| | | InvestmentHouse Weekend Market Update:
investmenthouse.com
- Friday sees some relief though low volume and narrow breadth as usual.
- RUTX, SP400 already at the 200 day SMA, first time since 11/16. Loss
leaders become bounce leaders?
- SP500, NASDAQ, SOX bounce back to resistance.
- Seen this setup before and stocks rallied. Is it different this time?
- Next move is in the algorithms' hands
- Trump tells China he his ordering an investigation into Chinese trade
practices.
Is it over yet? Safe to come out? It depends. On what you consider safe.
After the impressive Thursday declines there was a rebound. Of sorts.
Hardly commensurate with the selloff, but the selling did not continue
Friday.
SP500 3.11, 0.13%
NASDAQ 39.69, 0.64%
DJ30 14.31, 0.07%
SP400 0.19%
RUTX 0.12%
SOX 0.58%
NASDAQ 100 0.75%
VOLUME: NYSE -8%, NASDAQ -18%. Just like volume to run out when stocks try
to recover from a rout. NYSE slid back to lower below average while NASDAQ
gave up an above average volume selling session, slipping back below average
on the upside. Obviously no renewed upside buying strength.
ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.1:1. A powerhouse advance. NASDAQ
100 led the move higher as the big names garnered what few upside moves
there were.
THE MARKET
The stocks indices, again, fall into two categories. Okay, with the DJ30
thrown in it is three categories. It is just that the roles have changed.
Category 1: The Dow
DJ30: This index is in another world from the other indices. Sure, it sold
last week, but it was abnormally normal in its orderly test of an impressive
string of consecutive new highs. Holding at the 20 day EMA Thursday after
the selloff, again with a doji at the 20 day. Juxtaposed to the other
indices, quite abnormally normal.
Category 2: SP500, NASDAQ, SOX
This category contains indices that broke hard lower, broke next support,
and as of Friday are still problematic.
SP500: After spending three weeks riding along the 2009 upper channel line
SP500 tested. Then Thursday it dove lower, breaking the 50 day MA's.
Higher but not huge volume. Not even above average. It was not a massive
selloff. There was more downside volume in mid-May on that break of the 50
day MA's, but we all know that bounced right back after closing for a second
session below the 50 day MA. What am I saying? This is nothing that hasn't
been seen and overcome before. The selling was ugly, just as it was in May.
The question remains: will the algorithms buy on this dip or will they keep
selling the SP500 new high that reversed ahead of the Thursday selloff.
That said, the Friday bounce was NOT strong and sets up the potential to
fail at the 50 day MA and continue lower.
NASDAQ: After spending over a week working laterally over the 20 day EMA
and holding the June prior high, NASDAQ broke higher Tuesday but reversed.
Thursday it too dove below the 50 day MA's. It also broke the early June
prior high. Friday it recovered some ground but closed below the 50 day
MA's. Unlike SP500, NASDAQ volume jumped above average on the selling.
Still not huge trade, but above average. As with SP500, we have seen this
move before. NASDAQ also ripped lower in mid-May on volume but rebounded.
In June it broke the 50 day MA. It recovered to higher highs each time.
Indeed, NASDAQ can still give some ground and hold its uptrend. Sure
Thursday was ugly, but been there before and lived to tell about it. As with
SP500, the question is will the algorithms buy this dip or keep selling that
last new all-time high? That said, NASDAQ is just like SP500, and the
Friday rebound sets up a fade.
SOX: SOX could almost be in a category of its own. It never made a higher
high on the last rally before rolling over. It came back to the 50 day EMA,
looked as if it might form an inverted head and shoulders. Then it broke
lower Thursday, sold more Friday, then recovered a bit of ground to
positive. SOX, yes, CAN hold here and continue higher, it just doesn't look
very good. SOX is always a market key as it tends to forecast the overall
market moves. When it broke the possible inverted head and shoulders, that
was a mark against the uptrend.
Category 3: SP400, RUTX
These two indices were leaders -- in the selling.
