Weekend Market Summary

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7/18/14
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TONIGHT:

We have DIVIDED the video into component parts: Market Overview, Economy Summary, 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

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Market Overview Video

TO VIEW THE ECONOMY SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Economy Summary Video

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

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

SUMMARY

- Figuring the news couldn't get worse, stocks rebound from the Thursday selling.
- News Friday isn't great, just not nearly as bad.
- Friday solid advance mark the end of the selling? Doubt it as volatility remains the rule, but there are some good upside plays to consider if things stabilize.

Stocks bounce on less bad news.

After careening lower Thursday on a trio of negative news stories stocks found themselves oversold near term. No, SP500 and DJ30 were hardly oversold, but RUTX and SP400, and to a lesser extent NASDAQ were down a couple of weeks. The sharp drop Thursday stretched the rubber band to the max, and on Friday it snapped back versus snapped off.

SP500 20.10, 1.03%
NASDAQ 68.70, 1.57%
DJ30 123.37, 0.73%
SP400 1.25%
RUTX 1.50%, SOX 1.28%

Volume: Rose a modest 3% on NSYE, showing some buying, but fell 12% on NASDAQ, suggesting the buying was for show as trade faded back near average.

A/D: Almost as solid on the Friday upside as weak on the Thursday downside. NYSE 4.5:1 (-4.1:1 Thursday), NASDAQ 3.75:1 (-4.1:1 Thursday).

The move certainly had everyone breathing easier on the financial stations, and the breadth was good to see. Volume was questionable on NASDAQ though still solid. It was expiration, however, and you would expect some trade. It did not measure up to the selling volume.

An end to the current two week selling (at least in terms of NASDAQ, RUTX, SP400)? Likely not given Friday was nothing more than another volatile session in a very volatile market. Indeed late last week even SP500 got in on the volatility, diving through the 20 day EMA in a big Thursday loss but then recovering on Friday.

That sharp drop and fast recovery may indeed mark the end of the recent selling and volatility; ending volatility with big volatility so to speak. Perhaps, and there are quite a few stocks that rode out the ups and downs and are in a position to make an upside move. If they show they can rally well, game on. As it stands on Friday, however, the overall condition of leadership and the ongoing market volatility suggest there is more of the same coming as stocks work through the test of a solid 7 week rally about nothing off of the mid-May low.

THE NEWS

The news Friday really wasn't good, it just wasn't as bad as the geopolitical whirlwind on Thursday.

Earnings. There were some big beats and some big misses.
Beats: GOOG, IBM, SLB, HON. Not all enjoyed their beats but GOOG was somewhat impressive.

Misses: JCI, STX, AMD. Most held in despite some selling, but AMD bombed lower, gapping from a new recovery high through the 50 day EMA and indeed the 200 day SMA.

Earnings season thus far has been a pretty even mix of beats and misses. Hardly impressive.

China: Home prices showing the largest declines since LEH collapsed.

Michigan Sentiment, July Preliminary: 81.3 versus 84.0 expected, 82.5 June.

Weakest number since March and in somewhat of a tail off here, perhaps coming more in line with the Gallup surveys that see much less exuberant sentiment. In perspective, however, the Michigan readings, even before July, were not great. That is a number that tells darn little about direction, though it does suggest sentiment is not surging as everyone hopes it will in order to drive those overly high GDP expectations. Wait until the second half? It is here and it doesn't look overwhelming.

Clouds on the horizon: BRICS bank

The dollar is facing its most serious threat since ascending to reserve currency status. Decades of money printing, deficit spending on programs we could not even afford when prosperous, and fiscal policy actively inhibiting our economic strength has opened the door for countries that would like to kick the US out of reserve currency power.

Thus the BRICS Bank formation by Brazil, Russia, India and China. Friday the parties announced the BRICS 'mechanism' has been fully developed. One of the goals: an alliance to "reform the international finance system." In lay terms, dispose of the dollar as the reserve world currency.

The US set itself up for this kind of action. Frankly, I think the President secretly wants this to happen in order to further curtail and truncate the US' ability to influence global direction. Of course ceding our influence means who gets it. Russia? China? Do we want those countries dictating world policy? Those who think the US was bad, wait until those two get in charge.

