- Market survives the triumvirate of events, but GS 'air pocket' worries skewer FAANG, big tech, chips. - DJ30 cruises to a new high as does RUTX while NASDAQ, SOX are rocked. - Rotation for sure on Friday, but will it last or will the big tech and FAANG selling be, again, another short term selling event as all the others? - Plenty of leaders into early 2017 are set up to lead again.
There were some big events hitting on the week, potentially market moving events. Comey's testimony would expose Trump as a heavy handed justice obstructionist. CNN had already reported same weeks ago. Didn't happen. Indeed, some of those pushing the testimony came out in worse light than the President. The ECB might upset things with its policy decision. The market yawned. The UK election was worrisome in that May lost her majority, but stocks were up Friday early on even in the wake of the UK vote.
None of those stalled the move. It took something else. Something of authority.
Friday the FAANG, big techs, semiconductors, software, and the like turned and bit the hand that buys them. Goldman issued a report suggesting the FAANG hit a 'valuation air pocket' (not to be confused with the strangely popular Hot Pocket). After FAANG accounted for roughly 55% of NASDAQ's move this year, GS got nervous. With so many fund managers in a state of constant petrification regarding stock values, all they needed was an excuse to sell. It would appear that after several leading fund managers voiced their concerns, GS was the final 'authority.' Stocks from NASDAQ and SOX tumbled. Hard. The rest of the market? Nothing. Indeed, DJ30, SP400, and RUTX scored gains while the market spilled tech blood.
A/D: NYSE 1.6:1, NASDAQ 1.03:1. Yes, NASDAQ breadth was positive on a day it lost 1.8%. That is the definition of a narrow, large cap selloff. The money came in and pushed them higher and higher, and Friday it fled the scene.
Sharp declines for NASDAQ and SOX, but it was not a collapse. NASDAQ recovered, as did all stocks, in the last 1.5 hours, holding the 20 day EMA on the close. SOX did the same.
Of course DJ30 put in a new all-time high. SP400 rallied to a new high but just could not quite hold a new closing high past the March peak. SP500 tapped the 20 day EMA on the low then rebounded to flat, holding its lateral range for the week just over the 10 day EMA. It did put in a new high intraday. RUTX did manage to hold a new all-time closing high. Two new closing highs, new intraday highs on all the NYSE indices.
New highs on some indices as others are ripped open to the downside. No doubt FAANG and tech stocks were dumped, but others were bought as they were sold. Sure looks like rotation versus abandoning the market.
That make some sense if you are crediting the GS release with the move: dump the 'air pocket' stocks and go with other areas. As seen with the plays this weekend, there are a LOT of leadership plays that posted great moves into the first of the year that have tested while FAANG and SOX ran higher. They are in excellent position to make new moves higher and resume their leadership.
Just another hiccup?
There is also something else to consider: yes Friday resulted in sharp losses for the FAANG and tech stocks and on strong volume. They were dumped.
But . . . this has occurred before. Recall the litany of technical breakdowns I have chronicled just to see stocks reverse right back up. Even on the Friday selling, in the last 1.5 hours NASDAQ and SOX recovered their 20 day EMA, moving nicely off the lows. AMZN reversed big after undercutting its 50 day MA's. FB bounced off a 50 day EMA test; it fell to the 50 day MA in mid-May in an ugly gap and drop, but it immediately rebounded and moved to new highs yet again. AAPL managed to hold the 50 day MA after undercutting it. NFLX bounced off the 50 day on its low.
Wow, could the plunge protection team be on the move again, driving these indices and stocks back up and blunting the selloff?
These were not utter collapses, and that raises the question of whether these stocks got it out of their system, cleared the pipes so to speak, and can once again move higher. Unlike some of prior selloffs that recovered, this one saw these stocks in pretty solid technical position. More reason to watch for a possible short term upheaval that sees buying return.
So, if positions recovered decently enough we kept them, though with the wild moves it was not the easiest task. Others we sold. If, however, it is just a short-lived jerk lower, those that held support are in good position to rebound as well.
Of course, at some point they won't recover. This was not, however, the entire market, and if money rotates elsewhere you can see the market continue its move with other groups moving into the lead. There are many non-FAANG, non-tech stocks that rallied well into the first part of 2017 only to peak and then fade into bases while FAANG, tech, and chips led the charge higher. Now they are set to move higher, and as money comes out of those recently leading groups that many managers so feared, these stocks and sectors could rise and return to leadership.
Thus, we have several of these plays on the report for this coming week. Great patterns where bases have formed after runs to highs, ready to move higher. As money comes out of the recent leaders, these are primed to move. We will see if they get the money or if the money is yanked from the market altogether. Not the case Friday when everyone was really spooked, so that makes the rotation theory look a bit better.
