* * * *
4/30/2016 Investment House Daily
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Targets hit: MYL
Entry alerts: None issued
Trailing stops: MBLY
Stop alerts: NOAH
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- Stocks sell into weekend as NASDAQ, SOX are loss leaders.
- SP500, DJ30 holding up well enough along with recent leaders, but even the
leaders are suffering some profit taking.
- Market rally working through issues: long run to this point, natural
resistance, and seeking a bit of clarification as to how committed the
central banks still are.
After attempting to bounce off of a test of the new recovery rally highs hit
two weeks back, stocks ran into some trouble to end the week. Thursday and
Friday saw declines mostly in NASDAQ and SOX, but RUTX was not wholly
SP500 -10.51, -0.51%
NASDAQ -29.93, -0.62%
DJ30 -57.12, -0.32%
VOLUME: NYSE +28%, NASDAQ +16%. Some distribution on NASDAQ, SOX and some
churn on the NYSE indices.
A/D: NYSE -1.4:1, NASDAQ -1.8:1. All big names selling. Key point.
NASDAQ names are still under pressure despite strong earnings from AMZN and
FB (not NASDAQ, but a 'FANG' stock). Semiconductors, after moving to the
top of the month-long range, sold hard and imploded through the bottom of
that range Friday.
No major selloffs, but there is some trouble in the rally. SOX and NASDAQ
broke over some key resistance in the past three weeks but after testing
were unable to hold the breaks. They have subsequently sold a bit more
SP500 and DJ30, as well as SP400, are holding up rather well as they remain
beneficiaries of NASDAQ's and SOX' losses as money moves out of the latter
to the former. That has rallied metals, oil stocks, industrials,
materials -- the so-called old economy or value stocks that suffered bear
markets while the NASDAQ names rallied to higher all-time highs.
Last week saw some of those recent leader 'old economy' stocks suffer some
selling. Steels stocks ran into trouble, and while they managed a bit of a
rebound they do not look ready to run back up. On the other hand, other
metals (e.g. FCX, precious metals) are still solid. Oil stocks took hits
late in the week after posting earlier nice moves. Some big retail stocks
took some pops late week, e.g. WMT, TGT, COST.
Any reason for the recent weakness?
What does this mean, i.e. big name tech still selling despite good earnings
from some big names and some recent old economy leaders coming under fire?
First, the rally has gone on a long time. Off of the February plunge the
stock indices reversed and rallied over 10%. They took out resistance along
the way, but some levels, particularly after such a long, straight up run,
are proving tough. Accordingly, a bit of weariness though perhaps not
exhaustion, has set in.
Second, you have to consider the reason for the rally. It was not a sudden
belief that the economy was reversing to the better. Despite the
President's quite rose colored glass view of the economy under his
stewardship and his completely absurd and false statements about growth
during his time versus that of Reagan, the economy is rather pathetic.
I said years ago the goal was to make the US economy European. That has
been a success with nationalized healthcare, excessive regulation strangling
existing small businesses and erecting barriers to new ones, and increased
taxes and other costs.
US GDP has averaged year/year less than 3% for 10 years, the first such
streak since the Great Depression. GDP is heading down not higher.
Promoting 0% interest rates have allowed the big corporations that received
all the breaks to avoid investing in the US, instead shipping jobs overseas
(or demanding more lower wage foreign workers be allowed entry to displace
higher wage US workers). They use the 0% money they have access to (that
you and I do not) to borrow to buy back stock, increasing their EPS even as
revenues decline. Oh yes, and revenues are declining, down 50% year/year.
Quite the recovery!
Yet the President laments his inability to 'sell' the recovery as his
greatest failure. Well, it IS a hard sell with insurance not falling $2500
per average citizen, but RISING over $2500 per citizen. Then, even with
your mandated healthcare (thanks again Chief Justice and new head activist
judge John Roberts), hardly anyone really has healthcare because most cannot
even pay the deductible, particularly AFTER blowing 100% on average MORE in
monthly premiums. Multiply this epic failure by every one of the hundreds
of thousands of rules and regulations the EPA, DOI, BLM, DOE, OSHA, etc.
have promulgated and you get a strangling of the entrepreneurs and mom and
pop businesses that results in a 0.5% GDP economy.
