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6/13/2015 Investment House Report
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Targets hit: None issued
Buy alerts: ININ; VDSI
Trailing stops: CMGE; NOAH
Stop alerts: CRIS
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- Large caps resume decline, small and midcaps holding up very well.
- Nothing has really changed for the market and that can be good and that can be bad.
- Just when you thought you could just sit back and trust the data . . .
- Not seeing much good come out of the Wednesday FOMC rate decision announcement.
Friday was back to the downside after a two day upside bounce. Bigger picture, it was really more of the same in terms of individual stock index moves and also the market move overall. That means some indexes show renewed strength while other indexes are showing renewed weakness in a market that remains somewhat split.
DJ30 and SP500 faded from their two day bounce to the 50 day EMA breaches. Sure looks like a relief bounce in the process of failing for those two.
NASDAQ and SOX were lower as well with NASDAQ at the 20 day EMA, gapping lower after the Thursday gap higher to the April and May peaks. That could be an issue for the upside as NASDAQ was rejected with a gap, but the day did not show a cataclysmic decline or reversal. SOX gapped lower to the 50 day EMA where it held, trying to reset for another move from a possible short term double bottom. Perhaps, but it will have to show it and prove that it can regain the leader mantle.
RUTX and SP400 continue to look the most leader-like, at least in terms of the upside. Yes both were lower along with the rest of the indexes, but showing very tame action after good recoveries. RUTX shows a very tight doji above the 10 day EMA. SP400 sold back but is easily holding above the 50 day MA's and the lower trendline in its January channel. These are not just awesome patterns by any stretch; they have simply held on and are overcoming the odds of some pretty bad patterns, and that is impressive given the overall market summer lethargy.
Interesting isn't it? The dollar is lower the past three weeks after a bounce from the April to May selling, and is still well off the peaks from March and April. You would think that would benefit the large cap stocks and thus SP500, DJ30. Yet, those indexes are selling while the smaller caps are performing better. Is it all regional banks providing the lift for SP400 and RUTX thanks to the interest rate gains? They are no doubt a good part of the strength, but other areas in these indexes, e.g. biotech/drugs, are performing well.
SP500 -14.75, -0.70%
NASDAQ -13.41, -0.62%
DJ30 -140.53, -0.78%
VOLUME: NYSE -16%, NASDAQ -11%. Lower volume so no dumping, but definitely no bids to support stocks on the session.
A/D: NYSE -1.8:1 decliners over advancers. NASDAQ -1.4:1.
Leadership was very good in some cases, though mostly taking a pause. Software was mixed, strong early week with some fading late (FFIV, VMW), while others faded early then finished strong (CYBR, VDSI). Others held up nicely, e.g. SPLK.
Semiconductors were mixed as well. QRVO rallying off a test, AVGO bouncing off the 20 day EMA as well. Ditto SIMO. AMBA exploded upside. AAOI tested the same level and rebounded Wednesday to Friday. Lacking: FSL, NXPI, SWKS; but they can come along.
Biotech/Drugs looked good early but finished poorly Friday. CRIS broke lower, TTPH is struggling to continue the breakout. We got out of AGIO midweek and it bombed Friday. XON had a tougher Friday, slipping just below the 10 day EMA but on light trade. Still good overall but being tested. There are many biotech stocks showing a head and shoulders pattern, a topping pattern though it has a history of many false positives.
There are more but you get the point: leadership is still holding up but in some cases slipped to a point where they need to hold the line and resume the move higher or the market starts losing its leaders. Bad time of year to be doing that.
What has changed? Not much.
Last week I brought up the point that despite everything confronting the market, nothing has really changed. The economic data, what you can believe of it, continues improvement off a crappy Q1 and crappy start to Q2. Retail Sales looked great Thursday, until you look at the details. Yes we had to do lift up the skirt just to check. What we saw was a seasonal adjustment that was 10x the usual May seasonal adjustment. That turned a falling unadjusted number into a positive that still only just beat expectations. What was the explanation given for the revision? None. It is what it is. So, just when you thought it was safe to start believing the economic data was getting better you see that the assumptions are what is driving the improvement, not the data.
It is rather amusing and sad to listen to the mainstream defend the number crunchers in the federal government. While it is difficult and incorrect to label them all as lackey's of the Administration doing whatever its bidding is, the data has been manipulated. Pre-2012 election it was proved the jobs data was altered to drop unemployment levels. The LIBOR market, a market that was supposedly too big and too liquid to be manipulated was indeed manipulated. It didn't even take the power of a government holding all the cards in order to do it. Thus it becomes not so difficult to acknowledge that a few could manipulate the data either on their own or at the request of 'higher ups,' particularly when the data show huge seasonal adjustments that are out of line with all of the May adjustments for years upon years upon years. What was so different about May to cause such a revision? Nothing. Thus I find most of the data now utterly useless in predictive value for the economy.
