MARKET SUMMARY
- The test continues with some howls starting though the pullback is nothing horrid at the present.
- Weak into the open, tries to recover, then flops in the afternoon.
- Holding near support, leadership as well.
- Retail sales disappoint. Thank goodness for revisions.
- Iraq situation devolves, oil spikes, gasoline to follow to $4/gallon. Another wildcard is identified.
- Likely not decisions on Friday given the weekend.
Full moon. Friday the thirteenth. Solar flares. Al Qaeda taking over Iraq. Father's Day weekend. Stocks up. Neither snow nor rain nor heat nor gloom of night keeps stocks from rising. It can stop the mail, but apparently not the market. Thus even with the potential perils preceding the paternal celebrations this weekend, stocks posted gains.
SP500 6.05, 0.31%
NASDAQ 13.02, 0.30%
DJ30 41.55, 0.25%
SP400 0.26%
RUTX 0.28%
SOX 0.99%
Volume dipped: NYSE -10.4%, NASDAQ -7.8%. Friday, summer ahead of Father's Day. But it did dip on an upside session, so you know the buyers were not pushing to get in ahead of the weekend.
A/D: Up with the indices, but unsurprisingly light. NYSE 1.3:1, NASDAQ flat.
I would say it was a routine pre-semi holiday weekend in the summer, but there was a flurry of volatility at the open and very much so in the last hour. Futures were down early but managed a decent recovery. Momentum carried into the open and stocks turned positive after an initial half hour of selling the open. A long 4 hour lateral move then a break sharply higher to start the last hour. Breakout then a reversal. 25 minutes later the gains from Noon to that break upside were trashed and then some. Once more, however, stocks rebounded and traded right back up near the session's trading range highs and closed out the day. Yes, a bit of intraday volatility to spice the session.
HEADING INTO NEXT WEEK . . .
The action left the indices with modest gains. After 1-2-3 pullbacks on RUTX, SP400, SP500, and 1-2 fades on NASDAQ and DJ30, the bump higher makes it look as if they are ready to rebound after the test: Nice break and trend higher, cleared to higher highs, testing in a short flag. Textbook position to continue the move.
Perhaps they will and there are plenty of leaders in position to help the cause. Definitely a solid contender for the next move in this market. At the same time I am not convinced Friday was the start of a rebound from this dip, at least one that makes the progress you want, i.e. higher highs. I feel the coming week will see more testing. Maybe the Iraq issues resolve over the weekend, but the odds of that are about as good as seeing John McCain celebrating Father's Day at a cross-dressing bar in South Beach. Geez, the thought alone just makes me kind of queasy.
There is likely more testing and that is not necessarily a bad thing. Should not be too much more, however, before resuming the move if the indices are going to rally once more with SP500 taking a hot at the 2000 level.
All in all the indices definitely did nothing to hurt themselves, they make pretty pictures on this pullback, but this week they will have to really show the move. Gee, the FOMC is on deck with its next policy meeting results and there are rumors/worries it will pull an 'irrational exuberance' trick of some sort. Rumor and speculation of course, but the Fed has voiced dismay over the lack of concern in the stock market.
THE MARKET
CHARTS
SP500: Pulled its own 1-2-3 fade on the week, coming off a three week rally to 1950, tapping at the 20 day EMA and holding over the 38% Fibonacci retracement, then rebounding Friday. MACD put in a higher high on this leg, indicating no shifting momentum. Looks pretty textbook as noted, but would not be surprised to see some more testing early next week as a final shakeout. Given all of the issues on the market, not a bad showing, but not convincing.
NASDAQ: Another test of the 10 day EMA. Thursday NASDAQ dropped to that near support and held, Friday it gapped higher then bounced off of the 10 day EMA on an intraday test. Good action, second day of testing and holding the 10 day EMA. Compared to SP500, it looks as if NASDAQ is closer to being there. Held the 10 day EMA late May/early June on the last test, and if it holds here and bounces, a good indication the run continues.
