Weekend Market Summary

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11/21/14
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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

- China rate cuts! ECB asset buys! Market jumps then says 'so what?'
- It's the US versus everyone else.
- Stocks surge then don't. Seasonal pattern is still there and should hold.
- Why you don't over think the patterns. Listen to them for sure, but don't over think them.
- Thanksgiving week often not great, but often doesn't change the trend.

The best of times and the worst of times?

Global: It's the US versus everyone else: The US data last week was not all strong, but some of it was blowout, e.g. the Philly Fed posting its strongest reading since 1993. Of course the New York PMI missed expectations, but it did rise. Industrial production and capacity slid, housing starts fell 2.8% versus an expected rise, and food prices surged even as inflation is purportedly tame (+3.3% in 12 months). Hey, you shouldn't eat all of that pork anyway; Michelle Obama would not like that. Of course shelter, airfares, household furnishings, medical care, recreation, personal care, tobacco, and new vehicles all jumped as well, but be calm, because the Fed says there is no inflation. All of those gains are offset by falling TV and computer prices, so simply go buy some more computers and TV's and save yourself some money.

Still, compared to 'over there,' the US is considered bulletproof. Japan triple dips into recession in its ongoing depression, forcing Abe to dissolve his cabinet and put off sales tax hikes until 2017. Not to worry, because Brazil, France, Italy, Russia are also in recession.

Chinese and European PMI and consumption data was terrible, all sliding lower when expected to gain. The inflation mongers were so disappointed.

On Wednesday the FOMC minutes did more than suggest the US central bank isn't going to worry about what it styled weakness in the rest of the world but was focusing on the US economy and labor market, both of which the Fed deigns in solid recovery mode.

The rest of the world apparently bought in. Friday China cut interest rates 25BP. Not the tax cuts we heard rumor of last week. Nope, sticking with monetary policy versus fiscal policy, apparently thinking it 'worked' for the US so why change fiscal issues?

Friday also saw the ECB finally allow Draghi to make good on his 'QE is coming' wolf cries as the ECB actually bought some assets as Draghi implored the ECB to get that inflation rate up to its targets. How can you be economically sound without inflation at 2%? Oh yes, look at the US in the 1980's; one of the most massive recoveries in our history and . . no inflation.

So, the US' ability to outrun massive debt by printing more debt (thanks to its now tenuous reserve currency status) has finally convinced, or should I say forced, others to do the same. Now we are all in the money printing business and currency war business (outside Iceland and a few other sane places), and it will be a money printing race, at least until markets finally balk, realizing the emperors have no clothes.

I love the smell of monetary stimulus in the morning . . .

Markets: Stocks showed the best of times/worst of times action as well. Of course the talk of more monetary stimulus in China and QE in Europe jumped US stock futures. Big pre-market gains, but we warned in the pre-market alert that these kind of moves, particularly on top of expiration Friday AND a market that is a bit weary, could prove deceptive.

Stocks of course opened sharply higher but immediately started to sell. We used the upside open to bank some gain on November options, racking up 400+% on BWLD, 139% on TGTX, etc. After that higher open, 'the slide' took place with stocks falling to noon central time. There was recovery, but it was just a modest move, a handful of upside ticks, into the close. DJ30 lost 85 points (gained 91 on the session) high to close. NASDAQ lost 38 points (up 11 on the day), SP500 coughed up 8 points, faring better as it managed an 11 point closing gain.

SP500 10.75, 0.52%
NASDAQ 11.10, 0.24%
DJ30 91.06, 0.51%
SP400 0.45%
RUTX 0.14%
SOX 1.02%

VOLUME: NYSE +51%; NASDAQ +11%. Expiration, so don't go reading too much into these volume increases.

A/D: NYSE 2:1, NASDAQ 1.1:1. Pretty paltry for such grand news.

