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10/28/2017 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
- Earnings of the mega caps blast NASDAQ, SOX higher.
- Strong moves, narrow breadth.
- Q3 GDP beats upside for back to back 3% gains. Inventories rise
presumptively in anticipation of Q4 holiday sales.
- Stock buybacks down 15% but authorizations are up.
- Some of the big names still in the buy zone and we see other forgotten
names setting up a familiar upside pattern that has returned nice gains.
- Big question: was Friday the start of a new break higher based on new
rotation?
Friday showed definitely no earnings or good news saturation in the stock
market as a sack full of strong earnings provided the fuel for new breaks
higher and new highs for NASDAQ, SP400, SP500 and SOX, and a solid break
higher for RUTX off its test. FB, AMZN, GOOG, AAPL, MSFT, INTC all broke
out as well. Impressive moves and of course all of the financial station
analysts were spluttering all over themselves as is always the case when
there are impressive moves. That is okay; GOOG and others show strong
breakout moves.
SP500 20.67, 0.81%
NASDAQ 144.49, 2.20%
DJ30 33.33, 0.14%
SP500 0.54%
RUTX 0.73%
SOX 2.14%
NASDAQ 100 2.91%
VOLUME: NYSE +2%, NASDAQ +14%. NYSE volume moved a bit farther above
average, matching Wednesday, showing some good accumulation. NASDAQ volume
jumped to the highest in six weeks as it gapped and rallied. Plenty of
NASDAQ accumulation, but in what stocks?
ADVANCE/DECLINE: NYSE 1.65:1, NASDAQ 1.7:1. The breadth shows you which
stocks: the large cap stocks. Huge percentage moves on NASDAQ and SOX and
very decent gains on SP500 and even RUTX. But breadth was paltry by
comparison. It was a large cap move. Not that there is anything wrong with
that -- for the short term.
Impressive breakout move but not a broad move. Money poured into the FAANG
and large cap tech stocks. It stayed in software, machinery, retail,
financial, semiconductors -- most of the same leaders. It continued out of
China stocks and biotechs, very solid leadership groups that are not so
solid now.
With still solid leadership groups and big funds finding love again in FAANG
and massive cap tech, it could be this is a new breakout for a new run
higher. Money moving into new areas fuels moves and everyone has seen how
when money goes to FAANG NASDAQ moves up.
The other side of the coin is this good news is being piled on top of
already reported good news and could be the last hurrah of money moving in
on this earnings season. That would mean the market has hit or is near the
good news saturation point, something discussed over the past week. So one
question is whether the Friday action was the last great surge of this last
part of the rally?
Whether this is a saturation point gap remains to be seen, but other than
overall weak breadth Friday the moves did not have that look. We will wait
and see how they shake out to start the coming week as per the plan, but we
are ready to play upside off of these moves if they set up. The moves were
too strong not to be ready for that.
Moreover, it was not just these gap moves Friday. There are many stocks
again setting up patterns after long declines, trying to 'turn the corner'
back to the upside out of these bases. The semiconductors did this and we
made a lot of money on them. The China stocks did this and the same
outcome. Biotech stocks. Financial stocks. Hated, loathed, despised
downtrodden groups that had the look of turning, did so, and are now loved
and adored market leaders. They have established bases at the lows, the
FAANG and large cap tech have done so off their last rallies, both can rally
and thus continue the overall market rally.
Early this week we will see how sticky is the money that entered the market
Friday. Does it build on the Friday breakouts and do the new areas that are
setting up make breakouts or do the great moves upside reverse indicating
money is using the upside to exit? It will be one or the other, whether it
takes a day or several days to show the verdict.
NEWS/ECONOMY
Q3 GDP, 1st: 3.0% versus 2.8% expected versus 3.1% Q2.
Not a boom, nothing really changed, but many took heart of back to back 3%
reads. Why? Well, after a weak end to 2016 and start of 2017, the economy
is back to 'trend,' though 'trend' the past 9 years has been well below the
3% historical trend.
