* * * *
7/30/2016 Investment House Daily
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MARKET ALERTS:
NOTE: Jon Johnson is traveling and had an 'incident' with a car door. As a
result there will be no Market Summary video this weekend. New Plays will be
sent later today. Thank you.
MARKET ALERTS:
Targets hit: GOOG
Entry alerts: ISRG
Trailing stops: None issued
Stop alerts: None issued
The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html
********************************************************************
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
- BOJ disappoints, GDP misses big, market does the same.
- The economy continues to underwhelm as this will mark the first
Administration to have no year with 3% or better GDP growth.
- Earnings overall positive, market moves but again, market does not move.
Much.
- Bonds and gold surge on view Fed is nowhere near tightening yet dollar
sells. The data was that weak?
Friday was shocking. A lot of news hit the wires pre-market from earnings,
to central banks to economic data. Things did not go as expected in almost
all instances.
The BOJ, after Abe's announcement of 28T yen in stimulus to come, barely
budged on stimulus. It raised ETF purchases to 6T yen from 3.3T yen, but
that was it. Not even a rate cut.
More than that, it included a statement that it would undertake a
'comprehensive assessment' of its stimulus. Some say that means it will
announce large stimulus plans at the next meeting. I am not so sure of
that. I posit the BOJ may, after over two decades of depression fostered by
the very policies it will assess, be rethinking and reshaping what should be
done in terms of stimulus.
IMF: More shock. The IMF admitted that its restructuring requirements and
policies caused the Greece depression.
GDP shock: US Q2 GDP 1st iteration was a complete whiff at 1.2%. Remember,
some even thought a 3+% quarter was possible.
GDP: 1.2% vs 2.4% exp vs 0.8% prior (from 1.1% Q1 final)
Core PCE: 1.7% vs 2.1% Q1
Business Investment: -2.2%, third straight quarter lower.
Consumer: +4.1% vs 1.6% Q1. That SAVED the report as it added 3% to the
final GDP number.
GDP last 3 quarters: Less than 2%. Juxtapose that to the rosy scenario
painted Wednesday night at the DNC Convention. Who is 'peddling fiction'?
The facts, as we have reported month after month after month, do not support
the grand conclusions about the present and future being made. Nothing new
there, just given the election cycle it is more apparent given the grand
speeches and statements that are more based on what the candidates would
LIKE the facts to be versus what the facts really are.
The shocking facts: President Obama will be the first US President to NEVER
have a year of 3% GDP growth.
The middle class fell below 50% in this country supposedly as the country
enjoyed a strong economic recovery. That is not so much shocking as it is
damning in terms of the notion of a strong economic recovery having occurred
or is in progress.
And more GDP shock: during the run up to the election the numbers reported
were allowed to be so pathetic. How does that help those currently in power?
Will there be a September surprise, a 'surge' in GDP just before the
election, such that it gets the swing voter thinking, 'gee, things just got
better?'
For now, Europe is pointing the way for the US as the latter's GDP growth
rates continue their decline toward more European levels. Indeed, looking
at the EU GDP levels, the gap is narrowing, and that does not mean Europe is
rising to meet the us:
EU GDP: 0.3% as expected. Year/year: 1.6% vs 1.5% exp vs 1.7% prior
France GDP: 0.0% VS 0.2% exp vs 0.6% prior. Take off velocity?
Again, the stock indices didn't surge and they didn't tank. They continued
rather modest moves. Some tested an earlier break upside. Others continued
tight lateral moves.
AMZN and GOOG reported strong earnings and moved higher, helping push NASDAQ
and SP500 green, but there was no strong move. Good earnings for big name
stocks. The central banks perhaps a bit more conservative but hardly
pulling back. Economic data turned from getting better (suspiciously so) to
dramatically worse, e.g. Durable Goods Orders and Q2 GDP.
None of that was, however, an overall catalyst to send the stock indices
higher. SOX is on its own plan, surging higher Tuesday. SP400 broke to a
clearer high Friday. NASDAQ is slowly moving higher itself. SP500 and DJ30
are still in tests, looking to follow the other indices in at least their
trends higher.
Again, the stock indices are still attempting to find a catalyst to send
them seriously higher. Perhaps they are just going to bleed higher e.g.
NASDAQ, RUTX, SP400. With SOX in the lead and NASDAQ working higher as well
thanks to the big names, perhaps the other indices just follow along. Thus
far they have, more or less.
Now that just about all the data is out, except of course the new jobs
report out Friday of this coming week, you would expect more of a move.
Instead a very staggered move upside. If leadership continues to hold up,
to set up, and move higher, well, that is the ultimate factor. Thus far
leadership is indeed setting up and moving up. While this week brings a new
week and a new month and that could shake things up, the leaders are thus
far doing the job of keeping the market moving higher or at least holding
the gains.
THE MARKET
CHARTS
To view charts, click on link or paste URL into browser.
http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
NASDAQ: Gapped higher Wednesday out of a short consolidation and continued
higher into Friday. Steady move higher. Not blowout but very steady up the
10 day EMA following the break over the April and June highs. NASDAQ is now
at the late 2015 highs, pushing to move through toward that July 2015 high.
SOX: Big upside break Tuesday to a new post-2000 high. Faded in a 1-2-3
test Wednesday to Friday. SOX is leading, showing strength, and a test sets
it up in good position to continue to lead the market.
SP400: Has fiddled with a new high for over a week. Finally broke to a
more definitive new high Friday. As with SP500 and DJ30, the more mileage
it puts on the break higher, the more chance it has of sticking.
RUTX: Still trying to make the break into the final range that holds the
all-time high from mid-2015. Perhaps the Russell will follow SP400 in its
move.
SP500: Up Friday but not really a new move. The first to a new high, now
in an 8 session lateral move. Not giving up gains, consolidating what it has
won, and leaving itself in good position to continue upside again after this
nice test.
DJ30: Very nice test continues in progress, showing another doji as the Dow
tests the 20 day EMA. Nice test after being the second to hit an all-time
high.
MARKET STATISTICS
NASDAQ
Stats: +7.15 points (+0.14%) to close at 5162.13
Volume: 1.991B (+4.17%)
Up Volume: 922.5M (-117.5M)
Down Volume: 1.12B (+240.97M)
A/D and Hi/Lo: Advancers led 1.02 to 1
Previous Session: Decliners led 1.14 to 1
New Highs: 157 (+16)
New Lows: 38 (+9)
S&P
Stats: +3.54 points (+0.16%) to close at 2173.6
NYSE Volume: 1.2B (+37.06%)
A/D and Hi/Lo: Advancers led 1.68 to 1
Previous Session: Advancers led 1.08 to 1
New Highs: 262 (+90)
New Lows: 19 (+4)
DJ30
Stats: -24.11 points (-0.13%) to close at 18432.24
SENTIMENT INDICATORS
VIX: 11.87; -0.85
VXN: 13.97; -0.87
VXO: 11.52; -2.11
Put/Call Ratio (CBOE): 1.2; +0.3. First move over 1.0 on the close in 15
sessions. One such reading does not mean much but now watching to see if a
few more pop up.
14 of 15 below 1.0, 15 of last 32 over 1.0.
27 of the last 45 below 1.0. 35 of 65 over 1.0.
Definitely getting complacent at these levels.
Bulls and Bears: Bulls hanging in the low 50's, still off the 60ish level
that has spelled correction. Bears, however, are falling significantly and
are near levels where stock corrections have occurred.
Bulls: 53.9 versus 54.4
Bears: 21.6 versus 23.3
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: 53.9 versus 54.4
54.4% versus 52.5% versus 47.1% versus 41.6% versus 47.5% versus 45.9%
versus 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%
Bears: 21.6% versus 23.3%
23.3% versus 24.7% versus 24.5% versus 23.8% versus 23.2% versus 23.5%
versus 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%
OTHER MARKETS
Bonds (10 year): 1.46% versus 1.50%. TLT and bonds surging upside off the
test the first part of July.
Historical: 1.50% versus 1.51% versus 1.56% versus 1.57% versus 1.56% versus
1.558% versus 1.58% versus 1.56% versus 1.59% versus 1.58% versus 1.53%
versus 1.47% versus 1.51% versus 1.434% versus 1.36% versus 1.39% versus
1.373% versus 1.367% versus 1.44% versus 1.475% versus 1.51% versus 1.468%
versus 1.46% versus 1.57% versus 1.74% versus 1.68% versus 1.70% versus
1.67% versus 1.61% versus 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%
EUR/USD: 1.1173 versus 1.10806. Euro surging off of that double bottom.
Historical: 1.10806 versus 1.10732 versus 109857 versus 1.0992 versus 1.0977
versus 1.1021 versus 1.1022 versus 1.1021 versus 1.10654 versus 1.1035
versus 1.1117 versus 1.1099 versus 11061 versus 1.10588 versus 1.10502
versus 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106
versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070
versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778
versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526
versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 102.045 versus 104.679. The dollar plunges back into the
downtrend channel.
Historical: 104.679 versus 105.98 versus 104.731 versus 105.76 versus
106.05 versus 106.11 versus 107.16 versus 106.139 versus 105.95 versus
104.85 versus 105.31 versus 104.74 versus 102.686 versus 100.59 versus
100.768 versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus
102.912 versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus
104.87 versus 104.788 versus 103.98 versus 104.58 versus 104.12 versus
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
Oil: 41.60, +0.46. Modest gain after more than a week of losses took oil
to the 200 day SMA. Seven week test in progress, trying to rebound and
recover some lost ground.
Gold: 1357.50, +25.20. Surging higher, looking for no rate hikes near
term.
MONDAY
A lot of economic data, earnings, and central bank moves are all in the
market. More data and earnings hit this week, a lot more of each. Still,
it appears some important moves are in progress: bonds rallying, gold
surging, dollar fall, and stocks holding up with continued leadership.
With the market still showing leadership with even oil stocks holding
patterns despite oil's slide, we will continue working on finding good
leaders in position to enter and ride for gain. The world of central bank
driven markets is still in place and will remain in place if the data shows
the kind of weakness that reappeared last week. After all, as DB noted last
week, the US Fed says it is data dependent but doesn't act when data is
good, and then some bad data does actually hit and the entire process starts
over. I suppose that puts us in a start over situation and that means we
look for stocks to play higher as the Fed again puts off hiking rates.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5162.13
Resistance:
5162 is the early November peak, 5176 is the December intraday peak
Support:
5100 from the April peak and early May peak
The 10 day EMA is 5100
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
The 50 day EMA at 4946
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 200 day SMA at 4845
4836 is the March 2016 peak
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2173.60
Resistance:
Support:
The 10 day EMA at 2165
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
The 50 day EMA at 2116
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 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 200 day SMA at 2041
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,432.24
Resistance:
Support:
The 10 day EMA at 18,449
18,351 is the all-time high from May 2015
18,288 from March 2015
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
The 50 day EMA at 18,067
18,016 is the June 2016 peak
17,978 is the November 2015 peak
17,600 is the rough bottom of the April to June range.
The 200 day SMA at 17,435
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 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 29 - Friday
July 29 - Friday
GDP-Adv., Q2 (8:30): 1.2% actual versus 2.6% expected, 0.8% prior (revised
from 1.1%)
Chain Deflator-Adv., Q2 (8:30): 2.2% actual versus 1.9% expected, 0.5% prior
(revised from 0.4%)
Employment Cost Index, Q2 (8:30): 0.6% actual versus 0.6% expected, 0.6%
prior (no revisions)
Chicago PMI, July (9:45): 55.8 actual versus 54.0 expected, 56.8 prior (no
revisions)
Michigan Sentiment -, July (10:00): 90.0 actual versus 90.4 expected, 93.5
prior (no revisions)
August 1 - Monday
Construction Spendin, June (10:00): -0.8% prior
ISM Index, July (10:00): 53.1 expected, 53.2 prior
Construction Spendin, June (10:00): 0.7% expected, -0.8% prior
August 2 - Tuesday
Personal Income, June (8:30): 0.3% expected, 0.2% prior
Personal Spending, June (8:30): 0.3% expected, 0.4% prior
Core PCE Prices, June (8:30): 0.2% expected, 0.2% prior
PCE Prices, June (8:30): 0.2% prior
Auto Sales, July (14:00): 4.95M prior
Truck Sales, July (14:00): 8.24M prior
August 3 - Wednesday
MBA Mortgage Index, 07/30 (7:00): -11.2% prior
ADP Employment Chang, July (8:15): 165K expected, 172K prior
ISM Services, July (10:00): 55.8 expected, 56.5 prior
Crude Inventories, 07/30 (10:30): 1.671M prior
August 4 - Thursday
Challenger Job Cuts, July (7:30): -14.0% prior
Initial Claims, 07/30 (8:30): 264K expected, 266K prior
Continuing Claims, 07/23 (8:30): 2139K prior
Factory Orders, June (10:00): -1.9% expected, -1.0% prior
Natural Gas Inventor, 07/30 (10:30): 17 bcf prior
August 5 - Friday
Nonfarm Payrolls, July (8:30): 185K expected, 287K prior
Nonfarm Private Payr, July (8:30): 171K expected, 265K prior
Unemployment Rate, July (8:30): 4.8% expected, 4.9% prior
Average Hourly Earni, July (8:30): 0.2% expected, 0.1% prior
Average Workweek, July (8:30): 34.4 expected, 34.4 prior
Trade Balance, June (8:30): -$42.7B expected, -$41.1B prior
Consumer Credit, June (15:00): $16.2B expected, $18.6B prior
End part 1 of 2
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Sunday, July 31, 2016
Sunday, July 24, 2016
The Daily, Part 1 of 3, 7-23-16
* * * *
7/23/2016 Investment House Daily
* * * *
MARKET ALERTS:
Targets hit: OPHT
Entry alerts: None issued
Trailing stops: WWW
Stop alerts: ATW
The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html
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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
- After a Thursday fade the indices bounce right back.
- A big move left the indices overbought but they have done a nice job of
consolidating the gains.
- Hope again springs that the economy is finally taking off, but it is
nothing but the same cycle for 2016 we saw in 2015 and before.
- Still plenty of leadership working.
- Indices are setting up for the new move but some earnings help is what is
needed.
What Thursday tried to take away, Friday brought back. Or most of it. All
indices closed higher, holding their recent gains spurred on mostly, in our
opinion, by the belief in continued central bank support.
Given that, the recovery was not bad considering Mr. Kuroda at the Bank of
Japan reiterated there was no need for helicopter money in Japan.
Perhaps it was earnings reports that were less than grand splashing cold
water on the 'don't panic, all is well' company lines regarding the economy.
AMD beat nicely. V beat. GE reportedly beat, but beat what? Power
products -27%, Equipment -30%, Aviation -37%. GE beat with the usual GAAP
versus non-GAAP accounting, but the trends for sales were down across the
board. SKX missed, HON missed top line, VFC missed top line and lowered
2016 guidance, SBUX missed top line as well and reported weak same store
sales. Not the best prognosis for a recovering economy.
As noted earlier this week, there are two competing forces: better data
suggesting economic growth versus the addiction to central bank largesse.
If the economic data is strong enough, the Fed figures it is not needed, at
least in an easy money sense. Thus each time the central banks posture that
perhaps they are not going to be as market compliant . . a bit of a hiccup
. . . as on Thursday.
Not the case Friday. Kuroda was still curmudgeonly, but that did not hurt
stocks. No new highs, but not bad action to end the week when central banks
were not as effusive.
SP500 9.86, 0.46%
NASDAQ 26.26, 0.52%
DJ30 53.62, 0.29%
SP400 0.67%
RUTX 0.75%
SOX 0.55%
VOLUME: NYSE -9%, NASDAQ -13%. After volume rallied on the Thursday
selling, it fade as stocks rebounded. Not a lot of serious buying.
A/D: NYSE 1.9:1, NASDAQ 1.9:1. Not all that powerful in terms of breadth.
For the week the indices were again up, fighting off a Thursday selling
attempt. That makes four straight upside weeks off the late June Brexit
selling.
