Saturday, June 06, 2015

The Daily, Part 1 of 3, 6-6-15

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6/6/2015 Investment House Report
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Targets hit: None issued
Buy alerts: CYBR; QRVO; ZBB
Trailing stops: None issued
Stop alerts: None issued

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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.


- Jobs report beats, shows some solid improvement, but still suffers from some of the old issues as well.
- DJ30, SP500 sell, RUTX rises: dollar, interest rate effect.
- SOX is setup well to rebound and lead. That is a must.
- More areas joining in the leadership.
- Upside still setting up very well. Still so many issues impacting markets, but the underlying drivers remain the same.

Another Friday and no real change in the market status. At least no change from Thursday when DJ30 and SP500 broke lower below support. The market bifurcation remains as DJ30 continued lower, SP500 spun its wheels and slipped a bit deeper. RUTX again sported the best move Friday as it did Wednesday. Even so, it is still stuck at the 50 day EMA, holding it, making some attempts at starting a move, but as of yet unable to launch from it. SOX is set up, making the test of the big upside breakout, holding the 20 day EMA with a nice doji with tail.

Those are the barbell ends: DJ30 and SP500 on one end, RUTX and SOX on the other.

The 'bar' consists of SP400 midcaps, reaching lower and rebounding to hold over the 50 day SMA and its December uptrend, and NASDAQ, reaching down close to the 50 day EMA then rebounding positive to hold the 20 day EMA.

What is the cause of the split? Perhaps the recovery of the dollar from its April to mid-May decline is driving the wedge between the indexes once again. DJ30 formed a triangle into early May as the dollar declined from its March and April peaks. DJ30 broke higher, recall it led the market upside in early May, the one index that held its support at the 50 day MA. It rallied higher into mid-May until the dollar bottomed at the January consolidation range and started higher. DJ30 faltered, faded back to the 50 day EMA, tried to hold as the dollar faded some, but as the dollar rebounded late last week, DJ30 broke support.

RUTX shows a different route, breaking support in late April and early May as the dollar sold for its third and fourth week and just as DJ30 was holding support. RUTX recovered as the dollar held and turned back up. As the dollar rebounded last week off of a test of the new upside, RUTX broke higher Wednesday and again on Friday.

It is not just the dollar this time, however. Interest rates are shooting higher, and with them the small regional banks. Rates are to them as the dollar is to other small cap businesses. Those stocks are helping lift RUTX along with the dollar. Not a powerful lift yet, but very notable juxtaposed with the DJ30.

Regardless of the dollar's interplay or not, there is no rush upside by any of the major indexes. Even for the best looking it is a fight to hold as NASDAQ, SP400, and even RUTX are working hard just to hang in above support.

SP500 -3.01, -0.14%
NASDAQ 9.34, 0.18%
DJ30 -56.12, -0.31%
SP400 0.34%
RUTX 0.78%
SOX 0.07%

VOLUME: NYSE +7.4%, NASDAQ +0.4%. NASDAQ trade still above average as NASDAQ reached lower and rebounded. Not bad action as it shows buyers still there, but not dominant over the Thursday selling volume. On the week NASDAQ upside session volume surpassed rising volume on downside sessions 3:1. NYSE trade rallied higher, moving to average, as SP500 reached lower but recovered mush of the downside. Perhaps the doji shows a bounce back coming, but given the week's action it has to prove it.

A/D: NYSE -1.1:1; NASDAQ 1.8:1.

Yet, there are great stocks that faded to test and started back upside this week and even on Friday. Some semis started upside, e.g. QRVO, AAOI, AVGO. Others are set to do the same, e.g. FSL, SWKS, NXPI. Software started higher on the week and Friday, e.g. FEYE, CYBR, PANW, VDSI, VMW. Biotechs are mixed but we see good patterns and moves in AGIO, CRIS, GILD. Telecom shows promise, e.g. GIMO rallying, TSYS, JDSU and others setting up, showing momentum turns.

It is not the best time of the year for the market, but it is a good time for certain categories of stocks. They used the weakness on the week to set up and are starting back to the upside. The market overall may struggle, but the patterns and years of summer experience tells us that some stocks perform to the upside even as the indexes struggle and sell. Indeed, on Friday even as our DIA puts enjoyed the DJ30 downside, our software, chip, financial, telecom, biotech positions enjoyed nice upside.

