Sunday, June 03, 2018

The Daily, Part 1 of 3, 6-2-18

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6/1/2018 Investment House Daily
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MARKET ALERTS:

Targets hit: BABA; IQ; WHD
Entry alerts: HTHT; TXN; VEEV
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Stop alerts: None issued

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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

- NASDAQ, SOX answer the call, RUTX remains solid, SP500 tries to follow.
- May jobs top expectations, wages rise.
- End of the part-time economy? Nearly 1M full-time jobs added.
- A good start to June with some new money, but it was . . . a Friday.

Thursday I noted that how the indices respond to the Thursday trade and end
of month drop would be the tell. I also said NASDAQ, and SOX if it could as
well, needed to break higher, citing MSFT, INTC, AAPL as key stocks.

Well, Friday they obliged. Futures were higher from the open of trade,
holding a fairly tight range into the actual jobs report. The President
tweeted a couple of hours ahead of the release that he was looking forward
to the numbers, and that was interpreted as an indication they would be
good. Some attributed the morning rise in futures to that tweet. Looking
at the timeline, however, that is hard to conclude given futures were
already up before the tweet and didn't move much at all from there. Oh
well. The President should not, however, be tweeting about upcoming reports
just as his predecessor should not have given out the numbers ahead of the
official release. What happens next time if there is no tweet? Assume they
are not so great?

The jobs report was good enough and indeed initially caused futures to drop
as the 'Fear of the Fed' reemerged. A surprise beat, decent wage growth,
and high-quality jobs as the Household Survey showed 904,000 full-time jobs
added. Now that is REAL jobs growth, not the Affordable Care Act stunted
part-time waiter and burger flipper jobs through 2016.

In any event, if there was some Fed fear, stocks moved past it rather
quickly, opening higher, rallying to 1:00ET, then working laterally, holding
the gains into the close.

SP500 29.35, 1.08%
NASDAQ 112.21, 1.51%
DJ30 219.37, 0.90%
SP400 0.61%
RUTX 0.88%
SOX 2.34%

VOLUME: NYSE -38%; NASDAQ -13%. NYSE trade faded back to average after a
sharp end of month spike Thursday. Decent trade is about all you can say.
NASDAQ still showed solid overall trade levels (2.2B vs 2.4B), still solidly
above average after a month-end housekeeping session Thursday.

ADVANCE/DECLINE: NYSE 2.4:1, NASDAQ 2.4:1. Not the 4:1 from Wednesday, but
solid enough.


Yes, NASDAQ was a big leader with its big names working well. MSFT, INTC,
NFLX, BABA broke to higher highs. GOOG, NVDA, AAPL put in solid moves. It
is not unusual for techs to take some leadership in the summer and that is
why I put the emphasis on NASDAQ making a move. Good start.

Those leaders and many more gave NASDAQ a clean break from its May range,
clearing the January penultimate high. NASDAQ is now 34 points from the
March all-time closing high. Volume was not as big as the month-end trade,
but it was still solidly above average, the capper to a four-session run of
much improved volume.

SOX added the bonus move as it too broke higher and cleared the January
high. SP500 rallied back to near the top of its range in a decent move.
RUTX shook off the Thursday downside and moved right back up to the
Wednesday all-time high.

Thus, at least for Friday and the start of the new month the indices that
needed to contribute did just that. Okay, next week DJ30, SP500 and SP400
need to contribute . . . hey, it worked Friday.

We banked some gain on BABA, IQ and WHD as the former two hit our initial
targets. WHD struggled so we took the rest of the gain off the table. We
bought some HTHT, TXN, and VEEV. There were others we could have picked up,
e.g. AAPL, RHT, TTWO, but the volume was iffy, they did not move too far,
and we likely still get good entries to start next week. On top of that, a
quick review of stocks shows some nice patterns ready to move higher to
support the upside move. As noted all week, that is what the market needs,
i.e. enough leaders to push the indices.

