Sunday, June 17, 2018

The Daily, Part 1 of 3, 6-16-18

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6/16/2018 Investment House Daily
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MARKET ALERTS:

Targets hit: None issued
Entry alerts: None issued
Trailing stops: MRO
Stop alerts: Cleared out positions that did not rebound with the market.
AAPL; BLUE; CAT; COP; CRZO

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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

- US, China trade tariffs. Market struggles, but holds up very well.
- Economic data pretty good, some not so great, but all of it a shadow of
what it once was and could be again.
- Has the redefinition of a strong economy fooled the Fed?
- Index action Friday suggests most of the move was just position shuffling
at expiration.
- Still good patterns after the 'week from hell' for the markets. That
bodes well for the upside to continue.

Trade had to get back into the picture at some point, knew it would. The
week's rally was under the White House threat of Friday tariffs on China.
Friday that threat became reality. The White House announced $50B in
tariffs on Chinese goods via a 25% tariff rate. China vowed a response and
in the first hour of trade delivered it: soy beans, whiskey, beef and some
other US products. While it was hoped this stage of the trade reformation
talks could be avoided, they are now here.

Stocks struggled as the possibility became reality. Futures opened sharply
lower. When the session bell rang stocks opened lower but then dove lower
after the first half hour as China announced its tariffs.

That sharp 10 minute drop was met with equally sharp buying, snapping the
indices right back up. Didn't turn positive, but immediately jumped back
into the range. Stocks range-traded into mid-afternoon. Then at 2:00ET
buys hit and jumped stocks to session highs, trading basically flat from the
Thursday close. The move waffled some into the close but managed to hold a
decent part of the bounce.

SP500 -2.83, -0.10%
NASDAQ -14.66, -0.19%
DJ30 -84.83, -0.34%
SP400 -0.17%
RUTX -0.05%
SOX -0.08$
NASDAQ 100 -0.33%

VOLUME: NYSE +154%, NASDAQ +40%. Impressive expiration volume.

ADVANCE/DECLINE: NYSE -1.1:1, NASDAQ +1.1:1. Impressively boring breadth.

All indices managed a very solid move off the session lows that frankly were
never that low. Keep in mind it was expiration Friday and that means
holdings will be shuffled to position for next expiration. The tariff news
was fortuitous in a way as it assisted some in the shuffle. Then the market
showed a rebound to near flat: the dip was bought. Fairly clear expiration
shuffling and positioning with the assist from the tariff news.

Most stocks managed a rebound though not all. Our positions mostly
recovered, but those that did not we exited. Many stocks showed a dip then
a rebound on strong volume. Some of these were the industrial stocks that
have lagged and you would think would have been hammered lower and nailed
the floor on the trade issues managed very nice price recoveries with
volume. HON, UTX, DE, EMR are just a few.

The leaders from other areas showed less drama. Software was up in many
cases. AMZN, FB, NFX, GOOG, NVDA, BABA all held up just fine. SQ, QRVO,
ATHM, LSCC, BRKS, BIDU, TXN and many other stocks rallied, some quite
nicely.

It was not carnage for the leading groups of stocks. It was not carnage for
the indices either. It was a day off for the growth indices. It was
another day of testing, and perhaps a shakeout, for the lagging indices.
Despite the 'horrors' of a trade war as China called it, the market rode out
the news and expiration, holding their relative positions.

Of course, that leaves the large cap NYSE indices still looking for a break
higher, but as noted above, the action has the look of a shakeout that could
provide that spring upside for a new breakout.


NEWS/ECONOMY

A mountain of data and news on the week. FOMC decision to add another rate
hike in 2018. ECB decision to possible end QE by 2019 but has no intention
of hiking rates. Retail sales rather solid. Atlanta Fed hopping up its
current quarter GDP estimate to 4.8%.

Friday it was tariffs. It was New York PMI at 25.0 over 20.1 in May. It
was Michigan Sentiment at 99.3, up from 98.0 in May. All solid enough.

Note, however, that Industrial Production and Capacity Utilization for May
fell and missed expectations.

