Dollar, Bonds Go Somewhat Rogue

MARKET SUMMARY

- Stocks gap then fade as anticipated as the dollar, bonds go somewhat rogue.
- Bonds move over 3%, highest since 7/2011.
- Dollar goes schitzo intraday.
- Fund flows see $50B for 2013, but that is a drop in the bucket.
- The market rally is still in place but some worrisome action to end the week needs to be resolved.

Early rally fades, gives a chance to take some gain.

As indicated Thursday night, the stock market was set to fade some following an almost two week move higher. Stocks even gapped higher to start Friday, performing pretty much to script. We used the action to bank some gain as planned.

The move may have been doomed to suffer a downside session from a technical standpoint anyway, but there was just cause for some investor trepidation nonetheless.

To wit, the dollar traded in a wide range, selling off sharply against the euro. It managed to recover much of the loss but still lost ground. The weakness kept oil rising along with gold. In general commodities and the hard assets all performed better and indeed are establishing solid patterns. This begs the question, why is the dollar weaker if the Fed is tapering because a stronger economy?

Bonds were an issue as well with the 10 year trading over 3% (3.01% on the close) and at its highest level since July 2011. The 30 year hit 4.63%, its highest since May 2011. Of course that action broke the TLT below its August low, support that has held on four occasions since.

Thus, whether technical reasons or some volatile trade in the dollar and bond markets, perhaps both, stocks struggled on the session with all but SP400 and SOX closing lower, albeit modestly lower.

SP500 -0.62, -0.03%
NASDAQ -10.59, -0.25%
DJ30 -1.47, -0.01%
SP400 0.07%
RUTX -0.13%
SOX 0.02%

Volume improved but still well below average.


The Charts.

Thursday saw the growth indices rally but failed to hold much of the move. RUTX, SP400, and SOX showed doji, suggesting they were tiring. Friday they gapped and then faded to those modest losses.

Perhaps there is more weakness ahead next week before New Year's on Wednesday. The Friday action was not hard downside though NASDAQ did put in a modest downside engulfing pattern. There is no reason technically for stocks to abruptly truncate the Christmas and beyond rally, but the volatile bond and dollar action, if it continues, will indeed put investors on the sidelines. When they uptrend doesn't have its steady stream of bids, even if they have been just enough to keep the trend moving higher, the Friday action will repeat itself. If sellers decide to enter, then the action picks up downside speed.


Leaders.

Some big names definitely felt selling pressure Friday. TWTR is the poster child for this last leg of the rally, surging from 40 to 75. Friday it was slapped around, dropping 13% off a Thursday gap to a hanging man doji. As TWTR weakened it took other social media stocks with it.

Other 'names' struggled as well. NFLX thudded to the 20 day EMA in one move. PCLN fell through its 20 day EMA on rising volume. TRIP broke the 50 day EMA. WFM cracked and sold on rising, above average volume.

Not all names sold. GOOG easily held position. AAPL finished its 10 day EMA test. STX paused but didn't sell off.

Indeed, some sectors benefit from the dollar's weakness against the euro and the volatility in it and bonds. Energy looks much better. Metals and materials are stronger. The harder assets are getting funds pushed their way as interest rates breach a key level and the dollar acts up. Kind of worrisome to see the reserve currency so volatile. So, money moved to hard assets.


We used the early action to take some gain on positions that started higher but started to stall. Many were tickling near the target and the gap higher early gave some cover to take gains and indeed better gains. We also sold some stocks that were lagging, taking the loss now to offset some of the gains for the year. Doesn't do much given the big gains we have this year, but since they were down we took them as they wouldn't do us as much good in 2014.


Next week

This weekend we are looking at plays in energy, some hard substance such as metals, and perhaps some drugs. Don't forget the AAPL play; it is testing the 10 day EMA and could be in great shape to move higher this week. We also have some downside plays to consider; retail has enjoyed a nice run but some look as if they are ready to take a breather, and if so we want to use that to make some fairly easy money.

We will see what transpires with the dollar and bonds. If they remain volatile that will squelch bids from the money that is just now returning to market. Reports are that $50B moved into stock funds in 2013, but that is just 13% of the money that moved out the prior 5 years. Hey, it's a start. It is also the way it usually works: the average Joe's put in their money near the end of the line. Still, it is a small amount compared to what left the market, so it is not really a situation where you can say the retail investor is fully committed to stocks. Of course sentiment is still very high as reported Thursday, high enough to be extreme.

The market does have issues to deal with, but that is nothing new. We said that after the holiday rally all bets were off. The trend is still upside and there are still very solid stocks in great position to move or are in great ongoing moves. If the dollar and bonds settle down the rally can easily continue through this week. If not, the new year may receive a cold response from the buyers.

A prediction? Maybe that is what it is. I am not in the prediction business. Sure you look at the data and trends, but they often don't extrapolate to the markets, at least us human's interpretation of the data vis- -vis the markets. The market weighs and sums up all the data; whether we get it or not is not the market's concern. That is why we always have theories here in the office but we also know the market doesn't give a flying flip about our theories. That is why we look at patterns and let them do the talking, and being ready to move when they make the moves is the key, upside or downside. As noted, we have added some downside this week given the dollar and bond markets and the technical move up to this point. Just being prepared; we will see which way the market breaks.


THE MARKET

OTHER MARKETS

Dollar: 1.3749 versus 1.3690 euro. Moved up to 1.39 euro intraday as the dollar sold hard but did recover some ground.

Bonds: 3.01% versus 2.99% versus 2.98% 10 year. Broke support.


MARKET STATISTICS

NASDAQ
Stats: -10.59 points (+0.25%) to close at 4156.59
Volume: 1.233B (+5.84%)

Up Volume: 516.27M (-90.56M)
Down Volume: 701.41M (+179.2M)

A/D and Hi/Lo: Decliners led 1.07 to 1
Previous Session: Advancers led 1.11 to 1

New Highs: 213 (-91)
New Lows: 15 (-2)

S&P
Stats: -0.62 points (-0.03%) to close at 1841.4
NYSE Volume: 386.54M (+3.63%)

A/D and Hi/Lo: Decliners led 1.08 to 1
Previous Session: Advancers led 1.12 to 1

New Highs: 253 (-112)
New Lows: 87 (+3)


DJ30
Stats: -1.47 points (-0.01%) to close at 16478.41


SENTIMENT INDICATORS

VIX: 12.46; +0.13
VXN: 14.51; +0.58
VXO: 10.93; -0.29

Put/Call Ratio (CBOE): 0.73; +0.08

Bulls and Bears:


Bulls and Bears continued to diverge this week: Bulls 60%, bears 14%.

These are, as reported the prior three weeks, extreme levels. The timing is the key. They are showing excessive bullishness that leads to corrections, but the moves typically occur a few to several weeks after the levels are hit.

