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2/20/2016 Investment House Report
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Targets hit: CENX
Entry alerts: QRVO
Trailing stops: None issued
Stop alerts: SWN
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- Quiet expiration as sellers don't try to exploit any weakness.
- Stock indices continue a test of the 3-day move.
- CPI core jumps over 2.2%
- Stocks reload for the new expiration to try and continue past the January recovery high.
Friday was expiration, but it was a pretty quiet one. All of the action took place early as stocks started lower and sold in the first hour. CPI for January was flat overall, but cores jumped 0.3% (0.1% expected), a 2.2% year/year gain. That was the highest since June 2012 and the biggest jump since August 2011. That had stocks a bit unnerved as it works to handcuff the Fed's options regarding renewing any monetary easing. As for the session, however, it was, to use one of the Fed's favorite words, transitory.
Indeed after the first hour of trade the selling was over. It took the indices lower in a second day of testing the prior Friday, Tuesday and Wednesday sharp rally, but by the end of the session the indices were in very good shape. Indeed, they were never really in bad shape even with the early lows. It was a day of further testing or consolidating the 3-day surge, and frankly, the action was not bad at all for the upside to try and consolidate the gains and try for more.
DJ30 16.89, 0.38%
NASDAQ 21.44, 0.13%
VOLUME: NYSE 7.5%, NASDAQ -7%
A/D: NYSE decliners lead slightly, NASDAQ 1.2:1 advancers
This market is an interesting dichotomy. We know the big names led the move higher through year end while the majority of stocks had already engaged in selloffs, many down well over 20%, the level the pundit class calls a bear market.
When the big name leaders broke, many of the downtrodden, the oppressed areas longing for money to come their way did indeed start to recover. Industrial equipment, metals, department stores all have enjoyed money moving their way. Not huge, blowout moves, but some money fleeing the big names trying to find some place to go while staying in the market. These beaten up areas are getting some money parked in them. We saw that with good moves in FCX, CENX, AKS as they come off their lows.
The market now is at something of a crossroads. The stock indices set up big tops and broke lower, then set up a smaller topping pattern. They were breaking lower two Thursdays back when the OPEC production cut story hit, reversing oil from 26 to 34, and reversing the stock indices from new selloff lows. After a three-day move following the intraday reversal, the stock indices are testing the prior recovery high as is oil.
Will the indices fold or continue higher? Will the big names continue to recover or falter? If they falter, will money keep moving into the beaten down areas and thus keep the stock market from wholly rolling over even if the big names that move the needle on the indices again sell?
Overall we still view the stock market as in a major top. Fifteen months of putting in a rounded top, a breakdown, the formation of a head and shoulders pattern after the breakdown. Pretty negative, but the stock indices wanted to find a story to help them rally, and they did. Now they are trying to turn the selling back and continue a rebound move.
As of Friday, the upside move attempt is still alive. Three sharp days up, two very mild selling sessions that function as nice consolidations. The setup is still there to continue the move near term as money is put into those beaten down areas and the prior big name leaders try to continue their recoveries as well.
The indices are at the January recovery highs, and as discussed last week, that is the next major test of the rebound from the August, January, and February lows (in terms of DJ30, SP500, and more or less NASDAQ), and the Thursday and Friday consolidation action is a good way to digest the initial move and setup a continuation higher.
This week the indices will show if they can continue setting up. As noted, nothing as of Friday suggested they cannot, at least nothing technically. Oil is on everyone's radar, however, and it hit the 50 day MA's and the January high Thursday and stalled. If oil stumbles back down, those that are managing their funds via the price of oil will pressure the stock market as well.
DJ30: The three day recovery took the Dow to its January recovery high as of Wednesday. Thursday and Friday DJ30 tested, but Friday showed a nice intraday recovery off the early low. Definitely no sellers trying to exploit the stall at the prior highs, at least not yet. This is pretty solid consolidation action, taking a breather after a strong three day surge, holding the gains and trying to set up a new move.
SP500: Similar action, though SP500 has not made it quite back to the January highs. Testing as well, reaching lower Friday early session, then rebounding to close flat. Holding over the August and September lows, digesting the gains, in great position to continue the move.
NASDAQ: Started lower than the NYSE indices, making it back to the September lows by the end of the week. still below the January recovery high that failed at the 20 day EMA, but over the 20 day EMA on the Wednesday move and held it to close out the week. As with DJ30, SP500, even though it is lower, this is a key test in the recovery for NASDAQ as the big names try to continue their recovery and thus push NASDAQ.
SOX: Looks a lot like SP500, rallying close to the January high but not quite there. Indeed it touched at the 50 day EMA on the Thursday high and faded, and showed similar action Friday. Not as clear in terms of a quality consolidation, but it is holding its recovery gains.
