Saturday, September 26, 2015

The Daily, Part 1 of 3, 9-26-15

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9/26/2015 Investment House Report
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Targets hit: None issued
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: None issued

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- Relief bounce surges out of the gate then stumbles back.
- 'Brand names' gap and reverse and NASDAQ does the same.
- Calls for no rate hike to 'help the little guy' have it backward.
- Yellen speech a bit contradictory re foreign influences, broaches negative interest rates. How is THAT for 'the little guy?'
- Big name reversals not good for the upside as upside pressure released on the surge that purged.
- Relief bounce setup was good but didn't take, leaves stock indices still in the break lower, looking for a new catalyst to test the trendline break.

After the Thursday reversal and solid setups by the 'brand name' leader stocks the stock market opened Friday with a solid advance led by gaps in AMZN, NKE, PCLN. We were rather pleased with the reversal and the call on some of the big names to lead a move to test the break of the trendline in the wedge. The good start was tested as is usually the case, paring the gains into midday but holding a solid advance.

Then the market showed a new wrinkle, and it was one directly involving the big name brands. The big names started selling in the afternoon session. Not just a fade but selling and some serious high to low reversals. PCLN, GOOG, AMZN, BWLD -- stocks we touted Thursday as showing solid action to the upside. These are the stocks that, for the most part, have delivered the upside support. Not all are rolling over, e.g. SBUX, CMG, but key stocks are doing so, and if they don't check the poor action and rebound this week, the selling is likely on again without much of a bounce other than the early Friday surge.

SP500 -0.90, -0.05%
NASDAQ -47.98, -1.01%
DJ30 113.35, 0.70%
SP400 -0.17%
RUTX -1.30%
SOX 0.54%

VOLUME: NYSE faded 2% to average while NASDAQ trade nudged higher, still above average. Some distribution on NASDAQ as those big names turned over after solid gains.

A/D: NYSE -1.1:1, NASDAQ -2.1:1. NASDAQ of course suffered the most abuse as it was significantly lower on the session. Even with RUTX down 1.3% the NYSE breadth was palatable.

If a rebound of the break of the trendline from the wedge is going to occur it will take the weekend to lick the wounds and regroup. It was after all a rather strange end to the week with a bounce attempt setup and then a reversal in the afternoon Friday. With that rather strange ending to the week and with this market's volatility, that leaves Monday relatively wide open.

The overall picture, however, remains the same, i.e. a market in decline, mounting a four week test of a sharp selloff, then breaking back lower once more. If you look at SP500 and DJ30 you can see a bounce to test the break from the wedge is still a valid option. Looking at RUTX, SP400, not so much. NASDAQ? Nasty reversal suggest more downside, but even so, the 4615 level (closed at 4686) is a viable support level for a rebound. All in all, however, the patterns and the bias is downside, and the upside, as noted Thursday, is of the bounce variety only.

That leaves us still looking for PCLN, NFLX, and AMZN positions to bounce, and with their ugly Friday patterns that leaves Monday for them to show any upside. If they cannot, the upside bounce has to take a back seat to the overall downside bias, and we have to close out those positions in favor of, yes, letting our downside positions work lower and initiating some new ones on NASDAQ, etc.



Yellen talks liftoff, foreign influence, NIRP.

In her Thursday speech at Amherst Chairman Yellen made a lot of points. Unfortunately, it appeared as if she took statements from speeches over a several year period and put them all in one speech. What do I mean?

The Fed went out of its way when the Chinese stock market was crashing to comment that overseas issues should not influence FOMC decisions. Then, when it came to the lick log to actually hike rates two Thursdays back, the FOMC trotted out that very reason for NOT hiking rates.

Well, Thursday Ms. Yellen said "overseas developments should not influence policy decision." This after the Fed used the excuse not to hike as noted.

Then, she discussed the total contra to hiking, and that is negative interest rates or NIRP (as opposed to ZIRP, zero interest rate policy). This is where depositors PAY the bank for the privilege of the bank holding their money. No more of the 'magic penny' in the 'Love is something if you give it away song' from our childhood where if you took that penny and then loaned it spent it, etc. you would have so many they would roll all over the floor.

Yellen did not say it would happen, but she discussed it and how it could be done but not for very long. History lesson: WHENEVER the Fed starts talking about something new, there is a reason it is talking about it. It is part of the prepping of markets 'just in case' it is needed.

Cramer against a rate hike because he is 'for the little guy.'

