Sunday, August 30, 2015

The Daily, Part 1 of 3, 8-29-15

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8/29/2015 Investment House Report
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Targets hit: None issued
Buy alerts: None issued
Trailing stops: BWLD; FB
Stop alerts: BWLD; FB; NOX; SBUX; V. Closed some after rebounding off the gaps lower.

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

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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.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE Economic SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************

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

- Stock indices pause Friday after a sharp rebound to the sharp selling.
- V turn with the bottom already in? More upside before a test? End of the initial bounce?
- Lots of bear flags in the market, from the indices to stocks.
- Sentiment indicators fall into the bullish category, internals already there. Again, it is just up to the indices and stocks to set their patterns.

The past week saw the spectrum of market moves. Monday witnessed the largest point drop ever on the Dow 30. Tuesday the market tried to rally but failed, closing flat, looking something like a prize fighter stunned by a knockdown from what was considered an unworthy opponent. Wednesday the fighter jumped back up with new life and the Dow surged to its third largest single day rally ever. Add on Thursday's gain and the Dow posted its best two-day move in . . . a long time.

Those moves undid the damage from Monday, but not the prior week's Wednesday to Friday bomb lower.

SP500 1.21, 0.06%
NASDAQ 15.61, 0.32%
DJ30 -11.76, -0.07%
SP400 0.46%
RUTX 0.81%
SOX 0.68%

VOLUME: NYSE -17%, NASDAQ -18%.

A/D: NYSE 1.9:1, NASDAQ 2:1.

Indeed, Friday was a day we thought might show a pause after a surge upside and it did. DJ30 shows a hangman doji at the 10 day EMA, a key litmus of strength on a rebound move. The 10 day EMA will act as resistance in a developing and stronger downtrend.

SP500 shows the same pattern, that hangman doji at the 10 day EMA. SP400 and RUTX are also testing the 10 day EMA, not with doji but still at that key first test level.

NASDAQ and SOX made it through the 10 day EMA but volume was lower on the recovery, indeed for all of the indices. Still, that was above average volume, just not as many buyers as the sellers on the downside.

Many of the big name stocks that led the prior upside move rebounded as well, showing the same kind of massive gap lower and rebound back upside. Some made it back to their ranges, others are at some point along the route back upside. Some look well-positioned as of the Friday close, some do not. Perhaps all will continue to recover after what is being called the second flash crash (Monday morning), continuing on their way in disregard of the carnage.

Certainly we left some of the recovering positions continue, e.g. PCLN, part of the BWLD. Others we decided to close as they were at resistance similar to the DJ30, e.g. NOC. Others fared a bit better, but not great, and we opted to take them off after the bounce and will look for other entry points up or down. To wit, SBUX, FB, V. They could continue higher, but after the big rebounds from even bigger selling, we took the recovery and will see what develops.

If the rebound is serious, it should continue to give the market more of a relief move into the coming week to provide a better base when the original plunge is tested. The more time it spends in recovery, the better the foundation when stocks test the prior lows.

Thus the rebound move can certainly continue this week. The index and stock recovery is at the crossroads, the first test of the rebound. If the sellers are in charge, the move fails and stocks dive back lower and the bottoming process is extended if stocks cannot hold the prior lows. If the rebound holds, stocks continue higher and the ultimate setup for the upside is better and occurs sooner.

At this stage of the rebound, initiating new upside is on a case by case basis. Certainly some stocks are still in position to where they can generate solid returns from a good risk/reward position. If the upside continues and there is no second selloff, then the move continues and we let what positions we have ride while at the same time playing new upside opportunities as they arise. Likely not the scenario, but as soon as you discount it, you miss it.

More of our plays focus on the downside given the rebound to resistance. If the market fails, those plays make you money. Even if the move holds at the prior low and THIS is the setup for the bottom, we make some good money on that test and then there will be some good upside double bottoms and inverted head and shoulders to take advantage of the upside.


THE MARKET

CHARTS

SP500: Friday a hangman doji below the 10 day EMA after the sharp Wednesday and Thursday gains. Almost a perfect 50% Fibonacci retracement of the August dive lower. First major test of that decline and a very important one given the severity of the drop. Important first challenge of the recovery. Note also that SP500 is just showing its own death cross as the 50 day SMA moves below the 200 day.

DJ30: Same pattern as SP500, showing an even tighter doji at the 10 day EMA. This rebound is just below the 61% Fibonacci Retracement of the August drop.

NASDAQ: Overcame a soft open and reversed to a modest gain on lower, average volume. That put it just over the 10 day EMA and the 61% Fibonacci Retracement, as well as the top of the December/January range. A bit more promise here, but a 530 point bounce from the Monday low is a lot in any direction.

SP400: Three day recovery to the 10 day EMA on the Friday close. No doji at that point just a lower volume move. Has filled the gap lower from Monday, between the 38% and 50% Fibonacci retracement of the August dive lower. Lots of overhead resistance.

RUTX: Up through the 10 day EMA on the Friday close but that puts it still below the 50% Fibonacci Retracement. On the rebound, closing at the session high. Still, a long way to go through a lot of overhead.

SOX: Continued its move through the 10 day EMA up to the 20 day EMA on the Friday close. At the 61% Fibonacci Retracement, looking at filling the gap from two Thursdays back. The 618-620 level is important resistance on this rebound attempt.


LEADERSHIP

Very mixed. Upside to end the week but the moves are mostly rebound moves lacking a solid pattern other than a possible V bottom. Not the best odds but it does work sometimes. Still, there are lots and lots of bear flags, the rebounds to resistance after a sharp selloff.

Big Names: Mostly rebounds from sharp selling though some fared better. All need some more work. AAPL rebounded to the early August lows and plenty of resistance. AMZN made it to the trading range post-gap and is in decent shape to continue. FB is to the 50 day MA, can continue higher, but a critical resistance level from the July and August gaps. PCLN enjoyed a solid Friday as it works toward the 1280 key resistance. MSFT has rebounded, but just to the 10 day EMA and the June low. As you can see, still lots of work needed.

Chips: Some rebounds of course, but some chips look as if they could test just a bit and then be ready for further moves higher. Remember, they sold first and hardest, falling over 20% from the peak. Oversold, rebounded, and a test sets them in interesting upside position. LRCX can test this initial move, hold near 70, and be in good shape. AVGO made a good initial move, and a test of the 120 level is a great setup. QRVO is setting up an inverted head and shoulders. It too needs a test of 51 and a bounce to set the right shoulder.

Metals: Sold hard early and some may be harbingers of a future rebound by the overall market. New leaders? A stretch, but perhaps. AKS is bouncing off a double bottom. SID is bouncing for the first time, showing some better MACD. NEM is trying to form a second bottom to a double bottom. FCX is showing tremendous volume off a lower low and higher MACD.

Retail: After showing great leadership this group is struggling across most of its sectors. COST is in a bear flag. ROST ditto at the 20 day EMA. Even ULTA is struggling, showing an ugly reversal Friday below the 50 day EMA.

Biotech: Big names are struggling: AMGN, CELG. Other smaller names are working. TTPH is jumping off its 50 day EMA. DYAX is holding its move off its 200 day. XON is bouncing off its 200 day but volume is not that strong. A test of the initial move, however, leaves it in great position.

Financial: At the crossroads on the bounce. JPM moved through the 200 day SMA and is testing. WFC made it to the 10 day EMA showing a doji and a big bear flag. MA big bear flag after recovering to the gap point below the 50 day EMA.


MARKET STATISTICS

NASDAQ
Stats: +15.62 points (+0.32%) to close at 4828.32
Volume: 1.873B (-18.37%)

Up Volume: 1.37B (-770M)
Down Volume: 554.57M (+347.59M)

A/D and Hi/Lo: Advancers led 1.99 to 1
Previous Session: Advancers led 3.4 to 1

New Highs: 25 (+3)
New Lows: 30 (-25)

S&P
Stats: +1.21 points (+0.06%) to close at 1988.87
NYSE Volume: 1B (-16.67%)

A/D and Hi/Lo: Advancers led 1.9 to 1
Previous Session: Advancers led 8.26 to 1

New Highs: 5 (0)
New Lows: 19 (-10)

DJ30
Stats: -11.76 points (-0.07%) to close at 16643.01


SENTIMENT INDICATORS

As with the internal indicators and their moves on last week's market dive, the sentiment indicators are reaching extremes as well. Bulls below 35%. Put/call ratio eight straight sessions over 1.0. VIX spiking past all peaks subsequent to 2008.

That sets the stage for a rebound and we have seen one. Their effect is typically delayed, however, and the recent rebound is likely NOT the ultimate move they trigger. The technical picture still has to put in its work to set up good patterns to lead higher. That is why the sentiment indicators often show their hand well before the market makes a sustainable move.

VIX: 26.05; -0.05
VXN: 28.75; +0.29
VXO: 25.52; -0.63

Put/Call Ratio (CBOE): 1.28; +0.08

Recent history: Eight straight over 1.0. 14 over, 7 below. More puts, a lot more, than calls even as the market bounces. That is, ultimately for the move, a good indication of negative sentiment.


Bulls and Bears: This is where it gets interesting as the bulls plummet below 35%, a key level, below which suggests sentiment is negative enough to produce a bounce.

Bulls continuing falling harder and faster than bears rise, but bears have broken the ice and are bouncing smartly. They may not make it over 35%, but they don't have to do that to have bulls and bears cross, a very powerful upside indication.

Bulls: 31.6% versus 37.7% versus 40.2% versus 42.2% versus 43.3% versus 49.0%

Bears: 22.5% versus 18.4% versus 18.6% versus 17.5% versus 17.5% versus 15.6%

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: 31.6%
37.7% versus 40.2% versus 42.2% versus 43.3% versus 49.0% versus 43.7% versus 44.8% versus 49.5% versus 51.6% versus 45.5% versus 47.4% versus 51.5% versus 47.5% versus 51.5% versus 48.5%

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 22.5%
18.4% versus 18.6% versus 17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% versus 16.5% versus 16.5% versus 15.8% versus 14.9% versus 15.8% versus 13.9%

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): 2.18% versus 2.18%. Over the 50 day EMA after gapping sharply lower Tuesday, falling below the 200 day.

