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3/24/2016 Investment House Daily
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Targets hit: None issued
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: None issued
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- Stocks sell further Thursday but then recover to flat. More market buy on
the dips or just getting square ahead of the Easter weekend and potential
- Economic data remains disappointing as durables miss. GDP beats, but at
these levels it is like comparing a C- to D+
- Same leadership situation, big names getting some money.
- Indices show no relative change so post-Easter tells more of the story of
DJ30, NASDAQ resistance.
Stocks started lower in a second session of selling as DJ30 and NASDAQ both
touched important next resistance and faltered. Just a bit. Heading into
the weekend stocks were faltering some after a good run. DJ30 was off
100ish. It touched the 10 day EMA, however, and reversed. Surprise! Once
again they found a bid.
The economic data was again weak early on with Durable Goods February
flipping back negative after a brief one-month bump positive (-2.8% versus
4.2%), and capital investment tumbled back negative (-1.8% from 3.1%),
continuing the investment downtrend. Even the prior month's gains were
written lower from the original report. Lovely.
That appeared to weigh on stocks along with oil as it lost ground, hitting
near 38/bbl on the low. Bad news appeared to be bad news.
The Atlanta Fed released a revision to its Q1 GDP forecast, writing it down
to 1.5% from the rather wishful 2.7% it first opined. From the yearly
average of the past 10 years that was thought to be so good (mind you the
first 10 year period below 3% since the Great Depression) to a very European
1.5%. That woke the market. Hey, this is really bad news. Surely the Fed
will not, cannot hike. Possibly after that even more stimulus?
Bad news was bad news as investors and traders bought into the line we are
told by the Keynesian economists, the Fed, and the Administration
soothsayers about how solid the economy now is. Reality seemed to take hold
and the sentiment turned, however, when the Atlanta Fed revision hit. Even
the Fed it seemed, is now not that sure at all if the economy is growing or
slowing. Perhaps stimulus indeed.
Stocks bottomed, oil bottomed. SP500 bounced off the 200 day SMA. DJ30 off
the 10 day EMA. NASDAQ rebounded to the 10 day EMA. Nothing major, but
enough to close up the week flat.
SP500 -0.77, -0.04%
NASDAQ 4.64, 0.10%
DJ30 13.14, 0.08%
VOLUME: NYSE +3%, NASDAQ -9%. Mixed volume, mixed session, still showing
trade well below average.
A/D: NYSE flat, NASDAQ 1.1:1. All things flat ahead of the Easter weekend.
The action left the indices still at next resistance, leaving, as we
expected, the litmus test of this test unanswered Yes they again came back
from some selling, but that did not alter the relative position for DJ30 and
NASDAQ. Both remain at a key level after six week runs. DJ30 is not far
from the prior all-time highs but still at a lower high as in November 2015
when that run off the August low peaked out with a lower high.
Litmus test? Inflection point? Decision point? Can more central bank and
Fed intervention/manipulation/easing/stimulus drive prices higher or is the
economic weight too heavy for just a notion of less rate hikes to drive
stocks higher after this 10+% run?
The Friday GDP figures likely do little to change the notion the data is not
great. At 1.4% versus the 1.0% expected from the second reading it was
better but so pathetic nonetheless. Being happy with this beat is like
being happy you got a D+ versus a D.
The top in place speaks to an end to the rally on the Fed's and world
central banks' largesse. They have pushed financial markets higher but at
the same time have bifurcated wealth in the once wealthiest nation on earth.
It has bifurcated the economy into large corporations with protection of law
and regulation, and favor of free money. Small businesses cannot bear the
cost of the ACA and other regulations and their access to capital is a
veritable maze through the SBA as banks no longer lend to small businesses
as the return is just not there.
Thus there is now a dearth of money, of wealth in the middle of the
socioeconomic spectrum and accordingly no new businesses of note are created
and indeed we are still losing businesses after six to seven years of
supposed recovery. Real wages are lower. Tax collections are up, but those
working are not seeing the benefits of the money taken. Middle class jobs
are disappearing at an increasing rate even as we are told economic times
are better. US citizens lose good jobs to foreign imported workers with
less skills, as the fired US citizens are forced to train their replacements
or lose their severance. Disney, a 'great' American company is doing this
to Americans. Then it says it will pull out of states that pass legislation
regarding freedom of religion because it might in some way give the
perception of discrimination against certain groups. Seriously? Does the
company not see the irony of this holier than thou talk as it destroys the
lives of good, highly trained, loyal workers?
