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US Stock Service
Daily Hotline
 
12 November 2014    By John Gray
Market Action
  • Even with only tiny gains the major indexes all set further highs Tuesday. It was a quiet Veteran's Day session and the closed bond market contributed to a further volume drop. The averages held in tight ranges all day with some further chart advances on the highs.
  • Another homebuilder reported good news providing a further boost to that sector. The housing market has certainly lagged during the US economic recovery so if the latest positive results gain traction it will add a much needed element to increase the growth potential.
  • Consumer stocks will gain attention this week. Traders are looking for signals of higher spending from retailers Macy's, JC Penney, Kohls and Wal-Mart which will report today and Thursday.
  • Overall trading has calmed down after a wild Oct. Index charts are all bullish with the primary averages all at highs. Earnings have broadly beat estimates but with the reports ending some new push higher is needed.
  • Indicators are also bullish. Some initial overbought readings are shown but the main charts are not there yet, allowing for more gains. The stock breakout activity remains strong.
  • The weekly Sentiment had more optimism as funds return to equities. That is again becoming a worry as fully invested conditions could be signaled before too long.
Market Drivers
  • DR Horton followed Toll Brothers with positive results and guidance. Nationwide demand for homes is increasing as rates stabilize. Home starts rose 6.3% in Sep after falling 14.4% in Aug, according to the Commerce Dept.
  • The US$ hit a seven-year high against the Yen as that nation works on a new stimulus plan to avoid new deflation. The Nikkei rallied sharply as the Yen fell. The Japanese government will likely delay a series of planned sales tax increases as well.
  • The Dallas and Philadelphia regional Fed Heads both said rates were too low, and that delaying hikes could send the US back into recession.
Technical Outlook
  • The closed bond market Tuesday contributed to another quiet November session. Modest highs continue for the main averages, either all-time for the S&P 500 and DJ I or 14 year records for the NASDAQ. The short term action is only partially overbought while medium term oscillator gains continue. They suggest a market top is still to come. While a modest near term pullback would not surprise us the general tone should be up for the rest of this year. That is signaled by the steadily improving bullish % charts.
Portfolios
  • Large Caps 90% invested, Mid Caps 70% and Small Caps 80%.
  • Bear Portfolio is 0% short.
 Indicators
Short Term Medium Term
II Short Term Composite Indicator
70.7% (n/c%)
Bull Confirmed
NYSE %10 Week Moving Average
62.72% (+0.24)
Bull Confirmed
II Short Term Sector Sum
-7.50      (n/c)
Bullish
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 20 -20
Bears 1 -7
NYSE Bullish % Indicator
52.09% (+0.42%)
Bear Correction
NYSE %30 Week Moving Average
58.08% (+0.05)
Bull Confirmed
II Long Term Composite Indicator
+135.50    (weekly)
Bullish
  • The short term comp and % 10-wk MA charts were again unchanged. Some initial overbought readings have been achieved.
  • The stock breakout slowed but the ratio held strong.
  • The NYSE bullish % chart moved up, ending near a bullish low pole formation at X 54%.
  • The weekly money flow moved to a confirming new high.

Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 17,614.9 71.4m +1.16 +0.0% Bull Up 30 Oct 2014 15,800.00 15340.7/15855.1
S&P 500 Index 2,039.68 459.6m +1.42 +0.1% Bull Up 28 Oct 2014 1,820.00 1820.66/2001.01
NASDAQ Comp. 4,660.56 476.7m +8.94 +0.2% Bull Up 20 Oct 2014 4,100.00 3946.03/4116.6
NASDAQ 100 4,187.16 154.3m +11.22 +0.3% Bull Up 28 Oct 2014 3,700.00 3489.6/3700.22
S&P Midcap 400 1,435.05 116.3m +0.25 +0.0% Bull Up 17 Oct 2014 1,405.00
Russell 2000 Index 1,179.96 294.9m +0.39 +0.0% Bull Up 16 Oct 2014 1,100.00
Closing prices through Tuesday November 11, 2014
Chart Activity - Broad Index Moves 


Small advances over the final minutes Tuesday caused fractional further highs for the DJ I, S&P 500 and S&P 100 and also 14 year records for the NASDAQ Comp and 100. However the entire session held in narrow ranges with most daily differences less than 0.1%. The advance-decline breadth was also nearly flat and volume fell again. After the sharp rally late Oct investors appear reluctant to make further bets on the next direction for stocks. Bonds markets were closed Monday.

The modest session highs did advance some charts. Long vertical rallies and further highs were shown for the S&P 500 (21-boxes up), S&P 100 (17), NASDAQ Comp (27) and NASDAQ 100 (25). The Value Line Comp (25) and NYSE Comp (20) ended three and four boxes below their highs. The Russell 2000 also advanced but is relatively further below its 2014 highs from Mar and Jul. All index charts are bullish.

