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8/8/2015 Investment House Report
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No videos this weekend. Jon Johnson has been battling a bug the past few days. Thank you for your understanding.
Targets hit: None issued
Buy alerts: None issued
Trailing stops: None issued
Stop alerts: None issued
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- Lots of calls for the top. Could be in the bigger picture but indexes ready to bounce.
- NASDAQ, SP400, SP500 in good position.
- Jobs show the same old (and weak) story.
- Ready to play the bounce upside.
"It's the end of the world!" 'The Birds' (1963)
Thursday and Friday saw more selling in the stock market and more speculation the market is ready to drop.
SP500 -5.99, -0.29%
NASDAQ -12.90, -0.26%
DJ30 -46.37, -.27%
VOLUME: NYSE -17%, NASDAQ -12%. On this session a bit quieter trade on the pullback. No dumping on the day.
A/D: NYSE -1.4:1, NASDAQ -1.6:1.
Many are saying it is over. David Stockman says the top is in. Deutsche Bank sees 'seven signs' flashing red. Many other big names are calling it. With earnings posting another lackluster quarter with loads of top line misses, with another jobs report showing only low wage job production, with the Chinese economy in a midst of a bubble break (exports dive 10%), with Berkshire Hathaway seeing a 10% drop in earnings (something not seen since 2008), with the Fed ready to raise rates after ending its QE program in October, arguably the only thing that kept the economy moving, and with the market action since October, that case can be made. I made it a couple of weeks back.
Two things. First, that does not mean it has to happen. Negative sentiment is high and many are predicting the move is over. That is often good for at least a bounce.
Second (and this ties into the first) even if this is the top, just as with any other move, there are plays to make money contrary to the overall move. After a sharp decline in the stock indexes such as DJ30, there is likely a rebound here.
That isn't just an oversold condition. SP500, NASDAQ and SP400 are all in position to rebound, not just from oversold conditions, but from some pretty good setups.
The most interesting action is found in SP400 and NASDSAQ. SP400 is holding the same low as Thursday and bouncing some, the same level held in early July. Trying to put in a short inverted head and shoulders with this action attempting to form the bottom of the right shoulder. In any event, it is holding up an interesting pattern.
NASDAQ is off its lows, holding at the same low from the low two weeks back. That is the 61% Fibonacci retracement level and NASDAQ is attempting to put in a double bottom, a pattern we like at this level because of its good track record.
You can throw SP500 in as well as it holds near its 200 day MA for the third time in 5 weeks, almost the same pattern it put in from December to January that led to the February rally.
Any or all of them could make a move higher. Could. The X factor is what the big money in the market believes regarding whether the status quo, and we are talking Fed, remains the same OR whether an initial rate hike is palatable to the upside.
If they do make that move, what do you do with it? We plan on using it to play some stocks that move well and can make us good money. There are other stocks with some really nice patterns that held up in the dump lower last week; a market rebound puts them in position to make us some money. We also plan on using it to lighten up in some other areas, taking some gain and generally getting lighter upside. If the market continues moving, of course you let the positions run until it stalls. Then you have some downside plays in your pocket that you use to play any move lower.
It's all about those jobs, not quality.
Jobs miss, seen as solid, but the jobs market remains sick.
215K versus 229K versus 231K (223K prior).
Unemployment: 5.3% as expected as same as June
Earnings: 0.2% as expected
Average workweek: 34.6 versus 34.5.
Participation rate: 62.6%, steady
Not in labor force: 93.77M, yet another record (+144K)
Food & Beverage: +29K
Professional and Business: +27K
Since 2007 the economy has lost 1.4M manufacturing jobs and gained 1.4M waiter and bartenders
Jobs by Age
Of the 215K jobs created, 211K went to the 55+ age group.
16-24: -8K jobs
25-54: -131K jobs
So, in sum and in conclusion, the economy is producing more of the low end jobs and they are going to the older demographic.
This week saw some leadership groups get hit, e.g. biotechs and drugs, restaurants. DJ30 was bombed.
To view mid, click on link or paste URL into browser.
NASDAQ: Down hard Thursday, unable to keep the Tuesday and Wednesday bounce going. Friday, however, NASDAQ held the late July low, showing a nice doji with tail. This is the 61% Fibonacci Retracement of the early July rally, a good pattern to rally from. This is a good pattern at a good point to move. If it doesn't that speaks a lot to the NASDAQ's strength.
SP400: A tight doji with tail at the 200 day SMA and the early July low. Key support level, forming an inverted head and shoulders. As with NASDAQ, this is a pattern it should rally from, and if it doesn't and SP400 breaks lower from its range, that shows real weakness.
SP500: Doji at the 200 day SMA, the third visit of this level in the past six weeks. Losing momentum perhaps, but it did this in December/January and rallied nicely through February. Thus you cannot just write it off as 'the top'. At critical support for sure, but not breaking yet.
