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2/9/2015 Investment House Report
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MARKET ALERTS:
Targets hit: None issued
Buy alerts: IDCC; LCI
Trailing stops: NTES
Stop alerts: NTES; SOHU
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The REPORTS SCHEDULE is as follows:
Market Summary Video, Plays and Play Videos, and Play Tables with play
annotations will issue Monday, Wednesday and the Weekend.
Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play tables.
Access to all current videos will remain assessable each day using the play
links in the reports.
If any market circumstances arise where we see additional plays we want to
prepare for the next session, we will of course issue those plays regardless
of the day of the week.
MARKET SUMMARY
- Second day of testing is good enough with low volume over support.
- News is bad enough to credit it with the loss.
- China exports and imports tank.
- Greece, Germany, and the EU continue to fight like relatives.
- US banks now crying about the stronger dollar. Banks, multinationals all
benefitted from the Fed and Federal government policies, now it is time to
at least let the middle class benefit from a stronger dollar.
- Getting close to the bounce point if there is one.
Down all session, never making it positive, even in the pre-market. Stocks
did bounce from the lower open into midday, posting a decent recovery. Of
course the mood is consolidation right now and the indices could not hold
the recovery. A selloff to the last hour, then a modest rebound to the
close. Down across the board, but not necessarily carnage. Not really
carnage at all, just a continuation of the Friday fade that is testing the
rally off the trading range lows to the upper third if the channel.
SP500 -8.73, -0.42%
NASDAQ -18.39, -0.39%
DJ30 -95.08, -0.53%
SP400 -0.50%
RUTX -0.80%
SOX -1.09%
VOLUME: NYSE -14%, NASDAQ -19%. No dumping on the downside, and that is
not bad.
A/D: -1.4:1 NYSE, -1.7:1 NASDAQ.
THE NEWS
There was plenty to start the week and it was not the best news for world
economies and the US economy in particular. Thus there were plenty of
reasons to sell, plenty of excuses to pin the tail on the reason for the
loss. As noted over the weekend and last week, often there are stories
whose theme coincides with the market action. It is easy for the headline
readers on the financial stations to parrot those as 'causes' for the market
moves.
Sometimes they are; sometimes serious news truly trumps any market
attribute, technical or fundamental. Most other times, the news is simply
imbued with market-moving powers when it is really just the technical
pattern at work. Thus you see what you would think are positive stories used
as selling fodder when the market is simply negative and views every story
as negative.
Monday was a situation where negative stories were credited with the selling
but the selling was on light volume and coincided with a rather normal
pullback to test a good bounce off the range lows.
China Economic Woes: Imports down, Exports down.
Exports: -3.3% versus 6.9% expected versus 9.7% prior (year/year)
Imports: -19.9% versus -3.0% versus -2.4% prior (year/year)
No wonder China has started stimulus over the past few months: the numbers,
even fudged to look better, are trending lower and lower. Makes you wonder
why China pegs the yuan to the dollar: if the dollar rises it could export
more goods as Chinese goods are cheaper to the US. Oh well; China is not
looking good even though its market chart does not look all that bad,
testing the 50 day EMA after a strong November to January surge.
Greece and Germany: The G's don't like each other.
Ever since the Greece election and the anti-bailout candidate formed a
coalition government, the EU and ECB have gone after Greece, attempting to
convince the Greek populace that, regardless of what the Greek PM is telling
them, things would not go well for the nation if it decides to 'GreExit'
from the EU.
Monday they were at it again, Germany telling Greece that there is 'no way
out' of the bailout requirements. To get the money Greece must submit to
the will of the ECB. Makes perfect sense: you want the money to bail you
out, you need to do what the lenders require. Pretty basic.
But that assumes people are rational, something that is not that common on
the Continent. Greece wants its bailout and it wants to eat it as well. If
you can do it, why not?
But Greece does not control the bailout funds. So in response the Greeks
shot back that the ECB has 'lost control of monetary policy' with its foray
into QE.
