Monday, September 07, 2015

The Daily, Part 1 of 3, 9-5-15

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9/5/2015 Investment House Report
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Targets hit: None issued
Buy alerts: MA; MSFT
Trailing stops: None issued
Stop alerts: None issued

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Market Summary Video, Plays and Play Videos, and Play Tables with play annotations will issue Monday, Wednesday and the Weekend.

Tuesday and Thursday reports will contain the market summary, chart links to view the index charts, and updated play tables.

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MARKET SUMMARY

- Jobs announced, mixed reviews on the same old story, but stocks sell.
- Still debating a 'successful test' but if Tuesday was fear then we have forgot what fear is like, just as we have forgot what a really good economy looks like.
- Market is building for a bottom as the process continues with some promising patterns forming up.

Long before the jobs report hit the wires Friday morning stock futures were lower. After the jobs report was released futures were lower. It was simply going to be a down session. Thursday the stock market tried to continue the Wednesday upside rebound and indeed made that move early on. That move reversed, however, showing tombstone doji on all of the indices.

Off of that signal we anticipated the downside to continue. It did. Stocks gapped lower off that doji, tried to bounce back in the first hour, failed rather miserably. Hit new session lows mid-afternoon, but also build inverted head and shoulders patterns on SPY. A last 1.5 hour rally made the losses more respectable as shorts covered madly after a down week ahead of a 3-day weekend. As a somewhat poetic end, the last ten minutes saw stocks reverse hard with most indices closing down 1% or more. Hey, at least they avoided the session lows.

SP500 -29.91, -1.52%
NASDAQ -49.58, -1.05%
DJ30 -272.38, -1.66%
SP400 -1.21%
RUTX -0.78%
SOX -1.80%

VOLUME: NYSE -6.8%, NASDAQ -12.5%. At least volume was lower and below average. Just a complete and utter lack of bids as volume trailed off to end the week ahead of the Labor Day weekend. Even the jobs report could not muster any volume.

A/D: NYSE -3:1, NASDAQ -1.7:1. NYSE breadth again swelled on the downside. NASDAQ is actually showing some resilience with quite mild breadth. There is some stamina in some NASDAQ big names and some perhaps not so big names.


NEWS/ECONOMY

Okay, the jobs report. Depending upon who you listen to it was either strong or just more of the same, indeed more of what is not good about the same.

Nonfarm Payrolls, August (8:30): 173K actual versus 217K expected, 245K prior (revised from 215K)
Nonfarm Private Payrolls, August (8:30): 140K actual versus 210K expected, 224K prior (revised from 210K)
Unemployment Rate, August (8:30): 5.1% actual versus 5.2% expected, 5.3% prior
Hourly Earnings, August (8:30): 0.3% actual versus 0.2% expected, 0.2% prior
Average Workweek, August (8:30): 34.6 actual versus 34.6 expected, 34.5 prior (revised from 34.6)

The notable points:
-Headline payrolls missed but revisions to June and July added 44K jobs. As they love to say, it was a wash.
-Unemployment rate dropped two notches.
-Workweek rose to 34.6 but after lowered from that level to 34.5 the prior month

Mark Zandi: "The jobs market, by all accounts, is very, very strong."

Fox Business analysts: Noting the increase in temporary workers, "this is how recoveries start, adding temporary jobs."

Sounds peachy. Surely the jobs market has finally, after 6 years of recovery, 'turned the corner.'

That is the case, if the jobs market is chasing its tail in circles.

Jobs mix: Once again the jobs created are in the lowest pay sectors.

Healthcare: 56K
Professional and Business: 33K
Food and Drink: 26K
Retail: 11K
Manufacturing: -17K.
Mining: -9K
Government: +33K

Mining: Falls to 823K, the lowest number of workers in 4 years and 8 consecutive monthly declines.

Manufacturing: First decline in 2+ years. Just 28K manufacturing jobs added in 2015.

