, July (10:00): 3.689M actual versus 3.869M prior (revised from 3.936M)

September 11 - Wednesday
MBA Mortgage Index, 09/07 (7:00): -13.5% actual versus 1.3% prior
Wholesale Inventories, July (10:00): 0.1% actual versus 0.2% expected, -0.2% prior
Crude Inventories, 09/07 (10:30): -0.219M actual versus -1.836M prior

September 12 - Thursday
Initial Claims, 09/07 (8:30): 292K actual versus 327K expected, 323K prior
Continuing Claims, 08/31 (8:30): 2871K actual versus 2975K expected, 2944K prior (revised from 2951K)
Export Prices ex-ag., August (8:30): -0.1% actual versus -0.2% prior (revised from 0.0%)
Import Prices ex-oil, August (8:30): -0.2% actual versus -0.4% prior
Natural Gas Inventories, 09/07 (10:30): 65 bcf actual versus 58 bcf prior
Treasury Budget, August (14:00): -$147.9B actual versus -$146.0B expected, -$190.5B prior

September 13 - Friday
Retail Sales, August (8:30): 0.4% expected, 0.2% prior
Retail Sales ex-auto, August (8:30): 0.3% expected, 0.5% prior
PPI, August (8:30): 0.2% expected, 0.0% prior
Core PPI, August (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Preliminary, September (9:55): 82.0 expected, 82.1 prior
Business Inventories, July (10:00): 0.3% expected, 0.0% prior


September 16 - Monday
Empire Manufacturing, September (8:30): 9.0 expected, 8.6 prior
Industrial Production, August (9:15): 0.5% expected, 0.0% prior
Capacity Utilization, August (9:15): 77.8% expected, 77.6% prior

September 17 - Tuesday
CPI, August (8:30): 0.2% expected, 0.2% prior
Core CPI, August (8:30): 0.2% expected, 0.2% prior
Net Long-Term TIC Flows, July (9:00): -$66.9B prior
NAHB Housing Market Index, September (10:00): 59 expected, 59 prior

September 18 - Wednesday
MBA Mortgage Index, 09/14 (7:00): -13.5% prior
Housing Starts, August (8:30): 910K expected, 896K prior
Building Permits, August (8:30): 943K expected, 943K prior
Crude Inventories, 09/14 (10:30): -0.219M prior
FOMC Rate Decision, September (24:30): 0.25% prior
FOMC Rate Decision, September (14:00): 0.25% expected, 0.25% prior

September 19 - Thursday
Initial Claims, 09/14 (8:30): 340K expected, 292K prior
Continuing Claims, 09/07 (8:30): 2880K expected, 2871K prior
Current Account Balance, Q2 (8:30): -$100.0B expected, -$106.1B prior
Existing Home Sales, August (10:00): 5.30M expected, 5.39M prior
Philadelphia Fed, September (10:00): 9.0 expected, 9.3 prior
Leading Indicators, August (10:00): 0.6% expected, 0.6% prior
Natural Gas Inventories, 09/14 (10:30)

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Jobs Report Tries to Change the Status Quo, Fails

MARKET SUMMARY

- Jobs report tries to change the alter the status quo, fails.
- Stocks rally on the jobs weakness, then Putin torpedoes the move. At least stocks recovered the sharp losses.
- Jobs weak in number and in quality, unemployment rate masks the true issues.
- Looking for leaders to finish setting up to help SP500, DJ30 join NASDAQ and SOX.

Weak jobs tries to break the market upside, comes up short.

Thursday we opined that a jobs report at the extreme, strong or weak, could work to break the indices from the resistance they had bumped on the week. NASDAQ and SOX rallied nicely to next resistance while the rest of the market rallied, but not much, before hitting low resistance. The odds for a move on Friday were not great, but again, a report that moved investors could move the indices.

Jobs came in weaker than expected. As discussed in detail below, the revisions were killers, undermining the report The unemployment rate dropped two clicks to 7.3%, but that 'gain' was not really a gain based upon WHY it fell.

