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1/20/2016 Investment House Report
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Targets hit: AAPL; COST; FB
Entry alerts: ADBE; GOOG
Trailing stops: None issued
Stop alerts: SPNC
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- After a weak bounce attempt stocks bomb to lower lows. Stocks roar back, and of course, that sets up another bounce possibility.
- Some retail, some big names look ready to try a bounce.
Once again a bounce attempt one session was met with a bomb lower the next session. It would appear just enough selling pressure was released Tuesday to push Dow futures lower 300 points early morning.
It got worse. And worse. DJ30 opened lower and sold 565 points on the low. NASDAQ 164 points lost on the low. Things became so bad, however, that they got better. At 12:00ET the low was hit. The indices put in a 25 minute bottoming move and took off upside. But for a last half hour dip NASDAQ would have closed positive.
That rather dramatic reversal could have, yet again, set a relief move. After that kind of drop that saw SP500 undercut the August lows and hit 1812 (as in the War of 1812?), breadth hit -30:1 on NYSE, new lows at 1291 and 918 on NYSE, NASDAQ, respectively, and VIX cracking to a higher high over the early September peak, you would THINK that a relief move was set. The deal sealer? Goldman Sachs voiced its concern that the current selling would be worse than in August. You know what? It was! After that comment floated out in the morning, of course stocks had to reverse. Kind of like a bear appearing on TIME magazine appears pretty much after the selling is finished.
NASDAQ 211 points low to high before backing off some on the close. DJ30 539 points low to high. SP500 64 points. Impressive volatility yet again.
SP500 -22.00, -1.17%
NASDAQ -5.26, -0.12%
DJ30 -249.28, -1.56%
VOLUME: NYSE trade +30%, basically matching the high of 2016. NASDAQ +36%, and at 3.1B, the highest of 2016 and indeed for the past 5 months, only surpassed by expiration Fridays.
A/D: Finished at -2.5:1 NYSE, -1.2:1 NASDAQ, but that does not tell the tale. At the lows, NYSE breadth registered a shocking -30:1, coming as close as in 2008 to all stocks turning negative. Honey, that's extreme breadth.
New Lows: NYSE showed a mere 1291, NASDAQ 918. Pretty much off the scale extreme.
This action likely sets a relief move (he again says) given the impressive intraday recoveries in many stocks. The programs were selling and the indices were down lockstep. For example, I recall looking at the downside percentages intraday and saw SP500 and DJ30 down 2.77% each. It was that way much of the session. That tells you the programs are selling equally across the board. Then when they turned, they turned to the upside buys in a big way.
NASDAQ made it to positive in the last hour but could not quite hold it. Only SOX and RUTX made it positive and held. That is the preferred action for a key reversal: a reach to a lower low at or below support, a reversal, heavy volume, positive close. I guess you could say close but no cigar, but for me a move like this, whether it finishes positive or is damn close, is typically good enough.
What happens in Asia tonight and the US in the morning (particularly if the US gaps upside) will tell a lot of the tale of a rebound move. The relief move certainly looks a reality, but it did on Friday, Thursday before that, and Monday before that. But not at these lows and not as dramatic.
SP500 hit 1812 on the low and that worked a reversal. Massively oversold, massively extreme sentiment and internals. Big reach lower and big recovery. Once again it looks as if the stage is set for a serious relief move with a key reversal session of sorts. An SP500 rally to the mid-September peak (1990-1995) is a very respectable 7%ish relief move. That MAY be reaching a bit for the stars. A move to 1942, the peaks from a bounce attempt six sessions back, may be all it can muster.
SP500: A big reach lower to 1812, undercutting the August lows as well as the October 2014 Ebola flash crash lows, then a reversal. Still hanging around those summer lows on the close, good place to bounce after a 12.8% plunge from the late December lower high, quite a fall in just 14 sessions. Just about keeping that 1% per session loss rate. Time for a bounce and would love to see it up to 1980-1995, but watching 1940 as potential resistance as that is where SP500 tried to hold and bounce before the last bounce attempt failed. It is also the 38% Fibonacci retracement of the selloff and where NASDAQ gapped lower.
