| | | InvestmentHouse - Headline Jobs Report Bad (Weekend Newsletter)
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- Headline jobs report bad but some internals are not viewed as that bad
though they have their issues as well.
- Stocks pause on the week after the large caps took the leadership while
small and midcaps rest
- Plenty of leadership still in great position, others trying to rise as new
money aids virtuous rotation.
- Higher minimum wages, ACA taking out mid-market San Fran restaurants
- President may strike deal for short-term healthcare action, talks trash to
NK again
Stocks started soft but started to bounce back upside early in the session.
That move was chop-blocked, however, and stocks fell into midday as North
Korea talked of some other test this weekend. That gave reason to think a
bit more about the Trump version of the line from the movie '2010' -- 'You
see, something's going to happen,' says the being that was formerly Dave
Bowman. 'What? What's going to happen' asks Dr. Floyd (Roy Shieder).
'Something wonderful' responds the former Dave Bowman. Trump's version
after a dinner meeting with top military brass isn't so hope filled: 'this
is the calm before the storm.' When a reporter asked what he meant, Trump
responded 'you will see.' With that backdrop, when NK talked of tests and
launches, stocks fell.
You see, something wonderful is going to happen What? What is
going to happen?
Something wonderful.
The indices fell to the early afternoon, but then recovered lost ground into
the last hour. That flipped NASDAQ to positive as the NASDAQ 100 again led
it higher while SOX was already showing very good action all session. The
rest, well, they just limped home flat, happy to get to the weekend after a
week of new highs was followed with a day off from the large cap indices and
a good lateral test by the small caps and midcaps.
SP500 -2.74, -0.11%
NASDAQ 4.82, 0.07%
DJ30 -1.72, -0.01%
SP400 -0.08%
RUTX -0.12%
SOX 0.45%
NASDAQ 100 0.12%
VOLUME: NYSE -7%, NASDAQ -8%. Modest fade in trade on a weak session. That
fits the overall solid price/volume action seen in the rally of late. There
is a lot of complaining about this rally as being overdone, preceding a
sharp drop, etc., but the price/volume action is good and of course there is
good leadership.
ADVANCE/DECLINE: NYSE -1.8:1, NASDAQ -1.1:1. With the small and midcaps
the loss leaders (after leading higher for over a month), breadth was a bit
more negative.
Stocks were already soft pre-market ahead of the jobs report with SP500
lower while DJ30 and NASDAQ traded slightly positive. Then the September
negative jobs report hit and stocks slid to negative. Not a sharp selloff,
they just lost the already Jello-like bids the morning showed.
The jobs report, despite turning in -33K jobs the first negative tally since
sometime back in the financial crisis (2010), actually showed some
ostensibly internal positives. Wages were higher and participation jumped
two tenths. New full-time jobs rose 935K, the fourth highest level every
reported. Further, 1.5M people HAD a job but just could not get to work
because of the storms.
There is some controversy regarding wages. The headline at 0.5% was solid
and the 2.9% year/year was a nice jump from 2.5%. BUT . . . 1) the Food &
Beverage sector (read waiters, busboys), one of the lowest wage sectors,
lost 105,000 jobs. Take out those low wage jobs and you skew the average
wage higher; 2) then you had companies needing workers but could not get
them because they were taking care of their homes, etc. Shortage of workers,
wages go up; 3) Finally, the BLS simply bungled (putting the best light on
it) the data reporting, substituting the preliminary August weekly earnings
in the July revised (final) weekly earnings, making July lower than the
'final' read previously reported and making the rise look greater than it
was, and by a long shot.
Still, the headline negative number was easily explained and there is some
substance in arguing the internals were better. Given that, we thought
stocks would recover off a lower open. They were indeed doing that until
NKorea started flapping its jaws again. Stocks sold and then had to recover
yet again, and on this Friday ahead of Columbus Day (NOT a market holiday
anymore) that was a bridge just too far.
Even so there were some solid moves. NFLX continued upside along with GOOG,
both breakouts from cup with handle bases. AMZN added more upside HTHT took
off upside once more. INFI of the small biotechs still solid. CNAT surged
then faded, catching us in between. AMAT started upside again. There were
some very good moves as noted, but mostly modest gains to flat action.
After the rally on the week, not bad.
Thus, stocks made it to the weekend holding gains on the week, avoided a
potential blowup on the jobs report, and face next week with the same
situation if once again the world avoids any serious pitfalls. Of course
Monday is the Catalonian meeting regarding the independence vote, the market
is significantly overbought, bulls are higher, magazines covers depict bulls
in every market, and the algorithms are still out there. Kind of business
as usual.
Business as usual and thus far none of that has stopped the advance. We let
positions work higher whether that meant watching them make good moves as
noted above or just testing/resting after very good moves. New weeks are
always approached with some apprehension as you wonder if this is the week
the algos hit. Well, I can tell you, if there is a test on NFLX, GOOG, HTHT
or other good movers to start the week, they will be quite tempting to pick
up a few more positions.
