Thursday, January 28, 2016

The Daily, Part 1 of 3, 1-27-16

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1/27/2016 Investment House Report
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Targets hit: None issued
Entry alerts: AMGN; AMZN
Trailing stops: AMZN
Stop alerts: SPY

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- Stocks work low to high then the FOMC flips them sharply lower.
- Indices stall and fall from the 10 day EMA. Afterhours earnings, however, trying to resurrect the relief bounce.
- FOMC still holds too much sway over the market, but nothing can be done. It grabbed the power to control the economy and it won't give it up without being forced.
- FB helps rebound stocks after hours and the indices will get to test the 10 day EMA again.
- Market still can continue the relief move, but not a lot of great patterns to buy on that move.

Have I said how I hate a market that is led by the Fed? Oh, it is okay if the Fed stays out of the way or at least has enough credibility to take a track and then have people believe it will stick to it. Then you can invest and trade in accord with that direction; you have some certainty whether you agree with the policy or not.

Starting with Greenspan, however, and really going full bore with Bernanke and now Yellen, the Fed has lost credibility because it has lost its aura of full economic knowledge. It acts as if it knows not what it is doing, saying one thing while doing another, and that lack of clear direction, whether imputed or actual, feeds anxiety from the markets to individuals who know full well the Fed controls their financial future.

Wednesday the market started softer but nothing major. China's Industrial Profits flopped 4.7% and of course that is not good. US profits fell last quarter and the quarter before, so China is not alone. It is, however, just another signal that China's miracle economy is more smoke and mirrors at this juncture.

AAPL missed on revenues and iPhones sold, posting the slowest sales in iPhones since their introduction in 2007. Indeed, under Cook, no new products introduced, just size variations of what a Jobs-led AAPL already created and the introduction of some peripheral services around those products.

I am reminded of Barry Switzer coaching the Dallas Cowboys the year after Jones fired Jimmy Johnson who already had 2 Super Bowls in the bank and likely had 2 to 3 more ahead. Switzer was hired, and all he had to do was stand on the sidelines, let the coaches coach, and watch a great team Johnson built win another Super Bowl. And the last Super Bowl. The peak was reached and Switzer was no Johnson. Dallas has only been arguably close to a championship one time since.

That was an interesting play. Wish I had called it. Wonder if they are going to turn on my headphones today? Oh, that reminds me: got to gets this hole in my pocket fixed.

Sales are slowing. Yes it has over $200B in cash and major cash cows bringing in tons of money. So does INTC, PG, MSFT and other former growth companies. They are in the process of maximizing profits from their hit products. What new product can AAPL come up with? Likely none. Those are derived from what AAPL used to be: a startup with a better idea. When sales peak, the end of growth mode peaks. Remember DELL, HPQ, INTC, MSFT.

In any event, AAPL's miss was another factor weighing on the market to start Wednesday. Stocks started lower but moved higher toward the open. The downside was nothing major. After a quick dip in the first hour the stock indices rallied into midday. They then went into standby mode for two hours, awaiting the FOMC meeting announcement.

The FOMC spoke. Some said it was more hawkish. Some said it was more dovish. Ah, obviously a very clear, transparent statement. It said the economic issues caused by lower oil prices were transitory (a favorite Fed word) and that the jobs market remained strong. Then the Fed added to that: "labor market conditions improved further even as economic growth slowed late in the year." Could it be the Fed is actually acknowledging that the jobs market is lagging? Wow, the Fed actually acknowledging one of the very well known economic truths? If that was the case, the Fed statement was more dovish.

The market didn't see it that way. Stocks jumped for a few seconds then rolled over and sold to lower lows. Much lower lows.

SP500 -20.68, -1.09%
NASDAQ -99.50, -2.18%
DJ30 -222.17, -1.38%
SP400 -1.02%
RUTX -1.50%
SOX -1.20%

VOLUME: NYSE +9.5%, NASDAQ +7%. Volume solidly back above average after fading on the relief move. NASDAQ moved up above average as well as its stocks struggled with a 2+% loss.

A/D: NYSE -1.7:1, NASDAQ -2.4:1. Very mild given the selling. That shows much of the weakness was in the big names, e.g. AAPL, BA.

The market looked good on its bounce move. Then the FOMC intervened and the index charts finished bearish. Of course with FOMC announcements the reaction can take a session or more to show the market's true view. We adjusted positions accordingly, closing SPY calls, taking the rest of the AMZN gain. The action was pretty bearish post-FOMC.

Then after hours FB really trounced earnings on the top and bottom line. PYPL was not bad. EBAY missed, but not everyone can hit. FB surged. GOOG, AMZN joined in as well as they too jumped after hours.

