Sunday, January 14, 2018

The Daily, Part 1 of 3, 1-13-18

* * * *
1/13/2018 Investment House Daily
* * * *

Investment House Daily Subscribers:

MARKET ALERTS:

Targets hit: AAP; BAC; DDS; IMGN; ROK
Entry alerts: C; ULTA; XON
Trailing stops: XNET
Stop alerts: LEDS

The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

********************************************************************
The Market Video is DIVIDED into component parts: Market Overview, Economy,
Technical Summary, and the Next Session. Choose the segments you are
interested in without having to search a longer video. Click on the link to
the portion you wish to view.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************

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

- FB tries to ruin the move, but only FB ends the day getting roughed up.
- Stock indices surge led by DJ30 and other large caps.
- Everything just fine or is something up? What is a blow off top?
- Stocks perhaps extended near term, no signs of a major top imminent.

Up in the sky. It's a bird. It's a plane. No, it's Boeing. Or the Dow
Industrials. Or the Dow Transports. Or the SP500. Or AMZN. Or CAT. The
list goes on and on as stocks slip reality's surly bonds and soar.

Friday could have been problematic. FB announced changes to its news feed,
changes one of its top officials formerly said would not be implemented due
to the sharply negative usage impact they had in the markets were tested.
That change will result in near term usage drops, and FB suffered for it.
There was some early coattail action as the FAANG stocks traded lower
pre-market.

But then the market's usual fix arrived: the opening bell. Investors and
traders packed all their troubles in their old kit bag and bought, bought,
bought. FAANG stocks surged with AMZN +2.23%, NFLX 1.84%, AAPL 1.81%, and
GOOG bringing up the rear at a mere +1.51%, or +16.74 points. Loser.

Of course that had NASDAQ 100 rallying hard. Again. But the Dow had JPM,
BA, CAT and company rallying hard again as well, and it outpaced NASDAQ.
SP500 was by comparison the 'GOOG' of the group, rising a mere 0.67%.
Loser.

RUTX, Thursday's star, managed just 0.33% as the January Effect did not have
much of a lingering effect. SP400 was worse at 0.27%. Loser.

SOX gained 0.59%, putting it in the middle of the pack, but the chips are
the only index we track that did not put in a new high Friday. Or any day
of the week. Or any session in 8 weeks. Despite some very nice individual
moves (e.g. MRVL), they remain mired well below the November and early
January lower high, the 's***hole' of the market to borrow from the current
political parlance.

SP500 18.68, 0.67%
NASDAQ 49.28, 0.68%
DJ30 228.46, 0.89%
SP400 0.27%
RUTX 0.33%
SOX 0.59%
NASDAQ 100 0.75%

VOLUME: NYSE +5%, NASDAQ -1.5%. NYSE finally cracked back above average; at
least it was upside. NASDAQ trade faded to average after 7 sessions of
above average trade.

ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.5:1

NEW HIGHS: NYSE 396, NASDAQ 423. This is getting toward, but not at,
frothy.


Okay, so what gives?

The stock indices are soaring. There is high optimism. Economic activity
appears to be rallying though December Retail Sales reported Friday were not
barn burner. They were good enough, however, to make the 2017 holiday sales
season +5.5%, the biggest jump since before the Great Recession. Wow, after
all of that 'recovery' during the prior administration that never felt like
a recovery for 95% of the US population, NOW, in 2017 to early 2018, there
IS REAL recovery. It feels really good, and people are VERY excited about
it.

You can see it in business as projects are now greenlighted from the huge
corporations to the small businesses. As is ALWAYS the case when you go
from restrictive regulation and taxation to lower regs and the proper form
of lower taxes, you get money POURING into the economy. The millions upon
millions upon millions of announced bonuses and wage hikes are not 'crumbs'
as one of the many 'should no longer be in Congress given he/she has been
there for decades' House leaders said this past week. Moreover, when those
people see their take home pay rise in February when their withholding taxes
fall, you are going to see more optimism and more consumption.

Economic growth was 3% or better for 3 straight quarters, and while the
official estimates for Q1 are still below 3%, that will change and the US
will logs its first year of 3% growth since the Great Recession after the
first 10 year stretch without such a year since the Great Depression, 80
years ago. Again, a real recovery.

