- Just about all indices are back to Prexit levels. - Central banks remains the focus post-Brexit as everyone can now use Brexit as an excuse to do anything just as 9-11 was an excuse for police to do anything. - Some solid leadership groups are moving well, others are setting up to move.
After three days the market took a breather, at least in terms of not putting in quite as large a gain. Two sessions down hard on the Brexit, four sessions upside on the Brelief move, and the indices are still below the Prexit highs (the highs just before the vote).
VOLUME: NYSE -39%, NASDAQ -20%. Friday ahead of the Independence Day holiday.
A/D: 1.8:1 NYSE, 1.7:1 NASDAQ. Calmed down but you would expect that given the volume.
Of course SP500 and DJ30 are just off of those Prexit highs, effectively having recovered the move. So, after the dive, a rebound has the indices back in their ranges. All normal? For now the recovery has succeeded, Brexit just a bump in the road.
Okay, with the indices back where they started from all is on track for higher highs, right? Well, with that big 21 month top in place that is problematic, but, to borrow from 'Facing the Giants,' what's not possible for the markets with the Fed? Nothing coach.
Indeed, that is what one CNBC commentator Friday said when he predicted new highs for the stock indices, and frankly, if the world's central banks are on board as they were in February, we know that markets can levitate considerably, even when in a massive selloff and facing a breakdown.
That sets an interesting stage in the weeks to come as the 21 month top and the world central banks joust.
And there you have it. Central banks ready to act and indeed acting, attempting to prop up markets, using Brexit as the reason. Despite the economic data.
What do I mean? I have talked about the weak economic activity in the US and elsewhere. BUT, if you look at the official reports minted by the various governments, things are great and only getting better (per the 1980's song, the future's so bright, better break out the shades). Friday the world PMI's all improved from India to the UK to the EU -- well, except for China. It's PMI fell to 48.6 from 49.2, missing expectations. The $500B paper tiger in the room.
Thus, in the 'never let any crisis go to waste' mindset of governments, Brexit is the perfect excuse to continue policies that benefit those in power (the TIP) and the FOTIP (Friends Of Those In Power). Never mind the massive bifurcation it is causing in the socioeconomic spectrum and the complete destruction of the middle classes/middle income groups; it is all a money grab before things really go downhill. But, not to worry, Fed Vice Chairman Fischer said Friday on CNBC that the Fed has "no plans to move into negative [rate] territory and we will try to avoid getting to that position" though he also place the Brexit caveat in play, saying how it impacts the world and US depends upon how the central banks handle the situation. There you go, Brexit is there to use as an excuse if needed.
On that light note, Happy Independence Day! That may mean something new for many nations, as it looks to be for the UK now, including the US.
In any event, the central banks are active and of course the stock market likes that. As does the bond market as it surges to record levels in the US and elsewhere. Gold too. Cannot forget gold.
THE MARKET
CHARTS
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In a holding pattern Friday, holding the 3 prior days of Brelief move off the Friday and Monday selloff.
The index charts show most all indices effectively back into the Prexit range. SOX is still well off its high but it also sprinted into Brexit and suffered accordingly. That now means, however, they have to go back to working on that long 21 month topping range and try to move higher once more to challenge the summer 2015 highs. Again, with the central banks in the mix, all things upside are possible. It does not cure the problems; it just inflates asset values in the hope everything else catches up. As 6+ years shows, however, they don't catch up because the free money horribly skews investment decisions in favor of further paper gains (buybacks, dividends, no loans, no capital investment) and thus undermines any real recovery attempts from investment, creation, innovation, and new jobs. That will not change until the central banks relent AND the fiscal, regulatory, and tax policies change as well.
I heard some idiot in Austin the other day on the radio spluttering about how if the current policies are changed, meaning a Trump or libertarian (or other third party candidate) won election, that the policies they would invoke would lead to disincentives to invest, take chances, create, innovate. I had to ask just what world was he living in where this was occurring right now? The lack of investment, risk-taking, creation and innovation is what we are experiencing now as a result of 0% money, the ACA, massive new regulation, and oppressive tax increases. But, that is the way points are 'argued' today: take positions that you want to take because it suits your mindset then shout anyone down who disagrees. Facts? They are for the weak. Hey, they are at least practicing the old adage we know in the law: when you have good facts, argue the facts; when you have bad facts, argue the law. A slight change in the procedure for today: when you have bad facts, ignore logic and scream down your opponent.
