Seasonal Pattern is Holding Pat

MARKET SUMMARY

- More of the same with large cap NYSE testing while NASDAQ gains and SOX bounces.
- Excellent leadership action continues.
- Seasonal pattern is holding pat, but there Russia is a real potential market problem.

More of the same, for the most part. Stocks were sluggish pre-market, sluggish during the session, and indeed sluggish most of the week. There were of course exceptions, there always are. Those exceptions are typically with the trend and that was the case Friday as it was during the week.

SP500 0.49, 0.02%
NASDAQ 8.40, 0.18%
DJ30 -18.05, -0.10%
SP400 -0.04%
RUTX -0.14%
SOX 0.90%

VOLUME: NYSE -0.5%; NASDAQ -6%. No churn, no heavy selling, just lighter trade to end the week.

A/D: NYSE advancers led by a few issues. NASDAQ saw decliners lead by a few issues.


THE MARKET

CHARTS

SP500: Continued its tight lateral move, now 4 days and 4 tight doji. The 10 day EMA is moving up below it, still a ways off. That means SP500 likely continues the consolidation, but that is very good action because it is refusing to give up ground. It likely will give up some versus this lateral, not giving any ground, but that is still excellent action.

DJ30: Its upside advance started to stall similar to SP500, but the Dow still worked higher versus SP500's tight lateral move. It like has to test back toward the 10 day EMA as well, at least, to get new life and a new leg. Now the 10 day is WAY ahead of the September prior peak at 17,350 that would be the logical point to test on a pullback. That can still happen and would likely scare out all of the late money coming to the rally. At this juncture it does not look as if that would happen, but what if the Ukraine/Russia tensions shoot higher in the next week? ALL tests would be deeper.

NASDAQ: Not spectacular at all, but very steady. Broke higher Monday from its weeklong lateral consolidation and then just kept rising through Friday. Didn't close at the week's high; that was on Thursday when it jumped then dumped. Still quite solid aided not by GOOG but by AAPL, MSFT, AMZN's revival to mention a few.

RUTX: The disappointment of the week, and it didn't occur until the end of the week. Nice break higher from the lateral consolidation, jumping Wednesday. Thursday brought about a reversal of that move and Friday a bit more of a test. Still easily holding over the 10 day EMA, so we will watch and see if the small caps reset (hate to use that word, right?). Important index for the rally.

SOX: Nice break higher Friday off a 6-session pennant to the 10 day EMA. Very nice action to end the week. SOX rallied up to near the July and September highs, put in this test that measured the prior highs, and now we see if it has what it takes to make the new breakout to higher highs. Also a key index for the market this coming week.


LEADERSHIP

Big Names: GOOG did not perform on the week but AAPL, AMZN, MSFT, STX, SNDK and several big names worked and that is what pushed NASDAQ higher on the week.

Biotech: Hope this is not a portent of how the indices act off of their lateral moves. CELG worked laterally for two weeks, looked solid, then cracked Friday. BIIB broke down from a lateral consolidation at the 200 day MA. GILD broke below the 50 day MA.

Retail: Good week again. RH broke higher. BWLD and FIVE posted a great week. DECK moved up from a nice pattern. WSM and others enjoyed good weeks ahead of the Friday retail sales that were positive.

Software: Solid leaders. SWI, CALD, CMGE and others posted excellent gains.

Internet: Coming to life nicely. BITA, TRLA, WUBA surged. QIHU looks very good to make a big move. GRPN enjoyed a nice upside break and a good test to end the week.

Chips: Still look as if they want to break higher, and Friday was positive. ANAD, OCLR look ready to move. SWKS overcame a terrible pattern. We are looking for more from this sector in the event it really makes the break toward the prior highs.


MARKET STATS

NASDAQ
Stats: +8.4 points (+0.18%) to close at 4688.54
Volume: 1.7B (-6.04%)

Up Volume: 976.27M (+123.34M)
Down Volume: 718.88M (-262.97M)

A/D and Hi/Lo: Decliners led 1.05 to 1
Previous Session: Decliners led 1.99 to 1

New Highs: 71 (-81)
New Lows: 59 (-10)

S&P
Stats: +0.49 points (+0.02%) to close at 2039.82
NYSE Volume: 704.9M (-0.45%)

A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 1.8 to 1

New Highs: 85 (-75)
New Lows: 48 (-21)

DJ30
Stats: -18.05 points (-0.1%) to close at 17634.74


SENTIMENT INDICATORS

VIX: 13.31; -0.48
VXN: 15.16; +0.61
VXO: 12.06; -0.11

Put/Call Ratio (CBOE): 0.92; -0.03


Bulls and Bears:

Bulls: 55.5% versus 54.6% versus 47.0% versus 35.3% versus 37.8% versus 45.5%. Bulls are still moving upside though slowing the advance. Still below the 60ish level marking a top but getting closer.

Bears: 14.8% versus 15.1% versus 16.3% versus 18.2% versus 17.3% versus 14.1%. Still fading as bulls rise.