We are not deluding ourselves that the move is due to great expectations in
terms of economics; even as the headlines are better there are worrisome
economic signals, many of which are showing up in the earnings reports being
released now. Again, despite this past week that saw a bit of backpedaling
by the central banks (Kuroda, ECB unchanged), central bank support is still
the dominant factor in stock moves ever since the banks came back into the
market at the height of the January/February selling (or would that be a the
low?).
NEWS/ECONOMY
Listening to CNBC Friday, the US economy is great, the world economies while
not great are not horrible, and there is just a lot of fear mongering taking
place that is making people feel so despondent about their prospects. That
is the argument you hear every time there is economic decay felt by the
citizens but not showing up in the government numbers. Sure the economic
data headlines are better, but as we have pointed out, the underlying data
is not, and seasonal adjustments 2x or 3x the norm render the data so
subjective as to be useless. Well, perhaps not useless to the powers that
be. Their goal is to make sure the headlines proclaim all is well, things
great, and they are only getting better. Trying to convince people who
don't think things are better that they are better.
I have approached this many ways in the past. A person who hears of the
improvement in the economy reported by the news and the financial stations
assumes it is happening, it just hasn't made it to their geographic area or
their sector of the economy yet. Just a matter of time, right? That is
where the expectations portions of the sentiment surveys show their most
resilience: we are an optimistic people, usually, and thus we hold out hope
for the future.
Another tactic is calling the data 'great' or 'blowout' when in historical
terms it is nothing of the sort. After the last Jobs Report I discussed yet
again how as a nation our expectations of economic output has been dumbed
down by years of decline and subsequent lateral malaise. Then when there is
a sharper bump up in data we start to believe the nonsense that these really
are great numbers and hence great times.
At the same time, however, there is still that nagging restlessness in the
back of your mind asking when the heck am I going to see the benefit of all
this 'greatness?' When am I going to get my full-time job back and a salary
similar to what I had?
Cyclical Patterns Persist
This year is another case in point of the ongoing economic issues. Even
with the doctored results inflating what is the actual economic reality, the
economy is still showing down cycles.
2016 is showing the same pattern as 2015: 2015 was stronger after a slow
start, moving up in spring to summer, but it was a false rise as seen so
many times in this economy. The economy weakened again and to such a point
that fears of recession resurged late year and early 2016. Now the cycle is
repeating with an apparent improvement into the summer as the headlines
improve.
That is what happens in these systemic slowdowns. The economy cycles between
bad times and not so bad times, all the while output remains at a very
reduced level. Again, it is a case of the 'dumbing down' of our view of what
is a strong economy.
This happened in the 1970's and history has repeated thanks to the
regression back to the same failed ideas and policies that led to that
systemic slowdown. Big tax increases, huge regulatory burdens making it
next to impossible to start a business, keep it going, get a mortgage, etc.
To break the cycle you must wholly change the policies that only work to
reinforce the cycle.
That is what happened in the early 1980's with the sharp reductions in
marginal tax rates, accelerated depreciation, tax credits, drastically
reduced regulation. The policies were changed from those fostering systemic
malaise to ones once again awarding investment and risk taking. As Einstein
said, or something close to this, doing the same thing over and over and
expecting different results is the definition of insanity.
It would appear that we suffer, as a nation, bouts of recurring insanity
when we think we can regulate, tax, appropriate, redistribute, etc. our way
to prosperity.
Minimum Wage Hikes are just the next economic and standard of living
problem.
The minimum wage is another example of trying to overly manage the economy
by dictating what the economics should be. Micro economic management is a
time-proven disastrous course, but again, one in which our collective
insanity is currently engaged.
There is a lot of debate about the effects of a rising minimum wage.
Seattle did it in 2015 and the debate is whether it has harmed anything. I
heard Seattle dragged in on Fox Business over a discussion of this among
other economic issues. The overall Seattle economy is still good enough.
Some restaurants have gone out of business but the owners say it was not
because of the wage.
The claim was, however, that "everyone will be able to afford $15/HOUR
because it will be the new standard." Kind of the 'if you set it, they will
pay it' theory of economics.
To some extent that makes sense: in terms of the larger franchises the food
prices went up, passed along to the customers. They can come up with ways
to increase efficiencies across the board such as automating a lot of the
processes (testing that in China right now with 95% robot/automated chain
restaurants, soon to be brought to the rest of the world) that the smaller
operations, such as the Red Top Diner in Friendswood, Texas cannot.
Thus, in terms of businesses, the larger ones work to offset the increased
costs with higher prices and improved efficiencies that work to reduce the
source of the increased costs. While it will not admit it, SBUX, according
to its workers, is limiting hours worked by its workers, actually having
fewer workers in the stores on a shift. Complaints of lack of hours overall
while at the same time when they are working having to work extra hard due
to the staff being below the usual SBUX numbers. Smaller businesses will
have to employ less workers to do the same jobs, period. Further, neither
will likely hire that additional worker that might be desired. Indeed, it
appears SBUX is not only not hiring those additional workers but, surprise,
is expected MORE from its existing workers as part of getting that increased
minimum wage. There are no free lunches.
So, the 'standard' that everyone will be able to afford has consequences.
Prices will build in the extra cost. Companies that can do so will move to
systems that bring the labor cost back in line, either through automation,
requiring more worker productivity. Those that cannot, the smaller shops,
will have to reduce employees and also demand more productivity from those
keeping jobs.
ALL will reduce, all things equal, additional hiring or job creation. The
latter is one of the real costs of an artificial wage hike: it reduces the
creation of new jobs, not necessarily the elimination of existing jobs. If
you don't have a job and need one, that outcome is not one you want.
There are other impacts in other areas. Studies show that most of the
people receiving the minimum wage are not at the lowest end of the
socioeconomic scale. Thus food and other inflation still hits the lowest
end the hardest because all they see is higher prices without any increase
in wages or disposable income. Perhaps it would be better to not focus on
the wage as much as focus on achieving conditions where people can find a
good job AND have an incentive to do so. If you pay 94M working aged
people, (most of which CAN work as the jobs reports show) out of 318M total
population NOT to work through assistance programs, etc., as we have seen,
they won't work. Is it not better to have them in the workforce producing
versus making it where they can choose not to work and then complain when
prices go up because the minimum wage is artificially increased?
The minimum wage of course is not the only issue, it is just one that many
cite as a priority in order to get people out of poverty. It won't do it.
A job at McDonald's is not what Americans should strive for. We need to get
back to producing real jobs by not paying companies not to invest in growing
business. That means the Fed has to be curtailed to stop the madness of
giving free loans to the large companies. Just as with those choosing not
to work because they are paid not to work, the only way to get the
corporations to invest in their businesses again is to stop paying them to
buy back stock and chase paper investments they can profit from using the
free money. In short, get the Fed out of the economy managing business and
then change the fiscal policies to promote investment and innovation right
here in the US.
We have tried to cheat the system. We tried to say we can just print money,
create more debt, and magically float our economy without any real
investment. That only works short time. We are starting to see the results
of this where we have taken a nation that had the largest percentage of
wealth held by the middle class into one where the now the largest
percentage of wealth is held by the 1%. At the same time the middle class
has fallen out of the majority of our population for the first time since it
became the majority post-industrial revolution.
THE MARKET
Thursday it looked as if the stock indices would start a test, one beyond
just a lateral consolidation, perhaps even, my goodness, to the 10 day EMA.
Didn't happen as of Friday as the stock indices bounced, albeit on lighter
trade.
CHARTS
NASDAQ: An important index on the week, break higher out of its lateral
range with a Wednesday gap. Thursday was dicey, as it was for all of the
indices, but Friday NASDAQ recovered and moved to a higher recovery high.
5150-5160 is next resistance (closed at 5100). If the big names continue to
participate in the move toward their earnings Tuesday to Thursday, NASDAQ
can make that next resistance level. That is not great praise; that just
takes it to the penultimate resistance before the July 2015 high.
SOX: Reached lower but then regrouped for a solid move. Closed below the
Wednesday high, but good to see SOX hold over the 10 day EMA and find some
bids. It is considerably overbought with its 100+ point run off the June
low, now just 9 points off the June 2015 high (751).
SP400: SOX is not the only indices flirting with the old high. SP400
cracked over its June 2015 all-time high (1551.28; 1552.34 close) but it
will need to put some distance on that to make it stick. Overall this is
good positioning: SP400 is in an 8 session lateral move consolidating the
rally to the prior high. The 10 day EMA has caught up with it, it has not
sold, it is rested. Great position to make the breakout move.
RUTX: Same situation as SP400 only RUTX is trying to break into the summer
2015 range that holds the all-time high. Eight session lateral move, the 10
day EMA has caught up, Friday breaking to a higher closing high on this
move. It too is in position, just needs some love from earnings.
SP500: The first to a new high and still holding it. Thursday things
looked less than perfect with SP500 selling off Wednesday's move to a higher
high all in once move. Friday stabilized the pattern, and SP500 sports
something similar to SP400 as it is in a lateral consolidation.
DJ30: The Dow had its issues Thursday as well, taking back the Wednesday
and Tuesday upside. It held, however, over the 10 day EMA and is trying to
stretch into a lateral consolidation as well.
LEADERSHIP
Big Names: Another mixed bag though elevated and showing some decent
patterns overall. FB continued its test lower, tapped the 10 day EMA,
reversed to a gain. Good action. AMZN continued laterally along the 10 day
EMA; decent. AAPL tested to the 10 day EMA on low volume. GOOG sold lower
then reversed for a gain and a higher rally high; good. SBUX broke higher
from the two week lateral range. MSFT continued higher off its earnings
gap.
Oil: Very mixed. CWEI remains solid, moving up on rising trade off the 200
day SMA. APC has bounced off the 50 day EMA (earnings Tuesday before the
open). CVX in a nice 20 day EMA test. HAL showing a bit 50 day EMA doji.
ESV is bombing lower. MRO testing the 50 day EMA. ATW sold to the 50 day MA
on rising trade. Some key tests are occurring.
Metals: Hanging in. SID moved to yet a higher rally high. AKS held the 10
day EMA and attempting a bounce. FCX holding the 10 day EMA (earnings
Tuesday before open). Precious metals mixed; HMY holding steady after
selling, NEM moving back up.
Software: ROVI continues its impressive run. CALD announced results and
was wild, but nice bounce off the 50 day EMA. BLKB bouncing off the 20 day
EMA. FFIV, VMW moving upside. Solid group and we have some good plays
working.
Biotechs/Drugs: Volatile as always. BLUE bounced off the 50 day EMA on the
week. KERX moving well up the 10 day. BIIB moved well on earnings. EXAS
announces results Tuesday before open, jumping off a 20 day EMA test.
Chips: INTC held the 20 day EMA with a doji, bounced Friday. AMKR at the 10
day EMA, earnings Tuesday after. AVGO reached lower, recovered to show a
doji. XLNX bounced nicely off the 10 day EMA Friday. TSRA fell to the 20
day EMA Friday. KOPN keeps trying to bounce but back slides to the 200 day
SMA.
Retail: Still looks ready, still has not moved. RH in position. JWN, KSS,
M, DDS still in the nice handle formations, ready to break higher. EBAY
still running higher after its earnings.
MARKET STATISTICS
NASDAQ
Stats: +26.26 points (+0.52%) to close at 5100.16
Volume: 1.613B (-12.61%)
Up Volume: 1.15B (+433.13M)
Down Volume: 463.46M (-666.54M)
A/D and Hi/Lo: Advancers led 1.88 to 1
Previous Session: Decliners led 1.65 to 1
New Highs: 133 (+33)
New Lows: 26 (-10)
S&P
Stats: +9.86 points (+0.46%) to close at 2175.03
NYSE Volume: 750.8M (-8.66%)
A/D and Hi/Lo: Advancers led 1.92 to 1
Previous Session: Decliners led 1.37 to 1
New Highs: 196 (+52)
New Lows: 10 (+2)
DJ30
Stats: +53.62 points (+0.29%) to close at 18570.85
SENTIMENT INDICATORS
VIX: 12.02; -0.72
VXN: 14.59; -0.39
VXO: 10.55; +0.51
Put/Call Ratio (CBOE): 0.82; -0.13
10 of 10 below 1.0, 14 of last 28 over 1.0.
23 of the last 40 below 1.0. 34 of 60 over 1.0.
These are starting to flip with the 'below 1.0' overtaking 50% of the recent
readings.
Bulls and Bears: Bulls continue their run higher off the June low while
bears actually suffer a sharp slide.
Bulls: 54.4 versus 52.5. Another highest level since early 2015. Again,
around 60 is where an upside move has topped over the past 18 years.
Bears: 23.3 versus 24.7. The bears are losing some ground though still
over the 15 level where a lot of the fades have bottomed.
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: 54.4 versus 52.5%
52.5% versus 47.1% versus 41.6% versus 47.5% versus 45.9% versus 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%
Bears: 23.3% versus 24.7%
24.7% versus 24.5% versus 23.8% versus 23.2% versus 23.5% versus 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%
OTHER MARKETS
Bonds (10 year): 1.56% versus 1.558%. Trying to recover off the weaker
posture the past week. Rallied to close at the 20 day EMA but struggling to
hold the upside after falling into the late June upside gap zone.
Historical: 1.558% versus 1.58% versus 1.56% versus 1.59% versus 1.58%
versus 1.53% versus 1.47% versus 1.51% versus 1.434% versus 1.36% versus
1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475% versus 1.51%
versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68% versus
1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.0977 versus 1.1021. Euro tried to rally two weeks back but has
now flipped and is fading below the 10 day EMA. At the June lows, a key test
in progress.
Historical: 1.1021 versus 1.1022 versus 1.1021 versus 1.10654 versus 1.1035
versus 1.1117 versus 1.1099 versus 11061 versus 1.10588 versus 1.10502
versus 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106
versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070
versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778
versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526
versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 106.05 versus 106.11. Surged Wednesday, gave it back Thursday,
wasn't going anywhere Friday.
Historical: 106.11 versus 107.16 versus 106.139 versus 105.95 versus 104.85
versus 105.31 versus 104.74 versus 102.686 versus 100.59 versus 100.768
versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus 102.912
versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus 104.87 versus
104.788 versus 103.98 versus 104.58 versus 104.12 versus 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
Oil: 44.19, -0.56. Broke to a lower low in this 6 week pullback. Oil is
still working on building a new base and has not set the low yet.
Gold: 1323.40, -7.60. Trying to hold this two week pullback at the 20 day
EMA.
MONDAY
Earnings are coming in fast. We have several plays with results set for
next week. We want to see a continued move upside so we can bank some gain.
Some we may hold part of through earnings, but as this past week showed, it
is feast or famine. Often just beating is not enough, particularly if
stocks have moved higher into the announcement. They need something else
such as revenue guidance increase, stock buyback, both.
There are also stocks that have announce results and we like playing those,
kind of counterpunching the move on earnings. At least at that juncture the
news is out and you are dealing with the technical picture versus the
subjective reactions to earnings results.
The bigger picture are indices that surged upside off of the June Brexit
low. Some are more overbought, e.g. SOX, but all are doing credible jobs of
consolidating the move without selling off. Thursday was tricky, and it
could come back again this week, but Friday handled it well, extending the
lateral moves.
Indeed, the lateral moves are the best upside indication at this juncture.
Big gains, some testing, but mostly lateral moves. That shows those that
bought the stocks are not ready to sell yet. They work laterally and a bit
lower, work off the froth of the last move, then when the time is right,
make the next break upside.
