- Friday quieter but even so stocks lose early gains and fight for positive. - Oil freeze hope, lower dollar keep oil surging. Gee, why aren't stocks? - Fed chairmen: 'no bubbles here' as stocks rise on QE/Fed promises while profits fall, economic data declines. - Market action splitting: volatility, distribution, retail selling, but money still moving into other areas. - Earnings season. Expected to fall, but how much will they fall? - Post-Earnings season: May may be difficult.
The past week was marked by more day to day market volatility as sellers actually showed up and indeed challenged buyers and the uptrend at a key resistance level. For just over a week NASDAQ, DJ30, SOX have bumped key resistance. No decisive moves were made as the indices clearly held their ground. Some blows landed, however.
The sellers showed their presence, this time for more than just a cameo appearance. Even Friday stock futures were up but the indices lost the gains and had to struggle to show any green.
-Sellers managed two distribution sessions on NYSE, making it three such higher volume selling sessions in the last 7. Not an overwhelming swarm of selling, but if the coming week shows a couple of quick distribution sessions, the rally is in jeopardy.
-Oil surged on the week but, while stocks didn't break and roll over, they did not follow, planting the seed of doubt in those believing the stock/oil relationship.
-Most importantly, some leadership cracked as retail showed some major selloffs.
On the other hand, the buy side matched the selling, allowing the indices to hold their ground and move laterally. A bumpy lateral move at that, but toward the end of the week it calmed down, the range was still rather narrow, and the longer they hold the gains and consolidate, that is a win for the upside. Indeed, what assisted them in holding the upside gains were sectors getting money shifted their way, e.g. biotechs. Down Friday, but nonetheless, good patterns ready to continue upside.
The result was a draw by the end of the week with some wrinkles and age spots showing up on the rally.
VOLUME: NYSE -8%, NASDAQ -16%. No major volume so no major buying as the indices edged out a gain.
A/D: NYSE 3:1, NASDAQ 1.3:1
Another dichotomy brewing?
The action shows the market shifting a bit to the ends of the spectrum.
The indices are at key resistance as noted. Volatility jumped and distribution appeared. Retail leaders broke.
Then you have money continuing its move into sectors that suffered through their own bear markets but are trying to turn the corner, e.g. biotechs and drugs. Metals, materials, industrial equipment, energy, and others, including retail, did it before. It could simply be that retail is selling and the money is shifted to biotechs. Possibly, but if so, that is not necessarily bullish: money leaves one area, goes to another, but no net new money in the market. Rotation can keep things going for awhile, but new money eventually has to enter.
What is the line from Lincoln? A house divided against itself cannot stand. Okay, the context was different from financial markets, but there is a historical analogy there.
Other major upcoming events.
A constant, a given in this current market environment is the Federal Reserve. The daily comments of its members continue to impact near term the market moves. Yellen is still firmly in control and still firmly a dove. Hell, they had a gathering of all living Federal Reserve chairmen the past week (Volcker, Greenspan via phone, Bernanke, Yellen) and they all said 'read our lips, no new bubbles.'
'Coo, no bubbles, coo, coo.' She's my replacement? Where the hell is the exit?
What more could you want? Of course with the exception of Volcker, the others are primary reasons the US economy is in such dire condition. I am not going to let Volcker off with a get out of jail card, however. He is part of the almost 100 year destruction of the US dollar that has seen its value plunge 93% since the Fed's inception. Washington's dollar would never have made it across the Potomac today. Nice legacy oh great chair people.
The Fed is so confident all is well an unscheduled meeting is called for Monday using its 'expedited procedures' rules:
Hey, there are no bubbles, so if the economy is not performing, even if stock indices are up and pushing toward the old highs, why not more stimulus? Seriously? Nah. A rate hike then? Heck no. Maybe they are just planning their next office party.
EARNINGS AHEAD
Earnings. Can't live with them, can't leave them on the curb when you are done with them. That is an old joke that is a variation of the old saying about women. I know, how horrible, how sexist. I guess I need to establish a 'safe zone' now.
[Enter Safe Zone here]
[Exit Safe Zone here]
Okay, earnings. Q1 is up at bat and with the indices at resistance they could very well provide a serious market catalyst. Expectations are for earnings to continue lower as Q1 GDP expectations have plummeted. Indeed, the Atlanta Fed's expectations dropped to 0.1% Friday after the Wholesale Inventory data was released.
