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7/8/2017 Investment House Daily
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The REPORT SCHEDULE is as follows:
Market Summary Video, Plays and Play Videos, and Play Table with play
annotations will issue Wednesday, Weekend.
Monday a Market Summary video, new plays, play table annotations.
Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play table.
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
- Friday rebound post-jobs, trying to stave off a serious tech, chip
selloff.
- Jobs headlines are better, the rest is all the same and will remain the
same without policy changes
- Better jobs headlines help the market rally as market needs good economics
to rally with the Fed hiking.
- Just a tech/chip bounce or rotation back to those areas? Still better
patterns in other groups, making this week a tell between the two.
A back and forth week ended on the upside with a jobs report that easily
topped expectations. With the FOMC in a tightening mode the best thing for
the stock market is stronger economic activity. The market needed some good
economic data given the recent data has proved less than solid; otherwise a
Fed hiking campaign is not good news for the rally. With a good enough jobs
report, the market responded with sharp upside.
Friday the action was not as bifurcated as the prior sessions for the week.
Other sessions on one day would show NASDAQ and SOX stronger when recent
leaders such as biotech, machinery, manufacturing, financial were weaker.
The next session was the flip. Friday, many sectors rallied. Still, the
focus was on tech, chips, and even FAANG as they were scooped up after being
rejected the prior month.
SP500, SP400, RUTX bounced off their tests near the 50 day MA, moving up off
of or back through the that level. Good responses to the dives lower
Thursday. DJ30 shows no wear and tear, holding at the 20 day EMA in rather
normal action as it moves up the near term moving averages.
NASDAQ and SOX rebounded as well, posting solid percentage moves. NASDAQ
recovered the 50 day EMA but could not take out the 50 day SMA. SOX gapped
and rallied to the 50 day SMA. It faded from there and indeed closed just
below the 50 day EMA.
Good responses to the back and forth action, particularly the very weak
action early week for SOX and the Thursday sharp selling on SP500, SP400,
and RUTX.
SP500 15.43, 0.64%
NASDAQ 63.62, 1.04%
DJ30 94.30, 0.44%
SP400 0.96%
RUTX 1.07%
SOX 1.72%
NASDAQ 100 1.05%
VOLUME: NYSE -16%, NASDAQ -14%. Despite the solid price surges Friday,
volume lagged. NYSE trade was lower and well, well below average. NASDAQ
volume was lower and also well below average. Despite the moves higher,
volume did not track with it. All buyers on the session but not more buyers
than the Thursday sellers. That is a telling aspect.
A/D: NYSE 2.2:1, NASDAQ 2.6:1. Breadth was decent but with 1+% moves on
NASDAQ to SOX to RUTX to almost SP400, this was puny breadth. Indeed, if
you compare NASDAQ to NASDAQ 100 you see virtually identical percentage
gains; in other words, NASDAQ moved higher thanks to its large caps stocks.
So, the internals were not great. Passable. Enough to support a recovery
and a new rally to higher highs? This current uptrend has seen its share of
less than inspiring recoveries off of sharp selloffs. At least this one had
strong price moves.
Nice price moves, weaker internals than they should have been for the price
moves. The weakest indices, NASDAQ and SOX, are off the recent lows but
still below key resistance. To us that means Friday was not definitive in
terms of a new upside rally leg. So we opted to limit our action and see
how the moves play out to start the next week, to see if the back and forth
moves establish a trend.
Our own belief is that the Fed is in a different mode this time, i.e. it is
going to hike rates and reduce its balance sheet regardless, and that
economic data is not going to improve. Indeed, in its July Monetary Policy
Report released Friday (basically the testimony Yellen will deliver to
Congress next week), the Fed stated that "valuation pressures across a range
of assets and several indicators of investor risk appetite have increased
further since mid-February."
