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9/10/2016 Investment House Daily
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Targets hit: AVGO; STX
Entry alerts: AMZN; HAL
Trailing stops: NFLX; NSC; P; UNP
Stop alerts: AMZN; BIIB; HAR; GOOG; SCHN
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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
of the day of the week.
- The feared selling ignites Friday after the ECB sinks in, a Fed dove talks
- Volume surges, breadth is massively negative, but new lows are light, VIX
has a long way to go. Hard to bottom right after you put in a top.
- Have to respect that kind of selling and shift focus. Upside becomes
Perhaps a delayed reaction to Mario Draghi and the ECB failing to discuss
equity purchases, perhaps a reaction to a purported dove Fed voting member
(Rosengren) arguing that rate hikes are needed to prevent economic damage.
With talk of two hikes this year by some esteemed Fed members, that
certainly means September is on the menu. Perhaps those comments on top of
a less than great economy were more than investors could bear.
Whatever the ultimate reason the market went ahead and broke lower. A hard
break lower. SP500, DJ30, SP400 all crashed through their 50 day MA's while
SOX, NASDAQ and RUTX dove to close at their 50 day MA's.
SP500 -53.49, -2.45%
NASDAQ -133.57, -2.54%
DJ30 -394.46, -2.13%
VOLUME: NYSE +31%, NASDAQ +18%. Both exchanges sold on impressive jumps in
volume coming in well above average. Low volume advances can get dropped
like bags of dirt when the sellers show up.
A/D: NYSE -17:1. NASDAQ -6:1. One downside session and the downside
breadth is at an extreme level. -6:1 is extreme, -10:1 is typically market
turning. -17:1 is so bad it is almost meaningless, like getting blown out
in a basketball game by 50 points. Just forget about it and go on to the
next one. By itself the massively negative breadth doesn't mean a whole
lot. Just coming off new highs none of the other indicators are nearly that
VIX: +40%, but even that move took it just to 17.50.
New lows: Barely moving thus far given the indices at or near highs.
As you can see, the indicators are a mixed bag with some massively negative,
others not. Until they all line up together they mean little individually.
Not a lot of magic or mystery to this move. The market was still producing
up and coming leadership as noted last weekend, leadership turning the
corner after long downtrends. Many of those are actually still in good
shape even after Friday.
The gutting occurred in the big names and in the stocks that have already
enjoyed the biggest runs. GOOG, AMZN, AAPL, MMM, UTX, HD, NVDA -- stocks
that hit or nearly hit new highs getting turned over.
The question is going to be how far they fall, whether this is the start of
the feared plunge or just a violent shakeout in an otherwise continuing move
Given the virulence of the decline, even if it was on a Friday and a lot of
strange moves occur on Fridays, you have to give the move its due. For us
that means not assuming it is just a drop in a trend higher but the start of
some selling whose end is uncertain. The breaks were violent enough to put
the uptrends in question.
Thus we closed many positions that were not holding their trends. More than
a few held and we let them work; after Friday bombs if the move was just an
overreaction you can get a rebound early week to at least get a better exit
point. Outside of that, we don't want to count on Friday being a one-off
event. The strength of the drop has to be respected.
We were fortunate enough to get to take some gain, banking a nice profit on
STX as it jumped early, taking some solid downside gain on the AVGO
position. Wish we had taken more from other positions earlier in the week
but the trend was working well. Closed many positions with trailing stops
and managed to open some downside positions.
So we manage the remaining upside to see if they continue their trends and
patterns, if not we see if we can get good exit points. Any bounce that
fails is a better exit point and also a better entry point for downside
Again, with the force of the selling you have to respect the downside. We
were already somewhat defensive in that we were not letting upside plays
stray far before we closed them and we were moving into some downside
positions. Wish we had done more as noted above, but the shift was underway.
For now we are looking for downside opportunity and limiting damage
regarding upside positions.
Sharp breaks through near support with 2+% to 3+% losses on the indices.
The NYSE large caps and midcaps blew up the 50 day MA's, the small caps,
NASDAQ and SOX fell to those levels.
SP500: Gave up its 50 day MA's early session, gave up the July/September
trading range, gave up the 2015 prior all-time high. Just over some support
at 2120-2100, but with this kind of drop it is more of seeing where it
finally shows some support.
DJ30: Diving below the 2 month trading range and giving up the 2015 prior
all-time high, already at the mid-April high.
SP400: Gapped lower, broke the 50 day MA's, undercut the late July low,
landing on the early June high. Nice uptrend flipped in a session.
NASDAQ: NASDAQ gapped upside to start August on its way to higher highs.
After hitting a higher high Wednesday, Friday NASDAQ gapped lower and sold
through the early August upside gap. As with the other large cap indices,
NASDAQ broke below its new high range all in one move. Closed just below
the 50 day MA's. A little better positioning than the other large cap
indices, but no less virulent a selloff.