JOBS REPORT

Jobs, May: 223K vs 190K exp vs 159K prior (from 164K)

Unemployment: 3.8% vs 3.9% prior. Lowest since 4/08

Wages 0.3% vs 0.1% prior; +2.7% year/year

Workweek: 34.5 as expected and unchanged

Participation: 62.7% vs 62.8% prior as 170K left the workforce.

Those not in the labor force are at a new record of 95.9M. The ACA still has
effects. It was never repealed, just tinkered with. It still has its impact
and it shows.

Black unemployment: 5.9% versus 6.6% prior. Lowest since 1972.

Retail: 31K
Healthcare 29K
Construction 25K
Professional/Business 23K
Manufacturing 18K
Temp -7800

Full-time versus Part-time.

Recall during the Obama years the monthly lament about the low wage,
part-time jobs dominating the jobs reports. With the ACA in place and other
non-growth policies, it did not behoove companies to expend money on
full-time employees. Many industries and sectors did not hire at all
because the economy was so slow in terms of growth (recall the years and
years of top line revenue misses as sales declined during the 'recovery').
These were mostly the industries where you would typically find full-time
jobs. Instead, companies paid dividends, bought back stock shares, and cut
costs anywhere and everywhere. That is how they 'beat' the bottom line
earnings expectations even with sales declining quarter after quarter.

Indeed, even if they wanted to hire full-time workers, the ACA made that
unprofitable because of the added taxes and costs. The lucky received
exemptions. Still, it did not pay to hire full-time workers given the
economy.

Thus the proliferation of part-time jobs. Every month we would lose more
full-time jobs but see more and more part-time jobs. The sectors hiring
were retail, hospitality and leisure, government (huge federal expansion
under Obama), retail, food and beverage.

Now look at today. Individual mandate removed (though the ACA is still
there, still causing price increases in insurance premiums and otherwise
plaguing small businesses), anti-growth regulations unwritten, several taxes
undone, both replaced with pro-growth policies and tax reductions and
incentives.

The result: we started to see a return to high quality jobs in construction,
manufacturing, finance, etc. We saw retail hires shrink. We saw low hour,
low wage part-time jobs dry up.

So much so that in May a record was set for full-time jobs at 904,000.
Almost 1 million new full-time jobs. Quality jobs.

President Obama likes to take credit, likes to say he 'set the table' for
this rebound. In a way, yes he did. His policies were so anti-growth and
anti-business I said, during the heat of the election campaign, that WHOEVER
won could preside over a booming economy just by being smart and rolling
back the economy-crippling regulations and taxes. Clinton, Trump, Christie,
Cruz, etc., etc. Heck, even Bernie Sanders could have done so if he got rid
of the regulations and taxes (which he would not do, instead he would have
piled on more).

Thus, Obama DID set the table but it was not in the way he implies, i.e.
that his policies set up a growth environment. No, it was because his
policies HELD BACK what would have been a stronger, natural US economy
recovery that Trump's economy looks so good. I mean, Trump has not repealed
the ACA, just the mandate. He has removed a lot of regs, but there are
still many hobbling and hindering business. If he was able to do what he
wanted or said, the economy would REALLY be rumbling higher.

And that brings me to another point. I said this all during the prior
administration: we were being 'dummied down' in our understanding of what a
really strong economy is. We were told the US could not grow as fast as in
the past, etc. -- the same old tripe we were told in the Carter years.
'Nice try US, it worked for a while but the gravy train is over.' Then a
free enterprise President with a clear understanding of what drives that
system was elected. Huge boom.

So today I hear Cramer on CNBC say this was the best economy of his lifetime
(he is older than I am). Nonsense. The 1980's were stronger and broader.
Stronger GDP growth, more jobs created, all sectors booming, NEW tech
sectors emerging and booming. There is NO comparison. Today is 'okay'
growth, the kind of growth generated after the first few years of the Reagan
policies generated 4%, 6%, 7%, 10% and higher GDP rates. Strongest in his
lifetime? Absurd. But, Cramer has a history of these kind of statements,
i.e. full of BS and hyperbole.