The market is now definitely in the summer season and we trade accordingly: play specific stocks in specific sectors, take gains on good, strong moves, be ready to cut and run when a position loses momentum and its pattern as we did with several positions early in the week specifically so we could reallocate that money into stocks in leading sectors that were setting up for the next move higher, e.g. semis, software, China stocks, etc.

Oh, there was other stories on the day. OPEC kept oil production at 30M bbl/day. Bonds continued their massive selloff. The dollar continued back upside. The Jobs Report beat expectations, saw some hourly wage increases, and was heralded, yet again, as a clear indication the economy was not only healing but really strong. It was no doubt better in some areas. Unfortunately the report was maligned by the same old problems below the headlines that show the headlines are just part of the story. More jobs? Yes. More full-time jobs this time around but low hourly wage positions in the same low-wage sectors of past reports dominated the jobs creation. The headlines mask the story told by the jobs mix, and thus the continued evisceration of the middle class. But, most still have their iphone, internet access, sub-prime auto loan, free student loan, illusion of low-cost healthcare, and illusion of freedom to keep them docile. All is well. Whew, and I was worried.


Jobs top expectations, show better wages, show real improvement, but the headlines again mask some of the same shortcomings.

Household survey shows +272K employed, +125K unemployed.
Workforce increased by 397K.

Out of workforce: Still 93M
Participation rate steady at 62.9%

Jobs Quality: some improvement in better paying areas, but the jobs created are still dominated by the lower paying sectors:

Retail, Business, Temporary, Education/health, leisure/hospitality.

High pay sectors:

Construction: Added 17K, but that is half of April.
Manufacturing: so-so

Mining: -18K

Information: -3K

Indeed, two-thirds of the jobs created were from the lowest paying sectors.

But . . . full-time jobs actually GREW by 630K. Very good news though at 121.4M they are still 500K less than 2007 when the collapse started.

Wages: Better at 0.3%. Heaven knows we need it, but the 0.3% does not tell the story.

The following chart shows wages are up, but look where they were in 2007. Nowhere near that level now and indeed they are coming off an ugly downturn to end 2014 and start 2015.

Beyond that, WHO is getting the wage increases tells a story. The majority of the gains are taken in by supervisors:

While the non-supervisors are barely moving higher:

The problem remains: jobs quality is low so wages are low. With low quality jobs, productivity remains low as well. This is a major reason the US cannot pull out of economic malaise and averages 1.8% GDP per quarter the past six years.



Overall the stock indexes remain under pressure as they move further from the end of QE in October 2014. They remain in trends higher, some indexes better than others, some breaking their near term trends, but each successive new high is smaller in height and shorter in length. In other words, each move higher has less buyers and the bids fail and sellers take over faster. The sellers have been somewhat reluctant to step in and really sell the market as that has been a game of picking up nickels in front of the steamroller. With each weaker peak, however, the sellers have a better shot and it remains to be seen when they take it.

DJ30: After spending just over a week again testing the 50 day EMA following the early to mid-May bounce, the Dow broke lower Thursday, falling through the 50 day EMA on rising trade, unable to hold that important support. Friday it sold again though not as aggressively. The break of the 50 day EMA is not necessarily the kiss of death; it did the same several times in December to January and again in March to April, recovering each time. Each rally, however, it has put in a weaker high with less and less movement after breaking to that high. It wants to test lower toward the 200 day SMA and the late April/early May lows, and that will be the first point to evaluate how negative it is. We picked up some DIA puts on this break lower.

RUTX: Somewhat the opposite of DJ30, RUTX broke ranks and sold through the 50 day EMA in late April/early May, and there was no immediate recovery. Indeed it looked to have broken and rolled over. Then DJ30, NASDAQ and particularly SOX took over, with DJ30 starting the move then SOX took over, having repaired a suspect pattern. RUTX played the reluctant follower. It recovered the 50 day EMA in mid-May, worked laterally after that into Wednesday. It broke higher, faded Thursday, then broke upside Friday after testing below the 50 day MA. It is showing some life, no doubt aided by the dollar's recovery and also life in regional banks, the smaller banks that are now rallying thanks to higher interest rates.

SOX: The semiconductors spent last week testing that strong surge from the prior week on the AVGO/BRCM deal that sent many stocks higher. The test was needed, it took SOX back to the 20 day EMA on Thursday, and Friday it showed a nice doji with tail. Many of the leading chips have tested near support as well and show very nice setups to move back up.