SP500, DJ30, SP400 and RUTX are all pretty decent in their return to where they were Prexit: in the range of the past 3+ months, trying to consolidate the recovery and set up a break higher from the range. Fed/central bank activity of course welcome.
NASDAQ and SOX are not as positive. NASDAQ is just below the Prexit level, but it had to run a long way to get there, and its pattern Prexit was a double top. It was trying to break higher when Brexit hit, but it was still a weak overall pattern. Now it has rallied 288 points in four sessions and is still below the Prexit levels. You would think at a minimum it would need to rest a bit.
SOX made it to the Brexit initial gap point and stalled. It is just over the April highs; yea Very choppy, has left itself a lot of overhead resistance. The market depends a lot upon SOX and its movements, so this week how SOX works on that gap from the prior Friday will be key for the market.
LEADERSHIP
Leadership recovered well enough with the indices, but we note that some of the defensive groups continue to perform well, e.g. utilities (PCG, EQT, AEP). Those are not groups that herald a prosperous bull run, but it is also still early and the Brexit really shook up investment allocations in a very short time period.
Metals: Back in the game nicely. SID jumped 9.8% for us Friday, breaking to a higher rally high, higher than Prexit. AKS is running again. SCHN is breaking higher. CENX is jumping again and giving a new entry. Precious metals are jumping again and we picked up some HMY.
Industrials: Recovered back to the Prexit levels for the most part, but the patterns are not that inspiring just yet. HON, UTX, TMO.
Retail: SBUX poured a nice move on the week. WWW moved up well. ROST surged though Friday reversed the early upside. KSS, DDS, M, JWN and other department stores are in the process of 2 month bottoming patterns such as double bottoms and triangles after some aggressive March to May selloffs. These could provide some entries ahead.
Biotechs: Being talked up on the post-market shows, but there needs to be some pattern development overall. There are some strong movers, e.g. EXAS.
Software: A Prexit leader, now struggling Brexit. RHT struggling. BLKB has recovered but needs to set up better. CYBR struggling, FFIV as well.
Oil: Struggled Brexit after holding up well into it. Didn't tank as did other groups, but likewise has not rebounded sharply as have other groups. UNT rebounded Friday, PTEN enjoyed a good week along with SPN.
Chips: Rebounded, but struggling with their patterns. XLNX, SLAB, NXPI, AVGO. Others are looking better, e.g. MLNX, ARMH. QRVO might be able to straighten out its pattern.
MARKET STATISTICS
NASDAQ Stats: +19.89 points (+0.41%) to close at 4862.57 Volume: 1.732B (-19.46%)
Up Volume: 1.05B (-680M) Down Volume: 669.86M (+251.26M)
A/D and Hi/Lo: Advancers led 1.68 to 1 Previous Session: Advancers led 2.44 to 1
New Highs: 139 (+29) New Lows: 20 (-11)
S&P Stats: +4.09 points (+0.19%) to close at 2102.95 NYSE Volume: 855.5M (-38.89%)
A/D and Hi/Lo: Advancers led 1.75 to 1 Previous Session: Advancers led 3.73 to 1
New Highs: 351 (+28) New Lows: 10 (-8)
DJ30 Stats: +19.38 points (+0.11%) to close at 17949.37
Put/Call Ratio (CBOE): 0.92; -0.31. Only the second session below 1.0 in 14 sessions. It did drop on the start of a new quarter after topping 1.0 even as the market rallied to end June. That makes the jump in puts look more like rolling out of positions than downside speculation.
12 of 14 over 1.0. 12 of the last 26 below 1.0. 32 of 46 over 1.0. Still a LOT of put activity, historically a more bullish indication.
Bulls and Bears: Massive drop in bulls, but of course that was immediately countered by the recovery, so this reading is all in flux right now.
Bulls: 41.6 versus 47.5
Bears: 23.8 versus 23.2
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: 41.6% 47.5% versus 45.9% versus 47.3% versus 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% 23.2% versus 23.5% versus 23.8% versus 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): 1.44% versus 1.475%. Gapped to a new all-time high Friday as bond yields around the world continue to fall.
