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InvestmentHouse Weekend Market Summary

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

- Expiration jolts some indices and stocks. Was it just an expiration thing?
- Some big names look a bit toppish, others look fine as the indices broke higher last week.
- All is well economically right? Don't look at incomes or capital investment.
- Still leaders performing well, setting up even as some look weary.

Was Friday just an 'expiration thing' or is something afoot in the leadership? Many leaders started last week with a bad Monday but recovered nicely as the early selling was bought. Friday, however, after gapping higher, many leaders reversed the move.

SP500 -0.96, -0.05%
NASDAQ -13.64, -0.30%
DJ30 13.75, 0.08%
SP400 -0.59%
RUTX -1.07%
SOX -1.19%

VOLUME: Definitely expiration as NYSE trade jumped 166% and NASDAQ 61%.

A/D: -1.5:1 NYSE, -1.9:1 NASDAQ

They did not collapse, but they gave back a good portion of the Wednesday to early Friday move, some giving back all of it, others giving back damn little. When you look at some big names such as NFLX, CMG, and BWLD, however, while they are still holding up, they are fighting to hang on in patterns that have turned toppish.

Thus even as SP500, DJ30, SOX, and yeah verily, NASDAQ, moved to new highs or new post-bear market highs, the market showed some serious issues that have festered, keeping the stock market from advancing as rapidly and as steadily as you would expect it to have done. Hence that less than satisfying move upside we have discussed on several occasions where stocks rally but then quickly stall and give back ground as money proves fickle and hops to another sector, leaving the prior one to stumble around without guidance until the money makes its rounds and returns. The trick is holding up while that quick trip around the market is made.

What am I talking about? Look at some good stocks that showed trouble Friday, if only in that day's action versus their patterns overall. CAVM, FFIV, MLNX, MOBI and many others started well after a good recovery on the week, but then could not finish out the week, instead gapping then reversing hard.

Again, perhaps Friday was just an expiration event as DJ30, SP500, SOX and even NASDAQ broke to higher highs when many, recall the billionaires, were anticipating declines. Sure the super rich are buying gold bars, but even so gold is falling. Is there manipulation of the gold market similar to the LIBOR scandal? Anyway, we are told that a lot of those 27.5 pound gold bars are being purchased as the very wealthy turn very scared about the future. When you look at the charts I show in the 'Economy' section and how the Federal government and the Fed's policies have impacted wages and investment (something we have declared all along), you can understand why they are worried.

Now I am not saying Friday changed the tone of the market. What it did do was throw up a caution flag. DJ30, SOX, SP500, NASDAQ all broke higher on the week, yet on Friday some sell orders really jumped in. Perhaps just positions being rolled out thanks to the indices moving up not down as many bet, but when you see that kind of reversal in some big names and volume as well, you cannot just assume it was expiration.

So, this week is the 'watch to see if the Friday reversal immediately gives way to a recovery upside.' My suspicion is that it will, that Friday was an expiration-related event that pushed stocks lower. The post-FOMC reaction suggests investors were comfortable with the Fed's 'I'll know when I see it' view toward what a 'considerable time' is re raising rates. Thus Friday really looks to be expiration related, but of course our beliefs don't necessarily translate into market facts.

THE MARKET

DJ30: The market leader last week in terms of its ability to break to new highs, overcoming a potential double top. Good upside volume as it broke higher. Friday it surged but then gave most of it back, showing a tombstone doji. After five days upside that can indicate a pause or a fade, but it was expiration and perhaps the Dow just gave some deference to the struggles that the growth areas were having on the day.

SP500: After clearing to a new high Thursday and adding to it Friday thanks to the action in financial stocks, the large caps also showed a tombstone doji, finishing modestly lower. As with DJ30, overcoming obstacles to a new high and likely just an expiration thing.

NASDAQ: Tested the 50 day EMA to start the week, a rather normal test albeit a bit sharp, after breaking to a higher post-bear market high. Nice recovery, surging upside Tuesday and as of the Friday open gap higher, it was right back up at the high. Many big name stocks flipped their action, however, and NASDAQ sold back into the range though holding the 10 day EMA. It is not in danger from this pattern though MACD is lagging a bit. The real issue is the action in some big names such as NFLX, AMZN, BWLD that are showing breaks lower or big rounded tops. If the big boys break there are issues. Then again, there is GOOG and AAPL that are still moving well, along with chips.