NASDAQ: Struggled to hold a lateral move all week, Friday reaching down toward the 50 day EMA then rebounding to a gain on some better trade. Perhaps some buyers stepping in on that lower low for the week. All week volume was elevated as the index moved laterally below the April peak; that suggests some churn, that higher volume turnover that can erode upside moves. Still trending higher but struggling to do so and needs the help of SOX.

SP500: Broke lower along with DJ30 though not as dramatically. It too is impacted by the dollar moves to a certain extent. Spent last week trying to hold the 50 day EMA, but broke it Thursday and showed a doji below it Friday after tapping that resistance on the session high. Even less of a death signal than DJ30, SP500 has broken its 50 day EMA many times on its move higher. It will have a chance to recover again, but we do note that, as with DJ30, each higher high lasts a shorter period, something ongoing since QE ended in October 2014.


Semiconductors: As anticipated, some very nice setups here as the leaders tested back to near support and are in position to move higher. Indeed QRVO started upside on Friday with SWKS looking very ready. NXPI, FSL, AAOI, PLAB, SIMO, AVGO and others look very good.

Software: After looking good for so long yet doing nothing, they are on the move. VDSI and VMW started the move with big Wednesday surges on volume. CYBR was at it Friday along with SPLK. FEYE never tested; it just keeps moving up and exploded higher Friday.

China: These stocks are taking off again. SOHU is working well for us, moving to a new closing high on Friday. NOAH was up all week. Wish we didn't sell JD as it jumped 4.5% Friday. WUBA, SFUN, ATHM -- all look very good.

Biotech/Drugs: Still mixed but working well overall. CRIS, AGIO continue solid moves. TTPH in drugs ran into a deeper fade but held the breakout and Friday started upside.

Retail: Some interesting tests and we will see if they can make something of it, e.g. KIRK, M. On the other hand stocks such as ROST look ready to roll back over, and COST broke its 200 day SMA Friday.

Banks: The small banks jumped quickly on the interest rate climb. Most are out of range for now but they will test and we will see which ones provide good potential return.


Stats: +9.33 points (+0.18%) to close at 5068.46
Volume: 1.772B (+0.39%)

Up Volume: 970.64M (+457.98M)
Down Volume: 844.16M (-425.84M)

A/D and Hi/Lo: Advancers led 1.82 to 1
Previous Session: Decliners led 2.56 to 1

New Highs: 122 (+29)
New Lows: 47 (+11)

Stats: -3.01 points (-0.14%) to close at 2092.83
NYSE Volume: 783.9M (+7.38%)

A/D and Hi/Lo: Decliners led 1.13 to 1
Previous Session: Decliners led 3.37 to 1

New Highs: 59 (+24)
New Lows: 154 (+73)

Stats: -56.12 points (-0.31%) to close at 17849.46


VIX: 14.21; -0.5
VXN: 15.77; -0.02
VXO: 16.55; +1.06

Put/Call Ratio (CBOE): 1.04; -0.12. Two sessions over 1.0, making the total 6 such sessions in the past 8. Plenty of speculation in the puts to drive some stocks higher.

Bulls and Bears: Bulls back over 50, averaging that level of late while bears rise as well, now liking 15.8%. At least that is better than 13% as before.

Bulls: 51.5% versus 48.5% versus 50.6% versus 47.5% versus 52.5%

Still bouncing back and forth in a range that is centering around 50.

Bears: 15.8% versus 14.9% versus 15.8% versus 15.8% versus 13.9%

Once again the moves are opposite in terms of sentiment as both bulls and bears rise. Bulls still remain too high overall with no break and bears are too low though rising. As for bears it appears the idea of the permanent Fed put behind the market is ending, but they are giving in slow, slow, slowly.

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: 51.5%
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.

Bears: 15.8%
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): 2.40% versus 2.31%. Surged to 2.44% post-Jobs Report. Tough week for bonds, but good for banks.

Historical: 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/$: 1.1119 versus 1.1241. Dollar fought back after a stronger jobs report, moving back through the 50 day EMA. Please read the dollar/Dow, dollar/RUTX commentary.

Historical: 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 versus 1.0733 versus 1.0738 versus 1.0801 versus 1.0768% versus 1.0681 versus 1.0655 versus 1.0570

Oil: 59.13, +1.13. Tapped the 50 day EMA on the low then rebounded to a gain. Held this support for the second time in two weeks.