February Wholesale Inventories: -0.5% vs -0.2% expected versus -0.2% prior (FROM +0.3%!!)
Sales: -0.2% versus -1.9% prior (from -1.2%). Months of declining sales show that not only are companies not buying, but the fact that inventories are heading lower AS sales head lower show there is nothing being made either.
Inventory/Sales Ratio: 1.36 versus 1.31 year/year. Ouch. I smell an inventory write down coming.
Profits: Tumbling over the past quarter. Earnings will tell more of the tail but this is likely the last piece of the recession story.
'TIS THE SEASON
April earnings season but earnings is not the focus of this segment. It is the after April season. Stock moves have seasons as noted Thursday, and the overall market environment has seasons as well. After earnings there is the 'sell in May and go away' season. Doesn't always hold up and there are always stocks that move well, but the indices tend to struggle from May into late summer, punctuated usually with a summer rally.
Of course last year May showed some issues early, but ended higher. Indeed stocks traded in a volatile range into July before they collapsed. In 2014 stocks started May soft then surged into early July.
So what is the use of the adage? Things turn more volatile, making it harder for the big funds to sit on their positions without having to hedge, buy protection, etc. It is more work, it is choppier, and if you get on the wrong side of the back and forth you can get hurt.
For 2016, after such a large gain in the indices February to early April, there may be more to that versus years past. Something to watch and consider as we gauge how earnings season unfolds.
THE MARKET
A back and forth week session to session as volatility increased, some distribution, but in the end the indices stretched laterally, holding the moves higher and still working on resistance. Sure they can still fall and it takes time for a top to form after a big run (the top after the last 2015 run took two months), but hanging onto gains is not bad. With the Fed apparently ready to back the market because 'there are no bubbles,' the market may show more staying power than it did when the late 2015 rally ran out of gas.
CHARTS
All of the charts are the same: rally to next resistance then just over a week of lateral to slightly lower movement. Very much a normal test of a rally, and nothing has really changed for the upside. Some distribution as noted, some more volatility, both suggesting the upside's strength is ebbing.
Thus, while the test is normal it has a negative overlay not seen as much on the run. Overall, the sellers are a bit stronger, but there is no knockout punch yet. They are more into technical boxing than going for the knockout, doing the work to the body that sets up the eventual fall. Overall I would say they end up falling from this setup, but you have the Fed, other central banks (Japan not intervening to undermine the yen and thus helping US markets), and earnings that could cause some near term upside if they are better than the declines anticipated.
LEADERSHIP
Financial: Bounced modestly Friday to test the levels broken Thursday. Looks as if a good downside setup is in place for the likes of C, JPM. MA, on the other hand, looks to be setting up for a move higher, but then again, the credit card companies are doing just fine in terms of their charts.
Big Names: FB got slammed as there is talk people are tired of posting their daily bowel movement schedules or some other equally obnoxious and uninteresting aspect of their lives. AAPL is testing after a nice move to the 200 day SMA. GOOG is hanging in a lateral move a la the stock indices. AMZN is in a nice lateral move. SBUX enjoyed a great week though it was flat Friday. MSFT held nicely with a 20 day EMA test.
Metals: Still some solid patterns. CENX in its downward wedge. AKS tested lower to the 20 day EMA but snapped back; nice pennant continues. SID (steel) surged on the week to a higher high. NEM and other gold stocks surged.
Energy: Solid week with moves following oil's path. WLL broke higher and held the move. OII is rebounding. XEC surged to the 200 day SMA. HAL gapped over the 200 day SMA. APC gapped sharply but not much trade; still looks like a buy if it can hold.
Retail: Really struggling as KORS, DDS, M down hard. TJX, COST struggling.
Chinese: Still very nice. SINA enjoyed a good week. CTRP bounced Friday. QIWI still looks super.
Biotechs: Down Friday but good moves up to that point. Indeed the tests will give some entry possibilities, e.g. KITE, BIIB.
