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Daily Quant | 2015 | July
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2015 July

Friday, July 31, 2015

Posted by | The Daily | No Comments

2015-07-30.2

The final hurrah?

As I have been discussing over the past several months on the Market Thunder broadcast, it appears that the longer-term charts are going into a stall mode. With today being the end of the week and also the final trading day of the month, we are seeing a deceleration across the board on the long-term secular trend. While trend levels continue to remain high enough to supply support, they do not suggest an acceleration to the upside, in fact they are suggesting the end of the pattern.

If you take note of the accidental leak by the Federal Reserve last week, they are looking at the US economy that is not going to be able to grow much over 1.6%. The reason for this is that productivity has been falling substantially. This is most likely because of the continued zero rate policy. The Fed knows that they need to normalize interest rates and get them into the market rate environment rather than remain in an engineered environment.

The liftoff of short-term rates moving higher may trigger companies to stop borrowing to buy back stock and actually get them to begin capital investment. This in itself could trigger further economic development, but initially it’s likely that we will see some backfilling and a period of normalization and all pricing mechanisms across all markets will have to adjust.

The effects of moving back into a market driven environment could be risky since the rate has not been raised for 54 meetings. Just looking back into the taper tantrum you saw how quickly the market came off the highs. There is likely to be some unintended consequences when the rates do start to move higher. This could trigger a substantial decline in equity markets.

Just with the expectations of higher yields as we get closer to September you are seeing a flattening of the yield curve with the two-year and five-year notes rising faster than the 10 and 30’s. Shortly after the first increase in yields, we are likely to see the yield curve begin to steepen, seeing the 10-year moving back up towards the 2.80/3.03 levels and ultimately moving much higher as we move into 2016.

However, I believe that the stock market is in the final days and weeks of this rally. Even though we’re trading very near the historical highs, in the last two highs in 2000 and 2007 we saw a decline like we’ve experienced recently. The markets reversed and finished near the highs on a monthly basis but were unable to follow through to the upside in the following month.

So, it will be critical as we come in to the market over the next two weeks to see whether or not we can move above the 2135 level and maintain above that for at least two weeks after that event. Typically, the pattern that unfolds is a slightly new high is rendered and the market sells off again, pushing itself toward the previous month’s low.

The month of August will be the key in determining market direction for another 2 to 3 months. If we see the type of action I discussed above, a decline will unfold that will move us toward the 1980 level initially and then ultimately toward 1750/1725 over the next several months.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2098.90 level today.  

Today’s Key Levels

  RX 2128.15
  R3 2123.55
  R2 2118.40
Resistance R1 2113.25
Prior Close   2108.63 +0.06
Support S1 2104.00
  S2 2098.90
  S3 2093.70
  SX 2089.10

 

 

 

Thursday, July 30, 2015

Posted by | The Daily | No Comments

2015-07-29.2

Fed speaks and says nothing…

54 meetings in a row with no increase in yields. No wonder we remain stuck in a trading range. The Fed continues to talk in a somewhat dovish tone, not giving any clue whether they will ever raise rates. As I have said many times in the past, I believe they are way behind the power curve and that the normalization of interest rates should have started at least 18 months ago. But at the moment, none of this matters. The market has another classic Wednesday Fed rally. At the last Fed meeting, we saw a rally on Wednesday but then the markets faded for the balance of the week, trading sharply lower after the meeting.

In overnight action the Chinese market gave back most of the gains that it had achieved the previous session. Even after the 8 billion of buying power was issued yesterday the market closed down 2.20%. The configuration on the charts on the Shanghai index suggests that the market could start to decline again, moving back toward the lows that we saw just two sessions ago. The ominous configuration on the charts suggest that Friday’s action will be critical. In yesterday’s commentary, I cited that the continuation to the upside was also based upon the further advances in the Chinese market. Overnight we are seeing selling in the US futures indicating a lower open.

In yesterday’s commentary, I discussed that the setup is the same as it’s been every time we get up around the 2111 to 2121 level. The VIX trades back to the 12 range and the market reverses lower again, back into the trading range. This has been reoccurring for nearly 7 months now. The close over 2121 would suggest that we would test the 2135 historical highs. The minimum objective that has been rendered from this current pattern suggests we could go to 2152 if we close above 2135.