If the Fed was just out of the way, not making announcement, indeed not even acting UNLESS in a time of crisis such as a war. The Fed's role has morphed into an economic micromanagement position, prostrating itself before financial markets. And Congress cannot even pass a bill to allow an audit to see where the Fed is putting our money? That is the old government power grab ploy: how can we be independent if anyone has oversight? Well, the entire PURPOSE of our government under the Constitution is oversight and checks and balances. How one body that controls our finances and retirements can hoodwink people into thinking that any oversight whatsoever is bad for the country shows how far we have progressed down the road away from representative rule. But, of course, I digress.

So, the Fed causes markets to sell but then markets rebound when new facts emerge. Perhaps the move higher continues off of these earnings. The big names were higher after hours, but they were still below their Wednesday session highs. Once more we are waiting to see how stocks react after the Fed's latest pronouncement.



A pretty ugly afternoon rollover after a solid upside move. Rollovers at the 10 day EMA, the first resistance point in a rebound, and if it holds and pushes the indices lower that details a truly weak market. After hours big names were bouncing and they control the market. The indices will at least have a chance to test the 10 day EMA again, and with the catalyst of some good results may be able to turn the post-FOMC selling back upside for a continued relief move.


SP500: Rallied nicely through the 10 day EMA, moving from low to high. Then the FOMC result and SP500 sold back through the 10 day and lower. Manage to recover a bit to hold the recent lows, leaving SP500 with a chance at continuing the relief move. Not bad to hold this level, and if the big names throw in, the relief rally continues.

NASDAQ: Rather ugly with a fourth straight test of the 10 day EMA with a third consecutive lower intraday high. From their NASDAQ fell sharply. At least it filled the gap from the Friday upside surge. With the big names such as GOOG, AMZN moving higher after hours, NASDAQ will get another shot at the 10 day (4555).

DJ30: Similar action, moving up through the 10 day EMA intraday and then reversing to the downside. Okay, now it has to show it can hold and rebound versus hold and fold.

RUTX: Very similar to DJ30, working laterally in a fairly tight range just below the 10 day EMA. Up a day, down the next, repeat pattern, taking what was gained, regaining what was taken. Not a bad setup to make the continued upside break.

SP400: Just like SP500, the midcaps rallied to a higher high on this move then reversed to close below the 10 day.

SOX: Pretty nice action, moving through the 10 day EMA on the high, matching the Tuesday intraday high, then fading. Filled the Friday upside gap on the low, recovered decently. Despite all of the horrid patterns in the sector, SOX can still put in an oversold relief move after this test.


Big Names: Some pretty ugly patterns on the close what with the intraday reversals, but the afterhours action is trying to wash that away. FB is trading at the late December peak near 106 after diving lower toward the 200 day SMA. AMZN rolled over on volume but is just over the 10 day EMA after hours. GOOG rolled over on higher trade but is near the intraday higher afterhours. NFLX is diving lower, no longer in leadership status. SBUX continues hanging rather nicely in its patterns. Ugly close, saved after the bell.

Energy: CVX surged but purged it all in a big intraday reversal. Ditto XOM, putting in a lower high after a lower low. SWN surged but faded much of the move though still quite nice. GPOR ripped higher. HAL continues trending lower. Still mixed with smaller issues performing a bit better.

Retail: DDS moving up to the 50 day SMA in a continued recovery. M holding at the 50 day SMA, posting a modest gain in a nice pattern. COST struggles. BBBY trying to put in a short term double bottom on rising MACD. COH moving well after earnings; a test of the move could be good. DG continued upside through the 200 day SMA. Still some improvement.

Chips: XLNX still holding its takeout gap. MCHP still in a bear flag but hasn't broken yet. ARMH broke sharply lower from its upside move. AVGO, NXPI fading but not diving. QRVO on the other hand is diving lower.

Financial: JPM showing a big tombstone doji at the 10 day EMA. MA bombed lower on strong volume. GS tried to rally, faded well off the high, but still likely tries a bounce.

Biotech/Drugs: AMGN and CELG both bombed lower from the bear flag.

Metals: FCX is actually bouncing, moving higher on strong volume. Interesting. AKS looks like crud. STLD took a breather after surging to the 50 day MA.

Industrials: MMM surged to the 50 day EMA, faded much of the move after hitting October interim peak; rollover? UTX trying to find some support but not doing much yet. DE bounced but gave most of it up in its four month trading range.