Thus as the market is trending higher in a Holiday rally, you let the trend move run its course, but on the other side of the rally in early 2014 you have to keep the extreme bullishness in mind: when everyone is in, where does the ammunition to drive the market come from? It is not an exact science, but it is part of the picture, a bearish weight on the scale of the market's current position. After the holiday rally runs its course this could play a key role in a pullback.




Bulls: 60.0 versus 58.2 versus 57.1 versus 55.7 versus 53.6 versus 52.6 versus 55.2% versus 52.6 versus 49.5 versus 42.3% versus 45.4 versus 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Getting even more extreme . . .

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

Bears: 14.0 versus 14.3 versus 14.3 versus 14.4 versus 15.5 versus 15.5% versus 15.6% versus 16.5% versus 18.5 versus 21.6% versus 20.6% versus 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Held steady basically for the third straight week. Seems bears fall after each three weeks. Frankly, how much more can it fall? Further, I suppose.

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.


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4156.59

Resistance:

Support:
The 10 day EMA at 4109
4046 is the upper channel line for the November 2012 to present uptrend.
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
The 50 day EMA at 3986
3931 is the November 2012 trendline
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.
The 200 day SMA at 3630
The July 2013 intraday high at 3625
3573 is the August 2013 low
3532 is the May intraday high
The 2011 up trendline at 3522
3521 is the August 2000 low.
3502 is the May 2013 closing high
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 1841.40

Resistance:
New high.

Support:
The 10 day EMA at 1820
The 50 day EMA at 1781
1775.22 is the October prior all-time high
1746 is the December 2012 up trendline
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
The 200 day SMA at 1676
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
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


Dow: Closed at 16,478.18

Resistance:

Support:
The 10 day EMA at 16,241
16,175 is the November all-time high.
The 50 day EMA at 15,877
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,318 is the June closing high
The 200 day SMA at 15,273
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)
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

January 2 - Tuesday
Initial Claims, 12/28 (8:30): 333K expected, 338K prior
Continuing Claims, 12/21 (8:30): 2875K expected, 2923K prior
Construction Spending, November (10:00): 0.8% expected, 0.8% prior
ISM Index, December (10:00): 56.9 expected, 57.3 prior
Natural Gas Inventor, 12/28 (10:30): 177 bcf prior

January 3 - Wednesday
Crude Inventories, 12/28 (11:00): -4.731M prior
Auto Sales, December (14:00): 5.7M prior
Truck Sales, December (14:00): 7.1M 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

The Christmas Rally Continue

MARKET SUMMARY

- The Christmas rally continues aided by upward GDP revisions
- 4+% GDP for the third time in a 5 year recovery. Much rejoicing.
- Lost in the euphoria: China suffers another day of banking liquidity lockup, EU credit downgraded.
- Growth resumes leadership, looking very good.
- Short week but many stocks, even after a surge last week, are in good position to buy and continue higher.

Friday, post-FOMC, post-GDP surge continues the holiday rally.

Duck Dynasty and Q3 GDP dominated the headlines. The reaction to the former shows how difficult it is for us to get along on both sides. The reaction to the latter shows how difficult it is for the government to generate accurate data or perhaps the willingness to generate and report accurate data.


I have a plan: you let me talk and I will let you talk. We can agree to disagree but also agree to civilly let each other speak his or her mind.

There used to be this notion in the US that you may disagree, and disagree passionately, but you would fight for the right of your adversary to believe the way he wanted. That assured open and honest discussion of our differences and we would work out solutions. Today you are attacked and shouted down if you speak what you believe, left, right, middle, fringe. Heck, even those purportedly on your side can call you a fringe lunatic or something like that if the statement will garner poll points.

GDP sports largest revision on record: 45%

There also used to be this notion that you could trust the data the government reported regarding economic activity. From 'I am not a crook' to 'you can keep your insurance/doctor/ period,' however, things have changed. From the IRS, DEA, NSA, HHS (the ACA), to the BLS we have been targeted, used, spied upon, lied to and incompetently served, to downright deceived (the BLS altering employment data ahead of the 2012 elections).

Even so, we want to believe. Thus when the third revision of Q3 GDP showed massive, record-setting revisions, while hard to swallow, investors wanted to believe they numbers. We are a hopeful, optimistic lot. It worked on Friday.




2.8% first read, 3.6% second, and 4.1% third. 45% revision upward from the first read, a record setting revision. The second revision surged due to a massive 100% increase in inventory build. The third revision rose on consumption, mostly in the form of rising healthcare costs:

Personal consumption : 2.0% versus 1.4% originally reported.
60% of the increase was healthcare costs (read insurance cost surges; how is that ACA working for you?) and gasoline costs (27%). Those are not exactly the kind of costs that give you a great feeling about the rise in consumption. Policies cancelled, forced to pay up in new higher priced policies. Not good.

We can only hope the inventory build (115.7B from 56.5B in Q2) gets sold and can avoid the write-offs other inventory builds suffered during this recovery.
To wit, the last time GDP was this high (Q4 2011) it didn't last as inventories had to be liquidated as the late year surge was a false hope. This is the third 4+% GDP read in the recovery, each one occurring late in the year as retailers and manufacturers hoped this would be the turn.

Maybe this will be more of a turn. We need it. Don't be surprised, however, if it is just a blip that fades as the US economy continues to work through a protracted period of slow, sporadic growth. The same policies that produced a stagnant economy are still in place and indeed are even stronger with the ACA going live.

But don't you worry. Friday HHS and the President announced a suspension of the individual mandate for those losing policies as a result of the ACA enactment.


From Drudge Report

Once again the executive decides he is not going to faithfully enforce all parts of the laws passed by Congress but effectively re-write them as he sees fight. How monarch-like. Maybe someone in Congress grows a pair and takes him to task. To be fair some are as lawsuits have been filed. Oh joy. More wrangling. Sad but necessary given the circumstances.


The overlooked stories:

China: Second day of monetary intervention. China decided to get tough at the same time the FOMC tapered. Let's see, that makes about 45 Chinese attempts to reduce liquidity. Last week China's money markets started to freeze, displaying the same illiquidity indicia seen in June. As soon as it tried to taper itself, its markets rebelled. Thus some reverse repo action Thursday and again on Friday.

As noted Thursday, this is a gravely serious situation in China.


EU credit downgraded. Perhaps it is because the federal government sued S&P for its US downgrade this story did not receive much publicity. Whatever the reason, Friday S&P downgraded the EU credit to AA+ from AAA. We are told that all is fine and Europe is growing. Should the data from Europe be trusted any more than ours?


THE ACTION

The disquieting stories and the issues with the GDP report itself could not overcome the better feelings engendered by the third 4+% print in the 5 year recovery. In 20 quarters of recovery, just 3 over 4% (15%). Oh well. The holiday rally that started in early November as a continuation of the rally from early September, renewed itself last week with strong surges Monday, Wednesday and Friday.

