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3/17/2018 Investment House Daily
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Investment House Daily Subscribers:
Targets hit: None issued
Entry alerts: PII
Trailing stops: ARRY; NVDA
Stop alerts: ARRY
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- Expiration shows a lot of volume but still not a lot of movement.
- RUTX, SP400 show buying interest on expiration, bouncing off their tests.
- SOX, NASDAQ remain in position to try for new highs once more while SP500
and DJ30 remain quite problematic.
- If FAANG, with its current patterns, breaks higher, the entire group
likely goes higher, with chips, big tech, China stocks going as well.
- FOMC is the headline data point for the week, and a hike of 25BP is
- Lots of upside setups as the indices test the recovery moves. Can they
break higher, and if so, will the sellers re-enter and sell as on Tuesday?
And the market goes . . . nowhere. Still. Stocks tried to continue higher
early week but reversed Tuesday. NASDAQ and SOX gave up new highs. Sellers
came into the market as the leading indices hit fresh highs. Not promising.
The stock indices mostly sold the balance of the week. It was not, however,
a continuation of the Tuesday high volume selloff. Volume dropped, the
selling intensity mitigated. Indeed, after Tuesday it would be a
misrepresentation to say the selling had any intensity at all. The sellers
left, volume dropped, and stocks edged lower and laterally. After a rude
slap Tuesday with NASDAQ and SOX trying to break the top of their channels,
it was a very ordinary pullback. Ordinary and somewhat encouraging.
With SOX and NASDAQ at the top of their channels, however, the market will
have to once again defy the odds and beat the channel resistance. Thus far
they have beat the odds by avoiding a drop back to the February lows. Of
course after Tuesday they looked primed to go find them. Then the selling
intensity stalled. They are not free of that monkey on their back just yet,
but they consolidated instead of selling off, and that let a lot of stocks
form some pretty good pullbacks to support. Not new bases, just testing the
recovery runs higher. Thus, as with SOX and NASDAQ, they are in nice
consolidations, one that can break higher again, but they are also still
sitting on top of nice moves already. This has to be a real bull run to
break them all higher again. They look darn good to do it, but as noted,
they have to continue defying the odds.
Friday the indices were basically flat, except for RUTX and SP400. The
small caps and midcaps jumped nicely off the 10 day EMA and 50 day SMA,
respectively. At expiration big money was moving into domestically
sensitive areas. And it was not selling off the recent leaders either.
SP500 4.68, 0.17%
NASDAQ 0.25, 0.00%
DJ30 72.85, 0.29%
NASDAQ 100 -0.16%
VOLUME: NYSE +208%, NASDAQ +55%. Expiration, rebalance, tons of trade,
doesn't mean anything.
ADVANCE/DECLINE: NYSE +2:1, NASDAQ +1.7:1
The consensus, at least what we are reading and hearing, is that the market
is not supposed to go up anymore. The Fed is engaged in what is being
called 'quantitative tightening' (QT), it is also going to hike rates next
Wednesday and purportedly 2, maybe 3 more times this year, interest rates
are rising. There is likely more, it is just not worth reciting them.
At the same time here in the office we see a lot of patterns that look
really good to move higher. Some have not made big moves, others have put
in solid upside but have great tests in progress. While history indicates a
test of the prior lows is still a possibility, it would be foolish to ignore
good setups. The market makes a habit of not doing what everyone expects of
it. Thus we are watching these stocks and indeed buying some this past week
on the pullback when some good moves were made. We will see if those pan
out and if more join them next week off what looked to be a sharp reversal
that, at least for last week, died on the vine and allowed some really good
Thursday I said the indices were at a key pullback, a lick log for some.
Still that way after Friday, though RUTX and SP400 bounced off support. We
will see if next week they can continue and other indices move with them.
Then, most importantly, can they hold any new breaks higher without getting
the Tuesday treatment. That will be the key tell for the next attempt to
NASDAQ/SOX: Both of these indices broke to new highs last week. SOX broke
through its upper channel line, NASDAQ likely touched what could be the
upper channel line for a new channel. Both indices faded in a sharp Tuesday
high to low reversal session. The rest of the week they were lower, but the
sellers basically left. After Tuesday there was no heavy selling. None of
the indices could hold an early gain, but there was no high volume dumping
as on Tuesday. That leaves NASDAQ and SOX in tight lateral consolidations
over the 10 day EMA and in position to defy the odds and continue with more
upside. As noted Thursday, an important time for these two indices. And
all the other indices.
RUTX: Three-session test to the 10 day EMA, a bounce Friday. Expiration,
cannot make too much of it, but it is notable that the index approached the
January high, put in a rather normal test of the 10 day, then started to
bounce as it was bought more than other indices. It too is at an important
point, but it too is also showing promise.
SP400: Midcaps showed buying Friday as well, even more so than RUTX.