MARKET STATISTICS
NASDAQ Stats: +2.32 points (+0.05%) to close at 4850.69 Volume: 1.569B (-15.81%)
Up Volume: 847.67M (+459.06M) Down Volume: 710.91M (-789.09M)
A/D and Hi/Lo: Advancers led 1.32 to 1 Previous Session: Decliners led 2.73 to 1
New Highs: 35 (+7) New Lows: 26 (-8)
S&P Stats: +5.69 points (+0.28%) to close at 2047.6 NYSE Volume: 841.7M (-7.81%)
A/D and Hi/Lo: Advancers led 3.08 to 1 Previous Session: Decliners led 3.36 to 1
New Highs: 97 (+24) New Lows: 16 (0)
DJ30 Stats: +35 points (+0.2%) to close at 17576.96
8 of the last 13 above 1.0. If the market was at a low this would be bullish. After a big run it loses its efficacy.
1.0+ are starting to mount a lead over the sub-1.0. As noted before, this is more likely due to buying protection for long stock positions than downside speculation.
Bulls and Bears: Bulls rebounded back upside after a one-week backfill. Still very confident. Bears no so much so in their downside conviction, falling back to 27.8 from three weeks back. Retreated from well over 35% and still weakening.
Bulls: 45.4 versus 43.3
Bears: 27.8 versus 28.9
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: 45.4% 43.3% versus 47.4% versus 44.4% versus 39.4% versus 36.4% versus 34.7% versus 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 late 2015 and 2016 since the 2008 and 2009 market plummet.
Bears: 27.8% 28.9% versus 27.8% versus 30.3% versus 35.4% versus 34.3% versus 35.7% versus 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: Finally back below 35% after spiking to 39.8 three weeks back.
OTHER MARKETS
Bonds (10 year): 1.72% versus 1.691%. Off Friday but a big week. Somewhat volatile day to day as well, but a clear trend higher in prices, lower in yields.
Historical: 1.691% versus 1.75% versus 1.72% versus 1.77% versus 1.79% versus 1.77% versus 1.82% versus 1.80% versus 1.88% versus 1.90% versus 1.88% versus 1.94% versus 1.92% versus 1.89% versus 1.90% versus 1.91% versus 1.97% versus 1.966% versus 1.979% versus 1.927% versus 1.88% versus 1.82% versus 1.91% versus 1.88% versus 1.83% versus 1.84% versus 1.82% versus 1.74% versus 1.757% versus 1.70%
EUR/USD: 1.1397 versus 1.1370. Weeklong lateral move over the 10 day EMA that consolidates the move to a higher recover high over the February peak. At resistance from late 2015.
Historical: 1.1370 versus 1.1396 versus 1.13792 versus 1l1392 versus 1.1391 versus 1.1382 versus 1.1339 versus 1.1295 versus 1.1195 versus 1.1178 versus 1.1177 versus 1.1217 versus 1.1243 versus 1.1272 versus 1.1313 versus 1.1227 versus 1.1112 versus 1.1103 versus 1.1149 versus 1.1106 versus 1.1107 versus 1.1017 versus 1.0999 versus 1.0961 versus 1.0865 versus 1.0866 versus 1.0880 versus 1.0940 versus 1.102
USD/JPY: 108.175 versus 108.425. Down yet again as the dollar bombed lower versus the yen for the second week. When will Japan intervene? What deal did the Fed and the BOJ strike?
Historical: 108.425 versus 109.84 versus 110.45 versus 111.313 versus 111.620 versus 112.60 versus 112.415 versus 112.71 versus 113.425 versus 113.612 versus 112.83 versus 112.445 versus 112.298 versus 111.90 versus 111.605 versus 111.46 versus 112.58 versus 113.11
Oil: 39.72, +2.46. Surging off the 50 day SMA test with a solid four session bounce. Higher low put in, oil still moving higher. With the dollar down hard and still weak, that sadly, makes sense.
Gold: 1243.80, +6.30. Gold managed to hold the 50 day EMA twice the past three weeks and put in a solid bounce from that level this week. Still looks toppish with a head and shoulders, but many times those setup but never break lower.
MONDAY
Some volatility showed up, some distribution as well, all at resistance. With the overall large rounded market top of the past 16 months that suggests the rally is at least weakening. It is testing the move, and sellers are taking something of a shot. Not a cutthroat selloff, but showing more gumption than they have had.
Holding the gains into earnings may not be that great of a near term technical maneuver. If there is disappointment, gains are dumped. If there is some selling this week ahead of results, a bit of cushion is there to rebound.
Indices at resistance after big runs. The Fed and central banks backing markets. Earnings that are expected to be lower. Some emboldened sellers but not nearly enough to break the market, just take down some sectors that enjoyed big rallies. Earnings season itself that is weeks long now.