Indeed, the prior 10 years were the first since the Great Depression to not
have a single year that averaged 3% GDP annual growth. If tax cuts should
perhaps get a relatively quick thumbs up, perhaps confidence could jump and
what looks to be a good quarter 4 gets to be a great quarter 4 and posts the
first 3% annual growth rate in over 10 years? Highly unlikely as Q4 would
need to grow at roughly 4.7%, but there is promise there.
What caused the expectations beat?
INVENTORIES: added 0.7% to GDP. That can be good, that can be bad. In an
upswing economy, rising inventories indicate producers and sellers building
inventories in anticipation of future sales. The holiday season is coming,
and this kind of inventory build shows anticipation of coming sales. That
is economically bullish.
CONSUMPTION: 2.4% versus 2.2% expected and 2.24% prior. Added 1.62 points
to GDP.
Harvey and Irma: Apparently they had NO impact, or they had an impact and
prevented GDP from being huge. I would think the Bureau of Economic
Statistics just muffed the storm impact.
TAKEAWAY: If tax reform is passed the economy gets interesting. If
healthcare reform is passed and gets the ACA monkey off small business'
back, the combination could be a real boom, not just the ultra large cap
company boom seen thus far.
Stock Buybacks: Down 15% through Q3 in 2017. Big market driver as we know.
Buyback authorizations: Corporate resolutions to buy back shares for the
company treasury are way up, they simply have not been implemented. If
companies start announcing buybacks then the rally has new fuel for DJ30 25K
by yearend.
Caveat: It is earnings season, companies are reporting some pretty solid
results (lots of top line beats again versus cost-cutting bottom line beats
the prior 8 years), but they are as of yet not announcing buybacks.
THE MARKET
Of course some huge moves with NASDAQ even outpacing SOX' gain. Yet,
breadth was paltry (1.7:1 NASDAQ, 1.6:1 NYSE) as a few big names led the
move. Staying power? We will see.
CHARTS
NASDAQ: Have to lead with NASDAQ as its components were exploding higher.
Boom, boom, boom, boom. NASDAQ gapped upside rallied through the prior
highs earlier in October, and surged, closing near the session high. Volume
rallied Wednesday to Friday as it tested the 20 day EMA then on the blast
higher Friday.
SOX: SOX worked through its personal problems and chop over the past two
weeks, all the while holding the 10 day EMA. Then Friday, boom, a gap and a
fill, then a race higher and closing at a new post-2000 high near the
session high.
SP400: After a quite volatile week, and indeed Friday, the midcaps surged
to a new high, closing at that high. Not out of the woods but a good move.
SP500: Very similar action to the midcaps, gapping upside, testing the 10
day EMA then rallying to a new high. Lots of volatility the past week but
held support and we will see if this breakout on good volume holds.
RUTX: After lots of volatility the past two weeks, RUTX fell below the 20
day EMA intraday Wednesday but recovered. Friday was the big move, breaking
upside for 3/4%. No new high but got the test and now breaking upside.
LEADERSHIP
China stocks: Struggling as money moves out. BABA earnings this week and
perhaps it can bring them back. BABA trying to hold the 50 day EMA. SINA
breaks the 50 day. BIDU dives lower on earnings. BZUN as well. HTHT
trying to hang on. Overall the sector is a lot weaker.
Biotech: An awful week. CELG gapping lower and lower. AMGN plunges to the
200 day SMA. BIIB breaks the 50 day MA's. IDRA plummets. IMMU, INFI still
solid enough. Overall, very volatile.
FAANG: Of course a big day with AMZN, GOOG leading the way. FB strong as
well, AAPL surging upside. NFLX was quiet but has earnings this week. FB
as well.
Software: MSFT earnings helped surge the market and that stock. Others
were solid as usual, e.g. DATA, NTNX, VMW, CRM.
Financial: A solid week with JPM at a new rally high, BAC ditto. GS testing
decently.
Semiconductors: A big group of course but some big names made big moves,
e.g. INTC, TXN while others held gains and continued higher, e.g. AMAT,
LRCX, ON, BRKS. AMD bombed but even XLNX that had reversed managed a very
nice comeback.