Today will be a critical level in the pattern. A close under 2104.05 would suggest a minor decline back toward the 2098.95/2093.85 levels over the next two sessions. We’re in the final two sessions of the month of July and we have once again seen a spike down to the 2063 level which is the 40 month moving average. This has been the key support level.  We have seen several bounces off of this level over the last several months.

However, the long-term momentum continues to fade. As we come into next Monday, we will have of very good read on what we can expect for August as the market inches close to the final highs.

The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below 2113.10 level today.  

Today’s Key Levels

  RX 2127.80
  R3 2123.30
  R2 2118.20
Resistance R1 2113.10
Prior Close   2108.57 +15.32
Support S1 2104.05
  S2 2098.95
  S3 2093.85
  SX 2089.35

 

 

 

Wednesday, July 29, 2015

Posted by | The Daily | No Comments

2015-07-28.2

China rebounds… But Fed to speak

Just another day on Wall Street. In the last three sessions we saw a -22, a -12, and a +25 basis the S&P 500. This volatility continues to be the same as it has been acting for the last seven months. There’s no real reason for the market to go up and no real reason for the market to go down. Market participants continue to grab at the next news story to generate the next stampede in or out.

We’ll have to see what today brings as we have several economic reports and the FOMC meeting statement followed by a conference call with Janet Yellin. Volatility is likely to continue…

We’ve seen this pattern so many times. The technical patterns tend to generate similar expectations each time that we see the market dip down, we see the market bottom followed by higher objectives. But in the end, the market fails to follow through. Just three days ago on Friday at the close we were seeing the VPM indicators suggest that we are entering into a possible downtrend. I discussed this in the Market Thunder show on Monday. Yesterday’s follow-through to the downside suggested there was some validity to the pattern but we saw a dissipation of the downward momentum.

Then, an announcement by the Chinese government that they were going to be buying 8 billion more dollars of the shares stimulated the European markets and the US markets into a substantial rally. But initially China did not see a rally and continued the selloff. The overnight activity in China saw some negative numbers and then it was announced that the state was in buying yet again. We went from about a -1.39% to a +3.5% gain.

The problem with all this is there is no free market that the markets participants are basing their actions on. Remember over 55% of the Chinese market is still suspended. So what really is the price of the Shanghai index? But it does give a reason for the traders in Western markets to stampede back in, pushing the markets up sharply, exceeding normal daily expectations.

The reality of China is that the stock market does not reflect what’s going on in the economy. It is not fundamentally driven. In fact, the volatility that we’ve seen in the past several weeks is nothing more than a corrective phase which would suggest that we are likely to see a resumption of the downtrend sometime in the next several weeks. There could be a further rally as the pattern unfolds but overall the market is in a clear downtrend.

As I’ve mentioned many times, there are no real fundamentals to drive this market higher at this time. Nothing’s changed as it appears that the traders in control and folks that are trying to create wealth will have a very difficult time when using index strategies such as mutual funds are ETF’s. In the end, the only real way to generate any type of Alpha or returns in this market is through individual stock portfolios which most in the advisory community do not use. (Please look at our Target 25 premier portfolio in VPM, currently up 7.05%.)

This year continues to be a very frustrating experience, especially for those trying to use indexing.

Also, a similar pattern that has unfolded several times with the VIX trading up to the 16 to 20 level and all the sudden heading quickly back to the 12 level as fast as it went to 16. It appears, should the market continue higher for next several days, to be going back below 12. This can set the tone for yet another decline or otherwise maintaining the trading range that we been in for seven months.

The configuration on the S&P 500 suggests that if we can close over 2106.60 then we could see a retest of the same numbers I’ve talked about so many times. It was like a flashback or déjà vu as the 2111.10/2121.40/2135.60 levels are all key to the market continuing to the upside.

The pattern has generated some new objectives with a minimum of 2152 with an extreme of 2186/2207 basis the S&P. However, it will take a close above the 2135 level to confirm these objectives. Currently, only a 40% probability

The key level on the downside for today is the 2081.55 level. A penetration would suggest a decline toward the 2075/2069 levels. There is only a 30% probability for that to occur.