The point: it may take awhile to get to the next real move. Even if there is some selling, that doesn't mean it is a new dive lower. That seems to be the either/or game that most are playing right now: new highs or new lows. Often things are somewhere in between, but most of the time the market is not in the situation of a 5 year run based on stimulus, stimulus is ended, central banks are still acting as if they will act again, economic data worsening, corporate profits worsening . . you get the picture.
So we look at individual stocks and try to pick them off on good technical moves. The volatility makes it harder. GS didn't work nor did the other financials despite good setups and initial moves. On the other hand energy and biotechs are working upside while downside plays such as KORS returned well.
It is an inflection period given near resistance. Given the overall rounded market top. Given the indecision about how bad profits will be in Q1. Given Q1 GDP could be negative. Given the Fed and the world central banks and their agenda to keep stocks higher without new amounts of US stimulus if possible. In that situation you take the 'gimmes' such as KORS, but realize that with sentiment on edge, even good setups may not behave as they should.
We plan on still looking at individual patterns that make sense where the Fed is and where the market is overall. We have some index plays in the opposite direction ready to go. We will move into positions as they show good moves but not whole bore; too much volatility, too many trigger happy people out there right now. Be patient, don't feel the need to be as aggressive. Trade what you believe in, trade it well. If you have doubts or questions don't do it or get out of the trade. Confidence is important and at times such as these if the volatility is wearing on you, don't do it. There WILL be much easier times to trade ahead. The KEY is to not just check out but to be ready when those times show up. That way you are ready to get on the bus at the bus stop, not those people chasing it.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4850.69
Resistance: The 200 day SMA at 4855 4899 - 4902 from the September 2015 peak, July 2015 low 4916 is the mid-November 2015 low 4920 is the lower gap point from mid-October 2015, the January 2016 lower gap point 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: 4836 is the March 2016 peak The March 2015 lows at 4843 and 4825 4815 is the December 2014 peak 4811 is the November 2014 peak (intraday) 4774 is the January 2-15 high 4751 is the January 2015 lower high The 50 day EMA at 4742 4637 is the February intraday high 4736 is the early January lower gap point downside, the last downside gap in the selloff. 4620 is the February 1 closing high 4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low. 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 2047.60
Resistance: 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: 2040 is the March 2015 closing low 2023 is the November 2015 low 2020 is the September 2015 intraday high The 200 day SMA at 2014 2011 is the September prior all-time high The 50 day EMA at 2005 1995 is the September 2015 recovery peak 1991 is the July 2014 high 1972 is the December 2014 low 1947 is the February 2016 intraday high, the late February peak 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 1891 is last week's intraday low prior to the miraculous reversal. 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 17,576.96
Resistance: 17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range June 2015 low at 17,715 The March low at 17,786 17,978 is the November 2015 peak
Support: 17,351 is the September 2014 all-time high. 17,265 is a December 2015 closing low 17,245 is the November 2015 closing low The 50 day EMA at 17,165 17,152 is the mid-July post bear market high The 200 day SMA at 17,115 17,068 is the early July 2014 peak 17067 is the December 2014 low 16,970 is the June 2014 former all-time high 16,946 is the June 2014 peak 16,933 is the September 2015 recovery intraday peak 16,740 is the mid-September peak and potential apex for a right shoulder to a head and shoulders pattern 16,736 is a prior all-time high from May 2014 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 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 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
April 8 - Friday Wholesale Inventories, February (10:00): -0.5% actual versus -0.2% expected, -0.2% prior (revised from 0.3%)
April 12 - Tuesday Export Prices ex-ag., March (8:30): -0.4% prior Import Prices ex-oil, March (8:30): -0.1% prior Treasury Budget, March (14:00): $52.9B prior
April 13 - Wednesday MBA Mortgage Index, 04/09 (7:00): 2.7% prior Core PPI, March (8:30): 0.0% prior PPI, March (8:30): 0.3% expected, -0.2% prior Retail Sales, March (8:30): -0.1% prior Retail Sales ex-auto, March (8:30): -0.1% prior Core PPI, March (8:30): 0.2% expected, 0.0% prior Retail Sales, March (8:30): 0.1% expected, -0.1% prior Retail Sales ex-auto, March (8:30): 0.4% expected, -0.1% prior Business Inventories, February (10:00): -0.1% expected, 0.1% prior Crude Inventories, 04/09 (10:30): -4.937M prior
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