Who is right? Both are. If you want a bailout you need to abide by the
terms, that is unless you are a US bank and then you can say you will, take
the money, make billions, then never pay any price, at least with your
money.
This was, however, given as a reason for the down market.
Russia and Ukraine, Russia and US, Russia and Cyprus . . .
All kinds of activity here. Cyprus offered Russia a military base that will
be less than 90 miles from the Cyprus NATO base. Now they know how we felt
with Cuba.
France is said to be edging closer to Russia. It was France who still aided
Russia with its naval ships.
Germany is supposedly telling the US to back off arming Ukraine. Later in
the day after Ms. Merkel and Mr. Obama met they both announced that military
action against Russia was out of the questions. Some were saying Europe
doesn't want to stomach another war in Europe. I think it is safe to say
the US doesn't want another war in Europe either.
Shipping
Baltic Dry Index: We held off reporting on this until it was a record. Now
it is at an all-time low. This index measures shipping costs in the world.
That they are at record lows tells the story of woe in China, Asia, Europe,
and Brazil. The dive in oil prices and thus gasoline prices makes Brazil's
sugar-based ethanol worth a lot less.
India shines
Bright spot: India GDP 7.5% versus 5.5% expected, 5.3% prior
Dollar strength = more US companies belly aching.
The din of outcry from those bemoaning the rise in the dollar's relative
value comes with every new economic twist.
Monday US banks got their turn, screaming about a higher US dollar placing
them at a competitive disadvantage. This is the latest after weeks and
weeks of
the big multinational companies blubbering about lower exports and how bad
that is for the US.
Okay, time for some reality. Time to give the average US citizen a break.
Shafted in the stimulus package, shafted in the ensuing recovery, isn't it
time to consider those paying the bills?
First, who cares if some huge companies don't make as much because the
dollar is stronger? They benefitted HUGELY when it was low, and now that is
up a bit and profits drop, they complain.
But why is the dollar stronger? It is because other countries' economies
are terrible and money is fleeing them to the safety of US treasuries and
dollar-based assets. That makes dollars more valuable of course. Yet, with
these other economies so weak, they are going to consume less US goods IN
ANY EVENT. Thus the complaints would be there even if they got the dollar
undermined by further purposeful monetary weakening.
Second, the stimulus of 2009 gave close to 100% of the benefits to the big
corporations. The push to 'green' projects went to the big companies the
government could control. GE's CEO was seen with Obama so many times he was
called the White Shadow. GE benefitted HUGELY from the green contracts it
was rewarded and we saw thousands of GE commercials telling us how great it
was . . . yes, using our tax dollars to fund its stimulus receipts.
Third, after the banking crisis what banks really paid the price? Oh, yes;
the small banks strangled by Dodd/Frank. Sure the big banks had to pay some
fines, but they paid it with other people's money, not the CEO or officer
pay. All show, no substance.
Finally, finally there is a stronger dollar. That makes the US even more
desirable as the strength builds upon the strength. More money comes it for
investment, more investment is made, the economy grows, and this time
EVERYONE benefits, not just the friends of the Administration.
Further, with a stronger dollar, oil prices are lower as well (less dollars
to buy a barrel of foreign oil). Other goods, foreign goods, are cheaper to
US citizens, something the vast middle of the US needs given wages have
stagnated for 10 years. JUST WHEN they are catching a break and seeing
their buying power increase, not by wages but by currency appreciation,
those that made all the money want to take even this away from the
beleaguered US middle class.
Count your damn blessings. Big businesses prospered in the collapse because
of free money. The US is still destroying more small businesses than
creating. Let them get back on their feet with a stronger dollar (as they
certainly are not getting any regulatory or tax help) so they have a chance
to survive. In other words, shut the hell up already.
THE MARKET
CHARTS
Not bad action at all as the patterns and the internals show.
DJ30: Closed near the low, but holding over the 50 day SMA and the upper
trendline in its pennant. Volume lower, well below average. Thus far a
very normal, positive test.
SP500: Almost a carbon of the Dow, stepping back a second day to the 50 day
SMA and upper trendline in the pennant. Lower, below average volume means
no dumping.