Back to the status quo of the status quo. If nothing has changed in terms of Greece, Ukraine, Iran, US economic data, etc., why would anything change for the market? It has trended higher since the October Ebola plunge and recovery, albeit a quite choppy trend.
That action can continue but the action itself is not that constructive with new highs hit just to be disgorged and continued back and forth action day to day. This kind of action can be its own worst enemy as it wears out the bids. Good moves in certain sectors is attracting money, and that is what is keeping the overall market afloat. Not making and holding new highs upon new highs, but just hanging on. Without something else to catalyze the upside, that action eventually wears out.
What can trigger the next move?
What can be a catalyst? Economic data? The market still is not quite ready to react well to better data, bogus as it may be. Earnings? They are coming but not quite time for that pre-earnings push.
Fed? It does meet this coming week. Not many expect a rate hike, and while that gives the market a bit more time in terms of breathing room, it will not put off the inevitable rate hike this year, likely in September. Even if the Fed does not hike, it has to start more aggressive language about a stronger economy and the need to hike.
As such, even if there is no hike, I don't see much good coming out of this week's Fed meeting in terms of the market taking solace in what the Fed is going to do. Perhaps I am totally off base, but the Fed has to prep the market more for the rate hike and the market likely won't like that as it still cannot react positively to positive economic news.
Now I sound as if I am talking myself out of wanting to play any further upside. That is the risk of over-thinking the patterns and the news. There are those we have talked about before who have made themselves look foolish with their TV appearances saying what they are doing and are going to do. That is tough to do, i.e. go on TV and say what you are doing that day and then come back a week later and, because you are a faster trader, are doing something completely different. Makes you look like an idiot but all you did was follow the market and likely made money using your system that you understand.
Anyway, our brokerage accounts are up nicely right now but they keep bumping near the same levels on the upside and then the market backs off. Increasing in value overall, but each new high is met with a fade. The temptation is to take a lot off the table, but when we look at the positions for most there is no reason at all to do so based upon their patterns and action. If the Fed does dump on the market, and it may not even intend to do so but that is just how the market views it, then the gains retreat again and have to make another run.
That action in the accounts also tells you that the risk/reward is not as good overall at this juncture. Indices at or just off their highs, they make moves higher but find it hard to hold the moves. Not as it was in May when SOX broke out from the wedge and had open field ahead of it.
That is why we take partial profits at logical points, right? You bank some money, get naturally a bit leaner after good runs, and it allows you to think clearly versus worrying over what you might lose. Heading into the FOMC meeting on Wednesday, however, if we get a decent move ahead of that announcement, we will be banking gain. We also have some more downside plays on the report this weekend and will add more as the week progresses.
Stats: -31.41 points (-0.62%) to close at 5051.1
Volume: 1.399B (-10.88%)
Up Volume: 537.41M (-219.74M)
Down Volume: 865.79M (+25.2M)
A/D and Hi/Lo: Decliners led 1.38 to 1
Previous Session: Advancers led 1.05 to 1
New Highs: 79 (-47)
New Lows: 36 (+3)
Stats: -14.75 points (-0.7%) to close at 2094.11
NYSE Volume: 659.6M (-16.04%)
A/D and Hi/Lo: Decliners led 1.8 to 1
Previous Session: Advancers led 1.57 to 1
New Highs: 49 (-52)
New Lows: 86 (0)
Stats: -140.53 points (-0.78%) to close at 17898.84
VIX: 13.78; +0.93
VXN: 15.16; +0.52
VXO: 14.64; +1.39
Put/Call Ratio (CBOE): 1.06; +0.22. 8 of the last 14 over 1.0. Still quite a bit of downside hedging, speculation.
Bulls and Bears: Bulls fall back down to 48%ish, keeping the weekly back and forth tennis match between 48 and 51 going. Bears actually break higher over 16% for the first time in what has to be ages.
Bulls: 47.4% versus 51.5% versus 48.5% versus 50.6% versus 47.5%
Still bouncing back and forth in a range that is centering around 50.
Bears: 16.5% versus 15.8% versus 14.9% versus 15.8% versus 15.8% versus 13.9%
This week both bulls and bears move in the same direction in terms of both being a bit more negative.
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.
51.5% versus 47.5% versus 51.5% versus 48.5% versus 50.5% versus 50.6% versus 47.5% versus 52.5% versus 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.
15.8% versus 14.9% versus 15.8% versus 13.9% versus 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%
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): 2.39% versus 2.39%. Bounced off the Wednesday lower low, but not a reversal move.
Historical: 2.39% versus 2.48% versus 2.433% versus 2.388% versus 2.40% versus 2.31% versus 2.37% versus 2.26% versus 2.18% versus 2.10% versus 2.137% versus 2.133% versus 2.13% versus 2.21% versus 2.19% versus 2.25% versus 2.294% versus 2.22% versus 2.15% versus 2.23% versus 2.28% versus 2.26% versus 2.283% versus 2.14% versus 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%
Euro/$: 1.1254 versus 1.1268 versus 1.1325. Dollar slid on the week but managed to hold at some support from the January high.