THE MARKET

CHARTS

NASDAQ: Top billing given the breakout form the 2+ week lateral range and
the fact I noted Thursday it needed to do so. Volume lower but still
solidly above average as it takes out the January high and is running at the
March all-time high. Did what it needed, decent trade, good action from the
big names as well as the not so big names.

SOX: Clean break higher here as well, moving past the recent attempts at
higher highs. Now also cleanly past the mid-January peak. Some resistance
at 1420 from the bottom of the all-time high weeklong range and gap point
(less than 9 points away). Of course the prior high is wrapped up in that
resistance so it is basically an all-inclusive level to get through.

RUTX: New high Wednesday with a big surge off the weeklong test of the 10
day EMA. Faded Thursday, but Friday rallied right back to the all-time high
from Wednesday. Solid break higher, small caps still look good even if this
was not a session where they were in the lead (as has been the case the past
month).

SP500: Gapped off the 50 day EMA from the Thursday close, moved to a new
closing high in its lateral range. Not really a breakout as it has not
cleared the chaff at the top of the range. A good move aided by of course
the big NASDAQ names that started upside. Now it has to . . . actually make
the move and make it stick.

SP400: The midcaps looked so good Wednesday with their strong surge to a
new recovery high, clearing the range. Thursday gave that move back and
Friday, while higher, was an uninspired gap to a doji well below the
Wednesday and Thursday highs. Quite the letdown.

DJ30: Speaking of letdowns, DJ30 looked great two Mondays back, gapping
upside and out of its range. It gave that back, then really stunk the place
up with the Tuesday gap to the 50 day SMA. It bounced back and forth each
session since, going nowhere. Its claim to fame is that it did not break
below the 50 day MA. With the other indices breaking higher, that is faint
praise.


LEADERSHIP

FAANG: Have to start here as several are NASDAQ stocks. AAPL broke upside
from a 3 week lateral range over the 10 day EMA. Not any volume, but
promising for next week. FB continued a break higher from Thursday closing
with an all-time high closing price. NFLX Broke nicely higher off a 4-day
lateral move. GOOG gapped sharply higher and cleared the early May peak.
Two good days of upside price and volume. AMZN edged higher again on still
very low trade. All higher so NASDAQ was higher.

Chips: INTC put in a multiyear high with a solid upside break with volume.
MU recovered some from the Thursday downgrade drop. AMD posted a sharp move
and is now at the top of a 17 month trading range. AVGO is moving over its
200 day SMA. QRVO has set a good pattern. Others look stronger, e.g. XLNX,
ASML, SIMO. Indeed, SMTC broke sharply higher Thursday. The group is
coming around though it is not 'there' yet.

Software: VMW gapped sharply higher on earnings, clearing the May high;
that could produce an entry after a lateral test. MSFT broke to a new high.
VEEV broke higher Friday on very nice trade. NOW continues its comeback,
closing at an all-time closing high. FFIV is trying to break higher again.
TTWO started higher but could use more trade. GLUU is trying the same.
Very solid stocks working better.

Drugs/Biotechs: A mixed group but very good patterns and moves. ARWR
posted another good week. IMMU bouncing off the 10 day EMA. VCEL breaking
higher off a test. VVUS in a nice test. The group continues to produce
winners.

China: New life. BABA broke upside Friday. YY broke higher earlier in the
week. IQ broke sharply higher starting Wednesday. ATHM, HTHT enjoyed
strong weeks and Friday SOHU started upside with a nice move.

Industrial: Struggled but through they struggle they held on and have
worked some good consolidations, e.g. HON, BA. CAT can go into that
category as well.

Oil: Tough prior week, some healing this week though no clear renewal of
the upside. COP recovered decently off a 50 day MA test. APC likewise.
MRO recovered off a 20 day EMA test. CVX is trying to bounce from the 50
day MA. Others are struggling, e.g. PTEN, SPN, NBR -- small drillers and
operators.