DJ30: Fell to the 20 day EMA Thursday with a two day flop. Friday a bounce on stronger volume thanks to INTC's guidance increase. Could be ready, but as noted Thursday, it has liked falling to the 50 day EMA on its tests.
SOX: Still moving higher, with barely a pullback at all on the week. More like a pause here and there. Gapped upside Friday to a higher high yet again. Showing a doji, and after a big run that always raises some questions, but it has gapped to doji four times prior on this rally alone. Moving higher, holding the trend, good for the market.
RUTX: Now this is more like it when talking pullbacks. Strong break off the 200 day SMA started two weeks back. Rallied into Monday, tested Tuesday to Thursday, holding the 10 day EMA on the low. Friday a doji with tail, tapping the 10 day EMA on the low and bouncing. Classic action, showing a doji with tail tapping the 38% Fibonacci retracement. This one looks ready to go.
SP400: Similar to RUTX, the midcaps rallied through Monday, tested Tuesday to Thursday, started back up Friday. The test brought SP400 back to the 10 day EMA and the breakout point over the early March/early April twin peaks. Breakout, test, in position. Looks solid, now we see if it can make the bounce.
LEADERSHIP
Big Names: The stocks of repute that led the last move up mostly spent the week testing, and there are some very good looking tests in progress.
NFLX is working on a six-day lateral move over the 10 day EMA.
GOOG tested on the week and Friday put in a nice doji with tail at the converging 50 day and 20 day EMA.
TRIP is in a five-session flag holding at the 10 day EMA for three sessions.
AAPL is a bit heavy after its split.
VIPS is in a nice 1-2-3 pullback to the 10 day EMA. Excellent.
Internet-based: The group remains very nice.
FB broke out Tuesday but could not advance, fading to a doji at the 10 day EMA Friday.
Z enjoyed a great week, breaking upside Wednesday and holding the move into the weekend.
TRLA enjoyed an excellent upside week, breaking resistance along the way.
YELP exploded higher Friday with a gap over the 200 day SMA and other resistance.
Electronics/Chips: INTC set the pace with its raised guidance.
CAVM: Excellent week, testing a good move, bouncing off the 10 day EMA.
OVTI: Moved to a new high rally high Wednesday.
Still a leadership group.
Drugs/Healthcare: Still showing up great as it continues its recovery.
AMRI broke higher and held the move into the weekend.
CLDX has made the turn, holding a very nice flag.
BIIB still in a nice handle to its cup.
Energy: A great week on top of good moves, of course led by the Iraq issue.
APC blasted off Wednesday.
OAS took off the back half of the week.
ATHL, PXD, SYRG and many more enjoyed strong moves.
OTHER MARKETS
Euro/Dollar: Up on the week, down to end it, but dollar higher overall and bumping at the top of the range.
1.3539 versus 1.3551 versus 1.3531 versus 1.3545 versus 1.3589 versus 1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.3633 versus 1.3603
Dollar/Yen: Sold on the week, busted the 200 day SMA Thursday, bounced modestly Friday.
102.055 versus 101.735 versus 102.0370 versus 102.335 versus 102.5305 versus 102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775
Bonds: Held the 50 day EMA after selling off to that level the prior week. Started to bounce Thursday, held the move Friday, as the Iraq situation went from bad to worse.
10 year: 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66%
Oil: 106.85, +0.31. Surged on the Iraq issues, continued Friday, but gave up most of the move by the close. Key move: breakout over 105.
Gold: 1274.10, 0.00. Recovery week after the beating it took through the beginning of June. Back up to the bottom of the April through May range.