Historical: 2.18% versus 2.19% versus 2.13% versus 2.01% versus 2.05% versus 2.08% versus 2.12% versus 2.20% versus 2.15% versus 2.20% versus 2.19% versus 2.15% versus 2.14% versus 2.24% versus 2.17% versus 2.27% versus 2.15% versus 2.19% versus 2.29% versus 2.25% versus 2.23% versus 2.27% versus 2.27% versus 2.32% versus 2.34% versus 2.37% versus 2.34% versus 2.35% versus 2.35% versus 2.40% versus 2.44% versus 2.42% versus 2.31% versus 2.206% versus 2.26% versus 2.29% versus 2.38% versus 2.42%


Euro/$: 1.1180 versus 1.1243. Dollar was stronger again, pushing the euro back toward the 200 day SMA after its big surge the prior week.
Historical: 1.1243 versus 1.1413 versus 1.1490 versus 1.1595 versus 1.1362 versus 1.1237 versus 1.1132 versus 1.1032 versus 1.1080 versus 1.1110 versus 1.1154 versus 1.1165 versus 1.10448 versus 1.0966 versus 1.0906 versus 1.0953 versus 1.0978 versus 1.0936 versus 1.0983 versus 1.1058 versus 1.1092 versus 1.0977 versus 1.0992 versus 1.0927 versus 1.0944 versus 1.0927 versus 1.0825 versus 1.0836 versus 1.0880 versus 1.0946 versus 1.1005 versus 1.0999 versus 1.1157 versus 1.1032 versus 1.11069


$/JPY: 121.73 versus 121.06. Still working higher, moving through the 200 day SMA.

Historical: 121.06 versus 119.93 versus 118.97 versus 118.58 versus 122.06 versus 123.39 versus 123.79 versus 124.39 versus 124.44 versus 124.32 versus 124.41 versus 124.15 versus 125.08 versus 124.36 versus 124.74 versus 124.78 versus 124.31 versus 123.99 versus 123.89 versus 124.15 versus 123.99 versus 123.56 versus 123.26 versus 123.79 versus 123.89 versus 123.96 versus 123.88 versus 124.31 versus 124.07 versus 124.13 versus 123.78 versus 123.38 versus 123.42 versus 122.76 versus 121.29 versus 120.66


Oil: 45.22, _2.66. Strong two day move up through the 10 and 20 day EMA. Sold to support, was too oversold, rebounding.

Gold: 1134.00, +11.40. Bouncing after selling back from the initial move off the early August low.


MONDAY

As discussed in the Market Summary, the rebound is at its first test. Strong initial move, now at resistance, not yet with the leadership in patterns. The sentiment has hit extremes, internals hit extremes early week. Now the market has to go through the process of building a pattern and leaders it can ride higher.

Typically that means a test of the low and the question now is whether that test starts near the Thursday/Friday highs or higher with a continued upside move this coming week. Further upside helps set up a better bottom and it may even never look back similar to the Ebola low in October 2014. If it does that it has to prove it but that works if it does; we will get plenty of buys off that.

That said, there are not that many great upside patterns in leadership caliber stocks. Possibilities are setting up, but many are not there yet. That is where the test of the sharp selloff comes in. That likely sets double bottoms in quality stocks as well, perhaps some inverted head and shoulders (e.g. QRVO).

Until then we see many, many downside setups, most showing bear flags. That suggests the market has a test coming and it may be off of this move through Friday. It will show us, and to that end we are looking at several downside plays this week to be ready for a selloff from last week's upside move.

Have a great weekend!



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4828.32

Resistance:
The March lows at 4843 and 4825
4912 the mid-April China dip
The 200 day SMA at 4913
The June low at 4974
The 50 day EMA at 4982
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
The lower trendline is at 5125

Support:
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
4547 is the December low
4370 to 4300 (March 2014 peak to June gap point)
4185 to 4130 (May 2014 gap point to October 3014 low)
4292 is the August 2015 low

S&P 500: Closed at 1988.87

Resistance:
The 10 day EMA at 1989
1991 is the July 2014 high
2011 is the September prior all-time high
2046 is the July closing low
2062 is the January 2015 lower high
The 50 day EMA at 2061
The 200 day SMA at 2075
2076 is the all-time high from November
2079 is the intraday all-time high from November
2094 is the December 2014 high, the prior all-time high
The lower channel line at 2103
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
2130 is the June 2015 peak
2135 is the May 2015 all-time high

Support:
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.
1867 is the August 2015 low
1862 is the October 2014 closing low
The December and January highs at 1848
1829 us the October 2014 intraday low
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 16,643.01

Resistance:
16,653 is the 10 day EMA
16,736 is the penultimate all-time high from May 2014
16,946 is the June 2014 peak
16,970 is the June 2014 former all-time high
17067 is the December 2014 low
17,068 is the early July 2014 peak
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
The 50 day EMA at 17,378
17,515 is the early July closing low
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to July trading range.
June low at 17,715
The March low at 17,786
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range

Support:
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
16,333 is the August 2014 low
16,117 is the October 2014 closing low
16,026 is the April 2014 low
15,855 is the October 2014 intraday low
15,372 is the February 2014 closing low
14,803 is the October 2013 low

ECONOMIC CALENDAR

August 28 - Friday
Personal Income, July (8:30): 0.4% actual versus 0.4% expected, 0.4% prior
Personal Spending, July (8:30): 0.3% actual versus 0.4% expected, 0.3% prior (revised from 0.2%)
PCE Prices - Core, July (8:30): 0.1% actual versus 0.1% expected, 0.1% prior
Michigan Sentiment -, August (10:00): 91.9 actual versus 93.0 expected, 92.9 prior

August 31 - Monday
Chicago PMI, August (9:45): 54.7 expected, 54.7 prior

September 1 - Tuesday
ISM Index, August (10:00): 52.6 expected, 52.7 prior
Construction Spendin, July (10:00): 0.6% expected, 0.1% prior
Auto Sales, August (17:00): 5.8M prior
Truck Sales, August (17:00): 8.4M prior

September 2 - Wednesday
MBA Mortgage Index, 08/29 (7:00): 0.2% prior
ADP Employment Chang, August (8:15): 201K expected, 185K prior
Productivity-Rev., Q2 (8:30): 2.7% expected, 1.3% prior
Unit Labor Costs -Re, Q2 (8:30): -0.8% expected, 0.5% prior
Factory Orders, July (10:00): 0.9% expected, 1.8% prior
Crude Inventories, 08/29 (10:30): -5.452M prior

September 3 - Thursday
Challenger Job Cuts, August (7:30)
Initial Claims, 08/29 (8:30): 273K expected, 271K prior
Continuing Claims, 08/22 (8:30): 2261K expected, 2269K prior
Trade Balance, July (8:30): -$43.1B expected, -$43.8B prior
ISM Services, August (10:00): 58.4 expected, 60.3 prior
Natural Gas Inventor, 08/29 (10:30): 69 bcf prior

September 4 - Friday
Nonfarm Payrolls, August (8:30): 217K expected, 215K prior
Nonfarm Private Payr, August (8:30): 212K expected, 210K prior
Unemployment Rate, August (8:30): 5.2% expected, 5.3% prior
Hourly Earnings, August (8:30): 0.2% expected, 0.2% prior
Average Workweek, August (8:30): 34.6 expected, 34.6 prior

End part 1 of 3
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Saturday, August 22, 2015

The Daily, Part 1 of 3, 8-22-15

* * * *
8/22/2015 Investment House Report
* * * *

Targets hit: PANW
Buy alerts: None issued
Trailing stops: None issued
Stop alerts: None issued

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

********************************************************************
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.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE Economic SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************

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

- DJ30 dives 535 points, 10% off high, joining RUTX, SOX in 'official' corrections.
- China is to blame. Along with Singapore, Brazil and on and on, even the US.
- VIX explodes to biggest weekly gain ever.
- Fed Steadfast: Bullard says we don't look at no stinking markets. But will Fed be forced to QE again?
- Dollar plunging. Hey, shouldn't that make the big stocks happy?
- Oil down due to quantity or demand? Hate to say it, but demand.
- Despite the sharp selloff, still some stocks in really good patterns.
- Likely another selloff early this week, IF the market wants to try and bottom. Even if it does, that does not mean new highs are the next stop.

Find a Scapegoat! It's China! And Hong Kong and Brazil and Indonesia and Turkey and the Koreas . . .


Another explosion at a chemical warehouse in China. Standards are so high over there. And we want to import food from there?

Stocks continued the Thursday selling in a big way. DJ30 dropped 530 points. 40% of the SP500 is down 20% or more ('official' bear market declines). VIX surged past the December 2014 peak and closed over the October Ebola closing high, posting its largest one week advance ever. New lows surged to 612 on NYSE. Breadth -6:1 NYSE. The put/call ratio surged to 1.69. SP500 bombed to the December low, DJ30 is closing in on the August 2014 low, RUTX gapped to a hammer doji at the January 2015 lows.

SP500 -64.84, -3.19%
NASDAQ -171.45, -3.52%
DJ30 -530.94, -3.12%
SP400 -2.34%
RUTX -1.34%
SOX -2.72%

VOLUME: NYSE +44%, NASDAQ +32%

A/D: NYSE -5.7:1 (after -5.5:1 Thursday); NASDAQ -2.4:1. Hardly blowout negative breadth. NYSE is down broadly for a couple of days, however. NASDAQ's narrower breadth shows it was mostly a larger cap selloff.


