- Decent bounce to counter Thursday leaves leading indices, stocks decent. - This isn't a damn game. So House and Senate leave until Monday afternoon. Of course the President won't negotiate, so why stay? - Leaders performing, new leaders trying to set up despite the government issues.
Little news, no resolution to shut-down, stocks bounce.
The most interesting news, and just about the only news, Friday involved two comments. The first from someone at the White House, purportedly the President but denied by White House sources, that the democrats were 'winning,' supposedly the popularity contest, and thus there was no need to change from the 'no negotiation' position.
The second was House Speaker Boehner's utterance in response: 'This isn't a damn game.'
Indeed it is not. Yet we have reports of roads and bridges out west on land 'owned' by the federal government that are closed and not only that, are patrolled by armed federal marshals to enforce the closures. This in addition to the open air memorials that have had barricades moved onsite and are also patrolled by law enforcement to keep US citizens out of their own memorials.
Then what should be the final straw: military chaplains and clergy furloughed so troops cannot receive sacraments according to their religious beliefs. When private clergy volunteered to provide our fighting men and women the sacraments they were told they would be arrested.
First Amendment: 'Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof . . . '
Congress made no law. The Executive branch is preventing citizens from exercising their religion. Denying our fighting men and women the exercise of their religion as guaranteed by the law of the land, the Constitution. We truly live in an authoritarian state and no one is doing anything about it.
Perhaps that will change; Chuck Hagel, Defense Secretary, ordered half of the furloughed Pentagon staff back. Maybe some are chaplains. Congress won't speak on this over the weekend, however, because they are gone until Monday afternoon.
THE ACTION
The market didn't seem to mind much. After Thursday's drop, Friday saw some bids return and much of the losses were recaptured. That kept the leaders holding near support at the 20 day EMA and bouncing, keeping the trend higher intact. Leaders enjoyed a nice day, rebounding from the Thursday overall market weakness.
One thing we continue to see and that is leadership forming up. There are leaders that have moved higher all along, leading the last leg higher off of the August test, resting, then breaking higher again. There are other leaders that are still in tests of the last move and are setting up to run again. There are still others that, as we have seen throughout the many runs by the market during the Fed's QE, have formed long rounded bottom bases and are starting to turn the corner for runs higher. Those are fertile areas to find new plays AND to look for the next wave of leaders that help keep the upside drive alive.
With the shutdown firmly entrenched, that means the Fed's $85B/month stimulus is still firmly entrenched. That is why, while there are ups and downs in the market action as always, a bid remains and stocks continue under accumulation. That continued accumulation pushes leaders higher after tests and short bases, and also forms up new emerging leaders out of those long bases discussed above.
Unless and until the worry about an economic slowdown by virtue of the shutdown exceeds the perceived benefit of the $85B/month, stocks will continue, overall to be the beneficiary, finding bids on the pullbacks.
THE MARKETS
OTHER MARKETS:
Dollar: 1.3555 versus 1.3622 versus 1.3586 euro. Gapped lower, recovered but still closed lower. Trying to hold and retake support it broke early last week.
Bonds: 2.65% versus 2.61% versus 2.62% versus 2.64% versus 2.62% 10 year. Slid further, but holding the break higher off the double bottom at support. Still in position to continue upside and setting up to do that. As noted Thursday, the trigger is cocked, they just need something to drop the hammer.
Oil: 103.84, +0.53. Managed a modest bounce but still just below the bottom fo the July and August range. Again, a key point for the recovery attempt.
Gold: 1309.90, -7.50. Tried to rally through the 10 day EMA but failed. Gold is still very choppy as it has been for three weeks.
