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11/18/2015 Investment House Report
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Targets hit: None issued
Entry alerts: ETN; GLOG; GS; SOHU
Trailing stops: None issued
Stop alerts: AMZN; GOOG; NXPI
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- Large cap indices move right past the Wednesday doji as all indices score good price gains.
- Once again the big names take the lead along with some other groups familiar with the upside rallies.
- Housing starts drop as economic data remains weaker.
- Fed gives no overt indication there is any change in a December rate hike. Discussion of equilibrium rates, however, opens the door for other kinds of stimulus.
- Rebound in progress and watching the peaks of the last move as stocks try to resurrect the yearend run.
SP500 and DJ30 patterns may have looked a bit weaker, but that didn't hinder a move higher, not at all. After the tombstone doji at potential resistance those indices blew right past Tuesday's high. SP500 shot through the 200 day SMA, DJ30 as well. Of the two better positioned indices, NASDAQ surged while SOX, though up, lagged a bit.
What about RUTX and SP400? Decent bounces. RUTX moved up off the 50 day SMA and broke over the 50 day EMA and the top of the October lateral consolidation. SP400 broke the 50 day EMA and is back at the top of that October consolidation. Better, but not convincing.
Of course, it would appear those indices don't need to be that convincing. The big names acted like big names. Financials worked well, aided by Fed-speak in the morning and Minutes in the afternoon. China stocks enjoyed the usual scattered good moves. Better leadership. Not convincing, blow away leadership, but the kind that drove the indices toward those prior highs, and they look to be doing it again.
The result was a day that saw the Tuesday laggards move to the fore, though some leaders such as NFLX were already were on the move earlier this week. Leaders lead, and NFLX had sold after its results and after a shakeout (that shook us out of our last positions -- full disclosure here) NFLX is surging higher.
SP500 33.14, 1.62%
NASDAQ 89.19, 1.79%
DJ30 247.66, 1.42%
VOLUME: NYSE -19%. NASDAQ +7%. NYSE rallied but volume faded back below average. Hmmm. NASDAQ showing solid volume, moving back above average as NASDAQ gapped and rallied. Mixed volume action, but leadership stocks on NASDAQ getting the volume again.
A/D: NYSE 3.4:1, NASDAQ 2:1. Broader on NYSE as RUTX, SP400 put in solid price gains. NASDAQ was more of a large cap move as discussed above and the breadth somewhat confirms.
Solid breaks higher by the indices. The large cap indices look pretty solid though outside of NASDAQ volume faded. SOX not bad but did not surge. Small and midcaps, up nicely but more work to do on their patterns after they fell back in the hole they tried to climb from. Hmmm. Sure seems like old times, i.e. during October when the large caps rallied while the small and midcaps flat-lined.
Any catalysts? Yes and no. Housing starts flopped as multi units tanked 25.5% in October, hitting a 7 month low. Not great data for the Fed to chew on but with permits up 4.1% from -4.8% the Fed won't see an issue there.
Fed-Speak. Lacker took his still-warm chair on CNBC pre-market discussing the 'data' as he saw it to that point. As for the Paris attacks, Lacker sees a transitory impact on the economy. It had even a shorter half life on US stocks. In any event, they were not enough to change Lacker's thoughts on hiking interest rates.
In the afternoon the Fed minutes didn't do anything to change the December lift off, at least on the first few pages. On page 12, however, the Fed talked of equilibrium rates, something we have discussed before and something the Fed has raised. That is where a lender will lend to a borrower with no outside influences. That is perceived at less than 0%. Of course if the Fed feels it is too loose, it doesn't matter what the equilibrium rate or any other rate measure is; it will hike. But, the Fed mentions it and when it mentions things it is considering them. If the Fed won't go negative rates and indeed wants to hike, then how does it achieve a rate level where the economy still works given a negative equilibrium rate? QE. MStanley pointed out the equilibrium mentions by the Fed, we supply some analysis.
Remember, I made the recession call this past weekend. Nothing else to say, just reminding everyone.
Oh, Philly Fed is out Thursday and it will try to slow the contraction to -1.0 according to the experts. Negative PMI's; obviously a healthy, non-recessionary economy.
It is ironic how the data is poor, the retail sales are poor, and the retail charts stink. Of course, October is always a slower month in so-so economic times as people prepare for the holidays by cutting back on their pre-holiday spending to save up some cash. I noticed this every October in my house in the 1970's. My dad would get all stressed out about how slow work was. Every October. After a few years I noticed the trend and one October when my Dad was stressed I told him it slowed EVERY October and then business rallied year end and first of the year. He acknowledged that may be the case. But, he didn't stop stressing. The plight of a father.