That does not bode well for the markets, but right now the NYSE indices are
still holding their trends while the bond and gold markets are now selling
as they should if economics are improving. That means they can still rise
and rally yet again. If they are showing more of that Friday upside
strength this coming week, the market is going to try yet another run. We
feel that the runs are on their last gasps, but if they run, they run, and
we will play choice stocks accordingly.
ECONOMICS/NEWS
Jobs Report tops, prior months revised upside.
222K versus 173K expected versus 152K May (from 138K) versus 207K April
(from 174K)
Unemployment Rate: 4.4% versus 4.3% versus 4.3% May
U6 rate (those wanting full-time but cannot find it, those recently giving
up looking for work): 8.6% versus 8.4%.
Average Hourly Wages: 0.153% versus 0.3% expected versus 0.1% May.
2.5% year/year, barely with inflation.
Participation Rate: 62.8% versus 62.7% May
How can there be changes when nothing has changed?
Sounds great, and there are some real positives. Also, however, the same
problems. Why? Because there are structural changes in the jobs market
wrought by the economic policies of the past 12 years that the past six
months have not changed. The ACA is still in place, the taxes are still in
place, most of the massive numbers of regulations remain in place, minimum
wage laws are pushing people out and machines in (see the recent University
of Washington study of Seattle's jobs market after implementing its $15/hour
minimum wage) -- quite simply, not nearly enough has changed to spark
business creation, innovation, and of course, jobs.
Thus, most all areas showed the same recent trends.
The one change: Government jobs posted strong gains at 35K, almost 100% of
which was at the local level. Fiscal year end for most states and time to
hire and use up your budget or lose it. Heaven forbid any department risk a
budget cut.
Manufacturing: a strong 1K jobs created. Overheating, huh?
Healthcare: 37K
Education: 8K
Construction: 16K
Professional: 45K
Food and Restaurant: 29K
Mining: 8K
Temp: 13.4K
Prognosis: Marginally better but still the same market with 180K jobs per
month average the past six months. No real change, and as noted above,
without serious policy change there is no turning back from an economy that
produces lots of low wage hourly jobs. You cannot do the same thing and
expect change.
THE MARKET
CHARTS
Bounces on low volume and breadth not commensurate with price gains? A
'poser' move?
SP500: The volatility of the past 3 weeks continues. Four times in that
span the index has either gapped up followed immediately by a gap down or
gapped down only to be followed by a gap up, the latest on Thursday and
Friday. That last action occurred at the 50 day MA on Thursday and Friday
and keeps SP500 in position to bounce as it has since March, using the 50
day as support. The volatility is a bit more violent this time around and
this week it will show us if Friday's news-driven, quite low volume bounce
meant anything.
NASDAQ: After breaking the 50 day EMA and the bottom of the four week
pennant attempt, NASDAQ recovered some ground Friday, but remains below the
50 day EMA. Weak volume on the Friday recovery attempt. The Friday action
did not change the struggles for techs and leaves NASDAQ questionable.
SOX: So important to the market. After breaking below the 50 day MA the
prior week and bombing lower Monday, SOX gapped up Wednesday and again
Friday, recovering to the 50 day EMA. Something of an ABCD bounce attempt,
but as noted earlier in the week, not a great ABCD and thus the test of the
50 day MA currently in progress is a major tell for SOX and the overall
market.
RUTX: Small caps are also key as an economic indicator. Thursday they
bombed from the cusp of a new high to the 50 day MA. Friday a strong
rebound definitely keeps them in the game as the jobs report encouraged
small cap investors. The pattern remains solid enough, particularly with
the reaction off the 50 day MA dive.
DJ30: Not really impacted by all of the volatility plaguing the other
indices. DJ30 is in a 3 week lateral choppy range, but is easily holding
the 20 day EMA and is in very good position to finish consolidating and
continue upside. Ironically, DJ30 and the small caps are the most stable
patterns in the market right now.