Chart Activity - Sector Indexes 

The Dow Transports ended down 6 pts but intraday it traded above 9100 for the first time ever! The Airline XAL index also set a new record. The S&P 500 Energy reversed down but the Industrials and Health Care sectors moved up to highs. The Biotech BTK and Drug DRG charts reversed up, with a trading buy formation and move above a prior top for the latter. The MS High Tech MSH chart ended two-boxes below its high.

Chart Activity - Commodities 

Gold had another swing, this time up 14 to $1165. The chart was steady with its Friday to X $1170, from a 4˝ year low at O $1140. A move to $1200 in needed for a bullish low pole. Gold did have a selling climax last week that suggested it may occur. More than 20 gold stocks also had selling climaxes. The gold indexes [XAU & HUI] both reversed up Tuesday, continuing their base forming up and down trading. They held Friday's new trading buy signals. The Precious Metals bullish % had a bear confirmed status shift on 30-Sep and moved deeper into oversold territory last Wednesday at O 4%. Its reading is above 5%.

Crude oil remained around $77, also without any new chart move. It held its 5-Nov upturn to X $79, from its previous day low at O $76. That was a low since Oct-11 when oil fell to $75. The chart needs $81 for a positive low pole formation status shift. The energy indexes [OSX & XOI] had new downturns Tuesday. They also show work on bases and hold positive formations.

 

 

Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 62.72 +0.24 Bull Confirmed 23 Oct 2014
Nasdaq Composite 61.97 -0.56 Bull Confirmed 20 Oct 2014
S&P 500 81.73 +0.61 Bull Confirmed 23 Oct 2014
Nasdaq 100 82.69 +0.96 Bull Confirmed 23 Oct 2014
Option Stocks 73.1 -0.02 Bull Confirmed 23 Oct 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 58.08 +0.05 Bull Confirmed 21 Oct 2014
Nasdaq Composite 56.49 -0.05 Bull Alert 20 Oct 2014
S&P 500 78.31 +0.20 Bull Confirmed 24 Oct 2014
Nasdaq 100 79.81 n/c Bull Confirmed 28 Oct 2014
Option Stocks 66.37 +0.07 Bull Confirmed 21 Oct 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 52.09 +0.42 Bear Correction 29 Oct 2014
Nasdaq Composite 51.33 +0.26 Bear Correction 29 Oct 2014
S&P 500 67.81 +0.61 Bear Correction 23 Oct 2014
Nasdaq 100 63.11 +0.97 Bear Correction 21 Oct 2014
Option Stocks 55.15 +0.45 Bear Correction 28 Oct 2014
Breadth Indicators oscillate between overbought highs, at 70% and above, and oversold lows, at 30% or lower.
The % 10-week moving average is short term, % 30-week moving average intermediate, and the bullish %s are longer term.

Short-term:

Yesterday ended with some of the smallest daily differences for the moving average breadth values in memory. They had a small upside bias but failed to move a single chart. All point up with bullish formations and overall they remain near their 31-Oct highs. Three of the short term % 10-wk MA charts are overbought with the S&P 500 two-boxes below its Jun-14 highs at X 86%. The NYSE and NASDAQ hold below 70% but both have penetrated their downtrend line resistance. Each was last overbought early Jul. All five charts have buy signals from multiyear lows in Oct. That suggested strong rallies would follow.

Medium-term:

The % 30-wk MA charts were also steady after some ‘catch-up' on Monday. All five also show rallies from mid-Oct levels that were the worst since late 2011. The S&P 500 and NASDAQ 100 were the first to reach overbought levels. The NASDAQ Comp needs X 60% for a bull confirmed signal that would fulfill its current low pole prediction.

Long-term:

Despite the flat index trading the positive stock breakout data continued, albeit at a slower pace. Positive changes were shown for all five broad area bullish %s values with an advance on the NYSE chart. It ended just below the X 54% reading it needs to join the NASDAQ Comp and S&P 500 with a low pole formation retracement of its last vertical decline. That would predict more gains.

Current outlook:

The Nov data stalling continues for the moving average breadth indicators. Bullish status is clear but some overbought readings have also been achieved. A slowdown for momentum is typical as prior top levels are approached. They are still not at hand, especially for the two largest areas (NYSE and NASDAQ); suggesting higher markets should still occur. The broad area bullish %'s chart reversals up and new low poles also point to a larger overall move, likely extending at least to the end of the year.