CNBC is running a new commercial with Cramer now that the 'have we just seen a successful test of the bottom' commercial has been skewered. Reminds me of that gold commercial from 2014 saying that gold would reach $2000 before year end (in 2014!). Didn't happen so they kept running the commercial, just dropped the 'this year' part of it.

Anyway there is a new commercial with Cramer saying he wants the Fed to hold off rate hikes because he is for the little guy, Main Street, and rate hikes would hurt the common man. You know "It's people that make the difference. Little people, like you." (from . . 'Christmas Vacation' as Clark's boss Frank Shirley calls Clark 'Carl').

There is irony dripping all over those statements. First, it is the Fed and its ZIRP (zero interest rate policy) that has SLAUGHTERED the little people, particularly when aligned with the Administration's big money, big business, big government policies and regulations.

Second, as noted above, Ms. Yellen is talking out of both sides of her mouth, hedging her bets. She discusses 'liftoff' of rate hiking in 2015 but at the same time broaches the subject of NIRP, where depositors pay the banks for the privilege of putting their money into a 'safe' place. Oh THAT will help the little guy, the common man (or woman or transgender person or whatever is out there now).

Cramer's statement is one of those where he shows, just as Frank Shirley, how in touch he is with the common man. How he feels their pain and can make statements that seem on the face to be good for the average citizen but the policies espoused are what has devastated the average citizen since 2008. It is so easy to talk of very populist notions that can fool a lot of people for at least a bit of time. For some reason, I guess it is because the Pope is visiting, an old line from an old 'M*A*S*H' TV episode comes to mind where Trapper John McIntyre tells Frank Burns, after Frank was mistaken for a chaplain, 'You can fool some of the papal . . ."



NASDAQ: Given NASDAQ and its leaders looked quite good Thursday but then tossed their waffles Friday, we lead with the leader . . . downside. NASDAQ gapped higher into the Tuesday gap zone from that gap lower. That was it. NASDAQ sold from there. It closed at one of the early September closes on the rebound test. Not great action at all, looking as if NASDAQ failed the bounce attempt. That said, there is support from the early September test of the initial relief move from the August selling. If NASDAQ doesn't hold and resume from here, the 4635-4615 level is some pretty good looking support if there is any upside left in the rebound attempt.

DJ30: Given it was the market leader Friday and posted upside we put this one on next. Surged to the 20 day EMA that matched the middle of the wedge peak, faded, giving up 151 points from high to close. UP on the day, but not great action. Held a second bottom Thursday on the low, bounced. DJ30 remains in position to bounce, but will need a catalyst.

SOX: The other up index Friday, SOX gapped then faded to a modest gain. Reversed at support Thursday, tried to bounce form it Friday. Could not hold all of the bounce but as with DJ30 it has left itself a shot to bounce. Perhaps that is wishful thinking for the upside but we will see how it plays out.

RUTX: The small caps were clobbered, gapping upside then reversing, taking out the early September low on the test of the recovery move. RUTX is well on the way to making the test of the August low.

SP400: Gapped higher, reversed as well, but did hold over the Thursday intraday low. That is about all you can say. As with RUTX, SP400 appears to be on its way to test the August bottom.


Lots of leadership groups struggled. Look at what was up: PG, K, CLX - - personal products. AEP, PCG - - utilities. Very defensive, suggesting the attempted bounce was just that, an attempt.

Big Names: This was the new wrinkle, i.e. big name leaders getting boxed around. AMZN gapped and reversed negative. BWLD broke sharply lower, giving up a week's gains. PCLN gapped and reversed very much like AMZN, closing below the 50 day MA. GOOG gapped and reversed as well, also taking out the 50 day EMA. SBUX was lower, gapping to the August peak and reversing. CMG held up fine. NFLX faded some of the Thursday move but is still working on its rebound. AAPL tried the 50 day MA again, faded but just modestly. The sharp gaps and sharp reversals are not good news for the market overall holding on. We will have to see they react to start the week.

Software: VDSI still looks good, one of the few. VRSN gapped and reversed but volume was low. Still a decent pattern. RHT is trying to recover, struggling.

Financials: Up on the session, giving the support to DJ30 and SP500. JPM gapped higher but dojied at the 10 day EMA. WFC same action, gapping to a doji at the 10 day EMA.

Energy: HAL is still trying to work laterally in the four week range. APC gapped and turned, closing at a lower closing low as it slides down the 10 day EMA. CVX looks similar to HAL. Not tanking but they are not for your mother. Perhaps mother in-law.

