Saturday, August 11, 2018

The Daily, Part 1 of 3, 8-11-18

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8/11/2018 Investment House Daily
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The REPORTS SCHEDULE is as follows:

WEDNESDAY and the WEEKEND reports contain NEW PLAYS, Market Summary Video,
Play Videos, and Play Table with play annotations.

MONDAY report will contain a Market Summary Video, new plays, annotated play
table.

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

- Painfully slow session Thursday is triggered Friday by lira, falls from
the highs.
- Trump takes advantage of Turkey's bad policies and diving lira, doubles
steel and aluminum tariffs.
- World markets, currencies struggling, but US markets and dollar are solid.
For now.
- US in a good position but the Fed can louse it up as . . . always.
- Once again new and higher highs are tossed. Indices remain in nice
uptrends, but the New High Anxiety and damaged leader patterns are vexing.

The lira? More tariffs? Or, was it High Anxiety?

Friday the lira was a turkey, crashing as Turkey's problems go from bad to
worse. Even so, Erdogan told the Turks to convert any dollars to lira,
blustering 'they have got their dollars, we have got our people, our right,
our Allah.'

World markets were sharply lower and US futures followed. Then, still
before the US bell, Trump added to Turkey's woes, apparently seeing an
opportunity to affect the release of the American pastor held captive by our
'ally.' Trump moved to double the recently enacted tariffs to 50% on steel,
20% on aluminum. You have to hand it to Trump: he plays for keeps, and
while he keeps those across the negotiating table off balance, when he sees
an opening, he takes it.

So stocks were going to open lower. They did. I predicted the indices
would close higher than they opened. That would have been easily correct if
the market only traded for the first two hours of the session. They gapped
lower and immediately rose, recovering to 11:35ET. Then they gave it all
back and more, selling lower and lower to mid-afternoon. A late bounce
managed to close SP500, NASDAQ, SP400 over the open -- barely. It was not
much and certainly not the kind of recovery we had in mind.

SP500 -20.30, -0.71%
NASDAQ -52.67, -0.67%
DJ30 -196.09, -0.77%
SP400 -059%
RUTX -0.24%
SOX -2.47%
NASDAQ 100 -0.79%

VOLUME: NYSE +27%, moving back to average. NASDAQ +3%, back above average
on a gap down to the 10 day EMA.

ADVANCE/DECLINE: NYSE -2:1, NASDAQ -3:2.

So what really happened Friday? The lira provided perhaps an unexpected
catalyst and reason, but what happened in the bigger picture? Once again
the stock indices fell victim to selling when near highs, aka New High
Anxiety.

Last week I talked, and indeed others as well, about tops and bottoms being
a process versus a singular event. While NASDAQ and company are still
trending higher, every time they approach the highs they get knocked down.
Thus far, they get knocked down, they get up again, just can't seem to keep
them down. That is always the case . . . until they can't get up again.

For now this is just one of those 'get knocked down' sessions in a still
continuing uptrend. But again, a top is a process where there is
distribution on several occasions, particularly at the higher highs. After
a week and more of upside depending upon the index, they were at or close to
new highs. As noted, the lira could have acted as the trigger but the
result was another move back hear highs that was pushed down. With many
stocks across many sectors hit, you have to keep in mind that a top could be
in process.


CHARTS

Not a collapse, not a reversal. The indices are still in uptrends, some in
better shape than others, still trying to hit and hold new highs, still
struggling each time they get there. One step forward, a half step
backward, right? This is the most frustrating uptrending market in recent
memory.

NASDAQ: The focus of most attention, NASDAQ came close to a new high this
time around, didn't hit it, then gapped downside to the 10 day EMA Friday.
Rising, above average volume so once again some distribution as NASDAQ backs
down from the highs. No trend break, not even close, but if the sellers
take it down each time it hits this level, that eventually forms serious
resistance and a top.

