Saturday, December 30, 2017

The Daily, Part 1 of 3, 12-29-17

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12/29/2017 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: None issued
Trailing stops: JNJ
Stop alerts: Took some losses for 2017 to have something to write against
the wins. BBBY; RMBS; UA

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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.

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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.


- A late year rally, by any name, does not emerge.
- Weak action accelerates late on news Russia is also selling crude to North
- Technically, SP500 and DJ30 still need a deeper test.
- The new year predictions and the unpredictability of new years.
- It's all about the money flow as the new year starts.

Ho no no. The tepid Pere Noel (Belgium), Babbo Natale (Italy), Hoteiosho
(Japan) went backwards Friday, ending a strong equities year with losses
that were stronger than they have been in over two weeks. They even
accelerated very late in the session when stories hit the wire that Russia
is also selling North Korea oil in contravention of UN sanctions, apparently
hooking up with North Korea bound tankers out at sea. And the UN was upset
about the US wanting to move its embassy to Jerusalem? Seriously? Anyway,
that dive at the close made things look a bit worse than they were most of
the session, and things didn't look that bad regardless.

SP500 -13.93, -0.52%
NASDAQ -46.77, -0.67%
Dj30 -118.29, -0.48%
SP400 -0.56%
RUTX -0.87%
SOX -1.05%
NASDAQ 100 -0.70%

VOLUME: NYSE +34%, NASDAQ +20%. Up significantly but both still well below
average. Last day of the year shuffling exacerbated some by the tax reform
going into effect.


You could say the sellers took over, and they did on Friday for sure, but in
context it was the last day of the year, deductions will mean less next year
as tax rates are lower, and so take some losses to offset against this
year's gains. We did some of that as well.

That does not explain why some leaders were sold, but then again, some were
selling positions taken recently that were not doing anything in the yearend
lateral move. Take some off the table, book the loss this year, have the
money ready to go next year to put in whatever moves to start 2018 and the
lower tax rates that go with those gains.

Some stocks such as AMZN had their own reason to head lower, and when it did
not immediately rebound, there was piling on. The President unleashed his
final tweet storm for the 2017 stock market year and in it he mentioned AMZN
and its favorable treatment from the USPS, how the USPS should charge AMZN
more to keep the USPS from getting 'poorer and dumber.' When Trump comes in
on an issue, like it or not, things seem to change. Thus AMZN was punched
for a 1.40% loss back to the 20 day EMA.

Indeed, of the FAANG, AMZN, AAPL, FB did not have great sessions,
particularly the latter two. AAPL contritely offered battery changes for
$29 (regularly $79) for those seeking one, but let's face it, most of those
people already upgraded to another phone because their prior iPhone's
function degraded and they thought the phone was dying. If AAPL had told
customers that the phone function was decline when the battery weakened and
replacing the battery would return it to its original functionality then the
customer could have made an informed decision whether to upgrade because of
new features or not. As I tell the people in the office, communication
avoids 99% of the problems in the world.

Anyway, whether it was FAANG or chips or financials or machinery or software
or transports it was down. About all that was up were some oil stocks as
oil moved over $60/bbl, but even those moves were tame. The market
definitely suffered from a lack of leadership on the session as no one
wanted to step out and buy to end the year.


Where most of the week was marked by a lack of movement in the indices,
Friday saw larger moves and moves cracking the 10 day EMA on most indices.
Cracking the 10 day. What carnage. Again, likely just some loss taking on
recent positions ahead of the year end to use those for the higher tax rates
in 2017.

SP500: Closed just below the 10 day EMA, filling the gap higher 9 sessions
prior. Volume was significantly stronger than any on the week though still
well below average. Okay, SP500 is testing back on the last day of the year
but still nothing severe. The bigger issue are the five rallies up the 10
and 20 day EMA since leaving the 50 day EMA in early September. That is
typically the max number of runs you get and that means SP500 could see some
further testing to start 2018. The 20 day EMA is 2663, another 10 points
from the Friday close. The 50 day is down at 2620, another 50+ points
lower, and that is really where SP500 should go in a more typical technical

DJ30: Faded to the 10 day EMA on the close, higher though still well below
average trade. Very much some pre-yearend positioning. As with SP500, five
rotations up the 10 and 20 day EMA and due a test lower at least to the 20
day EMA at 24,500. The 50 day is near 23,960, and as with SP500, after this
kind of run that is typically where you would expect it to test.

