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11/7/2015 Investment House Report
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Targets hit: GS; JPM
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: ANAC
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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
- A "very strong" (not) jobs report sinks stocks but not far and the recoveries are quite nice.
- 271K jobs created, but still low paying jobs again going almost exclusively to the 55+ demographic.
- Bonds dive, dollar surges as December rate hike reality jumps.
- Small caps lead, along with SOX, a rebound off early lows, suggesting the rally still has eyes for the old highs.
The non-farms jobs print beat expectations by 90K, and in the land of the free and home of the headline readers, the beat was everything. Not that the number was historically strong because it wasn't. Only if you compare to the last 8 years of US history would 271K jobs be considered some kind of blowout number, and only those who cannot remember back before December 2007, and that apparently includes most in the Labor Department, would consider this number anything exciting. I guess when you are so starved for a good meal a 1970's era TV dinner would be considered gourmet.
It was enough, however, to scare stock investors, or more accurately, the headline reading algorithms that control a lot of today's automated trading that frankly does not work. Look at the hedge funds using them: down 15+% this year. Our option accounts are up 300% by comparison, and we are looking to add to that if the year end run continues. But, I digress.
The instant reaction was lower as the question about what was a good jobs report in terms of the market appeared to be a bad jobs report. With the 90K beat the algos sold. Stocks recovered but then sold again in what was a jagged, volatile morning session.
After the morning jockeying, stocks started to recover, rallying into early afternoon, testing to a higher low, then rallying into the bell to near session highs. Very solid action that saw the indices tap at the 10 day EMA on the session lows and then reverse to recover the losses and indeed turn positive in several cases. RUTX and SOX helped lead the move, not bad apples in this market, and indeed very needed if the rally is going to continue. As of Friday, based upon the reaction to the jobs numbers, it looks as if the rally can continue.
SP500 -0.73, -0.03%
NASDAQ 19.38, 0.38%
DJ30 46.90, 0.26%
SP400 -0.11%
RUTX 0.76%
SOX 2.59%
VOLUME: NYSE +9%, NASDAQ flat. Not bad to have volume move up on a test lower and rebound.
A/D: NYSE -1.6:1, NASDAQ -1.6:1. Modest negatives on a day of modest negatives on SP500.
NEWS/ECONOMY
Jobs Report blows past expectations but is it 'very strong?'
I suppose when you only expect 181K jobs to be created 271K appears to be a lot. Some on CNBC even described it as "very strong." It is neither.
As I have argued for years in this sadly lacking recovery, we would 'dumb down' our views as to what is good growth in the US. Adopt anti-growth policies such as the ACA that have doubled or more healthcare costs and crushed small business and you are going to get slower growth and wimpy jobs creation. Economic history is replete with examples, the most recent being the present. Oh sure, you will have ebbs and flows that produce an upside outlier report that is much stronger than the entire year, and suddenly all is well. That is what they said in December 2014 with its 327K. In 2013, 2012, 2011, and 2010 before that. Where did that get us?
But, to the numbers. And thank goodness they are better on the headlines.
Non-farm: 271K versus 181K expected versus 137K prior (from 142K). August revised to 153K from 136K.
Unemployment: 5.0% versus 5.1 versus 5.1
Hourly earnings: 0.4% versus 0.2% versus 0.0% September.
The best since 7/2009.
Year/year +2.5%.
Average Hourly workweek: 34.5 versus 34.5 versus 34.5. No change. Very unusual to get a spike in wages with no precursor jump in hours worked.
Minimum wage causing wages to rise:
So where is the wage growth coming from? Hikes in the minimum wage and transfer payments from taxes and the payouts to those receiving the benefits. Most jobs created are still the low-pay, hourly jobs and companies such as WMT, SBUX, etc. are raising the minimum wage, states too. WMT has had to fire hundreds of mid-level managers to pay for the increased minimum wage. Does that make the advance in wages real? No.
Participation: 62.4% versus 62.4%. No change in a critical data point. Again, how do wages rise when you are not pulling people back into the workforce? And, how can a report be 'very good' if you have not solved the main problem in your labor market?