 

Indicators

Close Change Chart Direction Chart Status Chart Action
Short term Composite Indicator 70.7 n/c Rising Bullish None
NYSE High-Low Index 81.76 -0.19 Rising Bullish None
Nasdaq High-Low Index 71.43 -0.48 Rising Bullish None
NYSE On Balance Volume (by DJIA) 285,804 +614.00 Rising Bullish HIgher
NYSE On Balance Volume (by breadth) 542,995 +615.00 Rising Bullish Higher
Nasdaq on Balance Volume by Composite 502.68 -1.63 Falling Bullish None
Nasdaq on Balance Volume by Breadth 40.74 -1.64 Rising Bullish None
NYSE Cumulative Advance/Decline 410,325 +68.00 Rising Bullish None
NYSE Money Flow Index 50,121 +815.56 Rising Bullish HIgher

  • The near flat Tuesday close left most daily indicator charts unchanged again. Bullish status is intact and still only some initial overbought readings have been achieved.
  • The daily short term composite chart hit X 72% on 3-Nov and remains there, consolidating its rally from lows. It shows the best level since the early Jul overbought peak at X 76%. It has reached even higher levels historically but watch for a downturn to signal near term weakness.
  • The medium term daily high low ratio charts were also steady. On Monday the NASDAQ entered overbought territory for bull confirmed status. It is fractionally below its last peak at X 72%. The NYSE is already overbought but it doesn't top out until its hits 90%.
  • The two daily NYSE on-balance-volume charts rallied with another high for the DJ I. All four charts hold buy signals.
  • The weekly money flow (computed after Tuesday's close) reading moved the chart up, exceeding its Sep high for a new record.

Industry Bullish %s and Sector Sum
Daily Industry Groups Bullish %s: The daily stock breakout activity slowed Tuesday with the 20 new buy signals just half of the Monday count. New sells fell to just 1, from 8 Monday, so the breakout ratio actually improved. There were 6 charts higher amongst the 46 broad area industry groups bullish %s, and no declines for the 4th day. There were no reversals or status shifts, or change for the sector sum reading.

The sector sum holds short and long term bullish status. The Bell Curve shows a major recovery from the mid-Oct pattern that was skewed well to the left side of 50%. We noted that was the area attractive for longs. The sector sum indicator shifted short term bullish on 21-Oct, ending the negative status from 11-Jul. It also has a long term P&F buy signal at -15.0 barely a week after achieving a bullish low pole at -27.0.

The sector sum value held at -7.5. It is rallying from its Oct low at -40.0. That reading that was down to historic low levels.

The sector sum short term status is determined by its chart direction, along with the direction of the groups' cumulative advance decline line and the last three day's direction on the NYSE bullish %. The sector sum and cum A-D charts reversed up 21-Oct. The NYSE bullish % already had three up days so that completed the positive shift. The rally to -15.0 showed a buy signal after a low pole formation to confirm its long term bullish status.

Sector Bullish% P&F Charts Higher:  
 

Sector
Bullish %
Comment
Biotech
40%
Holds bull alert.
Buildings
40%
Holds bull alert.
Internet
38%
Holds bull alert.
Leisure
44%
Holds bull alert.
Machinery/ Tools
46%
Holds bull alert.
Software
54%
Holds bear correction.


Sector Sum Indicator:

                      
Short term P&F chart status
 
Bullish
Value
    - 7.5
Change yesterday
     0.0
Last reversal
21-Oct up to -37.0
Short term stop
     -11.0
Long Term P&F chart status
Bullish
Last long term signal
P&F chart low pole at -27.0 on 24-Oct
Long term P&F stop loss
Potential bearish at -26.0 (high pole)
Last major resistance (& date)
+45.0 (Feb 12 highs)
Last major support (& date)
-46.5 (Sep 11 lows)

 

Sector P&F chart direction:
 

Total number of sectors
46
Last signal UP, # of rising groups
 36
Trigger for bearish  status   
 33
Sector charts overbought
3
Sectors charts oversold
8








Stock Action

The NYSE bullish % value gained 0.42% yesterday. Its short term momentum is now positive and will remain so until there are three straight falling sessions. It closed at 52.09%, moving up to X 52% on its chart. The NASDAQ Comp bullish % holds at X 50% from last Wednesday. Both show rallies from 3-year lows.

Trading activity fell to well below above average levels with 364 stocks moving on their P&F charts. There were 458 changes the prior session. Volume fell 10.0% on the NYSE and 9.9% for the NASDAQ. Large traders remained on sidelines.

 

Sector Action

The Biomedics Genetics Bullish % was the second strongest area yesterday, up by 2.47%. The current status is “bull alert” and that will improve to “bull confirmed” on a move to 46%, a move which is likely. Beyond that a test of falling trendline resistance at 52% would be expected. Longs in trending stocks are worth considering.
 
There were three buy signals Tuesday: Achillion Pharmaceuticals (ACHN), Alnylam Pharmaceuticals (ALNY) and Progenics Pharmaceuticals (PGNX). PGNX was the only stock to hold its gains on the close, up by 5.2%. That chart advanced two boxes as it reasserts its move off the end of 2012 low. New recovery highs anticipated, above the peak from January. Beyond that we would watch for a move to the July 2012 peak around $11.
 
 
 
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