Fear? Many denied it, but it was there. VIX exploded higher. Worry? Futures were not bad at all until one of the numerous Chinese PMI reports ('Chinese menu' syndrome economic reports) rolled in at a 6.5 year low. Futures dropped similar to a stone. Many news websites are pinning the tail of the decline on China. Why not? Seems to be one of the themes in politics now, i.e. blame China.

But China is in bad shape. Along with many, many markets and countries. Shanghai crashed 4.3%, breaking the 200 day SMA as it dropped 32% from its peak. Hong Kong fell into bear market territory as well. Bank of America warned of a 'Dow Theory sell signal, key supports broken, semiconductors are breaking lower, and no capitulation.' No fear there.

What about the Fed? Well, Mr. Bullard had to open his mouth and comment so stoically and seriously that the 'Fed doesn't react directly to equity markets.' You can almost see him looking down his nose as the words rolled out. Of course our first reaction was 'really?' QE 1 ends, market rolls over, Fed rushes in. QE 2 ends, stocks roll over, Fed rushes in with Operation Twist and other measures. Stocks stumble again and then the Fed goes whole bore with QE3 and the market surges into October 2014.

Okay, let's pretend 'the Fed doesn't react directly to equity markets.' How about crashing world economies? Surely the Fed realizes markets foretell economic angst ahead. Many markets that imploded already (over 20 and counting as of this week, another one if you want to throw the US in there) are showing economic numbers that justify the implosions. 500K+ in the streets of Brazil's capitol city. Turkey in civil war. The Koreas are heading toward a hot war (really hot if they go nuclear as some are warning). Pretty much all of Asia is heading into economic morass. Will that do?

Don't forget the media outlets. CNBC in the last hour and after showed at each break and return from break graphics of a roaring bear. When they would start talking they had that so serious and somber voice discussing the market selling. Now all we need is some weekend newspapers, Baron's, etc. showing bears on the cover.

I don't know if you would call all of that fear, but the selling is tremendous as nearly all stocks joined the hit list. Sure there were the holdouts, e.g. UBNT, PETX, HLF or others that have been hammered and are at support, already sold out. The most were still pricing in carnage.

So what are the solutions?

Some are calling for the Fed and/or the Treasury Secretary to come out of hiding and actually say something. Some want the Fed to say a rate hike is off the table until there is some resolution of the China implosion. Not sure that would help, but maybe that would be good for a relief bounce.

With the US economy in economic rollover, and yes, many more were saying Friday that is the case, a delay of a 25BP rate hike will not salvage anything. The economy is staggering under the burden of hundreds of thousands of new regulations and the associated costs the past six years from the ACA to wages to overtime to the EPA, the most recent gut punch being this week's new EPA regulations on methane produced from hydraulic fracturing.

With that, the only thing that helps the market is 1) new QE, or 2) a new administration with new policies. Gee, which is likely to happen first? The only question is when the Fed will admit to the world (as it already knows itself how bad things really are) that it has to step in again and swell its balance sheet by another $1 trillion or so? It does not want to do that, and thus Bullard's comment has some truth. What was implied but not stated was the last part of that statement: ". . . until things look really bad."

Waiting on that is not a great strategy, but looking at stocks, the indices, and the indications noted above, the market could put in a nice relief move off this 'China Syndrome' selling (straight down to China, and ironically, blamed on China) given it has been so unidirectional.

Typically with a selloff as this one that dives into the weekend and shows no short covering move there is a further downside early the next week. That is often the washout that leads to a decent rebound/relief rally.

That move has a lot of uses. We can put some money to work. While we have some positions that are down, they are not large positions as we have sold positions for profit on the way up and closed the majority already. Those that we have can rebound with a single bound on the relief move, and we are looking at playing them with a few more positions on a relief move off of a washout and reversal. We can play some of the stocks that didn't go down in the selling, e.g. HLF, PETX, UBNT . . . not many, but they are showing strength and strength leads. Then after the move runs its course we close upside that is peaking out and then play the downside as it renews itself.

Let the others worry, let them fret. Watch the market, watch the indicators, watch quality stocks, play the moves for what they give and move on to the next when the move peaks out.


THE MARKET

CHARTS

Stock indices are snapping support levels on a daily basis. No bottom has even become remotely visible, but they are becoming very stretched downside with SP500 and SP400 catching down, though they still lag, DJ30, RUTX, and SOX.

The 'big' news Friday was DJ30 hitting 'official' correction mode. It is not the first. SOX is off 23% from its May peak. RUTX is off 10.75% from the June high. SP400 is close at -8.25%. SP500 is the relative strength leader at 'just' -7.6%, but it is catching down rapidly.

SP500: -6.3% in a week pushed SP500 to the February low, December 2014 low, and July 2014 peaks. SP500 is dropping to new support levels each session, and early this coming week it could test toward 1920-1905 and then post a major reversal back upside to start a bounce to test the selling.

DJ30: A major plunger to the downside, leading the way lower and thus it is also already near some serious support from the spring and summer 2014. Hugely stretched to the downside with a 10+% decline off the highs and -6.4% for the week. Death crossed, and after a death cross you get a test after a major plunge lower. At key support and as with SP500, significantly oversold. A bounce back to 17,000ish on a relief move is a 50% retracement of this past week's decline.

RUTX: The midcaps gapped lower, filled the gap in the market recovery, then gave it all up. The pattern is a hammer doji at a pretty important support level running through the January and February lows, gaps from the summer 2014. Huge selloff to support.

NASDAQ: Impressively weak, breaking through the November and December 2015 peaks and March 2015 low. Closed in no-man's land between those points on the high and the September 2014 peak on the low. A further decline to that lower support (4600) to start the week sets up a rebound to test the 4800 resistance (closed at 4706).

SOX: Undercut the next support and now looking at the October 2014 low at 552 (closed at 578) as support. Ironically, that is where SOX bottomed on the September/October selloff that year to reverse and rally. Giving up that entire move sets up a relief move but does not speak well for any further upside.

SP400: A massive pair of downside gaps and declines to close at the session lows. Dove through the twin peaks from July and September 2014. Next support is near 1400 (closed at 1423). As with the other indices, another run lower early in the week sets up a rebound.


LEADERSHIP

After a day such as Friday after Thursday leaves little leadership unless you are looking at the downside. Some groups are still in good shape (homebuilders, utilities) as well as some solid stocks, though it is a rather divergent group of individual stocks from various sectors.

A few good patterns: PETX (biotech), ASPS (mortgages), HLF (druggish), UBNT (telecom), even a chip or two (e.g. XLNX).

Homebuilders: DHI is testing its three week breakout surge. TOL is testing a breakout as well.

Utilities: Oh yes, the excitement surges. Some of the utilities are testing good moves. SO is forming a two week handle to a cup base. PCG is fading to test a key break higher over resistance in its base. Okay, there is good risk/reward here, something you can make money on.

Big names: Sellers started to take down some of the names, always an indication the selling is getting overdone. NKE and UA knifed lower. ULTA sold through the 50 day EMA. GOOG is testing the 50 day EMA. NFLX is at the July gap test. FB gapped to the late June/early July lows and the March and April highs. AMZN is testing the 50 day EMA and the lower gap point from July. PCLN is holding the 50 day SMA on the low. Some selling but some moves to support.

A few more interesting patterns in shape: AAOI, RGEN, CRME, VIMC, COLM, LULU, OSUR, JCOM and more. Even with all the selling, some good patterns survived and indeed used the selling to set up further. Or, they just ignored it.

What does it mean when there are still stocks in good shape? It can mean the selling is not over, that not everything is torn down. It can also mean that that selling is not going to be apocalyptic, that a 10% DJ30 correction, and possibly similar corrections on the other indexes after the first of this week, is enough. It definitely means these stocks are very much worth watching in the context of making us money on a renewed upside market move.


MARKET STATISTICS

NASDAQ
Stats: -171.45 points (-3.52%) to close at 4706.04
Volume: 2.687B (+32%)

Up Volume: 421.97M (+247.36M)
Down Volume: 2.33B (+440M)

A/D and Hi/Lo: Decliners led 2.41 to 1. Surprisingly light. Shows the selling was focused in the bigger names, and as the look at leaders suggested, there are quite a few stocks out there that are holding nice upside patterns even after this selling.
Previous Session: Decliners led 5.25 to 1

New Highs: 15 (-3)
New Lows: 356 (+98)

S&P
Stats: -64.84 points (-3.19%) to close at 1970.89
NYSE Volume: 1.3B (+44.44%)

A/D and Hi/Lo: Decliners led 5.69 to 1. Hefty 5+:1 on the downside for a second session. Maybe not a -10:1, but consistently bad last week.
Previous Session: Decliners led 5.5 to 1

New Highs: 0 (-8)
New Lows: 612 (+258). This is getting there. Actually, it is 'there' in terms of acting as an oversold indicator.

DJ30
Stats: -530.94 points (-3.12%) to close at 16459.75


SENTIMENT INDICATORS

VIX: 28.03; +8.89
VXN: 30.2; +8.59
VXO: 28.34; +8.36

Put/Call Ratio (CBOE): 1.69; +0.36

Recent history: 9 over, 7 below. Still pretty even, showing no imbalance to the put side.


Bulls and Bears: Bulls fall harder again while bears actually back off their modest rise. Still converging thanks to a decline in bulls, but the bears just will not make a serious move upside, still believing to some degree in the Fed put.

Bulls: 37.7% versus 40.2% versus 42.2% versus 43.3% versus 49.0%

Bears: 18.4% versus 18.6% versus 17.5% versus 17.5% versus 15.6%

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: 37.7%%
40.2% versus 42.2% versus 43.3% versus 49.0% versus 43.7% versus 44.8% versus 49.5% versus 51.6% versus 45.5% versus 47.4% versus 51.5% versus 47.5% versus 51.5% versus 48.5%

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 18.4%
18.6% versus 17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% versus 16.5% versus 16.5% versus 15.8% versus 14.9% versus 15.8% versus 13.9%

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): 2.05% versus 2.08%. Continued the Thursday upside gap, moving to a higher high on the rally off the July low.

