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9/19/2015 Investment House Report
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Targets hit: BWLD; VA
Entry alerts: None issued
Trailing stops: FCX; UBNT
Stop alerts: AMKR; RIG
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- Post-FOMC angst continues as stocks gap lower.
- Indices reverse, set to test the August lows.
- Many stocks ignore Thursday and Friday, many continue working on bottoms.
- More downside likely even as stocks work on their bases.
No one and done. Not even a one and nothing. Just nothing. The FOMC's transparent black box remains as opaque as possible as rate hike indicators carefully spelled out are disregarded as some new, previously undisclosed threat, or worse, previously disclosed and dismissed threat, takes precedence over all rate hike markers.
Sure there was no rate hike, but the market hated it. More uncertainty generated by the Fed. Not just when a hike will come, but investors and traders questioned why the Fed did not hike, why it ignored its indicators, and what could be so bad to run 55 straight meetings at 0% rates with no hike.
Regardless, the FOMC question, for this meeting, is out of the way. The markets can now proceed with the process that was in play before interrupted by FOMC week.
That process was attempting to put in a bottom after the sharp selling in August. We said the stock indices could like what they heard and continue the rally, or spit the bit and test the break over the late August highs or head lower toward the August lows.
Clearly stocks spit the bit. The move higher into the FOMC decision set the stage for some theatrics. Thursday stocks rallied into the result but reversed to tombstone doji after the decision. Friday stocks started lower, sold lower, attempted a meager rebound, failed.
SP500 -32.17, -1.62%
NASDAQ -66.72, -1.36%
DJ30 -290.16, -1.74%
VOLUME: NYSE +160% (2.6B); NASDAQ +54% (2.8B). Plenty of expiration volume.
A/D: NYSE -2.3:1, NASDAQ -1.8:1. Nothing seriously bad here and this dovetails with what we see in many stocks on the day. The indices were hammered but many stocks were fine. Rather narrow downside leadership.
It would appear the test of the break over the late August highs is moot. SP500, DJ30, SP400 all flopped back below that level. NASDAQ and RUTX can still hold, but for the other indices, the test of the August lows looks to be on. Remember, NASDAQ, or any index for that matter, can test but still hold up relatively well, letting the other indices do its dirty work. Even so, NASDAQ would still likely wait until the other indices finished their tests before heading back upside with any kind of power.
So, a move higher to the FOMC decision clearing the late August recovery highs, a reversal after the decision Thursday, then a dive lower Friday. It certainly looks as if a full-fledged test of the August lows is set.
We went looking for stocks set to plunge to those lows. Sure there were some nasty moves Friday from sectors such as financials, industrials, some energy, some metals, but after scanning hundreds upon hundreds upon hundreds of stock charts, we see a surprisingly, very surprisingly, high number of stock patterns that are still showing they are in the bottoming or basing process or are just testing previous good moves in good patterns.
What does that mean? The process of finding a technical-based bottom after sentiment and internal indicators screamed to extremes is ongoing. Some are calling for not only a test of the August lows, but to the October 2014 lows. Others say that is just the start.
Perhaps ultimately they are correct. That would mean, however, that the many, many stocks currently setting up good patterns to reverse or continue runs would break those patterns. That can still happen; a plunge to the August lows would put them all under pressure. Maybe stocks do test and then put in a bottom and rally just to ultimately fail again, leading to that deeper collapse some predict.
That is plausible as well. After all, the Fed has quit QE, and as we noted the past several months, once QE ended the market behaved poorly, just as it has done as each QE round ceased. Ultimately, the economy still sucks and will continue to do so as long as the policies in place remain in place. That is a fact of economic life. Hoping the economy will get better when the Administration actively pursues policies that restrict (that is the nicest way I can think to say it) economic growth is foolish. Perhaps that in itself answers the question many have asked, i.e., why has the Fed taken upon itself to try and keep the economy afloat?
Nearer term, however, the extreme sentiment and internals, coupled with a lot of stocks that are still very engaged in the technical bottoming process, suggests that the market, even if it does drop to test the August lows as history would indicate, will try to put in a very tradable bottom near the August lows or higher.
That has been our premise all along, and as we said would be the case Wednesday, even after the FOMC meeting unless there was something clear such as a 'one and done' express statement. Nothing of the kind. The process continues.
SP500: The index everyone is watching so we start here. Thursday SP500 rallied well past the late August high and touched the 61% Fibonacci Retracement of the August diver lower. It reversed intraday to close near the 50% retracement. That big tombstone doji combined with the late August rebound to the 50% retracement forms a double top basically at the 50% level. That typically sets up a selloff to test the prior low. The Thursday tombstone reversal and the Friday plunge indicate that test process is in place.