Friday started higher out of the gate and rallied into early afternoon. It took that long to get a fade. With expiration and rebalance the last 1.5 hours was rather mundane, the fireworks released earlier in the session. We used the late fade to pick up some positions that rallied well on the session and held much of the moves. We also took some gain on some December options, banking 230% on SFUN, 220% on some FSLR, and 300+% on CRR.

SP500 8.72, 0.48%
NASDAQ 46.61, 1.15%
DJ30 42.06, 0.26%
SP400 1.11%
RUTS 1.87%
SOX 0.83%

Volume surged on rebalance and expiration: NYSE +80%, NASDAQ +67%

Breadth solid: 3:1 NYSE, 2.6:1 NASDAQ


THE MARKET

OTHER MARKETS

Dollar: 1.3675 versus 1.3643 versus 1.3683 versus 1.3765 versus 1.3761 versus 1.3733 versus 1.3752 versus 1.3787 versus 1.3763 versus 1.3738 versus 1.3704 versus 1.3671 versus 1.3589 versus 1.3593 versus 1.3538 versus 1.3592 euro. Up on the week but after breaking the 50 day EMA Thursday the dollar struggled. Not a surge on the taper.

Bonds: 2.88% versus 2.93% versus 2.88% versus 2.84% versus 2.88% versus 2.86% versus 2.88% versus 2.84% versus 2.80% versus 2.85% versus 2.875% versus 2.875% versus 2.83% versus 2.78% versus 2.78% 10 year.

What the heck? Gapped and surged upside off of support. Why are bonds selling and yields falling with stronger GDP, taper, etc?

Oil: 99.33, +0.26. Managed to hold the Thursday break over the 200 day SMA as oil firmed back up on the week.

Gold: 1203.80, +10.20. Reversed some of the massive Thursday losses but still below the support it blew apart that day.


MARKET INTERNALS and STATS

NASDAQ
Stats: +46.61 points (+1.15%) to close at 4104.74
Volume: 2.983B (+67.4%)

Up Volume: 2.67B (+1.892B)
Down Volume: 565.29M (-431.62M)

A/D and Hi/Lo: Advancers led 2.58 to 1
Previous Session: Decliners led 1.63 to 1

New Highs: 266 (+127)
New Lows: 28 (+3)

S&P
Stats: +8.72 points (+0.48%) to close at 1818.32
NYSE Volume: 1.095B (+80.4%)

Up Volume: 3.39B (+1.79B)
Down Volume: 1.51B (-320M)

A/D and Hi/Lo: Advancers led 3.02 to 1
Previous Session: Decliners led 1.43 to 1

New Highs: 287 (+117)
New Lows: 91 (-32)

DJ30
Stats: +42.06 points (+0.26%) to close at 16221.14


CHARTS

After Thursday's no change in status, the indices surged Friday, particularly growth. When the market really moves, growth is the driver. Friday was promising in that sense.

SP500: New high, clearing the three peaks formed from mid-November. Not a huge break, but a new high.

DJ30: A similar session to SP500, up but giving back more than it gains. New high. Much rejoicing.

NASDAQ: Excellent surge past the prior peaks and perhaps, just maybe, breaking away from the upper channel line for good.

RUTX: Strongest move of the session and a new closing high. Powerful move off the 50 day EMA test, now closing in on the upper channel line.

SP400: Broke higher from the 50 day EMA early in the week, surging Wednesday, then again Friday after testing back to the 10 day EMA Thursday. New closing high here as well as SP400 moves back up toward the upper channel line.

SOX: Same action as the other growth indices, i.e. moving well off that 50 day EMA test. Very nice and a new post-bear market high.


LEADERSHIP

Big names: Surging, e.g. AMZN, GOOG.

Much of the action, however, was in the smaller caps. We saw many good moves in many sectors. GPOR, MLNX, OPEN, OTIV, AEIS, NPSP. Many others are set to make a move even after that strong last half of the week. Growth stocks leading is great.


SENTIMENT INDICATORS

VIX: 13.79; -0.36
VXN: 14.48; -0.44
VXO: 11.8; -0.96

Put/Call Ratio (CBOE): 0.75; 0


Bulls and Bears:

Bulls crossed 58 while bears held steady, but the point: the divergence continues AND it is extreme. Now, I have seen readings near 65% on bulls, so there is room to move. It is, however, at a level that is flashing extreme. As noted last week, these levels lead to corrections, but timing is the trouble. At this point you look at technicals and leaders. Technicals are weaker but not broken. Leaders are still quite nice. There can be another run to year end. After that, dicey.





Bulls: 58.2 versus 57.1 versus 55.7 versus 53.6 versus 52.6 versus 55.2% versus 52.6 versus 49.5 versus 42.3% versus 45.4 versus 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Getting even more extreme . . .

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

Bears: 14.3 versus 14.3 versus 14.4 versus 15.5 versus 15.5% versus 15.6% versus 16.5% versus 18.5 versus 21.6% versus 20.6% versus 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Held steady basically for the third straight week. Seems bears fall after each three weeks. Frankly, how much more can it fall? Further, I suppose.

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

Christmas falls on Wednesday but outside of that session, operating hours are normal.

The market enjoyed a solid week, particularly the back half as the growth sectors and smaller caps took over. Seems a January effect is coming early, falling in the Santa Clause move. It has done this more and more of late.

As such we picked up a number of positions last week even as we were able to pocket some nice gains. Not bad. Even with the market gains, however, there are a lot more stocks still in great patterns that are not extended. Thus we will, despite a short and typically quiet and light volume week, look at some of these for buys if they show the right stuff. Of course, if the market continues to log gains we will look to bank gain when it presents itself.

As for the reports on the week, we will, as is usual for this time of the year, shorten the evening reports and focus on plays, both new and managing existing positions.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4104.74

Resistance:
Next major resistance is around 4100 as NASDAQ hits 13 year highs. NASDAQ is bumping them.

Support:
4031 is the upper channel line for the November 2012 to present uptrend.
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
The 50 day EMA at 3957
3917 is the November 2012 trendline
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.
The July 2013 intraday high at 3625
The 200 day SMA at 3612
3573 is the August 2013 low
3532 is the May intraday high
3521 is the August 2000 low.
The 2011 up trendline at 3515
3502 is the May 2013 closing high
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 1818.32

Resistance:
New high.