Stats: -99.51 points (-2.18%) to close at 4468.17
Volume: 2.046B (+6.65%)

Up Volume: 473.24M (-1.047B)
Down Volume: 1.62B (+1.169B)

A/D and Hi/Lo: Decliners led 2.34 to 1
Previous Session: Advancers led 2.44 to 1

New Highs: 10 (+4)
New Lows: 94 (+7)

Stats: -20.68 points (-1.09%) to close at 1882.95
NYSE Volume: 1.1B (+9.45%)

A/D and Hi/Lo: Decliners led 1.65 to 1
Previous Session: Advancers led 5.07 to 1

New Highs: 22 (+5)
New Lows: 50 (-25)

Stats: -222.77 points (-1.38%) to close at 15944.46


VIX: 23.11; +0.61
VXN: 27.27; +0.85
VXO: 24.38; +0.66

Put/Call Ratio (CBOE): 0.95; +0.07

Recent history: Second straight sub-1.00 session, even on the rollover. Over 1.0 for 16 of the last 19 sessions. 30 of 43 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.

Bulls: 26.8%
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.

Bears: 36.1%
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): 2.019% versus 2.01%. After a good test TLT looks ready to rally again.

Historical: 2.01% versus 2.01% versus 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: 1.0899 versus 1.0854

Historical: 1.0854 versus 1.0849 versus 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: 118.64 versus 118.48. After a short test of the 10 day EMA it looks as if USD is ready to rise again and take back more of that December decline.

Historical: 118.48 versus 118.32 versus 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: 32.16, +0.71. After EIA reported an 8.3M bbl build and API an 11+M bbl build, oil still rose. Looks as if it has put in a near term bottom as it rose on bearish news. I suppose that is good for stocks.

Gold: 1124.90, +4.70. Continuing the run toward the 200 day SMA, but that still puts it well below the October high at 1188ish.


Yes everyone is focused tomorrow morning on . . . Durable Goods Orders? They are out before the open and it will be interesting to see how many the government says were sold even as manufacturing has tanked the past six months.

The durables will be interesting but of course earnings has the stage. AAPL missed but afterhours FB beat handily and that has GOOG, AMZN and others sporting some solid afterhours gains, recovering back close to intraday highs lost post-FOMC.

We will have to see how the FOMC versus earnings battle plays out as the market digests what was in our view a fairly dovish statement even if it didn't say it would hold off hikes. It would look incredibly foolish if it did say that. Of course it will look even more foolish if the economy dives into a recession with the big corporations finally following most other companies already suffering. With, of course, the market leading the way. But, that is the Fed's cross to bear and they are big boys and girls. Heck, let them look absolutely foolish. That would only help in getting reforms made. Ha ha ha ha! Yea, that will happen.

As noted earlier, the indices likely get another shot at the 10 day EMA. SOX, RUTX look fully capable of taking it out. We will see. The market either continues its relief move after a pause or it rolls over. It will certainly let us know. What would be most instructive? A move higher early on the earnings and then another reversal. That would tell a pretty serious downside story. If so, this was a weak bounce and a strong selling episode is about to continue. Not sure it is ready to roll over just yet. Again, how it reacts to the afterhours earnings vis- -vis the Wednesday rollover tells a lot.

We see some upside possibilities, e.g. FCX . . . but not a lot more. So many stocks have bounced but in otherwise downside patterns. We see more downside possibilities at this juncture than upside, and that says a lot about the market unless there is a character change wrought by earnings. Examples: XOM, NVDA, V, CLX, MMM, STMP . . . rebounded decently enough but now at resistance and appear to be struggling. We will see which side wins out and move that way, though we will have more plays downside from the look of it.

Have a great evening!


NASDAQ: Closed at 4468.17

4485 are the twin July 2014 peaks
4517-4506 from the September 2015 and August 2015 closing lows
The 10 day EMA at 4555
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
The 50 day EMA at 4809
4811 is the November 2014 peak (intraday)
4815 is the December 2014 peak
The March 2015 lows at 4843 and 4825
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 4955
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


4471 is the January 2016 closing low
4352 is the March 2014 peak
4313 is the January 2016 intraday low
4292 is the August 2015 low

S&P 500: Closed at 1882.95

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 1899
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 1983
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 2047
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
1859 is the January 2016 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 15,944.46

16,026 is the April 2014 low
16,058 is the early September 2015 low
The 10 day EMA at 16,116
16,117 is the October 2014 closing low
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
The 50 day EMA at 16,873
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
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,399
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
15,766 is the January closing low
15,666 is the August 2015 closing low
15,450 is the January 2016 intraday 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% actual versus 5.8% expected, 5.5% prior
FHFA Housing Price I, November (9:00): 0.5% actual versus 0.5% prior
Consumer Confidence, January (10:00): 98.1 actual versus 96.8 expected, 96.3 prior (revised from 96.5)

January 27 - Wednesday
MBA Mortgage Index, 01/23 (7:00): +8.8% actual versus +9.0% prior
New Home Sales, December (10:00): 544K actual versus 506K expected, 491K prior (revised from 490K)
Crude Inventories, 01/23 (10:30): 8.383M actual versus 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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