SP400: Gave up the 50 day MA Thursday with a nasty gap and selloff, but it
held the June intraday lows and reversed Friday with a strong surge back
through the 50 day. That keeps SP400 in the upper part of its range and
similar to RUTX, in contention for a breakout to a higher high. Well, not
as much as RUTX as SP400 has the April, March and then June highs still
ahead of it as of the Friday close.
LEADERSHIP
Buying growth was back on Friday tech, chips, and FAANG attracted the most
interest and thus the largest gains. Before that, those stocks saw weakness
all week with biotechs, machinery, manufacturing and other more 'stoic'
sectors receiving some money. Friday there was rotation back to the growth
and the question is whether they last. From looking at the recent leaders
that tested and the patterns they have, it appears the late week move to
techs, chips is temporary.
FAANG: FB managed to hold through the chop at the 50 day MA and bounce
Friday, but even lower volume here. AMZN moved back through the 50 day MA,
also on very low volume. AAPL remains in a lateral move below the 10 day
EMA. NFLX sold to a Thursday doji, bounced Friday, stronger trade, trying
to bounce back from a selloff in a head and shoulders. GOOG rebounded to
end the week, closing below the 50 day MA after a big break lower. Overall
these stocks still look weak.
Chips: Finished the week on an upside rebound after struggling the most of
any sector. Analyst comments on LRCX, AMAT helped bolster the group Friday.
Key tests for stocks such as AMAT that is back at the 50 day SMA, ditto
LRCX. AVGO managed to break through the 50 day MA Friday. Important week
ahead: a real move higher or just a rebound in overall selling.
Biotechs/Drugs: The stronger moves from Wednesday tempered into the weekend
as money moved back toward chips, tech. CELG jumped Wednesday, then just
drifted higher into Friday. IMGN posted another strong week with higher
highs. ARRY looked good but then struggled Friday. AGEN looks solid to
break higher. Still very good patterns in this group.
Financial: Excellent week. JPM surged early and then drifted upside to end
the week, posting a second good week. GS was up early week but then faded
back to the 10 day EMA Friday; still in great position. C in a very nice
test to end the week, waiting on the 10 day. TCBI tested its break higher,
showing a big doji at the 10 day EMA Friday. Group looks good.
Machinery: Still very good setups after a modest test on the week. TEX at
the 10 day EMA and looks good. CAT is in a flat lateral move after a higher
high. CMI to a higher high. Looks good.
Telecom: Down for 5 weeks after good moves on earnings, many of these are
in very good patterns: SWIR, CIEN.
China: Faded, we will see. NTES at the 50 day MA and we see if it can
bounce. BABA continues working along the 10 day EMA in a 3 week lateral
move. SINA still in its shallow double bottom pullback. SOHU at the 50 day
MA.
Materials: Still solid in many cases, e.g. USCR, CX (concrete), MAS
(general building materials).
Metals: Some good tests to end the week setting up moves. SCHN in a great
breakout test. SID trying to set something up. STLD testing a solid 3 week
move to the top of the range. AKS is the downer of the group, struggling
all week.
MARKET STATS
DJ30
Stats: +94.3 points (+0.44%) to close at 21414.34
Nasdaq
Stats: +63.61 points (+1.04%) to close at 6153.08
Volume: 1.71B (-14.07%)
Up Volume: 1.21B (+853.48M)
Down Volume: 461.67M (-1.148B)
A/D and Hi/Lo: Advancers led 2.6 to 1
Previous Session: Decliners led 3.41 to 1
New Highs: 45 (+4)
New Lows: 57 (+17)
S&P
Stats: +15.43 points (+0.64%) to close at 2425.18
NYSE Volume: 735.3M (-16.21%)
A/D and Hi/Lo: Advancers led 2.23 to 1
Previous Session: Decliners led 4.19 to 1
New Highs: 82 (+49)
New Lows: 72 (+23)
SENTIMENT INDICATORS
VIX: 11.19; -1.35
VXN: 16.81; -1.19
VXO: 9.97; -2.19
Put/Call Ratio (CBOE): 0.93; -0.19
Bulls and Bears: No real change, just back and forth in the recent ranges,
Bulls just off highs earlier in the year in the 60's, bears just off lows
around 15. Those readings in the 60's suggest a market pullback, but to
this point, no serious backtracking.
