| | | Some of this weeks InvestmentHouse newsletter. The part on the market. Sentiment is getting pretty bearish. Bears are over 38%, bulls at 29.2%.
THE MARKET
Technical Picture
Sharp selloffs in the indices but not all have broken to lower lows. That means they could still hold the rally and continue higher, but we know how that works. In a falling economy and a topped market, the upside does not drag the laggards with it, but the laggards actually drag the upside leaders to the downside. Thus while the Dow and SP500 can work counter the downtrend for a bit of time, if the overall economic slide continues and the index top remains in place (and it is firmly in place), then even the holdouts will fall.
CHARTS
Money is leaving technology and growth and moving into the downtrodden industrials, materials, metals, as well as continuing to work in retail, utilities.
NASDAQ: New closing lows for 2016/2015 and indeed now negative since the end of QE in October 2014. The attempt to bounce to end January and start February has utterly failed. It closed at the March 2014 high formed ahead of that summer's selloff and the upper gap point from October 2014 as NASDAQ gapped higher off of the Ebola scare selloff. The August low (4292), the lower gap point from October 2014 (4316), the October low (4116) are all potential support for what they are worth. For now their worth is factoring in bounce points to close out near term downside plays, let a bounce occur, then pick up more.
SP500: Sold to the recent consolidation lows and held. That matches roughly the August and September lows. Still keeps it in the rally possibility mode to try 1940, but that has become a longer shot.
DJ30: Sold but just off the recent highs and resistance at the early January bounce peak at 16,500. Not in trouble, but it could be at the apex of the right shoulder to a head and shoulders pattern. Held higher by certain groups where value seekers are buying, but in an overall market top, that won't last.
SP400: Very similar to DJ30, backing off modestly from the rally off the last January low. Overall, a very sharp drop, a bounce to the 50% Fibonacci retracement, and struggling there.
RUTX: The small caps rallied up off the lows to the 38% Fibonacci retracement and have rolled over. Very weak action failing at the 38% Fibonacci retracement.
SOX: Rolled over from an ABCD downside pattern that peaked 5 sessions back. Never put much of a dent in the selloff, rebounding between the 38% and 50% Fibonacci retracement then rolling over.
LEADERSHIP
The metals, industrials, and energy recovery keeps the DJ30 holding its gains. They took a breather Friday but are holding well. Others are getting chucked overboard as money flees them to other areas, and leaves the market overall.
Big Names: More massive selling. GOOG -3.45%. AMZN -6.3%. FB -5.8%. NFLX -7.7%. MSFT -3.5%. Total flight.
Metals: Holding up very well. SID off modestly. STLD, CENX testing but nothing huge. Just testing the recent moves.
Financial: Hitting some resistance in the rebounds, e.g. JPM. GS rallied again but stalled at the 20 day EMA and reversed to flat. BAC gapped and rolled to negative. MA plunged. V broke below the 200 day SMA.
Energy: XOM up to the 200 day SMA. HAL gapped lower to the 20 day EMA. SWN posting a nice 5.6% move. GPOR making a nice 10 day EMA after its surge.
Retail: Again very mixed. LOW and HD are crashing. DLTR trying to hold after a sharp selloff. DDS, M (department stores) are testing but holding up well. KSS, another department store, bombed lower on the week. WSM looks interesting for an upside trade. RL was hammered. NKE broke the 200 day SMA, UA may have a gap to fill.
Utilities: Testing solid moves, e.g. EQT, PCG, AEP.
Software: Slaughtered. BLKB, RHT, SPLK, CALD, PANW and on and on. ORCL hasn't broken but will see if it plays. On the other hand, ROVI remains solid enough, AVID posted a gain Friday. Wish we could have caught some of these.
Chips: Down hard Friday but still trying to consolidate. Not ready to buy. NXPI, AVGO. AMD breaking lower. MU stalled at the 20 day EMA but looks as if it wants to move higher off the January lows.
Industrials: CMI still rallying, CAT taking a pause.
MARKET STATISTICS
NASDAQ
Stats: -146.42 points (-3.25%) to close at 4363.14
Volume: 2.412B (+12.69%)
Up Volume: 344.08M (-1.096B)
Down Volume: 2.14B (+1.398B)
A/D and Hi/Lo: Decliners led 4.37 to 1
Previous Session: Advancers led 1.46 to 1
New Highs: 3 (-11)
New Lows: 209 (+119)
S&P
Stats: -35.4 points (-1.85%) to close at 1880.05
NYSE Volume: 1.19B (-4.8%)
A/D and Hi/Lo: Decliners led 3.24 to 1
Previous Session: Advancers led 1.76 to 1
New Highs: 57 (+9)
New Lows: 153 (+85)
DJ30
Stats: -211.61 points (-1.29%) to close at 16204.97
SENTIMENT INDICATORS
VIX: 23.38; +1.54. VIX is going nowhere despite the selling. This indicator is lagging until it spikes the market likely has nothing but downside. Recall this was the one holdout in all of the sentiment and internal indicators we watched during the market selloff.
VXN: 27.65; +2.3. Even the NASDAQ volatility index is not moving, at least not nearly commensurate to the NASDAQ selloff.
