* * * *
1/27/2018 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: AMZN; RHT; VMW; WMT
Entry alerts: None issued
Trailing stops: None issued
Stop alerts: ENDP
The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html
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The Market Video is DIVIDED into component parts: Market Overview, Economy,
Technical Summary, and the Next Session. Choose the segments you are
interested in without having to search a longer video. Click on the link to
the portion you wish to view.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/ts/ts.mp4
TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/nxt/nxt.mp4
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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
- Another surge higher generates even more calls re a market top.
- January is impressive as money pours into the market, ramping up the angle
of rise. Will the money continue?
- So, you think you know a top when you see one?
- It can all end Monday, but the leadership has yet to show that kind of
movement.
- A truly impressive run makes you wonder about more upside, but we see more
stocks ready to move upside.
Another week upside, another solid finish to a week, this one more than
solid in the melt higher. After indecision Thursday, futures started
higher, stocks started higher, and stocks continued higher through the close
with a classic last 2 hour melt higher. New highs on all the large cap
indices, while RUTX, SP400, and SOX put in respectable showings after tests,
particularly SOX after its sharp Thursday drop.
SP500 33.62, 1.18%
NASDAQ 95.61, 1.28%
DJ30 223.92, 0.85%
SP400 0.40%
RUTX 0.40%
SOX 3.26%
NASDAQ 100 1.54%
VOLUME: NYSE -8%, NASDAQ flat. NYSE trade dropped below average after
moving back above average Wednesday and Thursday. NASDAQ trade was flat,
holding at above average levels. Some distribution on the week on both
indices, but they avoided adding another one Friday. Two distribution
sessions in the past 9 is watch-worthy but not enough in themselves to stall
the rally.
ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.5:1. Ah, another large cap session.
NASDAQ 100 +1.54% led by AMZN, NVDA with emphasis from INTC (+10.55%).
Looking at the brokerage accounts, this is getting rather insane. From our
actively traded: +32%, +68%, +73% -- and this is year to date, not quarter
over quarter (from Q4). From Q4 those numbers are 208%, 405%, 215%. Year
over year is where it gets shocking, with gains over 1000% showing up. That
begs the question, why do I still prepare these newsletters, videos, trades,
alerts, etc.?
Because I love it. I love helping people make their dreams reality, to gain
what I call the true measure of success: doing what you want to do when you
want to do it. If you can do that, you have it all. Yes, sometimes I get
pulled away for the kids' track meets, a basketball game, football playoffs,
or have to attend a church meeting, or am in another time zone and could not
lay off visiting just one more winery. I still have my computer with me,
still logging alerts, still making the trades because I live by this and I
owe it to those who want to get to that point of doing what they want when
they want.
As an aside, I receive many requests to manage other people's money. I
cannot do it. Not because I could not, but because I could not do it and
generate the returns I do now. I take smaller amounts of money from my
overall hoard and start new accounts. I then work those accounts
aggressively, racking up the gains discussed above. At a certain point, I
'retire' that money to different investment vehicles, start another smaller
account and do it again. That way I can buy 10, 20, 30, 50 contracts of
options without much trouble.
If I am trying to do that with $100M, there would be no way to move in and
out quickly without moving the market. That is the problem with funds: they
don't use my tactic because they cannot because they are not a complete
management service for client money. They are not set up that way. In the
1980's and 1990's, many a great fund quickly grew into a bloated behemoth
and ceased performing.
Therefore, I feel the highest and best use in helping people reach that 'do
what you want' goal is to educate you and let you know the trades we are
moving into here. I have help of course, but most all decisions are mine.
The praise and the blame fall on me. I sometimes stay in a trade too long
up and down, thinking I know what is going to happen. That is a constant
fight any trader has. You can mostly get away with it if the trend is in
your favor, but the key of course is recognizing when the trend is starting
to turn.
And that leads to the next area. The question, however, is not brokerage
accounts. They are up insanely for years now, particularly 2016 through
present. SP500 +44% since the election, and as you can see, that is just
'sitting doing nothing' money, i.e. just plunking it in an index fund. The
real question is what is next.
Why? Because recognizing and positioning for major market turns is one of
the foundations to making, holding what you made, and then making more. In
other words, recognizing major market shifts is an integral key to wealth
building. It does no good to amass big returns upside or downside and then
have a sizeable portion given back -- that defeats getting to your goal of
doing what you want when you want.
That is why buy and hold is of course dead, but that is EXACTLY what you
hear advocated on the financial stations, for the most part, daily. You
cannot time the market, etc. Sure you will mistime moves; every trader does
so. I used to be way too early on trades. I would see it setting up, for
instance a trend reversal. I would jump in on the first move and then get
chopped up in the subsequent battle of the buyers and sellers as they fought
it out until one side cried uncle. Of course the preferred way is to let
the big break happen, then counterpunch after the test. Then the trend gets
more or less set, or at least you have a really high probability of making
good money on the trade even if it is not a new trend.
Calling tops and bottoms is hard and that is often why we take partial
profits after great gains. Typically you get a pullback; you can see it in
your brokerage accounts: they surge higher to a higher high and then they
fade in a normal test. We look at capturing a rally or selling leg, taking
some gains, and letting part of the position work if the trend is strong.
Then we can augment or add to that position when it sets up again and we are
back at it. That way you have locked in some gain in the event the move
DOES NOT come back, and if it does, you are back in and taking advantage of
the full move. Make sense? You are not calling a top or bottom, you are
ready to move in when stocks show the 'buy me' or 'sell me' signal, and then
you MANAGE your position and your MONEY around those signals. That way we
have 3 plays on AMZN for instance, but we have also banked great money on
AMZN already during the move and STILL make excellent to superb returns as
it continues working.
This is incredibly relevant now because EVERYWHERE you look and hear there
are warnings about a market that is set to crash, end of run melt ups, blow
off tops, etc. This weekend Bank of America stated that one of its
indicators, one it says has a 100% accuracy rating, has triggered and calls
for a 12% stock decline with the following three months. BA says it is
fully back tested as well. Bully. A 12% decline would certainly not be out
of line with the kind of gains logged.
At the same time you have all-time record highs in bullishness (though bulls
did back off to 64.7 from 66.7 and bears 'surged' to 12.8 from a 30 year low
12.7). You have the sky falling and the tap never runs dry at the same
time. Sure sounds like the bulls and bears doing their usual dancing,
climbing a wall of worry. As many are scared of a top as are excited about
a continuing run.
In all of that misdirection, what is the right direction? Well, as I said,
calling tops is above my paygrade, and I have a very high market paygrade.
That said, there ARE a few more than the usual reasons to be wary. The
bullishness is very high. The runs seem to defy gravity and usual technical
indications, and that is a symptom of markets in some stage of a final
push -- nothing is ever truly different 'this time.' The length and lack of
interruption of the 2016 to present run is almost unprecedented. There are
'outside' factors, such as the dollar's decline, bond yields jumping (and
you have heard all of those theories of doom), impeachment, etc.
I fully anticipate a 10+% correction at some point. In all my years in the
market, however, despite having a pretty good sense of knowing a top was
about to happen, knowing the exact when is a loser's guess. Either you miss
out on a lot more upside or you fail to recognize when all leadership is
reversing as the money runs dry.
In the final analysis it is how much money is being pushed into the market.
Money has to continue believing the market will go higher and come into the
market to push it higher. That shows up in the stock charts, in the
continued ability to set up good patterns, to break higher, to hold the
breaks, test, and resume the moves. For now, that is exactly what stocks
are doing. There are few of the kind of reversals that red flag a major
market issue. That does not mean they don't show up next week, even Monday,
after such as finish to the week on Friday.
It is a matter, however, of having to accept the market that is presented
not the market that experts see lurking in the shadows, whether that is a
market set to crash or one set to surge another 10%. Bank of America,
again, says investor cash allocation is at 10%, a record low (according to
BofA) with equity exposure rising the fastest in 10 years, claiming everyone
is going 'all in.' Well, the question is how much MORE money is out there
being dragged in from all of those who pulled out of the market in the late
summer? That would seem to be important, just as the sun's heating and
cooling cycles are important to the earth's climate -- but are left out of
the climate models.
Again, it is looking at the market presented. I have my concerns about when
a correction that I feel is coming actually starts, but I cannot let those
fears keep me out of a market that keeps rising. I am not making a moral or
philosophical judgment about the market as it appears so many in the 'doom'
circles have done for years. I am looking at the market to play the
predominant trend to make as much as I can while that trend is in place and
is strong. Oh, I can philosophize with the best of them, but that has
virtually no -- no, it actually has zero -- bearing on making money in the
market. Watching the market, its leaders, up and coming stocks, and whether
there are breakdowns tells me more than any expert's bloviation.
THE MARKET
CHARTS
Some volatility crept into the indices the past 2.5 weeks with a couple of
higher volume selling sessions, but thus far that has not stopped the
advance. RUTX, SP400, and SOX did slow and failed to reach new highs to end
the week, but overall the indices are still trending higher, just showing
more of that volatility that is a key to watch this coming week.
NASDAQ: Starting with a weekly NASDAQ chart to emphasize the 2016 to
present run. 2013/2014 was similar, but this is different. Note the
acceleration over the past four weeks as money is forced at high rate into
stocks. That kind of move cannot last. Of course it cannot. It can,
however, continue on into the big earnings this coming week or beyond.
After a 2-day sidestep, NASDAQ broke higher again Friday. Big names that
tested during the week broke higher. NVDA for example. GOOG is testing
right now, FB as well. They can make a new break and add to the push. They
can. We will see if they continue their recent paths.
SOX: A pretty good barometer of the market as it often leads the overall
market. SOX gapped lower Wednesday, sold off Thursday but held the November
high. Friday it gapped back upside thanks to INTC's 10+% earnings gain. A
new high early week was coughed up on the midweek selling prompted by AAPL's
woes (and impact on its chip suppliers) and then TXN's earnings drag. Still
trending upside, however. The key is how it responds after Friday's
INTC-impacted move is absorbed.
DJ30: New high after new high, climbing up and indeed now off the 10 day
EMA. When it gets a bit out over its skis like this, it tends to edge back
toward the 10 day to continue the run after a pause. That is if the current
trend holds. Extended off the 50 day MA over the past 5 months, and now an
impressive 17.9% above the 200 day SMA. That is extreme for any index,
particularly the Dow.
RUTX: New high Monday, Tuesday and Wednesday, then reversed intraday
Wednesday. Well, it stalled is more appropriate. Held over the 10 day EMA
with a Thursday doji, bounced Friday, but the money was not flowing to
enough small caps to push to another high. Still a very good trend up the
10 day EMA after a new breakout in December from a 2 month consolidation.
SP400: Similar to RUTX, ran to new highs but also ran into a near term top
Wednesday at the open. Faded but held the 10 day EMA on each low to end the
week, putting in a pretty darn good test. Nice trend up the 10 day EMA
continues after that mid-November tap at the 50 day EMA.
SP500: Started strong Monday, flattened out somewhat then surged Friday.
It too has quite the upward ramp since the start of 2018 as tons of money
has poured in.
LEADERSHIP
Chips: After TXN, LRCX, SWKS, STM struggled mightily on the week, INTC rode
in, crushed earnings even with those chip flaws, and gapped over the
November and December highs in its 3 month trading range, breaking out with
a breakaway gap. Others still show promise, e.g. MRVL, of course NVDA, then
CCMP, AMD, AMAT, MXL.
FAANG: AAPL continues its struggle but is holding the bottom of its range.
FB jumped back up Friday and looks promising this week. New position
perhaps. AMZN continues its runaway train imitation. NFLX gapped higher on
earnings and continued upside into Friday. GOOG stalled Wednesday and
slipped laterally into the weekend. Perhaps enough time for a pre-earnings
play on a new upside break.