Gold: 1168.10, -6.70. Down Wednesday through Friday after tapping at the 50 day EMA . . . and failing.

$/JPY: 125.50 versus 124.35. After a brief rest, another massive surge higher versus the yen.

Historical: 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


So many issues impacting stocks. Geopolitical issues involving Greece and the EU and that relationship's impact on the dollar. Now stories and hacked emails show that George Soros is the puppet master of sorts in the Ukraine conflict, reminding you of the villain media mogul Elliot Carver in the James Bond flick 'Tomorrow Never Dies.'

Elliot Carver: 'You provide the pictures,
I'll provide the war' (quoting William Randolph Hurst) in 'Tomorrow Never Dies' (1997)

Every day the world is confronted with self-aggrandized central banks, megalomaniac billionaires, suffocatingly paternalistic governments, and out and out villains (though some would argue they are all the latter). With so many possible impacts on our lives and the market, it is a wonder any rational trading and living can take place. It is very sad that we have to spend more time worrying about what central banks and governments will do to our businesses and investments than what the market will do.

Nonetheless, stocks still set up just as they always have and move just as they always have because ultimately, whether machines control the buys late in the day or not, human emotions are at the root of market moves. You can see it in how the algos pursue certain news and events with fervor just as a human would.

Overall the market still looks problematic, continuing its less than confident moves since October and QE's end. Even so there are excellent stocks that are set up well and are making the moves and making us money. Heading into this week there are even more as other areas join in ore re-engage, e.g. regional banks and Chinese stocks.

Thus, despite all of the external noise and calls for a certain correction, there are great setups to play and make money. Upside setups. That can all change in a few days of turmoil, but that is always the case. We have some good plays working for us, we have cut back several plays that were so-so movers, and we have new plays that look very good to make good moves. If they continue to do this, we will continue to use them to make money.

Have a great weekend!


NASDAQ: Closed at 5068.46

5075 is the January to April pattern trendline
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high

5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
The 50 day EMA at 5010
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 4757
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 2092.83

The 50 day EMA at 2102
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 2045
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 17,849.46

17,923 is the January 2015 lower high
17,991 is the early December interim
The 50 day EMA at 18,031
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 March low at 17,604
The 200 day SMA at 17,608
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 5 - Friday
Nonfarm Payrolls, May (8:30): 280K actual versus 225K expected, 221K prior (revised from 223K)
Nonfarm Private Payrolls, May (8:30): 262K actual versus 225K expected, 206K prior (revised from 213K)
Unemployment Rate, May (8:30): 5.5% actual versus 5.4% expected, 5.4% prior
Hourly Earnings, May (8:30): 0.3% actual versus 0.2% expected, 0.1% prior
Average Workweek, May (8:30): 34.5 actual versus 34.5 expected, 34.5 prior
Consumer Credit, April (14:00): $16.8B expected, $20.5B prior
Consumer Credit, April (15:00): $20.5B actual versus $16.8B expected, $21.3B prior (revised from $20.5B)

June 9 - Tuesday
Wholesale Inventories, April (10:00): 0.2% expected, 0.1% prior
JOLTS - Job Openings, April (10:00): 4.994M prior

June 10 - Wednesday
MBA Mortgage Index, 06/06 (7:00): -7.6% prior
Crude Inventories, 06/06 (10:30): -1.948M prior
Treasury Budget, May (14:00): -$130.0B prior

June 11 - Thursday
Initial Claims, 06/06 (8:30): 278K expected, 276K prior
Continuing Claims, 05/30 (8:30): 2200K expected, 2196K prior
Retail Sales, May (8:30): 1.1% expected, 0.0% prior
Retail Sales ex-auto, May (8:30): 0.7% expected, 0.1% prior
Export Prices ex-ag., May (8:30): -0.7% prior
Import Prices ex-oil, May (8:30): -0.4% prior
Business Inventories, April (10:00): 0.2% expected, 0.1% prior
Natural Gas Inventor, 06/06 (10:30): 132 bcf prior

June 12 - Friday
PPI, May (8:30): 0.5% expected, -0.4% prior
Core PPI, May (8:30): 0.1% expected, -0.2% prior
Michigan Sentiment, June (10:00): 91.5 expected, 90.7 prior

End part 1 of 3
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