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InvestmentHouse - Market Waiting on the Inauguration? (Weekend Newsletter)

http://www.investmenthouse.com/frblog.php

- Despite a flurry of financial earnings, status quo remains as NASDAQ leads
the market.
- Status quo perhaps, but signs the buyers are still there even after the
lateral tedium.
- December Retail sales rally 0.6% headline, but without autos and the
gasoline that goes in them, sales were flat.
- Fake news weary: so many headlines, so many conflicting stories, a sort of
'had enough' numbing in the markets. That may not be such a bad thing.
- Retail sales disappoint huge.
- Many early rally leaders are holding up but not yet moving while
Semiconductors show some renewal and more stocks from many areas improve
their patterns. Hope for a continued rally after all.
- Market waiting on the inauguration?

Friday the status quo continued: NASDAQ moved to a new high, DJ30 missed
out, while SP500, SP400, RUTX, and SOX traded in their ranges just below
their highs.

SP500 4.2, 0.18%
NASDAQ 26.63, 0.48%
DJ30 -5.27, -0.03%
SP400 0.54%
RUTX 0.81%
SOX 0.71%

VOLUME: NYSE -6%, NASDAQ -11%. Volume was 3-day holiday light as the
indices mostly posted gains. Not much of an indication other than the
continued bullish bias in the absence of any other catalyst.

A/D: NYSE +1.7:1; NASDAQ 2.3:1.

It is getting tedious, the lateral range bound move just below the prior
highs. Outside, of course, NASDAQ. We are playing some of those FAANG and
other NASDAQ stocks higher, but for most of the market the pullback remains.

Friday showed some signs of life, and Thursday as well. First, you had a
selloff on Thursday that took the small and midcaps lower, SP500 as well.
The small and midcaps tapped the bottom of their 5-6 week ranges. Then the
bids returned and bounced stocks right back up to the upper part of the
range. After 5+ weeks of plodding laterally in lethargy, buyers still
showed up to buy when the market sold to the bottom of the range. That
shows the buyers are still ahead at this time, even after the sleepwalk.

Second, there were some interesting moves from leaders and wannabes.
Transports started to rise off their tests. Some semiconductor leaders
started to struggle on the week, but late week several improved their
outlook. Other areas, several areas, not necessarily in the leadership that
led the post-election move, have put together some pretty interesting
patterns. China stocks started to move nicely along with some biotech.
Gold stocks and other downtrodden and forgotten stocks are trying to turn
the corner. Money many be slowly accumulating during the 5 week range given
the look of some of these patterns. That is good given other areas such as
oil had looked so good but started to have issues the back half of the week.

Thus I am looking at the new week with just a bit of optimism for the
upside. It is still a Missouri 'show me' market, meaning the stocks have to
show the breakouts and make them stick. The plays for the weekend are a
rather eclectic mix, leaning toward the semiconductors but also representing
telecom, China, metals, software. If they make the breaks, that shows the
market rally has some broader support versus the very narrow move of NASDAQ
the past two weeks while everything else was stymied in a lateral range.

Friday we picked up some CAVM in chips and some more NFLX as it broke
higher. Closed PDS as it broke lower. The oil-related stocks are on the
bubble in several cases as we enter the new week. If other areas we noted
perform, it will be instructive if oil and other early move leaders hold
their gains or are sold. Rotation is good for a rally, but the better type
of rotation is that where sectors pause while others move higher, then
return to rallying when the money rotates again. Many sectors have held
their ground the past 5 weeks, so that is encouraging. Now we see if they
rally with the new promising areas -- IF the rally does indeed resume.


MARKET

The range to nowhere continues but some of the indices show signs of buying
still, and good individual stock setups supports the idea buyers still want
to push higher. At the same time, DJ30 is still churning on high volume.
NASDAQ's move is almost frighteningly narrow though it got a bit broader
Friday. Getting to the point where you would expect to see the range make a
move, but look back at September to early November: range-bound for 8 weeks
and that was after 7 weeks just ahead of it. The only thing to do in this
situation is keep alert, keep positions neat and trim, keep a watch on
leaders and potentially up and coming sectors, and be ready to act of they
break higher out of a range as in early November.

CHARTS

NASDAQ: Another all-time high as NASDAQ is the most recent darling as the
FAANG and a few other big name tech stocks rally. FB, AMZN, NFLX rallied
while AAPL, GOOG took a personal day. That was enough to post half percent
gains for the tech index.