Not dog food, but some major reversals from high to low in the indices. Basically it was potential unrealized as some good moves that could have really done the indices good were given back. Maybe the indices were not ready to continue higher, though RUTX put in a great Thursday move and was in position to really cement a recovery.

Nonetheless, I suppose we shouldn't complain. The indices did hold onto some gains, and that vaulted SOX to a new post-bear market high, SP500 and DJ30 as well. SP500 tapped the upper trendline on the high and faded, however . . . but, all in all you cannot complain. It's Christmas and the time of good cheer (at least according to Wal-Mart, and if you can't trust the nation's largest employer, who can you trust, the NSA?), so I suppose we will just take the move at face value: not great with the givebacks, but by golly some new highs and a continued year end run.

THE MARKET

CHARTS

SOX: Leading with SOX because it gapped to a new post-bear market high and it held the move. Doji, yes, but a new high and it held the move. SOX is one of the key smaller indices that often forecasts the moves of the overall market. SOX at a new high is a good thing.

SP500: Gapped higher, something unusual in itself, then rallied further. It moved right up to the upper channel line from 11/2012, kissed it, then faded not quite half the move. Seems the top of the range still carries some stroke, and of course, this level has more or less hemmed in SP500 in its entire upside move. I say hemmed in, but it has only acted as something of an upside limit on the individual legs; it has in no way stopped the run.

NASDAQ: Big gap to a higher high then faded most of the move. It did fill the gap on the low, so that is out of the way. Higher volume, but still below average and it was expiration, so not a lot of weight on that. The thing you have to watch is the next move. A gap to a higher high on pretty much no volume (as all of the recent NASDAQ higher highs have been) and one that reverses is not good action. Maybe it was just an expiration/stimulus around the world kind of thing, but it warrants watching.

RUTX: From a solid recovery move Thursday off the 200 day SMA test to a strong upside gap Friday. Then it gave basically all of it up, a la NASDAQ. Not bad, but it bumped the August and mid-November highs and faded. If RUTX is recovering, this is where it needs to make the move, holding the Thursday gain and continuing upside.

SP400: Gapped and rallied pst the August and early July highs but could not make the move stick. Closed over the August close, but just below the July close. Doji at resistance. Not a great technical signal, but it was expiration and stimulus causing the moves so we will see if it can hold the break from the lateral consolidation and continue higher.

DJ30: Broke higher nicely, and though it closed well off its high DJ30 still logged a nice gain.

There you have it, the analysis of the major index charts. The technical positioning is very important, but people often look too deeply into the moves, trying to read in something that is not there. Friday saw gaps to doji and closes well off the highs. It was also expiration and some goosing from foreign rate cuts and QE.

Now you can argue that the inability to hold the moves on good news is a sign of weakening, and that definitely is something you should watch. It does not, however, trump what the market has shown us to this point (seasonal move is playing out pat) and the nice individual stock chart patterns. Yes many are overbought right now, but money has shown a tendency to rotate around the market versus sell off.

The point: Over-thinking a pattern and trying to read something into it that is not there will lead to trouble. Maybe you get away with it a time or two, but it catches up with you. You can do it on the upside, i.e. seeing positives that are not really there or are too feeble compared to the negatives, and of course to the downside, seeing dangers that could be trouble but also fade against the prevailing trends.

How many of the negative commentators missed out this year? Well, judging from the talk on the financial stations and based upon a Bloomberg story stating that hedge funds were down on average 1% this year, quite a few. Hell, we played quite a few downside positions that didn't pan out. Some such as BRCM, SPY, CTXS made us a lot, but many of the downside plays started well but kept finding bids.

Overall, however, we have done what we always do, i.e. let the market tell us what it is going to do and then just take what the market gives us. We are not smarter than the market; no one is. Those hedge funds either 1) have the ability to manipulate the market (and if so, they better check into their system based upon their performance), or 2) think they can foretell market moves.

