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9/2/2017 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
- Stocks slow on the first day of September, but it was Friday ahead of
Labor Day.
- Jobs report is very mediocre, indeed bad. Hmm, no change in ACA, no change
in tax policy, some regulatory rollbacks. Okay, that is worth just 'some'
economic improvement, and we have seen that already.
- Thus far stocks tracking higher as per the market's MO.
- NASDAQ at a new closing high. Should have more upside before the move is
sold to once again reset the cycle.
September entered on a Friday ahead of a 3-day weekend and a Friday after a
week upside on the large cap indices and 2 weeks straight up for the RUTX
small caps. A bit of indifference on the indices is understandable,
particularly after the run and what was, all said and done, a weak jobs
report.
Even so, RUTX posted another solid session as it has, despite its distance
from the prior high, clearly led the market higher. NASDAQ was flat Friday,
but it too has taken the lead, if not so much in terms of percentage gain
compared to RUTX, but it is closing in on the July all-time high.
Given those nice moves leading into Friday, the session was rather
anticlimactic to end the week.
SP500 4.90 0.20%
NASDAQ 6.67, 0.10%
DJ30 39.46, 0.8%
SP400 0.40%
RUTX 0.59%
SOX 0.45%
VOLUME: NYSE -28%, NASDAQ -21%. After a rally in volume Thursday on the
last day of August, there definitely was not a lot of accumulation Friday as
trade plummeted back below average.
ADVANCE/DECLINE: NYSE 2.3:1, NASDAQ 1.9:1. Not bad given the light gains,
and with RUTX and SP400 leading on the session, you would expect breadth to
remain solid.
A solid week with NASDAQ and even SP500 approaching the prior highs. RUTX
flying up in its rebound off the sharp selloff, showing an equally sharp
recovery. The news has not been great, underscored Friday by a weak August
jobs report. Yet the market rallies, trying the old highs. Okay, just what
is the market theory now, i.e. is bad news good news or is good news good
news? Given the moves, all news is, relatively, good news.
Friday the news was jobs and construction. Hard to spin either one as not
bad.
Construction: -0.6% vs +0.5% expected vs -1.4% June (from -1.3%).
Bad news on top of bad news as year/year growth slipped to 1.8%. The last
two times construction hit this level (2001, 2007), the economy was heading
into recession.
Jobs Report: It wasn't just the jobs numbers miss, it was the way it got
there.
Non-farm payrolls, August: 156K vs 183K vs 189K (from 209K)
Unemployment rate: 4.4% vs 4.3% vs 4.3%
Earnings: 0.1% vs 0.2% expected vs 0.3% July. 2.5% year/year versus 2.6%
year/year July.
Average Workweek: 34.4 vs 34.5 expected vs 34.5 July. Not improving, and
once you do get a month that clicks up a tenth, it goes right back down.
Participation: 62.9% versus 62.9% prior. But out of workforce did grow by
128K. Same old problems.
The good points:
Manufacturing hiring jumped 36K. Nice improvement in an area we heard the
prior administration say would never see jobs return.
Construction 26K, healthcare 20k.
Mining +7K
Losers: government (-9K) and information tech (-8K). At least government
jobs are heading in the right direction.
Also, it is said that the August seasonal adjustments ALWAYS result in an
underreported month that is revised higher.
The bad points:
A miss on the top line was not the only bad news. Revisions of -20K on each
of the prior two months. More of the same with 185K jobs per month the past
3 months.
Stagnant workweek -- no surprise given the ACA is still in place. Won't
change until the incentive to work workers less is removed. Wages continue
their stagnation.
August understated? Even if it was understated, the prior two months were
overstated and revised lower. To remove any issues, look at the UNADJUSTED
data year/year to get rid of the month to month adjustment noise. If you do
so, you see a 16% drop in jobs added. Moreover, August year/year showed the
largest annual percentage drop in new jobs since the financial crisis. This
is of course heading the WRONG direction. If people were looking at the
REAL numbers they would be discounting a lot more than no hikes into
December. They would be looking for the Fed to come out with QE4.
In sum, the jobs mix improved with higher paying jobs in manufacturing,
construction, and mining picking up jobs. On the other hand, the same
structural changes remain: low overall hours worked, DECLINING jobs creation
versus net positives on a year/year basis. We are creating FEWER new jobs
when you look at the real numbers and not the ones adjusted to make them
more palatable to markets and the public.
