Monday, December 22, 2014

Not Much News to Drive Stocks


- After the fireworks, kind of an anticlimactic expiration, but stocks still post gains.
- Not much news to drive stocks, but they didn't need it.
- Modest gains but not the pullback yet for some new entries.

After all the news on the week . . . Russia, economic, and the grand finale, the FOMC's patience proclamation that set off an upside firestorm after the early week continuation of the oil/Russia selloff, Friday was pretty tame. Up but it had to slow some. Seems each time the market has a serious identity crisis as in October (Ebola, economics) and then December (oil and Russia), it roars back. Easy go, easy come?

SP500 9.42, 0.46%
NASDAQ 16.98, 0.36%
DJ30 26.65, 0.15%
SP400 0.33%
RUTX 0.32%
SOX -0.30%

Seems so, particularly with an FOMC perceived as continued lax and laissez-faire. Downright patient some would say. I don't really buy it; as discussed last week post-FOMC, to us Chairman Yellen's comments again indicate a rate hike 6 months after QE ended in October. That is the polar opposite of others such as Peter Schiff, the bear who believes the Fed will go for QE4. Still others believe the economy is in nirvana with 4% growth becoming the norm, great job creation, diving unemployment. Just your usual slightly different, a few degrees apart economic forecasts.

Of course reality is usually somewhere in between and we don't think things are going to hell in a hand basket (my father used that phrase; not sure what the derivation is or even the meaning for that matter) nor do we think it is anywhere near the boom the new normal believers claim. Jobs are not quality jobs and stats this weekend show that virtually all jobs growth has been from immigrants. Markit PMI readings are showing sharp slowdown, contrasting the establishment surveys. If oil continues its dive there will be further cap-ex cuts, less drilling, and layoffs, pressuring the one industry that kept the US economy alive during the recession.

Housing is worrisome as it slows, though as with the economy, the extreme high end is booming still while other areas start to struggle. Not only is the slowing worrisome but some of the comments you hear from our leaders once again talk of the inability of lower income households to gain access to mortgages. We are hearing the very same comments that preceded the housing boom then bust when banks were forced to lend to poor credit risks. There is no doubt the mortgage market is in a straightjacket gratis the tightened restrictions post-bust. Good risks with good credit find it hard to qualify. We went through that and put down an absurd amount on a place with just a small note yet I felt as if I was going to have to turn over my most recent prostate exam results. As usual with regulation, it is either too easy leading to corruption and bubble conditions, or it is too restrictive as it is now after the bust, when you need a bit of leeway to get the market going.

The point: things could crash; there are enough problems out there and if a few things fall the wrong way it could get messy. On the other hand, the US could continue to improve if we don't do stupid things that shoot ourselves in the foot such as banning fracturing, extend social benefits to millions of new people, etc. Of course we ARE blowing off our own feet so while there is improvement it remains painstakingly and frustratingly slow.

The Fed, however, needs to get some ammunition reloaded, and the only way to do that is get interest rates above 0%. If it does not and something hits, then we have negative rate policy in the US as in Europe, i.e. where it costs you money (other than inflation losses and opportunity cost) to keep banks on deposit. Thus the Fed has decided it wants to raise rates and will do so, albeit in a slow (is that patient?) process, unless something really ugly happens.

I could make some predictions for the new year but those are worthless and are only interesting in any shock value they have. You know, predicting the US and USSR will have an actual military altercation, intentional or otherwise, as a result of the school yard antics Russia is pulling such as buzzing US facilities in Guam with bombers, cutting off NATO aircraft with crazily risky moves, etc.

Russian fighter cuts across Norwegian F-16

Russian Bear bomber escorted away from Guam. Canadian F-18's intercepted two Bear bombers intruding into Alaska air defense identification zone on 12/8.

Or how about $20/bbl oil because demand really does tank as predicted but supply remains huge as Saudi Arabia wants to again kill off the US domestic industry to maintain market share. Interesting and based in some fact and history, but pure conjecture and just too many variables.

How do you position yourself for those predictions anyway? It is opinion, conjecture, and frankly in many cases BS.