Software: RHT screaming higher Friday after a steady rise on the week. VMW
exploded higher, giving us a big gain, on word DELL may buy it all. BLKB
looks interesting. FFIV surged and purged on earnings. CRM may be ready to
break higher again after its breakout and second test of the 10 day EMA.
Financial: Solid to excellent week. C hitting a higher rally high all
week. JPM ditto. BAC as well. GS strong move off the 50 day MA.
Manufacturing/Machinery: CAT tested after earnings while CMI broke higher
Friday from a consolidation. HON jumping on earnings.
China: Some excellent recoveries. BABA started higher Tuesday, we moved in
midweek, it rallied to a new high into the Friday close. BIDU struggled
through the week but held the 10 day EMA and Friday was at a higher closing
high in this rally on some solid trade. BZUN broke sharply higher. HTHT
struggled early week but held the 20 day and is trying to recover. SINA
tested on the week to the 10 day EMA, dojied, then gapped higher and rallied
to a higher high Friday.
Oil: Tested back some on the week with the big names faring a bit better.
HAL finally testing after that gap higher Monday. APC showed a bit Monday
and then crept up the 10 day the rest of the week. Some smaller names
struggled, e.g. CRZO. PTEN, DNR not spectacular but they did move higher on
the week.
Transports: Airlines down hard on their earnings, e.g. DAL, AAL, LUV.
Truckers solid either testing (JBHT) or still rallying (WERN).
THE MARKET
MARKET STATS
DJ30
Stats: +223.92 points (+0.85%) to close at 26616.71
Nasdaq
Stats: +94.61 points (+1.28%) to close at 7505.77
Volume: 2.07B (0%)
Up Volume: 1.44B (+504.59M)
Down Volume: 600.8M (-509.2M)
A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Decliners led 1.06 to 1
New Highs: 305 (+93)
New Lows: 30 (+1)
S&P
Stats: +33.62 points (+1.18%) to close at 2872.87
NYSE Volume: 805.1M (-8.19%)
Up Volume: 2.32B (+790M)
Down Volume: 1.05B (-1.15B)
New Highs: 292 (+27)
New Lows: 82 (+18)
SENTIMENT INDICATORS
VIX: 11.08; -0.50
VXN: 17.52; -0.73
VXO: 11.47; -0.04
Put/Call Ratio (CBOE): 0.79; -0.01
Bulls and Bears: Bulls backed off the cycle high but still very strong.
Bears ticked higher, but still at 30 year lows.
Bulls: 64.7 versus 66.7
Bears: 12.8 versus 12.7
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: 64.7 versus 66.7
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 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: 12.8 versus 12.7
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 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: 2.66% versus 2.627. Traded at the bottom of the 6 month range on the
week, did manage to rebound some.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.66%
versus 2.639% versus 2.617% versus 2.656% versus 2.661% versus 2.618% versus
2.587% versus 2.535% versus 2.55% versus 2.559% versus 2.551% versus 2.482%
versus 2.456% versus 2.463% versus 2.464% versus 2.405% versus 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%
EUR/USD: 1.24308 versus 1.24159. Euro surged on the week but then threw a
couple of tombstone doji to end it. A pause.
Historical: 1.24159 versus 1.24340 versus 1.23083 versus 1.22567 versus
1.22169 versus 1.2241 versus 1.2198 versus 1.22698 versus 1.22060 versus
1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus 1.20313 versus
1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus 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 1.15871
USD/JPY: 108.601 versus 109.411. Dollar melted on the week, failing at the
10 day EMA and tumbling. It is ripe to rebound to test the 10 day EMA, but
it is in a downtrend now and will hit the early September low. Then it
tries to rebound some.
Historical: 109.411 versus 109.033 versus 110.159 versus 110.159 versus
110.70 versus 110.834 versus 111.036 versus 111.290 versus 110.357 versus
111.024 versus 111.204 versus 111.534 versus 112.706 versus 113.15 versus
113.58 versus 112.749 versus 112.677 versus 112.27 versus 112.690 versus
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: 66.14, +0.63. After testing back to the 10 day EMA for a week, oil
broke higher once more, closing at a new rally closing high.
Gold: 1352.10, -10.80. Big surge on the week to a higher high past the
September peak, but gave it up with a Friday gap lower to test the 10 day.
MONDAY
It is either a certainty the market will at least correct or it will keep
going for some time without correcting. Ah, when is, as usual, the key.
Many are afraid of flying because they have seen the crashes before. You
have to respect the downside to keep what you made on the upside. You also
want to play the upside while it is making you great money as it has. You
just want to avoid, to borrow a trite but descriptive expression, picking up
nickels in front of the steam roller.
As noted earlier, the move could end Monday. The new money getting pushed
into the market could have seen its end Friday. Perhaps. The charts are
extended, but nothing Friday showed they were done. A couple of volatile
sessions with higher selling volume is something to note and watch for more
occurrences, but they don't end the rally themselves. There are still very
good stocks in good position, and if they can make the moves, then they make
the moves.
Therefore we will look at some more upside positions this coming week and
see if the money still comes into the market. Important earnings reports
from AMD, FB, MSFT, AAPL, AMZN, BABA, GOOG, stocks that initiated the
October break higher into the current run, are all due. Given the runs,
will there be enough good news to push them not just higher for that day,
but into new runs? The more they rally into the numbers, often the less
likelihood of a sustained move afterward. NFLX, of course, excepted.
So, we are concerned about when the top comes, but even so we are looking at
upside plays because the leaders are still setting up and rallying. As long
as they set up, rally, and don't reverse those rallies the upside remains in
charge and we want to play there.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 7505.77
Resistance:
Support:
7300 from a modest mid-January consolidation
The 20 day EMA at 7254
The 50 day EMA at 7049
7,000 from mid-December
6914 is the late November all-time high
6796 is the early November 2017
The 2016 trendline at 6720
6641 is the October high
The 200 day SMA at 6494
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
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
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 2872.87
Resistance:
Support:
2808 from the mid-January consolidation. Some support, not that strong.
The 20 day EMA at 2782
2751 from early January 2018
The 50 day EMA at 2710
2694 is the mid-December peak
2597 is the November 2017 high
2569 is the upper channel line from the March 2009 uptrend channel
The 200 day SMA at 2523
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
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 May 2017 low
Dow: Closed at 26,616.71
Resistance:
Support:
26,000 from mid-January consolidation
The 20 day EMA at 25,740
24,835 is the mid-December consolidation range
The 50 day EMA at 24,923
24,312
23,602 is the early November 2017 high
23,608 is the early November high
The 200 day SMA at 22,564
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
End part 1 of 3
_______________________________________________________
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Sunday, January 28, 2018
Sunday, January 21, 2018
The Daily, Part 1 of 3, 1-20-18
* * * *
1/20/2018 Investment House Daily
* * * *
Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: AGN; AMD; NVDA
Trailing stops: NOG
Stop alerts: IMMU; XON
The market alert service is a premium level service where we issue intraday
alerts relating to the general market conditions, when stocks hit action
points (buy, stop, target, etc.), and when we see other information
impacting the market or our stocks. To subscribe to the alert service you
can sign up at the following link:
http://www.investmenthouse.com/alertdaily.html
********************************************************************
The Market Video is DIVIDED into component parts: Market Overview, Economy,
Technical Summary, and the Next Session. Choose the segments you are
interested in without having to search a longer video. Click on the link to
the portion you wish to view.
TO VIEW THE MARKET OVERVIEW CLICK THE FOLLOWING LINK:
Flash: http://investmenthouse1.com/ihmedia/f/mo/mo.mp4
********************************************************************
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
- On again, off again market. Kind of.
- Market rally shows more volatility on the week but keeps marching higher
across the board.
- Small caps, midcaps lead Friday. Showing flashes of brilliance. Flashes.
- Market continues producing leaders from all areas.
- The issues: extended near term, earnings ahead after a strong run higher,
some volatility entering, sentiment extremes.
- Bullish sentiment having its own sort of blow off top, breaking out from
high to a new cycle high.
- Have to play the market at hand, but very mindful of the indications,
technical and sentiment, lining up.
Friday the stock market was back 'on' in a week that saw stocks up one day,
down the next, then back up. Tuesday gapped higher just to reverse.
Wednesday rallied as if Tuesday never happened. Thursday was modestly off,
then Friday was back up.
More than just back and forth, however, the mix of the moves changed day to
day as well. The prior Friday was up for all indices, but it was up big for
RUTX and SP400. Then the large cap indices took over. Friday it was back
to the small and midcaps leading as they put in 1+% moves to the 'ehh' moves
of the other indices.
SP500 12.27, 0.44%
NASDAQ 40.33, 0.55%
DJ30 53.91, 0.21%
SP400 1.07%
RUTX 1.33%
SOX 0.11%
NASDAQ 100 0.34%
VOLUME: NYSE +16%, NASDAQ -1.5%.
ADVANCE/DECLINE: NYSE 2.6:1, NASDAQ 2.5:1. Hey, somewhat good breadth,
thanks to the small and midcaps.
What are the takeaways from this?
First, the volatility that showed up Tuesday is still there though the late
week moves tend to mitigate that Tuesday upside gap and sharp reversal.
Second, the uptrends remain despite the volatility. Not a guarantee the
upside continues, but the trend keeps finding buyers on the selling
attempts.
Third, leadership continues showing up, and it shows up from different
areas. Large caps have dominated as evidenced by the DJ30, SP500, NASDAQ
moves. For January, the time of the 'January Effect,' the large caps show a
lot of upside. The small and midcaps have continued trending higher,
however, and the past two Fridays they took the market lead with outsized
moves.
The bottom line?
For now the market continues generating new leadership and somewhat day to
day or every other day it is rotating to different areas. All the while,
the market continues to trend higher, and that indicates money is mostly
remaining in the market. Violent reversal sessions such as last Tuesday
indicate that some money is being taken to the sidelines, selling as the
later money pushes into the market, but thus far just one of those sessions
has showed itself.
The market continues finding leaders and new stocks to move higher. At the
same time the large cap indices, particularly DJ30 and SP500 are extended in
their current runs both in terms of the number of rallies after last leaving
the 50 day MA in September, as well as the percentage above the 200 day SMA
(DJ30 16.7% at the high; SP500 12%). Those technical characteristics
typically lead to a correction below the 10 and 20 day EMA, more like the 50
day MA.
Thus far, however, this melt upside has not allowed a correction. It will
come, and the volatile reversal from Tuesday, the one day up, one day down
action the rest of the week are a caution flag that the sellers are testing
the waters right now. It does not mean they will succeed right now, but
they are trying.
With that scenario, while you can sell out and wait for a correction, we are
going to continue playing the upside with good new plays while letting
current positions run if they are, taking gain along the way. Then when the
inevitable correction starts, you already have gain in the bank and can take
positions off the table with in many cases even more gain, and you can close
the newer positions that struggle with near support.
As we have all seen in the past, it can look as if the market is starting
what would be an expected correction, only to right itself and continue
higher. As discussed last weekend, the indicia of a blow off top are not
present, though I do note that volatility jumped last week starting with the
Tuesday reversal, and continued higher into Thursday before a Friday fade.
Keep an eye on volatility as rising volatility in an uptrending market is a
sign of a more important top. VIX is still well contained inside its range
for now, however, so that is not flashing any warnings in this regard.
Extra-market events to cause trouble?
What about other events? Everyone likes to play the 'what drives the
market' game, and this weekend it is the government shutdown. There is so
much gnashing of the teeth over a shutdown, driven by those who want you to
believe you have to have the government tending to your every need every
minute of the day. Truth is, the essentials people rely on, even though
they are not really constitutionally areas the government was ever supposed
to enter, will be met.
That said, the top story on CNBC.com today is about Nicolas Cage spending
$150M on mansions, and island, etc. I guess things are not THAT bad as a
result of a shutdown. Surprise.