THUS, it would appear the stock moves, while perhaps a bit overblown near
term, are justified.


Maybe. What about the other side of the coin? Not the 'economic recovery
is phony' side -- that is just utter stupidity. No, I am talking about the
justification for the market's straight upside rally?

Sentiment is great as noted. Perhaps too great?

*Bulls keep getting more bullish; no surprise there given the stock run.
Bulls jumped back up to 64.4, matching the cycle high hit two months back.

*A new story out shows the big increase in credit card debt seen the past
month can in part be attributed to people using their cards to buy . . .
Bitcoin.

*Laymen interest in stocks and cryptocurrencies has surged. I had one of my
son's girlfriends text me asking what is the best trading platform for her
brothers to use. I saw this same kind of thing before the top in early
2000. Of course, seeing it is one thing; WHEN it is too much is another,
right?

*'Experts' are very busy justifying the rally (and thus their existence by
telling you it will go on and that you need their services -- hmm, I guess I
fall into that category). One I heard Friday was the monthly influx of 401K
dollars into the market. You know, back in 1998 myself and a bunch of us
other market students felt we were so smart because WE were the ones who saw
that happening. We saw how so many 'ordinary people' were shifting to using
the market as a form of savings versus traditional savings accounts, maxing
out their contributions and putting it all into stocks. We felt that with
the great economy that was only getting better and better that the '401k
Effect' would keep the market rallying with just minor corrections at normal
intervals.

Then the late summer/early fall of 1998 hit and in short order the Dow fell
from 9367.58 to 7400, a 21% drop. NASDAQ hit 2028 to end July that year,
then fell to 1357 as of 10/30, a 33% plunge. Sure it recovered with a
massive run in 1999 thanks to the Fed flooding the economy with pre-Y2K
billions (that were unneeded and stuffed into the market), but it goes to
show you that major selloffs STILL occur even with 'everyone' investing in
the market. What it showed: when the novices get in, when they panic, they
act as a magnifier of what moves would normally be.

Does this mean the market run is over? No! The market surged again in
1999, 2000 before it collapsed, and that was because of bad policy decisions
designed to slow the economy. They worked -- too well. It simply points
out you CANNOT assume that money will continually pursue stocks with no end.
You still have to watch the leaders, the economy, and the overall market
action and determine if tops are forming.


The technicals, the REAL story.

You are likely hearing a lot about a thing called a blow off top. This is
when the market surges higher and higher, almost straight up. The gains
typically get larger until a big surge sucks up all the cash on the
sidelines and there is nothing left to continue the buying. The move
stalls, rolls over, and crashes.

Other attributes:
*Stronger and stronger volume, the final moves showing the biggest volume of
the entire rally. Volume can be strong and then you see volume that even
makes that prior volume look like kindergarteners were trading.

*Breadth: Some moves show narrower breadth as fewer and fewer stocks
participate in the rush higher. In 1998, NASDAQ had just a handful of names
leading the charge. DELL held out the longest and we managed to make a lot
of money holding onto it after most crashed, playing out a stock split play.
My brokers were going nuts wanting me to sell, but technically there was no
reason to sell that last stock as it had not rolled over. They were calling
me 5 times a day about my positions, but I held on for another week to two
weeks and made almost 50% more. Then I sold.

Breadth can be broad as well as the ETF's, something relatively new compared
to old market tops, buy the stocks their fund tracks. Thus if they are
getting money they will be buying with the 'buy' light being on for the
market.

That makes breadth more difficult a measure, but IF breadth is narrow on the
climb, that is a red light flashing.

Is the market in a blow off?

Price action: The moves are straight up that is true. If you look at a
monthly chart of NASDAQ you see this month is outsized compared to all of
the other months in the run since the low of late February 2016. A weekly
chart shows similar action over the past two weeks as the angle of attack
has ramped up considerably.

The price action has attributes of a blow off, but it is not showing the
outlandish surges just yet. And that is often the case; they are outlandish
similar to how QCOM was up 500 points after a stock split announcement in
the late 1990's -- in ONE DAY. I bought 5 call contracts right before its
earnings with 5 minutes to go in the session. The next day the brokers were
begging me to sell. I didn't. I went fishing for white bass instead. I
kept it for another few days, THEN saw the topping action and sold for an
obscene profit. THAT was a textbook blow off. Huge trade, straight up, in
HUGE moves each day, then it reversed. It broke and never really recovered.