Historical: 2.08% versus 2.12% versus 2.20% versus 2.15% versus 2.20% versus 2.19% versus 2.15% versus 2.14% versus 2.24% versus 2.17% versus 2.27% versus 2.15% versus 2.19% versus 2.29% versus 2.25% versus 2.23% versus 2.27% versus 2.27% versus 2.32% versus 2.34% versus 2.37% versus 2.34% versus 2.35% versus 2.35% versus 2.40% versus 2.44% versus 2.42% versus 2.31% versus 2.206% versus 2.26% versus 2.29% versus 2.38% versus 2.42%


Euro/$: 1.1362 versus 1.1237. Euro is surging versus the dollar, reaching back toward May and June highs. You would think the large cap multinationals would be so happy. Along with the bald guys on CNBC.

Historical: 1.1237 versus 1.1132 versus 1.1032 versus 1.1080 versus 1.1110 versus 1.1154 versus 1.1165 versus 1.10448 versus 1.0966 versus 1.0906 versus 1.0953 versus 1.0978 versus 1.0936 versus 1.0983 versus 1.1058 versus 1.1092 versus 1.0977 versus 1.0992 versus 1.0927 versus 1.0944 versus 1.0927 versus 1.0825 versus 1.0836 versus 1.0880 versus 1.0946 versus 1.1005 versus 1.0999 versus 1.1157 versus 1.1032 versus 1.11069


$/JPY: 122.06 versus 123.39. Diving again after plunging through the 50 day EMA Thursday.

Historical: 123.39 versus 123.79 versus 124.39 versus 124.44 versus 124.32 versus 124.41 versus 124.15 versus 125.08 versus 124.36 versus 124.74 versus 124.78 versus 124.31 versus 123.99 versus 123.89 versus 124.15 versus 123.99 versus 123.56 versus 123.26 versus 123.79 versus 123.89 versus 123.96 versus 123.88 versus 124.31 versus 124.07 versus 124.13 versus 123.78 versus 123.38 versus 123.42 versus 122.76 versus 121.29 versus 120.66


Oil: 40.29, -0.69. Still sliding lower below the 10 day EMA. No sign of a bounce yet to even test the break of the January low and then the March low.


Perhaps the demand shows why there is no bounce thus far.


Gold: 1159.90, +7.30. A third sharp move upside takes gold to its next resistance.


MONDAY

Stocks closed hard on the lows Friday with no attempt at a relief move. That is considered an indication that the selling is not over as no one even bothered to cover shorts ahead of the weekend. Often what you see with such a sharp, vicious plunge is stocks down again early the following week as they seek a flush out. I know, I know, that is so pat, so standard a call. But, it works. It worked last year and it has worked on so many selloffs over so many years past.

Interestingly, as pat as that move appears, as many times as it has happened in the past, it always seems that investors, traders, HFT programs, etc. know it is the case that transpires, but their emotions get the best of them and thus the action plays out again and again, similar to 'The Matrix' trilogy. Or, the Fed and its QE rounds.



Mr. Bullard haughtily commented the Fed does not pay direct heed to financial markets. Okay, if you want to believe that you can. It may not pay heed to them, but all during the recovery each time a QE program ended and the markets rolled over, the Fed rushed in with new QE. The economy just wasn't quite ready to head out on its own. Thus we had the series of QE's to keep asset prices inflated, keep people feeling better, and hope the economy would catch up.

Well, here we are at another point where QE has run out and ever since the market has stumbled, and now is rolling over. It would seem that IF the economy was ever good enough to take the training wheels off, the Fed missed that opportunity as now the economy is struggling either under its own lack of traction given the hundreds of thousands of regulations strangling business, the latest the new EPA methane regs, as well as the rest of the world tanking.

Think about those regulations and the self-imposed economic strangulation they bring. The rail industry is struggling for survival now that the coal industry is shut down. Thousands upon thousands have lost jobs directly from coal or indirectly through those servicing the coal industry and communities. Now we are going to see the same in the oil industry as the administration attempts to strangle that form of fossil fuel in favor of uneconomical solar, high-priced and high mortality wind and who knows what is next.

Look at Germany. It was the 'most solar' country on earth with billions in subsidies to convert entire cities to solar, or at least as much as possible. It didn't really work for industrial cities, more like a Mayberry from the old 'Andy Griffith Show.' What happened? It realized that the industry cost more for power, that it didn't really create any new jobs because it was not profitable enough, and that it destroyed large numbers of jobs because other industries were force out of business and also the economic activity slowed to an extent that other businesses went under as well. Germany ended all its subsidies, went back to fossil fuels, and is now a world economic powerhouse again.

Lesson learned, but of course not here. We are smarter and can do it better. Just as the administration apparently feels it is smarter than prior socialists and indeed communists (there are self-avowed communists in the administration; just ask or look as they are not ashamed of it) and can 'do it right this time,' they feel they can do solar better than others, including Germany.

Back to the market.

A conflagration of bad news for stocks and a fairly incredible selloff the past two sessions, particularly on the Dow, has DJ30 joining SOX and RUTX as 10%+ losers. 530 points on a day is impressively bad, even more so as the second day of an impressive 2-day drop.

The notion of a sharp Thursday and Friday decline followed by a further blow down Monday and or Tuesday is not a pretty picture. Looking back at the accounts, however, we have trended out of positions and were surprised at how much cash we have been in. That naturally occurs when you take partial profits a couple of times on a position and sell out of positions with trialing stops that start to break support. Of course we do have some newer positions that are hurting but ones that at this point we are not going to do much about given the massive oversold condition and SP500, DJ30 and others at or close to next support. We likely do better staying with them, letting the flush out occur, then augmenting them with some new upside to ride a rebound, relief or otherwise.

Friday we took some more PANW gain as that stock was attempting to firm after approaching support. Again, may get more downside next week, but if PANW, torched on the week, is an example, then after some more fear early week the bounce move is set. It does not hurt that there are still a surprising number of stocks in position to bounce right now, or need just a bit more to be ready.

Perhaps Friday was not a capitulation, but investors, traders, funds, etc. notched down the big name leaders, and that is always a good indication of the move maturing, particularly when coupled with such sharp declines. We did not buy into more positions Friday, but we have found several potential rebound plays for this week after the market gets this leg lower out of its system either Monday or Tuesday.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4706.04

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 prior market peak
The March lows at 4843 and 4825
The 200 day SMA at 4912
4912 the mid-April China dip
The June low at 4974
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
The 50 day EMA at 5048
The lower trendline is at 5123
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5150-5160 is the June peak range
5164 is the June prior all-time high
5232 is the July 2015 all-time high.

Support:
4641 is minor support
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 1970.89

Resistance:
1991 is the July 2014 high
2011 is the September prior all-time high
2046 is the July closing low
2062 is the January 2015 lower high
2076 is the all-time high from November
The 200 day SMA at 2078
2079 is the intraday all-time high from November
The 50 day EMA at 2088
2094 is the December 2014 high, the prior all-time high
The lower channel line at 2103
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
2130 is the June 2015 peak
2135 is the May 2015 all-time high

Support:
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 16,459.75

Resistance:
16,506 is the March 2014 peak
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high
16,736 is the penultimate all-time high from May 2014
16,946 is the June 2014 peak
16,970 is the June 2014 former all-time high
17067 is the December 2014 low
17,068 is the early July 2014 peak
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
17,515 is the early July closing low
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to present trading range.
June low at 17,715
The March low at 17,718
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The 50 day EMA at 17,629
The 200 day SMA at 17,819

Support:
16,333 is the August 2014 low
16,026 is the April 2014 low


ECONOMIC CALENDAR

August 25 - Tuesday
Case-Shiller 20-city, June (9:00): 5.0% expected, 4.9% prior
FHFA Housing Price I, June (9:00): 0.4% prior
New Home Sales, July (10:00): 507K expected, 482K prior
Consumer Confidence, August (10:00): 92.6 expected, 90.9 prior

August 26 - Wednesday
MBA Mortgage Index, 08/22 (7:00): +3.6% prior
Durable Orders, July (8:30): -0.8% expected, 3.4% prior
Durable Goods -ex tr, July (8:30): 0.5% expected, 0.8% prior
Crude Inventories, 08/22 (10:30): +2.620M prior

August 27 - Thursday
Initial Claims, 08/22 (8:30): 272K expected,
Continuing Claims, 08/15 (8:30): 2239K expected,
GDP - Second Estimate, Q2 (8:30): 3.1% expected, 2.3% prior
GDP Deflator - Second, Q2 (8:30): 2.0% expected, 2.0% prior
Pending Home Sales, July (10:00): 1.0% expected, -1.8% prior
Natural Gas Inventor, 08/22 (10:30): 53 bcf prior

August 28 - Friday
Personal Income, July (8:30): 0.3% expected, 0.4% prior
Personal Spending, July (8:30): 0.4% expected, 0.2% prior
PCE Prices - Core, July (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Final, August (10:00): 93.0 expected, 92.9 prior

End part 1 of 3
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Monday, August 17, 2015

The Daily, Part 1 of 3, 8-17-15

* * * *
8/17/2015 Investment House Report
* * * *

Targets hit: None issued
Buy alerts: BWLD; NOC; PCLN; UBNT; V
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.

MARKET SUMMARY

- A second Monday posts a solid gain. Now can it hold it?
- Market overcomes terrible Japan GDP, terrible Empire State PMI, puts in a low to high move.
- Solid patterns on SP500, SP400, NASDAQ yield upside.
- SP400 trying to outpace SP500 to the new high.
- Leadership up but still too thin for serious new highs. Of course, we are playing a move to the prior highs, not new highs.