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.




Bulls: 55.5%
54.6% versus 47.0% versus 35.3% versus 37.8% versus 45.5% versus 47.5% versus 48.0% versus 52.5% versus 57.6% versus 56.1% versus 52.5% versus 49.5% versus 46.4% versus 50.5% versus 55.6% versus 56.5% versus 56.6% versus 60.6% versus 57.6% versus 60.2% versus 61.4% versus 62.6% versus 62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7

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

Bears: 14.8%
15.1% versus 16.3% versus 18.2% versus 17.3% versus 14.1% versus 15.1% versus 15.3% versus 15.2% versus 14.1% versus 13.3% versus 15.1% versus 16.2% versus 16.2% versus 17.1% versus 16.2% versus 17.2% versus 15.1% versus 15.2% versus 16.1% versus 16.3% versus 17.2% versus 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%

Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.


OTHER MARKETS

Bonds (10 year): 2.32% versus 2.35% versus 2.36% versus 2.36% versus 2.30% versus 2.38% versus 2.34% versus 2.33% versus 2.339% versus 2.33% versus 2.31% versus 2.32% versus 2.29% versus 2.26% versus 2.26% versus 2.28% versus 2.22% versus 2.18% versus 2.20% versus 2.16% versus 2.14 versus 2.20% versus 2.28% versus 2.31% versus 2.34% versus 2.42% versus 2.44% versus 2.44% versus 2.41% versus 2.49% versus 2.48% versus 2.53%

Trying to bounce higher off a four week consolidation at the 50 day EMA.


Oil: 75.82, +1.92. So beaten up it bounced Friday. Here was the headline on Bloomberg: "Oil rises as price plunge puts pressure on OPEC to act." So in more concise terms, oil prices rose because oil prices fell. Good grief. Oil is still in a massive selloff, and the Friday gain did not even make up the Thursday $2.97 loss.

Now oil did recover the break of support on Thursday, and that is a good indication as it suggests a false break and a true rebound. Maybe lower prices do mean higher prices as the Bloomberg headline suggested.


Gold: 1185.60, +24.10. Huge surge after three weeks trading laterally above support. Big move, strong move.


$/JPY: 116.29 versus 115.74 versus 115.53 versus 115.32 versus 114.86 versus 114.60 versus 114.98 versus 114.64 versus 113.60 versus 113.73 versus 112.32 versus 109.23 versus 108.89 versus 108.16 versus 107.83 versus 108.13 versus 108.17 versus 107.20 versus 106.88 versus 106.38 versus 106.875 versus 106.33 versus 105.92 versus 107.05 versus 107.29 versus 107.66 versus 108.12 versus 107.95 versus 108.96

Higher again though closed well off the intraday high. Huge move the past three weeks but still trending higher.

Euro/$: 1.2520 versus 1.2486 versus 1.2432 versus 1.2480 versus 1.2421 versus 1.2455 versus 1.2387 versus 1.2486 versus 1.2456 versus 1.2493 versus 1.2525 versus 1.2610 versus 1.2632 versus 1.2734 versus 1.2698 versus 1.2670 versus 1.2650 versus 1.2645 versus 1.2723 versus 1.2810 versus 1.2760 versus 1.2809 versus 1.2838 versus 1.2658 versus 1.2683 versus 1.2628 versus 1.2748 versus 1.2680 versus 1.2627

Still working laterally at the 10 day EMA in a weeklong consolidation. Looks like a good rest.


Next Week

As noted in the DJ30 chart discussion, this coming week and indeed the weeks to come have an old nemesis to deal with, the Ukraine/Russia revival . . . of hostilities. Reports of Russian again invading Ukraine and bringing in nukes to East Ukraine did not receive many headlines, but they were there and the market was a bit pensive.

Now a lot of that was technical: SP500 and DJ30 rallied without a break and they are taking one. Very normal. If tensions flare up, something Putin appears to desire in order to draw more reactions from the West and thus gain more followers for his 'anti-West' currency swaps, monetary clearing houses, etc. He is going to do this to cement as much advantage as he can before the 2016 elections that are still oh so long away yet close enough when you are attempting to reestablish your position as a super power.

The Russia issues have not gone away but we are going to turn our attention elsewhere, i.e. to the President unilaterally issuing amnesty and I am sure many other acts as he plays out his last 2 years and 1.5 months as self-styled monarch. So we are going to be embroiled in domestic disputes as Russia and China do their mischief, ISIS and Al Qaeda link up again and again to squash moderates in the Middle East. Suddenly we will look up and Israel will be at war with them, the rest of the Middle East, and likely Russia, at least through surrogates such as Iran (where Russia is building 9 nuclear plants for Iran). That would be the gut check for the US and the world and frankly I do not know how we would respond.

But I digress. The point is that while the market is in a bullish seasonal pattern, the old sell in September into October, bottom in October, and rally to Thanksgiving, sell a bit, then rally into year end, it is vulnerable to outside shocks. Good action thus far, good leadership, ready to run to year end with the usual pullbacks, tests, then rallies, yet there could be extraneous trouble.