Further: The 25-54 year old age demographic saw participation continue to drop, now at 80.7%, down from 80.8% to start the year and the peak at 85%.
94.5M working age adults still not in the labor force
-97K from September after a +500K reading that month.
Household: +320K as Number employed moved to 149,120 from 148,800
Where the Jobs are:
Most are in the same lower paying sectors.
Education and Health: +57K
Business/Professional: +54K
Retail: 44K
Food Service: 42K
Temporaries: 25K
Key Breadwinner jobs:
Some improvement in construction (+31K)
Manufacturing: 0. Hey, that is an improvement from -9K
Mining -5K.
Who gets the jobs?
More of the same, and the same is not that good.
55-69: 378K jobs
20-24: 61K jobs
16-19: 10K
25-54: -35K
Once again the demographic that is the earning powerhouse of the economy is losing jobs. They still have not recaptured all jobs lost since the Great Recession started in 12/2007.
Moreover, males aged 25-54 working in this job group declined by 119K.
Past 8 years: 55+ gained 7.5M jobs. Under 55 have lost 4.6M jobs.
Conclusion: We are told that because the October jobs report handily beat what are very low expectations, that because wages appeared to bounce, that all is now well. How many times have we seen these one-month bumps turn out to be just that, one month bumps? And again, this was not much of a bump. The construction gains were nice but manufacturing was a goose egg and once again the vast majority of jobs are created in the hourly, low wage sectors, a fact bolstered by the huge placement of jobs in the 55+ age group. You are not getting a lot of 55 and older people out swinging hammers or working the line in the plant. They are taking what they can get, and with little wage leverage they have they are not getting much. Once more we have an economy turning out low quality jobs, and contrary to what the dumbed down news media reports, they are not large quantities of jobs, low quality or otherwise.
THE MARKET
CHARTS
RUTX: The kind of move that has characterized the market run from the September lows. Sure, RUTX was not leading that charge, but after the 3 week consolidation where it sat while the large cap indices rallied, RUTX is taking on the attributes of the large cap indices during their run higher. This is exactly what you want to see for more upside into yearend. On the week RUTX was solid, surging Monday, adding gains Tuesday, testing Wednesday and Thursday, then back upside Friday, moving to a new rally high and taking out the September intraday high. Important milestone.
SP400: The midcaps showed similar action but not as strong. Tapped the 10 day EMA on the low and rebounded to a nice tight doji, but did not break to a higher high as did RUTX. Nice 1-2-3 test of the Monday/Tuesday renewed upside break, setting SP400 in excellent position to move higher this coming week.
SOX: After dogging it on the week compared to the other indices, SOX jumped upside Friday, gapping off the Thursday selloff to the 20 day EMA. Gapped and rallied through the high of the week and the 200 day SMA. Still has the late October peak in its way, but a good recovery as many dormant chips came to life, e.g. SWKS, QRVO.
NASDAQ: NASDAQ continues to trade at and just below the June and late August highs, the last resistance before the July peak. On the week a good Monday/Tuesday move to that next resistance, a Wednesday/Thursday fade to test the 10 day EMA, a test of the 10 day EMA again Friday, but then a rebound to positive and a rather solid gain all things considered. Still at that prior resistance, but frankly this is a good rest and test setting it up for a new break higher.
SP500: Same story as the other large cap indices, i.e. rallying early week, fading the back half of the week, bouncing off the 10 day EMA on the Thursday and Friday lows. A nice 1-2-3 test and rest to set up a move at the prior peaks. Next resistance is 2120ish, then 2130-2135.
DJ30: Similar to NASDAQ, DJ30 tested lower to the 10 day EMA in its third day of testing, fading from the Monday/Tuesday advance, tapping at the 10 day EMA then rebounding to positive. Right smack in the middle of its February to July trading range, but in good shape after this test to make a run at next resistance.
LEADERSHIP
Big Names. As a group holding up amazingly well given the size and length of the moves. AMZN was up almost the entire week with an explosive Wednesday to Friday move. NFLX posted a second week of gains that sported a Wednesday breakout from its triangle. PCLN rallied again but finally is giving a little bit back. SBUX has tested for two weeks back to the 20 day EMA. GOOG continued its climb, rising all week.
