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9/12/2015 Investment House Report
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Targets hit: None issued
Buy alerts: AVGO
Trailing stops: None issued
Stop alerts: None issued
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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 ends the week calmer. Calm before the storm?
- Index patterns are all less than appealing, but more stocks improve and set up for an eventual bottom.
- Market getting down to the lick log with another 'the most important FOMC meeting of our lives.'
- Keep emotions at bay, think, profit.
Volatility calmed last week. Not so much Tuesday and Wednesday as the indices again moved in huge swings, but Thursday and Friday the ranges were much narrower. Calmer action as they worked laterally, still holding the reflex move off the late August low, thus far fighting off attempts to sell it.
Sign of strength, of an impending move higher? It can be read that way. Some groups of stocks are setting up very interesting bottoming patterns, e.g. semiconductors, software, while other leaders never really collapsed and are strengthening: BWLD, AMZN, PCLN, GOOG. Sentiment continues to show extremes with bulls and bears crossing over, i.e. more bearish than bullish investment advisors. Tepper made what could be another one of his opposite the market move sentiment calls Thursday when he said it was a good time to sell stocks. $33+B left the markets from mutual funds and ETF's the past two weeks.
Improving patterns is part of the bottoming process. Extreme sentiment as well. They do not mean there won't be a test of the August low. If you look at index charts on a close line basis it certainly looks as if the indices need that test of that prior low. A move such as that sets up a great bottoming pattern to go along with the stocks that are already showing the signs of putting in bottoms themselves.
Last week didn't answer either question but it was another week doing a good job of setting up that resolution. At this juncture the indices have enough 'bounce time' on this relief move to make a test of the August low a big enough base to support a solid move higher. If it takes a bit more time, that works even better.
Friday the indices posted a gain, offsetting the Wednesday selling and the Thursday push. Lower volume, narrow breadth. Just biding time until the weekend and next week's FOMC meeting.
SP500 8.76, 0.45%
NASDAQ 26.09, 0.54%
DJ30 102.69, 0.63%
VOLUME: NYSE -17%, NASDAQ -9%.
A/D: NYSE 1.2:1, NASDAQ 1.3:1.
Friday experienced a dearth of news, a veritable dustbowl of interesting stories. Goldman said oil could fall to $20/bbl. Anything is possible. US PPI was flat, the core rose 0.3%, and core final demand rose 0.9% year/year. Eggs were up 23%; it is said they could be $6 a dozen by year end. Apparel rose 7%. No inflation, yeah verily they are saying there is deflation in the US . . . unless you eat and apparently feel the compulsion to wear clothes.
The real stories the market awaits are the China weekend data (retail sales, capital investment, industrial production) and the FOMC meeting Thursday. Be still my heart.
The real lick log is the two-day FOMC policy decision on Thursday, but China could set the tone leading into it. Some say a hike is priced in, others say not. Looking at the August plunge, gold, and bonds, I would say the market has done a pretty good job of pricing in a 25BP one and done hike as Fischer and Dudley imply. 25BP is hardly a recession instigator, and if the Fed says it is not going into a regular schedule of hikes the market likely can handle that truth.
The market can handle it, but the trip to that point is always the interesting aspect. NASDAQ and SOX sport some of the better stock setups and NASDAQ is the only index thus far to avoid the 'death cross.' SOX was first, but it is so far past that it was in the consolidation phase ahead of everyone else. Still, all of the index patterns are worrisome and frankly have to overcome typical historical trends to avoid another downside move. The improvement is there, it would simply appear the work is not quite done.
The trading ranges narrowed Thursday and Friday as the indices all worked laterally last week. While some sport some modestly different looks, they are basically all the same: rebounded from the selling, avoided an immediate selloff attempt, working laterally for roughly two weeks, bumping key resistance levels. They often test the prior lows but don't have to. If the Fed acts this week, that gives them the perfect reason to test and sets up the 'pat' downside drop to set a double bottom in the fall. Seems too contrived, but it often works that way. The close line charts suggest it. Still, watch for 'in your ear.'
"He won't want to load the bases, so expect low and away . . . but watch out for in your ear." Shoeless Joe Jackson to Moonlight Graham in 'Field of Dreams' (1989)
NASDAQ: Continues holding near that late August gap point and the late 2014 peaks/March 2015 lows. Big name NASDAQ stocks and semiconductors are helping NASDAQ hold near that level the past four sessions. Shows promise but when you look at the close line chart NASDAQ, and indeed all of the indices, have a heavy look that almost begs for the test of that prior low. NASDAQ avoided a drop last week, showing relative strength thanks to its 'names,' but that is not a breakout. It is very much part of an overall bottoming process that often sees the need for that test of the lows or even lower. Note, however, that the other indices can do the work for NASDAQ, i.e. they can sell off while NASDAQ remains relatively strong and avoids the plunge. The benefits of housing leaders investors still want.