Breadth: Breadth is too narrow. Now when RUTX was up Thursday, breadth
surged to 3.3:1; very respectable and it reacted as it should. Overall,
however, RUTX and SP400 are lagging and breadth is therefore lagging. This
can last for quite some time, however, before the other pieces of a top fall
into place.

Volume: Very weak. You want to see good volume on the upside as it shows
buyers are committed to the rise. NASDAQ has shown above average trade for
7 straight sessions on gains, average Friday. That is not bad. It is not,
however, HUGE.

NYSE trade finally made it above average, only the second time on this move
higher. It is too low when you are looking at a typically rally.

AND THERE is the paradox. The market attributes right now 1) DJ30, SP500
too far up from the 200 day MA, too many runs without a 50 day MA test; 2)
low volume rally; 3) sharp break higher with low volume and overly
extended -- they all point to a pullback or correction to come.

At this juncture, however, they DO NOT indicate a blow off top that puts in
THE top for the market that results in a new bear market. What these
indications DO show is that the market is extended, it has become more
extended after this week, and you need to watch for signs of topping such as
leaders reversing intraday after gapping higher again or surging after the
open then topping out and sliding back -- on big volume. Big volume is a
key otherwise they could just be taking a break for a day as they did . . .
early last week.


What plan of action?

With SP500 and DJ30 extended and even more so after Friday, and NASDAQ
somewhat extended itself, you have concern about when the
pullback/test/correction comes. Nothing, however, or damn little, is
suggesting a virile selloff is just around the corner other than the extent
of the run. Fear of flying, right?

Further, NASDAQ, as judged by FAANG, is not extended that far. While FAANG
stocks rallied well the past two weeks, as I have noted several times, they
based from the summer to October earnings. Then they broke out and are in
the process of rallying post-breakout. While AMZN may be near term extended
on its last run, bigger picture it is still just moving higher in runs after
its breakout. Ditto GOOG. Again, it is a case of having put in a new good
run and a bit extended near term based upon the size of prior post-breakout
runs.

Thus, you let your good plays run, taking profits as they hit initial
targets, start getting closer to expiration for options positions, or after
making a secondary or tertiary run from the breakout. Banking partial
profits along a run is prudent and locks in gains and takes the pressure off
about letting a winner run. The hardest things to do in investing are 1)
getting in when a stock says 'buy me,' (or 'sell me' short), 2) letting a
winning position run, and 3) admitting a play is not working and getting
out.

Taking partial profits helps you with #2, and that is one of the most
important things to do in order to make money in the market. You also have
to be in the play in the first place (taking the leap and getting in when
the indicators say to do so).

If you play blackjack you know that if you are going to do well you have to
stand when the rules say to stand, you need to double down, split, etc. when
the rules say to do so, and increase your bets. By betting correctly when
the probabilities indicate you have the best chance of winning, you can beat
the house. In other words, those times the odds are in your favor to win,
you follow the rules of winning and bet more as well. The odds are in your
favor at that point.

In stocks, you look for patterns you can make money from. You look at good
stocks, in sectors that are performing well or are 'turning the corner' and
in position to start performing. You look primarily for plays that are in
sync with the overall market trend. When those patterns indicate the 'buy
me' or 'enter' signal, you do so. If the market, the sector, the particular
stocks are in sync and working well, you put most of your money in your
account to work. It does no good to make 100% on 10% of your portfolio.
You want that gain on most of your portfolio. I am not saying put
everything into one trade, but to be smart with your money allocation and
using several plays, put enough money to work to take advantage of favorable
market conditions. That way if your stock plays rise 20%, 30% or more and
your options rise 80%, 100% or more, your brokerage accounts rise a
significant amount. You are taking advantage of when the deck is stacked in
your favor, when there are a lot of face cards still in the chute.

