Sunday, January 08, 2017

The Daily, Part 1 of 3, 1-6-17

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1/6/2017 Investment House Daily
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- SP500, NASDAQ move to new highs, but low trade and very narrow leadership.
- DJ30 fails at 20K again, no cigar, but a lot of volume, suggesting churn.
- Jobs Report heralded just as it is every month, but the facts show a
different story than the headlines.
- Great patterns are still abundant.
- With bullishness over 60% the rally now has a governor on it, but there
are many great setups that can provide another playable upside move before
that takes hold.

And still no Dow 20K. 0.37 points separated D30 from that 'magical' level.
Traders and bigwigs were on the NYSE floor, Dow 20,000 hats in hand, but . .
. no cigar.

After a week that small and midcaps put in great moves Wednesday, assuming
the lead in what looked to be a January Effect move, they faded to end the
week, failing to put in a new high. DJ30 put in a new high, it just could
not hold it. SOX is still down at the 20 day EMA as it puts in an important
test of prior gains.

While the small and midcaps slipped modestly from the prior highs to end the
week, NASDAQ and SP500, led by the FAANG stocks, moved to new all-time
highs. So, you have some large cap indices moving to new highs but on very
narrow breadth, unlike Wednesday that saw advance/decline readings of better
than 5:1. Thus, you had some new highs, but that was somewhat of a hollow
victory for the week.

SP500 7.98, 0.35%
NASDAQ 33.12, 0.60%
DJ30 64.51, 0.32%
SP400 -0.08%
RUTX -0.34%
SOX 0.77%

VOLUME: NYSE -15%, NASDAQ -1%. After average-ish volume on the first week
of the new year, trade fell below average. Definitely not a surge in buying
to start the new year, and SP500 and NASDAQ hit new highs on really light
volume. Unlike the Russian Hacking Intelligence Report, that does not give
the move 'high confidence.'

A/D: NYSE -1.1:1, NASDAQ -1.2:1. Negative breadth on the session shows the
thinness of the NASDAQ and SP500 gains.

Thus ended the first week of 2017. Many view this as a positive omen for
the market, but frankly I put little stock in the January indicator. Last
year January was a bloodbath but the market ended higher. Okay, a lot of
that was due to the post-election rally, because without it, the horrific
start to the year would have left the indices flat despite rallying from
February to October.

In any event, the past week showed the minimal in terms of new money
entering the market. There are plenty of great stocks in great patterns in
energy, financial, transports, telecom, metals. There are others trying to
turn back up such as some biotechs, drugs. The question the market has to
answer is whether new money is going to enter to drive these good patterns
to breakouts or otherwise solid upside moves.

As such we have some nice new plays in sectors that would be considered
candidates for new money in a new year, as well as plays on stocks that have
made some good moves but have consolidated and set up the foundation for a
new good move.

At the same time we let our current positions work as long as they do, but
we are also closing positions that show questionable action, preferring to
hold onto some gain versus risking bigger drops in a market that is less
than sure about its next moves.


The Final Obama Jobs Report

In 8 years $10T has been added to the debt to increase the number of people
out of the workforce by 18% to 95.1M and produce the worst recovery in

Not one year of 3% growth, part of the only streak of 10 years of no 3%
annual GDP growth since the Great Depression. An average of 2.1% yearly
growth for 8 years, an all-time low.

The Administration touts the creation of millions of jobs, but as we have
chronicled for the duration, those jobs are by far and away low pay, hourly
jobs. Indeed, thanks to regulations such as the ACA, the Administration has
encouraged the creation of part-time, temporary, and contract jobs and that
is exactly what has happened. I penned the query many times: are millions
of part-time and low-pay jobs that require a person to work 2 or 3 jobs an
equitable trade for what used to be full-time breadwinner jobs where one job
could support and provide a future for a family? Of course not, and you
have to wonder if November was in large part about that result.

With the December report (156K jobs) the final tally for 2016 is 180K jobs
per month. Hardly banner and indeed the lowest since and well off the pace
from 2011, and that was not a barnburner.

