Saturday, June 04, 2016

The Daily, Part 1 of 3, 6-4-16

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6/4/2016 Investment House Daily
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Targets hit: SWN
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: None issued

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- Jobs bomb, building on the April rollover and following the rest of the
economy lower.
- Rate hike odds for June and July plummet, but not so sure the Fed will be
that quick to knuckle under.
- Unemployment rate drops to 4.7% as workers flee from the labor force.
- Same old story: all May jobs were part-time as the economy lost 312K
full-time jobs the past two months.
- Stock indices do a credible job of recovering.
- Large caps still at resistance. RUTX, SOX, SP400 likely ready to test a
good rally.
- Same groups still look pretty solid, and that is the rally's hope.
- A test is likely, and the question is who will lead out of the test:
growth upside or large caps downside?

Some big moves on Friday. Not in the stock market. After a shockingly bad
Jobs Report stocks did a fairly good job of managing the aftermath. The big
moves? Jobs. Bonds. Dollar. Rate hike expectations.

As you would expect after a 38K print for May jobs, stocks started lower.
After the first half hour, however, the turned to a slow steady rise into
the last hour. Only SOX closed positive on the session, but DJ30 and even
SP500 put in credible recovery performances even if SP500 missed the 2100
level that so many watch by a mere 0.87 points.

SP500 -6.13, -0.29%
NASDAQ -28.84, -0.58%
DJ30 -31.50, -0.18%
SP400 -0.41%
RUTX -0.55%
SOX 0.31%

VOLUME: NYSE -7%, NASDAQ -3%. No big surge in selling on the weak jobs, so
no real dumping of shares and no churn as SP500, DJ30, NASDAQ bump against
the April highs. That is a better scenario than volume rising as they bump
those levels but cannot break through.

A/D: NYSE 1.2:1, NASDAQ -1.6:1.

JOBS: If it was not so sad it would have been comical watching the
Administration trying to talk up an utterly pathetic jobs report.

Non-Farm: 38K versus 155K expected versus 123K April (from 160K). March
and April revisions -59K

3-month average: 116K/month. Pathetic.

Harry Doyle (Bob Uecker): How many jobs did we get? 38K G** D*** jobs?
Color man: You can't say 'G** D***' on the air.
Doyle: That's okay. No one is listening anyway.
'Major League,' 1989

Unemployment rate: 4.7% vs 5% expected vs 5.0% April. Why so low? 458,000
left the workforce. Take away a half million people from the labor pool and
you get a better unemployment rate the same way a company buys back stock
and raises its EPS even if earnings were actually worse. Magic! Except --
94.7M people are not in the workforce have no jobs.

Workweek: 34.4 versus 34.5 expected versus 34.4 prior (revised down from
34.5). The workweek just cannot gain traction and it is no wonder given the
Affordable Care Act is such that it behooves companies to not work an
employee more than 29 hours per week. That incentive is keeping the
workweek lower . . . along with an economy that is nowhere near as good
those against 'fiction peddling' are peddling.

Participation rate: 62.6% versus 62.8%. Big drop as 458K left the

Part-time workers due to economic conditions (cannot find a full-time job):

Not in the workforce: 94.7M, +664K

Number of fulltime jobs since January: 0
Number of fulltime jobs lost the past two months: 312,000
Percentage of service jobs created of all jobs in May: 100%

Jobs breakdown:
Construction -15K
Mining: -10K
Manufacturing -18K
Temporary -21K

Healthcare +45K. The lion's share of jobs. Thank you Affordable Care Act,
Professional and Business: +10K
Food and Beverage +22K
Retail +11K
Government +13K. It takes a lot of people to enforce bathroom rules, to
monitor bakeries to make sure they serve everyone, to collapse the
healthcare system, to spy on every conversation of every man, woman, child,
trans-gender person, etc.

As you can see, all of the jobs are again in the lower wage service areas of
the economy. Services. 100% of the jobs gains. Basically you can say the
US took a few steps back in the jobs picture.

Indeed, since 2014, the US added 455K waiters and bartenders, LOST 10K
manufacturing jobs.

Insult to injury: Payrolls would have been negative but for seasonal


Ten year Treasury: 1.70% versus 1.80%. Bonds exploded higher, gapping
through the April and May twin peaks. Bonds are now knocking at the early
February high, the last high before the current four month trading range.
Quite the breakout as the market trashes any chance of a June and likely
July rate hike.


