- Stocks start lower, continuing the Thursday weakness, then the indices mostly recover. - Sellers just cannot get the job done thus far. - The recovery is good for the most part, but some leaders are problematic at best. - Economic recovery hope versus reality: is the administration listening to the right people? - Key leadership groups take a hit, some sport leader breakdowns. - This week the rally attempts to hold against weak internals, rising sentiment, some leaders breaking lower.
What a comeback. After a Thursday that saw stocks sell and recover in some cases, Friday opened down with some 40+ point losses on NASDAQ. SP500 and DJ30 were mostly fine on the session, but growth was way off the upside pace.
Once again, however, the sellers did not have their way. From the open stocks started to recover off the early weakness, moved into midmorning and worked laterally to the last hour. Then a 'miraculous' recovery in the last hour pushed all but RUTX and SOX positive.
Yes, once again the sellers tried but it was a half-hearted effort, and as soon as they didn't press the move the buyers bought back in. The indices bounced off the 10 or 20 day EMA, as the case may be, and recovered most of the downside.
Can you trust that recovery? Not on a Friday on a short week when the sellers give it a shot on the week. Thus we were not buying on the day. But, there are still many leaders that, while they were boxed around some on the week, held up well and indeed even have some pretty nice entry setups.
That means we are still looking at the upside predominantly as the trends held, are still holding, and the leaders are, most of them that did test, setting up some potential new entry points. It may be that Friday was just a short covering move or a buy on the dip bounce to close the week. As there are not that many shorts, covering seems to be a rather absurd conclusion.
I have to say that that some leaders did break on the week. NVDA broke the 50 day MA's after the last rally attempt failed to take out the prior high in December. But that is okay. Cramer Friday was talking his hedge fund knowledge saying that there were momentum 'battleground stocks' and you just don't get in until the battle is over.
That is true: let the fight between the buyers and sellers get resolved and then move in. What gets me about every one of these TV pundits is that they always say selling is okay, just buy it when the pullback is over. Well, not everyone has a hedge fund using other people's money. Cramer was touting NVDA up to the point it rolled over. Now he is saying buy it when the battle is over. With what, the profits you don't have now that a stock that was touted as a core holding a couple of weeks ago sells off? It is always the same story when selling crops up: just buy it on the dip! They always skip, however, that transition from strong buy to buy it after it sells off. And, of course, no one says one thing about it. Fake news or just a momentary lapse?
NEWS/ECONOMY
It was the best of times, it was the worst of times. New records on the stock indices, sentiment reports surging, but the 'hard' economic data still turning in disappointing results.
Gasoline demand fell 5.2% the past week, the second week of demand drop and this after GS said the prior week's and general demand trend points to recession. Happy spring! I would say the groundhog was wrong this year; saw his shadow but it is spring everywhere you go.
The Fed's national activity Index in January turned negative. Counter that with Small Business sentiment expecting the economy to grow jumping to 54% from 29% in the summer of 2016. Lots of hope, not a lot of real activity.
One of the more disappointing, even disturbing, stories of the week was the Trump meeting with CEO's. He wanted to discuss creating jobs and growing the economy. Sound great. When the meeting was over, however, the CEO's said that the main problem was not a lack of jobs but a lack of skilled workers, pushing again for more of the H-1b visas to let more cheaper foreign workers in.
If I was Trump I would have to ask, 'was that the problem at Disney?' Recall management called much of the senior staff into a meeting and abruptly told them they were going to be laid off. Moreover, they had to train their replacements, and if they did not, no severance. Many of the Disney employees told reporters that the people brought in from overseas to replace them knew NOTHING about the jobs they were hired to fill. No skills?
I would also have to ask about the tens upon tens of thousands of US citizens, educated at US universities in STEM degrees (science, technology, engineering, mathematics) who do not have jobs and are living with their parents. What about them filling those jobs? Even if it is not a perfect match, these are highly educated, and presumptively highly intelligent people who could, with minimal training, do the job. I mean Disney had to force terminated employees to train their clueless replacements. How hard could it be to teach someone already in the country to do the job?
Beyond that, they need to get to the root of the problem as to why companies feel compelled to choose America last for workers: the ability to compete internationally thanks to our tax code. The US taxes citizens and corporations no matter where they live in the world. You could live in Spain for five years, never coming to the US during that time, and the US would still say you owed the US taxes on what you earned in that country. That applies to corporations as well. Talk about building in a massive disadvantage and yes disincentive to for US companies.
Instead of importing a bunch of foreign workers, go ahead and lower the taxes, change the foreign collection practices, and make it where US companies are more competitive without feeling the need to cut out American workers for cheaper foreign workers. Sure that is not a dollar for dollar trade with a cheaper worker, but there are other ways to level the playing field. 0% corporate rates would help the corporations and the consumer, lowering prices all around.
That, of course, makes too much sense. Instead they are playing with a border tax that only raises prices to US consumers and does not help US exporters move goods to our NAFTA partners due to taxes that make end runs around that trade agreement. Negotiate to get trade truly free between our countries so US companies, small and large alike, can compete and sell their goods across borders.
