Sunday, May 29, 2016

The Daily, Part 1 of 3, 5-28-16

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5/28/2016 Investment House Daily
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Targets hit: None issued
Entry alerts: None issued
Trailing stops: NBL
Stop alerts: None issued

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Market Summary Video, Plays and Play Videos, and Play Tables with play
annotations will issue Monday, Wednesday and the Weekend.

Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play tables.

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If any market circumstances arise where we see additional plays we want to
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of the day of the week.


- Yellen confirms Fed ready to hike based on current data.
- Market gives up gains on Yellen words, rebounds, sprints higher to the
- Q1 GDP second read better but misses expectations. It is weak any way you
slice it or spin it, and hopes for a Q2 and beyond recovery are the same
hopes each year since 2008.
- Welcome to the Twilight Zone: the Fed, in attempting to get the ammo it
needs to fight off the next crisis might create very next crisis it needs
the ammo to fight.
- Same groups with a few new entrants this past week still look good.

Friday Chairman Yellen confirmed the Fed will continue hiking rates. She
did not say "June is on for a hike," but made it clear the Fed will hike
rates, not because the economy is so grand (though it likes to suggest
that), but because the Fed needs maneuvering room for the next crisis.

What Yellen said:

-The economy continues improving.

-Given the economic gains, raising rates in the coming months may be

-Fed does not have the "typical scope" to cut rates in case of economic or
other shocks.

So, even the uber-dove Yellen realizes keeping rates at 0 for so long has
risks, one of them being no weapons to manipulate markets and wealth when
the next opportunity -- I mean crisis -- comes along.

That raises the next question: how much maneuvering room does the Fed need
for the next shock, i.e. how many rate hikes will it need? Bullard says 4 in
2016, three more over the next 8 months. Easily doable logistically. The
issue is how the economy and market react.

As for the economy, the data Friday was glossed over as an improvement. Q1
GDP second iteration was 0.8%, missing expectations but beating the first

GDP, 2nd revision: 0.8% versus 0.9% expected versus 0.5% first read

Consumer spending: 1.9% vs 2.2% expected vs 1.9 first read

Business investment: -6.2% versus -5.9% first read

Sure there were the usual attempts to spin this a good news. The reality,
however, is another weak GDP report, revisions higher notwithstanding.

Indeed, according to historical norms, with unemployment at 5% GDP should be
3% to 3.5%. Not close in Q1. But of course there were the 'wait until the
second quarter' calls yet again, citing expectations of vast improvement.
Same story, different year. Calls for 'this is the year things are better'
turns into another pile of crappy data.

As for stocks, they reacted rather sanguine. Another weak GDP report?
Nothing changed so keep the status quo. Then you had the Yellen speech. At
first they sold off post-Yellen, but they recovered and indeed rallied to a
higher session high as shorts covered ahead of the long weekend given the
market did not crumble as the chairman confirmed she could and would hike
rates. If she absolutely, positively must.

SP500 8.96, 0.43%
NASDAQ 31.73, 0.65%%
DJ30 44.93, 0.25%
SP400 0.0.77%
RUTX 0.94%
SOX 0.60%

VOLUME: NYSE +5.5%, NASDAQ -6.5%

A/D: 2:1 NYSE, 2:1 NASDAQ

So, bring on the rate hikes, at least before a 3-day weekend. Not a bad
response as the rally shows it has some chops in not crumbling like a dried
out, bargain brand cookie. The short-covering sprint to the close will
certainly give the born again bulls even more fervor with the 'I told you
so' predictions (that, of course, started 6 days after SOX started the

Nothing worse than a reformed alcoholic? How about a reformed bear? Gushing
is a good word. Everything is coming up roses when not two weeks ago all was
dead and decaying. They are dominated by emotional responses that change
perspective. The economic numbers still are not great, not at all.
Moreover, there will not be a big change in the numbers or any real recovery
until policies in Washington DC change.

Thus, in the bigger picture, we have a bounce in a big 1.5 year top. It is
like the Titanic movie: it was a ship, it sank, get over it. This is a
bounce, it likely fails, deal with it.

How do you with it? Use it. We have some good positions. We are letting
them run. We likely won't buy more a lot more new ones until the market
shows a test of this last move and then demonstrates it can bounce again.
There is, of course, always that chance it won't bounce. Have to be
practical and not grotesquely emotional, recognizing the situation for what
it is. If you do that, you make money. If you start assuming things based
upon preconceived notions clouded by emotions, you end up missing what is in
front of you and not buying (or selling) stocks that have set up good
patterns and are telling you 'buy me.'


There was no change in the index charts in the immediate aftermath of
Yellen: the indices moved higher ahead of her speech, sold off that move
after. Then, however, the sellers could not advance farther and that caused
short covering. Stocks rallied back to pre-Yellen levels and then sprinted
to the close as shorts were squeezed ahead of a 3-day weekend.

The end result was a new bounce higher after a 2-day pause in the new rally
that is not as new as the financial stations say it is because they cannot
let on that they did not see the move taking shape and starting, missing the
first 2 to 6 days of the move depending upon the index you look at.

The problem is, the move was, as noted, likely short covering and that means
the stock market will have to deal with some potential give back early in
the week. That does not mean we believe the move is over.

To the contrary, the move looks as if it is still finding plenty of support.
Some of the big names are working well (e.g. GOOG), and the same groups that
turned leaders over the past couple of months are still leading: oil,
construction, drugs/biotech. They are joined by chips and some technology.
Indeed, the report this weekend focuses on biotech/drugs as that group is
showing a lot of good patterns with good potential. We even toss in FCX as
it has a nice new setup.


