Sunday, December 17, 2017

The Daily, Part 1 of 3, 12-16-17

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12/16/2017 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

- The tax reform dance: market drops, rallies based upon a few senators.
- Stocks surge back with even NASDAQ punching a new high ticket.
- FAANG trying to rejoin leadership, small caps as well.
- Economic data back and forth but trending higher ahead of a very busy data
week.
- Rally toward yearend may have just caught on for all indices.
-
Just when you thought the tax cut news was all baked into the market you get
a couple of 'no' votes crossing over to 'yes,' even Korker's, and you get a
market recovery, indeed, surge. Thursday RUTX and SP400 sold off on renewed
worries the bill would fail when Marco Rubio and Mike Lee were said to be a
'no' and a 'leaning no.' Rubio got what he wanted and Korker's came out of
nowhere as a yes. Stocks got what they wanted and rallied to new highs on
NASDAQ, NASDAQ 100, SP500, and DJ30.

SP500 23.80, 0.90%
NASDAQ 80.05, 1.17%
DJ30 143.08, 0.58%
SP400 1.05%
RUTX 1.56%
SOX 1.50%
NASDAQ 100 1.20%

VOLUME: NYSE +194%, NASDAQ +77%. Okay, it was quadruple expiration and thus
volume exploded upside.

ADVANCE/DECLINE: NYSE 2.2:1, NASDAQ 2.3:1. Very passable numbers. That is
all, just passable. With 1+% moves on the growth indices you would
anticipate 3:1 or so.


NEWS/ECONOMY

On a week of back and forth economic news the market showed a lot of back
and forth itself, but the major indices did not give up their trends.

Retail Sales, November topped expectations at 0.8%, 1.0% if you take out
autos. Clothing, Food and Drink, online sales were all strong.

Core CPI rose 0.1% month/month, sliding to +1.7% year/year versus the 1.8%
prior. Oh no, no inflation. The Phillips Curve readers remain confused.
Oh, there is inflation, it is just the kind that the antiquated way we
measure price increases misses. Producers make smaller sizes but charge the
same price; no inflation as per the government measures, but you pay more
for less. Voila, inflation.

New York Empire PMI at 18.0 fell from 19.4 and was the lowest since July.
At the same time, however, the New York Fed says the economy is growing at
4+% while the Atlanta Fed says 3.3%. Three 3+% GDP quarters in a row? That
is a long time coming.

So, the argument goes, why tax cuts? Because we need tax reform to compete
in the changing world. Lower corporate and small business taxes. Get out
of states forced to subsidize other states' profligate spending by limiting
SALT deductions (and they should be phased out for everyone). After years
of struggling with no investment, businesses and individuals are finally
feeling some optimism and are spending money.

That is all based upon an expectation for change and the repeal of thousands
of regulations from the prior administration. If you remove the restraints
on investment from the increased taxes, from the ACA, and from regulation,
the US could really boom, not just put in the 'usual' 3% growth experienced
these three last quarters. That is what we usually run. In a recovery, an
unfettered economy would really surge in the 4%, 5% or better range.

As you can see, I don't buy into the 'US has run its course' economic
argument. That is the SAME theory and argument heard in the late 1970's. I
recall it clearly: Newsweek, Time and others discussing how the US economic
run was impressive but over. Demographics changed, other countries were
rising, blah, blah, blah. SAME arguments are heard today: changing
demographics, changing world economics. IT DOESN'T MATTER. If we free up
our innovators from regulations and skewed tax codes, our system has always
produced the best and the most. Communism, even the updated version China
practices, cannot do that. Socialism obviously not. It is the system that
produces the outcomes. We need to let it work. Dance with who brought you
as the old Darrell Royal phrase goes.

Thus, if we truly reform the code to let money flow where it is most needed
or where the markets believe it should go, we will come up with the new
innovations that create demand where there was none before. No one needed a
personal computer. Heard that over and over in the 1980's. Apple made one
and what do you know, everyone needed one. People were not out saying 'we
need a personal computer!' People with vision saw the future and made the
goods that would be needed. That is how you make the innovations that drive
the next technology booms and the jobs they create.