The market should open flat to higher, with a 60 percent probability to close higher, should the market remain above the 2081.55 level today.  

Today’s Key Levels

  RX 2116.62
  R3 2111.10
  R2 2104.93
Resistance R1 2098.76
Prior Close   2093.25 +25.61
Support S1 2087.74
  S2 2081.57
  S3 2075.40
  SX 2069.88

 

 

Tuesday, July 28, 2015

Posted by | The Daily | No Comments

2015-07-27.2

China intervenes again…

Overnight it was announced that there would be some 8 billion of support launched back into the Chinese stock market. As a result, we saw a sharp rally after that announcement. It was short lived however as the markets faded back to close down 1½% on the session. Meanwhile, the European markets and the US futures rallied sharply on the news. It appears that market participants are happy just to hear about intervention so they are going on with business as usual. However, with the lower close in China, this may not be enough to hold this market up. Remember over half of the market is still suspended.

As I mentioned in yesterday’s Market Thunder show, there is still substantial support right at the 2063 level. Yesterday the market bounced off of that support slightly to close at 2067.64. The futures initially rallied about 350 points after the close and now it is up around 13 handles. This suggests that the market will open sharply higher if these prices hold into the open. There are several economic reports to be released along with the beginning of the FOMC meeting. It is likely that most folks are going to continue to take a neutral stance until the Wednesday FOMC meeting is over and the statement is released.

The configuration suggests that we are likely to see a 2 to 3 day rally trading back toward the 2083/2088 levels within an extreme of 2097. The reality of what’s happening is once again we are back into the trading range between the 2060 and 2120 levels. With only four days left in this month, a close below the 2065 level would be very negative suggesting that there would be further weakness as August comes in.

On the downside today, the critical level is 2062.75. A penetration of this level would suggest a further decline toward the 2051/2047 levels. In yesterday’s commentary I mentioned the downside targets if we close under the 2063.50 level would be a minimum of 2046 with extreme targets on the downside of 2014/1993.

If the market cannot trade above the 2088.25 level or in the next two sessions this will suggest that a resumption of the downside will unfold and we are likely to see Monday’s lows be challenged at the 2063.52 level.

The market should open higher, with a 60 percent probability to close higher, should the market remain above 2062.75 level today.  

Today’s Key Levels

  RX 2088.25
  R3 2083.40
  R2 2077.95
Resistance R1 2072.50
Prior Close   2067.64 -12.01
Support S1 2062.75
  S2 2057.35
  S3 2051.90
  SX 2047.05

 

 

Monday, July 27, 2015

Posted by | The Weekly Brief | No Comments

Market Overview
2014-08-25 YTD

YTD Performance

China down over 8%… Commodity prices continued their decline. Deflation?

There continues to be a substantial amount of volatility in China. This is in spite of the fact that nearly half of the market is suspended. It’s continuing to see a deleveraging or selling of its markets. Looking at China from a technical viewpoint, it appears that it has completed an upward corrective phase and is likely to begin a new leg to the downside. There is a potential for full-fledged meltdown which is likely to affect all of us should this occur. The slowdown in China is triggering a worldwide deflation in metals and other industrial complexes. This is putting deflationary forces into all world economies.

There will be a lot going on this week including the FOMC meeting minutes midweek. Also, there is nearly 1200 earnings being released which will be the biggest earnings reporting so far this quarter. If it is as bad as the previous week was then we could be in for more trouble.

There is little expected from the Fed this week. Janet Yellen’s testimony over the last week suggests that they are still on track for raising rates. This would be a very untimely place for a collapse in China if it did occur as the Fed does not have very many bullets left to trigger any type of support for the markets. We’re also seeing an unraveling of many of the emerging markets due to stronger dollars and fears of higher interest rates here in the US. It’s pretty tough to find a bullish story as you look around the planet.