We will see if that plays out and earnings will have a say in that. Not a
whole lot suggests the market stalls out here other than the fact it rallied
so well. Thursday did show some higher volume selling, but one such session
in isolation doesn't indicate any nefarious selloff ahead. There may be a
bit more testing as we saw last week, but after a week and more of this
lateral consolidation, stocks are in position to move and indeed need to
renew that upside using the earnings as the catalyst.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5100.16
Resistance:
5100 from the April peak and early May peak
5162 is the early November peak, 5176 is the December intraday peak
Support:
5042 is the March 2015 high
The 10 day EMA is 5032
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
4920 is the lower gap point from mid-October 2015, the January 2016 lower
gap point
4916 is the mid-November 2015 low
The 50 day EMA at 4904
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high
The 200 day SMA at 4837
4836 is the March 2016 peak
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2175.03
Resistance:
Support:
The 10 day EMA at 2156
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
The 50 day EMA at 2104
2094 is the December 2014 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 200 day SMA at 2037
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,570.85
Resistance:
Support:
The 10 day EMA at 18,431
18,351 is the all-time high from May 2015
18,288 from March 2015
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
The 50 day EMA at 17,980
17,978 is the November 2015 peak
17,600 is the rough bottom of the April to June range.
The 200 day SMA at 17,399
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 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 26 - Tuesday
Case-Shiller 20-city, May (9:00): 5.4% expected, 5.4% prior
Consumer Confidence, July (10:00): 96.0 expected, 98.0 prior
New Home Sales, June (10:00): 560K expected, 551K prior
July 27 - Wednesday
MBA Mortgage Index, 07/23 (7:00): -1.3% prior
Durable Orders, June (8:30): -1.0% expected, -2.2% prior
Durable Orders, ex-t, June (8:30): 0.2% expected, -0.3% prior
Pending Home Sales, June (10:00): 1.1% expected, -3.7% prior
Crude Inventories, 07/23 (10:30): -2.342M prior
FOMC Rate Decision, July (14:00): 0.375% expected, 0.375% prior
July 28 - Thursday
Initial Claims, 07/23 (8:30): 260K expected, 253K prior
Continuing Claims, 07/16 (8:30): 2128K prior
International Trade , June (8:30): -$61.2B expected, -$60.6B prior
Natural Gas Inventor, 07/23 (10:30): 34 bcf prior
July 29 - Friday
GDP-Adv., Q2 (8:30): 2.6% expected, 1.1% prior
Chain Deflator-Adv., Q2 (8:30): 1.9% expected, 0.4% prior
Employment Cost Inde, Q2 (8:30): 0.6% expected, 0.6% prior
Chicago PMI, July (9:45): 54.0 expected, 56.8 prior
Michigan Sentiment - Final, July (10:00): 90.4 expected, 93.5 prior
End part 1 of 3
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MARKET SUMMARY
- After a Thursday fade the indices bounce right back.
- A big move left the indices overbought but they have done a nice job of
consolidating the gains.
- Hope again springs that the economy is finally taking off, but it is
nothing but the same cycle for 2016 we saw in 2015 and before.
- Still plenty of leadership working.
- Indices are setting up for the new move but some earnings help is what is
needed.
What Thursday tried to take away, Friday brought back. Or most of it. All
indices closed higher, holding their recent gains spurred on mostly, in our
opinion, by the belief in continued central bank support.
Given that, the recovery was not bad considering Mr. Kuroda at the Bank of
Japan reiterated there was no need for helicopter money in Japan.
Perhaps it was earnings reports that were less than grand splashing cold
water on the 'don't panic, all is well' company lines regarding the economy.
AMD beat nicely. V beat. GE reportedly beat, but beat what? Power
products -27%, Equipment -30%, Aviation -37%. GE beat with the usual GAAP
versus non-GAAP accounting, but the trends for sales were down across the
board. SKX missed, HON missed top line, VFC missed top line and lowered
2016 guidance, SBUX missed top line as well and reported weak same store
sales. Not the best prognosis for a recovering economy.
As noted earlier this week, there are two competing forces: better data
suggesting economic growth versus the addiction to central bank largesse.
If the economic data is strong enough, the Fed figures it is not needed, at
least in an easy money sense. Thus each time the central banks posture that
perhaps they are not going to be as market compliant . . a bit of a hiccup
. . . as on Thursday.
Not the case Friday. Kuroda was still curmudgeonly, but that did not hurt
stocks. No new highs, but not bad action to end the week when central banks
were not as effusive.
SP500 9.86, 0.46%
NASDAQ 26.26, 0.52%
DJ30 53.62, 0.29%
SP400 0.67%
RUTX 0.75%
SOX 0.55%
VOLUME: NYSE -9%, NASDAQ -13%. After volume rallied on the Thursday
selling, it fade as stocks rebounded. Not a lot of serious buying.
A/D: NYSE 1.9:1, NASDAQ 1.9:1. Not all that powerful in terms of breadth.
For the week the indices were again up, fighting off a Thursday selling
attempt. That makes four straight upside weeks off the late June Brexit
selling.
We are not deluding ourselves that the move is due to great expectations in
terms of economics; even as the headlines are better there are worrisome
economic signals, many of which are showing up in the earnings reports being
released now. Again, despite this past week that saw a bit of backpedaling
by the central banks (Kuroda, ECB unchanged), central bank support is still
the dominant factor in stock moves ever since the banks came back into the
market at the height of the January/February selling (or would that be a the
low?).
NEWS/ECONOMY
Listening to CNBC Friday, the US economy is great, the world economies while
not great are not horrible, and there is just a lot of fear mongering taking
place that is making people feel so despondent about their prospects. That
is the argument you hear every time there is economic decay felt by the
citizens but not showing up in the government numbers. Sure the economic
data headlines are better, but as we have pointed out, the underlying data
is not, and seasonal adjustments 2x or 3x the norm render the data so
subjective as to be useless. Well, perhaps not useless to the powers that
be. Their goal is to make sure the headlines proclaim all is well, things
great, and they are only getting better. Trying to convince people who
don't think things are better that they are better.
I have approached this many ways in the past. A person who hears of the
improvement in the economy reported by the news and the financial stations
assumes it is happening, it just hasn't made it to their geographic area or
their sector of the economy yet. Just a matter of time, right? That is
where the expectations portions of the sentiment surveys show their most
resilience: we are an optimistic people, usually, and thus we hold out hope
for the future.
Another tactic is calling the data 'great' or 'blowout' when in historical
terms it is nothing of the sort. After the last Jobs Report I discussed yet
again how as a nation our expectations of economic output has been dumbed
down by years of decline and subsequent lateral malaise. Then when there is
a sharper bump up in data we start to believe the nonsense that these really
are great numbers and hence great times.
At the same time, however, there is still that nagging restlessness in the
back of your mind asking when the heck am I going to see the benefit of all
this 'greatness?' When am I going to get my full-time job back and a salary
similar to what I had?
Cyclical Patterns Persist
This year is another case in point of the ongoing economic issues. Even
with the doctored results inflating what is the actual economic reality, the
economy is still showing down cycles.
2016 is showing the same pattern as 2015: 2015 was stronger after a slow
start, moving up in spring to summer, but it was a false rise as seen so
many times in this economy. The economy weakened again and to such a point
that fears of recession resurged late year and early 2016. Now the cycle is
repeating with an apparent improvement into the summer as the headlines
improve.
That is what happens in these systemic slowdowns. The economy cycles between
bad times and not so bad times, all the while output remains at a very
reduced level. Again, it is a case of the 'dumbing down' of our view of what
is a strong economy.
This happened in the 1970's and history has repeated thanks to the
regression back to the same failed ideas and policies that led to that
systemic slowdown. Big tax increases, huge regulatory burdens making it
next to impossible to start a business, keep it going, get a mortgage, etc.
To break the cycle you must wholly change the policies that only work to
reinforce the cycle.
That is what happened in the early 1980's with the sharp reductions in
marginal tax rates, accelerated depreciation, tax credits, drastically
reduced regulation. The policies were changed from those fostering systemic
malaise to ones once again awarding investment and risk taking. As Einstein
said, or something close to this, doing the same thing over and over and
expecting different results is the definition of insanity.
It would appear that we suffer, as a nation, bouts of recurring insanity
when we think we can regulate, tax, appropriate, redistribute, etc. our way
to prosperity.
Minimum Wage Hikes are just the next economic and standard of living
problem.
The minimum wage is another example of trying to overly manage the economy
by dictating what the economics should be. Micro economic management is a
time-proven disastrous course, but again, one in which our collective
insanity is currently engaged.
There is a lot of debate about the effects of a rising minimum wage.
Seattle did it in 2015 and the debate is whether it has harmed anything. I
heard Seattle dragged in on Fox Business over a discussion of this among
other economic issues. The overall Seattle economy is still good enough.
Some restaurants have gone out of business but the owners say it was not
because of the wage.
The claim was, however, that "everyone will be able to afford $15/HOUR
because it will be the new standard." Kind of the 'if you set it, they will
pay it' theory of economics.
To some extent that makes sense: in terms of the larger franchises the food
prices went up, passed along to the customers. They can come up with ways
to increase efficiencies across the board such as automating a lot of the
processes (testing that in China right now with 95% robot/automated chain
restaurants, soon to be brought to the rest of the world) that the smaller
operations, such as the Red Top Diner in Friendswood, Texas cannot.
Thus, in terms of businesses, the larger ones work to offset the increased
costs with higher prices and improved efficiencies that work to reduce the
source of the increased costs. While it will not admit it, SBUX, according
to its workers, is limiting hours worked by its workers, actually having
fewer workers in the stores on a shift. Complaints of lack of hours overall
while at the same time when they are working having to work extra hard due
to the staff being below the usual SBUX numbers. Smaller businesses will
have to employ less workers to do the same jobs, period. Further, neither
will likely hire that additional worker that might be desired. Indeed, it
appears SBUX is not only not hiring those additional workers but, surprise,
is expected MORE from its existing workers as part of getting that increased
minimum wage. There are no free lunches.
So, the 'standard' that everyone will be able to afford has consequences.
Prices will build in the extra cost. Companies that can do so will move to
systems that bring the labor cost back in line, either through automation,
requiring more worker productivity. Those that cannot, the smaller shops,
will have to reduce employees and also demand more productivity from those
keeping jobs.
ALL will reduce, all things equal, additional hiring or job creation. The
latter is one of the real costs of an artificial wage hike: it reduces the
creation of new jobs, not necessarily the elimination of existing jobs. If
you don't have a job and need one, that outcome is not one you want.
There are other impacts in other areas. Studies show that most of the
people receiving the minimum wage are not at the lowest end of the
socioeconomic scale. Thus food and other inflation still hits the lowest
end the hardest because all they see is higher prices without any increase
in wages or disposable income. Perhaps it would be better to not focus on
the wage as much as focus on achieving conditions where people can find a
good job AND have an incentive to do so. If you pay 94M working aged
people, (most of which CAN work as the jobs reports show) out of 318M total
population NOT to work through assistance programs, etc., as we have seen,
they won't work. Is it not better to have them in the workforce producing
versus making it where they can choose not to work and then complain when
prices go up because the minimum wage is artificially increased?
The minimum wage of course is not the only issue, it is just one that many
cite as a priority in order to get people out of poverty. It won't do it.
A job at McDonald's is not what Americans should strive for. We need to get
back to producing real jobs by not paying companies not to invest in growing
business. That means the Fed has to be curtailed to stop the madness of
giving free loans to the large companies. Just as with those choosing not
to work because they are paid not to work, the only way to get the
corporations to invest in their businesses again is to stop paying them to
buy back stock and chase paper investments they can profit from using the
free money. In short, get the Fed out of the economy managing business and
then change the fiscal policies to promote investment and innovation right
here in the US.
We have tried to cheat the system. We tried to say we can just print money,
create more debt, and magically float our economy without any real
investment. That only works short time. We are starting to see the results
of this where we have taken a nation that had the largest percentage of
wealth held by the middle class into one where the now the largest
percentage of wealth is held by the 1%. At the same time the middle class
has fallen out of the majority of our population for the first time since it
became the majority post-industrial revolution.
THE MARKET
Thursday it looked as if the stock indices would start a test, one beyond
just a lateral consolidation, perhaps even, my goodness, to the 10 day EMA.
Didn't happen as of Friday as the stock indices bounced, albeit on lighter
trade.
CHARTS
NASDAQ: An important index on the week, break higher out of its lateral
range with a Wednesday gap. Thursday was dicey, as it was for all of the
indices, but Friday NASDAQ recovered and moved to a higher recovery high.
5150-5160 is next resistance (closed at 5100). If the big names continue to
participate in the move toward their earnings Tuesday to Thursday, NASDAQ
can make that next resistance level. That is not great praise; that just
takes it to the penultimate resistance before the July 2015 high.
SOX: Reached lower but then regrouped for a solid move. Closed below the
Wednesday high, but good to see SOX hold over the 10 day EMA and find some
bids. It is considerably overbought with its 100+ point run off the June
low, now just 9 points off the June 2015 high (751).
SP400: SOX is not the only indices flirting with the old high. SP400
cracked over its June 2015 all-time high (1551.28; 1552.34 close) but it
will need to put some distance on that to make it stick. Overall this is
good positioning: SP400 is in an 8 session lateral move consolidating the
rally to the prior high. The 10 day EMA has caught up with it, it has not
sold, it is rested. Great position to make the breakout move.
RUTX: Same situation as SP400 only RUTX is trying to break into the summer
2015 range that holds the all-time high. Eight session lateral move, the 10
day EMA has caught up, Friday breaking to a higher closing high on this
move. It too is in position, just needs some love from earnings.
SP500: The first to a new high and still holding it. Thursday things
looked less than perfect with SP500 selling off Wednesday's move to a higher
high all in once move. Friday stabilized the pattern, and SP500 sports
something similar to SP400 as it is in a lateral consolidation.
DJ30: The Dow had its issues Thursday as well, taking back the Wednesday
and Tuesday upside. It held, however, over the 10 day EMA and is trying to
stretch into a lateral consolidation as well.
LEADERSHIP
Big Names: Another mixed bag though elevated and showing some decent
patterns overall. FB continued its test lower, tapped the 10 day EMA,
reversed to a gain. Good action. AMZN continued laterally along the 10 day
EMA; decent. AAPL tested to the 10 day EMA on low volume. GOOG sold lower
then reversed for a gain and a higher rally high; good. SBUX broke higher
from the two week lateral range. MSFT continued higher off its earnings
gap.
Oil: Very mixed. CWEI remains solid, moving up on rising trade off the 200
day SMA. APC has bounced off the 50 day EMA (earnings Tuesday before the
open). CVX in a nice 20 day EMA test. HAL showing a bit 50 day EMA doji.
ESV is bombing lower. MRO testing the 50 day EMA. ATW sold to the 50 day MA
on rising trade. Some key tests are occurring.
Metals: Hanging in. SID moved to yet a higher rally high. AKS held the 10
day EMA and attempting a bounce. FCX holding the 10 day EMA (earnings
Tuesday before open). Precious metals mixed; HMY holding steady after
selling, NEM moving back up.
Software: ROVI continues its impressive run. CALD announced results and
was wild, but nice bounce off the 50 day EMA. BLKB bouncing off the 20 day
EMA. FFIV, VMW moving upside. Solid group and we have some good plays
working.
Biotechs/Drugs: Volatile as always. BLUE bounced off the 50 day EMA on the
week. KERX moving well up the 10 day. BIIB moved well on earnings. EXAS
announces results Tuesday before open, jumping off a 20 day EMA test.
Chips: INTC held the 20 day EMA with a doji, bounced Friday. AMKR at the 10
day EMA, earnings Tuesday after. AVGO reached lower, recovered to show a
doji. XLNX bounced nicely off the 10 day EMA Friday. TSRA fell to the 20
day EMA Friday. KOPN keeps trying to bounce but back slides to the 200 day
SMA.
Retail: Still looks ready, still has not moved. RH in position. JWN, KSS,
M, DDS still in the nice handle formations, ready to break higher. EBAY
still running higher after its earnings.
MARKET STATISTICS
NASDAQ
Stats: +26.26 points (+0.52%) to close at 5100.16
Volume: 1.613B (-12.61%)
Up Volume: 1.15B (+433.13M)
Down Volume: 463.46M (-666.54M)
A/D and Hi/Lo: Advancers led 1.88 to 1
Previous Session: Decliners led 1.65 to 1
New Highs: 133 (+33)
New Lows: 26 (-10)
S&P
Stats: +9.86 points (+0.46%) to close at 2175.03
NYSE Volume: 750.8M (-8.66%)
A/D and Hi/Lo: Advancers led 1.92 to 1
Previous Session: Decliners led 1.37 to 1
New Highs: 196 (+52)
New Lows: 10 (+2)
DJ30
Stats: +53.62 points (+0.29%) to close at 18570.85
SENTIMENT INDICATORS
VIX: 12.02; -0.72
VXN: 14.59; -0.39
VXO: 10.55; +0.51
Put/Call Ratio (CBOE): 0.82; -0.13
10 of 10 below 1.0, 14 of last 28 over 1.0.
