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