Chips: Some bounces. ARMH gapped upside and held most of the gap. QRVO is still way down but again, perhaps it can rally off some solidly rising MACD. SIMO is holding up very well. MXWL gapped higher, held it.

Biotechs/Drugs: Struggling. A lot. CELG, AMGN, GILD diving. ZGNX imploded.


Stats: -47.98 points (-1.01%) to close at 4686.5
Volume: 1.986B (+3.27%)

Up Volume: 684.75M (-184.44M)
Down Volume: 1.36B (+250M)

A/D and Hi/Lo: Decliners led 2.07 to 1
Previous Session: Decliners led 1.25 to 1

New Highs: 42 (+17)
New Lows: 171 (-24)

Stats: -0.9 points (-0.05%) to close at 1931.34
NYSE Volume: 980M (-2%)

A/D and Hi/Lo: Decliners led 1.1 to 1
Previous Session: Decliners led 1.47 to 1

New Highs: 20 (+15)
New Lows: 144 (-211)

Stats: +113.35 points (+0.7%) to close at 16314.67


VIX: 23.62; +0.15
VXN: 25.16; +0.44
VXO: 23.59; +0.02

Put/Call Ratio (CBOE): 1.3; +0.27

Recent history: 25 of 27 sessions at or over 1.0. Crazy number of closes over 1.0.

Bulls and Bears: Bulls faded modestly but bears blasted higher, reaching the highest levels since 2011. Closing in on the 35 level traditionally considered bullish. The bulls and bears remain crossed, now for three weeks, still quite bullish. That is a powerful rally signal though the rally ensues after the cross, typically not right on it.

Bulls: 26.0 versus 26.8% versus 25.7 versus 27.8 versus 31.6%

Bears: 30.2 versus 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.

Bulls: 26.0%
26.8% versus 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.

Bears: 30.2%
26.8% versus 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): 2.17% versus 2.11%. Gapped right back down after the strong upside gap Thursday. Appears as if bonds cannot make up their mind, but sold on Yellen's 'sometime this year' rate hike speculation.

Historical: 2.11% versus 2.15% versus 2.14% versus 2.20% versus 2.13% versus 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%

Euro/$: 1.1206 versus 1.1223. Euro holding over the 200 day SMA after falling to that level early in the week.

Historical: 1.1223 versus 1.11715 versus 1.11325 versus 1.12004 versus 1.13010 versus 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

$/JPY: 120.58 versus 120.30. The dollar surged higher to the 200 day SMA then faded, cutting the gain in half. Still in the five week range, still unable to breakout.

Historical: 120.30 versus 120.19 versus 120.00 versus 120.36 versus 119.996 versus 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

Oil: 45.34, +0.24. Still, repeat still, in the four week lateral move after the surge of the August lower low.

Gold: 1145.50, -7.80. Faded off the huge Thursday gain. Nice tap at the prior high in this move, rebounding off the low.


Nothing like snatching possible defeat form the jaws of victory. After breaking lower from the wedge and selling 5 of 6 days the indices were primed to bounce to test the move. They did, for the first hour to midday, depending upon the index. The sellers took over and ran many stocks, mostly on NASDAQ, lower.

The action left SP500, DJ30 and even SOX still with a near term upside bias. NASDAQ and RUTX gapped and reversed. RUTX looks like dog droppings. NASDAQ's reversal wasn't good; at least it leaves itself with a shot of a near term low at the early September low.

So, the bounce we were looking for, the one that looked quite good after the Thursday session, is at least back at the drawing board. That means the overriding theme, the flattening of the indices post-QE end, the massive break lower, the rebound to set up a test of that low, is still predominant. The question is whether there is a near term bounce to test the break below the trendline in the upward pointing wedge or a continuation of the move to test the low. Certainly enough time has been put in to make that a solid test for a solid rally, particularly when you throw in the sentiment and internal extremes already logged in the August selling.

Overall theme is eventually getting lower to test the prior low. Near term theme, the volatility continues and we can see upside moves inside the ultimate test lower. As another crossroads is left after the Thursday/Friday action, it behooves us to remain ready to play the overriding them (and thus we left our downside plays running) as well as the shorter term upside move. The latter appears in jeopardy after the Friday action; such is the life inside a bigger theme.

Again, if the big names continue the action shown Friday, the indices likely are on their way to that deeper test. Those stocks have held the indices higher, and if they go, so go the indices.

In that instance we look at more downside plays to capture that move. Some more SPY, some NASDAQ plays such as QID, some stock plays such as COST (trading range), SBUX that has put in a double top with lower MACD.

