InvestmentHouse - Stocks Wait on Storms, North Korea, Next Week (Weekend Newsletter)
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- Stocks opt to sit out Friday, wait on storms, North Korea, next week.
- North Korea supposedly set for another missile test, EFX drops a bomb of
its own admitting to a massive, all-encompassing data breach.
- Stock indices almost unanimous in showing good setups for the upside.
- Still leadership to push stock indices to new highs.
- Last week's lateral test gives us some more opportunities to play more
stocks on the next break higher.
The stock market sputtered to end the week, not selling off, but continuing
the weeklong post-holiday test of the upside move the prior week. Not a
feel-good end to the week, and with Irma ready to wreak havoc on Florida,
other storms in the wings, North Korea ready to launch another missile and
claiming to possess an EMP with America's name on it, and the dollar in a
complete freefall, no one wanted to step in front of the weekend with a lot
of bids.
Accordingly, the indices slid, but not in a major selloff. Indeed, DJ30,
SP400, and RUTX managed an upside close. SP500 was flat while NASDAQ
dropped 0.59% but held over the 20 day EMA on below average trade. SOX was
the albatross, but it held around the 20 day EMA as well.
SP500 -3.67, -0.15%
NASDAQ -37.68, -0.59%
DJ30 13.01, 0.06%
SP400 0.32%
RUTX 0.05%
SOX -1.25%
VOLUME: NYSE +2%, NASD -11%. NYSE traded moved back above average, NASDAQ
trade slipped below average for the first time on the week.
ADVANCE/DECLINE: NYSE -1.2:1, NASDAQ just positive.
Not a great finish to the week, not a flourish at the end, but perhaps that
is the better result. A lot of unknowns heading into the weekend, and a
rally might be the fodder for selling to start the following week. As it
is, stocks faded modestly all week, testing the prior week's nice break
upside. Indeed, even down to RUTX, they left themselves in good position to
continue the upside as the prior week's rally was consolidated, still
holding onto a good part of that move higher.
Of course, the indices will still have to break higher off this test and
prove they have something more than good looks, but they left themselves in
good position to do so. SOX was the albatross as noted, and some big name
chips struggled, e.g. AVGO, QRVO, AMD, XLNX, but as many others look quite
solid, both big names and smaller names. Did you see MVIS continue its
spike higher?
Outside of the chips, the China stocks held up well enough. Did you see the
truckers? Some solid moves from JBHT, WERN, ODFL. The rest of the
transports were at best wall flowers, but the truckers made up for them.
More on the leaders later. Suffice it to say they were not ripping higher
Friday, but they did not damage their position to continue higher this
coming week after this past week's pause.
NEWS/ECONOMY
Wholesale Inventories
Inventories: 0.6%
Sales: -0.1% versus +0.5% expected and +0.6% prior. Now down 4 of 5
months.
Inventory to sales ratio: 1.30, highest since 11/2016
Inventories were up, but with sales lower that is what happens. Not the
best case scenario. Down 4 of 5 months, sales are not burning up the
inventory. Okay, this looks somewhat recessionary, along with many other
indicators. But, we are told the economy is climbing higher and higher, so
who are we to stand in the way of that logic?
Equifax demonstrates the fragility of critical US systems.
One of the 'big 3' credit gods, Equifax was hacked in late July with the
records of 143M Americans stolen. Social security numbers, birth dates,
drivers license information -- basically a one-stop shopping spree for
credit thieves.
To make matters worse, two days after the breach three executives sold
millions of dollars worth of stock. Of course the company explains they knew
nothing of the breach when they sold, just unloading some shares.
Interestingly, the stock gapped lower on 7/27 inexplicably. It held the 50
day MA and recovered over the next few sessions. I was taught long ago that
this kind of inexplicable gap on no news indicates insider selling,
ostensibly when the insiders get some bad news on preliminary earnings, a
court or agency ruling, or say, a hack of the system. Then the news comes
out and you get the 14% loss as seen Friday.
The sad, tragic irony is that this is one of the companies given the golden
keys to all of our economic health, dispensing ratings as to whether we are
worthy of a so-called reasonable rate for borrowing versus the high-risk
pool or no loans at all. The repository of all our financial data and the
arbiter of our financial integrity gets its ass hacked. Then the weasels
running the place try to save their fortunes by selling the stock before
anyone learns of their ineptitude. If, like the banks, no one goes to jail
over this, this would actually be something worth taking to the streets
over.
