* * * *
6/18/2016 Investment House Daily
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MARKET ALERTS:
Targets hit: None issued
Entry alerts: KERX; NOV; UNT
Trailing stops: VMW
Stop alerts: AGN
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alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
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The REPORT SCHEDULE is as follows:
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.
Access to all current videos will remain assessable each day using the play
links in the reports.
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.
MARKET SUMMARY
- Thursday reversal but no Friday follow through as stocks struggle to hold
the line.
- Fed feckless and confused, Administration does not care. We are on our
own.
- AAPL banned in Beijing
- Fed officials go full dove, rate hiking 'cycle' all but over.
- Indices split in their strength. Same leadership groups still look good.
Thursday sold off but reversed upside, looking as if the pullback to test
the last higher highs was ending and stocks would advance. Leadership groups
performed decent enough. Friday, futures were lower. No big deal, just a
lower open leading to bids. It did, after further selling. Then, unlike
Thursday, the stock indices had to fight to recover gains and by the close
on SP500 closed positive.
SP500 -6.77, -0.33%
NASDAQ -44.57, -0.92%
DJ30 -57.94, -0.92%
SP400 0.08%
RUTX -0.30%
SOX -0.82%
Volume: Exploded on both exchanges given quad-expiration. No point even
mentioning the levels.
Bigger Picture.
We are on our own. We being US citizens and the economy. The Federal
Reserve is so feckless, so consumed with indecision and self-doubt, it could
star in a Woody Allen movie. The Administration is devoid of interest in
the economy, dogmatically answering all questions economic by reciting 4.7%
unemployment rate, as if almost one-third of the US population not working,
one-third that is all made up of working aged people mind you, is a sign of
robust growth.
How many jobs??!!
A Fed that cannot act when confronted even with the slightest deviation from
its script and a lame duck Administration believing in tax, tax, tax and
spend, spend, spend in order to fulfill its interests in legacy building and
ideological end games. Not great in and of themselves, but layered on top
of a world economy that continues to slide toward another global decline
(Rio de Janeiro, 49 days from the Olympics, announces a "public calamity"
due to the Brazilian financial crisis), the US included, the US citizen and
business owner is left in, at best, limbo, at worst heading for a lower
standard of living and closing in on bankruptcy.
If there was EVER a classic, textbook example of why there is no need for a
Federal Reserve, this is it. The only reason for a Fed was supposedly to
provide liquidity in times of stress. That has morphed, however, into an
economic micromanagement team, tinkering with rates, printing money,
purchasing assets, and more we don't even know about because, heaven forbid,
the Congress, the elected body, should be able to monitor what the Fed is
doing. We might find out just whose interest the Fed has as its primary
focus. All of this, of course, with other people's money.
This Fed, however, proves the utter futility of a small group of elites to
understand and manage markets. Greenspan embarked upon a campaign to
prevent the 'wealth effect' from causing a 'runaway consumer' and lead to
inflation. After he aided in wrecking the US economy and permanently
sending hundreds of thousands of US breadwinner jobs overseas he asked,
anyone, for data that there really was such a thing as a wealth effect.
Bernanke based his entire QE theories on a wealth effect, buying assets
specifically to inflate financial asset prices and make people feel rich so
they would buy, companies would invest to generate supply to meet the
demand, and the economy would pull out of the massive collapse. It just
didn't happen. The Fed didn't realize that if it gave money away to the
financial institutions and made it possible to make guaranteed returns, why
would they lend the money? If huge company executives could use zero
interest money to buy back stock, thus raising their EPS without making one
more item or investing one more cent, then get performance bonuses for
raising the stock price. Who in their right mind would take a risk in that
situation and blow making money on a sure thing? We have seen the result:
no one! US capital investment is horrid and has been horrid since these
programs started. Buybacks only inflate prices, more keeping the cycle
alive.
So smart, yet so stupid. Markets are the collection of every available
scrap of information, synthesized into prices based upon the probabilities
that information suggests. It is the pure price that factors in all human,
natural, and I guess even unnatural events. It is utter folly that a
handful of ivory tower elites could fathom how markets work in the first
place and then direct accurately direct outcomes. Humans might as well try
to accurately predict the weather and take steps to try and direct outcomes
even when they have no control on externalities such as, say, the sun. Oh,
but we are trying to do THAT as well and failing equally atrociously. It is
even to the point Greenspan now says the Fed doesn't really know what it is
doing, just experimenting.