THE MARKET
CHARTS
SOX: Leader on Friday after slowing its rally Tuesday to Thursday. Punched
out another post-2000 high after a pause though a Friday move on lighter
trade is not a confirmation of a new move upside.
NASDAQ moved higher as well, overcoming a gap lower to post a very modest
gain. Excellent week, however, continuing the rally to higher hand higher
highs off the 50 day MA test. Big help from FAANG stocks late in the week,
e.g. GOOG, NFLX.
RUTX: So important to the market with its incredible recovery off the
mid-August low, RUTX spent Tuesday to Friday working laterally in a very
tight range after blasting off to a new high yet again on Monday. The rally
put it in an overbought condition and it is trying to work it off while
holding onto all the gains with that tight lateral move. Typically it waits
for or fades a bit to meet the rising 10 day EMA, and that is what gives the
move its rest and support for another break higher, all things remaining
equal.
SP400: The midcaps show similar action, a big Monday move then drifting
upside and sideways into the weekend. Strong move, got a bit over its skis,
now waiting for the 10 day EMA to catch up to the move.
DJ30: Flat Friday after a week that saw DJ30 break higher Monday and resume
the flurry of new highs after 2 weeks of rest. Excellent action.
SP500: Also took Friday off after a strong week that scored four new
all-time highs. Similar to DJ30, SP500 broke higher out of a 2.5 week
lateral consolidation, really aided by strength in financial stocks.
LEADERSHIP
FAANG: NFLX, GOOG led again, joined by AMZN and its move through the 50 day
MA. FB was up but uninspiring while AAPL continues below the 50 day MA.
Software: A solid week again. MSFT broke higher off the 50 day MA. FEYE up
nicely along with RHT. CRM is trying to make its move. PANW is trying to
move higher as well. Still a solid group.
Biotechs: Definitely mixed as some smaller names sold (PACB, IMMU) while
others surged (INFI, IDRA). Big names were mixed as BIIB gapped upside,
AMGN held steady, CELG faded. Overall still very interesting.
China stocks: Faded early week as they ran well already, then rallied late.
SOHU surged Friday along with HTHT. YY in a nice doji test of the 10 day
EMA. BABA, BIDU moving laterally at near support. BZUN tested more than we
wanted but showing doji at the 50 day MA.
Financial: Nice week, taking a breather Friday after trending higher then
breaking upside Thursday. C, BAC, JPM, GS all showing this action.
Semiconductors: Some great tests on the week after good moves, some
starting upside Friday, e.g. AMAT. ON continued marching higher. LRCX in a
great test. HIMX trying to break higher and SIMO heading upside. MU
setting up a nice flag test of the 10 day EMA.
Oil: Continues to intrigue and we picked up some DO on the week. Still
looking at ESV, APC and this weekend CRZO to see if there are some breaks
higher from promising patterns even as oil backs off resistance.
Retail: After good moves mostly testing. DLTR added some upside on the
week. GPS, KORS, CONN testing. ROST trended higher all week. COST sales
were disappointing and it gapped sharply lower Friday.
Metals: Interesting action in some of the group. ZEUS in a nice flag test
of a breakout. Some industrial metals are setting up.
MARKET STATS
DJ30
Stats: -1.72 points (-0.01%) to close at 22773.67
Nasdaq
Stats: +4.82 points (+0.07%) to close at 6590.18
Volume: 1.75B (-7.41%)
Up Volume: 954.54M (-225.46M)
Down Volume: 763.67M (+96.53M)
A/D and Hi/Lo: Decliners led 1.11 to 1
Previous Session: Advancers led 1.63 to 1
New Highs: 193 (-102)
New Lows: 18 (-5)
S&P
Stats: -2.74 points (-0.11%) to close at 2549.33
NYSE Volume: 693.967M (-6.95%)
A/D and Hi/Lo: Decliners led 1.75 to 1
Previous Session: Advancers led 1.58 to 1
New Highs: 172 (-77)
New Lows: 19 (+11)
SENTIMENT INDICATORS
VIX: 9.65; +0.46
VXN: 13.33; +0.45
VXO: 7.85; +0.22
Put/Call Ratio (CBOE): 0.87; +0.03
Bulls and Bears: After dipping as the market started a new spike higher, of
course the bears are back up, pushing into the rarified air near 60 that is
the top of the typical range. Bears held pretty much steady.
Bulls: 57.5 versus 54.3
Bears: 17.0 versus 17.1
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: 57.5 versus 54.3
54.3 versus 50.5 versus 47.1 versus 49.5 versus 49.5 versus 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: 17.0 versus 17.1
17.1 versus 19.0 versus 20.2 versus 19.1 versus 19.1 versus 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: 2.361% versus 2.348%
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.348%
versus 2.327% versus 2.326% versus 2.341% versus 2.339% versus 2.312% versus
2.307% versus 2.236% versus 2.222% versus 2.253% versus 2.276% versus 2.273%
versus 2.246% versus 2.234% versus 2.201% versus 2.186% versus 2.19% versus
2.167% versus 2.134% versus 2.042% versus 2.105% versus 2.072% versus 2.166%
versus 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%
EUR/USD: 1.17352 versus 1.17100. Still holding the same lows the past two
weeks after breaking below the 50 day MA.
