Monday, June 10, 2019

The Daily, Part 1, 6-10-19

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6/10/2019 Investment House Daily
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MARKET ALERTS:

Targets hit: DE
Entry alerts: CRON; MTCH
Trailing stops: None issued
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.

SUMMARY

- Mexican tariffs officially put off, Fed still behind the market, stocks continue the rebound to start the week.
- NASDAQ and SOX lead the move as some software M&A gets investors excited.
- Stocks gap and rally, but give up a good part of the move, showing tombstone doji.
- Market ripe for a test of the move. The Fed has potentially shifted the bias so on a pullback you watch for a change in the patterns.

Stocks again found more upside as the stories leading to the selling continued to peel back. Tariffs against Mexico are off and the Fed said nothing to take back the notion the next move will be a cut, a cut in the near future.

On top of that, M&A was back on and that always gins up investors. UTX and RTN want to merge into the largest defense company. CRM is buying DATA, exciting a sector already leading the market.

Those two catalysts certainly did not get in the way of the bullish upside. Stocks were up premarket and rallied at the bell. Solid moves to midday as the stock indices put in the fifth or sixth session upside, depending upon the index.

SP500 13.39, 0.47%
NASDAQ 81.07, 1.05%
DJ30 78.74, 0.30%
SP400 0.54%
RUTX 0.61%
SOX 2.54%
NASDAQ 100 1.14%

VOLUME: NYSE +2%, NASDAQ 2%. Finally some upside volume on an upside session. Still below average, however, so no big move.

ADVANCE/DECLINE: NYSE 3:2, NASDAQ 1.8:1. Hardly inspiring.

An impressive string to the upside continues. After hitting the session highs, however, the indices peeled back the gains. SP500 and DJ30 gave up more off the high than what they held as gains as the close. NASDAQ, SP400, RUTX showed similar action. SOX managed to hold on decently enough, however, as it broke through the 50 day EMA. Always good for the market when the chips perform well.

It was another case of the indices moving to next resistance. Each move higher off the early June low seemed to put the indices at next resistance - that is what happens when you sell off, i.e. you have to move back up through that resistance. Thus far they are shooting them down.

Now you have the next level with the indices most all sporting doji.

CHARTS

Over the weekend I threw out the possibility the indices test this move higher with a higher low at the necklines of the head and shoulders patterns, thus morphing into inverted head and shoulders patterns, an upside setup. The big top is still in place, but if the Fed is going to support the markets then the potential to rally on top of this rally is there.

NASDAQ: Led he move outside SOX. It gapped upside, rallied through the 50 day SMA. Then it coughed up 72 points off the high in the afternoon session (closed up 81 points). It gave up the 50 day SMA on the high and is showing a gap higher to a tombstone doji. On the high NASDAQ found itself just over the mid-March high, the apex of the left shoulder to the head and shoulders pattern. Logical place for it to test back some perhaps, testing back near 7647 and perhaps setting up a right shoulder to an inverted head and shoulders as discussed over the weekend.

SP500: Similar action, gapping over the 50 day SMA then fading over half the move (18 points, closed 13 points higher) to close with a tombstone doji. Gapped off a doji 5 sessions back, could be a point to test. 2800, the support and neckline to the head and shoulders everyone is watching, may be a bit too much for it to test after this move, but it certainly would be a good test and set up a good pattern to play.

DJ30: Modest gap higher, a rally to the February peak near 26,250, then a fade to its own doji. Six sessions upside to resistance, a good place to test a bit and set up a new leg higher. Would it go to the neckline at 25,250? It could, but anything from 25,750 to that level is in play as potential support.

SOX: SOX also gave some back off the session high, but it posted an important move. It gapped through the gap created by the 5/20 downside gap. Always important when a stock or index gaps back through a prior gap as that shows it has power to wipe that gap off the books so to speak in an island reversal move. Closed 16 points off the high but closed up 35 - held onto most of the gain. This is good for the market overall. The other indices don't have to follow in lockstep, they can test and then follow as is often the case.

SP400: Gapped to some pretty serious resistance at 1920 and faded from there. Nothing major - it rallied six sessions including the gap, and a bit of a fade is normal. As with the other indices, a test to 1865ish would have the look of putting in the right shoulder to an inverted head and shoulders.

RUTX: Gapped upside, rallied to the 50 day SMA, then gave up 12 points (closed up 9 points). Lagging and tagging along.


LEADERSHIP

FAANG: AMZN was the power, rallying over 3%. GOOG was in that game, but then it stalled and gave up half its move to close just below the 10 day EMA. FB, APPLE moved modestly higher, showing their own tombstone doji. NFLX just out and out sold, dropping from an attempt to break through the 50 day MA. NASDAQ 100 was up more than NASDAQ overall, but these stocks were not the catalysts outside AMZN.

Software: Excited by the CRM/DATA deal. NOW gapped higher near the May peak, faded to close just modestly higher. COUP gapped, surged, then closed with a very pronounced tombstone doji. HUBS up but well off the high, still bearish near term. WDAY gapped to a tombstone right at the late May tombstone that was the high of that move. ZS gapped over the 50 day EMA and rallied to the 50 day SMA. VMW still putzing around at the 200 day SMA. MSFT gapped to a new high, but also closed with a tombstone; a pullback on this one provides an entry opportunity.

