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9/3/2016 Investment House Daily
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Targets hit: None issued
Entry alerts: AAPL; WMB
Trailing stops: None issued
Stop alerts: None issued
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- A sad Labor Day: jobs report shows the secular weakening of the American
- A confused session: bonds sell, stocks rally, gold rallies as jobs miss.
- SP400 posts a strong break upside. Can it avoid the session-after
- Tons of data absorbed and the modest trend holds, but no guarantees.
After a couple of better months of job creation in terms of the headline
numbers, August reverted more to the mean with 151K jobs created. Of
course, the underlying data was worse than the headlines with some very
telling numbers in terms of wages and hours worked. Suffice it to say those
internal numbers were not great and quite frankly match the list of weaker
data from the week ranging from Chicago PMI, pending home sales, and the ISM
manufacturing report. These were quite bad, and all of the hopeful 'wait
until next year' calls for the 3rd and 4th quarters to show an economic
pickup just won't cut it.
With the jobs miss and weak internals, stock futures jumped in something of
a bad news is good news reaction. Stocks started higher, rallied at the
open, peaking a half hour into the session, at least in terms of the large
cap indices. A fade to early afternoon cut the gains but a rebound the last
two hours recovered some lost ground. The big cap indices didn't get back
to session highs but they put in respectable gains.
The real action was in RUTX and SP500. Same action as the large cap indices
except they didn't dip as far intraday, and their afternoon recovery took
them to new session highs and to new rally highs. Impressive moves. NASDAQ
gapped to a doji at the top of its August range while SOX gapped higher but
closed more or less flat.
SP500 9.12, 0.42%
NASDAQ 22.69, 0.43%
DJ30 72.66, 0.39%
VOLUME: NYSE -3%, NASDAQ -6.5%
A/D: NYSE 4:1, NASDAQ 2.25:1. Blistering breadth as the small and midcaps
jumped to higher rally highs, SP400 to a new all-time high.
Low rates benefit, in theory, smaller cap stocks. Money they need to grow
is easier to come by so that makes growth easier. Of course we know that
banks such as WFC and its CEO go on CNBC and tout how small business
friendly they are, but we also know they are full of beans. I know bankers
at WFC on a personal basis and they tell me they are not writing any loans
for small businesses. No need to.
So, the theories are great, but reality is not. In the end, it is anyone's
guess as to what drove stocks higher Friday. Bond yields rose even as the
market supposedly priced in less chance of a rate hike in September and
December (falling to 22% from 36% and to 55% from 59%, respectively).
Financials, sensitive to rates, faded even as rates moved higher. Small and
midcaps rallied even as higher rates imply loans are harder to come by.
As Lucilla told her brother the emperor in 'Gladiator,' the mob is fickle.
The mob is fickle, brother -- Lucilla, 'Gladiator' (2000)
The end result Friday is no change. RUTX and SP400 are taking a hand at
leading higher, but you know what the market has done to indices that dared
to break to higher highs: shot them right back down the next session.
Indeed, despite the jobs report and the 'bad news works because the Fed may
be on hold longer' mindset, the stock indices did not race in the chosen
direction. That leaves NASDAQ at the top of its four week range along with
SP500 and DJ30 toiling in their lateral moves as well.
Perhaps the children along with SOX are the ones to lead the big indices
higher. There are still very good leadership patterns in the market
overall. If so, Friday was a good step to get that move started, but again,
those indices have to survive the attacks on their success when next week
comes around. Suffice it to say that Friday, while a positive upside
development, did not eliminate the possibility that declining MACD and lower
volume on these gains is indicating a top in the large cap indices. The
market is still in the same situation of having to show it can make the
break higher and make it stick.
And we were told Q3 would be better: a bad week for economic data.
Chicago PMI, August: 51.5 versus 54.5 expected versus 55.8 June. Sharp
ISM Index, August: 49.4 versus 52.2 expected versus 52.6 prior. Falling
back to contraction.
Productivity, Q2 Revised: -0.6% versus -0.5% first reported. Third quarter
of negative productivity, something not seen in years.
Unit Labor Costs explode higher: 4.3% versus 2.1% expected versus 2.0%
Construction Spending, July: 0.0% versus 0.6% expected versus 0.9% June
Auto sales: Ford says the sales cycle has hit a plateau.
JOBS: disappoint after 2 stronger months as the sub-headings show the same
NON-FARM JOBS, August: 151K versus 180K expected versus 275K July (from
June revised to 271K from 292K.
UNEMPLOYMENT RATE: 4.9% versus 4.8% expected versus 4.9% July
AVERAGE HOURLY EARNINGS: 0.1% versus 0.2% versus 0.3% July.