Trump needs to meet with a bunch of small business owners, several times, to see what the real obstacles and the changes that would benefit all businesses versus just the big corporations and their lobbying that gets them the best deals.
THE MARKET
CHARTS
A bit volatile on the week, but in the end holding near support, either the 10 or the 20 day EMA. If that is the best the sellers can do . . . Of course it is not and the internals and sentiment are at levels with a negative bias for stocks. A bit of volatility with those indications adds to some of the negatives, but then again, the trends refuse to give up at this juncture.
NASDAQ: Looked a bit toppy starting Wednesday, but after a Thursday test of the 10 day EMA and Friday opening back at that level, NASDAQ rebounded to post a slightly higher week. Still moving up the 10 day EMA.
SP500: Same action as NASDAQ, putting in new highs then flattening out, selling to the 10 day EMA, but recovering to hold the moves.
DJ30: Pretty much rising each session with no signs of topping out.
SOX: Surged to a new high Tuesday, stalled Wednesday, sold Thursday and on the Friday open. Rebounded to flat Friday, holding the trend rising above the 20 day EMA. Many chips struggled, but closed out the week looking promising once again.
SP400: Same action as SOX, i.e. a new high Tuesday, fading back Wednesday and Thursday and to start Friday. Bounced Friday off the 20 day EMA.
RUTX: Solid Tuesday move as well then a drop Wednesday to the Friday low, but held the 20 day EMA Friday and rebounded to a nice tight doji with tail. Tested the top of the lateral range from late 2016, early 2017 and held. That looks quite solid.
LEADERSHIP
Metals: Breaking down late last week and didn't recover much Friday. AKS, SCHN, STLD, FCX.
Materials: From great moves higher to rolling over. LPX gapped lower Friday. CX is struggling but has set up an ABCD. EXP is trying to hold the 50 day MA's.
Industrial machinery: Weak Thursday, tried to recover Friday with not a lot of success. CMI, CAT, TEX.
Chips: NVDA tried to recover some Friday and did a decent job but the pattern is still damaged. MU, XLNX testing the 50 day MA's. Some solid leaders struggled some late week but held up quite well: AMD, MCHP, SWKS, SLAB. Others are in great position: MVIS.
China: Some remain solid: JD, YNDX, ATHM, BABA. Others had a tougher week, e.g. SINA, BIDU, both on earnings. Some were weak but managed to recover, e.g. SOHU.
FAANG: FB looks ready to start upside again. AAPL continues trending upside. NFLX trying to hold the 20 day EMA and bounce. GOOG is trying to take on the late January peak.
Financial: All tested late week on the bond rally and rate drop. All okay in their patterns, just knocked around some.
MARKET STATS
DJ30 Stats: +11.44 points (+0.05%) to close at 20821.76
Nasdaq Stats: +9.8 points (+0.17%) to close at 5845.31 Volume: 1.668B (-10.52%)
Up Volume: 858.89M (+94.45M) Down Volume: 767.66M (-312.34M)
A/D and Hi/Lo: Decliners led 1.17 to 1 Previous Session: Decliners led 1.47 to 1
New Highs: 108 (-131) New Lows: 51 (+15)
S&P Stats: +3.53 points (+0.15%) to close at 2367.34 NYSE Volume: 890M (-0.89%)
A/D and Hi/Lo: Advancers led 1.07 to 1 Previous Session: Advancers led 1.16 to 1
Bulls and Bears: Bulls backed off again but remain over 61%. 6 of 8 weeks over 60%. Bears held steady at low levels.
Bulls: 61.2 versus 61.8
Bears: 17.5 versus 17.6
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: 61.2 versus 61.8 61.8 versus 62.7 versus 61.8 versus 58.2 versus 60.6 versus 58.6 versus 60.2 versus 59.8 versus 59.8 versus 59.6 versus 58.8 versus 56.3 versus 55.6 versus 51.0 versus 42.9 versus 41.7 versus 47.1 versus 42.9 versus 46.1 versus 46.7 versus 45.2 versus 44.6 versus 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
Bears: 17.5 versus 17.6 17.6 versus 16.7 versus 17.6 versus 17.5 versus 17.3 versus 18.3 versus 18.4 versus 19.6 versus 19.6 versus 19.2 versus 19.6 versus 22.3 versus 21.6 versus 23.5 versus 25.7 versus 24.3 versus 23.1 versus 23.8 versus 23.1 versus 22.8 versus 23.1 versus 24.3 versus 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%
OTHER MARKETS
Bonds (10 year): 2.31% versus 2.38%. Bonds gapped upside Friday, matching the high from early February.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.38% versus 2.42% versus 2.43% versus 2.42% versus 2.45% versus 2.50% versus 2.473% versus 2.43% versus 2.41% versus 2.398% versus 2.340% versus 2.393% versus 2.41% versus 2.48% versus 2.474% versus 2.477% versus 2.44% versus 2.49% versus 2.48% versus 2.512% versus 2.52% versus 2.467% versus 2.40% versus 2.47% versus 2.468% versus 2.422% versus 2.372% versus 2.393% versus 2.358% versus 2.365% versus 2.38% versus 2.962% versus 2.42% versus 2.357% versus 2.45% versus 2.448% versus 2.42% versus 2.48% versus 2.51% versus 2.56% versus 2.54% versus 2.55% versus 2.54% versus 2.564% versus 2.544% versus 2.59% versus 2.59% versus 2.52% versus 2.473%
EUR/USD: 1.05616 versus 1.05830
Historical: 1.05830 versus 1.0557 versus 1.05474 versus 1.06108 versus 1.06665 versus 1.06148 versus 1.05762 versus 1.06023 versus 1.06411 versus 1.06557 versus 1.06825 versus 1.06814 versus 1.07219 versus 1.07880 versus 1.07605 versus 1.07892 versus 1.0791 versus 1.07294 versus 1.06957 versus 1.06843 versus 1.0683 versus 1.0756 versus 1.07274 versus 1.0761 versus 1.07027 versus 1.06394 versus 1.06381 versus 1.07114 versus 1.06450 versus 1.0624 versus 1.05982 versus 1.0555 versus 1.0585 versus 1.05346 versus 105837 versus 1.0525 versus 1.03914 versus 1.05289 versus 1.05155 versus 1.04357 versus 1.04636 versus 1.0451 versus 1.04368 versus 1.04412 versus 1.0392
USD/JPY: 112.169 versus 112.745. Dollar weakened on the week, heading back near the early February lows.
