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InvestmentHouse Weekend Market Summary

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

- Jobs beat handsomely with major revisions to benchmarks and of course seasonal adjustments. Stocks rally, until, as with the December report, they don't.
- Lots of jobs in the low end once more and no indication at all of the layoffs in the oil patch. The Jobs calculus remains a mystery.
- North America rig count plunges again.
- Indices press toward prior highs, reverse to close the week lower, but . . SP400 hangs onto a new high.
- Indices nearing their peaks in an important test of the most recent bounce in the trading range. Some major stocks have bounced but it looks as if just in relief.

Stocks started fired up. Jobs were better than expected, revisions were good, wages looked higher. Futures were flat but jumped on the jobs data. With a half hour to the open, however, they started to peel back, giving up over half the gains. Not a good omen for the session as traders recalled early January when stocks jumped on the December report then rolled over.

They may have recalled that, but stocks rallied at the open and into midmorning. Good recovery, a little not so high to higher action.

Now maybe the numbers behind the jobs headlines finally came home to roost or perhaps it was the ECB again taunting Greece, giving the country 10 days to basically capitulate or face the total brush off with images of bank runs, mass hysteria, street fighting . . . basically biblical type disasters.

Whatever the case, stocks rolled over as lunch started and plunged into the close. Just as Thursday ended with a sprint higher, Friday ended with a dive.

SP500 -7.05, -0.34%
NASDAQ -20.70, -0.43%
DJ30 -60.59, -0.34%
SP400 -0.35%
RUTX -0.27%
SOX -0.57%

VOLUME: NYSE +13%, NASDAQ -0.3%

A/D: -1.7:1 NYSE, -1.2:1 NASDAQ

It was not a massive rollover. The indices rallied nicely Tuesday and Thursday, and with the early upside move Friday they came closer to their previous highs. Indeed DJ30 came darn close before it started to backtrack and frankly the other indices are close enough where if the mood hit, sellers could force a turn back downside, the rebound having run its course.

Fridays action didn't say that was the story, but when in a trading range, a test toward the highs that rolls over deserves attention and a bit of caution the next week.

THE NEWS

TO VIEW THE ECONOMY SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Economy Summary Video

Jobs numbers show definite improvement if no change in quality.

We heard the Gallup CEO earlier this past week lamenting that the BLS and the American populace is looking at the wrong numbers. An unemployment rate at 5.7% (up from 5.6% in December) means nothing when 92+M working aged people are out of the workforce, 50% of the working age population is on disability, and 52% of the US is collecting food stamps. Instead, focus on the record low 44% who have full-time jobs of 30+ hours per week. A 'great' jobs report loses a lot of luster in that circumstance.

Did the January report work a change in the jobs mix? You be the judge. I can and will list the numbers, and there was improvement, particularly in numbers with the November and December revisions (+147K for those two months), but the same issues plague the creation: numbers are up, but the poor jobs quality continues. So much so that even with the participation rate climbing 0.1%, the number of unemployed and underemployed (the U6 unemployment rate), rose: people getting jobs but not the jobs they want, i.e. part-time, low paying jobs. There is also the issue of accuracy: virtually no job losses in the oil patch.

The Numbers:

257K versus 235K expected versus 325K December (from 252K).
November: revised to 423K

Unemployment: 4.7% versus 4.6% versus 4.6% prior. More people re-entering the workforce.

Hourly wages: 0.5% versus 03% expected versus -0.2% prior. Best jump since 11/2008.

U6: 11.3% versus 11.2%. Adding in the underemployed the rate moved higher.

Participation rate: 62.9% versus 62.8%.

Workweek: 34.6 versus 34.6 versus 34.6

Now, behind the headlines.

Participation rate: This past week we heard from some states telling how their unemployment rate is falling as they ended jobless benefits. No free money, no more freeloading. I don't care what people argue, if you pay extended benefits there will be people who do not work in lieu of getting benefits. I know some very well educated people who golfed every day until the benefits ran out, then went back to work. If you pay someone not to do something, they won't do it, even if the pay is less than if they were in the real world having to perform or get nothing.

Household survey: +759K in the labor force. Less the 267K more unemployed you have 492K added. Some definite improvement.

Wages: the jump to +0.5% from -0.2% was heralded, as was November, as the 'start of higher wages.' Really? How about the fact that 20 states implemented higher minimum wage levels to start 2015? Ah, that is how you fix low wages: MANDATE workers be paid more. Why stop there? Mandate prosperity. In any event, that mandated wage increase accounted for 0.3% of the 0.5% gain; without it, just 0.2% growth, keeping things basically at 0 growth-wise.