Don't forget the upside. Utilities and personal products? Not our first choice. Some precious metals? Interesting, e.g. ABX. Chips still have a bottoming chance and thus we like MXWL. Some software is still solid, e.g. VDSI.

So, it is back to the same theme, sentiment and internals hit extremes and now the indices and stocks are working on setting up their bases. Again, the same story. We are looking at the selloff and are playing that move as well as trying to play some contra moves inside of it. Then after it is over, when the selling tests the prior low, that is when we anticipate playing some solid upside setups.

The market will have a lot of data to digest in the coming week from Personal Income and Spending, Chicago PMI, Challenger Job Cuts, ISM, Jobs Report. Will they 'confirm' the Q2 GDP Final reading of 3.9% and its jump in consumer spending that added 2.42% to the 3.9% GDP print (i.e. without the sending GDP would be 1.5%)? Personal spending for August is due out, perhaps providing some foreshadowing on a Q3 GDP report expected to plummet? Ah the intrigue. All of this even with no Fed meeting!

We saw some deterioration of patterns to end the week and not as many look ready to move higher. Perhaps the selloff to test the lows makes the difference, completes the cycle. Typically that is how it works, but we will keep watching to see if there are patterns improving and whether patterns deteriorate. If there are no good patterns to lead higher on a rebound move, they ultimately fail. Thus the importance of solid upside patterns is clear. Not there yet, still working on it, but getting much closer.

Have a great weekend!


NASDAQ: Closed at 4686.50

4751 is the January 2015 lower high
4774 is the January high
4811 is the November 2014 peak (intraday)
4815 is the December 2014 prior market peak
The March lows at 4843 and 4825
4837 is the late August 2015 rebound high
The 50 day EMA at 4875
4910 is the July 2015 low
4912 the mid-April China dip
The 200 day SMA at 4917
The June low at 4974
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high

4636 is the early September 2015 low testing the recovery from the August selling.
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 1931.34

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
The 50 day EMA at 2003
2011 is the September prior all-time high
2046 is the July 2015 closing low
2062 is the January 2015 lower high
The 200 day SMA at 2065
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

1913 is the early September 2015 closing low testing the bounce from the August selling
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 16,314.67

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
The 50 day EMA at 16,851
16,933 is the September 2015 recovery peak
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.
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 17,653
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 25 - Friday
GDP - Third Estimate, Q2 (8:30): 3.9% actual versus 3.7% expected, 3.7% prior
GDP Deflator - Third, Q2 (8:30): 2.1% actual versus 2.1% expected, 2.1% prior
Michigan Sentiment - Final, September (10:00): 87.2 actual versus 87.0 expected, 85.7 prior

September 28 - Monday
Personal Income, August (8:30): 0.4% expected, 0.4% prior
Personal Spending, August (8:30): 0.3% expected, 0.3% prior
PCE Prices - Core, August (8:30): 0.1% expected, 0.1% prior
Pending Home Sales, August (10:00): 0.5% expected, 0.5% prior

September 29 - Tuesday
Case-Shiller 20-city, July (9:00): 5.0% expected, 5.0% prior
Consumer Confidence, September (10:00): 96.0 expected, 101.5 prior

September 30 - Wednesday
MBA Mortgage Index, 09/26 (7:00): 13.9% prior
ADP Employment Chang, September (8:15): 200K expected, 190K prior
Chicago PMI, September (9:45): 52.7 expected, 54.4 prior
Crude Inventories, 09/26 (10:30): -1.925M prior

October 1 - Thursday
Challenger Job Cuts, September (7:30): 2.9% prior
Initial Claims, 09/26 (8:30): 270K expected, 267K prior
Continuing Claims, 09/19 (8:30): 2248K expected, 2242K prior
ISM Index, September (10:00): 50.6 expected, 51.1 prior
Construction Spending, August (10:00): 0.5% expected, 0.7% prior
Natural Gas Inventor, 09/26 (10:30): 106 bcf prior
Auto Sales, September (17:00): 5.6M prior
Truck Sales, September (17:00): 8.5M prior

October 2 - Friday
Nonfarm Payrolls, September (8:30): 205K expected, 173K prior
Nonfarm Private Payr, September (8:30): 200K expected, 140K prior
Unemployment Rate, September (8:30): 5.1% expected, 5.1% prior
Hourly Earnings, September (8:30): 0.2% expected, 0.3% prior
Average Workweek, September (8:30): 34.6 expected, 34.6 prior
Factory Orders, August (10:00): -1.0% expected, 0.4% prior

End part 1 of 3
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