The December details:

Unemployment rate: 4.7% vs 4.7% expected versus 4.6% November

Participation: 62.7% versus 62.8%

Number out of workforce: +18K to 95.1M (+841K in Q4), an all-time high.
For Obama's term that number has risen 18%. A great jobs recovery we are
told in what are, to borrow the parlance of the day, 'fake news' stories.

Average Hourly Earnings: +0.39% to 2.9% year/year, a 7 year high.

Average Workweek: 34.3 versus 34.4 expected versus 34.3 prior (revised from

The earnings are heralded, but as with each monthly jobs report the past 8
years, the headlines deceive you.

First, how do you get declining average workweeks, chronically weak the
entire recovery, and rising wages? Typically employers work employees to
the max, increasing the average workweek more and more until employees are
ready to quit, then the wages rise as the employers have to give wages or
lose workers to other employers. That is not the case right now.

Second, look at the causes of a wage rise. The workweek is not rising, but
in several states and localities, employers are forced to raise wages due to
higher minimum wage requirements, thus required to pay more than the
skillsets of the workers would draw in a free market. Rising wages by
government fiat. As Amazon is already showing, the shift to robotics can be
quick if the economics favor it.

Third, just where are the higher wages going? Production workers and
non-supervisory workers, 82.3% of the workforce have seen gains of 2.5%
annually, basically unchanged since 2014. This after annual gains of 4%
leading into the recession starting in 2007. Thus, for the vast majority of
workers, wages are growing just barely ahead of even the government reported
inflation that we know is not the real world inflation rate because they
take out some of the major components that the average citizen CANNOT

What about the other 17.7% of the workforce? Those are the supervisors and
management. They have enjoyed 4.7% gains in December ALONE!

Thus, even the wage gains are overstated, because just as everything else in
this economy where we were told that the policies were designed to help the
middle class, it has actually CRUSHED the middle class while the very high
end were greatly rewarded. Indeed, as I have often wrote, in the past few
years the middle class, for the first time since it became the majority
decades and decades ago, is no longer the majority of US citizens.

You can read all the headlines you want and fool yourself how great this
past 10 years has been for the economy, but if you look at the facts they
are lousy. You can compare to all of the prior recessions and recoveries
and they are the worst. Even without that comparison, however, when you
have the middle class fall from majority to minority that speaks for itself.
When a worker is forced to work 2 or 3 jobs and not even make the same
income has he or she did with 1 job before losing that job, that speaks for
itself. When you have an 8 year run to new highs in the stock market and
the middle class collapses you know the policies did not benefit them.
Great economy? Great recovery? Hogwash.


New highs on NASDAQ and SP500, but no volume. DJ30 on the other hand showed
big volume but could not punch higher. Neither of these are good


NASDAQ: After a questionable end to 2016 that saw NASDAQ break the 2016 up
trendline, NASDAQ posted an upside week that took it to a new all-time high
Friday. Volume jumped above average on Tuesday after the slow holiday
period, but after that session volume fell off and the Friday new high was
on the lowest trade of the week. Not a powerful move and indeed a very
narrow move as NASDAQ was driven by a very few large cap stocks.

SP500: A new all-time high here as well after a 4 week lateral move after a
new high in early December. Volume moved higher on the week but was never
back above average. Friday trade was the lowest of the week on the high --
not a good combination, not one that instills a lot of confidence the move
will hold. Very narrow move here as well.

DJ30: Hit a new all-time high intraday but did not hold it. Also missed
the 20K level again. Still in the four week lateral move. Unlike the other
indices, strong, above average volume each session. What does that mean?
Bumping up against 20K but every time it approached that level sell programs
kicked it, preventing the break. Going nowhere in the macro picture, the
high volume indicates churn, high volume selling that undermines attempts to
move higher after a rally. Thus time to be very observant as how the DJ30
leaders act.

