- The rally built on nothing continues for another week though Friday was mixed. - The silent hand is quiet for Friday after another two 'assists' on the week. - Economic data is purportedly better, but not. - Stores closing as middle class decline cannot support them. - Other areas attempting to join metals, retail moving higher. - SP500 still at 1950, still low volume. NASDAQ at the prior recovery high. Now the move shows its hand.
The low volume rally built on nothing continued for a second week. A midweek selloff attempt almost disrupted the best laid plans of the Fed, other world central banks, the Treasury, and any other powers with a vested interest in keeping things status quo. At all cost, these institutions are set on avoiding a major global disruption, as that would threaten the carefully planned control systems.
Conspiracy theories, right? Hello, Bernie Sanders? After last week I don't know of any serious trader who believes there is not some behind the scenes manipulation going on in the US market. We know other markets are being manipulated, and the actions the past couple of weeks strongly suggests there is something going on in the US markets. So there is your conspiracy theory. After decades of trading the market, it is clear to me that something else is going on beyond program trading. It is the manipulation of the program trading that I and others are seeing.
So, we have a rally I call built on nothing. A false story regarding an OPEC production cut deal. Okay, perhaps the story was not false; perhaps its source was. The 'deal' has been thoroughly debunked by the principles. Then the Fed open market operations cancelled with a handy post on the FOMC site noting 'technical issues.' That panicked the algos and they bought. That turned the Wednesday selloff that was turning seriously into a new rollover. When that initial rebound was running out of gas, lo, the open market operations were reinstituted, glitch solved. That sparked a renewed round of buying. Thursday the market turned weak again as the Wednesday induced reversal was selling. The Treasury was engaged, cancelling the 7 year note auction 10 minutes before scheduled, noting its own technical issues. Even if you accept all as true, just what the hell is wrong with the government systems? That maneuver again tricked the algos and they bought, pushing the indices to higher highs on the rally.
Friday was not so generous, but the powers could take a day off. The large cap indices struggled, but the small and midcaps, the true surprises, performed quite well.
What about the economics? If you turn on the financial stations they are talking about how things are improving. After 6 years of recovery, if things are improving they must be roaring now.
So much so, Q4 GDP was revised up to all of 1% from the initial 0.7%. Setting aside the revision was due to less of an inventory decline and a drop in imports offsetting consumption written lower, 1.0% is in itself absurdly low growth rate. So low in fact, that it supports stock LOSSES, not stock gains. Indeed, the market is trying to give back more of those gains but the silent hand is there.
Friday we learned that spending and income were up, both rising a more than expected 0.5%. Ah, nothing like that forced 'tax' (thanks again John Roberts) requiring buying insurance or paying a fine to keep spending high for the government reports. And income gains can pay homage to increased hourly wages that ironically are going to bring about the automation of large portions of minimum wage jobs at a rapid pace.
We saw Durable goods orders rise though we also debunked the rise by showing the 442% adjustment made versus the prior 5 year average for January at 124% (a mere 3.5x average). Before that we saw retail sales up as well, using the same kind of abnormal adjustment, turning a loss of billions into a gain of millions. When you can turn a loss to a gain at will in the financial data AND the markets, that is very convenient.
Nonetheless the mantra continues how this will be the year of the recovery. The facts below the headlines are a serious inconvenience but the television pundits do not look at them. They are pandering, talking their book whenever possible.
There are obvious facts, however, even if they want to accept the massively and arbitrarily revised data, that they still ignore.
Retailers are closing stores at an alarming pace. Sears is closing 50 more. Sports Authority is set to file bankruptcy with reports of 200 of 450 stores closing. KSS is closing 18, TGT 13. BBY closed 30 in 2015 and more are coming. ODP will have closed 400 by year end. WMT closing 154 US stores, K-Mart 25 stores, JCP 47 stores (40 in 2015), M closing 36, GPS closing 175 stores, ARO 84 stores, FL 150 stores in the next few years.
Retail stock prices are rising but it is primarily for the same as what we have seen during the entire 'recovery': cost cutting versus intrinsic growth. Reduce costs (read personnel), buyback shares and you can drive your stock price higher even without increasing sales revenues.
Sure you can doctor up the numbers all you want and see what you want to see as our President is doing, but the fact is the middle class is shrinking. It is now less than 50% of the US population for first time since surpassing it after the industrial revolution. 51% of all US workers make less than $30K per year. When that is the case, metropolitan areas simply cannot support retail. It is not just AMZN and the internet: when people are struggling just to pay the mortgage or sub-prime auto loan. Perhaps some small retailers can return to service the smaller communities in the aftermath of WMT's and other's departure.
