- Stocks, already starting their pullback, get a push from Brexit poll - Not such an orderly test to end the week. - Some leadership groups take on water as market gets a bit defensive. - Money resumes its outflow - A bit early to look for a lot of new upside.
Friday started lower on top of the Thursday modest fade. Unlike Thursday, there was no afternoon recovery. A lower start did try to rebound, but any possibility of a second serious afternoon recovery disappeared when a UK newspaper poll showed the Brits favoring Brexit by 55% to 45%. Any weak buy attempts were squashed as stocks sold to session lows in the afternoon. A late bounce tried to put a happier face on the day but it was thinly veiled and did not help many areas.
VOLUME: NYSE +8%, NASDAQ +12%. Volume was up but lower on NYSE, back up to average on NASDAQ. A bit heavier selling on the Friday drop shows some dumping but not wholesale fleeing.
A/D: NYSE -4.2:1, NASDAQ -3.8:1. Impressive leap in negative breadth thanks to the small and midcaps getting whacked.
Definitely a non-growth oriented session as DJ30 showed relative strength leadership. Tech, small caps, midcaps all took it on the chin, or other parts not mentioned in a family setting.
That said, the indices didn't show any breakdowns but the decline was not exactly orderly and was a larger magnitude than those showing a pullback due mostly to the lack of new bids.
Leadership was mixed. Oil, biotechs, financials took it in the shorts. Big Names, chips, construction, industrial equipment, big name industrials, software held up just fine.
It could still be early in the pullback, however. If there was no news out there that could potentially rock the boat, then you look for a shorter pullback. Might get that anyway, but there is that Brexit vote that, as Friday showed, can cause issues for the market. That vote is not until June 23, almost two weeks away. Lovely.
The news was light to end the week. There was the Brexit poll released in the afternoon. Bonds around the globe continued their surge with yields hitting record lows in Germany and other European countries. US treasuries were snapped up at every auction, driving Treasury yields lower and lower and pushing TLT to a higher closing high, moving past the February peak during the market plunge lower.
Yes you heard right. TLT is a 2016 new closing high, eyeing the January 2015 peak. Bonds are being bought as hard and fast as they were during the February market scare, YET stock indices are near their 2015 all-time highs despite the late week pullback.
Sentiment. I talked about the negative sentiment that surrounded the lows hit in May. They helped trigger it. There is still a lot of negative sentiment out there even as some turned way too bullish (certain people on CNBC among others) over just a rebound move.
Bonds can indicate the negative sentiment is correct sentiment. Bonds are considered the smartest money in the market and accurately forecast moves. Of course with the FOMC intervening constantly, rates get skewed. At times of stress, however, even if they are shifted up or down on the scale due to Fed action, they typically still project the correct read of economics or other worry.
Given that, if bonds are surging to levels hit in the February selling, one would conclude that something is amiss. The negative sentiment was good enough, combined with the double bottoms at the 38% Fibonacci retracement on some of the indices, to bounce the markets. Question is, as we noted all along, what will be the outcome of any test, one that is on right now?
This pullback is, as noted, rather abrupt in some areas, particularly growth that has been a large part of the move higher. It is not a slam dunk, indeed it never was, that this move continues higher after a test. The big 1.5 year top is still intact, the economic data is sketchy even in the best light, and money resumed leaving the market last week (-2.6B after a +1.6B bounce before that). Remember, the market is really only this high because of the Fed's 'wealth effect' actions to push stocks higher with QE. Now they are trying to hold stocks higher by being vague about when rate hikes resume. The lack of rate hikes, however, will not support the economy and thus not, ultimately, support stocks.
But for the leadership groups having been acting well, this is a challenged rebound. Friday some of those groups, as noted, saw money fleeing. If they don't hold the line the first half of the coming week, you have to discount more downside.
That is why we were taking gain as it presented itself and started paring back on the upside positions. We will now see if the pullback was just exacerbated by the Brexit poll results and becomes more orderly while leadership groups hold the line and their patterns. Or they don't. Then the larger top takes precedence until and if the FOMC acts.