Bartenders and waiters: All-time record 11.1M with 207,100 of these jobs added in 2015.

Manufacturing -1.4M jobs, waiters/bartenders +1.5M. That tells the story of the recovery.



Participation: "The unemployment rate fell for the right reasons." Fox Business reporter.

Citing the statistic that the economy employed 196K more people while the unemployed fell 237K, the Fox reporter made that erroneous conclusion. Why is that erroneous, for the same reason the unemployment rate has dropped this entire recovery.

Indeed, if you pay any attention at all to history, you wonder how the economy can feel so crappy when during boom times when Reagan was President and even when Bush was President sported 7%ish and 6%ish unemployment respectively in their recoveries.

The answer is the same: Participation.

Participation rate: 62.6%, a level not seen since 1977. At that point participation was on the rise as the economy tried to come out of recession. It is now at that level again, but heading lower as the economy and jobs market supposedly continues to recover. Is anyone calling Bull Sh*t on this yet?



94M working age adults are now out of the workforce, as 261K dropped out in August.

1.8M people have dropped out the past 12 months. 14.9M dropouts since 12/2007 when the Great Recession started.

They keep dropping out of the workforce instead of moving back in and taking advantage of all of those jobs. Why? Because the jobs are low pay, more menial jobs that many prefer just not to work and instead collect benefits and get the occasional cash job to make ends meet.

Is this a 'very, very strong' jobs market? Perhaps you could at least make a prima facie case for that if you measure jobs only by gross numbers. If you look at what kind of jobs are created and how many people are opting not to work those jobs, the picture is ugly. You have to be in denial to avoid seeing the decimation of the jobs market in the US and the contemporaneous collapse of the middle class.

Is it about to turn the corner thanks to increased temporary jobs? This is the sixth year of recovery. Every year there are a few months that show an increase in temporary jobs. Like clockwork, the old broken record is played about how temporary jobs lead to permanent jobs and thus the jobs market is turning the corner. Every year it doesn't happen.

Why the same problems? Nothing has changed because the policies creating this low-wage jobs economy have not changed. The ACA penalizes working over 30 hours/week. The massive regulatory and tax burdens on small businesses have stifled innovation and the quality, breadwinner jobs that arise from new small businesses becoming new large businesses. Without that engine creating the new technologies, processes, etc., the jobs machine cannot crank up.


Forgot where we came from.

Today I heard at least four commentators state that the jobs market was very strong and/or the economy was booming. The fascinating and sad aspect of this is they were not young, but old enough to remember the 1970's to 2000. The question I have to ask is how anyone who lived through those times and even remotely claims to have knowledge of economics can make those types of statements.

Very, very strong jobs market? 173K jobs and a 220K average the past three months is very, very strong? How about creating 1M jobs in a month? Reagan did it. Clinton did it. that is very, very strong. 173K? Are you joking?

Booming economy? 3.6% GDP is booming? Only 4 quarters of 4+% GDP in the entire recovery. Booming? How about 11% growth in one quarter under Reagan? How about that spurt bracketed by quarters of 7+%, 6+%, 8+%, 9+%? How about 10+% under Clinton? 8% under Bush 2? THAT is booming.

These commentators only prove what I posited several years ago would happen: we have accepted mediocrity as excellence. Sub-2% to 2% growth is seen as 'booming.' 40% of the working age citizens out of the labor force is 'very, very strong.' Net losses of 1.4M manufacturing jobs versus creation of 1.5M wait staff and bartender jobs is very, very strong. We have forgotten where we came from, what we can be, and are accepting mediocrity and the decline of our standard of living by redefining the standards by which we have always measured the US economy. Shame on us.


THE MARKET

CHARTS

The failed rebound attempt hopefully opens the door for a nasty downside test that causes severe puckering. The problem as we see it is everyone is looking for that test. The bald guy on CNBC has a commercial spot for his show that keeps asking the question if we just saw a successful test or not. With everyone looking for the test it doesn't work. To set the bottom the test has to scare all the sellers out. An expected test doesn't do that.