The democrats are going all in on their amnesty card while the republicans
once again struggle to even articulate a message. Ironically, the GOP
Congress complains about Trump tweeting his thoughts as they ping pong
around in his head but cannot put together a meaningful one line statement
about their position. The classic example is in the healthcare hashtags of
the democrats versus the republicans over the tax cuts. The democrats were
simple and direct, i.e. effective: #taxcutsfortherich. Did the republicans
initiate #TaxCutstoGiveYou$4500, or #TaxCutsIncreaseYourPaycheck? No, their
great minds incubated #keepYoMoney and #TaxCutsandJobsAct. Brilliant
marketing!
But, I digress. A lot is being made about the shutdown but it has little
actual effect. Oh yes, some are arguing that it will impact GDP. Why?
Because they believe the government is the main driver in our economy. They
are wrong; if that was correct, then the 10 years we did not have a year
averaging 3% GDP growth would not have occurred. Government spending
exploded in those years yet the economy staggered and stumbled around.
Clearly, government spending does NOT have a major impact on growth, and
indeed I would posit that a shutdown might help spur more growth as long as
the regulations are being reduced, and we know they are.
Earnings anyone?
Ah, the REAL near term impact. After a great response to the Q3 earnings
starting late October, the market rally continued to present day. Now the
Q4 season has started and the initial reaction to the stocks announcing is
not great (e.g. AXP, IBM) though there are company specific issues at play.
Still, after such strong runs that were kicked off by earnings, it takes a
really strong quarter and outlook to propel further gains. To us, earnings
could very well be the trigger that gives traders and investors the 'well,
why not take some profits?' mindset and thus a correction of this impressive
run.
Therefore, while we still see a lot of stocks we like, we also know that
earnings are here and many positions sport excellent runs from the last
round of results. Therefore, with options particularly, it is wise to bank
at least some more gain ahead of results if not all of it. Now there are
ALWAYS special circumstances where you don't mind holding a position through
earnings -- some plays are turning the corner after a long decline and
earnings tend to help that move. After big runs ahead of results, however,
the probabilities are a near term decline even if they do bump higher on the
results. Many times they open higher then reverse as the good news is now
all in and there is simply no more money to be pulled in.
Accordingly, a bit of common sense is warranted, i.e. not trying to squeeze
every nickel out of a play. The reward potential suffers high diminishing
returns in that situation. In other words, do you want to risk making
another buck while risking 5 bucks? The probabilities start turning against
you, and success in the market is all about getting the probabilities in
your favor from the pattern, to the stage in the lifecycle of a move, to the
percentage of money allocated to a particular trade. Right now there are
still a lot of good patterns, but for many stocks that have rallied well,
they are a bit aged in terms of the lifecycle. Also, there is the market's
lifecycle on top of that. We can play stocks in good positions that are not
extended, but on those that have enjoyed great runs, entering ahead of
earnings (with the intent of riding them through results) is not the best
plan in most cases.
Bulls on a rampage, bears in deep hibernation.
Bullish sentiment broke out to 66.7 last week, screaming to a new cycle high
and indeed the highest reading in the past 30+ years. At the same time
bears fell to 12.7, the lowest since 1987. They held in the range for
almost a year but now are breaking out. These are extreme bookends to the
market, showing sentiment is extreme.
Extremes are the only things important in sentiment. They are now at
extremes for certain, and are thus another indicator that a market pullback,
correction, etc. is going to come.
This week.
So, yes we have some new plays that look great and have time before
earnings. A couple we don't have a problem with holding through earnings if
they start to make the move we want ahead of time. And still other current,
longer term positions, we will look to bank some more gain ahead of results
if they have put in good moves.
THE MARKET
CHARTS
RUTX: It was the day for the small and midcaps as the bids flipped back
their way. RUTX surged to a new closing high though still below the
intraday high from Tuesday. Volatile as the other indices, but not nearly
the extended position. The upside is coming in big chunks when it comes,
holding out promise for a belated and more sustained January Effect.
SP400: A nice, market-leading move here as well as the midcaps jumped off
the 10 day EMA to a new all-time high. A bit volatile as well of course,
but holding tight on the trend up the 10 day EMA. As with the small caps,
this is more their time, and thus the rally should have more staying power.
Near term they are just a bit extended on this last leg given the 4 to 5
week run. As far as the 50 day MA, however, they last toughed it in
November, so not overly extended.
SOX: So important to the market, and an important move this past week,
breaking to a new all-time high past the 2000 peak. No one said a thing
about it but us. Eye not on the ball I think. Anyway, a nice new breakout
from the 8 week base, slowing a bit at the end of week. Many chips are
looking much improved in good patterns after the 2 month hiatus and that is
still good news for the market overall though they may be extended just a
bit near term after a rally into the breakout move.
NASDAQ: This current rally leg is almost 3 weeks old and pretty much
straight up outside of the Tuesday volatility. Friday saw NASDAQ to another
new high, so after that kind of move near term NASDAQ is extended. What
does that mean? Well, it can still move higher, it is just that after this
kind of rally it likely has less upside left in it before a test comes. We
do have some new plays on AMZN and NFLX after they put in short
consolidations, but even they remain overall extended despite the recent
test; we are looking at them more for a short play around earnings.
DJ30: Trended higher last week but did show volatility Tuesday and
Thursday, and then struggled some Friday thanks to AXP, IBM. Would have
performed better but for those, or as they say here in the office, it would
have performed better if it did. Anyway, really extended off the 50 day MA
and over the 200 day MA but thus far not testing.
SP500: Similar to DJ30, but SP500 punched out a new high Friday. Some
volatility, quite extended in terms of the 50 day and 200 day MA, but thus
far still finding bids. Not a blow off top as noted last week, but as with
DJ30, up 3 weeks on this leg alone AFTER it was already extended.
LEADERSHIP
The market continues producing new stocks moving higher.
Clearly manufacturing (HON, EMR, UTX), machinery (CAT, CMI), transports
(AAL, JBHT, BA) continue strong runs, not really in buy points given the
length of the moves.
Then there are others that broke out later that are not that extended in the
bigger picture, e.g. FAANG stocks. Software such as CRM, VMW, FFIV.
There are newer areas in oil (MRO, CVX, PTEN), Drugs/Biotechs (AMGN, IMGN,
SRPT), financial (C, BAC).
There are sectors and stocks that rallied but then needed to test and have
done so. Semiconductors are the classic example as many break higher (MCHP,
XLNX, LRCX) though many are right at earnings making it harder to play.
AVGO certainly looks interesting. Not all are great, e.g. SWKS, breaking
lower from the 200 day SMA.
Chinese stocks are another example similar to chips. BIDU looks great to
continue higher. YY is a bit extended on this move but solid. BITA looks
very good. HTHT looks great.
Retail is a broad mix that covers many stages. BBBY and CAKE are examples
that look ready to break higher. WMT is renewing its upside. DDS, JWN and
other department stores are rallying. Makes sense given the economy.
Individual stocks include SQ, TSLA, DIS. GRPN put in a strong move Friday
after a drop and four week lateral consolidation.
MARKET STATS
DJ30
Stats: +53.91 points (+0.21%) to close at 26071.72
Nasdaq
Stats: +40.33 points (+0.55%) to close at 7336.38
Volume: 2B (-1.48%)
Up Volume: 1.32B (+300M)
Down Volume: 627.91M (-347.37M)
A/D and Hi/Lo: Advancers led 2.5 to 1
Previous Session: Decliners led 1.74 to 1
New Highs: 294 (+126)
New Lows: 41 (-3)
S&P
Stats: +12.27 points (+0.44%) to close at 2810.30
NYSE Volume: 1B (+15.87%)
A/D and Hi/Lo: Advancers led 1.98 to 1
Previous Session: Decliners led 2.61 to 1
New Highs: 244 (+63)
New Lows: 86 (-8)
SENTIMENT INDICATORS
VIX: 11.27; -0.95
VXN: 16.15; -0.80
VXO: 10.41; -0.63
Put/Call Ratio (CBOE): 0.86; +0.03
Bulls and Bears: Cycle highs and cycle lows for bulls and bears,
respectively. This is starting to flash brightly as a warning. Bulls are
having their own blow off top of sorts.
Bulls: 66.7 versus 64.4
Bears: 12.7 versus 13.5
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: 66.7 versus 64.4
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 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: 12.7 versus 13.5
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 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: 2.661% versus 2.618%. So much for 6.2% as bonds tanked, sending
yields surging.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.618%
versus 2.587% versus 2.535% versus 2.55% versus 2.559% versus 2.551% versus
2.482% versus 2.456% versus 2.463% versus 2.464% versus 2.405% versus 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%
EUR/USD: 1.22169 versus 1.2241. Holding the break higher last week,
working laterally.
Historical: 1.2241 versus 1.2198 versus 1.22698 versus 1.22060 versus
1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus 1.20313 versus
1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus 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 1.15871
USD/JPY: 110.834 versus 111.036.
Historical: 111.036 versus 111.290 versus 110.357 versus 111.024 versus
111.204 versus 111.534 versus 112.706 versus 113.15 versus 113.58 versus
112.749 versus 112.677 versus 112.27 versus 112.690 versus 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: 63.31, -0.58. Still in a weeklong test of the 10 day EMA,
consolidating that good rally.
Gold: 1333.10, +5.90. Tested the 10 day EMA, bouncing modestly Friday. It
too is testing a move and is measuring the prior high at early September.
Why is gold moving up? Inflation?
SUPPORT AND RESISTANCE
NASDAQ: Closed at 7336.38
Resistance:
Support:
7,000 from mid-December
The 50 day EMA at 6962
6914 is the late November all-time high
6796 is the early November 2017
The 2016 trendline at 6694
6641 is the October high
6477 is the September intraday high
6461 is the July 2017 prior all-time high
The 200 day SMA at 6455
6450 is the early September high
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
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 2810.30
Resistance:
Support:
2751 from early January 2018
The 20 day EMA at 2741
2694 is the mid-December peak
The 50 day EMA at 2680
2597 is the November 2017 high
2569 is the upper channel line from the March 2009 uptrend channel
The 200 day SMA at 2508
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
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 May 2017 low
Dow: Closed at 26,071.72
Resistance:
Support:
25,697 is the 10 day EMA
The 20 day EMA at 25,340
24,835 is the mid-December consolidation range
The 50 day EMA at 24,609
24,312
23,602 is the early November 2017 high
23,608 is the early November high
22,420 is the September high
The 200 day SMA at 22,422
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
End part 1 of 3
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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
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If any market circumstances arise where we see additional plays we want to
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of the day of the week.
MARKET SUMMARY
- On again, off again market. Kind of.
- Market rally shows more volatility on the week but keeps marching higher
across the board.
- Small caps, midcaps lead Friday. Showing flashes of brilliance. Flashes.
- Market continues producing leaders from all areas.
- The issues: extended near term, earnings ahead after a strong run higher,
some volatility entering, sentiment extremes.
- Bullish sentiment having its own sort of blow off top, breaking out from
high to a new cycle high.
- Have to play the market at hand, but very mindful of the indications,
technical and sentiment, lining up.
Friday the stock market was back 'on' in a week that saw stocks up one day,
down the next, then back up. Tuesday gapped higher just to reverse.
Wednesday rallied as if Tuesday never happened. Thursday was modestly off,
then Friday was back up.
More than just back and forth, however, the mix of the moves changed day to
day as well. The prior Friday was up for all indices, but it was up big for
RUTX and SP400. Then the large cap indices took over. Friday it was back
to the small and midcaps leading as they put in 1+% moves to the 'ehh' moves
of the other indices.