Right now, as noted, there is nothing indicating that the run is over or
ending. New stocks keep pushing up to try their hand at breaking higher and
running. Not all succeed but you play the plays that the market presents.
We have some GOOG, AMZN, NFLX and AAPL in the FAANG, and they are not at a
buy point right now but they are making us money on their runs. We are
buying other stocks that are trying to just start a new moves and thus
Friday, even though it was Friday and many leaders and indices have already
surged on this leg, we picked up some C, ULTA, and XON. We picked up other
well-positioned stocks earlier in the week. And of course, we also let some
good positions continue working higher as well as banked some gain on AAP,
BAC, DDS, IMGN, ROK on Friday alone. It was a week of buying, running, and
taking gain.

Therefore, we continue looking for new upside plays because we still see
good attributes in the market and, most importantly, good stocks setting up
to move higher and make their contribution to the upside. While others
test, perhaps they will get money pushed their way. We have made a lot of
money this fall and winter on that kind of rotation through the market, and
for now it looks as if that kind of rotation can continue even if the big
names such as FAANG, Dow industrials leaders, need to take a breather and
somewhat stall the large cap indices.


THE MARKET

LEADERSHIP

FAANG: FB gapped below the 50 day MA, failed an attempt to recover. GOOG
renewed its upside after a 3-day lateral move. AMZN continued flying. NFLX
continued its 3 week run. AAPL broke out over the November/December trading
range.

Semiconductors: Good moves on some that were well positioned, i.e. MRVL,
ON. TXN continued a 5 week run. AMD shook off the news its chips were not
immune from the INTC flaws. INTC still floundered. NVDA is testing
breaking to a nominal new high early week. MU, LRCX, etc. still
floundering.

Oil: Still rallying as CVX, MRO put in more gains. The others were up but
the moves slowed after the impressive Thursday surge.

Software: Some strong moves on the week and on Friday. FFIV surged to a
higher rally high. DATA added more upside to its new break higher. CRM
started higher again on volume. MSFT gapped and rallied higher in a new
move.

Retail: Excellent moves on the week and on Friday. DDS surged off the 200
day SMA to the target. TGT is running away upside. ROST at a new high.
BBY as well. Great again indeed.

Financial: C finally broke higher from its pattern. JPM put in a new high.
BAC moved to a new high and the initial target.

Machinery/Manufacturing: Higher again. DE up all week. CAT gapped to a
new high. HON, MMM both surged upside again.

China: YY surged. BIDU as well, but it then gave up much of the move.
HTHT in a great pattern. BABA forming a possible handle.

Drugs/biotech: IPXL continued its move higher. IMGN hit the initial
target. SRPT surged to a new high. AMGN broke higher, BIIB does not look
bad to do the same.

Transports: A strong week for all. Friday the airlines moved well again.


MARKET STATS

DJ30
Stats: +228.46 points (+0.89%) to close at 25803.19

Nasdaq
Stats: +49.28 points (+0.68%) to close at 7261.06
Volume: 1.98B (-1.49%)

Up Volume: 1.12B (-370M)
Down Volume: 815.94M (+325.73M)

A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Advancers led 3.19 to 1

New Highs: 423 (+104)
New Lows: 17 (-6)

S&P
Stats: +18.68 points (+0.67%) to close at 2786.24
NYSE Volume: 870.1M (+5.12%)

A/D and Hi/Lo: Advancers led 1.16 to 1
Previous Session: Advancers led 3.36 to 1

New Highs: 396 (+104)
New Lows: 57 (+21)


SENTIMENT INDICATORS

VIX: 10.16; +0.28
VXN: 14.57; -0.20
VXO: 9.30; +0.42

Put/Call Ratio (CBOE): 0.74; +0.02


Bulls and Bears: Bulls surged back up and matched the cycle high. Bears
broke sharply lower to a cycle low.

Bulls: 64.4 versus 61.9

Bears: 13.5 versus 15.2

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: 64.4 versus 61.9
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 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: 13.5 versus 15.2
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 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: 2.55% versus 2.55%.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.55%
versus 2.559% versus 2.551% versus 2.482% versus 2.456% versus 2.463% versus
2.464% versus 2.405% versus 2.434% versus 2.412% versus 2.474% versus 2.485%
versus 2.484% versus 2.501% versus 2.459% versus 2.398% versus 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: 1.22060 versus 1.20608. Euro explodes past recent and September
high in a breakout move.

