Saturday, April 21, 2018

The Daily, Part 1 of 3, 4-21-18

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4/21/2018 Investment House Daily
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The REPORT SCHEDULE is as follows:

Market Summary Video, Plays and Play Videos, and Play Table with play
annotations will issue Wednesday, Weekend.

Monday a Market Summary video, new plays, play table annotations.

Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play table.

Access to all current videos will remain assessable each day using the play
links in the reports.

If any market circumstances arise where we see additional plays we want to
prepare for the next session, we will of course issue those plays regardless
of the day of the week.


MARKET SUMMARY

- Expiration sees a second day of selling off the Wednesday recovery peak.
- Volume mixed, not that high (surprise) as stocks sell.
- A lot of positive news in the world, but you would not know it.
- Will the bond yield curve invert? Does it matter?
- Still so many good patterns to drive the market upside. Can they do it
sans chips?
- Looking for more upside positions as earnings ramps up, stocks continue to
set up.

Not a banner expiration for the stock market, and with the worry about a 3%
10 year bond, a 2 year/10 year 40ish basis point yield curve, and weekend
event/news risk, I suppose not that surprising. There was little
volatility -- the action was all to the downside from a soft open. A couple
of bounce attempts were too thinly traded to succeed and by the close the
indices were all lower with the large cap indices back below the 50 day
MA's, now back at the 20 day EMA.

SP500 -22.99, -0.85%
NASDAQ -91.93, -1.27%
DJ30 201.95, -0.82%
SP400 -0.69%
RUTX -0.62%
SOX -1.17%
NASDAQ 10 -1.58%

VOLUME: NYSE +21% (900M); NASDAQ -5%. Some big volume in some NYSE listed
names, e.g. SKX helped push NYSE volume above average for the first session
in 7 sessions. Of course, on the downside. It was, however, expiration so
all volume is suspect.

ADVANCE/DECLINE: NYSE -2.2:1, NASDAQ -1.7:1. Still not disproportionate
and not as bad as the selling percentages would indicate.

After hitting a higher recovery high on this bounce Wednesday, stocks
struggled into the weekend. Chips didn't help, AAPL didn't help, but oil
was good, software as well. Many stocks held up very well even after 2 days
of selling. I know, I have said many leaders are holding up well even in
the weakness. I am still saying it after Friday. RHT, WDAY, FFIV, STX,
VMW, NFLX, HLF, NTNX -- many look good still, trying to offset LRCX and the
chips' drop on the TSMC guidance and all of those worries about iPhone sales
and thus potentially less demand for smartphone chips. Friday was not the
day to pull that off but most still look quite good as of the close with a
lot of important earnings to come.

Ah yes, the earnings season. It is the dominant factor though there is a
lot of talk about a recession with the bond yield curve narrowing. The 2
year and 10 year treasuries have just 40+ basis points between them and the
gap is narrowing. An inversion (2 year yield greater than 10 year yield)
historically signals a coming recession. The Fed has so intervened in the
bond market, however, some argue that the relationship does not hold the
same meaning as in the past. The level of interference/manipulation is
indeed high, but it was during the Greenspan years as well, and still bond
signals were accurate. Recall Greenspan's 'conundrum' comment to Congress
as to why yields remained low despite the Fed hiking the short end. He
opined it was due to heavy foreign buying keeping yields lower. That did
not prevent the subsequent collapse, however; the bond market signals, even
with intervention, still worked well.

Thus, bonds are likely a drag, but the market is set to receive some key
earnings this week that can definitely work a market rebound bid,
particularly with many well-positioned stocks even after Thursday and
Friday. Holding during that pullback shows owners staying with those
stocks, and good earnings brings in more bids.

Remember, we are playing a move to near the prior highs, not a new breakout,
at least not yet. While a possible recession is a huge factor, it is not so
huge near term. The curve has not inverted, stocks are not selling off
wholesale yet. Some good earnings and a rally back to the prior highs is
not far-fetched and is rather normal action.

