Weekend Market Summary

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1/23/15
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TONIGHT:

We have DIVIDED the video into component parts: Market Overview, Technical Summary and the Next Session. This allows you to choose the segments you are interested in without having to find the spot in a longer video. Click on the link to the portion you wish to view.

MARKET OVERVIEW

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Market Overview Video

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Technical Summary Video

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Watch Next Session Video

SUMMARY

- QE, apparently from anywhere, is all stocks want.
- Earnings in need of some improvement
- Stock indices pause after a strong Thursday EU QE move.
- SP400 midcaps look at becoming leaders.
- Good moves, more leaders showing up, now can the indices break up the toppy patterns?

Friday was not a great day for the market, but it was not a bad day. Thursday the ECB 'unleashed' its QE version with an extra E10B than expected. Stocks rallied nicely on solid volume. Friday was a bit of a backslide as all indices but NASDAQ finished lower though the RUTX small caps were basically flat.

SP500 -11.33, -0.55%
NASDAQ 7.48, 0.16%
DJ30 -141.38, -0.79%
SP400 -0.44%
SOX -0.28%
RUTX -0.12%

VOLUME: NYSE -12%, NASDAQ -17%

A/D: NYSE -1.2:1, NASDAQ -1.2:1

Though Friday was mostly lower, the action was not bad at all. The indices faded on lower volume to test the 4 day upside move ahead of and after the EU QE announcement. All are holding above the resistance they just broke (and the bulls hope will hold as support) and leadership branched out a bit. Last week's move didn't eliminate the near term toppy patterns SP500, DJ30, NASDAQ, RUTX continue to sport, but it shows that with the right news investors are willing to put money to work in this post-FOMC QE but new ECB QE market.

What is the big deal about European QE? It isn't going to add money to the US financial markets and further inflate those prices as US QE did. Or is it? The euro is getting slaughtered since the ECB's announcement. Heck, it was slaughtered before the announcement, likely in anticipation of the move similar to the Swiss national bank removing the peg ahead of the QE news.

Still, with the ECB willing to devalue its currency further, those storing some wealth in the euro will look elsewhere. Yes they will put money into European stocks; it may have built upon a throne of lies as Buddy the Elf told the fake Santa in 'Elf,' but prices went higher.

Some money will look for more value and go offshore, away from euros. That will include US treasuries, pushing them higher and yields lower. Ironically, our Fed that wants out of the stimulus game, at least according to its comments and the recent litany of Fed members giving speeches and interviews, will find another Greenspan-like 'conundrum' as it tries to move rates higher but foreign money seeks US treasuries and thus keeps rates lower. Oh how history, and fate if you wish, has a sense of irony. The Fed is always trying to get one thing, yet always seems to be fighting against natural market forces.

The Fed did all it could. It conjured, just as Bernanke planned, higher financial prices, not built upon economic expansion, but upon the Fed creating liquidity, pumping it into the system, and forcing it into financial assets because there was nothing else to do with the money, e.g. make capital investments. Prices indeed climbed. Record highs in many cases.

But capital investment outside of the oil and gas industry is still woefully low. Indeed, as I chronicled for the past few years, the 'new normal' capital investment is found in the three corporate investment groups: Buybacks, Acquisitions (buy it don't build it), and Dividends (to feed hungry activist investors). B.A.D.

The Fed got higher asset prices but didn't get the commensurate wealth effect Bernanke felt would follow. Basically the Fed floated enough liquidity to keep the economy from totally running aground. After enough time has passed it feels its job is done (or really that it can do nothing more), so it has to extricate itself and build up some reserves to fight the next coming crisis.

Along with getting some euros thrown our way, the hope is that EU QE will improve economic conditions and get Europeans spending, and in spending will buy more US goods. The old export economy the President turned us into . . . JUST as China and the other world economies peaked. Sucks gearing your economy, through the 2009 stimulus, to sell to others when the others don't have money to buy. Again, thank goodness for the US oil and gas industry using its technology and inventiveness to pursue the higher oil prices and thus spur enough economic activity to prevent the US from going off the cliff.

Back to the stock indices.

Well, that is a long way of getting to the point: the indices liked the EU QE, rallied in anticipation and on the news, then Friday posted a very normal, very manageable test. The key now is whether some of these stocks that have set up can move higher and strive to become new leaders. That is what will make the difference in whether the indices hit new highs and can sustain them versus faltering the rebound and rolling over. Remember, US stocks are still in the throes of hashing out stock values post-FOMC, post-Fed put. That is the old fashioned way of how a market works and quite frankly has not been the case since early 2009 when QE1 began.