Support:
1775.22 is the October prior all-time high
The 50 day EMA at 1771
1741 is the December 2012 up trendline
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
The 200 day SMA at 1671
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
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


Dow: Closed at 16,221.14

Resistance:

Support:
16,175 is the November all-time high.
The 50 day EMA at 15,785
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,318 is the June closing high
The 200 day SMA at 15,235
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)
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

December 20 - Friday
GDP - Third Estimate, Q3 (8:30): 4.1% actual versus 3.6% expected, 3.6% prior
GDP Deflator - Third, Q3 (8:30): 2.0% actual versus 2.0% expected, 2.0% prior

December 23 - Monday
Personal Income, November (8:30): 0.5% expected, -0.1% prior
Personal Spending, November (8:30): 0.5% expected, 0.3% prior
PCE Prices - Core, November (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Final, December (9:55): 83.3 expected, 82.5 prior

December 24 - Tuesday
MBA Mortgage Index, 12/21 (7:00): -5.5% prior
Durable Orders, November (8:30): 2.2% expected, -1.6% prior (revised from -2.0%)
Durable Goods -ex transports, November (8:30): 0.6% expected, 0.4% prior (revised from -0.1%)
FHFA Housing Price I, October (9:00): 0.3% prior
New Home Sales, November (10:00): 433K expected, 444K prior

December 26 - Thursday
Initial Claims, 12/21 (8:30): 350K expected, 379K prior
Continuing Claims, 12/14 (8:30): 2850K expected, 2884K prior

December 27 - Friday
Natural Gas Inventories, 12/21 (10:30): -285 bcf prior
Crude Inventories, 12/21 (11:00): -2.941M 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

Stocks Blow a Modest Bounce Attempt

MARKET SUMMARY

- Stocks blow a modest bounce attempt, but it was Friday pre-FOMC and they were not ready.
- DJ30 holding the 50 day EMA, SP500 and SOX may help out after a bit more downside.
- PPI falls for third month.
- IMF wants more US taxes.
- Holiday sales: CNBC poll corroborates Bloomberg poll.
- Poole talks of a political Fed.
- Leaders are holding on but after the week are a bit more ragged.

The big Friday blah. Sure there was some pre-market life but it was frittered away pretty much at the open. Without much ceremony stocks opened higher, kicked upside even more, then dropped the ball. Stocks faded to midmorning, bounced decently into mid-afternoon, then rolled over to lower lows. A decent rebound the back half of the afternoon session kept the indices bracketing the flat line, some up, some down.

A good day in that it didn't sell off hard, a bad day in that the indices couldn't advance off support. That left the indices down for the week, some such as DJ30 in a nice pattern, others e.g. RUTX and SP400 need to work on it. The session and the week was similar to Michael Fox in 'Back to the Future' kissing his mom: just not right, indeed it just felt wrong. Friday itself was an oxymoron day. Sweet and sour. Jumbo shrimp. Good disco. Bad day fishing. Angry love.



Reminds me of the line in 'The War of the Roses' when Barbara Rose (Kathleen Turner) says to Gavin (Danny DeVito) 'have you ever made angry love?' Gavin responds, 'Is there any other kind?'


Barbara Rose: 'Have you ever made angry love?'
Gavin: 'Is there any other way?'

SP500 -0.18, -0.01%
NASDAQ 2.58, 0.06%
DJ30 15.93, 0.10%
SP400 0.33%
RUTX 0.34%
SOX -0.06%

Volume faded: -13% NYSE (how appropriate on Friday the 13th), -15% NASDAQ


The end result? A week downside that left DJ30 and you can even argue SOX in decent shape to bounce. SP500 is at some support but could also easily fall to the 50 day EMA. NASDAQ is hanging onto its break above the channel by a thread while the other growth indices, SP400 and RUTX, struggle to retake the 50 day EMA.

The action suggests there is more downside this coming week ahead of the FOMC as investors jockey positions, attempting to place themselves where they want ahead of the decision. As noted Thursday, even the 'experts' from the many funds and analysis firms are as split as a coin flip. Nice job on the transparency FOMC, but then again, there is not much transparency in any branch of government or pseudo-government such as the Fed.

Stocks themselves are split with some breaking, many testing lower support, and quite a few leaders holding near support and setting up some good upside patterns. A continuation of the year end run is still very much on the table now that DJ30 has tested the 50 day EMA and put in a good pattern while SP500 and SOX are just a half session away from completing their tests and being in position as well.


THE NEWS

There was some real news in the form of economic reports, but it was Friday the 13th before an important FOMC meeting heading into the holidays and the news outlets were searching for something to talk about. As a result, there was more than a bit of 'stupid' news as I term it.


PPI: -0.1% as expected versus -0.2% prior. Third straight decline, something not seen in the past year.

PPI Core: 0.1 as expected versus 0.2% prior. Energy fell 0.4% on a big decline in heating oil. THAT will change with the twin storms that moved through recently.


Earnings

Last week we reported that negative pre-announcements are running 11:1 over positive pre-announcements, almost 5 times average. Friday saw more of the same.

ADBE beat top and bottom but guidance fell short.
ZQK (teen apparel) missed the top and bottom line.
UTX, a venerable Dow component, guided 2014 lower


Holiday shopping

CNBC echoed Bloomberg's survey from earlier in the week as it released its own survey. Everyone has a survey it seems. In any event, the same conclusion: the wealthy are spending less this holiday season. Skepticism about the stock market's rise is cited in this survey as well. Again the wealthy see the gains are built on easy money versus strong economic underpinnings.


The world to the US: Raise taxes.

The IMF saying the US should raise taxes on the highest bracket to 71%.


Just a little bit higher . . . from 40% to 71%

Been there, done that, bad results. At high tax rates those with excess money hide it. It leaves the economy. Stagnation results until better times when the risk/reward ratio is right. As Ronald Reagan said to his son when asked why he only made one movie a year, when the tax rate is so high on the marginal dollars you make, why take the risk, bust your tail with the extra work, etc. when you are only going to get 30 cents or less on the dollar IF everything goes perfect? So money goes into hiding, waiting for a better day, a better time to be put to work. It can wait. It always does.

The ACA and layoffs

There was some sobering news as well. The President has publicly stated there is no proof the ACA is or has led to layoffs. That is patently incorrect, and more evidence is piling up. A Duke University study/survey found that 48% of US CFO's indicated they will reduce employment in 2014 because of the ACA. Yet another less than savory after effect of the planned 'market' for health insurance, the market that will find coverage available but 1) many won't be able to afford the premiums and the deductible so they will be covered but have no access, and 2) if they can afford the upfront costs their doctor and hospital won't be part of the system. What a plan indeed!


The Fed is simply politics on a different scale.

The FOMC's Poole made some rather astonishing statements earlier in the year that were not released until recently. Astonishing, but nonetheless suspected given the Fed's actions.

So much is made of the Fed's political autonomy, how it has to be so in order to get the top notch analysis and action necessary to do the right thing to effectuate the Fed's mandate of price stability and maximum economic growth. It cannot be beholden to any group other than the United States in so doing.