MARKET STATISTICS
NASDAQ
Stats: +13.02 points (+0.3%) to close at 4310.65
Volume: 1.728B (-7.79%)
Up Volume: 1.11B (+467.65M)
Down Volume: 608.12M (-641.88M)
A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 1.81 to 1
New Highs: 62 (-8)
New Lows: 21 (+4)
S&P
Stats: +6.05 points (+0.31%) to close at 1936.16
NYSE Volume: 472M (-10.44%)
A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Decliners led 1.38 to 1
New Highs: 95 (-9)
New Lows: 13 (+5)
DJ30
Stats: +41.55 points (+0.25%) to close at 16775.74
SENTIMENT INDICATORS
VIX: 12.18; -0.38
VXN: 13.61; -0.24
VXO: 11.22; -0.37
Put/Call Ratio (CBOE): 0.77; -0.03
Bulls and Bears:
Bulls slowed the climb but climbed to a new 5 year high: 62.6%
Bears a bit lower but in a familiar range: 17.2%
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: 62.6%
62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 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: 17.2%
17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 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 NEWS
Producer Prices fade away according to the Fed.
Year/year: 2.0 versus 2.4% expected versus 2.1% prior
Core year/year: 2.0%
Down but still some pretty strong prices year/year. Not much to say here. Dropping prices is good, but the Fed views that as bad as it views inflation as a good thing. But the Fed should take heart: year/year numbers are still strong despite a one-month backtrack.
Michigan Sentiment, June Preliminary: 81.2 versus 82.9 expected versus 81.9 prior.
Not the gain anticipated, missing by the widest margin in 18 months. You know what? Who cares? As noted the last Michigan Sentiment report, at these levels the indicator means nothing. It is mired in mediocrity. Hmm. As the economy is mired in mediocrity perhaps this is representative.
What DOES mean something in sentiment terms is the newly released CEO Economic Sentiment Index. It limps in at 49.1, below the 50 expansion/contraction line, stuck at 2014 lows.
One CEO said his company is "concerned about the retail demand environment, and a little less bullish than earlier I the year due to a slower housing market, some inconsistency at retail, and an economy that's not quite as robust as expected."
Retailers in the survey complained of lower traffic and needing to continue promotions in order to drive sales.
The Q2 bounce is slipping away, just as it has done every year of the recovery but 2010. That is damn depressing.
MONDAY
Pre-market Friday we were perusing the headlines on the financial sites, blogs, etc., watching the futures and stock action. We traded notes on what we were seeing and what we all noticed were the comments about trouble ahead. Not the Tepper 'I'm nervous' comments, but similar.
CNBC reported a 'pro' as saying the rally is in the 'late innings.' Cramer said 'something unexpected may be imminent.'
Well, we are no fan of picking market tops or bottoms, but I did throw out there that if SP500 made it to 2000 that might very well be the top of this run. 1950 was the top for many 2014 S&P500 predictions. Hit that this past week. 2000 started to get some talk. Came under some pressure, sold back, then the talk about late innings, trouble lurking.
There could be problems for sure. There always can be problems. As for the unexpected but imminent, well, Iraq came unexpectedly but stocks really shrugged it off. Certainly no dive lower, just a test after a good run higher. The Fed is on tap for next week, and as I noted early week, it definitely could provide a Greenspan 'irrational exuberance' moment given its lamenting how its own actions caused market complacency. Begging the question, of course, what the hell did it think it was going to cause with its policies?
Perhaps Cramer was thinking of the Fed and that most would not expect the Fed to rattle investors' cages. Other than that, however, the statement struck me as particularly asinine. How do you expect something unexpected? If that is your criteria you should never invest.
This is the kind of 'noise' that I discuss in a free seminar I am giving next Thursday. It is the speculation, the gut feelings of the 'pros' as uttered on the financial stations. Smart traders/investors have fallen prey to this. They think they are immune to it, but when the action gets fierce and the emotions are raw, those words are there and they can cause you to not believe what you see.
And what is out there to be seen? A few things of note.
NASDAQ was forming a head and shoulders. It broke it up. SP500 was putting in a double top. Broke it up. SP400 had a double top in place. It broke out under two weeks back. SOX had set a head and shoulders pattern. It blew past the head and hasn't even looked back.
ALL OF THOSE PATTERNS formed during the March to May selling. On the DAY Tepper said he was nervous, the indices bottomed and we bought into GOOG, AAPL, PCLN, TRIP, VIPS, etc. We were watching the patterns of leaders. They were forming bullish patterns.
So of course that leads us to now and the key aspects: not what the 'pros' are saying, but what the patterns are telling us.