Reminds me of a show in the early 1990's that was very good but just didn't get traction. 'Shannon's Deal' was about a hot shot lawyer who loved to gamble. His success had him thinking he could foretell the outcomes of cases and he could see the cards before they were dealt. Of course he was wrong and he was ruined and had to start over. Hmmm. With hedge fund redemptions surging, that could be the case as well right now. Ironic isn't it? Market at new highs, hedge funds going under.

Anyway, the cockiness, overdone analysis, or whatever makes managers and people do stupid things like not buy GOOG, Z, YY, STX, TRLA, CAVM, ILMN, PCLN, TRIP, BIDU, AKAM, etc. at the mid-May Tepper bottom (named not because he called the bottom but because he puckered the very day stocks bottomed) because guys like Tepper, who are multimillionaires and billionaires, scare them even though the patterns are tailor made, textbook setups to scream higher.

Or they don't buy into AGIO, BABY, CMTL, IDCC, ATHM, BWLD, XON, SWIR, VIPS, CME, XLRN, VRTX, STX, TKMR, TGTX, ZLTQ, GPRO, etc. when bald guys on CNBC say you cannot trust the market EVEN AS the patterns of these stocks are screaming 'buy me!'

Those patterns, if they could talk, would be saying, 'hey, want to make some money? Buy me.' Then when they start the move it turns to an emphatic 'BUY ME!' But, alas, if you think with your guts or worse via some television fund manager pushing his/her own book and/or ego, you condemn yourself to do no better than them and then wonder how on freaking earth did the market make a screaming surge upside and your brokerage accounts barely moved.

From the May Tepper nervousness we had some great returns. I remember saying it was time to buy GOOG. 141% later we felt good about that one. Some more of our gains: 79% on Z, AAPL 88%, OAS 85%, TRIP 67%, 91% on STX, 74% ARRS, 130% CAVM, 79% ACT, 66% ARRS, 63% ATHL, 82% ILMN, 74% PCLN, 82% TRIP, 55% AFFX, 51% YELP, 97% BIDU, 145% AKAM, 55% GMCR.

From October when you were told not to trust the market, we entered these plays before the 'all clear': 108% XLRN, 63% TRLA, 66% TGTX, 115% CME, 40% GOOG, 103% VIPS, 53% FEYE, 63% AGIO, 83% XON, 181% BWLD, 157% IDCC, 90% ZLTQ, 50% AGIO, 114% RGEN, 127% (BRCM downside), 84% (CTXS downside), 143% (SPY downside).

The point is not to boast of gains but to underline how some very smart people were ignoring what the chart patterns were telling anyone who would look about accumulation patterns in stocks. They let their guts get in the way of their eyes and brains and consequently missed out on either the entire run or big chunks of it after realizing their mistakes and then trumping up some lame reasons how their 'ten things that must be fixed before you can trust the market' had been satisfied so they didn't look like the overblown windbags they are. Oh well, they have TV shows and I don't. They can have them. I will just keep trading from my four monitors out in the country, watching my horses, anticipating fishing in the pond or nearby lake later in the day, checking out the eagle that has taken up residence, checking the game feeder cameras to see what wildlife came up to eat, taking a bike ride or run in the hills.

MARKET STATS

NASDAQ
Stats: +11.1 points (+0.24%) to close at 4712.97
Volume: 1.799B (+11.33%)

Up Volume: 1.06B (-140M)
Down Volume: 782.54M (+353.84M)

A/D and Hi/Lo: Advancers led 1.13 to 1
Previous Session: Advancers led 2.01 to 1

New Highs: 134 (+65)
New Lows: 50 (-10)

S&P
Stats: +10.75 points (+0.52%) to close at 2063.5
NYSE Volume: 1B (+51.1%)

A/D and Hi/Lo: Advancers led 2.01 to 1
Previous Session: Advancers led 1.92 to 1

New Highs: 198 (+111)
New Lows: 15 (-22)

DJ30
Stats: +91.06 points (+0.51%) to close at 17810.06

SENTIMENT INDICATORS

VIX: 12.9; -0.68
VXN: 14.71; -0.16
VXO: 11.24; -0.76

Put/Call Ratio (CBOE): 0.74; -0.22

Bulls and Bears:

Bulls: 56.4% versus 55.5% versus 54.6% versus 47.0% versus 35.3%. Slowing the move toward the important 60 level.

