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3/18/2016 Investment House Daily
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Targets hit: XEC
Entry alerts: BIDU; JPM; MS; VMW
Trailing stops: None issued
Stop alerts: None issued
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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.
- With the Fed adopting a new 'rates lower regardless' policy, stocks are
- Rally built on central bank intervention continues in its fifth week.
- Big names struggle, same areas rallying continue rallying.
- Economic data shows tantalizing improvement in manufacturing PMI's, but
the rest of the data continues to weaken.
- DJ30, SP500 test into the November/December range.
- Still playing the solid upside plays, cognizant of the market's long
Stocks closed out the session, week, and for most of the indices, year,
higher. All of the stock indices we follow posted new post-February selloff
highs. Five and one-half weeks of almost straight rallying. Miraculous.
To wit: Bank of Japan going NIRP and intervening in the yen frequently.
OPEC engaging in its own market manipulation (oil of course) with rumors of
production cuts and freeze agreements, the latest one announced Wednesday
for April 17. The People's Bank of China setting the yuan peg lower and
lower, acting as a very serious and rational reserve currency nation. The
ECB upping QE and lowering a key borrowing rate making US-style share
buybacks, and thus higher EPS and higher share prices, much more likely.
The crowning moment was the US Fed altering its hiking policy, and indeed
the entire monetary policy philosophy of the Fed, indicating it was not that
concerned about an inflation speed limit and implying it would actively hold
rates lower as the new norm versus the usual case of leaving rates alone
except in times of extreme financial stress. When the Fed makes official it
is altering its mandate to maintaining interest rates low even if it
requires full-time intervention, that is going to have an impact.
So, stocks were higher again, moving for the most part into positive
territory for 2016. NASDAQ is not there nor is RUTX, but they are following
the rest of the indices. With this rally about stimulus (formerly the rally
about nothing), it may not be long before NASDAQ and RTUX follow the other
indices to new 2016 highs.
SP500 8.83, 0.43%
NASDAQ 20.66, 0.43%
DJ30 117.04, 0.67%
VOLUME: Shot higher as S&P rebalanced Friday on expiration. So, already
higher volume was even higher. NYSE +112%, NASDAQ +38% Fibonacci
retracement. Expiration, S&P rebalance.
A/D: NYSE 1.6:1, NASDAQ 1.8:1. Not a broad rush higher Friday, but there
was plenty of advancing breadth on the week.
The economic data was mostly lower for the week and calls for writing down
rather 'lofty' Q1 GDP expectations of 2.5%ish. Retail Sales for February
came in negative while January's aberrant seasonal adjustments were
reversed, thus actually showing the decline that we pointed out at the time
sans the adjustments. Industrial production and Capacity utilization
tumbled. Prices jumped. At least the regional PMI's from New York and
Philadelphia turned positive when expected to show more negative readings.
Hopefully that starts a trend higher in these numbers. They have shown
improvement in the past only to turn out to be just blips in the decline.
On top of that corporate profits are lower and still falling, while earnings
expectations are falling as well. No worries, mate. Janet the Generous,
the Easy Money Madame, is in charge. What, me hike? That should be the
inscription below her picture in the Federal Reserve. Stocks have responded
What, me worry? A.E. Yellen mask It's not my money!
Jim Bullard surfaced in the afternoon and helped push stocks lower for that
mid-session dip when he put his hawk's beak back on, talking of a 'prudent'
move to 'edge rates toward normal levels.' Recall as the market sold off in
February he started a lot of the manipulation upward when he switched to a
dove, labeling "tightening unwise." After the FOMC statement Wednesday that
declared rates low forever, however, the impact was muted.
'I regard it as unwise to continue It's 'prudent policy to
edge rates toward
a normalization strategy; February 17 normal levels.' Friday,
Some of the leaders of late struggled to close the week and expiration.
Metals were down, energy struggled, but nothing major. Big names, however,
struggled with MSFT, AMZN falling. Other big names stalled moves at
potentially key levels. Retail performed well, e.g. ROST, TJX, DDS.
Financial stocks enjoyed a nice jump, e.g. C, JPM, MS. It is their time I
suppose, though with the Fed going on low rate bias forever status, it would
seem the banks were not the favored few.