Year/year: 1.5%. That rate of growth is the worst annual rate in 32 months
Many states raised and are raising the minimum wage, but they are
eliminating the really well paying jobs in the economy, and thus the average
rate earned is falling more than the rise in minimum wages.
AVERAGE WORKWEEK: 34.3 versus 34.5 expected versus 34.4 July (from 34.5)
BIG news here. How can the workweek be falling when jobs are created and
there is supposedly this insatiable demand for more workers? Several
First, we know the ACA (Affordable Care Act) is an hours worked destroyer.
It pressures employers to limit workers logging more than 29 hours per week.
If they work more they fall under the ACA's rules of providing insurance or
Second, the mandated increases in minimum wages in many states has the
perverse effect of raising wages but lowering the number of hours an
employee works. There is only a finite pool of money in a business. If
wages rise and nothing increases revenues to offset it, another area has to
suffer. Businesses are loath to lose profits because in this economy so
many are running on thin margins already. So, if required to raise the rate
paid per hour, a way to keep labor costs the same is to lower the number of
We reported this was happening at SBUX as employees are finding their work
hours reduced as SBUX implements higher wages. It is happening elsewhere as
the data shows, but SBUX is so interesting because it has championed higher
minimum wages, even implementing them itself without a government mandate.
Yet, it too must play by the same laws of economics every business
experiences (outside of the monopolies that our government still lets occur
today despite its claims otherwise). Thus instead of cutting Mr. Shultz'
take home, they are simply reducing hours worked and becoming more efficient
with a leaner staff. As purely anecdotal evidence, I have personally heard
workers complain about not having enough staff on to properly run stores.
Texas, California, Colorado -- the complaint heard is the same.
PARTICIPATION RATE: 62.8% versus 62.8% July
Not in the workforce: +58,000 to 94.39M
Household Survey jobs created: 97K.
WHERE THE JOBS ARE: Same old story, just worse.
Leisure and Hospitality: +29K
Food and Beverage Service: +34K
Professional/Business Services: +20K
Temporary: -3K (heralded in July as showing a turn was in progress)
Since 2014: +520,000 waiters and bartenders, -13,000 manufacturing workers
There are now 9.93M more government workers than manufacturing workers in
the US (22.21M versus 12.28M).
The US employment decline continues. Sure there are respites from the fade
as in June and July, but even those months, as I showed when the reports
were issued, did not show an increase in the number of breadwinner jobs.
The US labor force has morphed, under the restrictions from regulations and
taxes, into one geared to create low wage service jobs that service other
low wage workers. The US simply does not have the level of capital
investment needed to create the new industries and technologies that drive
higher wages and higher standards of living.
Moreover, even when there are good jobs, the industry titans such as
Facebook's Zuckerburg, MSFT's Gates, AAPL's Tim Cook clamor for the
importation of more and more STEM degree graduates from other countries
using the US Visa system. They claim there are no US trained graduates to
do these jobs, but that is simply incorrect. Tens upon tens upon tens of
thousands of US degreed grads in the STEM fields (Science, Technology,
Engineering, Mathematics) are in the US and unemployed. The industry
leaders simply want to hire CHEAPER labor from overseas versus those trained
Quite the irony is it not? Our leaders feel that such educations are so
important they are shoving more and more free money into education every
year to get more into college. That result? Higher college costs through
inflation for one. Second, we have thousands of ready, willing, and able
grads, but our leaders then allow thousands of foreign workers in to
undercut them in salaries.
This is another election when fundamental change is necessary. If it does
not occur, if we do not get back to unshackling smaller business to be the
innovators and job creators they have been for over 200 years, then the
changes in the labor market wrought over the past 20 years will become
permanent until there is collapse and rebuilding.
SP400: Have to lead with the midcaps because they rallied well and punched
out a new all-time high. Nice gap and rally to close at the high and a new
all-time high. MACD is trying to cross back through itself and turn upside.
A solid move. Just as 7/29 was a solid break to a new high that was
immediately sold. Just as 8/15 was a solid new high that was also
immediately thrown back. Just as 8/23 was a solid gap upside that was
reversed the next session. Don't get me wrong; SP400 is still trending
higher, it just cannot seem to put together a several session rally.
RUTX: Similar session to SP400 though the small caps did not put in an
all-time high, just a new rally high. This after an eight session lateral
move at the 10 day EMA. A nice session Friday, but no definitive breakout.
As with SP400, the Russell has its share of new rally high reversals that
met a solid upside session with a day of selling. For now, however, RUTX
keeps finding the buyers.