We went through the leadership above. There are very good pullbacks in progress that look to be setting up the continuation of rallies: STX, GOOG, TRIP, VIPS, BIIB, TEN, NFLX, FB, QIWI. There are stocks coming off rounded bottoms, ready to make their moves, e.g. RVBD, DHRM, MANH, CLDX, QIHU.
Many different sectors, many different stages of moves. Similar to the May 15 bottom but different given the participation and that some stocks have rallied well. In May people were almost panicking over a modest pullback. Now they are seeing ghosts and fearing the unknown. Similar and thus promising.
Yes the Fed can rip the market. It gives as it has for five years, and it takes when it thinks it has done too much. It is the market's Sybil, and it has to be respected because it can change personalities on you at any time.
Indeed, we respect the possibility of a Greenspan moment so much, we are considering just paring back positions in terms of their size when talking solid plays working well, and eliminating plays that are just not performing. Staying with the many strong plays we have, culling the plodders, but still looking for positions in the many solid stocks that used this past week to set up new moves and thus new entry points for us to make money. Don't want to let a fear of the 'unexpected' keep us sitting on our hands when stocks are saying 'buy me.' You won't necessarily lose money if you do nothing, but the opportunity cost of not acting when stocks are saying act is huge. You have to make the plays when they are there.
Happy Father's Day!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4310.65
Resistance:
4372 is the March 2014 high
4397 is the lower November 2012 trendline
Support:
4289 is the July 2000 recovery high
The 10 day EMA at 4292
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4200
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4059
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
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 1936.16
Resistance:
Support:
1913 is the December 2012 up trendline
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 50 day EMA at 1897
1860 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
The 200 day SMA at 1810
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
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
Dow: Closed at 16,775.74
Resistance:
17,047 is a lower trendline off the 11/2012 low
Support:
16,736 is the penultimate all-time high from May 2014
The 20 day EMA at 16,731
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 50 day EMA at 16,582
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 16,021
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
June 13 - Friday
PPI, May (8:30): -0.2% actual versus 0.2% expected, 0.6% prior (no revisions)
Core PPI, May (8:30): -0.1% actual versus 0.1% expected, 0.5% prior (no revisions)
Michigan Sentiment, June (9:55): 81.2 actual versus 82.9 expected, 81.9 prior
June 16 - Monday
Empire Manufacturing, June (8:30): 12.8 expected, 19.0 prior
Net Long-Term TIC Fl, April (9:00): $4.0B prior
Industrial Productio, May (9:15): 0.5% expected, -0.6% prior
Capacity Utilization, May (9:15): 78.9% expected, 78.6% prior
NAHB Housing Market , June (10:00): 46 expected, 45 prior
June 17 - Tuesday
Housing Starts, May (8:30): 1028K expected, 1072K prior
Building Permits, May (8:30): 1050K expected, 1080K prior
CPI, May (8:30): 0.2% expected, 0.3% prior
Core CPI, May (8:30): 0.2% expected, 0.2% prior
June 18 - Wednesday
MBA Mortgage Index, 06/14 (7:00): +10.3% prior
Current Account Bala, Q1 (8:30): -$97.8B expected, -$81.1B prior
Crude Inventories, 06/14 (10:30): -2.596M prior
FOMC Rate Decision, June (14:00): 0.25% prior
June 19 - Thursday
Initial Claims, 06/14 (8:30): 313K expected, 317K prior
Continuing Claims, 06/14 (8:30): 2638K expected, 2614K prior
Philadelphia Fed, June (10:00): 13.4 expected, 15.4 prior
Leading Indicators, May (10:00): 0.5% expected, 0.4% prior
Natural Gas Inventor, 06/14 (10:30): 107 bcf prior
End part 1
The Daily, Part 1 of 3, 6-14-14
Current Issue
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6/14/2014 Investment House Daily
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MARKET SUMMARY
- The test continues with some howls starting though the pullback is nothing horrid at the present.
- Weak into the open, tries to recover, then flops in the afternoon.
