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InvestmentHouse Weekend Market Update:

http://www.investmenthouse.com/weekendmarketsummary.htm

- Sellers leave early for holiday, stocks continue rebound through Friday.
- Growth sectors again show more strength with NASDAQ making an important higher high.
- Leadership shows some old faces, new faces, and new old faces.
- VIX breaks below range. Lions, tigers and bears, oh my.
- The Fed doesn't' see any inflation, it just, as we do, feels it.
- The rally about nothing. Most missed it and are pushing it higher or waiting for an entry.

The rally about nothing continues.

We thought we would see some sellers return Friday afternoon given the stocks indices put in a surprisingly solid week that saw some big NASDAQ 'names' return to the leader board along with some of the same names that helped keep the indices from collapsing. Seems the sellers left for Memorial Day weekend early, leaving stocks to rise into the close.

New closing high for SP500 but once again large cap NYSE indices were not the session leaders. The honor again went to growth, RUTX and SOX in particular. After NASDAQ put in a higher recovery high Thursday, SOX did the same Friday. RUTX and SP400 both made significant moves (through 200 day and the trendline, respectively), though no higher recovery highs for them.

SP500 8.04, 0.42%
NASDAQ 31.47, 0.76%
DJ30 63.19, 0.38%
SP400 0.67%
RUTX 1.11%
SOX 0.96%

Volume expectedly shrank: -5% NYSE, -16% NASDAQ

A/D not bad: NASDAQ 2.8%, NYSE 2.1:1.

THE MARKET

THE CHARTS

NASDAQ: Nice rounded bottom the past 7 weeks, clearing the April peaks that marked the prior recovery high. Solid advance even if no volume, rising the backs of those same big names that really got this recovery move underway when they decided to rally.

SP500: New closing high. No volume, but new closing high. MACD is not at a new high with price so you always have to watch for a possible reversal on no volume and a lower MACD.

DJ30: Cleared the April high, still below the early May high. Important test ahead of course, but still trending nicely higher.

RUTX: Broke higher through the 200 day MA, its next important test. Still a scary pattern with the 50 day EMA just overhead that stopped it twice, once in April and again in May. Always harder breaking back through.

SP400: Scary pattern as well, but cleared the lower trendline after putting in a higher low. The uptrend continues though at a lower range.

SOX: Nice clean break through the trendline and also clearing the early May high hit just before SOX fell to test the 50 day EMA. For the third straight time SOX tested the 50 day, undercut it a session, but then recovered nicely.

LEADERS

The big names were at it again, pushing NASDAQ into a leadership role, but the smaller issues also enjoyed another great session.

AAPL, BIDU, GOOG, PCLN, TRIP posted solid gains.

Internet based: At it again. BIDU, TRIP, Z, TRLA, PCLN

Electronics: AFFX, CAVM, MXWL, OVTI, PSEM

Telecom: IDCC, MBT, MITL

OTHER MARKETS

Euro/Dollar: Surged to the 200 day SMA after a solid Thursday started the upside move again.

1.3632 versus 1.3654 versus 1.3687 versus 1.3704 versus 1.3170 versus 1.3698 versus 1.3716 versus 1.3713 versus 1.3702 versus 1.3754 versus 1.3853 versus 1.3914 versus 1.3928 versus 1.3878 versus 1.3875 versus 1.3865

Dollar/Yen: Broke through the 200 day SMA on a nice move though not as wild as the dollar index.

101.98 versus 101.80 versus 101.37 versus 101.2895 versus 101.40 versus 102.65 versus 101.49 versus 101.52 versus 101.84 versus 102.27 versus 102.15 versus 101.73 versus 101.81 versus 101.53 versus 101.73 versus 101.68 versus 102.11

Bonds: Sold on the week but Friday saw bonds bounce up off a rather normal 20 day EMA test for this move.

