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5/9/2015 Investment House Report
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Targets hit: None issued
Buy alerts: NXPI
Trailing stops: None issued
Stop alerts: TRIP
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- Jobs report good or bad, stocks surge with DJ30 leading.
- Same old story with jobs: part-time now 100% of the jobs, low paying dominate, 55+ get all the jobs, wages falling, record out of workforce.
- Wholesale sales fall for fourth straight month, worst since 2008.
- Eliminating worker skill and training from the pay equation.
- US jobs market resembling state-controlled markets, paving the way for automation.
- Still some good leaders on a solid upside price move: will investors continue putting a bid to the market, i.e. can the move hold?
Thursday I opined the indexes left themselves in position to move higher but that it would take something big to overcome the technical negatives. Friday they certainly did move higher, but whether the Jobs Report was really that strong is open to debate, one we discuss below. In any event, stocks roared upside on the news with SP500 and DJ30 clearly leading the pack based upon both percentage moves and their patterns.
SP500 28.10, 1.35%
NASDAQ 58.01, 1.17%
DJ30 267.05, 1.49%
VOLUME: NYSE -3.9%, NASDAQ -3%. Lower volume with NYSE sliding a bit lower below average. NASDAQ volume remained above average though slightly lower. Not bad volume at all, but once again, being totally technically anal (TTA, a market technical phrase), volume was lower on an advance than the selling.
A/D: NYSE 4:1, NASDAQ 1.7:1. NASDAQ breadth surprisingly narrow, suggesting more a large cap move. NYSE breadth was excellent, as the small and midcaps staged a recovery after getting hammered the prior two weeks.
SP500 and DJ30 posted the best technical moves with DJ30 clearly the best as it exploded through the top of its triangle and showing better volume, even if it was still below average. SP500 broke through the top of its pattern as well though it is right in the teeth of the prior peaks that failed. Lower volume as well . . . good but not convincing.
NASDAQ gapped back into the pattern and right to resistance. Beats tanking on the news. RUTX gapped to a doji just below the 50 day EMA, gapped to the 50 day SMA. SOX gapped over the 50 day EMA with some help from some big name leaders.
Okay, quite the response to the jobs number. They found their upside catalyst. As discussed last week, how they hold the move is the key. DJ30 is the clear leader, SP500 is there as well but the pattern is not as clear, moving right to resistance. The other indexes are up but did not change the character of their patterns. Some good individual stock moves no doubt, but this week they have to drive the move farther.
Jobs Report extolled as good by some, panned by others as more of the same.
The post-mortem on the April Jobs Report was a 180 degree view. Some say it is great, showing a bounce back from a dismal March revised even lower than first reported. Some say it is a pile of . . . you know what. Our view: it is from the BLS so any resemblance to reality is strictly unintentional.
The takeaways that scream out:
Revisions lower in March for jobs and wages.
New all-time high in persons not in the workforce.
Part-time jobs 100% of jobs created as full-time jobs fall.
55+ age group nets 100% of jobs.
Non-Farm Jobs: 223K versus 218K expected versus 85K March (from 126K).
March was the lowest since June 2012. The 3 month average fell below 200K.
Wages: 0.1% versus 0.2% versus 0.2% prior (revised from 0.3%).
Revisions: Both the number of jobs and waged written lower. Worst of the worst in terms of trends.
Not in the labor force: Moved higher to 93.194M versus 93.175M. Yes, things are getting better.
Workweek: same at 34.5. No growth in hours worked.
Job Types: Some good news, but mostly more of the same.
Construction good at +45K.
Manufacturing not so good: +1K on top of the 0 (goose egg) in March.
For every manufacturing job created, 26 waiter/bartender jobs were created. Fat, Drunk and stupid is no way to go through life, son.
Dean Wormer, 'Animal House' (1978)
Thank goodness the Administration policies have spurred the creation of those wait staff and bartender jobs to replace those manufacturing jobs lost. An equitable trade? Yea, right.