RUTX: Biggest gainer on the Friday session but that leaves RUTX still
solidly entrenched in its 5 week lateral range along the 20 day EMA. Sold
to the bottom of the range on the week, tested deep Thursday and undercut
it, but recovered. It is holding and started to rebound. Now will it
continue and then make a break?

SP400: Very similar to RUTX and SP500, the midcaps are in a sixth week of
consolidation in a 40 point range from 1660 to 1700, bumping at a new high.
Currently in the upper half of the range. MACD is lower. What does it
mean? For now the upside momentum has waned but there are no real sellers.
Indeed as with RUTX, it was sold Thursday and fell to the bottom of the
range just to be bought. That shows you there are still buyers ready to move
in even after 6 weeks of lethargy.

SP500: Tested lower Thursday, rebounded back to the top half of the 5 week
range. Friday a modest bounce tapped the top of the range, faded slightly.
So, the large caps are at the top of the range on lower MACD. Yes, momentum
has slowed but the buyers are still ready, at this point, to pick up stocks
on a dip. The next logical question are they gaining strength such that
they can push a breakout?

DJ30: Very similar action, now 5 weeks into a rather tight lateral range
with a bottom at 19,750 and a top at . . . just below 20K. MACD still
dropping suggesting waning momentum -- but that can be deceiving in these
lateral moves. If there is a second high that is on lower MACD, that is a
more negative indication. If it elongates like we are seeing, not so much.
There is that high volume taking it to nowhere, and that is churn, an
indication of unloading stocks. That makes this a bit inconsistent with the
other indices as it is more an indication the move is running out of gas,
being undermined as sellers sell as fast as buyers are buying, unloading a
lot of stock.

SOX: Bounced off the 20 day EMA last week, but failed to really make a
serious move. SOX posted a higher high three weeks back but MACD did not;
that is a more accurate sign of waning momentum than as on DJ30 as noted
above. It looked as if chips were in trouble, but many key names held on
just find, others recovered, and still others made upside moves. SOX is an
important indicator, and if that downside move was just a head fakes -- as
many of the moves suggest -- that is a positive for the overall market.


LEADERSHIP

Semiconductors: Some good moves on the week, some good recoveries. QRVO
came out of the bottom of its range to surge, MXL came to life, and LRCX
broke to a higher high Friday. AMAT continues as a leader. MU is hanging
in, SMTC, SLAB look quite solid. Not all is candy and nuts; AMD is still
fading, XLNX is challenged to hang on.

FAANG: FB again rallied and NFLX made a new break higher. AMZN put in a
Friday gain on top of a strong week. GOOG, AAPL rested.

Big tech: Holding on in most cases, e.g. MSFT in its narrow range, while
others such as JNPR struggled.

China: Still looks solid. YNDX in a nice 10 day EMA test of its prior
move. NTES in a great little pullback. BABA is very similar as is BIDU.

Transports: Could be starting the rebound. CSX continues as it has already
made its move, but others could be starting. Trucking is moving, e.g. SAIA,
ODFL breaking higher Friday. Airlines, not so much yet.

Financial: Lots of earnings hit and at least they avoided selling off. Sure
the bald headed guy on CNBC was touting the results, but BAC, BLK, WFC
missed on their metrics. Again, however, they did not fall so we will see if
they can resume the higher out of their flat lateral ranges.


MARKET STATS

NASDAQ
Stats: +26.63 points (+0.48%) to close at 5574.12
Volume: 1.805B (-11.42%)

Up Volume: 999.11M (+324.45M)
Down Volume: 588.04M (-481.96M)

A/D and Hi/Lo: Advancers led 2.34 to 1
Previous Session: Decliners led 1.93 to 1

New Highs: 153 (+65)
New Lows: 19 (-6)

S&P
Stats: +4.2 points (+0.18%) to close at 2274.64
NYSE Volume: 754.3M (-5.56%)

A/D and Hi/Lo: Advancers led 1.67 to 1
Previous Session: Decliners led 1.5 to 1

New Highs: 128 (+44)
New Lows: 10 (-7)

DJ30
Stats: -5.27 points (-0.03%) to close at 19885.73


SENTIMENT INDICATORS

VIX: 11.23; -0.31
VXN: 13.34; -0.52
VXO: 10.62; -0.42

Put/Call Ratio (CBOE): 0.92; -0.15

After a day back over 1.0 on the Thursday intraday selling the ratio fell,
but still is high overall, indicating still plenty of put protection buying
as the market moves laterally. At this juncture, that is starting to look
as a positive as the funds are still worried about selling enough to
continue buying protection.


