Market Draws Its Lines

MARKET SUMMARY

- Without another AAPL, the Weekend, WWIII talk blamed for spooking the market.
- Stocks fade the rally further. NASDAQ and RUTX go beyond just a fade, others try to hold the line.
- Fed tapering, economic data mixed. So are the market calls.
- Market draws its lines: SP500 holding the line with its defensive leaders versus NASDAQ selling as growth leaders grow thin.

WWIII and the weekend. Too much for a still pensive market.


This was not what 'more flexibility' means. (What an ass) (What a Pussy)

Fears of the unknowns the weekend may bring received the credit for stocks selling Friday. We anticipated more of the test of the move higher and the futures suggested that would be the case. NASDAQ led the early weakness thanks to AMZN's perpetual earnings misses finally catching up to it. As one analyst said, the company is 20 years old and it is still in the process of establishing itself. Friday AMZN established a new low on this selling, filling the upside gap from October 2013.

As for the test of the rebound move, the only index that looks like a test versus trying to dump the entire rebound move is SP500. Well, SP400 is not that bad; it is at the trendline as it too still holds most of the upside move. For that matter you can throw DJ30 in the category though its pattern remains less than lovable. Okay, three NYSE indices are still testing more or less.

Growth, however, is where things get interesting as the Chinese say. RUTX gave up over half of the 6 day upside move. Hard come, easy go for the small caps. NASDAQ is still holding onto more than half its upside recovery, but its gap and selloff on still significant volume (compared to the upside volume on the rebound) has many buzzing about head and shoulders patterns. You bet. That is the pattern we have watched it develop. SOX gave up a big bite of its rebound move and now holds less than half the recovery. In fairness, SOX did not sell as much as the other indices in the prior selloff, so its fade still leaves it over the support of the 50 day EMA and easily holding its uptrend. Have to have something to be happy about.

SP500 -15.21, -0.81%
NASDAQ -72.78, -1.75%
DJ30 -140.19, -0.85%
SP400 -1.18%
RUTX -1.86%
SOX -3.29%

Volume flat: NYSE +2%, NASDAQ -1.5%

A/D: Bad breadth on NASDAQ at -4.9:1. NYSE no issues at -2:1.


CHARTS and LEADERSHIP

NASDAQ: Made the 50 day EMA on the rebound and started to fade that move. That fell 45 points short of the January high at 4245ish, the level that would be a perfect match for a right shoulder. Didn't have to make it that far to roll, however, and Friday it faded the move hard and on significant volume versus the rebound trade. Unless this was just some jangled nerves ahead of a weekend where WW III comments are being rather recklessly tossed around, NASDAQ looks to be in trouble once again. Of course if it was my country on the threshold of invasion I might be kind of reckless with my language as well.

SP500: NASDAQ's foil is SP500. Sure it faded Friday, but it is holding the 20 day EMA and the upper channel line. That keeps it over the December and January peaks as well. Holding support, maintaining its trend. Foil for NASDAQ indeed. It is struggling itself; MACD posted a lower high as the index price posted an all-time high. The index is working laterally, trying to consolidate the February run and continue the trend. Not powerful, but hanging in the trend and performing because market leadership resides in the NYSE more defensive areas such as utilities, personal products, metals. At least energy is performing and a bit more exciting.

The other indices fall into their respective sides of this bifurcation. RUTX is selling with NASDAQ. SOX is suddenly problematical, selling hard Friday. Still in the trend but weakened.

DJ30 is with SP500, working laterally, but has that threat of a weaker third top that has signaled market tops in the past.

SP400 is something of the swing man, holding its trend but will need to show some strength to avoid its third straight break of the trend.

That raises the question yet again, the one discussed when NASDAQ sold off in March and early April while again SP500 showed relative strength: will the NYSE with its more staid and stoic stocks (utilities, consumer products) outperform AND be able to drag the growth areas along with it, or will NASDAQ, if it continues with the break lower, drag the rest of the market with it?

NASDAQ is not without its group of leaders, but the list is thinning. Electronics remain its bright spot and they are performing, e.g. LSCC, FSLR, OVTI. NASDAQ has some energy stocks as well. Both areas help but they haven't kept NASDAQ afloat now have they?




OTHER MARKETS

Euro/Dollar: A modest dip on the week testing the bounce to midmonth. In position to rebound and move back up in the range.

1.3839 versus 1.3831 versus 1.3817 versus 1.3805 versus 1.3794 versus 1.3815 versus 1.3815 versus 1.3814 versus 1.3820 versus 1.3883 versus 1.3886 euro versus 1.3855 versus 1.3797 versus 1.3742 versus 1.3701 versus 1.3712 versus 1.3760 versus 1.3794 versus 1.3779 versus 1.3752 versus 1.3748 versus 1.3788 versus 1.3823 versus 1.3842 versus 1.3794

Dollar/Yen: Also a modest fade on the week after bouncing off the 200 day SMA and the bottom of the three month range to start April. Dollar ready to advance versus the yen as well.

102.13 versus 102.32 versus 102.44 versus 102.61 versus 102.62 versus 102.44 versus 102.27 versus 101.80 versus 101.72 versus 101.43 versus 102.00 versus 101.70 versus 102.59 versus 103.10 versus 103.24 versus 103.92 versus 103.76 versus 103.68 versus 103.21 versus 102.81 versus 101.24 versus 101.99 versus 102.26 versus 102.25 versus 102.25


Bonds: A modest gain Friday on top of the upside week. A big move early to a new recovery high could not hold, but bonds continue in a breakout uptrend.

10 year: 2.67% versus 2.68% versus 2.69% versus 2.73% versus 2.71% versus 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79% versus 2.80% versus 2.75% versus 2.73% versus 2.71% versus 2.68% versus 2.70% versus 2.75% versus 2.73% versus 2.77%


Oil: 100.58, -1.37. Ever since oil came within a dollar of the last high in February it has turned and rolled. Friday it cracked the 200 day SMA. Didn't smash it, but showing surprising weakness. Okay, so it is rolling in a higher range now.


Gold: 1300.80, +9.80. Second day of upside off of the double bottom at the 78% Fibonacci retracement. Held with a nice intraday reversal Thursday, continued higher Friday. Good start.


MARKET STATISTICS

NASDAQ
Stats: -72.78 points (-1.75%) to close at 4075.56
Volume: 2.071B (-1.52%)

Up Volume: 331.5M (-624.04M)
Down Volume: 1.74B (+610M)

A/D and Hi/Lo: Decliners led 4.88 to 1
Previous Session: Decliners led 1.38 to 1

New Highs: 27 (-33)
New Lows: 59 (+32)

S&P
Stats: -15.21 points (-0.81%) to close at 1863.4
NYSE Volume: 612M (+1.83%)

A/D and Hi/Lo: Decliners led 1.94 to 1
Previous Session: Advancers led 1.05 to 1

New Highs: 82 (-60)
New Lows: 79 (+12)

DJ30
Stats: -140.19 points (-0.85%) to close at 16361.46


SENTIMENT INDICATORS

VIX: 14.06; +0.74
VXN: 18.59; +1.42
VXO: 13.89; +1.07

Put/Call Ratio (CBOE): 1.14; +0.35

Bulls and Bears:

Bulls recover some ground but just a small part of the drop from 54.6: 51.6 versus 50.05 versus 54.6

Bears bounce higher again: 21.6 versus 20.6 versus 18.6.

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 51.6 versus 50.5
54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

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

Bears: 21.7% versus 20.6
18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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.


THE ECONOMY

The week brought more economic data points and it remains puzzling. That is a technical market term. Tantalizingly better in some cases, more of the same nothing in others.