Personal Products: Held up well, EL added upside. PG recovered from a dip to close flat. CL stalled and started to fade so we banked some solid gain on the options. CLX hanging on in a test that started Friday.

Chips: AMD up again but gapped to a tombstone doji. AMAT solid with a gap over the 50 day SMA and a rally to the close. TXN moved over the 50 day SMA. XLNX broke over the 20 day MA. INTC continued upside on low volume. They are working upside.

Drugs/Biotech/Healthcare: Did their usual: After a good late week move they faded on Monday. Doesn't have to be Monday, just the day following a good move. Happened to PCRX, PTCT, ARNA, TNDM. Didn't break the patterns at all, just seems to be their on/off MO.

Social: SNAP was a bit lower on very low trade. MTCH jumped higher then gave it up for a modest loss holding the 10 day EMA. FB tombstone doji at the 6/3 lower gap point. TWTR gapped upside adding to the Friday surge but reversed to close lower. Not social's day.

Machinery: Moved upside then faded. CAT gapped and rallied, faded to a tombstone. DE gapped and ran to the 50 day EMA where it stalled and faded to a tombstone. We took some nice gain early. UTX gapped upside then reversed it all to close at the 200 day SMA. At first the market liked the deal then they punished UTX.

Financial: MA and V gapped higher then faded to modest gains after both put in solid moves last week. Banks were up then faded though some decent attempts upside from JPM, C.


MARKET STATS

DJ30
Stats: +78.74 points (+0.30%) to close at 26062.68

Nasdaq
Stats: +81.07 points (+1.05%) to close at 7823.17
Volume: 2.11B (+2.21%)

Up Volume: 1.47B (-160M)
Down Volume: 632.46M (+135.3M)

A/D and Hi/Lo: Advancers led 1.85 to 1
Previous Session: Advancers led 1.93 to 1

New Highs: 120 (-32)
New Lows: 52 (-59)

S&P
Stats: +13.39 points (+0.47%) to close at 2886.73
NYSE Volume: 740.456M (+1.71%)

Up Volume: 409.862M (-64.537M)
Down Volume: 320.656M (+93.334M)

A/D and Hi/Lo: Advancers led 1.53 to 1
Previous Session: Advancers led 2.83 to 1

New Highs: 208 (-84)
New Lows: 27 (-19)


SENTIMENT

VIX: 15.94; -0.36
VXN: 19.98; +0.05
VXO: 16.57; -0.82

Put/Call Ratio (CBOE): 0.78; -0.01. Recall the put/call ratio put in almost 20 sessions over 1.0 with just a few closed below that level. Lots of downside protecting and speculation and now a bit of a relief rally takes the pressure off.


Bulls and Bears:

One of the most spectacular moves in recent memory. Bulls dropped over 6 points while bears jumped 1.2 points. Of course, those more bearish moves pushed stocks the opposite direction

Indicator level: Fell from yellow to green, indicating the approach toward extremes did not make it and the pressure was released with the Friday rush higher in the stock indices.

Bulls: 42.7 versus 49.0 versus

Bears: 18.5 versus 17.3

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.






OTHER MARKETS

INTEREST RATES

Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread fell 6BP to -13BP. -26BP was the high water mark on this particular move. Healing.

The 2 year versus the 10 year: Spread held at 23BP. Still healing itself.

10 year: 2.15% versus 2.084%

3 month: 2.279% versus 2.277%
2 year: 1.917% versus 1.851%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.


The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.13134 versus 1.13326. After surging to the 200 day SMA Thursday, stalled Friday, doji Monday. Key level as is obvious in that it failed three prior attempts to take it out.

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.


USD/JPY: 108.425 versus 108.18. Bumping the 10 day EMA where it left off last week after a modest rally off the recent selling. Not looking as if it will take it out. Rate cut talk does that.

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.


Oil: 53.26, -0.73. Tapped the 10 day EMA on the high, faded to a loss. Oil does not have much strength.


Gold: 1329.30, -16.80. After the rally from 1274, a bit of a pullback is in order.


TUESDAY

The power of the Fed backing and some relief from the trade news took stocks higher another session, stretching the move to 5 or 6 sessions depending upon the index. A good bear market relief move that has the big asterisk next to it: Fed aided. Of course, with the Fed believed to be in the game, then upside can occur when it appears no upside can occur.

Thus, with the indices up that many sessions on overall lower volume and weak breadth, one would anticipate a pullback. Heck, even with the Fed there a pullback is still a normal part of the process. The doji at resistance, gaps to doji, further suggests a pullback is at hand.

That is good. If the Fed is going to push stocks higher, then a pullback provides great opportunity for more upside positions. A pullback to the old neckline - or close to it - morphs the near term outlook for a test of the old highs, and of course that is something we want to play.

Accordingly, given the action we didn't buy too much today - the gaps higher on top of the moves thus far did not provide many good entries. A test will. It also means we are on market pullback watch. Not for a crash - though you have remain open to the possibility - but a pullback to test the recent Fed-save move. Again, that is not a bad thing, just need to be aware of it for upside positions as well as downside as many of the latter have bounced with the market and are in position to retrace.

Have a great evening!

End part 1
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