Not saying that it has to happen. More news can hit that undercuts the
move, good patterns or no. I mean, there is a HISTORIC agreement with North
Korea, one that would be on the front page of every newspaper, the lead
story on every website, but for the mainstream media does not want to give
it much play. They rather lead with the bogus DNC lawsuit against Russia,
Wikileaks, and Trump for harming Clinton's election campaign. The only
thing that harmed the Clinton campaign was Clinton and her advisors who
ignored a big part of the country. That is what many of my left leaning
contacts believe and they are very much pro-democrat. I of course am not
democrat, not republican, but a true conservative; there is no room for me
in EITHER party. Ironically, I find that far left people who truly believe
in the Constitution and its protections can find common ground with me often
more times than republicans or mainstream democrats. Oh well.

The point: there are serious moves in the world to the positive. Not just
NKorea, but Saudi Arabia moving to modernize and aligning with the US and
Israel. These are huge shifts in the dynamics of the world for the good,
yet our headlines trumpet lawsuits that even left leaning pundits and
analysts say are BS, discuss Russia as if it is something other than a
post-communist society that never embraced capitalism and thus remains with
a puny economy that dictates the Cold War antics we see today in order to
project super power status and thus an attempt to remain relevant. Texas
alone could outmuscle Russia economically, and that has to gall Putin, the
little dictator who thinks he could.

Okay, so if the market can see the good through the BS smokescreen, it has
still room to rally and the patterns to carry it. They are still there as
they were before the chips fell. Chips are very big for the market, and if
we were playing for a market breakout this selloff be a major concern
cutting against that kind of move. That is not the case, and therefore with
the good patterns and the vast majority of our positions holding or moving
very well, we still play for that same objective heading into next week.

THE MARKET

CHARTS

A deeper test by the large cap indices broke the 50 day MA.

SP500: After rebound highs were hit Wednesday, SP500 faded into Friday,
ending at the 20 day EMA on the close. Volume rose above average, but with
expiration that must be discounted. SP500 is in a 2-day pullback to the 20
day MA and the early April recovery high and the late February low. Good
place to hold and indeed this is where SP500 needs to continue the rebound.

DJ30: Very similar to SP500, fading to the 20 day EMA and the late February
low on the Friday close as volume moved above average. Still very well
positioned to continue higher.

NASDAQ: Same story, recovery high and doji Wednesday followed by the
Thursday/Friday fade. Closed at the 20 day EMA just below the 50 day EMA.
Volume was lower and still below average on expiration; wow, no dumping for
sure. Not bad action considering the semiconductors had such a lousy end of
the week.

SOX: Speaking of SOX, it was not good. Thursday a gap below the 50 day
MA's and the lower channel trendline. An ugly week for true. That said,
after the nice February to March run, SOX sold as did the rest of the
indices. In early April it bottomed at the 78% Fibonacci retracement of
that rally. Then a bounce, and now last week's drop to match the prior low.
Get where I am heading? Potential double bottom at the 78% Fibonacci
retracement the same as SP500, DJ30. Those two bounced, moved higher, and
are testing that initial move. We will see if SOX can do the same.

SP400: Same action, higher recovery high Wednesday, testing back through
Friday. Nice action with a very good-looking pullback to the 10 day EMA,
filling the gap higher Tuesday. With the gap filled, SP400 will be ready to
move higher. Midcaps along with RUTX led the last move higher, and it looks
as if SP400 is in position to make the new move higher.

RUTX: Solid move up into Wednesday, then threw a tombstone doji. That led
to the Thursday/Friday selling to tap at the 10 day EMA on the Friday low.
Strong, market-leading move, not a pretty significant but normal test toward
the 10 day EMA, just a few points lower than the Friday close. Looking for
RUTX to fade some more early week, perhaps undercut the 10 day, show a doji
with tail, then rebound. That fits with a continuation of the upside move.


LEADERSHIP

FAANG: AAPL dropped to the 200 day SMA Friday on big volume. AMZN dropped
Friday after gapping upside Wednesday and Thursday. A bit of a fade, lower
volume on the drop. FB is working laterally, may try something but may need
more work. NFLX is testing the earnings gap and run higher. Will be a new
entry as it moves back upside. GOOG is working laterally mid-range and is
setting up a new move. Earnings are early week, and entering ahead of time
may not be a great move (LRCX versus NFLX) but it is setting up nicely.

Oil: A very good week though most were down a bit Friday. DO, HAL, APC
posted great moves, needed a rest. Others are setting up after moves, e.g.
CVX. MRO looks very good. Nice group that, after months, is actually
coming through on its patterns.

