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1/25/2016 Investment House Report
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Targets hit: AMZN
Entry alerts: CVX; LRCX; MA
Trailing stops: None issued
Stop alerts: None issued
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- Post-stimulus speculation is not that bounce worthy.
- Two days up in a bounce to the 10 day EMA now a test.
- Just a pause in the bounce or a new rollover?
- Economic data continues to stink as Dallas Fed Survey bombs lower again.
- Some stocks look ready to rebound after tests, suggesting the market may bounce as well.
Oh no, stocks did not rise to start the week after a Thursday and Friday rally off a huge intraday reach lower and reversal. It would appear Friday's speculation/rumor/hope of more stimulus from the BOJ, PBOC, and maybe some conciliatory language from the FOMC had the half life of Scott Walker's presidential run.
That must mean the bounce attempt is over. Well, it could, particularly given the indices tested the 10 day EMA, the first level of resistance after any significant plunge, and fell back. Index losses ranged from -1.3% to -2.3%, and indices such as SP500 just don't look all that great.
SP500 -29.82, -1.56%
NASDAQ -77.69, -1.58%
DJ30 -208.29, -1.29%
VOLUME: NYSE -8.7%, NASDAQ -10.2%. The price action was weak all session, but volume faded to average on NASDAQ while NYSE trade managed to hold just above average. The key is volume did not expand on this downside day after a couple of good advances off the Wednesday reversal. Not the same kind of high volume dumping seen ahead of the Wednesday reversal. That leaves the door open that Monday was more of a pause in the relief rally versus a return to the downside for good without any additional recovery.
A/D: NYSE -5.5:1, NASDAQ -2.9:1. Pretty salty downside breadth for sure.
Okay, so the percentage losses were ugly but volume was relatively much lighter than either the downside or upside of late. Surely the look of the indices with the bounce to the 10 day EMA and then the reversal is not good. SP500 seems to stand out to us as weak.
That said, often a tradable relief move will show a strong initial surge and then pause. That pause acts as something of an additional shakeout, the 'oh no here we go again' move that gets the rest of the sellers out near term. That sets the stage for a continuation move.
Coupled with the massively negative internals, 12+% losses on this leg alone, and the negative sentiment with bulls crossing down through bears (and vice versa), the stage for a move was set. More of a move than the two days shown thus far.
That is why, while we did move into some downside on Monday (CVX, LRCX, MA), we didn't wholesale move back in on the downside. Oh we have plays ready to go and will have more (e.g. AMZN, perhaps AAPL, perhaps more GOOG), but a low volume pause off of a good setup and start to a relief move will need to show it is serious. Monday was pretty serious -- 1.3% to 2.3% losses are not chicken feed -- if it continues, we play the downside again, a bit earlier than we anticipated.
Not a lot of new news to start the week, but what was out there was impressive.
Dallas Fed Survey, January: -34.0 versus -14.5 expected versus -20.1 December.
Thirteenth month of contraction, and the move is only picking up speed to the downside. To find a reading this low you have to, not surprisingly, go back into the teeth of the Great Recession. It would appear that the oil crash is doing just what it did to Texas and other oil producing states and regions in the early to mid-1980's: crush the new wealth creation, thus plunging the housing and commercial real estate markets into a black hole (how long will 'Texas Flip and Sale' and all of those other HGTV/DIY Network property reality shows based in Texas stay on the air?). It could once again be a great time to buy real property in Texas -- in a few years.
Jobs: Sprint throws its hat into the layoff ring, firing 2,500 employees or 8% of its total workforce. SLB cans 10K, Wall Street firms have already announced layoffs. Hundreds of thousands more still to come as many companies in the oil regions go out of business. Good times ahead as the rest of the economy joins the rest of the country already in recession.
M&A: JCI and TYC agree to an inversion deal. Congress may have thought it did away with those. Oh no, better go in front of the cameras, bluster and posture about your outrage, then pass some bill that is supposed to block these deals (versus fixing the issues that make them lucrative to US companies) but of course has some pork in it for your favorite companies that provide Congressmen with inside information to make their fortunes while in Congress. Isn't that what it is all about? Go to DC, get great healthcare and benefits for life, get a pension, and make yourself rich on insider information when you didn't have the ability to do that on your own in the private sector? Oh, but I digress and just perhaps show some anger at our leaders. That must make me a bitter clinger.
Critical juncture for the stock indices after a reversal and move to first resistance at the 10 day EMA. All faded back from that level Monday. It was not much through early afternoon, but then the selling ramped up, pushing stocks sharply lower into the close.
An oversold bounce with internals this extreme generally yields more than a 2-day bounce. Again, a critical juncture for the bounce move after the Monday selling.
