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Sunday, September 30, 2012 2:13:27 PM
InvestmentHouse Weekend Market Summary
http://www.investmenthouse.com/weekendmarketsummary.htm
- Stocks soften on the last day of the quarter, disrupting further window dressing, starting lower on Spain skepticism, worsening on more very weak US data.
- Thursday rebound falters but indices still above June up trendlines.
- Chicago PMI 'unexpectedly' breaks 50, jars mainstream media into saying business activity shrinking 'for first time' in 3 years. What?
- Confidence versus reality: Michigan Sentiment rises and Personal Spending outstrips negative disposable income. Mathematics dictates that cannot continue.
- Gasoline prices spike 18% in three days.
- Hydraulic Fracturing reduces US carbon footprint to the lowest in 20 years, surpasses Kyoto carbon reduction requirements at zero cost: free markets over regulation wins again.
- Friday pullback provides another shot at stocks that jumped away Thursday.
- New quarter will test QE3 resilience.
No follow through to the Thursday bounce but the indices hold their trends.
Something happened on the way to a second day of quarter ending window dressing. There was news, but it wasn't much to trip a solid move. Japan reported weak industrial production (-1.3%)? What is new about that? Some speculated there was some buyer's remorse after investors thought more about Spain's 'fall on the sword' austerity proudly announced Thursday. Interesting theories, but they really didn't explain the steady erosion in futures from the wee morning hours.
The US data release at 8:30ET turned out to be the low, but you could hardly say the fade stopped because of the data as it was not good to downright weak by the time the Chicago PMI hit a half hour into trade. Futures were recovering into the open and stocks were rising from the lower start when the Chicago PMI came in below 50, in contraction, for the first time in three years.
That news killed the rebound attempt, sending stocks to new session lows. Midmorning they recovered and the move continued into early afternoon. A low to high move looked to be in place, but after lunch the renewed bids disappeared. The indices slid toward the close, holding above session lows but still sporting losses averaging 0.5%. Not a harsh selloff but certainly not a continuation of the Thursday bounce toward quarter end.
SP500 -6.48, -0.45%
NASDAQ -20.37, -0.65%
DJ30 -48.84, -0.36%
SP600 -0.71%
SOX -0.83%
Disappointing way to end the quarter, but SP500 is still holding its up trendline and indeed all of the indices are above their June trendlines. That does not mean, however, there is no room for some more consolidation near term as VIX moves a bit higher, but overall leadership still looks good with certain sectors and stocks in position to move even as some of the bigger names that led the last leg of the rally higher look to test further.
THE NEWS
US economic data dominated the news flow, and once again it was a question of apparent consumer confidence versus unquestionably bad, though to the administration 'on the right track' data. With this kind of data, data that directly impacts consumers' ability to act upon that confidence, you have to wonder just how long this bump in confidence will last. It is as if the consumer does not comprehend the fiscal cliff, just how bad the Libya incident was on many levels, the precarious position of our economy and country. As Galadriel said in 'The Fellowship of the Ring': the quest stands upon the edge of a knife. Stray but a little, and it will fail.
Michigan Sentiment rises sharply, though not as much as expected.
Michigan Sentiment - Final, September (9:55): 78.3 actual versus 79.0 expected, 79.2 preliminary versus 74.3 final August.
The rather irrational consumer continued to show rather irrational confidence as the Michigan Sentiment Survey more or less lived up to its preliminary number. About the only thing going the consumer's way is housing as a bottom is in though how long it takes to get off the bottom is a big question. Shadow inventory at 13.1M houses is a big question mark. But after so long in the tank, any improvement buoys spirits.
That is good, because the list of reasons to be glum is downright impressively depressing. Incomes down 8.2% in four years. Gasoline prices up over 100% and RBOB up 18% in the past three days. Disposable income negative. Company planned hiring is down to 29% from 36%. Dollar under pressure driving savings into the ground. Food prices surging and only going to get worse into next summer as pork and beef prices surge thanks to shortages due to the drought. Yes, many reasons to be optimistic.
Personal Incomes see negative disposable income as wages/income lose ground to inflation. Spending rises on price increases, but how long can it continue?
Personal Income, August (8:30): 0.1% actual versus 0.2% expected, 0.1% prior (revised from 0.3%)
The irony: Farm incomes jumped 8% despite a devastating drought this year. Is it because prices are up on the crop that will make it to market? Some. But according to data from the government (and it may be skewed in order to promote more government involvement in markets), the gains are the opposite: the gains are from government crop insurance payments (tax dollars) and indeed an extra $10B is just reported to have been added to crop insurance payouts and that is boosting incomes on the farm.
Personal Spending, August (8:30): 0.5% actual versus 0.5% expected, 0.4% prior
PCE Prices - Core, August (8:30): 0.1% actual versus 0.1% expected, 0.1% prior (revised from 0.0%)
PCE Prices - Overall: 0.4%. Largest gain since 3/2011
Disposable Income: -0.3%
Sentiment may have met its match in the reality of incomes. Yes the headline was up though by just 0.1%. July was revised lower, taking away a decent 0.3% gain.
Spending continued its rise, up 0.5% as expected.
Many on the financial stations were initially exited by the spending, supposed evidence of a still strong consumer. Even the more liberal financial websites and stations had to note, however grudgingly, that spending rose because prices were up, not the amount of goods purchased. A 0.4% rise in prices, the largest since March 2011, forced consumers to part with more money than they wanted for items such as food and gas. Of course those two items are scrubbed from the CPI so I suppose they don't really exist.
Nonetheless, the consumer remains confident as the Michigan survey reports.
There is a collision ahead. Desire versus reality. Sentiment versus the pocketbook. Disposable income fell 0.3% in August. Incomes are down over 8% in four years and down 1.1% in August. The savings rate fell to -3.7%, indicating consumers are spending more than they are taking in.
With disposable income back into negative territory yet again, consumers simply will not have the funds available to continue spending without going on a massive credit binge. Oh great, just what we need. Not only the government has unsustainable debt, but there are $1T in student loans with a 13% ($120B) default rate way back in 2009 when times were better (Dept. of Education data), and now consumers have to take on a new pile of debt just to survive due to inflation, declining wages, or just plain old joblessness. At least we don't have to worry about mortgage debt spiraling out of control again; no one can qualify!
Chicago joins the rest of the manufacturing nation in contraction.
The Midwest was the holdout thanks to Ohio and Wisconsin and their improving economies thanks to reforms implemented by their governors. Apparently no region is an island as the Chicago region PMI, after three years, dipped into contraction.
Chicago PMI, September (9:45): 49.7 actual versus 52.9 expected, 53.0 prior
It is a big deal, but it is not as big as the news media made it out to be. Bloomberg headlines screamed the following: "Business Activity in U.S. Shrinks for First Time Since 2009. Business activity in the U.S. unexpectedly contracted in September for the first time in three years, adding to signs manufacturing will contribute less to the economic recovery."
Really? What about Richmond, Philly, New York, Dallas and all the other regions already in contraction? What about the national ISM in contraction June through August? What a totally biased headline to make it look as if just now things are getting worse for manufacturing. It has trended lower since 2010 and has spent the last quarter of the past 12 months in contraction.
New orders: 47.4 versus 54.8
Employment: 52 versus 57.1, the weakest reading since 3/2010
Prices: 63.2 versus 57.0
Summary of the Data: Stagflation is back
The Friday data by itself is a sad microcosm of the US economy. Manufacturing, the source of strength in whatever recovery the US has enjoyed in its QE spiked attempt at survival, has turned negative again across the board despite massive Fed action and because of government policies attacking business with higher costs and regulations.
As a result there is still virtually no job creation on a relative recovery basis despite government conjuring up over 300,000 'new' jobs with benchmark revisions. On top of no significant new jobs, those with jobs see their wages and salaries declining over the past four years and in August actually turning negative in terms of disposable income.
While economic activity turns negative in manufacturing (and we saw GDP dive below expectations with a 1.25% reading) and wages and salaries decline, the cost of living is increasing. The drought is a cause of this, but so is overall inflation in energy, tuition, healthcare, etc. The drought is simply that extraneous event that always hits when the government/Fed is attempting to engineer a solution versus letting markets handle the problems. As discussed in the Economy section below, the free market can accomplish amazing results that no one dreamed possible when viewed in terms of mandates and regulations designed to bring about a result.
The end result: we are seeing the start of 'stagflation' here in the US. I reported a couple of months ago that it was in Europe already. I reported over a year ago the US was headed for another round of this 1970's plague. The Fed knows it and that is one reason it has promised to keep interest rates artificially low until 2015. In the 1970's rates soared to 14% and beyond. With inflation added to that the drag on economic activity was numbing.
As we have seen (learned again?), however, just keeping rates down and liquidity available does not prevent stagflation. It has lengthened the time for it to take effect, but the lack of response to stimulus in the face of anti-business regulations coupled with extreme levels of liquidity is resulting in the inevitable rise in prices, reduction in wages, and lackluster economic activity known as stagflation.
Consumer sentiment is up on the perception things will get better, aided by the talk of a bottom in the housing market. That is the largest asset, even after the housing crash, for the majority of citizens. The prospect of a recovery in prices naturally raises hope that the end is in sight. There are harder aspects to see clearly, at least at first, that will sink sentiment again. Rising inflation, falling real wages, declining disposable income, higher healthcare costs now and even worse in 2013 are harder to see as they erode over time. The irony is the American spirit lifts confidence and hope for the future and it is rising for the election only to be dashed in late 2012 and in 2013 thanks to these impacts, the fiscal cliff, continued high energy costs, and a continuation of the same policies that have undermined every effort of the American entrepreneur to overcome.