SOX: Second week testing the new high hit late December. Holding the 20
day EMA for four sessions. A good test thus far but SOX has rallied well
and MACD did not breakout on the last high. As with the other indices,
showing a bit of lethargy after a good rally. Can still make the move,

SP400: Big move Wednesday to test the early December high, but could not
push through as money shifted to the large caps to end the week. Closed at
the 10 day EMA with a doji on Friday, leaving it in very good position

RUTX: Also a big Wednesday move that came just shy of a new high, followed
by a fall Thursday and Friday. Holding the range. Money was moving into
the small caps, as it should this time of year, but then stalled. It will
have to show more money coming its way this week.


Semiconductors: In the pullback phase. NVDA, XLNX holding near support,
trying to hold and set up a new move. INTC is still in a great pattern and
indeed many chips remain in good position to rally. After a lot of good and
long moves, they have to show they can hold and make the move.

Financial: GS looked good Friday, starting to break higher. The other big
names, e.g. C, BAC, JPM struggled in their continuing lateral 3 to 4 week

FAANG: Solid week. NFLX led the move, never really selling hard. Then FB,
AMZN, GOOG moved as well. GOOG had a pretty good setup. Some other big
NASDAQ stocks moved as well, e.g. MSFT, but not nearly showing the strength
of the FAANG stocks.

Oil: Still solid as oil struggled some but finished the week stronger. APC
is holding its range. PKD, PDS had very respectable weeks, moving back up
off tests. HAL hit a higher high. NE surged on the week. GST, BTE, SDLP,
DNR remain in very good setups.

Transports: Rails are starting to bounce with CSX in the lead. Truckers
are still solid though not moving higher yet, e.g. JBHT, SAIA, ODFL.
Airlines are in a similar way, e.g. DAL, AAL.

Metals: Not a bad week. FCX broke nicely higher. AKS holding its lateral
move. RS testing the 50 day EMA.

Biotech/Drugs: AMGN gapped higher Friday. BIIB is in a decent pattern.
KERX looks solid. IMGN, IMMU, SRPT, CORT -- many look solid.


Stats: +33.12 points (+0.6%) to close at 5521.06
Volume: 1.889B (-0.68%)

Up Volume: 995.63M (+125.16M)
Down Volume: 677.69M (-192.1M)

A/D and Hi/Lo: Decliners led 1.2 to 1
Previous Session: Decliners led 1.44 to 1

New Highs: 102 (-20)
New Lows: 21 (+3)

Stats: +7.98 points (+0.35%) to close at 2276.98
NYSE Volume: 769.4M (-14.51%)

A/D and Hi/Lo: Decliners led 1.11 to 1
Previous Session: Decliners led 1.24 to 1

New Highs: 108 (-91)
New Lows: 20 (+6)

Stats: +64.51 points (+0.32%) to close at 19963.8


VIX: 11.32; -0.35
VXN: 13.85; -0.78
VXO: 11.05; +0.05

Put/Call Ratio (CBOE): 0.97; -0.19

Slipped from 1.0+, but still holding at a higher level, still showing funds
are buying protection.

Bulls and Bears: After holding at 59.8, bulls jumped over 60 the past week,
moving over that level considered indicative of coming peaks in rallies.
Bears declined as they should have.

Bulls: 60.2 versus 59.8

Bears: 18.4 versus 19.6

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: 60.2 versus 59.8
59.8 versus 59.8 versus 59.6 versus 58.8 versus 56.3 versus 55.6 versus 51.0
versus 42.9 versus 41.7 versus 47.1 versus 42.9 versus 46.1 versus 46.7
versus 45.2 versus 44.6 versus 49.0 versus 52.5 versus 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

Bears: 19.4 versus 19.6
19.6 versus 19.6 versus 19.2 versus 19.6 versus 22.3 versus 21.6 versus 23.5
versus 25.7 versus 24.3 versus 23.1 versus 23.8 versus 23.1 versus 22.8
versus 23.1 versus 24.3 versus 22.6 versus 22.8 versus 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%


Bonds (10 year): 2.42% versus 2.357%. After surging to the 50 day MA's, TLT
faded to test and we will see if it can make the break higher after testing
the initial move.