That drives economic growth not at just a 3% average, but well above that.
In the 1980's that recovery produced 4%, 5%, 7%, 11% quarterly GDP growth.
If we had not loused up so bad in the 2000's with the recovery we would have
don't it again. Instead we regulated and mandated and taxed the economy to
less than 2% growth in a recovery. As I said then, that was no recovery.
Finally, NOW we are seeing are recovery, and it is based just on
ANTICIPATION of real change.

Now you see why the markets are up on tax reform talk and trade back and
forth based upon how that talk is going. If people would only READ and
attempt to understand what the tax reform bill is going to do for them
versus listening to soundbites from the network and cable news, they would
understand that the changes proposed are truly game changing and will
overall rev up the US economy once again. We then all benefit from the
growth, the new jobs, and yes, the increased tax revenues. We have to put
aside the 'what is in it for me that I directly get?' mindset and see the
big picture just as in the early 1980's.


THE MARKET

CHARTS

NASDAQ: A long time coming (since late November), NASDAQ broke to a new
high. After the rotation from these stocks to start December, they are back
for now after a brush near the 50 day EMA. NASDAQ is on its fourth run
after the third 20 day EMA test since breaking higher off the 50 day in
mid-September. Four to five such bounces are typical off a 50 day MA test.

DJ30: New high as well, the Dow now on its fifth rotation off the short
term moving averages after the last 50 day EMA in early September. DJ30 is
12+% over the 200 day MA, getting stretched on this move. No signs of
slowing thus far.

SP500: Still moving up off the 10 day EMA as SP500 presses its 14 week run
after starting at the 50 day MA in late August. 8% over the 200 day SMA and
still on the run thanks to the financial stocks working better and the big
techs rallying.

RUTX: RUTX was all over the map to end the week. Up Wednesday off support,
broke lower Thursday and fell to the 50 day EMA. Friday back up with a
higher recovery high. Nothing like tax cuts for the small caps.

SP400: Tested again on the week, a second week of consolidation after the
higher high to end November. Looked problematic Thursday as it closed below
the 20 day EMA, but then rebounded nicely to end the week. Nice trend
remains.

SOX: struggled all week below the 50 day EMA but Friday managed a close
above that level. Still below the 50 day SMA but trying to change its
outlook a la some of the NASDAQ big names that crashed their support but
have recovered.


LEADERSHIP

FAANG: A big part of NASDAQ, these stocks improved dicey patterns to good
moves. AAPL remains in a good pattern, and rallied nicely Friday. FB is up
off the 50 day MA test put in after the initial rebound from the early
December selling. AMZN doing the same. GOOG broke to a higher high --
recovery is in. NFLX is trying, but is lagging, back at the 50 day MA
still.

Drugs/Biotechs: Money is moving into the smaller names from what we are
seeing. IMGN is starting upside for us as did ENDP, MRTX. There are many
others we are looking at.

Financial: Tested to end the week, but a good week for GS, MS. Banks are
still solid enough as they put in a modest test, e.g. BAC, JPM. TCBI is
starting to break higher, one we are looking to enter.

Retail: COST gapped on its results. While most pulled back, the patterns
remain solid. TJX, ROST, BBBY, TGT.

Semiconductors: Some good setups and moves starting. INTC jumped, and if
it continues, we move in. CAVM looks very good and MRVL has a good pattern.
LRCX, AMAT recovering but still problematic. Very mixed but improving and
some are running, e.g. CREE.

Machinery/Manufacturing: Struggled to end the week, giving up some gains,
e.g. HON, MMM, TEX.