If one of the 'Fort Knox' of our data is so badly hacked, it shows how
vulnerable ALL our systems are whether our financial and personal data or
the power grid, nuclear plants, military installations, the food supply, the
water supply, government systems, banking records, etc. It would appear the
ONLY reason we are not all individually hacked by now is that the hackers
feel that many of us are just not worth the effort to individually hack.
But, if the payoff is the entire working population of the US, well then
that is worth the effort. I hope the executives at EFX go to jail and are
forced to pay out all their salaries, bonuses, stock options, etc. in civil
actions as payment to all those whose data they failed to secure. But they
won't. Heck, even the 'conservative' AG Jeff Sessions has decided not to
pursue the IRS cads that were directly involved in the IRS being used as a
weapon against select groups. Justice in the US, if not already, has become
a sad farce.
You have to ask, after this, how can ANY credit rating agency honestly and
accurately assess ANYONE's credit when all working people in America had
their data stolen and can be the victim of identity theft at any point in
time? Colossal asses.
A new development today is a ransom demand for 600 bitcoin ($2.6M) was
received by EFX. The senders claimed to be just two guys trying to take
care of their families. They don't want to harm anyone they say, just need
to monetize the data they stole, data that turned out to have much more
information than they thought they would obtain. Aw, hackers with heart.
Just a couple of family men hustling to do right for their families. Aw
shucks.
THE MARKET
CHARTS
The prior week was a rally week. The past week was a decent test of that
rally. No pre-weekend, thumb in the eye of North Korea and Irma rally;
investors and traders apparently had enough adventure and would just wait
for the weekend and the storm to hit. That leaves the stock indices for the
most part still in good shape to continue the rally on this leg to a new
high, then we see what happens.
NASDAQ: Fell to the 10 day EMA Tuesday and spent the week working laterally
there. That keeps NASDAQ over the early June prior high and just off the
late July all-time high. Good rally, nice fade to test, now NASDAQ shows if
it can make the next break higher.
SOX: Similar action to NASDAQ, falling Tuesday, riding laterally along the
20 day EMA the rest of the week. Friday a tap near the 50 day MA's. SOX
broke higher from its June/August triangle the prior week, tested the
breakout this week. As with NASDAQ, now it shows if it can make the break
higher off the breakout test.
RUTX: A weeklong test of the two week rally off the August low. Sold on
Tuesday with the other indices, spent the balance of the week showing doji
over the 10 day EMA. Nice sharp rally, easy test, in good position to move
higher.
DJ30: DJ30 was on the way higher when Tuesday hit and it gapped lower and
sold to the 50 day MA. It spent the week there, but managed to stretch out
the pattern decently to keep it in the trend and thus in the game for a move
higher.
SP500: Same story, i.e. the selloff Tuesday after the rally the prior week
up through the 50 day MA. Holds the 50 day MA all week, working in a tight
range Wednesday to Friday. Higher low possibility still in the 2017
uptrend.
SP400: Ugliest of the group with a harder Tuesday drop that it never really
contained. Closed below the 200 day SMA Thursday, gapped lower Friday but
did manage a recovery back over the 200 day. Problematic in itself and
really so in comparison to the other indices.
LEADERSHIP
Biotech/Drugs: From the big names to the smaller names this group enjoyed a
good week. CELG, AMGN, BIIB all put in good moves on the week. Smaller
issues did fine, e.g. VCEL, ARRY. Others look good as IMGN has set up again
as has IMMU, CERS.
China Stocks: Solid week. SINA up nicely. YY broke higher once more.
WUBA, SOHU, BIDU look good.
Semiconductors/Electronics: Mixed Friday with some big names in some
trouble, e.g. AVGO. QRVO surged Thursday but could not hold the move, then
Friday dropped to the 20 day. NVDA is still sluggish. ON, MLNX still in
good shape to move. MCHP is solid but MRVL, after a good move, struggled to
end the week. Important group needs to hold and make its move.
FAANG: Decent on the week, not so much on Friday. FB faded back to the 10
day EMA. AAPL broke below the 20 day EMA after a week of testing and volume
moved up above average. AMZN still working laterally below the 50 day MA.
NFLX showed a solid move Wednesday, faded modestly Friday. GOOG sent the
week testing along the 50 day MA.