From an economic standpoint, there are also going to be a number of key economic reports to be released this week. On Monday Durable Goods Orders. Tuesday, S&P Case-Shiller Index and Consumer Confidence. On Wednesday, Pending Home Sales and the FOMC meeting minutes and conference with the Fed. On Friday there will be Consumer Sentiment and Chicago PMI.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 07/20/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Last Week’s Overview

Monday’s action was a very lackluster trading session with the S&P managing to trade up slightly on the session closing up 0.08%. There was very little news on Monday released and market participants were focused on the upcoming earnings to be released later in the week. In the end, the market traded in a very narrow, choppy session with very little features throughout the day.

Tuesday

Market open flat but continued to trade lower throughout the session with the S&P finishing down 0.43%. The big news was the release of Apple earnings after the close. Consequently, the markets remained cautious throughout the session. The economic news was a virtual vacuum as there was no key releases of any sort.

Wednesday

Wednesday started the session slightly lower and traded in a choppy range for most of the session. Stronger Existing Home Sales had little effect on market sentiment as it just chopped throughout the session to finish down on the S&P by 0.24%. Also released was the FHFA house price index which came in in line with consensus and had little impact on the markets.

The big story of the day was Apple as it missed some key elements of its earnings report. After running up some 9% in five days, it fell 6 ½% on Wednesday giving back most of those gains. The reason for their miss was cited to be concerns in China. Furthermore, this report would not reflected the most recent collapse in prices in the stock market in China so many believed that this situation could get much worse. This kept the pressure on the stock throughout the session.

Thursday

The markets continued under pressure as we saw yet another loss of 0.57% basis the S&P 500. The market opened stable for the first two hours and then started a decline that would last into the close. Market sentiment was affected drastically by reports from UTX as well as CAT and others who had exposure to China. Jobless claims came in much lower than many expected at 255. Even though there were no seasonal adjustment cited, many economists and other market participants claimed that most likely there were several adjustments that were affecting the actual number. Normally this might’ve been construed as a positive number. Instead it was shrugged off.

Friday

Throughout the week the market remained under pressure with Monday having the only positive return for the week. The S&P 500 declined 2.21% on the week after rallying some 2 ½% the previous week. The S&P finished down 1.07% on the session. This was in spite of positive earnings reports that came out after the close with Amazon, Juniper Networks, and Starbucks to name a few. While this set the tone for an earlier higher opening, we saw the selling right after the open, pushing the market sharply lower as it unfolded throughout the session. Markets finished near the lows of the session but market sentiment had been destroyed last week with all of the negative reports with IBM, CAT, Microsoft and several others. This negative sentiment is likely to carry through as we begin earnings this week.

S&P 500 for 07/24/2015

2015-05-08.2

Friday’s action pushed the market down below the key support level at the 2080 level. We saw a massive deterioration of the momentum that was built last week as the S&P finished down to 2.21% for the week. I have discussed over the last several weeks that there were no new pattern objectives being built. However, we did see new downside targets generated by the VPM Fibonacci indicator. This suggests that a minimum decline toward the 2046 level with an extreme target zone now of 2014/1993.

Also, the market experienced an outside reversal bar on a weekly basis. This is the first pattern that we’ve seen that has been this negative out of the last seven months of sideways trading. We traded just shy of the all-time high with a high of 2132.82. The market reversed sharply from there and traded all the way down below last week’s low of 2080.03 with a low on Friday of 2077.09. These type of reversals suggest that we are likely to see at least 2 to 3 more weeks of lower prices. It would take a lower close for the week to confirm this pattern. Should this occur, then the objectives that I just mentioned would fulfill the initial decline.

On a larger scale it does appear that the markets are getting closer to generating an ultimate high of the markets. I have discussed many times in the past that there has been very little fundamentals that could generate prices above the 2121 level. This is why we’ve seen a continuation of failures time after time at this level. The VPM database responded to the decline showing a net selling of 1350 symbols which pushed the bullish percent back to the 30% level.

I’ve been discussing for several months on the Market Thunder broadcast that I saw a high coming sometime soon, and possibly in July. This outside reversal may be the trigger point. This suggests that this week is one of more critical weeks that we’ve seen over the past five months since this is the first true outside reversal to occur at these levels. In the past the pattern that has unfolded has been a reversal down but not an outside reversal which has a larger technical connotation to it.