Historical: 1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus
1.20313 versus 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
1.1936 versus 1.1936 versus 1.18998 versus 1.18593 versus 1.18628 versus
1.18658 versus 1.18792 versus 1.18408 versus 1.17703 versus 1.1752 versus
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


USD/JPY: 111.024 versus 111.204. Dollar broke below the 200 day SMA late
week and continued lower Friday.

Historical: 111.204 versus 111.534 versus 112.706 versus 113.15 versus
113.58 versus 112.749 versus 112.677 versus 112.27 versus 112.690 versus
112.758 versus 113.216 versus 113.208 versus 113.304 versus 113.363 versus
113.334 versus 112.870 versus 112.625 versus 112.619 versus 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


Oil: 64.30, +0.50. Up all week as oil continues its breakout run from
mid-December.


Gold: 1334.90, +12.40. Gold breaks higher from a 2 week lateral move.

End part 1 of 3
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Sunday, January 07, 2018

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

* * * *
1/6/2018 Investment House Daily
* * * *

Investment House Daily Subscribers:

MARKET ALERTS:

Targets hit: MSFT; SIFY; YY
Entry alerts: AAPL; FENG; GRUB; MMM; SQ
Trailing stops: ROKU; SRPT; ULTA
Stop alerts: ROKU

The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html

********************************************************************
The Market Video is DIVIDED into component parts: Market Overview, Economy,
Technical Summary, and the Next Session. Choose the segments you are
interested in without having to search a longer video. Click on the link to
the portion you wish to view.

TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4

TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4

TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
********************************************************************

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

- Stocks rally all week as the large caps, including NASDAQ, lead.
- Jobs Report misses on storm effects, but some very interesting internal
numbers.
- Small caps still looking for the January effect.
- Will the money stay in the market, and if so, will it stay with the large
caps or now move to smaller caps?

Quite the start to 2018, obviously upside and obviously has many stoked
about the stock market's prospects for 2018. Tax reform, a perception the
economy is picking even more speed, and a sense that the Fed cannot be that
aggressive given events such as the fairly large miss in December jobs.

Of course that is a lot of poppycock. The tax reform is definitely a help,
and indeed the economy is already improving on the reduction of regulations;
adding tax incentives will only help. As for the Fed, well, if the economy
really does take off, the Phillips Curve hugging FOMC will hike rates more
than the 3 times anticipated. They will panic as Volcker did in the early
1980's when Reagan's supply side economics were ready to pass. They cannot
help it; it is in their nature. The supposedly most learned economists in
the world cling to their Phillips Curve doctrine despite now decades of
history demonstrating it does not work, the most recent being the past 10
years. Married to ideology versus facts. A lot of that going around these
days.

Even so, one cannot discount the market gains. Impressively strong start to
the year. DJ30 crossed 25,000 while NASDAQ crossed 7,000. DJ30 +576.65
points (2.3%), NASDAQ +233.17 (3.3%). Of course, new highs all around once
again on Friday (less SOX). As with most of the week, however, it was the
large caps, both NYSE or NASDAQ, that led while the small caps brought up
the rear.

SP500 19.16, 0.70%
NASDAQ 58.65, 0.83%
DJ30 220.74, 0.88%
SP400 0.41%
RUTX 0.28%
SOX 0.64%
NASDAQ 100 1.04%

VOLUME: NYSE -14%, NASDAQ -3.5%. NYSE trade slipped back below average
Friday, able to mount above average volume only Thursday. NASDAQ trade fell
as well, but it remained above average as on Wednesday and Thursday. Better
accumulation strength on NASDAQ for the new year: they lagged at the very
end of 2017 and the past week saw some catchup in that regard.

ADVANCE/DECLINE: NYSE 1.5:1, NASDAQ 1.5:1. For a third session breadth
remained at 3:2, just a middle of the road advance. Again, with the small
caps lagging in favor of the fewer large caps, breadth obviously lagged.


With this kind of start, 2018 must be set for a barnburner year. Perhaps.
Mr. Tepper Thursday said that stocks heading into 2018 were 'as cheap' as
they were heading into 2017. Giddy up. You may recall, a few years ago Mr.
Tepper appeared on CNBC one morning and said he was 'concerned' about the
market as it had faded for several weeks and the Fed was being coy. We were
tracking a lot of stocks that set up very good patterns to that point, and
on that day, the day Tepper made that statement, the market bottomed and
those stocks broke higher. The pessimism of many big names turned the
market and we made a lot of money in the ensuing rally.