NASDAQ: Overall similar action though the levels are different given NASDAQ demonstrated more strength. NASDAQ cleared the late August highs Tuesday, rallying through the 200 day SMA and to the 50 day SMA Thursday. It too reversed with a tombstone doji then gapped lower Friday. The Thursday move took NASDAQ to and through the 78% Fibonacci retracement of the August selloff. It does not have a double top but a downside ABCD. Now the question is whether it makes the break lower. Friday it gapped to the late August highs and held with a tight doji. NASDAQ has some key names that are performing very well, e.g. AMZN, PCLN, BWLD, GOOG. They are providing support for NASDAQ that the other indices are not enjoying. Thus NASDAQ is more of an enigma; it likely tests lower but how far is the key.
DJ30: A much more clear cut pattern than NASDAQ, very similar to SP500. Break over the late August highs on Wednesday, big tombstone Thursday testing the 50 day EMA and the 61% Fibonacci Retracement, Friday a dump lower. As with SP500, DJ30 has a double top at the Fibonacci retracement levels.
SOX: A pattern of its own, often the case for SOX. Nonetheless, it is a double top at the 50 day MA and the coincident 78% Fibonacci retracement. A DTop at that point is a quite reliable downside signal. Of course there are some good chip patterns out there, but they can hold up during any test.
RUTX: More akin to NASDAQ with a rally to the 50 day EMA and close to the 78% Fibonacci retracement, showing a big tombstone and reversal through Friday. A downside ABCD pattern here as well.
With the indices showing a very strong reversal signal Thursday and Friday, you would expect stocks across the board to be down. Industrials, metals, financial were indeed lower. But there were many areas of continued strength, stocks that even rallied in the face of the Friday selling.
Big Names: A continued source of strength. AMZN up Thursday and Friday. GOOG off Friday but a normal 10 day EMA test after a nice week. PCLN gapped to the 10 day EMA but is still in a solid move. BWLD gapped lower, reversed to hold its pattern. CMG is holding in at the 10 day EMA. SBUX is testing the 10 day EMA. Not all are great. AAPL failed at the 50 day EMA. NFLX is still in a struggle.
Semiconductors: A wide range of patterns. SLAB in an inverted head and shoulders. MXWL in an easy test of a blast higher. MXL still surging. Others not so great. ATML plunging, MU gapping lower. SMH has that double top at the 78% Fibonacci retracement, showing overall that a test is coming.
Biotechs/Drugs: Solid overall and many plays this weekend from this group. AMGN, BIIB, CELG don't do much for us, but KITE, INFI, IMGN, TNXP are just some that look good.
Financial: Nasty gaps lower after the Thursday reversal. JPM, WFC, DB are prime examples.
Restaurants: Still quite solid. CHUY, BWLD, RUTH.
China stocks: ATHM still looks good to go. SINA has an interesting bottoming pattern. WUBA is attempting a bottom of its own.
Energy: Some ugly, some not so. SLB is ugly. XEC is a jumble. Others sold but sold with what appears to be a purpose to establish a bottom, e.g. GPOR, APC, SLCA.
Stats: -66.72 points (-1.36%) to close at 4827.23
Volume: 2.842B (+54.32%)
Up Volume: 762.67M (-218.54M)
Down Volume: 2.5B (+1.601B)
A/D and Hi/Lo: Decliners led 1.84 to 1
Previous Session: Advancers led 1.23 to 1
New Highs: 53 (-13)
New Lows: 75 (+43)
Stats: -32.17 points (-1.62%) to close at 1958.03
NYSE Volume: 2.6B (+160%)
A/D and Hi/Lo: Decliners led 2.29 to 1
Previous Session: Advancers led 1.53 to 1
New Highs: 11 (-32)
New Lows: 113 (+76)
Stats: -290.16 points (-1.74%) to close at 16384.58
VIX: 22.28; +1.14
VXN: 23.6; +0.97
VXO: 23.2; +1.17
Put/Call Ratio (CBOE): 1.14; +0.22
Recent history: 20 of 22 sessions over 1.0.
Bulls and Bears: Both backed off as stocks recovered from the sharp selling and from the prior week's crossover. They are now eye to eye, still an overall bullish indication. Bulls and bears crossed over two weeks back, something not done since 2011. That is a powerful rally signal though the rally ensues after the cross, typically not right on it.
Bulls: 26.8% versus 25.7 versus 27.8 versus 31.6%
Bears: 26.8% versus 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.
