Saturday, October 31, 2015

The Daily, Part 1 of 3, 10-31-15

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10/31/2015 Investment House Report
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Targets hit: None issued
Entry alerts: CY; SOHU
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

- SP400, RUTX still not making good on the Wednesday break higher.
- State of the Market, in terms of the Wednesday debate.
- Plenty of leaders, but market once again needs more.
- At the prior resistance, waiting on smaller caps to come around and SOX not to tank.
- FOMC ready to hike but not for its stated reasons.

Friday saw stocks struggle to continue the rally continuation. Yes I know I used a derivation of 'continue' twice in that sentence, but that is the mood I am in; it is, after all, All Hallows Eve.

After another 2-day test of a market surge (this one the prior Thursday/Friday rally), stocks bolted higher Wednesday, this time led by the small and midcaps. Those two indices appeared to break out from the doldrums of their three week lateral consolidations that saw them sit and tend to their knitting versus rally with the large caps. Of course, in the market, not selling off, while not the preferred choice of those long stocks, is not a bad option considering the alternatives. And if you are an option premium seller, holding steady can be a very sweet deal.

It looked as if the textbook fall setup and rally that was not textbook only in that it started a month earlier than usual, was going to accelerate yet another rally out of the book of market lore, i.e. the 'January Effect' (that has become the 'Late December Effect' for many recent years). RUTX, after all, posted a monstrous (as opposed to ghoulish) 2.43% rally Wednesday out of the three week consolidation.

Thursday and Friday, however, it and SP400 showed a notable lack of follow through, giving up half the move and closing the week at the highs in the three week consolidation. Not bad if you are testing, but not any real staying power for the initial move.

Not all blame for the late week stall can be heaped upon RUTX and SP400, but it sure is fun to find such ready scapegoats. No, the other indices had their issues as well. Mind you, none really broke down, though SOX does not show the glow of health as it gapped lower from a gap higher. Kind of island reversal-esque.

SP500 -10.05, -0.48%
NASDAQ -20.52, -0.40%
DJ30 -92.26, -0.52%
SP400 -0.07%
RUTX -0.32%
SOX 0.85%

VOLUME: NYSE +26%, NASDAQ +4%. Okay, not the best action to see a volume spike as stocks near the old highs hit in the March to August top that led to the August selloff. Always concerned that the recovery slams into a brick wall built after the Fed ended QE.

A/D: NYSE 1.2:1, NASDAQ -1.4:1


The action from Wednesday to Friday with small caps surging then fading of course begs several questions. I note that the breakout came on the same day as the CNBC Republican presidential debate. Given the near universal derision of debate thanks to its three main moderators (HQQ -- Harwood, Quick, and Quintanilla) -- it seems appropriate to view the moves in the same light as the debate.


John 'My Career is over for getting caught in two lies' Harwood, Becky 'not so quick' Quick, and Carl 'where you vetted properly' Quintanilla.

RUTX: You surged higher Wednesday but then quickly squandered those gains. You seem to be in an awful hurry to make up ground and attain new highs. Do you have the maturity to rally in support of the large cap indices and indeed seek a new high yourself?

NASDAQ: You are trying to get back to your old 2000 highs again. Yet back in 2000 and indeed again here in 2015, you were 'fired' by the market, sold off after attaining those levels. What do you say about your ability to 'manage' a new high?

SP500: You present a plan to attain new highs, but I have run the numbers and they just don't add up. Maybe you are showing some earnings beats, but the top line misses just don't get you there.

Buybacks, FOMC, favorable regulations from administration.

DJ30: You have made new highs in the past and you are trying to do so again, i.e. moving to a new all-time high. However, you only contain 30 stocks and many argue that you don't represent the overall market. Yet you want to, with a wave of bids, move to a new high, claim leadership, and by making the move proclaim that the market is healthy and the economy is fine. Is that not more of a cartoon character idea than real leadership?

To the large cap indices: You claim that the moves during the recovery are indicative of a healthy US. The benefits of your moves, however, only appear to show up in the large cap stocks and moreover accrue only to the top 1% of citizenry. Doesn't this say that your moves do not really help lift the common man or reflect the state of the market and economy?

SP400 and RUTX: Does DJ30 have the moral authority to unite the market to new highs?


There you have it. The market moves posed in terms of Wednesday night's debate questions.

The salient points:

The large cap indices are in the early 2015 trading range that led up to the August plunge.

The large cap indices have recovered to a point where new highs become an issue.

The small cap and midcap indices, laggards for good reason due to economic struggles and competitive disadvantage thanks to the stimulus, thousands of regulations favoring large corporations, e.g. the ACA, tried to break higher but could only manage one upside session.

After a seasonal, often typical year end run, who will lead and what is the foundational basis for a further move given the economy and a Fed in tightening mode?

Yes, the Fed can be classified as tightening given the end of QE in October even though it has not raised rates an iota. Even so, bonds are off their 2015 highs and are struggling below key resistance at the 200 day SMA. They are tightening themselves even if the FOMC has not officially moved on rates.

That leads to the December FOMC decision. This past week the FOMC kept rates steady, but removed language in its statement regarding influences of foreign economies and markets. After its joke of saying that those markets and economies had no impact on its decisions outside the decision it made in that same statement, I guess it felt it had some more work to do in the 'get serious' category. So, it takes out the language to show how tough it is. Doesn't raise rates, but takes out language that transferred the blame elsewhere.

Reminds me of a 'Frasier' TV episode where he was going to get back at some station people who were making fun of him on the air by some long-winded scheme, the sum of which would cause them to be sad every time they saw a red balloon. That's getting back at them! But, I digress.

Anyway, I feel this all leads up to a December rate hike of at least 25BP, maybe 50BP. Why? Because the Fed doesn't want to raise rates in 2016 as that is a presidential election year and it wants to appear unbiased. So, it hikes at the last opportunity it has, December.

Of course I could be giving the Fed WAY too much credit. It may not care about election years. It is apparent its members care more for plenty of TV face time and media coverage in order to land those lucrative post-FOMC consulting jobs.

Ironic, isn't it? We have eliminated the concept of 'stepping stone' job in the lowest end of the work scale with the 'livable wage' arguments yet the higher end is rife with them, namely government appointed/elected positions that the so-called public servant then turns into a 7 figure salary after 'selfless service' for 5 years or so. But, I again digress.

For the week some important moves were made. SP500, DJ30 and NASDAQ broke further into the prior 2015 range that led to the selling. SP400 and RUTX broke out from their lateral consolidations, potentially in position to provide support for the large caps hitting new highs. The market move is still dominated by large cap 'name brands' that moved to new highs on the week. SOX is worrisome with its gappy action, gapping sharply lower Wednesday.

Holding the upside break by all indices, especially RUTX and SP400, will be key this week. Will the indices hit new highs? Who knows? If the small and midcap moves hold and their rallies continue, anything is possible, even with the Fed set to hike rates.

You know, that reminds me of that old James Garner movie 'Support Your Local Sheriff' with Bruce Dern playing Joe Danby, a no good bushwhacker who gets jailed for shooting a man by the sheriff Garner (who is, by the way, just stopping over on his way to Australia). Danby tells his pa that the townsfolk laugh and talk about hanging him but he just doesn't believe they will do it. But, I digress again.


How dare you walk into my office and pull a gun on me.


NEWS/ECONOMY

Personal Income and Spending both missed their mark in terms of expectations.

Income: 0.1% versus 0.2% versus 0.4% August (from 0.3%)

Spending: 0.1% versus 0.2% versus 0.1% August

Employment Cost Index: 0.6% versus 0.5% expected versus 0.2% prior

Wages falling, yet costs for employees rising. How? As seen with this week's first read of the Q3 GDP, healthcare costs are surging, making up over 30% of all the 1.9% GDP growth reported. It is clear the ACA (aka Obamacare) is driving costs higher and higher.

Moreover, we learned this past week that the tenth state 'market' for insurance set up under the ACA failed, this one in New York. But . . . NO coverage of this at all. It is as if it does not exist as news.

Nonetheless, even if ignored, it might be that the ACA does simply die of its own accord even with the most favorable enforcement of any law ever written and passed. Lincoln always said if you want a bad law repealed, enforce it stringently.

The ACA has enjoyed every kind of delay and waiver imaginable, and it is still imploding. What a horribly bad idea, what horribly drafted legislation, and what a massive waste of resources and devastation of small businesses, wage growth, and upward mobility as well.



THE MARKET

CHARTS

SP500: The big surge off a 2-day pullback could not keep its momentum Thursday or Friday, indeed falling harder Friday with rising NYSE volume. Still not in danger per se, but SP500 is in the pre-August crash trading range/top, and that is a very important level for obvious reasons. Still very overbought after the October run, at resistance, but MACD broke out, the leadership is good, and thus far bids keep returning. 2070 to 2065ish is an important range to hold (closed at 2079)

DJ30: And once again the same action as SP500. The 200 day SMA (17,577) is a good area to watch for DJ30 to hold.

NASDAQ: Thanks to the leadership of the few, the proud, the NASDAQ name brands, NASDAQ has moved. AMZN, GOOG, FB, PCLN, SBUX. NASDAQ blasted to a higher rally high Wednesday, tested Thursday and Friday along with the market. NASDAQ made it to the third tier of highs last week (April and May highs), leaving just the June and August peaks between it and that July 2015 high. Thus far the big names have managed to rally, rest, and rally again without NASDAQ giving up ground. That huge gap from two Fridays back yawns below it, and whenever this move runs out of gas, that could be quite a drop.