Semiconductors: SOX at the 78% Fibonacci retracement, so perhaps some of
these can now bounce after a rough week. LRCX is at the 61% Fibonacci
retracement, its second visit; much like SOX, SP500, DJ30. MU trying to
hold near the 50 day MA's, and is right at the November high. Would prefer
to see a hold here given our current position. SLAB was hammered, XLNX,
SWKS -- AAPL did not help these stocks at all.

Software: Faded Friday, but a good week. CRM was off a bit on low trade
Friday. VMW is testing its gaps higher and despite the move can go higher,
and a test is an entry opportunity. FFIV is also making a good test. GLUU
enjoyed a great week. MSFT is testing back after bumping the March peak.

Drugs/Biotech: Continues to be a solid group though diverse. IMMU is in a
nice 1-2-3 test. CERS looked very good though Friday it dropped back to the
10 day MA. AMED continues upside with a nice move. UNH is in a flag test
of the Tuesday upside gap.

Retail: Good moves midweek but fading to end the week. BBY gapped upside
Wednesday, but then faded to close the gap by Friday. HD surged but it too
faded into Friday, testing the move. Still looks very good. TSCO tried to
make the move Friday, but gave it back. Still looks good. COST is in an
excellent breakout test, forming a handle. M starting higher in a nice
pattern. RH still looks good.

MISC: SQ started breaking higher last week, struggled Friday, still looks
good. Testing a good break higher. Works. FCX broke higher, tested a bit
Friday.

Metals: FCX enjoyed a good week. Steel is interesting, possibly setting
up, e.g. AKS, STLD, SCHN.


MARKET STATS

DJ30
Stats: -201.95 points (-0.82%) to close at 24462.94

Nasdaq
Stats: -91.93 points (-1.27%) to close at 7146.13
Volume: 1.88B (-4.57%)

Up Volume: 525.97M (+1.6M)
Down Volume: 1.34B (-80M)

A/D and Hi/Lo: Decliners led 1.68 to 1
Previous Session: Decliners led 1.71 to 1

New Highs: 54 (-19)
New Lows: 63 (+14)

S&P
Stats: -22.99 points (-0.85%) to close at 2670.14
NYSE Volume: 900M (+20.47%)

A/D and Hi/Lo: Decliners led 2 to 1
Previous Session: Decliners led 2.22 to 1

New Highs: 50 (-28)
New Lows: 103 (+8)


SENTIMENT INDICATORS

VIX: 16.88; +0.92
VXN: 21.63; +1.47
VXO: 16.72; +1.46

Put/Call Ratio (CBOE): 0.98; +0.01


Bulls and Bears:

Bulls rose ever so slightly while bears continued to rise. Finally seeing
more movement upside in bears. That is the more significant of the two
because bears have been so low for so long.

Bulls: 43.6 versus 42.2

Bears: 19.8 versus 18.6

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: 43.6 versus 42.2
42.2 versus 49.5 versus 55.5 versus 54.9 versus 48.6 versus 48.1 versus 48.5
versus 41.9 versus 54.4 versus 66.00 versus 64.7 versus 66.7 versus 64.4
versus 61.9 versus 64.1 versus 64.2 versus 62.3 versus 61.5 versus 63.5
versus 64.4 versus 63.5 versus 62.3 versus 60.6 versus 60.4 versus 57.5
versus 54.3 versus 50.5 versus 47.1 versus 49.5 versus 49.5 versus 48.1
versus 50.5 versus 57.5 versus 60.0 versus 60.2 versus 57.8 versus 50.0
versus 52.5 versus 54.9 versus 51.5 versus 50.00 versus 55.8 versus 50.00
versus 51.9 versus 58.1 versus 58.7 versus 58.5 versus 54.7 versus 51.9
versus 56.3 versus 55.8 versus 49.5

Bears: 19.8 versus 18.6
18.6 versus 17.5 versus 16.8 versus 15.7 versus 15.5 versus 14.4 versus 14.6
versus 14.4 versus 15.5 versus 12.6 versus 12.8 versus 12.7 versus 13.5
versus 15.2 versus 15.1 versus 15.2 versus 15.1 versus 15.1 versus 15.4
versus 15.4 versus 14.4 versus 14.4 versus 15.1 versus 15.2 versus 15.1
versus 17.0 versus 17.1 versus 19.0 versus 20.2