With all of this positive sentiment, surely the market will rally just as
steadily as it did in 2017, right? Who knows? But I will say that more and
more and more professionals, commentators, and everyday citizens are getting
converted to the idea the market is going to head higher. As discussed
Thursday (and if you didn't read it, do so!), that is always a dangerous
situation that leads to a correction, but the WHEN is the key. Big surges
inevitably revert. As long as leadership looks strong and the policy moves
are correct (as they are thus far), the upside, regardless of how extended,
can continue.

Thus, Friday, again, we were buying very good stocks moving higher, e.g.
AAPL, MMM, SQ, FENG, GRUB. We also took gains on some more positions that
hit targets: CNIT, MSFT, SIFY, YY. Some rally nice gain taken Friday. As
on Tuesday. And Wednesday. Some great gains and more in progress.

Even as we bought more positions as more quality stocks broke higher, we
could not help but thinking about the coming week and whether new money
would continue to push into the market. The first week of a year in an
uptrend of course has money pushed into it; indeed, this was a really strong
week as apparently a lot of the money that LEFT the market in November and
early December came right back in. Remember our discussion of the big names
that publicly announced they had pulled money from the market in August and
September would be forced to put it back in? They did. Same kind of thing
happening right now as that money taken out comes right back in.

After that first week, however, we will see if the money continues to come
in. FAANG took off to the upside again, chips found new buyers after their
selloffs. If the market continues producing new upside groups, the rally
continues. Right now it is doing that as energy has emerged a leader after
several false starts. Metals came around rather rapidly. More leaders
filling in behind those that surge higher keeps the rally going. That means
more money coming into the market, and of course, that takes you back to the
same question: will it continue coming in?


NEWS/ECONOMY

After a lot of buildup to the jobs report, goaded on by the Thursday ADP
report, jobs creation was 32K less than expected. It would appear the
storms had a bit more impact than anticipated. Okay, it was not that great,
but the market still liked it. Just right, I suppose.

Non-farm payrolls: 148K vs 180K exp vs 228K November. 204K/month in Q4

Unemployment rate: 4.1% vs 4.0 exp vs 4.1 Nov

Earnings: 0.3% as expected vs 0.2% prior. 2.5% year/year

Workweek: 34.5 as expected vs 34.5 prior

2017: 2.1M jobs created

Healthcare: 31K
Construction: 30K
Manufacturing: 25K (+196,000 in 2017, jobs that were supposedly never coming
back)
Food and Drink: 25K
Warehousing: 30K
Retail: -20K (-67K in 2017)

And this is said not to include any of the Amazon workers as they don't know
where to put them!

Participation: 62.7% flat for 3 months

U6: 8.1%

Black unemployment rate: 6.8%, -1% year/year, a record low.

Food Stamp recipients: -2 million


Trade balance, November: -$50.5B vs -47.9B expected vs -48.9B Oct.
A 6 month high on the deficit. Why? Imports surged. You will be told that
is horrible by everyone including Trump. But they are wrong. What this
tells you is that the US economy and consumer are going well. We always buy
more imports when the economy is working for us. When US consumers are
confident, they buy foreign goods, they buy domestic goods. Thus, a surge
in imports is a positive economic indication even if it detracts from
overall GDP.


Factory Orders, November: 1.3% versus 1.4% expected versus +0.4% Dec
(from -0.1)
Ex-Transports: +0.8%
Business investment: -0.2%. Disappointing, but consider: the tax reform
debate raged and looked to be on life support. No one was going to commit
big money until that was decided. It is. Expect more. With 100%
expensing, of course there will be more.


Tax reform effect: As of this week, 85 major companies now offering bonuses
or extra compensation to workers.


THE MARKET

CHARTS

The large cap indices launched almost straight up on the week as money
flowed into the big names. Something of an inverse January effect as the
small caps lagged.