RUTX: Big break upside Wednesday, then gave half back to the 50 day EMA as of Friday. Okay, the stage is set: lateral consolidation as refused to sell off, breakout Wednesday, test back to the top of the range Friday. If the bids return, it looks to be a merry holiday season with a further rally toward aforementioned holidays.

SP400: Same action as RUTX though looks a bit more refined with a very modest tst of the top of the range, showing the appropriate doji. Looks solid to continue, but it has to get the bids or it is, alas, just a pretty picture.

SOX: Wild card, as always. After an easy test of the 10 day EMA into Tuesday, SOX resumed the upside with a Wednesday gap and run. Then Thursday it gapped below the 10 day EMA. Friday it recovered some ground but closed at the 10 day EMA. SOX ignited a lot of the last part of the rally with its M&A excitement. If SOX fades the market has to have the small and midcaps step up.


LEADERSHIP

Big Names: After another week of upside and new highs, AMZN, GOOG, SBUX, FB faded Friday. PCLN gapped another 2% upside. AAPL lost some ground as well after a decent two week move. MSFT and INTC are finally in tests. NFLX sported its fourth solid gain in six sessions. Looks as if the leaders may need to take a breather.

NYSE big caps/Industrials: Still some good looking setups, e.g. UTX that we are still watching. MMM is holding its move over the 200 day SMA as is HON. MSFT, INTC struggling as noted. FLR looks really good off an inverted head and shoulders. ETN looks solid.

Financial: Another fade Friday, but we view this as setting up some more entries. JPM is a play we like after it tests this move. BAC is fading its Wednesday surge rather aggressively as has GS. All still look good at this juncture, however.

Energy: Some really good setups. Still like APA. OIS is coming around nicely after earnings. HP looks good as does MRO, but earnings are close. MRO is really interesting. CVX saved itself on the week and is back at the recent highs.

Biotech/Drugs: testing moves as well, e.g. CELG is putting in a great 10 day EMA test. If you are not in, consider this test as your opportunity. AMGN is testing the 200 day SMA it broke through and INFI has rested a week and the 10 day EMA has caught up to it. CLVS is still working at it. CRMD looks very interesting but earnings are very close.

China: Some good moves again. SOHU posted a nice upside break for us. SINA has had a volatile week but is still trending higher. ATHM looks as if it is ready to go again. BIDU gapped and rallied off of good earnings.

Software: Hanging in there as VDSI is still set up well. SPLK is interesting but doesn't look quite there yet. CALD is very interesting but earnings are next week.

Semiconductors: Some are picking up the slack even on a down day. SIMO looks really good. SMTC is in a nice setup. MXWL is attempting to come back around.


MARKET STATISTICS

NASDAQ
Stats: -20.53 points (-0.4%) to close at 5053.75
Volume: 1.939B (+3.84%)

Up Volume: 827.9M (+243.66M)
Down Volume: 1.17B (-140M)

A/D and Hi/Lo: Decliners led 1.37 to 1
Previous Session: Decliners led 1.86 to 1

New Highs: 53 (-51)
New Lows: 87 (+1)

S&P
Stats: -10.05 points (-0.48%) to close at 2079.36
NYSE Volume: 1.1B (+26.2%)

A/D and Hi/Lo: Advancers led 1.18 to 1
Previous Session: Decliners led 1.56 to 1

New Highs: 59 (-25)
New Lows: 53 (+14)

DJ30
Stats: -92.26 points (-0.52%) to close at 17663.54


SENTIMENT INDICATORS

VIX: 15.07; +0.46
VXN: 17.3; +0.13
VXO: 15.55; +0.37

Put/Call Ratio (CBOE): 0.95; +0.09

Recent history: 32 of 51 sessions at or over 1.0. The past dozen-plus sessions less than 1.0. Did its work in all the selling.


Bulls and Bears: Bulls surge 6.2 points. The 35% level and the crossover with bears is long gone. Bears dropped after two weeks at 31 and change, but still more stubborn than the bulls. They hit bullish extremes, are retracing the move, nothing bearish yet.

Bulls: 43.7 versus 37.5

Bears: 29.2 versus 31.3

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: 43.7%
37.5% versus 36.5% versus 30.2% versus 24.7% versus 26.0% versus 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

Background: Bulls hit their lowest level since the 2008 and 2009 market plummet.

Bears: 29.2%
31.3% versus 31.2% versus 34.4% versus 35.1% versus 30.2% versus 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. Done.


OTHER MARKETS

Bonds (10 year): 2.15% versus 2.17%. Modest recovery but as noted earlier, rates are moving ahead of the FOMC.

Historical: 2.17% versus 2.09% versus 2.03% versus 2.06% versus 2.09% versus 2.03% versus 2.07% versus 2.03% versus 2.03% versus 1.98% versus 2.04% versus 2.10% versus 2.11% versus 2.07% versus 2.04% versus 1.98% versus 2.04% versus 2.05% versus 2.05% versus 2.09% versus 2.17% versus 2.11% versus 2.15% versus 2.14% versus 2.20%


Euro/$: 1.1015 versus 1.0979. Tested the 200 day SMA after the terrible week below that level.

Historical: 1.10979 versus 1.1030 versus 1.1047 versus 1.1049 versus 1.1017 versus 1.1108 versus 1.1339 versus 1.1347 versus 1.1320 versus 1.1351 versus 1.13793 versus 1.1387 versus 1.1387 versus 1.1352 versus 1.1358 versus 1.1289 versus 1.1250 versus 1.1269 versus 1.12106 versus 1.1190 versus 1.1167 versus 1.1254 versus 1.1254 versus 1.1206 versus 1.1223 versus 1.11715


DXY0: Big upside week to a higher rally high, tested the 10 day EMA Thursday to Friday. Nice tap and bounce Friday as dollar remains strong.


USD/JPY: 120.62 versus 121.10 Dollar is stronger versus most currencies but the yen is being pesky.

Historical: 121.10 versus 120.34 versus 120.36 versus 121.10 versus 121.46 versus 120.71 versus 119.925 versus 119.897 versus 119.52 versus 118.87 versus 119.66 versus 119.75 versus 119.89 versus 120.23 versus 119.88 versus 119.92 versus 120.22 versus 120.45 versus 119.91 versus 119.86 versus 120.07 versus 119.76 versus 119.64 versus 120.58


Oil: 46.39, +0.33. Up off the lows Wednesday to Friday after a two week decline. Held at the early September consolidation lows and bounced.


Gold: 1141.70, -3.80. Gold suffered on the week, continuing a three week slid off the recovery high hit in mid-October. Held the 50 day SMA on the Friday close.


MONDAY

The FOMC took out the reference to foreign influences and basically left it as this: if the jobs reports are good enough, we hike. Well, next week there is a jobs report for October. There will be one after that for November as well before that fateful December meeting. So, two times to show how great the economy is via the jobs report.

Crazy is it not? You have over 94M people who could work out of the workforce and thus pushing unemployment to 'full employment' lows. Somehow this is overlooked and the jobs market is termed great. Further, the jobs that are created are mostly, and I apologize for the usage, crap. A Fox Business commentator talked of the 'millions' of jobs created under the Obama administration. While those figures are debatable in themselves, even if they are true they are millions of low end, hourly wage jobs, hardly the kind to fuel a surge in wages and standard of living. INDEED, both have declined under this Administration, and were declining in the administration preceding.

I also find it ironic that GE has those rather clever commercials with the fellow going to work to write code for trains, planes, and automobiles, yet it is GE who is one of the most adamant about hiring overseas versus US workers. Tens of thousands of US citizen STEM degree graduates (Science, Technology, Engineering, Mathematics) unable to find jobs in their field of study and we are told that we have to increase the number of visas allowing those workers to come to the US to fill needed jobs. Or we are blackmailed, saying if we don't revive the Import/Export bank or otherwise give the big corporations more handouts than in the stimulus and the hundreds of thousands of regulations benefitting them over smaller businesses that they will be 'forced' to move jobs overseas. Either way the taxpayer loses.

Okay, yes I digresses again.

This week there are jobs, more earnings, etc. The REAL story is how SP400 and RUTX hold their Wednesday breakout from their ranges. They enter the week tested and rested, and it is very important for a continued rally that they resume the upside. It would not hurt at all of SOX got the Thursday gap and selloff out of its system as well.

Thus we are still looking at technical attributes driving the action. Everything set up, the moves were made, and now the upside continues in the aftermath. With the large cap indices in the prior, pre-August selloff ranges it is a question of whether they can sustain the moves to test the hold highs and, perish the thought, move to new all-time highs.

There is no new QE and the Fed is talking of a December rate hike. It would appear the odds are stacked against new highs. That is why, for the upside to continue, it is very important that SP400 and RUTX continue their moves.

There is still plenty of leadership and plenty of stocks setting up with nice patterns to move higher and aid the rally. As seen before, however, not all stocks that setup make the moves. Thus energy, semiconductors, industrial, financials, etc. all need to not only hold, but to make the next moves higher.

Otherwise the rally most likely runs out of gas somewhere stuck in the February to August range. If that happens, what that likely means is the market has topped post-QE and is going to head lower and form some kind of larger, longer term base. The economy appears heading into some form of more serious slowdown just as the FOMC is set to hike rates. Big stock rallies in the fall back to major resistance. Not a great combination.

That said, we still likely get more of a yearend rally out of this, and you play what the market shows, not what you speculate might happen. That speculation helps you see moves occurring when they do versus scratching your head (or other anatomical parts) with that dull look of a caged animal on your face. You can act instead of wonder.