NASDAQ: Reached to within 21 points of the August intraday low and reversed. Almost made it positive, and indeed it did in the last hour before a late fade closed it negative. Kind of a key reversal session, definitely enough to bounce. Where to on a rebound? 4736 is the lower gap point from 1/7 and where SP500 hit when it tried its simultaneous bounce attempt.
DJ30: On the low just 120 points off the August intraday low and then a reversal. Never made it to positive but did close over the August closing low. Massive losses here as well, reversing at the prior low after a 13% loss from the last December lower peak.
RUTX: Lowest price since mid-2013 but as with last week, no support in particular. RUTX broke lower from a head and shoulders pattern and has tumbled. As for a bounce, look for the 38% Fibonacci retracement (1035, closed at 999.3).
SOX: Holding at the late September lows. If the market bounces, SOX is bouncing. After a 17% clubbing from the late December peak, that makes sense.
SP400: Massive reach lower to a Q3 2013 low, then a reversal. The 38% Fibonacci retracement is 1295 (closed at 1254).
Leadership? Well, how about leading bouncers? Sure some patterns held up and the moves higher are solid, e.g. EQT, ROVI, but most were hammered and are bouncing.
Utilities: Most stunk the place up, e.g. PCG, AEP, but those are electric. Our natural gas utility EQT surged 4%.
Big Names: Some potential interesting bounces setting up. AMZN looks quite good for a bounce. FB as well. VRSN looks great at the 200 day SMA. NFLX . . . maybe, but not ready to move in at this juncture. CMG, a former leader/big name, looks ready to make a move higher. GOOG sold further into the gap zone but recovered.
Industrials: MMM still looks ready to bounce after a doji at the summer lows. UTX is similar. EMR is at the September low with rising MACD.
Retail: Trying some bounces. DDS is finally making an upside bounce. M breaking through the 50 day MA. DLTR, DG the discount retailers held support and are not in the tank, but are not great patterns. HD and LOW, the home improvement companies, are in the tank.
Chips: Struggling as a group, and indeed XLNX looks ready to fall; right now.
Stats: -5.26 points (-0.12%) to close at 4471.69
Volume: 3.124B (+36.1%)
Up Volume: 1.34B (+416.05M)
Down Volume: 1.84B (+450M)
A/D and Hi/Lo: Decliners led 1.18 to 1
Previous Session: Decliners led 1.93 to 1
New Highs: 6 (-1)
New Lows: 918 (+440)
Stats: -22 points (-1.17%) to close at 1859.33
NYSE Volume: 1.45B (+31.82%)
A/D and Hi/Lo: Decliners led 2.55 to 1
Previous Session: Decliners led 2.07 to 1
New Highs: 2 (-9)
New Lows: 1291 (+631)
Stats: -249.28 points (-1.56%) to close at 15766.74
VIX: 27.59; +1.54
VXN: 30.84; +1.52
VXO: 28.47; +2.59
Put/Call Ratio (CBOE): 1.18; +0.28
Recent history: Back over 1.0 after a one-day hiatus. Over 1.0 for 13 of the last 14 sessions. 27 of 38 sessions above 1.0.
Bulls and Bears: Bulls plunged far below 35% while bears surged to 35.7%. A double bonus. Bears are over 35%, a bullish signals the same as bulls below 35%. In addition, bulls and bears crossed over, a very powerful upside signal. Last week we wondered if a crossover would come this week and it certainly did.
Bulls: 28.6 versus 34.7. Below 35% is bullish.
Bears: 35.7 versus 31.6. Above 35% is bullish.
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.
34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4% versus 43.3% versus 45.3% versus 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 in 2015 since the 2008 and 2009 market plummet.
31.6% versus 29.6% versus 29.6% versus 27.6% versus 26.8% versus 26.8% versus 28.9% versus 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. Both occurred in fall 2015.
Bonds (10 year): 1.99% versus 2.05%. Massive gap upside to test the late August peak (the last big selloff) and backed off as the market recovered.