SP500: Very well-defined pennant forming the past three weeks. Instead of forming off an upside flag pole, it is forming off of an inverted flag pole. As you would expect, the opposite result, a break lower, is the typical resolution. Typical, but assume nothing, prepare for all possibilities. And of course, a possibility is that a consolidation works to chase out the remaining sellers. Just look how negative sentiment is in terms of bulls/bears, fund outflows, and of course, Tepper.
DJ30, RUTX, and SP400 all sport almost identical patterns to SP500.
SOX: SOX more resembles NASDAQ in that it is holding near the top of its range versus the neatly formed pennants. Indeed, Tuesday SOX broke through the gap point and the top of its post-selloff range. Wednesday it gapped even higher and looked strong, only to hit the 50 day MA's and reversed to negative. Not quite ready for prime time breakout. Thursday and Friday it muddled laterally. Nicely improving patterns in the SOX is supporting it at the upper levels, and as with NASDAQ, while it would likely not escape another drop by all the market, it could fare much better thanks to the money being put into its stocks as the bottoming patterns indicate. SOX also shows that this pattern can resolve to the upside, the pennant that it first formed that is. That suggests the other indices could do the same.
I would not say Friday saw any new breakthroughs in leadership, but it did show more solid work in the semiconductors as well as in some of the big names on NASDAQ. Metals remains solid, at least some of them, and I would suggest that some of the industrial equipment stocks and some energy stocks are about to bounce. Telecom sports some good stocks and software is attempting a revival. There are plenty of areas already setting up some good patterns or are getting to that point. All of this is positive but it does not mean any bell has rung.
Big Names: AMZN continues to perform well. BWLD punched out a new high on the week. PCLN holds an important break higher. CMG shook out some sellers and holds near its high. SBUX started to recover, moving easily through the 50 day SMA. NFLX is still suffering from its excesses.
Software: VDSI is perking up as we expected, just got bored with it. VRSN (security) looks very good. PANW gapped upside on the week. BLKB is near highs but its pattern continues to round out on top. RHT is broken for now. Some interesting patterns, but overall work to be done.
Telecom: UBNT remains strong. TSYS is trying to move.
Semiconductors: A list of good patterns. SLAB, LRCX, QRVO (still hanging in), MXL, AMKR, ATML, MU. Most are well off highs but have the 'turning the corner' patterns or true bottoming patterns such as the inverted head and shoulders.
Energy: A bottom process in place. DO, RIG (offshore drilling). UNT (onshore drilling). GPOR. All showing rising MACD on the lows.
Industrials: Trying to set up double bottoms and the like, showing rising MACD, e.g. CAT.
Financial: Patterns mirror the indices, so whichever way they break, the market follows, at least SP500, DJ30, SP400. WFC, JPM, BAC. All are interchangeable right now.
Metals: Stealth recovery continues. Hearing nothing on 'Fast Money' or the financial stations about these stocks. SID, FCX.
Social: FB is a new play from Thursday as it sets up and shows great relative strength. TWTR remains in a nice pattern. LNKD put on a solid bounce last week.
Stats: +26.09 points (+0.54%) to close at 4822.34
Volume: 1.641B (-8.82%)
Up Volume: 898.5M (-301.5M)
Down Volume: 746.34M (+114.69M)
A/D and Hi/Lo: Advancers led 1.28 to 1
Previous Session: Advancers led 1.42 to 1
New Highs: 35 (+5)
New Lows: 85 (+17)
Stats: +8.76 points (+0.45%) to close at 1961.05
NYSE Volume: 833M (-16.7%)
A/D and Hi/Lo: Advancers led 1.17 to 1
Previous Session: Advancers led 1.15 to 1
New Highs: 9 (+1)
New Lows: 146 (+33)
Stats: +102.69 points (+0.63%) to close at 16433.09
VIX: 23.2; -1.17
VXN: 25.02; -1.42
VXO: 23.79; -2.03
Put/Call Ratio (CBOE): 1.21; +0.02. Continues to show downside hedging and fear. The sheer number of 1.0+ closing shows the downside worry is getting extreme.
Recent history: 16 of 17 sessions over 1.0. 22 over, 7 below the past 29 sessions.
Bulls and Bears: Bulls continue their decline, bears continue their rise, this time they have crossed over, something not done since 2011. That is a powerful rally signal though the rally ensues after the cross, typically not right on it.