10 year: 2.53% versus 2.55% versus 2.53% versus 2.51% versus 2.54% versus 2.51% versus 2.50% versus 2.54% versus 2.61% versus 2.66% versus 2.62% versus 2.60% versus 2.59% versus 2.59% versus 2.61% versus 2.59% versus 2.67% versus 2.69% versus 2.70% versus 2.67% versus 2.68% versus 2.69% versus 2.73% versus 2.71% versus 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79%

Oil: 104.36, +0.53. Right back up to the prior two highs in the range and now we see if there is a breakout or another roll lower. I saw a report of something like 1245 straight days of gasoline averaging over $3/gallon. Good thing wages are rising so nicely to cover for that. Oh yea, they aren't as average weekly wages continue to fall in this 'recovery.'

Gold: 1291.60, -3.4.

MARKET STATISTICS

NASDAQ
Stats: +31.47 points (+0.76%) to close at 4185.81
Volume: 1.52B (-16.16%)

Up Volume: 1.07B (-240M)
Down Volume: 401.22M (-97.47M)

A/D and Hi/Lo: Advancers led 2.82 to 1
Previous Session: Advancers led 2.06 to 1

New Highs: 58 (-5)
New Lows: 38 (-9)

S&P
Stats: +8.04 points (+0.42%) to close at 1900.53
NYSE Volume: 473M (-5.02%)

A/D and Hi/Lo: Advancers led 2.13 to 1
Previous Session: Advancers led 1.82 to 1

New Highs: 138 (+5)
New Lows: 56 (-5)

DJ30
Stats: +63.19 points (+0.38%) to close at 16606.27

SENTIMENT INDICATORS

VIX: 11.36; -0.67
VXN: 13.45; -0.75
VXO: 11; -0.32

Much was made of the VIX breaking below the trading range of the past year, approaching the quick dip from March 2013. Surely this will bring down hellfire and ruin upon the market.

It did this in March 2013 as noted. The market cruised higher. A low VIX CAN mean a selloff is coming, but it is certainly no guarantee one is coming.

VIX can show you short term fluctuations in a trending market. It is best, however, at extremes (as are all indicators, really). Extreme selling that sees it spiking. Rising as the stock market rises to new highs. That latter is the most worrisome and accurate warning VIX shows: if it rises as stocks rise then turmoil underlies the market's rise as money is moving out and options are betting on some serious movement. That is not happening now.

Put/Call Ratio (CBOE): 0.76; -0.11

Bulls and Bears:

Bulls up again, getting closer to levels that have upended upside moves: 57.2% versus 55.1%

Bears fade further: 18.3% versus 19.4%

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.

Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 57.2% versus 55.1%
55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 18.3% versus 19.4%
20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

Background: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.

TUESDAY

During and after market hours we watched several stations commenting on the rally. No one believed in it, and it appeared from the statements most were caught off guard by it and thus not in it. Dennis Gartman again said his group erred in their market direction call and now is looking for entries as he feels the wall of worry is enough to keep it moving. Okay, get ready to bail . . .

Reminds me of the 'Seinfeld' episodes where they wrote the pilot 'Jerry,' the show about nothing. The rally about nothing. Can't be the economy. Can't be the Fed as it is tapering. Overseas economies are worse than ours. Bonds are rallying. The rally about nothing.

It's a show about . . . nothing.

Point 1: many missed the move, they are now helping push it up, and on a dip, they might indeed provide more capital to push stocks even higher.

Point 2: This is EXACTLY why we play what the stocks tell us to do, not what the pundits or our guts say. Recall last weekend I said GOOG looked as if it was time to buy. Monday it gave us the entry and it has rallied since. TRIP, PCLN, etc. are also moving as their patterns showed a turn.

Now the question is how far they run. No volume but new highs, some very robust patterns and moves in progress. We could indeed see more upside this coming week barring some weekend blowup somewhere.

For new positions we will look and see what if anything is left to buy, but after this kind of upside, entering is riskier. So, we do as usual and look at some possible downside setups where maybe new highs were hit on no volume and weak MACD. Always need to be ready for the possibilities, even if our guts &/or Brains say the opposite. If it is a possibility, the market can do it, and when everyone is sure it won't, then watch for it. Doing that helped us catch some good moves early and we were letting them run Friday.