Of course those countries are in trouble themselves. China is a huge growth engine but it has bitten too much from the stimulus fruit as well and has its own issues with real estate as noted above, not to mention the issue of ghost cities. Hey, maybe a solution. Why not have those flooding across the US border to the angst of many states and cities be shipped to the Chinese ghost towns? Get someone living there, get some industry and commerce going. Have not heard that yet. Probably won't.

THE MARKET

CHARTS

SP500, DJ30: After SP500 got a big dicey Thursday, breaking the 20 day EMA, it was right back up Friday, over the 20 day. The move has flattened out the past two weeks. No real surprise there, just what happened in March as the rest of the market started to sell. SP500 didn't roll over but it did feel the effects though that only resulted in a 2.5 month lateral, more or less, pause.

DJ30 didn't miss a beat, rising off of the 20 day EMA it tested Thursday, maintaining its trend to the upside. Not a lot of issues here.

NASDAQ: After breaking the 20 day EMA Thursday and matching the prior week's intraday low, NASDAQ rebounded Friday on lower, average volume. Similar to SP500, NASDAQ is in a lateral move the past two weeks, recovering twice from what looked to be an ugly break lower. Thus far, not that bad at all, walking laterally, fighting off attempts to push it lower.

RUTX: Snapped the 200 day SMA Thursday, and as noted Thursday night, was ripe to rebound after two weeks lower, three hard downside sessions, the last after a series of really bad geopolitical stories. Now rebounding with an oversold bounce. The 50 day EMA near 1160 (closed at 1151) up to 1174 (upper gap point from early July) looks like logical resistance on a bounce.

SP400: broke the lower trendline and the 50 day MA Thursday but managed to recapture both Friday. Similar to RUTX, oversold near term and bounced just as it looked to be cracking. Still a toppish pattern, but it made a good initial bounce.

SOX: Fighting to hold the line after the Thursday gap and selloff pushed it through the 20 day EMA. Held it Friday and recovered, sporting the same kind of lateral rectangle pattern NASDAQ is showing.

LEADERSHIP

Internet-based: Some interesting patterns and one good move. Still more to develop, but interesting. FB rallied again on Friday. TRIP is in an interesting two week lateral move. TRLA broke below the 50 day EMA Thursday, rebounded some Friday. Iffy. Z on the other hand looks nice with a doji at the 50 day EMA on its test.

Electronics: INTC helped push SOX last week with its earnings gap. Friday saw some others in the area and related areas looking better. OVTI is trying to set up to make us more money. AMCC is very interesting. SYPR has promise. SCTY might have to flip to the upside after a nifty double bottom. The group of power stocks that surged early in the year look very interesting again: BLDP, PLUG.

Industrial metals: NOR is surging. USU looks as if it can contribute upside. Interesting moves from these stocks. Hedging or looking at new growth?

OTHER MARKETS

Euro/Dollar: Holding steady after a surge on the week took it back near the early June high.

1.3524 versus 1.3526 versus 1.3523 versus 1.3568 versus 1.3619 versus 1.3608 versus 1.3600 versus 1.3644 versus 1.3611 versus 1.3605 versus 1.3608 versus 1.3658 versus 1.3769 versus 13693 versus 1.3648 versus 1.3612 versus 1.3630 versus 1.3604 versus 1.3603 versus 1.3600 versus 1.3603 versus 1.3592 versus 1.3545 versus 1.3573

Dollar/Yen: Held steady Friday after the dollar dove to the support lows. Holding it again and now looking for a bounce.

101.34 versus 101.25 versus 101.63 versus 101.68 versus 101.57 versus 101.30 versus 101.325 versus 101.60 versus 101.564 versus 101.855 versus 102.210 versus 101.7595 versus 101.534 versus 101.3150 versus 101.4413 versus 101.722 versus 101.8695 versus 101.9195 versus 101.925 versus 102.059 versus 101.9595 versus 101.9335 versus 102.13 versus 101.955

Bonds: Faded some Friday after a massive Thursday gap. Modest loss but still holding up well.