SP500: After touching the 10 day EMA on the Friday close SP500 gave up the majority of that rally. Volume was lower, still above average but the lowest in three weeks. No major share dumping, closing right at the upper gap point from Friday. This is where SP500 shows us it is still ready to move higher or not.
NASDAQ: Tried higher above the 10 day EMA then turned lower and sold into the Friday gap point. Volume fell to average, also the lowest in three weeks for NASDAQ. No heavy dumping here either. Good surge higher, fading on low volume. As with SP500 we will see if this is just NASDAQ making a low volume test of the initial relief bounce move.
DJ30: Same action, turning lower after coming close ot the 10 day EMA Friday. Very low volume on the fade, again showing more a lack of buyers than new sellers rushing in.
RUTX: Same action as DJ30, falling back from the 10 day EMA after the bounce from the lows.
SP400: Also turning down from the 10 day EMA. Same story as the other indices.
SOX: After gapping up through the 10 day EMA Friday, SOX fell below it to start the week, Almost filled the gap from Friday. Not a bad test of the move, that is an island reversal: gapped lower 6 sessions back, gapped back upside Thursday and Friday. Now testing that move, and looks as if SOX wants to move back up despite the Monday drop.
Energy: Did not look all that anxious to move upside Monday. CVX gapped lower, tried higher but failed. SLB failed at the 20 day EMA for the second session after gapping to that level Friday. GPOR is in a nice test of its break over the 50 day EMA. Ditto SWN; nice test. XEC on the other hand is bombing to a lower low.
Big Names: AMZN surged to the 20 day EMA then reversed to flat. Good move higher, now decision time. GOOG rallied a bit higher then reversed below the 50 day MA; looks weak, lighter trade. AAPL Sold back from the 20 day EMA. Still in position to move higher but earnings after the close; could be interesting. FB faded ot the 10 day EMA, still in position to continue higher. SBUX faded from the 50 day EMA but on lower volume.
Retail: Some tests of the move higher. M fell through the 50 day EMA but to the 10 day EMA. JWN testing on lower volume. DDS looks very good, holding the move off the lows. WMT rallied on higher volume. LOW gapped higher then reversed to close lower. Might be a new leg down coming.
Chips: Some sold hard such as LRCX, falling lower on rising, above average volume. Others are holding the bounce decently, e.g. ARMH. A very mixed bag.
Financial: Look like crud. JPM sells lower form the modest bounce. GS Flopped, giving up all the Friday move. BAC bombed lower on high volume. MA sold off from the 10 day EMA on rising trade.
Biotech/Drugs: AMGN still looks interesting downside, tapping the 200 day SMA and flipping negative on rising trade. CELG struggling at the 20 day EMA though volume fall back to average. BIIB sold down from the 10 day EMA, still likely in a bottoming process.
Utilities. EQT in a nice test of the move higher, looking for a new entry. Electric utilities are falling again, e.g. PCG, AEP.
Materials: LPX falls hard on rising, above average volume. CX continues its trend lower.
Stats: -72.69 points (-1.58%) to close at 4518.49
Volume: 1.876B (-10.17%)
Up Volume: 353.2M (-1.487B)
Down Volume: 1.58B (+1.279B)
A/D and Hi/Lo: Decliners led 2.91 to 1
Previous Session: Advancers led 4.29 to 1
New Highs: 10 (-6)
New Lows: 119 (+56)
Stats: -29.82 points (-1.56%) to close at 1877.08
NYSE Volume: 1.05B (-8.7%)
A/D and Hi/Lo: Decliners led 5.45 to 1
Previous Session: Advancers led 8.36 to 1
New Highs: 16 (+6)
New Lows: 97 (+69)
Stats: -208.29 points (-1.29%) to close at 15885.22
VIX: 24.15; +1.81
VXN: 27.54; +1.8
VXO: 24.47; +1.29
Put/Call Ratio (CBOE): 1.03; -0.08
Recent history: Over 1.0 for 16 of the last 17 sessions. 30 of 41 sessions above 1.0.
Bulls and Bears: Bulls falling further below 35% and bears as bears continue to rise over 35%. Very bullish signal and the market is finally reacting a bit.
Bulls: 26.8 versus 28.6. Still well below 35%.
Bears: 36.1 versus 35.7. 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.
28.6% versus 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.
35.7% versus 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): 2.01% versus 2.05%. Gapped to a doji off the 10 day EMA test to end last week. Strong run, test of near support, starting to bounce.
Historical: 2.05% versus 2.01% versus 1.99% versus 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: 1.0849 versus 1.0798. Trying to bounce off the bottom of the two month range.
Historical: 1.0798 versus 1.0769 versus 1.0815 versus 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: 118.32 versus 118.78. Faded to the 10 day EMA after the surge last week. Normal test thus far.