Industrial Production: -0.1 vs 0.2 expected vs 0.9 prior (from 0.7)

Capacity Utilization: 77.9 versus 78.1 expected versus 78.1 April


Good and not so good, hot and cold.

Then there is the yield curve. The Fed is hiking the short end while longer
term bonds rally, pushing yields lower. That is flattening the curve, an
indication that economics are slowing or that the Fed is overreacting to the
economic pickup.

This is interesting. As you may recall, from the early stages of the
'recovery' under the Obama administration I said that the recovery would not
be good by historical standards, but, because it had been so long since we
had really good economic growth and because everyone was so starved for
improvement, that mediocre numbers would be described as 'great,' 'strong,'
and the like. That is exactly what happened, and a lot of people allowed
the story line to be skewed that way, allowed themselves to believe that
1.5% annual growth with 3 or 4 quarters spaced out over 8 years hitting the
high 3% level was a 'great' recovery.

Is the Fed a victim of the propaganda it helped underwrite? While growth is
vastly improved versus the Obama years, it is still well, well off 'strong'
or 'great.' Those words describe what was the recovery under Reagan: 4%,
5%, 7%, 11% quarterly GDP growth, massive capital investment, millions upon
millions of high quality (not food industry) jobs in tech, industrial,
mining, construction, and other sectors.

Those were strong numbers. What we are seeing now are decent. If this
quarter turns out to be 4.8%, THAT is strong. We will see, but those of us
who lived through the Carter years and the Reagan years know that even this
improvement in the economic condition is far from what our system is capable
if we get rid of all the socialist remnants from Bush and Obama.

I always find it revolting to hear purported experts say that capitalism
does not work in this world because of the income inequities generated the
past 10+ years. That is nonsensical. I heard the same thing in the Carter
years, about how America had a good run, but the world had changes and its
system just could not produce the same gains as in the past.

No the problem is under Bush and Obama we have careened well off the
capitalism course. Free enterprise works IF you have free enterprise. We
have handcuffed our system. Reagan showed what happens when you free up our
entrepreneurs, free up capital, remove restraints on investment and risk
taking. Trump is trying, but the Congress his party controls will not act
on his agenda to rid us of the ACA and other socialist restraints. If they
were gone, yes we could again post those dramatic gains.

And the meaning is . . .

Okay, so back to the current Fed. Is it drinking the Kool-Aid of the
economy growing too fast and being too strong? With 95.9M working aged
people still out of the workforce? With average GDP growth still in the
2's? Seriously? Yet, that is what we hear, meaning the Fed would like to
stymie growth in the 2% range.

Thus, the yield curve, a measure of true economic strength, is not happy
with the Fed cracking down on economic growth at these economic output
levels. It is telling you that the Fed risks overtightening -- something it
always does, sadly -- and the decent-ish economic growth we see right now
will be put at risk long before the economy ever has a chance to show what
it can really accomplish.


THE MARKET

CHARTS

Not bad action given the 'horror' of a trade war with China. As noted
below, even with this scenario and SP500 and DJ30 weighted with stocks that
will not like trade wars, they both held up remarkably well.

NASDAQ: After a new all-time high Thursday, NASDAQ opened lower, held 7700
on the low, and rebounded to a modest loss. NASDAQ shows good upside
volume, very good leadership, and Friday did nothing to change the strength
of the move higher.

SOX: This remains an enigma in this market, even more so than SP500 and
DJ30. SOX rallied quite well into early June, still shy of the March
all-time high, then tested a week back. It has held the 10 day EMA, but is
unable to break higher. Thursday as tech and growth rallied it bumped
higher, but nothing impressive. Still at the 10 day, and very important for
the market.

RUTX: Not exploding higher on the week but put in new highs yet again.
Thursday a new high, Friday a test intraday down near the 10 day EMA, then a
rush back upside for a most modest loss. Still very strong, still doing
well in a tariff fight environment.