Friday we learned Michigan Sentiment hit its highest level since 7/13 (84.1), just a click below the post-2007 high (85.1). Durable Goods orders reported Thursday were much better.

Yet, mortgage apps have tanked, New home and Existing Home sales are falling hard as the WSJ reports that demand for home loans is plunging. Q1 2014 saw a 58% decline over same time 2013 and off 23% from Q4 2013 as the end of 2013 saw its drop entirely due to lack of refinancing. With 30 year rates at 4.5% versus 3.6% in May 2013, you can see the reason refi's are lower. Even with rates still at historic lows, affordability is worsening as wages are not rising as weekly wages continue to decline.




How can there be a recovery with no housing? How can there be a continued housing recovery when wages are NOT recovering? The middle class is going away in many states, and with it, the middle of the housing market is gone. For the first time in modern history, another country has caught up with the wealth of the American middle class; Canada has done it first. We are losing our middle class, we are losing our standard of living. Wake up. That is your wakeup call right there. The policies we are on are simply the wrong policies.

Very puzzling data as this recovery continues to track like no 'recovery' since the Great Depression. Could it be . . the policies in place? I think you know where I stand on that one and I just don't have it in me to go there tonight. Suffice it to say we are doing ourselves no favors turning away from what made the US so economically strong and its middle class the greatest the world had ever seen.

And you can expect more turning away as the Administration plays host to the author of the most recent book touting socialism and 80% tax rates on the 'rich,' claiming that free enterprise class mobility was a myth. There they go again.


'There you go again . . .' -- Ronald Reagan to Jimmy Carter

What does conflicting data do to stocks? Stocks are peculiar when it comes to uncertainty, and that includes economic uncertainty. If they cannot figure it out, if the mix of fiscal and social policies from the federal government and the monetary policies of the Fed cause such flux that the future is hard to see, or what they see they do not like, investors drop back and punt and will wait for better field position to get back on offense.


MONDAY and THE WEEK AHEAD

Huge week in terms of data culminating with the April jobs report, lots more earnings, the Ukraine/Russia confrontation, and of course the resolution of the selling experienced to end the week.

Remember the bigger picture. This move upside from the get go was just seen as a bounce, particularly for NASDAQ. The question was how far it would go. NASDAQ recovered to a significant resistance point (50 day EMA), started to test, then started to sell Friday as the Russia/Ukraine situation devolved further and investors wanted out ahead of the weekend.

Next week we will see if the bounce is officially over, but it might be safe to assume that is the case. When the going got tough investors started for the exits. Of course Ron Insana just joined Dennis Gartman in turning bullish from bearish. That is Gartman's third call in the past two months just as stocks reversed the other direction. Seems Ron has joined Gartman but may be late to the party, at least on THIS particular move.

Overall the market volatility as we have discussed over the past few weeks remains and is still an indication the market uptrend is getting seriously tested. NASDAQ and RUTX are already trend breakers, working to find the bottom of their bases. SP400 is attempting to hang on. Definite erosion of the trends that started when the Fed indicated it would taper and then ratcheted up in intensity with Yellen's '6 month' comment.

Ironically, some on the financial stations claimed over the past week or two that the market is stronger since the Fed started to pull back on stimulus. Heard this again this week. I would say that the new highs are deceptive and that you have to look at the increasing volatility in what used to be a steady trend. You will get big moves up and big moves down in succession. Almost by definition you will get new rally highs because the index has rallied to highs and then careens back and forth in wider, more volatile swings.

On top of the increased volatility in the trend there is the very important decline of growth leadership and the transition to defensive leadership as well as the trend breaks by NASDAQ and RUTX, two former market leaders.

If the recovery attempt from those leaders fail and all that is left is the defensive leadership, the prognosis near term is not positive. Next week will be an important one, i.e. whether NASDAQ and RUTX can stem the Friday decline and resume the upside move with some leadership rebounding. If it is just nerves over Russia, that could very well happen. That would indicate the passing of the baton to the next leg upside and a continued rally, likely to new highs. As noted above, however, we are not going to count on that and will be watching for more downside as a definite possibility as the NASDAQ tries to base after breaking its trend.


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4075.56

Resistance:
4104 is the lower gap point from 12/20/13
4131 is the March 2014 low
The 50 day EMA at 4166
4246.55 is the January 2014 peak
4262 is the lower November 2012 trendline
4277 is the March lower gap point
4289 is the July 2000 recovery high
4363 is the upper channel line for the November 2012 to present uptrend.
4372 is the March 2014 high

Support:
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
The 200 day SMA at 3965
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.


S&P 500: Closed at 1863.40

Resistance:
1883.57 is the recent all-time high hit in early March.
1897 is the all-time high hit in April 2014

Support:
1864 is the December 2012 up trendline
The 50 day EMA at 1852
The December and January highs at 1848
The April 2014 low at 1814
1815 is the lower trendline from 11/2012
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
The 200 day SMA at 1772
1768 is the December 3013 low
1738 is the February 2014 low
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
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low


Dow: Closed at 16,362.90

Resistance:
16,506 is the March 2014 peak
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high
16,656 is a lower trendline off the 11/2012 low

Support:
The 50 day EMA at 16,289
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 15,806
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
15,340 is the February 2014 low
15,318 is the June closing high
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)


Economic Calendar

April 25 - Friday
Michigan Sentiment -, April (9:55): 84.1 actual versus 82.6 expected, 82.6 prior

April 28 - Monday
Pending Home Sales, March (10:00): 1.0% expected, -0.8% prior

April 29 - Tuesday
Case-Shiller 20-city, February (9:00): 13.0% expected, 13.2% prior
Consumer Confidence, April (10:00): 83.6 expected, 82.3 prior

April 30 - Wednesday
MBA Mortgage Index, 04/26 (7:00): -3.3% prior
ADP Employment Chang, April (8:15): 215K expected, 191K prior
GDP-Adv., Q1 (8:30): 1.0% expected, 2.6% prior
Chain Deflator-Adv., Q1 (8:30): 1.8% expected, 1.6% prior
Employment Cost Inde, Q1 (8:30): 0.5% expected, 0.5% prior
Chicago PMI, April (9:45): 56.5 expected, 55.9 prior
Crude Inventories, 04/26 (10:30): 3.524M prior
FOMC Rate Decision, April (14:00): 0.25% expected, 0.25% prior

May 1 - Thursday
Challenger Job Cuts, April (7:30): -30.2% prior
Initial Claims, 04/26 (8:30): 315K expected, 329K prior
Continuing Claims, 04/19 (8:30): 2725K expected, 2680K prior
Personal Income, March (8:30): 0.4% expected, 0.3% prior
Personal Spending, March (8:30): 0.6% expected, 0.3% prior
PCE Prices - Core, March (8:30): 0.2% expected, 0.1% prior
ISM Index, April (10:00): 54.5 expected, 53.7 prior
Construction Spendin, March (10:00): 0.4% expected, 0.1% prior
Natural Gas Inventor, 04/26 (10:30): 49 bcf prior
Auto Sales, April (14:00): 5.5M prior
Truck Sales, April (14:00): 7.6M prior

May 2 - Friday
Nonfarm Payrolls, April (8:30): 210K expected, 192K prior
Nonfarm Private Payr, April (8:30): 205K expected, 192K prior
Unemployment Rate, April (8:30): 6.6% expected, 6.7% prior
Hourly Earnings, April (8:30): 0.2% expected, 0.0% prior
Average Workweek, April (8:30): 34.5 expected, 34.5 prior
Factory Orders, March (10:00): 1.6% expected, 1.6% prior

By: Jon Johnson, Editor
Copyright 2014 | 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

Still a Split Market

MARKET SUMMARY

- Despite earnings misses, enough good news to propel stocks higher in the bounce.
- NASDAQ beats the first test in the rebound as growth plays catch up to NYSE large caps.
- Where have all the revenues gone? With what the US economy used to be. Now a revenues miss is considered a beat just as a 1.5% GDP economy is considered good.
- Jobless claims hold just over 300K.
- Philly Fed posts a 7 month high.
- Still a split market.