MARKET INTERNALS and STATS
NASDAQ Stats: +33.41 points (+0.89%) to close at 3807.75 Volume: 1.523B (-16.59%)
Up Volume: 1.2B (+802.26M) Down Volume: 336.16M (-1.114B)
A/D and Hi/Lo: Advancers led 2.16 to 1 Previous Session: Decliners led 2.85 to 1
New Highs: 143 (+18) New Lows: 23 (-1)
S&P Stats: +11.84 points (+0.71%) to close at 1690.5 NYSE Volume: 527M (-14.86%)
A/D and Hi/Lo: Advancers led 1.93 to 1 Previous Session: Decliners led 3.67 to 1
New Highs: 146 (+39) New Lows: 91 (-8)
DJ30 Stats: +76.1 points (+0.51%) to close at 15072.58
THE CHARTS
No change in the charts, just a bounce back from the Thursday selling, leaving the growth indices in their uptrends and SP500 holding and bouncing off the 50 day EMA. The lower volume was not great, but they held where they had to.
NASDAQ: After tapping the 20 day EMA on the Thursday low and bouncing to close, NASDAQ continued the rebound move started Thursday. Still in the upper reached of its channel, and thus it can still fail, but thus far it has slid up the channel as leaders continue to set up and trend higher. If AMZN, SBUX and others can break higher from their lateral consolidations of the past three weeks, NASDAQ continues its trend to the upside.
RUTX. The small caps as well continued the bounce off the 20 day EMA test. No major move but held and bounced. Important point to hold and continue upside, but the small caps have been an excellent leader of late.
SOX: After looking shaky to start the week, the chips immediately recovered from Monday's decline, held a 20 day EMA test, and moved higher Friday. That move closed SOX right at the lower trendline for its uptrend channel. Good recovery, now it needs to take it to the next level and move back into the channel.
SP400: Very solid last week. Could not hold the big Tuesday break higher, but on the fade held the 10 day EMA easily. This leaves the midcaps in great shape to break higher this week and make it stick.
SP500: Not bad, holding the 50 day EMA with the Thursday recovery and pushing up off the 50 day EMA Friday, though lower trade. Holding at a key support level all week, building a shelf to move back up from.
DJ30: Bounced Friday after getting another gutting Thursday. Up but no promise on this move really, and letting our downside plays continue.
LEADERSHIP
After leadership handled Thursday's selling with no real issues, Friday was a nice rebound to bulk the brokerage accounts back up. Leaders bounced nicely across the board.
Good: SINA, SOHU, BEN, CAMP, CELG, FOSL, GILD, KSU, MELI, OIS, OSIR, PCLN, PTEN, etc.
And still diverging with bulls climbing and bears falling. Bears are now down to levels that have led to market selling to this is telling us to remain alert to signs of stocks starting to roll.
Bulls: 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Sharp climb continues. Getting a bit over-baked, but has been higher when selling bouts started in earlier moves.
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
Bears: 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%. Really starting to tail off and at levels where selling ensued.
Background: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.
MONDAY
Congress won't be back in until Monday afternoon. The ratings for Congress, democrats, republicans, and even the President continue to fall. At some point something has to be done, but bear this in mind when you hear talk about 10/17 and the deadline for default. As Buffett said Thursday, that day does not mean default. The US has more tax revenue coming in right now thanks to the tax hikes (before they start impeding economic growth; receipts rise when taxes are raised, the fall after economic activity contracts); it has plenty of money coming in monthly to pay the Treasury bills, and THAT is how the US would default, i.e. DECIDING not to pay them. The money is there. It is what the Executive does with it, just as it is the Executive's decision to close open air memorials, roads and bridges on federal lands, etc.
So it looks as if no surprises over the weekend and that means the market at least has no new news to upset the Friday move. The market's near moves are of course subject to news headline risk each day, but this far each dip has been met with buyers, likely due to the notion the Fed's liquidity is reinforced even more with each day of the shutdown.
Thus we are looking at 'name' leaders in tests of recent moves as well as other stocks that are coming out of big rounded bottom bases and stocks that just breakout and are testing. They are in great position to move upside and continue making us money.