- Holding near support, leadership as well.
- Retail sales disappoint. Thank goodness for revisions.
- Iraq situation devolves, oil spikes, gasoline to follow to $4/gallon. Another wildcard is identified.
- Likely not decisions on Friday given the weekend.
Full moon. Friday the thirteenth. Solar flares. Al Qaeda taking over Iraq. Father's Day weekend. Stocks up. Neither snow nor rain nor heat nor gloom of night keeps stocks from rising. It can stop the mail, but apparently not the market. Thus even with the potential perils preceding the paternal celebrations this weekend, stocks posted gains.
SP500 6.05, 0.31%
NASDAQ 13.02, 0.30%
DJ30 41.55, 0.25%
SP400 0.26%
RUTX 0.28%
SOX 0.99%
Volume dipped: NYSE -10.4%, NASDAQ -7.8%. Friday, summer ahead of Father's Day. But it did dip on an upside session, so you know the buyers were not pushing to get in ahead of the weekend.
A/D: Up with the indices, but unsurprisingly light. NYSE 1.3:1, NASDAQ flat.
I would say it was a routine pre-semi holiday weekend in the summer, but there was a flurry of volatility at the open and very much so in the last hour. Futures were down early but managed a decent recovery. Momentum carried into the open and stocks turned positive after an initial half hour of selling the open. A long 4 hour lateral move then a break sharply higher to start the last hour. Breakout then a reversal. 25 minutes later the gains from Noon to that break upside were trashed and then some. Once more, however, stocks rebounded and traded right back up near the session's trading range highs and closed out the day. Yes, a bit of intraday volatility to spice the session.
HEADING INTO NEXT WEEK . . .
The action left the indices with modest gains. After 1-2-3 pullbacks on RUTX, SP400, SP500, and 1-2 fades on NASDAQ and DJ30, the bump higher makes it look as if they are ready to rebound after the test: Nice break and trend higher, cleared to higher highs, testing in a short flag. Textbook position to continue the move.
Perhaps they will and there are plenty of leaders in position to help the cause. Definitely a solid contender for the next move in this market. At the same time I am not convinced Friday was the start of a rebound from this dip, at least one that makes the progress you want, i.e. higher highs. I feel the coming week will see more testing. Maybe the Iraq issues resolve over the weekend, but the odds of that are about as good as seeing John McCain celebrating Father's Day at a cross-dressing bar in South Beach. Geez, the thought alone just makes me kind of queasy.
There is likely more testing and that is not necessarily a bad thing. Should not be too much more, however, before resuming the move if the indices are going to rally once more with SP500 taking a hot at the 2000 level.
All in all the indices definitely did nothing to hurt themselves, they make pretty pictures on this pullback, but this week they will have to really show the move. Gee, the FOMC is on deck with its next policy meeting results and there are rumors/worries it will pull an 'irrational exuberance' trick of some sort. Rumor and speculation of course, but the Fed has voiced dismay over the lack of concern in the stock market.
THE MARKET
CHARTS
SP500: Pulled its own 1-2-3 fade on the week, coming off a three week rally to 1950, tapping at the 20 day EMA and holding over the 38% Fibonacci retracement, then rebounding Friday. MACD put in a higher high on this leg, indicating no shifting momentum. Looks pretty textbook as noted, but would not be surprised to see some more testing early next week as a final shakeout. Given all of the issues on the market, not a bad showing, but not convincing.
NASDAQ: Another test of the 10 day EMA. Thursday NASDAQ dropped to that near support and held, Friday it gapped higher then bounced off of the 10 day EMA on an intraday test. Good action, second day of testing and holding the 10 day EMA. Compared to SP500, it looks as if NASDAQ is closer to being there. Held the 10 day EMA late May/early June on the last test, and if it holds here and bounces, a good indication the run continues.
DJ30: Fell to the 20 day EMA Thursday with a two day flop. Friday a bounce on stronger volume thanks to INTC's guidance increase. Could be ready, but as noted Thursday, it has liked falling to the 50 day EMA on its tests.