The market viewed the weakness as a positive, that the Fed might 'taper' its taper plans. Futures jumped, stocks opened higher. Maybe it was going to be a rather bizarre reaction to a weak jobs report that jogged the markets past resistance. Indeed, Rick Santelli, upon release of the numbers and the reaction of the markets, suggested the US was some kind of banana republic given we buy weak data on the hope of more printed money.

Stocks started upside, but as fast as they started they faded. The Fed may be inclined to taper its taper, but there is also the Syria issue and Vladamir Putin at the G-20 told reporters that is Syria was attacked, whoever did the attacking would have to deal with Russia.

Stocks plunged lower. Plunged. For a half hour they sold, but then the switch was thrown and the bids returned. Stocks rallied back up to the early highs and spent the rest of the day, almost, at those levels. A last hour selloff took more air out and closed the indices basically flat with DJ30 and SOX posting modest losses.

SP500 0.09, 0.01%
NASDAQ 1.23, 0.03%
DJ30 -14.98, -0.10%
SP400 0.16%
RUTX 0.08%
SOX -0.41%

So, after it looked as if the jobs report might go ahead and push the indices out of their doldrums ahead of the weekend, well, inertia took over and leaves the indices still to deal with the next resistance. NASDAQ and SOX actually moving well while SP500, DJ30, and SP400 bounced last week but only token bounces to low resistance levels.


THE NEWS

Jobs report disappoints on all fronts even as unemployment falls to 7.3%.

Improving, kind of, for all the wrong reasons. August non-farm payrolls missed expectations by 8K (169K versus 177K), but it was the dad-blamed revisions that hurt:

June: -16K
July: -58K as manufacturing dumped 22K MORE jobs than originally reported.

But, no need to fear. The unemployment rate fell to 7.3% from 7.4%, and that was a beat.

The Administration's Secretary of Labor dutifully pronounced that the 'steady recovery' continued, though, of course, not as fast as our benevolent King-President wants. So, by golly, Congress should go out and pass the President's middle class savior spending package consisting of, of course, road projects, bridge projects, this project, that project, etc.

Those never work. Fix a bridge. Then what do the workers do? That didn't create any lasting jobs. We tried it in 2009 and into 2010. 2010 was the zenith of the recovery and it was pathetic with just a couple of quarters, not even back to back, of 4% GDP growth. The economy has 'cooled' since then, cooling almost to stall speed. But for everyone else in the world looking so crappy we would look crappy. By our own standards (now just historical sadly) our economy is crappy regardless of what other countries are doing.

But Jon, you say, there ARE more jobs. The unemployment rate IS falling. Really?

Unemployment: 7.3% or 11.4%?

The reason the rate fell is the same one: fewer people in the workforce looking for jobs. The participation rate fell to 63.2%, the lowest since our friend Jimmy Carter was destroying the US economy back in August 1978. That is a whopping decrease from 63.4%. Carter would be proud of our current President.

Key stat: 516,000 people LEFT the workforce in August, pushing the total not in the workforce to a staggering 90.5M! We need more food stamps! More college loans to inflate college prices even more so our kids can graduate and go to work at $14.50/hour jobs working 27.4 hours per week! Get to work Mr. President!

Now the Labor Secretary pointed out that the U6 employment number fell to 13.7% from almost 14%. Those are the underemployed due to economic conditions. You know what is going on there? They are giving up, tired of working crappy jobs that pay little and are dead ends. They are opting out, quitting, collecting unemployment and whatever benefits they can. They are pushing the 'left the workforce' stat through the rough as noted above. You cannot be underemployed, at least how the government counts it, if you just stop working.

If you use the historical average of workforce participation at roughly 65%, the unemployment rate would be a whopping 11.4%, up from 11.2% in July. Now, Mr. Labor Secretary, is THAT a trend you feel is a good one to keep in place?


More Jobs: Love those low-pay, low hour jobs.

Our economy has shifted over the past six years from a creator of breadwinner, well-paying jobs to a creator of low-pay, low-skill jobs. The President talks of millions of jobs created and 800K just this year. That isn't even 200K per month. Quite the statistic to brag about.