NASDAQ: Not bad, showing a doji just over the 50 day SMA. Perhaps a higher
low setting up in the trading range as discussed last week? That is one
signal you look for as stocks test inside a range.
SP400: No longer a new high, but a nice test of that move, fading toward
and still over the 10 day EMA in what could be the start of a new uptrend
channel formed basically at the end of 2014.
SOX: As you can see, SOX was the issue. Down over 1%, looking a bit
heavier than the rest of the market. Not a bad pattern, just not leadership
caliber. The market tends to take SOX' lead, and thus if it breaks the
market test may turn into just more downside. Some great moves in smaller
chips not represented on the index, e.g. ANAD, ENPH, ONNN. Others look good
to go, e.g. NXPI, SLAB. Definitely not a lost cause.
LEADERSHIP
Big names: Some still look good, e.g. GOOG, setting up for a new move.
AMZN, UTX, MMM, just taking a breather. AAPL still looks toppish, but up on
the session in a down market. Perhaps it just breaks out. Some still look
weak but did not break lower in the action, e.g. MSFT.
China: Very mixed. NTES, SOHU dive. JD holds its ground. NOAH up over 4%.
Energy: Still taking a breather from its recent move. Not a bad test at
all, e.g. PTEN, APC, SLB.
Financial: Taking a breather after a big move Friday, e.g. BAC, C.
MARKET STATISTICS
NASDAQ
Stats: -18.39 points (-0.39%) to close at 4726.01
Volume: 1.607B (-18.64%)
Up Volume: 683.29M (-233.29M)
Down Volume: 942.8M (-147.2M)
A/D and Hi/Lo: Decliners led 1.7 to 1
Previous Session: Decliners led 1.16 to 1
New Highs: 48 (-59)
New Lows: 29 (-6)
S&P
Stats: -8.73 points (-0.42%) to close at 2046.74
NYSE Volume: 776M (-13.78%)
A/D and Hi/Lo: Decliners led 1.42 to 1
Previous Session: Decliners led 1.67 to 1
New Highs: 50 (-82)
New Lows: 22 (+7)
Dow/NYSE
Stats: -95.08 points (-0.53%) to close at 17729.21
SENTIMENT INDICATORS
VIX: 18.55; +1.26
VXN: 19.12; +0.71
VXO: 17.41; +0.14
Put/Call Ratio (CBOE): 1.07; +0.05
Bulls and Bears:
Bulls: 49.0% versus 53.1% versus 49.0% versus 48.0% versus 50.5% versus
56.4% versus 52.5%. Sold on the market selling. Next week it will rise on
the market gains. As volatile as the market itself.
Bears: 16.3% versus 16.3% versus 17.4% versus 16.3% versus 15.2% versus
14.9% versus 15.8% versus 14.9%. Back to the game of holding steady with
bears underrepresented in the market.
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: 49.0%
53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5%
versus 49.5% versus 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: 16.3%
16.3% versus 17.4% versus16.3% versus 15.2% versus 14.9% versus 15.8% versus
14.9% versus 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.
OTHER MARKETS
Bonds (10 year): 1.95%. Fading modestly after gapping higher, but still
holding the big gap lower from Friday post-Jobs.
1.94% versus 1.81% versus 1.77% versus 1.78% versus 1.68% versus 1.67%
versus 1.76% versus 1.73% versus 1.81% versus 1.82% VERSUS 1.80% versus
1.88% versus 1.86% versus 1.79% versus 1.83% versus 1.76% versus 1.84%
versus 1.91% versus 1.91% versus 1.95% versus 2.02% versus 1.97% versus
1.94% versus 2.04% versus 2.12% versus 2.17% versus 2.19% versus 2.21%
versus 2.25%
Oil: 52.99, +1.32. Moved up for a third day, tapping at the 50 day SMA on
the high. Backed off to close, but holding a gain. Key test for oil after
finally breaking through the 20 day EMA.
Gold: 1241.50, +6.90. Moved back up through the 50 day EMA. A rather
modest bounce after the $28 plunge Friday.