SOX: Speaking of chips, you have SOX also attempting to defy a potential double top a la DJ30. SOX started the week selling back to he 50 day EMA after matching the July peak. A furious Tuesday to Thursday bounce took SOX to a new breakout high. Friday it coughed up the entire Thursday move, putting it back inside the July range. KEY index moving into next week as to how the overall market responds.

RUTX: Really struggling and this is the worry ahead. RUTX rallied from the late July low, never making a higher high or matching the July high. It faded in September, but set up an ABCD pattern. It tried to break higher Wednesday and Thursday (totally failed to participate in the Tuesday move) but Friday was crushed. Not just giving up a day as the other indices but reversing and falling back through the 200 day SMA almost to a lower low. Small caps tend to foretell economic activity. Perhaps it is simply time for the small caps to fade in a market move, but the economics of this 'recovery' continue to show small business destruction as the economy bifurcates just as the socioeconomic dispersion of the US bifurcates thanks to FOMC and federal government policies.

LEADERSHIP:

Big Names: A split ticket. GOOG continued its surge. AAPL was off but holding gains. CMG is holding its gap but has a big rounded top look. AMZN still struggles even though it rebounded late in the week. PCLN bounced sharply last week, but hit the 20 day EMA and started to struggle. NFLX broke sharply lower and is trying to hold the 50 day EMA but does not look well. Some big names are struggling.

Tech: Some great moves last week (MSFT) and then Friday several reversed. Didn't kill them but the reversals were not pretty and something to watch to see if there is selling follow through. FFIV, SSYS.

Chips: Strong week though suffered some of the same issues as NASDAQ. Good moves or hanging in just fine (INTC, TXN, SWKS), while others reversed in ugly Friday moves (ALTR, CAVM, MLNX)

Financial: Off some Friday but that was after a strong week. JPM, GS, BAC, etc. all showing solid moves.

Transports continued to surge: KSU (rails), GLOG, or at least show some good patterns (UAL).

Industrial equipment: I guess the global slowdown is hurting, but then you have CAT plunging because of US sales falling the past three months. How can that be if, as we hear every day on the financial and news stations, if the US economy is so strong? TEX is trending lower as is CMI.

Drugs/Healthcare: Still trending higher. CELG bounced off the 50 day EMA, TGTX surged. Others are set up well, e.g. ANIP.

MARKET STATISTICS

NASDAQ
Stats: -13.64 points (-0.3%) to close at 4579.79
Volume: 2.784B (+61.26%)

Up Volume: 1.04B (-60M)
Down Volume: 2.11B (+1.461B)

A/D and Hi/Lo: Decliners led 1.89 to 1
Previous Session: Advancers led 1.49 to 1

New Highs: 98 (+7)
New Lows: 124 (+53)

S&P
Stats: -0.96 points (-0.05%) to close at 2010.4
NYSE Volume: 1.8B (+166.23%)

Up Volume: 1.87B (+110M)
Down Volume: 2.99B (+1.55B)

A/D and Hi/Lo: Decliners led 1.52 to 1
Previous Session: Advancers led 1.58 to 1

New Highs: 117 (-1)
New Lows: 101 (+14)

DJ30
Stats: +13.75 points (+0.08%) to close at 17279.74

SENTIMENT INDICATORS

VIX: 12.11; +0.08
VXN: 13.8; +0.29
VXO: 10.19; -0.31

Put/Call Ratio (CBOE): 0.83; -0.08

Bulls and Bears:

Bulls post a big drop after a big surge: 52.5% versus 57.6% versus 56.1% versus 52.1% versus 49.5%

Bears rise again: 15.2% versus 14.1% versus 13.3% versus 15.1% 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: 52.5% versus 57.6%
57.6% versus 56.1% versus 52.5% versus 49.5% versus 46.4% versus 50.5% versus 55.6% versus 56.5% versus 56.6% versus 60.6% versus 57.6% versus 60.2% versus 61.4% versus 62.6% versus 62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7

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

Bears: 15.2% versus 14.1%
14.1% versus 13.3% versus 15.1% versus 16.2% versus 16.2% versus 17.1% versus 16.2% versus 17.2% versus 15.1% versus 15.2% versus 16.1% versus 16.3% versus 17.2% versus 17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6%

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.