Alas, as our framers knew, when you split off any group from fear of the electorate, the group has no fear of the electorate. Some say that is the purpose, but what invariably happens is that these groups, necessarily made up of humans, succumb to human frailties such as political pressure. Thus a body created to be free from political pressure is still ruled by political pressure. Thus Poole says the Fed does NOT base its decisions on rational, logical, dispassionate application of economics, but those decisions are politically influenced:

'The real issue is the politics of monetary policy . . . I am not a political expert or a political analyst by trade. My qualifications for speaking on this topic is that I have followed the interactions between monetary policy and politics for a very long time.'

'As with all things political, the politics of the Fed means that realities often fail to match outward appearances . . . the pressure on the Fed will come from inside the government and may not be very visible; it may be limited to a few op-ed articles from the housing lobby. The true amount of political pressure will be largely hidden.'

A long-time FOMC member tells it like it is: any entity created by government to perform a governmental function (whether in the Constitution or not) is political and will act political. The ONLY checks on such a body is the electorate yet the electorate is so far removed it has virtually no control over the Fed, the most powerful entity in the government regarding our currency and thus our store of wealth. Heck, CONGRESS cannot even control it because it cannot get an audit from the Fed. When the members of the body start to question its integrity when that is paramount for its functioning, you KNOW you have trouble.


THE MARKET

OTHER MARKETS

Dollar: 1.3733 versus 1.3752 versus 1.3787 versus 1.3763 versus 1.3738 versus 1.3704 versus 1.3671 versus 1.3589 versus 1.3593 versus 1.3538 versus 1.3592 euro. Rallied Thursday and some Friday, but hit near resistance and faded. Not much of a bounce after the selloff, and still strange given the Fed is supposed to taper.

Bonds: 2.86% versus 2.88% versus 2.84% versus 2.80% versus 2.85% versus 2.875% versus 2.875% versus 2.83% versus 2.78% versus 2.78% 10 year. Bounced off the Wednesday and Thursday selling. Bonds are bouncing around in a narrow range just over support ahead of the FOMC meeting. The move from here, is key. If the 10 year breaks 3% post-FOMC, trouble for stocks near term.

Oil: 96.53, -0.93. Rallied to the 200 day SMA early week, then started to roll back down. Up off the lows, testing that move, but below key resistance.

Gold: 1235.10, +10.40. Gold is acting as confused as other markets, bouncing up and down session to session, holding over support. As with bonds, it is waiting on the Fed.


MARKET INTERNALS and STATS

NASDAQ
Stats: +2.58 points (+0.06%) to close at 4000.98
Volume: 1.588B (-14.81%)

Up Volume: 847.45M (+41.97M)
Down Volume: 720.24M (-319.76M)

A/D and Hi/Lo: Advancers led 1.41 to 1
Previous Session: Decliners led 1.08 to 1

New Highs: 56 (+10)
New Lows: 35 (-13)

S&P
Stats: -0.18 points (-0.01%) to close at 1775.32
NYSE Volume: 555M (-13.55%)

A/D and Hi/Lo: Advancers led 1.33 to 1
Previous Session: Decliners led 1.43 to 1

New Highs: 59 (+32)
New Lows: 169 (-83)

DJ30
Stats: +15.93 points (+0.1%) to close at 15755.36


THE CHARTS

DJ30 tried a bounce off the 50 day EMA. Once, twice, three times. Didn't take. It shows, however, a very nice tight doji at that support.

SP500 held right on top of the late October/early November. Still may want to test the 50 day EMA. Wish it would have got it out of its system and rebounded.

NASDAQ gapped higher then as GOOG, AAPL, NFLX and other names faded from recent decent action, it too faded, closing a bit further under its upper channel line. Still not a pattern you say 'got to buy that one.'

SP400 and RUTX (midcaps and small caps) bounced, but bounces that meant nothing in terms of changing the character. Big drop Wednesday, anemic bounces Thursday and Friday not making any significant headway, not changing the bias.

SOX actually is one we like better. It faded further after starting higher, fading closer to the 50 day EMA where it has found support time and time again on this last leg (4 times prior). Can it do it a fifth time?

DJ30 looks good, SP500 with a bit more of a quick 50 day EMA test would look good. Between those two and SOX they might get the job done. But, from the Friday close it looks as if some more near term softness is in store before a new move.

That really makes sense, however, when you factor in the FOMC meeting ahead, the market has faded ahead of the meeting, the indices are holding at or above support. If the Fed comes in with a light taper of $5B to $10B the market will have no issues with that and will be in place to rally. What would hurt would be a $25B or more taper.


LEADERS

As noted, some of the big NASDAQ names faltered. AAPL looked so solid over the 10 day, but it slipped through that level on volume. GOOG was off. AMZN was up after being down when the other NASDAQ names were up. Kind of zen, relating to the opening paragraph about the market overall.

Financial: Still holding decent patterns.

Industrial Equipment: Started to move back up. Nice test, trying to lead again.

Personal Products: Still watching this group after it jumped on the jobs numbers. Has faded since but has not broken down. Could be that when the FOMC meets and if it does taper that these stocks will bounce again.

Many other stocks in many sectors continued to struggle, but many have faded, are holding support, and if the right mood comes along, they are set to bounce.



SENTIMENT INDICATORS

VIX: 15.54; +0.12
VXN: 16; +0.12
VXO: 15.3; +0.69

Put/Call Ratio (CBOE): 0.7; -0.25


Bulls and Bears:

Bulls crossed 58 while bears held steady, but the point: the divergence continues AND it is extreme. Now, I have seen readings near 65% on bulls, so there is room to move. It is, however, at a level that is flashing extreme. As noted last week, these levels lead to corrections, but timing is the trouble. At this point you look at technicals and leaders. Technicals are weaker but not broken. Leaders are still quite nice. There can be another run to year end. After that, dicey.





Bulls: 58.2 versus 57.1 versus 55.7 versus 53.6 versus 52.6 versus 55.2% versus 52.6 versus 49.5 versus 42.3% versus 45.4 versus 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Getting even more extreme . . .

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

Bears: 14.3 versus 14.3 versus 14.4 versus 15.5 versus 15.5% versus 15.6% versus 16.5% versus 18.5 versus 21.6% versus 20.6% versus 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Held steady basically for the third straight week. Seems bears fall after each three weeks. Frankly, how much more can it fall? Further, I suppose.

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

Overall the market is heavy after a week of declines (more than a week in some cases), and there is no unified front on the indices or in leaders that make you say 'this market is set right now to make the next upside break.' It likely takes a bit more this coming week to get them set. Makes sense given the FOMC meeting result mid-week.

Again, the indices are split on the next move. DJ30 looks ready while SP500 and SOX could be there with just one intraday test and recovery. Of course, they have to show that move, and that comes from the leaders that are also making tests and will have to hold and them actually make good on the setups after the pullback. Indeed, a continued test/pullback early next week will put more stocks in position to rally once the information comes out post-Fed.