SP400: Broke the 50 day MA's to start August, moved laterally, then plunged
Wednesday to Thursday. Gapped down to the 200 day SMA Friday, rebounded to
positive. A clear trend break, breaking the December 2016 to August 2017
trend. The last time SP400 visited the 200 day was in November 2016. It
held. Thus, SP400 may have shifted from downside market leader to ready to
help lead a bounce upside.
RUTX: Same action as SP400, working laterally below the 50 day MA after
breaking that level to start August, then bombing lower to the 200 day SMA
on the Friday open. RUTX bounced off the 200 day and closed with a modest
gain and a doji. That doji suggests it is ready for a relief bounce. Last
time at the 200 day SMA: November 2016. As with SP400, ready to turn from a
loss leader to a new upside leader?
IN SUM, the market was bifurcated as the small and midcaps broke support.
The other indices, sans DJ30, caught down to those two indices. Now those
two loss leaders are at the 200 day SMA and, just as they did in November
2016, can rebound in some more upside and perhaps lead a move higher.
Stranger things have happened of course, particularly in this Fed and plunge
protection dominated market. The swing vote, the key vote, is still the
algorithms and whether they buy the dip or just keep selling. Volume is not
that heavy on this drop so it does not look that the algorithms all threw in
to the downside.
MARKET STATS
DJ30
Stats: +14.31 points (+0.07%) to close at 21858.32
Nasdaq
Stats: +39.68 points (+0.64%) to close at 6256.56
Volume: 1.8B (-18.18%)
Up Volume: 1.15B (+740.17M)
Down Volume: 625.77M (-1.154B)
A/D and Hi/Lo: Advancers led 1.1 to 1
Previous Session: Decliners led 3.86 to 1
New Highs: 27 (-5)
New Lows: 130 (-18)
S&P
Stats: +3.11 points (+0.13%) to close at 2441.32
NYSE Volume: 790.6M (-7.98%)
A/D and Hi/Lo: Advancers led 1.15 to 1
Previous Session: Decliners led 6.47 to 1
New Highs: 17 (-22)
New Lows: 157 (+38)
SENTIMENT INDICATORS
Interesting week as more very intelligent money managers turn bearish.
Dennis Gartman cited those very intelligent people as he made the prediction
that the long bull run for stocks is over. He said he realized what kind of
damage such a call, if incorrect, could do to an 'already damaged'
reputation, but he just feels compelled to do it.
I am reminded of a gambler who has squandered most of his fortune, but makes
one last bet with his remaining capital to make that one big score. If
correct, he lives to gamble another day. If not, it is over.
So, more negative sentiment from the big names, though Gartman has lost big
name status as he has sadly made multiple wrong calls on stocks, oil, and
other commodities over the past year or two. He truly appears to have just
flip-flopped as the markets sold then rebounded, sold then rebounded. The
problem is you have to recognize you can and will be wrong. You must
recognize you don't know with any certainty at all what the market will do.
You study the patterns, the moves, the trends, and distill down to the
possible moves at any given point. Sometimes there are clear inflection
points, e.g. SP400 and RUTX at the 200 day SMA right now. Then, you put
yourself in position to play what appear to be the high probability plays,
and importantly, the high profitability plays, up and down, at that time.
Then when the moves are made, you play them.
Gartman really needs to be right this time because he has lost sight of what
he really knows and does not know and thus made 'certainty' calls for market
direction. When those go wrong, it is death. And sadly for him, the
commentary to his Friday announcement about the bear market's end brought
out the morbid humor. "He has given up on prognosticating and has decided
to become Captain Obvious." "How can you stake something you no longer
have?" "At this point one has to wonder if Gartman's own family fades his
market calls." The market is, as always, ruthless.
VIX: 15.51; -0.53
VXN: 17.77; -1.29
VXO: 12.87; -0.99
Put/Call Ratio (CBOE): 0.97; +0.04
Bulls and Bears: The two week fade appears to have caught up with some of
the bulls as the number fell below 60 for the first time in three weeks.
Reached levels that call for more serious corrections. Perhaps NASDAQ and
SP500 are trying, but will the Powers let them fall?