The indices are still climbing with DJ30 approaching the highs from the
November/December 2015 range. After five weeks upside, making it to this
level is the next market tell in terms of the next move within the move.
Nothing has stood in the way of the market rally yet. Friday showed some
rotation from big names to some of the same leading groups, but nothing that
altered the current status. Again, the actions here at the top of the range
are the next market move tell.
SP500: Higher still, closing at a 2016 high as now this large cap index
moves well into the November/December 2015 range that led to the January
selloff. 2050 to 2075 is all resistance, but nothing has stopped the move
yet. Nothing as even slowed it down.
DJ30: Powering higher again to 17,600ish where next resistance resided. As
with SP500, however, pretty much everything from here to 18,000 is
resistance. After that it shoots for the old all-time high.
NASDAQ: Up but still lagging as NASDAQ approached the November and December
2014 twin highs and several gap points clustered around the 4800-4810 level.
A heck of a run, but this sure looks like a point that, if it were inclined
to fail, it would fail. The big names are struggling some and if they start
to break once more, NASDAQ loses its most significant leaders. For now AAPL
is still moving higher while GOOG is hanging in well enough. AMZN is
selling and others such as NFLX, FB are at critical levels in their
patterns. Which way those throw in will tell much of the tail.
RUTX: Broke to a higher recovery high, moving past the early March peak.
Now at the August 2015 low, still recovering but still a long, long way
below the November/December peaks. Even so, the small caps continue their
march toward 1140-1150 (closed at 1101).
SOX: Chips surged again, closing rapidly on the October to December head
and shoulders top that sent it to the lows. Nothing stopping it right now.
SP400: The midcap index cleared the 200 day SMA and the late December 2015
peak. Ready to test the summer 2014 double top at 1445 (closed at 1430ish).
The very choppy range from August to December 2015 has not slowed it one
Big names: Not in dire straits but not doing well. AMZN was clocked again,
closing below the 200 day SMA. MSFT dropped over 2% after a decent week.
GOOG is fine though was off Friday. FB is at an important retracement
level. NFLX is also at an important level, testing the early March rebound
peak. SBUX posted a low volume rally last week but showed a tombstone doji
Friday on volume. Again, not breaking, but some key names are on hard times
as others are not following the market move higher.
Financials: The interesting group Friday as they finally started moving
higher. JPM, C, TCBI, MS showed some nice upside moves.
Energy: Mixed but overall solid as oil enjoyed a strong week as the dollar
fell gratis the Fed. XEC hit our initial target Thursday. OII surged
Thursday, rested Friday. WLL had a tough Friday after a great week to that
point. CVX still solid. Service companies remain in good shape, e.g. HAL,
Industrial Equipment: A solid week even with CAT's earnings painting a
picture of gloom. But heck, even CAT rallied after those results. CMI hit
our initial target and we banked some excellent gain.
Materials: Solid. CX is surging for us. EXP surged higher to the 200 day
Retail: Some real winners, e.g. TJX, ROST, DDS. Not dead yet.
Chips: Some very good moves. SWKS rallied 2.8% for us while QRVO jumped 3%
and those moves were just Friday.
Software: Mixed. BLKB has jumped upside. ADBE reported strong earnings
and bolted higher. ORCL surged on earnings and is still running. MSFT,
however, sold hard Friday.
Stats: +20.66 points (+0.43%) to close at 4795.65
Volume: 2.55B (+38.12%)
Up Volume: 1.94B (+750M)
Down Volume: 872.76M (+187.67M)
A/D and Hi/Lo: Advancers led 1.79 to 1
Previous Session: Advancers led 2.17 to 1
New Highs: 88 (+23)
New Lows: 35 (-34)
Stats: +8.99 points (+0.44%) to close at 2049.58
NYSE Volume: 2.147B (+112.15%)
A/D and Hi/Lo: Advancers led 1.58 to 1
Previous Session: Advancers led 3.88 to 1
New Highs: 131 (-34)
New Lows: 13 (-5)
Stats: +120.81 points (+0.69%) to close at 17602.3
VIX: 14.02; -0.42
VXN: 17.2; -0.45
VXO: 14.66; -0.5
Put/Call Ratio (CBOE): 0.78; +0.1
About 50-50 over 1.0/under 1.0 the past 50 sessions. No real indication now
but already did its work.