This is thus not the best time to be moving in on the upside plays. We are going to let the leaders test more and show they are ready to bounce given Friday's drop for many was rather precipitous and unceremonious. Some are just fine, e.g. GOOG, and we can still look at it upside as well as some short term trades, options trades in some cases, on stocks such as CAT as it can bounce an easy 4 points to the prior peak and we can make money on that.
Indeed, that is the key right now until the market shows what this pullback is made of: plays that can make money near term without having to go far. If they end up going far, groovy. If we make 50+% on some option trades on a short move, that more than works as well. We may get some great entries on the upside after the Brexit upchucking from Friday ends, and we will be watching for those, but they are going to have to set up and show the moves.
THE MARKET
CHARTS
RUTX: Sharp drop through the 10 day EMA and looks to be heading toward the late April peak (1154 closing, 1164 Friday close) or 20 day EMA (1152). If the rally is to survive, that is the range you look for it to hold. Rally leader, important group.
SP400: Gapped and sold off through the 10 day EMA and is moving on the 20 day and the late April high (1488 closing, closed at 1499 Friday). As of Friday SP400 is still in the range of the summer 2015 highs, but right at the lower end.
SOX: Faded through the 10 day EMA though still holding well above the early December high (691; closed at 699 Friday). It is now testing the break to a higher high as expected, and how this leaders holds the move is key for the rally.
NASDAQ: Gapped through the 10 day EMA, sold below the 20 day EMA on the close. MACD was lower as NASDAQ put in a higher high in early June, so not a powerful move. The 50 day SMA (4858) is near the lower gap point from late May (4861), a rather logical point to test given the rather sizeable Friday drop.
SP500: Faded to test the 20 day EMA on the low, recovered a bit. The move to the higher rally high was not that strong, so this test is not that bad at all. Lower MACD similar to NASDAQ but holding up better thus far.
DJ30: Similar to SP500, DJ30 shows relative strength, tapping the 20 day EMA on the low and rebounding to cut the losses. Never made a higher high on this move. Showing relative strength on the selling, but then again, it never really moved that well on the rally.
LEADERSHIP
Oil: The losses started to get rather large Friday though some oil stocks held up well. SWN, CWEI, XEC lost chunks. Others were not bad, e.g. WMB, PTEN, GPOR, CVX. Definitely some pressure here, however.
Financial: Suffering some woes with gaps lower again: BAC, C, MS, GS.
Construction: Not bad as GRAM, MDR were lower but holding the trend higher.
Biotech/Drugs: Struggling for certain. BLUE, CELG, BIIB. But not all: GALE was up 5%, XLRN rose 2.7%. PACB closed at the 10 day EMA. Still some very interesting patterns in the group.
Metals: Steel mostly just tested its move, AKS, RS, STLD. FCX (copper) did not fare as well, gapping to the bottom of the four week range. Precious metals were lower but not that low.
Chips: Down but not bad. QRVO fell to the 10 day EMA. AVGO ditto. SLAB broke it but did not dive. AMKR was iffy so we closed it. MXL is in a nice test of the 20 day EMA; wow, an orderly test.
Big Names: GOOG still is setting up well. SBUX could put in a bounce off this four week range after the selloff to mid-May. FB is fading to test the 50 day MA's in a rather decent test. AMZN gave up some ground but looks solid enough; not going to try and short it, at least not just yet.
Software: Rather solid overall and could give some new entries after tests, e.g. VMW, FFIV. RHT is testing the 20 day EMA on lower volume.
Industrial/Equipment: Some interesting tests, e.g. CAT. UTX is hanging in. HON rallied nicely into Thursday, took a breather Friday. These are seeing almost defensive money move their way.
MARKET STATISTICS
NASDAQ Stats: -64.07 points (-1.29%) to close at 4894.55 Volume: 1.779B (+11.69%)
Up Volume: 341.31M (-322.3M) Down Volume: 1.47B (+549.63M)
A/D and Hi/Lo: Decliners led 3.74 to 1 Previous Session: Decliners led 2.23 to 1
New Highs: 49 (-51) New Lows: 55 (+22)
S&P Stats: -19.41 points (-0.92%) to close at 2096.07 NYSE Volume: 877.7M (+8.02%)
A/D and Hi/Lo: Decliners led 4.16 to 1 Previous Session: Decliners led 1.64 to 1
New Highs: 139 (-55) New Lows: 25 (+16)
DJ30 Stats: -119.85 points (-0.67%) to close at 17865.34
First 1.0+ on the close in over a week. 9 of the last 11 below 1.0. 20 of 31 over 1.0. They did their job, playing a part in bouncing the market. Now the extremes are backing off as you would expect. Even so, they are still fairly high readings after a solid move higher.