SP500 12.27, 0.44%
NASDAQ 40.33, 0.55%
DJ30 53.91, 0.21%
SP400 1.07%
RUTX 1.33%
SOX 0.11%
NASDAQ 100 0.34%
VOLUME: NYSE +16%, NASDAQ -1.5%.
ADVANCE/DECLINE: NYSE 2.6:1, NASDAQ 2.5:1. Hey, somewhat good breadth,
thanks to the small and midcaps.
What are the takeaways from this?
First, the volatility that showed up Tuesday is still there though the late
week moves tend to mitigate that Tuesday upside gap and sharp reversal.
Second, the uptrends remain despite the volatility. Not a guarantee the
upside continues, but the trend keeps finding buyers on the selling
attempts.
Third, leadership continues showing up, and it shows up from different
areas. Large caps have dominated as evidenced by the DJ30, SP500, NASDAQ
moves. For January, the time of the 'January Effect,' the large caps show a
lot of upside. The small and midcaps have continued trending higher,
however, and the past two Fridays they took the market lead with outsized
moves.
The bottom line?
For now the market continues generating new leadership and somewhat day to
day or every other day it is rotating to different areas. All the while,
the market continues to trend higher, and that indicates money is mostly
remaining in the market. Violent reversal sessions such as last Tuesday
indicate that some money is being taken to the sidelines, selling as the
later money pushes into the market, but thus far just one of those sessions
has showed itself.
The market continues finding leaders and new stocks to move higher. At the
same time the large cap indices, particularly DJ30 and SP500 are extended in
their current runs both in terms of the number of rallies after last leaving
the 50 day MA in September, as well as the percentage above the 200 day SMA
(DJ30 16.7% at the high; SP500 12%). Those technical characteristics
typically lead to a correction below the 10 and 20 day EMA, more like the 50
day MA.
Thus far, however, this melt upside has not allowed a correction. It will
come, and the volatile reversal from Tuesday, the one day up, one day down
action the rest of the week are a caution flag that the sellers are testing
the waters right now. It does not mean they will succeed right now, but
they are trying.
With that scenario, while you can sell out and wait for a correction, we are
going to continue playing the upside with good new plays while letting
current positions run if they are, taking gain along the way. Then when the
inevitable correction starts, you already have gain in the bank and can take
positions off the table with in many cases even more gain, and you can close
the newer positions that struggle with near support.
As we have all seen in the past, it can look as if the market is starting
what would be an expected correction, only to right itself and continue
higher. As discussed last weekend, the indicia of a blow off top are not
present, though I do note that volatility jumped last week starting with the
Tuesday reversal, and continued higher into Thursday before a Friday fade.
Keep an eye on volatility as rising volatility in an uptrending market is a
sign of a more important top. VIX is still well contained inside its range
for now, however, so that is not flashing any warnings in this regard.
Extra-market events to cause trouble?
What about other events? Everyone likes to play the 'what drives the
market' game, and this weekend it is the government shutdown. There is so
much gnashing of the teeth over a shutdown, driven by those who want you to
believe you have to have the government tending to your every need every
minute of the day. Truth is, the essentials people rely on, even though
they are not really constitutionally areas the government was ever supposed
to enter, will be met.
That said, the top story on CNBC.com today is about Nicolas Cage spending
$150M on mansions, and island, etc. I guess things are not THAT bad as a
result of a shutdown. Surprise.
The democrats are going all in on their amnesty card while the republicans
once again struggle to even articulate a message. Ironically, the GOP
Congress complains about Trump tweeting his thoughts as they ping pong
around in his head but cannot put together a meaningful one line statement
about their position. The classic example is in the healthcare hashtags of
the democrats versus the republicans over the tax cuts. The democrats were
simple and direct, i.e. effective: #taxcutsfortherich. Did the republicans
initiate #TaxCutstoGiveYou$4500, or #TaxCutsIncreaseYourPaycheck? No, their
great minds incubated #keepYoMoney and #TaxCutsandJobsAct. Brilliant
marketing!
But, I digress. A lot is being made about the shutdown but it has little
actual effect. Oh yes, some are arguing that it will impact GDP. Why?
Because they believe the government is the main driver in our economy. They
are wrong; if that was correct, then the 10 years we did not have a year
averaging 3% GDP growth would not have occurred. Government spending
exploded in those years yet the economy staggered and stumbled around.
Clearly, government spending does NOT have a major impact on growth, and
indeed I would posit that a shutdown might help spur more growth as long as
the regulations are being reduced, and we know they are.
Earnings anyone?
Ah, the REAL near term impact. After a great response to the Q3 earnings
starting late October, the market rally continued to present day. Now the
Q4 season has started and the initial reaction to the stocks announcing is
not great (e.g. AXP, IBM) though there are company specific issues at play.
Still, after such strong runs that were kicked off by earnings, it takes a
really strong quarter and outlook to propel further gains. To us, earnings
could very well be the trigger that gives traders and investors the 'well,
why not take some profits?' mindset and thus a correction of this impressive
run.
Therefore, while we still see a lot of stocks we like, we also know that
earnings are here and many positions sport excellent runs from the last
round of results. Therefore, with options particularly, it is wise to bank
at least some more gain ahead of results if not all of it. Now there are
ALWAYS special circumstances where you don't mind holding a position through
earnings -- some plays are turning the corner after a long decline and
earnings tend to help that move. After big runs ahead of results, however,
the probabilities are a near term decline even if they do bump higher on the
results. Many times they open higher then reverse as the good news is now
all in and there is simply no more money to be pulled in.
Accordingly, a bit of common sense is warranted, i.e. not trying to squeeze
every nickel out of a play. The reward potential suffers high diminishing
returns in that situation. In other words, do you want to risk making
another buck while risking 5 bucks? The probabilities start turning against
you, and success in the market is all about getting the probabilities in
your favor from the pattern, to the stage in the lifecycle of a move, to the
percentage of money allocated to a particular trade. Right now there are
still a lot of good patterns, but for many stocks that have rallied well,
they are a bit aged in terms of the lifecycle. Also, there is the market's
lifecycle on top of that. We can play stocks in good positions that are not
extended, but on those that have enjoyed great runs, entering ahead of
earnings (with the intent of riding them through results) is not the best
plan in most cases.
Bulls on a rampage, bears in deep hibernation.
Bullish sentiment broke out to 66.7 last week, screaming to a new cycle high
and indeed the highest reading in the past 30+ years. At the same time
bears fell to 12.7, the lowest since 1987. They held in the range for
almost a year but now are breaking out. These are extreme bookends to the
market, showing sentiment is extreme.
Extremes are the only things important in sentiment. They are now at
extremes for certain, and are thus another indicator that a market pullback,
correction, etc. is going to come.
This week.
So, yes we have some new plays that look great and have time before
earnings. A couple we don't have a problem with holding through earnings if
they start to make the move we want ahead of time. And still other current,
longer term positions, we will look to bank some more gain ahead of results
if they have put in good moves.
THE MARKET
CHARTS
RUTX: It was the day for the small and midcaps as the bids flipped back
their way. RUTX surged to a new closing high though still below the
intraday high from Tuesday. Volatile as the other indices, but not nearly
the extended position. The upside is coming in big chunks when it comes,
holding out promise for a belated and more sustained January Effect.
SP400: A nice, market-leading move here as well as the midcaps jumped off
the 10 day EMA to a new all-time high. A bit volatile as well of course,
but holding tight on the trend up the 10 day EMA. As with the small caps,
this is more their time, and thus the rally should have more staying power.
Near term they are just a bit extended on this last leg given the 4 to 5
week run. As far as the 50 day MA, however, they last toughed it in
November, so not overly extended.
SOX: So important to the market, and an important move this past week,
breaking to a new all-time high past the 2000 peak. No one said a thing
about it but us. Eye not on the ball I think. Anyway, a nice new breakout
from the 8 week base, slowing a bit at the end of week. Many chips are
looking much improved in good patterns after the 2 month hiatus and that is
still good news for the market overall though they may be extended just a
bit near term after a rally into the breakout move.
NASDAQ: This current rally leg is almost 3 weeks old and pretty much
straight up outside of the Tuesday volatility. Friday saw NASDAQ to another
new high, so after that kind of move near term NASDAQ is extended. What
does that mean? Well, it can still move higher, it is just that after this
kind of rally it likely has less upside left in it before a test comes. We
do have some new plays on AMZN and NFLX after they put in short
consolidations, but even they remain overall extended despite the recent
test; we are looking at them more for a short play around earnings.
DJ30: Trended higher last week but did show volatility Tuesday and
Thursday, and then struggled some Friday thanks to AXP, IBM. Would have
performed better but for those, or as they say here in the office, it would
have performed better if it did. Anyway, really extended off the 50 day MA
and over the 200 day MA but thus far not testing.
SP500: Similar to DJ30, but SP500 punched out a new high Friday. Some
volatility, quite extended in terms of the 50 day and 200 day MA, but thus
far still finding bids. Not a blow off top as noted last week, but as with
DJ30, up 3 weeks on this leg alone AFTER it was already extended.
LEADERSHIP
The market continues producing new stocks moving higher.
Clearly manufacturing (HON, EMR, UTX), machinery (CAT, CMI), transports
(AAL, JBHT, BA) continue strong runs, not really in buy points given the
length of the moves.
Then there are others that broke out later that are not that extended in the
bigger picture, e.g. FAANG stocks. Software such as CRM, VMW, FFIV.
There are newer areas in oil (MRO, CVX, PTEN), Drugs/Biotechs (AMGN, IMGN,
SRPT), financial (C, BAC).
There are sectors and stocks that rallied but then needed to test and have
done so. Semiconductors are the classic example as many break higher (MCHP,
XLNX, LRCX) though many are right at earnings making it harder to play.
AVGO certainly looks interesting. Not all are great, e.g. SWKS, breaking
lower from the 200 day SMA.
Chinese stocks are another example similar to chips. BIDU looks great to
continue higher. YY is a bit extended on this move but solid. BITA looks
very good. HTHT looks great.
Retail is a broad mix that covers many stages. BBBY and CAKE are examples
that look ready to break higher. WMT is renewing its upside. DDS, JWN and
other department stores are rallying. Makes sense given the economy.
Individual stocks include SQ, TSLA, DIS. GRPN put in a strong move Friday
after a drop and four week lateral consolidation.
MARKET STATS
DJ30
Stats: +53.91 points (+0.21%) to close at 26071.72
Nasdaq
Stats: +40.33 points (+0.55%) to close at 7336.38
Volume: 2B (-1.48%)
Up Volume: 1.32B (+300M)
Down Volume: 627.91M (-347.37M)
A/D and Hi/Lo: Advancers led 2.5 to 1
Previous Session: Decliners led 1.74 to 1
New Highs: 294 (+126)
New Lows: 41 (-3)
S&P
Stats: +12.27 points (+0.44%) to close at 2810.30
NYSE Volume: 1B (+15.87%)
A/D and Hi/Lo: Advancers led 1.98 to 1
Previous Session: Decliners led 2.61 to 1
New Highs: 244 (+63)
New Lows: 86 (-8)
SENTIMENT INDICATORS
VIX: 11.27; -0.95
VXN: 16.15; -0.80
VXO: 10.41; -0.63
Put/Call Ratio (CBOE): 0.86; +0.03
Bulls and Bears: Cycle highs and cycle lows for bulls and bears,
respectively. This is starting to flash brightly as a warning. Bulls are
having their own blow off top of sorts.
Bulls: 66.7 versus 64.4
Bears: 12.7 versus 13.5
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: 66.7 versus 64.4
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 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: 12.7 versus 13.5
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 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: 2.661% versus 2.618%. So much for 6.2% as bonds tanked, sending
yields surging.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.618%
versus 2.587% versus 2.535% versus 2.55% versus 2.559% versus 2.551% versus
2.482% versus 2.456% versus 2.463% versus 2.464% versus 2.405% versus 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%
EUR/USD: 1.22169 versus 1.2241. Holding the break higher last week,
working laterally.