Stocks had to fight off a negative reaction to a recession-level New York PMI, but it wasn't that much of a fight and it didn't take long before the bids returned and stocks rallied nicely for a second straight Monday.

SP500 10.90, 0.52%
NASDAQ 43.46, 0.86%
DJ30 67.78, 0.39%
SP400 0.85%
RUTX 1.02%
SOX 0.98%

VOLUME: NYSE +4.5%, NASDAQ +1.5%. Volume rallied, nice to see, but it was rallying from low levels, still well below average after dropping below the 50 day mark on Thursday.

A/D: NYSE 3:2, NASDAQ 3:2. Quite mediocre given the rather impressive moves on RUTX, SP400, and NASDAQ.

Homebuilder sentiment was released at the top of the first hour and at 61 it beat expectations by a point. That was credited with turning the market, but the bounce was already on AND homebuilder sentiment is likely one of the worst indicators there is in terms of accurately portraying that market's direction. How so? Too many times homebuilder sentiment turns out to be just wrong. The most classic example is early summer 2005 when the CEO's of the three largest builders were on the financial stations, just giddy at the '10 year demographic' that was going to propel housing even higher than the bubble it was already in. Of course we know the market peaked in July 2005 and then there was that little collapse afterward. So, builder sentiment is a horrible indicator. We got more reliable reports from Bagdad Bob during the Iraq war.


The housing market in Bagdad is fantastic!

Perhaps people were buying into the homebuilder sentiment or perhaps it was just the market responding to the technical setup that had SP500 and SP400 at their 200 day SMA with some very nice upside patterns. NASDAQ responded to its ABCD pattern with a solid upside break back through the 50 day MA's. The move was set as noted last week and in the weekend report, and Monday showed a good upside break.

Of course the prior Monday showed an excellent surge upside as the indices broke higher from similarly good patterns. Timing was everything, however, and the next day China's surprise yuan devaluation torpedoed that move. The indices did manage to work through that issue and setup again, laying the groundwork for today's move, but in this market they still have to prove every move.

The market received a lot of help Monday from many sectors that threw in to the upside. The big names helped the market's cause. Despite the commodities slaughter, some metal stocks are not bad at all, e.g. AKS, STLD. Software rallied, telecom posted some good moves, restaurants were at it again, and even energy, while not surging, is setting up new good patterns to rally out of.

So the market showed a good technical setup, overcame some bad economic news (is bad news still good news?), found some leaders, and posted solid gains. The move off of support has started, again, but as noted, in this market it is a day by day affair.


NEWS/ECONOMY

While the New York manufacturing report should be an eye opener, it was Japan's poor performance that set the tone for the morning.

Japan Q2 GDP: -1.6%. Consumption declined right at -1%. Japan is entering into its 5th recession in 6 years. Similar to many other economies in the world, there is a disconnect between financial markets and economic performance.


Empire Manufacturing, August: -14.9 versus 5.0 expected versus 3.9 prior.
Six year low.

New Orders: -15.7 versus -3.7 prior
Shipments: -13.8 versus +8.2 prior
Employment: Lower workweeks and fewer workers.

Again the US shows divergent data, but it is not surprising as manufacturing continues its struggles as we know from the jobs reports and how we have as many waiters and bartenders as manufacturing workers in the US.


China: Out of the headlines, sort of. The port disaster grows in magnitude daily. The yuan levels indicated China intervened again but the peg is a bit stronger so the reports are China passed a second day on any intervention.


Brazil: Protests, some riots in attempts to kick the current leadership out.

Thailand: Explosion in Bangkok from an IED, and two other devices were found prior to being set off.


THE MARKET

CHARTS

SP500: It wasn't all tea and crumpets Monday as SP500 started weak and gave up all of the Friday move before finding its bids and rallying. Closed out back inside its uptrend channel and over the 50 day MA's. Not a powerful move as volume, though higher, still landed well below average. It is last summer and thus lighter volume is the norm. Plus we are not looking for any kind of massive new breakout, just a nice rally to the prior highs. That move started again Monday (similar to the prior Monday), pushing a pattern very similar to that from December/January. A February-like rally at this juncture would be fantastic, but again, we don't have to have a new high to make some really good money on a run back up to the top of the range.

SP400: Excellent action on top of Friday's 200 day SMA bounce. SP400 cleared both 50 day MA's and put in a higher high on this recovery off the late July plunge low. SP400 looks very good and if it keeps this kind of percentage move going vis- -vis SP500, IT could be the next index moving to a new high.

NASDAQ: Looked a bit shaky to end last week. The big reversal Wednesday set a possible D point in an ABCD pattern. Tested Thursday and Friday, held on, and Monday NASDAQ broke upside through the 50 day MA's. No huge volume here either, but the pattern is solid and NASDAQ big names are helping lead once more. PCLN, SBUX, NFLX and others are up and if they really throw in, NASDAQ could solidify its leadership position yet again.

DJ30: Up, overcoming at 133 point deficit that took it below all of last week's closing lows. A nice reversal got it through the 10 day EMA, the first level of resistance, but it is looking 17,600, the lower threshold at the bottom of its trading range, right in the face. Has to get on through that level and hold the move.

RUTX: More to say about RUTX Monday than Friday. Friday was just another session of trying to keep from dropping yet again. Monday saw RUTX break back up through the May low as well as the 200 day SMA. Did this the prior Monday and then the China devaluations hit, but note that RUTX closed over that level this Monday.

SOX: Still working on building that shelf to rally from its oversold condition, again holding the Wednesday low and bouncing. MACD continues its climb even as the index hits lower price lows. It looks ready to tray a move, the question is how much of a move? If the chips throw in upside, the market suddenly has new power.



LEADERSHIP

Monday the leaders were moving along with some stocks in recovering sectors such as metals, while others put in some good tests (e.g. energy). Overall, however, the action did nothing to really bring any new leaders to the fore. Perhaps chips are ready to bounce, joining energy and some metals in a recovery move. That will help the indices reach our goal, i.e. the top of the SP500 range, but without more it doesn't change the lack of leadership dilemma.

Big Names: PCLN surged off its nice test. NFLX added some gain but was not a barn burner. AMZN is moving up to the top of its recent narrow range. MSFT looks very good as it put in a higher low. SBUX is solid and UTLA added a bit more upside to a nice Thursday/Friday move. FB looks great to move, just hasn't.

Biotechs/Drugs: Big name biotechs still look good, e.g. AMGN, CELG. ENDP is rallying back up. HLF still working on a great pattern. Still issues, however, e.g. KITE, TTPH,, BRLI.

Retail: LOW still surging. HD looks good. KORS still trying to make the turn. FIVE attempted to continue the Friday move but lost its bid. WSM surging to a new high. Overall retail remains solid.

Restaurants/Fast Food: CMG moving to a new high again. BWLD break higher out of the top of its post-gap range. On the other side you have JACK, WEN beaten down ugly. RUTH is bouncing off its earnings gap test.

Energy: Still some good setups: APC, GPOR, XEC. A good test and bounce in others, e.g. VLO.

Financial: Still has a weak streak of late. JPM is recovering but struggling at the 50 day SMA. BAC is bouncing off the 50 day MA, perhaps it can lead. WFC shows the same pattern as JPM. GS is off the 200 day SMA test but nothing really strong about it.


MARKET STATISTICS

NASDAQ
Stats: +43.46 points (+0.86%) to close at 5091.7
Volume: 1.476B (+1.61%)

Up Volume: 1.06B (+244.31M)
Down Volume: 434.44M (-198.85M)

A/D and Hi/Lo: Advancers led 1.59 to 1
Previous Session: Advancers led 1.53 to 1

New Highs: 89 (+29)
New Lows: 103 (-5)

S&P
Stats: +10.9 points (+0.52%) to close at 2102.44
NYSE Volume: 701.9M (+4.51%)

A/D and Hi/Lo: Advancers led 1.58 to 1
Previous Session: Advancers led 2.15 to 1

New Highs: 93 (+44)
New Lows: 148 (+43)

DJ30
Stats: +67.78 points (+0.39%) to close at 17545.18


SENTIMENT INDICATORS

VIX: 13.02; +0.19
VXN: 15.55; -0.86
VXO: 13.95; +0.02

Put/Call Ratio (CBOE): 0.89; -0.12

Recent history: 1 below, 1 over, 1 below, 5 over to 4 under the past 9 sessions. Pretty even as it was before: 3 below, 3 over, 8 below, 11 above. The 11 above helped bounce the last move upside.


Bulls and Bears: Actually converging, the closest in 9 months but still miles apart. Bulls are slowly trending lower, bears are just now starting to trend higher after months and months at the 12 to 15 level.

Bulls: 40.2% versus 42.2% versus 43.3% versus 49.0%

Bears: 18.6% versus 17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6%

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: 40.2%
42.2% versus 43.3% versus 49.0% versus 43.7% versus 44.8% versus 49.5% versus 51.6% versus 45.5% versus 47.4% versus 51.5% versus 47.5% versus 51.5% versus 48.5%

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 18.6%
17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% versus 16.5% versus 16.5% versus 15.8% versus 14.9% versus 15.8% versus 13.9%

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): 2.15% versus 2.20%. Gapped upside to the 200 day SMA where it stalled midweek last week and came back to test the 10 day EMA. Still trending higher, at an important point, likely goes on to try and fill that late April gap lower.

Historical: 2.20% versus 2.19% versus 2.15% versus 2.14% versus 2.24% versus 2.17% versus 2.27% versus 2.15% versus 2.19% versus 2.29% versus 2.25% versus 2.23% versus 2.27% versus 2.27% versus 2.32% versus 2.34% versus 2.37% versus 2.34% versus 2.35% versus 2.35% versus 2.40% versus 2.44% versus 2.42% versus 2.31% versus 2.206% versus 2.26% versus 2.29% versus 2.38% versus 2.42% versus 2.34% versus 2.364% versus 2.48% versus 2.40% versus 2.37% versus 2.40% versus 2.36%


Euro/$: 1.1080 versus 1.1110. Euro fell for a third day against the dollar after bumping the 200 day SMA last week. Not a rollover, just the first test of an important resistance level.