23 of the last 40 below 1.0. 34 of 60 over 1.0.
These are starting to flip with the 'below 1.0' overtaking 50% of the recent
readings.
Bulls and Bears: Bulls continue their run higher off the June low while
bears actually suffer a sharp slide.
Bulls: 54.4 versus 52.5. Another highest level since early 2015. Again,
around 60 is where an upside move has topped over the past 18 years.
Bears: 23.3 versus 24.7. The bears are losing some ground though still
over the 15 level where a lot of the fades have bottomed.
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: 54.4 versus 52.5%
52.5% versus 47.1% versus 41.6% versus 47.5% versus 45.9% versus 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%
Bears: 23.3% versus 24.7%
24.7% versus 24.5% versus 23.8% versus 23.2% versus 23.5% versus 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%
OTHER MARKETS
Bonds (10 year): 1.56% versus 1.558%. Trying to recover off the weaker
posture the past week. Rallied to close at the 20 day EMA but struggling to
hold the upside after falling into the late June upside gap zone.
Historical: 1.558% versus 1.58% versus 1.56% versus 1.59% versus 1.58%
versus 1.53% versus 1.47% versus 1.51% versus 1.434% versus 1.36% versus
1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475% versus 1.51%
versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68% versus
1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.0977 versus 1.1021. Euro tried to rally two weeks back but has
now flipped and is fading below the 10 day EMA. At the June lows, a key test
in progress.
Historical: 1.1021 versus 1.1022 versus 1.1021 versus 1.10654 versus 1.1035
versus 1.1117 versus 1.1099 versus 11061 versus 1.10588 versus 1.10502
versus 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106
versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070
versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778
versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526
versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 106.05 versus 106.11. Surged Wednesday, gave it back Thursday,
wasn't going anywhere Friday.
Historical: 106.11 versus 107.16 versus 106.139 versus 105.95 versus 104.85
versus 105.31 versus 104.74 versus 102.686 versus 100.59 versus 100.768
versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus 102.912
versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus 104.87 versus
104.788 versus 103.98 versus 104.58 versus 104.12 versus 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
Oil: 44.19, -0.56. Broke to a lower low in this 6 week pullback. Oil is
still working on building a new base and has not set the low yet.
Gold: 1323.40, -7.60. Trying to hold this two week pullback at the 20 day
EMA.
MONDAY
Earnings are coming in fast. We have several plays with results set for
next week. We want to see a continued move upside so we can bank some gain.
Some we may hold part of through earnings, but as this past week showed, it
is feast or famine. Often just beating is not enough, particularly if
stocks have moved higher into the announcement. They need something else
such as revenue guidance increase, stock buyback, both.
There are also stocks that have announce results and we like playing those,
kind of counterpunching the move on earnings. At least at that juncture the
news is out and you are dealing with the technical picture versus the
subjective reactions to earnings results.
The bigger picture are indices that surged upside off of the June Brexit
low. Some are more overbought, e.g. SOX, but all are doing credible jobs of
consolidating the move without selling off. Thursday was tricky, and it
could come back again this week, but Friday handled it well, extending the
lateral moves.
Indeed, the lateral moves are the best upside indication at this juncture.
Big gains, some testing, but mostly lateral moves. That shows those that
bought the stocks are not ready to sell yet. They work laterally and a bit
lower, work off the froth of the last move, then when the time is right,
make the next break upside.
We will see if that plays out and earnings will have a say in that. Not a
whole lot suggests the market stalls out here other than the fact it rallied
so well. Thursday did show some higher volume selling, but one such session
in isolation doesn't indicate any nefarious selloff ahead. There may be a
bit more testing as we saw last week, but after a week and more of this
lateral consolidation, stocks are in position to move and indeed need to
renew that upside using the earnings as the catalyst.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5100.16
Resistance:
5100 from the April peak and early May peak
5162 is the early November peak, 5176 is the December intraday peak
Support:
5042 is the March 2015 high
The 10 day EMA is 5032
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
4920 is the lower gap point from mid-October 2015, the January 2016 lower
gap point
4916 is the mid-November 2015 low
The 50 day EMA at 4904
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high
The 200 day SMA at 4837
4836 is the March 2016 peak
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2175.03
Resistance:
Support:
The 10 day EMA at 2156
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
The 50 day EMA at 2104
2094 is the December 2014 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 200 day SMA at 2037
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,570.85
Resistance:
Support:
The 10 day EMA at 18,431
18,351 is the all-time high from May 2015
18,288 from March 2015
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
The 50 day EMA at 17,980
17,978 is the November 2015 peak
17,600 is the rough bottom of the April to June range.
The 200 day SMA at 17,399
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 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 26 - Tuesday
Case-Shiller 20-city, May (9:00): 5.4% expected, 5.4% prior
Consumer Confidence, July (10:00): 96.0 expected, 98.0 prior
New Home Sales, June (10:00): 560K expected, 551K prior
July 27 - Wednesday
MBA Mortgage Index, 07/23 (7:00): -1.3% prior
Durable Orders, June (8:30): -1.0% expected, -2.2% prior
Durable Orders, ex-t, June (8:30): 0.2% expected, -0.3% prior
Pending Home Sales, June (10:00): 1.1% expected, -3.7% prior
Crude Inventories, 07/23 (10:30): -2.342M prior
FOMC Rate Decision, July (14:00): 0.375% expected, 0.375% prior
July 28 - Thursday
Initial Claims, 07/23 (8:30): 260K expected, 253K prior
Continuing Claims, 07/16 (8:30): 2128K prior
International Trade , June (8:30): -$61.2B expected, -$60.6B prior
Natural Gas Inventor, 07/23 (10:30): 34 bcf prior
July 29 - Friday
GDP-Adv., Q2 (8:30): 2.6% expected, 1.1% prior
Chain Deflator-Adv., Q2 (8:30): 1.9% expected, 0.4% prior
Employment Cost Inde, Q2 (8:30): 0.6% expected, 0.6% prior
Chicago PMI, July (9:45): 54.0 expected, 56.8 prior
Michigan Sentiment - Final, July (10:00): 90.4 expected, 93.5 prior
End part 1 of 3
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Sunday, July 17, 2016
The Daily, Part 1 of 3, 7-16-16
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7/16/2016 Investment House Daily
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Trailing stops: None issued
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MARKET SUMMARY
- Very quiet expiration session but things get interesting afterhours with a
Turkey coup attempt.
- New high for DJ30 Friday, other indices bumping resistance, a bit tired.
- Mixed economic data: retail sales beat but in the big picture are still
just not good.
- CPI not too hot; not too cold.
- Can central banks keep the markets afloat with yet another major
geopolitical event and the specter of more?
After a solid move higher continued this past week, it looked as if the
stock indices would head to the weekend quietly, sitting on the nice gains
that pushed SP500 and DJ30 to new all-time highs and pushed the other
indices to next resistance. Not new highs for the 'other' indices, but they
broke through resistance and continued higher to the next level. The
central bank throw in for the world stock markets as well as the surprising
upgrade in global economic data worked well as the indices posted very solid
moves higher. Solid action to slip into the weekend holding the gains even
after another terror attack in France resulted in dozens upon dozens of
deaths earlier in the week.
SP500 -2.01, -0.09%
NASDAQ -4.47, -0.09%
DJ30 10.14, 0.05%
SP400 -0.03%
RUTX 0.26%
SOX -0.08%
VOLUME: NYSE +4%, NASDAQ -3.7%. Not a lot of fireworks for expiration, and
indeed the entire week showed lower volume. Very calm for an expiration
week and a big market recovery after a big market selloff.
A/D: NYSE 1.2:1, NASDAQ 1.1:1
Impressive strength, and given the response to the various problems arising,
we figured there was nothing that would really impact the market advance.
Then right after the close reports of a coup in Turkey. Okay, a partial
coup. The military, supporting more secular Islam, took over some broadcast
stations and an airport. The President says the coup will fail. It did.
Almost immediately after it failed the Turkey president said it was the work
of the US. Hmm. Seems he might be protesting too much, trying to shift
scrutiny from the truth. It is now believed by many to be an orchestrated
coup so the power-hungry president can use it to strip more freedoms and at
the same time have 'proof' of the need to round up more of those who
disagree with his hunger for more power.
Immediately on the news US futures fell, bonds rallied, gold surged, oil
jumped. Okay, maybe the central bank-aided moves are not bulletproof.
After word a few hours later that the coup appeared to be failing, futures
started to climb back.
It looked as if markets might get a catalyst to play to a test of the nice
break higher that pushed through resistance for all of the indices though
not all managed new highs. A strong move with not much rest could use the
overseas turmoil to test the big move higher.
Of course central banks will have to be vigilant. They had to promise
stimulus on Brexit. Japan promised itself stimulus because of Brexit, as
tangential as that may be to Japan. China continued devaluing the yuan.
The US said it was ready to act though officially it did not change its
stance one way or the other.
With the central banks at the ready, world turmoil might cause near term
upset, but then, if it subsides, the central banks can bring the world
markets back along with the governments that put out the economic data the
markets await with Pavlovian anticipation.
What do I mean? The sudden spike in economic data just after several
jarring events starting with the Brexit vote. China GDP surprises with a
6.7% gain, topping expectations. US retail sales June jump 0.6% versus 0.2%
expected. Industrial Production also surprises at 0.6% from -0.3% and 0.3%
expected. At the same time this week saw business inventories jump as sales
fell, regional manufacturing reports are sliding back to stall speed (New
York to 0.55 from 6.01), and the goods sold and shipped around the US are
down 15 consecutive months to a 6 year low (Cass Freight Index).
It is a case of what I have talked about frequently: the headline data looks
good enough, albeit the 2.6% year/year retail sales is just above recession
levels, but the underlying data does not show the same thing. It is easy to
report the data in such a way that looks good while the data below does not
support the same conclusion.
Thus you have the central banks ready to prop up markets and the data
reporters ready to do the same with 'friendly' headlines.
At some point the central banks will run out of oil in their magic stock
market lamps, but for now they have not as evidenced by the post-Brexit
buying that sent stocks higher despite 17 weeks of outflows from equity
mutual funds.
On that note, this past week did mark the first week in 18 that funds moved
back into the market versus leaving. Just in time for the more potentially
market roiling news.
Will the Fed continue holding off on hikes?
Another point I was going to cover tonight was just how long the Fed could
hold off hiking rates given the improvement in the economic indicators they
watch with the stock markets surging upside post-Brexit.
Brexit, Nice, and now Turcoup and who knows what else coming. Perhaps China
takes some aggressive action in the South China Sea now that the UN tribunal
says China doesn't own it? After all, Virginia City is not the capital of
Virginia, not even in the same state; now THAT is precedent for the
decision.
With the world burning in one way or another, the Fed has all the cover it
needs to keep on not keeping on with the rate hikes. The rest of the
world's central banks want just that, the IMF is begging the Fed not to
hike, and I am sure others want the same thing. So, I guess the US will
head toward negative interest rates and US citizens will start buying a lot
of vaults and safes just as they are in Europe and Japan where they prefer
to keep the money under the mattress so to speak versus pay to keep it in a
bank that, when push comes to shove and it all goes in the toilet again,
will just take the money out of your account in a 'patriotic donation' to
the government.
NEWS/ECONOMY
Retail Sales, June: 0.6% vs 0.2% exp vs 0.2% May (from 0.5%) Of course, it
is easy to have big jumps when you revise the prior month sharply lower.
Overall year/year: 2.7%
Ex-auto & gas: 0.7% vs 0.4% vs 0.4%
Control group: 0.5%
This looks better and is better. It will be heralded as a good sign. Given
this economy, any improvement is good. BUT (you knew it was coming), at
2.7%, this is JUST over recessionary levels. Sales cannot break higher and
hold a trend higher.
Interestingly, food and drink establishments slowed their sales yet this is
the largest jobs creating area in this economy.
CPI, June: 0.2% vs 0.3% exp vs 0.2% prior
Core: 0.2% as expected vs 0.2% prior. Year/year: 2.3% vs 2.2% prior.
Matches February and that is the highest since 9/2008.
Empire State Manufacturing, July: 0.55 vs 5.0 exp vs 6.01 June. At least
it was not negative . . . Not a great showing for the start of Q3.
China: GDP 6.7%, beating expectations. This appears to have halted the
slide of GDP BUT many are questioning what it cost to get this number. In
other words, the debt escalation. Rabbobank already estimated Chinese debt
at 3x the size of its economy. With private investment at 0% for the quarter
where did it come from? Government money pushed into state-owned companies,
of course the most inefficient place to put the money.
THE MARKET
CHARTS
Virtually no change in the indices though DJ30 forged to another new high
with a powerful 0.05% move. Better get a bucket of ice water ready to cool
it off with moves like that. Of course it did put in some impressive
sessions on this move; Friday was just a pause form the look of it. For the
other indices as well.
DJ30: Doji though a new closing high, culminating a 7 of 8 session surge to
a new high. Strong move, new high, a test would be logical and if futures
continue descending as they are tonight, moving in a second leg lower after
the initial drop, looks as if the Dow will give it a shot at a test.
SP500: The other index at new highs, and the first to reach a new high, is
SP500. A doji here as well to end the week after an impressive three week
surge off the Brexit low. Broke through to a new high, now the 10 day EMA
is coincident with the old high, kind of a perfect testing point. But for
the Turkey news I would say it may not even try that level. Now it might.
NASDAQ: Rallied to a recovery high to Tuesday then started to struggle.
Managed to move higher to close the week but each session closed off the gap
higher point. Running low on momentum for now and even without Turcoupkey
NASDAQ likely would test.
SP400: Very similar to NASDAQ in the action on the week: surging early then
starting Wednesday a bit of a struggle. Nothing major, just a great move
that is a bit tired as it bumped into the prior all-time high. A test of
the June high/10 day EMA rising up below it (1525) is logical even in a
market that is hardly logical given all the monetary stimulus.
RUTX: Surged through Tuesday, worked laterally Wednesday to Friday in a
tight range. RUTX moved up to the bottom of the summer 2015 range and has
stalled for now. It is holding its gains, working in a nice lateral test,
not looking heavy.
SOX: Rally through Thursday, a modest loss Friday, holding in a tight
range. Closing at 723.65, SOX is still well below the 2015 interim highs
(730, 735) and the June post-2000 high (751). Nice break through the June
resistance as SOX works on recovering those prior highs. With the Fed and
central banks in the game and likely staying in the game thanks to events
such as Nice and Turcoupkey, after a test SOX can easily continue toward
those highs.
LEADERSHIP
Many groups took a day off, but not all, e.g. metals. The market has more
leadership as of course groups started to turn up as the move continued and
spread out. An upside move has to have leadership, and typically broad
leadership, to be successful. Of course there are always the FANG-style
rallies where just a few large caps control market direction, but now that
is not the case.
Metals: Solid moves pretty much across the board. SID rallied 4% on
stronger volume. AKS and SCHN were up but their moves were tamer. CENX
cooled its ingots with a pair of doji after a big move higher earlier. FCX
added over 1% to a big early week move. Precious metal stocks were flat
Friday but enjoyed a decent enough week though not the same as the prior
week.
Big Names: A mixed week for sure and a mixed session each day of the week.
FB closed the week on the 50 day SMA with a lateral move testing the prior
week upside. AMZN tested on the week, fading in an easy test of its new
high. AAPL jumped Thursday through the 50 day EMA, flat Friday; maybe
starting something. GOOG cleared the 200 day SMA but couldn't do anything
with it Wednesday to Friday but it did hold the move. SBUX bounced off the
50 day EMA on the week.