In any event, there are some great setups out there still, stocks that can really make us money if the move continues. That is necessary but not sufficient. The moves have to be made, and to us that means the small and midcaps have to get in on the action.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 5053.75

Resistance:
5100 from the April peak and early May peak
5164 is the June 2015 peak
5232 is the July high


Support:
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
The 10 day EMA at 4996
The June low at 4974
The 200 day SMA at 4936
4920 is the lower gap point from mid-October
4912 the mid-April China dip
4910 is the July 2015 closing low
The 50 day EMA at 4880
4837 is the late August 2015 rebound high
4828 is the late August peak
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
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 2014 low is giving way
4506 is the August 2015 selloff closing 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 intraday low


S&P 500: Closed at 2070.36

Resistance:
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

Support:
2062 is the January 2015 lower high
The 200 day SMA at 2062
2046 is the July 2015 closing low
2040 is the March 2015 closing low
The 50 day EMA at 2017
2011 is the September prior all-time high
1994 is the late August recovery peak
1991 is the July 2014 high
1989 is the last August closing high
1972 is the December 2014 low
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.
1872 is the September 2015 test low of the August low
1867 is the August 2015 low
1862 is the October 2014 closing low


Dow: Closed at 17,663.54

Resistance:
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
18,110 - 18,120 from December 2014, July 2015 peaks
18,289 from February 2015
18,351 from May 2015 and the all-time high


Support:
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 17,578
The 10 day EMA at 17,524
17,515 is the early July closing low
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
The 50 day EMA at 17,065
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,933 is the September 2015 recovery peak
16,736 is a prior all-time high from May 2014
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak.
16,665 is the late August 2015 closing high. Key, key level.
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
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
15,942 is the September 2015 low testing the August 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

October 26 - Monday
October 30 - Friday
Personal Income, September (8:30): 0.2% expected, 0.3% prior
Personal Spending, September (8:30): 0.2% expected, 0.4% prior
PCE Prices - Core, September (8:30): 0.1% expected, 0.1% prior
Employment Cost Index, Q3 (8:30): 0.5% expected, 0.2% prior
Chicago PMI, October (9:45): 49.0 expected, 48.7 prior
Michigan Sentiment - Final, October (10:00): 92.6 expected, 92.1 prior

November 2 - Monday
ISM Index, October (10:00): 50.0 expected, 50.2 prior
Construction Spendin, September (10:00): 0.4% expected, 0.7% prior

November 3 - Tuesday
Factory Orders, September (10:00): -0.9% expected, -1.7% prior
Auto Sales, October (17:00): 5.8M prior
Truck Sales, October (17:00): 8.9M prior

November 4 - Wednesday
MBA Mortgage Index, 10/31 (7:00): -3.5% prior
ADP Employment Chang, October (8:15): 180K expected, 200K prior
Trade Balance, September (8:30): -$43.0B expected, -$48.3B prior
ISM Services, October (10:00): 56.6 expected, 56.9 prior
Crude Inventories, 10/31 (10:30): 3.38M prior

November 5 - Thursday
Challenger Job Cuts, October (7:30): 93.2% prior
Initial Claims, 10/31 (8:30): 262K expected, 260K prior
Continuing Claims, 10/24 (8:30): 2145K expected, 2144K prior
Productivity-Prel, Q3 (8:30): -0.2% expected, 3.3% prior
Unit Labor Costs-Pre, Q3 (8:30): 2.2% expected, -1.4% prior
Natural Gas Inventor, 10/31 (10:30): 63 bcf prior

November 6 - Friday
Nonfarm Payrolls, October (8:30): 181K expected, 142K prior
Nonfarm Private Payr, October (8:30): 160K expected, 118K prior
Unemployment Rate, October (8:30): 5.1% expected, 5.1% prior
Hourly Earnings, October (8:30): 0.2% expected, 0.0% prior
Average Workweek, October (8:30): 34.5 expected, 34.5 prior
Consumer Credit, September (15:00): $18.0B expected, $16.0B prior

End part 1 of 3
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Saturday, October 24, 2015

The Daily, Part 1 of 3, 10-24-15

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10/24/2015 Investment House Report
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Targets hit: AMZN; ATHM; SIMO; SINA
Entry alerts: None issued
Trailing stops: KITE; YNDX
Stop alerts: ESV

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

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The Market Video is DIVIDED into component parts: Market Overview, Economy, Technical Summary, and the Next Session. Choose the segments you are interested in without having to search a longer video. Click on the link to the portion you wish to view.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
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TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
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********************************************************************

The REPORTS SCHEDULE is as follows:

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.

Access to all current videos will remain assessable each day using the play links in the reports.

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 SUMMARY

- Earnings, Chinese stimulus send already hot market soaring.
- Buybacks still help fuel stock rise, to wit GOOG's $5B repurchase.
- Very narrow rally pushes large cap indices back into old resistance.
- Small, midcap indices lag, but in position to throw in to the upside if money heads back their way.
- After the surge, waiting for the test to see how the large caps set up again. Can they run to the prior or new highs? Stimulus doesn't hurt.

Friday was a no-brainer, at least at the open. Thursday Mario Draghi helped ignite a new rally off the Wednesday selling with hints and winks about further ECB stimulus. Solid earnings from TXN, UA, CTXS, and even MCD didn't hurt.

Thursday evening AMZN, GOOG, and MSFT reported quite incredible earnings and gapped higher after hours. The morning was set to the upside based simply on those stocks' market caps in the various indices they are listed.

Then came China. There were hints and rumors all week, indeed those hints and rumors were credited for early week move higher. Friday morning they became reality as the PBOC announced a 25BP cut in the 1 year lending rate and a 50BP drop in reserve requirements. Very bold moves for an economy the Chinese say is in great shape. That news hit at 7:15ET and you can see the futures rocket higher on the news. Great news from earnings were goosed even more.

In 24 hours the market received a triumvirate of news stories that basically delivered all it could want. Europe talking more stimulus, US earnings showing solid beats (if you discount the plethora of top line misses), and the PBOC ratcheting up the stimulus meter. About the only thing left that would gin stocks even further is the Fed announcing second thoughts on its stimulus removal bias, opting for QE4.

But, the Fed doesn't need it. The market healed itself with a few big winners winning really big and other central banks having to do the dirty work.

SP500 22.64, 1.10%
NASDAQ 111.81, 2.27%
DJ30 157.54, 0.90%
SP400 0.49%
RUTX 1.00%
SOX 1.15%

VOLUME: NASDAQ +0.4%, NYSE -9%. Lower but still quite solid with NASDAQ above average and NYSE slipping back to average.

A/D: NYSE 1.4:1, NASDAQ 1.95:1. This is important. 1% gains on NYSE indices and less than 3:2 breadth. NASDAQ gaining 2+% and less than 2 stocks rising for every one declining. Indeed, NASDAQ new highs are at three year lows even as NASDAQ forges toward a new all-time high and NASDAQ 100 bumps at that level. The generals are leading, but no one is following right now.

Earnings outside the big three of the day were not bad. Well, perhaps outside of Friday that saw lots of top line misses again: PG, T, WHR, P. Some were really bad, missing the top and bottom line: VFC, SXK. STT missed the bottom line.

There are still some issues even with the earnings beats.

Jobs: MSFT lays off 1,000 more. That is one way to boost the bottom line.

Buybacks: GOOG goosed its move with a $5B buyback. UAL is buying $2B. Earlier UTX announced a $12B buyback; look how its stock has moved since the announcement.

There is no doubt: stimulus, buybacks work very well in driving stocks higher. They have done so for almost 6 years now even with dubious economic advances and as a few commentators on CNBC said this week, virtually no capital investment.

Indeed, buybacks have taken the place of capital investment. Recall my commentary in 2013, 2014 and early 2015 discussing the new forms of capital investment: dividends, and stock buy backs. Buybacks slowed some during mid-2015, but they are back big time here in Q4. And by gosh, so are stock prices. Beats having to actually produce sales.


'You don't know what it's like out there. I've worked in the private sector. They expect results.' Dan Aykroyd, 'Ghostbusters' (1984). Perhaps they should have worked on global warming research for the university? Unending supply of funds for keeping the belief alive.


THE MARKET

CHARTS

NASDAQ: On the back of AMZN, GOOG, MSFT, SBUX, CSCO, JNPR, BRCM and other large caps, NASDAQ gapped through the 200 day SMA and the September high. It gapped, traded up and down, closing just about where it opened, i.e. showing a doji. It is at the March peak that is coincident with gaps in June and July as well as consolidations in the mid-range of the March to July channel. A big move with some of its biggest components making it possible. The next question is whether there is anything left in the tank after such a grand move? In July both AMZN and GOOG reported strong earnings and gapped sharply higher. Both spent all their currency on that one day, basing for the next quarter. With only large caps really providing any of the upside strength, how much more can the index move? NASDAQ 100 gapped as well, gapping to its own doji just below the July all-time closing high. All kinds of strength in the big names, but it is mostly just the big names that are rallying with any kind of consistency. Just how much more can it move on any kind of news, good or bad? We will have to see how it reacts to the gap, but we do know GOOG likes to fill its big gaps. AMZN too.

SP500: Continued the Thursday break higher, gapping and clearing the 200 day SMA by a wide margin. SP500 is in the teeth of the March to August rounded top. Volume was lower and below average, not befitting such a strong move. Will it hit new highs? MACD is breaking out ahead of the stock. Will it make new highs on this move? Likely not before a test of the move to give it a rest and a clean shot at the highs. Many S&P stocks that have languished are making upside moves; if they continue to recover then SP500 has a good shot at those prior highs. Lots of beaten down stocks in the S&P 500 that have a long way to run to reach former highs. If they make a credible run at those highs, SP500 has room to move.