Then, even when it has set out definite rules to follow, when confronted
with any possible upset to its plans, it pulls a Sherman from 'American Pie'
and pisses itself.
Thus, when every criterion the Fed set out to hike rates was met, when China
sneezed the Fed didn't hike. The jobs report flopped, but Yellen said it
was still likely transient. Then the Brexit polls showed the people of the
UK actually want their independence back from a rule-crazy, immigration
pushing elite. Oh, can't hike in that climate; what would the world think?
So, we have an FOMC decision this past week that virtually eliminated any
more than one more rate hike for the year, and frankly I don't think the Fed
will even get there because the world economic situation continues to
worsen. The Fed went from statements that the market was misreading the Fed
minutes, that hikes were indeed coming, and Yellen even saying the Fed had
to get more ammunition back in the gun -- just two weeks ago -- to full
capitulation.
Again, a classic textbook case of why we just need a Fed, if we need one at
all, that can only act to inject some liquidity on a temporary, defined,
finite timetable and then leave the market. If that doesn't fix the
problem, the markets will have to fix themselves. Simple, takes the human
element out of it.
Venezuelan riots at night.
Lots of textbook examples over the past 15 years to teach us once again what
we knew worked and didn't work. Socialism: Venezuela. Keynes economic
theories: Japan, China, US (lower standards of living, massive segments of
the populations not working, wages declining for years). Government
controlled housing markets. Stimulus/deficit spending. And the grand daddy
of them all, the 97% decline in the value of the dollar since the US Federal
Reserve was established. The dollar buys 97% less of what it could buy
pre-Fed while gold still buys the relative same items at the same quality it
has always bought.
THE MARKET
Friday the stock market pulled a mini-Thursday, i.e. selling off intraday
but then recovering. Thursday many indices made it positive. Friday most
did not. On a week where the stock indices and leading groups made nice
tests of the last highs and were set up to rebound, the most notable feature
was their inability to do so. Wednesday a break higher failed. Thursday
stocks sold off hard but recovered, leaving them in position for a Friday
expiration rebound.
Didn't pan out. Friday futures traded lower as Housing Starts fell 0.3% in
what should be a strong May period. Bullard went full frontal dove from
hawk, saying only one rate hike would be needed until 2018!
The market reacted to a wholly feckless, confused, and unnerved Federal
Reserve as you would expect: it sold off. Sure rates were going nowhere,
but when those anointed ones who micromanage our economy have no clue of
what the economy is doing and change their views as each data point comes
out, we are all in deep.
Stocks did recovery from the lows, but only SP400 made it back to positive.
It was not a banner day. Sure it was blamed on the death of the UK
parliamentarian shot and stabbed by a mentally deranged individual, but that
is not the issue. It goes beyond that: a world economy that people feel is
slipping into another major slowdown and those in power to prevent or buffer
the move don't have a clue as to what to do.
The failure to take advantage of a bounce attempt so neatly set up is
disconcerting for the upside. It leaves the market, in our view, now more
vulnerable to the downside even though some leadership groups, e.g. oil,
performed beautifully on Friday. Indeed they still may perform beautifully
for awhile even if the rest of the market fades.
We found ourselves entering more downside positions last week as they
presented themselves along with the good upside in oil and software. AAPL
was ripe and we entered; Friday Beijing banned iPhone 6 sales in China's
ongoing move to block Apple taking over the market or at least extorting
large sums of profits if it allows AAPL in. FB presented a natural new
entry. DIA, QID as well.
Again, the market could go down just as easily, indeed likely more easily,
than up from this juncture. There are some great sectors, e.g. oil and gas,
but the overall action is quite worrisome for the market continuing moving
higher.
Thus we have a lot of downside plays to go along with many still very good
upside plays.
CHARTS
NASDAQ: Thursday I was concerned NASDAQ could not rise off of that
reversal. It certainly could not Friday as it gapped lower and closed at a
lower closing low for this June move lower. Expiration so volume spiked.
NASDAQ double topped from April to June and now it is in the process of
selling, breaking an interim support level Friday. Many big names are
struggling and of course that pushes NASDAQ down, NASDAQ 100 (-1.13%) even
more. Not much to like right now.
SP500: No major issue Friday, just the same inability to move higher off
this 50 day EMA test. Four days working laterally though volatile intraday.
