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3/7/2015 Investment House Report
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MARKET ALERTS:
Targets hit: None issued
Buy alerts: None issued
Trailing stops: V; VIMC
Stop alerts: None issued
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The Market Video is DIVIDED into component parts: Market Overview, Economy, Technical Summary, and the Next Session. Choose the segments you are interested in without having to search a longer video. Click on the link to the portion you wish to view.
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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
- Friday post-jobs action is again down but turns ugly for SP500 and DJ30. Just a Friday thing with a bit of panic thrown in?
- Jobs again stronger on the headlines but not internally, but the Fed's stance leaves it little operating room on rates.
- Fear of hikes or fear the result of hikes on the belief that the economy is not as strong as claimed?
- Many leaders held up, but with the large drops on SP500, want to see this selling dissipate as rapidly as it showed up.
Friday was a second jobs Friday that saw stocks sell post a better jobs report, at least in terms of headlines. Down again, but this one was stronger than the February decline.
SP500 -29.78, -1.42%
NASDAQ -55.44, -1.11%
DJ30 -278.94, -1.54%
SP400 -1.21%
RUTX -1.36%
SOX -1.09%
VOLUME: NYSE +31%, NASDAQ +11%. Back above average on both exchanges as stocks were surely dumped on the session. That can be a tell for a downside leg starting, but we have to see how they react to this one-day drop.
The stock index move lower is not really a reaction necessarily to the 'strength' of the report. After all, at this juncture you would think a strong jobs report would engender enthusiasm for stocks given greater economic growth and higher future earnings. It may not even be a reaction to the continued lack of internal strength thanks to the structural change in the US labor market. For those taking umbrage at that comment, how else can you describe job creation that sees stagnant wages, a greater number of people NOT working, record numbers OUT of the workforce, and hourly workweeks stuck in the mud?
While the internal issues with the report juxtaposed to the stronger headline numbers could cause the discerning investor to sell after concluding a rate hike is coming and the economy is in no position to handle it (almost 50 of the last 52 economic reports were misses), most investors don't get that far in the analysis.
They are, however, able to take it to the first stage, of course believing the company line that the jobs report was really strong. In other words, the reality of a Fed rate hike is perhaps, actually setting in.
I am reminded of the movie 'Support Your Local Sheriff' starring the late great James Garner where Joe Danby (Bruce Dern) from his jail cell told Pa Danby (Walter Brennan) that though the people talked and joked a lot about hanging Danby, he really didn't think they were going to do it. Reality hit, however, once the father met the new sheriff in town, James Garner.
The sheriff, just passing through on his way to Australia, mind you, thwarts Pa Danby's attempt to strong arm his son Joe out of jail, putting his finger in the end of Danby's revolver.
Yellen may just be James Garner in this situation, though not nearly as good looking a woman as James Garner is a man. She said in her infamous first press conference slip that the Fed would hike rates 'about six months' after QE ended. Since then the Fed has changed its statement steadily, and is now data dependent, its 'patience' to end in a 'couple' more meetings, it is focusing heavily on the jobs report as its main data, and April being 6 months after the end of QE.
The Fed, to borrow a phrase from Archie Bunker in the 1970's TV comedy 'All in the Family', has painted itself into a corner and thrown away the key.
In other words, by putting so much emphasis on the unemployment rate and jobs numbers given its 'data dependent' status, it is going to have to raise faster than most. Some are saying June. April still sounds right; what a coup for Yellen to raise in April and 'prove' her abilities to tell the economic future?
Of course it must just be jobs because consumer credit was terrible, joining the 50 or so economic reports misses over the past few months. Just a slow patch is how it has to be viewed though you still have to ask when does it turn to a quagmire?
As in February after the January Jobs Report, stocks sold off on a better than expected jobs reading. Pretty ugly selling, closing just off session lows with SP500 and DJ30 flopping all the way to the 50 day EMA on the session low.
Quite the one-sided session as futures were up heading into the jobs report but flipped negative after the headlines improved once more.
As noted, SP500 and DJ30 took the full monty plunge to the 50 day EMA, leading the market lower. RUTX and SP400 broke below their 20 day EMA near support and closed in no-man's land between the 20 day and the 50 day MA. That is the 'hanging chad' position, but with the breach of the 20 day EMA, a test of the 50 day MA by these indices is a definite possibility unless Friday was pure and simply a Friday thing post jobs as in February.
NASDAQ and RUTX are fading toward their respective 20 day MA, still holding over the near term trendlines.