For a second session stocks continued the upside, still moving higher off of the Tuesday reversal session. We even heard talk Thursday about how this move 'has legs.' Art Cashen said on CNBC that the liquidation selling seen over the past several weeks could be over. Art is a market sage and is often right. I was struck, however, about how it was Holy Thursday and Art is a Catholic. The time of renewed hope is upon us. Connections?

In any event, the market rallied. Futures were not good thanks to IBM and GOOGL earnings. Those were plain misses. Yet GOOGL was called a success by some on CNBC. Maybe it is and will prove to be a buying point. I know that BAC's results on Wednesday were also called a success though it fell short on revenues. I know CMG was called a success as its revenues missed. UNH, AXP, DD, CMG and many others, indeed TWO-THIRDS of those reporting thus far have missed the top line revenues. Sales are not growing. They are continuing the lack of growth for quarter, after quarter, after quarter.

But, in this '1.5% average GDP is a great' European-style economy, some fancy footwork by management (read layoffs, working existing employees more, cutting benefits) to beat the bottom line, the fact that sales CONTINUE to decline is apparently not a worry. As long as companies 'invest' in themselves with stock buy backs and dividend payments stock prices continue to rise. And our government wonders why jobs remain low. Come on now guys and gals in the government. You know your policies are anti-investment policies for industry and entrepreneurs. You know that is why there are woeful levels of job openings. But, if the government can play fiction with the facts why can't the companies? Monkey see, monkey do.

Yes 2/3 of the companies reporting have missed the top line with 51% beating on the bottom line. Success! What an economy!

With that selective cognition of the facts, stocks overcame early weakness and rallied into the afternoon session before a slight dip into the close That dip took DJ30 negative, but growth was back in front, playing catch up to the strong Wednesday performance by the NYSE large caps.

SP500 2.54, 0.14%
NASDAQ 9.29, 0.23%
DJ30 -16.31, -0.10%
SP400 0.23%
RUTX 0.54%
SOX 1.85%

Volume: +19% NYSE, +3.5% NASDAQ. It was Holy Thursday before the Easter weekend so volume is usually light, but this time it was expiration so a bit of a bump there.

A/D: 1.4:1 NYSE, 1.7:1 NASDAQ. Ho-hum, but that is okay after the surge on the Wednesday move.

Maybe the 304K jobless claims (up from 302K prior) and a solid 16.6 on the April Philly Fed PMI (a 7 month high versus the 8.6 expected) helped boost prices past some poor earnings by IBM. Along with all of those scintillating 'beats' CNBC and other networks talk about, the market had the fuel it needed to get home on Thursday with overall gains.

CHARTS

The indices reversed Tuesday and built onto the gains into the weekend. That sets the stage for a follow through session this week, a session of strong gains on higher volume. I always view this as the next step after the initial sprint, kind of like the second leg of a relay race: the first leg gets your position in the race and if there is a successful passing of the baton then the next leg of the race can continue.

NASDAQ passed its first test as it clear the 10 day EMA . . . by a gnat's butt. It was surging well on the day, easily topping that level and looking at the 20 day EMA. It suffered that late selling and barely hung onto the 10 day. Not a pillar of strength (keeping it biblical; I can do that as I went to Holy Thursday services last night), but managing to close out the reversal week upside. Kind of a bobble of the baton but they kept hold of it.

SP500: Doji on the session but held a gain for the week that took SP500 back up through key levels. Now will there be follow through?

RUTX: Small caps cracked the 10 day EMA as well, also giving back some late. Solid move off the 200 day SMA. For now, that is all it is.

SOX: After laying back, SOX made the break Thursday, gapping up off the 50 day EMA lateral move. Good action at the 50 day all week, it was just holding back in reserve. Nice solid upside break.


OTHER MARKETS

Euro/Dollar: Flat on the session as the dollar paused after the week of gains.

1.3815 versus 1.3815 versus 1.3814 versus 1.3820 versus 1.3883 versus 1.3886 euro versus 1.3855 versus 1.3797 versus 1.3742 versus 1.3701 versus 1.3712 versus 1.3760 versus 1.3794 versus 1.3779 versus 1.3752 versus 1.3748 versus 1.3788 versus 1.3823 versus 1.3842 versus 1.3794

Dollar/Yen: Dollar a bit stronger.

102.44 versus 102.27 versus 101.80 versus 101.72 versus 101.43 versus 102.00 versus 101.70 versus 102.59 versus 103.10 versus 103.24 versus 103.92 versus 103.76 versus 103.68 versus 103.21 versus 102.81 versus 101.24 versus 101.99 versus 102.26 versus 102.25 versus 102.25 versus


Bonds: Dove lower after a three week run that included a breakout. Still holding the breakout, indeed the 10 day EMA, but a big hit to end the week.

10 year: 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79% versus 2.80% versus 2.75% versus 2.73% versus 2.71% versus 2.68% versus 2.70% versus 2.75% versus 2.73% versus 2.77%


Oil: 103.85, +0.12. Right back to the February high at 105. Oil is pressing for a breakout. Joy.


Gold: 1294.20, -9.2. Slipped through the 200 day SMA after the sharp break lower Tuesday. Struggling to hold the move.


MARKET STATISTICS

NASDAQ
Stats: +9.29 points (+0.23%) to close at 4095.52
Volume: 1.894B (+3.61%)

Up Volume: 1.2B (-290M)
Down Volume: 732.04M (+388.16M)

A/D and Hi/Lo: Advancers led 1.72 to 1
Previous Session: Advancers led 2.44 to 1

New Highs: 52 (+19)
New Lows: 37 (+8)

S&P
Stats: +2.54 points (+0.14%) to close at 1864.85
NYSE Volume: 727M (+18.79%)

A/D and Hi/Lo: Advancers led 1.39 to 1
Previous Session: Advancers led 3.82 to 1

New Highs: 141 (+23)
New Lows: 69 (+4)

DJ30
Stats: -16.31 points (-0.1%) to close at 16408.54


SENTIMENT INDICATORS

VIX: 13.36; -0.82
VXN: 19.39; -1.02
VXO: 12.8; -0.73

Put/Call Ratio (CBOE): 0.85; -0.06


Bulls and Bears:

Bulls fade right back: 50.05 versus 54.6 versus 50.5 versus 54.6.

Bears bounce higher: 20.6 versus 18.6 versus 18.6 versus 7 of 8 weeks at mid-17.

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 50.5 versus 54.6 versus 50.5
54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

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

Bears: 20.6 versus 18.6 versus 18.6
17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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

This week is the lick log. Stocks have bounced off the selling with the Tuesday reversal, and Wednesday to Thursday brought them higher. NASDAQ and growth joined more on Thursday with the SOX and smaller issues really coming along. Growth in terms of NASDAQ and RUTX is still iffy; SOX looks solid. The NYSE large caps still look better than the growth areas in terms of leaders and money. Lick log indeed.

We have both some upside plays and downside. The upside are designed to play the bounce without necessarily needing a new breakout. Such is playing a bounce in the market that is not that certain. If it turns out to be a new rally, beautiful as we make even more on our plays. If it is just a bounce, we take our gain on plays designed to give profit without having to break a lot of ice to get where we want to go.