THE MARKET
CHARTS
SP500: After moving past the early February high Thursday, SP500 pushed higher but faded to a modest loss on slightly higher volume. Low volume all the way up, slightly higher Friday, but not enough to really suggest serious selling. Shockingly, SP500 closed below 1950, a key level for most traders.
DJ30: Faded after moving to 16,800 on the Friday high. Closed lower but still over the 50 day MA's as well as 16,500. DJ30 was selling off Wednesday but miraculously reversed as did SP500 and other indices. Above support, well below next resistance.
NASDAQ: Gapped to the 50 day EMA on the open, faded to a modest gain. The open took NASDAQ to the early February closing high. Key level. They other large caps broke this level, NASDAQ is still seeking. Still something of an inverted head and shoulders, a bullish pattern, trying to develop.
RUTX: Never really in danger on the week, RUTX reversed off the Wednesday low and continued higher to Friday, closing just below the 50 day MA's.
SP400: Similar to RUTX, SP400 tested the Monday gap higher, held, and rallied to a higher rally high. The midcaps, however, moved through the 50 day MA's. They are now at the August and September lows, recovering to a key level.
SOX: Big reversal off the Wednesday gap lower propelled SOX through the 50 day MA's and a new recovery high Friday as it gapped to a doji. New high, past the early February peak but still below the important 630-633 level.
LEADERSHIP
Metals, retail, industrials have turned off of long declines. Some drugs/biotechs/medical appliances are attempting to do the same. These stocks have struggled in long declines and are providing some help to the upside.
Metals: Rebounded off a midweek test, e.g. FCX, CENX, AKS.
Retail: Continues its run off the turn. DDS, TJX, KORS.
Drugs/Biotech: BIOD is turning off the low; if not so low priced we would consider it. If you want you can play it. CLDX is showing great volume. KITE is interesting though earnings are too close. Ditto HZNP. EYES looks very interesting.
Big Names: GOOG is testing the 50 day EMA again, still a weak pattern. SBUX is hanging on to the 50 day MA's. AMZN is trying to hold the move over the 200 day SMA. NFLX is off the lows. Recoveries but still some issues in key stocks.
Restaurants: CMG looks ready to move higher again. SHAK is setting up to make a turn. JACK is struggling, WEN is muddled.
Financial: Recovering from the weakness and at a critical juncture. BAC rallied to the 20 day EMA and the gap point and faded. GS gapped to the 20 day EMA as well and could not hold a move through it.
MARKET STATISTICS
NASDAQ Stats: +8.27 points (+0.18%) to close at 4590.47 Volume: 1.829B (+2.66%)
Up Volume: 1.06B (-130M) Down Volume: 690.27M (+222.48M)
A/D and Hi/Lo: Advancers led 1.79 to 1 Previous Session: Advancers led 1.56 to 1
New Highs: 42 (+11) New Lows: 53 (+1)
S&P Stats: -3.65 points (-0.19%) to close at 1948.05 NYSE Volume: 1.005B (+11.67%)
A/D and Hi/Lo: Advancers led 1.6 to 1 Previous Session: Advancers led 2.83 to 1
New Highs: 45 (-39) New Lows: 27 (-11)
DJ30 Stats: -57.32 points (-0.34%) to close at 16639.97
Recent history: 6 of 8 sessions over 1.0. 8 of 16 sessions below 1.0, 26 of the last 40 sessions above 1.0. This indicator is still running very high in terms of negative sentiment.
Bulls and Bears: Bulls recovered a bit of ground after falling the prior week from over 30. Bears remain very skeptical with their numbers rising despite a market bounce. Still in a crossover position. This indicator is strongly suggesting a bounce, but this is not a timing indicator.
Bulls: 34.7 versus 26.5. Wow, surging to the upside as a bit of low volume recovery has sentiment jumping back near the 35 threshold.
Bears: 35.7 versus 39.8. A bit more belief from the bears with a rather sizable move lower from a very high near 40 reading.
Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.
Bulls: 34.7% 26.5% versus 24.7% 34.0% versus 29.2% versus 26.8% versus 28.6% versus 34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4%
Background: Bulls hit their lowest level in 2015 since the 2008 and 2009 market plummet.
Bears: 35.7% 39.8% versus 39.2% versus 38.1% versus 35.4% versus 36.1% versus 35.7% versus 31.6% versus 29.6% versus 29.6% versus 27.6% versus 26.8% versus 26.8% versus 28.9% versus 28.1% versus 29.2% versus 31.3% versus 31.2% versus 34.4% versus 35.1% versus 30.2% versus 26.8% versus 27.9 versus 26.8% versus 22.5% versus 18.4% versus 18.6% versus 17.5%
Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Both occurred in fall 2015.
OTHER MARKETS
Bonds (10 year): 1.757% versus 1.70%. Gapped back to the 20 day EMA for the third visit in two weeks. The move higher is struggling.
