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11/14/2015 Investment House Report
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Targets hit: None issued
Entry alerts: GOOG; NXPI
Trailing stops: AMZN
Stop alerts: NFLX
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- Stocks continue selling Friday, futures point to more selling after Paris attacks.
- Large cap selling still fairly ordinary, but small and midcaps are leaving the building.
- Leaders thinning as groups that were trying to set up falter.
- Retail sales weak, retail stocks tank.
- US likely in or falling into recession.
- Paris attacks have futures lower, stocks likely sell more.
The selling did not slow Friday as the indices started the session negative and closed the session even lower. What started the week as a rather orderly continuation of the pullback to test the last leg of the October to November rally ended causing technical damage at least to the near term prospects of a short test and new advance.
If you look at the charts of the large cap indices, while of course suffering a round of significant losses Thursday and Friday, the pullbacks are rather ordinary, at least for now.
SP500, DJ30, NASDAQ and SOX are all at or just over the 38% Fibonacci retracement after 8 days of pulling back from the highs hit early November. That does not mean they will necessarily hold at that nearest significant Fibonacci retracement level, but it does help quantify just where the indices are at this stage of the pullback.
As for RUTX and SP400, the great hopes to provide support and new leadership blood to the move, they broke through the 38% Fibonacci retracement and are at the 50% retracement or farther. Indeed, SP400 broke below its 3 week lateral consolidation in October, a clear sign of dumping of this group.
SP500 -22.93, -1.12%
NASDAQ -77.20, -1.54%
DJ30 -202.83, -1.16%
VOLUME: NYSE +9%, NASDAQ +10%. Higher volume on the Friday selling indicates sellers ramping up their selling, but the overall levels are not blowout, coming average on NYSE and just above average on NASDAQ.
Advance/Decline: NYSE -1.6:1, NASDAQ -1.7:1. Quite modest negative breadth on losses of 1+% on the large cap indices. The mid and small caps suffered less and thus the milder breadth, but the index losses were still significant.
In sum, the stock indices failed to hold the nearest support for a new run at the prior 2015 highs. The selling Thursday and Friday was sharper, but in terms of the large cap indices, as noted above is still in the upper reaches of the rally. They can hold near this level and continue. Of course, they have to hold. With RUTX and SP400 breaking lower through their consolidation ranges, however, the market is losing what could have been a solid support group for the large cap indices.
That leaves two scenarios. First, the large cap indices go it alone without the small and midcaps as in October. Second, the collapse of the small and midcaps is the precursor to a deeper selloff by the large cap indices.
What about the year end run? Well we noted that the usual fall pattern was a month ahead this year given the bottom was completed in September instead of October. So it could be argued that the year end run has come and possibly concluded with a move up near the 2015 highs.
For now the pullback is on and with some intensity. For now the assumption is downside though after 7 of 8 days lower there is an oversold condition that might yield a relief bounce. You don't want to forget there are still several stocks in very good position to move higher even through the selling this past week. As soon as you assume a move is over it resurrects, particularly if it has stocks that are in position to help resurrect and there is an oversold condition. Keep that in mind, but for now the bias is downside until it shows otherwise.
Friday another round of at best mediocre data was released, ironically as the FOMC prepared for its first rate hike in 10 years.
October Retail Sales again missed with the year/year reading at its second weakest level since the financial crisis.
Retail Sales: 0.1% versus 0.3% expected versus 0.0% September (from 0.1%)
Control group: 0.2% versus 0.4% expected versus 0.1% prior (revised from -0.1%).
What was down? Everything. Even autos. That is why Sales less autos was 0.2% versus the 0.1% overall move.
Autos, electronics, food and beverages, gasoline, general merchandise. All lower.
The experts keep saying the consumer is strong and will get stronger with the 'gasoline bonus,' that they have not spent thus far. As one commentator put it, if you don't have a job and don't have to drive to work, lower gasoline prices don't mean that much.
Retail sales disappointed overall. They also disappointed specifically, e.g. M with its earnings miss, JWN with its top and bottom line miss, PRTY with its miss, LOCO missing the top line, FOSL also missing the top line. It was not a banner week for retail stocks as they reported a less than banner Q3.
The consumer is not getting stronger. The wage gains from Q3? Increased minimum wages, an artificial rise in wages that is unsustainable because other areas are cut in order to raise them (e.g. WMT cutting management jobs), and more basic, the economics don't support it. Plus, when all of the machines take over the tasks of menial jobs there will be even less income as those jobs disappear. Yes the consumer is buzzing.