RUTX: From a higher recovery high to right back to where the move of the
last 5 weeks started from. That puts RUTX at the 50 day EMA that are
coincident with the bottom of the summer 2015 range that holds RUTX'
SOX: Gapped through the 20 day EMA and sold to just above the 50 day EMA.
Of all the indices, a more 'normal' looking drop to a key support level.
Big Names: FB folded off of the strong move through Wednesday. AAPL, already
heading lower, broke the 50 day MA's. AMZN gapped and sold to the late
August lows, still holding over the 50 day MA's. NFLX fell hard away from
the 200 day SMA test. GOOG gapped and sold to the 50 day EMA. Not good.
Chips: Not all carnage. MRVL sold to the 20 day EMA, recovering to hold
it. MU is holding the 10 day EMA. Others are not as well off. AMD undercut
the 50 day MA's. XLNX is selling back toward the 50 day from its high.
Ditto SLAB. AVGO dove below the 50 day MA's, landing us a nice gain.
Financial: Even as interest rates jumped higher the financials struggled,
victims of the strong overall market decline. C gapped and faded but still
holds over the 20 day EMA. JPM is testing its 20 day EMA. GS surged then
reversed to the 10 day EMA. Struggled but fared better than most.
Oil: Oil gave back part of its big Thursday move, but held well enough.
CWEI did the same. APC gave back just a bit while APA put in a gain. AXAS
is testing a great move higher. WMB lost just a bit of ground. Others are
not so pretty, e.g. PTEN.
Industrial equipment: Started breaking down. CAT, TEX were fine but put in
strong breaks lower. CMI tested and is heading lower.
Stats: -133.57 points (-2.54%) to close at 5125.91
Volume: 2.135B (+17.9%)
Up Volume: 195.16M (-596.07M)
Down Volume: 2.01B (+990M)
A/D and Hi/Lo: Decliners led 5.98 to 1
Previous Session: Decliners led 1.02 to 1
New Highs: 45 (-106)
New Lows: 47 (+14)
Stats: -53.49 points (-2.45%) to close at 2127.81
NYSE Volume: 1.1B (+31.06%)
A/D and Hi/Lo: Decliners led 17.16 to 1
Previous Session: Decliners led 1.2 to 1
New Highs: 68 (-165)
New Lows: 24 (+15)
Stats: -394.46 points (-2.13%) to close at 18085.45
VIX: 17.5; +17.5. VIX jumps 40% but is still only at 17. 30 starts getting
interesting, 40+ is more important when considering a recovery.
VXN: 17.96; +17.96
VXO: 17.36; +17.36
Put/Call Ratio (CBOE): 1.18; +1.18
Six 1.0+ Readings in 3 weeks. Likely still several more of these to come.
Bulls and Bears: Bulls are backing off nicely without hitting near 60 and
bears are climbing. Not bad action for the rally to continue.
Bulls: 52.5 versus 55.9
Bears: 22.8 versus 20.6
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 55.9
55.9 versus 56.7 versus 56.2 versus 54.3 versus 52.9% versus 53.9% versus
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: 22.8 versus 20.6
20.6 Versus 20.2 versus 20.0 versus 20.9% versus 21.2% versus 21.6% versus
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%
Bonds (10 year): 1.67% versus 1.61%. After selling through the 50 day EMA
Thursday, TLT gapped sharply lower and through the late June upside gap.
Bonds broke this past week.
Historical: 1.61% versus 1.53% versus 1.54% versus 1.601% versus 1.57%
versus 1.58% versus 1.57% versus 1.57% versus 1.62% versus 1.58% versus
1.56% versus 1.54% versus 1.58% versus 1.53% versus 1.55% versus 1.57%
versus 1.558% versus 1.51% versus 1.56% versus 1.51% versus 1.54% versus
1.59% versus 1.585% versus 1.503% versus 1.54% versus 1.558% versus 1.51%
versus 1.46% versus 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%
EUR/USD: 1.12318 versus 1.12661
Historical: 1.12661 versus 1.1239 versus 1.12554 versus 1.11545 versus
1.11943 versus 1.11572 versus 1.1146 versus 1.11708 versus 1.11949 versus
1.12894 versus 1.1300 versus 1.13045 versus 1.3254 versus 1.13251 versus
1.1342 versus 1.13036 versus 1.12773 versus 1.11824 versus 1.11636 versus
1.11372 versus 1.11803 versus 1.1115 versus 1.1080 versus 1.10882 versus
1.1130 versus 1.1148 versus 1.1219 versus 1.1164 versus 1.1173 versus
USD/JPY: 102.685 versus 102.439. After a massive Tuesday drop, the dollar
recovered lost ground back up to the 50 day MA's, but that still keeps it in
the downtrend channel.