With this being the final week in the month of July, if we close below the 2064.75 this would confirm that a minor top is in place and we would begin a decline toward the 1993/1975 levels with a longer-term expectation of moving down to 1755.

I will go through these patterns and expectations in detail on the Market Thunder show today. This is one of the most significant events that I’ve seen since November 2007 at the last major high.

The market should open higher, with a 60 percent probability to close lower, should the market remain below 2088.95 Level today.  

This Week’s Key Levels

ER 2127.75
R3 2116.40
R2 2103.70
Resistance R1 2091.00
Prior Close   2079.65 -46.99
Support S1 2068.30
S2 2055.60
S3 2042.90
ES 2031.55

Today’s Key Levels

ER 2098.20
R3 2093.85
R2 2088.95
Resistance R1 2084.05
Prior Close   2079.65 -22.50
Support S1 2075.30
S2 2070.40
S3 2065.50
ES 2061.10

Friday, July 24, 2015

Posted by | The Daily | No Comments

2015-07-23.2

US Market fails again… China’s economy continues to signal a contraction…

The Chinese PMI was released and came out below 50 at 48.2 which suggests that the economy is going to continue to contract. The question that remains with China is “how long can the phony market hold up?” China began to finally see some backfilling as it was down overnight about 1.29%.

The declines could start to accelerate as there is a 60% probability that the lows will be challenged. A substantial amount of the market remains frozen so there is still a lot of anxiety around price movement. With the negative fundamental news coming out, this could put further pressure on prices over the next several days. As I’ve mentioned over the last several weeks, I continue to believe that China is a much bigger story than the Greece story as it has faded all the way to the back pages of the newspaper.

This is somewhat of an ominous sign as commodity prices continue to decline and remain under pressure. Overnight several of the international miners have announced massive layoffs and restructuring. They are also warning that they believe that the metals markets will get worse. I suspect this is because of the lack of demand that they are seeing, as well as the continuing strong US dollar.

In the end this is not good for the international community. It suggests that the continuing softness is likely as the world economy struggles.

While yesterday’s jobless report would suggest that things are continuing to do well here in the US, market participants did not buy into the numbers. While it was stated that there was no seasonal adjustments, many believe that there was an aberration due to several contributing outside forces. This is why the markets declined after the release of this report and the selling accelerated with negative earnings reports with Caterpillar leading the way down.

As I mentioned in yesterday’s comments, it was critical that in the next two sessions that the market close over the 2121.95 level. The probability of this occurring now is only 20%. This suggests that we are likely to see lower prices early next week. Also as I discussed in the past couple days, we are continuing to see the same pattern set up. Every time the market moves into the 2120 to the 2130 range, the same characteristics set up each time as the VIX moves down to the low 12s and the VPM three-day indicator moves to the 10.0 level or below which signifies some downside risk is likely. The three-day volatility indicator is currently at 13.3 today.

This is the exact setup that we saw even though yesterday it appeared that there was a good chance for the markets to move higher. They couldn’t move higher once the market sentiment was triggered by both the jobless claims as well as the negative earnings reports.

A close today below the 2100 level will suggest that we will see a decline toward the 2083/2077 levels over the next several sessions. It will take a close today above 2108.80 to negate the downside objective and put the market back into a neutral position.

Due to some of the weakness in the markets, we did see a bid come back into the treasury market. It moved back to the 2.28 level and could continue to decline toward the 2.18/2.16 levels. As I’ve mentioned many times in the past on the Market Thunder show and in commentary, it is likely that 10 year treasuries will remain in a sideways range between the 2.16 and 2.45 levels for it least the next 6 to 8 weeks.

The market is set to open higher this morning due to several key earnings reports that came out after the close. Amazon stocks surged as they posted a profit as analysts were expecting flat to a negative quarter. This propelled the stock some 18% higher. Visa and several others also reported beats which has triggered some optimism as we start today’s session.

The market should open higher, with a 60 percent probability to close lower, should the market remain below 2108.80 level today.