OTHER MARKETS
On Friday the other markets were driven by the same news and trends that have pushed them somewhat contra-trend over the past two to two and a half weeks.
Dollar. 1.2864 versus 1.2913 euro. The dollar was stronger. You might ask how this could possibly be given that the US economic data was so horrid on Thursday and again on Friday. Remember we had GDP that was terrible followed by the Chicago PMI flipping negative for the first time in three years. We had personal income with disposable income at -0.3%. Not good.
We had issues in Europe. Spain was a question mark. On Thursday it came out with the plan that would embark upon austerity and yet bring about wealth for everybody. The problem with Spain is that it is not really a capitalist country, at least not in the true sense, so austerity will not necessarily breed entrepreneurism. Although we understand that there is entrepreneurism alive in well in Spain; it is just under the table beyond the government's reach. Nonetheless, since Europe has seen its trouble, the dollar acted as a safe haven. As it acts as a safe haven, of course it rises. It is still not out of the bear flag. It has rallied up to the 20 day EMA. It has not broken through yet. Technically on Friday it cracked it, but that is no big revelation. We see stocks trade around resistance or support frequently, break it, bounce back, etc., and then continue as if nothing was wrong.
We still have a big rollover, but we have a bounce off of a support level. It is holding, and it picked up a bit of steam on Friday.
Bonds. 1.64% 10 year US Treasury. Bonds were virtually flat. You would expect bonds to also act as safe havens if there was trouble in the US economy (there was) or if there is trouble in Europe that would cause a flight from the continent (there was). Yet bonds gave up most of their gain on the session. They could not make any real further headway over the Wednesday peak when they gapped to the upside through the 50 day EMA. They are sitting on the 50 day EMA. They have retaken some resistance. That is rather surprising, but with the bad news out there, bonds as a safe haven makes some perverse sense yet again. We do have bonds holding gains after breaking some resistance. Then again, they are bumping right up against the next resistance levels. It is a long, tough road to hoe for the bond market, but on the week it did pretty well. Next week with the start of the new quarter, we will see if bonds are still interesting to investors based upon world events and based upon the US economic data that remains rather horrid or, as one commentator put it today, "putrid."
Gold. 1773.60, -6.90. Gold was down. It rallied on the day but then faded into the afternoon and the close. Is that any major change? Not at all. Gold continues to bump up against the highs from March. It has moved laterally for the past two weeks. It is understandable that it would have some resistance at this level. It is showing it, but it is not giving up gains. It is working laterally, consolidating. That tells us that it will want to try breaking through this November 2011 and February 2012 peak. That would take it over 1800. Then it has a shot to run at the highs from 2011 which put it near $2000, but it was closer to the $1900 level on the high.
Nonetheless, with QE3 out there, gold has a backstop, no doubt. It is just resting right now because it has put in one heck of a run from late July into September. A little more consolidation, a little more bad news in the world that would prompt more printing or the prospects of more printing, and then you have gold breaking up higher and likely breaking that resistance at 1800.
Oil. 92.19, +0.34. Oil was up on the day, but it was not a bounce that changed the current outlook. Oil broke lower three weeks back. It bounced and tested the 50 day EMA, it failed, it rolled over through Wednesday, and it has recovered up to the 10 day EMA. That is just below the 50 day EMA, as of Friday, showing a doji. It looks as if oil is ready to slide back down. Why would it do that? The dollar has been on a run higher, and that has pushed oil lower. It bounced on Thursday when the dollar was down a bit. Now it has bounced back up to near resistance with the dollar moving higher on worries out of Europe. Then we might see oil turn lower yet again.
Will this make any difference for us at the pump? It usually does, but here is the rub this time around: Over the past three days, the RBOB gasoline price has gone up 18%. Even though oil is overall down over the past two weeks, we will see prices rise somewhat dramatically over the next week or so. It is not a question of supply of oil; it is a question of capacity to refine the oil into gasoline. That has been the problem for several years. That is why we have seen gasoline prices more than double during this administration.
What has been done about it? Nothing. Because lowering gasoline prices is not part of the administration's energy agenda. It is not an energy plan; it is an agenda. It is not designed to reduce any of our costs. It is not designed to push us off of hydrocarbons. As you read in the economic section, we should let free enterprise work. It has gotten us out of a carbon emission jam that all of the wind power, solar power, and electric car subsidies have been unable to even approach. It has done in a matter of a few years what the Kyoto Treaty wanted people to do over 20 years. It is truly an amazing story, so be sure to read it.
It looks as if oil is in a bear flag and wants to top out and roll back over. A lot of its movement will depend upon what the dollar does simply because the world economy is not in good shape, as we saw this past week and as was underscored on Friday in the US. Thus it will not demand as much oil. It takes a falling dollar and rising tensions around the world likely to push oil back up given the capacity we are seeing right now.
TECHNICAL SUMMARY
Internals.
Volume. NASDAQ +3.5%, 1.82B; NYSE 15%, 662M. Downside day and volume was up. Not necessarily a good thing. Although the indices did bounce off of the lows, so you can say they got some buying. It pushed the stocks higher, and that is a positive, but they had a hard time holding it. The last hour was back and forth, and the indices ended with a bit of a downdraft to close. I would not call it the buyers rushing back in to save the indices and push them higher, but as we will see in the charts, they did a decent job of holdings the trendline.
Breadth. NASDAQ -1.9:1; NYSE -1.5:1. Nothing really here. Once again the internals have been rather nondescript. I do note that there has been better breadth in the 2.5:1 to 3:1 category on the upside days versus just -1.5 on the downside days. That is a positive as well.
THE CHARTS
SP500. SP500 was down. It bounced off of its lows to close at the 20 day EMA. It remains above the trendline off of the June low. It looks good. It makes continual moves to the upside, higher and higher pyramids. It has pulled back and looks good. Now it just needs to hold and break higher. You can see that higher volume as it tested and bounced modestly. Perhaps that is a positive indication. Maybe or maybe not, but it beats a sharp stick in the eye. We need to see more of a test on Monday or so and then a break back to the upside.
NASDAQ. NASDAQ was a little choppier. It has further to go to the downside, at least to the trendline that is lurking just below the 50 day EMA near 3068. It hit the 20 day EMA on the open, gapped down to it, and it sold from there. Not a horrible down day, but volume was up. It is holding right above the April and May peak as well as the consolidation from August. It bounced in a good place. It play want to come back a little more, however, if we get some of that VIX-type of selling I talked about earlier.
SP600. The small caps had a tough two weeks, but they landed on the trendline. They held on Wednesday, bounced on Thursday, and came right back to it on Friday. Not bad. It moved for about a week or so on the trendline in mid August. We could get a move along the trendline as the VIX sells off. That is exactly this period in August when the small cap index was moving laterally and slightly higher along the trendline. VIX was rallying and the rest of the market was pulling into a modest pullback. We could very well see the small caps echo the same move here. The question is whether the small caps will hold up given that the economic news has turned so sour.
SOX. The SOX bounced nicely on Thursday. After the Wednesday doji at support, it kind of just floundered on Friday, down -0.8%. Nothing major. The major move was already in on Tuesday when it broke below support. It has had a rebound back up near that resistance level, and it has not done much with it. More will be seen next week as the new quarter starts and we see if there is any money brought to the market at that time.
DJ30/DJ20. The Dow undercut the 20 day EMA on the lows, but it recovered to hold it on the close as it, too, looks quite strong in its run to the upside. It is the strongest index right now.
What about the transports and the Dow Theory? Will they confirm the move to the new high by the DJ30? As of Friday they were not. It looked like they were trying to bounce Wednesday and Thursday, and then on Friday they got dumped to the downside. But all is not lost. On the low it tapped at the mid-May lows, and it rebounded somewhat. It looks like it is working this support. It is not a clean break to the upside, but it is working it and trying to make it happen. It still could make the move back upside in this rolling range. We will see. We will give it the opportunity to do that. If Dow Theory is going to be consummated, it will have to move to the upside. If it does not make that break, theory has it that the Dow will not be able to hold the break to the new high.
LEADERSHIP
There are still many stocks in position to move as some of the rally leaders come back again after bouncing some on Thursday.
Technology/Semiconductors. FFIV looks really great in its pullback to test the highs in its base. MSPD is a semiconductors. It looks pretty good, unlike many. It is starting to break higher out of a lateral consolidation. MXWL has a nice test of the 50 day EMA. Kind of a cup-with-handle-with-handle pattern. Some technology looks pretty good, but not all of the chips look so grand. CRUS gapped and rallied, and then a week ago it gapped lower. Now it is having trouble at the 50 day EMA. LSI has a big rollover, and it looks rather weak right now.
Looking at some of the big names, AAPL had apologies and what have you with respect to the maps application on its iPhone 5. I do not know about this CEO. Listening to what happened today, and then the deal with the dividend along with everything else we have seen, I am beginning to wonder if the Jobs era has already ended. In other words, I wonder if the momentum from Jobs and the "products in the pipeline" has waned as fast as QE3. We will see.
Financial. The financials look decent. BAC had a nice pullback to the 20 day EMA. MS had a nice test of the 200 day EMA after its breakout. GS is very similar, holding at the 20 day EMA after a cup with handle breakout and run. They still look good and like they could still move to the upside.