SOX: The clear market leader got a bit tired last week though it certainly
looks somewhat rejuvenated Thursday as it broke higher off the 10 day EMA to
a new post-2000 high. Friday a gap higher but could not hold it as SOX was
the only index to close negative. Nonetheless, a solid trend up the 10 day
EMA continued for a fifth week. Perhaps a bit extended, but many chips are
still in very good upside patterns.
NASDAQ: Gapped to a tight doji of its own at the top of the four week flat
lateral range. A bit better volume Tuesday to Thursday as NASDAQ tested the
20 day EMA with doji. Big names still look as if they can support a break
higher, and the increased volume on that test of near support is not a bad
SP500: Gapped over the 10 and 20 day EMA but still below the August highs
in the most recent lateral move a 4 week flat range. Trying to stretch this
lateral move sideways and set up a new move. MACD continues to slide lower
as momentum is low. A lateral move sets up a better upside chance.
DJ30: Gapped to a doji at the 10 and 20 day EMA. Trying to put in a higher
low at the 50 day MA's from last week. Not bad action, but DJ30 is in the
same position with its own declining MACD and trying to stretch the move
laterally, put in a solid bounce and break up that July/August double top.
Big Name NASDAQ: AAPL gapped above the 10 and 20 day EMA on rising trade.
Gapped close to a higher high then faded for a modest gain. Edging higher
but needs to show the breakout. FB gapped, faded some, held some of the
gain. NFLX continued its tight, flat move along the 10 day EMA. Gapped
over the 10 and 20 day EMA, no volume. Still a good pattern. SBUX is still
struggling after failing at the 200 day SMA.
Financial: Modest gains after losing some ground Thursday. Upside for the
week, however, and a bit of a pause here is not bad with still good
patterns, e.g. JPM working laterally over the 10 day EMA, GS and C doing the
Chips: Mostly another good week. Stocks such as MRVL, RMBS surged nicely.
Others moved higher though not a blast off: MCHP, AMAT, NPTN. Others are
setting up interesting possibilities, e.g. ON, NVDA.
Retail: Got a bit shaky into midweek but recovered nicely. JWN is still
working a good pattern as is KSS. M, DDS, however, sold much farther. Some
of the apparel makers were sold. LULU hammered, DECK down to the 50 day MA,
UA breaking below the 200 day SMA and selling on volume. FL still looks
great to make a move form a great setup.
Restaurants: Still some improving patterns but work to do for most. BWLD
looks good. PNRA working on it. CAKE could set something up out of this
pattern. EAT still in a nice 3 week flag test.
Software: ROVI jumped nicely off a test of the 20 day EMA into Thursday.
BLKB not bad at all, forming an inverted head and shoulders the past two
months, breaking higher. RHT gapped to the 50 day MA's on the high.
China stocks: BIDU gapped over the 200 day SMA to a doji. SOHU in a nice
test of the initial surge; adjusting the buy point to get in if we can.
SINA continues running upside.
Stats: +22.69 points (+0.43%) to close at 5249.9
Volume: 1.462B (-6.5%)
Up Volume: 999.47M (+91.66M)
Down Volume: 448.48M (-202.5M)
A/D and Hi/Lo: Advancers led 2.24 to 1
Previous Session: Advancers led 1.14 to 1
New Highs: 180 (+67)
New Lows: 25 (-9)
Stats: +9.12 points (+0.42%) to close at 2179.98
NYSE Volume: 803.2M (-3.03%)
A/D and Hi/Lo: Advancers led 4.04 to 1
Previous Session: Decliners led 1.1 to 1
New Highs: 219 (+102)
New Lows: 13 (-8)
Stats: +72.66 points (+0.39%) to close at 18491.96
VIX: 11.98; -1.5
VXN: 14.32; -1.07
VXO: 10.8; -1.55
Put/Call Ratio (CBOE): 0.96; -0.05. Busted over 1.0 a few times last
week, now 5 over 3 weeks. Getting better but typically takes a few more to
get a move going. That said, the indices are moving as RUTX, SP400 showed
Friday, SOX on Wednesday.
Bulls and Bears: The sideways move in the market pulled bulls back below 56
and pushed bears to 20.6 from 20.2. Not huge moves, just a pause in the leg
Bulls: 55.9 versus 56.7
Bears: 20.6 versus 20.2
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: 55.9 versus 56.7
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: 20.6 versus 20.2
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): 1.601% versus 1.57%. The pattern is tightening up a bit
as TLT still holds the lateral move over the 50 day EMA. Testing the 50 day
EMA late week, showing a doji at that level Friday. The TLT pattern still
shows a bullish setup consolidating the June to early July bond rally.