Rails: Great week, took some time off Friday. NSC surged into Thursday,
faded just modestly Friday and on very low trade. UNP surged as well, doji
Thursday, sold back some Friday but on light trade. Strong break higher.
CSX reported great results and blasted higher through Thursday. A bit of a
sharp drop Friday but not bad.
Financial: Great week with GS leading the surge upside and moving close to
the 200 day SMA and the April high. MS made it to the 200 day SMA Friday on
the open. JPM reported a beat and gapped Thursday, flat Friday, holding
below the early June peak. Other bank results were not so great. WFC
gapped lower and sold 2.5% Friday. BAC and C were up nicely on the week and
held steady Friday.
Software: Sports some solid patterns still. ROVI put in four lateral
sessions in a tight range, prepping the next upside move. CYBR continued
higher through Friday. BLKB punched out a higher high, faded Friday. RHT
recovered to the 50 day MA's through Thursday but then turned lower Friday;
kind of weak looking with a downside ABCD pattern. CRM in a nice easy
lateral test of the 10 day EMA.
Chips: Not bad, good week. AVGO gapped higher Monday, continued upside in
the channel into Friday. LRCX continued its run this week though ran into
some resistance. AMKR rallied early week, coasted into Friday. NVDA put in
a new high on the week, testing Friday.
Biotechs/Drugs: Some good moves on the week but a lot of struggles. Friday
a bit better. BIIB put in a strong upside move. EXAS faded to end the week
but surged Wednesday and let us take some nice gain. GILD has an
interesting double bottom set up. BLUE had a tougher week but it also is
set up very nicely in a 1-2-3 fade to near support. EYES looks in great
shape to move higher. OPHT shot higher Friday.
Oil: Back and forth week. CWEI broke through the 200 day SMA, let us take
some gain, faded to end the week but still very solid. CVX put in a higher
high on the week. Same with XOM and BP. APC as well but faded to the 20
day EMA Friday. Lots of stocks just holding on, biding time: PTEN, SPN,
COG, HAL. Had good runs, a bit winded, trying to consolidate as oil tries
to keep from selling farther after selling a bit more after the break below
the 50 day MA's, then bouncing back to test them as of Friday.
MARKET STATISTICS
NASDAQ
Stats: -4.47 points (-0.09%) to close at 5029.59
Volume: 1.572B (-3.66%)
Up Volume: 767.82M (-272.18M)
Down Volume: 803.18M (+257.93M)
A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Advancers led 1.24 to 1
New Highs: 109 (-70)
New Lows: 25 (-1)
S&P
Stats: -2.01 points (-0.09%) to close at 2161.74
NYSE Volume: 874.2M (+4.31%)
A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.31 to 1
New Highs: 125 (-70)
New Lows: 8 (+4)
DJ30
Stats: +10.14 points (+0.05%) to close at 18516.55
SENTIMENT INDICATORS
VIX: 12.67; -0.15
VXN: 14.29; -0.37
VXO: 11.68; -0.57
Put/Call Ratio (CBOE): 0.85; +0.23
5 of 5 below 1.0, 14 of last 23 over 1.0.
18 of the last 35 below 1.0. 34 of 55 over 1.0.
Bulls and Bears: Massive drop in bulls, but of course that was immediately
countered by the recovery, so this reading is all in flux right now.
Bulls: 52.5 versus 47.1. Highest level since early 2015, by a long shot.
Around 60 is where an upside move has topped over the past 18 years.
Bears: 24.7 versus 24.5. Somewhat opposite of the bulls, bears actually
became more numerous with the rally.
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: 52.5% versus 47.1%
47.1% versus 41.6% versus 47.5% versus 45.9% versus 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: 24.7%
24.5% versus 23.8% versus 23.2% versus 23.5% versus 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): 1.58% versus 1.53%. Broke below the 20 day EMA for the
first time on this pullback, now reaching the upper gap point from late
June. After hours on the Turkey coup attempt bonds rallied off the Friday
selling but not a game changer at this point. Just for reference, the prior
Friday bonds closed at 1.36%.
Historical: 1.53% versus 1.47% versus 1.51% versus 1.434% versus 1.36%
versus 1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475% versus
1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68%
versus 1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.1035 versus 1.1117. Held up during the session but then the euro
broke back below the 200 day SMA on the Turkey news.
Historical: 1.1117 versus 1.1099 versus 11061 versus 1.10588 versus 1.10502
versus 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106
versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070
versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778
versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526
versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 104.85 versus 105.314. Dollar dropped against yen after making it
just through the 50 day MA's Thursday.
Historical: 105.31 versus 104.74 versus 102.686 versus 100.59 versus
100.768 versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus
102.912 versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus
104.87 versus 104.788 versus 103.98 versus 104.58 versus 104.12 versus
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
Oil: 46.65, +1.15. Gapped upside to the 50 day EMA, the same level it
rallied to on Tuesday but immediately gave up. Still in a 6 week fade off
the early June high. Has definitely turned to backfilling the move after
doubling off the February panic low. Friday we learned there were more rigs
turning in the US (+6 to 357). That is the most since 12/2011.
Gold: 1327.40, -4.80. Closed lower but was up on the Turkey news. On the
week, a nice pullback to the 20 day EMA, testing the break to a higher high.
Very normal test.
MONDAY
After the initial drop on Turkcoup futures were recovering. We will see how
Asian markets respond but I would not be surprised that, regardless of the
initial reaction, the markets find their support even if they test first.
The central banks are again all in and there is enough world turmoil and the
threat of more to keep the Fed on hold.
Leadership remains good enough for now and there are new highs on DJ30 and
SP500. Of course that means watching if the other indices can follow along
with SP400 in best position to post the next new high though it might want
to test first. It also means watching DJ20, the transports, and whether
they follow with their own new high and confirm the DJ30 new high or if they
roll over with a lower high in an uncomfortable look similar to 2006/2007.
DJ20 is over 1250 points from a new high and indeed has not passed the twin
tops from Mary and April. If it makes a lower high here, not good news
longer term.
For now we have some new upside plays to consider along with a downside
play. Again, leadership is good enough and with the central banks backing
the move, that is really all it needs until the point is reached the central
banks have no more marginal efficacy. Not at that point yet. So, we will
see how stocks react when the markets start opening, and perhaps get the
chance to use a bit of a respite as an entry point.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5029.59
Resistance:
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:
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
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 50 day EMA at 4867
4836 is the March 2016 peak
The 200 day SMA at 4828
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2161.74
Resistance:
Support:
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
The 50 day EMA at 2091
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 200 day SMA at 2032
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,516.55
Resistance:
Support:
18,351 is the all-time high from May 2015
18,288 from March 2015
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,978 is the November 2015 peak
The 50 day EMA at 17,852
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,349
17,265 is a December 2015 closing low
17,245 is the November 2015 closing low
17,152 is the mid-July 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 15 - Friday
Empire Manufacturing, July (8:30): 0.55 actual versus 5.0 expected, 6.0
prior
Retail Sales, June (8:30): 0.6% actual versus 0.2% expected, 0.2% prior
(revised from 0.5%)
Retail Sales ex-auto, June (8:30): 0.7% actual versus 0.4% expected, 0.4%
prior (no revisions)
CPI, June (8:30): 0.2% actual versus 0.3% expected, 0.2% prior (no
revisions)
Core CPI, June (8:30): 0.2% actual versus 0.2% expected, 0.2% prior (no
revisions)
Capacity Utilization, June (9:15): 75.4% actual versus 75.0% expected, 74.9%
prior (no revisions)
Industrial Production, June (9:15): 0.6% actual versus 0.2% expected, -0.3%
prior (revised from -0.4%)
Business Inventories, May (10:00): 0.2% actual versus 0.2% expected, 0.1%
prior (no revisions)
Michigan Sentiment, July (10:00): 89.5 actual versus 93 expected, 93.5 prior
July 18 - Monday
NAHB Housing Market , July (10:00): 61.0 expected, 60 prior
Net Long-Term TIC Flow, May (16:00): -$79.6B prior
July 19 - Tuesday
Building Permits, June (8:30): 1150K expected, 1138K prior
Housing Starts, June (8:30): 1165K expected, 1164K prior
Building Permits, June (8:30): 1150K expected, 1138K prior
July 20 - Wednesday
MBA Mortgage Index, 07/16 (7:00): 7.2% prior
Crude Inventories, 07/16 (10:30): -2.546M prior
July 21 - Thursday
Initial Claims, 07/16 (8:30): 265K expected, 254K prior
Continuing Claims, 07/09 (8:30): 2149K prior
Philadelphia Fed, July (8:30): 5.0 expected, 4.7 prior
FHFA Housing Price I, May (9:00): 0.2% prior
Existing Home Sales, June (10:00): 5.50M expected, 5.53M prior
Leading Indicators, June (10:00): 0.3% expected, -0.2% prior
Natural Gas Inventor, 07/16 (10:30): 64 bcf prior
End part 1 of 3
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MARKET SUMMARY
- Very quiet expiration session but things get interesting afterhours with a
Turkey coup attempt.
- New high for DJ30 Friday, other indices bumping resistance, a bit tired.
- Mixed economic data: retail sales beat but in the big picture are still
just not good.
- CPI not too hot; not too cold.
- Can central banks keep the markets afloat with yet another major
geopolitical event and the specter of more?
After a solid move higher continued this past week, it looked as if the
stock indices would head to the weekend quietly, sitting on the nice gains
that pushed SP500 and DJ30 to new all-time highs and pushed the other
indices to next resistance. Not new highs for the 'other' indices, but they
broke through resistance and continued higher to the next level. The
central bank throw in for the world stock markets as well as the surprising
upgrade in global economic data worked well as the indices posted very solid
moves higher. Solid action to slip into the weekend holding the gains even
after another terror attack in France resulted in dozens upon dozens of
deaths earlier in the week.
SP500 -2.01, -0.09%
NASDAQ -4.47, -0.09%
DJ30 10.14, 0.05%
SP400 -0.03%
RUTX 0.26%
SOX -0.08%
VOLUME: NYSE +4%, NASDAQ -3.7%. Not a lot of fireworks for expiration, and
indeed the entire week showed lower volume. Very calm for an expiration
week and a big market recovery after a big market selloff.
A/D: NYSE 1.2:1, NASDAQ 1.1:1
Impressive strength, and given the response to the various problems arising,
we figured there was nothing that would really impact the market advance.
Then right after the close reports of a coup in Turkey. Okay, a partial
coup. The military, supporting more secular Islam, took over some broadcast
stations and an airport. The President says the coup will fail. It did.
Almost immediately after it failed the Turkey president said it was the work
of the US. Hmm. Seems he might be protesting too much, trying to shift
scrutiny from the truth. It is now believed by many to be an orchestrated
coup so the power-hungry president can use it to strip more freedoms and at
the same time have 'proof' of the need to round up more of those who
disagree with his hunger for more power.
Immediately on the news US futures fell, bonds rallied, gold surged, oil
jumped. Okay, maybe the central bank-aided moves are not bulletproof.
After word a few hours later that the coup appeared to be failing, futures
started to climb back.
It looked as if markets might get a catalyst to play to a test of the nice
break higher that pushed through resistance for all of the indices though
not all managed new highs. A strong move with not much rest could use the
overseas turmoil to test the big move higher.
Of course central banks will have to be vigilant. They had to promise
stimulus on Brexit. Japan promised itself stimulus because of Brexit, as
tangential as that may be to Japan. China continued devaluing the yuan.
The US said it was ready to act though officially it did not change its
stance one way or the other.
With the central banks at the ready, world turmoil might cause near term
upset, but then, if it subsides, the central banks can bring the world
markets back along with the governments that put out the economic data the
markets await with Pavlovian anticipation.
What do I mean? The sudden spike in economic data just after several
jarring events starting with the Brexit vote. China GDP surprises with a
6.7% gain, topping expectations. US retail sales June jump 0.6% versus 0.2%
expected. Industrial Production also surprises at 0.6% from -0.3% and 0.3%
expected. At the same time this week saw business inventories jump as sales
fell, regional manufacturing reports are sliding back to stall speed (New
York to 0.55 from 6.01), and the goods sold and shipped around the US are
down 15 consecutive months to a 6 year low (Cass Freight Index).
It is a case of what I have talked about frequently: the headline data looks
good enough, albeit the 2.6% year/year retail sales is just above recession
levels, but the underlying data does not show the same thing. It is easy to
report the data in such a way that looks good while the data below does not
support the same conclusion.
Thus you have the central banks ready to prop up markets and the data
reporters ready to do the same with 'friendly' headlines.
At some point the central banks will run out of oil in their magic stock
market lamps, but for now they have not as evidenced by the post-Brexit
buying that sent stocks higher despite 17 weeks of outflows from equity
mutual funds.
On that note, this past week did mark the first week in 18 that funds moved
back into the market versus leaving. Just in time for the more potentially
market roiling news.
Will the Fed continue holding off on hikes?
Another point I was going to cover tonight was just how long the Fed could
hold off hiking rates given the improvement in the economic indicators they
watch with the stock markets surging upside post-Brexit.
Brexit, Nice, and now Turcoup and who knows what else coming. Perhaps China
takes some aggressive action in the South China Sea now that the UN tribunal
says China doesn't own it? After all, Virginia City is not the capital of
Virginia, not even in the same state; now THAT is precedent for the
decision.
With the world burning in one way or another, the Fed has all the cover it
needs to keep on not keeping on with the rate hikes. The rest of the
world's central banks want just that, the IMF is begging the Fed not to
hike, and I am sure others want the same thing. So, I guess the US will
head toward negative interest rates and US citizens will start buying a lot
of vaults and safes just as they are in Europe and Japan where they prefer
to keep the money under the mattress so to speak versus pay to keep it in a
bank that, when push comes to shove and it all goes in the toilet again,
will just take the money out of your account in a 'patriotic donation' to
the government.
NEWS/ECONOMY
Retail Sales, June: 0.6% vs 0.2% exp vs 0.2% May (from 0.5%) Of course, it
is easy to have big jumps when you revise the prior month sharply lower.
Overall year/year: 2.7%
Ex-auto & gas: 0.7% vs 0.4% vs 0.4%
Control group: 0.5%
This looks better and is better. It will be heralded as a good sign. Given
this economy, any improvement is good. BUT (you knew it was coming), at
2.7%, this is JUST over recessionary levels. Sales cannot break higher and
hold a trend higher.
Interestingly, food and drink establishments slowed their sales yet this is
the largest jobs creating area in this economy.
CPI, June: 0.2% vs 0.3% exp vs 0.2% prior
Core: 0.2% as expected vs 0.2% prior. Year/year: 2.3% vs 2.2% prior.
Matches February and that is the highest since 9/2008.
Empire State Manufacturing, July: 0.55 vs 5.0 exp vs 6.01 June. At least
it was not negative . . . Not a great showing for the start of Q3.
China: GDP 6.7%, beating expectations. This appears to have halted the
slide of GDP BUT many are questioning what it cost to get this number. In
other words, the debt escalation. Rabbobank already estimated Chinese debt
at 3x the size of its economy. With private investment at 0% for the quarter
where did it come from? Government money pushed into state-owned companies,
of course the most inefficient place to put the money.
THE MARKET
CHARTS
Virtually no change in the indices though DJ30 forged to another new high
with a powerful 0.05% move. Better get a bucket of ice water ready to cool
it off with moves like that. Of course it did put in some impressive
sessions on this move; Friday was just a pause form the look of it. For the
other indices as well.
DJ30: Doji though a new closing high, culminating a 7 of 8 session surge to
a new high. Strong move, new high, a test would be logical and if futures
continue descending as they are tonight, moving in a second leg lower after
the initial drop, looks as if the Dow will give it a shot at a test.
SP500: The other index at new highs, and the first to reach a new high, is
SP500. A doji here as well to end the week after an impressive three week
surge off the Brexit low. Broke through to a new high, now the 10 day EMA
is coincident with the old high, kind of a perfect testing point. But for
the Turkey news I would say it may not even try that level. Now it might.