Bulls and Bears: Bulls rose again though just 2 points after the 10 point jump the week before. From gloom to almost happy. Now the market has stumbled and it will be interesting and instructive to see how fast the bears run back in.
Bulls: 47.3 versus 45.4
Bears: 23.8 versus 23.7
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: 47.3% 45.4% versus 35.4% versus 40.2 versus 39.2 versus 40.2% versus 44.3% versus 47.4% versus 41.2% versus 45.4% versus 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%
Bears: 23.8% 23.7% versus 24.0% versus 21.7% versus 21.6% versus 21.7 versus 20.6% versus 21.7% versus 27.8% versus 27.8% versus 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%
OTHER MARKETS
Bonds (10 year): 1.64% versus 1.68%. New closing high for the year.
Historical: 1.68% versus 1.70% versus 1.72% versus 1.73% versus 1.70% versus 1.80% versus 1.84% versus 1.85% versus 1.85% versus 1.83% versus 1.87% versus 1.86% versus 1.83% versus 1.85% versus 1.85% versus 1.85% versus 1.76% versus 1.75% versus 1.70% versus 1.75% versus 1.735% versus 1.75% versus 1.75% versus 1.78% versus 1.74% versus 1.77% versus 1.80% versus 1.87% versus 1.83% versus 1.83% versus 1.86% versus 1.94%
EUR/USD: 1.12526 versus 1.13149. Breaking below the 50 day MA's after staling at the early April highs. Kind of a head and shoulders and now EUR is heading back toward the late May low over the 200 day SMA. Brexit worries if the pound is not there.
Historical: 1.13149 versus 1.1412 versus 1.13570 versus 1.13553 versus 1.13668 versus 1.1149 versus 1.1186 versus 1.1128 versus 1.1113 versus 1.1181 versus 1.1155 versus 1.1142 versus 1.1221 versus 1.1216 versus 1.1199 versus 1.1219 versus 13.1317 versus 1.13145 versus 1.1307 versus 1.13791 versus 1.4252
USD/JPY: 106.933 versus 106.966. Still working laterally the past week, though up and down in the range, right over the early May low.
Historical: 106.966 versus 106.66 versus 107.347 versus 107.72 versus 106.55 versus 106.66 versus 108.86 versus 109.99 versus 111.285 versus 110.233 versus 109.70 versus 109.72 versus 109.99 versus 109.25 versus 110.165 versus 109.985 versus 110.187 versus 109.073 versus 108.856 versus 108.65 versus 108.95 versus 108.47 versus 109.28 versus 108.343 versus 107.10 versus 107.41 versus 107.126 versus 107.312 versus 106.16 versus 106.33
Oil: 48.88, -1.68. After surging to a higher rally high Wednesday, oil is backtracking, aided by the stronger dollar. Held the 20 day EMA on the Friday close, however, and that has been the trendline for this move to that higher recovery high.
Gold: 1276.30, +3.60. Stormed higher on the week, reversing off the late March low and rallying pat the March closing highs. Looks as if it is working on the right shoulder to a head and shoulders, but that remains to be seen.
MONDAY
As noted earlier, thanks to the leadership groups acting well, this rally has survived. Without them, this is a challenged rebound. Friday some of those groups saw money fleeing. If they don't hold the line the first half of the coming week, you have to factor in more downside.
That is why we were taking gain as it presented itself and started paring back on the upside positions, including new ones. We will now see if the pullback was just exacerbated by the Brexit poll results and becomes more orderly while leadership groups hold the line and their patterns. Or they don't. Then the larger top takes precedence until and if the FOMC acts.