Historical: 1.2241 versus 1.2198 versus 1.22698 versus 1.22060 versus
1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus 1.20313 versus
1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus 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 1.15871
USD/JPY: 110.834 versus 111.036.
Historical: 111.036 versus 111.290 versus 110.357 versus 111.024 versus
111.204 versus 111.534 versus 112.706 versus 113.15 versus 113.58 versus
112.749 versus 112.677 versus 112.27 versus 112.690 versus 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: 63.31, -0.58. Still in a weeklong test of the 10 day EMA,
consolidating that good rally.
Gold: 1333.10, +5.90. Tested the 10 day EMA, bouncing modestly Friday. It
too is testing a move and is measuring the prior high at early September.
Why is gold moving up? Inflation?
SUPPORT AND RESISTANCE
NASDAQ: Closed at 7336.38
Resistance:
Support:
7,000 from mid-December
The 50 day EMA at 6962
6914 is the late November all-time high
6796 is the early November 2017
The 2016 trendline at 6694
6641 is the October high
6477 is the September intraday high
6461 is the July 2017 prior all-time high
The 200 day SMA at 6455
6450 is the early September high
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
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 2810.30
Resistance:
Support:
2751 from early January 2018
The 20 day EMA at 2741
2694 is the mid-December peak
The 50 day EMA at 2680
2597 is the November 2017 high
2569 is the upper channel line from the March 2009 uptrend channel
The 200 day SMA at 2508
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
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 May 2017 low
Dow: Closed at 26,071.72
Resistance:
Support:
25,697 is the 10 day EMA
The 20 day EMA at 25,340
24,835 is the mid-December consolidation range
The 50 day EMA at 24,609
24,312
23,602 is the early November 2017 high
23,608 is the early November high
22,420 is the September high
The 200 day SMA at 22,422
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
End part 1 of 3
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Sunday, January 14, 2018
The Daily, Part 1 of 3, 1-13-18
* * * *
1/13/2018 Investment House Daily
* * * *
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Stop alerts: LEDS
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interested in without having to search a longer video. Click on the link to
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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
- FB tries to ruin the move, but only FB ends the day getting roughed up.
- Stock indices surge led by DJ30 and other large caps.
- Everything just fine or is something up? What is a blow off top?
- Stocks perhaps extended near term, no signs of a major top imminent.
Up in the sky. It's a bird. It's a plane. No, it's Boeing. Or the Dow
Industrials. Or the Dow Transports. Or the SP500. Or AMZN. Or CAT. The
list goes on and on as stocks slip reality's surly bonds and soar.
Friday could have been problematic. FB announced changes to its news feed,
changes one of its top officials formerly said would not be implemented due
to the sharply negative usage impact they had in the markets were tested.
That change will result in near term usage drops, and FB suffered for it.
There was some early coattail action as the FAANG stocks traded lower
pre-market.
But then the market's usual fix arrived: the opening bell. Investors and
traders packed all their troubles in their old kit bag and bought, bought,
bought. FAANG stocks surged with AMZN +2.23%, NFLX 1.84%, AAPL 1.81%, and
GOOG bringing up the rear at a mere +1.51%, or +16.74 points. Loser.
Of course that had NASDAQ 100 rallying hard. Again. But the Dow had JPM,
BA, CAT and company rallying hard again as well, and it outpaced NASDAQ.
SP500 was by comparison the 'GOOG' of the group, rising a mere 0.67%.
Loser.
RUTX, Thursday's star, managed just 0.33% as the January Effect did not have
much of a lingering effect. SP400 was worse at 0.27%. Loser.
SOX gained 0.59%, putting it in the middle of the pack, but the chips are
the only index we track that did not put in a new high Friday. Or any day
of the week. Or any session in 8 weeks. Despite some very nice individual
moves (e.g. MRVL), they remain mired well below the November and early
January lower high, the 's***hole' of the market to borrow from the current
political parlance.
SP500 18.68, 0.67%
NASDAQ 49.28, 0.68%
DJ30 228.46, 0.89%
SP400 0.27%
RUTX 0.33%
SOX 0.59%
NASDAQ 100 0.75%
VOLUME: NYSE +5%, NASDAQ -1.5%. NYSE finally cracked back above average; at
least it was upside. NASDAQ trade faded to average after 7 sessions of
above average trade.
ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.5:1
NEW HIGHS: NYSE 396, NASDAQ 423. This is getting toward, but not at,
frothy.
Okay, so what gives?
The stock indices are soaring. There is high optimism. Economic activity
appears to be rallying though December Retail Sales reported Friday were not
barn burner. They were good enough, however, to make the 2017 holiday sales
season +5.5%, the biggest jump since before the Great Recession. Wow, after
all of that 'recovery' during the prior administration that never felt like
a recovery for 95% of the US population, NOW, in 2017 to early 2018, there
IS REAL recovery. It feels really good, and people are VERY excited about
it.
You can see it in business as projects are now greenlighted from the huge
corporations to the small businesses. As is ALWAYS the case when you go
from restrictive regulation and taxation to lower regs and the proper form
of lower taxes, you get money POURING into the economy. The millions upon
millions upon millions of announced bonuses and wage hikes are not 'crumbs'
as one of the many 'should no longer be in Congress given he/she has been
there for decades' House leaders said this past week. Moreover, when those
people see their take home pay rise in February when their withholding taxes
fall, you are going to see more optimism and more consumption.
Economic growth was 3% or better for 3 straight quarters, and while the
official estimates for Q1 are still below 3%, that will change and the US
will logs its first year of 3% growth since the Great Recession after the
first 10 year stretch without such a year since the Great Depression, 80
years ago. Again, a real recovery.
THUS, it would appear the stock moves, while perhaps a bit overblown near
term, are justified.
Maybe. What about the other side of the coin? Not the 'economic recovery
is phony' side -- that is just utter stupidity. No, I am talking about the
justification for the market's straight upside rally?
Sentiment is great as noted. Perhaps too great?
*Bulls keep getting more bullish; no surprise there given the stock run.
Bulls jumped back up to 64.4, matching the cycle high hit two months back.
*A new story out shows the big increase in credit card debt seen the past
month can in part be attributed to people using their cards to buy . . .
Bitcoin.
*Laymen interest in stocks and cryptocurrencies has surged. I had one of my
son's girlfriends text me asking what is the best trading platform for her
brothers to use. I saw this same kind of thing before the top in early
2000. Of course, seeing it is one thing; WHEN it is too much is another,
right?
*'Experts' are very busy justifying the rally (and thus their existence by
telling you it will go on and that you need their services -- hmm, I guess I
fall into that category). One I heard Friday was the monthly influx of 401K
dollars into the market. You know, back in 1998 myself and a bunch of us
other market students felt we were so smart because WE were the ones who saw
that happening. We saw how so many 'ordinary people' were shifting to using
the market as a form of savings versus traditional savings accounts, maxing
out their contributions and putting it all into stocks. We felt that with
the great economy that was only getting better and better that the '401k
Effect' would keep the market rallying with just minor corrections at normal
intervals.
Then the late summer/early fall of 1998 hit and in short order the Dow fell
from 9367.58 to 7400, a 21% drop. NASDAQ hit 2028 to end July that year,
then fell to 1357 as of 10/30, a 33% plunge. Sure it recovered with a
massive run in 1999 thanks to the Fed flooding the economy with pre-Y2K
billions (that were unneeded and stuffed into the market), but it goes to
show you that major selloffs STILL occur even with 'everyone' investing in
the market. What it showed: when the novices get in, when they panic, they
act as a magnifier of what moves would normally be.
Does this mean the market run is over? No! The market surged again in
1999, 2000 before it collapsed, and that was because of bad policy decisions
designed to slow the economy. They worked -- too well. It simply points
out you CANNOT assume that money will continually pursue stocks with no end.
You still have to watch the leaders, the economy, and the overall market
action and determine if tops are forming.
The technicals, the REAL story.
You are likely hearing a lot about a thing called a blow off top. This is
when the market surges higher and higher, almost straight up. The gains
typically get larger until a big surge sucks up all the cash on the
sidelines and there is nothing left to continue the buying. The move
stalls, rolls over, and crashes.
Other attributes:
*Stronger and stronger volume, the final moves showing the biggest volume of
the entire rally. Volume can be strong and then you see volume that even
makes that prior volume look like kindergarteners were trading.
*Breadth: Some moves show narrower breadth as fewer and fewer stocks
participate in the rush higher. In 1998, NASDAQ had just a handful of names
leading the charge. DELL held out the longest and we managed to make a lot
of money holding onto it after most crashed, playing out a stock split play.
My brokers were going nuts wanting me to sell, but technically there was no
reason to sell that last stock as it had not rolled over. They were calling
me 5 times a day about my positions, but I held on for another week to two
weeks and made almost 50% more. Then I sold.
Breadth can be broad as well as the ETF's, something relatively new compared
to old market tops, buy the stocks their fund tracks. Thus if they are
getting money they will be buying with the 'buy' light being on for the
market.
That makes breadth more difficult a measure, but IF breadth is narrow on the
climb, that is a red light flashing.
Is the market in a blow off?
Price action: The moves are straight up that is true. If you look at a
monthly chart of NASDAQ you see this month is outsized compared to all of
the other months in the run since the low of late February 2016. A weekly
chart shows similar action over the past two weeks as the angle of attack
has ramped up considerably.
The price action has attributes of a blow off, but it is not showing the
outlandish surges just yet. And that is often the case; they are outlandish
similar to how QCOM was up 500 points after a stock split announcement in
the late 1990's -- in ONE DAY. I bought 5 call contracts right before its
earnings with 5 minutes to go in the session. The next day the brokers were
begging me to sell. I didn't. I went fishing for white bass instead. I
kept it for another few days, THEN saw the topping action and sold for an
obscene profit. THAT was a textbook blow off. Huge trade, straight up, in
HUGE moves each day, then it reversed. It broke and never really recovered.
Breadth: Breadth is too narrow. Now when RUTX was up Thursday, breadth
surged to 3.3:1; very respectable and it reacted as it should. Overall,
however, RUTX and SP400 are lagging and breadth is therefore lagging. This
can last for quite some time, however, before the other pieces of a top fall
into place.
Volume: Very weak. You want to see good volume on the upside as it shows
buyers are committed to the rise. NASDAQ has shown above average trade for
7 straight sessions on gains, average Friday. That is not bad. It is not,
however, HUGE.
NYSE trade finally made it above average, only the second time on this move
higher. It is too low when you are looking at a typically rally.
AND THERE is the paradox. The market attributes right now 1) DJ30, SP500
too far up from the 200 day MA, too many runs without a 50 day MA test; 2)
low volume rally; 3) sharp break higher with low volume and overly
extended -- they all point to a pullback or correction to come.
At this juncture, however, they DO NOT indicate a blow off top that puts in
THE top for the market that results in a new bear market. What these
indications DO show is that the market is extended, it has become more
extended after this week, and you need to watch for signs of topping such as
leaders reversing intraday after gapping higher again or surging after the
open then topping out and sliding back -- on big volume. Big volume is a
key otherwise they could just be taking a break for a day as they did . . .
early last week.
What plan of action?
With SP500 and DJ30 extended and even more so after Friday, and NASDAQ
somewhat extended itself, you have concern about when the
pullback/test/correction comes. Nothing, however, or damn little, is
suggesting a virile selloff is just around the corner other than the extent
of the run. Fear of flying, right?
Further, NASDAQ, as judged by FAANG, is not extended that far. While FAANG
stocks rallied well the past two weeks, as I have noted several times, they
based from the summer to October earnings. Then they broke out and are in
the process of rallying post-breakout. While AMZN may be near term extended
on its last run, bigger picture it is still just moving higher in runs after
its breakout. Ditto GOOG. Again, it is a case of having put in a new good
run and a bit extended near term based upon the size of prior post-breakout
runs.