An interesting side bar to the report are rumors of layoffs coming at FB and
GOOG. The theme is that the fake ads and results from purchasing programs
and campaigns on their platforms have caused a significant decline in
advertiser dollars. You have already heard about one large corporation
dropping its Facebook ad program.
MARKET
CHARTS
RUTX led the gains while NASDAQ put in a new closing high. New highs are a
time to start watching closely as they have been reversed in prior upside
runs. The pattern is not an immediate reversal, but a continued move
higher, then a sharp reversal.
RUTX: Small caps continued their impressive rally, rising 8 of 9 sessions
and accelerating Wednesday to Friday. From heavily oversold they have
staged a 5% recovery move in two weeks. Impressive as noted, but now RUTX
is at some resistance, hitting the February peak and bumping at April and
June. Last week I discussed the potential of a right shoulder forming to a
potential head and shoulders at those levels. Something to watch as RUTX
trades into early September, a month known for its downside pitfalls. The
interesting thing is the economic data has not been great though the
sentiment indications are good. Small caps perform well in anticipation of
a rising economy and you wonder if this is a comment on a turn in economics.
RUTX is very range-bound right now and thus for now this is just an oversold
recovery, but it shows a lot more power than you would anticipate.
NASDAQ: New closing highs for NASDAQ Thursday and Friday though it is still
below the late July intraday peak. NASDAQ is the closest to a new high with
its impressive Tuesday to Thursday rally off its trendline. New highs have
meant trouble for the upside moves, but as noted earlier in the week, the
pattern is not an immediate collapse once a new is hit, but a week to two
weeks of continued upside THEN the sharp reversal. Thus we look for some
more upside this coming week.
SP500: Solid Tuesday to Thursday rebound as well, doji Friday 15 points
below the early August high. That gives SP500 some additional room to move
higher, and given it recovered its 2017 trend on this last move, typically
it would test back near the top of the range. That suggests a bit more
upside on this move.
DJ30: Not as impressive a move as some of the more oversold indices. DJ30
did test its 50 day MA's the past three weeks, but it was nowhere near the
selling of the other indices. Thus as they rebounded from oversold
conditions, DJ30 rested. Still in a very well defined uptrend over the 50
day MA.
SP400: A solid rally from its oversold condition though not as impressive
as RUTX. Moved up through the 200 day SMA Wednesday and continued on
through the 50 day EMA Friday. A good rebound but it is now in the teeth of
the resistance in the range from February into July.
SOX: Broke out from its three month triangle Wednesday and continued upside
into Friday though Friday showed a doji closing off the high. Nice setup and
a move through the late July peak on the breakout. Good initial move and it
can test or continue from the Friday close. Nice, but not explosive move.
LEADERSHIP
FAANG: These stocks threw in on the upside starting Tuesday in that gap
lower and reversal. Friday was somewhat a dud for them (NASDAQ 100 was
negative) but a good surge by GOOG, NFLX, FB, AAPL on the week. These
stocks paused on Friday, and it will be key for the market if they continue
the move upside off that Friday rest.
China stocks: A mixed week for these stocks though overall it was more of a
struggle for recent leaders. BIDU did a good job of reversing a Tuesday
break from its range, surging upside to a breakout on Friday. BABA bounced
off a 20 day EMA test but slowed to a crawl Thursday and Friday. YY bounced
nicely in an ABCD pattern. HTHT bounced from a 20 day EMA test and scored a
new high. SINA was on the ropes but recovered and Friday surged to a new
high.
Semiconductors: Coming back around nicely. NVDA came off its 50 day MA's
last week with a good move though Friday it showed a doji at the prior
highs. LRCX rallied to the top of its triangle and showed a pair of doji,
not quite ready for the breakout. AMAT posted a solid bounce into
Wednesday, then it too was flat to end the week -- a good setup inside its
pattern. MLNX broke through the 200 day SMA then paused Wednesday to
Friday; forming a handle. MCHP rallied to a higher closing high for us.
Software: Still a solid group. VMW rallied to a new high through Thursday.
TTWO was down Friday, but was up on the week. GLUU posted a new high,
hitting our initial targets. RHT put in a higher high.