But it is worse. The jobs the US is creating far and away predominant in the low-pay, and now becoming low-hours worked, sectors. Retail and hospitality make up 70% of that market. That is the burgeoning sector of jobs growth. At approximately $14.50/hour, it is not where you want to spend the prime of your career.

Yet, that is where the bulk of our jobs are created. In August 44K retail jobs dwarfed other sectors. They go to the 50+ age group, the 'Wal-Mart Greeter Generation' as I term it. Damn waste of knowledge and talent, and a damn shame they have to do it. But then again, we all may be doing that before this is over . . .

Lower hours worked.

Not only are the bulk of the jobs low pay, but the bulk are also low hours. The low-wage sectors, the fastest growing mind you, are also logging lower and lower hours worked. In July, the last figures available, the workweek fell to 27.4 hours, the lowest ever recorded for this group. With Obamacare hitting any employers with 50+ employees who work 30 hours or more per week, it behooves employers to cut hours worked and if need be, hire more workers.

That is what has happened. The lion's share of the new jobs created in 2013 are at the low end pay scale and the reason for the hiring 'bonanza' in that segment is they need more workers because they cannot let existing workers log more than 30 hours per week. So, hire more workers and EVERYONE works less hours. In 2013, payrolls are up 3 times the hours worked. There you have it.

Perhaps the delay of the implementation of the employer mandate will reverse this, but I doubt it. It was a one-year reprieve. Why go back to the old ways when you know the law is coming? Just keep in place what you have now and then you are ready without incurring more costs associated with switching back and then having to switch again.



THE MARKET

OTHER MARKETS
Dollar lost ground: 1.3178 versus 1.3121 euro.

Bonds rallied back: 2.92% versus 2.98% 10 year.

Oil rebounded: 110.53, +2.16

Gold recovered: 1386.70, +14.10


INTERNALS

NASDAQ
Stats: +1.23 points (+0.03%) to close at 3660.01
Volume: 1.701B (+11.03%)

Up Volume: 953.69M (-196.31M)
Down Volume: 747.59M (+366M)

A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 1.51 to 1

New Highs: 105 (-13)
New Lows: 19 (-3)

S&P
Stats: +0.09 points (+0.01%) to close at 1655.17
NYSE Volume: 615M (+8.66%)

A/D and Hi/Lo: Advancers led 1.63 to 1
Previous Session: Decliners led 1.06 to 1

New Highs: 127 (+13)
New Lows: 110 (-48)


DJ30
Stats: -14.98 points (-0.1%) to close at 14922.5


THE CHARTS

Closed out the week with the gains intact, but unable to really change the needle on the NYSE indices.

SP500: Big doji at the 50 day EMA Friday, still with a rally on the rally but also unable to break the trend lower from early August. Decision time this week for the large caps, i.e. do they follow NASDAQ and SOX higher? Can the latter two lead higher?

NASDAQ: held the 50 day EMA the prior week and rallied off of it last week. Made it to the November trendline on the Friday high, then faded some. Still trending higher, the strongest of the indices, and it is up to NASDAQ to continue the trend higher. Up for a week and usually that means a test to rest, but NASDAQ doesn't really have any room to test and keep things moving higher.

DJ30: a second doji just below the 20 day EMA as DJ30 continues to look very toppy though near term it is building some momentum for a bounce higher.

SP400: Still weak, tapping the 50 day EMA on the Friday high then fading to a big doji. Bounced on the week but remains below resistance and looks like a bear flag, similar to SP500.

RUTX: Trying to improve and bridge to NASDAQ and SOX. Closed over the 50 day EMA after breaking it Thursday. Not bad, working in a lateral range the past three weeks, holding the May high as it does. If it can join upside, that is very good for the market.

SOX: Excellent break higher last week took SOX through the 2011 peak. Friday it tested the move, but managed to hold that key level. Very important to for SOX to hold this general level on a test and then break higher once more. It can still form a head and shoulders as it is right at the May peak that could turn into a left shoulder. Important point indeed.


LEADERSHIP

Energy is picking up, e.g. HAL, SLB, KEG. Not across the board but a big help to SP500.

Internet remain strong: YNDX, LNKD, FB, NTES, SINA.