MARKET STATS

DJ30
Stats: +143.08 points (+0.58%) to close at 24651.74

Nasdaq
Stats: +80.06 points (+1.17%) to close at 6936.58
Volume: 3.5B (+76.77%)

Up Volume: 2.51B (+1.744B)
Down Volume: 929.88M (-250.12M)

A/D and Hi/Lo: Advancers led 2.31 to 1
Previous Session: Decliners led 2.25 to 1

New Highs: 133 (+40)
New Lows: 51 (-19)

S&P
Stats: +23.80 points (+0.90%) to close at 2675.81
NYSE Volume: 2.4B (+194.91%)

A/D and Hi/Lo: Advancers led 2.22 to 1
Previous Session: Decliners led 1.85 to 1

New Highs: 123 (+42)
New Lows: 32 (-17)


SENTIMENT INDICATORS

VIX: 9.42; -1.07
VXN: 11.88; -0.51
VXO: 7.88; -0.81

Put/Call Ratio (CBOE): 0.97; +0.17


Bulls and Bears: Pretty large drop though still easily over 60 for the
bulls. That is still in the overly optimistic range and of course the surge
Friday will bring them around again to the upside. This is a warning
indication, but not a great timing device.

Bulls: 61.9 versus 64.2

Bears: 15.2 versus 15.1

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: 61.9 versus 64.2
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
versus 56.7 versus 53.4 versus 57.7 versus 63.1 versus 61.2 versus 61.8
versus 62.7 versus 61.8 versus 58.2 versus 60.6 versus 58.6 versus 60.2
versus 59.8 versus 59.8 versus 59.6 versus 58.8 versus 56.3 versus 55.6
versus 51.0 versus 42.9 versus 41.7 versus 47.1 versus 42.9

Bears: 15.2 versus 15.1
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
versus 19.1 versus 19.1 versus 18.3 versus 18.1 versus 17.0 versus 16.2
versus 16.5 versus 16.7 versus 18.6 versus 18.8 versus 18.6 versus 18.3
versus 19.2 versus 18.3 versus 17.1 versus 17.3 versus 17.9 versus 17.9
versus 18.3 versus 17.5 versus 18.3 versus 18.1 versus 17.3 versus 13.75
versus 17.3 versus 16.5 versus 17.5 versus 17.6 versus 16.7 versus 17.6
versus 17.5 versus 17.3 versus 18.3 versus 18.4 versus 19.6 versus 19.6
versus 19.2 versus 19.6 versus 22.3 versus 21.6 versus 23.5 versus 25.7
versus 24.3 versus 23.1 versus 23.8 versus 23.1 versus 22.8 versus 23.1
versus 24.3


OTHER MARKETS

Bonds: 2.351% versus 2.351%. Bonds overall rallied Friday even if the 10
year was steady. Curve flattens farther.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.351%
versus 2.36% versus 2.403% versus 2.389% versus 2.378% versus 2.34% versus
2.353% versus 2.381% versus 2.363% versus 2.363 versus 2.412% versus 2.385%
versus 2.326% versus 2.329% versus 2.321% versus 2.34% versus 2.354% versus
2.367% versus 2.345% versus 2.37% versus 2.336% versus 2.375% versus 2.407%
versus 2.402% versus 2.34% versus 2.326% versus 2.316% versus 2.32% versus
2.332% versus 2.349% versus 2.358% versus 2.378% versus 2.37% versus 2.419%
versus 2.456% versus 2.435% versus 2.421% versus 2.366% versus 2.383% versus
2.318% versus 2.341% versus 2.30% versus 2.302% versus 2.275%


EUR/USD: 1.1752 versus 1.17798. Euro tried to bounce Wednesday, fell back
to the 50 day SMA on the Friday close.

Historical: 1.17798 versus 1.18392 versus 1.17430 versus 1.17652 versus
1.1764 versus 1.17754 versus 1.17990 versus 1.18276 versus 1.18727 versus
1.18983 versus 1.18976 versus 1.18529 versus 1.18489 versus 1.1899 versus
1.19329 versus 1.18148 versus 1.17402 versus 1.1791 versus 1.1787 versus
1.1786 versus 1.1799 versus 1.16443 versus 1.16646 versus 1.16439 versus
1.15871 versus 1.15954 versus 1.1609 versus 1.16092 versus 1.16575 versus
1.15480 versus 1.1644 versus 1.16091 versus 1.16330 versus 1.18163 versus
1.17570 versus 1.1759 versus 1.17798 versus 1.18476 versus 1.17995 versus
1.1771 versus


USD/JPY: 112.619 versus 112.298. Dollar fell on the week, tried to buck up
Friday over the 200 day SMA.