The middle and former middle class does. That is why the outsiders in both
parties are so popular. The people feel betrayed and they are acting up,
scaring the establishment. They are not stupid; they see the problems.
Their only choice is to toss those who have been in power the past 30 years
and let this come about.
Ah, I digress, but it is with a purpose. The market rally is built on money
that is ruining the economy and thus US society. As I have long argued,
most Americans did not participate in this 7 year market run. They were
washed out after the financial crisis. They could not rebuild in the
recovery because their jobs were gone and the replacements were low pay,
hourly jobs. You cannot rebuild a portfolio when you don't have enough
money to pay the bills. New reports this week show this is the case. We
were an ownership society in the 1980's and 1990's, but that is gone because
they were betrayed by the gamblers on the Fed and the companies that gambled
their pensions away. Thus the lack of money and with nowhere else to turn,
they are going to candidates that even many of these people think are out
there. A socialist? A bomb throwing tycoon? Pendulum swings are strange
Anyway, that is an explanation of why this is a market top based upon the
economy post-FOMC QE. The outcome hangs in the balance of whether the Fed
and central banks can continue holding financial markets higher in spite of
a US and world economies that simply do not support prices this high.
Moreover, earnings are going to fall and profits are already falling. The
top is still in place despite the February/March rally and again, DJ30 and
NASDAQ are at important resistance levels that will further define which
side wins. We are still awaiting the next phase after this rally.
To view charts, click on link or paste URL into browser.
DJ30 and NASDAQ remain at the key resistance levels after the rally from the
February lows. SP500 and SOX are similarly situated, just not as well
defined. Thursday did not change the analysis one bit.
Most of the leaders of late held their position and indeed many that
struggled Wednesday rebounded Thursday, e.g. metals, energy, biotechs,
materials, industrial machinery. Interestingly, the big NASDAQ names appear
to be getting money once again thrown their way.
To wit: AMZN is impressive, moving up on the week and then surging past the
March highs Thursday. Looks as if an inverted head and shoulders may be
consummating. GOOG was lower Thursday but after a week of upside. Still not
bad. AAPL forming a nice flag test of the 10 day EMA, setting up the next
move. FB not blasting off, but up all week. MSFT was up Thursday as well
as it recovered off last Friday's drop.
Stats: +4.64 points (+0.1%) to close at 4773.5
Volume: 1.544B (-8.78%)
Up Volume: 805.69M (+371.43M)
Down Volume: 774.49M (-505.51M)
A/D and Hi/Lo: Advancers led 1.15 to 1
Previous Session: Decliners led 3.71 to 1
New Highs: 30 (+3)
New Lows: 54 (+13)
Stats: -0.77 points (-0.04%) to close at 2035.94
NYSE Volume: 887M (+2.84%)
A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Decliners led 2.85 to 1
New Highs: 49 (-4)
New Lows: 23 (+8)
Stats: +13.14 points (+0.08%) to close at 17515.73
VIX: 14.74; -0.2
VXN: 17.31; -0.44
VXO: 14.91; -0.11
Put/Call Ratio (CBOE): 1.06; +0.02
Third straight 1.0+ reading, the first 1+ readings in over a week. This even
as the market is at a high after 5+ weeks of upside. Betting the downside?
If so, that is bullish. Goodness.
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 continue their surge but still well below the 60ish
that is bearish. Bears are back below 30 and as such are not growling.
Bulls: 47.4 versus 44.4. Roaring back upside.
Bears: 27.8 versus 30.4. Definitively breaking below 35%. Plummeting.
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.
44.4% versus 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.
30.3% versus 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): 1.90% versus 1.88%. As the data got worse, fears of a Fed
hike faded and bonds bounced off the 50 day EMA it has tested all March.
Gapped upside big Thursday but faded to the close.