Historical: 2.05% versus 2.03% versus 2.09% versus 2.07% versus 2.105% versus 2.17% versus 2.11% versus 2.15% versus 2.18% versus 2.25% versus 2.18% versus 2.24% versus 2.27% versus 2.30% versus 2.30% versus 2.23% versus 2.26% versus 2.24% versus 2.20% versus 2.19% versus 2.24% versus 2.29% versus 2.27% versus 2.23% versus 2.13% versus 2.23% versus 2.21% versus 2.23% versus 2.23% versus 2.27% versus 2.33% versus 2.18%
EUR/USD: 1.0815 versus 1.0910. Still in the 8 week lateral move.
Historical: 1.0910 versus 1.0917 versus 1.0869 versus 1.0879 versus 1.0851 versus 1.0854 versus 1.0921 versus 1.0937 versus 1.0789 versus 1.0748 versus 1.0835 versus 1.0934 versus 1.0928 versus 1.0972 versus 1.0963 versus 1.0917 versus 1.0953 versus 1.0920 versus 1.0868 versus 1.0818 versus 1.08334 versus 1.0934 versus 1.0992 versus 1.0987 versus 1.0944 versus 1.1029 versus 1.0892 versus 1.0844 versus 1.0872 versus 1.0948 versus 1.0595
USD/JPY: 116.99 versus 117.60. Reached lower to the August low and a recovery to positive. Still trending lower below the 10 day EMA and will see if the dollar can break the downtrend.
Historical: 117.60 versus 117.02 versus 118.06 versus 117.72 versus 117.50 versus 117.73 versus 117.71 versus 117.24 versus 117.58 versus 118.25 versus 119.02 versus 119.397 versus 120.495 versus 120.45 versus 120.345 versus 120.295 versus 120.86 versus 121.01 versus 121.33 versus 122.30 versus 122.68 versus 122.35 versus 121.64 versus 120.85 versus 121.64 versus 121.40 versus 122.97 versus 123.28 versus 123.15 versus 122.49
Oil: 28.35, -1.22. Diving lower still. That is all. Showing no signs of recovery. Oh yes, and why then did the stock market bounce if oil did not?
Gold: 1106.20, +17.10. Impressive upside break, matching the high from two week's back. 1110 is a key level to clear.
Again, what happens overnight sets the stage, but the main event in the US. If it gaps higher it will be instructive how sellers/shorts react: will they try it again or feel the heat and cover, thus adding upside pressure? If there is a lower open we would actually view that as a positive, allowing some head clearing after the madcap dash to the close Wednesday, and giving the buyers a chance to come in if they want. Of course, it is likely too early for serious buyers to get up the nerve to buy, so it will be up to the shorts worrying the downside is over for now and start covering again, forming that snowball that rolls the stock market uphill in a relief move.
Remember, even if there is a continued move, this is just likely a high velocity relief rally inside the downtrend and we use it for all we can on the upside and then reload the downside at perhaps 1990 on SP500, a mere 130 points hither.
We took some gain on COST, AAPL, FB. We picked up some GOOG and ADBE puts and likely should have sold them intraday on their drops. GOOG still has not filled the gap so that is still going to happen and we still feel comfortable enough letting those work. FB came close to the target intraday . . . should have, could have . . . we will get the shot.
Now, as for new plays, we like some upside here. FB, AMZN, VRSN, CMG, DDS, M. As per above, not long term buy 'em to marry 'em, but trades, taking what they give and dumping them. No time for romance in this market.
There are still downside plays ready to go after all of this, but of course if the market bounces they like don't just open up to the downside. XLNX looks weak in a bear flag. PNRA bombed through the 200 day SMA Wednesday; on a bounce to test it could be a great entry.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4471.69
4517-4506 from the September 2015 and August 2015 closing lows
The 10 day EMA at 4613
4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low.
4736 is the early January lower gap point downside, the last downside gap in the selloff.
4751 is the January 2015 lower high
4774 is the January high
4811 is the November 2014 peak (intraday)
4814 is the gap point from last week.