DJ30: Tough week, breaking to a lower low outside of its range. Six sessions lower so oversold but not horribly. Remember, DJ30 put in a false break two weeks back but could not hold the rebound.
RUTX: Doji at the lower support, and after a week downside could bounce. At that point where it has to show it as the small caps have really struggled.
SOX: Still attempting to put in a double bottom at the 630 level. MACD is improved so it has a shot, particularly given the two months of selling.
Big Names: Some are fine, some need help. GOOG is testing the 10 day EMA. FB testing the 20 day EMA, still working in a nice pullback. AMZN struggling a bit, SBUX holding the 20 day EMA after a rough Thursday. NFLX holding its gains fine. MSFT sold on the week but is holding the 20 day EMA. Not a great week, not a collapse.
Biotechs/Drugs: Rough week. TTPH broke lower. KITE broke its trend. HZNP broke its 50 day EMA. Some trouble.
Restaurants: JACK broke lower. DRI fell to the 50 day EMA. BWLD is testing well. CMG is testing well.
Financials: Testing but holding up well. JPM, BAC, MA.
Stats: -12.9 points (-0.26%) to close at 5043.54
Volume: 1.96B (-12.38%)
Up Volume: 934.86M (+348.57M)
Down Volume: 1.06B (-620M)
A/D and Hi/Lo: Decliners led 1.55 to 1
Previous Session: Decliners led 2.38 to 1
New Highs: 23 (-44)
New Lows: 179 (-19)
Stats: -5.99 points (-0.29%) to close at 2077.57
NYSE Volume: 831.6M (-16.84%)
A/D and Hi/Lo: Decliners led 1.42 to 1
Previous Session: Decliners led 1.49 to 1
New Highs: 29 (-21)
New Lows: 187 (-135)
Stats: -46.37 points (-0.27%) to close at 17373.38
VIX: 13.39; -0.38
VXN: 16.9; 0
VXO: 14.76; +0.3
Put/Call Ratio (CBOE): 1.23; -0.07
Recent history: 2 over, 3 below, 1 over, 3 below, 3 over, 8 below, 11 above. Getting a bit away from the string of above 1.0 to act as an upside catalyst. Interestingly, there is purportedly a lot of pessimism regarding the stock market, but the put/call ratio is not showing that right now.
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): 2.17% versus 2.227%
Historical: 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/$: 1.0966. Bouncing up off the recent low
Historical: 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: 124.21 versus 124.74
Historical: 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: 43.87, -0.97. Back at support at the January lows.
Gold: 1094.10, +5.10. Trying to bounce off the lows but still in the lateral move.
SP500 back at the 200 day SMA, NASDAQ back at the last low, SP400 at the bottom of its range. In position to bounce, but can they? Lots of negativity, lots of Fed speculation, lots of speculation as to what happens when the Fed moves. Ah, speculation. That is all it is.
We too are concerned as to the market putting in a top. Have been since October. Inside all of the topping action, however, there were many upside rallies and we predominantly played them to grow some accounts by 2x+. The point: even in tops you can play the upside nicely.
Thus if we get a rebound from NASDAQ, SP400, SP500, definitely want to play it. How high it rallies is the open question; the last rebound didn't make it that far. With that in mind, we are not going to load the boat but will play some choice lays and see what they can do for us, and start working in some downside plays to play that move when it shows up.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5043.54
The 50 day EMA at 5076
The lower trendline is at 5095
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 4889
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 2077.57
2094 is the December 2014 high, the prior all-time high
The lower channel line at 2097
The 50 day EMA at 2096
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 2073
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 17,373.38
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 17,796
The 200 day SMA at 17,804
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 7 - Friday
Nonfarm Payrolls, July (8:30): 215K actual versus 229K expected, 231K prior (revised from 223K)
Nonfarm Private Payr, July (8:30): 210K actual versus 220K expected, 227K prior (revised from 223K)
Unemployment Rate, July (8:30): 5.3% actual versus 5.3% expected, 5.3% prior
Hourly Earnings, July (8:30): 0.2% actual versus 0.2% expected, 0.0% prior
Average Workweek, July (8:30): 34.6 actual versus 34.5 expected, 34.5 prior
Consumer Credit, June (15:00): $20.7B actual versus $17.0B expected, $16.5B prior (revised from $16.1B)
August 11 - Tuesday
Productivity-Prel, Q2 (8:30): 1.4% expected, -3.1% prior
Unit Labor Costs, Q2 (8:30): -0.1% expected, 6.7% prior
Wholesale Inventories, June (10:00): 0.8% prior
August 12 - Wednesday
MBA Mortgage Index, 08/08 (7:00)
JOLTS - Job Openings, June (10:00): 5.363M prior
Crude Inventories, 08/08 (10:30)
Treasury Budget, July (14:00): -$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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