Techs are working of course: AAPL in a nice base. FNSR is flying in the networking. STX is trying to turn. Chips are aiding as well: AMCC, AFOP, ALTR, BRCM is turning as well.


SENTIMENT INDICATORS

VIX: 15.88; -0.73
VXN: 16.77; -1.12
VXO: 15.57; -0.96

Put/Call Ratio (CBOE): 0.77; +0.02


Bulls and Bears:

After the big decline in bulls and jump in bears, the moved moderated with just 0.1% changes. Taking a breather after starting a serious convergence the prior week.




Bulls: 37.1 versus 38.1% versus 43.3%. Diving below the early July, late June levels. 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 23.7 versus 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.

Background: 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

Stocks start the week facing resistance brought about by a week of gains. That is typically not a bad scenario in a bull market as the market rallies to resistance, takes a breather, then takes it out.

Right now the market is still split with NASDAQ and SOX leading but facing resistance from their good moves, with NASDAQ continuing as the only index not to break its uptrend. RUTX is in the middle, trying to make it across to the leading indices. SP500, DJ30, and SP400 look weak, bouncing back up but in bear flags. The latter three have a lot to prove. Heck, even NASDAQ has a lot to prove.

With the indices unable to hold initial moves after a weak jobs report, it is somewhat clear investors are accepting the Fed will taper. They are accepting it without tanking the market, at least for now. How DJ30, SP500 and SP400 react this week tells just how enthusiastic that acceptance is.

That still does not guarantee a break higher from this resistance. Even so, we like the patterns that continue to develop in the market. Internet still leads, techs are doing well, chips are stepping up, even some energy and commodities are turning. With leadership forming up the market has a shot because it has fresh legs coming in. AAPL is set to breakout and if it does then the market has a big component to help NASDAQ head upside.

This week we will see some of the plays we have try to finish a test or put in a short test as the indices bump resistance and attempt to work through. We want to see those stocks break upside, and if they do then we, of course, step in. Some pretty bearish index patterns on NYSE and it will take leadership to turn them. Makes for an interesting week.



Support and resistance

NASDAQ: Closed at 3660.01

Resistance:
3680 is the November 2012 up trendline
3694 is the August high and the post-bear market high.
3755 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
The July 2013 intraday high at 3625
The 50 day EMA at 3586
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3360
The 200 day SMA at 3315
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high


S&P 500: Closed at 1655.17

Resistance:
The 50 day EMA at 1656
1657 is the late August upper gap point
1687 is the May high and post-bear market high
1710 is the August 2013 peak

Support:
1654 is the June 2013 peak
1627 is the August 2013 low
1576 from October 2007, the prior all-time high
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
The 200 day SMA at 1568
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows


Dow: Closed at 14,922.50

Resistance:
The 20 day EMA at 15,019
15,050 from the August 2013 interim recovery high
The 50 day EMA at 15,131
15,318 is the June closing high
15,542 is the May 2013 intraday high

Support:
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
The 200 day SMA at 14,479
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation


Economic Calendar

September 3 - Tuesday
ISM Index, August (10:00): 55.7 actual versus 53.6 expected, 55.4 prior (no revisions)
Construction Spending, July (10:00): 0.6% actual versus 0.5% expected, 0.0% prior (revised from -0.6%)

September 4 - Wednesday
MBA Mortgage Index, 08/31 (7:00): -2.5% prior
Trade Balance, July (8:30): -$38.2B expected, -$34.2B prior
Auto Sales, August (14:00): 5.6M prior
Truck Sales, August (14:00): 6.8M prior

September 5 - Thursday
Challenger Job Cuts, August (7:30): 56.5% actual versus 2.3% prior
ADP Employment Change, August (8:15): 176K actual versus 180K expected, 198K prior (revised from 200K)
Initial Claims, 08/31 (8:30): 323K actual versus 333K expected, 332K prior (revised from 331K)
Continuing Claims, 08/24 (8:30): 2951K actual versus 2977K expected, 2994K prior (revised from 2989K)
Productivity-Rev., Q2 (8:30): 2.3% actual versus 1.5% expected, 0.9% prior
Unit Labor Costs, Q2 (8:30): 0.0% actual versus 1.0% expected, 1.4% prior
Factory Orders, July (10:00): -2.4% actual versus -3.7% expected, 1.6% prior (revised from 1.5%)
ISM Services, August (10:00): 58.6 actual versus 54.5 expected, 56.0 prior
Natural Gas Inventories, 08/31 (10:30): 58 bcf actual versus 67 bcf prior
Crude Inventories, 08/31 (11:00): -1.836M actual versus 2.986M prior