Historical: 1.475% versus 1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68% versus 1.70% versus 1.67% versus 1.61% versus 1.57% versus 1.58% versus 1.62% versus 1.61% versus 1.64% versus 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%
EUR/USD: 1.11396 versus 1.1106 versus. Continued a weeklong recovery, but one that no way matches the sharp selloff on Brexit.
Historical: 1.1106 versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070 versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778 versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526 versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 102.497 versus 103.128. After a modest bounce to the 10 day EMA on the week. turning lower Friday at the lowest resistance level. Not a good indication for the dollar versus yen. Might force Japan's hand to intervene if the yen rebounds next week.
Historical: 103.128 versus 102.912 versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus 104.87 versus 104.788 versus 103.98 versus 104.58 versus 104.12 versus 104.68 versus 105.62 versus 106.085 versus 106.019 versus 106.933 versus 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
Oil: 49.28, +0.95. Down then up on the week. Back near Prexit levels but still bouncing all around the pat three weeks.
Gold: 1333.90, +20.20. Surging to a new closing high for the rally from January.
TUESDAY
The real first of the quarter will show up and with the central banks stating they will stand by the markets, one would presume the indices will continue higher though perhaps after a rest given the violence of the move lower and the move back up. After a bit of shakeout then we see if the move continues.
Remember, just because the indices are back to, more or less, Prexit levels, that does not mean they have beaten the prior highs. No, they still very much have to deal with them. This time, however, they will get help from central banks. That does help US stocks as it gives the rest of the world a backstop, but it is not the same game changer that the Fed turning soft would have. Thus, even though the BOE pledges stimulus over the summer and Draghi is ready to expand QE, the US Fed has not really spoken as to what it will do post-Brexit though there will be some minutes released this week. My will those be dated given they were way Prexit.
We see good patterns moving higher or ready to do so. We also see patterns that rebounded but don't look that comforting to buy. Others look ready to fall. Again there will be upside and downside on the report; the market has rebounded, but it has not made the next definitive break higher. Thus don't assume it has to move higher. Play leaders that are in good patterns that break higher but don't forget to look at stocks breaking lower. Not only do they tell part of the market story, they can also make you money even if the market tries to rally farther.
Have a great Fourth!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4862.57
Resistance: 4894 is the September 2015 closing high 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 4980 is the June 2016 peak 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: 4836 is the March 2016 peak The 50 day SMA at 4827 The 200 day SMA at 4818 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 4684 is the May 2016 test low 4637 is the February intraday high 4620 is the February 1 closing high 4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low. 4574 is the June 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 2102.95
Resistance: 2104 is the December 2015 high 2111 is the April 2016 recovery high 2116 is the November 2015 high 2119 is the February 2015 intraday high 2120 is the June 2016 peak 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 2079 is the intraday all-time high from November 2014 The 50 day SMA at 2071 2062 is the January 2015 lower high 2046 is the July 2015 closing low 2040 is the March 2015 closing low 2026 is the May 2016 low 2023 is the November 2015 low The 200 day SMA at 2023 2020 is the September 2015 intraday high 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 17,949.37
Resistance: 17,978 is the November 2015 peak 18,016 is the June 2016 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 17,754 The 50 day EMA at 17,692 17,600 is the rough bottom of the April to June range. 17,351 is the September 2014 all-time high. 17,265 is a December 2015 closing low The 200 day SMA at 17,264 17,245 is the November 2015 closing low 17,152 is the mid-July 2014 post bear market high 17,068 is the early July 2014 peak 17067 is the December 2014 low 17,063 is the June 2016 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
July 1 - Friday ISM Index, June (10:00): 53.2 actual versus 51.4 expected, 51.3 prior (no revisions) Construction Spending, May (10:00): -0.8% actual versus 0.5% expected, -2.0% prior (revised from -1.8%) Auto Sales, June (14:00): 4.95M actual versus 5.16M prior Truck Sales, June (14:00): 8.24M actual versus 8.55M prior
July 5 - Tuesday Factory Orders, May (10:00): -0.9% expected, 1.9% prior
July 6 - Wednesday MBA Mortgage Index, 07/02 (7:00): -2.6% prior Trade Balance, May (8:30): -$40.0B expected, -$37.4B prior ISM Services, June (10:00): 53.3 expected, 52.9 prior Crude Inventories, 07/02 (10:30) FOMC Minutes, June 15 (14:00)