4815 is the December 2014 prior market peak
The March lows at 4843 and 4825
4828 is the late August peak
4837 is the late August 2015 rebound high
The 50 day EMA at 4872
4902 is the July 2015 low
4912 the mid-April China dip
4916 is the mid-November 2015 low
4920 is the lower gap point from mid-October
The 200 day SMA at 4966
The June low at 4974
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
5162 is the early November peak, 5176 is the December intraday peak
5164 is the June 2015 peak, 5175 is the August intraday peak
5232 is the July high
4485 are the twin July 2014 peaks
4352 is the March 2014 peak
4292 is the August 2015 low
S&P 500: Closed at 1859.33
1862 is the October 2014 closing low
1867 is the August 2015 low
1872 is the September 2015 test low of the August low
1883.57 is the early March high.
1897 is the prior all-time high hit in April 2014
1902 from early May was the intraday all-time high.
1905 is the August 2014 low
1913 is the early September 2015 closing low testing the bounce from the August selling
The 10 day EMA at 1917
1972 is the December 2014 low
1989 is the last August closing high
1991 is the July 2014 high
1995 is the September 2015 recovery peak
The 50 day EMA at 2004
2011 is the September prior all-time high
2040 is the March 2015 closing low
2046 is the July 2015 closing low
The 200 day SMA at 2052
2062 is the January 2015 lower high
2079 is the intraday all-time high from November 2014
2094 is the December 2014 high, the prior all-time high
2104 is the December 2015 high
2116 is the November 2015 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
1820 is the October 2014 intraday low
1815 is the April 2014 low
1772 are the Q4 2013 highs and lows
Dow: Closed at 15,766.74
15,855 is the October 2014 intraday low
16,026 is the April 2014 low
16,058 is the early September 2015 low
16,117 is the October 2014 closing low
16,368 is the August 2014 low
The 10 day EMA at 16,436
16,506 is the March 2014 peak
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high
16,665 is the late August 2015 closing high. Key, key level.
16,670 is the December 2014 peak and the recent August 2015 relief bounce peak.
16,736 is a prior all-time high from May 2014
16,740 is the mid-September peak and potential apex for a right shoulder to a head and shoulders pattern
16,933 is the September 2015 recovery peak
16,946 is the June 2014 peak
16,970 is the June 2014 former all-time high
17067 is the December 2014 low
17,068 is the early July 2014 peak
The 50 day EMA at 17,120
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,458
June 2015 low at 17,715
17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range
The March low at 17,786
17,978 is the November 2015 peak
15,666 is the August 2015 closing low
15,372 is the February 2014 low
15,370 is the August 2015 low
January 19 - Tuesday
NAHB Housing Market , January (10:00): 60 actual versus 61 expected, 60 prior (revised from 61)
Net Long-Term TIC Fl, November (16:00): $31.4B actual versus -$17.7B prior (revised from -$16.6B)
January 20 - Wednesday
MBA Mortgage Index, 01/16 (7:00): +9.0% actual versus +21.3% prior
CPI, December (8:30): -0.1% actual versus 0.0% expected, 0.0% prior (no revisions)
Core CPI, December (8:30): 0.1% actual versus 0.2% expected, 0.2% prior (no revisions)
Housing Starts, December (8:30): 1149K actual versus 1197K expected, 1179K prior (revised from 1173K)
Building Permits, December (8:30): 1232K actual versus 1200K expected, 1282K prior (revised from 1289K)
Crude Inventories, 01/16 (10:30): 0.234M prior
January 21 - Thursday
Initial Claims, 01/16 (8:30): 280K expected, 284K prior
Continuing Claims, 01/09 (8:30): 2263K prior
Philadelphia Fed, January (8:30): -4.0 expected, -5.9 prior
Natural Gas Inventor, 01/16 (10:30): -168 bcf prior
January 22 - Friday
Existing Home Sales, December (10:00): 5.12M expected, 4.76M prior
Leading Indicators, December (10:00): -0.1% expected, 0.4% prior
End part 1 of 3
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