Sunday, September 16, 2018

The Daily, Part 1 of 3, 9-15-18

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9/15/2018 Investment House Daily
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The REPORT SCHEDULE is as follows:

Market Summary Video, Plays and Play Videos, and Play Table with play
annotations will issue Wednesday, Weekend.

Monday a Market Summary video, new plays, play table annotations.

Tuesday and Thursday reports will contain the market summary, chart links to
view the index charts, and updated play table.

Access to all current videos will remain assessable each day using the play
links in the reports.

If any market circumstances arise where we see additional plays we want to
prepare for the next session, we will of course issue those plays regardless
of the day of the week.


MARKET SUMMARY

- Trump makes his 'usual' Friday trade comments, market reacts like
Pavlov's dogs.
- In the end it was just a day off Friday, similar to the day off
Wednesday, in a continuation of the uptrend.
- Various big names help drive the action on the week, but the small
and midcaps step up late week.
- SOX makes a bounce off support just as, of course, the final big
names throw in the towel on chips. A little bit of history repeating.
- Retail sales miss but still trending nicely higher.
- Industrial production revised nicely higher with mining producing
good jobs
- Still plenty of negative vibes on the market, but the leaders remain
as do the trends.

I said last weekend that it seemed every Friday the President would say
something negative about trade ahead of the weekend causing a market drop,
and perhaps we should play it. We should have.

Friday once again the President had something to say. Just before 12:00ET
President Trump said he still wanted to implement the $200B in tariffs
against China regardless of whether the two sides were talking or going to
talk again about trade.

The stock market, after starting higher, testing, then rallying to midday,
responded as usual, dumping 143 points on DJ30, 60 points on NASDAQ. After
an hour of this weakness, stocks then recovered in the afternoon session,
the large cap indices never made it back to their session highs,
particularly NASDAQ. The small and midcaps did while SOX posted a nice
recovery as well for its second 1+% gain.

SP500 0.80, 0.03%
NASDAQ -3.67, -0.05%
DJ30 8.68, +0.03%
SP400 0.36%
RUTX 0.43%
SOX 1.11%
NASDAQ 100 -0.21%

VOLUME: NYSE +1%, NASDAQ -11%. All things considered, this is not bad
price/volume action. The small caps, midcaps and large cap NYSE moved up,
albeit in the latter cases very little, on rising, once again above average
volume. NASDAQ sold back but on significantly lower trade than the prior 3
sessions of upside. Again, not bad price/volume action.

ADVANCE/DECLINE: NYSE 1.1:1, NASDAQ 1.1:1. Pretty much tells the story . .
. of boring trade.

The move left the large cap stock indices little changed, showing doji
similar to Wednesday's pause or continuation doji. These are likely the
same.

SP400 and RUTX, however, posted nice moves off rather tight lateral
consolidations. Good resumptions of their upside moves after testing and
resting.

SOX rallied for a second session over 1% after the Wednesday gap down to the
200 day SMA and doji with tail. It was a gap lower, a gap higher -- an
island reversal -- and as per that pattern, SOX is moving upside. It also
happened at a key level, the 200 day SMA and tapping the lower trendline in
its triangle pattern. There is some history there and it bounced chips.
Important group, finished the week decently, but was it just a flare for
help?


NEWS/ECONOMY

The trade commentary impacted market action the most, but there was other
news.

Bonds: The 10 year yield closed at 3.0% for the first time since August.
It should, but reluctance marks the move.

Manafort: Entered a plea deal with the Mueller team and agreed to help.
The usual Hollywood types were ecstatic with one saying 'check mate and f***
Trump.' Class as always. The plea deal, however, discusses the areas he
will provide aid, and they deal with key officials tied to the Clinton
campaign as well as Obama advisors. The intrigue, if not boredom, continues
to grow.

Retail Sales, August: Smallest rise in 6 months, but still a solid trend
higher in sales. Is it inflation, more buying, both? CPI for August backed
off from expectations and prior reading on the core both for the month and
year/year (0.1% vs 0.2%, 2.2% vs 2.4%) -- thus, there was some inflation
aspect to the sales number, but it played a lesser role than in the prior
months.

Overall: 0.2% vs 0.2% expected vs 0.2% July. Year/year 2.7% vs 2.8%.