Historical: 1.1110 versus 1.1154 versus 1.1165 versus 1.10448 versus 1.0966 versus 1.0906 versus 1.0953 versus 1.0978 versus 1.0936 versus 1.0983 versus 1.1058 versus 1.1092 versus 1.0977 versus 1.0992 versus 1.0927 versus 1.0944 versus 1.0927 versus 1.0825 versus 1.0836 versus 1.0880 versus 1.0946 versus 1.1005 versus 1.0999 versus 1.1157 versus 1.1032 versus 1.11069 versus 1.1099 versus 1.1055 versus 1.1082 versus 1.1054 versus 1.1131 versus 1.1243 versus 1.1205


$/JPY: 124.44 versus 124.32. Doji over the 20 day EMA in a nice tight lateral move. Hit some resistance at the June high, has tested, and now we see if the dollar has real strength.

Historical: 124.32 versus 124.41 versus 124.15 versus 125.08 versus 124.36 versus 124.74 versus 124.78 versus 124.31 versus 123.99 versus 123.89 versus 124.15 versus 123.99 versus 123.56 versus 123.26 versus 123.79 versus 123.89 versus 123.96 versus 123.88 versus 124.31 versus 124.07 versus 124.13 versus 123.78 versus 123.38 versus 123.42 versus 122.76 versus 121.29 versus 120.66 versus 122.46 versus 122.51 versus 123.04 versus 123.115 versus 122.43 versus 122.497 versus 123.82 versus 123.63 versus 123.88 versus 123.69 versus 123.37 versus 122.66


Oil: 42.41, -0.33. Down again, continuing the trend lower, but oil is going to try a bounce relatively soon as it tests its mid-March low.

Gold: 1118.40, +5.20. Working on a three day lateral test of its rally through Wednesday. Holding near support after that move, setting up the next try higher as the economic data is not so great.


TUESDAY

Solid move Monday as the indices start a new week, again, with a solid upside break. Some solid names in solid patterns moved well. We picked up some new BWLD, some PCLN, UBNT, NOC, and V. Restaurants, online travel, software, defense, and financial. Broad spectrum helped push the market gains, and if energy moves higher again off the nice setups shown there, if the beaten down commodities continue higher, and the actual leaders continue to push higher as on Monday, the indices have a good shot at reaching those prior highs such as SP500.

The first step is getting past Tuesday. Last week saw a good Monday and a lousy, China-devaluation driven Tuesday. It took the rest of the week to recover and setup again. The important takeaway: the market did setup again. Monday it was breaking higher again. Despite China and continued iffy US data and lousy world data, the stock indices held good patterns and set up again.

Okay, so the market has some resilience and is trying to make a new run back toward the top of the range. We picked up some new positions to play that as noted above. We will look at more vehicles to play the move as there are still some good patterns to take advantage of.

Still not looking at anything more than a rally back up to the prior peaks on SP500 though SP400 is making a serious run of its own. Still lots of potential pitfalls, still lots calling for the top, still resilient. All is correct, and that is why we are only looking for a rally to the prior peaks for now.

Have a great evening!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 5091.70

Resistance:
The lower trendline is at 5115
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5150-5160 is the June peak range
5164 is the June prior all-time high
5232 is the July 2015 all-time high.

Support:
The 50 day EMA at 5072
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
The June low at 4974
4912 the mid-April China dip
The 200 day SMA at 4906
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
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 2102.44

Resistance:
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
2130 is the June 2015 peak
2135 is the May 2015 all-time high

Support:
The lower channel line at 2100
The 50 day EMA at 2095
2094 is the December 2014 high, the prior all-time high
2079 is the intraday all-time high from November
The 200 day SMA at 2077
2076 is the all-time high from November
2062 is the January 2015 lower high
2046 is the July closing low
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 17,545.95

Resistance:
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to present trading range.
June low at 17,715
The March low at 17,718
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The 50 day EMA at 17,727
The 200 day SMA at 17,825
17,923 is the January 2015 lower high
17,991 is the early December intraday high
18,104 is the December high
18,200 to 18,206 (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

Support:
17,515 is the early July closing low
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


ECONOMIC CALENDAR

August 17 - Monday
Empire Manufacturing, August (8:30): -14.9 actual versus 5.0 expected, 3.9 prior
NAHB Housing Market , August (10:00): 61 actual versus 61.0 expected, 60 prior
Net Long-Term TIC Fl, June (16:00): $103.0B actual versus $93.0B prior

August 18 - Tuesday
Housing Starts, July (8:30): 1200K expected, 1174K prior
Building Permits, July (8:30): 1257K expected, 1343K prior

August 19 - Wednesday
MBA Mortgage Index, 08/15 (7:00): 0.1% prior
CPI, July (8:30): 0.2% expected, 0.3% prior
Core CPI, July (8:30): 0.2% expected, 0.2% prior
Crude Inventories, 08/15 (10:30): -1.682M prior
FOMC Minutes, 7/29 (14:00)

August 20 - Thursday
Initial Claims, 08/15 (8:30): 272K expected, 274K prior
Continuing Claims, 08/08 (8:30): 2265K expected, 2273K prior
Existing Home Sales, July (10:00): 5.42M expected, 5.49M prior
Philadelphia Fed, August (10:00): 7.0 expected, 5.7 prior
Leading Indicators, July (10:00): 0.2% expected, 0.6% prior
Natural Gas Inventor, 08/15 (10:30): 65 bcf prior

End part 1 of 3
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Saturday, August 15, 2015

The Daily, Part 1 of 3, 8-15-15

* * * *
8/15/2015 Investment House Report
* * * *

Targets hit: None issued
Buy alerts: None issued
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.

MARKET SUMMARY

- And on the fourth day the PBOC rested.
- Visualize a market without the Fed. And the Federal government intervention.
- Fed is in a box as it prepares to hike when it likely needs more QE to save its markets and the 'wealth effect.'
- Near term SP500 looks ready to lead a bounce to the top of the range, but longer term the prognosis is not that great.
- A lack of leadership stepping up despite the trading range action.
- Playing a move up then we see what the sellers can do.

Friday China decided not to intervene and indeed pegged the yuan 0.05% higher. Well that took the pressure off; I for one was so relieved. Apparently everyone else as well as it was reported $14B flowed out of US equity funds on the week.

I often wish I didn't have anything to write about or think about market other than the market. What do I mean? Think how great it would be without a Federal Reserve, or at least one that morphed its mandate from two simple objectives, maximum growth while maintaining price stability, into the obligation to micromanage the economy. A federal government that did not intrude on every aspect of business, that did not implement massively unpopular regulations on people and businesses, that did not intervene or promulgate new massive regulatory schemes by the stroke of a pen with rules written by unelected bureaucrats versus deliberation and passage by Congress. Or an administration that just flat out fabricates stories to get its way? Thursday and Friday Secretary of State Kerry was pushing the theory that if the Iran deal was not passed the US dollar would crash. Seriously. With that kind of crap, who believes anything they hear?


If we don't give Iran $150B, the US dollar will crash. I know. I was in Viet Nam and saw atrocities and compared them to the barbarism of Genghis Kahn.


Instead, how about a market that reflected a freer business climate, not for the huge conglomerates that have thrived under the favoritism displayed the past few decades, but one that turns back to the way it used to be, keeping the playing field open for anyone with a better idea to succeed and then letting those that succeed actually reap the reward?

I remember the 1980's, and that was a great time for the startup. After a decade and more of terrible policies leading to stagnation, inflation, unemployment, lack of confidence, and disco, taxes were slashed, capital investment incentives provided that everyone could take advantage of, enthusiasm surged, and millions of new businesses were born. Morning in America.

It can happen again. I have written more than a few times that the next President in the US could preside over a boom as good as or better than the Reagan boom with just a few simple and history proven actions. The question is whether we remain mired in esoteric crapola the ruling class from both parties want to keep us preoccupied with, or do we get back to basics and foster an entrepreneurial environment where the best ideas and the hardest and smartest workers succeed? We can grow size of the pie once again and mint many new millionaires from the middle and lower class, not just grow existing millionaires into billionaires under a 'favorites win' system as we have now.

Okay, okay. Enough reminiscing, but it is a worthwhile exercise. Those were exciting times. Fresh out of school I bought a new vehicle and a new fangled personal computer, using accelerated depreciation and investment tax credits, took that technology to the oil patch, and started my own company. In a year I was running several dozen people, using that new portable technology to create opportunities and advantages beyond what was thought possible. Multiply that by millions upon millions and you can understand how the US went from stagflation and malaise to a booming economy with quarter after quarter, year after year, of massive GDP growth. It can be done again, but the policies have to be changed. No change in policies, no change in outcomes.


Stock market still in a topping pattern. It can't help it: QE over, rate hikes ending, economy still weak.

Overall the market still looks to be in a topping pattern. QE ended in October, and as with the end of each QE round since the Fed implemented it in March 2009, the market has struggled. Trending higher, indeed putting in higher highs, but it is a struggle as each high is rather unceremoniously punted and a new index has to step up and try its leadership hand.

Now the economic apologists claim that the economy has truly turned the corner this time. I guess they figure after 6 years the odds are on their side even more now than when the predicted the turn in 2011, 2012, 2013, 2014, and of course 2015. If so, why did many big forecasters this past week lower their Q3 and Q4 outlook to levels that bring GDP growth to sub-2% for the year? The Fed didn't quite go that far, but it did lower its forecast as well. I can finally empathize with Chicago Cubs fans on that long wait for a pennant.