Bulls and Bears: Well, back down and quite a drop in bulls, moving below 60
and below the prior week's 59.8 reading. Typically, however, the damage has
been done once 60 is broached.

Bulls: 58.6 versus 60.2 versus 59.8

Bears: 18.4 versus 18.4 versus 19.6

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: 58.6 versus 60.2
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 versus 44.6 versus 49.0 versus 52.5 versus 55.9
versus 56.7 versus 56.2 versus 54.3 versus 52.9% versus 53.9% versus 54.4%
versus 52.5% versus 47.1% versus 41.6% versus 47.5% versus 45.9% versus
47.3% versus 45.4% versus 35.4% versus 40.2 versus 39.2

Bears: 18.3 versus 18.4
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 versus 22.6 versus 22.8 versus 20.6
Versus 20.2 versus 20.0 versus 20.9% versus 21.2% versus 21.6% versus 23.3%
versus 24.7% versus 24.5% versus 23.8% versus 23.2% versus 23.5% versus
23.8% versus 23.7% versus 24.0% versus 21.7% versus 21.6% versus 21.7 versus
20.6% versus 21.7% versus 27.8% versus 27.8% versus 28.9% versus 27.8%
versus 30.3% versus 35.4%


OTHER MARKETS

Bonds (10 year): 2.393% versus 2.358%

Historical: 2.358% versus 2.365% versus 2.38% versus 2.962% versus 2.42%
versus 2.357% versus 2.45% versus 2.448% versus 2.42% versus 2.48% versus
2.51% versus 2.56% versus 2.54% versus 2.55% versus 2.54% versus 2.564%
versus 2.544% versus 2.59% versus 2.59% versus 2.52% versus 2.473% versus
2.475% versus 2.471% versus 2.40% versus 2.349% versus 2.39% versus 2.396%
versus 2.394% versus 2.454% versus 2.388% versus 2.30% versus 2.31%. versus
2.36% versus 2.355% versus 2.317% versus 2.30% versus 2.34% versus 2.297%
versus 2.219% versus 2.22% versus 2.23% versus 2.14% versus 2.077% versus
1.867% versus 1.83% versus 1.778%


Dollar: Landed on the 50 day MA's last week as other countries intervened
to support their currencies. They cannot keep that up forever, the US looks
stronger and with the Trump growth policies planned it will likely be
stronger. Thus the dollar is well-positioned to bounce.

EUR/USD: 1.06450 versus 1.0624

Historical: 1.0624 versus 1.05982 versus 1.0555 versus 1.0585 versus 1.05346
versus 105837 versus 1.0525 versus 1.03914 versus 1.05289 versus 1.05155
versus 1.04357 versus 1.04636 versus 1.0451 versus 1.04368 versus 1.04412
versus 1.0392 versus 1.0407 versus 1.0459 versus 1.0415 versus 1.05094
versus 1.0636 versus 1.06326 versus 1.05586 versus 1.06140 versus 1.07745
versus 1.07194 versus 1.07614 versus 1.06638 versus 1.06631 versus 1.0601
versus 1.0649 versus 1.05699 versus 1.066 versus 1.05910


USD/JPY: 114.473 versus 114.57

Historical: 114.57 versus 114.70 versus 115.811 versus 116.023 versus
116.923 versus 115.93 versus 116.46 versus 117.983 versus 116.739 versus
116.456 versus 116.793 versus 117.41 versus 117.413 versus 117.32 versus
117.537 versus 117.544 versus 117.835 versus 117.453 versus 117.941 versus
118.257 versus 117.397 versus 115.038 versus 115.058 versus 115.20 versus
114.23 versus 113.325 versus 113.993 versus 113.601 versus 113.52 versus
113.945 versus 114.19 versus 112.685 versus 112.44 versus 111.835 versus
113.14 versus 112.445 versus 111.129 versus 110.809


Oil: 52.37, -0.64. Oil dropped like a rock Monday and Tuesday, held the 50
day EMA and rebounded. Friday was a bit weak but oil held just over the
breakout point that is, after so many back and forth moves, somewhat porous.