Cleared the 50 day SMA and the December high the prior Friday, then came
back to test that move and held. Still inside the selloff from January to
February, and that makes all moves inside that level suspect, particularly
one of these with the lack of an upside base or pattern. Still this is
promising and how the midcaps react this week, as with the other indices, is
SP500: SP500 definitely looks better than it did early week as it managed
to hold the 50 day SMA with a pair of tight doji Thursday and Friday. It
broke through the 50 day two Fridays back and then this fade. It set itself
up for a possible bounce, but overall the pattern makes me a skeptic. You
can see the outline of an upward pointing wedge from the February selloff to
present, all contained inside that selloff. That is not a bullish pattern.
We will see how SP500 performs this week off the 50 day SMA test.
DJ30: DJ30's pattern is even harder to interpret. The selloff, then a slow
rise in arguably a channel and arguably a triangle. Last week it put in a
lower high and faded to the lower trendline. Still looks weak, but it has
put itself in a position where it could bounce near term.
Chips: And still testing. Some have put themselves in position to move
higher, e.g. ON, SLAB, TXN, MU, XLNX. Others are almost there but appear to
need more work, e.g. LRCX, SWKS. As with SOX, they are getting into
position to bounce, but can they do so at these levels?
FAANG: This group poses the same question as chips, even to a higher
degree: can they move at these levels. If so, then I would say the entire
group is a buy. FB has set up something of a double bottom with handle.
AAPL is in a nice 10 day EMA test after breaking to a new high. AMZN is in
a 1-2-3-4 test of the 10 day EMA after a new high. NFLX is holding the 10
day EMA in a tight range after the breakout was tossed back Monday. GOOG is
very similar to FB with a double bottom with handle. Again, if the market
is going to move up, these patterns are ones that can make that move.
China: NTES broke higher Thursday, held it Friday. BIDU is testing the 10
day, looks good to go. BABA gapped up off the 50 day MA Thursday. YNDX is
in excellent position to break higher. ATHM is in very good position. CTRP
is showing buying and VIPS is in a good consolidation. HTHT gapped lower
Wednesday, not helping us at all, but it did hold the prior low and is
Drugs/Biotechs: Up and down but overall still working well. IMGN with a
new high Friday. VCEL in a great pennant. PTCT moved higher last week.
IMMU, ARRY stumbled and we exited. Big names continue to underperform the
smaller ones, e.g. AMGN, GILD.
Internet: LLNW continues the nice tight lateral move, but it is time to
make the break. AKAM started upside Thursday, waffled Friday, but still
looks as if it will give an entry.
Software: Holding up well enough, not inspiring with new entry points just
yet. VMW has set up the FB/GOOG double bottom -- of sorts -- pattern. FFIV
is still holding the 20 day MA. RHT consolidated laterally on the week as
the 10 day EMA caught up to it. CRM testing the 10 day EMA. MSFT near the
20 day EMA, still trending higher.
Retail: There are some that look as if they can make new breaks higher.
DDS, M, KSS, TJX. WSM did break higher Thursday. TGT is trying to form up
a pattern. WMT sold to the 200 day SMA and Friday bounced; will see if
anything comes of that. There are also some good moves, e.g. PII as it
broke higher Friday. Note the PII pattern: it is very similar to FB, GOOG,
CAT -- will they break higher as well from this pattern?
Stats: +72.85 points (+0.29%) to close at 24946.51
Stats: +0.25 points (0.00%) to close at 7481.99
Volume: 3.08B (+54.77%)
Up Volume: 1.88B (+1.124B)
Down Volume: 1.15B (-50M)
A/D and Hi/Lo: Advancers led 1.67 to 1
Previous Session: Decliners led 1.31 to 1
New Highs: 109 (+26)
New Lows: 41 (-9)
Stats: +4.68 points (+0.17%) to close at 2752.01
NYSE Volume: 2.5B (+207.77%)
A/D and Hi/Lo: Advancers led 2.03 to 1
Previous Session: Decliners led 1.71 to 1
New Highs: 40 (+8)
New Lows: 90 (-46)
VIX: 15.80; -0.79
VXN: 17.64; -0.81
VXO: 14.11; -0.62
Put/Call Ratio (CBOE): 0.96; +0.07
Bulls and Bears: The rally to new highs on NASDAQ and SOX two weeks back of
course brought the bulls back in with a solid bump of over six points.
Heck, that is a big bump. Bears were not convinced, and they actually rose
0.2 even as the market rallied.