DJ30: Gapped and rallied through the 200 day SMA and into the lower reaches of its February to July trading range formed just before the August collapse. This moves DJ30 to the 17,600 range we saw as resistance, a 1600 point move from the late September low. As overbought now as it was oversold in late August. It will need to test this move and we want to see that test before getting deep into a lot of new upside.

SOX: Gapped and rallied as well, moving further through the 200 day SMA. Moving into some heavy resistance at this level on up to 697-700 (closed at 684). Big move here the past four weeks. As sharp as this move has been, SOX is not as overbought as it was oversold in the June to August selloff.

RUTX: Perhaps RUTX is setting up an inverted head and shoulders and will follow SP500, DJ30, and NASDAQ higher. It is bumping the same resistance the past three weeks at one of the upper gap points in the August selloff. If it can move through here it can rally to the 1200 level (closed at 1166) where the bottom fell out.

SP400: Very similar pattern to RUTX, working laterally the past three weeks, bumping the same gap point from the August selling. Definitely has room to run to near 1480 (closed at 1440).


LEADERSHIP

Big Names: Of course there were big gains. AMZN, GOOG, MSFT. SBUX, FB rallied to higher highs. NFLX tried to get off the mat. It was another strong day for large cap stocks.

NYSE large caps: UTX gapped a bit higher, extended after four upside sessions. MMM couldn't move through the 200 day SMA hit Thursday. IP continued its move higher off its inverted head and shoulders.

Energy: Took the day off after a decent week. CVX, HAL. Others still look good to move or continue moves, e.g. OIS, XEC.

Financial: MA and V resumed breakouts after a quick midweek test. Banks better with WFC moving up to the 200 day SMA in a two week run. JPM gapped through the 200 day. GS and MS are problematic: bumping resistance for more than a week, but using the time to try and set up an upside move.

Chips: A solid week. INTC still running upside after earnings, surpassing its May peak, its most recent prior high. XLNX faded at the June high. MLNX moves through the 200 day SMA. NXPI is making a nice test of its break through the 200 day SMA. AVGO gapped higher off the 200 day SMA.

China: Overall quite solid, and Chinese stimulus plans are not hurting. SINA gapped upside, continuing its move up the 10 day EMA off the lows. ATHM gapped upside, also climbing the 10 day EMA off the lows. VIPS broke higher on the week. CTRP posted a solid week.

Biotech: Showing some interesting recovery signs though the big names still have somewhat scary patterns. ANAC is bouncing off a gap fill and 200 day SMA test. CLVS has a tougher week but started to climb off the test. INFI enjoyed a strong week coming off the lows.


MARKET STATISTICS

NASDAQ
Stats: +111.81 points (+2.27%) to close at 5031.86
Volume: 2.108B (+0.4%)

Up Volume: 1.64B (+100M)
Down Volume: 523.72M (-79.05M)

A/D and Hi/Lo: Advancers led 1.95 to 1
Previous Session: Advancers led 1.75 to 1

New Highs: 140 (+52)
New Lows: 68 (-27)

S&P
Stats: +22.64 points (+1.1%) to close at 2075.15
NYSE Volume: 1B (-9.09%)

A/D and Hi/Lo: Advancers led 1.44 to 1
Previous Session: Advancers led 2.91 to 1

New Highs: 100 (+16)
New Lows: 57 (+4)

DJ30
Stats: +157.54 points (+0.9%) to close at 17646.7


SENTIMENT INDICATORS

VIX: 14.46; +0.01
VXN: 16.6; +0.97
VXO: 14.95; -0.13

Put/Call Ratio (CBOE): 0.77; -0.14

Recent history: 32 of 46 sessions at or over 1.0. Did its work for a bounce.


Bulls and Bears: Bulls move a point higher, bears move a tenth higher. They are now parting ways after crossing over and bulls falling below 35% (bullish) and bears above 35% (bullish). The work was done, the rally ensued.

Bulls: 37.5 versus 36.5

Bears: 31.3 versus 31.2

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: 37.5%
36.5% versus 30.2% versus 24.7% versus 26.0% versus 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: Bulls hit their lowest level since the 2008 and 2009 market plummet.

Bears: 31.3%
31.2% versus 34.4% versus 35.1% versus 30.2% versus 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. Done.


OTHER MARKETS

Bonds (10 year): 2.02% versus 2.03%

Historical: 2.03% versus 2.07% versus 2.03% versus 2.03% versus 1.98% versus 2.04% versus 2.10% versus 2.11% versus 2.07% versus 2.04% versus 1.98% versus 2.04% versus 2.05% versus 2.05% versus 2.09% versus 2.17% versus 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%


Euro/$: 1.1017 versus 1.1108. Plunging below the 200 day SMA versus the dollar as the selling post Mario Draghi comments continues.

Historical: 1.1108 versus 1.1339 versus 1.1347 versus 1.1320 versus 1.1351 versus 1.13793 versus 1.1387 versus 1.1387 versus 1.1352 versus 1.1358 versus 1.1289 versus 1.1250 versus 1.1269 versus 1.12106 versus 1.1190 versus 1.1167 versus 1.1254 versus 1.1254 versus 1.1206 versus 1.1223 versus 1.11715 versus 1.11325 versus 1.12004 versus 1.13010


DXY0: Still surging upside, clearing the September peaks. More for companies to grip about.

USD/JPY: 121.46 versus 120.71. Rallying up to the 200 day SMA, recovering from the August selloff and its first important test on this move.

Historical: 120.71 versus 119.925 versus 119.897 versus 119.52 versus 118.87 versus 119.66 versus 119.75 versus 119.89 versus 120.23 versus 119.88 versus 119.92 versus 120.22 versus 120.45 versus 119.91 versus 119.86 versus 120.07 versus 119.76 versus 119.64 versus 120.58 versus 120.30 versus 120.19 versus 120.00 versus 120.36 versus


Oil: 44.60, -0.89. Sold down all week, breaking through the 50 day SMA Friday. Now near support from the bottom of the September trading range.

Gold: 1162.80, -3.10. In a two week test of the October surge upside. Hit the 200 da and is testing that move.


MONDAY

Quite a week, quite a month of gains off the last September low. The past week erased the last of the August losses for the large cap indices. Again, it is the large caps that led the move higher and that pushed them to those highs.

The move leaves the large cap indices near term overbought. DJ30 is at next resistance in the February to July range. NASDAQ 100 is at the July high. SP500 has moved into the March to August range.

The small and midcaps are stalled at resistance below the September highs, leaving them far from overbought. Perhaps they can break through and follow the large cap indices. Money would have to rotate back their way to do that, and typically the year end rally waits until yearend to move back that way for the January effect.

So, do the big caps lead higher? From here? The market has enjoyed the ECB hinting at more stimulus announced at its December meeting, the big US 'brand name' stocks posted huge earnings and equally huge moves, and China has made good on its rumors and launched more stimulating measures. Again, can the news get any better for stocks outside the Fed announcing QE4? Even if that were the case, can it put in a further move given the good news saturation and commensurate run? Doubtful.

Thus the play is to let the large caps test this move and when they do, pick them up as the run toward yearend resumes. Play the run in the large caps while it is there.

At the same time we keep an eye on the midcaps and small caps. Sure the money rotated big to the large caps, but the midcaps and small caps have plenty of room to run to play catch up with the large caps.

Moreover . . . everything this year is moved up a month. The selloff started early, it finished with a second bottom in September. October was not the bottoming month as it usually is, finishing off the selling and putting in the bottom. Here it is still October and the indices have recaptured all of the August losses.

Thus, perhaps the January effect, now moving into December as seen the past few years, will come a month earlier as well. That doesn't really fit the calendar for funds and loading the portfolios with big names for year end, but we need to be ready because everything is moved forward this back half of the year.

Accordingly, we are going to look for large caps still in position to buy right now. We are going to watch for large caps to test the overbought condition next week. We are also watching for other areas that still look really good to move higher to be ready if money decides to move their way, to rotate once again, to spread out and broaden the rally.