Historical: 2.357% versus 2.45% versus 2.448% versus 2.42% versus 2.48%
versus 2.51% versus 2.56% versus 2.54% versus 2.55% versus 2.54% versus
2.564% versus 2.544% versus 2.59% versus 2.59% versus 2.52% versus 2.473%
versus 2.475% versus 2.471% versus 2.40% versus 2.349% versus 2.39% versus
2.396% versus 2.394% versus 2.454% versus 2.388% versus 2.30% versus 2.31%.
versus 2.36% versus 2.355% versus 2.317% versus 2.30% versus 2.34% versus
2.297% versus 2.219% versus 2.22% versus 2.23% versus 2.14% versus 2.077%
versus 1.867% versus 1.83% versus 1.778% versus 1.81% versus 1.797% versus
1.827% versus 1.83% versus 1.85% versus 1.84% versus 1.791%

EUR/USD: 1.05346 versus 1.05837. After surging to the 50 day EMA Thursday,
the euro backed off Friday. This is where it failed in early December.

Historical: 105837 versus 1.0525 versus 1.03914 versus 1.05289 versus
1.05155 versus 1.04357 versus 1.04636 versus 1.0451 versus 1.04368 versus
1.04412 versus 1.0392 versus 1.0407 versus 1.0459 versus 1.0415 versus
1.05094 versus 1.0636 versus 1.06326 versus 1.05586 versus 1.06140 versus
1.07745 versus 1.07194 versus 1.07614 versus 1.06638 versus 1.06631 versus
1.0601 versus 1.0649 versus 1.05699 versus 1.066 versus 1.05910 versus
1.05519 versus 1.0672 versus 1.06265 versus 1.0587 versus 1.0650 versus
1.07026 versus 1.0725 versus 1.07492 versus 1.0858 versus 1.08898 versus
1.09398 versus 1.10186 versus 1.10327 versus 1.11406 versus 1.11059 versus
1.11020 versus 1.10560 versus 1.09646 versus 1.09860 versus 1.08963 versus
1.0895 versus 1.08793

USD/JPY: 116.923 versus 115.93. Faded on the week but rebounded Friday to
the 10 day EMA.

Historical: 115.93 versus 116.46 versus 117.983 versus 116.739 versus
116.456 versus 116.793 versus 117.41 versus 117.413 versus 117.32 versus
117.537 versus 117.544 versus 117.835 versus 117.453 versus 117.941 versus
118.257 versus 117.397 versus 115.038 versus 115.058 versus 115.20 versus
114.23 versus 113.325 versus 113.993 versus 113.601 versus 113.52 versus
113.945 versus 114.19 versus 112.685 versus 112.44 versus 111.835 versus
113.14 versus 112.445 versus 111.129 versus 110.809 versus 110.905 versus
110.240 versus 109.07 versus 108.164 versus 107.455 versus 106.621 versus
106.814 versus 105.192 versus 101.286 versus 104.386 versus 103.112 versus
102.96 versus 103.350 versus 104.042 versus 104.798 versus 104.710 versus
105.305 versus 104.412 versus 104.2110 versus 104.331 versus 103.83 versus
103.99 versus 103.99

Oil: 53.99, +0.23. Back up to the recent closing highs post-breakout.
Struggling to get through 54.50.

Gold: 1173.40, -7.90. Rallied up near the 50 day MA's Thursday, took a day
off Friday.


Second week of 2017. The first week saw some good moves in small and
midcaps give way to a narrow break higher by some select large caps Friday.
You would expect the smaller caps to fare better as big funds buy them in a
January Effect move, so this week and how they perform will be instructive
as to the market's continued efforts to rally.

Other items to watch as noted earlier. NASDAQ and SP500 put in new highs on
low volume and failing MACD. DJ30 failed to break 20K, but more importantly
it moved laterally just below that level on very high volume, suggesting
that sellers were very active, selling each time DJ30 tried to take out 20K.
That churn is an indication of money moving out of the market and can spell
the end of a rally. Overlay bullish advisor sentiment over 60 and you have
to be careful and watch how the leaders hold up.

There are still many good setups in the market in many sectors. We have
some very good plays that are in great position to move, including some
China stocks that are now moving well.