THE MARKET
LEADERSHIP
Semis: The big movers were targets. NVDA gapped higher on another upgrade then reversed. But it held the 10 day EMA. AVGO sold hard but landed on the 20 day EMA. MU held the 20 day on the close. Same with SWKS, SLAB. SIMO held the 10 day EMA. RTEC hard to the 10 day. NPTN down but held up well; of course it has not surged as have the others. Not a total rout as they held onto near support. That leaves them in position to rebound, IF the buyers still want them, if, as it were, this was enough of an air pocket.
FAANG: FB sold to the 50 day EMA but bounced off it; that level has held as support before. AAPL sold below the 50 day MA but did manage a rebound to hold it. AMZN tumbled 80 points and undercut the 50 day MA only to rebound to a 32 point loss. NFLX tested the 50 day MA and rebounded some. GOOG undercut the 20 day EMA and could not quite recapture it on the rebound. Down hard but did see some buyers off the lows in the last hour.
China: As leaders they were hit as well. NTES held the 10 day EMA on a 3% drop. SOHU sold to the 20 day EMA. SINA continued its test, holding the 50 day EMA on the low. CTRP sold to the 20 day EMA. Here as with FAANG, the selling was sharp, but there were some recoveries.
Financial: Seeing money their way. JPM, C, BAC, TCBI, KEY.
Metals: Not a great day but still some good patterns, e.g. AKS, SCHN, FCX, CENX.
Oil stocks: Some nice setups and moves. ATW continues improving. CVX is surging up off the lows. HAL could be in a double bottom. JAG caught our attention as a new issue.
Construction/Engineering: JEC breaking higher. MDR moving off a good consolidation. Getting some money.
Manufacturing: DAKT in an interesting pattern. MTW very interesting. HOLI. Some patterns that could yield good upside.
MARKET STATS
DJ30 Stats: +89.44 points (+0.42%) to close at 21271.97
Nasdaq Stats: -113.85 points (-1.8%) to close at 6207.92 Volume: 3.15B (+47.2%)
Up Volume: 1.24B (-250M) Down Volume: 1.88B (+1.276B)
A/D and Hi/Lo: Advancers led 1.03 to 1 Previous Session: Advancers led 2.02 to 1
New Highs: 246 (+64) New Lows: 35 (-17)
S&P Stats: -2.02 points (-0.08%) to close at 2431.77 NYSE Volume: 1B (+11.11%)
A/D and Hi/Lo: Advancers led 1.61 to 1 Previous Session: Advancers led 1.41 to 1
Put/Call Ratio (CBOE): 1.06; +0.36. A bit of fear returned to the market.
Bulls and Bears: The opposite effect? Bulls fell as the market rallied and now the bulls rally back as the market sold. Okay, it was Friday selling and that happened well after the survey. Bears fell right back down to again close at 18.3.
Bulls: 55.8 versus 50.0
Bears: 18.3 versus 19.2
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: 55.8 versus 50.00 50.00 versus 51.9 versus 58.1 versus 58.7 versus 58.5 versus 54.7 versus 51.9 versus 56.3 versus 55.8 versus 49.5 versus 56.7 versus 53.4 versus 57.7 versus 63.1 versus 61.2 versus 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
Bears: 18.3 versus 19.2 19.2 versus 18.3 versus 17.1 versus 17.3 versus 17.9 versus 17.9 versus 18.3 versus 17.5 versus 18.3 versus 18.1 versus 17.3 versus 13.75 versus 17.3 versus 16.5 versus 17.5 versus 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
OTHER MARKETS
Bonds: 2.21% versus 2.19%. Bonds faded again, but held over the 20 day EMA. Still in a test of the break higher and still in an upside pattern.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.19% versus 2.176% versus 2.14% versus 2.183% versus 2.154% versus 2.21% versus 2.20% 2.26% versus 2.255% versus 2.252% versus 2.287% versus 2.254% versus 2.233% versus 2.229% versus 2.223% versus 2.32% versus 2.34% versus 2.34% versus 2.393% versus 2.401% versus 2.394% versus 2.381% versus 2.354% versus 2.322% versus 2.289% versus 2.322% versus 2.30% versus 2.31% versus 2.33% versus 2.275% versus 2.236% versus 2.234% versus 2.21% versus 2.15% versus 2.248% versus 2.232% versus 2.264% versus 2.30% versus 2.36% versus 2.37% versus 2.34% versus 2.33% versus 2.34% versus 2.33% versus 2.35% versus 2.40% versus 2.41% versus 2.382% versus 2.418% versus 2.376% versus 2.40% versus 2.41% versus 2.40% versus 2.43% versus 2.463% versus 2.50% versus 2.529% versus 2.502% versus 2.602
EUR/USD: 1.11965 versus 1.11990. Nice doji at the 20 day EMA as the euro maintains its uptrend.