September 6 - Friday
Nonfarm Payrolls, August (8:30): 169K actual versus 177K expected, 104K prior (revised from 162K)
Nonfarm Private Payr, August (8:30): 152K actual versus 180K expected, 127K prior (revised from 161K)
Unemployment Rate, August (8:30): 7.3% actual versus 7.4% expected, 7.4% prior
Hourly Earnings, August (8:30): 0.2% actual versus 0.2% expected, 0.0% prior (revised from -0.1%)
Average Workweek, August (8:30): 34.5 actual versus 34.5 expected, 34.4 prior


September 9 - Monday
Consumer Credit, July (15:00): $13.0B expected, $13.8B prior

September 10 - Tuesday
JOLTS - Job Openings, July (10:00): 3.936M prior

September 11 - Wednesday
MBA Mortgage Index, 09/07 (7:00): 1.3% prior
Wholesale Inventories, July (10:00): 0.2% expected, -0.2% prior
Crude Inventories, 09/07 (10:30): -1.836M prior

September 12 - Thursday
Initial Claims, 09/07 (8:30): 327K expected, 323K prior
Continuing Claims, 08/31 (8:30): 2975K expected, 2951K prior
Export Prices ex-ag., August (8:30): 0.0% prior
Import Prices ex-oil, August (8:30): -0.4% prior
Natural Gas Inventories, 09/07 (10:30): 58 bcf prior
Treasury Budget, August (14:00): -$190.5B prior

September 13 - Friday
Retail Sales, August (8:30): 0.4% expected, 0.2% prior
Retail Sales ex-auto, August (8:30): 0.3% expected, 0.5% prior
PPI, August (8:30): 0.2% expected, 0.0% prior
Core PPI, August (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Preliminary, September (9:55): 82.0 expected, 82.1 prior
Business Inventories, July (10:00): 0.3% expected, 0.0% prior

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Investors Wait on the War

MARKET SUMMARY

- Coming in heavy to end the month. Indices sport poor performance to close out August as investors wait on the war.
- Spending and income limp in positive.
- Chicago PMI still benefitting from the cars.
- Michigan Sentiment remains rosy.
- Leadership takes a day off.
- Down as long as the May to June selling, but the patterns still look heavy and no resolution to the issues of the day. At least on Friday.

NASDAQ getting lonely as the only index holding support.

The President talked and the Secretary of State talked Friday, and between the two the markets were somewhat confused. Secretary Kerry talked of 'high confidence' the Syrian government was responsible for the death of 1400+ from chemical weapons and sounded very resolute while the President was more sanguine, stating that no decision about military action against Syria was yet made.

A market that took quite a bit of air out Tuesday when it looked as if an attack was certain and was waiting around for the Tomahawks to fly, didn't take the good cop, bad cop routine well.

Stocks opened decently but sold to lunch. A sharp rebound looked promising, but it faltered as the last hour began and flopped to the close. A last minute bounce took some of the sting out of the session. Some. The finish was still pretty ugly.

SP500 -5.20, -0.32%
NASDAQ -30.43, -0.84%
DJ30 -30.64, -0.21%
SP400 -1.45%
RUTX -1.56%
SOX -0.89%

NASDAQ, and to a lesser extent SOX and RUTX, looked fairly solid after Thursday's action. Friday didn't totally trash SOX or RUTX, but they were wobbly. SOX cracked back through the bottom of its range, but it was a very small break. RUTX undercut the twin lows of the past two weeks though it too was a small breach. They don't look that strong and that left NASDAQ pretty much as the only index still holding some support. Of course NASDAQ was no pillar of strength, flopping on the high side of 1% though it still held the 50 day EMA and the early July upside gap point.