SOX: Still moving higher, with barely a pullback at all on the week. More like a pause here and there. Gapped upside Friday to a higher high yet again. Showing a doji, and after a big run that always raises some questions, but it has gapped to doji four times prior on this rally alone. Moving higher, holding the trend, good for the market.
RUTX: Now this is more like it when talking pullbacks. Strong break off the 200 day SMA started two weeks back. Rallied into Monday, tested Tuesday to Thursday, holding the 10 day EMA on the low. Friday a doji with tail, tapping the 10 day EMA on the low and bouncing. Classic action, showing a doji with tail tapping the 38% Fibonacci retracement. This one looks ready to go.
SP400: Similar to RUTX, the midcaps rallied through Monday, tested Tuesday to Thursday, started back up Friday. The test brought SP400 back to the 10 day EMA and the breakout point over the early March/early April twin peaks. Breakout, test, in position. Looks solid, now we see if it can make the bounce.
LEADERSHIP
Big Names: The stocks of repute that led the last move up mostly spent the week testing, and there are some very good looking tests in progress.
NFLX is working on a six-day lateral move over the 10 day EMA.
GOOG tested on the week and Friday put in a nice doji with tail at the converging 50 day and 20 day EMA.
TRIP is in a five-session flag holding at the 10 day EMA for three sessions.
AAPL is a bit heavy after its split.
VIPS is in a nice 1-2-3 pullback to the 10 day EMA. Excellent.
Internet-based: The group remains very nice.
FB broke out Tuesday but could not advance, fading to a doji at the 10 day EMA Friday.
Z enjoyed a great week, breaking upside Wednesday and holding the move into the weekend.
TRLA enjoyed an excellent upside week, breaking resistance along the way.
YELP exploded higher Friday with a gap over the 200 day SMA and other resistance.
Electronics/Chips: INTC set the pace with its raised guidance.
CAVM: Excellent week, testing a good move, bouncing off the 10 day EMA.
OVTI: Moved to a new high rally high Wednesday.
Still a leadership group.
Drugs/Healthcare: Still showing up great as it continues its recovery.
AMRI broke higher and held the move into the weekend.
CLDX has made the turn, holding a very nice flag.
BIIB still in a nice handle to its cup.
Energy: A great week on top of good moves, of course led by the Iraq issue.
APC blasted off Wednesday.
OAS took off the back half of the week.
ATHL, PXD, SYRG and many more enjoyed strong moves.
OTHER MARKETS
Euro/Dollar: Up on the week, down to end it, but dollar higher overall and bumping at the top of the range.
1.3539 versus 1.3551 versus 1.3531 versus 1.3545 versus 1.3589 versus 1.3644 versus 1.3664 versus 1.3601 versus 1.3630 versus 1.3597 versus 1.3633 versus 1.3603
Dollar/Yen: Sold on the week, busted the 200 day SMA Thursday, bounced modestly Friday.
102.055 versus 101.735 versus 102.0370 versus 102.335 versus 102.5305 versus 102.540 versus 102.415 versus 102.7395 versus 102.5350 versus 102.365 versus 101.7765 versus 101.775
Bonds: Held the 50 day EMA after selling off to that level the prior week. Started to bounce Thursday, held the move Friday, as the Iraq situation went from bad to worse.
10 year: 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47% versus 2.44% versus 2.52% versus 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66%
Oil: 106.85, +0.31. Surged on the Iraq issues, continued Friday, but gave up most of the move by the close. Key move: breakout over 105.
Gold: 1274.10, 0.00. Recovery week after the beating it took through the beginning of June. Back up to the bottom of the April through May range.