Here is our take. Given the data showing up across the board with sustained weakness, I am making the call that the US is in recession already or just starting one. This as the Fed, the master of bad timing, is going to raise rates in December.
Actually, that is perfect timing. The Fed needs to hike and could even pop off a 50BP move. Then it doesn't have to do anything in 2016 as it has hiked rates and the economy hits recession. In an election year. Or perhaps it sees the deterioration in the numbers outside its jobs report and balks at hiking rates, fearing causing a recession in an election year and handing the election to those who actually have the temerity to seek a more serious audit of what the Fed does with our money. Poor Fed. Tough decisions brought on by its inability to act when it should have acted.
Still selling into Friday, moving to the 38% Fibonacci retracement levels on the large cap indices. The midcaps broke to a lower low below its trading range while the small caps look ready to break their October consolidation range. The large caps are still in a normal test while the small and midcaps are breaking down. Typically in this situation over the past few years, when this happens the downside ends up winning the move, forcing the rest of the market to form up again.
SP500: After attempting to hold and bounce at the 200 day SMA, SP500 broke lower Thursday and again Friday, taking out the 200 day SMA and the 50 day EMA along the way. Friday SP500 closed at the 38% Fibonacci retracement, but no doji, just a flop to that level. Still in position where it could hold and hold a lot of its momentum, but the Friday price action does not suggest a bounce. A bit oversold the past 8 sessions but nothing major.
NASDAQ: Gapped and sold Friday, moving through the 200 day SMA and the 50 day EMA in one move. NASDAQ is bent on filling the mid-October upside gap. Rising above average volume as it does. At the September high and gap point as well, a logical point to hold, but nothing yet suggesting NASDAQ is ready to rebound. Indeed, many of the big name NASDAQ leaders just started to sell. Might be more downside to come.
RUTX: The small caps sold back to the three week October range, fell into it Thursday, and sold to the bottom of it Friday. The upside showed very little staying power and we will see if RUTX can start over once more.
SP400: While we see if RUTX can hold, consider the midcap SP400. It sold hard Thursday, gapping into the three week consolidation range. Friday SP400 sold again, undercutting the consolidation range that set up the move higher. The breach of the consolidation lows is a sign of weakness.
SOX: Down but rather modestly, undercutting the 50 day EMA but holding the 38% Fibonacci retracement similar to the large cap indices. Has set up an ABCD consolidation to that near support in what is not a bad pattern. Not saying it is going to lead a new move higher from here, but by itself it is not in bad shape.
DJ30: Similar to SP500 the industrials fell hard Thursday and Friday, selling Friday on rising volume. Just cracking the 50 day EMA and still above the 38% Fibonacci retracement, DJ30 still has decent momentum though on Friday it was showing no signs of slowing the decline.
Energy failed its attempt to assume some leadership, running out of . . energy? Industrials don't look so industrious, may be giving up their shot. Software softened. Financials trying to hold the line but struggling. Big names not looking so big. Leadership has some work to do, or is that, as Senator Schumer said, the Fed Chairman has work to do? Leadership is in question. There are some solid patterns on the report, but the great patterns are farther apart.
Big Names: AMZN broke sharply lower on volume. GOOG started to roll over from its low volume new high. SBUX fell to the 50 day EMA. AAPL broke sharply lower below the 50 day SMA. FB is making its first serious test, filling the early November upside gap. Former leaders look as if they will remain former leaders, e.g. PCLN, CMG.
Tech/Software: Mixed results. MSFT is holding three week lateral move. BLKB gapped lower, RHT plunged to the 50 day EMA. CSCO gapped sharply lower, off 5.8%, on its earnings. VDSI still looks solid but it is something of a minority.
China: And yes, still mixed. SOHU is in a great 20 day EMA test of its rally. SINA dove lower. CTRP is slowing its move as is BIDU, but both remain strong. YNDX has set up a nice ABCD test. Still promise here as the world looks to China for more stimulus, not from a strong economy, but from the government.
Financial: Struggling. JPM not bad at the 20 day EMA. GS continued lower to the 20 day EMA. BAC gapped to the 20 day EMA, giving up all of the gap move from the Jobs Report Friday. TCBI (regional) did the same. Not so cock sure of a rate hike from the lok of the patterns.