Don't get the impression AAPL and SOX were passed over. They both lost in excess of 1%. They were, however, in better position to start and they also showed a bit more relative strength.
There was still some upside. Not much, but there was some. AFOP, ENPH, FLTX, VIPS.
Others were down but hardly out. JD, QRVO, SWKS, MLNX, GRUB, FB, GOOG, NXPI, CREE, AVGO, DE, SUNE, and on and on.
The point: There was rate hike-fear panic Friday. There were algos selling that were programmed to do so if the sum of its calculations was the Fed would raise rates sooner. They don't factor in the structural change in the labor market over the past 6 years since the ACA was enacted and how that has transformed the jobs market to part-time, low pay jobs with a dearth of full-time breadwinner jobs. They don't understand that low paying jobs mean that the average consumer has not recovered and will not recover what was lost in the great recession. They just read the headlines, apply their assumptions, and react. They sold all day.
While SP500 and DJ30 do not look good we didn't engage in the panic. Monday and Tuesday will tell more of the tale, and in reality, if it is economic health headlines driving the selling because it may trigger a Fed rate hike, that likely dissipates rapidly.
Thus, as noted, we did not engage in the selling. Frankly, we didn't have to based upon our positions and logical stop points. Of course they cannot continue to decline, but Friday certainly had the 'stink' on it of panic, and selling into that is usually a losing scenario.
One point that is interesting in terms of all the 'top of the market' talk. Lots of discussion about how NASDAQ hit 5000 and held it just briefly before fading. Okay, big deal. More important: AAPL, accounting for 10% of NASDAQ's moves, is expanding to DJ30. That move has many times in history marked the top of those stocks. A top for AAPL is not directly a top for NASDAQ, SP500 or DJ30, but it certainly makes life a lot harder for the upside.
In any event, the jobs number was strong enough to spook the program traders and nothing was resuscitating stocks on the session. Ugly declines on the large cap NYSE indices, and this may lead to something uglier. That said, with a flop to the 50 day EMA the indices at least are likely to show a reflex bounce off of that early next week and we can then gage how much damage if any was done Friday.
THE NEWS
295K versus 240K versus 239K (from 257K).
3-month average = 288K
Unemployment: 5.5% versus 5.6% exp versus 5.7% January
Hourly wages: 0.1% versus 0.2% exp versus 0.5% January
Participation Rate: 62.8% versus 62.9% January versus 62.7% December
Workforce: -274K. Unemployed +96K
Not in the Workforce: +354K to 92.898M a new US record. Much rejoicing. Yea.
BLS Accuracy: Apparently all is well in the oil patch.
BLS reports just 1900 jobs lost in the oil patch in January. In February, just 1100 jobs lost.
No brain, no headache?
Challenger reports actual job cuts of 39,621 or 38% Fibonacci retracement of all job cuts in January and February. February alone saw oil patch losses accounting for 36% of job losses (18,299).
All you can say is, what the hell? You can also say the February jobs report GROSSLY overstates jobs.
Jobs quality: US Labor Secretary Perez proudly claimed "quality of jobs is going up." But it really isn't. If you look at the actual data the BLS releases, it just isn't.
Leisure/Hospitality: 66K
Education and Health: 54K
Retail: 32K
All lowest pay categories.
Waiter and Bartender count his all-time high
58,700 waiters and bartenders added in February, the most since 72,000 added in August 2013.
The good news: if you ever wanted to be a bartender that field is booming. The bad news, it has boomed so much how much more is there? Bad news 2: low paying, hourly job. But, you can be a 'people person!'
Note how the jobs are massively skewed to the lowest paying sectors.
SUMMARY
It is the same old story from our preliminary look: more low pay, hourly jobs. More people leaving the workforce. that pushes unemployment lower and thus the 'false positive' headlines that have the journalism majors on the financial stations calling the report 'blow out.'
What it really means: more people on disability, food stamps, or some form of federal government 'assistance,' more of the workers having to shoulder more of the population not working.
THE MARKET
CHARTS
SP500, DJ30: Both gave up new highs on the week, both belly flopped at the 50 day EMA to end the week. Once again these indices, just after putting in higher new highs, indeed new all-time highs, have given them up with rather large single day declines. The issue for both this week, and the move that will tell the tale of the last run, is whether they can shake off Friday and resume the upside, making it just a jobs related 'Friday thing.'