SP500: Nasty Tuesday selloff, Wednesday bounce to a Thursday tombstone doji, then a predictable rollover. Low volume but it was the last official Friday of summer, so lower volume goes without saying. Perhaps this action leads to a test of the prior lows, and if it works right, an undercut that panics those watching for a test. That is the false break lower, the one that makes the technicians say more selling is coming just as the algos buy and reverse the market.

NASDAQ: The techs gapped lower to a doji on low volume. This is a very jumbled pattern, but the theme is 1) big selloff crashing the trend, 2) a rollover at the 61% Fibonacci Retracement of that selloff, 3) a rebound attempt failing at the 10 day EMA with a tombstone doji, 4) a gap lower to a doji Friday. Overall it appears to be weakening with the rest of the market for a second big drop, but note that many important 'name' stocks such as AMZN, PCLN, CMG are not selling off but working on patterns. Okay, they can continue working on their patterns even as other big names drop in the deeper test, it just doesn't happen all that much.

RUTX: Very similar action to NASDAQ, gapping lower to a doji Friday. Negative overall but not throwing in the towel and going full monty downside.

DJ30: Higher volume selloff after the tombstone doji at the 10 day EMA Thursday. Ugly selloff, but even DJ30 did not undercut the Tuesday low yet.

SP400: Broke lower after the Thursday tombstone doji at the 10 day EMA. Closed near the session low, under pressure, and not that far from the 1350 low from late August (closed at 1386 Friday).

SOX: Gapped lower yes, but chips are not rolling over. Instead they are bouncing up and down in a trading range the past six sessions. Approaching the low side of the range at 590 and would not be surprised if SOX tried to bounce when it gets there.


LEADERSHIP

Big Names: PCLN, AMZN both look very interesting, two names are holding up very well. They could provide the backbone for the market when the selling ends. GOOG is struggling. SBUX looks ready to roll over. MSFT gapped lower, looks weak. Definitely mixed but some key stocks are holding up and setting up well.

Financial: Continue to struggle, falling off tombstone doji at resistance. JPM gapped lower Friday off that Thursday doji below the 200 day SMA. WFC gapped lower off the tombstone at the 10 day EMA. MA gapped lower though it did manage to hold the 200 day SMA after undercutting it intraday. Overall financials remain weak, and that is not good for the market overall.

Chips: Trying to firm up. AMKR worked well this week. AAOI is testing in a good pattern. QRVO looks great. MXWL is still setting up. AVGO is trying to set up over the 200 day SMA. SLAB is attempting to set up an inverted head and shoulders as is FORM. MLNX is trying but some of these are far from slam dunks.

Social: Trying to bottom but work to do. LNKD not bad, TWTR trying to form up an inverted head and shoulders. FB is a mess.

Internet: AKAM is trying to set up to lead. XXIA is still in a great pattern. Some life here.

Metals: Still setting up their patterns, e.g. AKS, FCX, SID.



MARKET STATISTICS

NASDAQ
Stats: -49.58 points (-1.05%) to close at 4683.92
Volume: 1.533B (-12.47%)

Up Volume: 379.46M (-587.74M)
Down Volume: 1.18B (+359.47M)

A/D and Hi/Lo: Decliners led 1.69 to 1
Previous Session: Advancers led 1.06 to 1

New Highs: 12 (-19)
New Lows: 70 (+30)

S&P
Stats: -29.91 points (-1.53%) to close at 1921.22
NYSE Volume: 828M (-6.8%)

A/D and Hi/Lo: Decliners led 3.1 to 1
Previous Session: Advancers led 1.83 to 1

New Highs: 5 (-3)
New Lows: 135 (+105)

DJ30
Stats: -272.38 points (-1.66%) to close at 16102.38


SENTIMENT INDICATORS

VIX: 27.8; +2.19
VXN: 28.92; +0.82
VXO: 28.04; +2.31

Put/Call Ratio (CBOE): 1.48; +0.36

Recent history: 13 straight over 1.0. 19 over, 7 below in the past 26 sessions. Belt and suspenders. Has easily met the threshold for a reversal upside.