OTHER MARKETS

Bonds: 2.58% versus 2.63% versus 2.62% versus 2.59% versus 2.59% versus 2.61% versus 2.55% versus 2.54% versus 2.50% versus 2.47% versus 2.45% versus 2.45% 10 year.

It would seem bond investors were not so sanguine about the economy on Friday as they surged off of the sharp selloff of the past week, indeed filling the gap lower from just over a week back.

Oil: 92.42, -0.65. Gapped sharply lower to close at the closing level from two weeks back, and now will again attempt to hold the support at that level.

Gold: 1216.50, -19.30. Gold is on the plunge again, gapping lower after a short lateral respite from the prior selling.

$/JPY: 108.982 versus 109.17 versus 108.265 versus 107.13 versus 107.19 versus 107.34 versus 107.13 versus 106.80.

Faded some after a torrid run. Took a day off.

Euro/$: 1.2831 versus 1.2916 versus 1.2875 versus 1.2960 versus 1.2940 versus 1.2963 versus 1.2912.

The dollar took a breather Thursday and then was back at it to a new closing high on this leg Friday.

THE ECONOMY

More are waking up to the divergence in the US economy.

This weekend the New York Times joined in the growing number who are finally giving up and stating the obvious: the economy, despite the headlines we are fed, is not what it is said to be. We are told all of the jobs lost in the Great Recession have been recovered, but we learned a few months ago that the BLS made errors in its assumptions and we are still millions short. Even if that were not the case and you took the BLS data as true the most important demographic groups (25 to 54) are still MILLIONS of jobs short of 2007 levels. There are a lot of jobs in the lowest pay scales, i.e. service industry (read burger joints, Wal-Mart greeters); thank goodness for those as our seniors can live out their golden years with dignity working at low paying, menial jobs to make ends meet thanks to trusting financial advisors to keep them out of trouble and an FOMC that wants them eating dog food by keeping interest rates at 0%, now effectively for 15 years.

Bitter? No just sad. Also, wondering why it took them so long to join the party.

'Welcome to the party, pal!' -- John McClain, 'Die Hard' 1988

Those coming in late are blaming the Fed, but that is just part of it. They are having a hard time getting a grip on the fact that the federal government policies, this administration and the prior one two . . . three, are a major culprit. History is replete with examples of how moves to socialist and communist policies don't create the utopia where people can pursue lotus eating, the job they always wanted to try, and everyone lives happily ever after. Where is the USSR and all of the 'communist block?' China is forced to turn away from communism to survive. Someday it will simply be unable to continue placating the masses because, yes, it will run out of other people's money. Rome fell when it tried to become everything to everybody. People DO HAVE TO WORK. It is part of life to have to work and produce. This understanding dates back to ancient Greece in 'The Odyssey' and the story of the Land of the Lotus Eaters.

The line of people who are wealthy and got it because it was given them used to be very short. Almost everyone I know who has a lot of money earned it either working their butts off (and still do) or work very hard at keeping it. Of course with the federal government playing favorites with big corporations over small businesses and the Fed favoring those with financial assets over the majority of the US, the handout line has grown, both at the upper end of the economic spectrum and the lower end. It is the middle where most reside (or used to) that is getting crushed because THEY have to pay the bills. THEY are the ones who produce the 'other people's money' that Margaret Thatcher famously said drives socialism. As she noted, you always run out of other people's money, and we are at that stage now in the US.

We have built this economy on phony money and have hollowed out its economic power thanks to fiscal and monetary policies. Thus we have an inflated GDP that doesn't really measure what is going on in the US. In the history of governments that is an old trick: if the data gets bad, change how you calculate the data. It will fool the masses who are just headline readers.

I am constantly amazed by intelligent people who just accept what they are fed in the headlines even if it doesn't square with what they are experiencing. I see the mindset that they don't really think it can happen to them whether it be economic downsizing of their skill set or intrusion into privacy. The 'if you are doing nothing wrong you have nothing to fear' mindset is pervasive regarding the IRS scandal, the NSA scandal, etc.