Historical: 112.745 versus 113.324 versus 113.399 versus 112.906 versus 113.356 versus 113.880 versus 114.306 versus 113.65 versus 113.856 versus 113.265 versus 113.401 versus 112.207 versus 112.332 versus 111.815 versus 112.567 versus 112.903 versus 112.68 versus 112.50 versus 114.493 versus 115.094 versus 114.469 versus 113.362 versus 113.850 versus 112.736 versus 114.39 versus 114.686 versus 114.538 versus 112.774 versus 114.473 versus 114.57 versus 114.70 versus 115.811 versus 116.023 versus 116.923 versus 115.93 versus 116.46 versus 117.983
Oil: 53.99, -0.46. Tried the breakout again, struggled again at the top of the range.
Gold: 1258.30, +6.90. Strong break higher Thursday and Friday, moving to the 200 day SMA. As with bonds, surprising strength, based mostly on the Fed not going to do anything and the notion Trump will not get his policies moving.
MONDAY
A volatile week that started stronger, ended problematic, but the bids were still ready on the dip and the indices recovered and held the trends. Thus, a bit more testy, but holding the trends higher with bids returning when some modest selling hit.
Yes, overall it was modest though some leaders did get hit. Chinese stocks had some leaders really struggle. Chips had some issues, and though most recovered, some big names did not and others are still problematic.
Basically the market started to see some leaders struggle: materials, metals, industrial equipment, some chips, some China. If leaders cannot hold the line and those struggling roll over, the market rally is in jeopardy. Makes sense given the issues with internals and sentiment. Leaders are the last peg and the past week's struggles have to keep everyone on guard.
That said, the trends remain in place. There are still plenty of leading stocks holding up well and more setting up or upside moves. Thus despite the issues in the struggling leaders, others look ready to step into their place. So, we have some good-looking upside plays still ready to go. We will see how they move and how the others hold the line. If the new stocks cannot break higher and if those hanging on fail, the rally likely tests deeper.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5845.31
Resistance:
Support: 5661 is the late January upper gap point The 50 day EMA at 5620 5601 is the January lower gap point The 50 day SMA at 5599 The 2016 trendline at 5559 The November prior all-time high at 5404 5340 is the September and October 2016 twin peaks 5287.61 is the September 2016 high 5271.36 is the August 2016 intraday prior all-time high The 200 day SMA at 5242 5231.94 is the 2015 all-time high 5170 is the October intraday low. 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
S&P 500: Closed at 2367.34
Resistance:
Support: The 2016 trendline at 2309 2301 is the late January 2017 high The 50 day SMA at 2288 The 50 day EMA at 2289 2282 - 2280 from January 2017 2277.53 is the December 2016 high The November 2016 all-time high at 2213.25 2194 is the August 2016 prior all-time high The 200 day SMA at 2179 2175 is the June 2016 high 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 September 2016 low; 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 2046 is the July 2015 closing low 2040 is the March 2015 closing low
Dow: Closed at 20,821.76
Resistance:
Support: 20,126 is the January 2017 intraday high 20,101 is the late January closing high. The 50 day SMA at 20,080 The 50 day EMA at 20,016 19,994 - 19,999 (early January high, upper gap point from late January 19750 is the lows of the December/January range The 200 day SMA at 18,733 18,669 is the August 2016 all-time high 18,595 is the July 2016 peak 18,351 is the prior all-time high from May 2015 18,288 from March 2015 18,262 is the upper gap point from the Monday gap lower. 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 17,992 is the early September low 17,978 is the November 2015 peak 17,960 is the October intraday low 17,600 is the rough bottom of the April to June range. 17,351 is the September 2014 all-time high.