Bulls: 54.9 versus 48.6
Bears: 15.7 versus 15.5
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 48.6
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: 15.7 versus 15.5
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
Bonds: 2.844 versus 2.826%. Bonds rallied last week, clearing the 20 day
EMA Tuesday. Rallied to the 50 day EMA then lost some ground Friday. The
move leads some to speculate if bonds are about to rally. A break through
the 50 day MA's would be the most important move for that direction.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.826%
versus 2.819% versus 2.844% versus 2.866% versus 2.896% versus 2.872% versus
2.879% versus 2.863% versus 2.879% versus 2.868% versus 2.799% versus 2.875%
versus 2.893% versus 2.864% versus 2.866% versus 2.934% versus 2.952% versus
2.893% versus 2.873% versus 2.904% versus 2.913% versus 2.833% versus 2.857%
versus 2.8577% versus 2.844% versus 2.813% versus 2.805% versus 2.707%
versus 2.841% versus 2.792% versus 2.713% versus 2.72% versus 2.72% versus
2.66% versus 2.66% versus 2.639% versus 2.617% versus 2.656% versus 2.661%
versus 2.618% versus 2.587% versus 2.535% versus 2.55% versus 2.559% versus
2.551% versus 2.482%
EUR/USD: 1.2287 versus 1.2304. Euro fell to the 50 day EMA on the week,
but it continues a 2 month lateral move that is consolidating the prior
Historical: 1.2304 versus 1.23782 versus 1.2392 versus 1.23412 versus 1.2305
versus 1.2305 versus 1.24017 versus 1.2411 versus 1.2344 versus 1.23187
versus 1.22822 versus 1.21894 versus 1.21893 versus 1.23257 versus 1.2296
versus 1.2324 versus 1.22820 versus 1.23431 versus 1.2411 versus 1.25083
versus 1.2450 versus 1.23528 versus 1.22887 versus 1.22524 versus 1.2273
versus 1.2377 versus 1.24573 versus 1.2502 versus 1.2404 versus 1.2402
versus 1.23832 versus 1.24308 versus 1.24159 versus 1.24340 versus 1.23083
versus 1.22567 versus 1.22169 versus 1.2241 versus 1.2198 versus 1.22698
versus 1.22060 versus 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
USD/JPY: 106.00 versus 106.344. Dollar is in a 4 week lateral range below
the 10 day EMA, trying to find some support for a break higher through the
20 day EMA that has held it in check since early January.
Historical: 106.344 versus 105.846 versus 106.42 versus 106.335 versus
106.77 versus 106.41 versus 106.105 versus 105.752 versus 106.359 versus
105.734 versus 106.03 versus 106.695 versus 107.381 versus 106.96 versus
106.886 versus 106.85 versus 107.581 versus 107.435 versus 106.294 versus
106.153 versus 106.782 versus 107.77 versus 108.669 versus 108.669 versus
108.797 versus 108.88 versus 109.33 versus 109.58 versus 108.651 versus
110.001 versus 109.46 versus 109.50 versus 108.77 versus 108.84 versus
108.601 versus 109.411 versus 109.033 versus 110.159
Oil: 62.41, +1.22. Still in the lateral move that started with the
Gold: 1312.30, -5.5. Unable to hold near the 50 day EMA and breaking lower
It is FOMC week and this time it is expected the Fed will hike rates 25 BP,
one of those 3 hikes for 2018. More important than the hiking is the QT,
the 'quantitative tightening' as the Fed removes the buys of the junk assets
from its balance sheet, the 'give us your poor, your wretched junk assets
yearning for a buyer of last resort' program. As with that immigration
period, there comes a time when you don't need them anymore, and just as
immigration was shut down in the 1930's until the 1960's, the asset buying
program is unneeded.
Okay, so FOMC is the big dog but there is also Existing Home Sales, Leading
Economic Indicators, Durable Goods Orders, and New Home Sales. Enough to
keep things interesting as the Fed digests the stronger than expected
Industrial production for February (1.1% vs 0.3% exp vs -0.3% January) and
Capacity Utilization (78.1% vs 77.7% exp vs 77.4% January). Michigan
sentiment was also up at 102.0 from 99.7 in February. If the FOMC raises as
expected, that should at least not rattle markets.
This is one of those situations where we see a lot of really interesting
upside patterns, but most of which are tests of upside moves. The leading
indices have recovered much or all of the February losses. They rallied to
new highs or close thereto and are now testing those moves.
The big question, the huge question, is whether they can use the
consolidations to break higher yet again, putting in new highs that can
hold. If there is a fail at this point, it is likely an epic one that leads
to a test of the February low. If not, then there will be some good buys
and moves to profit from, even if they are at higher highs and leave you
with that uncomfortable feeling that there is that low still hanging out
Recall in October I wrote that we just had to get used to the idea of buying
the FAANG and letting them work for us even if not much else was working?
That paid off huge for us. This is developing into one of those situations
where we just have to accept it for what it is, and if the moves are made,
buy them. Heck, isn't that what we ALWAYS do? We can contemplate,
postulate, speculate, and other 'ates that we want, but when it comes down
to it, you look at good patterns up or down, and if they make the moves,
then you follow the moves.
Key for this area, given the Tuesday action, is how any new breaks higher,
to new highs particularly, are treated. If they get the same old smack in
the face that Tuesday saw, that shows the sellers are still ready, willing,
and able to sell at this level. Breaks higher that fail shortly thereafter
are of course not good action, and if they start popping up all over the
place, that tells you the sellers are using each move higher to unload
shares and that a downturn is coming.
Thus, Tuesday was a warning, but just a warning because the sellers left and
stocks consolidated nicely. The next breaks higher off these pullbacks,
however, will really be the moves that tell the market's near-term tale.
Have a great weekend!
End part 1 of 3
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