Bulls: 52.5 versus 54.9
Bears: 18.8 versus 18.6
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 54.9
54.9 versus 51.5 versus 50.00 versus 55.8 versus 50.00 versus 51.9 versus
58.1 versus 58.7 versus 58.5 versus 54.7 versus 51.9 versus 56.3 versus 55.8
versus 49.5 versus 56.7 versus 53.4 versus 57.7 versus 63.1 versus 61.2
versus 61.8 versus 62.7 versus 61.8 versus 58.2 versus 60.6 versus 58.6
versus 60.2 versus 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
Bears: 18.8 versus 18.6
18.6 versus 18.3 versus 19.2 versus 18.3 versus 17.1 versus 17.3 versus 17.9
versus 17.9 versus 18.3 versus 17.5 versus 18.3 versus 18.1 versus 17.3
versus 13.75 versus 17.3 versus 16.5 versus 17.5 versus 17.6 versus 16.7
versus 17.6 versus 17.5 versus 17.3 versus 18.3 versus 18.4 versus 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
OTHER MARKETS
Bonds: 2.386% versus 2.368%. Bonds continued to sell all week, now down 8
sessions off the late June rally high, taking out the 200 day SMA Thursday.
Showing the weakness you would anticipate when the Fed is serious about
hiking and, supposedly, economics are better.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.368%
versus 2.34% versus 2.304% versus 2.268% versus 2.20% versus 2.140% versus
2.140% versus 2.148% versus 2.165% versus 2.156% versus 2.191% versus 2.155%
versus 2.162% versus 2.209% versus 2.21% versus 2.21% versus 2.19% versus
2.176% versus 2.14% versus 2.183% versus 2.154% versus 2.21% versus 2.20%
EUR/USD: 1.14010 versus 1.14220. Modest dollar recovery Friday, but euro
made a strong move off a flag test Thursday.
Historical: 1.14220 versus 1.13508 versus 1.13710 versus 1.13510 versus
1.14208 versus 1.14432 versus 1.13786 versus 1.13409 versus 1.11834 versus
1.11928 versus 1.11484 versus 1.11670 versus 1.11346 versus 1.11419 versus
1.11968 versus 1.11466 versus 1.12213 versus 1.12086 versus 1.11930 versus
1.11965 versus 1.1199 versus 1.12491 versus 1.12798 versus 1.12684 versus
1.12811 versus 1.12181 versus 1.12547 versus 1.11768 versus 1.11810 versus
1.12148 versus 1.12240 versus 1.11868 versus 1.12390 versus 1.11916 versus
1.23077 versus 1.10985 versus 1.11557 versus 1.10862 versus 1.09833 versus
1.09328 versus 1.08655 versus 1.08671
USD/JPY: 113.913 versus 113.126. Solid new break higher Thursday and
Friday after a quick test following the move over the 200 day SMA. Dollar
looking better and now very near the May high, the last high before the
selloff into June.
Historical: 113.126 versus 113.253 versus 113.270 versus 112.413 versus
111.993 versus 112.340 versus 112.24 versus 111.943 versus 111.299 versus
111.357 versus 111.278 versus 111.470 versus 111.729 versus 110.873 versus
110.854 versus 109.560 versus 110.060 versus 109.97 versus 110.334 versus
110.299 versus 109.355
Oil: 44.23, -1.29. Well, after a very solid rebound into the range, oil
stalled at the 50 day MA and has suffered two big downside sessions
Wednesday and Friday.
