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8/17/2015 Investment House Report
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Targets hit: None issued
Buy alerts: BWLD; NOC; PCLN; UBNT; V
Trailing stops: None issued
Stop alerts: None issued
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- 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%
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.
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.
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.
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.
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)
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)
Stats: +67.78 points (+0.39%) to close at 17545.18
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.
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.
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.
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.
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
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.
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
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
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
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
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
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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