SP500: Very similar action to NASDAQ, gapping downside to the 20 day EMA
after moving to a higher high over the late July peak. Gapped down, tight
range on the session, volume moving up to average for the first time in two
weeks. Still in the upper range of its channel formed as it moved off the
bottom of the base. As with NASDAQ, still trending upside, no issue with
breaking the uptrend but some high volume selling at the higher high.

SOX: Gapped below the 50 day MA's, back to the middle of its pattern. It
did not hold the 50 day MA and use that as a higher low to make the breakout
run. SOX is key, the move was not great, the pattern still holds. Watch to
see if it reloads and can make a move upside.

DJ30: Gapped lower through the 10 day EMA, landing on the 20 day EMA.
Higher volume but still below average. No real issues, in the upper half of
the channel, still working on a pattern, a pretty good one.

SP400: From a higher high gapping to the 20 day EMA and a doji. Nice
uptrend, holding near support. Great trend. But, three times in the past
two months SP400 has been right here, eked out a higher high, but was
immediately shoved back.

RUTX: Fourth straight doji over the 10 day EMA, quite frankly ignoring the
overall market selling. This is actually encouraging action for the small
caps, also a very important index economically.


LEADERSHIP

FAANG: FB fell below the 200 day MA, possibly failing its rebound attempt
after the earnings gap lower. AAPL on the other hand is in a tight lateral
range as the 10 day EMA rises to meet it; good looking for the upside. AMZN
faded just modestly, showing a doji, still solid. GOOG gapped lower to the
10 day EMA. Hardly a bad pattern. NFLX still dancing around laterally just
below the 10 day EMA. Problematic.

Software: The group could make a comeback to leadership status. TTWO is
looking great in the recovery, breaking to a new high. Could lead the group.
FFIV is another recovering software stock, breaking higher into the week
then trying to form a handle. VMW working in a tight lateral pattern after
breaking higher out of its flag. UIS testing a very nice post-earnings run;
could be a new play. DATA is at the 10 day EMA, could be putting in a
possible entry. NOW is not that bad either. ADBE, VRSN still trying to
hang on after recovering but still unable to move upside.

Financial: Some very ugly action as bonds surged and yields dropped.
Reason: if the lira and Turkey is contagion, bonds will continue as a safe
haven. C gapped to the 50 day EMA, losing 2.39%. JPM is not bad, gapping
lower to the 20 day EMA and a doji. BAC shows the same action. GS gapped
lower to the 50 day SMA. V is not bad, holding a lateral move over the 10
day EMA.

Industrial: More trouble. CAT gapped lower to support at 135. CMI faded in
a handle on the week after a good initial move, holding the 20 day EMA. EMR
in a great 1-2-3 test of its earnings surge. UTX held up decently, holding
the 20 day EMA. HON gapped to a dojij, holding over the late May/early June
peaks. Not bad. The group struggled, but not a rout.

Drugs: PFE finally testing the strong move, fading as the 10 day EMA rises
to meet it. MRK testing the 10 day EMA as well. BMY still stuck at the 200
day MA. BCRX in biotech took off late week. ARWR in the same group is
solid. Still a solid group of course and will see if we get entries off
these tests.

Chips: INTC downgraded and several chips struggled though not AMD, INTC's
main rival. TXN gapped below the 50 day MA's. XLNX fell to test near the
200 day SMA on the low. QRVO fell to the 20 day EMA, nothing major. MXIM
sold lower as well. Very familiar action though not a lot of breakdowns.

Retail: Some up, some down, still some good patterns. KSS moved higher on
volume. M held fine over near support. DDS faded a bit, but fine. RH off
just a bit. JWN tried to surge, faded. HD faded to again test the 50 day
EMA. Most, as noted, remain fine.

Transports: Rails held up well, e.g. CGX, CNI, RAIL, KSU.

Misc: GRUB still solid. SQ ditto at the 20 day EMA. DIS testing the 20
day EMA. WOW posted a nice gap and run higher.