When you consider the big picture, the notion the economy has recovered or is 'turning the corner' is preposterous. As preposterous as the Fed and others commenting this past week that we are at 'full employment.' How can that be when 93.7M working aged workers are out of the labor force (over 40% of all workers)? It is not because everyone is retiring to live the good life: the vast majority of all jobs created have gone to the 55+ age demographic as they re-enter the workforce to make ends meet to pay for their twenty-something kids living at home who have $100K in college debt but no job to show for it. Perhaps the EPA breached the mine containment dam near Silverton, CO as a jobs creator similar to the Great Depression jobs programs: dig that ditch then fill it up. By the way, you should read the account of the geologist who predicted this disaster just days before it happened. Someone needs to hire the 2500 KHZ just announced it would lay off, or the 'hundreds' of management level jobs Union Pacific will close down due to lower and lower coal shipments.



How can the economy be in great shape when food banks are running out of food as the lines get longer and longer? We have 'created or saved' so many more food service jobs than manufacturing jobs that we now have as many bartenders and wait-staff in the US as manufacturing workers. Yet at the same time you hear people such as Bill Gates lamenting the lack of available STEM (Science Technology Engineering Mathematics) employee candidates to fill positions while tens of thousands of graduates with degrees in those areas live in Mom and Dad's basement unemployed in their field. Grand editorials are written by Gates, Zuckerburg and others demanding increased immigration to fill the need for workers, but apparently they only want foreign workers they can pay much less than US citizens. If they don't get their way, they claim they are 'forced' to go overseas.

No, the illusion that the US economy has turned the corner and is on a normal growth cycle is as contrived as the jobs numbers and the 'full employment' meme. This week one of the administration apologists said that the severity of the recession caused the timidity of the recovery (my words, and I think much more descriptive). That is nonsense. History shows that the recovery is proportionate, indeed stronger, than the downturn. Of course, it goes back to policies. The wrong policies lead to weak recoveries no matter how hard the downturn: look at the 1930's and the 1970's as the clear historical record on that.

Of course the stock market reflects these issues, and as when other QE programs ended, the market is waffling. There is not the economic activity to support more sales and thus greater earnings. Once again another earnings season has revealed a lack of sales growth.

For the Dow 30 stocks: Q1 -0.8%. Q2 -3.58%. Q3 -4.0% expected. Q4 -1.8% expected.

If the economy is turning the corner, it has turned it and is staring a massive mountain top climb ahead of it. The Fed, however, has boxed itself into a corner in terms of a rate hike. It has said there will be one this year. If it doesn't hike, everyone knows something is wrong. If it does hike it risks being just another Fed that, by the time it got around to tightening its easy money ways, tightened just at the wrong time.



If the economic deterioration continues around the world and in the US the Fed is in a box. It will be forced, similar to that one-term first Bush disaster to go back on its 'read my lips, first rate hike in 2015' words. But it cannot do that without crashing the markets (after an initial rally) on fear of something wicked this way coming. So, as many have predicted (GS, BAC, Art Cashin, Rick Santelli), the Fed will have to save the market, and thus preserve the utter nonsense of what it calls the 'wealth effect', by implementing a new round of QE. That will only enrich the rich more and further crush the middle class that has to pay for the growing number of lower class citizens those policies create, but that is not the point. We are only talking about markets here, not the citizenry. We will again make great money but it is not the same as that made as companies surge sales, the citizens do well, and the gains are from the success of the country. It is just a monetary event, and at some point history shows that monetary events always unwind.


The Particulars

Friday was mostly higher after a week that started big but as with every good move it seems, it was met Tuesday with selling. A Wednesday reversal looked promising, but the market wandered laterally to the weekend. At least it did not roll over after the Wednesday reversal struggled to continue.

SP500 8.15, 0.39%
NASDAQ 14.68, 0.29%
DJ30 69.15, 0.40%
SP400 0.66%
RUTX 0.66%
SOX -0.60%

VOLUME: NYSE -13%, NASDAQ -9%. Volume lower and still below average on both exchanges in a pretty typical Friday in late summer.

A/D: NYSE 2.2:1, NASDAQ 1.5:1. NASDAQ still sporting very narrow breadth, meaning the big names are still the leaders.

That bought time into this week where SP500 will again attempt the amazing feat of rallying back to its May to July three peaks and perhaps a new high similar to NASDAQ's move four weeks back. It is, after all, SP500's turn. It remains in a pretty decent double bottom test of the July rally, and it is not the lone index showing decent near term (repeat, near term) upside potential. SP400 looks quite good at its 200 day SMA with an inverted head and shoulders, and even NASDAQ is hanging in with a double bottom Fibonacci retracement of the July rally.

So they can bounce. They still have to do it, and near term we think they will, for what that is worth. It all depends upon what the leadership stocks decide. There are leadership stocks that are in position to move from many different sectors. Some look great, many look good, a lot are just okay.

Indeed, many stocks that sported good patterns are just unable to put together the move needed. They are holding the line, but just wandering sideways as the patterns start to deteriorate. We have seen some breakouts get reversed, always as telltale sign to be careful, that perhaps an upside run is running out of stamina. Several plays on the report are just doing nothing, not up, not down, just nothing as we wait to see if they can produce the definitive move to signal an entry. The longer they take, the more we lose interest in them.

That said, SP400, SP500, NASDAQ are set to make a bounce higher off these patterns and we intend to continue playing that move and bank some gain on it.

After that, however, we are not all that confident. The market will go where it wants but if the history of this market during the recovery from the Great Recession holds, it will struggle post-Fed stimulus. Unfortunately, the Fed will be even slower with any new QE this time around and thus there likely will be a rather precipitous tumble before the bald-headed guys on CNBC figure it out and one of them rants and raves again that the Fed now again knows nothing, having forgot the 'lessons' of 2008-2009. Remember, in the current mindset in the US and the world, you cannot let markets go down, everything must be bailed out. The Fed is needed to cheapen the money so the federal government can spend ever more. Without the Fed, interest rates and the dollar would seek their appropriate levels versus the 98% reduction in value seen since the Fed's inception.


THE MARKET

CHARTS

SP500: This looks to be the large cap hope index, at least near term. Still in the 78% Fibonacci retracement double bottom off the July rally to the top of the range, we wait to see if SP500 can make the new break higher to again test the top of the range or put in its own higher high, following NASDAQ's lead. Held the 200 day SMA all last week on the closes, showing a good setup, now looking for that move to follow.

SP400: Also holding the 200 day SMA on last week's closes, SP400 undercut the 200 day Wednesday, reversed to hold it on the close, and Friday jumped higher off that support. Still working on the bottom of a right shoulder to an 8 week inverted head and shoulders pattern. In very good shape to make its own run to the top of its range. Good setup, now has to show the move.

NASDAQ: Lost some of its edge on the week, but it too still holds its double bottom or even ABCD at the 61%/78% Fibonacci retracement. Wednesday looked to be a solid reversal but Thursday was massively disappointing in the tap at the 50 day MA on the high and the fade. It left itself in position to move, and as with the S&P brothers above, it is time to make that move.

DJ30: Struggling below its March to July trading range, rebounding to end the week, but just managing to make it to the rapidly declining 10 day EMA. DJ30 'death crossed' last week with the 50 day MA moving down through the 200 day MA. Typically that signals a near term oversold condition that leads to a rebound, but bigger picture it takes more than just a relief rally from selling to change the cross.

RUTX: Russell small caps are attempting a bottom at 1200, the lowest level of support in its range. That is about all I can say at this point.

SOX: After its 11 weeks of selling, SOX is attempting to put in a temporary floor to rally back upside. MACD has improved with higher lows as it puts in lower price lows. Oversold, trying to work laterally to bottom, and definitely in relief bounce position. What kind of a bounce? Not planning on anything major.


LEADERSHIP

As noted above, there are many stocks that are still hanging in at the same price levels, but more just working laterally than working. Now the old adage is never short a dull market or stock. That plays into the notion that the indices are preparing for a bounce higher in the range in some cases or a bounce off new lows in other cases. NASDAQ leadership remains more limited to the big names though there are others in various stages of moves that can provide upside support. The big name leaders are not broken, but they have yet to get any sustained new help, and the market has to develop new leaders.

Recall my comments about the back and forth action typically producing more leaders as patterns are built and then launched? Damn few new names are showing up from this lateral, range-trading action. Oh sure, there are the utilities moving up in decent patterns; now THAT is a real signal of bullish strength.

New leadership remains unsatisfactorily thin. Sure we found several good names in position to take advantage of another run by SP500, SP400 and NASDAQ to the prior highs, but no groundswell of good patterns massing to support not only that move but a move to higher highs. That as much as anything else, indeed more so, is a reason we look at the market with concern for the upside, particularly after this next leg that takes SP500 to the prior peaks.

Big Names: FB remains in a solid four week test of the earnings rally. AMZN is holding its lateral range post-earnings. NFLX bounced Thursday from the 10 day EMA, was flat Friday. Important time for it to reignite the upside. MSFT is putting in a higher low on its test. ULTA is moving to a higher high. EBAY is trying to recover from its Wednesday dip. SBUX broke higher off its 50 day EMA. BA has a nice pattern in place.

Retail: Some interesting stocks, some turning the corner. LOW surged Thursday and Friday, proving the old adage (I made up I think) that if you watch a good pattern long enough you will watch a good move occur. KORS looks ready to put in a relief move of some sort off its selling. WSM is moving to higher highs again. FIVE is showing some good volume as it makes a move from a three week 200 day SMA consolidation. Some leaders still moving to higher highs, others trying to turn the corner and help out.

Biotechs/Drugs: CELG still looks solid. AMGN still looks solid. Both are in pullbacks and could give us buys. ENDP is coming back around in its pattern. HLF is in a nice flag. Others not so great, e.g. KITE, TTPH. ZIOP, BRLI. Formerly great, now goats.

Transports: Some look to be ready for a counter move to the selling. KSU in rails. ODFL and SAIA in trucking. Shipping is still horrid, e.g. TK, DRYS.