DJ30 was a bit weaker as was SP500, but they did not give up any new ground, indeed holding above the early week low. Perhaps they found a little strength, but they are going to have to prove it next week . . . along with SOX and RUTX.

The SP400 midcaps were quite bad, breaking below the lows of the week as well as the mid-June interim peak. Not looking good, in a full dive.

So you have the split still: NASDAQ along with SOX and RUTX, though not much of the latter two, versus DJ30, SP500, and now SP400, indices that are in retreat and their patterns suggest further retreat.

Basically it is NASDAQ versus everyone else. A lot of the leaders are in NASDAQ, a lot of those leaders that are getting money put their way despite the woes of SP500, DJ30 and company. For a new move upside NASDAQ has to hold and get some help from SOX. SP500 and DJ30 need to change their ways as well.

The patterns of the latter don't suggest any change in the offing. Perhaps when the rumor of war (that was a book about Vietnam) becomes the fact stocks will rally as they have done in past episodes. For now it is still a waiting game and the better and not better economic data Friday could not push the hedge fund managers from leaning negative near term . . . that and the 3-day Labor Day weekend that is here.


THE NEWS/ECONOMY

The data keeps looking better so the expectations of a second half recovery are more plentiful. Today more economists that get a lot of airtime were talking about acceleration in the second half.

Fortunately for us all the data is not diving off a cliff. Unfortunately for us all, it is still a weak recovery.

There was the headline data for the day. Personal income posted a 0.1% gain. Wow. Spending rose 0.1% as well when 0.3% was expected. Limping in.

Personal Income, July (8:30): 0.1% actual versus 0.1% expected, 0.3% prior
Personal Spending, July (8:30): 0.1% actual versus 0.3% expected, 0.6% prior (revised from 0.5%)


Chicago PMI did jump nicely to 53.0, matching expectations. New orders hit 57.2, posting a nice gain. Backlogs rose 3.5 to 46.5. Inventories rose 7.3 to 45.

Chicago PMI, August (9:45): 53.0 actual versus 53.0 expected, 52.3 prior

Some encouraging news. The Midwest is doing better due to autos. Anything you can get in this economy.


Michigan Sentiment continued to rise, moving above 80 again.

Michigan Sentiment - Final, August (9:55): 82.1 actual versus 80.0 expected, 80.0 prior

Again there is promise but it never hits stride and takes off. Look at the GDP revision. 2.5% was better than expected and the prior 1.7% read. As noted Thursday that was due to trade data regarding improved exports while key areas fell, e.g. consumption and investment.

Bloomberg looked at the data and realized that final sales are in trouble. More importantly they point to trouble. They have hit a level that historically means recession. Each time they hit the level shown in the red line, recession followed.


ECRI says we are already in recession in terms of wages and sales. It has predicted the western world has entered into a period of slow economic growth punctuated by much more frequent recessions.

I am not sure what the reasons are for ECRI's conclusions, but my take on it is that the major growth engine of the world has adopted policies that truncate investment and risk taking, thus making innovation slower and that means fewer new companies and fewer new quality jobs.

The fastest growing jobs sectors are in 'service,' i.e. retail, hospitality, etc. Those are also the lowest paying sectors. No longer does the US produce a plethora of high quality jobs that people from around the world envy. Welcome to an economy designed, whether by intention of just idiocy, to produce low paying jobs and push would be companies overseas.

With that background it is easy to see why ECRI is drawing its conclusion: Japan is in decline, Europe is improving out of its depression, but the southern countries won't. The US is muddling along just above stall speed. Heck, the Fed's Lacker noted Friday that the US economy would stumble along at 2%, just above stall speed, for the foreseeable future.


THE MARKET

OTHER MARKETS

Dollar: 1.3211 versus 1.3243 euro. Bounced again, not much strength, but continuing the break higher off the test of support at the bottom of the range.

Bonds: 2.77% versus 2.75% versus 2.77%. Backed off modestly but still moving up off of the test of support. Long selloff, trying to set up an inverted head and shoulders to put in a more substantial move. Now why would bonds be doing that if the Fed is going to taper? If the economy is better? It has not done it yet; this is just an oversold bounce so far. But, it is curious.