We see stocks that look good and are actually starting to move already, e.g. MONT, PACB, FB, RMTI, TWTR, LNKD and we will see if they are indeed the early leaders setting the early pace.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4000.98

Resistance:
4009 is the upper channel line for the November 2012 to present uptrend.
4069.70 is the post-bear market high.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
The 50 day EMA at 3934
3894 is the November 2012 trendline
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.
The July 2013 intraday high at 3625
The 200 day SMA at 3591
3573 is the August 2013 low
3532 is the May intraday high
3521 is the August 2000 low.
The 2011 up trendline at 3504
3502 is the May 2013 closing high
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 1775.32

Resistance:
The 20 day EMA at 1788
1813.55 is the November 2013 peak

Support:
1775.22 is the October prior all-time high
The 50 day EMA at 1765
1734 is the December 2012 up trendline
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
The 200 day SMA at 1664
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
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


Dow: Closed at 15,755.36

Resistance:
15,798 the November 2013 high
16,175 is the November all-time high

Support:
The 50 day EMA at 15,721
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,318 is the June closing high
The 200 day SMA at 15,190
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)
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

December 13 - Friday
PPI, November (8:30): -0.1% actual versus -0.1% expected, -0.2% prior
Core PPI, November (8:30): 0.1% actual versus 0.1% expected, 0.2% prior

December 16 - Monday
Empire Manufacturing, December (8:30): 5.0 expected, -2.2 prior
Productivity-Rev., Q3 (8:30): 2.7% expected, 1.9% prior
Unit Labor Costs, Q3 (8:30): -1.3% expected, -0.6% prior
Net Long-Term TIC Fl, October (9:00): $25.5B prior
Capacity Utilization, November (9:15): 78.1% prior
Industrial Productio, November (9:15): 0.4% expected, -0.1% prior
Capacity Utilization, November (9:15): 78.4% expected, 78.1% prior

December 17 - Tuesday
CPI, November (8:30): 0.1% expected, -0.1% prior
Core CPI, November (8:30): 0.1% expected, 0.1% prior
Current Account Bala, Q3 (8:30): -$101.0B expected, -$98.9B prior
NAHB Housing Market , December (10:00): 55 expected, 54 prior

December 18 - Wednesday
MBA Mortgage Index, 12/14 (7:00): 1.0% prior
Housing Starts, September (8:30): 915K expected, 891K prior
Housing Starts, October (8:30): 920K expected,
Housing Starts, November (8:30): 950K expected,
Building Permits, November (8:30): 983K expected, 1034K prior
Crude Inventories, 12/14 (10:30): -10.585M prior
FOMC Rate Decision, December (14:00): 0.25% expected, 0.25% prior

December 19 - Thursday
Continuing Claims, 12/07 (8:30)
Initial Claims, 12/14 (8:30): 333K expected, 368K prior
Continuing Claims, 12/07 (8:30): 2760K expected, 2791K prior
Existing Home Sales, November (10:00): 5.00M expected, 5.12M prior
Philadelphia Fed, December (10:00): 5.0 expected, 6.5 prior
Leading Indicators, November (10:00): 0.6% expected, 0.2% prior
Natural Gas Inventor, 12/14 (10:30): -81 bcf prior

December 20 - Friday
GDP - Third Estimate, Q3 (8:30): 3.6% expected, 3.6% prior
GDP Deflator - Third, Q3 (8:30): 2.0% expected, 2.0% 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

Jobs Report Shows Some Strength

MARKET SUMMARY

- Jobs report shows some strength as full-time tries to play catch up to part-time, but most of the move comes from the return of government workers and there is still a lot of work to be done.
- Stocks rise on the stronger jobs data as investors perhaps ready to take the training wheels off.
- Where did the new workers go?
- Incomes remain a problem, dropping 0.6%.
- Is growth really strong enough to support these valuations? In Friday's market surge, consumer non-durables, drugs led the move in a defensive shift.
- Growth stocks need to regroup to keep the growth character of the market. With taper coming sometime in the next three months, how the market sectors react this week tells the kind of market we will have.

Jobs beat, report viewed as better, stocks rally anyway, sort of.

When the jobs report beat and actually showed some improvement futures actually rallied. Stocks moved up into the open and at the bell all stocks shot higher. Then the shakeout, the change, the possible alteration of the market's leadership and character as investors factor in the Fed no longer dumping a full $1.02T per year into the market, er, economy. All indices finished positive, but not all were solid.

SP500 20.06, 1.12%
NASDAQ 29.36, 0.73%
DJ30 198.69, 1.26%
SP400 0.82%
RUTX 0.79%
SOX 1.11%

Volume lighter: -8% NASDAQ, -5% NYSE

Breadth very credible: 2:1 NASDAQ, 2.5:1 NYSE.

Specifically, all stocks jumped higher at the open, but they all did not advance and some did not even hold the move. This was particularly apparent in growth sectors. NASDAQ gapped but sold and had to recover to keep most of the gain but did not advance at all beyond the gap. AAPL never looked good, finishing off over 1%. Not all growth suffered; small caps looked fine. Semiconductors look solid though they too gapped but could not advance.

On the other hand, personal products/consumer nondurables excelled (CLX, CL, PG) as did drugs. Both are a more defensive flavor, suggesting that with the perceived imminent taper (December at the earliest out to February), money funds are not that certain the economy will be strong enough to push ahead and shifted toward more defensive sectors on the very day they felt a taper was confirmed.

To be fair breadth was solid at 2:1 or better on both exchanges as most stocks gained ground. The difference was in those stocks that rallied through to the close and closed near the highs versus those that gapped and then stalled or even faded to negative. Techs and internets, recent leaders, were widely divergent even in their own sectors.

Still, overall stocks moved higher, and despite some growth areas fading, most stocks were up on the session. Perceived better news, taper seems assured, stocks higher. Perhaps it is the time investors figured taper was not only near, it is here, and they better get used to it.

The real question this week, however, is whether investors, specifically hedge funds, change their buys and allocations based upon the turn to taper. Looked to be the case Friday and this week we will see if that continues or if the leaders of the rallies during the taper are cast aside in favor of slower, more defensive plays that were indeed the Friday leaders.


THE NEWS/ECONOMY

Jobs report credited with real improvement. There was some, but it was no nirvana.

Non-Farm Payrolls beat with 203K and the unemployment rate fell from 7.3% from 7.0%. Household jobs gained were 818K. With the participation rate rising from 62.8% to 63%, many concluded this report was 'for real,' i.e. showing true improvement based upon the headlines and the internals.



When we looked at the headlines and even below the headlines we at first thought that finally, finally some real improvement was at hand. There was, but it was just a very slight improvement, made to look better after the very ugly October numbers. With more review, it looks more like just another modest uptick month out of many downtick months in an ever so slow recovery.

Some more data points:
Leaving workforce in October: 932,000
Returning to the workforce in November: 818,000
Net: -114,000

Participation rates: September 63.2%. October 62.8%. November 63.0%.