RUTX, SP400: The small and midcaps showed the same action in their own pair. They broke the 20 day EMA, are about halfway to the 50 day EMA, but are also sitting over the late December peak. Thus while breaching near support they are still holding an important level. Haven't tested it yet, but hey, they are holding it right?
NASDAQ: Broke the 10 day EMA on above average volume. After breaking higher Monday NASDAQ immediately gave it up. We noted at the time this was not good action for NASDAQ or any of the other indices, but they held up well, recovering at near support. Friday that was not the case. Still in good shape, still a lot of NASDAQ stocks in great shape, but a very important test of the 20 day EMA (4910). Note that NASDAQ is way, way above its 38% Fibonacci retracement of the February rally. The 38% Fibonacci retracement level is at the December peak. Yes, it has 'room to give' as they say and still maintain the momentum, but we don't want to ride that apple cart to that level.
SOX: Stumbled around as well, surging Monday then giving it all up and more by the Friday close. Still easily over the 20 day EMA and the December twin peaks. Overall we like SOX a lot, and if not for SP500 and DJ30 we would say things look fine. This has been the case before, however, and SOX, while it didn't tank was not an island.
Summary: Some damage was done Friday, mostly by SP500 and DJ30. The other indices are easily holding key levels. The same old question: who holds the most sway, who has the clout? If SP500, DJ30 can hold the 50 day EMA, the others likely continue their moves, maybe with a bit more early week consolidation. If not, then we want to start buttoning up shorter term positions.
MARKET STATISTICS
NASDAQ
Stats: -55.44 points (-1.11%) to close at 4927.37
Volume: 1.871B (+10.99%)
Up Volume: 581.1M (-428.9M)
Down Volume: 1.33B (+632.98M)
A/D and Hi/Lo: Decliners led 2.26 to 1
Previous Session: Advancers led 1.35 to 1
New Highs: 71 (-32)
New Lows: 54 (+7)
S&P
Stats: -29.78 points (-1.42%) to close at 2071.26
NYSE Volume: 900M (+31.06%)
Up Volume: 672.38M (-807.62M)
Down Volume: 3.17B (+1.6B)
A/D and Hi/Lo: Decliners led 5.61 to 1
Previous Session: Advancers led 1.22 to 1
New Highs: 48 (-33)
New Lows: 59 (+20)
DJ30
Stats: -278.94 points (-1.54%) to close at 17856.78
SENTIMENT INDICATORS
VIX: 15.2; +1.16
VXN: 16.75; +1.53
VXO: 15.58; +1.82
Put/Call Ratio (CBOE): 1.28; +0.33. THAT is a big jump in put activity.
Bulls and Bears:
Bulls: 58.7% versus 59.5% versus 56.6% versus 52.5% versus 49.0%
Okay, a bit of a fade even as the remnants of the upside were still around. Still too many bulls and too few bears, and this is still a negative for the market.
Bears: 14.1% versus 14.1% versus 14.1% versus 15.2% versus 16.3% versus 16.3% versus 17.4%.
Stuck in the mud.
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: 58.7%
59.5% versus 56.6% versus 52.5% versus 49.0% versus 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: 14.1%
14.1% versus 14.1% versus 15.2% versus 16.3% versus 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): 2.245%
2.11% versus 2.12% versus 2.12% versus 2.08% versus 1.98% versus 2.04% versus 1.96% versus 1.98% versus 2.06% versus 2.09% versus 2.11% versus 2.08% versus 2.14% versus 2.03% versus 1.99% versus 1.98% versus 1.99% versus 1.95% versus 1.94% versus 1.81% versus 1.77% versus 1.78% versus 1.68% versus 1.67% versus 1.76%
Massive gap lower. So much for any double bottom attempt. Rates are going higher. Rick Santelli was absolutely right just over 5 weeks back when he said on 1/30 that session's break higher looked like the top. I love him because he doesn't, as he says, have a string of letters behind his name, he just looks at the market and what it is doing as his guide.
Oil: 49.62, -1.14. Still bumbling along the 50 day SMA as it has for the past 5 weeks after bouncing off the late January low.
Gold: 1164.20, -32.00.
Massive plunge undercutting the late December low. Gold has tarnished even more for now.
$/JPY: 120.72 versus 120.14 versus 119.71 versus 119.74 versus 120.179 versus 119.63 versus 119.48 versus 118.86 versus 118.95 versus 118.78 versus 119.08 versus 119.04 versus 118.70 versus 119.34 versus 118.83 versus 118.915 versus 120.26 versus119.48 versus 118.62 versus 118.987 versus 117.56 versus 117.21 versus 117.58 versus 117.52 versus 117.40 versus 118.30
Dollar taking off again, approaching the early December 2014 high.