SP400: Brushed a new high, just putting in one, but that was the extend of
the move. Not surprising given SP400 rallied 2 weeks to get to that point.
Wednesday was a little wild, but it calmed down nicely Thursday and Friday,
showing a pair of doji with tail, holding the 10 day EMA on the close.
Touched a new high then tested to consolidate the rally, now in good
position to move to a new high and this time make it stick.

SP500: Similar to SP400, a rally from late May into this week. Spent the
week rounding out the move and fading to test the 10 day EMA, holding above
it on the close. Nice shakeout action. Many big names have tested and held
on. We will see if the reach lower and recovery was indeed a good shakeout.

DJ30: Also rallied, moving past the May highs with a solid break two weeks
back, rounding out the top then fading to the 10 day EMA Thursday. Friday a
gap lower, a test of the 20 day EMA, then a rebound to the 10 day. Shakeout
here as well? Again, it will show if that is the case, but here is the
point: even with the 'worst case' scenario for trade the Dow held its
breakout over resistance.


LEADERSHIP

FAANG: As noted Thursday, all posted nice gains but AAPL. Friday they all
held good patterns, again except AAPL. It broke below the 20 day EMA and we
just did not want to mess with it anymore. AMZN tested modestly with a
doji. FB ditto. NFLX ditto. GOOG was actually up. These look fine.

Chips: QRVO, LSCC, BRKS, AVGO continued upside. Still some strength here.
NVDA doji tested. ON is in great shape. MU may have found its test bottom.
AAOI looks good in its test. There is promise here though many are
struggling.

Software: Some impressive moves in the circumstances. FFIV up again. GLUU
up. DATA solid upside. EA as well. RHT, VMW look excellent to move higher
again.

Industrials: EMR, UTX, HON all tested lower, rebounded nicely. CAT gapped
rather large and did not get back. TEX has to make a 50 day MA stand. MMM
is interesting and looks as if it is about to turn the corner upside. Still
possibilities here.

Metals: Very mixed action. NUE, STLD down. SCHN exploded higher. CLF
reached lower, recovered a lot of ground to show a doji holding the 10 day
EMA.

China: BABA faded Friday after a Thursday break higher. Holding the 10 day
EMA and still solid in its uptrend and breakout. ATHM pushed higher, HTHT
looks solid to break higher. IQ, after a huge move, threw a doji Friday.
SOHU showing a nice move to end the week. NTES looks interesting to turn
the corner back up, perhaps SINA as well.

Drugs/Biotech: Still some looking good. EXAS added to a week of good
gains. Others not so good. ARWR fell to the 10 day EMA rather abruptly.
IMMU is back at the 20 da after a bounce didn't keep running. BLUE jumped
Wednesday and Thursday but reversed those moves sharply Friday.

Internet: AKAM enjoyed a good week and was up 1.37% Friday; not bad. LLNW
still setting up for a move higher.


MARKET STATS

DJ30
Stats: -84.83 points (-0.34%) to close at 25090.48

Nasdaq
Stats: -14.66 points (-0.19%) to close at 7746.38
Volume: 3.04B (+39.45%)

Up Volume: 1.35B (-20M)
Down Volume: 1.64B (+865.56M)

A/D and Hi/Lo: Advancers led 1.02 to 1
Previous Session: Advancers led 1.35 to 1

New Highs: 167 (-27)
New Lows: 44 (+9)

S&P
Stats: -2.83 points (-0.10%) to close at 2779.66
NYSE Volume: 2.36B (+153.80%)

A/D and Hi/Lo: Decliners led 1.1 to 1
Previous Session: Advancers led 1.33 to 1

New Highs: 86 (-16)
New Lows: 71 (+20)


SENTIMENT

VIX: 11.98; -0.14
VXN: 15.42; -0.52
VXO: 11.01; +0.50

Put/Call Ratio (CBOE): 0.93; 0.00

Bulls and Bears:

Bulls up 5.5 points over the past three weeks, bears -1.4 over the same
period. After dropping rather sharply during the stock rebound, bulls
finally feel the upside a bit. Likewise, bears rallied into the selling,
now tailing off after a few weeks of upside. That is the way it works.