Bulls and Bears: Bulls are surging though at 44 still well below the 60ish
that is bearish. Bears are back below 30 and as such are not growling.
Bulls: 44.4 versus 39.4. Third week back over 35%
Bears: 30.3 versus 35.4. After bouncing last week, bears plummeted.
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.
39.4% versus 36.4% versus 34.7% versus 26.5% versus 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 late 2015 and 2016 since the
2008 and 2009 market plummet.
35.4% versus 34.3% versus 35.7% versus 39.8% versus 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: Finally back below 35% after spiking to 39.8 three weeks back.
Bonds (10 year): 1.89% versus 1.90%. Hit 1.87% on the high then backed
off. Bonds are stronger post-FOMC of course given the Fed's rate hike
passion is not as fervent. Of course Bullard said Friday that it was time
to start normalizing again, one month after saying to do so would be unwise.
My, things have changed that much in a month? Oh yes, the market is not at
2016 highs versus diving lower. So much has changed.
Historical: 1.90% versus 1.91% versus 1.97% versus 1.966% versus 1.979%
versus 1.927% versus 1.88% versus 1.82% versus 1.91% versus 1.88% versus
1.83% versus 1.84% versus 1.82% versus 1.74% versus 1.757% versus 1.70%
versus 1.74% versus 1.74% versus 1.76% versus 1.75% versus 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%
EUR/USD: 1.1272 versus 1.1313. After surging Wednesday and Thursday
post-FOMC, the euro took a day off Friday after the euro hit the February
peak, the highest peak since October 2015 and the subsequent selloff.
Historical: 1.1313 versus 1.1227 versus 1.1112 versus 1.1103 versus 1.1149
versus 1.1106 versus 1.1107 versus 1.1017 versus 1.0999 versus 1.0961 versus
1.0865 versus 1.0866 versus 1.0880 versus 1.0940 versus 1.102 versus 1.1016
versus 1.1039 versus 1.1130 versus 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
USD/JPY: 111.605 versus 111.46. Dollar plunged to the bottom of the 6 week
trading range, then held there Friday. An epic battle between the BOJ
trying to weaken yen and the Fed trying to weaken the dollar.
Historical: 111.46 versus 112.58 versus 113.11 versus 113.795 versus 113.78
versus 113.15 versus 113.396 versus 112.58 versus 112.965 versus 113.795
versus 113.70 versus 113.45 versus 113.896 versus 112.76 versus 113.965
versus 112.90 versus 112.11 versus 112.435 versus 112.65 versus 113.25
versus 114.04 versus 114.33 versus 114.747 versus 113.29 versus 112.39
versus 113.36 versus 115.085
Oil: 41.14, 0.94. Tremendous end of the week with a Wednesday to Friday
surge gratis the weaker dollar gratis the Fed. Hit near the 200 day SMA
Friday then faded. That puts oil at the late November peak and the October
low; some pretty serious resistance at that range and on up to 46-48.
Gold: 1254.30, -10.70. Gold is still undecided. Hit a new high just over
a week back, but started to struggle. Faded into the FOMC meeting then of
course rebounded on the result. Now it is stuck below the recent highs with
lower MACD. A tremendous move, but losing some momentum.
A short week with Good Friday on . . . Friday.
As the rally continues, even though in its fifth week, new stocks from new
groups are stepping up. Friday we picked up some of those financials as
well as BIDU, VMW. They go well with QIWI, BITA, and FFIV picked up earlier
in the week, all moving well.
The rally continues with DJ30 bumping closer and closer to the
November/December range peaks. That remains the big tell for the coming
next move, i.e. whether stocks breakout in a continued celebration of the
new Fed monetary policy self-mandate or if the market tops and resumes the
selling it wanted to continue before a month+ of intervention and
manipulation began. At the time we called it the silent hand. It became
more pronounced and open as the month continued.
Now, just as the excitement is drawing people back in the market after a big
run, Bullard changes his tune to a 'rate hike is prudent' and the financials
start to break higher. Is the Fed so quickly turning back after Wednesday
opting not to hike and cutting its Fed Funds forecast to just two 2016
hikes? Does not seem likely, but what is noteworthy is the market rally was
roughly coincident with Bullard's shift to dove status from hardliner.