As the rate hike chances faded, so too did the dollar's value. Supposedly
this is good for US businesses. Then why was it down so much when business
was so bad it was not hiring?

EUR/USD: 1.13668 versus 1.1149. Euro explodes higher off the 200 day SMA
test. Over the February peak, taking back half of the losses sustained since
the early May higher high.

USD/JPY: 106.55 versus 108.85. So much for breaking out of the downtrend.
That breakout move had all but failed and then came the insult, slamming the
dollar back down to the late April/early May lows. No breakout.

Jobs dive, bonds soar, the dollar dumps. Stocks? They sold but not hard,
managing a fairly decent recovery.

SP500 closed just below 2100 and that had the correction tongues wagging.
Could be correct as that is the April high and a potential double top with
lower MACD, indicating slowing momentum.

NASDAQ shows similar action, also at the April high on lower MACD. DJ30 is
not even at that level.

It appears the large cap indices are slowing at resistance. The small cap
and midcaps, however, blew through the April peaks. That does not mean they
won't test, but the money is moving their way, and they can test back toward
the April high and still be in position to rally.

That will be the main question: will the small and midcaps test then
rebound? If so, will they carry the large caps with them? Or, will the
large caps stall and fall, unable to move past the April peaks?

Thus far the leadership groups are still working, and that has been the tell
for the market direction. Biotechs and drugs struggled Friday, but they
have good patterns and have started breaking higher. Software still looks
strong. Oil as well. Financial stocks are of course weak after the
terrible economic data, and while many discount them in the market's bigger
picture, I would note that the market has performed better when they were
setting up positive patterns versus when they suffer interest rate related

Friday we didn't do much. We banked some solid 20% stock gain and 50+%
option gain on SWN. That was it. We figured the market has to recover from
what the jobs report dropped on it and thus the Friday direction may not be
that indicative of next week. With the leadership groups holding up well,
however, we were content to let our positions work.


The large cap indices are at resistance from the April highs and elsewhere.
The small, midcap, and SOX indices broke to higher rally highs and are a bit
extended. Their test will be key as will the action of the large caps if
there is a successful test by the smaller caps. There are still leadership
groups performing nicely, and that is what has kept the rally alive.


RUTX: Sold back from Thursday's higher recovery high, but did cut the
losses in half. Easily above the 10 day EMA after its 9 session run.
Likely tests, and the April high (1154 closing) and the 10 day EMA (1148)
are logical targets.

SOX: Continued its rally though with less power. Gapped to the session
high, filled the gap, but then recovered some of the early gains. Long 15
session rally has SOX bumping the last trading range that held the June 2015
peak. About due for a test. 692 is the early December 2015 peak as well as
the 10 day EMA (689).

SP400: Punched a new rally high Thursday, then faded Friday. Tapped near
the 10 day EMA on the low, recovered to a more modest decline. Following
RUTX and SOX higher, working nicely up the 10 day EMA.

NASDAQ: Posted a higher closing high Thursday over the April closing high
but then gave it up Friday. Tested the 10 day EMA on the low, rebounded to
cut the losses by the close. Nice double bottom bounce off the 38% Fibonacci
retracement yielded this rally. Now it is at the prior high and
experiencing some resistance from that level as well as the October through
December trading range. Key test of resistance for NASDAQ.

SP500: Very similar situation to NASDAQ, at the April high that is also in
the October through December trading range. MACD lower. 2100 is a level
many watch as a key resistance point and thus far SP500 has not taken it
out. That will embolden some sellers and they will likely try to sell it
next week. Given the market is due a test that is okay. A lot will depend
upon how the other indices test their higher highs.

DJ30: Just following along, still below the April high but in the upper
half of the November through December range. Not bad action at all, holding
at the 20 day EMA and trying to put in a higher low.


Everything was more or less under pressure Friday post-jobs, but the same
groups held their patterns and moves and look solid overall.

Oil: SWN surged early and gave us our initial target. NGL was up yet
again. CWEI was holding up at the 10 day EMA just fine. WMB, UNT also
holding nicely at the 10 day EMA. Overall just a solid group, holding their
trends and moving higher.

Drugs/Biotech: Struggled but holding up. XLRN reached down to the 10 day
EMA but rebounded to cut the losses. GALE gapped lower but then moved back
up. EVHC lost some ground but is trending higher. EXAS holding fine.
Basically not an up session, but taking a breather.