OTHER MARKETS

Bonds: 2.96% versus 2.914%. Bonds broke lower Thursday, gapping below the
50 day MA. Friday they continued lower. A breakdown and 3+% 10 year yields
look viable.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.914%
versus 2.867% versus 2.83% versus 2.829 versus 2.825% versus 2.781% versus
2.801% versus 2.805% versus 2.775% versus 2.812% versus 2.806% versus 2.781%
versus 2.739% versus 2.714% versus 2.781% versus 2.775% versus 2.854% versus
2.813% versus 2.814% versus 2.881% versus 2.90% versus 2.852% versus 2.826%
versus 2.819% versus 2.844% versus 2.866% versus 2.896% versus 2.872% versus
2.879% versus 2.863% versus 2.879% versus 2.868% versus 2.799% versus 2.875%
versus 2.893% versus 2.864% versus 2.866% versus 2.934% versus 2.952% versus
2.893% versus 2.873% versus 2.904% versus 2.913%


EUR/USD: 1.22876 versus 1.23464. The euro broke lower below the 50 day
MA's. Not out of the lateral range, but heading toward the lows in the four
month range.

Historical: 1.23464 versus 1.23748 versus 1.23712 versus 1.238532 versus
1.23313 versus 1.23299 versus 1.23720 versus 1.2359 versus 1.2311 versus
1.22812 versus 1.2247 versus 1.2285 versus 1.22698 versus 1.23073 versus
1.23234 versus 1.2406 versus 1.24494 versus 1.2351 versus 1.23301 versus
1.23467 versus 1.22478 versus 1.2342 versus 1.2287 versus 1.2304 versus
1.23782 versus 1.2392 versus 1.23412 versus 1.2305 versus 1.2305 versus
1.24017 versus 1.2411 versus 1.2344 versus 1.23187 versus 1.22822 versus
1.21894 versus 1.21893 versus 1.23257 versus 1.2296 versus 1.2324 versus
1.22820 versus 1.23431 versus 1.2411 versus 1.25083 versus 1.2450 versus
1.23528 versus 1.22887 versus 1.22524 versus 1.2273 versus 1.2377 versus
1.24573 versus 1.2502 versus 1.2404 versus 1.2402 versus 1.23832 versus
1.24308 versus 1.24159 versus 1.24340 versus 1.23083 versus 1.22567


USD/JPY: 107.645 versus 107.404. Dollar trying to break higher out of the
three week lateral range.

Historical: 107.404 versus 107.409 versus 107.027 versus 107.010 versus
107.362 versus 107.267 versus 106.882 versus 106.873 versus 107.09 versus
107.16 versus 106.939 versus 107.11 versus 106.816 versus 106.797 versus
105.901 versus 106.286 versus 106.81 versus 105.397 versus 105.473 versus
104.789 versus 104.829 versus 105.892 versus 106.478 versus 105.945 versus
105.946 versus 106.344 versus 105.846 versus 106.42 versus 106.335 versus
106.77 versus 106.41 versus 106.105 versus 105.752 versus 106.359 versus
105.734 versus 106.03 versus 106.695 versus 107.381 versus 106.96 versus
106.886 versus 106.85 versus 107.581 versus 107.435 versus 106.294 versus
106.153 versus 106.782 versus 107.77 versus 108.669 versus 108.669


Oil: 68.40, +0.07. Great week, breaking higher Wednesday after a quick
test of the range breakout. Nice setup to continue the move higher. Toward
80 to 100 as Saudi says? Who knows? The pattern is simply bullish.


Gold: 1338.30, -10.50. Flopped Friday after a tight lateral move all week.
Still in the range, but not breakout out Friday.


MONDAY

Earnings ramp up with GOOG (4/23 after), AMZN (4/26 after). Others are set
as well, and the bulls are looking for these stocks to reignite the upside
move. As noted earlier, there are still very good patterns to drive higher.
Good stocks as well, e.g. NFLX, FFIV, etc.

Therefore we are looking at more positions as the market heads higher with
some of these good patterns. Some oil, some big names, some retail. They
are good, the move is still a bounce, they can still make us money. Still
looking for just a move up to near the prior highs before the move
completely fizzles. It can move higher given all the good patterns, but
with the semiconductors dropping out, that prospect dimmed. If LRCX and
others in the group, including SOX itself, rally off their Fibonacci double
bottoms, that can happen. That would be great, but it has to prove it.

Have a great weekend!

End part 1
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