Bears: 14.9% versus 14.8% versus 15.1% versus 16.3% versus 18.2%. Modest rise after the rather precipitous plunge.

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: 56.4%
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: 14.9%
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): 2.31% versus 2.34% versus 2.35% versus 2.32% versus 2.34% versus 2.32% versus 2.35% versus 2.36% versus 2.36% versus 2.30% versus 2.38% versus 2.34% versus 2.33% versus 2.339% versus 2.33% versus 2.31%

Trying to move up off of the 50 day EMA, getting a bit of traction.

Oil: 76.51, 0.66. Bouncing through the 10 day EMA for the first time in two months. Bumped the 20 day EMA on the high and fell sharply, however.

Gold: 1197.70, +6.8. Nothing like some QE and rate cutting to bump up gold a bit. Nonetheless, bumped the 50 day EMA and faded back.

$/JPY: 117.73 versus 117.96 versus 118.00 versus 116.98 versus 116.47 versus 116.29 versus 115.74 versus 115.53 versus 115.32 versus 114.86 versus 114.60 versus 114.98 versus 114.64 versus 113.60 versus 113.73 versus 112.32 versus 109.23 versus 108.89 versus 108.16 versus 107.83 versus 108.13 versus 108.17 versus 107.20 versus 106.88

Euro/$: 1.2386 versus 1.2549 versus 1.2543 versus 1.2532 versus 1.2455 versus 1.2520 versus 1.2486 versus 1.2432 versus 1.2480 versus 1.2421 versus 1.2455 versus 1.2387 versus 1.2486 versus 1.2456 versus 1.2493 versus 1.2525 versus 1.2610

Dramatic jump in the dollar versus the euro and also the DYX0 basket of 25 currencies.

MONDAY

Thanksgiving week and that has a mixed history. It is often a week where stocks that are in a run have some troubles on the week. They often correct themselves once the week is over, but it is something to watch for and not to get too rattled by if you see it occurring. As always, looking at the stocks holding good patterns, i.e. many that we have on the report, will guide you through. If they start breaking down and no others are improving, that could be trouble.

Again, this week can show weakness but it can also show good moves. We are going to look at some more upside plays because that is clearly the trend and the year end upside move is well-entrenched this year. Doesn't mean it can't or won't change, just that we need to see some more trouble before we bite on that.

What we want to do is let good plays run. If there are some in trouble and cannot improve and worsen, then of course we want to close them out. If they are holding, however, given the seasonal move that is working well this year, we really want to let them run if we can as they should return even more by the year end.

As for the reports, we always give everyone, including me, a break. Monday and Tuesday reports as usual, Wednesday a summary and play tables, market stats and play tables after Friday. The idea is to have good positions as we have and may add to on the week, and let them work with the seasonal trend in place. Of course if anything changes, we will be there to try and help determine what has changed, what it means, and what we need to do about it.

Have a great weekend!

SUPPORT AND RESISTANCE

NASDAQ: Closed at 4712.97

Resistance:

Support:
The 10 day EMA at 4676
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
The 50 day EMA at 4549
4486 is the July 2014 high
4372 is the March 2014 high
The 200 day SMA at 4359
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
4070 is the series of highs from late November/early December

S&P 500: Closed at 2063.50

Resistance:
2073 is the December 2012 up trendline

Support:
The 10 day EMA at 2043
2012 is the lower trendline from 11/2012
2011 is the September prior all-time high
1991 is the July 2014 high
The 50 day EMA at 1994
The 200 day SMA at 1931
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 17,810.06

Resistance:

Support:
The 10 day EMA at 17,643
17,351 is the September 2014 all-time high.
The 50 day EMA at 17,188
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
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
The 200 day SMA at 16,736
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

November 17 - Monday
- Empire Manufacturing, November (8:30): 10.2 actual versus 12.0 expected, 6.2 prior
- Industrial Production, October (9:15): -0.1% actual versus 0.2% expected, 0.8% prior (revised from 1.0%)
- Capacity Utilization, October (9:15): 78.9% actual versus 79.3% expected, 79.2% prior (revised from 79.3%)

November 18 - Tuesday
- PPI, October (8:30): 0.2% actual versus -0.2% expected, -0.1% prior
- Core PPI, October (8:30): 0.4% actual versus 0.1% expected, 0.0% prior
- NAHB Housing Market , November (10:00): 58 actual versus 55 expected, 54 prior
- Net Long-Term TIC Fl, September (16:00): $164.3B actual versus $52.1B prior

November 19 - Wednesday
- MBA Mortgage Index, 11/15 (7:00): 4.9% actual versus -0.9% prior
- Housing Starts, October (8:30): 1009K actual versus 1025K expected, 1038K prior (revised from 1017K)
- Building Permits, October (8:30): 1080K actual versus 1040K expected, 1031K prior (revised from 1018K)
- Crude Inventories, 11/15 (10:30): 2.608M actual versus -1.735M prior
- FOMC Minutes, 10/29 (14:00)

November 20 - Thursday
- Initial Claims, 11/15 (8:30): 291K actual versus 285K expected, 293K prior (revised from 290K)
- Continuing Claims, 11/08 (8:30): 2330K actual versus 2380K expected, 2403K prior (revised from 2392K)
- CPI, October (8:30): 0.0% actual versus -0.1% expected, 0.1% prior
- Core CPI, October (8:30): 0.2% actual versus 0.1% expected, 0.1% prior
- Existing Home Sales, October (10:00): 5.26M actual versus 5.17M expected, 5.18M prior (revised from 5.17M)
- Philadelphia Fed, November (10:00): 40.8 actual versus 18.3 expected, 20.7 prior
- Leading Indicators, October (10:00): 0.9% actual versus 0.6% expected, 0.7% prior (revised from 0.8%)
- Natural Gas Inventor, 11/15 (10:30): -17 bcf actual versus 40 bcf prior

November 25 - Tuesday
- GDP - Second Estimate, Q3 (8:30): 3.3% expected, 3.5% prior
- GDP Deflator - Second, Q3 (8:30): 1.3% expected, 1.3% prior
- Case-Shiller 20-city, September (9:00): 4.6% expected, 5.6% prior
- FHFA Housing Price Index, September (9:00): 0.5% prior
- Consumer Confidence, November (10:00): 96.0 expected, 94.5 prior

November 26 - Wednesday
- MBA Mortgage Index, 11/22 (7:00): 4.9% prior
- Initial Claims, 11/22 (8:30): 286K expected, 291K prior
- Continuing Claims, 11/15 (8:30): 2373K expected, 2330K prior
- Durable Orders, October (8:30): -0.7% expected, -1.3% prior
- Durable Goods -ex transports, October (8:30): 0.5% expected, -0.2% prior
- Personal Income, October (8:30): 0.4% expected, 0.2% prior
- Personal Spending, October (8:30): 0.3% expected, -0.2% prior
- PCE Prices - Core, October (8:30): 0.1% expected, 0.1% prior
- Chicago PMI, November (9:45): 63.0 expected, 66.2 prior
- Michigan Sentiment - Final, November (9:55): 89.9 expected, 89.4 prior
- New Home Sales, October (10:00): 469K expected, 467K prior
- Pending Home Sales, October (10:00): 0.8% expected, 0.3% prior
- Crude Inventories, 11/22 (10:30): 2.608M prior
- Natural Gas Inventor, 11/22 (24:00): -17 bcf prior

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