Bulls: 25.7 versus 27.8 versus 31.6%
Bears: 27.9 versus 26.8% versus 22.5%
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.
27.8% versus 31.6% versus 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: This is the lowest since the 2008 and 2009 market plummet.
26.8% versus 22.5% versus 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. Getting close.
Bonds (10 year): 2.18% versus 2.23%. Back and for last week but still trending lower after the massive gap lower the last week of August. Still appears to not have much belief the Fed will not hike rates.
Historical: 2.23% versus 2.18% versus 2.19% versus 2.13% versus 2.17% versus 2.19% versus 2.16% versus 2.21% versus 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%
Euro/$: 1.1338 versus 1.1278. Euro spikes higher again after the 50 day EMA test.
Historical: 1.1278 versus 1.1217 versus 1.12093 versus 1.1148 versus 1.1122 versus 1.1220 versus 1.1299 versus 1.1216 versus 1.1180 versus 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
$/JPY: 120.58 versus 120.73. Dollar lost some ground Friday after a Tuesday to Wednesday recovery took it back to bump the 200 day SMA from below.
Historical: 120.73 versus 120.39 versus 119.98 versus 119.04 versus 120.15 versus 120.25 versus 119.59 versus 121.24 versus 121.73 versus 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
Oil: 44.63, -1.29. Goldman says oil could fall to $20/bbl. Didn't do it Friday as oil holds the two week pennant test after the initial rally from late August. Still looks as if it wants to climb off of that low.
Gold: 1103.30, -6.00. Tough week, the second down week as gold has lost its upside mojo on the August bounce. As with bonds, gold does not appear to believe the Fed will pass on a rate hike.
Fed week and yet another 'biggest Fed meeting in our lifetime' hype. Over 25BP? Seriously? And be clear, it IS over 25BP because the Fed desperately wants to at least get above 0% but it is petrified to go any further with any kind of tightening. You would think the Fed would hike given the data it watches, but with pressure from around the world (IMF, World Bank, Larry Summers, Paul Krugman) and now even Larry Kudlow, will Yellen keep the resolve to get off of zero? As the very old TV commercial pushing women's hair care products would say, only her hairdresser knows. Or in the case of others, those monitoring the server in the bathroom. I don't want to go too far here; don't want to get accused of 'Trumping' any female readers, whether actual, transgender, or those that just 'identify with' females. What a complicated world we live in. Makes the stock market seem easy.
Ah the stock market. It is really working on putting in a bottom. Bottoming patterns are in progress, some already in position, just waiting for the trigger.
That trigger may be the final flush out, when stocks drop, either precipitously or in a slow 'bleeding from a thousand cuts' fashion. By the way, still waiting to hear that description trotted out; it will happen if we get a two to three week slow test lower and lower each day. When that trigger hits, these stocks in the better patterns will jump and be off. Leaders lead, right?
The FOMC decision could be the catalyst for a decline or it could be the catalyst for the break higher. It could be both in one: the news that pushes the weak hands to sell out and that in turn triggers the rebound.
We need to try to keep the emotions in check and stay above the fray, thinking our way through it. Given what appears to be upward pressure or support from big name stocks and others building good upside patterns, any break lower of significance we want to use to take gain or otherwise close out the downside lest we don't get a ton of downside and get caught hanging on too long. Remember, downside often happens fast, particularly if you are near an inflection point, i.e. when there are signs of bottoming as we have now.
That said, don't be trigger happy and close out on the first sign of a drop; be patient and let it work. If it is a cataclysmic drop that hits a support point (the prior low perhaps) and starts to reverse, take some off. If that holds and builds, take the rest off. If it closes on the session low, let it run. If it opens higher the next session, see if it fails and rolls back over; it often does. If it opens lower, let it ride, but when that lower open selloff shows support, particularly at a logical bounce point, start taking some downside off the table.
For the upside, given we like the bottoming action we are seeing, we let them hang in as long as they can hold the pattern together on the session closes. They are forming up for a reason: big money wants them and is putting money in them as they appear sold out, e.g. the semiconductors. That tends to help them weather the selling as long as the bigger players remain in. These stocks can suffer some intraday jogs lower but they should close decently. We will try to hang in them as much as we can.
At the same time we look for new opportunities and they are out there. We have several current plays that are still a go if they can make the moves, and we are adding more almost each session as more set up patterns. If these stocks can keep it together during any selling, they are fire tested and are ones we want to be in as they likely form up the next market leadership on an upside move.