Energy: Oil rolled over the past two weeks and oil stocks with it. The patterns say they are not dead, but they have work ahead of them. CVX landed at the 50 day EMA to end the week. OIS is still very nice with a tight doji at the 50 day SMA.
Industrial: UTX is trying to hang on at the 50 day EMA. FLR is trying the same with an ABCD. MMM trying to hold near the 200 day SMA. HON broke the 200 day SMA and is at the 50 day EMA. Problematic at this point.
Retail: Tough week with department stores falling apart: DDS, M, JWN. KIRK imploded. WSM is diving to lower lows. FL, JCP, FOSL, CHS. Death row.
Chips: Actually holding up better than most. NVDA in a nice flag test. SLAB recovered after a deep test Friday. QRVO looks super in its test. AMAT beat on earnings and gapped to a higher high over last week's recovery high. There is promise here.
Stats: -77.2 points (-1.54%) to close at 4927.88
Volume: 1.941B (+9.87%)
Up Volume: 500.26M (+73.68M)
Down Volume: 1.49B (+120M)
A/D and Hi/Lo: Decliners led 1.69 to 1
Previous Session: Decliners led 3.43 to 1
New Highs: 27 (-8)
New Lows: 200 (+47)
Stats: -22.93 points (-1.12%) to close at 2023.04
NYSE Volume: 925M (+8.82%)
A/D and Hi/Lo: Decliners led 1.6 to 1
Previous Session: Decliners led 4.31 to 1
New Highs: 10 (-6)
New Lows: 217 (+36)
Stats: -202.83 points (-1.16%) to close at 17245.24
VIX: 20.08; +1.71
VXN: 21.24; +2.32
VXO: 20.57; +2.15
Put/Call Ratio (CBOE): 1.16; -0.06
Recent history: 7 of 8 above 1.0. Still quite interesting how this correlated with the indices topping near term.
Bulls and Bears: Bulls paused for a week, backtracking a bit but still well over 35%. Bears resumed rising after a 1 week hiatus. Both bulls and bears are retracing after crossing over in September.
Bulls: 45.3 versus 46.9
Bears: 28.9 versus 28.1
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.
46.9% versus 43.7% versus 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.
28.1% versus 29.2% versus 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.
Bonds (10 year): 2.28% versus 2.32%. Rebounding all week from the two week plunge to the September low. Trying to bounce off that support.
Historical: 2.32% versus 2.32% versus 2.35% versus 2.33% versus 2.24% versus 2.23% versus 2.22% versus 2.19% versus 2.15% versus 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%
Euro/$: 1.0751 versus 1.0821. Not much traction trying to move higher form a weeklong consolidation.
Historical: 1.0821 versus 1.0740 versus 1.0725 versus 1.0754 versus 1.0742 versus 1.0878 versus 1.0860 versus 1.0963 versus 1.1012 versus 1.1015 versus 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
DXY0: Still in a nice weeklong test of the 10 day EMA after breaking to a higher high over the July and August twin peaks.
USD/JPY: 122.67 versus 122.56. Very excellent flag test of the 10 day EMA, showing a tight doji Friday. Nice break higher, nice test, in great position to continue upside.
Historical: 122.56 versus 122.85 versus 122.90 versus 123.16 versus 123.16 versus 121.76 versus 121.58 versus 120.98 versus 120.77 versus 120.62 versus 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
Oil: 40.74, -1.01. Still diving lower after undercutting the October low. Heading back toward the August low near 37.80. 30M bbls sitting in tankers outside of Galveston, Texas. You can drive along the Bolivar Peninsula, east of Galveston and slightly up the coast, and see the lines of tankers parked, nowhere to offload. This is the same situation in ports all over the world. How many barrels? 100M+? Easily. Cargos with no home right now.
Gold: 1081.50, +0.50. Sold to the July low on the week, a point where we will see if gold has any guts left in it at all.
Over the past two weeks we started closing positions as the market rallied nicely, hitting targets, and then started to backslide. That backslide was a normal test at first and for some stocks it still is. Many others, however, are doing more than testing near support,. More leaders are giving up their moves, notably some of the 'name' stocks that clearly led the move higher. With their struggles, the indices started breaking lower with RUTX and SP400 breaking back down into or below the October lateral trading range.
