- Stocks turn a bit pensive ahead of a big earnings week. - NFLX downgrade bandwagon getting pretty full, helping spook overall bids. - President says US/UK strike an 'ambitious' trade deal - President calls EU a foe economically, along with Russia, China. - NASDAQ, RUTX, SP400 testing back from the highs. How they react off this test is obviously key. - Don't forget SP500, DJ30: they are getting some money and will it be at the detriment of other indices?
After good breakouts Thursday with NASDAQ and NASDAQ moving to new highs and SP500 clearing important resistance, stocks were pensive Friday. NFLX was downgraded on valuation more than once just ahead of its Monday earnings because . . . it could actually miss expectations. Wow, a stock could actually miss earnings expectations? Duh. Yet, they act as if it is an impossibility.
Of course it is not. Just ask the banks announcing on Friday. C missed the top line, WFC missed the top and bottom line. Looks as if they are going to have to get over getting free money from the Fed and then buying bonds for a guaranteed return. WFC might actually have to start making loans again and not just come on CNBC and falsely claim the banks are open for business to lend to small businesses. That was the biggest farce ever. You would go to WFC and you would be directed to a SBA loan; no way WFC was touching that -- it had risk attached to it. Now, with the Fed not so generous with the free money, banks have to make money the old fashioned way, e.g. loans, jacking up fees, etc.
Anyway, NFLX was hit hard, falling from the new closing high hit early week. NFLX' action helped stymie NASDAQ's upside move, but didn't kill it.
Instead, a week of heavy earnings for NASDAQ is ahead, and it very much looked as if the downgrades and bank earnings misses had bids pulling back Friday after some good moves higher earlier week.
Not across the board of course. AMZN continued its new move while FB and GOOG added more upside. Overall, however, Friday saw the action cool as the indices turned in mixed sessions.
VOLUME: NYSE -7%, NASDAQ -10%. Volume remained low and below average on NYSE, an issue for the move higher. That is, however, no change from what it has shown. NASDAQ trade faded after a good Thursday on that breakout. Volume is still quite low overall after showing some good volume on the move higher through late June.
ADVANCE/DECLINE: NYSE -1.03:1, NASDAQ -1.2:1.
Interestingly, the week did see some changes but also more of the same. As noted, SP500 broke through important resistance while NASDAQ moved to a new all-time high. DJ30 showed a bit more life as well as the large cap NYSE finally blipped a pulse.
At the same time, RUTX and SP400, clear leaders to this point, finished the week a bit weaker, testing the 10 day EMA Wednesday through Friday. Thus far normal tests for leading indices though you have to keep an eye on RUTX as it ran into the June high with a head of steam then faded. Of course it also rallied 6 of 7 sessions to get back up to that level, so a test of near support is nothing in itself surprising. It is just one to watch in the week ahead as earnings start to come out.
NEWS/ECONOMY
Friday the news was relative light. The President's trip to the UK yielded news that the type of Brexit, hard or otherwise, would not inhibit new trade agreements between the US and UK. Thus, an 'ambitious trade deal' was proclaimed. How ambitious remains to be seen as the UK cannot even figure out what it wants to do with Brexit right now.
After the UK meetings the President was reported to have called the EU an enemy. Well, he said the EU is a foe for what it does to the US in trade. He also said Russia is a foe and that China is an economic foe. That is true, but not many are yet accustomed to the President's direct style of calling things as he sees them as part of his preparation for negotiations. The horror of it all. Right. It may not be what people are used to, i.e. the 'dignified diplomacy' of the past, but it is not designed to be. It is designed to throw the 'foe' off balance and make it difficult to anticipate the next step. It is a kind of chaos style but with very definite methods and goals.
Thus, when I hear this I just watch and listen with interest because the old dignified diplomacy got us nothing. No, that is not correct. It got us poor deals for the US, and attempts to alter those deals have failed. These tactics appear to be somewhat successful. At the NATO summit, for example, Trump obtained agreement on issues the prior President had asked for but got nothing in return. We will see if there is further success.
The big story for the week, however, is earnings. That will drive much of the action with NFLX reporting Monday after the close to establish the pace.
THE MARKET
CHARTS
NASDAQ: New high Thursday, then flat Friday as NFLX sold and the bids faded. Nonetheless, a solid indication. The next key move is how NASDAQ reacts to that new high, i.e. can it hold and resume or whether it reverses. NASDAQ took a break to test the 10 day EMA just before the break higher; it is rested to make the move and thus it should hold if it is for real.
SP500: Nice break higher Thursday as well, then Friday a modest rise on no volume an important move upside and now this week with the earnings we see if this important move from midrange off the January high holds and then continues.
DJ30: Also came to life last week, indeed the past two weeks, but the Dow is still well off the June peak that itself was well off the January peak. About midrange for the trading range with a lot of work ahead of it.
SP400: Early June SP400 matched the January all-time high. SP400 faded to the 50 day MA to end June and rallied back upside. SP400 broke to a new all-time high at the first of the week. It then faded back to the 10 day EMA to tend the week. This is the lick log for SP400, i.e. if it can hold this shallow test of the break higher and make good on that new all-time high.