Metals. Some of the metals are showing some life. FCX has put in the base, handle, breakout, and the test. BHP looks interesting. It has had a break of the trendline and has tested it. But on Friday it was not able to extend the Thursday move, so we will see if it can hold and make the new break to the upside. What is not working in metals? Steel. It looks pretty pathetic. STLD has broken down and has not really gone up. It is somewhat indicative of all of the steel sector in general.
Retail. Retail continues to look solid. LULU is still in a very nice ABCD pullback to the 20 day EMA. FDO extended its Thursday upside break. Indeed, it had a good, solid week all the way around. DLTR still looks like it wants to break higher. But note that, outside of LULU, some of the best-looking retail stocks are the deep discounters that work in recessions such as DLTR and FDO. The economic data looks so pathetic right now, and that is why these stocks are shaping up and looking better and better for the move to the upside.
Rally Leaders. AMZN bounced back down just a little bit after that Thursday move, but it is holding the 20 day EMA. It looks solid. EBAY looks like it might want to come back and test a little more as well. Some of those leaders on the move higher have a little heaviness right now. Even EBAY, thanks to this move that is coming back, has a little head and shoulders formed at the top of this run. It was not a great setup with the action on Friday with no follow-through to the upside.
THE ECONOMY
Free markets defeat mandates: US cuts carbon footprint below Kyoto mandates by . . . 2012.
It is not just the US reporting the astounding news. As the Olympics caught the world's attention this summer, Paris-based International Energy Agency reported that the US posted the 'largest reduction of emissions of all countries or regions' since 2006, a 7.7% decline. The US Energy Information Agency, based upon the first five months of 2012, expects US CO2 emissions to decline by 14% from their peak in 2007.
Indeed, this year could very well see the US carbon emissions falling below 1990 levels, the very target set under the Kyoto treaty, a treaty the US found the wisdom not to enter. California has a 'cap and trade' law and it requires 1990 emissions . . . by 2020.
Was it tough mandates and subsidies for electric cars, wind power, and solar initiatives to save us from the evils of rising CO2 emissions? After all, our President promised that electricity rates "would necessarily skyrocket" under his plans. Did he carry through with designs that we all would not like because of the price tag for the changes and the price to the economy in terms of economic slowing caused by the huge price tag (but of course would all thank him later for cleaner air, receding oceans, and a healing planet)? Did we have to spend the trillions estimated to reach the Kyoto Treaty mandates and suffer the associated pain?
NO! The cost: ZERO. Moreover, electricity rates are LOWER. A quick reduction in carbon emissions at no cost? How?
Was this simply good fortune, a gift from the heavens? Well, if you consider a capitalist economy and free enterprise good fortune or a gift from heaven, the answer would be 'yes.'
The catalyst: technology advances in the private sector involving hydraulic fracturing of horizontal wellbores. Horizontal drilling revolutionized the oil and gas industry. Instead of drilling vertically and puncturing a small area of the horizontal extent of a hydrocarbon reservoir, horizontal drilling allowed running a wellbore through the entire horizontal extent of a hydrocarbon (oil and gas) bearing formation. One well, more production, lower cost energy.
Fracturing augments the cost savings as liquids are pumped into the reservoir at high pressure, fracturing the formation so hydrocarbons flow to the wellbore more easily and rapidly, increasing the production and again lowering costs for every barrel or MCF produced. Indeed, formations considered too 'tight' to economically produce hydrocarbons, e.g. shale, are now adding millions of barrels of oil and billions of MCF in natural gas to US reserves.
The result: natural gas prices have dropped so dramatically that communities across the nation are switching to natural gas powered electricity plants. Natural gas prices have not been this low in 35 years (inflation adjusted) and are 3 to 5 times lower this year versus 2005-06. Cleaner burning, cheaper natural gas (45% less carbon per energy unit) has garnered so much of the market that our carbon footprint has plunged over the past two years and is at 20 year lows. This is even more impressive considering 57M more energy consumers exist today than 20 years ago according to the Census Department. Indeed, carbon emissions per person are down 20%, at the lowest levels since 1961. Per year, the reduction in US emissions is TWICE THE TOTAL EFFECT of the Kyoto Protocol carbon emissions in the rest of the world. Natural gas power generation has risen from 20% to 32% as of April 2012, telling you there is still a lot of room to make more gains. Amazing.
But then again, not. Instead of placing burdens in the trillions of dollars on industry (and in the end consumers through price pass-through) to retrofit or completely build new machinery and plants to reduce emissions, instead of mandating expensive and economically infeasible 'alternative' energy sources, we utilized a readily available natural resource to affect a major reduction in air pollutants that not only cost us nothing, but BENEFITTED all involved.
Companies discovered massive new sources of resources to sell. The costs of finding those resources, thanks to the new technologies and application of technologies, plummeted. The companies sell the product, and even with lower prices thanks to the success of the new methods, make money and employ workers. Energy producing regions in the US are about the only major economic hubs in the economy.
Consumers and communities make money on the deal. Natural gas power is cheaper. The cleaner burning gas means no costs associated with reducing emissions. Consumers see their power bills fall. We should all see health benefits as well.
The world benefits from a massive reduction in carbon from one of the largest industrial economies on the earth.
Again, the cost? Nothing. It works because free enterprise works. Trillions of dollars in costs on mandated, inefficient regulations and forms of power? Economic slowing as a result of costs that 'necessarily skyrocket' energy prices? No. Indeed the 30,000 heavily subsidized and environmentally damaging wind turbines in the US reduce emissions only by one-tenth versus natural gas. Biofuels by only 10 megatons. Solar just 3 megatons. The costs of those? Staggering in terms of kilowatt hours thanks to subsidies and inefficient technologies, not to mention creating unforeseen environmental damage (e.g. wind farms changing the climate at the surface due to mixing of hot and cold air; the slaughter of eagles and migratory birds that is going virtually unreported). Compare natural gas: it has reduced US emissions 400 to 500 megatons per year.
Compare this to Europe as well with its mandated solar and wind power initiatives at the cost of $20B per year since 1990. The improvement: per person emissions are down by less than half of the US reduction of just the past two years. $440B over 20 years in Europe for half of the US reduction since 2010. US cost: $0.
Capitalism shows it works. If left to its own means it finds or creates the latest technologies to efficiently meet challenges faced by society and the economy.
If there was ever a case study as to why regulation should be limited to the necessities and the government should allow great minds and entrepreneurs to pursue the best ideas, and yes, profit, this is it. It was NEVER believed the US could reach these levels by 2012 and indeed by 2020. The data show clearly that the impact of hydraulic fracturing is the catalyst in this massive reduction in cost, the conversion to natural gas generated power, and thus the reduction in carbon emissions. Go tell it on the mountain.
THE MARKET
SENTIMENT INDICATORS
VIX. A big hit on Thursday as the market bounced, but on Friday it was back up modestly. 6% is modest compared to some of the recent moves, but it did hold at support and it bounced. We may see some more selling in the market as the VIX moves up toward that late-August peak. It held at the same support that has lunched other selling. It has made big strides higher as the market sold hard through Wednesday. Now it looks as if it has paused and could continue as the new quarter starts. That would mean a little more pullback in the overall markets. But we also need to look at the technical patterns on the charts to see how much pullback there should be if they hold logical support or if there would be more if volatility wants to surge higher.
VIX: 15.73; +0.89
VXN: 17.01; +0.56
VXO: 14.57; +1.09
Put/Call Ratio (CBOE): 0.99; +0.17
Bulls versus Bears
Bulls: 51.0% versus 54.2% versus 51.1%. Back to pre-QE3 levels as quick as they ran up. Still below the 60% to 65% bullish levels that flash a warning sign, and that is a positive for a continued rally . . . likely after a bit more pullback. Up from 43.6% over 5 weeks and that after five weeks at 39%. Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.
Bears: 24.5% versus 24.5% versus 25.5%. Steady at 24.5%. Bears have sat at this level three of the past four weeks. Still a bit skeptical but they appear to be in a holding pattern as the fiscal cliff and election approach. March and April saw lower lows in the 21% range. On the last run never made it to the 35% that can be a bullish indication, but the bulls were weak enough back in June. 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.
NASDAQ
Stats: -20.37 points (-0.65%) to close at 3116.23
Volume: 1.822B (+3.52%)
Up Volume: 781.68M (-518.32M)
Down Volume: 1.07B (+692.52M)
A/D and Hi/Lo: Decliners led 1.88 to 1
Previous Session: Advancers led 2.62 to 1
New Highs: 74 (-18)
New Lows: 20 (-1)
SP500/NYSE
Stats: -6.48 points (-0.45%) to close at 1440.67
NYSE Volume: 662M (+15.33%)
A/D and Hi/Lo: Decliners led 1.54 to 1
Previous Session: Advancers led 3.02 to 1
New Highs: 149 (+8)
New Lows: 13 (+4)
DJ30
Stats: -48.84 points (-0.36%) to close at 13437.13
Volume: 147M shares Friday versus 114M Thursday.
MONDAY
Next week is big in terms of data. The data train does not slow, building into the September jobs report on Friday. It will be an important one. It is the next-to-last one before the election. Expectations are 120K after the benchmarks were revised up 382K for the last 12 months ending in March. Who knows what can happen here? The polls show that the President is comfortably ahead, but not a lot of people believe those polls. Frankly, they are oversampled one way. I don't know about you, but a lot of people I know do not answer the phone for the pollsters or do not participate. They keep it close to the vest, at least in terms of letting the pollsters know who they want to vote for.