Historical: 1.1268 versus 1.1325 versus 1.1277 versus 1.1288 versus 1.1119 versus 1.1241 versus 1.1272 versus 1.1144 versus 1.0922 versus 1.0985 versus 1.0945 versus 1.0904 versus 1.0878 versus 1.1012 versus 1.1111 versus 1.1093 versus 1.1149 versus 1.1314 versus 1.1449 versus 1.1408 versus 1.1311 versus 1.1207 versus 1.1152 versus 1.1207 versus 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
Oil: 59.96, -0.59. Working laterally in the range that started at the first of May.
Gold: 1179.20, -2.30. Going nowhere in its three month range.
$/JPY: 123.41 versus 122.64 versus 124.31. Down on the week, finding support for now at the 20 day EMA post-President's denied remark on the problem of a strong dollar.
Historical: 122.64 versus 124.31 versus 124.44 versus 125.50 versus 124.35 versus 124.26 versus 124.12 versus 124.81 versus 124.10 versus 123.85 versus 124.12 versus 124.15 versus 123.11 versus 121.53 versus 121.09 versus 121.35 versus 120.71 versus 119.99 versus 119.33 versus 119.18 versus 119.11 versus 119.93 versus 120.13 versus 119.75 versus 119.75 versus 119.43 versus 119.85 versus 120.12
Friday we picked up some more VDSI and started some ININ as VDSI showed a great doji with tail off the 10 day EMA and ININ bounced off the 50 day MA. We also closed some so-so positions such as CMGE and NOAH, both with modest gains. We bagged CRIS as it broke near support rather convincingly.
As noted earlier, our positions are mostly holding up quite well and for now letting them work, even though the overall market action is sluggish and in the cases of SP500 and DJ30 downright negative.
Monday is a new week with the same issues (Greece, dollar, Fed worries along with a Fed meeting), and each session of late is characterized as a relative crapshoot by the financial station experts. Perhaps, but we see many stocks, and we are in them, that are working quite well, and with a bit more work even more can join in. Semiconductors re-engaging would be a boon for the upside, and thus how SWKS, NXPI, FSL and company react from this week's continued test will play a role in the market's ability to hold and extend this move.
There is also that Fed decision to factor in and the overall market action and time of the year. We don't want to talk ourselves out of profits, but again, if we get a move higher into the FOMC announcement on Wednesday, we anticipate, for now, in banking some more gain to be lighter when the FOMC decision is released.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5051.10
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5042 is the March 2015 high
The 50 day EMA at 5017
5008.57 is the early March 2015 post-bear market high
The June low at 4974
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
The 200 day SMA at 4770
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
4547 is the December low
S&P 500: Closed at 2094.11
The 50 day EMA at 2100
2115 is the late March lower high
2119.59 is the February intraday prior all-time high
2126 was the April prior all-time high
2135 is the May 2015 all-time high
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
2062 is the January 2015 lower high
The 200 day SMA at 2048
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 17,898.84
17,923 is the January 2015 lower high
17,991 is the early December interim
The 50 day EMA at 18,007
18,104 is the December high
18,206 is the late March lower high
18,289 is the March 2015 high, the prior all-time high
18,351 is the May 2015 all-time high
17,748 is the mid-April China margin selloff
The June low at 17,715
The 200 day SMA at 17,630
The March low at 17,604
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
June 15 - Monday
Empire Manufacturing, June (8:30): 6.0 expected, 3.1 prior
Industrial Productio, May (9:15): 0.3% expected, -0.3% prior
Capacity Utilization, May (9:15): 78.3% expected, 78.2% prior
NAHB Housing Market , June (10:00): 56 expected, 54 prior
Net Long-Term TIC Fl, April (16:00): $17.6B prior
June 16 - Tuesday
Housing Starts, May (8:30): 1100K expected, 1135K prior
Building Permits, May (8:30): 1100K expected, 1143K prior
June 17 - Wednesday
MBA Mortgage Index, 06/13 (7:00)
Crude Inventories, 06/13 (10:30): -6.812M prior
FOMC Rate Decision, June (14:00): 0.25% expected, 0.25% prior
June 18 - Thursday
Initial Claims, 06/13 (8:30): 276K expected, 279K prior
Continuing Claims, 06/06 (8:30): 2270K expected, 2265K prior
CPI, May (8:30): 0.5% expected, 0.1% prior
Core CPI, May (8:30): 0.2% expected, 0.3% prior
Current Account Bala, Q1 (8:30): -$116.4B expected, -$113.5B prior
Philadelphia Fed, June (10:00): 8.0 expected, 6.7 prior
Leading Indicators, May (10:00): 0.4% expected, 0.7% prior
Natural Gas Inventor, 06/13 (10:30): 111 bcf prior
End part 1 of 3
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