NASDAQ: Rallied to a recovery high to Tuesday then started to struggle.
Managed to move higher to close the week but each session closed off the gap
higher point. Running low on momentum for now and even without Turcoupkey
NASDAQ likely would test.
SP400: Very similar to NASDAQ in the action on the week: surging early then
starting Wednesday a bit of a struggle. Nothing major, just a great move
that is a bit tired as it bumped into the prior all-time high. A test of
the June high/10 day EMA rising up below it (1525) is logical even in a
market that is hardly logical given all the monetary stimulus.
RUTX: Surged through Tuesday, worked laterally Wednesday to Friday in a
tight range. RUTX moved up to the bottom of the summer 2015 range and has
stalled for now. It is holding its gains, working in a nice lateral test,
not looking heavy.
SOX: Rally through Thursday, a modest loss Friday, holding in a tight
range. Closing at 723.65, SOX is still well below the 2015 interim highs
(730, 735) and the June post-2000 high (751). Nice break through the June
resistance as SOX works on recovering those prior highs. With the Fed and
central banks in the game and likely staying in the game thanks to events
such as Nice and Turcoupkey, after a test SOX can easily continue toward
those highs.
LEADERSHIP
Many groups took a day off, but not all, e.g. metals. The market has more
leadership as of course groups started to turn up as the move continued and
spread out. An upside move has to have leadership, and typically broad
leadership, to be successful. Of course there are always the FANG-style
rallies where just a few large caps control market direction, but now that
is not the case.
Metals: Solid moves pretty much across the board. SID rallied 4% on
stronger volume. AKS and SCHN were up but their moves were tamer. CENX
cooled its ingots with a pair of doji after a big move higher earlier. FCX
added over 1% to a big early week move. Precious metal stocks were flat
Friday but enjoyed a decent enough week though not the same as the prior
week.
Big Names: A mixed week for sure and a mixed session each day of the week.
FB closed the week on the 50 day SMA with a lateral move testing the prior
week upside. AMZN tested on the week, fading in an easy test of its new
high. AAPL jumped Thursday through the 50 day EMA, flat Friday; maybe
starting something. GOOG cleared the 200 day SMA but couldn't do anything
with it Wednesday to Friday but it did hold the move. SBUX bounced off the
50 day EMA on the week.
Rails: Great week, took some time off Friday. NSC surged into Thursday,
faded just modestly Friday and on very low trade. UNP surged as well, doji
Thursday, sold back some Friday but on light trade. Strong break higher.
CSX reported great results and blasted higher through Thursday. A bit of a
sharp drop Friday but not bad.
Financial: Great week with GS leading the surge upside and moving close to
the 200 day SMA and the April high. MS made it to the 200 day SMA Friday on
the open. JPM reported a beat and gapped Thursday, flat Friday, holding
below the early June peak. Other bank results were not so great. WFC
gapped lower and sold 2.5% Friday. BAC and C were up nicely on the week and
held steady Friday.
Software: Sports some solid patterns still. ROVI put in four lateral
sessions in a tight range, prepping the next upside move. CYBR continued
higher through Friday. BLKB punched out a higher high, faded Friday. RHT
recovered to the 50 day MA's through Thursday but then turned lower Friday;
kind of weak looking with a downside ABCD pattern. CRM in a nice easy
lateral test of the 10 day EMA.
Chips: Not bad, good week. AVGO gapped higher Monday, continued upside in
the channel into Friday. LRCX continued its run this week though ran into
some resistance. AMKR rallied early week, coasted into Friday. NVDA put in
a new high on the week, testing Friday.
Biotechs/Drugs: Some good moves on the week but a lot of struggles. Friday
a bit better. BIIB put in a strong upside move. EXAS faded to end the week
but surged Wednesday and let us take some nice gain. GILD has an
interesting double bottom set up. BLUE had a tougher week but it also is
set up very nicely in a 1-2-3 fade to near support. EYES looks in great
shape to move higher. OPHT shot higher Friday.
Oil: Back and forth week. CWEI broke through the 200 day SMA, let us take
some gain, faded to end the week but still very solid. CVX put in a higher
high on the week. Same with XOM and BP. APC as well but faded to the 20
day EMA Friday. Lots of stocks just holding on, biding time: PTEN, SPN,
COG, HAL. Had good runs, a bit winded, trying to consolidate as oil tries
to keep from selling farther after selling a bit more after the break below
the 50 day MA's, then bouncing back to test them as of Friday.
MARKET STATISTICS
NASDAQ
Stats: -4.47 points (-0.09%) to close at 5029.59
Volume: 1.572B (-3.66%)
Up Volume: 767.82M (-272.18M)
Down Volume: 803.18M (+257.93M)
A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Advancers led 1.24 to 1
New Highs: 109 (-70)
New Lows: 25 (-1)
S&P
Stats: -2.01 points (-0.09%) to close at 2161.74
NYSE Volume: 874.2M (+4.31%)
A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.31 to 1
New Highs: 125 (-70)
New Lows: 8 (+4)
DJ30
Stats: +10.14 points (+0.05%) to close at 18516.55
SENTIMENT INDICATORS
VIX: 12.67; -0.15
VXN: 14.29; -0.37
VXO: 11.68; -0.57
Put/Call Ratio (CBOE): 0.85; +0.23
5 of 5 below 1.0, 14 of last 23 over 1.0.
18 of the last 35 below 1.0. 34 of 55 over 1.0.
Bulls and Bears: Massive drop in bulls, but of course that was immediately
countered by the recovery, so this reading is all in flux right now.
Bulls: 52.5 versus 47.1. Highest level since early 2015, by a long shot.
Around 60 is where an upside move has topped over the past 18 years.
Bears: 24.7 versus 24.5. Somewhat opposite of the bulls, bears actually
became more numerous with the rally.
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: 52.5% versus 47.1%
47.1% versus 41.6% versus 47.5% versus 45.9% versus 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: 24.7%
24.5% versus 23.8% versus 23.2% versus 23.5% versus 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): 1.58% versus 1.53%. Broke below the 20 day EMA for the
first time on this pullback, now reaching the upper gap point from late
June. After hours on the Turkey coup attempt bonds rallied off the Friday
selling but not a game changer at this point. Just for reference, the prior
Friday bonds closed at 1.36%.
Historical: 1.53% versus 1.47% versus 1.51% versus 1.434% versus 1.36%
versus 1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475% versus
1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68%
versus 1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.1035 versus 1.1117. Held up during the session but then the euro
broke back below the 200 day SMA on the Turkey news.
Historical: 1.1117 versus 1.1099 versus 11061 versus 1.10588 versus 1.10502
versus 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106
versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070
versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778
versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526
versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 104.85 versus 105.314. Dollar dropped against yen after making it
just through the 50 day MA's Thursday.
Historical: 105.31 versus 104.74 versus 102.686 versus 100.59 versus
100.768 versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus
102.912 versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus
104.87 versus 104.788 versus 103.98 versus 104.58 versus 104.12 versus
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
Oil: 46.65, +1.15. Gapped upside to the 50 day EMA, the same level it
rallied to on Tuesday but immediately gave up. Still in a 6 week fade off
the early June high. Has definitely turned to backfilling the move after
doubling off the February panic low. Friday we learned there were more rigs
turning in the US (+6 to 357). That is the most since 12/2011.
Gold: 1327.40, -4.80. Closed lower but was up on the Turkey news. On the
week, a nice pullback to the 20 day EMA, testing the break to a higher high.
Very normal test.
MONDAY
After the initial drop on Turkcoup futures were recovering. We will see how
Asian markets respond but I would not be surprised that, regardless of the
initial reaction, the markets find their support even if they test first.
The central banks are again all in and there is enough world turmoil and the
threat of more to keep the Fed on hold.
Leadership remains good enough for now and there are new highs on DJ30 and
SP500. Of course that means watching if the other indices can follow along
with SP400 in best position to post the next new high though it might want
to test first. It also means watching DJ20, the transports, and whether
they follow with their own new high and confirm the DJ30 new high or if they
roll over with a lower high in an uncomfortable look similar to 2006/2007.
DJ20 is over 1250 points from a new high and indeed has not passed the twin
tops from Mary and April. If it makes a lower high here, not good news
longer term.
For now we have some new upside plays to consider along with a downside
play. Again, leadership is good enough and with the central banks backing
the move, that is really all it needs until the point is reached the central
banks have no more marginal efficacy. Not at that point yet. So, we will
see how stocks react when the markets start opening, and perhaps get the
chance to use a bit of a respite as an entry point.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5029.59
Resistance:
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:
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
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 50 day EMA at 4867
4836 is the March 2016 peak
The 200 day SMA at 4828
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2161.74
Resistance:
Support:
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
The 50 day EMA at 2091
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 200 day SMA at 2032
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,516.55
Resistance:
Support:
18,351 is the all-time high from May 2015
18,288 from March 2015
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,978 is the November 2015 peak
The 50 day EMA at 17,852
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,349
17,265 is a December 2015 closing low
17,245 is the November 2015 closing low
17,152 is the mid-July 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 15 - Friday
Empire Manufacturing, July (8:30): 0.55 actual versus 5.0 expected, 6.0
prior
Retail Sales, June (8:30): 0.6% actual versus 0.2% expected, 0.2% prior
(revised from 0.5%)
Retail Sales ex-auto, June (8:30): 0.7% actual versus 0.4% expected, 0.4%
prior (no revisions)
CPI, June (8:30): 0.2% actual versus 0.3% expected, 0.2% prior (no
revisions)
Core CPI, June (8:30): 0.2% actual versus 0.2% expected, 0.2% prior (no
revisions)
Capacity Utilization, June (9:15): 75.4% actual versus 75.0% expected, 74.9%
prior (no revisions)
Industrial Production, June (9:15): 0.6% actual versus 0.2% expected, -0.3%
prior (revised from -0.4%)
Business Inventories, May (10:00): 0.2% actual versus 0.2% expected, 0.1%
prior (no revisions)
Michigan Sentiment, July (10:00): 89.5 actual versus 93 expected, 93.5 prior
July 18 - Monday
NAHB Housing Market , July (10:00): 61.0 expected, 60 prior
Net Long-Term TIC Flow, May (16:00): -$79.6B prior
July 19 - Tuesday
Building Permits, June (8:30): 1150K expected, 1138K prior
Housing Starts, June (8:30): 1165K expected, 1164K prior
Building Permits, June (8:30): 1150K expected, 1138K prior
July 20 - Wednesday
MBA Mortgage Index, 07/16 (7:00): 7.2% prior
Crude Inventories, 07/16 (10:30): -2.546M prior
July 21 - Thursday
Initial Claims, 07/16 (8:30): 265K expected, 254K prior
Continuing Claims, 07/09 (8:30): 2149K prior
Philadelphia Fed, July (8:30): 5.0 expected, 4.7 prior
FHFA Housing Price I, May (9:00): 0.2% prior
Existing Home Sales, June (10:00): 5.50M expected, 5.53M prior
Leading Indicators, June (10:00): 0.3% expected, -0.2% prior
Natural Gas Inventor, 07/16 (10:30): 64 bcf prior
End part 1 of 3
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The Daily, Part 1 of 3, 7-9-16
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7/9/2016 Investment House Daily
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Access to all current videos will remain assessable each day using the play
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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
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MARKET SUMMARY
- June jobs report beats by as much as May missed, stocks launch.
- SP500 flirting with the all-time high.
- 'Whopping' jobs report is not so whopping historically, and it is also
more of the same in terms of underwhelming internals.
- SOX, DJ30 longer term patterns trying to make a silk purse out of the 21
month rounded top
I styled Thursday as a pre-Jobs Report holding pattern. A better
description should have been a session on the launch pad waiting for the go
ahead to launch. The Friday Jobs Report provided the go ahead for launch as
non-farm payrolls added 287K, over 100K more than expected and wiping away
the May revised 11K. We won't go into the details -- yet -- because the
market didn't go into details. Massive miss, massive beat, Fed on hold,
other central banks easing, time to rally.
SP500 32.00, 1.53%
NASDAQ 79.95, 1.64%
DJ30 250.86, 1.40%
SP400 1.86%
RUTX 2.40%
SOX 2.82%
VOLUME: NYSE +3%, NASDAQ +16%. NYSE trade higher but still below average.
NASDAQ trade back up to average. Stronger volume is better on the upside if
you are looking for a more sustainable move, though volumes were not blowout
great.
A/D: NYSE 7.4:1, NASDAQ 4.8:1. Impressive breadth as all areas of the
market jumped and of course the small cap lead in percentage gain, by a wide
margin sans SOX, shows the strength of the overall market on the session.
RUTX and SOX posted the strongest percentage gains, but I suppose the
session's highlight was SP500's flirtation with its all-time high. SP500
gapped higher, stormed through the June 2016 and November 2015 highs, and on
its high traded past the May 2015 closing high (2132.82). Couldn't hold
that move, but at this point that may just be semantics: SP500 not only put
in a Brelief move from Brexit, it avoided a Brollover and is trying to put
in a Brew High. With RUTX and SOX putting in strong performances as well,
the market was only heading higher.
The question is always can it hold. Long rounded top/range, several sharp
selloffs, questionable economics despite some recent reports. Yet, the
market comes back, and it comes back thanks to the willingness of central
banks to avoid any kind of possible upset. They were taken aback by the
viciousness of the January to February selling and that had Janet Yellen on
the phone with the BOE head when the indices were hitting lower lows. That
day, starting about 20 minutes after her appointment book showed the
telephone conversation ended, the stock indices reversed off the lows. The
next day she was on the phone with Mario Draghi, and about a half hour after
their conversation, voila, European and US markets jumped higher again. A
miracle.
This last episode it did not even take a selloff, just the threat of a
selloff as a result of a political vote. Get the plunge protection gear out
and start hosing down the market to prevent any fires breaking out. The
markets didn't even get started lower in terms of a percentage move when the
BOE was out with stimulus and promising more, the ECB saying there was no
limit to what it could buy (other than just not being enough assets for it
to purchase), the IMF demanding central banks step in to prevent what would
surely be the end of the world.
Again: it did not even take a serious drop to get the central banks in the
market yet again, protecting them from the foolishness of the proletariat
that had the nerve to vote to wrest back some control over their lives.
With that background, yes Virginia, there likely really are new highs
coming. Better data, compliant central banks. It just doesn't get better
than that.
NEWS/ECONOMY
TO VIEW THE NEWS/ECONOMY OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.mp4
So what was all the excitement over? After a May jobs report that missed by
5 standard deviations downside, a June report that beat by 5 standard
deviations upside. Nothing like pinpoint accuracy from our leading
economists who are, as it is turning out, about as accurate as weathermen,
whether trying to predict the next rain storm or the climate in the future.
Of course you cannot lay all of the blame at their feet. You have a BLS
full of professionals whose job is to compile this data accurately and
without any consideration of the political consequences. Thus just before
the 2012 election the jobs numbers steadily improved to the magic numbers,
defying all measures of the economy. Shockingly (?) it was later confirmed
that some of the BLS professionals had fudged the data. Oh you fun-loving
federal employee rascals. We need to watch you guys.
The upshot: you got a May report that had everyone worried about the economy
but rejoicing the Fed was on hold. In June you get a report that has
everyone initially joyous but likely to start worrying the Fed is not on
hold. Indeed, the pundits and the futures contracts are now giving
September a shot at a rate hike, though bond rates, gold, and just about
everything else does not appear to be nearly convinced.
Think about it. The jobs market is so solid, yet businesses are not
investing at all in capital equipment or anything else. As David Rosenberg
put it: "It makes little or no sense that the business sector would be so
cautious over committing capital to the real economy and at the same time
embark on a sustained hiring spree."
Jobs Report
Non-farm jobs, June: 287K vs 175K exp vs 11K prior (from 38K)
3 month average: 147K/month
Unemployment: 4.9% vs 4.8% exp vs 4.7% prior
Average Hourly earnings: 0.1% vs 0.2% exp vs 0.2% prior.
Year/year 2.6% vs 2.7% expected as jobs mix remains tilted toward lower pay,
hourly.