As with the October jobs report, you have to really look for WHERE the positives are.

Believability: First, what can you believe anymore regarding weekly jobless claims and the jobs report? The manipulation ahead of the 2012 elections throws every unemployment read into question. The jobless claims and the household survey were also both thrown into the twilight zone when the Obama Administration, long before the 2012 election, changed the definition of what was work or looking for work to include parent/teacher conferences, reading the want ads, etc. Remember how claims tumbled as a result along with the unemployment rate? If the facts don't fit your view of what reality should be, change the definition of the facts. Beat solving the problem.

Second, while the BLS reported 818K new household jobs were reported (largest in 30 years yet still lower than month's huge 932K decline), many overlooked the surge as a result of the 365K furloughed federal workers thanks to the shutdown returning to work. Also, the participation rate moved to 63.2% from 62.8%.

What doesn't seem right? The strange irony of this is how it impacted the numbers in October and November. In October the 365K federal workers were not counted in the household survey (932K leaving the workforce) and the participation rate fell from 63.2% to 62.8%; the unemployment rate rose one-tenth to 7.3%. In November, just 338K government workers were said to have returned, 818K found work (this included those 338K government workers) and the participation rate fell well shy of its September level by two-tenths. YET, the unemployment rate plummeted to 7.0%.

How do you get such a dramatic plunge in the unemployment rate when total jobs gains was less than the prior month and participation rose but was still below the September level by as much as was recovered? It does not add up. Believability.

Hourly Wages:



I suppose it is good that it is not heading lower the past four months, but NOTE that year/year earnings FELL to 2.0% from 2.2%. Is this good??

Workweek:



Heralded by Marc Zandi as a great improvement, the one-tenth tick higher is basically where the workweek has been for months and months and months. It is no improvement, just month to month noise in a stagnant trend.


The continued Part-Time effect:

Friday many went out of their way to tout the numbers as somehow disproving that there is a part-time bias in the US economy.

Full-time jobs: +652K November versus -623K in October
Part-time jobs: +174K November versus -127K in October

It is true that full-time jobs played some catch up in November. They are still massively below the part-time jobs created in this economic recovery:




The 'recovery' in full-time jobs after the collapse is nowhere near the rate or level of prior recoveries, another indication that this big-government, big regulation, increased taxation recovery is the worst on record.

Where the jobs are:
Service: +152K. Down from 183K in October but still the largest of the categories.
Retail: +22K, half of October's 46K.
Leisure/Hospitality: +17K well off the 49K in October but well above September's -1K.
Total: 194K jobs in the lowest paying, part-time areas.

Missing Workers:

Nobel Prize winner for economics, Dr. Fama on Friday pondered and was puzzled by the US unemployment rate. He is worried there is going to be another worldwide recession and did not view the US numbers as encouraging, saying he was 'not reassured at all' . . . 'The only reason the unemployment rate is 7%, which is high by historical standards in the U.S., is that people gave up looking for jobs.'

Thus Fama discounted the improvement many claimed to see in Friday's jobs numbers.

If you look at the numbers outside of those reported by the BLS, you can see his point. Since November 2012, the US population of eligible workers over 16 years of age (not including those incarcerated and thus out of the workforce) has risen by 2.4 million people. YET, the US labor force is smaller by 25,000 during that same period.

US eligible population for workforce 11/12 to 11/13: +2.4M
US Workforce 11/12: 155,319. 11/13: 155294


Summary: One month doesn't make a trend. Non-farm payrolls were only remarkable because they were supposed to be so bad. Indeed, they were LESS than the October original read of 204K!

Participation: At 63.0% it only recovered half of where it was in September before the October plunge. Participation for the past two months still heading lower and the trend continues lower REGARDLESS of what November showed.

Full-time versus Part-time jobs: The mix improved in October, but 1) full-time jobs have not snapped back and the recovery is the slowest I have ever seen in reviewing data going back to the Great Depression; and 2) at the pace of recovery even in this more recent 'improved' environment as the pundits style it, it will take 7 years to get back to what are considered normal, non-bubble levels.

A major turn in the employment market? Hardly. AT BEST this was a stemming of the losses, exacerbated by a snap-back from the government shutdown that furloughed over 300K federal workers.

It is not a case, as some made it out to be, of 'how good would it have been if there was no shutdown?' Just look at the 'snap back' numbers: Participation was still LOWER than in September. Jobs creation was less than August and is still struggling.

What was November? It was another month in a slow, stumbling recovery that from time to time sees better months after weaker months, the aggregate being a poor, slow recovery as the full-time jobs recovery graph showed.

As discussed on Thursday and the minimum wage argument, the PROBLEM is not being fixed: the economy is not creating enough quality jobs to satisfy the population. The problem to the problem: there won't be any change in the Administration's policies because it 1) won't change its policies as it believes it can do it where other socialists in the past could not, and 2) it believes it is right regardless of results. Again, the problem won't be fixed as they chase symptoms not the root issues unlike the hero in 'Disclosure.'


So, you are a research assistant for Professor Arthur Friend? A friend?
Michael Douglas post-crisis after 'fixing the problem' in the 1994 tech movie 'Disclosure'.


THE MARKET

OTHER MARKETS

Dollar: 1.3704 versus 1.3671 versus 1.3589 versus 1.3593 versus 1.3538 versus 1.3592 euro. Lower again versus the euro but managed a modest bounce versus other currencies. You have to again ask: why would the dollar fall if taper is coming? Not making sense unless the economic data is not that strong as the talking heads Friday would have you believe.

Bonds: 2.875% versus 2.875% versus 2.83% versus 2.78% versus 2.78% 10 year. Bonds overall rebounded toward the long end but the 10 year did not recover 2.85%. Still at support and in position to bounce, but why should it if the Fed is going to end the taper and thus stop buying so many bonds?

Oil: 97.70, +0.32. Still hanging at the 50 day EMA after a solid move higher on the week. Still some key resistance.

Gold: 1229.10, -2.80. Another doji at support and still looking as if gold wants to bounce off this support. Why would it bounce higher if the Fed is going to taper and thus protect the dollar somewhat from dilution.


MARKET INTERNALS and STATS

NASDAQ
Stats: +29.36 points (+0.73%) to close at 4062.52
Volume: 1.71B (-8.06%)

A/D and Hi/Lo: Advancers led 2.09 to 1
Previous Session: Decliners led 1.18 to 1

New Highs: 178 (+88)
New Lows: 27 (-9)

S&P
Stats: +20.06 points (+1.12%) to close at 1805.09
NYSE Volume: 575M (-5.27%)

A/D and Hi/Lo: Advancers led 2.54 to 1
Previous Session: Decliners led 1.95 to 1

New Highs: 147 (+85)
New Lows: 129 (-19)

DJ30
Stats: +198.69 points (+1.26%) to close at 16020.2


THE CHARTS

Could be a change in progress as NASDAQ showed less strength than the large cap NYSE indices and more defensive issues such as personal products. That makes this coming week very interesting to see where the big funds chase performance.