Today’s Key Levels

  RX 2115.45
  R3 2112.30
  R2 2108.80
Resistance R1 2105.30
Prior Close   2102.15 -12.00
Support S1 2099.00
  S2 2095.50
  S3 2092.00
  SX 2088.95

 

 

Thursday, July 23, 2015

Posted by | The Daily | No Comments

2015-07-22.2

Markets holds support… One more run for the roses

The market configuration suggests that we are once again at a critical junction in the pattern as it is necessary for the S&P 500 to close over 2121.95 in the next two sessions. A failure to do so could set up a pattern failure which would indicate that the market would decline to test the 2103.90 level and possibly decline toward the 2093/2083 levels. However, it will take a close over 2121.95 in order to see a retest of the historical highs at 2134.70 which currently has a 40% probability.

Momentum has increased. Even with the downtick yesterday the PPM 1 has ticked up to the .3215 level. This suggests that there is substantial support at yesterday’s low at the 2110.00 level. This indicates that there is only a 30% probability for the market to decline below this level.

The three-day volatility indicator continues to be just above 10 at 10.25. This suggests that there is some downside risk. But with the substantial support at the 2110 level, it doesn’t appear likely that we will see much downside for at least today.

There is roughly 275 earnings releases today. As a results, there are plenty of moving targets to trigger market sentiment either way. However, it does appear that it is more likely to be positive at this point based on the technical considerations.

The market should open flat to higher, with a 60 percent probability to close higher, should the market remain above 2109.00 level today.  

Today’s Key Levels

  RX 2124.40
  R3 2121.95
  R2 2119.30
Resistance R1 2116.60
Prior Close   2114.15-5.06
Support S1 2111.70
  S2 2109.00
  S3 2106.30
  SX 2103.90

 

 

Wednesday, July 22, 2015

Posted by | The Daily | No Comments

2015-07-21.2

Apple disappoints…

As we all know Apple has been one of the premier stocks over the last several years. The stock has been in a sideways range for several months and now is seeing some true volatility come back into the pattern. The reason why I talk about this is because this could be a very significant event. If folks start to not believe in the ability for Apple to maintain itself we could start to see a pretty major tech decline.

While the NASDAQ has been able to eke out new highs over the last several days, it is becoming very vulnerable to forming a major top should we see a sharp reversal over the next 2 to 3 weeks. Not only did Apple miss their earnings but so did Microsoft, Yahoo and several other tech companies putting some downward pressure on the major indices.

While expectations have been that the lowering of earnings would set the tone for many companies to deliver better numbers, so far this week this that has not been the case. The action in IBM and UTX were responsible for nearly half of the losses of the 181 point drop in the Dow Jones industrial average. Even favorite stocks like Tesla, Yahoo, and Verizon all are trading off after the reporting of their earnings.

I mentioned earlier in the week that this week would be about earnings. It certainly is playing out that way so far. The next two sessions will be dominated by nearly 425 companies reporting. This will certainly be the biggest surge we’ve seen this earnings season. Should we start to see a lot of significant misses this could set the tone for more declines.

As I mentioned in yesterday’s commentary, every time that we have gotten above the 2121 level we start to see the same similar activity as there is no real fundamental reason that is likely to stimulate further buying above these levels. Now that we are seeing a failure in the tech market it is likely that we can see market sentiment decline even further.

Connecting the dots in the earning reports that we’ve seen come out yesterday there were two themes that were painfully obvious to investors that triggered midday selling. While most companies delivered in line or better than expected earnings the forward-looking guidance continues to suggest week returns.

The configuration on the S&P 500 suggests that if the 2113.95 level is broken then we will see a further decline toward the 2108/2103 levels. We’ve seen this level tested before and if it should be broken then there would be a further expectation of declines toward the 2093/2083 levels.

On the upside, the key pivot number now is 2129.65. A close above that level would be necessary to reignite a positive tone in the market. Currently there is only a 40% probability for that to occur in the next two sessions. Also, it’s notable to discuss the failure in the momentum that is occurring. The three-day volatility Index continues to be at 10.4 which suggests the market is vulnerable to the downside confirming the negative expectations in this commentary.

I mentioned on Monday’s Market Thunder show that we were in an uptrend level on the short term charts. Yesterday’s action negated the uptrend.

Intermediate charts continue to be lackluster and trendless which tells us nothing about the probabilities for the markets in the upcoming weeks. The only positive trend that remains out there is the secular trends on the monthly graphs which those are fading as well as the months unfold.