Financial: Struggled as interest rate hikes are deferred. MS, GS gapped
lower, but both held support and rebounded to doji. BAC, JPM did the same,
gapping, holding support on the low, recovering some lost ground. Not a
total washout and we will have to see what Yellen says Monday.

Construction: Not bad. GRAM moved higher off its test, posting a solid 4.6%
gain. MDR held steady at the 10 day EMA.

Industrial machinery: some good moves. DE gapped higher and cleared the
April and May peaks. CAT looks very good right now.

Chips: Not bad at all. XLNX trying to break higher from a two week lateral
move. MXL tested, but showing a doji at the 10 day EMA. QRVO up modestly
after a nice Wednesday and Thursday move. AVGO gapped higher on earnings.
NXPI testing the 10 day EMA after a nice two week run.

Software: Solid week. CYBR was flat on the day, but this after a solid
Tuesday to Thursday rally. RHT was flat as well, but it too put in a good
move on the week. VMW enjoyed a strong week, hitting our initial target
along the way.


Stats: -28.85 points (-0.58%) to close at 4942.52
Volume: 1.68B (-3.04%)

Up Volume: 520.83M (-639.17M)
Down Volume: 1.14B (+591.43M)

A/D and Hi/Lo: Decliners led 1.6 to 1
Previous Session: Advancers led 1.61 to 1

New Highs: 71 (-15)
New Lows: 33 (+8)

Stats: -6.13 points (-0.29%) to close at 2099.13
NYSE Volume: 888M (-6.72%)

A/D and Hi/Lo: Advancers led 1.17 to 1
Previous Session: Advancers led 1.86 to 1

New Highs: 182 (+64)
New Lows: 10 (+2)

Stats: -31.5 points (-0.18%) to close at 17807.06


VIX: 13.47; -0.16
VXN: 15.03; -0.12
VXO: 12.59; -0.13

Put/Call Ratio (CBOE): 0.88; -0.03

4 of the last 6 below 1.0. 19 of 26 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: As fast as bulls plunged the prior week they surged,
jumping 10 points. Highest reading in 7 weeks (47.5). Bears fell, but not
at the same rate. Back and forth action shows investment advisors are being
fickle, right? They were caught napping with the move, as bulls tumbled to
35 just as the rally started. Now they are right back in, saying they knew
it all along. While not at the 60 level that would condemn a rally, the big
moves show how fickle the big money is right now.

Bulls: 45.4 versus 35.4

Bears: 23.7 versus 24.0

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: 45.4%
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: 23.7%
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%


Bonds (10 year): 1.70% versus 1.80%

Historical: 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% 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: 1.13668 versus 1.1149. The dollar strikes back with a gain,
sending the Wednesday upside bounce in the euro back to the showers.

Historical: 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 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

USD/JPY: 106.55 versus 108.86

Historical: 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 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

Oil: 48.62, -0.44. Spent the week testing the prior week's gains. Modest
loss Friday, closing just below the 10 day EMA. This even as the dollar was
hammered. If the dollar stays lower, that acts as support for oil as oil is
priced in dollars. The weaker the dollar, the more dollars it takes to buy
oil, and thus the price rises.

Gold: 1242.90, +30.30. After slipping to the late March lows last week,
Friday gold exploded higher as the rate hike odds dropped sharply. Back to
the middle of the February to June range.


The carefully, if not foolishly, constructed meme to further raise interest
rates received a sharp blow. Jobs are one of the Fed's main indicators
prompting its new found courage to talk about hiking rates. Not hiking
rates, just talking about it. Of course the Fed could dogmatically focus on
the unemployment rate, but to do so reveals the Fed as totally mechanical
and almost pandering to a false narrative. I mean, we all know why the
unemployment rate is at 4.7%: almost one-third of the country is not
working, and that group is a much larger portion of the actual working-aged
group in society. Hey, if the other 7.4M people who are 'officially'
unemployed decided to leave the workforce, unemployment would be 0%! Surely
the Fed would hike rates then.

Yellen will talk Monday in Philadelphia and everyone will listen and watch
closely. You know what? I think she sticks to her guns regarding hiking to
get more ammo for when the next crisis arises. If she does not, what kind
of fool would the chairman and her fellow FOMC members appear? They
carefully construct the reasons for hiking, then one report and they go
running as if a skunk snuck in the committee room? Of course Yellen could
panic and revert to her nature, the one where she has the urge to migrate
every year and coo in the mornings. One would hope not.