NASDAQ: Went with NASDAQ to lead off though any of the big 3 large cap
indices would suffice. NASDAQ jumped off the 20 day EMA test Tuesday and
rallied on a solid expansion of volume back above average. Big names did
the leading as NASDAQ 100 shows even a stronger gain as FAANG jumped back in
on the upside.

SP500: Rocketing upside again after another 20 day EMA test. Volume was up
but less than impressive with only Thursday showing above average trade.
Extended off its 50 day EMA it left behind in early September, it should
correct, but the new money coming in was not about to let it. For now,
playing the move, watching for trouble such as good moves reversing sharply.
Not thus far.

DJ30: Nice surge, quite strong Friday after lagging NASDAQ on the week. As
extended as SP500 above its 50 and 200 day MA's, but its mix of large cap
industrial and tech is enjoying the new money.

SOX: Big moves early week then riding the wave, surpassing the early
November high and now looking at the late November recovery peak at 1342
(closed at 1325.71). A good surge with some good patterns moving higher
along with some not great patterns. New money was obviously pushing it and
that leaves me wondering if SOX can maintain the rebound.

RUTX: Big move Tuesday but after that the small caps followed versus led
the move. For January, that is a bit bass-ackward as the January effect is
where the funds buy smaller cap names as they present the greatest potential
for high percentage gains versus the mega cap stocks. Now, if the money
that chased the big names to start 2018 starts looking elsewhere, the small
caps are primed to move. Indeed, if there is a change next week that could
very well be the change.

SP400: Similar to RUTX, SP400's best gain was early week. New highs each
session but slowed as the week progressed. A bit stronger than RUTX, in the
middle of the large caps and smalls -- as midcaps I guess that is
appropriate.


LEADERSHIP

FAANG: In the lead again as AAPL joined in. FB new high. AMZN, GOOG, NFLX
all new highs. Big buying in these stocks and the latter 3 above are all
building very strong gains for us. Remember, these are not extended
vis- -vis the other large caps: they based all summer into fall and broke
out in late October. They are still relatively early in their moves.

Oil: This time showing staying power. Big names put in good moves and held
them, e.g. CVX, XOM, MRO, HAL, SLB. Kept waiting on HAL to test; it didn't.
Mid-size working as well, e.g. APC. Small also good, e.g. NOG, DNR, PTEN,
CRZO.

Semiconductors: A nice recovery with some good patterns really moving well,
while others rebounded but still have weak patterns. The good: XLNX, MRVL,
MCHP, NVDA. Questionable patterns: LRCX, AMAT, QRVI; SWKS. INTC is trying
to recover from its gap lower on the identified flaws in its chips; we will
see.

Software: CNIT surged but it is a small issue. FFIV was still solid. MSFT
hit our initial target. VMW up nicely on the week. CRM rallying well for
us. Working on it.

Retail: A week were most tested, some struggled after good moves. AAP
surged upside, ROST enjoyed a higher high. TGT testing, COST, TLRD and
others showing the same. Good moves some testing.

Financial: Up midweek, but as usual, it is a fight. C up but cannot seal
the deal on the new upside break. BAC did put in higher highs to end the
week. JPM did but faded back to the 10 day EMA Friday. Working higher but
back and forth day to day.

Machinery/Manufacturing: CAT, DE up again, TEX, CMI testing. Still strong
manufacturing. UTX, HON, EMR all breaking higher. Solid.

China: Some strength returning. YY surged to the initial target. BZUN up
all week for us. CNIT exploded higher through the target. BIDU broke
higher, tested well late. BABA broke upside, pushing for a new high. HTHT
making a nice test of its run; possibility for this week.


MARKET STATS

DJ30
Stats: +220.74 points (+0.88%) to close at 25295.87

Nasdaq
Stats: +58.64 points (+0.83%) to close at 7136.56
Volume: 2.02B (-3.35%)

Up Volume: 1.23B (-90M)
Down Volume: 747.68M (+9.11M)

A/D and Hi/Lo: Advancers led 1.47 to 1
Previous Session: Advancers led 1.5 to 1

New Highs: 269 (-7)
New Lows: 16 (-10)

S&P
Stats: +19.16 points (+0.70%) to close at 2743.15
NYSE Volume: 771.2M (-13.85%)

A/D and Hi/Lo: Advancers led 1.53 to 1
Previous Session: Advancers led 1.45 to 1

New Highs: 252 (-41)
New Lows: 22 (+2)


SENTIMENT INDICATORS

If you have not done so, please read the Thursday report discussion of
sentiment in the Market Summary.