Machinery/Manufacturing: Strong week for CAT, CMI, EMR. HON, HOLI holding
up very well.
Retail: WMT, TGT, WSM all solid either rallying farther or testing a bit.
Others such as TLRD, SIG look as if they might be ready to turn the corner.
MARKET STATS
DJ30
Stats: +33.33 points (+0.14%) to close at 23434.19
Nasdaq
Stats: +144.49 points (+2.20%) to close at 6701.26
Volume: 2.41B (+13.68%)
Up Volume: 1.43B (+571.19M)
Down Volume: 946.7M (-263.3M)
A/D and Hi/Lo: Advancers led 1.7 to 1
Previous Session: Advancers led 1.04 to 1
New Highs: 197 (+65)
New Lows: 76 (+6)
S&P
Stats: +20.67 points (+0.81%) to close at 2581.07
NYSE Volume: 888.7M (+2.31%)
A/D and Hi/Lo: Advancers led 1.64 to 1
Previous Session: Advancers led 1.1 to 1
New Highs: 181 (-6)
New Lows: 79 (-4)
SENTIMENT INDICATORS
VIX: 9.80; -1.50
VXN: 14.30; -1.52
VXO: 8.27; -1.05
Put/Call Ratio (CBOE): 0.88; +0.01
Bulls and Bears: Third week over 60 for the bulls as they are banging at the
top of the sentiment range that has rallies in check. Look at the chart
below: every time the 60 level is hit and holds consistently there is a
selloff. Sentiment has spent a LOT of time in 2017 at 50 or above.
Bulls: 62.3 versus 60.0
Bears: 15.1 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: 62.3 versus 60.60
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 versus 46.1 versus 46.7
versus 45.2
Bears: 15.1 versus 15.2
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: 2.419% versus 2.456%. Bonds were hammered lower with TLT breaking
below the 200 day SMA. A bit of recovery Friday, but hitting the 200 day
SMA from below.
Historical: the last sub-2% rate was in November 2016 (1.867%). 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% versus 2.321% versus 2.345%
versus 2.345% versus 2.361% versus 2.348% versus 2.327% versus 2.326% versus
2.341% versus 2.339% versus 2.312% versus 2.307% versus 2.236% versus 2.222%
versus 2.253% versus 2.276% versus 2.273% versus 2.246% versus 2.234% versus
2.201% versus 2.186% versus 2.19% versus 2.167% versus 2.134% versus 2.042%
EUR/USD: 1.16091 versus 1.16330. Dollar rallied, euro dropped below the
September and October lows to close the week. Kind of a 3 month head and
shoulders formed on the euro.
Historical: 1.16330 versus 1.18163 versus 1.17570 versus 1.1759 versus
1.17798 versus 1.18476 versus 1.17995 versus 1.1771 versus 1.17932 versus
1.1823 versus 1.1834 versus 1.18662 versus 1.1813 versus 1.17460 versus
1.17352 versus 1.17100 versus 1.1754 versus 1.17676 versus 1.17315 versus
1.1812 versus 1.17817 versus 1.1746 versus 1.17852 versus 1.18540 versus
1.19476 versus 1.19420 versus 1.19420 versus 1.19954 versus 1.19436 versus
1.1918 versus 1.1874 versus 1.19706 versus 1.19551 versus 1.20379 versus
1.2025 versus 1.19258 versus 1.19143 versus 1.18621 versus 1.19131 versus
1.18938 versus 1.19731 versus 1.19678 versus 1.19212 versus 1.18 versus
1.17516 versus 1.1813 versus 1.17595 versus 1.17107 versus 1.17812 versus
1.17445 versus 1.17751 versus 1.18216 versus 1.17652 versus 1.17596 versus
1.17619 versus 1.17975 versus 1.1774 versus 1.18718 versus 1.18457 versus
1.18072 versus 1.18281 versus 1.18293 versus 1.1683 versus 1.17419 versus
1.1646 versus 1.1637 versus 1.16640 versus 1.16271 versus 1.15280 versus
1.15549 versus 1.14735
USD/JPY: 113.675 versus 114.071. Dollar moving up the 10 day EMA but up
one session, down the next.