Bulls: 57.5 versus 60.0
Bears: 17.0 versus 16.2
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: 57.5 versus 60.0
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: 17.0 versus 16.2
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: 2.191% versus 2.201%. Bonds are trying to break higher to take on
the June high.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.18216 versus 1.17652. Euro bounces up off support, ready to
rally some more.
Historical: 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 versus
1.14010 versus 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
USD/JPY: 109.183 versus 109.177. Trying to bounce off the selloff, but in a
sharp downtrend.
Historical: 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 versus 111.128 versus 111.863 versus 111.89 versus 112.096 versus
112.582 versus 112.536 versus 113.314 versus 113.152 versus 113.929 versus
114.063 versus 113.913 versus 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
Oil: 48.82, +0.23. Oil faded to test the 20 day EMA to end the week,
showing a nice doji with tail. Still an excellent setup for the upside.
Needs something to trigger it.
Gold: 1294.00, +3.90. Gold is now bumping the April and June highs.
THIS WEEK
Given the index setups, this could actually be a week that decides some
direction. As noted earlier, the volume was not such that would indicate
the algorithms decided it was time to dump all stocks in a sell the rally
move.
Therefore, as we are not, as some seem to believe they are, omniscient with
what the self-thinking algos are going to do, we just prep for what can
happen off this selling. Nothing new there regardless whether algos, fund
managers, pension managers, etc. are making the investing decisions. There
are some good upside plays to make us money if the bids return, and some
downside for sure if they bids do not return.
That raises a very interesting point. When ETF's started to gain
popularity, I believed that was the start of the destruction of the markets.
Not that ETF's were the problem themselves, they were just part of the
preparation for market demise. They allow lazy investing, and the irony is,
they do not reflect the dollar for dollar moves of the stocks that comprise
the ETF. That is up to the ETF management, within certain limits of course.
As ETF's grew in popularity, you started to see market distorting movements.
Stocks would move intraday, but the ETF's would not follow. Then, in the
last hour, large index price moves occurred as the ETF's were brought more
in line with the days' trading action.
Now the next step is in place: algorithms running some very large funds and
thus lots of money, coupled with smaller robot advisors that tell investors
what ETF's to place their money. Then it is all turned over to the
machines. People playing the ETF game get unmercifully whipsawed as they
are rebalanced in sudden moves. It is like a mini expiration session every
session.
If you pay attention to how the algos trade you, how they accumulate shares,
etc., you recognize the tracks just as always, regardless of who manages the
money. That is why the false breakdown proved to be such a good entry for
us: program trades and algos were taught to buy those, and they have
dutifully done so for years. Thus, what does the current situation on
NASDAQ, SP500, and SOX show? Another break of support that could be a false
break.
In any event, this is going to lead to the destruction of any real
price-finding market. When the machines take over most of the action, that
will be the day the market ceases to reflect what markets have always shown,
e.g. the belief of investors as to the economic future, and will instead
reflect only the reactions of each algorithm and program to the headlines
that appear in the news ticker.
That puts a whole new angle on 'fake news' does it not? You have seen how a
planned rumor can move a stock, even the market. Just think what happens
when hundreds, even thousands, of headline-reading programs react to each
headline, and then what happens when the ETF's are then 'balanced' at the
end of the session to reflect the latest headlines? Destruction of markets.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6256.56
Resistance:
The 50 day EMA at 6263
6300 is the mid-June interim high
6341.70 is the all-time high from early June.
6461 is the June 2017 prior all-time high
Support:
6205 is the late May all-time high
The 2016 trendline at 6141
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 5838
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 2441.32
Resistance:
The 50 day EMA at 2446
2453.46 is the June prior all-time closing high
2487 is the upper channel line from the March 2009 uptrend channel
Support:
2439 is the early June all-time closing high
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
The 200 day SMA at 2339
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 21,858.32
Resistance:
21,681is the July prior all-time high
22,179 is the August 2017 all-time high
Support:
The 20 day EMA at 21,836
The 50 day EMA at 21,574
21,169 is the March 2017 all-time high
20,553 is the lows of the week of May 15
20,547 is the lower gap point from late April 2017
The 200 day SMA at 20,484
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 |
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