Financial: Big moves on the jobs report and rates spiking higher. JPM gapped to the June and July highs. GS gapped through the 200 day SMA and rallied to close at session highs and a 3.7% gain. MA moves to a higher high though not so spectacular.
Industrials: Down on the thought, er reality, of a stronger dollar, but not tanking. CAT put in a 1-2-3 pullback. UTX held fine, tapping the 10 day EMA on the low then rebounded. FLR fell to the 10 day EMA on the low and bounced. Yes they took on some water but did not suffer major damage.
China: Not a great Friday but a good week . . . overall. SOHU surged to the 200 day SMA then stalled Wednesday to Friday. SINA was up all week with a solid move. CTRP continues to surge. BIDU enjoyed a strong week.
Energy: Big start to the week, then a Wednesday to Friday struggle. CVX surged then faded, Friday testing lower but reversing to hold the 10 day EMA. OIS showing a really nice 10 day EMA test. APC hanging on. HAL starting a bounce off the 50 day SMA, but in a four week range. HP looks great but earnings are close. MRO so-so. Still some good patterns, had a tougher week.
Biotech/Drugs: Struggles more when rates rise and some had good weeks until they did not. INFI is one we closed Wednesday. It plunged Friday. BIIB on the other hand looks great. CELG gapped lower on earnings, trying to recover. Perhaps not as fertile an area right now.
Semiconductors: Making a comeback with a good Friday move. SLAB breaking higher. QRVO surged in a first move off the selling. SWKS gapped over the 50 day MA's on its earnings. XLNX showing a nice pullback. MLNX still in an interesting pattern. SMTC surging higher for us. Some possibilities here.
MARKET STATISTICS
NASDAQ
Stats: +19.38 points (+0.38%) to close at 5147.12
Volume: 2.012B (+0.12%)
Up Volume: 1.22B (+459.97M)
Down Volume: 842.55M (-417.45M)
A/D and Hi/Lo: Advancers led 1.56 to 1
Previous Session: Decliners led 1.16 to 1
New Highs: 157 (+61)
New Lows: 78 (+5)
S&P
Stats: -0.73 points (-0.03%) to close at 2099.2
NYSE Volume: 975M (+8.93%)
A/D and Hi/Lo: Decliners led 1.61 to 1
Previous Session: Decliners led 1.05 to 1
New Highs: 58 (-10)
New Lows: 79 (+19)
DJ30
Stats: +46.9 points (+0.26%) to close at 17910.33
SENTIMENT INDICATORS
VIX: 14.33; -0.72
VXN: 16.36; -0.84
VXO: 13.87; -1.05
Put/Call Ratio (CBOE): 1.04; -0.02
Recent history: 3 straight above 1.0 after 15+ consecutive below 1.0. Again, there is some hedging ongoing as the large cap indices test near the March to August highs and the market rides out the jobs report.
Bulls and Bears: Bulls continue rising and bears continue to decline, but both after their surge below and above 35% and crossing over.
Bulls: 46.9 versus 43.7
Bears: 28.1 versus 29.2
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: 46.9%
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.
Bears: 28.1%
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.
OTHER MARKETS
Bonds (10 year): 2.33% versus 2.24%. After declining for 1.5 weeks in anticipation of a rate hike, bonds gapped massively lower toward the September low.
Historical: 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% 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%
Euro/$: 1.0742 versus 1.0878. Sharp dive undercutting the May, July, August trio of lows. Draghi is giddy as now he has all kind of room to work on more stimulus.
Historical: 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 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
DXY0: Blasting off through the July and August peaks, now working on the April and March highs.
USD/JPY: 123.16 versus 121.76. Blasting off through the 200 day SMA.
Historical: 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: 44.52, -0.87. After rallying into Tuesday, a three-day drop. Still over the last October low and that keeps oil in the 9 week trading range.
Gold: 1088.90, -14.10. Not a good three weeks for gold. This past week gold fell through the September and early October lows and is now heading to the July/August lows where there is a four week lateral consolidation.