Euro/$: 1.0849 versus 1.1030 versus 1.1079 versus 1.1175 versus 1.1182 versus 1.1197 versus 1.1195 versus 1.1362 versus 1.1337 versus 1.1385 versus 1.1379 versus 1.1366 versus 1.1398 versus 1.14 versus 1.1390 versus 1.1409 versus 1.1294 versus 1.1315 versus 1.1324 versus 1.1318 versus 1.1474 versus 1.1387 versus 1.1481 versus 1.1336 versus 1.1290 versus 1.1318 versus
With the EU into QE and the US, even with its economic data points in a post-QE downtrend, the US is seen as a much better place and thus the dollar is crushing the euro.
NEXT WEEK
SP500 and DJ30 did damage Friday and the market question is whether they are leaders or just weaker while the growth areas consolidate their market dominance with more modest pullbacks?
As in December and January, when the large caps struggled, everything struggled, so we need to be aware of that as the new week starts. There could very well be some more consolidation to start the week as SP400, RUTX could still test the December highs, and as the plays show, many are testing and could come back a bit more to finish the job.
The key tell for us is how SP500 and DJ30 hold the 50 day EMA while any other testing is finished by the other indices and the leaders. If they hold around the 50 day that is a good indication. If the selling continues for those indices with vigor, they will have a effect on the other indices, i.e. an anchor chain effect.
So, we watch how those two hold up, but also, and critically, how the leaders hold up. The jostling last week leading into Friday was some consolidation action, and a quick dip could finish the test. Or, if they don't hold, they could accelerate the selloff.
If they do sell off, is it the top or just another selloff? The last two new highs were sold off shortly thereafter, but they came right back. History shows if you throw in rate hikes stocks sell as well but then come right back as the idea is the economy is better thus the hikes.
There are some great upside patterns still out there and for now we are mostly looking at upside though we threw in a downside on LCI as it is at the top of its channel. After the Friday selling, we look for a bounce that fails to enter more downside. Another inflection point in the market after a good run. Happens all the time.
Again, it is a matter of seeing how the market responds early this week to the Friday action. We want to protect the nearer term positions in options and take more gain or otherwise close them if the market continues to struggle. If you feel uncomfortable, by all means get comfortable; you can always get back in with the money you banked in order to get comfortable.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4927.37
Resistance:
5132.52 is the 3/2000 all-time high
Support:
The 20 day EMA at 4910
The 50 day EMA at 4816
4815 is the December 2014 prior market peak
4811 is the November 2014 peak (intraday)
4774 is the January high
4751 is the January 2015 lower high
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
The 200 day SMA at 4562
4547 is the December low
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
S&P 500: Closed at 2071.26
Resistance:
2105 is the lower trendline from 11/2012
2119.59 is the all-time high
2168 is the December 2012 up trendline
Support:
2094 is the December 2014 high, the prior all-time high
2079 is the intraday all-time high from November
2076 is the all-time high from November
The 50 day EMA at 2068
2062 is the January 2015 lower high
2011 is the September prior all-time high
The 200 day SMA at 2000
1991 is the July 2014 high
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 17,856.78
Resistance:
17,923 is the January 2015 lower high
17,991 is the early December interim
18,104 is the December all-time high
18,289 is the all-time high
Support:
The 50 day EMA at 17,839
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,238
17,152 is the mid-July post bear market high
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
March 6 - Friday
Nonfarm Payrolls, February (8:30): 295K actual versus 240K expected, 239K prior (revised from 257K)
Nonfarm Private Payrolls, February (8:30): 288K actual versus 230K expected, 237K prior (revised from 267K)
Unemployment Rate, February (8:30): 5.5% actual versus 5.6% expected, 5.7% prior
Hourly Earnings, February (8:30): 0.1% actual versus 0.2% expected, 0.5% prior
Average Workweek, February (8:30): 34.6 actual versus 34.6 expected, 34.6 prior
Trade Balance, January (8:30): -$41.8B actual versus -$42.0B expected, -$45.6B prior (revised from -$46.6B)
Consumer Credit, January (15:00): $11.6B actual versus $14.0B expected, $17.9B prior (revised from $14.8B)
End part 1 of 3
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