Thus, you let your good plays run, taking profits as they hit initial
targets, start getting closer to expiration for options positions, or after
making a secondary or tertiary run from the breakout. Banking partial
profits along a run is prudent and locks in gains and takes the pressure off
about letting a winner run. The hardest things to do in investing are 1)
getting in when a stock says 'buy me,' (or 'sell me' short), 2) letting a
winning position run, and 3) admitting a play is not working and getting
out.
Taking partial profits helps you with #2, and that is one of the most
important things to do in order to make money in the market. You also have
to be in the play in the first place (taking the leap and getting in when
the indicators say to do so).
If you play blackjack you know that if you are going to do well you have to
stand when the rules say to stand, you need to double down, split, etc. when
the rules say to do so, and increase your bets. By betting correctly when
the probabilities indicate you have the best chance of winning, you can beat
the house. In other words, those times the odds are in your favor to win,
you follow the rules of winning and bet more as well. The odds are in your
favor at that point.
In stocks, you look for patterns you can make money from. You look at good
stocks, in sectors that are performing well or are 'turning the corner' and
in position to start performing. You look primarily for plays that are in
sync with the overall market trend. When those patterns indicate the 'buy
me' or 'enter' signal, you do so. If the market, the sector, the particular
stocks are in sync and working well, you put most of your money in your
account to work. It does no good to make 100% on 10% of your portfolio.
You want that gain on most of your portfolio. I am not saying put
everything into one trade, but to be smart with your money allocation and
using several plays, put enough money to work to take advantage of favorable
market conditions. That way if your stock plays rise 20%, 30% or more and
your options rise 80%, 100% or more, your brokerage accounts rise a
significant amount. You are taking advantage of when the deck is stacked in
your favor, when there are a lot of face cards still in the chute.
Right now, as noted, there is nothing indicating that the run is over or
ending. New stocks keep pushing up to try their hand at breaking higher and
running. Not all succeed but you play the plays that the market presents.
We have some GOOG, AMZN, NFLX and AAPL in the FAANG, and they are not at a
buy point right now but they are making us money on their runs. We are
buying other stocks that are trying to just start a new moves and thus
Friday, even though it was Friday and many leaders and indices have already
surged on this leg, we picked up some C, ULTA, and XON. We picked up other
well-positioned stocks earlier in the week. And of course, we also let some
good positions continue working higher as well as banked some gain on AAP,
BAC, DDS, IMGN, ROK on Friday alone. It was a week of buying, running, and
taking gain.
Therefore, we continue looking for new upside plays because we still see
good attributes in the market and, most importantly, good stocks setting up
to move higher and make their contribution to the upside. While others
test, perhaps they will get money pushed their way. We have made a lot of
money this fall and winter on that kind of rotation through the market, and
for now it looks as if that kind of rotation can continue even if the big
names such as FAANG, Dow industrials leaders, need to take a breather and
somewhat stall the large cap indices.
THE MARKET
LEADERSHIP
FAANG: FB gapped below the 50 day MA, failed an attempt to recover. GOOG
renewed its upside after a 3-day lateral move. AMZN continued flying. NFLX
continued its 3 week run. AAPL broke out over the November/December trading
range.
Semiconductors: Good moves on some that were well positioned, i.e. MRVL,
ON. TXN continued a 5 week run. AMD shook off the news its chips were not
immune from the INTC flaws. INTC still floundered. NVDA is testing
breaking to a nominal new high early week. MU, LRCX, etc. still
floundering.
Oil: Still rallying as CVX, MRO put in more gains. The others were up but
the moves slowed after the impressive Thursday surge.
Software: Some strong moves on the week and on Friday. FFIV surged to a
higher rally high. DATA added more upside to its new break higher. CRM
started higher again on volume. MSFT gapped and rallied higher in a new
move.
Retail: Excellent moves on the week and on Friday. DDS surged off the 200
day SMA to the target. TGT is running away upside. ROST at a new high.
BBY as well. Great again indeed.
Financial: C finally broke higher from its pattern. JPM put in a new high.
BAC moved to a new high and the initial target.
Machinery/Manufacturing: Higher again. DE up all week. CAT gapped to a
new high. HON, MMM both surged upside again.
China: YY surged. BIDU as well, but it then gave up much of the move.
HTHT in a great pattern. BABA forming a possible handle.
Drugs/biotech: IPXL continued its move higher. IMGN hit the initial
target. SRPT surged to a new high. AMGN broke higher, BIIB does not look
bad to do the same.
Transports: A strong week for all. Friday the airlines moved well again.
MARKET STATS
DJ30
Stats: +228.46 points (+0.89%) to close at 25803.19
Nasdaq
Stats: +49.28 points (+0.68%) to close at 7261.06
Volume: 1.98B (-1.49%)
Up Volume: 1.12B (-370M)
Down Volume: 815.94M (+325.73M)
A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Advancers led 3.19 to 1
New Highs: 423 (+104)
New Lows: 17 (-6)
S&P
Stats: +18.68 points (+0.67%) to close at 2786.24
NYSE Volume: 870.1M (+5.12%)
A/D and Hi/Lo: Advancers led 1.16 to 1
Previous Session: Advancers led 3.36 to 1
New Highs: 396 (+104)
New Lows: 57 (+21)
SENTIMENT INDICATORS
VIX: 10.16; +0.28
VXN: 14.57; -0.20
VXO: 9.30; +0.42
Put/Call Ratio (CBOE): 0.74; +0.02
Bulls and Bears: Bulls surged back up and matched the cycle high. Bears
broke sharply lower to a cycle low.
Bulls: 64.4 versus 61.9
Bears: 13.5 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: 64.4 versus 61.9
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 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: 13.5 versus 15.2
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 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: 2.55% versus 2.55%.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.55%
versus 2.559% versus 2.551% versus 2.482% versus 2.456% versus 2.463% versus
2.464% versus 2.405% versus 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: 1.22060 versus 1.20608. Euro explodes past recent and September
high in a breakout move.
Historical: 1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus
1.20313 versus 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
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 1.15871
USD/JPY: 111.024 versus 111.204. Dollar broke below the 200 day SMA late
week and continued lower Friday.
Historical: 111.204 versus 111.534 versus 112.706 versus 113.15 versus
113.58 versus 112.749 versus 112.677 versus 112.27 versus 112.690 versus
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: 64.30, +0.50. Up all week as oil continues its breakout run from
mid-December.
Gold: 1334.90, +12.40. Gold breaks higher from a 2 week lateral move.
End part 1 of 3
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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
- FB tries to ruin the move, but only FB ends the day getting roughed up.
- Stock indices surge led by DJ30 and other large caps.
- Everything just fine or is something up? What is a blow off top?
- Stocks perhaps extended near term, no signs of a major top imminent.
Up in the sky. It's a bird. It's a plane. No, it's Boeing. Or the Dow
Industrials. Or the Dow Transports. Or the SP500. Or AMZN. Or CAT. The
list goes on and on as stocks slip reality's surly bonds and soar.
Friday could have been problematic. FB announced changes to its news feed,
changes one of its top officials formerly said would not be implemented due
to the sharply negative usage impact they had in the markets were tested.
That change will result in near term usage drops, and FB suffered for it.
There was some early coattail action as the FAANG stocks traded lower
pre-market.
But then the market's usual fix arrived: the opening bell. Investors and
traders packed all their troubles in their old kit bag and bought, bought,
bought. FAANG stocks surged with AMZN +2.23%, NFLX 1.84%, AAPL 1.81%, and
GOOG bringing up the rear at a mere +1.51%, or +16.74 points. Loser.
Of course that had NASDAQ 100 rallying hard. Again. But the Dow had JPM,
BA, CAT and company rallying hard again as well, and it outpaced NASDAQ.
SP500 was by comparison the 'GOOG' of the group, rising a mere 0.67%.
Loser.
RUTX, Thursday's star, managed just 0.33% as the January Effect did not have
much of a lingering effect. SP400 was worse at 0.27%. Loser.
SOX gained 0.59%, putting it in the middle of the pack, but the chips are
the only index we track that did not put in a new high Friday. Or any day
of the week. Or any session in 8 weeks. Despite some very nice individual
moves (e.g. MRVL), they remain mired well below the November and early
January lower high, the 's***hole' of the market to borrow from the current
political parlance.
SP500 18.68, 0.67%
NASDAQ 49.28, 0.68%
DJ30 228.46, 0.89%
SP400 0.27%
RUTX 0.33%
SOX 0.59%
NASDAQ 100 0.75%
VOLUME: NYSE +5%, NASDAQ -1.5%. NYSE finally cracked back above average; at
least it was upside. NASDAQ trade faded to average after 7 sessions of
above average trade.
ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.5:1
NEW HIGHS: NYSE 396, NASDAQ 423. This is getting toward, but not at,
frothy.
Okay, so what gives?
The stock indices are soaring. There is high optimism. Economic activity
appears to be rallying though December Retail Sales reported Friday were not
barn burner. They were good enough, however, to make the 2017 holiday sales
season +5.5%, the biggest jump since before the Great Recession. Wow, after
all of that 'recovery' during the prior administration that never felt like
a recovery for 95% of the US population, NOW, in 2017 to early 2018, there
IS REAL recovery. It feels really good, and people are VERY excited about
it.
You can see it in business as projects are now greenlighted from the huge
corporations to the small businesses. As is ALWAYS the case when you go
from restrictive regulation and taxation to lower regs and the proper form
of lower taxes, you get money POURING into the economy. The millions upon
millions upon millions of announced bonuses and wage hikes are not 'crumbs'
as one of the many 'should no longer be in Congress given he/she has been
there for decades' House leaders said this past week. Moreover, when those
people see their take home pay rise in February when their withholding taxes
fall, you are going to see more optimism and more consumption.
Economic growth was 3% or better for 3 straight quarters, and while the
official estimates for Q1 are still below 3%, that will change and the US
will logs its first year of 3% growth since the Great Recession after the
first 10 year stretch without such a year since the Great Depression, 80
years ago. Again, a real recovery.
THUS, it would appear the stock moves, while perhaps a bit overblown near
term, are justified.
Maybe. What about the other side of the coin? Not the 'economic recovery
is phony' side -- that is just utter stupidity. No, I am talking about the
justification for the market's straight upside rally?
Sentiment is great as noted. Perhaps too great?
*Bulls keep getting more bullish; no surprise there given the stock run.
Bulls jumped back up to 64.4, matching the cycle high hit two months back.
*A new story out shows the big increase in credit card debt seen the past
month can in part be attributed to people using their cards to buy . . .
Bitcoin.
*Laymen interest in stocks and cryptocurrencies has surged. I had one of my
son's girlfriends text me asking what is the best trading platform for her
brothers to use. I saw this same kind of thing before the top in early
2000. Of course, seeing it is one thing; WHEN it is too much is another,
right?
*'Experts' are very busy justifying the rally (and thus their existence by
telling you it will go on and that you need their services -- hmm, I guess I
fall into that category). One I heard Friday was the monthly influx of 401K
dollars into the market. You know, back in 1998 myself and a bunch of us
other market students felt we were so smart because WE were the ones who saw
that happening. We saw how so many 'ordinary people' were shifting to using
the market as a form of savings versus traditional savings accounts, maxing
out their contributions and putting it all into stocks. We felt that with
the great economy that was only getting better and better that the '401k
Effect' would keep the market rallying with just minor corrections at normal
intervals.