And for some interesting counter plays, perhaps we play some gap fills on GOOG and AMZN as they filled their gaps after the July upside earnings moves. With the market so overdone on this move, that could make some good money on the downside just playing a test of a great move.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 5031.86

Resistance:
5042 is the March 2015 high
5100 form the April peak and early May peak
5164 is the June 2015 peak
5232 is the July high


Support:
5008.57 is the early March 2015 post-bear market high
The June low at 4974
The 200 day SMA at 4925
4912 the mid-April China dip
4910 is the July 2015 closing low
The 50 day EMA at 4840
4837 is the late August 2015 rebound high
4828 is the late August peak
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
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 2014 low is giving way
4506 is the August 2015 selloff closing 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 intraday low


S&P 500: Closed at 2075.15

Resistance:
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

Support:
2062 is the January 2015 lower high
The 200 day SMA at 2060
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2011 is the September prior all-time high
The 50 day EMA at 2003
1994 is the late August recovery peak
1991 is the July 2014 high
1989 is the last August closing high
1972 is the December 2014 low
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.
1872 is the September 2015 test low of the August low
1867 is the August 2015 low
1862 is the October 2014 closing low


Dow: Closed at 17,646.70

Resistance:
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
18,110 - 18,120 from December 2014, July 2015 peaks
18,289 from February 2015
18,351 from May 2015 and the all-time high


Support:
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 17,574
17,515 is the early July closing low
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
16,933 is the September 2015 recovery peak
The 50 day EMA at 16,898
16,736 is a prior all-time high from May 2014
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak.
16,665 is the late August 2015 closing high. Key, key level.
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
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
15,942 is the September 2015 low testing the August 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

October 26 - Monday
New Home Sales, September (10:00): 550K expected, 552K prior

October 27 - Tuesday
Durable Orders, September (8:30): -1.3% expected, -2.3% prior (revised from -2.0%)
Durable Goods -ex transports, September (8:30): 0.2% expected, -0.2% prior (revised from 0.0%)
Case-Shiller 20-city, August (9:00): 5.0% expected, 5.0% prior
Consumer Confidence, October (10:00): 102.5 expected, 103.0 prior

October 28 - Wednesday
MBA Mortgage Index, 10/24 (7:00): 11.8% prior
Crude Inventories, 10/24 (10:30): 8.028M prior
FOMC Rate Decision, October (14:00): 0.25% expected, 0.25% prior

October 29 - Thursday
Initial Claims, 10/24 (8:30): 264K expected, 259K prior
Continuing Claims, 10/17 (8:30): 2185K expected, 2170K prior
GDP-Adv., Q3 (8:30): 1.6% expected, 3.9% prior
Chain Deflator-Adv., Q3 (8:30): 1.3% expected, 2.1% prior
Pending Home Sales, September (10:00): 0.6% expected, -1.4% prior
Natural Gas Inventories, 10/24 (10:30): 81 bcf prior

October 30 - Friday
Personal Income, September (8:30): 0.2% expected, 0.3% prior
Personal Spending, September (8:30): 0.2% expected, 0.4% prior
PCE Prices - Core, September (8:30): 0.1% expected, 0.1% prior
Employment Cost Index, Q3 (8:30): 0.5% expected, 0.2% prior
Chicago PMI, October (9:45): 49.0 expected, 48.7 prior
Michigan Sentiment - Final, October (10:00): 92.6 expected, 92.1 prior

End part 1 of 3
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Saturday, October 17, 2015

The Daily, Part 1 of 3, 10-17-15

* * * *
10/17/2015 Investment House Report
* * * *

Targets hit: None issued
Entry alerts: CTRP; SINA; TWTR; VIPS
Trailing stops: None issued
Stop alerts: None issued

The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the alert service you can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

********************************************************************
The Market Video is DIVIDED into component parts: Market Overview, Economy, Technical Summary, and the Next Session. Choose the segments you are interested in without having to search a longer video. Click on the link to the portion you wish to view.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE Economic SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************

The REPORTS SCHEDULE is as follows:

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.

Access to all current videos will remain assessable each day using the play links in the reports.

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 SUMMARY

- Quiet expiration Friday, but the indices add to the Thursday rebound from the test.
- Lots of top line earnings misses yet again to start the season.
- Economic data less than stellar yet again.
- Indices already looking at the pre-August consolidation ranges as next resistance.
- Leadership still developing and stepping up.
- Earnings dominate the landscape, making new entries a bit more difficult.

Friday was up but anticlimactic, the tag to the TV show where the main story is over and actors try to leave you with a smile at the show's end.

Indeed, the substantive moves in terms of the technical pattern occurred early in the week as the indices tested the rally off the second low in the double bottom Tuesday and Wednesday, then bolted back upside Thursday. SP500 held the test of the September closing peak, successfully testing from that position of strength discussed last week as it had broken resistance and then used former resistance as support. Ditto DJ30. SOX foreshadowed it all, however, with the Friday to Tuesday 1-2-3 test then the breakout move Wednesday as M&A fever swept the sector. Once again it would seem, SOX set the market direction, but the important point is all the indices followed suit.

That left Friday, even though it was expiration, with cleanup duty for the week. The gains were modest but they were gains, continuing the Thursday rebound that marked a successful test of the rally from the second leg of the double bottom. After the test and Wednesday rebound, the ability to continue upside is sauce for the goose.

SP500 9.25, 0.46%
NASDAQ 16.59, 0.34%
DJ30 74.22, 0.43%
SP400 0.04%
RUTX -0.04%
SOX 0.11%

VOLUME: NYSE +7%, NASDAQ -7%. Rather tame trade for expiration Friday.

A/D: NYSE 1.5:1, NASDAQ -1.1:1. After excellent breadth on the Thursday surge, taking a day off to end the week. Matches the action in the indices.

SP500 and NASDAQ 100 led the gains, each with 0.46% moves while DJ30 was right there, continuing its rebound from the test as well. SOX, SP400, RUTX all slowed the move. SOX was already out in front so a rest is fine. SP400 and RUTX continue to lag the moves overall. All in all, not bad action as the indices continue up off of the tests.


NEWS/ECONOMY

The week was full of . . . economic data and the start of earning season. Not much of it was positive, and more and more the numbers are recessionary in nature. Philly Fed negative, Empire Manufacturing negative, and that is not the first negative read. Empire three straight months, Philly down two months in a row, the first back to back losses since January and February 2013. Dramatic turns lower in New Orders and Employment, both flipping from solidly positive to negative.


Industrial Production, September: -0.2% versus -0.2% expected versus -0.1% August (from -0.4%)

Down 7 of 9 months for 2015.

Capacity Utilization, September: 77.5 versus 77.4 expected versus 77.8 August (from 77.6). At least this beat expectations.


JOLTS: A favorite of Yellen's. Job openings fell to 5.37M from 5.667M in August, and August was written down from 5.74M.

That pushed openings down to the lowest level since 2009!

Again, the economic data continues to erode, in many cases to levels not seen since the market started rallying in 2009 and indeed back to 2008 in some cases. It is no wonder earnings are not blowout.

Earnings: again a season starts with plenty of bottom line beats but also plenty of top line misses. GE, HON, WYNN, SLB, XLNX, PNC, JNJ, CSX.

There were some beats: BAC, INTC, DAL, AMD.

But surprising complete misses on the bottom line: JPM, MAT, STI, GS, NFLX.

A rather dismal report card thus far. Can only get better, right? Not necessarily, but you would think with all of the positive commentary from the financial stations that earnings would be grand. But, that is all fluff. The big names have, thanks to the old stimulus, the ACA, the EPA, and hundreds of thousands of new regulations, a massive competitive advantage and thus make the money. Things are not so great they are just printing money, but good enough where they can spend $10B on a stock buyback in the case of JNJ or $3B for HPQ. High times indeed.


THE MARKET

CHARTS

Not a lot of excitement, just a modest continuation of the Thursday break higher (Wednesday for SOX). That works, however, avoiding an immediate reversal. Monday will tell more of the tale, but it was a solid week in the test and then the renewed move upside.

SP500: Solid advance on another session of rising volume. Strong break higher Thursday took SP500 past the September peak, adding to that move Friday. Now SP500 has to start thinking about the March to August range that led to the August plunge. First resistance is at the March low (2039) and the July low (2044). SP500 closed at 2033, so the bottom of the range is rapidly becoming a reality. That is the life of a recovering anything, right? One obstacle after another.

DJ30: Held on to the gains the longest, shook off the Wednesday sacking from JPM and friends, nice solid rebound on increasing trade Thursday and Friday to close at new recovery highs. That lands DJ30 at the January low, the start of the next phase of resistance in the recovery. 17,350 is next from August, and after that 17,600 is a serious level to contend with. Thus far handling the resistance with volume.

NASDAQ: Solid moves as well though Friday volume was lower. NASDAQ is now at the September closing high and is closing in on the May and July lows that are roughly coincident with the 200 day SMA from 4900 to 4920 (200 day MA).

SOX: Modest Friday gain, but SOX started the move Wednesday, a day ahead of the other indices. So it took a day off Friday. On the breakout it cleared the September peak as well as broke into and to the upper range of the July/August lateral consolidation. Very solid move.

RUTX: Flat Friday after a solid Thursday surge. RUTX did not clear the prior week highs and it is still below the September peak. It is working on it, but it is also very much into following versus leading.

SP400: Similar to RUTX, the midcaps slept through expiration. Still below last week's highs and the September closing high, following along.


LEADERSHIP

Big Names: Some impressive moves on the week and on Friday. AMZN posted its second session in its breakout move. PCLN continued to recover from the Wednesday flop to the 10 day EMA. GOOG was flat Friday but a very solid week of gains. FB is closing in on the July peak. NFLX struggled for a second day post-earnings.

Social: Improving as TWTR broke higher after Balmer said he had taken a big stake. FB worked toward its old high. GRUB moving well. LNKD, so so.

Tech: Big names are working, e.g. MSFT, INTC, CSCO, JNPR.

China: Nice recovery after a Wednesday hiccup. ATHM, CTRP, SINA, YNDX.

Chips: Strong week. XLNX, FCS, EXAR. Many solid moves.

Telecom: Some solid advances again with SWIR, TSYS, MBT all looking solid.

Energy: Slowed a bit Friday but that was the norm. Still some good moves, e.g. CVX. Still some great setups, e.g. ESV, WLL, OIS.

Retail: Some interesting patterns trying to shape up what we will watch, e.g. DDS, W, RL.