What you have to do is look to stocks themselves and see how they are acting. Good patterns or weak patterns? Holding trends or giving them up? Leadership solid or struggling and fading?

Those are much more pertinent than broad guesses as to the future. Leaders help show you where the money is going and that is, bottom line, what you have to look at to determine where to place your money. If you get wedded to a big picture notion you tend to look at market moves through that prism and that can cause you to miss what stocks are telling you. That is why, regardless of how I feel about the economy and prospects for the future, I have to check them at the door when it is time to invest and trade. My economic opinions are not going to influence the market one bit even if I am right as of course I usually am.

Thus with the market still showing some very good patterns and setups that jumped higher last week, it appears the market still wants to rally to year end and thus we look for new plays upside. Indeed, while we were not too keen on taking new positions Friday given the 2-day sprint Wednesday and Thursday, we picked up some AAPL as it looks very good.



SP500: Added more upside, tapping at the November all-time highs on the intraday high, backing off some to the close. MACD is lagging, at the prior highs. Still looking for a continued move higher to year end, but this gets interesting here at the prior high and the October and December close proximity selloffs.

NASDAQ: As with SP500, NASDAQ added more to end the week, though it too faded off the intraday high after touching near the November high. Strong recovery, near the prior high, lower MACD. Nice rebound off the 38% Fibonacci retracement, showing momentum is still good but an important test of the prior highs is ahead.

RUTX: The small caps continued the move over the November trading range. Still below the July and February peaks but took out an important one if it can hold the breakout.

DJ30: Gave back most of the Friday move by the close. Huge upside move Wednesday and Thursday, hit some resistance Friday, took a day off. Similar comments to NASDAQ with the 38% Fibonacci retracement hold and rebound but now at the prior high.

SOX: Still a great looking pattern with the surge off the 50 day EMA test. Modest loss Friday on some retrenching, but a very solid pattern and a solid new upside move.


Leaders were still performing Friday. Some took the day off, but good moves continued to move higher.

Data storage: STX and WDC still moving.

Software: SWI jumping.

Biotechs: Looking solid again. CELG, TGTX, XON.

Materials: Still looking better and better. LPX. TREX was down but still a nice pattern.


Stats: +16.98 points (+0.36%) to close at 4765.38
Volume: 2.831B (+33.83%)

Up Volume: 1.85B (+80M)
Down Volume: 1.3B (+917.38M)

A/D and Hi/Lo: Advancers led 1.06 to 1
Previous Session: Advancers led 3.18 to 1

New Highs: 138 (+5)
New Lows: 52 (+8)

Stats: +9.42 points (+0.46%) to close at 2070.65
NYSE Volume: 2.5B (+127.27%)

A/D and Hi/Lo: Advancers led 1.82 to 1
Previous Session: Advancers led 4.14 to 1

New Highs: 221 (+33)
New Lows: 23 (0)

Stats: +26.65 points (+0.15%) to close at 17804.8


VIX: 16.49; -0.32
VXN: 16.89; -0.34
VXO: 14.63; -0.25

Put/Call Ratio (CBOE): 0.88; +0.1

Bulls and Bears:

Bulls: 49.5% versus 51.5% versus 53.4% versus 56.5%. Down again after some sharp declines. Never did get to 60%, a red flag top indicator for the market the past few years.

Bears: 14.9% versus 14.8% versus 13.9% versus 13.8% versus 14.9%. Bears still don't want to grow much at all.

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: 49.5%
51.5% versus 53.4% versus 56.5% versus 56.4% versus 55.5% versus 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%

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

Bears: 14.9%
14.8% versus 13.9% versus 13.8% versus 14.9% versus 14.8% versus 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%

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.


Bonds (10 year): 2.17 versus 2.21%
2.14% versus 2.05% versus 2.11% versus 2.08% versus 2.18% versus 2.16% versus 2.22% versus 2.26% versus 2.31% versus 2.24% versus 2.29% versus 2.29% versus 2.22 versus 2.17% versus 2.21% versus 2.24% versus 2.26% versus 2.30% versus 2.31% versus 2.34% versus 2.35% versus 2.32% versus 2.34% versus 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%

Surging, suggesting that the Fed IS going to raise rates sooner than later.