Given the moves quality patterns are showing, despite a fifth week upside,
we picked up new positions this past week, and they look good. As long as
the move continues showing good patterns making good breaks higher, we play
Still you have to be aware of the overall market position and factor that
in. After a 5 week move back up near the highs that preceded the February
selloff, keep in mind the overall top. While the Fed wants the market to
hold its gains and maintain whatever fiction of a 'wealth effect' the Fed
feels is created, the Fed might not want it to create its own bubble just on
this rally. The Fed and its counterparts around the world managed to stem
the selling and indeed produce a five week 10+% surge in US stock indices.
Even IF they want to keep it running, it is highly unlike this move
continues much farther before taking a more serious rest.
With that in mind, we plan on playing the move with solid patterns coming
off the lows, patterns that have suffered their own bear markets and are in
recovery mode. Money is more likely to continue rotating to them, and as
long as that continues we will play them. Accordingly, we play the move,
bank gain when it is there, but if it runs into trouble, we know the market
is sitting on a big bounce in an overall top so we close them up, and play
the moves the market presents.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4795.65
4811 is the November 2014 peak (intraday)
4815 is the December 2014 peak
The March 2015 lows at 4843 and 4825
The 200 day SMA at 4872
4902 is the July 2015 low
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
4774 is the January 2-15 high
4751 is the January 2015 lower high
The 50 day EMA at 4662
4637 is the February intraday high
4736 is the early January lower gap point downside, the last downside gap in
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
4517-4506 from the September 2015 and August 2015 closing lows
4485 are the twin July 2014 peaks
4471 is the January 2016 closing low
4425 is the late February intraday 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 2049.58
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
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2023 is the November 2015 low
2020 is the September 2015 intraday high
The 200 day SMA at 2017
2011 is the September prior all-time high
1995 is the September 2015 recovery peak
1991 is the July 2014 high
1972 is the December 2014 low
The 50 day EMA at 1970
1947 is the February 2016 intraday high, the late February peak
1940 is the January 2016 recovery bounce peak closing high
1913 is the early September 2015 closing low testing the bounce from the
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
1891 is last week's intraday low prior to the miraculous reversal.
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 17,602.30
June 2015 low at 17,715
17,748 is the mid-April China margin selloff and the bottom of the 5 month
The March low at 17,786
17,978 is the November 2015 peak
17,351 is the September 2014 all-time high.
17,265 is a December 2015 closing low
17,245 is the November 2015 closing low
17,152 is the mid-July post bear market high
The 200 day SMA at 17,136
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 intraday peak
The 50 day EMA at 16,817
16,740 is the mid-September peak and potential apex for a right shoulder to
a head and shoulders pattern
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
16,665 is the late August 2015 closing high
16,632 is the April 2014 peak
16,621 is the late February 2016 peak
16,589 is the December 2013 former all-time high
16,526 is the early January resistance
16,511 is the January 2016 intraday high
16,506 is the March 2014 peak
16,466 is the January 2016 recovery closing peak.
16,368 is the August 2014 low
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
March 18 - Friday
Michigan Sentiment, March (10:00): 90.0 actual versus 92.2 expected, 91.7
March 21 - Monday
Existing Home Sales, February (10:00): 5.37M expected, 5.47M prior
March 22 - Tuesday
FHFA Housing Price I, January (9:00): +0.4% prior
March 23 - Wednesday
MBA Mortgage Index, 03/19 (7:00): -3.3% prior
New Home Sales, February (10:00): 511K expected, 494K prior
Crude Inventories, 03/19 (10:30): 1.317M prior
March 24 - Thursday
Durable Goods -ex tr, - (8:30)
Initial Claims, 03/19 (8:30): 268K expected, 265K prior
Continuing Claims, 03/12 (8:30): 2227K prior
Durable Orders, February (8:30): -2.9% expected, +4.9% prior
Durable Goods -ex tr, February (8:30): -0.2% expected, +1.8% prior
Natural Gas Inventor, 03/19 (10:30): -1 bcf prior
March 25 - Friday
GDP - Third Estimate, Q4 (8:30): +1.0% expected, +1.0% prior
GDP Deflator - Third, Q4 (8:30): +0.9% expected, +0.9% prior
End part 1 of 3
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