Oil faded: 107.65, -1.15. Faded for the second session, holding the 20 day EMA on the low and rebounding to the 10 day EMA on the close. Broke out on the week with the Syria war drums, faded some as the drums didn't beat as loudly, but still looks good to move higher.

Gold: 1396.10, -20.50. Faded to the 10 day EMA after a solid move the prior week. Broke the downtrend, tested, rallied through Wednesday, now testing again.


TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: -30.43 points (-0.84%) to close at 3589.87
Volume: 1.262B (-4.18%)

Up Volume: 303.12M (-693.77M)
Down Volume: 982.82M (+651.6M)

A/D and Hi/Lo: Decliners led 3.2 to 1
Previous Session: Advancers led 2.51 to 1

New Highs: 37 (-24)
New Lows: 28 (+9)

S&P
Stats: -5.2 points (-0.32%) to close at 1632.97
NYSE Volume: 578M (+16.77%)

A/D and Hi/Lo: Decliners led 2.22 to 1
Previous Session: Advancers led 1.68 to 1

New Highs: 34 (-5)
New Lows: 133 (+16)


DJ30
Stats: -30.64 points (-0.21%) to close at 14810.31


SENTIMENT INDICATORS

VIX: 17.01; +0.2
VXN: 17.53; +0.13
VXO: 17.62; +0.91

Put/Call Ratio (CBOE): 1.12; +0.16


Bulls and Bears:

Major decline in bulls, -4.8 points, closing rapidly on the 35% level considered bullish for stocks. Bears on the rise, +2.2 points. Convergences are very good for the upside but it is not there yet. Bulls are, however, lower than they have been since October 2012.




Bulls: 38.1% versus 43.3%. Diving below the early July, late June levels. 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.

Background: 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.



LEADERSHIP
Even the recent leaders took a break on Friday ahead of the weekend. No one wanted to stick their portfolio out. Well, some did fine. VIPS rallied 7%. Most did not.

NXPI, NFLX, DDD, TEAR, GMCR, PCLN. You name it; they all took a break. But, it was just a break, not any kind of pounding. It was not a great day. It was a long weekend. There is war coming. Even the leaders felt it.


TUESDAY

Perhaps the news, i.e. the lack of a clear picture of what military action the US will take (imagine that when you are planning an attack; your opponent not know when and where and how) just accelerated an already dismal picture in the NYSE indices. Or maybe it was just no one wanted to venture out ahead of a three day weekend when the Tomahawks may start flying.

Maybe some questions will be answered this weekend, the long Labor Day weekend. Labor Day has led to some ugly market action in the past. At least the market is already beaten down some. I recall in the past calls from some 'names' that the market had topped for various reasons in September. Some of them came true. Friday Ralph Acampora was reiterating his call for DJ 12,000 (closed at 14,810) though he is still bullish longer term.

We will see. The indices don't look good. NASDAQ is the strongest as its uptrend continues, but it is more or less going lone wolf to the upside, holding its trend, the 50 day EMA and the July gap up point.

Still some great patterns out there but overall the market doesn't look great. NASDAQ and some leaders. SP500 and DJ30 look quite distressed while SP400 dives.

Again, perhaps something breaks over the weekend, but don't count on that. We will keep watching for solid upside, solid downside, keep positions that hold support, dump those that don't. The indices are down about the same amount as in May and June, but this is also further along in the move and the Fed is talking taper; no automatic backstop. It is up to economic growth and stocks reflecting that prospect of growth. Gee, not too comforted by that, but we take what is given.