Lowest wage areas lead again:
Professional/Business services: +46K
Leisure and Hospitality: +17K
Full-time versus Part-time: and the winner is . . . part-time of course
Of the jobs created in April, 100% were part-time. 437K part-time jobs created versus a LOSS of 200K+ fulltime jobs. Fulltime jobs still remain below the 2008 peak.
Who gets the jobs?
Surprise: Still the 55+ age group.
The Household Survey reported a net 255K workers added. Of those jobs over 100% (266K) went to workers aged 55+. In other words, the 54 and younger age demographics LOST jobs. The older generations have to go back to work in ever-increasing numbers to pay for the necessities as it is hard to make interest income at 0% interest rates. Again, darn good thing there are all of those low-paying part-time jobs out there they can pick and choose between.
WHOLESALE INVENTORIES FADE, SALES NEGATIVE FOR 4TH STRAIGHT MONTH
Wholesale Inventories, March: 0.1% versus 0.3% versus 0.2% (from 0.3%)
Wholesale Sales: -0.2%. Four straight months of negative sales, the longest streak since 7 straight negative months in that banner year 2008.
Inventories fell but they did not fall because everyone was buying up the goods as sales were again lower. They just are not buying as much goods given a steady sales decline.
Thus, with this kind of data, you understand the economy is still truly weak, that QE and 0% interest rates and six years of the Administration's policies are not fixing the problem. They inflated financial assets as planned, but step 2 didn't materialize, i.e. the increase in money velocity as the free money was put to work. That never happened, at least outside of stock buybacks and M&A (buy it, don't build it). Therefore the jobs report, with new record highs in people out of the workforce, falling wages, stagnant hours, and more low pay jobs, is not really a positive.
US Labor Market more resembles socialist, indeed communist, labor forces.
Indeed, the US labor market is getting absurdly like the communist labor market under the USSR. A California city just mandated a $16/hour minimum wage and there is the continued push among the fast food workers to raise the minimum wage to $15/hour. This amount of money for rank, unskilled labor.
At the same time, contract legal services that provide fully licensed attorneys for document reviews in mergers and acquisitions and in litigation are paying $20-$26/hour. Three years of law school, passing the bar exam, maintaining expertise with continuing education, incurring tens of thousands of dollars in debt. For all of that, the wage difference versus a fast food worker in one California city is $4.
We are eliminating the benefit of having a skill, JUST as in the communist countries. Baker, welder, nuclear sub crewman: you all worked for the 'good' of the state. Oh if you could play hockey or were freakishly limber for gymnastics you could have a decent life. Everyone else, it didn't matter.
The result: chronically low output and a chronically weak economy with only the elites in the society enjoying the wealth. Wow, sure sounds as if the US is indeed on that path.
The next logical step: Japan has just unveiled robots that move like humans with the aid of a gel-like substance. China is unveiling the first fully robotic plant. It will not be long before McDonald's and all-fast food restaurants have 100% robotic food prep and ordering with just a person to make sure the system is running correctly. And a janitor. The low level jobs will be eliminated THANKS TO THE VERY POLICIES THAT WERE CONTRIVED UNDER THE BELIEF THEY WOULD BENEFIT THE WORKER. Of course with the government the way it is now, it would probably just pass a mandate that no robotic workers were allowed . . .
DJ30: Strongest chart now, breaking through the top of the pattern and eyeing the February all-time high near 18,300 (closed at 18,191). If all the charts looked like this, the market would look great. Note, however, MACD is lower as it moves toward the high. Not dispositive, but something to watch along with volume as DJ30 attempts the breakout.
SP500: Moved sharply higher, right to the mid-February high and just below the late April and early May high. Weaker volume, lower MACD, but it fought the selling fire with buying fire. Now at the cusp of a new high yet again, not looking internally that great, but following DJ30.
