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4/23/2016 Investment House Daily
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Targets hit: NGL
Entry alerts: WETF
Trailing stops: AMZN; CTRP
Stop alerts: None issued
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- NASDAQ big names take heavy fire after earnings.
- 'Old economy' aka 'value' areas continue to perform.
- Job cuts are very sad as more quality jobs are lost.
- BOJ to lend at negative rates?
- Markit PMI suggests it was not just a Q1 slowdown.
- Working the same areas that have produce high percentage winners.
Friday saw more of the 'old economy' or 'value' stocks as some are putting it lead the market though even those stocks were again taking somewhat of a pause before the weekend. Thursday saw SP500 and the NYSE indices fall, and Friday they were off a bit as well, that is, until they rebounded in the afternoon session.
SP500 0.10, 0.00%
NASDAQ -39.66, -0.80%
DJ30 21.23, 0.12%
Despite some of the old economy/value stocks (the leaders) taking time off, many were still moving higher. Money is still moving their way as it was coming out of big names as evident by the Friday bombs lower from MSFT, GOOG, SBUX. Stocks that have been in bear markets while the FANG rallied started to rally a few months back and others continue to join in on the move.
The incongruity in the moves is the relative economic performance in the world versus upside price moves in commodities, materials, industrial equipment, and other similar stock prices.
Friday Markit released its US PMI and April was the worst month for the US in 6.5 years. What a recovery! The Fed expects Q1 GDP this week to show a scintillating 0.3%. Markit's study shows that the Q1 weakness is not, as many will claim, just a Q1 thing, but is extending into Q2.
Hate to be a downer and seen as always dissing the US economy, but there is a point: it goes to show that the market rise off the February low and what appear to be attempts at a higher high are built on Fed and world central bank easy money. That is nothing new to readers, but it is important to keep things in perspective.
Thus when you hear Thursday and Friday some analysts and TV mouths gushing about what great quarters some companies had in beating earnings expectations, you have to give it the idiot test. That test is 'do you think I am an idiot to just accept what you are saying when I know that expectations where at best HALF of what they were a year ago?' Profits are getting cut in half but of course that reduction in profits is still good enough to support stock prices that are basically equivalent or higher than they were back then. Seriously? Profits are falling and that justifies prices rising to levels at profits 2x what they are now? It strains credulity.
Add to that the jobs picture. INTC bleeding 1/3 of its workers; 12,000 quality jobs gone. HAL announced 1/3 of its workers were going as well. Quality jobs still being turned into waiters, waitresses, and bartenders. At some point who is going to be buying the food and drinks? The Fed as part of a new round of stimulus?
That is why when you look at the bigger picture and not just the daily hustle to make money in the market you get kind of cynical. You realize that the majority of companies cannot support their stock price, that it is a trick of financial asset inflation.
Indeed, it is getting so bad that some are suggesting the Fed simply monetize gold, i.e. just outright buy gold for high prices, sprinkling that money throughout the economy. At least we would be buying something of value for a change. It almost seems like sane monetary policy at this juncture, proof of how insane things are. After all the BOJ is now toying with negative rates on what it lends to its banks. In other words, paying banks to borrow money.
A major problem we see lurking is the dollar. The administration, Fed, and large corporations want it lower. That means higher prices for oil and other dollar based items. The Fed wants inflation. The administration wants a weaker dollar for debt reasons as well as some other reasons that are not that politically correct to state.
The dollar does look as if it is about to break. A big rally to early 2015, a fade, a rally back to the early 2015 high late that year, and now a fall to the 2015 lows. A key test in a double top pattern. If the dollar breaks and heads lower, the US consumer is crushed as energy prices spike along with the cost of everything else. The Fed gets inflation, but a hollow victory because the inflation is not due to economic growth as its Keynesian models want, but because of horrid monetary policy that has collapsed the dollar's value. Again.
Frankly, the dollar doesn't have much downside left. Since the central bank's inception by act of Congress, the US dollar has lost 97% of its value. Yes, a dollar today valued in dollars at the time the central bank was formed is worth 3 cents. Gold still holds the same relative value in what it can buy. The dollar, down 97% in the same period. Good work oh great central bank!
SP500 rallied to the November 2015 peak and then faded Thursday and Friday. Long rally straight up. It is at prior resistance. The rounded top started in October 2014 (QE end) is still in place. SP500 in that context is quite precarious. If you add in the Fed and its willingness to back the financial markets, you can toss a lot of technical issues out the window. The question remains: how long can the Fed keep this up before the markets say 'no mas' and sell anyway? Cannot know. So for now we play the upside even if the pattern is precarious on SP500. Let it test then pick up the 'value' names as they bounce off of their trend tests.