Anyway, with weaker data but the denial things could be getting bad, you hear a bunch of bogus explanations. And you get tired of hearing the crapola.
Case in point: We are deep into the election process for 2016 with lots of candidates talking daily. Complaints about the economy, how it is handled, what needs to be done, etc. are quite common.
So is the status quo carping. Once again we are hearing how the politicians and their talk about the economy is causing an economic lag? The argument goes like this: candidates talk about the problems with the economy and country, it makes consumers think there are real problems, consumers stop buying, economy sags. The bald guy on CNBC was pushing this propaganda today, saying he was talking with CEO's who were blaming the political process for slowing business.
Utter nonsense. First, consider the source. These are the people who have had it MADE for the past 7 years after the stimulus and regulations that effectively eliminated their competition from upstarts or other smaller businesses. They have a vested interest in maintaining the status quo so of course they don't want anything to threaten their power. When some candidates talk common sense, get us back to free enterprise ideas, they have to take action to protect their monopolies. Second, WE get tired of THEM berating our country's political process that we hold dear. You can make money AND have freedom, individual and economic.
NASDAQ: Gapped and rallied past the mid-October upper gap point. Volume moved back above average on the move through that resistance. Not bad. Of course with the breadth shown that means the big names were leading, and they were. Okay, on the way back to the June and August peaks, the last highs before the July 2015 high. If others can join NFLX in its move, those highs are the shot to shoot for.
SOX: Nice upside though lagged the overall market. Nice pattern remains in place with some chips moving well. Though it was not a day for SOX to lead, its pattern has improved quite a bit from a couple of weeks back with an ABCD using the 50 day EMA as the D point.
SP500: Blasted through the 200 day SMA and into the March to August range. Volume, not so great. It is working, however, and the financial stocks took strength from the Lacker comments as well as the FOMC minutes stating the Fed was good to go if the data remains solid. Of course many can argue, rationally so, that the data stinks. Never, however, let the facts get in the way. Working its way toward its November high, and it is an AA move: one day at a time.
DJ30: Through the 200 day SMA as well, back in the February to July range as well. Not awe inspiring but working.
RUTX: Continues its recovery move, up through the 50 day EMA and the top of the October three week range. 1080is the next resistance (closed at 1172). Working back, still not leading, but willing to follow.
SP400: Broke through the 50 day EMA and back to the top of the three week October range. Working on the recovery.
Big Names: NFLX continued its surge. AMZN reversed its downside tendencies on rising volume. SBUX moving up off the 50 day EMA. GOOG moved to a new high though volume remains sketchy. FB gapped and rallied as well though volume was lower and below average as well. AAPL was upgraded and gapped through the 50 day EMA on rising, average volume. Once again the market finds its support from the big names. For the most part.
Financial: Solid moves on the 'rate hike is on' indications from the Fed Wednesday. JPM up 2%, V surged 2%, GS 1.5+%.
Chips: Still working in some areas (it is a broad category). QRVO, SIMO, XLNX, SLAB and others rallied. The FCS buyout by ON didn't hurt.
China: YNDX surged. BIDU is starting to break higher. SOHU moving well as is SINA.
Energy: Some moves trying to stir up, but there is work to do. ESV up on stronger volume. BHI up nicely but the pattern is questionable. Still hit or miss.
Drugs/Biotech: Starting to show life. MYL continues a strong move. BIIB jumping back toward the 50 day EMA but the pattern is not what it was. AMGN cleared the 200 day SMA, CELG rallied well, but the patterns are not huge. Getting some money however.
Stats: +89.19 points (+1.79%) to close at 5075.2
Volume: 1.924B (+6.7%)
Up Volume: 1.54B (+666.07M)
Down Volume: 461.14M (-475.72M)
A/D and Hi/Lo: Advancers led 2.1 to 1
Previous Session: Decliners led 1.16 to 1
New Highs: 57 (+2)
New Lows: 130 (-22)
Stats: +33.14 points (+1.62%) to close at 2083.58
NYSE Volume: 900M (-18.18%)
A/D and Hi/Lo: Advancers led 3.41 to 1
Previous Session: Decliners led 1.71 to 1
New Highs: 47 (+23)
New Lows: 134 (+12)
Stats: +247.66 points (+1.42%) to close at 17737.16
VIX: 16.85; -1.99
VXN: 17.76; -1.58
VXO: 16.29; -2.32
Put/Call Ratio (CBOE): 1.02; +0.14
Recent history: Back above 1.0 after a week of below that level. Some covering of shorts on the strong move higher.