BUT, all is okay because there are many, many hourly jobs out there that you
can work. There are 24 hours in a day so you can work three jobs a day. As
Senator Schumer so famously told Ben Bernanke, 'Get to work Mr. Chairman.'
I suppose that is the President's advice to those who lost really good
breadwinner jobs and are now struggling to hang onto their houses and
anything else they acquired during the days they actually had good jobs AND
some quality time to spend with the family versus working at jobs well below
their expertise. I recall some of those ACA commercials talking about how
'Jane' would be able to go and pursue her bliss because her healthcare would
be taken care of. Problem is, Jane's 'bliss' was likely regulated and taxed
out of existence before she ever had a chance to find it.
Central bank intervention caused rally: now market trying to decide if still
in the game.
The Point: the rally was built on Fed intervention, not a new-found belief
the economy was suddenly better. Indeed, after a one-month bounce in the
regional PMI readings they are heading right back down as we predicted.
Recall Chairman Yellen phoned the BOE head on February 11; within 40 minutes
after that call the SP500 bottomed and reversed. The next day she called
Mario Draghi; 40 minutes after that conversation US stocks shot higher and
never looked back. Afterward, each time the market started to roll over it
magically found support. Voila, a rally into April, nearing the prior
market all-time highs.
Then last week the BOJ did nothing in terms of new stimulus, something world
markets saw as a surprise. Japan had talked of more stimulus but then
didn't deliver and didn't offer any real reasons.
After that the FOMC kept rates steady as expected, but it hardened its view
on the economy as it adjusted its statement to lessen the emphasis on world
Granted these were not large scale restatements of position, but they went
against expectations and cracked the door of uncertainty regarding whether
the central banks are ready to stand and support the rally they engineered
off the February low. No one really believes Yellen is anything but a
jovial cooing dove, but a market built on the notion the Fed has its back
wants, similar to an actress sensing her popularity is waning, continual
assurance that all is just perfect and is still loved and adored.
Thus, the weakness on NASDAQ and SOX are a bit worrisome, and the late week
weakness in energy (a sector that overall has a forward PE of 100x expected
earnings growth) definitely has to be watched.
After a long rally back to resistance, some issues. NASDAQ and SOX broke
key levels but over the past week failed to hold them and sold rather hard.
SP500, DJ30, SP400 are still quite solid, but after bouncing off a test of
near support, they failed the move and sold more. Now they are trying
again. Not a major meltdown, but in the context of the bigger picture of a
1.5 year rounded top still in place, the action has to alert you that an
important test of resistance is underway in an overall still bearish market
NASDAQ: NASDAQ sold off again Friday, undercutting the 50 day SMA though it
did recover off the new low on the session low. Six days into a selloff
after gapping lower two Fridays back. Island reversal-esque gap and selloff
after taking out important resistance. Not in a freefall and still over the
38% Fibonacci retracement of the February to April move, BUT unable to move
higher even with some major earnings beats from the likes of AMZN.
SOX: Gapped through the 50 day MA's Friday and sold to the 200 day SMA on
the session low. Just a modest bounce off of that support to close the week.
The 4.5 week lateral move below the late 2015 head and shoulders top failed
to hold -- and did so after breaking through resistance the second week of
April Breaking resistance and then rolling over is pretty bearish action.
SP500: Reached lower Friday after gapping below the 20 day EMA, managing to
cut the losses considerably by the close. Still in decent shape, still just
a modest fade to test the move higher. It did, however, fail to capitalize
on a bounce off the 10 day EMA test.
DJ30: Similar action to SP500, gapping below the 20 day EMA, selling off
rather sharply, but then recovering much of the Friday loss. Still off hard
Thursday, but no serious damage. No wanton selling, but perhaps not as much
wanton buying right now after the concern as to what the Fed and central
RUTX: Sold Thursday to the 10 day EMA and Friday to the confluence of the
20 day EMA and 200 day SMA. The 20 day EMA has been the key support level
for this run off the February low, so this is an important test.
SP400: Sold through the 20 day EMA Friday but recovered it as of the close.
Similar to RUTX, the 20 day EMA has held as support on this entire move
higher off the February low.