MONDAY
Wow some big news out of the way and the market, at first blush at the full frontal prospects of a December rate hike, did not collapse. Indeed, the Friday action and the action leading up to Friday suggest the market is going to continue its year end move, aided by the small caps.
This week earnings season winds down and the data points are back-end loaded with retail sales out Friday. Retail sales are important, but all of this is rather pale versus the earnings and jobs report the market just digested.
The indices look as if they are ready to resume the move higher after a 2 to 3 day test ahead of and after the jobs report. Of course you have to take their pulse again when the new week starts, but it would appear they anticipated data that would support the Fed's reasoning to hike. After all, bonds, gold and currencies were working on that well ahead of the jobs report with the dollar climbing, bonds and gold selling.
The next gut check is the large cap indices making a play at the prior highs, and post-Thanksgiving, the FOMC December meeting. Those are the two events you can somewhat plan around; there is always the geopolitical intrigue as an overlay.
We still have some good positions working and Friday we were able to let most keep going. There are still sectors wanting to join in on the move, and if they can put in the moves that works. We will continue to accumulate good stocks making good moves. There are still several sectors that are far from overbought that started to pitch in on the upside, and if stocks are going to run to yearend we definitely want to be involved. When the market is moving, get more involved. After the reaction to the jobs report, if it holds into next week, we view this as a signal the market wants to continue the move toward year end.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5147.12
Resistance:
5164 is the June 2015 peak
5232 is the July high
Support:
5100 from the April peak and early May peak
The 10 day EMA at 5086
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 4947
The 50 day EMA at 4927
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 2099.20
Resistance:
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:
2094 is the December 2014 high, the prior all-time high
The 10 day EMA at 2087
2079 is the intraday all-time high from November
2076 is the all-time high from November
The 200 day SMA at 2063
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 2032
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 17,910.23
Resistance:
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:
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The March low at 17,786
The 10 day EMA at 17,751
June low at 17,715
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 17,584
17,515 is the early July closing low
17,351 is the September 2014 all-time high.
The 50 day EMA at 17,212
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
ECONOMIC CALENDAR
November 6 - Friday
Nonfarm Payrolls, October (8:30): 271K actual versus 181K expected, 137K prior (revised from 142K)
Nonfarm Private Payr, October (8:30): 268K actual versus 160K expected, 149K prior (revised from 118K)
Unemployment Rate, October (8:30): 5.0% actual versus 5.1% expected, 5.1% prior (no revisions)
Hourly Earnings, October (8:30): 0.4% actual versus 0.2% expected, 0.0% prior (no revisions)
Average Workweek, October (8:30): 34.5 actual versus 34.5 expected, 34.5 prior (no revisions)
Consumer Credit, September (15:00): $28.9B actual versus $18.0B expected, $16.0B prior (no revisions)
November 10 - Tuesday
Export Prices ex-ag., October (8:30): -0.6% prior
Import Prices ex-oil, October (8:30): -0.3% prior
Wholesale Inventories, September (10:00): 0.1% expected, 0.1% prior
November 12 - Thursday
MBA Mortgage Index, 11/07 (7:00): -0.8% prior
Initial Claims, 11/07 (8:30): 269K expected,
Continuing Claims, 10/31 (8:30): 2155K expected,
JOLTS - Job Openings, September (10:00): 5.4M prior
Crude Inventories, 11/07 (11:00): 2.85M prior
Treasury Budget, October (14:00): -$130.0B expected, -$121.7B prior
November 13 - Friday
PPI, October (8:30): 0.1% expected, -0.5% prior
Core PPI, October (8:30): 0.1% expected, -0.3% prior
Retail Sales, October (8:30): 0.3% expected, 0.1% prior
Retail Sales ex-auto, October (8:30): 0.4% expected, -0.3% prior
Michigan Sentiment, November (10:00): 92.0 expected,
Business Inventories, September (10:00): 0.0% expected, 0.0% prior
Natural Gas Inventories, 11/07 (10:30): 52 bcf prior
End part 1 of 3
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