NASDAQ: Gapped to a doji at the 20 day EMA Friday after a weeklong lateral move. NASDAQ broke resistance with a gap and run 1.5 weeks earlier but could not advance. It has now gapped back through that resistance to the downside, forming something of an island reversal to the downside. It is up to the big names to stem the selling and attempt to hang on. NASDAQ is now with SOX as an index that broke resistance only to give it up. Possible downside drag on the rest of the market, but thus far what has occurred is a reallocation of money from NASDAQ big names to the 'value' areas.
DJ30: Similar to SP500 testing its move on the week. DJ30 broke past the November 2015 peak and is in the last range that included the all-time high. Tested Friday, tapping the 10 day EMA on the low and rebounding to a doji. Trying to set up for another upside bounce and a step closer to taking out the 2015 all-time high.
RUTX: Nice break higher Friday to a new rally high after clearing the 200 day SMA on the week. Nice move, still in the middle of the September to December resistance.
SP400: Bounced off the 10 day EMA, managing to hold the move over the late 2015 twin peaks. Just overhead is the March to July 2015 range and the all-time high.
SOX: Still struggling at the lows of the April range formed after SOX failed its attempt to take out the October/December 2015 highs.
The bifurcation caused by money rotating from NASDAQ large cap names to 'old economy' stocks continues.
Big Names: GOOG, MSFT, SBUX all broke lower. AAPL was down all week, struggling Friday to hold the 50 day EMA.
Metals: Some are testing, e.g. AKS, CENX, FCX while others continue to rally, e.g. ZEUS, TX. Overall very strong.
Energy: Same as metals with some testing but many rising: NGL, SWN, WLL, APC, OII.
Financial: WETF jumped nicely. GS, JPM up nicely on the week, pausing Friday. Group still getting money.
Chips: Some interesting setups as some stocks are trying to break higher, e.g. AMBA
Stats: -39.66 points (-0.8%) to close at 4906.23
Volume: 2.076B (+6.85%)
Up Volume: 1.12B (+284.6M)
Down Volume: 876.44M (-24.89M)
A/D and Hi/Lo: Advancers led 1.67 to 1
Previous Session: Decliners led 1.12 to 1
New Highs: 49 (-4)
New Lows: 24 (+2)
Stats: +0.1 points (0%) to close at 2091.58
NYSE Volume: 1.05B (+6.38%)
A/D and Hi/Lo: Advancers led 2.36 to 1
Previous Session: Decliners led 1.75 to 1
New Highs: 54 (-8)
New Lows: 9 (0)
Stats: +21.23 points (+0.12%) to close at 18003.75
VIX: 13.22; -0.73
VXN: 16.61; +0.04
VXO: 13.49; -0.04
Put/Call Ratio (CBOE): 0.98; -0.19
9 of the last 22 above 1.0. After a spike of several 1.0 sessions, a streak of sub-1.0.
Bulls and Bears: Bulls surge, jumping past the high hit three weeks back. Bears plummet to near 20. Stock traders and investors are buying into the Fed backing the market.
Bulls: 47.4 versus 41.2
Bears: 21.7 versus 27.8
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.
45.4% versus 43.3% versus 47.4% versus 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.
27.8% versus 28.9% versus 27.8% versus 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): 1.88% versus 1.86%. It would appear the bond market is not buying that the Fed will not hike rates. Economic data is horrid but rates are moving higher.
Historical: 1.86% versus 1.95% versus 1.79% versus 1.77% versus 1.75% versus 1.79% versus 1.76% versus 1.77% versus 1.72% versus 1.72% versus 1.691% versus 1.75% versus 1.72% versus 1.77% versus 1.79% versus 1.77% versus 1.82% versus 1.80% versus 1.88% versus 1.90% versus 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%
EUR/USD: 1.12249 versus 1.1289. Euro closes the week at the 50 day SMA as it struggles since the early April high.
Historical: 1.1289 versus 1.1295 versus 1.1360 versus 1.1317 versus 1.1285 versus 1.1264 versus 1.1278 versus 1.1389 versus 1.1410 versus 1.1397 versus 1.1370 versus 1.1396 versus 1.13792 versus 1l1392 versus 1.1391 versus 1.1382 versus 1.1339 versus 1.1295 versus 1.1195 versus 1.1178 versus 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
USD/JPY: 111.79 versus 109.46. When the BOJ said it would lend at negative rates the yen folded.