Financial: Hanging in but appear confused by the data and what it means for
Fed rate hikes. C held the 50 day EMA and bounced off the lows in its
range. BAC held the 200 day SMA early week and rebounded, still mired in
its range. GS is very much range-bound. Need to see breakouts from these
stocks to have any confidence in them.
Machinery: CAT continued its trend higher. Not surging but steadily higher.
CMI posted a nice bounce from the 200 day -- after its ugly August collapse
to that level. TEX is still working laterally along the 50 day MA after
peaking in early August.
Materials: Surged on the assessment of Harvey. LPX jumped the back half of
the week as did USCR, VMC.
Biotechs/Drugs: Struggled some Friday after a very good week. IMGN surged
into Wednesday. AMGN found solid bids as did CELG. SPPI posted a nice
breakout.
MARKET STATS
DJ30
Stats: +93.46 points (+0.18%) to close at 21987.56
Nasdaq
Stats: +6.67 points (+0.1%) to close at 6435.33
Volume: 1.479B (-20.43%)
Up Volume: 868.221M (-491.702M)
Down Volume: 556.364M (+81.778M)
A/D and Hi/Lo: Advancers led 1.92 to 1
Previous Session: Advancers led 2.16 to 1
New Highs: 194 (+28)
New Lows: 24 (-3)
S&P
Stats: +4.9 points (+0.2%) to close at 2476.55
NYSE Volume: 651.5M (-27.61%)
A/D and Hi/Lo: Advancers led 2.31 to 1
Previous Session: Advancers led 2.8 to 1
New Highs: 168 (+35)
New Lows: 17 (-2)
SENTIMENT INDICATORS
VIX: 10.13; -0.46
VXN: 14.1; -0.23
VXO: 8.94; -0.32
Put/Call Ratio (CBOE): 0.83; -0.23
Bulls and Bears: Bulls are off 8 points in four weeks after rallying back to
60 for two weeks. Was the recent selloff the response to those high
readings? If that was it, that is a break from history.
Bulls: 49.5 versus 48.1 versus 50.5
Bears: 19.1 versus 18.3 versus 18.1
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: 49.5 versus 48.1
48.1 versus 50.5 versus 57.5 versus 60.0 versus 60.2 versus 57.8 versus 50.0
versus 52.5 versus 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: 19.1 versus 18.3
18.3 versus 18.1 versus 17.0 versus 16.2 versus 16.5 versus 16.7 versus 18.6
versus 18.8 versus 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: 2.166% versus 2.120%. Bonds rallied into Thursday, then fell Friday
on rather weak jobs data. Something of the inverse of what you would
expect.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.210%
versus 2.136% versus 2.129% versus 2.175% versus 2.169% versus 2.189% versus
2.217% versus 2.183% versus 2.197% versus 2.185% versus 2.225% versus 2.264%
versus 2.24% versus 2.191% versus 2.201 versus 2.246% versus 2.262% versus
2.257% versus 2.264% versus 2.221% versus 2.266% versus 2.253% versus 2.296%
versus 2.291% versus 2.303% versus 2.287% versus 2.330% versus 2.255% versus
2.241% versus 2.270% versus 2.261% versus 2.318% versus 2.331% versus 2.346%
versus 2.316% versus 2.361% versus 2.375% versus 2.375% versus 2.368% versus
2.34% versus 2.304% versus 2.268% versus 2.20% versus 2.140% versus 2.140%
versus 2.148%
EUR/USD: 1.18621 versus 1.19131. Euro faded into the weekend but holding
the 20 day EMA, the support for its solid uptrend.
Historical: 1.19131 versus 1.18938 versus 1.19731 versus 1.19678 versus
1.19212 versus 1.18 versus 1.17516 versus 1.1813 versus 1.17595 versus
1.17107 versus 1.17812 versus 1.17445 versus 1.17751 versus 1.18216 versus
1.17652 versus 1.17596 versus 1.17619 versus 1.17975 versus 1.1774 versus
1.18718 versus 1.18457 versus 1.18072 versus 1.18281 versus 1.18293 versus
1.1683 versus 1.17419 versus 1.1646 versus 1.1637 versus 1.16640 versus
1.16271 versus 1.15280 versus 1.15549 versus 1.14735 versus 1.14672 versus
1.13986 versus 1.14335 versus 1.14682 versus 1.13964
USD/JPY: 110.254 vs 110.049. Resting after its bounce off the lows in its
trading range.