Also some downside as there are stocks that bounced with the market, but bounced right into resistance in patterns that need help. The market remains split in growth/large cap NYSE, and in upside and downside. If the bounce fizzles, if the follow through passing of the baton is bobbled and dropped, then those plays are ready. Heck, they may even be ready if the market does make a follow through given the bifurcation that still exists.

We go into the week with no expectations or hope of a rally to new highs, Easter renewal or not. We see upside possibilities, we see downside. Much of the upside we see is areas we really don't like to play, but if the upside keeps narrowing that may be all there is left. At least we can play downside as well; it is faster anyway, right?


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4095.52

Resistance:
The 10 day EMA at 4094 is being tested
4104 is the lower gap point from 12/20/13
4131 is the March 2014 low
The 50 day EMA at 4175
4240 is the lower November 2012 trendline
4246.55 is the January 2014 peak
4277 is the March lower gap point
4289 is the July 2000 recovery high
4342 is the upper channel line for the November 2012 to present uptrend.
4372 is the March 2014 high

Support:
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
The 200 day SMA at 3949
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.


S&P 500: Closed at 1864.85

Resistance:
1883.57 is the recent all-time high hit in early March.
1897 is the all-time high hit in April 2014

Support:
The December and January highs at 1848
1856 is the December 2012 up trendline
The 50 day EMA at 1848
1808 is the November and December 2013 twin peaks
1809 is the lower trendline from 11/2012
1775.22 is the October prior all-time high
1768 is the December 3013 low
The 200 day SMA at 1766
1738 is the February 2014 low
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
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low


Dow: Closed at 16,408.54

Resistance:
16,506 is the March 2014 peak
16,595 is a lower trendline off the 11/2012 low
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high

Support:
16,257 is the January 2014 low
The 50 day EMA at 16,251
16,179 is the November 2013 peak.
The 200 day SMA at 15,774
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
15,340 is the February 2014 low
15,318 is the June closing high
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)


Economic Calendar

April 17 - Thursday
Initial Claims, 04/12 (8:30): 304K actual versus 312K expected, 302K prior (revised from 300K)
Continuing Claims, 04/05 (8:30): 2739K actual versus 2800K expected, 2750K prior (revised from 2776K)
Philadelphia Fed, April (10:00): 16.6 actual versus 8.6 expected, 9.0 prior
Natural Gas Inventor, 04/12 (10:30): 24 bcf actual versus 4 bcf prior

April 21 - Monday
Leading Indicators, March (10:00): 0.8% expected, 0.5% prior

April 22 - Tuesday
FHFA Housing Price I, February (9:00): 0.5% prior
Existing Home Sales, March (10:00): 4.60M expected, 4.60M prior

April 23 - Wednesday
MBA Mortgage Index, 04/19 (7:00): 4.3% prior
New Home Sales, March (10:00): 455K expected, 440K prior
Crude Inventories, 04/19 (10:30): 10.013M prior

April 24 - Thursday
Initial Claims, 04/19 (8:30): 312K expected, 304K prior
Continuing Claims, 04/12 (8:30): 2750K expected, 2739K prior
Durable Orders, March (8:30): 2.0% expected, 2.2% prior
Durable Goods -ex tr, March (8:30): 0.5% expected, 0.1% prior (revised from 0.2%)
Natural Gas Inventor, 04/19 (10:30): 24 bcf prior

April 25 - Friday
Michigan Sentiment - Final, April (9:55): 82.6 expected, 82.6 prior

By: Jon Johnson, Editor
Copyright 2014 | 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

Inflation Starts Its Rise

MARKET SUMMARY

- Another down Friday as the market swings to a near term downtrend.
- Predictions of more selling then a rebound or further selling. No one knows who is right, just know there is trouble and we can play it.
- Inflation starts its rise, almost camouflaged by all of the issues swirling in the economy.
- NASDAQ, RUTX, even SP500 already approaching the next important support.
- How to approach this post Q-eternity market.

Another weak end to a week.

Last weekend I talked about how the correction was not coming but that it was here. The past week the market demonstrated once again the sellers are in control. A solid relief bounce, at least in price and somewhat breadth terms, couldn't put in more than two upside sessions before it was hammered back down. Hard. All of the indices coughed up the most recent rally attempt, undercutting the low of the prior selling.

SP500 -17.39, -0.95%
NASDAQ -54.38, -1.35%
DJ30 -143.47, -0.89%
SP400 -1.27%
RUTX -1.44%
SOX -1.55%

Volume: +1% NYSE, -6% NASDAQ. Above average on both exchanges as they more or less matched the Thursday higher volume selling.

A/D: -2.5:1 NYSE, -3.9:1 NASDAQ

In loss terms the moves are not so bad (SOX) to fairly ugly (RUTX). Of course this is where it gets a bit weird. Not that the market is correcting. After such a run a correction had to come. It is the predictions. Ron Insana says 10% to 20% followed by a resumption of the upside. Carl Icahn Thursday night said a 'major correction' was coming as the earnings are just not that good; the Fed's easy money allowed many companies to 'fake' their results. When will the correction come? Three days or three years. Marc Faber says the major indices could lose 30% in a 1987-type crash, but Faber suspects it will be even worse. This year, 'for sure.' Maybe from a 'higher diving board' from here as Faber calls it, but overall he has shifted from a buyer during the money printing to now saying it is not a good time to buy stocks.



With the indices shifting dramatically to a near term downtrend it is pretty easy to say now is not a good time to buy stocks if you anticipate months of gains ahead. Duh. I, however, am simply not smart enough to know how much or how far. As Eastwood said in 'Magnum Force,' a man has got to know his limitations.


Lieutenant Briggs getting blown up. 'A man's got to know his limitations.'
Magnum Force, 1973

I do know the market looks to be at the start of a more significant move lower as noted last weekend and indeed even before that when I wrote of the volatility indicating the trend was at an end. The character has changed. The leaders have faltered and nothing dynamic is taking their place. The run was getting too volatile as I have discussed using the NASDAQ chart as an example with its wider range and greater volatility after a long trend higher.

I do know that the new highs are not supported by the economic growth. We have said all along that the economic data was not the driver. Just three quarters of 4% GDP growth in a 5+ year recovery does not warrant NASDAQ growing 3.5 times and SP500 2.8 times its 2009 lows. The economic data has been weak for most of the time, and when it is stronger, it is highly questionable as we pointed out time and time again. Even now with the data stronger the past two quarters, it is the headlines that show the strength while the guts of the reports still fail to show that consistent kind of underpinnings you see when the economy is truly strong. It seems the Fed easy money has made it easier not only for companies to 'fake' their earnings, but the government to 'fake' the data as well. No conspiracy theory there; it was shown the data ahead of the 2012 elections was manipulated to get to 'magical' numbers pre-election.

Now we see the data taking a nasty turn. Friday's March PPI took a nasty turn to inflation. You can only change the calculus and hide the number for so long before even the rigged numbers (using that because it is a word of appeal these days it seems) can no longer contain the facts.




It was explained away as an increase in demand for services. Increased demand or just prices? What about food rising 1.1% in March? Cattle prices surging to multiyear highs on top of already high prices. Pork prices surging as a certain disease hits the US supply for the first time ever. Eggs surging.

They even tell us gasoline and energy are not contributing to the price rise. Really? Really? Gasoline prices are up a solid 30 cents the past few weeks to an 8-month high (Lundberg Survey), and even without that spike they have been over $3/gallon for years.



Do you not think there is ANY connection between that and the lethargy in our consumer? In the plight and blight of the middle class? That is money burned, pure and simple.