Historical: 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: 1.11545 versus 1.11943. Euro sold to the 50 day SMA then started
a bounce Thursday. Friday the EUR surged but then reversed to close back
below the 200 day SMA.
Historical: 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 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
USD/JPY: 103.92 versus 103.226. Dollar is on the recovery, up 5 of 7
sessions off the low. Broke through the 50 day MA's on the week, extended
the gain Friday. Pretty nifty double bottom off the June/July and August
Historical: 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: 44.44, +1.28. After a harsh Wednesday and Thursday broke oil below
the 50 day MA's. Rebounded Friday but nothing major.
Gold: 1326.70, +9.60. Rebounding off the early week selling. Held the
July low and is rebounding, making it back to the 50 day EMA on the Friday
close. This is an important move for gold to hold the more bullish pattern.
And even more data is now out. Jobs, ISM, Yellen/Fischer/Bullard at Jackson
Hole. GDP. Earnings.
The market has trended slightly higher on this data but over the past 7
weeks has not made a significant break higher on SP500, DJ30, 5 weeks on
NASDAQ. SP400 has trended slightly higher for 9 weeks then a good break
higher Friday. Maybe this is the charm. RUTX is similar, though a bit
better advance. SOX of course is the leader with a steady, albeit slow,
move up the 10 day EMA.
Yes the data is behind the market, again, but surviving the data dumps are
not enough. Something has to catalyze the buyers to take the still good
uptrends and send them higher.
Leadership remains solid enough and there are stocks that have put in good
moves that used some of the market lateral action to test and set up for
potential new moves. With leadership still in position to move that means
looking at more upside to take advantage of upside moves. Friday we picked
up some AAPL and WMB, adding to our buys into positions on BABY, HIMX, NPTN,
STX, VIP. Good stocks in good position and we are looking at some more this
Of course with the market still unable to make clean breaks higher and with
momentum waning, you have to also be ready in the event the upside runs out
of gas and rolls over.
Letting the upside run continue, ready if the move reverses. Friday was
decent enough with no major negatives on the jobs report, but there were no
major positives, at least across the entire market. As we have seen, doesn't
have to be in order for the moves to continue, but it is always nice to see
more power. Kind of like what our presidential candidates seek.
Have a great Labor Day holiday!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5249.90
5271.36 is the August 2016 intraday all-time high
5231.94 is the 2015 all-time high
5162 is the early November peak, 5176 is the December intraday peak
The 50 day EMA at 5121
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 4871
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 2179.98
2194 is the August 2016 all-time high
2175 is the June 2016 high
The 50 day EMA at 2155
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
2079 is the intraday all-time high from November 2014
2062 is the January 2015 lower high
The 200 day SMA at 2056
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 18,478.27
18,595 is the July 2016 peak
18,351 is the all-time high from May 2015
The 50 day EMA at 18,355
18,288 from March 2015
18,247 is the August 2016 low
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
17,600 is the rough bottom of the April to June range.
The 200 day SMA at 17,553
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 2 - Friday
Nonfarm Payrolls, August (8:30): 151K actual versus 180K expected, 275K
prior (revised from 255K)
Nonfarm Private Payrolls, August (8:30): 126K actual versus 175K expected,
225K prior (revised from 217K)
Unemployment Rate, August (8:30): 4.9% actual versus 4.8% expected, 4.9%
prior (no revisions)
Average Hourly Earnings, August (8:30): 0.1% actual versus 0.2% expected,
0.3% prior (no revisions)
Hourly Earnings, August (8:30): 0.3% prior
Average Workweek, August (8:30): 34.3 actual versus 34.5 expected, 34.4
prior (revised from 34.5)
Trade Balance, July (8:30): -$39.5B actual versus -$43.0B expected, -$44.7B
prior (revised from -$44.5B)
Factory Orders, July (10:00): 1.9% actual versus 2.0% expected, -1.8% prior
(revised from -1.5%)
September 6 - Tuesday
ISM Services, August (10:00): 54.7 expected, 55.5 prior
September 7 - Wednesday
MBA Mortgage Index, 09/03 (7:00): 2.8% prior
JOLTS - Job Openings, July (10:00): 5.624M prior
Crude Inventories, 09/03 (10:30): 2.276M prior
September 8 - Thursday
Initial Claims, 09/03 (8:30): 265K expected, 263K prior
Continuing Claims, 08/27 (8:30): 2159K prior
Natural Gas Inventor, 09/03 (10:30): 51 bcf prior
Crude Inventories, 09/03 (11:00): 2.276M prior
Consumer Credit, July (15:00): $16.0B expected, $12.3B prior
September 9 - Friday
Wholesale Inventories, July (10:00): 0.0% expected, 0.3% prior
End part 1 of 3
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