NASDAQ: Gapped into the tip of its triangle, but at this juncture that pattern is pretty battered and beaten. It is at the February, March and early April peaks. Even with this move, it is still problematic on the upside; has to hold the move, right?
SOX: Gapped through the 50 day EMA and the upper trendline, rallied to the 50 day SMA. Tapped it, faded from the high. Not bad, had the help of some big names, e.g. NXPI, FSL, and made a good move. Still needs to break to a higher high, ending the series of lower highs. That will be a more definitive move.
RUTX: Gapped to a tight doji just below the 50 day EMA and the mid-February peak. Up, following the other indices, but not a strong move. Not writing it off, but we are putting a downside IWM play on the report if it kisses the 50 day EMA goodbye.
SP400: Gapped through the 50 day EMA and rallied just past the 50 day SMA. Similar to RUTX and bumping the mid-February peak. Top-heavy, but a bit better position than the RUTX from the look of it.
Still plenty of leadership in key areas, and the biotechs, Yellen or no, look to be back in the mix.
Chips: Some good moves from NXPI, FSL. SWKS looks decent but no volume to speak of. SIMO continues to sport a very nice pattern. Good to see as the market needs the chips to lead.
Software: CYBR reported good results and gapped higher but showed a very big doji and a rather ambiguous pattern in terms of new entries. SPLK gapped nicely, cleared the February closing high, but then gave that up. Still good but needs to keep going. VDSI put in a higher low at the 50 day MA in its triangle; good action. FFIV jumped beautifully. VMW looks ready to bounce back up. An important leadership group.
Big Names: GOOG gapped higher for a second good move. AMZN gapped upside for a second day off the 10 day EMA. AAPL remains sluggish. MNST was bombed on its earnings.
Energy: After two rough sessions, in the move. USO back up. RIG bouncing nicely. ESV looks ready for another entry.
Metals: Off modestly, but for the most part holding their gains. AKS flat and trending up the 10 day EMA, FCX gapped upside to a doji, still in the 10 day EMA test flag.
Financial: Excellent Friday. Our MA gapped to a higher high, V gapped and ran hard, JPM gapped and rallied to a higher high.
Biotechs: Like what we see in AMGN coming off its trendline. AGIO and CLVS look super.
Stats: +58 points (+1.17%) to close at 5003.55
Volume: 1.926B (-2.99%)
Up Volume: 1.38B (+130M)
Down Volume: 586.8M (-186.88M)
A/D and Hi/Lo: Advancers led 1.69 to 1
Previous Session: Advancers led 1.26 to 1
New Highs: 79 (+34)
New Lows: 47 (-22)
Stats: +28.1 points (+1.35%) to close at 2116.1
NYSE Volume: 776.1M (-3.85%)
A/D and Hi/Lo: Advancers led 4.03 to 1
Previous Session: Advancers led 1.38 to 1
New Highs: 74 (+48)
New Lows: 26 (-23)
Stats: +267.05 points (+1.49%) to close at 18191.11
VIX: 12.86; -2.27
VXN: 15.38; -1.99
VXO: 12.57; -3.5
Put/Call Ratio (CBOE): 0.86; -0.08. Three sessions over 1.0 in 7. Never was that strong to support a bounce, but didn't seem to matter.
Bulls and Bears: Bulls surge, bears fall right back down.
Bulls: 52.5% versus 57.4% versus 52.5% versus 50.5%
Right back down to the 52.5% level, but after getting close to that 60% level that has marked market tops.
Bears: 13.9% versus 13.9% versus 15.2% versus 13.9%
Bulls fall, bears hold steady. Still the belief that the Fed has the market's back and thus no rise in bearishness at all. This is the one indicator that proves up the market belief the Fed won't let the market fall and shows the problems of moral hazard of bailouts, etc.
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.