Then the late summer/early fall of 1998 hit and in short order the Dow fell
from 9367.58 to 7400, a 21% drop. NASDAQ hit 2028 to end July that year,
then fell to 1357 as of 10/30, a 33% plunge. Sure it recovered with a
massive run in 1999 thanks to the Fed flooding the economy with pre-Y2K
billions (that were unneeded and stuffed into the market), but it goes to
show you that major selloffs STILL occur even with 'everyone' investing in
the market. What it showed: when the novices get in, when they panic, they
act as a magnifier of what moves would normally be.
Does this mean the market run is over? No! The market surged again in
1999, 2000 before it collapsed, and that was because of bad policy decisions
designed to slow the economy. They worked -- too well. It simply points
out you CANNOT assume that money will continually pursue stocks with no end.
You still have to watch the leaders, the economy, and the overall market
action and determine if tops are forming.
The technicals, the REAL story.
You are likely hearing a lot about a thing called a blow off top. This is
when the market surges higher and higher, almost straight up. The gains
typically get larger until a big surge sucks up all the cash on the
sidelines and there is nothing left to continue the buying. The move
stalls, rolls over, and crashes.
Other attributes:
*Stronger and stronger volume, the final moves showing the biggest volume of
the entire rally. Volume can be strong and then you see volume that even
makes that prior volume look like kindergarteners were trading.
*Breadth: Some moves show narrower breadth as fewer and fewer stocks
participate in the rush higher. In 1998, NASDAQ had just a handful of names
leading the charge. DELL held out the longest and we managed to make a lot
of money holding onto it after most crashed, playing out a stock split play.
My brokers were going nuts wanting me to sell, but technically there was no
reason to sell that last stock as it had not rolled over. They were calling
me 5 times a day about my positions, but I held on for another week to two
weeks and made almost 50% more. Then I sold.
Breadth can be broad as well as the ETF's, something relatively new compared
to old market tops, buy the stocks their fund tracks. Thus if they are
getting money they will be buying with the 'buy' light being on for the
market.
That makes breadth more difficult a measure, but IF breadth is narrow on the
climb, that is a red light flashing.
Is the market in a blow off?
Price action: The moves are straight up that is true. If you look at a
monthly chart of NASDAQ you see this month is outsized compared to all of
the other months in the run since the low of late February 2016. A weekly
chart shows similar action over the past two weeks as the angle of attack
has ramped up considerably.
The price action has attributes of a blow off, but it is not showing the
outlandish surges just yet. And that is often the case; they are outlandish
similar to how QCOM was up 500 points after a stock split announcement in
the late 1990's -- in ONE DAY. I bought 5 call contracts right before its
earnings with 5 minutes to go in the session. The next day the brokers were
begging me to sell. I didn't. I went fishing for white bass instead. I
kept it for another few days, THEN saw the topping action and sold for an
obscene profit. THAT was a textbook blow off. Huge trade, straight up, in
HUGE moves each day, then it reversed. It broke and never really recovered.
Breadth: Breadth is too narrow. Now when RUTX was up Thursday, breadth
surged to 3.3:1; very respectable and it reacted as it should. Overall,
however, RUTX and SP400 are lagging and breadth is therefore lagging. This
can last for quite some time, however, before the other pieces of a top fall
into place.
Volume: Very weak. You want to see good volume on the upside as it shows
buyers are committed to the rise. NASDAQ has shown above average trade for
7 straight sessions on gains, average Friday. That is not bad. It is not,
however, HUGE.
NYSE trade finally made it above average, only the second time on this move
higher. It is too low when you are looking at a typically rally.
AND THERE is the paradox. The market attributes right now 1) DJ30, SP500
too far up from the 200 day MA, too many runs without a 50 day MA test; 2)
low volume rally; 3) sharp break higher with low volume and overly
extended -- they all point to a pullback or correction to come.
At this juncture, however, they DO NOT indicate a blow off top that puts in
THE top for the market that results in a new bear market. What these
indications DO show is that the market is extended, it has become more
extended after this week, and you need to watch for signs of topping such as
leaders reversing intraday after gapping higher again or surging after the
open then topping out and sliding back -- on big volume. Big volume is a
key otherwise they could just be taking a break for a day as they did . . .
early last week.
What plan of action?
With SP500 and DJ30 extended and even more so after Friday, and NASDAQ
somewhat extended itself, you have concern about when the
pullback/test/correction comes. Nothing, however, or damn little, is
suggesting a virile selloff is just around the corner other than the extent
of the run. Fear of flying, right?
Further, NASDAQ, as judged by FAANG, is not extended that far. While FAANG
stocks rallied well the past two weeks, as I have noted several times, they
based from the summer to October earnings. Then they broke out and are in
the process of rallying post-breakout. While AMZN may be near term extended
on its last run, bigger picture it is still just moving higher in runs after
its breakout. Ditto GOOG. Again, it is a case of having put in a new good
run and a bit extended near term based upon the size of prior post-breakout
runs.
Thus, you let your good plays run, taking profits as they hit initial
targets, start getting closer to expiration for options positions, or after
making a secondary or tertiary run from the breakout. Banking partial
profits along a run is prudent and locks in gains and takes the pressure off
about letting a winner run. The hardest things to do in investing are 1)
getting in when a stock says 'buy me,' (or 'sell me' short), 2) letting a
winning position run, and 3) admitting a play is not working and getting
out.
Taking partial profits helps you with #2, and that is one of the most
important things to do in order to make money in the market. You also have
to be in the play in the first place (taking the leap and getting in when
the indicators say to do so).
If you play blackjack you know that if you are going to do well you have to
stand when the rules say to stand, you need to double down, split, etc. when
the rules say to do so, and increase your bets. By betting correctly when
the probabilities indicate you have the best chance of winning, you can beat
the house. In other words, those times the odds are in your favor to win,
you follow the rules of winning and bet more as well. The odds are in your
favor at that point.
In stocks, you look for patterns you can make money from. You look at good
stocks, in sectors that are performing well or are 'turning the corner' and
in position to start performing. You look primarily for plays that are in
sync with the overall market trend. When those patterns indicate the 'buy
me' or 'enter' signal, you do so. If the market, the sector, the particular
stocks are in sync and working well, you put most of your money in your
account to work. It does no good to make 100% on 10% of your portfolio.
You want that gain on most of your portfolio. I am not saying put
everything into one trade, but to be smart with your money allocation and
using several plays, put enough money to work to take advantage of favorable
market conditions. That way if your stock plays rise 20%, 30% or more and
your options rise 80%, 100% or more, your brokerage accounts rise a
significant amount. You are taking advantage of when the deck is stacked in
your favor, when there are a lot of face cards still in the chute.
Right now, as noted, there is nothing indicating that the run is over or
ending. New stocks keep pushing up to try their hand at breaking higher and
running. Not all succeed but you play the plays that the market presents.
We have some GOOG, AMZN, NFLX and AAPL in the FAANG, and they are not at a
buy point right now but they are making us money on their runs. We are
buying other stocks that are trying to just start a new moves and thus
Friday, even though it was Friday and many leaders and indices have already
surged on this leg, we picked up some C, ULTA, and XON. We picked up other
well-positioned stocks earlier in the week. And of course, we also let some
good positions continue working higher as well as banked some gain on AAP,
BAC, DDS, IMGN, ROK on Friday alone. It was a week of buying, running, and
taking gain.
Therefore, we continue looking for new upside plays because we still see
good attributes in the market and, most importantly, good stocks setting up
to move higher and make their contribution to the upside. While others
test, perhaps they will get money pushed their way. We have made a lot of
money this fall and winter on that kind of rotation through the market, and
for now it looks as if that kind of rotation can continue even if the big
names such as FAANG, Dow industrials leaders, need to take a breather and
somewhat stall the large cap indices.
THE MARKET
LEADERSHIP
FAANG: FB gapped below the 50 day MA, failed an attempt to recover. GOOG
renewed its upside after a 3-day lateral move. AMZN continued flying. NFLX
continued its 3 week run. AAPL broke out over the November/December trading
range.
Semiconductors: Good moves on some that were well positioned, i.e. MRVL,
ON. TXN continued a 5 week run. AMD shook off the news its chips were not
immune from the INTC flaws. INTC still floundered. NVDA is testing
breaking to a nominal new high early week. MU, LRCX, etc. still
floundering.
Oil: Still rallying as CVX, MRO put in more gains. The others were up but
the moves slowed after the impressive Thursday surge.
Software: Some strong moves on the week and on Friday. FFIV surged to a
higher rally high. DATA added more upside to its new break higher. CRM
started higher again on volume. MSFT gapped and rallied higher in a new
move.
Retail: Excellent moves on the week and on Friday. DDS surged off the 200
day SMA to the target. TGT is running away upside. ROST at a new high.
BBY as well. Great again indeed.
Financial: C finally broke higher from its pattern. JPM put in a new high.
BAC moved to a new high and the initial target.
Machinery/Manufacturing: Higher again. DE up all week. CAT gapped to a
new high. HON, MMM both surged upside again.
China: YY surged. BIDU as well, but it then gave up much of the move.
HTHT in a great pattern. BABA forming a possible handle.
Drugs/biotech: IPXL continued its move higher. IMGN hit the initial
target. SRPT surged to a new high. AMGN broke higher, BIIB does not look
bad to do the same.
Transports: A strong week for all. Friday the airlines moved well again.
MARKET STATS
DJ30
Stats: +228.46 points (+0.89%) to close at 25803.19
Nasdaq
Stats: +49.28 points (+0.68%) to close at 7261.06
Volume: 1.98B (-1.49%)
Up Volume: 1.12B (-370M)
Down Volume: 815.94M (+325.73M)
A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Advancers led 3.19 to 1
New Highs: 423 (+104)
New Lows: 17 (-6)
S&P
Stats: +18.68 points (+0.67%) to close at 2786.24
NYSE Volume: 870.1M (+5.12%)
A/D and Hi/Lo: Advancers led 1.16 to 1
Previous Session: Advancers led 3.36 to 1
New Highs: 396 (+104)
New Lows: 57 (+21)
SENTIMENT INDICATORS
VIX: 10.16; +0.28
VXN: 14.57; -0.20
VXO: 9.30; +0.42
Put/Call Ratio (CBOE): 0.74; +0.02
Bulls and Bears: Bulls surged back up and matched the cycle high. Bears
broke sharply lower to a cycle low.
Bulls: 64.4 versus 61.9
Bears: 13.5 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: 64.4 versus 61.9
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 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: 13.5 versus 15.2
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 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: 2.55% versus 2.55%.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.55%
versus 2.559% versus 2.551% versus 2.482% versus 2.456% versus 2.463% versus
2.464% versus 2.405% versus 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: 1.22060 versus 1.20608. Euro explodes past recent and September
high in a breakout move.
Historical: 1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus
1.20313 versus 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
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 1.15871
USD/JPY: 111.024 versus 111.204. Dollar broke below the 200 day SMA late
week and continued lower Friday.
Historical: 111.204 versus 111.534 versus 112.706 versus 113.15 versus
113.58 versus 112.749 versus 112.677 versus 112.27 versus 112.690 versus
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: 64.30, +0.50. Up all week as oil continues its breakout run from
mid-December.
Gold: 1334.90, +12.40. Gold breaks higher from a 2 week lateral move.
End part 1 of 3
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The Daily, Part 1 of 3, 1-6-18
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1/6/2018 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
- Stocks rally all week as the large caps, including NASDAQ, lead.
- Jobs Report misses on storm effects, but some very interesting internal
numbers.
- Small caps still looking for the January effect.
- Will the money stay in the market, and if so, will it stay with the large
caps or now move to smaller caps?
Quite the start to 2018, obviously upside and obviously has many stoked
about the stock market's prospects for 2018. Tax reform, a perception the
economy is picking even more speed, and a sense that the Fed cannot be that
aggressive given events such as the fairly large miss in December jobs.