10 year: 2.48% versus 2.46% versus 2.55% versus 2.55% versus 2.52% versus 2.54% versus 2.55% versus 2.56% versus 2.61% versus 2.64% versus 2.62% versus 2.56% versus 2.52% versus 2.53% versus 2.53% versus 2.56% versus 2.58% versus 2.61% versus 2.61% versus 2.63% versus 2.60% versus 2.65% versus 2.60% versus 2.60% versus 2.60% versus 2.64% versus 2.64% versus 2.61% versus 2.59% versus 2.58% versus 2.60% versus 2.60% versus 2.53% versus 2.47% versus 2.47%

Oil: 103.14, -0.01.

Gold: 1309.90, -7.00. Sold off some of the Wednesday and Thursday surge.

MARKET STATISTICS

NASDAQ
Stats: +68.7 points (+1.57%) to close at 4432.15
Volume: 1.805B (-11.74%)

Up Volume: 1.52B (+1.095B)
Down Volume: 245.02M (-1.345B)

A/D and Hi/Lo: Advancers led 3.74 to 1
Previous Session: Decliners led 4.15 to 1

New Highs: 40 (+6)
New Lows: 56 (-20)

S&P
Stats: +20.1 points (+1.03%) to close at 1978.22
NYSE Volume: 648M (+3.35%)

A/D and Hi/Lo: Advancers led 4.55 to 1
Previous Session: Decliners led 4.31 to 1

New Highs: 103 (+17)
New Lows: 21 (-15)

DJ30
Stats: +123.37 points (+0.73%) to close at 17100.18

SENTIMENT INDICATORS

VIX: 12.06; -2.48
VXN: 13.4; -2.45
VXO: 10.24; -2.89

Put/Call Ratio (CBOE): 0.91; -0.09

Bulls and Bears:

Bulls take a hit, fall below 60: 56.6% versus 60.6%

Bears fall again? Yep: 15.1% versus 15.2%

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.

Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 56.6% versus 60.6%
57.6% versus 60.2% versus 61.4% versus 62.6% versus 62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

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

Bears: 15.1% versus 15.2%
16.1% versus 16.3% versus 17.2% versus 17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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

Investors 'ease' into the week with no scheduled economic data, but of course that does not mean earnings won't suddenly lose importance or that the geopolitical climate calms. Hardly.

A good recovery Friday relieved some of the tension from the Thursday geopolitical issues and the market dive on same. Did it solve the problems? As noted above, there are some very nice upside setups off of these two weeks of selling, and we have put some nice upside on the report to counterbalance the downside we put on the past week. If they show good moves, so be it. Good patterns yielding strong moves is what you look for, up or down.

That said, there are still many issues outstanding, issues yet resolved. Anything can happen geopolitically, and the Israel Gaza land action is not ending and indeed protests are springing up around the world. Seems you have to endure rockets raining down on you but woe be to you if you try and do something about it.

In any event there are earnings aplenty and world events to occupy the market. Earnings can provide a source of rally as seen gratis INTC, GOOG, but even they didn't end the volatility issues. Perhaps they are drawing an end to it; as noted there are good upside patterns out there. If they join in with enough numbers, then the downside ends.

Has to prove it. Still looks very much like March and that means more downside to come for the growth indices if it continues. We will watch the leaders, both the dynamic ones that lead good strong rallies and those that lead or act as parking places when the market struggles. If the former makes the breaks, that signals the selling is drawing to the close. For now they are just pictures; they need to show the breaks that stick. When they do we take what the market gives us and see what that builds into.

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4432.15

Resistance:
4486 is the July 2014 high
4493 is the lower November 2012 trendline
4582 is the upper channel line formed off the 11/2012 low.