Software: Not a bad week with a recovery off some sluggish action. TTWO
broke to a higher high though was flattish Friday. GLUU tested but held the
10 day EMA. VMW putting in a nice test at the 10 day EMA after a new high.
Retail: Came to life Wednesday and then coasted to the weekend. GPS, KSS
showed good moves. DLTR enjoyed a solid upside week.
Transports: Great week for truckers continued Friday on top of the Thursday
gains: JBHT, ODFL, WERN. Rails not all that exciting and airlines are not
even taxiing to the runway.
MARKET STATS
DJ30
Stats: +13.01 points (+0.06%) to close at 21797.79
Nasdaq
Stats: -37.68 points (-0.59%) to close at 6360.19
Volume: 1.78B (-10.77%)
Up Volume: 654.41M (-392.625M)
Down Volume: 1.09B (+170.023M)
A/D and Hi/Lo: Advancers led 1.02 to 1
Previous Session: Decliners led 1.05 to 1
New Highs: 145 (-5)
New Lows: 42 (-13)
S&P
Stats: -3.67 points (-0.15%) to close at 2461.43
NYSE Volume: 801.2M (+1.84%)
A/D and Hi/Lo: Decliners led 1.19 to 1
Previous Session: Advancers led 1.05 to 1
New Highs: 123 (0)
New Lows: 53 (+15)
SENTIMENT INDICATORS
VIX: 12.12; +0.57
VXN: 16.07; +0.67
VXO: 10.76; +0.92
Put/Call Ratio (CBOE): 1.09; -0.04
Bulls and Bears: After the sharp decline in bulls the past month, they held
steady. Bears as well. A standoff, at least for now. A bounce then a
pause. The sides are confused, and that is not bad.
Bulls: 49.5 versus 49.5
Bears: 19.1 versus 19.1
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 49.5
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: 19.1 versus 19.1
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: 2.042% versus 2.105%. Debt ceiling lifted, talk of doing away with
the debt ceiling. All of that elevates bonds. Also, with Harvey, Irma and
who knows what other storms to follow, the notion of a Fed rate hike this
year is pretty much out the window. Thus bonds higher, yields lower.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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% 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: 1.20225 versus 1.19258. ECB holds rates, keeps QE at least
through year end, Draghi notes the currency needs watching so it does not
impinge growth. Yet, still, the euro rises.
Historical: 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 versus 1.14672 versus 1.13986 versus 1.14335 versus
1.14682 versus 1.13964
USD/JPY: 108.444 versus 109.132. Dollar sells back to the lows in the
range.
Historical: 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: 49.11, -0.05
Gold: 1354.00, +15.00
MONDAY
Lots of data on the week (PPI, CPI, Retail Sales, Empire Manufacturing) for
a market where most of the indices spent last week testing the prior week's
move. Further, IRMA will have made landfall and be working its way up the
east coast so there will be an idea of the damage. Thus far no North Korea
launch, but it is early.
The indices are set up to continue the move and make some new highs on
NASDAQ, SP500 as it did on the last rally before the test. They have
certainly put in the work and are in position, and there are good leadership
groups ready to go as well.
This is pretty technical as far as we are concerned. Good initial move off
the selling, a pause below prior highs, then a move to new highs and a bit
more, then the selloff comes again. Thus, looking for that continued move
off of this test.
New positions? We did pick up some more last week as the indices prolonged
the test and more stocks set up. If the move had continued upside of course
we would have bought some but not as many. Now that the test extended to a
week, there are stocks that are set up still that can make good sprints for
us upside in a run off this test, to new highs, and a bit beyond. Again,
viewing this as a technical move, taking advantage of the continued lateral
setup.
Have a great and safe weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6360.19
Resistance:
6450 is the early September high
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 6300
The 2016 trendline at 6244
6205 is the late May all-time high
5996 is the recent May 2017 low
The 200 day SMA at 5943
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 2461.43
Resistance:
2491 is the August all-time high
2498 is the upper channel line from the March 2009 uptrend channel
Support:
2453.46 is the June prior all-time closing high
The 50 day EMA at 2450
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 2368
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 21,797.79
Resistance:
22,086 is the mid-August lower high
22,179 is the August 2017 all-time high
Support:
The 50 day EMA at 21,717
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 20,805
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 |