Historical: 1.70% versus 1.74% versus 1.74% versus 1.76% versus 1.75% versus 1.74% versus 1.81% versus 1.78% versus 1.75% versus 1.64% versus 1.69% versus 1.73% versus 1.76% versus 1.85% versus 1.85% versus 1.88% versus 1.86% versus 1.96% versus 1.93% versus 1.99% versus 2.019% versus 2.01% versus 2.01% versus 2.05%
EUR/USD: 1.0940 versus 1.102. Major break below the 50 day SMA by the euro.
Historical: 1.102 versus 1.1016 versus 1.1039 versus 1.1130 versus 1.1103 versus 1.1124 versus 1.1275 versus 1.1154 versus 1.1249 versus 1.1322 versus 1.1293 versus 1.1294 versus 1.1197 versus 1.1159 versus 1.1206 versus 1.1110 versus 1.0916 versus 1.0905 versus 1.0836 versus 1.0939 versus 1.0899 versus 1.0854 versus 1.0849 versus 1.0798 versus 1.0769 versus 1.0815 versus 1.0910 versus 1.0917 versus 1.0869
USD/JPY: 113.965 versus 112.90. Dollar surging to the 20 day EMA off the double bottom.
Historical: 112.90 versus 112.11 versus 112.435 versus 112.65 versus 113.25 versus 114.04 versus 114.33 versus 114.747 versus 113.29 versus 112.39 versus 113.36 versus 115.085 versus 115.74 versus 116.83 versus 116.76 versus 117.88 versus 120.04 versus 121.014 versus 121.055 versus 118.27 versus 118.64 versus 118.48
Oil: 32.84, -0.24. Tried the breakout over the 50 day MA's after the weeklong handle, but could not hold the move Friday. Still in good position to give it a try.
Gold: 1222.80, -10.90. Faded but still holding over the 10 day EMA.
MONDAY
With all of the market movement, up and down and then back up, SP500 is still at the 1950 level. DJ30 jumped through 16,500 and is trying 16,800. The Russell is back to the prior recovery high and 50 day EMA while SP400 has blown through. NASDAQ is at the 50 day EMA and the recovery peak. That makes SP500 and NASDAQ critical players; will the other indices pull them or will they act as a drag on the leaders?
The move has less than strength, basically a low volume recovery move. It is one, however, that shows resilience and it has backing. The small and midcaps are showing strength and metals, industrials, retail, and now drugs/biotech/medical appliances are trying to turn and rally as well. Then, on top of that, there is the silent hand of the Fed and the feds. With that kind of backing, even with the low trade, you get a move that can stick, at least for this kind of rebound.
There are those who still voice concern about the move. We are one. There are others that threw in the towel and closed shorts, e.g. Gartman. After the move higher, we were not closing downside Friday, particularly with the SP500 at 1950 and NASDAQ still at its own resistance.
We want to see how this move plays out. While we see some areas moving higher and others setting up to move higher, the move has some issues and many stocks are still in very bearish patterns. It has attributes of both increasing strength and just a relief move. Given the overall market top, we still anticipate more downside while we acknowledge and play upside countertrend moves as they occur such as this one.
For new plays we have a split of upside and downside. Upside in groups turning the corner. Downside on more of those bearish patterns.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4590.47
Resistance: 4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low. The 50 day EMA at 4618 4620 is the February 1 closing high 4637 is the February intraday high 4736 is the early January lower gap point downside, the last downside gap in the selloff. 4751 is the January 2015 lower high 4774 is the January 2-15 high 4811 is the November 2014 peak (intraday) 4815 is the December 2014 peak The March 2015 lows at 4843 and 4825 The 200 day SMA at 4899 4902 is the July 2015 low 4916 is the mid-November 2015 low 4920 is the lower gap point from mid-October 4894 is the September 2015 closing high 4999 is the October upper gap point 5008.57 is the early March 2015 post-bear market high 5042 is the March 2015 high 5100 from the April peak and early May peak 5162 is the early November peak, 5176 is the December intraday peak
Support: 4517-4506 from the September 2015 and August 2015 closing lows 4485 are the twin July 2014 peaks 4471 is the January 2016 closing low 4425 is the late February intraday low 4363 is the February upper gap point 4352 is the March 2014 peak 4313 is the January 2016 intraday low 4292 is the August 2015 low 4212 is the February intraday low 4116 is the October 2014 low
S&P 500: Closed at 1948.05