SP400: The midcaps are also very similar to SP500, testing the nice move to near the January highs, bouncing back from intraday weakness.
RUTX: More like NASDAQ, posting a recovery off the lower low, now trying to consolidate the move to take on the January high.
Big Names: GOOG bounced to the 50 day EMA but appears to be stalling. AMZN touched the 200 day SMA Thursday then reversed, but Friday it rebounded close to that level. FB managed to close over the 50 day MA Friday after struggling there all week. AAPL rallied early week then faded it Thursday and Friday. Still looks as if it can continue higher, but showed this same action in late January right before it gapped lower. NFLX recovered to the 20 day EMA then reversed late week. MSFT rallied to the 50 day EMA Wednesday, tried to extend the move, faded late week. Still a good recovery off the 200 day SMA test.
Retail: Department stores in some cases are not bad, e.g. DDS, even with JWN earnings.
Metals: Solid week moving up off the lows, some testing nice moves to end the week, e.g. FCX. CENX surged and AKS remains solid.
Financial: Still in downtrends, e.g. GS, BAC. JPM is trying to hold a recovery off the January low, but choppy. MA and V are off the lows but are at the next step where they need to show they can continue.
Utilities: Still holding the line in some good tests of prior moves, e.g. AEP, PCG. Defensive group and that suggests there is still some downside worry.
Industrials: Testing after good moves from CAT, CMI. Others such as TEX are not even resting. Recovering off of the lows, trying to change the trend.
Chips: Still a struggle. NXPI faded from a 20 day EMA test. AVGO still below the 200 day SMA. MCHP, SWKS are trying to use the market pause to set up the next try at moving higher.
Stats: +16.89 points (+0.38%) to close at 4504.43
Volume: 2.076B (-7.16%)
Up Volume: 1.13B (+442.25M)
Down Volume: 741.44M (-508.56M)
A/D and Hi/Lo: Advancers led 1.25 to 1
Previous Session: Decliners led 1.51 to 1
New Highs: 20 (0)
New Lows: 57 (-6)
Stats: -0.05 points (0%) to close at 1917.78
NYSE Volume: 1.13B (+7.62%)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Advancers led 1.04 to 1
New Highs: 30 (-2)
New Lows: 41 (+10)
Stats: -21.44 points (-0.13%) to close at 16391.99
VIX: 20.53; -1.11
VXN: 24.91; -1.69
VXO: 22.33; -0.69
Put/Call Ratio (CBOE): 1.06; -0.01
Three sessions back over 1.0 as the put action remained heavier on expiration after the market posted such a strong rebound. That has a lot of positions being rolled or closed.
Recent history: 6 of 12 sessions below 1.0, 23 of the last 35 sessions above 1.0, including the last three.
Bulls and Bears: Bulls recovered a bit of ground after falling the prior week from over 30. Bears remain very skeptical with their numbers rising despite a market bounce. Still in a crossover position. This indicator is strongly suggesting a bounce, but this is not a timing indicator.
Bulls: 26.5 versus 24.7. Some recovery from the plunge from over 30 three weeks back.
Bears: 39.8 versus 39.2. Still no faith in bears the market has bottomed.
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.
24.7% 34.0% versus 29.2% versus 26.8% versus 28.6% versus 34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4%
Background: Bulls hit their lowest level in 2015 since the 2008 and 2009 market plummet.
39.2% versus 38.1% versus 35.4% versus 36.1% versus 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%
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): 1.75% versus 1.74%. After a test of the 20 day EMA through Wednesday, a bounce Thursday, pause Friday. Big surge higher is now tested.
Historical: 1.74% versus 1.81% versus 1.78% versus 1.75% versus 1.64% versus 1.69% versus 1.73% versus 1.76% versus 1.85% versus 1.85% versus 1.88% versus 1.86% versus 1.96% versus 1.93% versus 1.99% versus 2.019% versus 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%
EUR/USD: 1.1130 versus 1.1103. EUR still testing the 20 day EMA after the big break higher. 7 session test, showing doji. EUR rallied when US stocks struggled.
Historical: 1.1103 versus 1.1124 versus 1.1275 versus 1.1154 versus 1.1249 versus 1.1322 versus 1.1293 versus 1.1294 versus 1.1197 versus 1.1159 versus 1.1206 versus 1.1110 versus 1.0916 versus 1.0905 versus 1.0836 versus 1.0939 versus 1.0899 versus 1.0854 versus 1.0849 versus 1.0798 versus 1.0769 versus 1.0815 versus 1.0910 versus 1.0917 versus 1.0869
USD/JPY: 112.65 versus 113.25. Dollar touched the 10 day EMA early week, has sold since.