MARKET STATISTICS

NASDAQ
Stats: +16.59 points (+0.34%) to close at 4886.69
Volume: 1.75B (-7.36%)

Up Volume: 925.37M (-604.63M)
Down Volume: 890.4M (+481.96M)

A/D and Hi/Lo: Decliners led 1.08 to 1
Previous Session: Advancers led 4.52 to 1

New Highs: 57 (+10)
New Lows: 30 (-20)

S&P
Stats: +9.25 points (+0.46%) to close at 2033.11
NYSE Volume: 1B (+7.15%)

A/D and Hi/Lo: Advancers led 1.46 to 1
Previous Session: Advancers led 4.33 to 1

New Highs: 53 (+18)
New Lows: 18 (-10)

DJ30
Stats: +74.22 points (+0.43%) to close at 17215.97


SENTIMENT INDICATORS

The sentiment indicators are backing off as they should. They did their job as they spiked in late August. The market set up the technical pattern afterward, and voila, a breakout.

Now there is STILL a very negative sentiment from commentators on the financial stations. They feel the move is over. While I don't necessarily buy into the market making new highs, the pattern is good and there is still leadership showing up. That combination speaks to more upside.

VIX: 15.05; -1
VXN: 17.2; -0.87
VXO: 15.08; -1.09

Put/Call Ratio (CBOE): 0.87; -0.24

Recent history: 32 of 41 sessions at or over 1.0. Did its work for a bounce.


Bulls and Bears: No longer a crossover, but for almost a month they were crossed and the signal was given as bulls fell below 35% and bears moved over 35%. Again, the work has been done here.

Bulls: 36.5 versus 30.2 versus 24.7

Bears: 31.2 versus 34.4% versus 35.1%

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: 36.5%
30.2% versus 24.7% versus 26.0% versus 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: 31.2%
34.4% versus 35.1% versus 30.2% versus 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. Done.


OTHER MARKETS

Bonds (10 year): 2.03% versus 2.03%. Bounced on the week with the lower economic data, but stalling out below the 200 day SMA Thursday and Friday.

Historical: 2.03% versus 1.98% versus 2.04% versus 2.10% versus 2.11% versus 2.07% versus 2.04% versus 1.98% versus 2.04% versus 2.05% versus 2.05% versus 2.09% versus 2.17% versus 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%


Euro/$: 1.1351 versus 1.13793. Euro faded a second session after surging through Wednesday.

Historical: 1.13793 versus 1.1387 versus 1.1387 versus 1.1352 versus 1.1358 versus 1.1289 versus 1.1250 versus 1.1269 versus 1.12106 versus 1.1190 versus 1.1167 versus 1.1254 versus 1.1254 versus 1.1206 versus 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


DXY0: Dollar bouncing for a second session, finding some support at the June and September lows.

USD/JPY: 119.48 versus 118.87. Dollar rebounding off the bottom of its September/October range.

Historical: 118.87 versus 119.66 versus 119.75 versus 119.89 versus 120.23 versus 119.88 versus 119.92 versus 120.22 versus 120.45 versus 119.91 versus 119.86 versus 120.07 versus 119.76 versus 119.64 versus 120.58 versus 120.30 versus 120.19 versus 120.00 versus 120.36 versus


Oil: 47.73, +0.87. Sold all week, reversed Thursday, added a bit of upside Friday.

Gold: 1177.40, -5.60. Broke through the 200 day SMA Wednesday, tested back to that level on the Friday close. No fear of a rate hike here.


MONDAY

Yes there will be data this coming week, but the economic variety takes a back seat to the earnings reports that will flood the market. Of course there is the overriding factor: the Fed. Some 47 speeches, interviews, and appearances are scheduled for next week. Shocking, and as noted Thursday night, there are too many chefs in the Fed's kitchen, too many Fed members thinking of fat salaries post-Fed, pontificating to whoever will listen so as to bolster their credentials.

All of this over the backdrop of a textbook fall pattern. Massive selloff in August spiked negative sentiment and internals. A rebound, not to an ascending triangle as that one fellow on Fast Money called it but an upward wedge that should break lower, a tumble back down to test the lows, then the late September/October rally. SP500 and DJ30 broke past the September recovery peak, tested, then resumed the move, notching higher recovery highs. Classic action in every respect.

Leadership is still present with other sectors such as energy, telecom, tech, chips all stepping in to support the move. Retail looks as if it might be ready to turn the corner and rally again after punting leadership ahead of the August selloff.

The point: there is still leadership setting up to help keep the move going.

As for Monday, we have some new plays to take advantage of these areas coming to the fore, but it is also the heart of earnings season, and that limits what we can do. While we don't mind holding some positions into earnings, as NFLX shows that can have its pitfalls. We prefer to play up to and after results, as we have a more controlled setting.

Thus we have some plays that we will watch for opportunity but factor in the time until earnings. Many sport earnings announcements in the first and second week of November; enough room to play, just know what you expect out of any particular position.

On some more upside, in addition to new positions, we will be looking at banking some gain, e.g. GOOG, AMZN. The market is coming off a test of the September/October run and is looking good. Of course we want to let this run work as much as it will for us, then bank some gain.

Definitely want to take gain when it is there on a continued move as the indices will start to bump next resistance. For SP500, DJ30, SOX that is the prior trading ranges before the August crash. For RUTX, SP400, that is the September, even last week's peaks. Resistance is not that far ahead, so yes, worth taking some more gain as it shows up.

Not that exciting, not that insightful I know, but the insight, I think you will agree, came in recognizing what was setting up starting with the internals and sentiment spiking negatively in August, and then keeping the bigger picture in focus of the textbook setup taking place when so many were panicked, including that bald guy on CNBC who, until this past week, finally said things looked better than he thought. Remember, he said the first dip after the August selloff was a successful test. Then he threw in the towel on the second decline. Now, after a big rally off of that September low where we picked up PCLN, AMZN, and friends, he is feeling more sanguine (his work from last week).

It happens. That is why I always say you have to look at what the stocks are telling you and act accordingly versus getting pulled back and forth by market swings. Keep an eye on the big picture (index patterns, internals, sentiment, time of year) but focus like a hawk on leadership and potential leadership.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4886.69

Resistance:
4910 is the July 2015 closing low
4912 the mid-April China dip
The 200 day SMA at 4919
The June low at 4974
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high

Support:
4837 is the late August 2015 rebound high
The March lows at 4843 and 4825
4828 is the late August peak
4815 is the December 2014 prior market peak
4811 is the November 2014 peak (intraday)
The 50 day SMA at 4808
4774 is the January high
4751 is the January 2015 lower 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 2014 low is giving way
4506 is the August 2015 selloff closing 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 intraday low


S&P 500: Closed at 2033.11

Resistance:
2040 is the March 2015 closing low
2046 is the July 2015 closing low
The 200 day SMA at 2060
2062 is the January 2015 lower high
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

Support:
2011 is the September prior all-time high
1994 is the late August recovery peak
1991 is the July 2014 high
The 50 day SMA at 1985
1989 is the last August closing high
1972 is the December 2014 low
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.
1872 is the September 2015 test low of the August low
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 17,215.97

Resistance:
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 17,582
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:
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
16,933 is the September 2015 recovery peak
The 50 day EMA at 16,832
16,736 is a prior all-time high from May 2014
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak.
16,665 is the late August 2015 closing high. Key, key level.
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
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
15,942 is the September 2015 low testing the August 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

October 13 - Tuesday
Treasury Budget, September (14:00): $95.0B expected, $105.8B prior

October 14 - Wednesday
MBA Mortgage Index, 10/10 (7:00): -27.6% actual versus 25.5% prior
PPI, September (8:30): -0.5% actual versus -0.3% expected, 0.0% prior
Core PPI, September (8:30): -0.3% actual versus 0.1% expected, 0.3% prior
Retail Sales, September (8:30): 0.1% actual versus 0.2% expected, 0.0% prior (revised from 0.2%)
Retail Sales ex-auto, September (8:30): -0.3% actual versus -0.1% expected, -0.1% prior (revised from 0.1%)
Business Inventories, August (10:00): 0.0% actual versus 0.1% expected, 0.0% prior (revised from 0.1%)

October 15 - Thursday
Continuing Claims, 10/03 (8:30): 2204K prior
Initial Claims, 10/10 (8:30): 255K actual versus 269K expected, 262K prior (revised from 263K)
Continuing Claims, 10/03 (8:30): 2158K actual versus 2200K expected, 2208K prior (revised from 2204K)
CPI, September (8:30): -0.2% actual versus -0.2% expected, -0.1% prior
Core CPI, September (8:30): 0.2% actual versus 0.1% expected, 0.1% prior
Empire Manufacturing, October (8:30): -11.4 actual versus -8.0 expected, -14.7 prior
Philadelphia Fed, October (10:00): -4.5 actual versus -2.5 expected, -6.0 prior
Natural Gas Inventor, 10/10 (10:30): 100 bcf actual versus 95 bcf prior
Crude Inventories, 10/10 (11:00): 3.073M prior
Treasury Budget, September (11:00): $95.0B expected, $105.8B prior
Crude Inventories, 10/10 (11:00): 7.562M actual versus 3.073M prior
Treasury Budget, September (15:30): $91.1B actual versus $95.0B expected, $105.8B prior

October 16 - Friday
Industrial Production, September (9:15): -0.2% actual versus -0.2% expected, -0.1% prior (revised from -0.4%)
Capacity Utilization, September (9:15): 77.5% actual versus 77.4% expected, 77.8% prior (revised from 77.6%)
JOLTS - Job Openings, August (10:00): 5.370M actual versus 5.668M prior (revised from 5.753M)
Michigan Sentiment, October (10:00): 92.1 actual versus 88.4 expected, 87.2 prior
Net Long-Term TIC Fl, August (16:00): $20.4B actual versus $7.7B prior (no revisions)

October 19 - Monday
NAHB Housing Market Survey, October (10:00): 62 expected, 62 prior

October 20 - Tuesday
Building Permits, September (8:30): 1170K prior
Housing Starts, September (8:30): 1150K expected, 1126K prior
Building Permits, September (8:30): 1170K expected, 1170K prior

October 21 - Wednesday
MBA Mortgage Index, 10/17 (7:00): -27.6% prior
Crude Inventories, 10/17 (10:30): 7.562M prior

October 22 - Thursday
Initial Claims, 10/17 (8:30): 265K expected,
Continuing Claims, 10/10 (8:30): 2185K expected,
FHFA Housing Price Index, August (9:00): 0.6% prior
Existing Home Sales, September (10:00): 5.38M expected, 5.31M prior
Leading Indicators, September (10:00): -0.1% expected, 0.1% prior
Natural Gas Inventories, 10/17 (10:30): 100 bcf prior

End part 1 of 3
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Saturday, October 10, 2015

The Daily, Part 1 of 3, 10-10-15

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10/10/2015 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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The REPORTS SCHEDULE is as follows:

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.