Historical: 1.17100 versus 1.1754 versus 1.17676 versus 1.17315 versus
1.1812 versus 1.17817 versus 1.1746 versus 1.17852 versus 1.18540 versus
1.19476 versus 1.19420 versus 1.19420 versus 1.19954 versus 1.19436 versus
1.1918 versus 1.1874 versus 1.19706 versus 1.19551 versus 1.20379 versus
1.2025 versus 1.19258 versus 1.19143 versus 1.18621 versus 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
USD/JPY: 112.643 versus 112.818. Still in the 1.5 week lateral move along
the 10 day EMA and just below the July and May peaks.
Historical: 112.818 versus 112.79 versus 112.667 versus 112.716 versus
112.442 versus 112.86 versus 112.289 versus 111.649 versus 1.12125 versus
111.995 versus 112.454 versus 111.559 versus 111.435 versus 110.846 versus
110.01 versus 110.62 versus 110.216 versus 109.434 versus 107.847 versus
108.444 versus 109.132 versus 108.747 versus 110.254 versus 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: 49.29, -1.50. Oil faded through the 200 day SMA and held the 50 day
MA. Hit near the top of the trading range and fell again. Very important
test to see if oil can put in a higher low and move back up to challenge the
top of the range. A stronger dollar hampers that effort.
Gold: 1274.90, +1.70. 4.5 week pullback showing a doji that tapped near
the 200 da and rebounded Friday. Gold is acting as if the Fed is going to
hike and reduce its balance sheet.
MONDAY
PPI, CPI, Retail Sales, Michigan sentiment October preliminary. A bit of
data to chew on, but after the jobs report, even with the headline jobs
miss, the Fed will use the higher wages as its cue to continue with its rate
hiking bias with December said to be the next hike. Of course higher wages
are not inflationary if they are higher because there is plenty of work due
to a solid economy. Supply prevents bottlenecks.
It is interesting that San Francisco is finding out that the higher minimum
wage and the high cost of ACA compliance with restaurants is causing some of
the middle market favorites to go out of business. How shocking: in a
low-margin business, forced higher wage costs and forced higher insurance
costs are causing companies to go out of business. For every dollar
increase in the minimum wage, Kevin Alexander has found a $20K reduction in
independent restaurant profits (roughly 10% for the size of restaurants
being tracked). San Fran had a $5/hour hike. Carnage. The ACA added
another $72K of annual expenses (in 2015, and prices have risen since -- a
lot). That takes off another 30% of profits for these businesses. That is
50%? Who can survive that?
Late today it is reported that the President met with Schumer and another
deal of sorts was struck to put in place executive orders re rolling back
some parts of the ACA to make it easier to group together through
"association health plans" and the like, making a year or two deal that
ultimately leads to block grants to the states. We will see.
At the same time Trump tweets of implied war with N. Korea, nothing that
Presidents have talked to NK for 25 years but it has not worked; 'sorry, but
only one thing will work' he tweeted.
Okay, some positives, some not so positive. Status quo I suppose.
Lots of talk about an overdone market with Way too low volatility that
surely must lead to a selloff it is said. Again, a selloff will come, but
look at how the indices have acted of late: RUTX, SP400 on big runs and are
now resting. SP500, DJ30, NASDAQ had rested but then last week they started
back upside with nice rallies.
Put another way, there is virtuous rotation ongoing as an area rallies to
gains, then rests in place or with modest tests while other parts of the
market rally. That means some new money still coming into stocks because if
not, money would be pulled from one area and put into another, with the
former falling while the latter rises.
For now the action in the indices is very good and the action in leadership
is very good. They are moving up, resting, then moving up again. The
algorithms are still out there but thus far the new highs have not been
sold. Can still happen, but we also see a lot of really solid setups --
still -- and we are looking at more upside this week given the action still
shows plenty of leadership with money moving into the market to drive areas
higher.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6590.18
Resistance:
Another new high Friday.
Support:
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
The 50 day EMA at 6397
The 2016 trendline at 6342
6341.70 is the all-time high from early June.
6300 is the mid-June interim high
6205 is the late May all-time high
The 200 day SMA at 6051
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
5661 is the late January upper gap point
5601 is the January lower gap point
S&P 500: Closed at 2519.36
Resistance:
New high Friday.
Support:
2515 is the upper channel line from the March 2009 uptrend channel
2491 is the August all-time high
The 50 day EMA at 2486
2480 the late August and early August highs
2453.46 is the June prior all-time closing high
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 2396
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 22,773.67
Resistance:
Support:
22,420 is the September high
The 10 day EMA at 22,562
22,179 is the August 2017 all-time high
The 50 day EMA at 22,109
22,086 is the mid-August lower high
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 21,097
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 |
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