Historical: 102.439 versus 102.439 versus 101.698 versus 101.412 versus
103.92 versus 103.226 versus 103.269 versus 102.965 versus 102.160 versus
101.808 versus 100.485 versus 100.306 versus 100.27 versus 100.297 versus
100.21 versus 99.843 versus 100.529 versus 100.953 versus 101.308 versus
101.864 versus 101.23 versus 101.857 versus 102.356 versus 101.832 versus
101.178 versus 101.256 versus 101.09 versus 102.599 versus 102.045 versus
104.679 versus 105.98 versus 104.731 versus 105.76 versus 106.05
Oil: 45.99, -1.74. Big recovery Tuesday through Thursday. Friday oil
tested that move, coming back to close just over the 50 day SMA.
Gold: 1334.90, -7.10. Big move through Tuesday then fading much of that
move Wednesday to Friday. Hanging in at some support . . . for now. If the
Fed hikes and if the ECB does not expand its QE, gold loses some of its
As noted in the Market Overview, you have to respect the power of the
downside. Even if there is a reflex bounce early next week it has to show
it can hold in the face of that selling.
For now we are using a bounce to let upside plays holding their trends
continue working, hopefully to take some gain. Others that are more
problematic we use a bounce to close.
For new positions, of course we will look at some upside as there are some
still very good patterns and on the circumstance the market shakes off this
downside day and continues back to trending higher. Downside of course is
very important, but we would prefer a rebound to set up better entry points
versus where the closed Friday. Some are not oversold and can be entered
on further selling, but overall, a little bounce is a better setup to enter.
Watching leadership groups offers clues, e.g. chips, financial, oil, Chinese
stocks. A market has to have leadership to move higher, and if more of the
leadership groups reverse trends or break patterns then the upside's chance
of reasserting itself diminish.
Again, you have to respect the sharp selling, and use the moves next week to
set up for the next move.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5125.91
The 50 day EMA at 5138
5162 is the early November peak, 5176 is the December intraday peak
5231.94 is the 2015 all-time high
5271.36 is the August 2016 intraday all-time high
5100 from the April peak and early May peak
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
4920 is the lower gap point from mid-October 2015, the January 2016 lower
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 4874
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
4574 is the June 2015 low
4517-4506 from the September 2015 and August 2015 closing lows
4485 are the twin July 2014 peaks
S&P 500: Closed at 2127.81
2130 is the June 2015 peak
2135 is the May 2015 all-time high
The 50 day EMA at 2157
2175 is the June 2016 high
2194 is the August 2016 all-time high
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
2062 is the January 2015 lower high
The 200 day SMA at 2057
2046 is the July 2015 closing low
2040 is the March 2015 closing low
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
Dow: Closed at 18,089.69
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,168 is the April 2016 recovery high
18,247 is the August 2016 low
18,288 from March 2015
The 50 day EMA at 18,345
18,351 is the all-time high from May 2015
18,595 is the July 2016 peak
18,669 is the August 2016 all-time high
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 17,566
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
September 9 - Friday
Wholesale Inventories, July (10:00): 0.0% actual versus 0.0% expected, 0.3%
prior (no revisions)
September 13 - Tuesday
Treasury Budget, August (14:00): -$64.4B prior
September 14 - Wednesday
MBA Mortgage Index, 09/10 (7:00): 0.9% prior
Export Prices ex-ag., August (8:30): 0.3% prior
Import Prices ex-oil, August (8:30): 0.3% prior
Crude Inventories, 09/10 (10:30): -14.513M prior
September 15 - Thursday
Initial Claims, 09/10 (8:30): 263K expected, 259K prior
Continuing Claims, 09/03 (8:30): 2144K prior
Retail Sales, August (8:30): -0.1% expected, 0.0% prior
Retail Sales ex-auto, August (8:30): 0.3% expected, -0.3% prior
PPI, August (8:30): 0.1% expected, -0.4% prior
Core PPI, August (8:30): 0.1% expected, -0.3% prior
Philadelphia Fed, September (8:30): 0.0 expected, 2.0 prior
Current Account Balance, Q2 (8:30): -$122.8B expected, -$124.7B prior
Empire Manufacturing, September (8:30): 0.0 expected, -4.2 prior
Industrial Production, August (9:15): -0.3% expected, 0.7% prior
Capacity Utilization, August (9:15): 75.7% expected, 75.9% prior
Business Inventories, July (10:00): 0.1% expected, 0.2% prior
Natural Gas Inventor, 09/10 (10:30): 36 bcf prior
September 16 - Friday
CPI, August (8:30): 0.1% expected, 0.0% prior
Core CPI, August (8:30): 0.2% expected, 0.1% prior
Mich Sentiment, September (10:00): 91.5 expected, 89.8 prior
Net Long-Term TIC Fl, July (16:00): -$3.6B prior
End part 1 of 3
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