Stats: +31.74 points (+0.65%) to close at 4933.5
Volume: 1.517B (-6.54%)

Up Volume: 1.09B (+265.75M)
Down Volume: 391.32M (-350.88M)

A/D and Hi/Lo: Advancers led 2.06 to 1
Previous Session: Decliners led 1.18 to 1

New Highs: 81 (+15)
New Lows: 22 (-9)

Stats: +8.96 points (+0.43%) to close at 2099.06
NYSE Volume: 835.9M (+5.46%)

A/D and Hi/Lo: Advancers led 2.06 to 1
Previous Session: Advancers led 1.08 to 1

New Highs: 73 (0)
New Lows: 14 (-3)

Stats: +44.93 points (+0.25%) to close at 17873.22


The sentiment indications this week provide a textbook example of how they
work: bears jumped, bulls fell just as the market started its most recent

The irony is, the Fed, in trying to get rates higher in order to have
ammunition to fight the next crisis, may precipitate the next crisis. You
cannot make this stuff up. You don't have to. Such brilliant people are so
blind to the reactions to their actions that they cause the very issues they
are attempting to avoid. It is like the old 'Twilight Zone' episode where
the man goes back in time to stop a school fire and is actually part of the
sequence of events that causes the fire.

VIX: 13.12; -0.31
VXN: 14.55; -0.16
VXO: 12.2; -0.5

Put/Call Ratio (CBOE): 0.9; -0.03

18 of 22 over 1.0, 28 of the last 48 above 1.0. Three sessions straight
below 1.0 as the bounce continues. Easily enough high ratio readings to
bounce stocks and perhaps they are going to make a bounce after this last

Bulls and Bears: Bulls plunged and bears jumped just as the market was
starting its move higher. That is a textbook demonstration showing
sentiment is opposite market moves. Everyone from the major brokerages down
to the bald guy on CNBC was glum about the market's prospects. Then it

Bulls: 35.4 versus 40.2

Bears: 24.0 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.

Bulls: 35.4%
40.2 versus 39.2 versus 40.2% versus 44.3% versus 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%

Bears: 24.0%
21.7% versus 21.6% versus 21.7 versus 20.6% versus 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%


Bonds (10 year): 1.85% versus 1.83%

Historical: 1.83% versus 1.87% versus 1.86% versus 1.83% versus 1.85% versus
1.85% versus 1.85% versus 1.76% versus 1.75% versus 1.70% versus 1.75%
versus 1.735% versus 1.75% versus 1.75% versus 1.78% versus 1.74% versus
1.77% versus 1.80% versus 1.87% versus 1.83% versus 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%

EUR/USD: 1.1113 versus 1.1181

Historical: 1.1181 versus 1.1155 versus 1.1142 versus 1.1221 versus 1.1216
versus 1.1199 versus 1.1219 versus 13.1317 versus 1.13145 versus 1.1307
versus 1.13791 versus 1.4252 versus 1.13707 versus 1.13869 versus 1.1405
versus 1.1399 versus 1.14864 versus 1.14864 versus 1.1478 versus 1.15306
versus 1.1450 versus 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

USD/JPY: 110.233 versus 109.70. Dollar bounces, trying to get up and away
from the 50 day MA's that have hemmed it in during the downtrend.

Historical: 109.70 versus 109.72 versus 109.99 versus 109.25 versus 110.165
versus 109.985 versus 110.187 versus 109.073 versus 108.856 versus 108.65
versus 108.95 versus 108.47 versus 109.28 versus 108.343 versus 107.10
versus 107.41 versus 107.126 versus 107.312 versus 106.16 versus 106.33
versus 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

Oil: 49.56, +0.16. Still trending higher up the 10 day EMA.

Gold: 1215.30, -4.50. Now down to the late March lows and in good position
to bounce back upside in a relief move, but it has not set that bottom for a
bounce yet.


Friday stocks resumed the upside after a 1 to 2-day pause. The key to start
the week is whether there is some give back of the move given the short
squeeze last hour surge Friday.

That said, some give back of the Friday move does not give back the rally.
It still appears to have solid underpinnings for now. We are a bit
disappointed in the late upside as we wanted more of a test before resuming
the move. Again, perhaps there is some give back early that helps.

Even so, we have several very nice patterns to play upside regardless of any
early week moves one way or the other. We see the same areas still showing
good accumulation and upside setups, so we plan on continuing making those
plays as long as the market provides them.

Have a great Memorial Day!


NASDAQ: Closed at 4933.50

4960 is the September 2015 intraday high, an important reversal point for
4969 is the April 2016 recovery high
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

4920 is the lower gap point from mid-October 2015, the January 2016 lower
gap point
4916 is the mid-November 2015 low
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high
The March 2015 lows at 4843 and 4825
4836 is the March 2016 peak
The 50 day SMA at 4833. Note the 50 day SMA has crossed up through the 200
day MA.
4815 is the December 2014 peak
The 200 day SMA at 4812
4811 is the November 2014 peak (intraday)
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 2099.06

2104 is the December 2015 high
2111 is the April 2016 recovery 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

2094 is the December 2014 high, the prior all-time high
2079 is the intraday all-time high from November 2014
2062 is the January 2015 lower high
The 50 day EMA at 2054
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 2011
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 17,873.22
17,978 is the November 2015 peak
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,168 is the April 2016 recovery high
18,288 from March 2015
18,351 is the all-time high from May 2015

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 17,605
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 17,124
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


May 27 - Friday
GDP - Second Estimate, Q1 (8:30): 0.8% actual versus 0.9% expected, 0.5%
GDP Deflator - 2nd, Q1 (8:30): 0.7% prior
GDP Deflator - 2nd, Q1 (8:30): 0.6% actual versus 0.7% expected, 0.7% prior
Michigan Sentiment - Final, May (10:00): 94.7 actual versus 95.5 expected,
95.8 prior

End part 1 of 3
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