We have a lot of news coming out, and it is all basically a warm up. Given the Chicago tumble, the neat one will be the ISM out on Monday. We are expecting it to be negative again. It is expected to rise some, but I don't see that. It has probably slipped further than anticipated because the surprises have been to the downside. Tuesday is kind of a nothing day. Wednesday we get the ISM service and also the ADP. That is always good for a laugh or two. Then on Thursday we get the Challenger report. Factory orders will be important. We will see if Initial Claims rise or fall unexpectedly. It is getting close to the election, so we can expect some monkeying around with those.
Of course we have the nonfarm payrolls. Will the unemployment rate fall magically below 8% this time? It is about time for them to pull that miracle, isn't it? Of course no one would believe it because the companies have all told us that the plans on hiring have declined in a very short period of time. They were already low, and now they are even lower. We will not really get any employment, and any numbers that say otherwise are bogus. I know no one likes to hear that, and people think, "Go away, conspiracy theorist." But think about it. Who is hiring?
There are pockets in the country where they are hiring like crazy. All the energy producing areas are booming. Texas looks good. Ohio is decent. Virginia is decent. Florida is decent. They are all states with Republican governors as well. Interesting. They are doing better than the other states. In any event, I will not get too much into that. It is what it is. They will report what they will report, and then we will pick the numbers apart. If they got fast and loose with the revisions, the adjustments, or with things such as the birth/death rate, we will talk about it. Not that anyone else will because it is just not apparently important to anyone that the truth comes out.
What about this window dressing that did not show up on Friday? That leaves the question as to what will happen on Monday. There are still some good stocks in pullbacks that could test back further. EBAY, as noted earlier, is a bit troubling. It has a bit of a head and shoulders formed, but those do not mean that much necessarily. You could argue the same thing for AMZN as well. But if it pulls back a little bit more to trend, perhaps, even the 50 day EMA, it is still in great shape to move higher. As VIX continues to work a bit further higher, we could see these big names come back a bit more. But as we looked at the leaders, there are some areas such as the drugs that look super and are moving to the upside.
As a matter of fact, I forgot to talk about those drugs initially. Trust me, the drugs are looking quite good. Let's flip through some of them so I can help you see what I have been seeing in those stocks. OSIR had a good 8% move on Friday. BCRX looked to have broken down, but it is now trying to break back to the upside. ARIA had a great move, still in progress. CELG looks like it might be ready to rebound off of a nice flag. PCYC is moving higher as well out of its nice 50 day EMA test. As you can see, the drug stocks are doing fine. They are set up well, and some are already running. Others are ready to run. A little bit defensive, but that is okay. They were defensive yet they tend to go up when the rest of the market goes higher as well.
The point is there will be stocks that will want to pull back. At the same time, there are stocks that want to move higher. Since our overall thesis is that stocks will resume the move thanks to QE3, once this pullback is completed, then we look for buys as they fade in the pullback.
The question I had in the headlines is: Will there be further pullback or will new money enter into the new quarter? It might, but likely VIX has a little more work to do. A little more pullback in these names that rallied high but are now fading over the past couple of weeks to test. The new quarter may not have a lot of initial resilience with the QE3, but we do expect it to show up shortly thereafter. Remember, right now -- and this will change in the future -- the market is rallying to stimulus. It is rallying on the $40B+ purchases of mortgage-backed securities, which is the start of QE3. And it is just the start. The economy will not get any better, and thus the Fed will put more stimulus on the table. That will be good for financial assets. Maybe not as potent as before, but it will provide a backstop. We think we will be able to get more upside out of this.
Pretty simple. I don't want to sound pollyanna-ish because it kind of came back in our face on Friday. But we look for the pullbacks of those stocks that have rallied and need to come back a bit. We also look at the stocks that are already set up well and can continue to the upside even as the rest of the market takes a little breather.
It always concerns you when there is just no follow-through as there was on Friday. You also have to look at the good patterns. You look at the good patterns of the leaders and the leader wannabes. The overall catalyst for the move is still there, and it will be there. While we do not expect to have the same effect as QE1, or QE2 for that matter, the move on the announcement of QE3 is not the culmination. It may have been the culmination of this move off of June in anticipation from the promise, but after this consolidation we fully anticipate the bids to come back in and drive things higher. We may be proved wrong, but we will see the patterns break down before that.
I will see you on Monday for another fact-filled week. It will also be a fiction-filled week as we hear about economic reports and what he did and she did and what the cat saw and what the parrot repeated in the presidential campaign.
Have a great weekend!
Support and resistance
NASDAQ: Closed at 3116.23
Resistance:
The 20 day EMA at 3125
3134 is the March 2012 post-bear market peak: broken, not forgotten.
3227 is the April 2000 intraday low
3401 is the May 2000 closing low
Support:
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high
The 50 day EMA at 3068
The June up trendline at 3056
3042 from 5/2000 low
3026 from 10/2000 low
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
The 200 day SMA at 2926
2910 is the March 2012 low
2900 is the March 2012 low
S&P 500: Closed at 1440.67
Resistance:
1475 is the September 2012 high
1499 from January 2008
1539 from June 2007
Support:
The 20 day EMA at 1440
1440 from November 2007 closing lows
1433 from August 2007 closing lows
1432 is the June up trendline
1425 from May 2008 closing highs
1427 is the August 2012 peak
1422.38 is the prior post-bear market high (March 2012)
The 50 day EMA at 1416
1406 is the early May 2012 peak
1402.22 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
The 200 day SMA at 1359
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak
1325 is the July 2012 intraday low
1309 is the right shoulder low from June 2012
1295 to 1294 is the April 2011 low and the February 2011 consolidation low (bottom of the trading range)
1293 is the October 2011 peak
1275 is the January 2010 low, early January 2011 peak
1267 is the December 2011 peak
1266 is the June 2012 base low
Dow: Closed at 13,437.13
Resistance:
13,668 from 12-2007 peak
13,692 from 6-2007 peak
14,022 from 7-07 peak
Support:
The 20 day EMA at 13,411
13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 50 day EMA at 13,229
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,971 is the early July 2012 high
The 200 day SMA at 12,850
12,754 is the July intraday peak
12,716 is the April 2012 closing low
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak
Economic Calendar
September 25 - Tuesday
- Case-Shiller 20-city, July (9:00): +1.2% actual versus 0.8% expected, 0.5% prior
- Consumer Confidence, September (10:00): 70.3 actual versus 63.0 expected, 61.3 prior (revised from 60.6)
- FHFA Housing Price Index, July (10:00): 0.2% actual versus 0.7% prior
September 26 - Wednesday
- MBA Mortgage Index, 09/22 (7:00): +2.8% actual versus -0.2% prior
- New Home Sales, August (10:00): -0.3%; 373K actual versus 380K expected, 374K prior (revised from 372K)
- Crude Inventories, 09/22 (10:30): -2.446M actual versus 8.534M prior
September 27 - Thursday
- Initial Claims, 09/22 (8:30): 359K actual versus 379K expected, 385K prior (revised from 382K)
- Continuing Claims, 09/15 (8:30): 3271K actual versus 3270K expected, 3272K prior
- Durable Orders, August (8:30): -13.2% actual versus -5.0% expected, 4.1% prior (revised from 4.2%)
- Durable Orders ex-Transports, August (8:30): -1.6% actual versus -0.2% expected, -1.3% prior (revised from -0.6%)
- GDP - Third Estimate, Q2 (8:30): 1.3% actual versus 1.7% expected, 1.7% prior
- GDP Deflator - Third, Q2 (8:30): 1.6% actual versus 1.6% expected, 1.6% prior
- Pending Home Sales, August (10:00): -2.6% actual versus 0.5% expected, 2.4% prior
September 28 - Friday
- Personal Income, August (8:30): 0.1% actual versus 0.2% expected, 0.1% prior (revised from 0.3%)
- Personal Spending, August (8:30): 0.5% actual versus 0.5% expected, 0.4% prior
- PCE Prices - Core, August (8:30): 0.1% actual versus 0.1% expected, 0.1% prior (revised from 0.0%)
- Chicago PMI, September (9:45): 49.7 actual versus 52.9 expected, 53.0 prior
- Michigan Sentiment - Final, September (9:55): 78.3 actual versus 79.0 expected, 79.2 prior
October 1 - Monday
- ISM Index, September (10:00): 49.7 expected, 49.6 prior
- Construction Spending, August (10:00): 0.4% expected, -0.9% prior
October 2 - Tuesday
- Auto Sales, September (14:00): 5.3M prior
- Truck Sales, September (14:00): 6.3M prior
October 3 - Wednesday
- MBA Mortgage Index, 09/29 (7:00): +2.8% prior
- ADP Employment Change, September (8:15): 133K expected, 201K prior
- ISM Services, September (10:00): 53.0 expected, 53.7 prior
- Crude Inventories, 09/29 (10:30): -2.446M prior
- FOMC Minutes, 9/12 (14:00)
October 4 - Thursday
- Challenger Job Cuts, September (7:30): -36.9% prior
- Initial Claims, 09/29 (8:30): 365K expected, 359K prior
- Continuing Claims, 09/22 (8:30): 3273K expected, 3271K prior
- Factory Orders, August (10:00): -6.0% expected, 2.8% prior
October 5 - Friday
- Nonfarm Payrolls, September (8:30): 120K expected, 96K prior
- Nonfarm Private Payrolls, September (8:30): 130K expected, 103K prior
- Unemployment Rate, September (8:30): 8.1% expected, 8.1% prior
- Hourly Earnings, September (8:30): 0.2% expected, 0.0% prior
- Average Workweek, September (8:30): 34.4 expected, 34.4 prior
- Consumer Credit, August (15:00): $5.0B expected, -3.3B prior
http://www.investmenthouse.com/weekendmarketsummary.htm
- Stocks soften on the last day of the quarter, disrupting further window dressing, starting lower on Spain skepticism, worsening on more very weak US data.