The thing is, at some point it ALWAYS impacts you whether you are 'doing nothing wrong' or not. Why? Because the DEFINITION OF WHAT IS WRONG is changed by the powers that be just as they change how they calculate data. When did displaying religious beliefs become wrong? Our Supreme Court said if things can make someone uncomfortable then they need to be controlled. That was Justice Kennedy in an opinion discussing the display of religious items. Uncomfortable is the test of constitutionality? Hell, I am uncomfortable that I am taxed well in excess of 50% of what I make. How can that be a standard of free people with what our founders said were God-given rights? Oh, there I go, talking about God and making some people uncomfortable. So, I guess I cannot talk about that. I guess that also makes them not God-given because some people would be uncomfortable with the notion that a supreme being gave us rights.

But I digress. The point is that people are believing utter nonsense without questioning it. 4+% GDP? Really?

How can you have this kind of GDP growth with incomes in decline? You cannot. But we have changed the calculus and also allowed a small segment of our country to control most of the wealth. Thank you Federal government, thank you FOMC. Thank you US citizens for being sheep and letting these areas usurp our rights to hold them accountable.

The hollowing of the economy.

I have talked at length about the new three forms of capital investment that supplanted traditional investment in your business to grow it. Dividends, stock buy backs, mergers. Pay out the excess money the government policies give the big corporations to buy off the big shareholders. Buy back billions of dollars of stock with the profits the feds have given big businesses. That keeps stock prices high so earnings per share are higher without increasing sales (by reducing the number of shares outstanding) and that makes sure those running the company get their big bonuses. Third, don't invest and grow, buy up the smaller competition, thus further centralizing and consolidating market dominance, keeping barriers to entry high so no competition can enter and prices remain high.

Chart shows capital investment as a percentage of GDP less dividend payments as a percentage of GDP. Note how investment has plummeted and dividends have risen. Thus it is true, via the St. Louis Fed, our assertion that dividends (as well as buybacks and M&A) have displaced capital investment in the US.

If you buy the headlines, you are buying into America's arranged decline but you don't know it because you think everything is fine.

MONDAY

The large cap indices, particularly on the NYSE, look pretty solid. Breaks to new highs, testing Friday. Even NASDAQ looks pretty solid as well as it broke higher and faded but held decently. SOX is there as well.

What needs to happen is the Friday reversals in key stocks and some indices reverse themselves. That is a lot of reversing but if the Friday pressure dissipates, the upside continues.

RUTX is a real worry even if it is a bit of a longer term worry. As discussed above, the demise of small business is how the US economy will ultimately decline into mediocrity. It is already on the path. It doesn't have to be, we can change it, but the will and the knowledge base necessary to recognize that we actually have a problem is diminishing each year. I had a discussion this week about how we have lost hundreds of years of wisdom regarding freedom and economics in this country in just the last 30 to 40 years. We can reverse it, but with what they are teaching the kids about freedom and economics these days, the window is closing.

But I digress again. This week we are looking at upside and downside plays. Some of the big names are worrisome, and if they break we play them lower It is getting to be time for some of these stocks to form new bases and we want to be in on the initial sharp drops if they do start.

There are also still areas with stocks in good patterns and turning the corner in long bases of their own. New leadership often emerges when old leadership takes a break. Thus we are trying to play both sides of that equation, that balance sheet of the market so to speak.

Overall the market continues its advance and Friday was likely just an expiration thing. We will know soon enough by how the market reacts to start the week and by what stocks step up as others step off the front lines to take a breather.

Have a great weekend!