Historical: 114.071 versus 113.607 versus 113.913 versus 113.31 versus
113.530 versus 112.561 versus 113.031 versus 112.21 versus 112.20 versus
111.852 versus 112.25 versus 112.413 versus 112.41 versus 112.700 versus
112.653 versus 112.818 versus 112.79 versus 112.667 versus 112.716 versus
112.442 versus 112.86 versus 112.289 versus 111.649 versus 1.12125 versus
111.995 versus 112.454 versus 111.559 versus 111.435 versus 110.846 versus
110.01 versus 110.62 versus 110.216 versus 109.434 versus 107.847 versus
108.444 versus 109.132 versus 108.747 versus 110.254 versus 110.049 versus
110.289 versus 109.652 versus 108.04 versus 109.160 versus 109.573 versus
109.195 versus 109.648 versus 109.173 versus 109.205 versus 109.333 versus
109.842 versus 110.6621 versus 109.927
Oil: 53.90, +1.26. Spent all week bumping up at the start of resistance at
the top of the range (52.50ish) then -- boom -- breaking higher Friday.
Key, key test of the February high at 54.90 - 55.00 ahead.
Gold: 1271.80, +2.20. Nice rally from late June to early September
followed by a September fade to the 200 day SMA and 61% Fibonacci
retracement. A bounce then a fade the past two weeks back to that same
level. This setup is typically a pretty darn solid upside setup that would
move gold higher. Why would gold move higher? North Korea? Interesting
incongruity.
MONDAY
The big story? The revival of the front shooter theory in the JFK
assassination after the release of -- almost -- all of the remaining
government documents.
Okay, perhaps that is not the biggest story but it has a lot of people
talking. Also the false flag operations of the CIA and FBI on US soil,
plans to assassinate Castro -- things we kind of knew were happening and
many claim are happening to this day in other areas. Surprise! Or not.
Or how about the first charges in the Russia probe to be released Monday?
Will Mueller be one of the ones charged? From the stories reported, the
whole group on both sides ought to be handcuffed on down to those conducting
the investigation.
No, the reaction to the mega cap Friday move is the first big story though
Personal Income and Spending to come out ahead of the Monday open.
The Friday move was on Friday and it was rather limited to some really big
stocks that announced earnings. Was enough momentum created to keep the
move going, to keep new money chasing the large caps AND continue into
stocks that look to be turning the corner for a new move higher? THAT is
the big question in our view.
If it continues there are stocks we like quite a bit to the upside, some
that have broken out of bases, some that are looking to turn the corner.
Some that are loved, some that are forgotten but are setting up that old
pattern where they consolidate a long downtrend then start turning the
corner. If money stays in the market and continues flowing their way, we
want to be ready to make the plays and move up with them as they turn the
corner and rally. Just as with biotechs, chips, China stocks, etc. as they
made their turns.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 6701.26
Resistance:
More new highs
Support:
The 20 day EMA at 6578
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
The 50 day EMA at 6492
The 2016 trendline at 6418
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
The 200 day SMA at 6135
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 2581.07
Resistance:
New highs again
Support:
The 20 day EMA at 2552
2525 is the upper channel line from the March 2009 uptrend channel
The 50 day EMA at 2520
2491 is the August all-time high
2480 the late August and early August highs
2453.46 is the June prior all-time closing high
The 200 day SMA at 2418
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 recent May 2017 low
2348 is the April 2017 lower gap point
2329 is the March and April twin lows
2322 is the March 2017 low
2301 is the late January 2017 high
2298 is the late January 2017 high
2282 - 2280 from January 2017
2277.53 is the December 2016 high
The November 2016 all-time high at 2213.25
2194 is the August 2016 prior all-time high
2175 is the June 2016 high
Dow: Closed at 23,434.19
Resistance:
Support:
The 10 day EMA at 23,246
The 50 day EMA at 22,579
22,420 is the September high
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
The 200 day SMA at 21,338
21,169 is the March 2017 all-time high
End part 1 of 3
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