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): 2.27% versus 2.26%. Started lower for a second session and once again moved to close higher. Moving higher but bonds are struggling to recover but did hold the September low on this pullback.
Historical: 2.26% versus 2.27% versus 2.28% versus 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/$: 1.0659 versus 1.0642. Euro recovers some ground despite the Fed Minutes.
Historical: 1.0642 versus 1.0669 versus 1.0751 versus 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: After a strong three day surge off the 10 day EMA, a pause.
USD/JPY: 123.55 versus 123.44.
Historical: 123.44 versus 123.20 versus 122.67 versus 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: 40.75, +0.08. Still holding the lows of the week but unable to make the break higher.
Gold: 1068.70, -0.30. Pausing after the sharp break lower Tuesday to a new 2015 low.
Wednesday saw more Fed talk that on the face supports that December rate hike. Thus financials rallied higher again. Of course so did the big names in growth. Rate hikes don't necessarily go with growth, but if there is a move to 'safety' with that is ongoing in Europe, well know brand names are soothing. Or, perhaps the Fed's talk of interest rate equilibrium deep in the minutes, again, leaves an opening for the Fed to keep stimulus alive. With the view that equilibrium rates, the rate at which a willing lender will lend to a willing borrower sans outside influence, is below zero, if the Fed doesn't want to go to negative rates perhaps it ramps up QE once again. Could the market be looking that far in the weeds in order to buy? The algos don't go that deep so . . not likely. But possible.
We didn't like the index look earlier in the week, but the big indices overcame the Tuesday doji and put in a good price move. The big names stepped in along with financials, China, some chips. Same names, but that has worked. If biotechs/drugs come back in, interesting things can happen.
Wednesday we focused on those in good patterns once again and thus bought into ETN, GS, GLOG, SOHU while Tuesday's upside buys QRVO, NFLX, YNDX, and SIMO moved well. Of course we had to close GOOG, AMZN and NXPI to the downside as they showed too much recovery strength. That happens and we remain more focused upside for now and have added some good movers and are looking at some more, e.g. BIDU, SBUX, FLR as this upside move to perhaps try the prior highs as a yearend holiday basket continues.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5075.20
5100 from the April peak and early May peak
5164 is the June 2015 peak
5232 is the July high
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
4999 is the October upper gap point
The June low at 4974
The 200 day SMA at 4960
The 50 day EMA at 4954
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 2083.58
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
2079 is the intraday all-time high from November 2014
2076 is the all-time high from November
The 200 day SMA at 2065
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
The 50 day EMA at 2040
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 17,734.32
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
June low at 17,715
The 200 day SMA at 17,590
17,585 to 17,579, the March intraday lows, helping mark the bottom of the Dow's The February to July trading range.
17,351 is the September 2014 all-time high.
The 50 day EMA at 17,310
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 16 - Monday
Empire Manufacturing, November (8:30): -10.7 actual versus -6.0 expected, -11.4 prior (no revisions)
November 17 - Tuesday
CPI, October (8:30): 0.2% actual versus 0.2% expected, -0.2% prior (no revisions)
Core CPI, October (8:30): 0.2% actual versus 0.2% expected, 0.2% prior (no revisions)
Industrial Production, October (9:15): -0.2 actual versus 0.1% expected, -0.2% prior
Capacity Utilization, October (9:15): 77.5% actual versus 77.5% expected, 77.7% prior (revised from 77.5%)
NAHB Housing Market , November (10:00): 62.0 actual versus 64.5 expected, 65 prior (revised from 64)
Net Long-Term TIC Fl, September (16:00): $33.6B actual versus $20.8B prior (revised from $20.4B)
November 18 - Wednesday
MBA Mortgage Index, 11/14 (7:00): +6.2% actual versus -1.3% prior
Housing Starts, October (8:30): 1060K actual versus 1173K expected, 1191K prior (revised from 1206K)
Building Permits, October (8:30): 1150K actual versus 1137K expected, 1105K prior (revised from 1103K)
Crude Inventories, 11/14 (10:30): 0.252M actual versus 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
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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