Historical: 112.298 versus 112.639 versus 113.555 versus 113.476 versus
113.48 versus 113.473 versus 112.473 versus 112.554 versus 112.442 versus
112.190 versus 112.55 versus 112.102 versus 111.583 versus 111.244 versus
111.523 versus 111.247 versus 112.349 versus 112.615 versus 112.124 versus
112.91 versus 112.879 versus 113.430 versus 113.615 versus 113.526 versus
113.379 versus 113.99 versus 113.723 versus 113.758 versus 114.064 versus
114.010 versus 114.010 versus 113.845 versus 113.640 versus 113.175 versus
113.675 versus 114.071 versus 113.607 versus 113.913 versus 113.31 versus
113.530 versus 112.561 versus 113.031 versus 112.21 versus 112.20 versus
111.852


Oil: 57.33, +0.29. Still working in the lateral 3 week range over the
rising 50 day MA.


Gold: 1257.90, +0.40. Rebounded on the week to test up near the 200 day
SMA Showed a doji, looks as if it will break back downside.


MONDAY

Fed hiked rates as expected, has a gentle upward slope as expected, lots
more data to come in the week ahead: Housing starts, Existing Home Sales,
GDP third, Philly Fed, Leading indicators, Personal income and spending,
Durable Goods Orders, New Homes, Michigan Sentiment. A veritable data dump.
Overall the economic data is up and down but trending up.

The big event of course will be the tax reform vote set for Tuesday as of
this writing. Friday's rally built upon 'no' votes turning 'yes,' including
Corker (Korker's). Collins and Flake are still nut jobs while McCain and
Cochran, both suffering some medical impairment, are expected to be back
next week. Pence is hanging around DC just in case.

With the move Friday and based upon our belief the tax bill passes one way
or another, most new plays are to the upside. Some more drug plays,
software, even a chip or two. The market may be extended or on the last
move higher in these runs, but the plays down below are setting up. In
other words, some areas have not rallied and are setting up good patterns to
turn off the lows; seen that before, many times.

So, let the good positions continue working and watch for the money pushing
new plays such as the small drugs and others back upside.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 6936.58

Resistance:

Support:
6914 is the late November all-time high
6796 is the early November 2017
The 50 day EMA at 6737
6641 is the October high
The 2016 trendline at 6589
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
6341.70 is the all-time high from early June.
The 200 day SMA at 6320
6300 is the mid-June interim high
6205 is the late May all-time high
5996 is the recent May 2017 low
5937 is the all-time high from April
5915 is the tops of the March to April 2017 range
5910 is the lower gap point from mid-April
5800 from the February consolidation lows


S&P 500: Closed at 2675.81

Resistance:

Support:
The 20 day EMA at 2634
2597 is the November 2017 all-time high
The 50 day EMA at 2596
2549 is the upper channel line from the March 2009 uptrend channel
2491 is the August all-time high
2480 the late August and early August highs
The 200 day SMA at 2468
2453.46 is the June prior all-time closing high
2409 is the July 2017 closing low
2406 is the all-time high from May 2017
2401 is the March 2017 all-time high
2352 is the recent May 2017 low
2348 is the April 2017 lower gap point
2329 is the March and April twin lows
2322 is the March 2017 low
2301 is the late January 2017 high
2298 is the late January 2017 high
2282 - 2280 from January 2017
2277.53 is the December 2016 high
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
2175 is the June 2016 high


Dow: Closed at 24,651.74

Resistance:

Support:
24,255-ish
The 20 day EMA at 24,136
23,602 is the early November 2017 high
23,608 is the early November high
The 50 day EMA at 23,608
22,420 is the September high
22,179 is the August 2017 all-time high
22,086 is the mid-August lower high
The 200 day SMA at 21,935
21,681is the July prior all-time high
21,638 is the July 2017 closing high
21,529 is the June 2017 high
21,169 is the March 2017 all-time high

End part 1 of 3
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