The next two sessions are likely to be important for the balance of the week as well as moving into next week. If the continuation of the negative forward-looking guidance continues with many companies then this could set the tone for more disappointment as the earnings season unfolds.

The market should open lower, with a 60 percent probability to close lower, should the market remain below 2127.20 level today.  

Today’s Key Levels

  RX 2129.65
  R3 2127.20
  R2 2124.45
Resistance R1 2121.70
Prior Close   2119.21-9.07
Support S1 2116.75
  S2 2113.95
  S3 2111.25
  SX 2108.80

 

 

Tuesday, July 21, 2015

Posted by | The Daily | No Comments

2015-07-20.2

Volatility contracts…

Today will be one of the larger days of earnings releases with 93 expected including Apple which will be released after the close. We may finally get an insight into what type of sales are going on within the Apple Watch which has been rumored not to be good. Whether or not this holds, the sharp rally from the lows may be ready for a pause as Apple has run from 119 back to 133 in just 10 sessions.

I’ve noticed an interesting phenomenon that continues to happen every time we approach the 2122/2135 levels. Markets start to get narrower ranges as the days unfold after a sharp surge only to fall back into the range again. With the VIX at 12.25 this suggest that the market is very close to a top again. Though there was a slight surge in upward momentum yesterday, it leaves only two sessions for the market to close above 2135 or risk a decline again back toward the 2111/2102 levels.

The three-day volatility indicator is at 10.25. When it drops below 10 then it usually is also another indicator that the market will decline. The key number below the market is the 2117.60 level. Should that level be penetrated then a decline toward the 2104.80/2093.30 levels is likely to unfold.

However, should the market close above the 2136.45 level then we should see it be able to move higher into new historical highs toward the 2148.45 levels. There currently is only a 40% probability for that to occur.

The market should open flat to higher, with a 60 percent probability to close lower, should the market remain below the 2133.65 level today.  

Today’s Key Levels

  RX 2138.15
  R3 2135.45
  R2 2132.40
Resistance R1 2129.35
Prior Close   2126.64 +2.35
Support S1 2123.90
  S2 2120.90
  S3 2117.85
  SX 2115.15

 

 

Monday, July 20, 2015

Posted by | The Daily | No Comments

Market Overview
2014-08-25 YTD

YTD Performance

Earnings! Here we go…

As a new week begins there seems to be a new optimism in the air. We saw the markets close some 75 handles off the lows just nine days ago. Once again we have reached this area and there is substantial amount of information coming to the markets to make a decision whether they can break out of the range that we have been in for six months or whether we fall back into the trading range. The big event this week is that there is some 640 stocks releasing earnings. This is certainly the biggest week so far of the earnings season. This will generate most of this sentiment as at least for now it appears that Europe is on the back burner.

With most of the earnings expectations being lowered, it’s possible there could be enough information coming out this week to push the markets through the highs of 2035 basis the S&P. One of the issues that continues to haunt the market is that every time it gets to the upper end of the range there seems to be so much pushing against it. As I mentioned earlier, it is likely that the earnings reports will give us enough guidance to move higher.

From an economic viewpoint, there are very few reports coming out. On Wednesday there is Existing Home Sales coming out. Then on Thursday, Jobless Claims and Leading Economic Indicators followed by the PMI on Friday. So, the economic news is very light and is not likely to have the effects that the earnings will have.

As far as Greece goes it looks like the Germans are maintaining a fairly hard line and negotiations will start so it will be interesting to see whether or not they can put a real deal together. There’s some expectations out there that the deal has failed even before it has been agreed upon. The next couple weeks will continue to keep some volatility in the markets.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 07/13/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Looking back on last week

Monday

The market began the week on an upbeat note with the S&P 500 registered the bulk of its 23 point gain shortly after the opening bell. The market sought a last hour surge to push it to showing a gain of 1.11%. All of this was based upon the weekend negotiations in Greece that showed that they had a deal to negotiate a deal. While there’s still no deal, market participants took this as a sign that we are moving forward and there was a stampede into the markets. All 10 sectors ended in the green with five of the groups adding more than 1%. The tech sector lead the way up 1.6% on the session.