Big Names: AMZN, FB are holding their gaps but frankly, if this market
continues acting as it did last week we see them filling those gaps. AAPL
sold Wednesday to Friday but did show a doji Friday after gapping lower and
testing the January/February lows. NFLX down all week but a doji with tail
Friday suggests it attempts a bounce toward the 10 day EMA before continuing
lower. GOOG sold very hard Thursday, moving below the 200 day SMA, and
Friday could not recover it. SBUX sold all week then showed a big doji with
tail Friday; might try a bit of a bounce as well but still a very negative
Retail: Some major breaks lower: WMT, TGT, COST, JWN, M. Not looking good.
Energy: Great week into Wednesday then some late week fades. Overall still
solid. APC strong move and not bad with a 10 day EMA test and bounce
Friday. WLL holding the 10 day EMA after testing the 200 day SMA from
below. SWN hit a wall Thursday but did a very good job recovering Friday.
UNT, WMB tested Friday but recovered well enough.
Metals: Steel has struggled for two weeks, making a test then bouncing, but
the test was harder than you want to see and the bounce for now is tepid.
Copper (FCX) posted a tremendous week while CENX (aluminum) tested late in
the week but easily bounced off the 10 day EMA Friday. Precious metals are
still very strong, e.g. NEM.
Financial: Tested and rested on the week after good moves higher, but still
in solid position to continue higher, e.g. JPM.
Stats: -29.93 points (-0.62%) to close at 4775.36
Volume: 2.629B (+16.41%)
Up Volume: 693.29M (-3.93M)
Down Volume: 1.67B (+220M)
A/D and Hi/Lo: Decliners led 1.8 to 1
Previous Session: Decliners led 1.93 to 1
New Highs: 56 (-23)
New Lows: 38 (+15)
Stats: -10.51 points (-0.51%) to close at 2065.3
NYSE Volume: 1.28B (+28%)
A/D and Hi/Lo: Decliners led 1.34 to 1
Previous Session: Decliners led 1.9 to 1
New Highs: 74 (-25)
New Lows: 13 (0)
Stats: -57.12 points (-0.32%) to close at 17773.64
VIX: 15.7; +0.48
VXN: 19.3; +1.23
VXO: 16.04; +0.65
Put/Call Ratio (CBOE): 1.16; +0.16. Buying some protection and likely
some downside speculation as the indices start to struggle at the prior
Three straight at 1.0 or better as the indices hit a high and then started
to peel back. 12 of the last 27 above 1.0.
Bulls and Bears: After surging two weeks back, bulls fade off that 47
level. Still not overly bullish to cause a top. Bears fell again, now down
over 7 points in two weeks. Pretty serious decline.
Bulls: 44.3 versus 47.4
Bears: 20.6 versus 21.7
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.
47.4% versus 41.2% versus 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.
21.7% versus 27.8% versus 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): 1.83% versus 1.83%. Hit 1.87% on the session high but
bonds then rallied back. More discussion of negative rates (in the future)
for the US with negative mortgage rates (yes, paid to take out a mortgage)
offered as a carrot to make the 'pay to hold your dollars' a bit more
Historical: 1.83% versus 1.86% versus 1.94% versus 1.90% versus 1.88% versus
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%
EUR/USD: 1.1450 versus 1.1382. Strong week for the euro, moving to a new
closing high on this rally, just over the early April highs.
Historical: 1.1382 versus 1.1329 versus 1.1293 versus 1.1261 versus 1.2249
versus 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
USD/JPY: 106.33 versus 107.36. The selloff continues after the dollar
rallied to the 50 day EMA 7 sessions back. New lower low on this selling.
Historical: 107.36 versus 109.35 versus 111.36 versus 111.79 versus 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
Oil: 45.92, +0.04. Doji after a three day surge off the 10 day EMA test.
Dollar weaker, oil higher as it is denominated in dollars. The US consumer
is a double loser in that deal. That could change, however, as China has
bought so much gold it is now trying to tie its currency to gold. Friday it
pegged the yuan with its biggest single increase since 2005. It is
positioning to take reserve currency from the dollar and of course that will
make a devalued dollar look good to the US citizen versus the aftermath of
losing reserve status.
Gold: 1294.90, +26.80. It would seem gold traders do not believe the Fed
is going to hike rates.
First week of a new month so it is jobs week. We will again get to see how
many low wage jobs the US economy added, or conversely, how many breadwinner
jobs it lost.
Earning are still coming fast and we will get a lot of smaller energy,
biotech and the like results that issue early May.