Historical: 110.049 versus 110.289 versus 109.652 versus 108.04 versus
109.160 versus 109.573 versus 109.195 versus 109.648 versus 109.173 versus
109.205 versus 109.333 versus 109.842 versus 110.6621 versus 109.927 versus
109.183 versus 109.177 versus 110.03 versus 109.09 versus 110.09 versus
110.757 versus 110.689 versus 109.963 versus 110.717 versus 110.368 versus
110.28 versus 110.704 versus 111.07 versus 111.166 versus 111.897 versus
111.176
Oil: 47.29, +0.06. Down for another week after peaking in early August on
its last bounce. Trying to put in a higher low near the 50 day MA, however.
Gold: 1330.40, +8.20. Gold continues its climb following breaking out over
the April and June twin peaks just over a week back.
MONDAY
NASDAQ is bumping at a new high, and the MO of this market is that new highs
are sold. Typically 1 to 2 weeks after the high is hit and after more
upside is added. Thus, at this juncture, after having picked up several
nice positions, the play is not so much buying but letting positions work as
high as they will, then bank some gain.
The news can always impact this and over this weekend North Korea tested a
sixth nuclear bomb, one it claims to be hydrogen and warhead ready. That
puts a nice pall over everyone. There is also the usual sniping in the
government and in these somewhat disunited states right now. Harvey waters
are receding -- in some places -- while fires rage just outside of Los
Angeles. Always plenty on the market's plate.
Headlines are dominated by the North Korean nuke, and we will have to see
how the world markets handle this when they open. Nonetheless, the US open
is a long way off: Tuesday. Things can cool quite a bit in terms of the
nuke test.
Further, this market, while pushed and pulled by the news, still finds its
same pattern. Despite the small cap and midcap collapse, the large cap
indices held intact and are continuing upside, doing what they have done in
other moves in the rally. Thus, we are sticking with the plan of
anticipating a continued move higher by NASDAQ and the other indices,
followed by another reversal of the new high. That is the apparent
algorithm programming and thus far, despite all of the predictions of a
selloff that won't bounce, the indices have bounced. The algos bought on
the last dip and as that aspect remained we would expect the other to
remain.
So, we let our upside run some more this week, then we start looking at
banking gain. Do we pick up new upside positions? Typically on breakouts
you look for more breakouts. We will indeed look for some great stocks in
good position to move with a quick burst, but in this market MO/pattern, it
is getting long into the move to buy a lot of new positions. We have
already picked up a lot of good positions as the move started and on some we
have even banked some gain already. We are disinclined to load up a bunch
of new positions on the upside given the market MO. If that MO shows a
change at some point, we will change with it. We can always keep some
partial positions open if we want to test that potential change if the move
next week is strong. Otherwise, we want to let our current positions run,
take gain after some more upside, and not load up on a lot of new positions
given the move is well underway.
Have a great Labor Day weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6435.33
Resistance:
6461 is the July 2017 prior all-time high
Support:
6341.70 is the all-time high from early June.
6300 is the mid-June interim high
The 50 day EMA at 6285
The 2016 trendline at 6217
6205 is the late May all-time high
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
The 200 day SMA at 5865
5800 from the February consolidation lows
5661 is the late January upper gap point
5601 is the January lower gap point
S&P 500: Closed at 2476.55
Resistance:
2453.46 is the June prior all-time closing high
2491 is the August all-time high
2498 is the upper channel line from the March 2009 uptrend channel
Support:
The 50 day EMA at 2448
2409 is the July 2017 closing low
2406 is the all-time high from May 2017
2401 is the March 2017 all-time high
The 200 day SMA at 2362
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
2301 is the late January 2017 high
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 21,987.56
Resistance:
22,086 is the mid-August lower high
22,179 is the August 2017 all-time high
Support:
The 50 day EMA at 21,705
21,681is the July prior all-time high
21,638 is the July 2017 closing high
21,529 is the June 2017 high
21,169 is the March 2017 all-time high
The 200 day SMA at 20,748
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.
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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