Access to all current videos will remain assessable each day using the play links in the reports.

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 SUMMARY

- Dull session brings out the calls of the rally's end. What is new?
- Indices show doji after a solid week. Pretty normal.
- Fed's illogic continues. Along with the rest of the government.
- Leaders holding in well. Early leaders test, newcomers still rallying, others ready to go again.
- Don't read too much into the Friday move, be patient and let the market work.

The important thing about Friday is not to read too much into it. The next important item is not to get in a hurry, i.e. let the moves work. That includes the rallies as well as any tests. Thus a slower session should not get you flustered or anticipating collapse. Believe me, after Friday there were many talking 'move over.'

Of course with the Fed and its merry men and women are not helping maintain calm, and thus that contributes to the unease as to the recovery ending. Ironic, isn't it, that a body that was envisioned as a stabilizing force and has moved toward transparency has actually promoted anxiety, skewed asset allocations in response, and left average citizens as well as the professionals in the dark as to its path. I mean, if you draw red lines in the sand in terms of when you will act on monetary policy but then time and again find excuses to ignore them or even flat out say one thing and do another, well, you are hardly transparent. Of course, that is the state of our government is it not? Most transparent administration ever. Red line in the sand on Syria. Spying. On everyone. Purported enforcement of immigration laws but at the same time quietly releasing most. Standard operating procedure to say one thing, do another.

Anyway, Mr. Evans Friday made a rather interesting comment, some would say absurd. Of course when the Fed states in once sentence foreign economic activity has no bearing on its decisions and then says it did have a bearing on its decision, I suppose his statement was not that abnormal. Anyway, Evans, stated that the economy was doing much better. Okay, that is an opinion, and surely as a Fed expert he has the empirical evidence to back up the statement, e.g. employment, hours worked, capital investment, new business startups, etc.


'What? The Dot Plot is not hard economic data? Really?' Charles Evans

Or not. Instead of hard data, Evans referenced the Fed's own 'dot plot' chart. The dot plot chart is nothing more than the Fed's view of Evans using the Fed's 'dot plot' chart, its own creation of what the Fed, by plotting the beliefs of its individual members, thinks the appropriate Fed policy should be and where they are in getting there. So, to be clear, Evans says the economy is just fine because the Fed governors think they have the right policy in place. Right policy, smart men and women set the policy, so everything must be fine. This logic is kind of like a doctor judging the level of an illness based upon how much medicine the doctor decides to give. There is a tangential relationship, but not a cause and effect relationship.

With that kind of 'logic' from some of the most respected people in our governance (and they do govern whether we admit it or not) is there any wonder so many people have lost a bit of faith in our institutions and that outsiders are leading or are rapidly catching up to what are considered 'establishment' candidates? The deliberation for a new Speaker of the House of Representatives is called a circus, something you would see in a banana republic. But who is saying that? The establishment desperately attempting to hold onto the power it has.


An always pleasant Representative Peter King calls the House a banana republic.

The proof? When the establishment heir apparent withdrew for some specified and some speculative issues, instead of proceeding with the election between those who were left in the running as would typically be the case, the current speaker took all of his marbles and went home, calling off the election.


The Pope made me do it.

An elected, deliberative body deliberating to select its leader, but not allowed to deliberate, indeed not allowed to vote. An amazing collapse of democracy brought about by the establishment yet blamed on those who would dare not submit to the establishment's will. Frightening how many times this has occurred in history and reported in textbooks, but even more frightening is that it is not called for what it is as it happens in our time.


The Session

What about the Friday session? Futures were lower, moved higher, dipped toward the open. That was regular session as well: lower then higher followed by a dip into midsession. A modest rally late pushed the indices back to positive.

SP500 1.46, 0.07%
NASDAQ 19.68, 0.41%
DJ30 33.74, 0.20%
SP400 0.16%
RUTX 0.18%
SOX -0.83%

VOLUME: NYSE flat; NASDAQ -11%. Slower Friday trade on smaller gains. The moves are slowing and volume is slowing. Just a bit.

A/D: NYSE 1.3:1, NASDAQ 1.2:1


After a week of solid moves, Friday showed rather modest gains with doji on the index charts. Lower volume to boot. Definitely a slowing in momentum. Okay so it slows? That does not axiomatically result in a collapse. Certainly the market rebound could suddenly die. It just would have to change its character rapidly if Friday was an indication of impending demise.

Oh, but Jon, this move is a result of massive short covering. BAC concluded the rally was all short covering given big inflows to money market funds but cash levels remaining high even as the stock market rallied.

Okay, so it is short covering. No doubt that is a good part of it as stocks that were hammered lower rebound without any real bases. News flash: ALL rallies start with short covering, particularly after massive selloffs in a violent double bottom. I am not saying that this rally is a surefire run to new highs, but it is just a historical fact that rallies following big selloffs start with short covering. It is a non sequitur, however, in terms rally's life.

Sure there are oversold stocks bouncing from non-patterns, a sure sign of short covering. On the other hand, many others ARE bouncing from patterns, trendlines, key moving averages, etc. There were early leaders that started the move, a next wave that fell in behind them as they initially paused, and others are still setting up to rally and try to become leaders themselves. Maybe there won't be enough to keep the move going, but the action is helping more stocks setup the upside patterns, and if the market decides to test off of the Friday pause versus roll over, that action will help other stocks set up their upside patterns as well.

In sum, sure Friday was a slower day after a nine session recovery off the September lows. That alone, however, does not mean the rally is over. Indeed, with SP500, DJ30, SP400 over the September peaks, they are in a good position to test and important break to a higher high, testing from a position of strength as we like to say.

Thus, back to the point: let's not over think this or make it complicated. Everything set up as it should: big selloff in August accompanies by massive negative spikes in sentiment and internals. A rebound to test, then a second leg lower with SP500, SP400 matching the prior lows. Even as they made those dips, MACD was higher, some key leaders held trendlines and good patterns (e.g. PCLN, AMZN, NFLX) and led the charge. Everyone else followed. The move fanned out with more stocks showing good patterns and even as the market acts as if it wants to test (rollover as some suggest), several are working laterally in tight consolidations, ready to break higher again after their first moves.

That does not suggest imminent collapse. It can happen, it always can. But the probabilities suggest that the market tries to test and tries another move. Perhaps it wants to see some more earnings come out as a new catalyst, perhaps it does not care. The market rallied, broke some key resistance, is set to test. This test, a week later than anticipated (it looked as if it would start midweek this past week), will tell the tale.

Sure it doesn't make sense with a rather bad economy below the headlines (and the upper tier of wealth) as well as the rest of the world spiraling lower. Perhaps that will drag stocks lower. If nothing changes, I have no doubt that will happen. Indeed, perhaps the break lower was simply the start of a bear market after the indices put in rounded tops after QE's end in October.

Nothing as of Friday, however, suggested the current double bottom move is mover.

Let it test, let it show what it plans next. We have bought some good positions, several are delivering nice gains we banked the past week, and others look prepped to move higher. As long as they look solid and likewise the overall market, we let them work.


THE MARKET

CHARTS

SP500: Looked as if SP500 might start to test Tuesday as it posted a modest loss, but it turned and rallied Wednesday and Thursday, clearing the late August and September peaks. Friday a doji that touched the September intraday high. Eight of nine sessions upside, breaking key resistance. Perhaps this time it will test. As noted earlier, however, nothing suggests anything more than a test. Indeed, MACD broke to a higher high with the move (topping the levels at the August levels pre-selloff).

DJ30: Modest gain on below average trade. Also up eight of nine sessions, MACD breakout as DJ30 broke over the September recovery highs. If it tests, it tests from a position of strength.

NASDAQ: Up 7 of 8 sessions, adding to the gains Friday. Slow session, first below average volume in more than two weeks, bumping the 50 day SMA on the close. Just made it past the late August peak but still well below the September high that bumped the July low on that initial strong move off the August selling. Not leading, but it has some of the big name leaders that are helping drive it.

SP400: Added a bit more Friday to the break over the September closing peak. Similar to SP500, just not as much distance on that high. Same pattern, blistering move higher off the lows, not bad at all.

RUTX: Moved just past the 50 day EMA, SMA after testing them Thursday. Small step after a strong surge off the September low. Still below the September peak, but started at a lower low than the other indices. Heck of a move, now an important test.

SOX: No clear break through the September recovery highs as SOX again tests the late July/early August consolidation as it did in September. Not bad action, and MACD has already broken out ahead of the stock move; that positive divergence suggests SOX' upside momentum remains. Thus, after a test of the last move, a test that looks as if it started Thursday, SOX could follow that MACD higher.