Historical: 1.88% versus 1.94% versus 1.92% versus 1.89% versus 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: 1.1178 versus 1.1177. After a week of euro declines to the 20 day
EMA, virtually no change Thursday. The euro fell as the belief the Fed would
hike grew. Now the market is not so sure.
Historical: 1.1177 versus 1.1217 versus 1.1243 versus 1.1272 versus 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
USD/JPY: 112.83 versus 112.445. Dollar rallied all week, paused a bit
Historical: 112.445 versus 112.298 versus 111.90 versus 111.605 versus
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
Oil: 39.46, -0.33. Tanked below 38 (38.33 low) but recovered to hold the
10 day EMA. Looks like a shakeout. At the 10 day EMA after a three day test
of the last break higher.
Gold: 1221.60, -2.40. Down a bit more after the sharp Wednesday plunge.
Still over the 50 day EMA but testing lower.
Next week starts where the market left off Thursday. And Wednesday. And
Tuesday, and Monday. The prior week's move took DJ30 and NASDAQ to
resistance and this past week was a rather normal test after a move.
I am reminded of a story from my childhood, 'The Lady or the Tiger?' The
story ended with the hero opening the door that would lead to the lady or
the tiger; we could only speculate what the outcome was. I remember telling
my teacher it was the tiger because I had also read a story that said
nothing compared to the scorn of a woman. Still, that was conjecture on my
We will get to see the outcome of this choice: up with the Fed or down with
the economy. We have upside plays, we have downside plays and we plan on
throwing the weight to the side that wins this battle at DJ30 and NASDAQ
resistance. There are still leadership groups looking good, especially with
the Thursday recoveries. NASDAQ Big Names look better though the patterns
are not all necessarily buys. There are downside setups as well if the
market fails at resistance.
So, we are seeing what is the stronger market driving force, the Fed with
fewer rate hikes but nowhere near more QE, or the economy sliding out from
under the market even as some bald pundits claim, much the same as the
fictitious President Starkey from 'The Postman' that 'stuff's getting
better, stuff's getting better every day.' Someone asked if he was a
democrat or republican. The Postman replied 'parties are over with. It's an
individual that counts.' Hmmm, lessons for today?
If the market rolls over here it likely rolls over big. If it does not, the
risk/reward upside is still overall less than ideal given such a solid
upside run. We will need to look at those groups coming off the lows as we
have, now including biotechs and perhaps some internet stocks.
We have plays on both sides of the ledger ready to go, and we will look at
more for Monday as we play the way the market breaks. We don't have to be
on the initial move, particularly if the move is lower. If so, the move
will likely be long-winded and give plenty of opportunity. Nonetheless,
those early plays will yield big returns so yes, we will be venturing in if
we see the market break lower.
Have a great Easter weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4773.50
4811 is the November 2014 peak (intraday)
4815 is the December 2014 peak
The March 2015 lows at 4843 and 4825
4836 is the March 2016 peak
The 200 day SMA at 4866
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 4681
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 2035.94
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
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
The 50 day EMA at 1981
1972 is the December 2014 low
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 17,515.73
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 17,131
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 16,926
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 21 - Monday
Existing Home Sales, February (10:00): 5.08M actual versus 5.37M expected,
March 22 - Tuesday
FHFA Housing Price I, January (9:00): 0.5% actual versus 0.5% prior (revised
March 23 - Wednesday
MBA Mortgage Index, 03/19 (7:00): -3.3% actual versus -3.3% prior
New Home Sales, February (10:00): 512K actual versus 511K expected, 502K
prior (revised from 494K)
Crude Inventories, 03/19 (10:30): 9.357M actual versus 1.317M prior
March 24 - Thursday
Durable Goods -ex tr, - (8:30)
Initial Claims, 03/19 (8:30): 265K actual versus 268K expected, 259K prior
(revised from 265K)
Continuing Claims, 03/12 (8:30): 2179K actual versus 2218K prior (revised
Durable Orders, February (8:30): -2.8% actual versus -2.9% expected, 4.2%
prior (revised from 4.9%)
Durable Goods -ex tr, February (8:30): -1.0% actual versus -0.2% expected,
1.2% prior (revised from 1.8%)
Natural Gas Inventor, 03/19 (10:30): 15 bcf actual versus -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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