Jobs distribution:

Education: 46K
Retail: 46K
Leisure and hospitality: 37K (35K waiters and bartenders)
Professional business services (secretaries): 43K
Manufacturing: 22K
Construction: 39K

Once again, the lowest paying sectors produced far and away the most jobs. Thus wage gains reported were indeed resulting from increases in minimum wages, not an organic growth in wages via demand.

Manufacturing gap: Bartenders and waters versus manufacturing jobs: 1.387M (record low). Compare to January 1990 when manufacturing jobs outnumbers waiters and bartenders by 11.3M.

This will worsen as more in the machining areas servicing the oil and gas industry are laid off.

Can you believe the BLS?

The BLS already has a spotty history of making up numbers to fit the executive branch's needs. Pre-2012 elections the data was adjusted to make sure the unemployment rate was below 8%.

Seasonal and benchmark changes: This report saw massive changes to the 2014 data based upon further adjustments of the prior adjustments. January 2014 was adjusted very low due to the polar vortex. With the end of year adjustments, it was revised up to nearly 250K from the mid-100K level. Guess it wasn't an issue as first believed and as we reported it should not be. Worse weather in the early 1980's and the economy grew 4+% that quarter.

Energy jobs losses: The BLS reports -1900 jobs in January. Bloomberg reported 18,000 January layoffs, and Challenger Gray reported 21,322 with 19.8K in Texas.

It is rather clear now that the jobs report and indeed other economic data is simply a tool to influence voters. The news media now is in the influence business, not the news reporting business. Helicopters supposedly shot with rocket propelled grenades that were not (Brian Williams lie) to make a point, but the point is made with a lie. Yet, it is being accepted as okay. The government agencies, the news media, sporting teams; there appears to be no area where fabrication is absent and it appears that the US populace is okay with that. Have iPhone, a cell connection, an internet connection, a sub-prime car loan, a student loan you never intend to repay and indeed use for living expenses, and a disability check and you are doing fine my man.

I don't want to sound too pessimistic. The data shows some improvement and some truth: the unemployment rate rose as it should if more come to the market. The problem is there has been so many times the actual data has been adjusted away that the report's veracity is shot. We heard of the 'professionals' at the BLS who would never manipulate data at the time the allegations were made, and then, what do you know, those professionals actually did adjust the data to achieve a purpose. Unfortunately that purpose was not the truth regarding jobs.

THE MARKET

CHARTS

SP400: After moving to a new all-time high Thursday, a bit of backtracking Friday. On the low the midcaps undercut the prior peak, but they recovered enough ground close not with a new high, but they did hold the breakout over that December peak. Okay, good move to a new high but not MACD is thus far lagging on the move. Not fatal; it is a very small lag and can change quickly if SP400 continues this breakout.

DJ30: Came within 40 points of the early December interim high then reversed to a loss. Not a huge rollover, just a test near the prior peak that ran out of gas. After a strong Monday to Thursday move, it is okay it took a break to end the week. Makes some sense but at a critical point in the rebound and thus this coming week is important. Note volume was lower as DJ30 climbed this week.

SP500: Similar to DJ30, a good run through Thursday and indeed early Friday before it faded the Friday move. Matched the January twin peaks and stalled for the session. Got to within 10 points of the early December peak then faded. Still in the trading range, still decent but after this kind of move higher in the range you start watching the action when the prior highs get close.

NASDAQ: Rallied up to the upper trendline of its three month range, tapped it, then faded. Nothing major, but at the top of the range where it failed three times prior. Quite the track record and thus watching this week.

RUTX: Still well off the highs form 2014, but closing in on the late December peak. Tapped at it Friday them faded modestly. Working on it, following SP400. That works for now.

SOX: Still lagging. UP on the week with the indices, but less than impressive. Friday a move up through the 50 day SMA then a fade to near support. Very flat three month range. SOX is not out of the game, just needed a consolidation along with the rest of the market. At a key level, however, so as with the other indices, needs to be watched this week to see if this was just a pause.

LEADERSHIP

Chips: Despite SOX lagging (due to some big names), chips still performed well. ENPH, ANAD, MTSN, AFOP, NXPI.

Financial: Bounced nicely off the double bottoms, e.g. JPM, BAC (over the 200 day MA on big volume).

Social media: Riding good earnings. TWTR, LNKD. Well, not all, e.g. YELP.

Big Names: AAPL is still at the November high, threatening a double top. GOOG looks ready to break higher again. AMZN exploded. DIS surged on earnings.

Some others are up in a rebound and thus helped the market, but they may be done, and this may be a reason the indices struggle some next week.

MSFT, INTC, PG.