VXO: 25.99; +2.78
Put/Call Ratio (CBOE): 0.97; +0.03
Recent history: Below 1.00 for the past four sessions. Over 1.0 for 18 of the last 26 sessions.
Bulls and Bears: Bulls jumped but so did bears, and with bears jumping the crossover held. Still bullish but thus far the reaction is not there.
Bulls: 34.0 versus 29.2. A rather absurd jump to 34%. Still below 35% threshold and still more bears that bulls.
Bears: 38.1 versus 35.4.
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: 29.2%
29.2% versus 26.8% versus 28.6% versus 34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4% versus 43.3% versus 45.3% versus 46.9% versus 43.7% versus 37.5% versus 36.5% versus 30.2% versus 24.7% versus 26.0% versus 26.8% versus 25.7% versus 27.8% versus 31.6% versus 37.7% versus 40.2%
Background: Bulls hit their lowest level in 2015 since the 2008 and 2009 market plummet.
Bears: 38.1%
35.4% versus 36.1% versus 35.7% versus 31.6% versus 29.6% versus 29.6% versus 27.6% versus 26.8% versus 26.8% versus 28.9% versus 28.1% versus 29.2% versus 31.3% versus 31.2% versus 34.4% versus 35.1% versus 30.2% versus 26.8% versus 27.9 versus 26.8% versus 22.5% versus 18.4% versus 18.6% versus 17.5% versus 17.5%
Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Both occurred in fall 2015.
OTHER MARKETS
Bonds (10 year): 1.85% versus 1.85%. Lowest weekly close since 4/2015.
Historical: 1.85% versus 1.88% versus 1.86% versus 1.96% versus 1.93% versus 1.99% versus 2.019% versus 2.01% versus 2.01% versus 2.05% versus 2.01% versus 1.99% versus 2.05% versus 2.03% versus 2.09% versus 2.07% versus 2.105% versus 2.17% versus 2.11% versus 2.15% versus 2.18% versus 2.25% versus 2.18% versus 2.24% versus 2.27% versus 2.30%
EUR/USD: 1.1159 versus 1.1206. Paused the surge higher through the 200 day SMA and the December peak. Big move and now just below the August to October treble highs.
Historical: 1.1206 versus 1.1110 versus 1.0916 versus 1.0905 versus 1.0836 versus 1.0939 versus 1.0899 versus 1.0854 versus 1.0849 versus 1.0798 versus 1.0769 versus 1.0815 versus 1.0910 versus 1.0917 versus 1.0869 versus 1.0879 versus 1.0851 versus 1.0854 versus 1.0921 versus 1.0937 versus 1.0789 versus 1.0748 versus 1.0835 versus 1.0934 versus 1.0928 versus 1.0972 versus 1.0963 versus 1.0917 versus 1.0953 versus 1.0920 versus 1.0868
USD/JPY: 116.83 versus 116.76. Dollar sold off hard to the January low, showing a tight doji Friday. We will see if it bounces, but the dollar bombed versus the yen after those NIRP's in Japan.
Historical: 116.76 versus 117.88 versus 120.04 versus 121.014 versus 121.055 versus 118.27 versus 118.64 versus 118.48 versus 118.32 versus 118.78 versus 118.85 versus 116.99 versus 117.60 versus 117.02 versus 118.06 versus 117.72 versus 117.50 versus 117.73 versus 117.71 versus 117.24 versus 117.58 versus 118.25 versus 119.02 versus 119.397 versus 120.495 versus 120.45 versus 120.345 versus 120.295 versus 120.86 versus 121.01 versus 121.33 versus 122.30
Oil: 30.89, -0.80%. Still in the 4 week move up off the January low, but the downtrend is not broken.
Gold: 1157.70, +1.70. Doji after a blistering week higher on top of more than a month of rallying.
MONDAY
A Friday bomb lower has often meant a Monday recovery of some degree. Of course now the market is in a downtrend and that can dull bounce attempts, and at worst lead to more selling with no bounce.
That said, there is still money seeking other areas of the market as discussed earlier, the 'value' areas. Thus after such a selloff you are hearing talk of opportunity to step in and buy. Perfect. We believe that opportunity will lead to our opportunity for more downside plays. We will be watching for some of these stocks to rebound and give us a better entry point for the downside.
Indeed, we see several plays, despite the Friday selling, that are in position to pick up of the market continues lower. If it wants to bounce a bit, okay, they give us a better entry point. We can go either way. Not sure how that came out, but you get the meaning.
Upside? Yes there are some we see as possibilities in addition to the SWN, EQT we already have. WSM, CENT -- there are a few where money is still moving that can make us money. If they continue rallying, great. But, remain vigilant as the market is now in a downtrend, and if a stock becomes too conspicuous in its advance the sellers may start shooting at it.
Overall the market is now in a downtrend and we act accordingly. Play some upside in areas showing money flow as long as they work, playing shorter moves with options or stock as the case allows, bank some gain, repeat when we can. Play the downside as the predominant play with short term single moves as well as longer term options and non-option plays (e.g. SDS, QID) to play many rotations to the downside, thus using short term and long term plays to provide our best possible returns with as little headache as possible.
Have a great weekend! |
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