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8/12/2015 Investment House Report
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Targets hit: None issued
Buy alerts: APC; CALD
Trailing stops: None issued
Stop alerts: None issued
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- Second day of China devaluation, another selloff, this time a reversal.
- NASDAQ, SP500 show nice patterns to the upside.
- Big names showing good setups, energy is starting to move, biotechs setup again as well.
- Watching for leaders to move again for another run at the recent highs as we wait on . . . QE?
Man, when China decides to go, it goes. With reserve currency status under consideration (one would hope now in the past tense), China devalued not once, but back to back, doing so by the most on record for single moves. To most with brains, this simply shows how bad China's situation is, how the Chinese rulers view the need to keep the economy alive as a survival battle. Not for the Chinese people, but for the Chinese communist government.
Thus, survival of the power scheme trumps (get it?) currency dominance, at least for now. Perhaps China feels this is not a bad bet given the current US leadership's apparent desire to punt reserve currency status as just about every policy decision it makes fosters that outcome. With any luck, China won't be successful in taming the economic collapse dragon, thus buying time for the US to get its act together and actually implement policies that strengthen the US and by extension, the dollar, reinforcing the dollar's reserve status. Ah, the game of global intrigue. Who would have thought that your vote would have such an impact outside of the US as well as inside?
In any event, another Chinese devaluation and another worldwide market selloff greeted US investors. In the pre-market alert, after looking at a lot of stock patterns Tuesday and in the morning, we stated we should watch how key stocks traded after the initial selling as this could be a point that buyers came back in to rebid the market.
After selling off the first hour of trade, and forcing ourselves to sit on our hands, stocks found support and started to recover. Another resolve tester came in a half hour ahead of the East Cost lunch hour as stocks tested the choppy move off that first hour low. The indices put in a higher low at noon ET, and from there it was recovery time right up to the closing bell.
SP500 1.98, 0.10%
NASDAQ 7.60, 0.15%
DJ30 -0.33, -0.00%
VOLUME: NYSE +5%, NASDAQ +9.5%. Both showing a nice bounce to higher above average, and well above average on NASDAQ. Pretty decent reversal-level volume.
A/D: NYSE just slightly negative. NASDAQ -1.3:1. Negative even with the reversal, but that is how it works and not a real negative.
The closing prices were not all that impressive, and indeed a few of the key indices and many quality stocks closed a bit lower, but the close was just a part of the picture. The intraday reversals and the ground covered in the reversals was damn impressive.
NASDAQ reversed 98 points low to close. SP500 34 points. DJ30 276 points. Big reaches lower, big recoveries.
It helped to stay the course by watching how some leadership stocks acted. FB, SBUX, NFLX, AMZN, PCLN, BWLD. Tested, held. That always helps bolster conviction.
The index patterns are quite interesting along with some of the big name leaders.
NASDAQ: Closed Tuesday somewhat in no-man's land, holding the recent lows but with a questionable pattern. After Wednesday NASDAQ put the pieces in place, testing down to the 78% Fibonacci retracement of the July rally to the new high then reversing to the upside, putting in a D point to an ABCD pattern.
SP500: Showing either the same ABCD pattern as NASDAQ given the big reach lower Wednesday, or you can call it a 78% Fibonacci retracement double bottom. Either one is a bullish pattern. Of course a pattern is a pattern, and a move is something that comes off of a pattern. Pattern? Set. Move? We will see.
SP400: Big, big dive through the 200 day SMA though the midcaps did managed to hold over the July low, then shot right back up. Still in the inverted head and shoulders, still trying to form the right shoulder, still bucking like a bronco at the county fair. But . . . SP400 is holding the lower support in its 5 month trading range, keeping the trading range alive, keeping the faith, keeping the inverted head and shoulders that will try to bounce the midcaps back up in the range.
DJ30: Tested way, way down to the December 2014 and early February 2015 lows, then reversed sharply back to flat. Okay. that is about all you can say. An expansion of the trading range . . . to the downside? I guess you can say that DJ30 is setting up for a recovery rally. High praise indeed.
RUTX: Who the heck knows? Beaten down for 7+ weeks, selling off hard then recovering to the March low and the lowest rung of support in terms of the lateral-ish move since March. Oversold as can be but MACD just put in a fresh lower low, so no upside divergence even with the Wednesday test and reversal.
SOX: Oh gee, SOX tested the lows again and reversed. Must be ready to bounce. Just as in mid-July, just as it did last week (before crashing back of course). Just as the economy has been ready to surge for years. Just as wages have been ready to surge, for years. Interestingly, however, in the market you can make the oversold case and when stocks are oversold enough they do bounce. MACD is showing the MACD improvement that suggests that, a positive divergence. As for the economy, it doesn't work that way. If the policies are bad and result in poor performance, performance remains poor until the policies change.