- Thursday rebound falters but indices still above June up trendlines.
- Chicago PMI 'unexpectedly' breaks 50, jars mainstream media into saying business activity shrinking 'for first time' in 3 years. What?
- Confidence versus reality: Michigan Sentiment rises and Personal Spending outstrips negative disposable income. Mathematics dictates that cannot continue.
- Gasoline prices spike 18% in three days.
- Hydraulic Fracturing reduces US carbon footprint to the lowest in 20 years, surpasses Kyoto carbon reduction requirements at zero cost: free markets over regulation wins again.
- Friday pullback provides another shot at stocks that jumped away Thursday.
- New quarter will test QE3 resilience.
No follow through to the Thursday bounce but the indices hold their trends.
Something happened on the way to a second day of quarter ending window dressing. There was news, but it wasn't much to trip a solid move. Japan reported weak industrial production (-1.3%)? What is new about that? Some speculated there was some buyer's remorse after investors thought more about Spain's 'fall on the sword' austerity proudly announced Thursday. Interesting theories, but they really didn't explain the steady erosion in futures from the wee morning hours.
The US data release at 8:30ET turned out to be the low, but you could hardly say the fade stopped because of the data as it was not good to downright weak by the time the Chicago PMI hit a half hour into trade. Futures were recovering into the open and stocks were rising from the lower start when the Chicago PMI came in below 50, in contraction, for the first time in three years.
That news killed the rebound attempt, sending stocks to new session lows. Midmorning they recovered and the move continued into early afternoon. A low to high move looked to be in place, but after lunch the renewed bids disappeared. The indices slid toward the close, holding above session lows but still sporting losses averaging 0.5%. Not a harsh selloff but certainly not a continuation of the Thursday bounce toward quarter end.
SP500 -6.48, -0.45%
NASDAQ -20.37, -0.65%
DJ30 -48.84, -0.36%
SP600 -0.71%
SOX -0.83%
Disappointing way to end the quarter, but SP500 is still holding its up trendline and indeed all of the indices are above their June trendlines. That does not mean, however, there is no room for some more consolidation near term as VIX moves a bit higher, but overall leadership still looks good with certain sectors and stocks in position to move even as some of the bigger names that led the last leg of the rally higher look to test further.
THE NEWS
US economic data dominated the news flow, and once again it was a question of apparent consumer confidence versus unquestionably bad, though to the administration 'on the right track' data. With this kind of data, data that directly impacts consumers' ability to act upon that confidence, you have to wonder just how long this bump in confidence will last. It is as if the consumer does not comprehend the fiscal cliff, just how bad the Libya incident was on many levels, the precarious position of our economy and country. As Galadriel said in 'The Fellowship of the Ring': the quest stands upon the edge of a knife. Stray but a little, and it will fail.
Michigan Sentiment rises sharply, though not as much as expected.
Michigan Sentiment - Final, September (9:55): 78.3 actual versus 79.0 expected, 79.2 preliminary versus 74.3 final August.
The rather irrational consumer continued to show rather irrational confidence as the Michigan Sentiment Survey more or less lived up to its preliminary number. About the only thing going the consumer's way is housing as a bottom is in though how long it takes to get off the bottom is a big question. Shadow inventory at 13.1M houses is a big question mark. But after so long in the tank, any improvement buoys spirits.
That is good, because the list of reasons to be glum is downright impressively depressing. Incomes down 8.2% in four years. Gasoline prices up over 100% and RBOB up 18% in the past three days. Disposable income negative. Company planned hiring is down to 29% from 36%. Dollar under pressure driving savings into the ground. Food prices surging and only going to get worse into next summer as pork and beef prices surge thanks to shortages due to the drought. Yes, many reasons to be optimistic.
Personal Incomes see negative disposable income as wages/income lose ground to inflation. Spending rises on price increases, but how long can it continue?
Personal Income, August (8:30): 0.1% actual versus 0.2% expected, 0.1% prior (revised from 0.3%)
The irony: Farm incomes jumped 8% despite a devastating drought this year. Is it because prices are up on the crop that will make it to market? Some. But according to data from the government (and it may be skewed in order to promote more government involvement in markets), the gains are the opposite: the gains are from government crop insurance payments (tax dollars) and indeed an extra $10B is just reported to have been added to crop insurance payouts and that is boosting incomes on the farm.
Personal Spending, August (8:30): 0.5% actual versus 0.5% expected, 0.4% prior
PCE Prices - Core, August (8:30): 0.1% actual versus 0.1% expected, 0.1% prior (revised from 0.0%)
PCE Prices - Overall: 0.4%. Largest gain since 3/2011
Disposable Income: -0.3%
Sentiment may have met its match in the reality of incomes. Yes the headline was up though by just 0.1%. July was revised lower, taking away a decent 0.3% gain.
Spending continued its rise, up 0.5% as expected.
Many on the financial stations were initially exited by the spending, supposed evidence of a still strong consumer. Even the more liberal financial websites and stations had to note, however grudgingly, that spending rose because prices were up, not the amount of goods purchased. A 0.4% rise in prices, the largest since March 2011, forced consumers to part with more money than they wanted for items such as food and gas. Of course those two items are scrubbed from the CPI so I suppose they don't really exist.
Nonetheless, the consumer remains confident as the Michigan survey reports.
There is a collision ahead. Desire versus reality. Sentiment versus the pocketbook. Disposable income fell 0.3% in August. Incomes are down over 8% in four years and down 1.1% in August. The savings rate fell to -3.7%, indicating consumers are spending more than they are taking in.
With disposable income back into negative territory yet again, consumers simply will not have the funds available to continue spending without going on a massive credit binge. Oh great, just what we need. Not only the government has unsustainable debt, but there are $1T in student loans with a 13% ($120B) default rate way back in 2009 when times were better (Dept. of Education data), and now consumers have to take on a new pile of debt just to survive due to inflation, declining wages, or just plain old joblessness. At least we don't have to worry about mortgage debt spiraling out of control again; no one can qualify!
Chicago joins the rest of the manufacturing nation in contraction.
The Midwest was the holdout thanks to Ohio and Wisconsin and their improving economies thanks to reforms implemented by their governors. Apparently no region is an island as the Chicago region PMI, after three years, dipped into contraction.
Chicago PMI, September (9:45): 49.7 actual versus 52.9 expected, 53.0 prior
It is a big deal, but it is not as big as the news media made it out to be. Bloomberg headlines screamed the following: "Business Activity in U.S. Shrinks for First Time Since 2009. Business activity in the U.S. unexpectedly contracted in September for the first time in three years, adding to signs manufacturing will contribute less to the economic recovery."
Really? What about Richmond, Philly, New York, Dallas and all the other regions already in contraction? What about the national ISM in contraction June through August? What a totally biased headline to make it look as if just now things are getting worse for manufacturing. It has trended lower since 2010 and has spent the last quarter of the past 12 months in contraction.
New orders: 47.4 versus 54.8
Employment: 52 versus 57.1, the weakest reading since 3/2010
Prices: 63.2 versus 57.0
Summary of the Data: Stagflation is back
The Friday data by itself is a sad microcosm of the US economy. Manufacturing, the source of strength in whatever recovery the US has enjoyed in its QE spiked attempt at survival, has turned negative again across the board despite massive Fed action and because of government policies attacking business with higher costs and regulations.
As a result there is still virtually no job creation on a relative recovery basis despite government conjuring up over 300,000 'new' jobs with benchmark revisions. On top of no significant new jobs, those with jobs see their wages and salaries declining over the past four years and in August actually turning negative in terms of disposable income.
While economic activity turns negative in manufacturing (and we saw GDP dive below expectations with a 1.25% reading) and wages and salaries decline, the cost of living is increasing. The drought is a cause of this, but so is overall inflation in energy, tuition, healthcare, etc. The drought is simply that extraneous event that always hits when the government/Fed is attempting to engineer a solution versus letting markets handle the problems. As discussed in the Economy section below, the free market can accomplish amazing results that no one dreamed possible when viewed in terms of mandates and regulations designed to bring about a result.
The end result: we are seeing the start of 'stagflation' here in the US. I reported a couple of months ago that it was in Europe already. I reported over a year ago the US was headed for another round of this 1970's plague. The Fed knows it and that is one reason it has promised to keep interest rates artificially low until 2015. In the 1970's rates soared to 14% and beyond. With inflation added to that the drag on economic activity was numbing.
As we have seen (learned again?), however, just keeping rates down and liquidity available does not prevent stagflation. It has lengthened the time for it to take effect, but the lack of response to stimulus in the face of anti-business regulations coupled with extreme levels of liquidity is resulting in the inevitable rise in prices, reduction in wages, and lackluster economic activity known as stagflation.
Consumer sentiment is up on the perception things will get better, aided by the talk of a bottom in the housing market. That is the largest asset, even after the housing crash, for the majority of citizens. The prospect of a recovery in prices naturally raises hope that the end is in sight. There are harder aspects to see clearly, at least at first, that will sink sentiment again. Rising inflation, falling real wages, declining disposable income, higher healthcare costs now and even worse in 2013 are harder to see as they erode over time. The irony is the American spirit lifts confidence and hope for the future and it is rising for the election only to be dashed in late 2012 and in 2013 thanks to these impacts, the fiscal cliff, continued high energy costs, and a continuation of the same policies that have undermined every effort of the American entrepreneur to overcome.