Gold: 1196.20, -3.60. Showed a Friday doji after clearing the 50 day MA's
midweek. Not bad action but gold has not proved it can sustain the 3 week
rally and hold a break over the 50 day MA's. Those stopped it in September
and again in early November when it tried to recover.


TUESDAY

NASDAQ leads but the move is extremely narrow, the other indices locked in
5+ week ranges, unable to push higher. The tedium is here for certain as
the market watches the upcoming inauguration as well as all of the issues
swirling that have little to do with what is actually going to happen once
the new administration begins.

We hear China blustering about the US had better prepare for military action
if the US won't adhere to the 'one China' fiction. The factually bereft
rumor mill about the Russian connection, trade protectionism, and on and on.

All speculation and it is as if the market has said 'enough, I am going to
wait until the inauguration.' Often it is not the results of the event but
the start that is enough for the market. Ahead of the Iraq war the market
was at a standstill, but when the 'shock and awe' bombs started to fly, so
did the market. Sometimes it is not upside, but the point is if the market
idles during a swirl of stories and confusion, it will likely make its move
when the event finally begins. Oh yes, and don't forget earnings just
getting started.

As for the China comments, you can tell China has done its homework on The
Donald, throwing out its extreme negotiating point in the first salvo just
as outlined in Trump's 'The Art of the Deal.' Anyone who thinks China is
serious or is hand-wringing over what Trump says, you should go read that
book as well. You don't have to buy it if you don't want Trump to get any
royalties; just borrow it. Indeed, I think the country would have been much
more at ease in the election process if everyone actually knew something
about the candidates other than what the news reports. Most everyone in the
primaries and certainly the final two candidates have books out and you can
tell a lot about a person by not only what they write in a book but what
they include and don't include. But alas, the majority of the citizenry
gets its 'information' from headline snippets and 30 second stories that
barely get the headline out before they get the cue to move onto the next
non-story. But, I digress.

So, it makes sense with all of the speculation and supposition versus facts
in the news that the market is idling laterally. We have tightened up our
positions in anticipation of the triggering moment, at the same time still
picking up positions that look good, and having a lot of good looking plays
from many sectors at the ready for when the move occurs.

Now we see which way the market will break. Earnings might provide a
catalyst, but Friday they certainly were not for the financials. Beat or
miss they were status quo. While earnings will no doubt move individual
stocks, it may indeed be the inauguration that moves stocks as a whole,
getting the certainty of at least getting to the point some of the plans can
actually be executed.

What about the current economic data? Well, as usual, the feds love to
paint the data with glowing commentary, but also as usual, the facts don't
support it. Friday the December retail sales were issues, and the headline
at 0.6% looked good enough compared to the 0.2% in November.

Of course the details were bedeviling. If you take out autos and gasoline
sales as is always done by most serious economists, you get a 0.0% gain when
a 0.4% gain was expected! Outside of auto sales that were at a record pace
and now are expected to drop off, and gasoline prices that made up the bulk
of the December increase, you had NO increase in spending in December.
Recall there was supposed to be a late surge of buying after a weak
November. Did not happen. Much room for the new Administration to improve
despite the feverish legacy building ongoing right now.

So, with the sellers rarely showing any strength and the buyers returning on
each test of the range lows, we are still looking upside in terms of new
plays, but it is also still a 'show me' move upside as discussed before.
With the inauguration on Friday, it could still be another week of range
trading, but we are already seeing some stocks get out in front of a move.
As on Friday, we will get out there with them if they can hold the gains.

Have a great weekend and Martin Luther King Day!