Energy: Many still prepping for that second move higher after that initial break from the downtrend. APC, XEC, maybe RIG. Others look solid, testing recent moves, e.g. VLO.


MARKET STATISTICS

NASDAQ
Stats: +14.68 points (+0.29%) to close at 5048.24
Volume: 1.453B (-8.88%)

Up Volume: 815.69M (+99.21M)
Down Volume: 633.29M (-270.56M)

A/D and Hi/Lo: Advancers led 1.53 to 1
Previous Session: Decliners led 1.28 to 1

New Highs: 60 (+11)
New Lows: 108 (+24)

S&P
Stats: +8.15 points (+0.39%) to close at 2091.54
NYSE Volume: 671.6M (-12.61%)

A/D and Hi/Lo: Advancers led 2.15 to 1
Previous Session: Decliners led 1.51 to 1

New Highs: 49 (-12)
New Lows: 105 (-17)

DJ30
Stats: +69.15 points (+0.4%) to close at 17477.4


SENTIMENT INDICATORS

VIX: 12.83; -0.66
VXN: 16.41; -0.54
VXO: 13.93; -0.92

Put/Call Ratio (CBOE): 1.01; +0.05

Recent history: 1 over, 1 below, 5 over to 4 under the past 9 sessions. Pretty even as it was before: 3 below, 3 over, 8 below, 11 above. The 11 above helped bounce the last move upside.


Bulls and Bears: Actually converging, the closest in 9 months but still miles apart. Bulls are slowly trending lower, bears are just now starting to trend higher after months and months at the 12 to 15 level.

Bulls: 40.2% versus 42.2% versus 43.3% versus 49.0%

Bears: 18.6% versus 17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6%

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: 40.2%
42.2% versus 43.3% versus 49.0% versus 43.7% versus 44.8% versus 49.5% versus 51.6% versus 45.5% versus 47.4% versus 51.5% versus 47.5% versus 51.5% versus 48.5%

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 18.6%
17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% versus 16.5% versus 16.5% versus 15.8% versus 14.9% versus 15.8% versus 13.9%

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): 2.20% versus 2.19%. Rallied to midweek, hit the 200 day SMA, faded to test the 10 day EMA to close the week. Important level in this five week move off the lows.

Historical: 2.19% versus 2.15% versus 2.14% versus 2.24% versus 2.17% versus 2.27% versus 2.15% versus 2.19% versus 2.29% versus 2.25% versus 2.23% versus 2.27% versus 2.27% versus 2.32% versus 2.34% versus 2.37% versus 2.34% versus 2.35% versus 2.35% versus 2.40% versus 2.44% versus 2.42% versus 2.31% versus 2.206% versus 2.26% versus 2.29% versus 2.38% versus 2.42% versus 2.34% versus 2.364% versus 2.48% versus 2.40% versus 2.37% versus 2.40% versus 2.36% versus 2.26% versus 2.35% versus 2.32% versus 2.32% versus 2.36% versus 2.39% versus 2.39% versus 2.48%


Euro/$: 1.1110 versus 1.1154. Dollar faded on the week but after the pair hit the 200 day SMA, the dollar firmed a bit.

Historical: 1.1154 versus 1.1165 versus 1.10448 versus 1.0966 versus 1.0906 versus 1.0953 versus 1.0978 versus 1.0936 versus 1.0983 versus 1.1058 versus 1.1092 versus 1.0977 versus 1.0992 versus 1.0927 versus 1.0944 versus 1.0927 versus 1.0825 versus 1.0836 versus 1.0880 versus 1.0946 versus 1.1005 versus 1.0999 versus 1.1157 versus 1.1032 versus 1.11069 versus 1.1099 versus 1.1055 versus 1.1082 versus 1.1054 versus 1.1131 versus 1.1243 versus 1.1205


$/JPY: 124.32 versus 124.41. Rallied into Tuesday then stalled, holding the 20 day EMA to end the week, just below the June highs.

Historical: 124.41 versus 124.15 versus 125.08 versus 124.36 versus 124.74 versus 124.78 versus 124.31 versus 123.99 versus 123.89 versus 124.15 versus 123.99 versus 123.56 versus 123.26 versus 123.79 versus 123.89 versus 123.96 versus 123.88 versus 124.31 versus 124.07 versus 124.13 versus 123.78 versus 123.38 versus 123.42 versus 122.76 versus 121.29 versus 120.66 versus 122.46 versus 122.51 versus 123.04 versus 123.115 versus 122.43 versus 122.497 versus 123.82 versus 123.63 versus 123.88 versus 123.69 versus 123.37 versus 122.66


Oil: 42.74, +0.51. Modest bounce to end the week after a straight line decline below the 10 day EMA in July. No trend change, still very weak.

Gold: 1113.20, -2.40. Rallied nicely on the week but stalled Thursday and Friday, testing the move, holding over the 20 day EMA. Still lots of resistance overhead, but if the feeling is the Fed is on hold, gold has some breathing room.


MONDAY

The Market Summary section pretty much laid it out. SP500, SP400, and NASDAQ are in near term bullish patterns, and there is enough leadership near term to bounce them back near the prior SP500 highs. From there perhaps a higher high, or not. After that, our view is still the stock market indices are in overall topping patterns, setting up for a bigger decline to consolidate the last moves and perhaps beg for some Fed QE. Hey, it has worked before and it is hard to teach an old dog new tricks as the clich goes.

We intend to continue playing that upside move, though as you know our active positions in terms of positions we are holding are very reduced in number. We have spotted some good vehicles to ride a move back upside, and many are not the traditional ones we have played but are from retail, industrial, drugs. We are also looking at some downside, but of course after this selling would prefer this bounce up to the old highs to really set up some nice downside entries in the event the rally stalls as expected.

This market has consistently turned these kind of selloffs into money making entries and we are willing to commit some more money to that proposition if the upside resumes, knowing full well, of course, that the move could end as the prior peaks. Going in with eyes wide open as it were.

That said, some of these stocks are in sectors and patterns that can yield continued moves despite wherever the indices top out the move. Not counting on it, but recognizing the patterns and the sectors that have held up well during the selling bouts.

As you can tell from the discussion of the economic and policy situation, from the market pattern discussion, and the leadership issues, things are pretty basic right now. I lamented being able to just write about the market, but you know as well as I do, despite the outside influences that exert pressure on stocks and can in the near term influence their action, the same market actions still apply and still occur time and time again. Thus while it is a pain in the rear to each day hear some Fed official setting up his/her post-Fed speaking circuit, book tour, cushy job with a Wall Street firm, or all of the above, the statements have a rather transient effect before the market trends again take over.

Thus as always we watch the patterns, watch the leaders, watch the plays that set up, and make the plays when they flash the moves. Sure some have made breaks then gave them up, but most are not doing that. Thus when they flash the 'buy me' signal we pick some up and take what is given. If the market is going to make a move on those prior highs we should find out this week. If it takes longer than that, well, that speaks to the indecision in the overall pattern does it not?

Have a great weekend!



SUPPORT AND RESISTANCE

NASDAQ: Closed at 5048.24

Resistance:
The 50 day EMA at 5072
The lower trendline is at 5110
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5150-5160 is the June peak range
5164 is the June prior all-time high
5232 is the July 2015 all-time high.

Support:
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
The June low at 4974
4912 the mid-April China dip
The 200 day SMA at 4904
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
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 2091.54

Resistance:
2094 is the December 2014 high, the prior all-time high
The 50 day EMA at 2095
The lower channel line 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
2130 is the June 2015 peak
2135 is the May 2015 all-time high

Support:
2079 is the intraday all-time high from November
2076 is the all-time high from November
The 200 day SMA at 2076
2062 is the January 2015 lower high
2046 is the July closing low
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 17,477.40

Resistance:
17,515 is the early July closing low
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to present trading range.
June low at 17,715
The March low at 17,718
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The 50 day EMA at 17,735
The 200 day SMA at 17,822
17,923 is the January 2015 lower high
17,991 is the early December intraday high
18,104 is the December high
18,200 to 18,206 (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

Support:
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


ECONOMIC CALENDAR

August 14 - Friday
PPI, July (8:30): 0.2% actual versus 0.1% expected, 0.4% prior
Core PPI, July (8:30): 0.3% actual versus 0.1% expected, 0.3% prior
Industrial Production, July (9:15): 0.6% actual versus 0.3% expected, 0.1% prior (revised from 0.2%)
Capacity Utilization, July (9:15): 78.0% actual versus 78.0% expected, 77.7% prior (revised from 77.8%)
Michigan Sentiment, August (10:00): 92.9 actual versus 93.7 expected, 93.1 prior

August 17 - Monday
Empire Manufacturing, August (8:30): 5.0 expected, 3.9 prior
NAHB Housing Market , August (10:00): 61.0 expected, 60 prior
Net Long-Term TIC Fl, June (16:00): $93.0B prior

August 18 - Tuesday
Housing Starts, July (8:30): 1200K expected, 1174K prior
Building Permits, July (8:30): 1257K expected, 1343K prior

August 19 - Wednesday
MBA Mortgage Index, 08/15 (7:00): 0.1% prior
CPI, July (8:30): 0.2% expected, 0.3% prior
Core CPI, July (8:30): 0.2% expected, 0.2% prior
Crude Inventories, 08/15 (10:30): -1.682M prior
FOMC Minutes, 7/29 (14:00)

August 20 - Thursday
Initial Claims, 08/15 (8:30): 272K expected, 274K prior
Continuing Claims, 08/08 (8:30): 2265K expected, 2273K prior
Existing Home Sales, July (10:00): 5.42M expected, 5.49M prior
Philadelphia Fed, August (10:00): 7.0 expected, 5.7 prior
Leading Indicators, July (10:00): 0.2% expected, 0.6% prior
Natural Gas Inventor, 08/15 (10:30): 65 bcf prior

End part 1 of 3
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