Tuesday

Tuesday’s action continued the advance for the fourth consecutive day with the S&P climbing up 0.45%. The market reclaimed the 2100 area at the beginning of the session and continued to hold those advances throughout the day with once again the NASDAQ composite leading the way up 0.7%. There was some resistance midsession after an announcement of a nuclear deal with Iran put some temporary pressure on crude oil that then rebounded later as fears subsided quickly. With the rebound in crude oil, the energy sector rebounded as well showing a gain of 0.8%. This helped to keep the bid strong throughout the session in the overall market.

Wednesday

Finally after four days of advancing the markets hesitated as the S&P closed slightly lower, showing a decline of 0.07%. Most of the session the market was able to trade in positive territory but faded in the last two hours finishing just lower on the session. Part of the upward bias for most of the session was due to the earnings reports of the major banks which showed better-than-expected performance. This helped market participants to keep a positive view on the market.

Thursday

The market resumed the enthusiasm on Thursday as it opened higher and was higher for the balance of the session with the S&P finishing up 0.80%. The big earnings news that helped to improve market sentiment was Intel’s reporting better-than-expected earnings as well as Netflix which continued to surge keeping the NASDAQ strong. Also helping market sentiment was the Greek parliament voted in favor of the austerity measures and other elements of the deal made over the weekend helping to bring in more confidence that there will be a deal. This helped the Greeks to get their banks opened and get some of the ELA funds to keep the basic capital controls in place where Greeks are only allowed the withdraw €60 a day.

Friday

Markets opened slightly lower and traded in a sideways range for most of the day with the S&P finishing up 0.11% for the day and 2.41% for the week. This was certainly one of the strongest weeks that we’ve seen for a while. There was a fair amount of continuation of short covering throughout the week which was featured on the biggest days on Monday and Thursday. While there were some new buying, market sentiment was changed primarily by the deal in Greece which dominated the discussions. The earnings beat by Google sent the stock up 16.3% to a new record high which helped market sentiment and added stability. This kept the technology sector leading the way again up 1.8% which was the only group that spent the entire session in positive territory. The only other laggings sectors were financials and consumer discretionary which were down just slightly on the session by 0.2%.

S&P 500 for 07/17/2015

2015-05-08.2

Friday’s action traded in a sideways range for most of the session finishing just higher at the 2126.64 level. The configuration suggests that the market is completing an eight day sequence which should result in a 3 to 5 day decline. The key level on the upside today is 2129.35. A penetration will suggest a move toward the 2135.45/2138.15 levels.

The VIX is trading at 11.95. This is the lowest level it’s been since July 2014. This suggests that there is a strong possibility that the market will not be able to move through the upper end of the range over the next 2 to 3 sessions. It also suggests that more of the same is likely. We could remain in this trading range between the 2132/2080 levels.

The patterns that are unfolding are not generating any new upward objectives at this time. It appears it will take a close over 2136 to trigger some new objectives. We are also not seeing any substantial acceleration in the trends at this point.

We will discuss the activity in the database on Market Thunder as we did see around 2100 new buys but they were in areas that aren’t likely to affect many portfolios. The bullish percent in the database has come up from around 32% up to 37% and still substantially below the 42% level needed to signal the probability that a new uptrend could form from here.

The secular trends continue to drive these markets higher as they remain in a solid uptrend even though the intermediate and short term charts are not currently indicating any trends. This has been the case throughout several other cycles that we’ve seen over the last 2 to 3 years.

The market should open flat to higher, with a 60 percent probability to close higher, should the market remain above 2120.90 the 2130.85 level today.  

 

This Week’s Key Levels

ER 2170.33
R3 2159.95
R2 2148.45
Resistance R1 2136.95
Prior Close   2126.64 +50.02
Support S1 2116.35
S2 2104.80
S3 2093.30
ES 2083.00

Today’s Key Levels

ER 2138.15
R3 2135.45
R2 2132.40
Resistance R1 2129.35
Prior Close   2126.64 +2.35
Support S1 2123.90
S2 2120.90
S3 2117.85
ES 2115.15

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