MARKET STATISTICS
NASDAQ
Stats: +13.02 points (+0.3%) to close at 4310.65
Volume: 1.728B (-7.79%)
Up Volume: 1.11B (+467.65M)
Down Volume: 608.12M (-641.88M)
A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 1.81 to 1
New Highs: 62 (-8)
New Lows: 21 (+4)
S&P
Stats: +6.05 points (+0.31%) to close at 1936.16
NYSE Volume: 472M (-10.44%)
A/D and Hi/Lo: Advancers led 1.35 to 1
Previous Session: Decliners led 1.38 to 1
New Highs: 95 (-9)
New Lows: 13 (+5)
DJ30
Stats: +41.55 points (+0.25%) to close at 16775.74
SENTIMENT INDICATORS
VIX: 12.18; -0.38
VXN: 13.61; -0.24
VXO: 11.22; -0.37
Put/Call Ratio (CBOE): 0.77; -0.03
Bulls and Bears:
Bulls slowed the climb but climbed to a new 5 year high: 62.6%
Bears a bit lower but in a familiar range: 17.2%
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: 62.6%
62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 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: 17.2%
17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 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 NEWS
Producer Prices fade away according to the Fed.
Year/year: 2.0 versus 2.4% expected versus 2.1% prior
Core year/year: 2.0%
Down but still some pretty strong prices year/year. Not much to say here. Dropping prices is good, but the Fed views that as bad as it views inflation as a good thing. But the Fed should take heart: year/year numbers are still strong despite a one-month backtrack.
Michigan Sentiment, June Preliminary: 81.2 versus 82.9 expected versus 81.9 prior.
Not the gain anticipated, missing by the widest margin in 18 months. You know what? Who cares? As noted the last Michigan Sentiment report, at these levels the indicator means nothing. It is mired in mediocrity. Hmm. As the economy is mired in mediocrity perhaps this is representative.
What DOES mean something in sentiment terms is the newly released CEO Economic Sentiment Index. It limps in at 49.1, below the 50 expansion/contraction line, stuck at 2014 lows.
One CEO said his company is "concerned about the retail demand environment, and a little less bullish than earlier I the year due to a slower housing market, some inconsistency at retail, and an economy that's not quite as robust as expected."
Retailers in the survey complained of lower traffic and needing to continue promotions in order to drive sales.
The Q2 bounce is slipping away, just as it has done every year of the recovery but 2010. That is damn depressing.
MONDAY
Pre-market Friday we were perusing the headlines on the financial sites, blogs, etc., watching the futures and stock action. We traded notes on what we were seeing and what we all noticed were the comments about trouble ahead. Not the Tepper 'I'm nervous' comments, but similar.
CNBC reported a 'pro' as saying the rally is in the 'late innings.' Cramer said 'something unexpected may be imminent.'
Well, we are no fan of picking market tops or bottoms, but I did throw out there that if SP500 made it to 2000 that might very well be the top of this run. 1950 was the top for many 2014 S&P500 predictions. Hit that this past week. 2000 started to get some talk. Came under some pressure, sold back, then the talk about late innings, trouble lurking.
There could be problems for sure. There always can be problems. As for the unexpected but imminent, well, Iraq came unexpectedly but stocks really shrugged it off. Certainly no dive lower, just a test after a good run higher. The Fed is on tap for next week, and as I noted early week, it definitely could provide a Greenspan 'irrational exuberance' moment given its lamenting how its own actions caused market complacency. Begging the question, of course, what the hell did it think it was going to cause with its policies?
Perhaps Cramer was thinking of the Fed and that most would not expect the Fed to rattle investors' cages. Other than that, however, the statement struck me as particularly asinine. How do you expect something unexpected? If that is your criteria you should never invest.
This is the kind of 'noise' that I discuss in a free seminar I am giving next Thursday. It is the speculation, the gut feelings of the 'pros' as uttered on the financial stations. Smart traders/investors have fallen prey to this. They think they are immune to it, but when the action gets fierce and the emotions are raw, those words are there and they can cause you to not believe what you see.
And what is out there to be seen? A few things of note.
NASDAQ was forming a head and shoulders. It broke it up. SP500 was putting in a double top. Broke it up. SP400 had a double top in place. It broke out under two weeks back. SOX had set a head and shoulders pattern. It blew past the head and hasn't even looked back.
ALL OF THOSE PATTERNS formed during the March to May selling. On the DAY Tepper said he was nervous, the indices bottomed and we bought into GOOG, AAPL, PCLN, TRIP, VIPS, etc. We were watching the patterns of leaders. They were forming bullish patterns.