The import of that? Others can rebound sharply, but leaders breakout sharply and then they tend to sustain the move time and time again, rising, testing, rising, testing, etc. in a very clockwork manner. We can sit back and let them do the work for us as we troll for others setting up to do the same.
We still have to see what China does with its data this weekend, but that is all part of the 'noise' that contributes to what we are seeing ongoing right now in terms of the bigger picture process in progress. China data and the FOMC will help focus the energies on the process, but that is all they do. They act as the trigger for the market move that is already set up.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4822.34
The March lows at 4843 and 4825
4837 is the late August 2015 rebound high
4912 the mid-April China dip
The 50 day EMA at 4913
The 200 day SMA at 4916. A 'death cross' but just the 50 day EMA and many discount that.
The June low at 4974
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
The lower trendline is at 5145
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
4614 is the September 1 intraday low
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 1961.05
1972 is the December 2014 low
1989 is the last August closing high
1991 is the July 2014 high
1994 is the late August recovery peak
2011 is the September prior all-time high
The 50 day EMA at 2027
2046 is the July closing low
2062 is the January 2015 lower high
The 200 day SMA at 2071
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
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
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 16,433.09
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
16,665 is the late August 2015 closing high
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. Key level.
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
The 50 day EMA at 17,060
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 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
16,117 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
15,370 is the August 2015 intraday low
14,803 is the October 2013 low
September 8 - Tuesday
Consumer Credit, July (15:00): $19.1B actual versus $18.0B expected, $27.0B prior (revised from $20.7B)
September 9 - Wednesday
MBA Mortgage Index, 09/05 (7:00): -6.2% actual versus 11.3% prior
JOLTS - Job Openings, July (10:00): 5.753M actual versus 5.323M prior (revised from 5.249M)
September 10 - Thursday
Initial Claims, 09/05 (8:30): 275K actual versus 275K expected, 281K prior (revised from 282K)
Continuing Claims, 08/29 (8:30): 2260K actual versus 2257K expected, 2259K prior (revised from 2257K)
Export Prices ex-ag., August (8:30): -1.3% actual versus -0.5% prior (revised from -0.4%)
Import Prices ex-oil, August (8:30): -0.4% actual versus -0.3% prior
Wholesale Inventories, July (10:00): -0.1% actual versus 0.3% expected, 0.7% prior (revised from 0.9%)
Natural Gas Inventories, 09/05 (10:30): 68 bcf actual versus 94 bcf prior
Crude Inventories, 09/05 (11:00): 2.570M actual versus 4.670M prior
September 11 - Friday
PPI, August (8:30): 0.0% actual versus -0.1% expected, 0.2% prior
Core PPI, August (8:30): 0.3% actual versus 0.1% expected, 0.3% prior
Michigan Sentiment, September (10:00): 85.7 actual versus 91.5 expected, 91.9 prior
Treasury Budget, August (14:00): -$64.4B actual versus -$62.0B expected, -$128.7B prior
September 15 - Tuesday
Retail Sales, August (8:30): 0.3% expected, 0.6% prior
Retail Sales ex-auto, August (8:30): 0.2% expected, 0.4% prior
Empire Manufacturing, September (8:30): 0.3 expected, -14.9 prior
Industrial Production, August (9:15): -0.2% expected, 0.6% prior
Capacity Utilization, August (9:15): 77.8% expected, 78.0% prior
Business Inventories, July (10:00): 0.1% expected, 0.8% prior
September 16 - Wednesday
MBA Mortgage Index, 09/12 (7:00): -6.2% prior
CPI, August (8:30): -0.1% expected, 0.1% prior
Core CPI, August (8:30): 0.1% expected, 0.1% prior
NAHB Housing Market , September (10:00): 61 expected, 61 prior
Crude Inventories, 09/12 (10:30): 2.570M prior
Net Long-Term TIC Flows, July (16:00): $103.0B prior
September 17 - Thursday
Initial Claims, 09/12 (8:30): 275K expected, 275K prior
Continuing Claims, 09/05 (8:30): 2254K expected, 2260K prior
Housing Starts, August (8:30): 1160K expected, 1206K prior
Building Permits, August (8:30): 1159K expected, 1119K prior
Current Account Bal., Q2 (8:30): -$112.2B expected, -$113.3B prior
Philadelphia Fed, September (10:00): 6.5 expected, 8.3 prior
Natural Gas Inventories, 09/12 (10:30): 68 bcf prior
FOMC Rate Decision, September (14:00): 0.25% expected, 0.25% prior
September 18 - Friday
Leading Indicators, August (10:00): 0.2% expected, -0.2% prior
End part 1 of 3
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