Thus the money rotation, thus the volatility, thus the angst. Nothing like an unfettered financial market to strip away any notions of confidence, comfort, or serenity that a controlled environment engenders. As Hal said in 'Cliffhanger' when one of the bad guys went over the edge of the mountain, gravity is a b**ch.

Earnings anyone?

What the market needs is some good earnings. Sure some companies reported excellent results, e.g. NFLX, INTC, but there are some high profile misses on the top and bottom lines that are calling Q4 generally into question in earnings and thus economic terms.

UPS was a big miss reported Friday. Of course the bald guy blamed management; any miss the past few years has had to be management. GE missed the top line, MCD missed both top and bottom, COF missed bottom line, KMB top line. Before that SNDK, FFIV, XLNX, JCI. Financial stocks beat in some cases but it was questionable accounting.

Indeed at this juncture aggregate revenues are missing expectations by 1.2% while earnings are 0.4% off expectations. The reports need to improve or Q4 could be the worst since quarter in two years.

THE MARKET

CHARTS

DJ30: Faded Friday on lower, average volume, taking a breather after 3 of 4 days upside and a strong Thursday move. Even with that Thursday break higher the Dow is still below the early January high, the early December interim high, and the late December all-time high. In short, the toppy pattern is still there. Good action last week, particularly into Thursday, but still a lot to prove.

SP500: Thursday rallied to the lower channel line from 2012, moving through the 50 day SMA. Friday a modest, below average volume fade, easily holding over the 50 day MA. As with the Dow, good action on the week, particularly Thursday and the modest Friday test, but still the same toppy pattern the Dow is showing. Still has to break that up with a move through the early January high, the early December high, and then, of course, the late December all-time high. Lots of work to accomplish, and though the Thursday action was good, the pattern just does not look good. Indeed, we are going to watch for a market rollover again, and then re-up the SPY play if SP500 fails to clear this resistance.

NASDAQ: Good week into Thursday's surge, added a bit Friday, but that was on lower, below average volume, indeed the first below average session in three weeks. NASDAQ has gyrated up and down in an 8 week range on high volume. The buyers and sellers really battling it out at these levels. NASDAQ is attempting to make the breakout over the twin peaks at 4800. While its pattern looks a bit less toppish than SP500 and DJ30, it is no daisy and has to show it can make the move. Stocks such as GOOG are not hurting its effort.

SP400: Thursday SP400 cleared all resistance but the December all-time high. Friday it fade dot test, but still held over the prior resistance it broke on the Thursday move. SP400 is a sleeper and looks as if it is about to take to some leadership.

SOX: Broke higher Wednesday from its pennant formed off the early December high. Strong move Wednesday, lagged the other indices Thursday and Friday but put in a good showing, holding the gains. Still looks best of all the indices.

RUTX: Strong Thursday move, doji for no gain Friday. RUTX sits at the top of the November/December range, but that is no great move: it is still below the July peak, the higher March peak, and the December all-time high. Working on it but needs to take the lead and show some kind of January effect. After all, January is almost in the books.

LEADERSHIP

I noted that leadership is spreading out a bit. Some good patterns are developing off of the selling, but the groups in the lead are still rather thin. More stocks participating, but the groups are not branching out quite that fast.

Chips: Still solid overall. TSEM, ENPH, ANAD are examples of chips enjoying solid gains. INTC still sports a good pattern but still has done nothing with it. BRKS jumped, SPIL had a great week. SIMO recovered nicely. Important group and the overall pattern looks good.

Internet: GOOG is providing some leadership as it continued its move off of its double bottom. Made us some good money on the week and is still working. Chinese internet was solid: VIPS, NTES, SOHU. TRLA has a nice double bottom set. Social media is back to working, in some cases, but needs to keep working, e.g. TWTR.

Gold: Testing but not enough yet to make decent entries. NG, GG.

Software is coming back: FEYE, BLKB

Retail: After testing the 50 day EMA in a quick drop many of these leaders held and are attempting to bounce: BBBY, ROST, COST, TJX. RH looks good on its 50 day EMA test.

Biotech: Still mixed but some moving well, e.g. CLDX. CRME sports an interesting breakout test/flag.

Big names: GOOG as noted continues to perform. AAPL is contributing upside as is AMZN. Maybe not the best patterns they ever built, but hanging in.