SUPPORT AND RESISTANCE

NASDAQ: Closed at 5574.12

Resistance:

Support:
The 2016 trendline at 5458
The November prior all-time high at 5404
The 50 day EMA at 5404
The 50 day SMA at 5373
5340 is the September and October 2016 twin peaks
5287.61 is the September 2016 high
5271.36 is the August 2016 intraday prior all-time high
5231.94 is the 2015 all-time high
5170 is the October intraday low.
5162 is the early November peak, 5176 is the December intraday peak
The 200 day SMA at 5126
5100 from the April peak and early May peak
5042 is the March 2015 high
5008.57 is the early March 2015 post-bear market high
5007 is the 12/31 upper gap point from that big gap lower
4999 is the October upper gap point
4980 is the June 2016 peak
4969 is the April 2016 recovery high
4960 is the September 2015 intraday high, an important reversal point for
NASDAQ.
4920 is the lower gap point from mid-October 2015, the January 2016 lower
gap point
4916 is the mid-November 2015 low
4899 - 4902 from the September 2015 peak, July 2015 low
4894 is the September 2015 closing high


S&P 500: Closed at 2274.64

Resistance:
2277.53 is the December 2016 high

Support:
The 2016 trendline at 2255
The 50 day EMA at 2230
The 50 day SMA at 2219
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
2175 is the June 2016 high
The 200 day SMA at 2146
2135 is the May 2015 all-time high
2130 is the June 2015 peak
2126 was the April 2015 prior all-time high
2120 is the June 2016 peak
2119 is the September 2016 low; February 2015 intraday high
2116 is the November 2015 high
2111 is the April 2016 recovery high
2104 is the December 2015 high
2094 is the December 2014 high
2079 is the intraday all-time high from November 2014
2062 is the January 2015 lower high
2046 is the July 2015 closing low
2040 is the March 2015 closing low
2026 is the May 2016 low
2023 is the November 2015 low
2020 is the September 2015 intraday high
2011 is the September prior all-time high
1995 is the September 2015 recovery peak
1991 is the July 2014 high


Dow: Closed at 19,885.73

Resistance:
19,987.53 is the December 2016 high

Support:
The 20 day EMA 19,816
19750 is the lows of the December/January range
The 50 day EMA at 19,437
The 50 day SMA at 19,355
18,669 is the August 2016 all-time high
18,595 is the July 2016 peak
The 200 day SMA at 18,402
18,351 is the prior all-time high from May 2015
18,288 from March 2015
18,262 is the upper gap point from the Monday gap lower.
18,247 is the August 2016 low
18,168 is the April 2016 recovery high
18,100 to 18,181: interim peaks in the December 2014 to July 2015 range
18,016 is the June 2016 peak
17,992 is the early September low
17,978 is the November 2015 peak
17,960 is the October intraday low
17,600 is the rough bottom of the April to June range.
17,351 is the September 2014 all-time high.


ECONOMIC CALENDAR

January 13 - Friday
PPI, December (8:30): 0.3% actual versus 0.3% expected, 0.4% prior (no
revisions)
Core PPI, December (8:30): 0.2% actual versus 0.1% expected, 0.4% prior (no
revisions)
Retail Sales, December (8:30): 0.6% actual versus 0.7% expected, 0.2% prior
(revised from 0.1%)
Retail Sales ex-auto, December (8:30): 0.2% actual versus 0.6% expected,
0.3% prior (revised from 0.2%)
Business Inventories, November (10:00): 0.7% actual versus 0.6%
expected, -0.1% prior (revised from -0.2%)
Michigan Sentiment - Pre, January (10:00): 98.1 actual versus 98.5 expected,
98.2 prior (no revisions)

January 17 - Tuesday
Empire Manufacturing, January (8:30): 8.3 expected, 9.0 prior

January 18 - Wednesday
MBA Mortgage Applications, 01/14 (7:00)
MBA Mortgage Index, 01/14 (7:00): 5.8% prior
CPI, December (8:30): 0.3% expected, 0.2% prior
Core CPI, December (8:30): 0.2% expected, 0.2% prior
Industrial Production, December (9:15): 0.6% expected, -0.4% prior
Capacity Utilization, December (9:15): 75.4% expected, 75.0% prior
NAHB Housing Market , January (10:00): 70 prior
Net Long-Term TIC Flows, January (16:00): $9.4B prior

January 19 - Thursday
Initial Claims, 01/14 (8:30): 252K expected, 247K prior
Continuing Claims, 01/07 (8:30): 2087K prior
Housing Starts, December (8:30): 1193K expected, 1090K prior
Building Permits, December (8:30): 1217K expected, 1201K prior
Philadelphia Fed, January (8:30): 15.3 expected, 21.5 prior
Natural Gas Inventor, 01/14 (10:30): -151 bcf prior
Crude Inventories, 01/13 (11:00): +4.100M prior