OTHER MARKETS
On Friday the other markets were driven by the same news and trends that have pushed them somewhat contra-trend over the past two to two and a half weeks.
Dollar. 1.2864 versus 1.2913 euro. The dollar was stronger. You might ask how this could possibly be given that the US economic data was so horrid on Thursday and again on Friday. Remember we had GDP that was terrible followed by the Chicago PMI flipping negative for the first time in three years. We had personal income with disposable income at -0.3%. Not good.
We had issues in Europe. Spain was a question mark. On Thursday it came out with the plan that would embark upon austerity and yet bring about wealth for everybody. The problem with Spain is that it is not really a capitalist country, at least not in the true sense, so austerity will not necessarily breed entrepreneurism. Although we understand that there is entrepreneurism alive in well in Spain; it is just under the table beyond the government's reach. Nonetheless, since Europe has seen its trouble, the dollar acted as a safe haven. As it acts as a safe haven, of course it rises. It is still not out of the bear flag. It has rallied up to the 20 day EMA. It has not broken through yet. Technically on Friday it cracked it, but that is no big revelation. We see stocks trade around resistance or support frequently, break it, bounce back, etc., and then continue as if nothing was wrong.
We still have a big rollover, but we have a bounce off of a support level. It is holding, and it picked up a bit of steam on Friday.
Bonds. 1.64% 10 year US Treasury. Bonds were virtually flat. You would expect bonds to also act as safe havens if there was trouble in the US economy (there was) or if there is trouble in Europe that would cause a flight from the continent (there was). Yet bonds gave up most of their gain on the session. They could not make any real further headway over the Wednesday peak when they gapped to the upside through the 50 day EMA. They are sitting on the 50 day EMA. They have retaken some resistance. That is rather surprising, but with the bad news out there, bonds as a safe haven makes some perverse sense yet again. We do have bonds holding gains after breaking some resistance. Then again, they are bumping right up against the next resistance levels. It is a long, tough road to hoe for the bond market, but on the week it did pretty well. Next week with the start of the new quarter, we will see if bonds are still interesting to investors based upon world events and based upon the US economic data that remains rather horrid or, as one commentator put it today, "putrid."
Gold. 1773.60, -6.90. Gold was down. It rallied on the day but then faded into the afternoon and the close. Is that any major change? Not at all. Gold continues to bump up against the highs from March. It has moved laterally for the past two weeks. It is understandable that it would have some resistance at this level. It is showing it, but it is not giving up gains. It is working laterally, consolidating. That tells us that it will want to try breaking through this November 2011 and February 2012 peak. That would take it over 1800. Then it has a shot to run at the highs from 2011 which put it near $2000, but it was closer to the $1900 level on the high.
Nonetheless, with QE3 out there, gold has a backstop, no doubt. It is just resting right now because it has put in one heck of a run from late July into September. A little more consolidation, a little more bad news in the world that would prompt more printing or the prospects of more printing, and then you have gold breaking up higher and likely breaking that resistance at 1800.
Oil. 92.19, +0.34. Oil was up on the day, but it was not a bounce that changed the current outlook. Oil broke lower three weeks back. It bounced and tested the 50 day EMA, it failed, it rolled over through Wednesday, and it has recovered up to the 10 day EMA. That is just below the 50 day EMA, as of Friday, showing a doji. It looks as if oil is ready to slide back down. Why would it do that? The dollar has been on a run higher, and that has pushed oil lower. It bounced on Thursday when the dollar was down a bit. Now it has bounced back up to near resistance with the dollar moving higher on worries out of Europe. Then we might see oil turn lower yet again.
Will this make any difference for us at the pump? It usually does, but here is the rub this time around: Over the past three days, the RBOB gasoline price has gone up 18%. Even though oil is overall down over the past two weeks, we will see prices rise somewhat dramatically over the next week or so. It is not a question of supply of oil; it is a question of capacity to refine the oil into gasoline. That has been the problem for several years. That is why we have seen gasoline prices more than double during this administration.
What has been done about it? Nothing. Because lowering gasoline prices is not part of the administration's energy agenda. It is not an energy plan; it is an agenda. It is not designed to reduce any of our costs. It is not designed to push us off of hydrocarbons. As you read in the economic section, we should let free enterprise work. It has gotten us out of a carbon emission jam that all of the wind power, solar power, and electric car subsidies have been unable to even approach. It has done in a matter of a few years what the Kyoto Treaty wanted people to do over 20 years. It is truly an amazing story, so be sure to read it.
It looks as if oil is in a bear flag and wants to top out and roll back over. A lot of its movement will depend upon what the dollar does simply because the world economy is not in good shape, as we saw this past week and as was underscored on Friday in the US. Thus it will not demand as much oil. It takes a falling dollar and rising tensions around the world likely to push oil back up given the capacity we are seeing right now.
TECHNICAL SUMMARY
Internals.
Volume. NASDAQ +3.5%, 1.82B; NYSE 15%, 662M. Downside day and volume was up. Not necessarily a good thing. Although the indices did bounce off of the lows, so you can say they got some buying. It pushed the stocks higher, and that is a positive, but they had a hard time holding it. The last hour was back and forth, and the indices ended with a bit of a downdraft to close. I would not call it the buyers rushing back in to save the indices and push them higher, but as we will see in the charts, they did a decent job of holdings the trendline.
Breadth. NASDAQ -1.9:1; NYSE -1.5:1. Nothing really here. Once again the internals have been rather nondescript. I do note that there has been better breadth in the 2.5:1 to 3:1 category on the upside days versus just -1.5 on the downside days. That is a positive as well.
THE CHARTS
SP500. SP500 was down. It bounced off of its lows to close at the 20 day EMA. It remains above the trendline off of the June low. It looks good. It makes continual moves to the upside, higher and higher pyramids. It has pulled back and looks good. Now it just needs to hold and break higher. You can see that higher volume as it tested and bounced modestly. Perhaps that is a positive indication. Maybe or maybe not, but it beats a sharp stick in the eye. We need to see more of a test on Monday or so and then a break back to the upside.
NASDAQ. NASDAQ was a little choppier. It has further to go to the downside, at least to the trendline that is lurking just below the 50 day EMA near 3068. It hit the 20 day EMA on the open, gapped down to it, and it sold from there. Not a horrible down day, but volume was up. It is holding right above the April and May peak as well as the consolidation from August. It bounced in a good place. It play want to come back a little more, however, if we get some of that VIX-type of selling I talked about earlier.
SP600. The small caps had a tough two weeks, but they landed on the trendline. They held on Wednesday, bounced on Thursday, and came right back to it on Friday. Not bad. It moved for about a week or so on the trendline in mid August. We could get a move along the trendline as the VIX sells off. That is exactly this period in August when the small cap index was moving laterally and slightly higher along the trendline. VIX was rallying and the rest of the market was pulling into a modest pullback. We could very well see the small caps echo the same move here. The question is whether the small caps will hold up given that the economic news has turned so sour.
SOX. The SOX bounced nicely on Thursday. After the Wednesday doji at support, it kind of just floundered on Friday, down -0.8%. Nothing major. The major move was already in on Tuesday when it broke below support. It has had a rebound back up near that resistance level, and it has not done much with it. More will be seen next week as the new quarter starts and we see if there is any money brought to the market at that time.
DJ30/DJ20. The Dow undercut the 20 day EMA on the lows, but it recovered to hold it on the close as it, too, looks quite strong in its run to the upside. It is the strongest index right now.
What about the transports and the Dow Theory? Will they confirm the move to the new high by the DJ30? As of Friday they were not. It looked like they were trying to bounce Wednesday and Thursday, and then on Friday they got dumped to the downside. But all is not lost. On the low it tapped at the mid-May lows, and it rebounded somewhat. It looks like it is working this support. It is not a clean break to the upside, but it is working it and trying to make it happen. It still could make the move back upside in this rolling range. We will see. We will give it the opportunity to do that. If Dow Theory is going to be consummated, it will have to move to the upside. If it does not make that break, theory has it that the Dow will not be able to hold the break to the new high.
LEADERSHIP
There are still many stocks in position to move as some of the rally leaders come back again after bouncing some on Thursday.
Technology/Semiconductors. FFIV looks really great in its pullback to test the highs in its base. MSPD is a semiconductors. It looks pretty good, unlike many. It is starting to break higher out of a lateral consolidation. MXWL has a nice test of the 50 day EMA. Kind of a cup-with-handle-with-handle pattern. Some technology looks pretty good, but not all of the chips look so grand. CRUS gapped and rallied, and then a week ago it gapped lower. Now it is having trouble at the 50 day EMA. LSI has a big rollover, and it looks rather weak right now.
Looking at some of the big names, AAPL had apologies and what have you with respect to the maps application on its iPhone 5. I do not know about this CEO. Listening to what happened today, and then the deal with the dividend along with everything else we have seen, I am beginning to wonder if the Jobs era has already ended. In other words, I wonder if the momentum from Jobs and the "products in the pipeline" has waned as fast as QE3. We will see.
Financial. The financials look decent. BAC had a nice pullback to the 20 day EMA. MS had a nice test of the 200 day EMA after its breakout. GS is very similar, holding at the 20 day EMA after a cup with handle breakout and run. They still look good and like they could still move to the upside.
Metals. Some of the metals are showing some life. FCX has put in the base, handle, breakout, and the test. BHP looks interesting. It has had a break of the trendline and has tested it. But on Friday it was not able to extend the Thursday move, so we will see if it can hold and make the new break to the upside. What is not working in metals? Steel. It looks pretty pathetic. STLD has broken down and has not really gone up. It is somewhat indicative of all of the steel sector in general.
