- Two good post-FOMC upside sessions and a Friday test. - AAPL, FB have a few issues, market takes a break. - A day off on Friday, but the test of the FOMC rally is the key to the continuing trend. - Market rotation has kept the market rallying, thus far it is still working. - Tons of data next week as market moves toward next earnings season.
After 2 days higher following the FOMC 'stay the do nothing course' and higher highs from NASDAQ, SOX, and RUTX, stock indices took a breather, some more than others. Stocks started a bit lower, sold into early afternoon, bounced, but then slid back near session lows to close.
VOLUME: NYSE -5%, NASDAQ -8%. Lower volume on a decline means no heavy selling, so no distribution damage done.
A/D: NYSE -1.7:1, NASDAQ -1.7:1
Pretty much even selling across the board outside of SOX, but that index is more volatile. In short, after all stocks rose fairly evenly after the Fed, all pulled back rather evenly Friday. The difference, of course, is in their patterns and there relative position after the rally and pullback.
DJ30, SP500 and SP400 clearly lagged the FOMC induced bounce with DJ30 the weakest link. NASDAQ, SOX and RUTX are the stronger and best positioned after Friday, but SOX and RUTX did not make clear breakouts and indeed slid back below their early September highs at the Friday close. Not sharp reversals but something to watch as those indices tested the prior highs, moved to higher highs, but have slipped back below the prior highs. That leaves AAPL as the sold index holding a higher high. Hey, leadership has to come from somewhere.
This coming week we see just what the post-FOMC move really gave the market. Before the FOMC, the indices were less than inspirational, particularly DJ30, SP500, SP400. That means this rather normal test heading into the weekend after two solid surges needs to hold next week and not let those indices slip back into the neutral to negative near term patterns shown immediately ahead of the FOMC decision to once again cheese up and do nothing. You almost have to laugh at the statement "for the time being" as it implies the Fed really considered acting or will consider acting in the future.
In any event, laughing or not at the Fed's invertebrate classification, the market reaction this coming week after the surge on the news and then the pullback. In some cases it is a normal test. In other cases such as DJ30, SP500, they are quickly reverting to their weak upside position ahead of the FOMC. If they fall back into that pattern, that is a sign of weakness.
There is a lot of Fed-speak next week with Fischer on Tuesday and Yellen twice later in the week as she heads to Congress. The debate Monday is considered an important event. As discussed Thursday, there is the notion a good Trump performance is bad for stocks as it might mean he can win and of course we cannot have an outsider enter Washington, DC and even talk about changing up the power structure. Frankly, all of that talk is more political BS. The politics are full bore, full press into every area they feel they can achieve an advantage for their side. The market is a pawn in that fight. It can have short term swings based on any event, political or otherwise, but the utter nonsense about crashes if one candidate or the other is elected is nonsensical (e.g. Mark Cuban). After all, there is the Fed backstop, right?
Again, as the play in 'Hamlet' was the thing to catch the conscience of the king, the test will be the thing to prove . . . the strength of the FOMC-driven move.
We were confident enough of some moves to initiate positions on CEMP and TCBI and to let our other positions work, upside and down. Remember, this market has worked higher by rotation from sector to sector. That has provided upside and downside plays even as the market rises as money leaves one sector and moves to another. The test of the FOMC move will tell a lot more about the market's ability to continue making higher highs. Thus far the market has overcome near term selling, using the FOMC decision as the upside catalyst. This coming week will tell the strength of the move post-Fed.
THE MARKET
CHARTS
NASDAQ: The week's leader, NASDAQ hit two new all-time highs Wednesday then Thursday. Friday it tested and likely fills the Thursday upside gap. With AMZN at new highs, GOOG surging into Thursday, NASDAQ had the horsepower. It does not look bad at all and should put in a rather normal test of this move. Rallied up the 10 day EMA, tested back to the 50 day MA the second week of September, now back over the 10 day EMA and punching out new highs. Classic breakout, rally, test, resumption of the breakout move.
SOX: The other index punching out new highs on the week, though SOX is just a post-2000 high. Still, impressive strength as it too put in the rally up the 10 day EMA, the 50 day MA test, then the resumption of the rally. Still, it looks a bit heavy here with some sluggish action and lower MACD on the higher high. Not the kiss of death, but as noted earlier, the test is the key.