MACD and volume lagged on the June higher high, not a good combination. Has
to hold these 50 day MA levels. Overall the pattern is toppy.
SOX: Acting much better than the other indices. Tapping the April highs
Thursday and Friday on the lows, rebounding to close and holding that break
higher. This is a classic test, breaking higher through resistance then
fading to test, bouncing off it from the intraday lows. SOX looks quite
good with this action.
RUTX: The small caps are trying to hang on. Broke to a higher recovery high
into the second week of June, tested, and Tuesday to Friday held in a
lateral move. Just below the April highs, trying to set up for a new bounce.
Not bad, but this is definitely a 'show me' kind of situation for all
indices.
SP400: Doji Friday, the fourth in a row as SP400 moves laterally along the
rising 50 day MA's and just below the April peak. Good positioning similar
to SOX. Looks as if it is up to the chips and midcaps.
DJ30: after the Thursday reversal DJ30 looked good for a higher low and
bounce. After Friday it is not bad, just not as great. AAPL hurt it with
the Beijing ban. Anyway, it is working in its range, trying to set up a
move upside. Nothing determinative yet.
LEADERSHIP
Oil: Sporting excellent action as oil rebounded and oil stocks rebounded
off doji tests as well. ORIG, SPN. We are looking at new plays on CWEI,
ATW.
Software: ROVI, CYBR had great weeks. RHT not bad but has to make a move.
Chips: Overall still quite nice as the SOX indicates, but some recent
leaders struggling, e.g. SLAB, AGVO.
Biotechs/Drugs: Some working well, others struggling. GALE continues
blowing higher. CELG is still selling. More struggling starting up.
Industrials: Still fine, e.g. CAT, HON.
Construction: Still good after a test. MDR bouncing, GRAM holding support.
Big Names: FB, AAPL down hard again Friday. GOOG bombed lower. NFLX could
do the same, and AMZN is heavy right now and we are looking at downside
plays on both in the event NASDAQ breaks further downside.
THE MARKET
MARKET STATISTICS
NASDAQ
Stats: -44.58 points (-0.92%) to close at 4800.34
Volume: 2.397B (+31.72%)
Up Volume: 1.16B (+100M)
Down Volume: 1.44B (+671.36M)
A/D and Hi/Lo: Decliners led 1.29 to 1
Previous Session: Decliners led 1.18 to 1
New Highs: 43 (+2)
New Lows: 51 (-30)
S&P
Stats: -6.77 points (-0.33%) to close at 2071.22
NYSE Volume: 2.1B (+134.98%)
A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Decliners led 1.04 to 1
New Highs: 92 (-5)
New Lows: 15 (-28)
DJ30
Stats: -57.94 points (-0.33%) to close at 17675.16
SENTIMENT INDICATORS
VIX: 19.41; +0.04
VXN: 20.25; +0.42
VXO: 18.63; -1.67
Put/Call Ratio (CBOE): 1.11; -0.28
Four straight over 1.0 on the close as the negative sentiment in the options
market prevails. Maybe it will be enough to rebound stocks along with the
leaders holding up.
10 of the last 16 below 1.0. 24 of 36 over 1.0. They did their job,
playing a part in bouncing the market. Now the extremes are backing off as
you would expect. Even so, they are still fairly high readings after a
solid move higher.
Bulls and Bears: Bulls faded back to the levels three weeks back and of
course bears, as it seems usually the case, held more or less steady. Still
more bullish.
Bulls: 45.9 versus 47.3
Bears: 23.5 versus 23.8
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.
Bulls: 45.9%
47.3% versus 45.4% versus 35.4% versus 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: 23.5%
23.8% versus 23.7% versus 24.0% versus 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%
OTHER MARKETS
Bonds (10 year): 1.61% versus 1.57%. After a big surge through Thursday,
TLT gapped lower off a tombstone doji. After 3 weeks of surging, just a bit
overdone.
Historical: 1.57% versus 1.58% versus 1.62% versus 1.61% versus 1.64% versus
1.68% versus 1.70% versus 1.72% versus 1.73% versus 1.70% versus 1.80%
versus 1.84% versus 1.85% versus 1.85% versus 1.83% versus 1.87% versus
1.86% versus 1.83% versus 1.85% versus 1.85% versus 1.85% versus 1.76%
EUR/USD: 1.12778 versus 1.12554. Still holding a volatile lateral move
below the 50 day SMA.