Workweek: 34.4 vs 34.4 exp vs 34.4 prior. Just cannot get the workweek
rising.
The Non-Farms portion of the Jobs Report was termed 'whopping' just about
anywhere you looked. While it was indeed much larger than the 11K from May,
sub-300K is historically not whopping for the US economy, at least if you
look earlier than the last 15 years.
As I have written many times, the years of mediocre, substandard growth
levels have dumbed down our historical perception of what is strong and what
is mediocre for the US economy. I wrote over 5 years ago this would be the
case and it is exactly what has happened.
Thus we get 'wowed' by data that in the 1980's and 1990's would have been on
the low end. In September 1983 1.1M jobs were created. The following 10
months averaged 354K per month. And these were GREAT jobs. Tech companies
were birthed, companies invested massive amounts in plants, equipment, and
people. These were full-time, high quality, breadwinner jobs, the kind we
mostly dream about right now.
Household Survey: Something of the counterbalance to the Non-Farms
'establishment' survey. It is said by economists, that in turns in the jobs
market the household survey is the more accurate forecast. If that is the
case, then the prognosis is not great. Indeed, even with the June non-farms
number, the overall trend in jobs is not up but is still lower. Throw out
May and June, both apparent outliers, and you still have jobs trending
lower.
Household Survey: +347K unemployed versus +37K employed.
Long-term unemployed: +211K
Unemployed: rose to 7.783M
Participation rate: 62.7% vs 62.6%. 191K moved into the workforce though
those out of the workforce remains just over 94M.
Participation still at 30+ year lows. Much rejoicing. Yea.
Jobs gains dominate in the lower pay areas again: According to the Non-Farm
establishment Survey:
Leisure & Hospitality: 59K
Health: 58K
Information 44K (Verizon strike over)
Professional & Business services: 38K
Retail: 30K
Manufacturing: +14K (a miracle! What an economy!)
Jobs losses:
Mining: -6K
Age Breakdown:
Age 55 - 69: +259K
Age 25 - 54: +28K
Age 20 - 24: -67K
Age 16 - 19: -40K
Thus, 90% of jobs in the household survey went to the 55+ group, the norm in
this entire recovery.
Indeed, if you go back to when the recession started in December 2007:
Age 55+: +8.2M jobs
All other age groups: -3.4M jobs, still underwater, from the peak. Jobs
have been created, but they had more jobs well into 2008 than they have now.
Another report, heralded as a 'whopper,' but historically it is average at
best.
THE MARKET
CHARTS
The big top still remains, but the indices are trying to turn it into
something upside, thanks to the power of central banks.
SOX: All over the map is an accurate description of SOX the past two weeks,
from a breakout the day of Brexit voting to a plunge to the 200 day SMA to a
Brelief move that still has about 15 points to match the Prexit high. Good
recovery, still work to do. On a grander picture, one from 2012, SOX has
put in a double bottom at the 50% Fibonacci retracement, with lows in August
2015 and January/February 2016. It formed a handle and broke higher in late
May, and during Brexit it tested that breakout. Now it is bouncing. With
this analysis, and with the central banks willing to help, SOX would have a
target at 750. Not a bad prognosis, another 7%.
SP500: Gapped and rallied through the June high and the November/December
2015 range. As noted earlier, toyed with the summer 2015 all-time highs,
closed below them, but showing plenty of momentum.
DJ30: Same type of pattern as SOX, i.e. a strong rally from 2012 to early
2015, the big selloffs in 2015 and early 2016 after the mid-2015 all-time
high, the recovery, the three month lateral move forming a handle. A double
bottom with handle formed at the 38% Fibonacci retracement of the 2012 to
2015 run. Now DJ30 is approaching the prior high in 2015, and as it was a
38% retracement, typically it should move through that level and put in
higher highs.
NASDAQ: The 'tech heavy' index does not sport as convincing a pattern as
DJ30 or SOX. Broke to a lower low on the Brexit selling, selling that was
already underway. Friday recovered back to the April/June highs, or
actually just under them, and now has to show it can continue the move. If
DJ30, SP500 lead, NASDAQ likely follows.
RUTX: Over the past 5 weeks RUTX has formed, thanks to the Friday surge, a
short inverted head and shoulders. That is trying to act as the right
shoulder to a larger 10 month inverted head and shoulders formed in the
selloff from the June 2015 high. That suggests there is room upside.
SP400: Almost fully recovered from Brexit, indeed surpassing the late June
high and now working on the June high. That is the last peak before the
mid-2015 range housing the all-time high. Somewhat similar to RUTX with the
inverted head and shoulders, though a bit skewed to the upside for the right
shoulder. Looks as if it wants to make a run at that old high at 1551
(closed at 1520).
LEADERSHIP
Pretty much everything was moving higher, but leadership is about stocks in
good patterns moving higher, stocks moving to new highs -- that sort of
thing. Thus while many stocks were up, not all are leaders. There are
quite a few areas with good patterns that are moving well, however.
Oil: Oil is not necessarily one of them. Not bad, and perhaps just needs
to take a break after leading the market during a choppy time. PTEN is not
bad with a nice base in the bigger picture. APC continues its recovery off
its January low, putting in a new recovery high on the week. CWEI keeps
working on its attempt at the 200 day SMA. HAL and SLB are in solid larger
bases but have more work to do. NBL, SWN, SPN, COG and others are all trying
to hold on and set up for a new move higher.
Industrials: HON broke to a higher high Friday. MMM at a higher high. UTX
breaking higher from an 8 week consolidation. CAT, CMI trying to break
upside.
Biotech/Drugs: BLUE enjoyed a good week upside. OPHT broke higher Friday,
continuing its move off the 50 day EMA.
Chips: Big surge Friday as SOX tries to fix its pattern. KOPN jumped
higher Friday. AVGO is breaking higher off the bottom of its uptrending
channel. AMKR looks interesting. ARMH is trying to make a new break
higher. LRCX is trying to break from a 19 month base. EXAR is working in a
big double bottom with handle.
Financial: Stormy week, still not great patterns given the central bank
action, but with stronger jobs reports and stronger services PMI, financial
stocks may try to build in some possible rate hike upside. GS has a double
bottom trying to shape up, but MS is still mushy, JPM is up but at the 200
day SMA. BAC is still struggling below the 20 day EMA.
Retail: AMZN at a new high on the week. WWW shot higher Thursday and
Friday, making us some good money. Department stores are still working on
their patterns, e.g. JWN, M, DDS; broke higher Friday and showing some
promise.
Software: Making some moves, e.g. ROVI, CALD, CYBR.
Metals: Not just precious metals started looking better. CENX looks ready
to make the next move higher. AKS is improving. SID is still looking
solid. SCHN rallied nicely on the week. FCX is working laterally in a
rather tight 9 week trading range.
MARKET STATISTICS
NASDAQ
Stats: +79.95 points (+1.64%) to close at 4956.76
Volume: 1.97B (+15.88%)
Up Volume: 1.67B (+560M)
Down Volume: 252.13M (-251.93M)
A/D and Hi/Lo: Advancers led 4.75 to 1
Previous Session: Advancers led 1.34 to 1
New Highs: 159 (+71)
New Lows: 25 (-7)
S&P
Stats: +32 points (+1.53%) to close at 2129.9
NYSE Volume: 906M (+3.14%)
A/D and Hi/Lo: Advancers led 7.43 to 1
Previous Session: Advancers led 1.18 to 1
New Highs: 267 (+134)
New Lows: 12 (-10)
DJ30
Stats: +250.86 points (+1.4%) to close at 18146.74
SENTIMENT INDICATORS
VIX: 13.2; -1.56
VXN: 15.74; -1.54
VXO: 12.35; -1.84
Put/Call Ratio (CBOE): 0.73; -0.13. Wow, 2 straight readings below 1.0.
14 of 18 over 1.0.
14 of the last 30 below 1.0. 34 of 50 over 1.0. Overall still some very
nervous action.
Bulls and Bears: Massive drop in bulls, but of course that was immediately
countered by the recovery, so this reading is all in flux right now.
Bulls: 47.1 versus 41.6. Right back up, from Brexit to Brelief.
Bears: 24.5 versus 23.8. Unlike bulls, bears are not buying it.
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: 47.1%
41.6% versus 47.5% versus 45.9% versus 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: 24.5%
23.8% versus 23.2% versus 23.5% versus 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): 1.36% versus 1.39%. After the jobs report, the 10 year
yield rose to 1.43%. By the close, however, even with large index gains,
bonds rallied back and dropped the yield. Despite 'better' data that should
reduce the risk in the economy and the improve the odds of a Fed rate hike,
bonds are rallying.
Historical: 1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475%
versus 1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus
1.68% versus 1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.10502 versus 1.10634. Overall the euro was down on the week,
closing in the range formed after the Brexit dump lower.
Historical: 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus
1.1106 versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus
1.14070 versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus
1.12778 versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus
1.12526 versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 100.59 versus 100.768. Doji near the June low, keeping the
possibility of a double bottom bounce for the dollar in place.
Historical: 100.768 versus 101.15 versus 100.89 versus 102.497 versus
103.128 versus 102.912 versus 102.60 versus 101.93 versus 102.32 versus
106.73 versus 104.87 versus 104.788 versus 103.98 versus 104.58 versus
104.12 versus 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
Oil: 45.12, -0.07. Tough week, down Tuesday and Thursday, moving below the
50 day MA's hard to a lower low, undercutting the three week range. Doji
Friday but oil is struggling.
Gold: 1367.40, +5.60. Big week and was up Friday even with the jobs data.
Sold off for sure, but held near the 10 day EMA and roared back to a gain.
Gold is not buying any increased rate hike odds.
MONDAY
Perhaps there will be some give back to start next week after such a strong
move to close out the post-Brexit, but the momentum is strong and it appears
the market is hell bent on making new highs for SP500 and DJ30 in rather
short order. With SOX and RUTX trying to take the lead again with their
strong percentage gains, the move has backing. If it continues of course
the move is to continue picking up great patterns to the upside.
Sure the Fed continues playing a roll: will she or won't she raise rates and
when will that occur? Then there is Brexit. Will the powers that be decide
the people are fools and don't know what is good for them, rolling it back?
Not unprecedented in this world we now live in.
Don't want to over think it. Sure the market can still top out with the
massive post-QE rounded top, but the indices, as pointed out in the charts,
are trying their best to set up a new upside move, central bank aided, of
course. As long as good patterns set up and break higher, it behooves us to
be in. Great analysis, huh? Again, don't over think it.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4956.76
Resistance:
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
4969 is the April 2016 recovery high
4980 is the June 2016 peak
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:
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
4836 is the March 2016 peak
The 50 day SMA at 4827
The 200 day SMA at 4818
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2129.90
Resistance:
2130 is the June 2015 peak
2135 is the May 2015 all-time high
Support:
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
2079 is the intraday all-time high from November 2014
The 50 day EMA at 2076
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2026 is the May 2016 low
The 200 day SMA at 2026
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,147.40
Resistance:
18,168 is the April 2016 recovery high
18,288 from March 2015
18,351 is the all-time high from May 2015
Support:
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,978 is the November 2015 peak
The 50 day EMA at 17,731
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,293
17,265 is a December 2015 closing low
17,245 is the November 2015 closing low
17,152 is the mid-July 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 8 - Friday
Nonfarm Payrolls, June (8:30): 287K actual versus 175K expected, 11K prior
(revised from 38K)
Nonfarm Private Payr, June (8:30): 265K actual versus 170K expected, -6K
prior (revised from 25K)
Unemployment Rate, June (8:30): 4.9% actual versus 4.8% expected, 4.7% prior
Hourly Earnings, June (8:30): 0.1% actual versus 0.2% expected, 0.2% prior
Average Workweek, June (8:30): 34.4 actual versus 34.4 expected, 34.4 prior
Consumer Credit, May (15:00): $18.6B actual versus $15.3B expected, $13.4B
prior
July 12 - Tuesday
Wholesale Inventories, May (10:00): 0.2% expected, 0.6% prior
July 13 - Wednesday
MBA Mortgage Index, 07/09 (7:00)
Export Prices ex-ag., June (8:30): 1.0% prior
Import Prices ex-oil, June (8:30): 0.3% prior
Crude Inventories, 07/09 (10:30)
Treasury Budget, June (14:00): $50.5B prior
July 14 - Thursday
Initial Claims, 07/09 (8:30): 265K expected, 254K prior
Continuing Claims, 07/02 (8:30): 2124K prior
PPI, June (8:30): 0.3% expected, 0.4% prior
Core PPI, June (8:30): 0.1% expected, 0.3% prior
Natural Gas Inventor, 07/09 (10:30)
July 15 - Friday
Empire Manufacturing, July (8:30): 5.0 expected, 6.0 prior
Retail Sales, June (8:30): 0.2% expected, 0.5% prior
Retail Sales ex-auto, June (8:30): 0.4% expected, 0.4% prior
CPI, June (8:30): 0.3% expected, 0.2% prior
Core CPI, June (8:30): 0.2% expected, 0.2% prior
Capacity Utilization, June (9:15): 75.0% expected, 74.9% prior
Industrial Productio, June (9:15): 0.2% expected, -0.4% prior
Business Inventories, May (10:00): 0.2% expected, 0.1% prior
Mich Sentiment, July (10:00): 93 expected, 94.3 prior
End part 1 of 3
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MARKET SUMMARY
- June jobs report beats by as much as May missed, stocks launch.
- SP500 flirting with the all-time high.
- 'Whopping' jobs report is not so whopping historically, and it is also
more of the same in terms of underwhelming internals.
- SOX, DJ30 longer term patterns trying to make a silk purse out of the 21
month rounded top
I styled Thursday as a pre-Jobs Report holding pattern. A better
description should have been a session on the launch pad waiting for the go
ahead to launch. The Friday Jobs Report provided the go ahead for launch as
non-farm payrolls added 287K, over 100K more than expected and wiping away
the May revised 11K. We won't go into the details -- yet -- because the
market didn't go into details. Massive miss, massive beat, Fed on hold,
other central banks easing, time to rally.
SP500 32.00, 1.53%
NASDAQ 79.95, 1.64%
DJ30 250.86, 1.40%
SP400 1.86%
RUTX 2.40%
SOX 2.82%
VOLUME: NYSE +3%, NASDAQ +16%. NYSE trade higher but still below average.
NASDAQ trade back up to average. Stronger volume is better on the upside if
you are looking for a more sustainable move, though volumes were not blowout
great.
A/D: NYSE 7.4:1, NASDAQ 4.8:1. Impressive breadth as all areas of the
market jumped and of course the small cap lead in percentage gain, by a wide
margin sans SOX, shows the strength of the overall market on the session.
RUTX and SOX posted the strongest percentage gains, but I suppose the
session's highlight was SP500's flirtation with its all-time high. SP500
gapped higher, stormed through the June 2016 and November 2015 highs, and on
its high traded past the May 2015 closing high (2132.82). Couldn't hold
that move, but at this point that may just be semantics: SP500 not only put
in a Brelief move from Brexit, it avoided a Brollover and is trying to put
in a Brew High. With RUTX and SOX putting in strong performances as well,
the market was only heading higher.
The question is always can it hold. Long rounded top/range, several sharp
selloffs, questionable economics despite some recent reports. Yet, the
market comes back, and it comes back thanks to the willingness of central
banks to avoid any kind of possible upset. They were taken aback by the
viciousness of the January to February selling and that had Janet Yellen on
the phone with the BOE head when the indices were hitting lower lows. That
day, starting about 20 minutes after her appointment book showed the
telephone conversation ended, the stock indices reversed off the lows. The
next day she was on the phone with Mario Draghi, and about a half hour after
their conversation, voila, European and US markets jumped higher again. A
miracle.
This last episode it did not even take a selloff, just the threat of a
selloff as a result of a political vote. Get the plunge protection gear out
and start hosing down the market to prevent any fires breaking out. The
markets didn't even get started lower in terms of a percentage move when the
BOE was out with stimulus and promising more, the ECB saying there was no
limit to what it could buy (other than just not being enough assets for it
to purchase), the IMF demanding central banks step in to prevent what would
surely be the end of the world.