Retail. Retail continues to look solid. LULU is still in a very nice ABCD pullback to the 20 day EMA. FDO extended its Thursday upside break. Indeed, it had a good, solid week all the way around. DLTR still looks like it wants to break higher. But note that, outside of LULU, some of the best-looking retail stocks are the deep discounters that work in recessions such as DLTR and FDO. The economic data looks so pathetic right now, and that is why these stocks are shaping up and looking better and better for the move to the upside.
Rally Leaders. AMZN bounced back down just a little bit after that Thursday move, but it is holding the 20 day EMA. It looks solid. EBAY looks like it might want to come back and test a little more as well. Some of those leaders on the move higher have a little heaviness right now. Even EBAY, thanks to this move that is coming back, has a little head and shoulders formed at the top of this run. It was not a great setup with the action on Friday with no follow-through to the upside.
THE ECONOMY
Free markets defeat mandates: US cuts carbon footprint below Kyoto mandates by . . . 2012.
It is not just the US reporting the astounding news. As the Olympics caught the world's attention this summer, Paris-based International Energy Agency reported that the US posted the 'largest reduction of emissions of all countries or regions' since 2006, a 7.7% decline. The US Energy Information Agency, based upon the first five months of 2012, expects US CO2 emissions to decline by 14% from their peak in 2007.
Indeed, this year could very well see the US carbon emissions falling below 1990 levels, the very target set under the Kyoto treaty, a treaty the US found the wisdom not to enter. California has a 'cap and trade' law and it requires 1990 emissions . . . by 2020.
Was it tough mandates and subsidies for electric cars, wind power, and solar initiatives to save us from the evils of rising CO2 emissions? After all, our President promised that electricity rates "would necessarily skyrocket" under his plans. Did he carry through with designs that we all would not like because of the price tag for the changes and the price to the economy in terms of economic slowing caused by the huge price tag (but of course would all thank him later for cleaner air, receding oceans, and a healing planet)? Did we have to spend the trillions estimated to reach the Kyoto Treaty mandates and suffer the associated pain?
NO! The cost: ZERO. Moreover, electricity rates are LOWER. A quick reduction in carbon emissions at no cost? How?
Was this simply good fortune, a gift from the heavens? Well, if you consider a capitalist economy and free enterprise good fortune or a gift from heaven, the answer would be 'yes.'
The catalyst: technology advances in the private sector involving hydraulic fracturing of horizontal wellbores. Horizontal drilling revolutionized the oil and gas industry. Instead of drilling vertically and puncturing a small area of the horizontal extent of a hydrocarbon reservoir, horizontal drilling allowed running a wellbore through the entire horizontal extent of a hydrocarbon (oil and gas) bearing formation. One well, more production, lower cost energy.
Fracturing augments the cost savings as liquids are pumped into the reservoir at high pressure, fracturing the formation so hydrocarbons flow to the wellbore more easily and rapidly, increasing the production and again lowering costs for every barrel or MCF produced. Indeed, formations considered too 'tight' to economically produce hydrocarbons, e.g. shale, are now adding millions of barrels of oil and billions of MCF in natural gas to US reserves.
The result: natural gas prices have dropped so dramatically that communities across the nation are switching to natural gas powered electricity plants. Natural gas prices have not been this low in 35 years (inflation adjusted) and are 3 to 5 times lower this year versus 2005-06. Cleaner burning, cheaper natural gas (45% less carbon per energy unit) has garnered so much of the market that our carbon footprint has plunged over the past two years and is at 20 year lows. This is even more impressive considering 57M more energy consumers exist today than 20 years ago according to the Census Department. Indeed, carbon emissions per person are down 20%, at the lowest levels since 1961. Per year, the reduction in US emissions is TWICE THE TOTAL EFFECT of the Kyoto Protocol carbon emissions in the rest of the world. Natural gas power generation has risen from 20% to 32% as of April 2012, telling you there is still a lot of room to make more gains. Amazing.
But then again, not. Instead of placing burdens in the trillions of dollars on industry (and in the end consumers through price pass-through) to retrofit or completely build new machinery and plants to reduce emissions, instead of mandating expensive and economically infeasible 'alternative' energy sources, we utilized a readily available natural resource to affect a major reduction in air pollutants that not only cost us nothing, but BENEFITTED all involved.
Companies discovered massive new sources of resources to sell. The costs of finding those resources, thanks to the new technologies and application of technologies, plummeted. The companies sell the product, and even with lower prices thanks to the success of the new methods, make money and employ workers. Energy producing regions in the US are about the only major economic hubs in the economy.
Consumers and communities make money on the deal. Natural gas power is cheaper. The cleaner burning gas means no costs associated with reducing emissions. Consumers see their power bills fall. We should all see health benefits as well.
The world benefits from a massive reduction in carbon from one of the largest industrial economies on the earth.
Again, the cost? Nothing. It works because free enterprise works. Trillions of dollars in costs on mandated, inefficient regulations and forms of power? Economic slowing as a result of costs that 'necessarily skyrocket' energy prices? No. Indeed the 30,000 heavily subsidized and environmentally damaging wind turbines in the US reduce emissions only by one-tenth versus natural gas. Biofuels by only 10 megatons. Solar just 3 megatons. The costs of those? Staggering in terms of kilowatt hours thanks to subsidies and inefficient technologies, not to mention creating unforeseen environmental damage (e.g. wind farms changing the climate at the surface due to mixing of hot and cold air; the slaughter of eagles and migratory birds that is going virtually unreported). Compare natural gas: it has reduced US emissions 400 to 500 megatons per year.
Compare this to Europe as well with its mandated solar and wind power initiatives at the cost of $20B per year since 1990. The improvement: per person emissions are down by less than half of the US reduction of just the past two years. $440B over 20 years in Europe for half of the US reduction since 2010. US cost: $0.
Capitalism shows it works. If left to its own means it finds or creates the latest technologies to efficiently meet challenges faced by society and the economy.
If there was ever a case study as to why regulation should be limited to the necessities and the government should allow great minds and entrepreneurs to pursue the best ideas, and yes, profit, this is it. It was NEVER believed the US could reach these levels by 2012 and indeed by 2020. The data show clearly that the impact of hydraulic fracturing is the catalyst in this massive reduction in cost, the conversion to natural gas generated power, and thus the reduction in carbon emissions. Go tell it on the mountain.
THE MARKET
SENTIMENT INDICATORS
VIX. A big hit on Thursday as the market bounced, but on Friday it was back up modestly. 6% is modest compared to some of the recent moves, but it did hold at support and it bounced. We may see some more selling in the market as the VIX moves up toward that late-August peak. It held at the same support that has lunched other selling. It has made big strides higher as the market sold hard through Wednesday. Now it looks as if it has paused and could continue as the new quarter starts. That would mean a little more pullback in the overall markets. But we also need to look at the technical patterns on the charts to see how much pullback there should be if they hold logical support or if there would be more if volatility wants to surge higher.
VIX: 15.73; +0.89
VXN: 17.01; +0.56
VXO: 14.57; +1.09
Put/Call Ratio (CBOE): 0.99; +0.17
Bulls versus Bears
Bulls: 51.0% versus 54.2% versus 51.1%. Back to pre-QE3 levels as quick as they ran up. Still below the 60% to 65% bullish levels that flash a warning sign, and that is a positive for a continued rally . . . likely after a bit more pullback. Up from 43.6% over 5 weeks and that after five weeks at 39%. Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.
Bears: 24.5% versus 24.5% versus 25.5%. Steady at 24.5%. Bears have sat at this level three of the past four weeks. Still a bit skeptical but they appear to be in a holding pattern as the fiscal cliff and election approach. March and April saw lower lows in the 21% range. On the last run never made it to the 35% that can be a bullish indication, but the bulls were weak enough back in June. 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.
NASDAQ
Stats: -20.37 points (-0.65%) to close at 3116.23
Volume: 1.822B (+3.52%)
Up Volume: 781.68M (-518.32M)
Down Volume: 1.07B (+692.52M)
A/D and Hi/Lo: Decliners led 1.88 to 1
Previous Session: Advancers led 2.62 to 1
New Highs: 74 (-18)
New Lows: 20 (-1)
SP500/NYSE
Stats: -6.48 points (-0.45%) to close at 1440.67
NYSE Volume: 662M (+15.33%)
A/D and Hi/Lo: Decliners led 1.54 to 1
Previous Session: Advancers led 3.02 to 1
New Highs: 149 (+8)
New Lows: 13 (+4)
DJ30
Stats: -48.84 points (-0.36%) to close at 13437.13
Volume: 147M shares Friday versus 114M Thursday.
MONDAY
Next week is big in terms of data. The data train does not slow, building into the September jobs report on Friday. It will be an important one. It is the next-to-last one before the election. Expectations are 120K after the benchmarks were revised up 382K for the last 12 months ending in March. Who knows what can happen here? The polls show that the President is comfortably ahead, but not a lot of people believe those polls. Frankly, they are oversampled one way. I don't know about you, but a lot of people I know do not answer the phone for the pollsters or do not participate. They keep it close to the vest, at least in terms of letting the pollsters know who they want to vote for.