LEADERSHIP

Big Names: NFLX enjoyed a good week, rallying, testing, surging. Friday a bit off. GOOG broke higher, tested Wednesday to Friday, moving up Friday and looking solid. PCLN continued upside Friday, making it 5 for 5 on the week and 8 straight upside sessions. AMZN tested on the week after a Monday upside gap. Good test, moving up Friday. SBUX fought off any selling, rallied to a new high Friday. CMG is fighting off the sellers, forming a base. MSFT rallied to the July/August peaks.

Energy: Most took a breather Friday, showing doji similar to the indices. Nonetheless, some great continued moved on the week with may moving off bottoming patterns such as SN, XEC, APC, CVX.

Financials: Still struggling. JPM up but no volume. BAC up on the wee but hit the trendline and is stalling.

China: ATHM still ready for the next move. SINA enjoyed a solid week, testing Thursday and Friday. SOHU looks interesting. CTRP tested a bit further. VIPS tested, looks good.

Industrial: CAT, CMI look ready to test good moves higher. UTX continued upside, moving through the 50 day EMA.

Homebuilders: Rallied but are at a key resistance level, e.g. PHM, TOL.

Software: VDSI started strong, nice test. RHT surging late week. BLKB broke higher on the week. CALD was volatile, but after selling a Monday move, a solid upside break Friday.

Telecom: TSYS rallying nicely Friday off a test. ARRS breaking over a handle. MBT making a nice test.

Retail: Some renewed moves. COST, TJX. LB broke to a new high.

Chips: Some strong weeks here as well. XLNX, MCHP, FORM.


MARKET STATISTICS

NASDAQ
Stats: +19.68 points (+0.41%) to close at 4830.47
Volume: 1.728B (-10.59%)

Up Volume: 1.02B (-240M)
Down Volume: 746.24M (+50.04M)

A/D and Hi/Lo: Advancers led 1.21 to 1
Previous Session: Advancers led 1.83 to 1

New Highs: 72 (+5)
New Lows: 37 (-1)

S&P
Stats: +1.46 points (+0.07%) to close at 2014.89
NYSE Volume: 895M (0%)

A/D and Hi/Lo: Advancers led 1.29 to 1
Previous Session: Advancers led 3.53 to 1

New Highs: 54 (-1)
New Lows: 12 (0)

DJ30
Stats: +33.74 points (+0.2%) to close at 17084.49


SENTIMENT INDICATORS

VIX: 17.08; -0.34
VXN: 20.5; -0.41
VXO: 16.67; -0.93

Put/Call Ratio (CBOE): 0.87; -0.06

Recent history: 31 of 37 sessions at or over 1.0. Has done its work for a bounce.


Bulls and Bears: Three weeks back the bulls and bears crossed, and two weeks back bulls hit a new low on this selling, the lowest since 2008, while bears moved over 35%. The past week they backtracked the moves, but remain crossed. The work has been done here.

Bulls: 30.2 versus 24.7

Bears: 34.4% versus 35.1%

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: 30.2%
24.7% versus 26.0% versus 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: 34.4%
35.1% versus 30.2% versus 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. Done.


OTHER MARKETS

Bonds (10 year): 2.10% versus 2.11%. Bonds sold on the week, holding at the 50 day EMA on the Friday close. Fed is said to have taken a rate hike off the table with those Thursday FOMC minutes, but bonds don't seem to think so.

Historical: 2.11% versus 2.07% versus 2.04% versus 1.98% versus 2.04% versus 2.05% versus 2.05% versus 2.09% versus 2.17% versus 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/$: 1.1358 versus 1.1289. Euro took off Friday, now challenging the mid-September high.

Historical: 1.1289 versus 1.1250 versus 1.1269 versus 1.12106 versus 1.1190 versus 1.1167 versus 1.1254 versus 1.1254 versus 1.1206 versus 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


DXY0: Lots of talk about the stronger dollar impacting results and holding down US exports, but the dollar is not all that strong in terms of where it has been for 8 months.

USD/JPY: 120.23 versus 119.88. Dollar still in the same 7 week lateral range.

Historical: 119.88 versus 119.92 versus 120.22 versus 120.45 versus 119.91 versus 119.86 versus 120.07 versus 119.76 versus 119.64 versus 120.58 versus 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


Oil: 49.49, +0.06. Up 9.1% for the week. Surged to the 200 day SMA Friday, backed off most of that gain. Leading energy stocks higher, now at an important level to pause a bit.

Gold: 1144.30, -4.40. Testing the break higher over the past week after hitting the last September high.


MONDAY

The shift to earnings begins this coming week. A smattering of announcements the past week were less than encouraging, but other seasons had slow starts then fast finishes. It all depends upon investor mood. I have talked of it before, how the market's mood colors how it reacts to news. Negative mood and it doesn't really matter what the story is. Positive mood and the market puts its head down and rallies through all news.

Mood is improved of late, and that can serve the upside well even through a test of the two week rally off the second low. Of course, nothing helps quite like some solid earnings from big names, and NFLX announces this coming Wednesday after the close.

Earnings will perhaps be a catalyst for the market to test. Two weeks upside off the September second lows, clearing resistance on SP500, SP400, DJ30, perfect setup for a test. As noted in the technical picture, the technical action is quite positive, not showing much wear and tear. Further, leadership remains decent enough. Thus at this juncture it would appear a test versus a rollover is more likely, short covering this past week or not.

Patience and let the test play out if it will. A test sets up new buys for leading stocks. There are already stocks ready to move, however, and it is possible the market does not stop, that they drive it higher. More likely: there is a test but these stocks, as they are taking some of the lead, can move higher even as a next wave of leadership while some market areas test.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4830.47

Resistance:
The 50 day SMA at 4835
4828 is the late August peak
The March lows at 4843 and 4825
4837 is the late August 2015 rebound high
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

Support:
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
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 2014 low is giving way
4506 is the August 2015 selloff closing 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 intraday low


S&P 500: Closed at 2014.89

Resistance:
2046 is the July 2015 closing low
2062 is the January 2015 lower high
The 200 day SMA at 2062
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

Support:
2011 is the September prior all-time high
1994 is the late August recovery peak
The 50 day SMA at 1993
1991 is the July 2014 high
1989 is the last August closing high
1972 is the December 2014 low
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.
1872 is the September 2015 test low of the August low
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 17,084.49

Resistance:
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 17,604
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:
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
16,933 is the September 2015 recovery peak
The 50 day EMA at 16,772
16,736 is a prior all-time high from May 2014
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak.
16,665 is the late August 2015 closing high. Key, key level.
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
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
15,942 is the September 2015 low testing the August 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

October 5 - Monday
ISM Services, September (10:00): 56.9 actual versus 58.0 expected, 59.0 prior

October 6 - Tuesday
Trade Balance, August (8:30): -$48.3B actual versus -$44.5B expected, -$41.8B prior (revised from -$41.9B)

October 7 - Wednesday
MBA Mortgage Index, 10/03 (7:00): 25.5% actual versus -6.7% prior
Crude Inventories, 10/03 (10:30): 3.073M actual versus 3.995M prior
Consumer Credit, August (15:00): $16.0B actual versus $19.5B expected, $18.9B prior (revised from $19.1B)

October 8 - Thursday
Initial Claims, 10/03 (8:30): 263K actual versus 275K expected, 276K prior (revised from 277K)
Continuing Claims, 9/26 (8:30): 2204K actual versus 2202K expected, 2195K prior (revised from 2191K)
Natural Gas Inventor, 10/03 (10:30): 95 bcf actual versus 98 bcf prior
FOMC Minutes, 9/17 (14:00)

October 9 - Friday
Export Prices ex-ag., September (8:30): -0.6% actual versus -1.3% prior
Import Prices ex-oil, September (8:30): -0.3% actual versus -0.4% prior
Wholesale Inventories, August (10:00): 0.1% actual versus 0.0% expected, -0.3% prior (revised from -0.1%)

October 13 - Tuesday
Treasury Budget, September (14:00): $95.0B expected, $105.8B prior

October 14 - Wednesday
MBA Mortgage Index, 10/10 (7:00): 25.5% prior
PPI, September (8:30): -0.3% expected, 0.0% prior
Core PPI, September (8:30): 0.1% expected, 0.3% prior
Retail Sales, September (8:30): 0.2% expected, 0.2% prior
Retail Sales ex-auto, September (8:30): -0.1% expected, 0.1% prior
Business Inventories, August (10:00): 0.1% expected, 0.1% prior

October 15 - Thursday
Continuing Claims, 10/03 (8:30): 2204K prior
Initial Claims, 10/10 (8:30): 269K expected, 263K prior
Continuing Claims, 10/03 (8:30): 2200K expected, 2204K prior
CPI, September (8:30): -0.2% expected, -0.1% prior
Core CPI, September (8:30): 0.1% expected, 0.1% prior
Empire Manufacturing, October (8:30): -8.0 expected, -14.7 prior
Philadelphia Fed, October (10:00): -1.0 expected, -6.0 prior
Natural Gas Inventor, 10/10 (10:30): 95 bcf prior
Crude Inventories, 10/10 (11:00): 3.073M prior

October 16 - Friday
Industrial Production, September (9:15): -0.2% expected, -0.4% prior
Capacity Utilization, September (9:15): 77.4% expected, 77.6% prior
JOLTS - Job Openings, August (10:00): 5.753M prior
Michigan Sentiment Preliminary, October (10:00): 88.5 expected, 87.2 prior
Net Long-Term TIC Fl, August (16:00): $7.7B prior

End part 1 of 3
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