MARKET STATS

DJ30
Stats: -196.09 points (-0.77%) to close at 25313.14

Nasdaq
Stats: -52.67 points (-0.67%) to close at 7839.11
Volume: 2.1B (+2.94%)

Up Volume: 656.98M (-330.79M)
Down Volume: 1.4B (+370M)

A/D and Hi/Lo: Decliners led 1.51 to 1
Previous Session: Advancers led 1.1 to 1

New Highs: 92 (-22)
New Lows: 105 (+39)

S&P
Stats: -20.30 points (-0.71%) to close at 2833.28
NYSE Volume: 826.278M (+27.38%)

A/D and Hi/Lo: Decliners led 1.97 to 1
Previous Session: Advancers led 1.01 to 1

New Highs: 70 (-45)
New Lows: 88 (+53)


SENTIMENT

VIX: 13.16; +1.89
VXN: 16.22; +1.31
VXO: 11.85; +1.72

Put/Call Ratio (CBOE): 1.20; +0.35

Bulls and Bears:

Market in a recovery mode so the bulls recovered a bit, bears fell a bit,
but no significant change on the week. That likely changes some after
Friday.

Bulls: 54.9 versus 54.5

Bears: 18.6 versus 18.8

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: 54.9 versus 54.5
54.5 versus 54.9 versus 55.3 versus 52.4 versus 47.1 versus 47.6 versus 52.0
versus 55.5 versus 52.9 versus 50.0 versus 49.1 versus 46.6 versus 43.1
versus 43.6 versus 48.0 versus 43.6 versus 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

Bears: 18.6 versus 18.8
18.8 versus 18.6 versus 18.5 versus 18.5 versus 18.6 versus 18.4 versus 17.6
versus 17.8 versus 17.7 versus 19.2 versus 19.2 versus 19.4 versus 19.4
versus 20.6 versus 20.8 versus 19.6 versus 19.8 versus 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: 2.873% versus 2.928%. Bonds gapped upside in a flight to safety,
closing just over the 50 day SMA. Could be working on the right shoulder of
a head and shoulders top spanning late May to present. Those often set up,
don't often lead to major selling.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.928%
versus 2.963% versus 2.977% versus 2.977% versus 2.945% versus 2.95% versus
2.986% versus 3.005% versus 2.962% versus 2.975% versus 2.958% versus 2.982%
versus 2.965%


EUR/USD: 1.1413 versus 1.1526. Sharp break lower, moving through the late
May low as well as the late 2017 lows. The euro just broke lower from a 13
month head and shoulders. Wow. Serious break lower.

Historical: 1.1526 versus 1.16186 versus 1.16001 versus 1.15572 versus
1.15683 versus 1.15864 versus 1.1662 versus 1.1689 versus 1.17074 versus
1.16558 versus 1.17324 versus 1.17385 versus 1.16846 versus 1.16989 versus
1.17214 versus 1.1651 versus 1.16514 versus 1.16603 versus 1.1709 versus
1.1685 versus 1.16608 versus 1.1672 versus 1.17288 versus 1.17578 versus
1.17439 versus 1.1689 versus 1.1665 versus 1.16388 versus 1.1638 versus
1.15634 versus 1.15602 versus 1.16517 versus 1.17031 versus 1.16572 versus
1.16072 versus 1.15762 versus 1.1586 versus 1.15746 versus 1.2624 versus
1.16245 versus 1.15678 versus 1.17973 versus 1.17454 versus 1.17761 versus
1.17737 versus 1.17987 versus 1.1774 versus 1.1762 versus 1.1697 versus
1.166 versus 1.16993


USD/JPY: 110.840 versus 111.07. Doji at support. Against all other
currencies, the dollar is soaring.