RUTX: RUTX shows very similar action to SP400. They both led the move higher so acting in tandem is not surprising. RUTX touched the prior high from June Monday then faded to the 10 day EMA Thursday and Friday. As with SP400, a test makes sense, but it has to hold near support and then make a new move higher.
SOX: Still trending up the 200 day SMA but struggling to make serious headway. SOX rallied off the 200 day the prior week through Tuesday last week. Then it had issues, gapping back below the 50 day MA's it cleared Tuesday. Higher low, used the 200 day as support, now has to hold and rally again. AVGO upset things as it dove on the CA acquisition announcement, but it is not the only cause. Some chips look great, some do not.
LEADERSHIP
FAANG: AMZN had the big week, up 4 of 5 sessions. FB put in a series of new highs but is not exploding higher. NFLX had the downgrades Friday that punished it ahead of Monday earnings. It is hanging in near the 20 day EMA. AAPL broke upside but then moved laterally. GOOG, as with AMZN, enjoyed a big move higher, clearing the June peak.
Software/Cloud: MSFT powered to a new high two sessions straight. DATA was strong all week. ATVI surged to a new high, paused Friday. TTWO broke to a higher recovery high as well. VRSN moved to a new high. Some very solid moves. VMW still trying to hold near support and bounce. NTNX moved up to the 50 day EMA and is trying to hold that move.
Chips: Some of the recent leaders took Friday off, e.g. TXN, NVDA, AMD. AVGO still struggled after its huge Thursday gap lower.
Financial: V enjoyed a big week to a new high though was off a bit Friday. Banks still struggle whether JPM or C or WFC.
Drugs/Biotechs: Still on the edge of some good moves by the big names, e.g. AGN, GILD. CELG started a move, MYGN gapped and we are waiting for it to set up a bit better. JNJ flopped to the 10 day EMA but may set up off that test.
Energy/Oil: The setups remain good but these stocks also go back and forth in decent patterns. APC testing the 20 day. DO looks as if it can break higher. EOG remains in great shape to move. Some good looks looking for a good move.
Industrials/Machinery: Improving. UTX broke higher Thursday and Friday. MTW looks very interesting and HON looks to be moving up on volume. On the other hand, DE flopped.
MISC: SQ, PYPL down Friday but still look good. IQ continues looking very good. ULTA is breaking higher.
MARKET STATS
DJ30 Stats: +94.52 points (+0.38%) to close at 25019.41
Nasdaq Stats: +2.06 points (+0.03%) to close at 7825.98 Volume: 1.73B (-10.36%)
Up Volume: 733.51M (-646.49M) Down Volume: 959.55M (+434.88M)
A/D and Hi/Lo: Decliners led 1.22 to 1 Previous Session: Advancers led 1.43 to 1
New Highs: 101 (-10) New Lows: 50 (-5)
S&P Stats: +3.02 points (+0.11%) to close at 2801.31 NYSE Volume: 632.726M (-7.08%)
A/D and Hi/Lo: Decliners led 1.03 to 1 Previous Session: Advancers led 1.61 to 1
After the plummet in bulls they post an impressive 5.3 point rally. As soon as they were falling the market rallied. How quickly did those bulls return? Fast. A bit worrisome as it indicates some froth in the move. Bears remained stagnant.
Bulls: 52.4 versus 47.1
Bears: 18.5 versus 18.6
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: 52.4 versus 47.1 47.1 versus 47.6 versus 52.0 versus 55.5 versus 52.9 versus 50.0 versus 49.1 versus 46.6 versus 43.1 versus 43.6 versus 48.0 versus 43.6 versus 42.2 versus 49.5 versus 55.5 versus 54.9 versus 48.6 versus 48.1 versus 48.5 versus 41.9 versus 54.4 versus 66.00 versus 64.7 versus 66.7 versus 64.4 versus 61.9 versus 64.1 versus 64.2 versus 62.3 versus 61.5 versus 63.5 versus 64.4 versus 63.5 versus 62.3 versus 60.6 versus 60.4 versus 57.5 versus 54.3 versus 50.5 versus 47.1 versus 49.5 versus 49.5 versus 48.1 versus 50.5 versus 57.5 versus 60.0 versus 60.2 versus 57.8 versus 50.0 versus 52.5 versus 54.9 versus 51.5 versus 50.00 versus 55.8 versus 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
Bears: 18.5 versus 18.6 18.6 versus 18.4 versus 17.6 versus 17.8 versus 17.7 versus 19.2 versus 19.2 versus 19.4 versus 19.4 versus 20.6 versus 20.8 versus 19.6 versus 19.8 versus 18.6 versus 17.5 versus 16.8 versus 15.7 versus 15.5 versus 14.4 versus 14.6 versus 14.4 versus 15.5 versus 12.6 versus 12.8 versus 12.7 versus 13.5 versus 15.2 versus 15.1 versus 15.2 versus 15.1 versus 15.1 versus 15.4 versus 15.4 versus 14.4 versus 14.4 versus 15.1 versus 15.2 versus 15.1 versus 17.0 versus 17.1 versus 19.0 versus 20.2
OTHER MARKETS
Bonds: 2.829% versus 2.849%. TLT broke over the 200 day SMA on the week and advanced Friday. Bond yields drop, bonds rally, yield curve continues to be flat.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.829% versus 2.849% versus 2.853% versus 2.867% versus 2.867% versus 2.824% versus 2.835% versus 2.833% versus 2.871% versus 2.86% versus 2.84% versus 2.833% versus 2.877% versus 2.882% versus 2.895% versus 2.899% versus 2.937% versus 2.889% versus 2.915% versus 2.922% versus 2.933% versus 2.977% versus 2.963% versus 2.952% versus 2.948% versus 2.928% versus 2.974% versus 2.935% versus 2.944% versus 2.902% versus 2.86% versus 2.857% versus 2.79% versus 2.931% versus 2.992% versus 2.982% versus 3.063% versus 3.056% versus 3.06% versus 3.123% versus 3.096% versus 3.069%
EUR/USD: 1.1685 versus 1.16608. Euro faded on the week but showed some strength Friday. Still working in a 5 week lateral range. Looks to be in a bottoming process over the past 8 weeks.