That is how we can maybe take a rally that is about nothing and make it something, i.e. money, for us.

Have a great Memorial Day weekend and remember why we have the holiday.

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4185.81

Resistance:
4246.55 is the January 2014 peak
4277 is the March lower gap point
4289 is the July 2000 recovery high
4344 is the lower November 2012 trendline
4372 is the March 2014 high

Support:
The 50 day EMA at 4136
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
The 200 day SMA at 4014
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.

S&P 500: Closed at 1900.53

Resistance:
1902 from early May is the intraday all-time high.

Support:
1897 is the prior all-time high hit in April 2014
1894 is the December 2012 up trendline
1883.57 is the early March high.
The 50 day EMA at 1869
The December and January highs at 1848
1839 is the lower trendline from 11/2012
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
The 200 day SMA at 1791
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point

Dow: Closed at 16,606.27

Resistance:
16,632 is the April 2014 all-time high
16,736 is the all-time high from May 2014
16,902 is a lower trendline off the 11/2012 low

Support:
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
The 50 day EMA at 16,426
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 15,906
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)

Economic Calendar

May 21 - Wednesday
- MBA Mortgage Index, 05/17 (7:00): 0.9% actual versus 3.6% prior
- MBA Mortgage Purchas, 05/17 (7:00)
- Crude Inventories, 05/17 (10:30): -7.226M actual versus 0.947M prior
- FOMC Minutes, 4/30 (14:00)

May 22 - Thursday
- Initial Claims, 05/17 (8:30): 326K actual versus 305K expected, 298K prior (revised from 297K)
- Continuing Claims, 05/12 (8:30): 2653K actual versus 2700K expected, 2666K prior (revised from 2667K)
- Existing Home Sales, April (10:00): 4.65M actual versus 4.66M expected, 4.59M prior
- Leading Indicators, April (10:00): 0.4% actual versus 0.5% expected, 1.0% prior (revised from 0.8%)
- Natural Gas Inventories, 05/17 (10:30): 106 bcf actual versus 105 bcf prior

May 23 - Friday
- New Home Sales, April (10:00): 433K actual versus 415K expected, 407K prior (revised from 384K)

May 27 - Tuesday
- Durable Orders, April (8:30): -1.3% expected, 2.9% prior (revised from 2.6%)
- Durable Goods -ex tr, April (8:30): -0.2% expected, 2.4% prior (revised from 2.0%)
- Case-Shiller 20-city, March (9:00): 11.8% expected, 12.9% prior
- FHFA Housing Price I, March (9:00): 0.6% prior
- Consumer Confidence, May (10:00): 82.7 expected, 82.3 prior

May 28 - Wednesday
- MBA Mortgage Index, 05/24 (7:00): 0.9% prior

May 29 - Thursday
- Initial Claims, 05/24 (8:30): 318K expected, 326K prior
- Continuing Claims, 05/17 (8:30): 2650K expected, 2653K prior
- GDP - 2nd Estimate, Q1 (8:30): -0.5% expected, 0.1% prior
- GDP Deflator - 2nd, Q1 (8:30): 1.3% expected, 1.3% prior
- Pending Home Sales, April (10:00): 1.0% expected, 3.4% prior
- Natural Gas Inventor, 05/24 (10:30): 106 bcf prior
- Crude Inventories, 05/24 (11:00): -7.226M prior

May 30 - Friday
- Personal Income, April (8:30): 0.3% expected, 0.5% prior
- Personal Spending, April (8:30): 0.2% expected, 0.9% prior
- PCE Prices - Core, April (8:30): 0.2% expected, 0.2% prior
- Chicago PMI, May (9:45): 60.3 expected, 63.0 prior
- Michigan Sentiment - Final, May (9:55): 81.4 expected, 81.8 prior