So of course that leads us to now and the key aspects: not what the 'pros' are saying, but what the patterns are telling us.
We went through the leadership above. There are very good pullbacks in progress that look to be setting up the continuation of rallies: STX, GOOG, TRIP, VIPS, BIIB, TEN, NFLX, FB, QIWI. There are stocks coming off rounded bottoms, ready to make their moves, e.g. RVBD, DHRM, MANH, CLDX, QIHU.
Many different sectors, many different stages of moves. Similar to the May 15 bottom but different given the participation and that some stocks have rallied well. In May people were almost panicking over a modest pullback. Now they are seeing ghosts and fearing the unknown. Similar and thus promising.
Yes the Fed can rip the market. It gives as it has for five years, and it takes when it thinks it has done too much. It is the market's Sybil, and it has to be respected because it can change personalities on you at any time.
Indeed, we respect the possibility of a Greenspan moment so much, we are considering just paring back positions in terms of their size when talking solid plays working well, and eliminating plays that are just not performing. Staying with the many strong plays we have, culling the plodders, but still looking for positions in the many solid stocks that used this past week to set up new moves and thus new entry points for us to make money. Don't want to let a fear of the 'unexpected' keep us sitting on our hands when stocks are saying 'buy me.' You won't necessarily lose money if you do nothing, but the opportunity cost of not acting when stocks are saying act is huge. You have to make the plays when they are there.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4310.65
Resistance:
4372 is the March 2014 high
4397 is the lower November 2012 trendline
Support:
4289 is the July 2000 recovery high
The 10 day EMA at 4292
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 50 day EMA at 4200
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4059
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
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 1936.16
Resistance:
Support:
1913 is the December 2012 up trendline
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 50 day EMA at 1897
1860 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
The 200 day SMA at 1810
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
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
Dow: Closed at 16,775.74
Resistance:
17,047 is a lower trendline off the 11/2012 low
Support:
16,736 is the penultimate all-time high from May 2014
The 20 day EMA at 16,731
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 50 day EMA at 16,582
16,506 is the March 2014 peak
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 16,021
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
June 13 - Friday
PPI, May (8:30): -0.2% actual versus 0.2% expected, 0.6% prior (no revisions)
Core PPI, May (8:30): -0.1% actual versus 0.1% expected, 0.5% prior (no revisions)
Michigan Sentiment, June (9:55): 81.2 actual versus 82.9 expected, 81.9 prior
June 16 - Monday
Empire Manufacturing, June (8:30): 12.8 expected, 19.0 prior
Net Long-Term TIC Fl, April (9:00): $4.0B prior
Industrial Productio, May (9:15): 0.5% expected, -0.6% prior
Capacity Utilization, May (9:15): 78.9% expected, 78.6% prior
NAHB Housing Market , June (10:00): 46 expected, 45 prior
June 17 - Tuesday
Housing Starts, May (8:30): 1028K expected, 1072K prior
Building Permits, May (8:30): 1050K expected, 1080K prior
CPI, May (8:30): 0.2% expected, 0.3% prior
Core CPI, May (8:30): 0.2% expected, 0.2% prior
June 18 - Wednesday
MBA Mortgage Index, 06/14 (7:00): +10.3% prior
Current Account Bala, Q1 (8:30): -$97.8B expected, -$81.1B prior
Crude Inventories, 06/14 (10:30): -2.596M prior
FOMC Rate Decision, June (14:00): 0.25% prior
June 19 - Thursday
Initial Claims, 06/14 (8:30): 313K expected, 317K prior
Continuing Claims, 06/14 (8:30): 2638K expected, 2614K prior
Philadelphia Fed, June (10:00): 13.4 expected, 15.4 prior
Leading Indicators, May (10:00): 0.5% expected, 0.4% prior
Natural Gas Inventor, 06/14 (10:30): 107 bcf prior
By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved
Jon Johnson is the Editor of The Daily at InvestmentHouse.com
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