This is thus not the best time to be moving in on the upside plays. We are going to let the leaders test more and show they are ready to bounce given Friday's drop for many was rather precipitous and unceremonious. Some are just fine, e.g. GOOG, and we can still look at it upside as well as some short term trades, options trades in some cases, on stocks such as CAT as it can bounce an easy 4 points to the prior peak and we can make money on that.
Indeed, that is the key right now until the market shows what this pullback is made of: plays that can make money near term without having to go far. If they end up going far, groovy. If we make 50+% on some option trades on a short move, that more than works as well. We may get some great entries on the upside after the Brexit hiccupping from Friday ends, and we will be watching for those, but they are going to have to set up and show the moves.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4894.55
Resistance: 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 4960 is the September 2015 intraday high, an important reversal point for NASDAQ. 4969 is the April 2016 recovery high 4999 is the October upper gap point 5007 is the 12/31 upper gap point from that big gap lower 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: 4894 is the September 2015 closing high The 50 day SMA at 4858 The March 2015 lows at 4843 and 4825 4836 is the March 2016 peak 4815 is the December 2014 peak The 200 day SMA at 4815 4811 is the November 2014 peak (intraday) 4774 is the January 2-15 high 4751 is the January 2015 lower high 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
S&P 500: Closed at 2096.67
Resistance: 2104 is the December 2015 high 2111 is the April 2016 recovery 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: 2094 is the December 2014 high, the prior all-time high 2079 is the intraday all-time high from November 2014 The 50 day EMA at 2070 2062 is the January 2015 lower high 2046 is the July 2015 closing low 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 2015 2011 is the September prior all-time high 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 17,865.34 Resistance: 17,978 is the November 2015 peak 18,100 to 18,181: interim peaks in the December 2014 to July 2015 range 18,168 is the April 2016 recovery high 18,288 from March 2015 18,351 is the all-time high from May 2015
Support: The 50 day SMA at 17,788 The March low at 17,786 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 50 day EMA at 17,691 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 200 day SMA at 17,168 17,152 is the mid-July post bear market high 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
June 10 - Friday Michigan Sentiment - Pre, June (10:00): 94.3 actual versus 94.0 expected, 94.7 prior Treasury Budget, May (14:00): -$52.5B actual versus -$84.1B prior
June 14 - Tuesday Export Prices ex-ag., May (8:30): 0.5% prior Import Prices ex-oil, May (8:30): 0.1% prior Retail Sales, May (8:30): 0.3% expected, 1.3% prior Retail Sales ex-auto, May (8:30): 0.4% expected, 0.8% prior Business Inventories, April (10:00): 0.2% expected, 0.4% prior
June 15 - Wednesday MBA Mortgage Index, 06/11 (7:00): 9.3% prior PPI, May (8:30): 0.3% expected, 0.2% prior Core PPI, May (8:30): 0.1% expected, 0.1% prior Empire Manufacturing, June (8:30): -4.7 expected, -9.0 prior Capacity Utilization, May (9:15): 75.2% expected, 75.4% prior Industrial Productio, May (9:15): -0.2% expected, 0.7% prior Capacity Utilization, May (9:15): 75.2% expected, 75.4% prior Crude Inventories, 06/11 (10:30): -3.226M prior FOMC Rate Decision, June (14:00): 0.37% expected, 0.37% prior Net Long-Term TIC Fl, April (16:00): $78.1B prior
June 16 - Thursday CPI, May (8:30): 0.3% expected, 0.4% prior Core CPI, May (8:30): 0.2% expected, 0.2% prior Initial Claims, 06/11 (8:30): 270K expected, 264K prior Continuing Claims, 06/04 (8:30): 2095K prior Philadelphia Fed, June (8:30): 1.2 expected, -1.8 prior Current Account Bala, Q1 (8:30): -$125.0B expected, -$125.3B prior NAHB Housing Market , June (10:00): 59 expected, 58 prior Natural Gas Inventor, 06/11 (10:30): 65 bcf prior
June 17 - Friday Building Permits, May (8:30): 1147K expected, 1116K prior Housing Starts, May (8:30): 1155K expected, 1172K prior Building Permits, May (8:30): 1147K expected, 1116K prior
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