Historical: 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus
1.12526 versus 1.13149 versus 1.1412 versus 1.13570 versus 1.13553 versus
1.13668 versus 1.1149 versus 1.1186 versus 1.1128 versus 1.1113 versus
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
USD/JPY: 104.124 versus 104.68. Dollar keeps bombing lower versus the yen.
At some point before too long Japan will break its vow of nonintervention.
Historical: 104.68 versus 105.62 versus 106.085 versus 106.019 versus
106.933 versus 106.966 versus 106.66 versus 107.347 versus 107.72 versus
106.55 versus 106.66 versus 108.86 versus 109.99 versus 111.285 versus
110.233 versus 109.70 versus 109.72 versus 109.99 versus 109.25 versus
110.165 versus 109.985 versus 110.187
Oil: 48.56, +1.82. After fading to the 50 day MA through Thursday in a
test of the higher high, oil blasted upside Friday, starting the recovery.
Gold: 1301.60, +3.20. Up all week, moving to a higher closing high. Not a
lot of power on the moves, but moving upside.
MONDAY
The market has a split of sorts. SOX, SP400 looking solid. RUTX, SP500
in-between. DJ30 just watching. Big Names breaking lower, many of the same
leaders holding and then bouncing Friday.
The market is going to have to make a decision. We still have upside plays
in the solid sectors and if the market breaks higher or those sectors do, we
have plays for more of them. We also have more downside plays because the
market is showing those setting up and breaking lower. At some point they
market has to make the direction they are all going. For now, while there
are good upside sectors remaining, we feel the market is in trouble.
That is, however, just a feeling. It is not the market move. So, we play
the individual moves that make up the market moves. Again, there are some
very good looking upside plays remaining. Quite a few for that matter.
Fitting the Clash is a UK band.
There is also the Brexit vote Thursday. There could be some gyrations ahead
of that. If they stay, much rejoicing. If they go, temporary panic. Both
would be overreactions to actual events.
Unfortunately the moves in anticipation and in reality can be hard on the
psyche. So, we stick with good patterns as long as they are good patterns.
If we see good moves in good sectors, we go with that. The downside can be
more fickle, but if this move breaks some of these big names will provide
impressive returns, in size and in speed.
One step at a time. See how the leading indices hold, see how the leading
stocks perform. We base our actions off of them, not the hyperbole being
spread every day on the financial stations.
Have a great weekend and Father's Day!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4800.34
Resistance:
4811 is the November 2014 peak (intraday)
4815 is the December 2014 peak
The 200 day SMA at 4817
4836 is the March 2016 peak
The March 2015 lows at 4843 and 4825
The 50 day EMA at 4843
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
gap point
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
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
Support:
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 2071.22
Resistance:
2079 is the intraday all-time high from November 2014
2094 is the December 2014 high
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
Support:
The 50 day EMA at 2070
2062 is the January 2015 lower 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
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 17,675.16
Resistance:
The 50 day EMA at 17,691
17,748 is the mid-April China margin selloff and the bottom of the 5 month
trading range
June 2015 low at 17,715
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
18,168 is the April 2016 recovery high
18,288 from March 2015
18,351 is the all-time high from May 2015
Support:
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
The 200 day SMA at 17,191
17,152 is the mid-July post bear market high
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
ECONOMIC CALENDAR
June 17 - Friday
Housing Starts, May (8:30): 1164K actual versus 1150K expected, 1167K prior
(revised from 1172K)
Building Permits, May (8:30): 1138K actual versus 1150K expected, 1130K
prior (revised from 1116K)
June 22 - Wednesday
MBA Mortgage Index, 06/18 (7:00): -2.4% prior
FHFA Housing Price I, April (9:00): 0.7% prior
Existing Home Sales, May (10:00): 5.50M expected, 5.45M prior
Crude Inventories, 06/18 (10:30): -0.933M prior
June 23 - Thursday
Initial Claims, 06/18 (8:30): 273K expected, 277K prior
Continuing Claims, 06/11 (8:30): 2157K prior
New Home Sales, May (10:00): 560K expected, 619K prior
Natural Gas Inventor, 06/18 (10:30): 69 bcf prior
June 24 - Friday
Durable Orders, May (8:30): -0.6% expected, 3.4% prior
Durable Orders, ex-transports, May (8:30): 0.1% expected, 0.4% prior
Michigan Sentiment - Final, June (10:00): 94.0 expected, 94.3 prior
End part 1 of 3
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