Note that PPI rose 2.9% year/year, indicating that while both consumer and
producer prices are rising, producer prices are rising more and thus profits
are getting squeezed a bit. Morgan Stanley stated Wednesday that the US was
already in a bear market because profits were starting to decline. Well,
this data would seem to suggest MS is at least partially correct: if this
month's results continue then companies will see profits decline as costs
rise but selling prices do not.

Sales ex-autos: 0.3% versus 0.5% expected versus 0.9% July (from 0.6%).
NICE upside revision.


Industrial Production, August: 0.4% as expected vs 0.4% July (from 0.1%).
VERY NICE revision.

Mining: +0.7% vs 0.7% July. Year/year +14%! This sector is producing a LOT
of quality jobs.

Utilities: +1.2% -- a sweltering August significantly increased HVAC usage.

Manufacturing: +0.2% versus 0.3% expected, but year/year +3.1%


Capacity Utilization: 78.1 versus 78.3 expected vs 77.9 July (revised lower
from 78.1). This is not bad. We are producing more but not straining
capacity so no supply bottlenecks that leads to price increases.

THE MARKET

CHARTS

SOX: SOX failed to hold the 50 day MA mid-range in its triangle --
obviously. It gapped lower Wednesday as MU and others were downgraded by
big name brokerages. After all the selling in these names I posited this
looked as if the towel had been thrown in and it could bounce. Further,
looking at the pattern, it was a gap lower to a doji with tail that tapped
the lower triangle trendline on the low then rebounded to hold the 200 day
SMA on the close. Sure enough, SOX gapped upside Thursday, then added
another 1+% Friday, closing over the 50 day MA's. Not a breakout, not a new
resurgence, but it held the pattern and bounced right back. A bit more work
in the pattern and some of these other chip names that were mauled in the
selling can set up some bases to rally upside. Well what do you know?

RUTX: after 5 sessions of tight doji at the 20 day EMA testing the late
August move to a new high, the small caps posted a quite solid move upside
Friday. Not a blast off, but a notable bid moved their way.

SP400: Very similar to RUTX, i.e. after a weeklong lateral test of the late
August new high, the midcaps jumped higher, almost putting in a new all-time
high Friday. It is hard to argue with the action: breakout of its 7 month
base in mid-August, rallying to a series of new highs. A test of that move,
coming back to the 20 day EMA and holding the breakout, then breaking higher
again. Textbook.

NASDAQ: On the week NASDAQ held the 50 day MA test and started higher
Tuesday. Paused Wednesday, gapped upside Thursday. Paused again Friday.
Very solid volume Tuesday to Thursday as NASDAQ held and then broke higher
off that key level. Looks very good to continue moving upside in its trend
after this test and bounce.

SP500: Held the 20 day EMA on the week and bounced similar to NASDAQ,
moving higher Tuesday, then a pause, then up again Thursday. Friday was
flat, but SP500 is just below the late August all-time high.

DJ30: The same action as SP500, the move up off the weeklong 20 day EMA
test on Tuesday, a rest day, then a gap upside to a higher rally high.
Friday was not much but the Dow did edge higher.

LEADERSHIP

FAANG: AAPL was off Friday but testing the 10 day EMA on lower volume. A
good rally after a week of testing back to the 20 day EMA. AMZN also had
tested back to the 20 day EMA and started upside Tuesday with a big move.
It continued higher Wednesday and Thursday but then sold back Thursday after
the initial high. Had a harder time keeping on track upside. NFLX broke
higher Tuesday and Wednesday in a move over the 50 day SMA, testing Thursday
and Friday. We are looking to enter after this test. FB trying to set up a
bounce, forming a short double bottom at its lower low in the selloff. GOOG
bled higher on the week up to the 10 day EMA but sluggish. Looks like a bear
flag setup.

Chips: NVDA enjoyed a solid Friday on strong volume, though it did close
off its high. Wednesday it sold to the 50 day EMA on the low and reversed
sharply to a doji. That helped spring it higher and it still looks good.
AMD sold hard Thursday but was back upside Friday, maintaining its trend.
XLNX finished its 20 day EMA test on the week, gapped higher Thursday,
flattish Friday; still looking to enter. SMTC remains solid in a 2 week
pennant. SIMO broke down over the past 2 weeks. For those that crashed,
they bounced with SOX but the patterns are not necessarily comforting to the
upside. MU bounced, but looks like a bear flag. Ditto AMAT, INTC. AVGO is
interesting as is MLNX, but they need more work.