Bulls and Bears: Bulls continue their plung, hitting levels not hit since the depths of the 2008 selloff. Bears are surging, almost ready to cross over with bulls on their collapse. Impressive collapse in bulls and bears are getting there.

Bulls: 27.8 versus 31.6% versus 37.7% versus 40.2% versus 42.2% versus 43.3% versus 49.0%

Bears: 26.8% versus 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.




Bulls: 27.8%
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: 26.8%
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.


OTHER MARKETS

Bonds (10 year): 2.13% versus 2.17%

Historical: 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/$: 1.1148 versus 1.1122. Euro firmed at the 200 day SMA, ready to rebound.

Historical: 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: 119.04 versus 120.15. Dollar continues to dive versus the yen, putting in a lower closing low on this move.

Historical: 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 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


Oil: 46.05, -0.64. Testing the big surge higher, still in a flag test.

Gold: 1121.40, -3.10. Testing the surge higher with a little double bottom test.


TUESDAY

The jobs report is in the bag and those on Fed watch can argue the report lessened the likelihood of a rate hike while others say there is no change. Indeed, Mr. Lacker Friday gave the market a piece of his mind on the September rate hike. Of course as Boss Hog said to Sheriff Roscoe P. Coltrane on 'The Dukes of Hazzard,' if he gave a piece of his mind he might not have any mind left. That, however, is another story.


James Best also played Jim Lindsey on the Andy Griffith show who became a guitar player for Jimmy Fleet and His Band with the Beat.

Lacker stated there was a "strong case for a rate hike' in September, and that the "jobs data won't change that decision." Okay, so much for the lack of clarity.

Lacker also said that "both mandate conditions appear to have been met" such that exceptionally low interest rates are no longer warranted. Again, clarity. Maybe only in his mind, but at least he is clear. Indeed, if all is so great as we are told, the Fed has no business NOT hiking. In a bit less than two weeks we will know, but likely the market is already pricing in a 25BP hike.

That means back to the market. It is still seeking bottom. It would make absolute sense that the market starts to rally at or just before the FOMC makes the decision to hike rates. What happens in the buildup to war? Markets sell on uncertainty, but once the war starts they rally. The point: markets prepare for the worst, rally on fact, whether considered good or bad.

Right now the market is still in the process of preparing for the worst. Next week should be lower, but as we have seen, the course of this market is as straight as Lombard Street in San Francisco: it zigs and zags but it does trend in one direction.

Thus while it bounces up then down, the market likely trends lower near term to find that test that sets the bottom. It is too easy to say if it matches the last low the bottom is in. There has to be that element of super fear once more to scare out the sellers. OR it takes you by surprise, either selling off slowly, slowly, sneaking up on you as it bores people out of the market, and they exit in frustration. Or it deceives you and rallies from here, making Tuesday the successful test as some have argued.

Still looking for the market to sell further, however, the more pat move. Pat with a twist, i.e. an undercut of the prior low to put some more fear back in.

Timing is the thing. Two weeks to the FOMC. Bottoms that week? On the news? We will see.

We will let current downside continue; of course, also looking at new downside as they set up. At the same time we build a list of good upside patterns in addition to the ones we already have. Several chips are forming inverted head and shoulders patterns, the 'other' pattern we were looking to develop in addition to double bottoms. Some big names are still setting up nicely. Others less known are setting up as well. Still a lot to do, still need more to set up. Additional up and down in the selling should do that.

