Saturday, October 17, 2015

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

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10/17/2015 Investment House Report
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Targets hit: None issued
Entry alerts: CTRP; SINA; TWTR; VIPS
Trailing stops: None issued
Stop alerts: None issued

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- 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.


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.



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.


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.


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)

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)

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


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.


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.


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!


NASDAQ: Closed at 4886.69

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

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

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

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

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

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


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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