$/JPY: 118.62 versus 118.987 versus 117.56 versus 117.21 versus 117.58
versus 117.52 versus 117.40 versus 118.30 versus 117.54 versus 117.88 versus
118.45 versus 117.78 versus 118.49 versus 117.80 versus 118.82 versus 117.52
versus 115.928 versus 117.33 versus 117.77 versus 118.29 versus 118.50
versus 119.69
A second day of testing that big surge Thursday through the 50 day SMA.
Euro/$: 1.1324 versus 1.1318 versus 1.1474 versus 1.1387 versus 1.1481
versus 1.1336 versus 1.1290 versus 1.1318 versus 1.1287 versus 1.1375 versus
1.1263 versus 1.1204 versus 1.1366 versus 1.1590 versus 1.1550 versus 1.1543
versus 1.1609 versus 1.1789 versus 1.1764 versus 1.1832 versus 1.1842 versus
1.1789 versus 1.1839 versus 1.1890 versus 1.1934 versus 1.2002 versus 1.2099
versus 1.2156
Doji at the Friday peak. Stalling a day after surging off the 20 day EMA.
Hasn't changed: still back and forth each session as it was last week.
TUESDAY
Testing for day number two after rallying to the upper third of the trading
range (or in the case of SP400, to a new high). Lower volume, breadth tame
enough. NASDAQ could put in a higher low in its range. So far a test that
works.
So, a decent pullback in progress, but still has to show it is just a test,
that near support holds, and that the bids return to launch stocks on their
next leg. We will keep looking at good upside possibilities but also, as
today, pick up some downside if good stocks need to take a break and retrace
and base, e.g. IDCC that we picked up today.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4726.01
Resistance:
4751 is the January 2015 lower high
4774 is the January high
4811 is the November 2014 peak (intraday)
4815 is the December 2014 market peak
Support:
The 50 day EMA at 4685
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
4563 and 4567 are the January lows
4547 is the December low
The 200 day SMA at 4487
4486 is the July 2014 high
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
S&P 500: Closed at 2046.74
Resistance:
2079 is the lower trendline from 11/2012
2062 is the January 2015 lower high
2076 is the all-time high from November
2079 is the intraday all-time high from November
2145 is the December 2012 up trendline
Support:
The 50 day EMA at 2034
2011 is the September prior all-time high
1991 is the July 2014 high
The 200 day SMA at 1980
1972 is the December 2014 low
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 17,729.21
Resistance:
17,923 is the January 2015 lower high
17,991 is the early December interim
18,104 is the December all-time high
Support:
The 50 day EMA at 17,575
17,351 is the September 2014 all-time high.
17,152 is the mid-July post bear market high
The 200 day SMA at 17,098
17,068 is the early July 2014 peak
17067 is the December 2014 low
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
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.
15,855 is the October 2014 low
15,739 is the December 2013 low
ECONOMIC CALENDAR
February 10 - Tuesday
Wholesale Inventories, December (10:00): 0.2% expected, 0.8% prior
JOLTS - Job Openings, December (10:00): 4.972M prior
February 11 - Wednesday
MBA Mortgage Index, 02/07 (7:00): 1.3% prior
Crude Inventories, 02/07 (10:30): 6.333M prior
Treasury Budget, January (14:00): -$10.3B prior
February 12 - Thursday
Initial Claims, 02/07 (8:30): 285K expected, 278K prior
Continuing Claims, 1/31 (8:30): 2405K expected, 2400K prior
Retail Sales, January (8:30): -0.5% expected, -0.9% prior
Retail Sales ex-auto, January (8:30): -0.5% expected, -1.0% prior
Business Inventories, December (10:00): 0.2% expected, 0.2% prior
Natural Gas Inventor, 02/07 (10:30): -115 bcf prior
February 13 - Friday
Export Prices ex-ag., January (8:30): -1.2% prior
Import Prices ex-oil, January (8:30): -0.1% prior
Mich Sentiment, February (10:00): 98.5 expected, 98.1 prior
End part 1 of 3
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