A new month also means new money, and that has been the case on this move
higher off the February lows. With the indices putting in strong upside
moves, bumping resistance, and some breaking down from resistance, it will
be instructive to see if funds put any money to work. If so, will the moves
hold after the new money does hit the market?
As for the stock indices, the same issues present. First, are the Fed and
other central banks ready to continue support financial markets after the
run, will they let them test some and then step in, or are they done with
the direct albeit behind the scenes intervention seen in February through
March? I seriously doubt they are done though they might let them test a
bit and see if the banks need to get into the intervention mode again.
For now most of the recent leaders look pretty solid in their trends and we
intend to keep playing them as they allow. Thus we are looking at some more
energy, financial, etc.
At the same time, money continues moving out of other areas. Thus we are
still playing some big names lower and are looking at some other ones as
well, even looking at more FB downside along with some NASDAQ big names and
Again, the market is at a resistance point and is showing signs of wear
after the run higher and with some questions arising as to the commitment
from central banks. With the overall large market top still in place, that
is the key longer term market directional indicator. We are playing moves
that present themselves inside that pattern, both up and down, but if the
overall top asserts itself, most stocks will, as usual, start trending with
the overall market direction.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4775.36
The 50 day EMA at 4810
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 4846
4894 is the September 2015 closing high
4899 - 4902 from the September 2015 peak, July 2015 low
4916 is the mid-November 2015 low
4920 is the lower gap point from mid-October 2015, the January 2016 lower
4960 is the September 2015 intraday high, an important reversal point for
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
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
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
S&P 500: Closed at 2065.30
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
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 2040
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
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 17,773.64
The March low at 17,786
17,978 is the November 2015 peak
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
June 2015 low at 17,715
17,748 is the mid-April China margin selloff and the bottom of the 5 month
The 50 day EMA at 17,508
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 17,123
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
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 29 - Friday
Personal Income, March (8:30): 0.4% actual versus 0.3% expected, 0.1% prior
(revised from 0.2%)
Personal Spending, March (8:30): 0.1% actual versus 0.2% expected, 0.2%
prior (revised from 0.1%)
Core PCE Prices, March (8:30): 0.1% actual versus 0.1% expected, 0.2% prior
(revised from 0.1%)
Employment Cost Index, Q1 (8:30): 0.6% actual versus 0.6% expected, 0.5%
prior (revised from 0.6%)
Chicago PMI, April (9:45): 50.4 actual versus 53.3 expected, 53.6 prior (no
Michigan Sentiment - Final, April (10:00): 89.0 actual versus 90.0 expected,
May 2 - Monday
ISM Index, April (10:00): 51.4 expected, 51.8 prior
Construction Spending, March (10:00): 0.6% expected, -0.5% prior
May 3 - Tuesday
Auto Sales, April (14:00): 5.12M prior
Truck Sales, April (14:00): 8.21M prior
May 4 - Wednesday
MBA Mortgage Index, 04/30 (7:00): -4.1% prior
ADP Employment Chang, April (8:15): 196K expected, 200K prior
Productivity-Preliminary, Q1 (8:30): -1.4% expected, -2.2% prior
Unit Labor Costs - P, Q1 (8:30): 2.6% expected, 3.3% prior
Trade Balance, March (8:30): -$41.4B expected, -$47.10B prior
Factory Orders, March (10:00): 0.5% expected, -1.7% prior
ISM Services, April (10:00): 54.5 expected, 54.5 prior
Crude Inventories, 04/30 (10:30): 1.99M prior
May 5 - Thursday
Challenger Job Cuts, April (7:30): 31.7% prior
Initial Claims, 04/30 (8:30): 259K expected, 257K prior
Continuing Claims, 04/23 (8:30): 2130K prior
Natural Gas Inventor, 04/30 (10:30): 73 bcf prior
May 6 - Friday
Nonfarm Payrolls, April (8:30): 207K expected, 215K prior
Nonfarm Private Payrolls, April (8:30): 191K expected, 195K prior
Unemployment Rate, April (8:30): 5.0% expected, 5.0% prior
Hourly Earnings, April (8:30): 0.3% expected, 0.3% prior
Average Workweek, April (8:30): 34.5 expected, 34.4 prior
Consumer Credit, March (15:00): $18.0B expected, $17.3B prior
End part 1 of 3
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