Again: it did not even take a serious drop to get the central banks in the
market yet again, protecting them from the foolishness of the proletariat
that had the nerve to vote to wrest back some control over their lives.
With that background, yes Virginia, there likely really are new highs
coming. Better data, compliant central banks. It just doesn't get better
than that.
NEWS/ECONOMY
TO VIEW THE NEWS/ECONOMY OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.mp4
So what was all the excitement over? After a May jobs report that missed by
5 standard deviations downside, a June report that beat by 5 standard
deviations upside. Nothing like pinpoint accuracy from our leading
economists who are, as it is turning out, about as accurate as weathermen,
whether trying to predict the next rain storm or the climate in the future.
Of course you cannot lay all of the blame at their feet. You have a BLS
full of professionals whose job is to compile this data accurately and
without any consideration of the political consequences. Thus just before
the 2012 election the jobs numbers steadily improved to the magic numbers,
defying all measures of the economy. Shockingly (?) it was later confirmed
that some of the BLS professionals had fudged the data. Oh you fun-loving
federal employee rascals. We need to watch you guys.
The upshot: you got a May report that had everyone worried about the economy
but rejoicing the Fed was on hold. In June you get a report that has
everyone initially joyous but likely to start worrying the Fed is not on
hold. Indeed, the pundits and the futures contracts are now giving
September a shot at a rate hike, though bond rates, gold, and just about
everything else does not appear to be nearly convinced.
Think about it. The jobs market is so solid, yet businesses are not
investing at all in capital equipment or anything else. As David Rosenberg
put it: "It makes little or no sense that the business sector would be so
cautious over committing capital to the real economy and at the same time
embark on a sustained hiring spree."
Jobs Report
Non-farm jobs, June: 287K vs 175K exp vs 11K prior (from 38K)
3 month average: 147K/month
Unemployment: 4.9% vs 4.8% exp vs 4.7% prior
Average Hourly earnings: 0.1% vs 0.2% exp vs 0.2% prior.
Year/year 2.6% vs 2.7% expected as jobs mix remains tilted toward lower pay,
hourly.
Workweek: 34.4 vs 34.4 exp vs 34.4 prior. Just cannot get the workweek
rising.
The Non-Farms portion of the Jobs Report was termed 'whopping' just about
anywhere you looked. While it was indeed much larger than the 11K from May,
sub-300K is historically not whopping for the US economy, at least if you
look earlier than the last 15 years.
As I have written many times, the years of mediocre, substandard growth
levels have dumbed down our historical perception of what is strong and what
is mediocre for the US economy. I wrote over 5 years ago this would be the
case and it is exactly what has happened.
Thus we get 'wowed' by data that in the 1980's and 1990's would have been on
the low end. In September 1983 1.1M jobs were created. The following 10
months averaged 354K per month. And these were GREAT jobs. Tech companies
were birthed, companies invested massive amounts in plants, equipment, and
people. These were full-time, high quality, breadwinner jobs, the kind we
mostly dream about right now.
Household Survey: Something of the counterbalance to the Non-Farms
'establishment' survey. It is said by economists, that in turns in the jobs
market the household survey is the more accurate forecast. If that is the
case, then the prognosis is not great. Indeed, even with the June non-farms
number, the overall trend in jobs is not up but is still lower. Throw out
May and June, both apparent outliers, and you still have jobs trending
lower.
Household Survey: +347K unemployed versus +37K employed.
Long-term unemployed: +211K
Unemployed: rose to 7.783M
Participation rate: 62.7% vs 62.6%. 191K moved into the workforce though
those out of the workforce remains just over 94M.
Participation still at 30+ year lows. Much rejoicing. Yea.
Jobs gains dominate in the lower pay areas again: According to the Non-Farm
establishment Survey:
Leisure & Hospitality: 59K
Health: 58K
Information 44K (Verizon strike over)
Professional & Business services: 38K
Retail: 30K
Manufacturing: +14K (a miracle! What an economy!)
Jobs losses:
Mining: -6K
Age Breakdown:
Age 55 - 69: +259K
Age 25 - 54: +28K
Age 20 - 24: -67K
Age 16 - 19: -40K
Thus, 90% of jobs in the household survey went to the 55+ group, the norm in
this entire recovery.
Indeed, if you go back to when the recession started in December 2007:
Age 55+: +8.2M jobs
All other age groups: -3.4M jobs, still underwater, from the peak. Jobs
have been created, but they had more jobs well into 2008 than they have now.
Another report, heralded as a 'whopper,' but historically it is average at
best.
THE MARKET
CHARTS
The big top still remains, but the indices are trying to turn it into
something upside, thanks to the power of central banks.
SOX: All over the map is an accurate description of SOX the past two weeks,
from a breakout the day of Brexit voting to a plunge to the 200 day SMA to a
Brelief move that still has about 15 points to match the Prexit high. Good
recovery, still work to do. On a grander picture, one from 2012, SOX has
put in a double bottom at the 50% Fibonacci retracement, with lows in August
2015 and January/February 2016. It formed a handle and broke higher in late
May, and during Brexit it tested that breakout. Now it is bouncing. With
this analysis, and with the central banks willing to help, SOX would have a
target at 750. Not a bad prognosis, another 7%.
SP500: Gapped and rallied through the June high and the November/December
2015 range. As noted earlier, toyed with the summer 2015 all-time highs,
closed below them, but showing plenty of momentum.
DJ30: Same type of pattern as SOX, i.e. a strong rally from 2012 to early
2015, the big selloffs in 2015 and early 2016 after the mid-2015 all-time
high, the recovery, the three month lateral move forming a handle. A double
bottom with handle formed at the 38% Fibonacci retracement of the 2012 to
2015 run. Now DJ30 is approaching the prior high in 2015, and as it was a
38% retracement, typically it should move through that level and put in
higher highs.
NASDAQ: The 'tech heavy' index does not sport as convincing a pattern as
DJ30 or SOX. Broke to a lower low on the Brexit selling, selling that was
already underway. Friday recovered back to the April/June highs, or
actually just under them, and now has to show it can continue the move. If
DJ30, SP500 lead, NASDAQ likely follows.
RUTX: Over the past 5 weeks RUTX has formed, thanks to the Friday surge, a
short inverted head and shoulders. That is trying to act as the right
shoulder to a larger 10 month inverted head and shoulders formed in the
selloff from the June 2015 high. That suggests there is room upside.
SP400: Almost fully recovered from Brexit, indeed surpassing the late June
high and now working on the June high. That is the last peak before the
mid-2015 range housing the all-time high. Somewhat similar to RUTX with the
inverted head and shoulders, though a bit skewed to the upside for the right
shoulder. Looks as if it wants to make a run at that old high at 1551
(closed at 1520).
LEADERSHIP
Pretty much everything was moving higher, but leadership is about stocks in
good patterns moving higher, stocks moving to new highs -- that sort of
thing. Thus while many stocks were up, not all are leaders. There are
quite a few areas with good patterns that are moving well, however.
Oil: Oil is not necessarily one of them. Not bad, and perhaps just needs
to take a break after leading the market during a choppy time. PTEN is not
bad with a nice base in the bigger picture. APC continues its recovery off
its January low, putting in a new recovery high on the week. CWEI keeps
working on its attempt at the 200 day SMA. HAL and SLB are in solid larger
bases but have more work to do. NBL, SWN, SPN, COG and others are all trying
to hold on and set up for a new move higher.
Industrials: HON broke to a higher high Friday. MMM at a higher high. UTX
breaking higher from an 8 week consolidation. CAT, CMI trying to break
upside.
Biotech/Drugs: BLUE enjoyed a good week upside. OPHT broke higher Friday,
continuing its move off the 50 day EMA.
Chips: Big surge Friday as SOX tries to fix its pattern. KOPN jumped
higher Friday. AVGO is breaking higher off the bottom of its uptrending
channel. AMKR looks interesting. ARMH is trying to make a new break
higher. LRCX is trying to break from a 19 month base. EXAR is working in a
big double bottom with handle.
Financial: Stormy week, still not great patterns given the central bank
action, but with stronger jobs reports and stronger services PMI, financial
stocks may try to build in some possible rate hike upside. GS has a double
bottom trying to shape up, but MS is still mushy, JPM is up but at the 200
day SMA. BAC is still struggling below the 20 day EMA.
Retail: AMZN at a new high on the week. WWW shot higher Thursday and
Friday, making us some good money. Department stores are still working on
their patterns, e.g. JWN, M, DDS; broke higher Friday and showing some
promise.
Software: Making some moves, e.g. ROVI, CALD, CYBR.
Metals: Not just precious metals started looking better. CENX looks ready
to make the next move higher. AKS is improving. SID is still looking
solid. SCHN rallied nicely on the week. FCX is working laterally in a
rather tight 9 week trading range.
MARKET STATISTICS
NASDAQ
Stats: +79.95 points (+1.64%) to close at 4956.76
Volume: 1.97B (+15.88%)
Up Volume: 1.67B (+560M)
Down Volume: 252.13M (-251.93M)
A/D and Hi/Lo: Advancers led 4.75 to 1
Previous Session: Advancers led 1.34 to 1
New Highs: 159 (+71)
New Lows: 25 (-7)
S&P
Stats: +32 points (+1.53%) to close at 2129.9
NYSE Volume: 906M (+3.14%)
A/D and Hi/Lo: Advancers led 7.43 to 1
Previous Session: Advancers led 1.18 to 1
New Highs: 267 (+134)
New Lows: 12 (-10)
DJ30
Stats: +250.86 points (+1.4%) to close at 18146.74
SENTIMENT INDICATORS
VIX: 13.2; -1.56
VXN: 15.74; -1.54
VXO: 12.35; -1.84
Put/Call Ratio (CBOE): 0.73; -0.13. Wow, 2 straight readings below 1.0.
14 of 18 over 1.0.
14 of the last 30 below 1.0. 34 of 50 over 1.0. Overall still some very
nervous action.
Bulls and Bears: Massive drop in bulls, but of course that was immediately
countered by the recovery, so this reading is all in flux right now.
Bulls: 47.1 versus 41.6. Right back up, from Brexit to Brelief.
Bears: 24.5 versus 23.8. Unlike bulls, bears are not buying it.
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: 47.1%
41.6% versus 47.5% versus 45.9% versus 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: 24.5%
23.8% versus 23.2% versus 23.5% versus 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): 1.36% versus 1.39%. After the jobs report, the 10 year
yield rose to 1.43%. By the close, however, even with large index gains,
bonds rallied back and dropped the yield. Despite 'better' data that should
reduce the risk in the economy and the improve the odds of a Fed rate hike,
bonds are rallying.
Historical: 1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475%
versus 1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus
1.68% versus 1.70% versus 1.67% versus 1.61% versus 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%
EUR/USD: 1.10502 versus 1.10634. Overall the euro was down on the week,
closing in the range formed after the Brexit dump lower.
Historical: 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus
1.1106 versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus
1.14070 versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus
1.12778 versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus
1.12526 versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 100.59 versus 100.768. Doji near the June low, keeping the
possibility of a double bottom bounce for the dollar in place.
Historical: 100.768 versus 101.15 versus 100.89 versus 102.497 versus
103.128 versus 102.912 versus 102.60 versus 101.93 versus 102.32 versus
106.73 versus 104.87 versus 104.788 versus 103.98 versus 104.58 versus
104.12 versus 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
Oil: 45.12, -0.07. Tough week, down Tuesday and Thursday, moving below the
50 day MA's hard to a lower low, undercutting the three week range. Doji
Friday but oil is struggling.
Gold: 1367.40, +5.60. Big week and was up Friday even with the jobs data.
Sold off for sure, but held near the 10 day EMA and roared back to a gain.
Gold is not buying any increased rate hike odds.
MONDAY
Perhaps there will be some give back to start next week after such a strong
move to close out the post-Brexit, but the momentum is strong and it appears
the market is hell bent on making new highs for SP500 and DJ30 in rather
short order. With SOX and RUTX trying to take the lead again with their
strong percentage gains, the move has backing. If it continues of course
the move is to continue picking up great patterns to the upside.
Sure the Fed continues playing a roll: will she or won't she raise rates and
when will that occur? Then there is Brexit. Will the powers that be decide
the people are fools and don't know what is good for them, rolling it back?
Not unprecedented in this world we now live in.
Don't want to over think it. Sure the market can still top out with the
massive post-QE rounded top, but the indices, as pointed out in the charts,
are trying their best to set up a new upside move, central bank aided, of
course. As long as good patterns set up and break higher, it behooves us to
be in. Great analysis, huh? Again, don't over think it.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4956.76
Resistance:
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
4969 is the April 2016 recovery high
4980 is the June 2016 peak
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:
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
4836 is the March 2016 peak
The 50 day SMA at 4827
The 200 day SMA at 4818
4815 is the December 2014 peak
4811 is the November 2014 peak (intraday)
4774 is the January 2-15 high
4751 is the January 2015 lower high
4684 is the May 2016 test low
4637 is the February intraday high
4620 is the February 1 closing high
4615 from September 2014 highs, October 2014 upper gap point, late August
2015 low.
4574 is the June 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 2129.90
Resistance:
2130 is the June 2015 peak
2135 is the May 2015 all-time high
Support:
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
2079 is the intraday all-time high from November 2014
The 50 day EMA at 2076
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2026 is the May 2016 low
The 200 day SMA at 2026
2023 is the November 2015 low
2020 is the September 2015 intraday high
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
Dow: Closed at 18,147.40
Resistance:
18,168 is the April 2016 recovery high
18,288 from March 2015
18,351 is the all-time high from May 2015
Support:
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,978 is the November 2015 peak
The 50 day EMA at 17,731
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.
The 200 day SMA at 17,293
17,265 is a December 2015 closing low
17,245 is the November 2015 closing low
17,152 is the mid-July 2014 post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
17,063 is the June 2016 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
ECONOMIC CALENDAR
July 8 - Friday
Nonfarm Payrolls, June (8:30): 287K actual versus 175K expected, 11K prior
(revised from 38K)
Nonfarm Private Payr, June (8:30): 265K actual versus 170K expected, -6K
prior (revised from 25K)
Unemployment Rate, June (8:30): 4.9% actual versus 4.8% expected, 4.7% prior
Hourly Earnings, June (8:30): 0.1% actual versus 0.2% expected, 0.2% prior
Average Workweek, June (8:30): 34.4 actual versus 34.4 expected, 34.4 prior
Consumer Credit, May (15:00): $18.6B actual versus $15.3B expected, $13.4B
prior
July 12 - Tuesday
Wholesale Inventories, May (10:00): 0.2% expected, 0.6% prior
July 13 - Wednesday
MBA Mortgage Index, 07/09 (7:00)
Export Prices ex-ag., June (8:30): 1.0% prior
Import Prices ex-oil, June (8:30): 0.3% prior
Crude Inventories, 07/09 (10:30)
Treasury Budget, June (14:00): $50.5B prior
July 14 - Thursday
Initial Claims, 07/09 (8:30): 265K expected, 254K prior
Continuing Claims, 07/02 (8:30): 2124K prior
PPI, June (8:30): 0.3% expected, 0.4% prior
Core PPI, June (8:30): 0.1% expected, 0.3% prior
Natural Gas Inventor, 07/09 (10:30)
July 15 - Friday
Empire Manufacturing, July (8:30): 5.0 expected, 6.0 prior
Retail Sales, June (8:30): 0.2% expected, 0.5% prior
Retail Sales ex-auto, June (8:30): 0.4% expected, 0.4% prior
CPI, June (8:30): 0.3% expected, 0.2% prior
Core CPI, June (8:30): 0.2% expected, 0.2% prior
Capacity Utilization, June (9:15): 75.0% expected, 74.9% prior
Industrial Productio, June (9:15): 0.2% expected, -0.4% prior
Business Inventories, May (10:00): 0.2% expected, 0.1% prior
Mich Sentiment, July (10:00): 93 expected, 94.3 prior
End part 1 of 3
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