We have a lot of news coming out, and it is all basically a warm up. Given the Chicago tumble, the neat one will be the ISM out on Monday. We are expecting it to be negative again. It is expected to rise some, but I don't see that. It has probably slipped further than anticipated because the surprises have been to the downside. Tuesday is kind of a nothing day. Wednesday we get the ISM service and also the ADP. That is always good for a laugh or two. Then on Thursday we get the Challenger report. Factory orders will be important. We will see if Initial Claims rise or fall unexpectedly. It is getting close to the election, so we can expect some monkeying around with those.
Of course we have the nonfarm payrolls. Will the unemployment rate fall magically below 8% this time? It is about time for them to pull that miracle, isn't it? Of course no one would believe it because the companies have all told us that the plans on hiring have declined in a very short period of time. They were already low, and now they are even lower. We will not really get any employment, and any numbers that say otherwise are bogus. I know no one likes to hear that, and people think, "Go away, conspiracy theorist." But think about it. Who is hiring?
There are pockets in the country where they are hiring like crazy. All the energy producing areas are booming. Texas looks good. Ohio is decent. Virginia is decent. Florida is decent. They are all states with Republican governors as well. Interesting. They are doing better than the other states. In any event, I will not get too much into that. It is what it is. They will report what they will report, and then we will pick the numbers apart. If they got fast and loose with the revisions, the adjustments, or with things such as the birth/death rate, we will talk about it. Not that anyone else will because it is just not apparently important to anyone that the truth comes out.
What about this window dressing that did not show up on Friday? That leaves the question as to what will happen on Monday. There are still some good stocks in pullbacks that could test back further. EBAY, as noted earlier, is a bit troubling. It has a bit of a head and shoulders formed, but those do not mean that much necessarily. You could argue the same thing for AMZN as well. But if it pulls back a little bit more to trend, perhaps, even the 50 day EMA, it is still in great shape to move higher. As VIX continues to work a bit further higher, we could see these big names come back a bit more. But as we looked at the leaders, there are some areas such as the drugs that look super and are moving to the upside.
As a matter of fact, I forgot to talk about those drugs initially. Trust me, the drugs are looking quite good. Let's flip through some of them so I can help you see what I have been seeing in those stocks. OSIR had a good 8% move on Friday. BCRX looked to have broken down, but it is now trying to break back to the upside. ARIA had a great move, still in progress. CELG looks like it might be ready to rebound off of a nice flag. PCYC is moving higher as well out of its nice 50 day EMA test. As you can see, the drug stocks are doing fine. They are set up well, and some are already running. Others are ready to run. A little bit defensive, but that is okay. They were defensive yet they tend to go up when the rest of the market goes higher as well.
The point is there will be stocks that will want to pull back. At the same time, there are stocks that want to move higher. Since our overall thesis is that stocks will resume the move thanks to QE3, once this pullback is completed, then we look for buys as they fade in the pullback.
The question I had in the headlines is: Will there be further pullback or will new money enter into the new quarter? It might, but likely VIX has a little more work to do. A little more pullback in these names that rallied high but are now fading over the past couple of weeks to test. The new quarter may not have a lot of initial resilience with the QE3, but we do expect it to show up shortly thereafter. Remember, right now -- and this will change in the future -- the market is rallying to stimulus. It is rallying on the $40B+ purchases of mortgage-backed securities, which is the start of QE3. And it is just the start. The economy will not get any better, and thus the Fed will put more stimulus on the table. That will be good for financial assets. Maybe not as potent as before, but it will provide a backstop. We think we will be able to get more upside out of this.
Pretty simple. I don't want to sound pollyanna-ish because it kind of came back in our face on Friday. But we look for the pullbacks of those stocks that have rallied and need to come back a bit. We also look at the stocks that are already set up well and can continue to the upside even as the rest of the market takes a little breather.
It always concerns you when there is just no follow-through as there was on Friday. You also have to look at the good patterns. You look at the good patterns of the leaders and the leader wannabes. The overall catalyst for the move is still there, and it will be there. While we do not expect to have the same effect as QE1, or QE2 for that matter, the move on the announcement of QE3 is not the culmination. It may have been the culmination of this move off of June in anticipation from the promise, but after this consolidation we fully anticipate the bids to come back in and drive things higher. We may be proved wrong, but we will see the patterns break down before that.
I will see you on Monday for another fact-filled week. It will also be a fiction-filled week as we hear about economic reports and what he did and she did and what the cat saw and what the parrot repeated in the presidential campaign.
Have a great weekend!
Support and resistance
NASDAQ: Closed at 3116.23
Resistance:
The 20 day EMA at 3125
3134 is the March 2012 post-bear market peak: broken, not forgotten.
3227 is the April 2000 intraday low
3401 is the May 2000 closing low
Support:
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high
The 50 day EMA at 3068
The June up trendline at 3056
3042 from 5/2000 low
3026 from 10/2000 low
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
The 200 day SMA at 2926
2910 is the March 2012 low
2900 is the March 2012 low
S&P 500: Closed at 1440.67
Resistance:
1475 is the September 2012 high
1499 from January 2008
1539 from June 2007
Support:
The 20 day EMA at 1440
1440 from November 2007 closing lows
1433 from August 2007 closing lows
1432 is the June up trendline
1425 from May 2008 closing highs
1427 is the August 2012 peak
1422.38 is the prior post-bear market high (March 2012)
The 50 day EMA at 1416
1406 is the early May 2012 peak
1402.22 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
The 200 day SMA at 1359
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak
1325 is the July 2012 intraday low
1309 is the right shoulder low from June 2012
1295 to 1294 is the April 2011 low and the February 2011 consolidation low (bottom of the trading range)
1293 is the October 2011 peak
1275 is the January 2010 low, early January 2011 peak
1267 is the December 2011 peak
1266 is the June 2012 base low
Dow: Closed at 13,437.13
Resistance:
13,668 from 12-2007 peak
13,692 from 6-2007 peak
14,022 from 7-07 peak
Support:
The 20 day EMA at 13,411
13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 50 day EMA at 13,229
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,971 is the early July 2012 high
The 200 day SMA at 12,850
12,754 is the July intraday peak
12,716 is the April 2012 closing low
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak
Economic Calendar
September 25 - Tuesday
- Case-Shiller 20-city, July (9:00): +1.2% actual versus 0.8% expected, 0.5% prior
- Consumer Confidence, September (10:00): 70.3 actual versus 63.0 expected, 61.3 prior (revised from 60.6)
- FHFA Housing Price Index, July (10:00): 0.2% actual versus 0.7% prior
September 26 - Wednesday
- MBA Mortgage Index, 09/22 (7:00): +2.8% actual versus -0.2% prior
- New Home Sales, August (10:00): -0.3%; 373K actual versus 380K expected, 374K prior (revised from 372K)
- Crude Inventories, 09/22 (10:30): -2.446M actual versus 8.534M prior
September 27 - Thursday
- Initial Claims, 09/22 (8:30): 359K actual versus 379K expected, 385K prior (revised from 382K)
- Continuing Claims, 09/15 (8:30): 3271K actual versus 3270K expected, 3272K prior
- Durable Orders, August (8:30): -13.2% actual versus -5.0% expected, 4.1% prior (revised from 4.2%)
- Durable Orders ex-Transports, August (8:30): -1.6% actual versus -0.2% expected, -1.3% prior (revised from -0.6%)
- GDP - Third Estimate, Q2 (8:30): 1.3% actual versus 1.7% expected, 1.7% prior
- GDP Deflator - Third, Q2 (8:30): 1.6% actual versus 1.6% expected, 1.6% prior
- Pending Home Sales, August (10:00): -2.6% actual versus 0.5% expected, 2.4% prior
September 28 - Friday
- Personal Income, August (8:30): 0.1% actual versus 0.2% expected, 0.1% prior (revised from 0.3%)
- Personal Spending, August (8:30): 0.5% actual versus 0.5% expected, 0.4% prior
- PCE Prices - Core, August (8:30): 0.1% actual versus 0.1% expected, 0.1% prior (revised from 0.0%)
- Chicago PMI, September (9:45): 49.7 actual versus 52.9 expected, 53.0 prior
- Michigan Sentiment - Final, September (9:55): 78.3 actual versus 79.0 expected, 79.2 prior
October 1 - Monday
- ISM Index, September (10:00): 49.7 expected, 49.6 prior
- Construction Spending, August (10:00): 0.4% expected, -0.9% prior
October 2 - Tuesday
- Auto Sales, September (14:00): 5.3M prior
- Truck Sales, September (14:00): 6.3M prior
October 3 - Wednesday
- MBA Mortgage Index, 09/29 (7:00): +2.8% prior
- ADP Employment Change, September (8:15): 133K expected, 201K prior
- ISM Services, September (10:00): 53.0 expected, 53.7 prior
- Crude Inventories, 09/29 (10:30): -2.446M prior
- FOMC Minutes, 9/12 (14:00)
October 4 - Thursday
- Challenger Job Cuts, September (7:30): -36.9% prior
- Initial Claims, 09/29 (8:30): 365K expected, 359K prior
- Continuing Claims, 09/22 (8:30): 3273K expected, 3271K prior
- Factory Orders, August (10:00): -6.0% expected, 2.8% prior
October 5 - Friday
- Nonfarm Payrolls, September (8:30): 120K expected, 96K prior
- Nonfarm Private Payrolls, September (8:30): 130K expected, 103K prior
- Unemployment Rate, September (8:30): 8.1% expected, 8.1% prior
- Hourly Earnings, September (8:30): 0.2% expected, 0.0% prior
- Average Workweek, September (8:30): 34.4 expected, 34.4 prior
- Consumer Credit, August (15:00): $5.0B expected, -3.3B prior
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