57.4% versus 52.5% versus 50.5% versus 50.4% versus 54.5% versus 55.6% versus 52.0% versus 53.6% versus 58.7% versus 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% versus53.4% versus 56.5%
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
13.9% versus 15.2% versus 13.9% versus 14.2% versus 14.2% versus 14.1% versus 14.3% versus 14.1% versus 14.1% versus 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.
Bonds (10 year): 2.14%. Perhaps a bit more belief the Fed might hold off, but if you look at TLT, this is a bear flag relief bounce to the 200 day SMA it broke on Monday.
2.18% versus 2.23% versus 2.17% versus 2.15% versus 2.11% versus 2.04% versus 2.05% versus 1.99% versus 1.92% versus 1.92% versus 1.94% versus 1.98% versus 1.91% versus 1.86% versus 1.86% versus 1.89% versus 1.88% versus 1.90% versus 1.93% versus 1.95% versus 1.95% versus 1.89% versus 1.89% versus 1.90% versus 1.86% versus 1.91% versus 1.86% versus 1.93% versus 1.96% versus 1.95% versus 2.01% versus 1.92% versus 1.87% versus 1.91% versus 1.927% versus 1.97% versus 1.95% versus 2.06% versus 2.09% versus 2.10% versus 2.12%
Euro/$: 1.1207 versus 1.1266. Modest bounce as on Thursday. One 'Fast Money' trader actually ventured that the dollar/market connection was not a connection right now.
1.1266 versus 1.1349 versus 1.1189 versus 1.1147 versus 1.1215 versus 1.1220 versus 1.119 versus 1.0982 versus 1.0885 versus 1.0862 versus 1.0824 versus 1.0722 versus 1.0733 versus 1.0738 versus 1.0801 versus 1.0768% versus 1.0681 versus 1.0655 versus 1.0570 versus 1.0654 versus 1.0782 versus 1.0819 versus 1.0939 versus 1.0950 versus 1.0872 versus 1.0759 versus 1.0752 versus 1.0833 versus 1.0898 versus 1.0890 versus 1.0973 versus 1.0925 versus 1.0946 versus 1.0811 versus 1.0648 versus
Oil: 59.32, +0.44. After a two-day weaker trade oil found support at the 10 day EMA with a nice doji.
Gold: 1189.10, +6.80. Up but still in the lower half of the 7 week range.
$/JPY: 119.75 versus 119.75. Flat on the session hold at the 50 day SMA in its own 8 week range.
119.75 versus 119.43 versus 119.85 versus 120.12 versus 120.16 versus 119.41 versus 119.02 versus 118.45 versus 119.10 versus 118.91 versus 119.53 versus 119.90 versus 119.66 versus 119.26 versus 119.12 versus 119.03 versus 119.18 versus 119.39 versus 120.12 versus 120.20 versus 120.64 versus 120.15 versus 120.32 versus 119.48 versus 119.73 versus 119.72 versus 119.94 versus 120.11 versus 119.086 versus 119.167 versus 119.405 versus 119.72 versus 119.705 versus 120.02 versus 120.855 versus 120.04 versus 121.34 versus 121.39 versus 121.43 versus 121.28 versus 121.50 versus 121.80 versus 121.60
Jobs Report: check. Earnings: check (more or less). Now what?
Quite simple, actually. With the Jobs Report and its initial reaction to the upside in the bank, we see if the market can hold the move.
Overall the stock indexes were not looking great ahead of the Jobs Report. That report, whether viewed as good enough for the economy without Fed help or as bad enough to put the Fed on hold, induced its move. Now we see if the buyers can take the baton from the jobs data and continue the move with more bids put in because of a belief in better times ahead. Or will the sellers re-emerge and capitalize on the pattern weakness in everything sans DJ30? We will see.
So we are lighter than we were a week ago in terms of positions. We have upside, we have downside, we have new upside and new downside to move to depending upon where the market breaks from here. We view it as technical at this point; of course we typically do.
Friday showed more strength than we thought it would in some instances (DJ30), but was at expectations in terms of other indexes, e.g. RUTX, SP400, even NASDAQ. SP500 looked stronger but was not really that strong in our view.