25.7% versus 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.
27.9 versus 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): 2.13% versus 2.20%. Bonds gapped and rallied back through the 50 day MA's. Still well off the last August high but are making a run after the four week pullback.
Historical: 2.20% versus 2.30% versus 2.28% versus 2.17% versus 2.18% versus 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/$: 1.13010 versus 1.14077. Gave back the Wednesday move higher.
Historical: 1.14077 versus 1.13068 versus 1.1268 versus 1.1317 versus 1.1338 versus 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: 119.996 versus 119.82. Sold off, recovered, but still in the 5 week trading range after the mid-August selloff.
Historical: 119.82 versus 120.46 versus 120.49 versus 120.34 versus 120.58 versus 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: 45.02, -1.88. After the Wednesday break higher form the nice two week flag, oil flopped back and gave up that Wednesday move. Still holding the test, but failed the rally attempt.
Gold: 1137.80, +20.80. Gold gapped through the 50 day EMA and continued the rally that started Wednesday. Gold put in an ABCD pattern and is surging upside.
The pattern appears set for the indices to work lower toward that August low. Will it plunge to scare everyone out or slowly work lower to that level, boring everyone out? It is never a straight line; expect continued back and forth just as the market has shown. It will bounce around in attempts to fool you, to get you to misstep. It will get you on a play here or there, but keep in mind the big picture, the overall process as stocks use the selling to set up bases or bottoms.
Indeed, as we looked at stocks for weekend plays, we saw many, many stocks in the process of building a pattern. The frustrating thing is, there just are not that many in position to buy upside or downside. The test of the August low will help that on both fronts, as upside patterns use the selling to complete their patterns and new downside plays emerge.
In that respect, you see that the selling is a necessary part of getting upside patterns built and in place to support a move higher. At this juncture, however, it is fairly frustrating trying to find patterns that we really like on stocks that we really like. We have found some, but we have to take some of our own advice this weekend and remain patient and let the patterns set up on the stocks we really like to play.
We anticipate letting our current downside run and adding plays as they show us good entries. Friday our SPY and DXD plays gapped away, but maybe we get an early week rebound to enter next to test the Friday drop and give us an entry.
As for the upside, many ignored the selling, going about their own business Friday. As long as they do that we can let them work for us. At the same time we will continue looking for new plays as they set up and be ready for when they make their moves. So many plays this weekend are in the process but are just not there. They will no doubt use market weakness to further set up their bases. We will keep watching for good setups, and as they ripen, we will put our favorites on the report. Time for patience and to let them set up and then of course show the moves.
There will be news out on the week and it will be talked up, but with the jobs report and FOMC no-decision settled, the technical process can go about its business and set up in the wake of the extreme sentiment and internals.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4827.23
4837 is the late August 2015 rebound high
The 50 day EMA at 4903
4910 is the July 2015 low
4912 the mid-April China dip
The 200 day SMA at 4918
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 5151
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
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 1958.03
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 2017
2046 is the July 2015 closing low
2062 is the January 2015 lower high
The 200 day SMA at 2068
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 16,384.58
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. Key, key level.
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. Key level.
16,736 is a prior 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 16,968
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.
The 200 day SMA at 17,692
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
16,058 is the early September 2015 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 18 - Friday
Leading Indicators, August (10:00): 0.1% actual versus 0.2% expected, 0.0% prior (revised from -0.2%)
September 21 - Monday
Existing Home Sales, August (10:00): 5.50M expected, 5.59M prior
September 22 - Tuesday
FHFA Housing Price I, July (9:00): 0.2% prior
September 23 - Wednesday
MBA Mortgage Index, 09/19 (7:00): -7.0% prior
Crude Inventories, 09/19 (10:30): -2.104M prior
September 24 - Thursday
Initial Claims, 09/19 (8:30): 271K expected, 264K prior
Continuing Claims, 09/12 (8:30): 2248K expected, 2237K prior
Durable Orders, August (8:30): -2.0% expected, 2.2% prior (revised from 2.0%)
Durable Goods -ex tr, August (8:30): 0.2% expected, 0.4% prior (revised from 0.6%)
New Home Sales, August (10:00): 515K expected, 507K prior
Natural Gas Inventor, 09/19 (10:30): 73 bcf prior
September 25 - Friday
GDP - Third Estimate, Q2 (8:30): 3.7% expected, 3.7% prior
GDP Deflator - Third, Q2 (8:30): 2.1% expected, 2.1% prior
Michigan Sentiment -, September (10:00): 87.0 expected, 85.7 prior
End part 1 of 3
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