Market Alert - The Close

Stocks caught a bid from the start of the pre-market session and held the bid to the open. Stocks rallied through the first half hour. That was, however, the peak for the session. Stocks slid lower into early afternoon with 3 down legs. A bounce starting early afternoon carried stocks off the lows to the start of the last hour. The last hour stocks faded but managed to hold off the earlier session lows. That left a mixed close with the small and midcaps doing the work for the session.

SP500 -0.04, -0.001%
DJ30 -9.54, -0.18%
DJ30 -3.63, -0.02%
SP400 0.75%
RUTX 0.63%
SOX 0.19%

VOLUME: NYSE -61%, NASDAQ -35%. Remarkable drops but post-expiration.

A/D: NYSE 2.1:1, NASDAQ 1.5:1.

There was little news on the session. Homebuilders once again show a lot of optimism for the housing market. That means the housing market is done for now.

China reported housing price increases that were "quite hard to believe" as many commentators noted. For good measure China devalued the yuan a good chunk.

Oil: Venezuela, home of the $150/dozen egg special, commented that it sure looked as if the OPEC and non-OPEC members were going to come to a deal on production. That these comments even made the headlines outside of the comics section is absurd. What number of false flag OPEC agreement stories have come from Venezuela? Three I can recall offhand. That poor country is so desperate it has to try whatever it can to help -- except, of course, free market policies that would actually help it. No, in a very Mao-like response when Mao was confronted with the starvation deaths of 60M Chinese citizens, keep those communist policies working. With the Venezuelan president doubling, tripling, quadrupling down on his socialist policies and citizens roaming the streets eating garbage, it looks as if it will take an all out revolution. But, I digress yet again.

Oh, oil did finish higher by 0.28 at 43.90, but it was well off the intraday high.

All of this news trades in the vacuum of the Wednesday FOMC rate decision, now sporting a solid 9% chance of a September rate hike.

Looking at the index charts, however, for the most part they look as if they are deathly afraid the FOMC may indeed just 'surprise' the market and hike rates.

CHARTS

SP500 and DJ30 both look very shaky. Sure they are not dropping like stones but their patterns would allow that. But for the FOMC decision Wednesday AND a market that currently lives and dies by the Fed's actions, we would be looking at seriously shorting these two. We have downside plays on them and they are right at the entry point, but with the FOMC on Wednesday, you are betting on Yellen to pull a surprise in order for the downside play to work. It might indeed be worth putting a little bit of money to work ahead of the FOMC decision on those downside plays, but it would also be money that you could very easily never see again when the 'one and done' FOMC decides to do nothing (that 91% chance category). That leaves SP500 and DJ30 grubbing along laterally just below the 50 day MA's after that sharp break lower 2 Fridays back. Primed to drop for sure, but if the Fed does nothing they are not so far down as to be damaged goods.

NASDAQ: Gapped higher, rallied close to the early September all-time high. Then NASDAQ reversed to negative. Did hold the 10 day EMA on the low and rebounded modestly. No serious damage done and it likely would not take much to continue NASDAQ back upside, but the point is that NASDAQ rallied back to the prior peak (or darn close) and then reversed quickly off of that initial move higher. There was not a lot of volume so it was not so much the sellers swarming but bids just dying off. As such, it was not that negative.

SOX: Same action as NASDAQ, rallying up to and indeed through the 9/2 post-2000 high. SOX could not hold the move, however, fading back to close just positive. A move higher ran out of gas and faded most of that move. Not a lot of volume overall so as with NASDAQ there was no big reversal move; just a drop off in bids that you often see with indecision about an upcoming event. That said, MACD is lower as SOX tests the prior highs and fades. Potential double top here but right now, just potential.

RUTX: Still rather solid. Closed off its intraday high but held decently enough to its pattern that saw a test through last Wednesday then a bounce higher. Rallied up the 10 day EMA, fell to the 50 day MA in a test, rebounding. That is not bad and indeed quite good action.

SP400: The midcaps gapped upside then rallied to the 50 day SMA. That was the peak. SP400 faded off of that move, losing just 8.5 points off the high as it gained 11.4 points on the session. That move higher tapped the 50 day EMA on the high and then retreated. Looks a lot like a bear flag at this juncture.


LEADERSHIP

Big Names: Overall still good, just a bit off on the session. AAPL finally sold back some after its spurt higher. FB gapped higher, closed lower, still holding the 10 day EMA trend. AMZN gapped higher, faded to a modest loss on low volume, also holding over the 10 day EMA. NFLX gapped higher but reversed to give up the 200 day SMA again. GOOG gapped and faded as well, posting a modest loss but still in a good lateral pattern. MSFT rallied higher as well then flipped and faded to close at the 50 day MA.

Chips: AAPL chips took a second session off, e.g. SWKS, AVGO, but not in bad shape at all. XLNX and SLAB, both leaders that peaked in early September, continue to struggle in a weeklong bear flag. NVDA moved to a new high Monday though it gave back most of the move with a big tombstone doji. MRVL held a modest gain while LSCC tried higher but reversed. Hey, it now may put in a nice test.

Biotech: Picked up some IDRA as it continued the Friday surge higher. AGEN rallied higher, faded. EXAS continued upside with a solid move. ACAD moved higher again. Overall a nice group.

Financial: Modest moves higher with many finishing off the session high, e.g. C, JPM. MS continues a nice flag along the 10 day EMA while GS posts a flag as well.

Oil: Oil was higher but the oil stocks were still somewhat mixed. APC was flat after starting higher. CWEI posted a small gain as it too started higher but could not make the move stick. Small names struggling e.g. GPOR.

Retail: Testing a bit. JWN is putting in a nice 2-day test of the Thursday upside break. RH is testing the 20 day EMA. Like ROST's break higher off the 50 day MA test. LULU looks as if it is trying to bounce off the 200 day SMA dive.

Metals: Enjoyed a solid session. AKS gapped higher off the 200 day SMA. SID gapped upside as did CENX.


We picked up some IDLA stock positions as well as some puts on CERN. Closed STLD and RHT. RUTX looks solid enough. NASDAQ and SOX are still high in their ranges, but have had a bit of trouble testing that prior high again, fading off that peak. SP500 and DJ30 do not look so good. That said, as noted last week, all things are possible with a compliant Fed.

Have a great evening!


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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