VIX: 9.22; 0.00
VXN: 13.48; -0.49
VXO: 8.56; +0.24

Put/Call Ratio (CBOE): 0.92; +0.10


Bulls and Bears: Trading back and forth in a narrow range at the top what
is historically an extreme level for bulls.

Bulls: 61.9 versus 64.1

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 (1/2/18) versus 64.1
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 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 15.2 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 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: 2.476% versus 2.456%. Down early week. Lateral to end it, right in
the range of the past 3 months. The volatile range.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.456%
versus 2.463% versus 2.464% versus 2.405% versus 2.434% versus 2.412% versus
2.474% versus 2.485% versus 2.484% versus 2.501% versus 2.459% versus 2.398%
versus 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: 1.20313 versus 1.20756. Another upside week for the euro though
it finished lower on Friday.

Historical: 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
1.1936 versus 1.1936 versus 1.18998 versus 1.18593 versus 1.18628 versus
1.18658 versus 1.18792 versus 1.18408 versus 1.17703 versus 1.1752 versus
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


USD/JPY: 113.058 versus 112.749. Up on the week after testing near the 200
day MA. Range-trading right now.

Historical: 112.749 versus 112.677 versus 112.27 versus 112.690 versus
112.758 versus 113.216 versus 113.208 versus 113.304 versus 113.363 versus
113.334 versus 112.870 versus 112.625 versus 112.619 versus 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


Oil: 61.44, -0.57. Down Friday, but a solid continuation of the break to a
higher high. Bumping at the mid-2015 highs, a key resistance point that
likely hems in oil prices or awhile.


Gold: 1322.30, +0.70. Up all week, continuing 4 week run off the lower low
from early December. A pause after that kind of move is normal.


MONDAY

Again, the big question is whether the money keeps coming in. It poured
into the large caps the past week. As noted in the discussion of the small
caps, it is January and typically the smaller issues get the money. IF
money tapers its bid for the large caps after that first strong week, it
makes sense it would seek the small and midcaps, the more traditional
January buys. Thus, even if the large caps slow, the market can still rise
gratis bids moving to the smaller caps. We will see.

Definitely a strong start to the year and the old adages say that bodes well
for the year. Does not mean there are not fades, pullbacks, or even out and
out corrections. It is all a matter of when and what stocks.

For now the retail are a bit weaker after strong runs, but oil, FAANG,
manufacturing, tech are strong. Will chips continue gathering money their
way? Will others step up and move up, e.g. China, drugs, internet? The
market will need new sectors stepping up to keep the move rallying,
especially if SP500, DJ30 start to correct back after their extended moves
up from the 50 day MA.

We will continue playing the trend, watching how the leaders trade (e.g. any
reversals, stalls), and looking for and picking up good stocks in good
patterns that are not extended, taking what the market gives as the run
continues.

Have a great weekend!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 1736.56

Resistance:

Support:
7,000 from mid-December
6914 is the late November all-time high
The 50 day EMA at 6842
6796 is the early November 2017
The 2016 trendline at 66.60
6641 is the October high
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
The 200 day SMA at 6394
6341.70 is the all-time high from early June.
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 2743.15

Resistance:

Support:
The 20 day EMA at 2682
2694 is the mid-December peak
The 50 day EMA at 2637
2597 is the November 2017 high
2549 is the upper channel line from the March 2009 uptrend channel
2491 is the August all-time high
The 200 day SMA at 2490
2480 the late August and early August highs
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 May 2017 low


Dow: Closed at 25,295.87

Resistance:

Support:
24,835 is the mid-December consolidation range
The 20 day EMA at 24,688
24,312
The 50 day EMA at 24,118
23,602 is the early November 2017 high
23,608 is the early November high
22,420 is the September high
The 200 day SMA at 22,194
22,179 is the August 2017 all-time high
22,086 is the mid-August lower high
21,681is the July prior all-time high
21,638 is the July 2017 closing high
21,529 is the June 2017 high

End part 1 of 3
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