Support:
The 20 day EMA at 4397
4372 is the March 2014 high
The 50 day EMA at 4327
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 200 day SMA at 4140
4131 is the March 2014 low
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3968 is the February 2014 low
3946 is the April 2014 intraday low

S&P 500: Closed at 1978.12

Resistance:
1986 is the July 2014 high

Support:
The 20 day EMA at 1965
1946 is the December 2012 up trendline
The 50 day EMA at 1940
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1894 is the lower trendline from 11/2012
1883.57 is the early March high.
The December and January highs at 1848
The 200 day SMA at 1844
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point

Dow: Closed at 17,100.18

Resistance:
17,319 is a lower trendline off the 11/2012 low

Support:
16,970 is the June 2014 former all-time high
The 20 day EMA at 16,966
The 50 day EMA at 16,817
16,736 is the penultimate all-time high from May 2014
16,341 is the May low
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
16,257 is the January 2014 low
The 200 day SMA at 16,229
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
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
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
14,551 is the June 2013 intraday low on the selloff (14,659 closing)

ECONOMIC CALENDAR

July 15 - Tuesday
- Retail Sales, June (8:30): 0.2% actual versus 0.7% expected, 0.5% prior (revised from 0.3%)
- Retail Sales ex-auto, June (8:30): 0.4% actual versus 0.6% expected, 0.4% prior (revised from 0.1%)
- Empire Manufacturing, July (8:30): 25.6 actual versus 13.2 expected, 19.3 prior
- Export Prices ex-ag., June (8:30): -0.3% actual versus 0.1% prior
- Import Prices ex-oil, June (8:30): -0.1% actual versus 0.0% prior
- Business Inventories, May (10:00): 0.5% actual versus 0.6% expected, 0.6% prior

July 16 - Wednesday
- MBA Mortgage Index, 07/12 (7:00): -3.6% actual versus 1.9% prior
- PPI, June (8:30): 0.4% actual versus 0.2% expected, -0.2% prior
- Core PPI, June (8:30): 0.2% actual versus 0.2% expected, -0.1% prior
- Net Long-Term TIC Fl, May (9:00): $19.4B actual versus -$41.2B prior (revised from -$24.2B)
- Industrial Production, June (9:15): 0.2% actual versus 0.4% expected, 0.5% prior (revised from 0.6%)
- Capacity Utilization, June (9:15): 79.1% actual versus 79.2% expected, 79.1% prior
- NAHB Housing Market , July (10:00): 53 actual versus 50 expected, 49 prior
- Crude Inventories, 07/12 (10:30): -7.525M actual versus -2.370M prior

July 17 - Thursday
- Initial Claims, 07/12 (8:30): 302K actual versus 311K expected, 305K prior (revised from 304K)
- Continuing Claims, 07/05 (8:30): 2507K actual versus 2563K expected, 2586K prior (revised from 2584K)
- Housing Starts, June (8:30): 893K actual versus 1020K expected, 985K prior (revised from 1001K)
- Building Permits, June (8:30): 963K actual versus 1037K expected, 991K prior (revised from 991K)
- Philadelphia Fed, July (10:00): 23.9 actual versus 12.5 expected, 17.8 prior
- Natural Gas Inventor, 07/12 (10:30): 107 bcf actual versus 93 bcf prior

July 18 - Friday
- Michigan Sentiment, July (9:55): 81.3 actual versus 84.0 expected, 82.5 prior
- Leading Indicators, June (10:00): 0.3% actual versus 0.5% expected, 0.7% prior (revised from 0.5%)

July 22 - Tuesday
- Core CPI, June (8:30): 0.3% prior
- CPI, June (8:30): 0.3% expected, 0.4% prior
- Core CPI, June (8:30): 0.2% expected, 0.3% prior
- FHFA Housing Price I, May (9:00): 0.0% prior
- Existing Home Sales, June (10:00): 5.00M expected, 4.89M prior

July 23 - Wednesday
- MBA Mortgage Index, 07/19 (7:00): -3.6% prior
- Crude Inventories, 07/19 (10:30): -7.525M prior

July 24 - Thursday
- Initial Claims, 07/19 (8:30): 308K expected, 302K prior
- Continuing Claims, 07/12 (8:30): 2533K expected, 2507K prior
- New Home Sales, June (10:00): 475K expected, 504K prior
- Natural Gas Inventor, 07/19 (10:30): 107 bcf prior

July 25 - Friday
- Durable Orders, June (8:30): 0.3% expected, -0.9% prior (revised from -1.0%)
- Durable Goods -ex tr, June (8:30): 0.7% expected, 0.0% prior (revised from -0.1%)

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