RUTX: The same action, testing off a rally up the 10 and 20 day EMA, holding the 50 day MA, rebounding back to a higher high Thursday. Looks as if RUTX is resuming the uptrend over the 10 day EMA as well, though MACD is lagging a bit, perhaps not as much as on SOX.
SP400: The midcaps did well enough, but now how they test is key. Gapped back over the 50 day MA Thursday after selling to and holding the up trendline from way back in January. Tested Friday, holding the 50 day MA. No higher highs for SP400 yet and it only made it to the lower gap point from where it gapped lower in early September. MACD is lagging as on the other indices. Yes, the test will tell the story, but holding that trendline was important. Now if it sells and breaks that TL, that of course is a negative story.
SP500: Similar to SP400, gapped over the 50 day SMA Thursday then slipped Friday, closing below that level. Just missed filling the early September gap lower but was a point from it; close. MACD lagging, volume stronger on the selling than the previous upside volume and the subsequent recovery volume the past 2 weeks. Still trending higher, really not bad at all, but the test this week tells the tale.
DJ30: You could say DJ30 struggled the most of the indices. It did recovery, it did gap higher Thursday, but after hitting the 50 day SMA on the high it faded to a doji. Friday DJ30 sold to fill the Thursday upside gap. After recapturing the prior all-time high from 2015 Thursday, DJ30 gave it up Friday. MACD lags, volume favored the stronger early September selling. Not to be too repetitious, but the test this week is the real story.
LEADERSHIP
Big Names: AMZN edged out a new all-time high after a strong Wednesday and Thursday surge. GOOG took a breather after a strong Thursday gap and run. FB gapped lower but remains in the trend after revealing for 2 years it overstated its video ad views by as much as 80%. AAPL sold to the 10 day EMA on volume after a private company reported that iPhone 7 sales might not be that good. NFLX is struggling to hold the 50 day MA. MSFT faded some of the move but holding over the 20 day EMA. MMM dropped on strong volume off a Thursday tombstone doji.
Biotech: Good week, not much Friday, e.g. BIIB, CELG. IDRA enjoyed a strong week as did AGIO, OVAS. BCRX still looks good as does NVIV. ACAD moved up early week, tested nicely to Friday. Looks as if CEMP is starting up a move as of Friday. ENDP surged Friday; could be interesting.
Chips/Electronics: Mixed, some looking heavy. LSCC posted a good move Thursday. UNXL surged Friday. HIMX is still rending up the 10 day EMA. AVGO and SWKS, however, suffered a weak Friday on that AAPL iPhone 7 report. SLAB, XLNX look heavy but are holding on for now.
Financial: Picked up some TCBI options as it broke higher on strong volume. C, BAC still look good in their 3 week flag tests. MS is holding, but going nowhere. GS broke harder to the downside Friday, selling to the 50 day MA.
Utilities: A strong week but testing late week, and that means some possibilities perhaps setting up. Others continued higher, e.g. AES, AEE.
Oil: After a good week in some issues, e.g. AXAS, CWEI, APC, Friday was a downer. Still some very strong moves but as with the indices, the test this week tells more of the tale.
Retail: Getting more interesting. JWN is starting to move and if it continues we will enter. FL worked up off the 20 day EMA test. RL is interesting at the 200 day SMA. ROST continued higher.
MARKET STATS
NASDAQ Stats: -33.78 points (-0.63%) to close at 5305.75 Volume: 1.719B (-7.86%)
A/D and Hi/Lo: Decliners led 1.65 to 1 Previous Session: Advancers led 2.52 to 1
New Highs: 109 (-98) New Lows: 19 (-2)
S&P Stats: -12.49 points (-0.57%) to close at 2164.69 NYSE Volume: 810.4M (-4.8%)
A/D and Hi/Lo: Decliners led 1.71 to 1 Previous Session: Advancers led 4.67 to 1
New Highs: 54 (-112) New Lows: 6 (+1)
DJ30 Stats: +98.76 points (+0.54%) to close at 18392.46
Eleven 1.0+ Readings in 4 weeks, 7 of the last 12 sessions over 1.0.
Bulls and Bears: Of course bulls tumbled and bears jumped just as the market bottomed.