With the sentiment over 60, you have to proceed under the assumption that
the rally is now in its end game before a deeper correction. It can still
put in a further rally and it has the setups to do so. We will play good
moves as long as they show up and good runs continue. When breaks higher
quickly roll and fail, and when good rallies break trend, then you know the
move is out of gas.

Moving forward we will have to see if the money comes in on the buy side and
can rally the indices to higher highs on strong volume versus the anemic
trade shown last week. Good setups need to yield good upside moves and
produce broad index moves. Oh, not that difficult, right?

Have a great weekend!


NASDAQ: Closed at 5521.06


The 2016 trendline at 5440
The November prior all-time high at 5404
The 50 day EMA at 5371
5340 is the September and October 2016 twin peaks
The 50 day SMA at 5338
5287.61 is the September 2016 high
5271.36 is the August 2016 intraday prior all-time high
5231.94 is the 2015 all-time high
5170 is the October intraday low.
5162 is the early November peak, 5176 is the December intraday peak
The 200 day SMA at 5107
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
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

S&P 500: Closed at 2276.98

2277.53 is the December 2016 high

The 2016 trendline at 2247
The November 2016 all-time high at 2213.25
The 50 day EMA at 2220
The 50 day SMA at 2205
2194 is the August 2016 prior all-time high
2175 is the June 2016 high
The 200 day SMA at 2141
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 September 2016 low; 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
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 19,963.80

10,987.53 is the December 2016 high

The 20 day EMA 19,764
The 50 day EMA at 19,336
The 50 day SMA at 19,179
18,669 is the August 2016 all-time high
18,595 is the July 2016 peak
18,351 is the prior all-time high from May 2015
The 200 day SMA at 18,345
18,288 from March 2015
18,262 is the upper gap point from the Monday gap lower.
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
17,992 is the early September low
17,978 is the November 2015 peak
17,960 is the October intraday low
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.


January 6 - Friday
Nonfarm Payrolls, December (8:30): 156K actual versus 175K expected, 204K
prior (revised from 178K)
Nonfarm Private Payr, December (8:30): 144K actual versus 170K expected,
198K prior (revised from 156K)
Unemployment Rate, December (8:30): 4.7% actual versus 4.7% expected, 4.6%
prior (no revisions)
Hourly Earnings, December (8:30): 0.4% actual versus 0.3% expected, -0.1%
prior (no revisions)
Average Workweek, December (8:30): 34.3 actual versus 34.4 expected, 34.3
prior (revised from 34.4)
Trade Balance, November (8:30): -$45.2B actual versus -$42.2B
expected, -$42.4B prior (revised from -$42.6B)
Factory Orders, November (10:00): -2.4% actual versus -2.1% expected, 2.8%
prior (revised from 2.7%)

January 9 - Monday
Consumer Credit, November (15:00): $18.0B expected, $16.0B prior

January 10 - Tuesday
JOLTS - Job Openings, November (10:00): 5.534M prior
Wholesale Inventorie, November (10:00): 0.9% expected, -0.4% prior

January 11 - Wednesday
MBA Mortgage Applica, 01/06 (7:00): 0.1% prior
Crude Inventories, 01/06 (10:30): -7.100M prior

January 12 - Thursday
Export Prices ex-ag., December (8:30): 0.2% prior
Import Prices ex-oil, December (8:30): -0.1% prior
Initial Claims, 01/07 (8:30): 255K expected, 235K prior
Continuing Claims, 12/31 (8:30): 2112K prior
Natural Gas Inventor, 01/07 (10:30): -49 bcf prior
Treasury Budget, December (14:00): -$14.4B prior

January 13 - Friday
PPI, December (8:30): 0.3% expected, 0.4% prior
Core PPI, December (8:30): 0.1% expected, 0.4% prior
Retail Sales, December (8:30): 0.7% expected, 0.1% prior
Retail Sales ex-auto, December (8:30): 0.6% expected, 0.2% prior
Business Inventories, November (10:00): 0.6% expected, -0.2% prior
Mich Sentiment, January (10:00): 98.5 expected, 98.2 prior

End part 1 of 3
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