We still have to drive to work. We still have to move massive amounts of goods. We are not a small area such as the EU. We need lower fuel prices or our standard of living falls. Yet, we don't factor them into the equation because they are 'stable' at over $3/gallon of gas. Let me put it this way: do you not think it would impact the economy if everyone was required each week to take an extra $30 out of his or her wallet or purse and throw it in the trash (an extra $1.50/gallon of gas times 20 gallons)? With over 300+ million people that is $9B per week, $36B/month, and $432B/year.




But I digress.

This market is not built upon economic fundamentals or even a rosy growth story. It is on Fed money and now Fed money is being withdrawn and we know that, despite the FOMC minutes proclaiming 'from here to dove-ternity' in terms of interest rates, rates will rise. Yellen, uber dove, had a moment of truth in the press conference following her first FOMC meeting as the chair. She may want the words taken back, but that does not make them any less true. Just transparent now, right?

The market started to break almost as soon as the Fed announced taper. NASDAQ chart shows the volatility in the uptrend started at that point. The fight was on as the swings down and up increased in amplitude and frequency. The fight between the buyers and sellers started. I called the top around that time, but it was not the top, it was part of the topping process, the start of that process. Thus my top was consumed by more rallies. No complaints; we made a ton of money on those moves.

With Yellen's post-meeting admission, the path is complete. The market is pricing in a market without the Fed printing money. No matter what you hear about 'gee guys, there is still $55B/month being printed and rates are low,' the fact is that tapering is tightening to market gains built on QE when there is no commensurate belief the economy can pick up the slack. Indeed, the nasty spike in PPI is the worst-case scenario: the Fed has tried to kickstart the economy with easy money, it knows it has to withdraw it or risk inflation even if the economy is not strong enough, and now it looks as if inflation is stirring. INFLATION OCCURS WHEN DEMAND, REAL OR ARTIFICIALLY CREATED (as in easy money situations) IS GREATER THAN SUPPLY. WITH NO COMPANIES INVESTING IN GROWTH (but instead in buy backs and dividends), SUPPLY STAGNATES. Inflation results. I fear we are seeing that finally appearing.


This is a pretty good cartoon. Economy big and strong, inflation low. Economy slows and supply shrinks. Fed, government push up demand. More demand, lower supply. Textbook inflation.


Pricing it all in.

Now the market is engaged in setting prices in this environment. That is not a good environment when the economic activity is so tepid and uncertain thanks to policies promulgated by the federal government. Beef prices are surging. So, let's run off a rancher from lands his family has grazed cattle upon for generations.



Gasoline prices are eviscerating the budgets of millions of middle class households, contributing to the wipeout of the middle class. So, let's kill pipelines that can transport Canadian oil to the US either for us to use or sell. Pass environmental regulations (or should I say, write executive orders) on top of those that already have US waters swimmable and fishable as per the Clean Water Act's mandates, making it impossible to build and operate new gasoline refineries in the US. Thus no matter how much oil we produce, gasoline prices will remain high.

Lots to price in, and what this adds up to is a belief that Mr. Insana's prognosis of a correction then growth in the spring (as Chauncey Gardener would say in 'Being There') may not come true. I don't ascribe to Faber's disaster scenario, but a major correction, perhaps more than Icahn predicts, seems quite possible.


Playing it.

All we can do is play and take what the market gives. As stated Thursday, that means a near term downtrend that is now in place and will likely continue for quite some time as we work through the next elections and then the 2016 elections. I kid you not; the economic course of this country will not change with the current administration in charge. Modest to moderate growth, as the Fed puts it, will be the best we get.

The downtrends will of course be punctuated by sharp upside. Always is. We got two days last week and thought we would get more but it was not ripe yet. Now you have NASDAQ at support or darn close, RUTX at the 200 day, SP500 just off its next support level. Soon, after a bit more downside, there is a tradable upside rally we can play. We will take some more gain on our downside positions as some more weakness shows itself next week, then we prepare for a bounce.

We prepare by tracking stocks that are not selling off in the selling but using the selling to set up solid patterns. Not all are boring utilities, consumer stocks, or financials that don't move much. Hell, none of them are financials because they are diving as interest rates fall again. Energy is there, electronics (yes still leading), even some tech and internet. Very good patterns even in the carnage.

When the selling gets right, when you have a big drawdown in the indices one week and it continues unabated and with vigor into the next, you look for the reversal. It is getting close to that on NASDAQ and RUTX with their six weeks of downside starting to crescendo the past 7 sessions.

The upside is played with shorter time horizons and thus shorter target expectations. You look for plays that do not necessarily have to break resistance to return 3:1 or 2:1. Move in, get to the target or close, get out. One thing this climate does: it makes you play upside very precisely, it makes you set targets and stops and stick to them. In overall upside trends we play the ripe downside just this way: precise targets to prior lows and/or key support, good risk/reward, good ratios of success, and banking the gain when it is hit.

The downside is played with more latitude. You are with the trend so you take partial profits when the initial target is hit, then let some of the position run as the trend will favor letting positions continue. Geed patterns, good entries, partial profits, let them run.



THE MARKET

OTHER MARKETS

Euro/Dollar: Down all week but now at support and may try to bounce.

1.3883 versus 1.3886 euro versus 1.3855 versus 1.3797 versus 1.3742 versus 1.3701 versus 1.3712 versus 1.3760 versus 1.3794 versus 1.3779 versus 1.3752 versus 1.3748 versus 1.3788 versus 1.3823 versus 1.3842 versus 1.3794 versus 1.3776 versus 1.3831 versus 1.3930 versus 1.3925 versus 1.3907 versus 1.3858 versus 1.3907 versus 1.3870 versus 1.3869 versus 1.3872 versus

Dollar/Yen: Down all week as well, but slowing the decline, showing a bounce coming at support.

101.43 versus 102.00 versus 101.70 versus 102.59 versus 103.10 versus 103.24 versus 103.92 versus 103.76 versus 103.68 versus 103.21 versus 102.81 versus 101.24 versus 101.99 versus 102.26 versus 102.25 versus 102.25 versus 102.42 versus 102.51 versus 101.40 versus 101.75 versus 101.29 versus 101.67 versus 102.71 versus 102.90 versus 103.24 versus 103.33 versus


Bonds: New high. Money pouring into bond funds. Escaping stocks? Probably. Worried about overseas issues? Probably. Worried about US economic prospects. Probably this as well. The yield curve is flattening, however, and that is the worrisome thing. As noted last week, that foretells weaker economic activity. Always has.

10 year: 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79% versus 2.80% versus 2.75% versus 2.73% versus 2.71% versus 2.68% versus 2.70% versus 2.75% versus 2.73% versus 2.77% versus 2.78% versus 2.77% versus 2.67% versus 2.70% versus 2.65% versus 2.65% versus 2.72% versus 2.77% versus 2.78% versus 2.79%


Oil: 103.74, +0.34. Rallied back near the late February high and showed a doji Friday. Maybe a bit of softness near term given the run, but oil continues to show the ability to run right back up to this level.

Gold: 1318.60, -1.50. Two week bounce, but not much ground covered. Back over the longer term down trendline, but not with a lot of force.


CHARTS

NASDAQ: Gapped lower, fill the gap intraday, then sold off closing near the session low. This follows the Thursday 100+ point downside session. New low on this sixth week since the peak in early March. NASDAQ is now just 30 points from the February low (3968). There is some support there and with the nasty downside the past four weeks NASDAQ may try to put in a stand there. Why this particular point? Because it would be where NASDAQ would bounce to set up a head and shoulders pattern, rallying back to the January peak near 4230 for the apex of a right shoulder. Thus NASDAQ is close to a tradable, 240 point rally.

SP500: Finally broke, selling through the 50 day EMA, the 11/12 trendline, and the December and January highs. Some support at 1808-1805 from the November/December highs.