Given the downside bias and the absolute lack of any bounce, short covering or otherwise, we closed many of our positions over the past two weeks, taking upside gain on the moves to the highs, and afterward as stocks faded through near support. Friday we picked up some downside positions on GOOG and NXPI as well as closing our last AMZN position for a big gain. Now we watch for an oversold bounce as a possibility to close some additional upside if that bounce stalls and then pick up some more downside positions as well if the move does stall.
Not the best week for the stock market in recent times, but not terrible either. The large cap indices are at the 38% Fibonacci retracement as noted, still in very normal and decent tests of solid breaks higher. Weaker of course but still holding good patterns. That keeps open the door for a resumption of the year end move.
The horrendous terror attacks in Paris after the Friday close may have a further negative impact on stocks this coming week. What other events occur this weekend will bear more on that possibility. If the French have the attackers in custody, dead or otherwise, as they claim, that is a start to getting past this in terms of market action. Don't mean to appear callous, just have to deal with the market we get.
The bias remains negative at the Friday close, and the terror attacks do not help. We will look at some upside plays holding up well, but also downside even if the market is oversold for now. NXPI and GOOG were hardly oversold but are showing rollover patterns we want to ride for gains.
Pray for those in Paris who are not going home and steel yourself for what will need to be done ahead as a result.
Have a great weekend and let's truly appreciate what we have while we still have it.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4927.88
The 50 day EMA at 4946
The June low at 4974
The 200 day SMA at 4956
4999 is the October upper gap point
5008.57 is the early March 2015 post-bear market high
5042 is the March 2015 high
5100 from the April peak and early May peak
5164 is the June 2015 peak
5232 is the July high
4920 is the lower gap point from mid-October
4912 the mid-April China dip
4910 is the July 2015 closing low
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
S&P 500: Closed at 2023.04
The 50 day EMA at 2037
2040 is the March 2015 closing low
2046 is the July 2015 closing low
2062 is the January 2015 lower high
The 200 day SMA at 2064
2076 is the all-time high from November
2079 is the intraday all-time high from November 2014
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
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 17,245.24
The 50 day EMA at 17,277
17,351 is the September 2014 all-time high.
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to July trading range.
June low at 17,715
The 200 day SMA at 17,590
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The March low at 17,786
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
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
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
November 13 - Friday
PPI, October (8:30): -0.4% actual versus 0.1% expected, -0.5% prior (no revisions)
Core PPI, October (8:30): -0.3% actual versus 0.1% expected, -0.3% prior (no revisions)
Retail Sales, October (8:30): 0.1% actual versus 0.3% expected, 0.0% prior (revised from 0.1%)
Retail Sales ex-auto, October (8:30): 0.2% actual versus 0.4% expected, -0.4% prior (revised from -0.3%)
Michigan Sentiment, November (10:00): 93.1 actual versus 92.0 expected, 90.0 prior (no revisions)
Business Inventories, September (10:00): 0.3% actual versus 0.0% expected, 0.1% prior (revised from 0.0%)
Natural Gas Inventor, 11/07 (10:30): 49 bcf actual versus 52 bcf prior
November 16 - Monday
Empire Manufacturing, November (8:30): -6.0 expected, -11.4 prior
November 17 - Tuesday
CPI, October (8:30): 0.2% expected, -0.2% prior
Core CPI, October (8:30): 0.2% expected, 0.2% prior
Industrial Productio, October (9:15): 0.1% expected, -0.2% prior
Capacity Utilization, October (9:15): 77.5% expected, 77.5% prior
NAHB Housing Market , November (10:00): 64.5 expected, 64 prior
Net Long-Term TIC Fl, September (16:00): $20.4B prior
November 18 - Wednesday
MBA Mortgage Index, 11/14 (7:00): -1.3% prior
Housing Starts, October (8:30): 1173K expected, 1206K prior
Building Permits, October (8:30): 1137K expected, 1103K prior
Crude Inventories, 11/14 (10:30): 4.22M prior
FOMC Minutes, 10/28 (14:00)
November 19 - Thursday
Initial Claims, 11/14 (8:30): 272K expected, 276K prior
Continuing Claims, 11/07 (8:30): 2164K expected, 2174K prior
Philadelphia Fed, November (8:30): -1.0 expected, -4.5 prior
Philadelphia Fed, November (10:00): -4.5 prior
Leading Indicators, October (10:00): 0.6% expected, -0.2% prior
Natural Gas Inventories, 11/14 (10:30): 49 bcf prior
End part 1 of 3
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