MARKET STATS

NASDAQ
Stats: +7.48 points (+0.16%) to close at 4757.88
Volume: 1.614B (-16.88%)

Up Volume: 941.86M (-618.14M)
Down Volume: 700.93M (+279.26M)

A/D and Hi/Lo: Decliners led 1.26 to 1
Previous Session: Advancers led 2.68 to 1

New Highs: 97 (+34)
New Lows: 64 (-20)

S&P
Stats: -11.33 points (-0.55%) to close at 2051.82
NYSE Volume: 784.8M (-11.86%)

A/D and Hi/Lo: Decliners led 1.24 to 1
Previous Session: Advancers led 3.56 to 1

New Highs: 268 (+29)
New Lows: 41 (+9)

DJ30
Stats: -141.38 points (-0.79%) to close at 17672.6

SENTIMENT INDICATORS

VIX: 16.66; +0.26
VXN: 17.06; -0.02
VXO: 15.89; +0.82

Put/Call Ratio (CBOE): 1.28; +0.3. Interesting action. On Thursday put activity was up sharply (covering?), and Friday with a modest loss they were very active. That suggests a lot of disbelief in the bounce. Not in its existence, but whether it can maintain the move.

Bulls and Bears:

Bulls: 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5%. A modest uptick after the steady decline that just missed out on the upper 50's/60 level that marked rollovers. Seems to have been enough . . .

Bears: 17.4% versus 16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% Well now, after the prior week broke the ice, bulls are actually climbing toward the October peak.

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.

Note the low short interest as well, an indication of some complacency.

Bulls: 49.0%
48.0% versus 50.5% versus 56.4% versus 52.5% versus 49.5% versus 51.5% versus 53.4% versus 56.5% versus 56.4% versus 55.5% versus 54.6% versus 47.0% versus 35.3% versus 37.8% versus 45.5% versus 47.5% versus 48.0% versus 52.5% versus 57.6% versus 56.1% versus 52.5%

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 17.4%
16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% versus 14.8% versus 13.9% versus 13.8% versus 14.9% versus 14.8% versus 15.1% versus 16.3% versus 18.2% versus 17.3% versus 14.1% versus 15.1% versus 15.3% versus 15.2% versus 14.1% versus 13.3% versus 15.1% versus 16.2%

Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.

OTHER MARKETS

Bonds (10 year): 1.80%
1.88% versus 1.86% versus 1.79% versus 1.83% versus 1.76% versus 1.84% versus 1.91% versus 1.91% versus 1.95% versus 2.02% versus 1.97% versus 1.94% versus 2.04% versus 2.12% versus 2.17% versus 2.19% versus 2.21% versus 2.25%

Taking flight again after a short Wednesday to Thursday pause.

Oil: 45.59, -0.72. Just cannot get through the 10 day EMA, turning lower from that resistance.

Gold: 1292.60, -12.60. Ready to test some of the recent run higher.

$/JPY: 117.78 versus 118.49 versus 117.80 versus 118.82 versus 117.52 versus 115.928 versus 117.33 versus 117.77 versus 118.29 versus 118.50 versus 119.69 versus 119.43 versus 118.39 versus 119.62 versus 120.50 versus 119.81 versus 119.51 versus 120.67 versus 120.31 versus 120.48 versus 120.79 versus 119.99 versus 119.49 versus 118.83 versus 118.86 versus 116.81 versus 117.61 versus 118.75 versus 119.07

After moving up to the 50 day SMA, it looks as if the yen is ready to move higher once more.

Euro/$: 1.1204 versus 1.1366 versus 1.1590 versus 1.1550 versus 1.1543 versus 1.1609 versus 1.1789 versus 1.1764 versus 1.1832 versus 1.1842 versus 1.1789 versus 1.1839 versus 1.1890 versus 1.1934 versus 1.2002 versus 1.2099 versus 1.2156 versus 1.2143 versus 1.2183 versus 1.2203 versus 1.2171 versus 1.2223 versus 1.2225 versus 1.2284 versus 1.2345 versus 1.2509 versus 1.2448 versus 1.2462 versus 1.2389 versus 1.2439 versus 1.2366 versus 1.2318 versus 1.2289 versus 1.2379 versus 1.2313 versus 1.2383 versus 1.2473 versus 1.2452 versus 1.2509 versus 1.2477 versus 1.2442 versus 1.2386 versus 1.2549 versus 1.2543 versus 1.2532

The dollar spiking higher against the euro again. No surprise there and the question now turns to whether the euro and dollar hit parity. They should; no reason not to given the sorry state of Europe.