Historical: 109.46 versus 109.135 versus 109.06 versus 108.762 versus 109.65 versus 109.29 versus 108.505 versus 107.95 versus 108.175 versus 108.425 versus 109.84 versus 110.45 versus 111.313 versus 111.620 versus 112.60 versus 112.415 versus 112.71 versus 113.425 versus 113.612 versus 112.83 versus 112.445 versus 112.298 versus 111.90 versus 111.605 versus 111.46 versus 112.58 versus 113.11
Oil: 43.75, +0.34. New rally high Wednesday, hanging on Thursday and Friday. In the September through October price resistance.
Gold: 1233.70, -15.80. Still banging around in the range from 1200 to 1280.
Lots of news including GDP and lots more earnings. Money continues moving through the market and we are looking at many of the same kind of plays that are making us money, i.e. those forming good patterns off of long declines. Those are deemed 'value' and are accumulated in their bases, then break higher to some pretty serious percentage gains. Those have made us some excellent money so we are going to go there again.
As for the state of the market, it is the same, just a bit higher. NASDAQ and SOX are a worry, but if money is flowing from them to other places in the market, the move can continue. If the Fed stays steadfast, at least in the market's view, regarding supporting stocks, then the confidence continues as reflected in the increase in bulls and flop in bears.
Don't want to over think it right now. Going to stick with what is working. After all, if you think about it too much and what likely ultimately happens when the well runs dry, you get depressed. Much rather keep looking for those CENX, AKS, NLG, XEC, etc. plays that set up off the lows and surge.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4906.23
4916 is the mid-November 2015 low
4920 is the lower gap point from mid-October 2015, the January 2016 lower gap point
4960 is the September 2015 intraday high, an important reversal point for NASDAQ.
4999 is the October upper gap point
5007 is the 12/31 upper gap point from that big gap lower
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
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high
The 200 day SMA at 4850
4836 is the March 2016 peak
The March 2015 lows at 4843 and 4825
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
The 50 day EMA at 4802
4774 is the January 2-15 high
4751 is the January 2015 lower high
4637 is the February intraday high
4736 is the early January lower gap point downside, the last downside gap in the selloff.
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low.
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
S&P 500: Closed at 2091.58
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
2079 is the intraday all-time high from November 2014
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
The 50 day EMA at 2029
2023 is the November 2015 low
2020 is the September 2015 intraday high
The 200 day SMA at 2014
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
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 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
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 18,003.75
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,288 from March 2015
18,351 is the all-time high from May 2015
17,978 is the November 2015 peak
The March low at 17,786
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 50 day EMA at 17,417
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 17,122
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
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 peak.
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
April 25 - Monday
New Home Sales, March (10:00): 521K expected, 512K prior
April 26 - Tuesday
Durable Orders, March (8:30): 1.7% expected, -2.8% prior
Durable Goods -ex tr, March (8:30): 0.5% expected, -1.0% prior
Case-Shiller 20-city, February (9:00): 5.6% expected, 5.7% prior
Consumer Confidence, April (10:00): 96.2 prior
April 27 - Wednesday
MBA Mortgage Index, 04/23 (7:00)
Pending Home Sales, March (10:00): 0.3% expected, 3.5% prior
Crude Inventories, 04/23 (10:30): 2.08M prior
FOMC Rate Decision, April (14:00): 0.5% expected, 0.5% prior
April 28 - Thursday
GDP-Adv., Q1 (8:30): 0.9% expected, 1.4% prior
Chain Deflator-Adv., Q1 (8:30): 0.6% expected, 0.9% prior
Initial Claims, 04/23 (8:30): 259K expected, 247K prior
Continuing Claims, 04/16 (8:30): 2137K prior
Natural Gas Inventor, 04/23 (10:30): 7 bcf prior
April 29 - Friday
Core PCE Prices, March (8:30): 0.1% expected, 0.1% prior
Employment Cost Inde, Q1 (8:30): 0.6% expected, 0.6% prior
PCE Prices, March (8:30): 0.1% prior
Personal Income, March (8:30): 0.3% expected, 0.2% prior
Personal Spending, March (8:30): 0.2% expected, 0.1% prior
Personal Spending, March (8:30): 0.2% expected, 0.1% prior
Core PCE Prices, March (8:30): 0.1% expected, 0.1% prior
Employment Cost Inde, Q1 (8:30): 0.6% expected, 0.6% prior
Chicago PMI, April (9:45): 53.3 expected, 53.6 prior
Michigan Sentiment -, April (10:00): 90.0 expected, 89.7 prior
End part 1 of 3
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