The NASDAQ and SP500 patterns, coupled with the big reach lower and reversal, suggest a run at their prior highs. That is what they suggest. Now they have set up that move, is there enough bid enthusiasm to drive stocks higher? Last bounce attempt, 1 day. Prior bounce attempt, 2 days. The big reach lower and reversal does work toward resetting the moves, so if there is a move, it likely has a little more staying power.
I say if, because in some serious selling you can see these 'flare' sessions where stocks sell hard, reverse hard and look good to go upside as they sport those 'key reversal' attributes. But it can be a false signal. The indexes could have used up all the buy side pressure in the rebound, kind of like the bike racer who suffers a puncture as the last climb in a mountain stage starts. He spends all his energy catching back up, and when he does catch up the others simply accelerate the pace and the poor rider can only watch as they ride away from his front wheel. In any event, the move is set up, now we see if the bids indeed return.
Not a world of change in the world of leadership, and that is not necessarily a great thing given it has been as thin as Bruce Willis' hair before he opted for the Yul Brynner look.
Of course there were the big names that are still in the game. NFLX shows a great flag at the 10 day EMA. SBUX tested the 50 day EMA and rebounded for a second session. AMZN tested the 20 day EMA and rebounded. Heck, even AAPL Rebounded from yet another lower low. PCLN has made the test to fill the gap, holding the 10 day EMA. Nice volume.
Energy: The patterns that held the move on the test, made a great move higher. APC broke upside. XEC surged. HAL not bad though hit the 50 day MA and stopped. Looks as energy is rallying despite oil's woes.
Biotech/Drugs: Some good looking setups. AMGN tested and reversed off the 50 day EMA on volume. GILD is still interesting at the 50 day EMA. CELG has recovered nicely as well. VRTX held the breakout and is starting to bounce. Some pretty good patterns, we will see if they can move.
Restaurants: Still mixed but the leaders are the leaders. CMG tested below the 10 day EMA and rebounded to hold it. BWLD is still working laterally, tapping the 10 day EMA, readying for the next move.
Retail: LOW still looks good to continue after testing the trend break. COST is setting up for a bounce after a four week lateral move. TJX is holding at the late March highs.
Stats: +7.6 points (+0.15%) to close at 5044.39
Volume: 2.036B (+9.56%)
Up Volume: 1.15B (+762.57M)
Down Volume: 904.04M (-575.96M)
A/D and Hi/Lo: Decliners led 1.27 to 1
Previous Session: Decliners led 2.3 to 1
New Highs: 35 (-8)
New Lows: 151 (+17)
Stats: +1.98 points (+0.1%) to close at 2086.05
NYSE Volume: 900M (+4.92%)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Decliners led 1.68 to 1
New Highs: 29 (-8)
New Lows: 213 (+60)
Stats: -0.33 points (0%) to close at 17402.51
VIX: 13.61; -0.1
VXN: 17.24; -0.21
VXO: 15.38; +0.51
Put/Call Ratio (CBOE): 1.04; -0.06
Recent history: 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:
Bulls: 42.2% versus 43.3% versus 49.0% versus 43.7% versus 44.8% versus 49.5%
Bears: 17.5% versus 17.5% versus 15.6% versus 15.6% versus 15.6% versus 15.4% versus 15.4% versus 16.5%
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.
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% versus 50.5% versus 50.6% versus 47.5% versus 52.5% versus 57.4% versus 52.5% versus 50.5% versus 50.4% versus 54.5% versus 55.6% versus 52.0% versus 53.6% versus 58.7% versus 59.5% versus 56.6% versus 52.5% versus 49.0% versus 53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5% versus 49.5% versus 51.5% versus53.4% versus 56.5%
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
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% versus 13.9% versus 15.2% versus 13.9% versus 14.2% versus 14.2% versus 14.1% versus 14.3% versus 14.1% versus 14.1% versus 14.1% versus 14.1% versus 15.2% versus 16.3% versus 16.3% versus 17.4% versus16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% versus 14.8% versus 13.9% versus 13.8%
Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.
Bonds (10 year): 2.15% versus 2.14%. Hit 2.05% on the low then reversed, stalling at the 200 day SMA.
Historical: 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/$: 1.1165 versus 1.10448. Continued higher, rallying up through the 50 day EMA to the 200 day SMA. Could not hold the move through it, but it looks as if there is concern the China Syndrome will keep the Fed from hiking.
Historical: 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: 124.15 versus 125.08. After moving to a new rally high, a sharp drop to the 20 day EMA on the close.
Historical: 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: 43.30, +0.22. Still trending lower below the 10 day EMA, now a 5 week trend below that level.
Gold: Surging given the China worries and the notion, as with the dollar and bonds, that the Fed won't be hiking in September.
Another incredibly important weekly jobless claims report where we will learn that claims remain at 40 year lows and is again affirmation of how strong the jobs market is. So strong wages remain stuck in the twilight zone of no growth for . . . ever. Decades low productivity growth, the bulk of jobs created in the lowest paying sectors of the economy and most all going to the 55+ demographic seeking to make ends meet in their golden years, 93.7M working aged people opting out of working. Nirvana. Yea verily.