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4579.79

Resistance:
4610 is the September 2014 post-bear market high.
4672 is the lower November 2012 trendline

Support:
4486 is the July 2014 high
The 50 day EMA at 4491
4372 is the March 2014 high
The August low at 4321
4289 is the July 2000 recovery high
4277 is the March lower gap point
The 200 day SMA at 4270
4246.55 is the January 2014 peak
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
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

S&P 500: Closed at 2010.40

Resistance:
2011 is the all-time high

Support:
2007 is the December 2012 up trendline
1991 is the July 2014 high
The 50 day EMA at 1977
1953 is the lower trendline from 11/2012
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
The 200 day SMA at 1893
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
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 17,279.74

Resistance:

Support:
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
The 20 day EMA at 17,077
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
The 50 day EMA at 16,958
16,736 is the penultimate all-time high from May 2014
16,341 is the May low
16,334 is the August 2014 low
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
The 200 day SMA at 16,521
16,506 is the March 2014 peak
16,334 is the August 2014 low
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak

ECONOMIC CALENDAR

September 15 - Monday
- Empire Manufacturing, September (8:30): 27.5 actual versus 16.0 expected, 14.7 prior (no revisions)
- Empire Manufacturing, October (8:30)
- Industrial Production, August (9:15): -0.1% actual versus 0.3% expected, 0.2% prior (revised from 0.4%)
- Capacity Utilization, August (9:15): 78.8% actual versus 79.3% expected, 79.1% prior (revised from 79.2%)

September 16 - Tuesday
- PPI, August (8:30): 0.0% actual versus 0.0% expected, 0.1% prior (no revisions)
- Core PPI, August (8:30): 0.1% actual versus 0.1% expected, 0.2% prior (no revisions)
- Net Long-Term TIC Fl, July (16:00): -$18.6B actual versus -$30.2B prior (revised from -$18.7B)

September 17 - Wednesday
- MBA Mortgage Index, 09/13 (7:00): +7.9% actual versus -7.2% prior
- CPI, August (8:30): -0.2% actual versus 0.0% expected, 0.1% prior (no revisions)
- Core CPI, August (8:30): 0.0% actual versus 0.2% expected, 0.1% prior (no revisions)
- Current Account Bala, Q2 (8:30): -$98.5B actual versus -$114.5B expected, -$111.2B prior
- NAHB Housing Market , September (10:00): 59 actual versus 56 expected, 55 prior
- Crude Inventories, 09/13 (10:30): +3.673M actual versus -0.972M prior
- FOMC Rate Decision, September (14:00): 0.25% actual versus 0.25% expected, 0.25% prior

September 18 - Thursday
- Initial Claims, 09/13 (8:30): 280K actual versus 305K expected, 316K prior (revised from 315K)
- Continuing Claims, 09/06 (8:30): 2429K actual versus 2495K expected, 2492K prior (revised from 2487K)
- Housing Starts, August (8:30): 956K actual versus 1045K expected, 1117K prior (revised from 1093K)
- Building Permits, August (8:30): 998K actual versus 1054K expected, 1057K prior (revised from 1052K)
- Philadelphia Fed, September (10:00): 22.5 actual versus 23.5 expected, 28.0 prior (no revisions)
- Natural Gas Inventor, 09/13 (10:30): 90 bcf actual versus 92 bcf prior

September 19 - Friday
- Leading Indicators, August (10:00): 0.2% actual versus 0.4% expected, 1.1% prior (revised from 0.9%)

September 22 - Monday
- Existing Home Sales, August (10:00): 5.2M expected, 5.15M prior

September 23 - Tuesday
- FHFA Housing Price I, July (9:00): 0.4% prior

September 24 - Wednesday
- MBA Mortgage Index, 09/20 (7:00): +7.9% prior
- New Home Sales, August (10:00): 435K expected, 412K prior
- Crude Inventories, 09/20 (10:30): +3.67M prior

September 25 - Thursday
- Initial Claims, 09/20 (8:30): 300K expected, 280K prior
- Continuing Claims, 09/13 (8:30): 2470K expected, 2429K prior
- Durable Orders, August (8:30): -16.3% expected, 22.6% prior
- Durable Goods -ex tr, August (8:30): 0.7% expected, -0.7% prior (revised from -0.8%)
- Natural Gas Inventor, 09/20 (10:30): 90 bcf prior

September 26 - Friday
- GDP - Third Estimate, Q2 (8:30): 4.6% expected, 4.2% prior
- GDP Deflator - Third, Q2 (8:30): 2.1% expected, 2.1% prior
- Michigan Sentiment, September (9:55): 85.0 expected, 84.6 prior