Oil: 56.52, +2.41. Laterally Tuesday to Friday. Oil is at support, it wants to bounce even if it is nothing more than a relief bounce.

Gold: 1196.00, +1.10

$/JPY: 119.49 versus 118.83 versus 118.86 versus 116.81 versus 117.61 versus 118.75 versus 119.07 versus 118.12 versus 119.76 versus 120.55 versus 121.42 versus 119.78 versus 119.81 versus 119.21 versus 118.36 versus 118.63 versus 117.58 versus 117.93 versus 118.27 versus 117.73 versus 117.96 versus 118.00 versus 116.98 versus 116.47 versus 116.29 versus 115.74

Euro/$: 1.2225 versus 1.2284 versus 1.2345 versus 1.2509 versus 1.2448 versus 1.2462 versus 1.2389 versus 1.2439 versus 1.2366 versus 1.2318 versus 1.2289 versus 1.2379 versus 1.2313 versus 1.2383 versus 1.2473 versus 1.2452 versus 1.2509 versus 1.2477 versus 1.2442 versus 1.2386 versus 1.2549 versus 1.2543 versus 1.2532


A shortened week of course with Christmas on Thursday. Christmas Eve the market closes at 1:00ET. Friday the market is open but no one will be there.

A short week and typically a quiet week, but of course all economic data needs to be crammed in ahead of the holiday. Thus Tuesday is chocked full with durable goods, GDP third iteration (4.2% expected), Michigan Sentiment, Personal income and spending, New home sales . . . a full calendar.

Doesn't really change how we look at the market. After all, the Fed has spoken and it will be patient with us.

After the two day surge some positions we wanted got a bit away to the upside and Friday we watched for a bit of a pullback. There was just a bit with just some stocks. Not really what we wanted. So, we watch for that early this week. Remember, the test can take a few days. As the Fed, patience is key. Watch for orderly pullbacks/fades of the Wednesday and Thursday moves. When the stocks start back up, start picking up positions.

That is all for now.


NASDAQ: Closed at 4765.38

4782 is the November 2014 peak

The 50 day EMA at 4638
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
4545 is the 38% Fibonacci retracement
4486 is the July 2014 high
The 200 day SMA at 4402
4372 is the March 2014 high
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 2070.65

2076 is the all-time high from November
2099 is the December 2012 up trendline

2041 is the lower trendline from 11/2012
The 50 day EMA at 2020
2011 is the September prior all-time high
1991 is the July 2014 high
The 200 day SMA at 1950
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 17,804.80

17,991 is the all-time high

The 50 day EMA at 17,434
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
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
The 200 day SMA at 16,880
16,736 is the penultimate all-time high from May 2014
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


December 22 - Monday
Existing Home Sales, November (10:00): 5.20M expected, 5.26M prior

December 23 - Tuesday
Durable Orders, November (8:30): 2.8% expected, 0.4% prior
Durable Goods -ex transports, November (8:30): 1.0% expected, -0.9% prior
GDP - Third Estimate, Q3 (8:30): 4.2% expected, 3.9% prior
GDP Deflator - Third, Q3 (8:30): 1.4% expected, 1.4% prior
FHFA Housing Price Index, October (9:00): 0.0% prior
Michigan Sentiment - Final, December (9:55): 93.8 expected, 93.8 prior
Personal Income, November (10:00): 0.5% expected, 0.2% prior
Personal Spending, November (10:00): 0.5% expected, 0.2% prior
PCE Prices - Core, November (10:00): 0.1% expected, 0.2% prior
New Home Sales, November (10:00): 460K expected, 458K prior

December 24 - Wednesday
MBA Mortgage Index, 12/20 (7:00): -3.3% prior
Initial Claims, 12/20 (8:30): 290K expected, 289K prior
Continuing Claims, 12/13 (8:30): 2358K expected, 2373K prior
Crude Inventories, 12/20 (10:30): -0.847M prior
Natural Gas Inventor, 12/20 (24:00): -64 bcf prior

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

Jon Johnson is the Editor of The Daily at

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