Support and resistance

NASDAQ: Closed at 3589.87

Resistance:
The July 2013 intraday high at 3625
3655 is the November 2012 up trendline
3694 is the August high and the post-bear market high.
3734 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
The 50 day EMA at 3576
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3352
The 200 day SMA at 3299
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high


S&P 500: Closed at 1632.97

Resistance:
1654 is the June 2013 peak
The 50 day EMA at 1657
1687 is the May high and post-bear market high
The November up trendline at 1755

Support:
1576 from October 2007, the prior all-time high
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
The 200 day SMA at 1562
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows


Dow: Closed at 14,810.31

Resistance:
14,844 is the June intraday low
14,888 is the April peak and prior all-time high
14,934 is the 10 day EMA
15,050 from the August 2013 interim recovery high
The 50 day EMA at 15,170
15,318 is the June closing high
15,542 is the May 2013 intraday high

Support:
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
The 200 day SMA at 14,434
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation


Economic Calendar

August 26 - Monday
Durable Orders, July (8:30): -7.3% actual versus -5.0% expected, 3.9% prior (revised from 4.2%)
Durable Goods -ex transports, July (8:30): -0.6% actual versus 0.6% expected, 0.1% prior (revised from -0.1%)

August 27 - Tuesday
Case-Shiller 20-city, June (9:00): 12.1% actual versus 12.0% expected, 12.2% prior
Consumer Confidence, August (10:00): 81.5 actual versus 77.0 expected, 81.0 prior (revised from 80.3)

August 28 - Wednesday
MBA Mortgage Index, 08/24 (7:00): -2.5% actual versus -4.6% prior
Pending Home Sales, July (10:00): -1.3% actual versus 0.2% expected, -0.4% prior
Crude Inventories, 08/24 (10:30): 2.986M actual versus -1.428M prior

August 29 - Thursday
Initial Claims, 08/24 (8:30): 331K actual versus 330K expected, 337K prior (revised from 336K)
Continuing Claims, 08/17 (8:30): 2989K actual versus 2969K expected, 3003K prior (revised from 2999K)
GDP - Second Iteration, Q2 (8:30): 2.5% actual versus 2.1% expected, 1.7% prior
GDP Deflator - Second Iteration, Q2 (8:30): 0.8% actual versus 0.7% expected, 0.7% prior
Natural Gas Inventor, 08/24 (10:30): 67 bcf actual versus 57 bcf prior

August 30 - Friday
Personal Income, July (8:30): 0.1% actual versus 0.1% expected, 0.3% prior
Personal Spending, July (8:30): 0.1% actual versus 0.3% expected, 0.6% prior (revised from 0.5%)
PCE Prices - Core, July (8:30): 0.1% actual versus 0.2% expected, 0.2% prior
Chicago PMI, August (9:45): 53.0 actual versus 53.0 expected, 52.3 prior
Michigan Sentiment - Final, August (9:55): 82.1 actual versus 80.0 expected, 80.0 prior

September 3 - Tuesday
ISM Index, August (10:00): 53.6 expected, 55.4 prior
Construction Spendin, July (10:00): 0.5% expected, -0.6% prior

September 4 - Wednesday
MBA Mortgage Index, 08/31 (7:00): -2.5% prior
Trade Balance, July (8:30): -$38.2B expected, -$34.2B prior
Auto Sales, August (14:00): 5.6M prior
Truck Sales, August (14:00): 6.8M prior

September 5 - Thursday
Challenger Job Cuts, August (7:30): 2.3% prior
ADP Employment Chang, August (8:15): 180K expected, 200K prior
Initial Claims, 08/31 (8:30): 333K expected, 331K prior
Continuing Claims, 08/24 (8:30): 2977K expected, 2989K prior
Productivity-Rev., Q2 (8:30): 1.5% expected, 0.9% prior
Unit Labor Costs, Q2 (8:30): 1.0% expected, 1.4% prior
Factory Orders, July (10:00): -3.7% expected, 1.5% prior
ISM Services, August (10:00): 54.5 expected, 56.0 prior
Natural Gas Inventor, 08/31 (10:30): 67 bcf prior
Crude Inventories, 08/31 (11:00): 2.986M prior

September 6 - Friday
Nonfarm Payrolls, August (8:30): 177K expected, 162K prior
Nonfarm Private Payr, August (8:30): 180K expected, 161K prior
Unemployment Rate, August (8:30): 7.4% expected, 7.4% prior
Hourly Earnings, August (8:30): 0.2% expected, -0.1% prior
Average Workweek, August (8:30): 34.5 expected, 34.4 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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