SOX: Started to crack. Lower low on Thursday, then gapped through the 50 day EMA Friday as well as the upper range of the long term trading range. It is toying with the top, but it is such a big pattern that minor breaches don't really matter. What does matter is the near term for the market and how it reacts to this minor incursion.

SP400: Crashed the lower trendline in the channel. Hard. Did this in late January but reversed it almost immediately. Only the second time it has done this the entire rally from November and it did it within two months. Nasty two weeks culminating in this move. SP400 is also approaching next support, however, and could aid in the rebound move.

RUTX: At the 200 day SMA after two weeks of harsh selling. Other support from prior lows and peaks in this range so RUTX, as with NASDAQ, is in a good area to put in a more tradable move upside.


LEADERSHIP:

Dynamic leadership is harder to come by, an indication of a market in a downtrend. Some leaders are able to make money, others you would rather ignore. There are still some very solid leaders that produce very solid returns, and if they can continue using the selling to set up, they will provide nice returns on that tradable bounce.

Electronics: Still leading. FSLR was down but holding. MXWL. OVTI. LSCC. IPGP.

Energy: AXAS, NBL, CRR

Tech: WDC in an interesting pattern. STX may set up again. More techs are breaking down than setting for sustained upside moves, however.

Financials: Tanking. JPM gapped below the 200 day SMA on earnings. BAC is down even more but getting closer to a bounce. WFC fell to the 50 day EMA and is trying to bounce.



MARKET STATISTICS

NASDAQ
Stats: -54.37 points (-1.34%) to close at 3999.73
Volume: 2.245B (-6.07%)

Up Volume: 368.8M (+213.8M)
Down Volume: 1.84B (-420M)

A/D and Hi/Lo: Decliners led 3.87 to 1
Previous Session: Decliners led 6.2 to 1

New Highs: 15 (-15)
New Lows: 98 (+40)

S&P
Stats: -17.39 points (-0.95%) to close at 1815.69
NYSE Volume: 714M (+0.71%)

A/D and Hi/Lo: Decliners led 2.49 to 1
Previous Session: Decliners led 3.43 to 1

New Highs: 36 (-39)
New Lows: 105 (+22)

DJ30
Stats: -143.47 points (-0.89%) to close at 16026.75


SENTIMENT INDICATORS

VIX: 17.03; +1.14
VXN: 22.65; +2.06
VXO: 17.19; +1.64

Put/Call Ratio (CBOE): 1.15; +0.12


Bulls and Bears:

Bulls right back up: 54.6 versus 50.5 versus 54.7 versus 52.0. Nothing like a sharp pullback to rethread the bulls' heads.

Bears holding higher level: 18.6 versus 18.6 versus 7 of 8 weeks at mid-17.

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 54.6 versus 50.5
54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

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

Bears: 18.6 versus 18.6
17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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

Downtrend in place near term but the indices are a bit oversold near term as well. NASDAQ and RUTX are at or very near support as is SP500. With Thursday and Friday ending on rather sharply negative notes the next week often starts weak. This past week there was not quite the downside flush out you want see in order to land a sharp and more sustained reversal. With the indices down even more and NASDAQ at a key level for a pattern to develop, a good run lower to finish the test Monday helps set up a new move.

We are looking at some positions to the upside and the downside. Long upside trends die slowly, and there will be an attempt to buy them at this next support. As noted earlier, that provides plenty of room for a tradable bounce upside. Thus the upside plays. They are stocks in good patterns that used the selling to set up, that are testing support by using the selling to digest gains, or they are at the bottom of a range and ready to bounce as they have done in the past. Those are good percentage plays and we want good risk/reward in that we don't have to necessarily break to new highs to make our money.

As for the downside, after this kind of drop you would prefer waiting for a bounce to enter new plays and for the most of our downside plays that is what we will do. There are some, however, in excellent position to continue lower as they are not oversold but their patterns are weak or weakening and there are gaps to fill. Thus even if they sell then recover some, they are going to be drawn to that gap point again. We can put some money to work on them if not full positions.

Selling is always more tumultuous than the upside. Steady gains are often sold off hard and fast. Now that we have a trend lower the downside has the upper hand but it will still be a battle. As noted, long trends tend to die hard and not without a fight. Thus nothing is straight up or straight down.

Have a great weekend and take note of all that is ongoing here. Standoff in Nevada with a rancher and BLM. Militia have moved in as well. High food prices. High gas prices. Wages still falling in a purportedly recovering economy. Bonds surging. There are many things bubbling on the stove as they say. And then of course, there are earnings!



SUPPORT AND RESISTANCE

NASDAQ: Closed at 3999.73

Resistance:
4070 is the series of highs from late November/early December
4104 is the lower gap point from 12/20/13
The 10 day EMA at 4128
4131 is the March 2014 low
The 50 day EMA at 4194
4226 is the lower November 2012 trendline
4246.55 is the January 2014 peak
4277 is the March lower gap point
4289 is the July 2000 recovery high
4320 is the upper channel line for the November 2012 to present uptrend.
4372 is the March 2014 high

Support:
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
The 200 day SMA at 3936
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.


S&P 500: Closed at 1815.69

Resistance:
The 50 day EMA at 1847
The December and January highs at 1848
1850 is the December 2012 up trendline
1883.57 is the recent all-time high hit in early March.
1897 is the all-time high hit in April 2014

Support:
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
The 200 day SMA at 1761
1738 is the February 2014 low
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
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low


Dow: Closed at 16,026.75

Resistance:
16,179 is the November 2013 peak.
The 50 day EMA at 16,238
16,257 is the January 2014 low
16,506 is the March 2014 peak
16,515 is a lower trendline off the 11/2012 low
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high

Support:
The 200 day SMA at 15,746
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
15,340 is the February 2014 low
15,318 is the June closing high
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)


Economic Calendar

April 11 - Friday
PPI, March (8:30): 0.5% actual versus 0.1% expected, -0.1% prior
Core PPI, March (8:30): 0.6% actual versus 0.1% expected, -0.2% prior
Michigan Sentiment, Preliminary April (9:55): 82.6 actual versus 81.0 expected, 80.0 March final

April 14 - Monday
Retail Sales, March (8:30): 1.0% expected, 0.3% prior
Retail Sales ex-auto, March (8:30): 0.5% expected, 0.3% prior
Business Inventories, February (10:00): 0.6% expected, 0.4% prior

April 15 - Tuesday
CPI, March (8:30): 0.1% expected, 0.1% prior
Core CPI, March (8:30): 0.1% expected, 0.1% prior
Empire Manufacturing, April (8:30): 7.5 expected, 5.6 prior
Net Long-Term TIC Fl, February (9:00): $7.3B prior
NAHB Housing Market , April (10:00): 50 expected, 47 prior

April 16 - Wednesday
MBA Mortgage Index, 04/12 (7:00): -1.6% prior
Housing Starts, March (8:30): 955K expected, 907K prior
Building Permits, March (8:30): 1003K expected, 1018K prior
Industrial Productio, March (9:15): 0.5% expected, 0.6% prior
Capacity Utilization, March (9:15): 78.8% expected, 78.4% prior (revised from 78.8%)
Crude Inventories, 04/12 (10:30): 4.030M prior

April 17 - Thursday
Initial Claims, 04/12 (8:30): 312K expected, 300K prior
Continuing Claims, 04/05 (8:30): 2800K expected, 2776K prior
Philadelphia Fed, April (10:00): 8.6 expected, 9.0 prior
Natural Gas Inventor, 04/12 (10:30): 4 bcf prior

By: Jon Johnson, Editor
Copyright 2014 | 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 Storm Hits NASDAQ and RUTX Again

MARKET SUMMARY

- The storm hits NASDAQ and RUTX again, this time taking a toll on SP500 and company as well.
- Jobs Report called Goldilocks scenario, but market decided it certainly was not just right.
- Low paying jobs dominate yet again. No improvement until there is investment, and investment relies upon stable policy that promotes risk taking. Right there are two risks: the usual risk of an endeavor with the added risk of government sanction if you are successful.
- VIX elevated its trading range but not at critical stage. Worth watching.
- Still some great upside sectors and stocks, if they can hold up against growth's selling.