The rub right now is earnings season. Warnings are reportedly running at an 82% pace of pre-announcements. Compare this to 70% in Q4 2008. Those were hardly good times. Wow.
Earnings always are more of a wildcard and are more like gambling than anything. For stocks such as CAMP earnings helped nicely last week. That is not always the case of course and be cognizant of earnings and your comfort level with moving into earnings. With options, an earnings surprise could wipe out what you have left in the position. Thus we typically go in at least 'lighter,' i.e. having sold at least part of the position. If you have a solid gain and have not banked any, stock or options, taking some part of your gain ahead of earnings makes sense. For any part you have left moving toward earnings, what you do depends upon how much the stock has run into the results (a solid runs begs some selling on the news), if it has moved at all (a miss can hurt you, but if the stock has pullback back ahead of the results to solid support the odds of a good upside move on the news improve considerably).
So, take earnings in mind on the new plays, i.e. can you play a pre-earnings run with some discipline, AND on existing positions, i.e. should some gain be taken ahead of the results, should the position simply be closed and then play again after earnings? We prefer playing after the results for new plays versus riding through the results. Then we can counterpunch off the move, up or down, with a much higher probability of success versus the crapshoot of earnings.
In any event, the market continues to find a bid, and that keeps new leaders setting up as continuing leaders test and bounce, test and bounce.
Have a great weekend!
Support and resistance
NASDAQ: Closed at 3807.75
Resistance: 3828 is the upper channel line for the November 2012 to present uptrend. Next major resistance is around 4100 as NASDAQ hits 13 year highs
Support: 3799 is the September 2013 high. The 20 day EMA at 3757 3763 is the November 2012 up trendline 3694 is the August high and the post-bear market high. The 50 day EMA at 3687 The July 2013 intraday high at 3625 3573 is the August 2013 low 3532 is the May intraday high 3521 is the August 2000 low. 3502 is the May 2013 closing high The 2011 up trendline at 3405 The 200 day SMA at 3392 3295 is the June 2013 low selloff 3227 is the April 2000 intraday low 3197 is the September 2012 post-bear market high 3171 is the October intraday high
S&P 500: Closed at 1690.50
Resistance: 1698 to 1700 are the July and August interim highs 1710 is the August 2013 peak. 1730 is the September 2013 peak
Support: 1687 is the May high and post-bear market high 1685 is the mid-August 2013 upper gap point The 50 day EMA at 1678 1657 is the late August upper gap point 1662 is the December 2012 up trendline 1654 is the June 2013 peak 1627 is the August 2013 low The 200 day SMA at 1596 1576 from October 2007, the prior all-time high 1573 is the June 2013 closing low 1569.48 is the 78% Fibonacci retracement of the April to May 2013 run 1560 is the June 2013 reversal low 1556 from July 2007 1541 is the April 2013 closing low in that pullback inside the uptrend 1539 from June 2007 1531 is the recent high 1499 from January 2008 1475 is the September 2012 high 1471 is the October 2012 intraday high 1466 is the September 2012 closing peak and rally closing high 1440 from November 2007 closing lows
Dow: Closed at 15,072.58
Resistance: The 50 day EMA at 15,218 15,318 is the June closing high 15,542 is the May 2013 intraday high 16,659 is the August 2013 peak
Support: 15,050 from the August 2013 interim recovery high 14,888 is the April peak and prior all-time high 14,844 is the June intraday low 14,762 is the August 2013 low The 200 day SMA at 14,704 14,551 is the June 2013 intraday low on the selloff (14,659 closing) 14,198 from the October 2007 high 14,149 is the February 2013 high 14,022 from 7-07 peak 14,010 from the early February 2013 consolidation
Economic Calendar
October 7 - Monday - Consumer Credit, August (15:00): $11.8B expected, $10.4B prior
October 8 - Tuesday - Trade Balance, August (8:30): -$38.6B expected, -$39.1B prior - JOLTS - Job Openings, August (10:00): 3.689M prior
Market Data 
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