MARKET STATISTICS

NASDAQ
Stats: -20.7 points (-0.43%) to close at 4744.4
Volume: 1.975B (-0.31%)

Up Volume: 916.58M (-603.42M)
Down Volume: 1.09B (+592.18M)

A/D and Hi/Lo: Decliners led 1.16 to 1
Previous Session: Advancers led 2.77 to 1

New Highs: 107 (+13)
New Lows: 35 (-3)

S&P
Stats: -7.05 points (-0.34%) to close at 2055.47
NYSE Volume: 900M (+13.38%)

A/D and Hi/Lo: Decliners led 1.67 to 1
Previous Session: Advancers led 3.09 to 1

New Highs: 132 (-5)
New Lows: 15 (-5)

Dow/NYSE
Stats: -60.59 points (-0.34%) to close at 17824.29

SENTIMENT INDICATORS

VIX: 17.29; +0.44
VXN: 18.41; +0.23
VXO: 17.27; +0.97

Put/Call Ratio (CBOE): 1.02; +0.06

Bulls and Bears:

Bulls: 49.0% versus 53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5%. Sold on the market selling. Next week it will rise on the market gains. As volatile as the market itself.

Bears: 16.3% versus 16.3% versus 17.4% versus 16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9%. Back to the game of holding steady with bears underrepresented in the market.

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: 49.0%
53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5% versus 49.5% versus 51.5% versus 53.4% versus 56.5% versus 56.4% versus 55.5% versus 54.6% versus 47.0% versus 35.3% versus 37.8% versus 45.5% versus 47.5% versus 48.0% versus 52.5% versus 57.6% versus 56.1% versus 52.5%

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

Bears: 16.3%
16.3% versus 17.4% versus16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% versus 14.8% versus 13.9% versus 13.8% versus 14.9% versus 14.8% versus 15.1% versus 16.3% versus 18.2% versus 17.3% versus 14.1% versus 15.1% versus 15.3% versus 15.2% versus 14.1% versus 13.3% versus 15.1% versus 16.2%

Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.

OTHER MARKETS

Bonds (10 year): 1.94%. Bonds selling, rates jumping. Again.
1.81% versus 1.77% versus 1.78% versus 1.68% versus 1.67% versus 1.76% versus 1.73% versus 1.81% versus 1.82% VERSUS 1.80% versus 1.88% versus 1.86% versus 1.79% versus 1.83% versus 1.76% versus 1.84% versus 1.91% versus 1.91% versus 1.95% versus 2.02% versus 1.97% versus 1.94% versus 2.04% versus 2.12% versus 2.17% versus 2.19% versus 2.21% versus 2.25%

Oil: 51.67, +1.20. Bouncing off the Wednesday test of the initial break higher. Still a lot to prove with the 50 day EMA ahead. Recall that Wednesday a much larger than expected build in inventories (6+M bbl versus 3.7M bbl) sent prices lower. Friday we learned the North American rig count fell 87 rigs on top of the 94 the prior week. The North American count is down a whopping 1140 in the last 9 weeks.

Gold: 1234.60, -28.40. Plummeting to the 50 day SMA on the low.

$/JPY: 118.987 versus 117.56 versus 117.21 versus 117.58 versus 117.52 versus 117.40 versus 118.30 versus 117.54 versus 117.88 versus 118.45 versus 117.78 versus 118.49 versus 117.80 versus 118.82 versus 117.52 versus 115.928 versus 117.33 versus 117.77 versus 118.29 versus 118.50 versus 119.69

Wow. After the four week lateral move just below the 50 day EMA, a big upside break.

Euro/$: 1.1318 versus 1.1474 versus 1.1387 versus 1.1481 versus 1.1336 versus 1.1290 versus 1.1318 versus 1.1287 versus 1.1375 versus 1.1263 versus 1.1204 versus 1.1366 versus 1.1590 versus 1.1550 versus 1.1543 versus 1.1609 versus 1.1789 versus 1.1764 versus 1.1832 versus 1.1842 versus 1.1789 versus 1.1839 versus 1.1890 versus 1.1934 versus 1.2002 versus 1.2099 versus 1.2156

Big move higher off the 20 day EMA test.

MONDAY

FOMC. Check. Jobs report. Check. Earnings. Mostly check. Lots of news is in the bank so to speak. The indices have rallied again off the lows of the trading range, approaching the range top. Friday a move higher toward those levels and a modest fade.

With a lot of data now priced in, the next move tells much about the market. That is what I wrote back when the indices were finding the bottom of the range on the last selloff. Okay the bounce we were looking for has occurred, at least for the most part. Will there be some more upside then a rollover? Will some more upside reveal a breakout? Or will stocks just fall from the Friday close?