Thus, the market could be right back where it was pre-jobs in terms of rate
hike expectations. All it takes is the chairman saying it was just one
report and the hikes are still on track. Then the financials start to
recover from Friday, and quite likely we see the same leadership groups
continue to work. We may see the latter group continue to work regardless.

That said, near term the market still could use a test. SOX and RUTX are up
nicely over the April highs and it is normal to test breaks through
resistance. SP500 and NASDAQ are struggling at the April highs, a natural
place to fade. As noted earlier, the question then becomes whether the
large caps drag down the leadership indices, or if the leaders (SOX, RUTX)
represent where the money is moving and pull the big names back up.

It is noteworthy that money actually moved back into equity funds last week
after fleeing for its life just as the market bottomed for this current
rebound move. Not a huge amount, but a net positive of $1.6B. Late to the
party? Perhaps, but pulling that short money back into the upside is how
rallies maintain themselves.

We are going to continue looking at the leadership groups of late, and if
there is a pullback we want to use that as stocks rebound, if they do
rebound. This current leg likely cannot rally much more before it needs to
test, and if there is a further move higher we want to use it to bank some
more gain. Then we let it test, see how the leadership groups hold and
setup, see if any new groups emerge, and if so, play them on a bounce.

Of course, the market is still in that big 1.5 year top and this level for
the indices is starting to tug on Superman's cape, so to speak. In other
words, we have to exercise caution and watch closely as any pullback starts.
What are the leadership groups doing? How are their stocks holding support?
What is the overall market volume? Breadth? The economy is weak, jobs are
rolling over to follow it, and the Fed likely still wants to hike rates.
Heck, even if it does not hike that won't prevent issues relating to a
weaker and weaker economy. So, we play the good stocks but we also have to
recognize where the market is.

Have a great weekend! Enjoy graduations and early summer. We have another
graduation party this weekend. It is a great time and everyone should make
a point of sharing it with friends and family.


NASDAQ: Closed at 4942.52

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
The 50 day SMA at 4845
4836 is the March 2016 peak
4815 is the December 2014 peak
The 200 day SMA at 4810
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 2099.13

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 2061
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 17,807.06
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 17,635
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
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


June 3 - Friday
Nonfarm Payrolls, May (8:30): 38K actual versus 155K expected, 123K prior
(revised from 160K)
Nonfarm Private Payr, May (8:30): 25K actual versus 160K expected, 130K
prior (revised from 171K)
Unemployment Rate, May (8:30): 4.7% actual versus 4.9% expected, 5.0% prior
(no revisions)
Hourly Earnings, May (8:30): 0.2% actual versus 0.2% expected, 0.4% prior
(revised from 0.3%)
Average Workweek, May (8:30): 34.4 actual versus 34.5 expected, 34.4 prior
(revised from 34.5)
Trade Balance, April (8:30): -$37.4B actual versus -$41.6B expected, -$35.5B
prior (revised from -$40.4B)
Factory Orders, April (10:00): 1.9% actual versus 1.6% expected, 1.7% prior
(revised from 1.1%)
ISM Services, May (10:00): 52.9 actual versus 55.4 expected, 55.7 prior (no

June 7 - Tuesday
Productivity-Rev., Q1 (8:30): -0.6% expected, -1.0% prior
Unit Labor Costs - R, Q1 (8:30): 4.0% expected, 4.1% prior
Consumer Credit, April (15:00): $18.5B expected, $29.6B prior

June 8 - Wednesday
MBA Mortgage Index, 06/04 (7:00): -4.1% prior
JOLTS - Job Openings, April (10:00): 5.757M prior
Crude Inventories, 06/04 (10:30): -1.366M prior

June 9 - Thursday
Initial Claims, 06/04 (8:30): 265K expected, 267K prior
Continuing Claims, 05/28 (8:30): 2172K prior
Wholesale Inventories, April (10:00): 0.1% expected, 0.1% prior
Natural Gas Inventor, 06/04 (10:30): 82 bcf prior

June 10 - Friday
Michigan Sentiment - Pre, June (10:00): 94.0 expected, 94.7 prior
Treasury Budget, May (14:00): -$84.1B prior

End part 1 of 3
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