Bulls: 55.5 versus 52.9

Bears: 17.8 versus 17.7

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: 55.5 versus 52.9 versus 50.0
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 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: 17.8 versus 17.7 versus 19.2
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: 2.922% versus 2.933%. Bonds stemmed the selling on the week, worked
laterally long the 50 day MA's. Then they started to rally post-FOMC. Fed
raises rates and bonds rally, dropping yields? Again, not much faith shown
in the bond market that the Fed has a clue.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.933%
versus 2.977% versus 2.963% versus 2.952% versus 2.948% versus 2.928% versus
2.974% versus 2.935% versus 2.944% versus 2.902% versus 2.86% versus 2.857%
versus 2.79% versus 2.931% versus 2.992% versus 2.982% versus 3.063% versus
3.056% versus 3.06% versus 3.123% versus 3.096% versus 3.069% versus 2.997%
versus 2.97% versus 2.966% versus 3.006% versus 2.952% versus 2.948% versus
2.968% versus 2.954% versus 2.959% versus 2.975% versus 3.0245% versus 3.00%
versus 2.962% versus 2.96% versus 2.914% versus 2.867% versus 2.83% versus
2.829 versus 2.825% versus 2.781%


EUR/USD: 1.1607 versus 1.15678. After a gut punch plunge Thursday from the
50 day MA to almost the May low, the euro recovered just a bit. Nothing
major on the upside for the euro.

Historical: 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 versus 1.16643 versus 1.15446 versus 1.17148 versus
1.17096 versus 1.17022 versus 1.17826 versus 1.1786 versus 1.17714 versus
1.1802 versus 1.1811 versus 1.18272 versus 1.19358 versus 1.19411 versus
1.1913 versus 1.18533 versus 1.18672 versus 1.19150 versus 1.19619 versus
1.1983 versus 1.1978 versus 1.19896 versus 1.20741 versus 1.21291 versus
1.21788 versus 1.2163 versus 1.22232 versus 1.22094 versus 1.22876 versus
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


USD/JPY: 110.668 versus 110.578. Dollar enjoyed gains all week but
Wednesday, the FOMC announcement day. Looked dead in late May. Quite the
comeback.

Historical: 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 versus 108.699 versus 108.699 versus 109.385 versus
109.667 versus 109.502 versus 110.833 versus 110.95 versus 110.76 versus
110.935 versus 110.376 versus 110.246 versus 109.693 versus 109.384 versus
109.40 versus 109.746 versus 109.038 versus 109.022 versus 109.08 versus
109.175 versus 109.628 versus 109.91 versus 109.354 versus 109.051 versus
109.28 versus 109.373 versus 108.894 versus 108.728 versus 107.645 versus
107.404 versus 107.409 versus 107.027 versus 107.010


Oil: 65.06, -1.83. It had to happen. After a 2 week climb back up to the
50 day EMA after breaking it in late May, oil rolled back over. Surging
dollar pushing it lower as well.


Gold: 1278.50, -29.80. Bombing lower as well, indeed breaking below the
May lows. That corrects the Thursday upside action that I called bizarre.


MONDAY

The 'week from hell' for the financial markets is in the books and NASDAQ,
RUTX and SP400 managed to put in new highs on the week before a bit of a
late week fade. SP500 and DJ30, the indices you would expect to get
hammered, while not coming close to new highs, held up very well, setting
themselves up for a new move higher despite news that most would have
predicted would scuttle any idea of an upside move. What doesn't kill you
makes you stronger, right?

SP500, DJ30 start the week in position to make good upside moves if the
conditions merge. Many tech stocks remain positive in their moves, not
extended after starting good upside breaks. Still like many of the patterns
out there. We are in several, and will look to be in more if they can make
good on the patterns in place. Thus far tech and growth have done so and we
will look at those hard. Don't forget, however, the industrials. As noted
before, if they could survive the back and forth dueling tariffs and hold
their patterns, it behooves you to keep a watch on them and when they break
higher, pick up the positions.

Have a great weekend!

End part 1
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