Gold: 1209.70, -13.60. No doubt vexing those believing gold must surge,
instead gold plunges below the May low and is heading for the March low at
1200.
MONDAY
The market did have a jobs report reaction, likely given the Fed set on a
rate hiking and balance sheet reducing mindset. Again, if the Fed is
hiking, the market wants to see positive economic data. But there are
problems. As seen in the GDP reports, corporate profits are falling based
upon the real test, i.e. the tax receipts. That is the real measure of
earnings, not the fake news non-GAAP earnings reported each quarter. The
toads in the Senate are now starting to say they cannot repeal the ACA and
will just have to tinker with its small business and jobs-killing
structures. Hell, there is even talk now that republicans cannot agree on
removing the onerous taxes inside the ACA that utterly crush small
businesses.
If this legislature impotence remains, if they cannot find a shipment of
backbones or at least Viagra for Congress, there won't be any changes in
healthcare or tax policy and the lethargy will continue. That will be
cemented in the midterm elections when the conservatives who voted to have
action taken once again are burned and once again realize voting for the GOP
is pointless. The market figures this stuff out. With no 'got your
backside' Fed, you get reality check. That is some of what you were seeing
in tech and chips during the past month or so.
That does not mean there is not more upside. There are still plenty of good
patterns to play upside. The next decision for the market is which groups
rise. Outside of Wednesday, not much new money is coming in. It is more a
game of moving money around inside the market. If the Fed is on, rates are
rising, growth may have issues. It has had issues the past 6 or so weeks,
and Friday was not really, as shown from the technical discussion, a rebirth
of growth upside.
We will see this week if the Friday money movement to growth sustains.
There are many other solid upside patterns in other groups that have good
roots versus just rebounds from selling. The former is typically more
reliable in making money unless there is a sea change of money on short
order. Likely not the case. They can bounce near term, and we will play
good patterns in those if they are there. At the same time we look at those
really good patterns as well. And of course, bigger picture, it is a weaker
time of the year ahead, the Fed is hiking, economics are not great,
legislative agendas are highly questionable. At some point it all breaks,
but technically it is not at hand unless, again, there is something that
causes a sea change.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6153.08
Resistance:
6205 is the late May all-time high
6300 is the mid-June interim high
6341.70 is the all-time high.
Support:
The 50 day EMA at 6132
The 2016 trendline at 5997
5996 is the recent May 2017 low
5937 is the all-time high from April
5915 is the tops of the March to April 2017 range
5910 is the lower gap point from mid-April
5800 from the February consolidation lows
The 200 day SMA at 5705
5661 is the late January upper gap point
5601 is the January lower gap point
The November prior all-time high at 5404
5340 is the September and October 2016 twin peaks
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
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
S&P 500: Closed at 2425.18
Resistance:
2439 is the early June prior all-time closing high
2453.46 is the all-time closing high
Support:
The 50 day EMA at 2412
2406 is the all-time high from May 2017
2401 is the March 2017 all-time high
2352 is the recent May 2017 low
2348 is the April 2017 lower gap point
2329 is the March and April twin lows
2322 is the March 2017 low
2319 is the 78% Fibonacci retracement
2301 is the late January 2017 high
The 200 day SMA at 2299
2298 is the late January 2017 high
2282 - 2280 from January 2017
2277.53 is the December 2016 high
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
2175 is the June 2016 high
Dow: Closed at 21,414.34
Resistance:
21,535 is the all-time high
Support:
21,169 is the March 2017 all-time high
The 50 day EMA at 21,161
20,553 is the lows of the week of May 15
20,547 is the lower gap point from late April 2017
20,412 is the March 2017 low
20,400 is the mid-April 2017 low.
20,126 is the January 2017 intraday high
20,101 is the late January closing high.
The 200 day SMA at 20,040
19,994 - 19,999 (early January high, upper gap point from late January
19750 is the lows of the December/January range
19,732 is the January 2017 low
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
end part 1 of 3
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