Historical: 1.16608 versus 1.1672 versus 1.17288 versus 1.17578 versus 1.17439 versus 1.1689 versus 1.1665 versus 1.16388 versus 1.1638 versus 1.15634 versus 1.15602 versus 1.16517 versus 1.17031 versus 1.16572 versus 1.16072 versus 1.15762 versus 1.1586 versus 1.15746 versus 1.2624 versus 1.16245 versus 1.15678 versus 1.17973 versus 1.17454 versus 1.17761 versus 1.17737 versus 1.17987 versus 1.1774 versus 1.1762 versus 1.1697 versus 1.166 versus 1.16993 versus 1.16643 versus 1.15446 versus 1.17148 versus 1.17096 versus 1.17022 versus 1.17826 versus 1.1786 versus 1.17714 versus 1.1802 versus 1.1811 versus 1.18272 versus 1.19358 versus 1.19411 versus 1.1913 versus 1.18533 versus 1.18672 versus 1.19150 versus 1.19619 versus 1.1983 versus 1.1978 versus 1.19896 versus 1.20741 versus 1.21291 versus 1.21788 versus 1.2163 versus 1.22232
USD/JPY: 112.337 versus 112.631. Faded a bit to end the week after a surge Monday to Thursday that broke the dollar out of a 7 week lateral move.
Historical: 112.631 versus 112.093 versus 110.911 versus 110.973 versus 110.474 versus 110.666 versus 110.40 versus 110.854 versus 110.687 versus 110.523 versus 110.223 versus 110.097 versus 109.678 versus 109.980 versus 109.895 versus 110.376 versus 110.03 versus 109.783 versus 110.668 versus 110.578 versus 110.247 versus 110.381 versus 110.314 versus 109.466 versus 109.705 versus 110.164 versus 109.878 versus 109.90 versus 109.53 versus 108.767
Oil: 71.01, +0.68. After breaking to a higher high to end June, oil tested laterally but starting Wednesday was dropped hard to the 50 day MA.
Gold: 1241.20, -5.40. Putting in a double bottom over the past two weeks with MACD rising. Gold could be prepping a new upside attempt.
MONDAY
Earnings should be the driving story on the week with NFLX starting it off Monday afternoon. As noted, NFLX was rattled in price because others on Friday joined UBS' Thursday call that NFLX might miss its earnings if it does not get the overseas subscriptions. Yes, and if it is cloudy the sun won't likely show for the day. Earnings are always hit or miss; even if earnings are beaten a stock can still decline. It could be, and I said so Thursday and Friday, that there are those attempting to get NFLX lower ahead of earnings with the specific notion of moving in on the dip. Fake news? That would be the case, but hard to prove this kind of gamesmanship.
In any event, we will watch NFLX and see if we can pick up a few more positions at a good price. Very aggressive given earnings, but NFLX gapped upside on its April earnings. Even though it peaked on that day, that still provides a nice gain.
On the week, earnings will flow, the yield curve will remain flat, and trade issues are still out there with China 'going high' while the US 'goes low.' Give me a break, China. That didn't work in the 2016 elections; think it will work for you? And in what way?
Earnings are key, but they will just provide the impetus for NASDAQ, SP400, and RUTX that are testing back after reaching prior or new highs. How they hold and rebound -- or not -- tells the story of these attempts at prior highs. They tested them, backed off, and now holding near support, regrouping. The next moves will tell the tale for them.
At the same time, watch SP500 and DJ30. Some money is moving their way. Will it continue moving in even if the growth areas break higher off their tests? Or, will money leave the growth areas and move to the large cap NYSE stocks? Those will be important notes to watch for, important tells, regarding existing positions.
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