Software: Solid group on the week though testing a bit late week. DATA
moved higher, off a bit Friday. NOW solid on the week. VRSN new high again
Friday. MSFT new high into Friday. ADBE posted a big new upside break
Friday. VMW posted a huge surge Friday in a clean, new breakout.

Retail: Mostly testing on the week, e.g. ULTA, ROST, TJX, COST.

Financial: Credit services had a good week, e.g. V, MA. Banks more of the
same, i.e. going nowhere, even struggling the cases of BAC, C.

Energy: Getting some interesting setups, e.g. CRC, PTEN, UNT, APA. Some
service companies already making good moves, e.g. ESV. The big service
companies (SLB, HAL) rallied, but just moved up to their resistance in
downtrends. The group has been down awhile and it is setting up a bounce.

Transports: Airlines are still interesting and look set to move up, e.g.
AAL. Truckers still solid. ODFL testing after a great move while SAIA,
JBHT, WERN test and try to set up as well. Rails are mixed with NSC solid,
KSU not bad, CSX struggling right now.

Materials/Industrial metals: Not bad as CLF continues higher. LPX (lumber)
solid. CX (cement) and VMC trying to set up.

Manufacturing: Remains solid, e.g. EMR, ETN. UTX broke out Friday after a
weeklong move higher; we will try to pick it up on a test. We don't want to
buy right now because it rallied to get to the breakout and is near term
extended; let it test, hold then pick it up as it starts back upside. BA
tested the 200 day SMA on the week and reversed to rally back to the late
July high.


MARKET STATS

DJ30
Stats: +8.68 points (+0.03%) to close at 26154.67

Nasdaq
Stats: -3.67 points (-0.05%) to close at 8010.04
Volume: 2.06B (-11.21%)

Up Volume: 1.16B (-70M)
Down Volume: 877.36M (-182.64M)

A/D and Hi/Lo: Advancers led 1.13 to 1
Previous Session: Advancers led 1.09 to 1

New Highs: 147 (+4)
New Lows: 74 (+6)

S&P
Stats: +0.80 points (+0.03%) to close at 2904.98 NYSE Volume: 760.443M
(+0.73%)

A/D and Hi/Lo: Advancers led 1.06 to 1
Previous Session: Advancers led 1.31 to 1

New Highs: 108 (-27)
New Lows: 91 (+6)


SENTIMENT

VIX: 12.07; -0.30
VXN: 16.12; -0.33
VXO: 10.80; +0.14

Put/Call Ratio (CBOE): 0.83; -0.01

Bulls and Bears:

After a one week move to 60 the bulls faded but not significantly. This
move reflects two weeks ago, and the market was n a fade to test. With all
the negative commentary from the big brokerages and billionaires, even a
routine test of the trend support freaks some investors. Bears were up, but
still quite low historically.

Bulls: 57.7 versus 60.1

Bears: 18.3 versus 18.1

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: 57.7 versus 60.1
60.1 versus 59.6 versus 57.7 versus 57.3 versus 54.9 versus 54.5 versus 54.9
versus 55.3 versus 52.4 versus 47.1 versus 47.6 versus 52.0 versus 55.5
versus 52.9 versus 50.0 versus 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

Bears: 18.3 versus 18.1
18.1 versus 18.3 versus 18.3 versus 18.6 versus 18.8 versus 18.6 versus 18.5
versus 18.5 versus 18.6 versus 18.4 versus 17.6 versus 17.8 versus 17.7
versus 19.2 versus 19.2 versus 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: 3.00% versus 2.972%. After bounce off the prior selling, touching
the 10 day EMA on the Thursday high, bonds gapped sharply lower Friday,
closing in on the early August low. They should sell and rates should rise.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.972%
versus 2.963% versus 2.977% versus 2.937% versus 2.941% versus 2.879% versus
2.904% versus 2.897% versus 2.86% versus 2.857% versus 2.882% versus 2.882%
versus 2.846% versus 2.813% versus 2.828% versus 2.821% versus 2.819% versus
2.819% versus 2.864% versus 2.871% versus 2.879% versus 2.882% versus 2.873%
versus 2.928% versus 2.963% versus 2.977% versus 2.977% versus 2.945% versus
2.95% versus 2.986% versus 3.005% versus 2.962% versus 2.975% versus 2.958%
versus 2.982% versus 2.965%


EUR/USD: 1.16226 versus 1.16900. Euro broke higher Thursday, matched the
late August high, and then was pounded Friday. The ECB talk Thursday
apparently ran its course.