NASDAQ: Dropped to the 20 day EMA on rising but still well below average
volume. That makes four tests of the 20 day EMA for NASDAQ since leaving
the 50 day in late September. That leaves NASDAQ another rotation to go,
but if SP500 and DJ30 sell NASDAQ will likely be hard pressed to rally as
they fade unless there is a round of rotation back into techs.

NASDAQ 100 just cracked the 20 day EMA as the large cap NASDAQ continue to
underperform the overall NASDAQ.

SP400: Dropped to the 10 day EMA after gapping to a higher high on the
open. The midcaps still look quite good as they continue their trend into
the tax vote. Not a freight train upside of late, but still trending

RUTX: Fell through the 10 day EMA as RUTX was unable to make the break to a
higher high. Neither RUTX nor SP400 are extended.


Retail: Actually showed some upside stocks though many were flat to lower.
TGT was up modestly. TJX a hair. Most were testing, e.g. HD, COST, ROST,
TLRD. ULTA, AAP in nice tests.

Oil: Some gains, e.g. DNR, PTEN, HAL, but a lot of tests in progress, e.g.

Financial: Testing in pretty good patterns, e.g. C, JPM, GS.

FAANG: AMZN hit by the Trump USPS pricing tweet and sent to the 20 day EMA.
AAPL broke the 50 day MA's. FB sold through the 50 day MA's again. NFLX
tested the Thursday surge. GOOG held the 20 day EMA test with a nice tight

Semiconductors: Struggled, even the chips in better patterns, e.g. MRVL,
CAVM. CREE, INTC still solid. SWKS, QRVO still have work to do. AMD, MU,
LRCX, AMAT all have more work. NVDA could be a downside play here with its
upward pointing wedge. Will have to see which way the money goes to start
the new year.

Machinery/Manufacturing: Even CAT and CMI were off, but ever so modestly.
HON, UTX down a bit harder but holding fine.

Transports: Airlines, truckers, the sector leaders, were down modestly on
the session after testing most of the week.

China: Struggled to end the week with the Chinese economic data questions
and the evidence China is selling North Korea oil in violation of the UN
sanctions. It's okay; so is Russia.


Stats: -118.29 points (-0.48%) to close at 24719.22

Stats: -46.77 points (-0.67%) to close at 6903.39
Volume: 1.57B (+19.85%)

Up Volume: 368.35M (-421.88M)
Down Volume: 1.16B (+666.38M)

A/D and Hi/Lo: Decliners led 1.92 to 1
Previous Session: Advancers led 1.5 to 1

New Highs: 158 (+46)
New Lows: 27 (0)

Stats: -13.93 points (-0.52%) to close at 2673.61
NYSE Volume: 710.2M (+34.76%)

A/D and Hi/Lo: Decliners led 1.44 to 1
Previous Session: Advancers led 1.92 to 1

New Highs: 185 (+50)
New Lows: 13 (-11)


VIX: 11.04; +0.86
VXN: 15.68; +1.06
VXO: 9.46; +1.03

Put/Call Ratio (CBOE): 1.11; -0.02

Bulls and Bears: Pretty large drop though still easily over 60 for the
bulls. That is still in the overly optimistic range and of course the surge
Friday will bring them around again to the upside. This is a warning
indication, but not a great timing device.