Bulls: 44.6 versus 49.0
Bears: 24.3 versus 22.6
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: 44.6 versus 49.0 49.0 versus 52.5 versus 55.9 versus 56.7 versus 56.2 versus 54.3 versus 52.9% versus 53.9% versus 54.4% versus 52.5% versus 47.1% versus 41.6% versus 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%
Bears: 24.3 versus 22.6 22.6 versus 22.8 versus 20.6 Versus 20.2 versus 20.0 versus 20.9% versus 21.2% versus 21.6% versus 23.3% versus 24.7% versus 24.5% versus 23.8% versus 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%
OTHER MARKETS
Bonds (10 year): 1.62% versus 1.625%. Big gap Thursday post-FOMC, Friday TLT stalled at the 50 day EMA and just below the July through August range. That makes bonds look a bit weak post-FOMC.
Historical: 1.625% versus 1.656% versus 1.693% versus 1.705% versus 1.698% versus 1.70% versus 1.698% versus 1.718% versus 1.671% versus 1.67% versus 1.61% versus 1.53% versus 1.54% versus 1.601% versus 1.57% versus 1.58% versus 1.57% versus 1.57% versus 1.62% versus 1.58% versus 1.56% versus 1.54% versus 1.58% versus 1.53% versus 1.55% versus 1.57% versus 1.558% versus 1.51% versus 1.56% versus 1.51% versus 1.54% versus 1.59% versus 1.585% versus 1.503% versus 1.54% versus 1.558% versus 1.51% versus 1.46% versus 1.50%
EUR/USD: 1.12259 versus 1.12061. Euro looks ready to move higher after recovering the 200 day SMA and the 50 day MA's. Big inverted head and shoulders pattern.
Historical: 1.12061 versus 1.11898 versus 1.1151 versus 1.1177 versus 1.1155 versus 1.12444 versus 1.1245 versus 1.12196 versus 1.12335 versus 1.12318 versus 1.12661 versus 1.1239 versus 1.12554 versus 1.11545 versus 1.11943 versus 1.11572 versus 1.1146 versus 1.11708 versus 1.11949 versus 1.12894 versus 1.1300 versus 1.13045 versus 1.3254 versus 1.13251 versus 1.1342 versus 1.13036 versus 1.12773 versus 1.11824 versus 1.11636 versus 1.11372 versus 1.11803 versus 1.1115 versus 1.1080 versus 1.10882
USD/JPY: 101.034 versus 101.045. Dollar broke down hard Wednesday below the 50 day MA's, back into the downtrend. Overall, however, USD could be bottoming in a 3 month range with a low at 99.50 to 100.
Historical: 101.045 versus 100.386 versus 101.714 versus 101.956 versus 102.280 versus 102.086 versus 102.172 versus 102.155 versus 102.814 versus 101.57 versus 102.685 versus 102.439 versus 102.439 versus 101.698 versus 101.412 versus 103.92 versus 103.226 versus 103.269 versus 102.965 versus 102.160 versus 101.808 versus 100.485 versus 100.306 versus 100.27 versus 100.297 versus 100.21 versus 99.843 versus 100.529 versus 100.953 versus 101.308 versus 101.864
Oil: 44.48, -1.84. Dropped like a rock after rallying Monday to Thursday. Rig count jumped in the US, Iran told Saudi Arabia to take its production freeze idea and . . .
Gold: 1341.70, -3.00. Goldl jumped Wednesday and Thursday on the FOMC, then faded just modestly Friday, holding at the 50 day SMA. In the 2.5 month range and will see if it can put in a higher low at the 50 day and move higher.
MONDAY
The Fed decision is out, arguably the most important data point. Hell, you know it is. Continuing virtually free money for the banks and big corporations has done SO much for the economy as a whole. Okay, so financial assets are up, but as is evident talking to a lot of FORMER investors, people who used to have money to invest but now need it all just to try and hang onto what they have. To add to the Fed's 'no action' action, this week the market gets some Fed-speak from Fischer and then Yellen at Congress. Who knows how many others chime in?
Lots of data as well. New home sales, consumer confidence, durable orders, GDP Q2 final, income and spending, Chicago PMI. Data heavy.
Okay, here comes the repeat: how the market tests from the Wednesday Thursday FOMC-induced surge tells the tale. Friday some stocks took some pretty serious hits to their gains, e.g. MMM selling hard from a tombstone doji at the top of the July through August range.
A pullback gives opportunity in overbought leaders, IF the market holds the test and resumes. With the Fed still all in the market should hold and continue higher. If not, then the market has hit the saturation point of the Fed just doing nothing. Of course if the market dives lower, not to fear as the Fed and other central banks will step in as they did in February. But here's the rub (still in Shakespeare mode, right?): of course the market has to dive first.