A storm is coming! I know.
The Terminator, 1984


Jo, Bill! It's coming! Bill: It's already here . . .
Twister, 1996.

As the boy who took Sarah Connor's picture in the first 'Terminator' said, viene la tormenta (a storm is coming). The market had the look, we started shifting to downside plays, and Friday the NASDAQ selling that showed up two weeks back resumed. As Bill Paxton in 'Twister' responded to Phillip Seymour Hoffman's warning a storm was on the way, it's already here.

A bit melodramatic, but they fit. Similar to Ron Insana's article Friday regarding the 'shock' about HFT trading, where he quoted Captain Renault in the great movie classic 'Casablanca': "I'm shocked, SHOCKED to find that gambling is going on here!'


Captain Renault is shocked about the gambling, then collects his winnings.

The session started to off decently. Futures up ahead of jobs. Jobs came in not too hot, not too cold, kind of Goldilocks just as some on the morning financial stations proclaimed. Futures jumped nicely. Stocks started nicely higher. Immediately, however, the move came under pressure. They sold into the first half hour but bounced. Never made it back to the opening high, however.

The storm hit rather ferociously. Even SP500 and SOX, holdouts to the upside during the prior selling and indeed through much of the Friday session while NASDAQ burned, flared off 1% to 2% losses by the close. Volume swelled, downside breadth exploded on NASDAQ as it lost a startling 110 points.

SP500 -23.68, -1.25%
NASDAQ -110.01, -2.60%
DJ30 -159.84, -0.96%
SP400 -1.59%
RUTX -2.35%
SOX -2.81%

Volume: +22% NYSE, +27% NASDAQ. Slightly above average on NYSE, but surging above average on NASDAQ.

A/D: -4.9:1 NASDAQ but just -1.85:1 NYSE.


THE NEWS

Jobs Report in the eye of the beholder.

192K jobs. The Joe Lavorgna 275K estimate was more 'all is well' nonsense as Mr. Lavorgna continues to confuse QE-induced market gains as an economic indicator versus market gains based upon investment in the US that will lead to economic growth.

192K versus 195K expected, 197K prior (from 175K).

January and February revised up 15K and 22K, respectively.

Unemployment rate: 6.7% versus 6.6% expected, 6.7% February. If you use historical participation rates before the Great Recession created massive new entitlement classes, unemployment would be 9.7%. Hey, below 10% right?


The views on the report ran the extremes of the spectrum. David Gregory on MSNBC claimed the jobs report points to a 'robust recovery.' This is the same network that postulated a black hole swallowed the flight from Malaysia. CNBC's Steve Leisman actually took a more hawkish posture, vehemently disagreeing with guests who said the 192K jobs was a good report. Leisman huffed that the economy needed to product 300K AND 400K new jobs per month in order to show any kind of serious growth.

Sadly, as we noted with the Factory Orders, ISM, trade, etc. show no significant US investment, and it is investment to grow businesses that results in new jobs that are the better jobs versus the predominant service sector, lowest pay scale jobs this recovery produces. Indeed, the Friday report showed manufacturing, the second highest paying sector, LOSING jobs.

Ironically, and proving the point, CarMax reported results Friday that missed expectations, BUT KMX also announced the savior of stock prices, a $1B stock buyback. If you cannot please them with earnings, use the funny money in this recovery to buy your price higher. That is the new corporate capital investment.

Average Hourly Earnings fall to unchanged, Workweek rises 0.2.

In February hourly earnings jumped 0.4% while the workweek fell. Much was made of the longer workweek, how that accounts for thousands of new jobs with each 0.1 tick. If it were REAL that might be interesting. We said last month, however, hourly earnings jumped because of paid hours not worked due to weather while the workweek fell because of the weather. This month was a reversion.

Hourly earnings: 0.0 versus 0.2% expected, 0.4% February

Workweek: 34.5 versus 34.4 expected, 34.3 February

Clearly this was makeup time for hours not worked during February. Had to work more hours to make up for the lost work in February. Cause and effect as our old friend the Frenchman would say.


I drank too much wine, now I must . . .


Other numbers called important: 500K came back to the workforce as participation rose to 63.2% from 63.0%. People not in the workforce fell by 300K to a still huge 91,030,000.

Yet, the unemployed ROSE 27K to 10.486M. How? Not enough jobs. Cannot absorb the new people, the long-term unemployed. Add the unemployed to the out of the workforce and you get 101.5M people, or 32% of the population not working. It is even a larger proportion of the working age population.


Another telling statistic: Part-time worker growth. Still outpacing the
full-time as the below chart shows:



Indeed, temps rose 29K. Temp workers are in the lower end of the pay scale along with Education and Health, Leisure and hospitality, and retail. Those areas, however, added the most jobs at 34K, 29K, and 21K, respectively.

At the same time the highest pay scale sectors barely added jobs. Financial services, manufacturing, and information added just 2K jobs (manufacturing, as noted above, lost 1,000).

Of the jobs created it is the same story we have told for several years: low end, low pay. It is no wonder citizens are not spending as the used to because their incomes are not what they were and there is still quite a bit of worry about the future.


THE MARKET

OTHER MARKETS

Euro/Dollar: Stronger all week.

1.3701 versus 1.3712 versus 1.3760 versus 1.3794 versus 1.3779 versus 1.3752 versus 1.3748 versus 1.3788 versus 1.3823 versus 1.3842 versus 1.3794 versus 1.3776 versus 1.3831 versus 1.3930 versus 1.3925 versus 1.3907 versus 1.3858 versus 1.3907 versus 1.3870 versus 1.3869 versus 1.3872 versus

Dollar/Yen: Lost some ground Friday after a very strong week for the dollar.

103.24 versus 103.92 versus 103.76 versus 103.68 versus 103.21 versus 102.81 versus 101.24 versus 101.99 versus 102.26 versus 102.25 versus 102.25 versus 102.42 versus 102.51 versus 101.40 versus 101.75 versus 101.29 versus 101.67 versus 102.71 versus 102.90 versus 103.24 versus 103.33 versus


Bonds: Down week for bonds, falling to the 50 day EMA. Friday, however, a big bounce given the data and US market selling.

10 year: 2.73% versus 2.79% versus 2.80% versus 2.75% versus 2.73% versus 2.71% versus 2.68% versus 2.70% versus 2.75% versus 2.73% versus 2.77% versus 2.78% versus 2.77% versus 2.67% versus 2.70% versus 2.65% versus 2.65% versus 2.72% versus 2.77% versus 2.78% versus 2.79%


Oil: 101.14, +0.85.

Gold: 1303.40, +18.80. Started a modest rebound Wednesday after two straight weeks of selling.