Historical: 118.78 versus 118.85 versus 116.99 versus 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
Oil: 30.34, -1.85. touched the 20 day EMA on the high, reversed much of the move. The 20 day EMA acted as resistance in late November, late December. Now late January?
Gold: 1108.10, +11.80. Still working well, moving back up to the early January peak. Still quite solid.
Okay, rebound off of extreme readings and new session lows. Bounce up to the 10 day EMA. A lower volume, but rather large, fade off of that move. Just a pause in a continuing relief bounce or a resumption of the downside?
Lots of stocks lower Monday, many falling from the near resistance, some quite hard. A pause is normal before a resumption of the move, but of course there is no guarantee the relief move continues. Often it does, particularly off of such nastily extreme internals and sentiment.
So, we watch for the oversold bounce to continue, and it likely tests nerves before it does, i.e. a further drop in the morning. The key at that point is if the shorts cover once more.
There are some upside plays we see setting up off of tests of recent moves; that is one reason we feel the market has more upside. For example, SWN, GPOR, EQT, VRSN, COG, CYBR, SAVE. Not the old market leaders, of course, but money is moving into some beaten up areas and some stocks that actually have decent patterns versus just getting clubbed and then lurching back up.
We will prep with some upside and some downside and let the market show us. Again, it looks as if the market remains a bit weaker early on this evening, but we are not going to assume that early weakness absolutely means the stock market remains lower. In short, we anticipate a move back up once more to continue the relief bounce. It is good to anticipate and prepare, but don't assume anything has to be.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4518.49
The 10 day EMA at 4575
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 2-15 high
4811 is the November 2014 peak (intraday)
4815 is the December 2014 peak
The March 2015 lows at 4843 and 4825
The 50 day EMA at 4833
4902 is the July 2015 low
4916 is the mid-November 2015 low
4920 is the lower gap point from mid-October
The 200 day SMA at 4959
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
4517-4506 from the September 2015 and August 2015 closing lows
4485 are the twin July 2014 peaks
4352 is the March 2014 peak
4292 is the August 2015 low
S&P 500: Closed at 1877.08
1897 is the prior all-time high hit in April 2014
1902 from early May was the intraday all-time high.
The 10 day EMA at 1902
1905 is the August 2014 low
1913 is the early September 2015 closing low testing the bounce from the August selling
1972 is the December 2014 low
The 50 day EMA at 1990
1991 is the July 2014 high
1995 is the September 2015 recovery peak
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 2049
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
1872 is the September 2015 test low of the August low
1867 is the August 2015 low
1862 is the October 2014 closing low
1820 is the October 2014 intraday low
1815 is the April 2014 low
1772 are the Q4 2013 highs and lows
Dow: Closed at 15,887.63
16,026 is the April 2014 low
16,058 is the early September 2015 low
16,117 is the October 2014 closing low
The 10 day EMA at 16,151
16,368 is the August 2014 low
16,506 is the March 2014 peak
16,589 is the December 2013 former all-time high
16,632 is the April 2014 peak
16,665 is the late August 2015 closing high
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
The 50 day EMA at 16,941
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
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,418
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
15,855 is the October 2014 intraday low
15,666 is the August 2015 closing low
15,372 is the February 2014 low
15,370 is the August 2015 low
January 26 - Tuesday
Case-Shiller 20-city, November (9:00): 5.8% expected, 5.5% prior
FHFA Housing Price I, November (9:00): 0.5% prior
Consumer Confidence, January (10:00): 96.8 expected, 96.5 prior
January 27 - Wednesday
MBA Mortgage Index, 01/23 (7:00): +9.0% prior
New Home Sales, December (10:00): 506K expected, 490K prior
Crude Inventories, 01/23 (10:30): 3.979M prior
FOMC Rate Decision, January (14:00): 0.5% expected, 0.5% prior
January 28 - Thursday
Initial Claims, 01/23 (8:30): 285K expected, 293K prior
Continuing Claims, 01/23 (8:30): 2230K expected,
Durable Orders, December (8:30): -0.5% expected, 0.0% prior
Durable Goods -ex tr, December (8:30): -0.1% expected, 0.0% prior
Pending Home Sales, December (10:00): 0.8% expected, -0.9% prior
Natural Gas Inventor, 01/23 (10:30): -178 bcf prior
January 29 - Friday
GDP-Adv., Q4 (8:30): 0.9% expected, 2.0% prior
GDP Deflator, Q4 (8:30): 0.9% expected, 1.3% prior
Employment Cost Index, Q4 (8:30): 0.6% expected, 0.6% prior
Chicago PMI, January (9:45): 45.0 expected, 42.9 prior
Michigan Sentiment - Final, January (10:00): 93.2 expected, 92.6 prior
End part 1 of 3
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