MONDAY

ECB QE in the bank. Earnings started less than stellar but will have a lot of chances this week to change the course. Economic data in copious amounts: durable goods, consumer confidence, new home sales, FOMC rate decision Wednesday, GDP Q4, Chicago PMI.

The big news is in the bag but the US stock indices are still off their highs. They need another goose to get them up to the prior highs and, just perhaps, beyond. I have to say that while SP400 looks as if it wants to step into the lead along with SOX, the other index patterns look still near term toppish, still having to prove they can make the move and then hold it afterward.

As noted in the Leadership section, there are quite a few plays that have formed up better patterns and we have quite a few on the report. At the same time this is after 3 to 4 days upside on the indices and they are just getting formed up. The indices are testing and that is what the market needs: a test of the initial move, a hold of support, then these new patterns making the next run higher spread out even more.

Even if they do just that, test, setup, then break higher, the question still remains if they can make the breakout to higher highs out of the toppy patterns. SOX and SP400 don't have that same kind of problem as the other indices and with the chips still leading and solid patterns in the midcaps, they could pave the way for the others to follow.

If, could . . . those are confident words, right? Basically the market has to prove it can make and hold the move. There are many plays we are looking at to play near term moves, many pre-earnings runs for stocks reporting in February or early March. If earnings reports step it up, these plays could work well as the market continues to recover from a pre-earnings fade.

So, the game plan is to see if the indices can hold a modest test as on Friday, get some decent earnings, then start back upside, playing the good patterns as they bounce, playing more for near term gains. If things really improve overall, we just let them work. If the indices falter after the SP500 4-day bounce and cannot hold a modest test, we look back to the downside later in the week.

Have a great weekend!

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4757.88

Resistance:
4811 is the November 2014 peak (intraday)
4815 is the December 2014 market peak

Support:
4751 is the January 2015 lower high
The 50 day EMA at 4672
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
4547 is the December low
4545 is the 38% Fibonacci retracement
4486 is the July 2014 high
The 200 day SMA at 4453
4372 is the March 2014 high
The August low at 4321
4316 is the lower gap point from October 2014
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
4185, the May lower gap point
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13

S&P 500: Closed at 2063.15

Resistance:
2066 is the lower trendline from 11/2012
2062 is the January 2015 lower high
2076 is the all-time high from November
2079 is the intraday all-time high from November
2128 is the December 2012 up trendline

Support:
The 50 day EMA at 2032
2011 is the September prior all-time high
1991 is the July 2014 high
1972 is the December 2014 low
The 200 day SMA at 1969
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high

Dow: Closed at 17,813.98

Resistance:
18,104 is the December all-time high

Support:
17,991 is the early December interim
17,923 is the January 2015 lower high
The 50 day EMA at 17,578
17,351 is the September 2014 all-time high.
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
The 200 day SMA at 17,026
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,736 is the penultimate all-time high from May 2014
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
16,341 is the May low
16,334 is the August 2014 low
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak

ECONOMIC CALENDAR

January 27 - Tuesday
- Durable Orders, December (8:30): 0.5% expected, -0.9% prior (revised from -0.7%)
- Durable Goods -ex tr, December (8:30): 0.7% expected, -0.7% prior (revised from -0.4%)
- Case-Shiller 20-city, November (9:00): 4.3% expected, 4.5% prior
- Consumer Confidence, January (10:00): 95.5 expected, 92.6 prior
- New Home Sales, December (10:00): 450K expected, 438K prior

January 28 - Wednesday
- MBA Mortgage Index, 01/24 (7:00): 14.2% prior
- Crude Inventories, 01/24 (10:30): 10.071M prior
- FOMC Rate Decision, January (14:00): 0.25% expected, 0.25% prior

January 29 - Thursday
- Initial Claims, 01/24 (8:30): 301K expected, 307K prior
- Continuing Claims, 01/17 (8:30): 2430K expected, 2443K prior
- Pending Home Sales, December (10:00): 0.6% expected, 0.8% prior
- Natural Gas Inventor, 01/24 (10:30): -216 bcf prior

January 30 - Friday
- GDP-Adv., Q4 (8:30): 3.2% expected, 5.0% prior
- Chain Deflator-Adv., Q4 (8:30): 1.0% expected, 1.4% prior
- Employment Cost Inde, Q4 (8:30): 0.5% expected, 0.7% prior
- Chicago PMI, January (9:45): 58.0 expected, 58.3 prior
- Michigan Sentiment -Final, January (9:55): 98.2 expected, 98.2 prior

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