MARKET STATISTICS

NASDAQ
Stats: -110.01 points (-2.6%) to close at 4127.73
Volume: 2.573B (+27.19%)

Up Volume: 315M (-326.94M)
Down Volume: 2.29B (+900M)

A/D and Hi/Lo: Decliners led 4.88 to 1
Previous Session: Decliners led 2.37 to 1

New Highs: 86 (-19)
New Lows: 59 (+32)

S&P
Stats: -23.68 points (-1.25%) to close at 1865.09
NYSE Volume: 694M (+22.4%)

A/D and Hi/Lo: Decliners led 1.85 to 1
Previous Session: Decliners led 1.45 to 1

New Highs: 180 (+6)
New Lows: 68 (+7)

DJ30
Stats: -159.84 points (-0.96%) to close at 16412.71


CHARTS

DJ30 never did confirm the DJ20 transports new high with a closing new high of its own. It did not really damage itself as it closed between the 10 day and 20 day EMA. it simply did not have the strength for a new closing high on this move and was eventually dragged lower in the afternoon.

NASDAQ was gutted, breaking the bottom of its uptrend channel, undercutting last week's low, and closing at the lower trendline recently formed off the November 2012/March 2013 lows.

RUTX managed to hold last week's low, but it splintered the 50 day EMA and the uptrend channel yet again, the second such big selloff is as many weeks. Hanging around in a bad neighborhood for sure.

SP500 was finally torn from its new high after holding out much of the session at or above the 10 day. It fell further but found support at the 20 day EMA.

SOX dittoed SP500, falling from a decade-plus high to the 20 day EMA. Very important to watch because it led the rest of the market higher. If it rolls over the rest of the market likely does the same.

SP400 dove down from its upper channel line. Not necessarily surprising though its bounce off the 50 day EMA last week gave it the chance of a breakout. That was blown away in the storm.

SOX, SP500, SP400, and even DJ30 are still decent in terms of their positioning in their trends, but they were sold hard, matching that one-day event in early March.


LEADERSHIP

Many stocks were lower but it was along the same lines seen already, just magnified.

Biotech: ALXN, CELG, BIIB, GILD

Social media: FB, YELP

Big names: NFLX, AMZN, GOOG, PCLN

Even electronics were hit: SWKS, LSCC, MU

Steel: Held up decently. AKS, STLD

Utilities: Of course they were up in a defensive play.

Financials lower but not dumping: JPM, WFC. It was not all candy and nuts: BAC, STT.


SENTIMENT INDICATORS

VIX: 13.96; +0.59
VXN: 18.79; +1.83
VXO: 13.42; +0.69

VIX is elevated the past two months, range-trading at a higher level than in all of 2013. You watch for major tops when VIX rises as the stock market continues posting gains. Thus the elevation in the trading range is something to watch but at this juncture it does not rise to the level of great concern.

Look at the long-term chart of VIX compared with SP500. From 1996 ('irrational exuberance' utterance from Greenspan) VIX bumped higher and continued to trend higher into 2000 as the stock market trended higher. Compare that with the period 2003 to mid-2007: stocks rose smartly but VIX faded. Not until the second half of 2007 did VIX rise as the stock market rose. In both instances a major selloff occurred only when VIX started to rise significantly off its status quo levels as stocks rallied.

The recent rise in VIX does not approach these levels, at least not yet. As noted, it should be watched.


Put/Call Ratio (CBOE): 0.94; +0.06


Bulls and Bears:

Bulls bounced right back up: 50.5 versus 54.7 versus 52.0. Nothing like a sharp pullback to rethread the bulls' heads.

Bears breaking higher: 18.6 versus 7 of 8 weeks at mid-17.

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 50.5 versus 54.7
52.0% versus 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

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

Bears: 18.6 versus 17.5%
17.4% versus 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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

Friday we did not do that much despite the selling. As noted Thursday we were relative balanced heading into the jobs report. Upside plays took some hits but many are holding a support level, not bad after this kind of selling. Indeed, in many of the sectors on the NYSE stocks are quite intriguing upside. Energy, metals, industrial minerals, materials, chemicals, even some tech not only held up but worked on very nice patters. Yes the selling dragged most stocks lower, but as we looked through dozens of sectors, many were fine.

Now we see what kind of follow through there is next week. Ugly Fridays often lead to further selling through the early week, typically through Tuesday. That type of selling can yield a pretty sharp rebound, though typically just a relief move for those with broken patterns. SP500 is still in position to deliver a follow through session to the rebound from two Fridays back if it does not fall too much farther. If those stocks we see in solid patterns continue to work on them through any early week selling they could help lead a rebound in the market and good moves for themselves.

Our plan is to use any further downside early next week to see if we can bank some downside gain then watch for an oversold bounce to set up. A new trend is trying to establish itself, at least on NASDAQ and RUTX, and it is not an upside trend. The other indices, not really though they can be dragged lower. At the pace of the Friday decline, the market can get oversold quickly.

We have some new downside plays on the report as there are stocks that resisted the selloff but have weak patterns. If they make the move we can play some but knowing that after another couple of downside sessions through Tuesday a bounce can come. Likely just a relief move on NASDAQ that sets up some more downside, but again, there are many plays out there holding up just fine despite the NASDAQ and RUTX woes. Perhaps they don't break down and provide some leadership immune to the selling. Perhaps. I don't like the market's prospects even now for a sustained run. Keep your eye on SOX. If it breaks we would view that as something of the canary that the NYSE indices will break as well.


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4127.73

Resistance:
4131 is the March 2014 low
4209 is the November 2012 trendline
The 50 day EMA at 4219
4246.55 is the January 2014 peak
4277 is the March lower gap point
4289 is the July 2000 recovery high
4306 is the upper channel line for the November 2012 to present uptrend.
4372 is the March 2014 high

Support:
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
The 200 day SMA at 3918
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.


S&P 500: Closed at 1865.09

Resistance:
1883.57 is the recent all-time high hit in early March.

Support:
The December and January highs at 1848
The 50 day EMA at 1848
1844 is the December 2012 up trendline
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
The 200 day SMA at 1755
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
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low


Dow: Closed at 16,412.71

Resistance:
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
16,466 is a lower trendline off the 11/2012 low

Support:
16,257 is the January 2014 low
The 50 day EMA at 16,242
16,179 is the November 2013 peak.
15,739 is the December 2013 low
The 200 day SMA at 15,710
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
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)


Economic Calendar

April 4 - Friday
Nonfarm Payrolls, March (8:30): 192K actual versus 195K expected, 197K prior (revised from 175K)
Nonfarm Private Payr, March (8:30): 192K actual versus 205K expected, 188K prior (revised from 162K)
Unemployment Rate, March (8:30): 6.7% actual versus 6.6% expected, 6.7% prior
Hourly Earnings, March (8:30): 0.0% actual versus 0.2% expected, 0.4% prior
Average Workweek, March (8:30): 34.5 actual versus 34.4 expected, 34.3 prior (revised from 34.2)

April 7 - Monday
Consumer Credit, February (15:00): $14.3B expected, $13.7B prior

April 8 - Tuesday
JOLTS - Job Openings, February (10:00): 3.974M prior

April 9 - Wednesday
MBA Mortgage Index, 04/05 (7:00): -1.2% prior
Wholesale Inventorie, February (10:00): 0.5% expected, 0.6% prior
Crude Inventories, 04/05 (10:30): -2.379M prior
FOMC Minutes, 3/19 (14:00)

April 10 - Thursday
Initial Claims, 04/05 (8:30): 325K expected, 326K prior
Continuing Claims, 03/29 (8:30): 2843K expected, 2836K prior
Export Prices ex-ag., March (8:30): 0.6% prior
Import Prices ex-oil, March (8:30): -0.2% prior
Natural Gas Inventor, 04/05 (10:30): -74 bcf prior
Treasury Budget, March (14:00): -$106.5B prior

April 11 - Friday
PPI, March (8:30): 0.1% expected, -0.1% prior
Core PPI, March (8:30): 0.1% expected, -0.2% prior
Mich Sentiment, April (9:55): 81.0 expected, 80.0 prior

By: Jon Johnson, Editor
Copyright 2014 | 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