Resistance: 1972 is the December 2014 low 1991 is the July 2014 high 1995 is the September 2015 recovery peak 2011 is the September prior all-time high 2020 is the September 2015 intraday high The 200 day SMA at 2027 2040 is the March 2015 closing low 2046 is the July 2015 closing low 2062 is the January 2015 lower high 2079 is the intraday all-time high from November 2014 2094 is the December 2014 high, the prior all-time high 2104 is the December 2015 high 2116 is the November 2015 high 2119.59 is the February intraday prior all-time high 2126 was the April prior all-time high 2130 is the June 2015 peak 2135 is the May 2015 all-time high
Support: 1947 is the February 2016 intraday high, the late February peak The 50 day SMA at 1944 1940 is the January 2016 recovery bounce peak closing high 1913 is the early September 2015 closing low testing the bounce from the August selling 1905 is the August 2014 low 1902 from early May was the intraday all-time high. 1897 is the prior all-time high hit in April 2014 1872 is the September 2015 test low of the August low 1867 is the August 2015 low 1862 is the October 2014 closing low 1859 is the January 2016 closing low 1820 is the October 2014 intraday low 1815 is the April 2014 low 1812 is the January 2016 intraday low 1772 are the Q4 2013 highs and lows
Dow: Closed at 16,639.97
Resistance: 16,736 is a prior all-time high from May 2014 16,740 is the mid-September peak and potential apex for a right shoulder to a head and shoulders pattern 16,933 is the September 2015 recovery intraday peak 16,946 is the June 2014 peak 16,970 is the June 2014 former all-time high 17067 is the December 2014 low 17,068 is the early July 2014 peak 17,152 is the mid-July post bear market high The 200 day SMA at 17,217 17,351 is the September 2014 all-time high. June 2015 low at 17,715 17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range The March low at 17,786 17,978 is the November 2015 peak
Support: 16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. 16,665 is the late August 2015 closing high 16,632 is the April 2014 peak 16,621 is the late February 2016 peak 16,589 is the December 2013 former all-time high The 50 day SMA at 16,585 16,526 is the early January resistance 16,511 is the January 2016 intraday high 16,506 is the March 2014 peak 16,466 is the January 2016 recovery closing peak. 16,368 is the August 2014 low The 20 day EMA 16,227 16,117 is the October 2014 closing low 16,058 is the early September 2015 low 16,026 is the April 2014 low 15,855 is the October 2014 intraday low 15,766 is the January closing low 15,666 is the August 2015 closing low 15,450 is the January 2016 intraday low 15,372 is the February 2014 low 15,370 is the August 2015 low
ECONOMIC CALENDAR
February 26 - Friday GDP - Second, Q4 (8:30): 1.0% actual versus 0.4% expected, 0.7% prior GDP Deflator - Second, Q4 (8:30): 0.9% actual versus 0.8% expected, 0.8% prior Personal Income, January (10:00): 0.5% actual versus 0.4% expected, 0.3% prior Personal Spending, January (10:00): 0.5% actual versus 0.3% expected, 0.1% prior (revised from 0.0%) Michigan Sentiment -, February (10:00): 91.0 expected, 92.0 prior Core PCE Prices, January (10:00): 0.3% actual versus 0.1% expected, 0.1% prior (revised from 0.0%) Michigan Sentiment - Final, February (10:00): 91.7 actual versus 91.0 expected, 92.0 January final
February 29 - Monday Chicago PMI, February (9:45): 52.0 expected, 55.6 prior Pending Home Sales, January (10:00): 0.7% expected, 0.1% prior
March 1 - Tuesday Construction Spendin, January (10:00): 0.5% expected, 0.1% prior ISM Index, February (10:00): 49.0 expected, 48.2 prior Auto Sales, February (14:00): 5.54M prior Truck Sales, February (14:00): 8.62M prior
March 2 - Wednesday MBA Mortgage Index, 02/27 (7:00): -4.3% prior ADP Employment Chang, February (8:15): 190K expected, 205K prior Crude Inventories, 02/27 (10:30): 3.502M prior
March 3 - Thursday Challenger Job Cuts, February (7:30): 41.6% prior Initial Claims, 02/27 (8:30): 270K expected, 272K prior Continuing Claims, 02/27 (8:30): 2258K expected, 2253K prior Productivity-Rev., Q4 (8:30): -3.3% expected, -3.0% prior Unit Labor Costs-Rev, Q4 (8:30): 4.7% expected, 4.5% prior Factory Orders, January (10:00): 2.0% expected, -2.9% prior ISM Services, February (10:00): 53.1 expected, 53.5 prior Natural Gas Inventor, 02/27 (10:30): -117 bcf prior
March 4 - Friday Nonfarm Payrolls, February (8:30): 190K expected, 151K prior Nonfarm Private Payr, February (8:30): 180K expected, 158K prior Unemployment Rate, February (8:30): 4.9% expected, 4.9% prior Hourly Earnings, February (8:30): 0.2% expected, 0.5% prior Average Workweek, February (8:30): 34.6 expected, 34.6 prior Trade Balance, January (8:30): -$44.0B expected, -$43.4B prior
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