Historical: 1.1199 versus 1.12491 versus 1.12798 versus 1.12684 versus 1.12811 versus 1.12181 versus 1.12547 versus 1.11768 versus 1.11810 versus 1.12148 versus 1.12240 versus 1.11868 versus 1.12390 versus 1.11916 versus 1.23077 versus 1.10985 versus 1.11557 versus 1.10862 versus 1.09833 versus 1.09328 versus 1.08655 versus 1.08671 versus 1.08843 versus 1.09286 versus 1.09994 versus 1.09086 versus 1.08923 versus 1.09284 versus 1.090984 versus 1.08987 versus 1.08691 versus 1.09093 versus 1.09358 versus 1.08449 versus 1.07255 versus 1.07255 versus 1.07188 versus 1.0717 versus 1.07304 versus 1.06431 versus 1.06138 versus 1.0671 versus 1.06068 versus 1.05984
USD/JPY: 110.334 versus 110.299. Rallied Wednesday to Friday, showing a doji Friday at some resistance.
Historical: 110.299 versus 109.355 versus 110.038 versus 110.446 versus 111.595 versus 110.909 versus 111.086 versus 111.217 versus 111.828 versus 111.678 versus 111.835 versus 111.076 versus 111.534 versus 111.271 versus 111.584 versus 111.167 versus 112.414 versus 113.074 versus 113.749 versus 113.349 versus 113.759 versus 114.263 versus 113.771 versus 113.217 versus 112.683 versus 112.495 versus 112.782 versus 112.779 versus 111.793 versus 111.524 versus 111.197 versus 111. 177 versus 111.234 versus 109.704
Oil: 45.83, +0.19. Second doji at the May lows. Trying to make a rebound?
Gold: 1271.40, -8.10. Faded in a 1-2-3 drop off the high that matched the April high. Key test now for the upside move for gold.
MONDAY
Friday was the start of some rotation. Will it be the end of it? With the good patterns in manufacturing, construction, and other 'old economy' stocks and sectors, it would not be surprising at all for those to continue seeing money flow their way and break them higher.
If money is not leaving the market, it will seek other areas, and the likely candidates are those that are under quiet accumulation during the ascent of the FAANG et al. Many of those managers lamenting the surge in the narrow leadership have likely put money into these other areas, hence the accumulation patterns. We anticipate seeing them make breaks higher, and the plays on the report this weekend reflect that.
Not that the recent leaders are out of the upside mix. As noted, many managed to hold onto near support and as has been in the past, could bounce right on up again. The plunge protection team was working hard the last hour Friday and we will see if the managers try buying the big names again. If not, will the PPT move back in?
Whether the PPT acts or not, if the recent leaders move back up, we have some still in the portfolio, and we can always move into some more if they hold and money just cannot resist them.
Interesting for certain, some good patterns in other sectors have built up to breakouts, other areas are trying to turn up after a long time of weakness. And there is FAANG and company. We will see where the money goes, as it has not, as of yet, decided to totally leave the market.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6207.92
Resistance: 6341.70 is the Friday all-time high.
Support: 6205 is the late May all-time high The 50 day EMA at 6081 6170 is the recent all-time high 5996 is the recent May 2017 low 5937 is the all-time high from April The 2016 trendline at 5925 5915 is the tops of the March to April 2017 range 5910 is the lower gap point from mid-April 5800 from the February consolidation lows 5661 is the late January upper gap point The 200 day SMA at 5614 5601 is the January lower gap point 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 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
S&P 500: Closed at 2431.77
Resistance: 2439 is the all-time closing high The 2016 trendline at 2453
Support: 2406 is the all-time high from May 2017 2401 is the March 2017 all-time high The 50 day EMA at 2391 2352 is the recent May 2017 low 2348 is the April 2017 lower gap point 2329 is the March and April twin lows 2322 is the March 2017 low 2319 is the 78% Fibonacci retracement 2301 is the late January 2017 high 2298 is the late January 2017 high 2282 - 2280 from January 2017 2277.53 is the December 2016 high The 200 day SMA at 2274 The November 2016 all-time high at 2213.25 2194 is the August 2016 prior all-time high 2175 is the June 2016 high
Dow: Closed at 21,271.97
Resistance:
Support: 21,169 is the March 2017 all-time high The 50 day EMA at 20,898 20,553 is the lows of the week of May 15 20,547 is the lower gap point from late April 2017 20,412 is the March 2017 low 20,400 is the mid-April 2017 low. 20,126 is the January 2017 intraday high 20,101 is the late January closing high. 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 19,749 19,732 is the January 2017 low 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
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