Of course it likely won't make any difference. I suppose the more interesting story is whether China will make it three in a row.
At that point, devaluation or not, the market is fairly immune to simple devaluations given the two straight thus far. What more could China do to embarrass itself?
If no devaluation maybe the market continues the Wednesday reversal. There are good setups in good names. Good patterns in NASDAQ, SP400, SP500, patterns that can work. Can work. The flare out syndrome discussed earlier, i.e. where the indexes and stocks used up the buy side during the rebound surge. The basketball team down by 16 makes the run to tie the game, then runs out of gas and loses anyway syndrome.
Keep that in mind as you watch NFLX, SBUX, AMZN, AMGN, PCLN, CELG try to renew moves after testing, selling further but reversing, holding support on the close.
If they can make the move, we can make the plays. The market may still be at an overall topping point now that the Fed is out of the stimulus game, so keep that in mind on the plays. We can make the plays for the bounce back up to the recent highs on SP500 and NASDAQ. But again, keep in mind the market, where it is, what it has done since October as discussed over the weekend and earlier this week.
And that brings up an interesting point. The Chinese actions and obvious economic problems there have BAC and GS second-guessing and Fed hike in September. Others such as Art Cahsin and Peter Schiff muse that the Fed will launch another round of QE to fend off Chinese deflation exports to the US. Cashin said this today. Schiff said this, and I believe Rick Santelli as well, many weeks, indeed months, back.
Recall how when each QE session ended, the market could not stand on its own. It would look around, see where it was without any support, and start to sink as did Peter when he walked on water toward Jesus but started sinking when he saw what he was doing and doubt crept in. And now the market and its 8 month toppy action. Oh ye investors of little faith.
Back then the market would sink because the economics were not there. Well guess what we have now: the economics are not there, and they are getting worse. Indeed today some predictions the US is heading into recession. Heresy of course, but reality is reality.
Thus, despite the Fed's almost desperate desire to hike rates, it has likely, as I said months ago, missed its window to do that. More than not hiking, it may have to launch that QE again. With what, who knows, but of course stocks would love it.
Unfortunately things would likely have to get a lot worse before the 12 wise ones made that decision.
Anyway, if the move works, play it. Another way of saying take what the market gives.
There are some nice leaders we want to play if that move comes. Wednesday we picked up some APC (energy) and CALD (software). For the next step we are eying a new play on NFLX as noted Monday's report. SBUX tested the 50 day EMA for a second session and bounced for a second session. PCLN has filled the gap from earnings. AMGN and CELG have tested their moves as well. Some big names looking for new, perhaps big moves as well.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5044.39
The 50 day EMA at 5074
The lower trendline is at 5107
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.
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 4898
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 2086.05
2094 is the December 2014 high, the prior all-time high
The 50 day EMA at 2096
The lower channel line at 2098
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
2079 is the intraday all-time high from November
2076 is the all-time high from November
The 200 day SMA at 2075
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 17,402.51
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 17,759
The 200 day SMA at 17,816
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
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
August 11 - Tuesday
Productivity-Prel, Q2 (8:30): 1.3% actual versus 1.4% expected, -1.1% prior (revised from -3.1%)
Unit Labor Costs - P, Q2 (8:30): 0.5% actual versus 0.1% expected, 2.3% prior (revised from 6.7%)
Wholesale Inventories, June (10:00): 0.9% actual versus 0.3% expected, 0.6% prior (revised from 0.8%)
August 12 - Wednesday
MBA Mortgage Index, 08/08 (7:00): 0.1% actual versus 4.7% prior
JOLTS - Job Openings, June (10:00): 5.249 actual versus 5.357 prior (revised from 5.363M)
Crude Inventories, 08/08 (10:30): -1.682M actual versus -4.407M prior
Treasury Budget, July (14:00): -$149.2B actual versus -$149.0B expected, -$94.6B prior
August 13 - Thursday
Initial Claims, 08/08 (8:30): 273K expected,
Continuing Claims, 08/01 (8:30): 2247K expected,
Retail Sales, July (8:30): 0.5% expected, -0.3% prior
Retail Sales ex-auto, July (8:30): 0.5% expected, -0.1% prior
Export Prices ex-ag., July (8:30): -0.1% prior
Import Prices ex-oil, July (8:30): -0.2% prior
Business Inventories, June (10:00): 0.3% expected, 0.3% prior
Natural Gas Inventor, 08/08 (10:30)
August 14 - Friday
PPI, July (8:30): 0.1% expected, 0.4% prior
Core PPI, July (8:30): 0.1% expected, 0.3% prior
Industrial Production, July (9:15): 0.3% expected, 0.2% prior (revised from 0.3%)
Capacity Utilization, July (9:15): 78.0 expected, 77.8% prior (revised from 78.4%)
Michigan Sentiment, August (10:00): 93.9 expected, 93.1 prior
End part 1 of 3
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