Bulls: 61.9 versus 64.2

Bears: 15.2 versus 15.1

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: 61.9 versus 64.2
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
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

Bears: 15.2 versus 15.1
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
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


Dollar selling off, bonds rallying, gold surging with a supposedly tighter
Fed and pro-growth policies coming into effect. That appears to make little

Bonds: 2.405% versus 2.434%. Bonds surged on the week after a massive
collapse the prior 1.5 weeks down to the 200 day SMA. Again bonds bounced
from this level.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.434%
versus 2.412% versus 2.474% versus 2.485% versus 2.484% versus 2.501% versus
2.459% versus 2.398% versus 2.351% versus 2.36% versus 2.403% versus 2.389%
versus 2.378% versus 2.34% versus 2.353% versus 2.381% versus 2.363% versus
2.363 versus 2.412% versus 2.385% versus 2.326% versus 2.329% versus 2.321%
versus 2.34% versus 2.354% versus 2.367% versus 2.345% versus 2.37% versus
2.336% versus 2.375% versus 2.407% versus 2.402% versus 2.34% versus 2.326%
versus 2.316% versus 2.32% versus 2.332% versus 2.349% versus 2.358% versus
2.378% versus 2.37% versus 2.419% versus 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%

EUR/USD: 1.12001 versus 1.1936. Huge breakout over the November high and
now challenging the September high.

Historical: 1.1936 versus 1.1936 versus 1.18998 versus 1.18593 versus
1.18628 versus 1.18658 versus 1.18792 versus 1.18408 versus 1.17703 versus
1.1752 versus 1.17798 versus 1.18392 versus 1.17430 versus 1.17652 versus
1.1764 versus 1.17754 versus 1.17990 versus 1.18276 versus 1.18727 versus
1.18983 versus 1.18976 versus 1.18529 versus 1.18489 versus 1.1899 versus
1.19329 versus 1.18148 versus 1.17402 versus 1.1791 versus 1.1787 versus
1.1786 versus 1.1799 versus 1.16443 versus 1.16646 versus 1.16439 versus

USD/JPY: 112.690 versus 112.758. Faded Wednesday to Friday but holding well
within its range.

Historical: 112.758 versus 113.216 versus 113.208 versus 113.304 versus
113.363 versus 113.334 versus 112.870 versus 112.625 versus 112.619 versus
112.298 versus 112.639 versus 113.555 versus 113.476 versus 113.48 versus
113.473 versus 112.473 versus 112.554 versus 112.442 versus 112.190 versus
112.55 versus 112.102 versus 111.583 versus 111.244

Oil: 60.42, +0.58. First close over $60/bbl since 2015.

Gold: 1309.30, +12.10. Gold sprinting higher the past three weeks into the
yearend. Not at the highs for the year hit in August near 1365, but what a

TUESDAY and the New Year

Predictions come flying this time of year and it seems everyone has one or
two or twenty. I predict that 99% of them don't occur, and the other 1%
were so vaguely worded that the claim of correctness will be dubious.

I don't know if the market will go up by year end or not. I do know it will
go up and down or down and up depending upon your perspective. By how much?
Again, I don't know and neither does anyone else.

Technically, SP500 and DJ30 should test deeper toward the 50 day EMA even if
the overall rally or uptrend in those indices continues. NASDAQ is close
enough to their extension to go along with them barring, as noted earlier,
rotation into big techs again.

The small and midcaps are not extended as are the large caps, so the
technical picture favors them continuing their uptrends barring any
character changes.

What could cause that? Well, the money that headed to the exits in late
2017 is a primary concern. Bonds rallied as money moved in, oil as well,
gold also. Bitcoin and other cyptos? Sure, some money went there as well.

The risk/reward with the tax cuts would suggest the small caps and midcaps
continue to perform. If that money does not come back in for the new year
and the better taxation scenario, then the market likely does not hit new
highs again any time soon.

I always hate new years in the market because there is often no predictable
direction. This year is even more tangled thanks to the tax reform and now
even more geopolitical intrigue thrown on top with the Russia/China UN
sanction-breaching oil sales to North Korea. Let the good times roll in

Our plan is to let the trends hold if they will. There are some very good
setups to buy into and there are very good ongoing plays to let rally if
they will. It is all about where the money goes to start the year. We have
some great plays working and ready to go to work if the money comes in.

At the same time, if the money leaves some areas, some downside plays would
be appropriate. DJ30 is extended as is SP500; some downside plays there
would be appropriate. We will look at others to start the week and add more
if the action remains ambivalent to lower to start 2018

Have a great New Year's celebration!

End part 1 of 3
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