MARKET STATS

DJ30
Stats: +219.37 points (+0.90%) to close at 24635.21

Nasdaq
Stats: +112.22 points (+1.51%) to close at 7554.33
Volume: 2.2B (-12.7%)

Up Volume: 1.59B (+797.72M)
Down Volume: 568.39M (-1.122B)

A/D and Hi/Lo: Advancers led 2.41 to 1
Previous Session: Decliners led 1.57 to 1

New Highs: 206 (+48)
New Lows: 43 (-7)

S&P
Stats: +29.35 points (+1.08%) to close at 2734.62
NYSE Volume: 856.023M (-37.52%)

A/D and Hi/Lo: Advancers led 2.37 to 1
Previous Session: Decliners led 1.72 to 1

New Highs: 116 (+14)
New Lows: 40 (-26)


SENTIMENT

VIX: 13.46; -1.97
VXN: 15.11; -1.67
VXO: 12.52; -1.46

Put/Call Ratio (CBOE): 0.86; -0.27

Bulls and Bears:

Bulls edged higher as part of a 4 week recovery from the plummet from the 65
range. Hardly a new surge. Bears are holding a rebound from the prior five
months, but frankly, it is not that much of a bounce.

Bulls: 50.0 versus 49.1

Bears: 19.2 versus 19.2

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: 50.0 versus 49.1
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: 19.2 versus 19.2
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: 2.902% versus 2.86%. After a early week on the trade scares, bonds
slipped back to end the week, pushing yields higher. Now testing the 50 day
MA and the lower gap point from Tuesday.

Historical: the last sub-2% rate was in November 2016 (1.867%). 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: 1.166 versus 1.16993. Bounced up to the 10 day EMA, bumping there
Thursday and Friday, showing doji. Likely fails here.

Historical: 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: 109.53 versus 108.767. Up off the lows at the 50 day MA tested
early week. Interesting collision with the 200 day SMA ahead.

Historical: 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 versus 107.362 versus
107.267 versus 106.882 versus 106.873 versus 107.09 versus 107.16 versus
106.939 versus 107.11 versus 106.816 versus 106.797 versus 105.901 versus
106.286 versus 106.81 versus 105.397 versus 105.473 versus 104.789 versus
104.829 versus 105.892 versus 106.478 versus 105.945 versus 105.946


Oil: 65.81, -1.23. After trying to retake the 50 day MA Wednesday and
Thursday, oil failed as anticipated, falling to a lower closing low on this
selling. 60.00 looks probable still.


Gold: 1299.30, -5.40. Rallied up to the 200 day SMA through Thursday,
tried to break over but failed, then Friday gapped lower. Looks as if
gold's bounce is failing as well.


MONDAY

Good moves from key indices and stocks to end the week. That is all well
and good. Needed to do it. But, you know what is next: can they not only
hold the moves but can they push the gains? The patterns look right, the
leadership is expanding some, moves are starting. With this market,
however, there is no resting on laurels.

Fortunately there are good patterns we see ready to step up and help
continue the drive higher. Naturally we will be looking at those for plays
to further participate in the upside. With NASDAQ and SOX breaking higher
and SP500 not looking atrocious, we want to have money in them if the moves
are made.

Summer is getting going, often stocks stumble through summer even if tech
shows some leadership. That is working against the upside, but the patterns
are fanning out a bit, and a rally loves having a lot of stocks in good
patterns to drive it higher. We have some great plays in very good stocks
and are looking at even more; if the market wants to set up leaders and send
them running higher, I am not going to question it.

I have seen too many smart people outsmart themselves and miss out on good
runs that are presented simply because they are at the wrong time of the
year or otherwise make no sense. As you know, the market does not always
make sense. It does, however, set up the same kind of patterns and moves
over and over and over. They don't always make the moves (just pretty
pictures until they do, right?), but when they ARE making the moves, it is
time to move with them. We will see if this coming week the new breaks can
hold and continue higher, pulling more indices and stocks with them.

Have a great weekend!

End part 1
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