Have a great Labor Day weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4683.92

Resistance:
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
4912 the mid-April China dip
The 200 day SMA at 4914
The 50 day EMA at 4933
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

Support:
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 1921.22

Resistance:
The 10 day EMA at 1958
1972 is the December 2014 low
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 2039
2046 is the July closing low
2062 is the January 2015 lower high
The 200 day SMA at 2073
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

Support:
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 16,102.38

Resistance:
16,117 is the October 2014 closing low
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
16,670 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
17067 is the December 2014 low
17,068 is the early July 2014 peak
17,152 is the mid-July post bear market high
The 50 day EMA at 17,179
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

Support:
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


ECONOMIC CALENDAR

August 31 - Monday
Chicago PMI, August (9:45): 54.4 actual versus 54.7 expected, 54.7 prior

September 1 - Tuesday
ISM Index, August (10:00): 51.1 actual versus 52.6 expected, 52.7 prior
Construction Spending, July (10:00): 0.7% actual versus 0.5% expected, 0.7% prior (revised from 0.1%)
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): 11.3% actual versus 0.2% prior
ADP Employment Change, August (8:15): 190K actual versus 201K expected, 177K prior (revised from 185K)
Productivity-Rev., Q2 (8:30): 3.3% actual versus 2.8% expected, 1.3% prior
Unit Labor Costs - Final, Q2 (8:30): -1.4% actual versus -0.9% expected, 0.5% prior
Factory Orders, July (10:00): 0.4% actual versus 0.9% expected, 2.2% prior (revised from 1.8%)
Crude Inventories, 08/29 (10:30): 4.670M actual versus -5.452M prior

September 3 - Thursday
Challenger Job Cuts, August (7:30): 2.9% actual versus 125.4% prior
Initial Claims, 08/29 (8:30): 282K actual versus 273K expected, 270K prior (revised from 271K)
Continuing Claims, 08/22 (8:30): 2257K actual versus 2261K expected, 2266K prior (revised from 2269K)
Trade Balance, July (8:30): -$41.9B actual versus -$42.7B expected, -$45.2B prior (revised from -$43.8B)
ISM Services, August (10:00): 59.0 actual versus 58.4 expected, 60.3 prior
Natural Gas Inventor, 08/29 (10:30): 94 bcf actual versus 69 bcf prior

September 4 - Friday
Nonfarm Payrolls, August (8:30): 173K actual versus 217K expected, 245K prior (revised from 215K)
Nonfarm Private Payr, August (8:30): 140K actual versus 210K expected, 224K prior (revised from 210K)
Unemployment Rate, August (8:30): 5.1% actual versus 5.2% expected, 5.3% prior
Hourly Earnings, August (8:30): 0.3% actual versus 0.2% expected, 0.2% prior
Average Workweek, August (8:30): 34.6 actual versus 34.6 expected, 34.5 prior (revised from 34.6)

September 8 - Tuesday
Consumer Credit, July (15:00): $18.0B expected, $20.7B prior

September 9 - Wednesday
MBA Mortgage Index, 09/05 (7:00): 11.3% prior
JOLTS - Job Openings, July (10:00): 5.249M prior

September 10 - Thursday
Initial Claims, 09/05 (8:30): 275K expected, 282K prior
Continuing Claims, 08/29 (8:30): 2257K expected, 2257K prior
Export Prices ex-ag., August (8:30): -0.4% prior
Import Prices ex-oil, August (8:30): -0.3% prior
Wholesale Inventories, July (10:00): 0.3% expected, 0.9% prior
Natural Gas Inventor, 09/05 (10:30): 94 bcf prior
Crude Inventories, 09/05 (11:00): 4.670M prior

September 11 - Friday
PPI, August (8:30): -0.1% expected, 0.2% prior
Core PPI, August (8:30): 0.1% expected, 0.3% prior
Michigan Sentiment, Preliminary September (10:00): 91.5 expected, 91.9 prior
Treasury Budget, August (14:00): -$128.7B prior

End part 1 of 3
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