Still many good sectors and stocks in good position to move. Picked up some this past week, looking at more of course this week. How they test and hold is the important aspect. Those that don't care and move higher anyway, well they are likely to be very solid movers.
For downside plays, on an further test how they move tells their fate. If the market sells and they don't, they likely don't sell much more and we jettison. I have to say MMM still looks ready to drop and it is not alone. TEX broke lower hard Friday and CMI still looks ready to blow an engine. Despite all of the upside Fed euphoria (of sorts), there are issues out there in the economy, market, and well, I just don't want to go into the long list of extra-market issues facing the country because it is simply too depressing to dwell upon.
Overall, the indices are in uptrends. There is still leadership, and there are still good stocks forming good patterns and moving higher as money rotates through different sectors. Of course we want to take advantage of the trend and those stocks as long as they work.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5305.75
Resistance:
Support: 5287.61 is the all-time high from September 2016 5271.36 is the August 2016 intraday prior all-time high 5231.94 is the 2015 all-time high The 50 day EMA at 5175 5162 is the early November peak, 5176 is the December intraday peak 5100 from the April peak and early May peak 5042 is the March 2015 high 5008.57 is the early March 2015 post-bear market high 5007 is the 12/31 upper gap point from that big gap lower 4999 is the October upper gap point 4980 is the June 2016 peak 4969 is the April 2016 recovery high 4960 is the September 2015 intraday high, an important reversal point for NASDAQ. 4920 is the lower gap point from mid-October 2015, the January 2016 lower gap point 4916 is the mid-November 2015 low 4899 - 4902 from the September 2015 peak, July 2015 low 4894 is the September 2015 closing high The 200 day SMA at 4881 4836 is the March 2016 peak 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
S&P 500: Closed at 2164.69
Resistance: 2175 is the June 2016 high 2194 is the August 2016 all-time high
Support: The 50 day EMA at 2154 2135 is the May 2015 all-time high 2130 is the June 2015 peak 2126 was the April 2015 prior all-time high 2120 is the June 2016 peak 2119 is the February 2015 intraday high 2116 is the November 2015 high 2111 is the April 2016 recovery high 2104 is the December 2015 high 2094 is the December 2014 high 2079 is the intraday all-time high from November 2014 2062 is the January 2015 lower high The 200 day SMA at 2060 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 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
Dow: Closed at 18,285.92
Resistance: 18,288 from March 2015 18,351 is the all-time high from May 2015 The 50 day SMA at 18,431 18,595 is the July 2016 peak 18,669 is the August 2016 all-time high
Support: 18,247 is the August 2016 low 18,168 is the April 2016 recovery high 18,100 to 18,181: interim peaks in the December 2014 to July 2015 range 18,016 is the June 2016 peak 17,978 is the November 2015 peak 17,600 is the rough bottom of the April to June range. The 200 day SMA at 17,589 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 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
ECONOMIC CALENDAR
September 26 - Monday New Home Sales, August (10:00): 585K expected, 654K prior
September 27 - Tuesday Case-Shiller 20-city, July (9:00): 5.1% expected, 5.1% prior Consumer Confidence, September (10:00): 98.0 expected, 101.1 prior (revised from 99.8)
September 28 - Wednesday MBA Mortgage Index, 09/24 (7:00): -7.3% prior Durable Orders, August (8:30): -1.9% expected, 4.4% prior Durable Orders, Ex-T, August (8:30): -0.4% expected, 1.5% prior Crude Inventories, 09/24 (10:30): -6.200M prior
September 29 - Thursday GDP - Third Estimate, Q2 (8:30): 1.3% expected, 1.1% prior GDP Deflator - Third, Q2 (8:30): 2.3% expected, 2.3% prior Initial Claims, 09/24 (8:30): 259K expected, 252K prior Continuing Claims, 09/17 (8:30): 2113K prior International Trade , August (8:30): -$59.3B prior Pending Home Sales, August (10:00): 1.0% expected, 1.3% prior Natural Gas Inventor, 09/24 (10:30): 52 bcf prior
September 30 - Friday Personal Income, August (8:30): 0.2% expected, 0.4% prior Personal Spending, August (8:30): 0.2% expected, 0.3% prior Core PCE Prices, August (8:30): 0.2% expected, 0.1% prior Chicago PMI, September (9:45): 52.0 expected, 51.5 prior Michigan Sentiment -, September (10:00): 90.0 expected, 89.8 prior
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