Historical: 1.16900 versus 1.15863 versus 1.16016 versus 1.15946 versus
1.15534 versus 1.16243 versus 1.16341 versus 1.15832 versus 1.16029 versus
1.1664 versus 1.17035 versus 1.1691 versus 1.16802 versus 1.16216 versus
1.15390 versus 1.15709 versus 1.158 versus 1.1487 versus 1.1437 versus
1.13765 versus 1.13731 versus 1.13479 versus 1.14052 versus 1.1413 versus
1.1526 versus 1.16186 versus 1.16001 versus 1.15572 versus 1.15683 versus
1.15864 versus 1.1662 versus 1.1689 versus 1.17074 versus 1.16558 versus
1.17324 versus 1.17385 versus 1.16846 versus 1.16989 versus 1.17214 versus
1.1651 versus 1.16514 versus 1.16603 versus 1.1709 versus 1.1685 versus
1.16608 versus 1.1672 versus 1.17288 versus 1.17578 versus 1.17439 versus
1.1689


USD/JPY: 112.06 versus 111.81. Strong week for the dollar, clearing interim
highs on the base formed off the mid-July high.

Historical: Last below 109 four months back. 111.81 versus 111.491 versus
111.608 versus 111.192 versus 111.064 versus 110.680 versus 111.448 versus
111.468 versus 111.082 versus 110.962 versus 111.734 versus 111.19 versus
111.081 versus 111.249 versus 111.351 versus 110.766 versus 109.92 versus
110.49 versus 110.935 versus 110.818 versus 111.229 versus 110.737 versus
110.840 versus 111.07 versus 111.361 versus 111.344 versus 111.254 versus
111.621 versus 111.628 versus 111.744 versus 110.990 versus 110.995 versus
110.791 versus 110.871 versus 111.235 versus 111.084 versus 111.451 versus
112.732 versus 112.783 versus 112.896 versus 112.337 versus 112.631 versus
112.093 versus 110.911


Oil: 68.99, +0.40. Gapped higher over the 50 day MA, fell back to test it
to end the week.


Gold: 1201.10, -7.10. Moved up to tap the 50 day MA on the Thursday high,
then faded back off that test.


MONDAY

Plenty more data, some more current, e.g. the Empire PMI Monday and the
Philly Fed Thursday. Housing starts, Existing home sales, Leading
indicators also on the week. Of course, the FOMC is the following week and
expected to hike rates at that meeting.

The indices continue to trend higher and in the face of quite a load of very
negative views regarding the current market and the economy's future. As
noted during the week, big firms, economists, billionaires were saying
another financial crisis will occur in 2019 or 2020, a recession in 2019, a
bear market either is here now or in the near future -- the trending market
that continues trending higher with leadership gets no respect. Ah, one of
the Rodney Dangerfield 'no respect' rallies. As Charles Payne noted Friday,
he likes all the negativity given the contrary indications and that the
market rallies in the face of adversity (I hate to call it this, but so many
people know what it means -- 'climbing the wall of worry.' Yuck).

We still see leadership setting up, we still see the indices test support,
hold, bounce. In that environment I am going to continue to play the solid
upside setups.

What worries me? The Fed. I commented on this Thursday, and if you have
not you need to read that commentary. The Fed is speaking the 'Fed
language' about the perils of a strong economy, particularly vis-a-vis the
rest of the world. The 2000 Fed created disaster out of prosperity and we
are still paying the price. The current Fed is using different words but
talking the same theories. As the late, great Crocodile Hunter would say,
danger, danger, danger.

For now we continue to play the good setups because for now it is just
negative talk and Fed posturing. If it changes and the market's character
changes, we will change as well, but for now it has not.

Have a great weekend!

End part 1
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