There are still some really good leadership plays from chips, tech, internet. Others are up on nice moves already and can test without rolling over. In short, there are enough stocks that can still rally and thus push the indices to and beyond the old highs.

That can happen, but is that a realistic expectation? SP500 is the poster child for volatility since the Fed ended QE in October. Five breaches of the channel in a market filled with volatility. As noted last week, volatility is the hallmark of a trend change. After a long move up or down, volatility represents a season change just as the weather gets wild when seasons change.

Thus, all the more reason to be cautious with a move higher that was on lower volume for the most part. Not all sessions, but there was stronger downside trade than upside. So, don't assume a break over the prior highs just because the indices have made it that far.

Of course, don't assume a break lower either just because the indices are in a range and are near the top after a week of upside. If the breakouts come, so be it.

We have several upside plays, many we have banked some gain on already, others not yet. On further upside that probes the prior highs but cannot make the break, we want to look at taking some more gain off the table. A very good week upside toward the range peaks, and if there is another try higher that starts to struggle, e.g. throwing tombstone doji or gapping upside to or through the tops and reversing, a good time to bank some gain. At the same time we have some new downside and some plays already on the report we can enter if there is that rollover that heads back toward the bottom of the range. This is, until proved otherwise, after all, only a trading range.

Have a great weekend!

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4744.40

Resistance:
4751 is the January 2015 lower high
4774 is the January high
4811 is the November 2014 peak (intraday)
4815 is the December 2014 market peak

Support:
The 50 day EMA at 4683
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
4563 and 4567 are the January lows
4547 is the December low
4486 is the July 2014 high
The 200 day SMA at 4484
4372 is the March 2014 high
The August low at 4321
4316 is the lower gap point from October 2014
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
4185, the May lower gap point
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13

S&P 500: Closed at 2055.47

Resistance:
2078 is the lower trendline from 11/2012
2062 is the January 2015 lower high
2076 is the all-time high from November
2079 is the intraday all-time high from November
2144 is the December 2012 up trendline

Support:
The 50 day EMA at 2033
2011 is the September prior all-time high
1991 is the July 2014 high
The 200 day SMA at 1979
1972 is the December 2014 low
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
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

Dow: Closed at 17,824.29

Resistance:
17,923 is the January 2015 lower high
17,991 is the early December interim
18,104 is the December all-time high

Support:
The 50 day EMA at 17,569
17,351 is the September 2014 all-time high.
17,152 is the mid-July post bear market high
The 200 day SMA at 17,092
17,068 is the early July 2014 peak
17067 is the December 2014 low
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,736 is the penultimate all-time high from May 2014
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
16,341 is the May low
16,334 is the August 2014 low
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,855 is the October 2014 low
15,739 is the December 2013 low

ECONOMIC CALENDAR

February 6 - Friday
- Nonfarm Payrolls, January (8:30): 257K actual versus 235K expected, 329K prior (revised from 252K)
- Nonfarm Private Payr, January (8:30): 267K actual versus 225K expected, 320K prior (revised from 240K)
- Unemployment Rate, January (8:30): 5.7% actual versus 5.6% expected, 5.6% prior
- Hourly Earnings, January (8:30): 0.5% actual versus 0.3% expected, -0.2% prior
- Average Workweek, January (8:30): 34.6 actual versus 34.6 expected, 34.6 prior
- Consumer Credit, December (15:00): $14.8B actual versus $15.0B expected, $13.5B prior (revised from $14.1B)

February 10 - Tuesday
- Wholesale Inventorie, December (10:00): 0.2% expected, 0.8% prior
- JOLTS - Job Openings, December (10:00): 4.972M prior

February 11 - Wednesday
- MBA Mortgage Index, 02/07 (7:00): 1.3% prior
- Crude Inventories, 02/07 (10:30): 6.333M prior
- Treasury Budget, January (14:00): -$10.3B prior

February 12 - Thursday
- Initial Claims, 02/07 (8:30): 285K expected, 278K prior
- Continuing Claims, 1/31 (8:30): 2405K expected, 2400K prior
- Retail Sales, January (8:30): -0.5% expected, -0.9% prior
- Retail Sales ex-auto, January (8:30): -0.5% expected, -1.0% prior
- Business Inventories, December (10:00): 0.2% expected, 0.2% prior
- Natural Gas Inventor, 02/07 (10:30): -115 bcf prior

February 13 - Friday
- Export Prices ex-ag., January (8:30): -1.2% prior
- Import Prices ex-oil, January (8:30): -0.1% prior
- Mich Sentiment, February (10:00): 98.5 expected, 98.1 prior