Historical: 113.25 versus 114.04 versus 114.33 versus 114.747 versus 113.29 versus 112.39 versus 113.36 versus 115.085 versus 115.74 versus 116.83 versus 116.76 versus 117.88 versus 120.04 versus 121.014 versus 121.055 versus 118.27 versus 118.64 versus 118.48
Oil: 31.75, -0.98. Gapped to the 50 day EMA Thursday but sold back. Friday oil filled the upside gap. Trying to change things up a bit, and did make it through the 20 day EMA this time.
Gold: 1231.30, 0.00. After the big surge Thursday off the 10 day EMA test, oil held steady.
The indices are sitting on a big three day push higher, testing Thursday and Friday. They held the moves and the shorts did not try to take new positions ahead of expiration. Now we see if DJ30, SP500 et al can push higher again to continue the advance. Key test of the move and prior levels as discussed earlier.
We have a balanced mix of upside downside plays for the start of the week. Some areas that are recovering could continue doing so. Others continue to struggle even after the bounce, setting up some possible downside plays. As we have seen, both can work in this market.
You have to acknowledge the overall negative market pattern yet defer to the recent strength until the sellers show up again. Given the overall top in the market, we feel they will show up, but perhaps not until there is more of a relief move upside.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4504.43
4517-4506 from the September 2015 and August 2015 closing lows
4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low.
4620 is the February 1 closing high
4637 is the February intraday high
The 50 day EMA at 4631
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
4902 is the July 2015 low
The 200 day SMA at 4909
4916 is the mid-November 2015 low
4920 is the lower gap point from mid-October
4894 is the September 2015 closing high
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
4485 are the twin July 2014 peaks
4471 is the January 2016 closing low
4363 is the February upper gap point
4352 is the March 2014 peak
4313 is the January 2016 intraday low
4292 is the August 2015 low
4212 is the February intraday low
4116 is the October 2014 low
S&P 500: Closed at 1917.78
1940 is the January 2016 recovery bounce peak closing high
The 50 day EMA at 1940
1947 is the February 2016 intraday high
1972 is the December 2014 low
1991 is the July 2014 high
1995 is the September 2015 recovery peak
2011 is the September prior all-time high
2020 is the September 2015 intraday high
The 200 day SMA at 2031
2040 is the March 2015 closing low
2046 is the July 2015 closing low
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
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
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
1812 is the January 2016 intraday low
1772 are the Q4 2013 highs and lows
Dow: Closed at 16,391.99
16,466 is the January 2016 recovery closing peak.
16,506 is the March 2014 peak
16,511 is the January 2016 intraday high
16,526 is the early January resistance
The 50 day EMA at 16,552
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 intraday 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
The 200 day SMA at 17,253
17,351 is the September 2014 all-time high.
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
16,368 is the August 2014 low
The 20 day EMA 16,227
16,117 is the October 2014 closing low
16,058 is the early September 2015 low
16,026 is the April 2014 low
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
February 19 - Friday
CPI, January (8:30): 0.0% actual versus -0.1% expected, -0.1% prior
Core CPI, January (8:30): 0.3% actual versus 0.1% expected, 0.2% prior (revised from 0.1%)
February 23 - Tuesday
Case-Shiller 20-city, December (9:00): 5.8% expected, 5.8% prior
Consumer Confidence, February (10:00): 97.3 expected, 98.1 prior
Existing Home Sales, January (10:00): 5.30M expected, 5.46M prior
February 24 - Wednesday
MBA Mortgage Index, 02/20 (7:00): 8.2% prior
New Home Sales, January (10:00): 523K expected, 544K prior
Crude Inventories, 02/20 (10:30): 2.150M prior
February 25 - Thursday
Initial Claims, 02/20 (8:30): 270K expected, 262K prior
Continuing Claims, 02/13 (8:30): 2268K expected, 2273K prior
Durable Orders, January (8:30): 2.0% expected, -5.0% prior
Durable Goods -ex tr, January (8:30): 0.4% expected, -1.0% prior
FHFA Housing Price I, December (9:00): 0.5% prior
Natural Gas Inventor, 02/20 (10:30): -158 bcf prior
February 26 - Friday
GDP - Second Estimat, Q4 (8:30): 0.4% expected, 0.7% prior
GDP Deflator - Secon, Q4 (8:30): 0.8% expected, 0.8% prior
Personal Income, January (8:30): 0.4% expected, 0.3% prior
Personal Spending, January (8:30): 0.3% expected, 0.0% prior
Core PCE Prices, January (8:30): 0.1% expected, 0.0% prior
Michigan Sentiment -, February (10:00): 91.0 expected, 92.0 prior
End part 1 of 3
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