Historical: 111.07 versus 111.361 versus 111.344 versus 111.254 versus
111.621 versus 111.628 versus 111.744 versus 110.990 versus 110.995 versus
110.791 versus 110.871 versus 111.235 versus 111.084 versus 111.451 versus
112.732 versus 112.783 versus 112.896 versus 112.337 versus 112.631 versus
112.093 versus 110.911 versus 110.973 versus 110.474 versus 110.666 versus
110.40 versus 110.854 versus 110.687 versus 110.523 versus 110.223 versus
110.097 versus 109.678 versus 109.980 versus 109.895 versus 110.376 versus
110.03 versus 109.783 versus 110.668 versus 110.578 versus 110.247 versus
110.381 versus 110.314 versus 109.466 versus 109.705 versus 110.164 versus
109.878 versus 109.90 versus 109.53 versus 108.767


Oil: 67.63, +0.82. Bouncing off some support at 66.


Gold: 1219.00, -0.90.


MONDAY

Earnings winding down, data ratcheting up. Back end loaded on the week:
retail sales, Empire manufacturing and Philly Fed, industrial production and
capacity, housing starts, leading indicators, Michigan sentiment.

Data is important as it is important the US economy remain strong as it
tackles the trade and other issues from the rogues such as China (don't
agree? Just look at the South China Sea aggression), Iran, Russia, North
Korea, Turkey. Peace through strength -- economic strength as it pays for
everything else.

The July CPI core inflation clocked in at 2.4% year/year with real wages up
just 0.1% a -0.2% move year/year. That is a problem because of the Fed.
The Fed will fear inflation more than it does the yield curve. Ironic is it
not? The Fed desperately wanted to create inflation, and now it has it but
is acting to prevent what it wanted to the point it will stall out the
expansion. Insanity. The Fed likes to say IT prevents the swings.
Baloney. It CAUSES swings that it feels it must then fight. And we need
the Fed for what? Creating cycles it must then fight, kind of like a
firefighter starting fires so they can be extinguished, justifying the need
for more firefighters.

In any event, the economy must be strong for the market as well. Shocks
such as the lira drop should be temporary as it only underscores the US
strength vis- -vis other countries. The dollar is showing that as well.

Thus, in theory, the market should hold and continue higher if the economy
is going to do the same. Ah, but the Fed. The market is a forecaster, not
follower. New highs being sold on higher volume. Leaders sacked as well, a
few recovering to higher highs, most not. New movers trying to be leaders
now struggling again. The trend remains but it could very well be the
bucking at new highs suggesting economic issues ahead thanks to the Fed
tightening into a flat yield curve -- as it always does.

The market action last week was hard on stocks that started moving up,
trying to turn to leaders. They are not wrecked, but many are at support
they have to hold and rebound off if the upside is to continue. MMM, SWK
are examples as they formed ABCD consolidations.

The New High Anxiety makes it more treacherous moving into upside, but then
again you have good moves from TTWO and many software stocks look better
along with AAPL for example. So, we look at some of those upside. Still.

Also, looking at NFLX downside already and likely add FB to that with some
others if the numbers work.

Many are dismissing the trouble at new highs, letting moves by AAPL and a
few others trowel over the cracks others are showing. They may turn out
100% correct in ignoring those other stocks, but we have seen tops start
this way before. Heck, they all start this way with some of the big horses
missing revenues and even bottom line earnings. They are symptomatic of a
larger problem, and when such huge market cap stocks roll over, the market
does as well. That does not mean other stocks cannot take their place;
sometimes it is simply time for new leadership and the money rotates
elsewhere.

Sometimes. Often when the powerful leaders break, everything typically
breaks as well and resets. The confluence of the Fed, the balky market, and
the almost blind confidence that things can only remain good can be
treacherous.

Accordingly, we have to be cautious but we also cannot for certain say a top
is definitely forming; no one can. Thus, we still look at possible upside
from leaders still leaders and in great patterns, such as AAPL, UIS, TTWO,
perhaps FFIV, perhaps others. Also, watching for falling starts, e.g. FB,
NFLX. Looking both ways, the effect of this kind of market.

End part 1
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