For now we continue playing the seasonal pattern. It is working and Friday even more stocks broke higher. Big moves from many and we picked up some CALD and CMGE while BITA and others surged. We will continue to look for good patterns but watch the East.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4688.54

Resistance:

Support:
The 10 day EMA at 4641
4610 is the September 2014 post-bear market high.
The 50 day EMA at 4517
4486 is the July 2014 high
4372 is the March 2014 high
The 200 day SMA at 4343
The August low at 4321
4316 is the lower gap point from October 2014
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
4185, the May lower gap point
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


S&P 500: Closed at 2039..82

Resistance:
2066 is the December 2012 up trendline

Support:
The 10 day EMA at 2026
2011 is the September prior all-time high
2006 is the lower trendline from 11/2012
1991 is the July 2014 high
The 50 day EMA at 1981
The 200 day SMA at 1923
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high


Dow: Closed at 17,634.74

Resistance:

Support:
The 10 day EMA at 17,503
17,351 is the September 2014 all-time high.
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
The 50 day EMA at 17,072
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,736 is the penultimate all-time high from May 2014
The 200 day SMA at 16,682
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
16,341 is the May low
16,334 is the August 2014 low
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak


ECONOMIC CALENDAR

November 12 - Wednesday
MBA Mortgage Index, 11/08 (7:00): -0.9% actual versus -2.6% prior
Wholesale Inventories, September (10:00): 0.3% actual versus 0.2% expected, 0.6% prior (revised from 0.7%)

November 13 - Thursday
Initial Claims, 10/11 (8:30): 264K actual versus 290K expected, 287K prior
Continuing Claims, 10/04 (8:30): 2389K actual versus 2388K expected, 2382K prior (revised from 2381K)
Industrial Production, September (9:15): 1.0% actual versus 0.4% expected, -0.2% prior (revised from -0.1%)
Capacity Utilization, September (9:15): 79.3% actual versus 79.0% expected, 78.7% prior (revised from 78.8%)
Philadelphia Fed, October (10:00): 20.7 actual versus 19.8 expected, 22.5 prior
NAHB Housing Market , October (10:00): 54 actual versus 59 expected, 59 prior
Natural Gas Inventories, 10/11 (10:30): 94 bcf actual versus 105 bcf prior
Crude Inventories, 10/11 (11:00): 8.923M actual versus 5.015M prior
Treasury Budget, September (14:00): $106B expected, $75.1B prior
Net Long-Term TIC Fl, August (16:00): $52.1B actual versus -18.6B prior

November 14 - Friday
Retail Sales, October (8:30): 0.3% actual versus 0.3% expected, -0.3% prior
Retail Sales ex-auto, October (8:30): 0.3% actual versus 0.2% expected, 0.0% prior (revised from -0.2%)
Export Prices ex-ag., October (8:30): -0.9% actual versus -0.2% prior
Import Prices ex-oil, October (8:30): -0.2% actual versus -0.1% prior
Mich Sentiment, November (9:55): 89.4 actual versus 87.5 expected, 86.9 prior
Business Inventories, September (10:00): 0.3% actual versus 0.2% expected, 0.1% prior (revised from 0.2%)
Natural Gas Inventor, 11/08 (10:30): 40 bcf actual versus 91 bcf prior

November 17 - Monday
Empire Manufacturing, November (8:30): 12.0 expected, 6.2 prior
Industrial Productio, October (9:15): 0.2% expected, 1.0% prior
Capacity Utilization, October (9:15): 79.3% expected, 79.3% prior

November 18 - Tuesday
PPI, October (8:30): -0.2% expected, -0.1% prior
Core PPI, October (8:30): 0.1% expected, 0.0% prior
NAHB Housing Market , November (10:00): 55 expected, 54 prior
Net Long-Term TIC Fl, September (16:00): $52.1B prior

November 19 - Wednesday
MBA Mortgage Index, 11/15 (7:00): -0.9% prior
Housing Starts, October (8:30): 1025K expected, 1017K prior
Building Permits, October (8:30): 1040K expected, 1031K prior (revised from 1018K)
Crude Inventories, 11/15 (10:30): -1.735M prior
FOMC Minutes, 10/29 (14:00)

November 20 - Thursday
Initial Claims, 11/15 (8:30): 285K expected, 290K prior
Continuing Claims, 11/08 (8:30): 2375K expected, 2392K prior
CPI, October (8:30): -0.1% expected, 0.1% prior
Core CPI, October (8:30): 0.1% expected, 0.1% prior
Existing Home Sales, October (10:00): 5.17M expected, 5.17M prior
Philadelphia Fed, November (10:00): 18.0 expected, 20.7 prior
Leading Indicators, October (10:00): 0.6% expected, 0.8% prior
Natural Gas Inventor, 11/15 (10:30)

By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

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

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