NASDAQ: Gapped upside, faded, mounted a recovery, closed lower than the open. That still put NASDAQ at a new post-bear market closing high. Great to see a new high, but it was not an incredibly strong session, not nearly what you would expect or want based upon the purportedly good news and the green all the way around the market.

RUTX: after compressing at the 20 day EMA Tuesday to Thursday with doji, the small caps showed a credible bounce Friday. Credible, solid, but not leadership with a three-quarter percent gain versus 1% gains on the large caps. Up, but a growth area that is following now versus leading.

SOX: Impressive gap to a new post-bear market high. Held it. That is all. Used up all its ammo on the gap upside. Much of the move was thanks to INTC and an upgrade. If the chips lead, things look good for the market.

SP500: Jumped off the 20 day EMA test set up with the weekly decline (first in 7 weeks).
Aided by the consumer staples and non-durables along with some industrials. Financials didn't help and energy was mixed.

DJ30: Same as SP500, bouncing off the test the prior four sessions of the week. Solid, but lower volume on the Dow as was the case on SP500.

SP400: Midcaps gapped back through the 20 day EMA and moved back up toward the top of the range. No deeper test thus far after the touch of the upper channel line, showing tenacity.


LEADERSHIP:

Perhaps the start of some rotation out of some growth areas and into staples, consumer products, and some industrials as fund managers confront the reality of a taper and what it may mean to the economy and the market.

Consumer: CLX, CL, PG

Electronics look quite interesting: AFOP, HOLI, MONT, AEIS, ALTI, SIMO.

Internet, Net retail: Some questionable, some solid. WWWW still looks good, YNDX is problematic as is TRIP. PCLN solid, NFLX still trending higher.

Medical: CELG gapped higher, ZMH hit a new high, JNJ posted a good move.

Construction solid: GVA, FWLT.

Energy weak: NOG, XEC, HAL.


SENTIMENT INDICATORS

VIX: 13.79; -1.29
VXN: 14.85; -1.26
VXO: 12.74; -1.5

Put/Call Ratio (CBOE): 0.87; +0.1


Bulls and Bears:

Bulls are up over 57%, bears fell a tick to 14.3%. Kind of, kind of extreme as you would say. This kind of divergence typically leads to corrections . . . at some point. It is not an exact timing device.





Bulls: 57.1 versus 55.7 versus 53.6 versus 52.6 versus 55.2% versus 52.6 versus 49.5 versus 42.3% versus 45.4 versus 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Getting somewhat extreme.

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

Bears: 14.3 versus 14.4 versus 15.5 versus 15.5% versus 15.6% versus 16.5% versus 18.5 versus 21.6% versus 20.6% versus 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. After holding steady at the 15.5ish level for three weeks the downward push resumed. Still a very low level.

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

Jobs report and a ton of data is out of the way. Now the market can do what it wants into Christmas and New Year's. Of course it has to factor in the new view of imminent taper and what sectors it wants to push into year end. Some appeared to chase lagging areas Friday, but they will also want what they consider 'good' names in the year end statements, names that have performed all year. Thus we ultimately expect to see buys of those leaders that moved the market to where it is now regardless of CLX', CL's, etc. performance on Friday.

Still, for Monday we have a series of electronics plays and we also have several drug plays from last week we are watching. A good mix to hit what works as the Holiday/Christmas rally tries to continue after the Friday post-jobs report renewal. Pretty basic at this point until the market shows otherwise.


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4062.52

Resistance:
4069.70 is the post-bear market high.
Next major resistance is around 4100 as NASDAQ hits 13 year highs

Support:
The 10 day EMA at 4027
3995 is the upper channel line for the November 2012 to present uptrend.
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
The 50 day EMA at 3914
3877 is the November 2012 trendline
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.
The July 2013 intraday high at 3625
3573 is the August 2013 low
The 200 day SMA at 3568
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3495
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 1805.09

Resistance:
The 20 day EMA at 1789
1813.55 is the November 2013 peak

Support:
1775.22 is the October prior all-time high
The 50 day EMA at 1759
1730 is the September 2013 peak
1727 is the December 2012 up trendline
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
1657 is the late August upper gap point
The 200 day SMA at 1657
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
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


Dow: Closed at 16,020.20

Resistance:
16,175 is the November all-time high

Support:
15,798 the November 2013 high
15,696 is the September 2013 peak
The 50 day EMA at 15,689
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,318 is the June closing high
The 200 day SMA at 15,143
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)
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

December 6 - Friday
Nonfarm Payrolls, November (8:30): 203K actual versus 188K expected, 200K prior (revised from 204K)
Nonfarm Private Payrolls, November (8:30): 196K actual versus 200K expected, 214K prior (revised from 212K)
Unemployment Rate, November (8:30): 7.0% actual versus 7.2% expected, 7.3% prior
Hourly Earnings, November (8:30): 0.2% actual versus 0.2% expected, 0.1% prior
Average Workweek, November (8:30): 34.5 actual versus 34.5 expected, 34.4 prior
Personal Income, October (8:30): -0.1% actual versus 0.3% expected, 0.5% prior
Personal Spending, October (8:30): 0.3% actual versus 0.3% expected, 0.2% prior
PCE Prices - Core, October (8:30): 0.1% actual versus 0.1% expected, 0.1% prior
Michigan Sentiment, December (9:55): 82.5 actual versus 75.1 expected, 75.1 prior
Consumer Credit, October (15:00): $18.2B actual versus $15.8B expected, $16.3B prior (revised from $13.7B)

December 10 - Tuesday
Wholesale Inventories, October (10:00): 0.3% expected, 0.4% prior
JOLTS - Job Openings, October (10:00): 3.913M prior

December 11 - Wednesday
MBA Mortgage Index, 12/07 (7:00): -12.8% prior
MBA Mortgage Purchases, 12/07 (7:00): -12.8% prior
Crude Inventories, 12/07 (10:30): -5.585M prior
Treasury Budget, November (14:00): -$172.1B prior

December 12 - Thursday
Initial Claims, 12/07 (8:30): 315K expected, 298K prior
Continuing Claims, 11/30 (8:30): 2750K expected, 2744K prior
Retail Sales, November (8:30): 0.6% expected, 0.4% prior
Retail Sales ex-auto, November (8:30): 0.3% expected, 0.2% prior
Export Prices ex-ag., November (8:30): -0.4% prior
Import Prices ex-oil, November (8:30): 0.0% prior
Business Inventories, October (10:00): 0.3% expected, 0.6% prior
Natural Gas Inventories, 12/07 (10:30)

December 13 - Friday
PPI, November (8:30): -0.1% expected, -0.2% prior
Core PPI, November (8:30): 0.1% expected, 0.2% 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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