But, of course, our view does not count, nor does the view of any other pundit count, at least not singularly. So we are watching the leaders, have good plays to go on those (and groups coming back such as the biotechs) as well as some more downside plays.
Our plan is to let the Friday move run its course and see if it can stick. Still view the market as at an important post-QE moment here as it has stumbled upside since QE ended in October. It is not showing the same strength it had in prior moves and indeed is acting somewhat as it did when other QE rounds ended and the market wandered aimlessly, similar to an army of drones when the command center is destroyed. Given that history, it should not be much of a surprise the market is struggling, and as the Fed said QE is over but the economy is not that strong,
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5003.55
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
4979 is the January to April pattern trendline
The 50 day EMA at 4948
4912 the mid-April China dip
The March lows at 4843 and 4825
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
The 200 day SMA at 4696
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
S&P 500: Closed at 2116.10
2115 is the late March lower high
2119.59 is the February intraday prior all-time high
2126 is the April new all-time high
2094 is the December 2014 high, the prior all-time high
The 50 day EMA at 2089
2079 is the intraday all-time high from November
2076 is the all-time high from November
2062 is the January 2015 lower high
The 200 day SMA at 2030
2011 is the September prior all-time high
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 18,191.11
18,206 is the late March lower high
18,289 is the all-time high
18,104 is the December high
17,991 is the early December interim
The 50 day EMA at 17,944
The January trendline at 17,928
17,923 is the January 2015 lower high
17,748 is the mid-April China margin selloff
The March low at 17,620
The 200 day SMA at 17,472
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
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
May 8 - Friday
Nonfarm Payrolls, April (8:30): 223K actual versus 218K expected, 85K prior (revised from 126K)
Nonfarm Private Payrolls, April (8:30): 213K actual versus 215K expected, 94K prior (revised from 129K)
Unemployment Rate, April (8:30): 5.4% actual versus 5.4% expected, 5.5% prior
Hourly Earnings, April (8:30): 0.1% actual versus 0.2% expected, 0.2% prior (revised from 0.3%)
Average Workweek, April (8:30): 34.5 actual versus 34.5 expected, 34.5 prior
Wholesale Inventories, March (10:00): 0.1% actual versus 0.3% expected, 0.2% prior (revised from 0.3%)
May 12 - Tuesday
JOLTS - Job Openings, March (12:00): 5.133M prior
JOLTS - Job Openings, March (10:00): 5.133M prior
Treasury Budget, April (14:00): $155.0B expected, $106.9B prior
May 13 - Wednesday
MBA Mortgage Index, 05/09 (7:00): -4.6% prior
Retail Sales, April (8:30): 0.2% expected, 0.9% prior
Retail Sales ex-auto, April (8:30): 0.4% expected, 0.4% prior
Export Prices ex-ag., April (8:30): 0.2% prior
Import Prices ex-oil, April (8:30): -0.4% prior
Business Inventories, March (10:00): 0.2% expected, 0.3% prior
Crude Inventories, 05/09 (10:30): -3.882M prior
May 14 - Thursday
Initial Claims, 05/09 (8:30): 275K expected, 265K prior
Continuing Claims, 05/02 (8:30): 2300K expected, 2228K prior
PPI, April (8:30): 0.2% expected, 0.2% prior
Core PPI, April (8:30): 0.1% expected, 0.2% prior
Natural Gas Inventor, 05/09 (10:30): 76 bcf prior
May 15 - Friday
Empire Manufacturing, May (8:30): 4.0 expected, -1.2 prior
Industrial Production, April (9:15): 0.1% expected, -0.6% prior
Capacity Utilization, April (9:15): 78.4% expected, 78.4% prior
Michigan Sentiment, May (10:00): 96.0 expected, 95.9 prior
Net Long-Term TIC Fl, March (16:00): $9.8B prior
End part 1 of 3
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