Of course that is a lot of poppycock. The tax reform is definitely a help,
and indeed the economy is already improving on the reduction of regulations;
adding tax incentives will only help. As for the Fed, well, if the economy
really does take off, the Phillips Curve hugging FOMC will hike rates more
than the 3 times anticipated. They will panic as Volcker did in the early
1980's when Reagan's supply side economics were ready to pass. They cannot
help it; it is in their nature. The supposedly most learned economists in
the world cling to their Phillips Curve doctrine despite now decades of
history demonstrating it does not work, the most recent being the past 10
years. Married to ideology versus facts. A lot of that going around these
days.
Even so, one cannot discount the market gains. Impressively strong start to
the year. DJ30 crossed 25,000 while NASDAQ crossed 7,000. DJ30 +576.65
points (2.3%), NASDAQ +233.17 (3.3%). Of course, new highs all around once
again on Friday (less SOX). As with most of the week, however, it was the
large caps, both NYSE or NASDAQ, that led while the small caps brought up
the rear.
SP500 19.16, 0.70%
NASDAQ 58.65, 0.83%
DJ30 220.74, 0.88%
SP400 0.41%
RUTX 0.28%
SOX 0.64%
NASDAQ 100 1.04%
VOLUME: NYSE -14%, NASDAQ -3.5%. NYSE trade slipped back below average
Friday, able to mount above average volume only Thursday. NASDAQ trade fell
as well, but it remained above average as on Wednesday and Thursday. Better
accumulation strength on NASDAQ for the new year: they lagged at the very
end of 2017 and the past week saw some catchup in that regard.
ADVANCE/DECLINE: NYSE 1.5:1, NASDAQ 1.5:1. For a third session breadth
remained at 3:2, just a middle of the road advance. Again, with the small
caps lagging in favor of the fewer large caps, breadth obviously lagged.
With this kind of start, 2018 must be set for a barnburner year. Perhaps.
Mr. Tepper Thursday said that stocks heading into 2018 were 'as cheap' as
they were heading into 2017. Giddy up. You may recall, a few years ago Mr.
Tepper appeared on CNBC one morning and said he was 'concerned' about the
market as it had faded for several weeks and the Fed was being coy. We were
tracking a lot of stocks that set up very good patterns to that point, and
on that day, the day Tepper made that statement, the market bottomed and
those stocks broke higher. The pessimism of many big names turned the
market and we made a lot of money in the ensuing rally.
With all of this positive sentiment, surely the market will rally just as
steadily as it did in 2017, right? Who knows? But I will say that more and
more and more professionals, commentators, and everyday citizens are getting
converted to the idea the market is going to head higher. As discussed
Thursday (and if you didn't read it, do so!), that is always a dangerous
situation that leads to a correction, but the WHEN is the key. Big surges
inevitably revert. As long as leadership looks strong and the policy moves
are correct (as they are thus far), the upside, regardless of how extended,
can continue.
Thus, Friday, again, we were buying very good stocks moving higher, e.g.
AAPL, MMM, SQ, FENG, GRUB. We also took gains on some more positions that
hit targets: CNIT, MSFT, SIFY, YY. Some rally nice gain taken Friday. As
on Tuesday. And Wednesday. Some great gains and more in progress.
Even as we bought more positions as more quality stocks broke higher, we
could not help but thinking about the coming week and whether new money
would continue to push into the market. The first week of a year in an
uptrend of course has money pushed into it; indeed, this was a really strong
week as apparently a lot of the money that LEFT the market in November and
early December came right back in. Remember our discussion of the big names
that publicly announced they had pulled money from the market in August and
September would be forced to put it back in? They did. Same kind of thing
happening right now as that money taken out comes right back in.
After that first week, however, we will see if the money continues to come
in. FAANG took off to the upside again, chips found new buyers after their
selloffs. If the market continues producing new upside groups, the rally
continues. Right now it is doing that as energy has emerged a leader after
several false starts. Metals came around rather rapidly. More leaders
filling in behind those that surge higher keeps the rally going. That means
more money coming into the market, and of course, that takes you back to the
same question: will it continue coming in?
NEWS/ECONOMY
After a lot of buildup to the jobs report, goaded on by the Thursday ADP
report, jobs creation was 32K less than expected. It would appear the
storms had a bit more impact than anticipated. Okay, it was not that great,
but the market still liked it. Just right, I suppose.
Non-farm payrolls: 148K vs 180K exp vs 228K November. 204K/month in Q4
Unemployment rate: 4.1% vs 4.0 exp vs 4.1 Nov
Earnings: 0.3% as expected vs 0.2% prior. 2.5% year/year
Workweek: 34.5 as expected vs 34.5 prior
2017: 2.1M jobs created
Healthcare: 31K
Construction: 30K
Manufacturing: 25K (+196,000 in 2017, jobs that were supposedly never coming
back)
Food and Drink: 25K
Warehousing: 30K
Retail: -20K (-67K in 2017)
And this is said not to include any of the Amazon workers as they don't know
where to put them!
Participation: 62.7% flat for 3 months
U6: 8.1%
Black unemployment rate: 6.8%, -1% year/year, a record low.
Food Stamp recipients: -2 million
Trade balance, November: -$50.5B vs -47.9B expected vs -48.9B Oct.
A 6 month high on the deficit. Why? Imports surged. You will be told that
is horrible by everyone including Trump. But they are wrong. What this
tells you is that the US economy and consumer are going well. We always buy
more imports when the economy is working for us. When US consumers are
confident, they buy foreign goods, they buy domestic goods. Thus, a surge
in imports is a positive economic indication even if it detracts from
overall GDP.
Factory Orders, November: 1.3% versus 1.4% expected versus +0.4% Dec
(from -0.1)
Ex-Transports: +0.8%
Business investment: -0.2%. Disappointing, but consider: the tax reform
debate raged and looked to be on life support. No one was going to commit
big money until that was decided. It is. Expect more. With 100%
expensing, of course there will be more.
Tax reform effect: As of this week, 85 major companies now offering bonuses
or extra compensation to workers.
THE MARKET
CHARTS
The large cap indices launched almost straight up on the week as money
flowed into the big names. Something of an inverse January effect as the
small caps lagged.
NASDAQ: Went with NASDAQ to lead off though any of the big 3 large cap
indices would suffice. NASDAQ jumped off the 20 day EMA test Tuesday and
rallied on a solid expansion of volume back above average. Big names did
the leading as NASDAQ 100 shows even a stronger gain as FAANG jumped back in
on the upside.
SP500: Rocketing upside again after another 20 day EMA test. Volume was up
but less than impressive with only Thursday showing above average trade.
Extended off its 50 day EMA it left behind in early September, it should
correct, but the new money coming in was not about to let it. For now,
playing the move, watching for trouble such as good moves reversing sharply.
Not thus far.
DJ30: Nice surge, quite strong Friday after lagging NASDAQ on the week. As
extended as SP500 above its 50 and 200 day MA's, but its mix of large cap
industrial and tech is enjoying the new money.
SOX: Big moves early week then riding the wave, surpassing the early
November high and now looking at the late November recovery peak at 1342
(closed at 1325.71). A good surge with some good patterns moving higher
along with some not great patterns. New money was obviously pushing it and
that leaves me wondering if SOX can maintain the rebound.
RUTX: Big move Tuesday but after that the small caps followed versus led
the move. For January, that is a bit bass-ackward as the January effect is
where the funds buy smaller cap names as they present the greatest potential
for high percentage gains versus the mega cap stocks. Now, if the money
that chased the big names to start 2018 starts looking elsewhere, the small
caps are primed to move. Indeed, if there is a change next week that could
very well be the change.
SP400: Similar to RUTX, SP400's best gain was early week. New highs each
session but slowed as the week progressed. A bit stronger than RUTX, in the
middle of the large caps and smalls -- as midcaps I guess that is
appropriate.
LEADERSHIP
FAANG: In the lead again as AAPL joined in. FB new high. AMZN, GOOG, NFLX
all new highs. Big buying in these stocks and the latter 3 above are all
building very strong gains for us. Remember, these are not extended
vis- -vis the other large caps: they based all summer into fall and broke
out in late October. They are still relatively early in their moves.
Oil: This time showing staying power. Big names put in good moves and held
them, e.g. CVX, XOM, MRO, HAL, SLB. Kept waiting on HAL to test; it didn't.
Mid-size working as well, e.g. APC. Small also good, e.g. NOG, DNR, PTEN,
CRZO.
Semiconductors: A nice recovery with some good patterns really moving well,
while others rebounded but still have weak patterns. The good: XLNX, MRVL,
MCHP, NVDA. Questionable patterns: LRCX, AMAT, QRVI; SWKS. INTC is trying
to recover from its gap lower on the identified flaws in its chips; we will
see.
Software: CNIT surged but it is a small issue. FFIV was still solid. MSFT
hit our initial target. VMW up nicely on the week. CRM rallying well for
us. Working on it.
Retail: A week were most tested, some struggled after good moves. AAP
surged upside, ROST enjoyed a higher high. TGT testing, COST, TLRD and
others showing the same. Good moves some testing.
Financial: Up midweek, but as usual, it is a fight. C up but cannot seal
the deal on the new upside break. BAC did put in higher highs to end the
week. JPM did but faded back to the 10 day EMA Friday. Working higher but
back and forth day to day.
Machinery/Manufacturing: CAT, DE up again, TEX, CMI testing. Still strong
manufacturing. UTX, HON, EMR all breaking higher. Solid.
China: Some strength returning. YY surged to the initial target. BZUN up
all week for us. CNIT exploded higher through the target. BIDU broke
higher, tested well late. BABA broke upside, pushing for a new high. HTHT
making a nice test of its run; possibility for this week.
MARKET STATS
DJ30
Stats: +220.74 points (+0.88%) to close at 25295.87
Nasdaq
Stats: +58.64 points (+0.83%) to close at 7136.56
Volume: 2.02B (-3.35%)
Up Volume: 1.23B (-90M)
Down Volume: 747.68M (+9.11M)
A/D and Hi/Lo: Advancers led 1.47 to 1
Previous Session: Advancers led 1.5 to 1
New Highs: 269 (-7)
New Lows: 16 (-10)
S&P
Stats: +19.16 points (+0.70%) to close at 2743.15
NYSE Volume: 771.2M (-13.85%)
A/D and Hi/Lo: Advancers led 1.53 to 1
Previous Session: Advancers led 1.45 to 1
New Highs: 252 (-41)
New Lows: 22 (+2)
SENTIMENT INDICATORS
If you have not done so, please read the Thursday report discussion of
sentiment in the Market Summary.
VIX: 9.22; 0.00
VXN: 13.48; -0.49
VXO: 8.56; +0.24
Put/Call Ratio (CBOE): 0.92; +0.10
Bulls and Bears: Trading back and forth in a narrow range at the top what
is historically an extreme level for bulls.
Bulls: 61.9 versus 64.1
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 (1/2/18) versus 64.1
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 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 15.2 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 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: 2.476% versus 2.456%. Down early week. Lateral to end it, right in
the range of the past 3 months. The volatile range.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.456%
versus 2.463% versus 2.464% versus 2.405% versus 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: 1.20313 versus 1.20756. Another upside week for the euro though
it finished lower on Friday.
Historical: 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
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 1.15871
USD/JPY: 113.058 versus 112.749. Up on the week after testing near the 200
day MA. Range-trading right now.
Historical: 112.749 versus 112.677 versus 112.27 versus 112.690 versus
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: 61.44, -0.57. Down Friday, but a solid continuation of the break to a
higher high. Bumping at the mid-2015 highs, a key resistance point that
likely hems in oil prices or awhile.
Gold: 1322.30, +0.70. Up all week, continuing 4 week run off the lower low
from early December. A pause after that kind of move is normal.
MONDAY
Again, the big question is whether the money keeps coming in. It poured
into the large caps the past week. As noted in the discussion of the small
caps, it is January and typically the smaller issues get the money. IF
money tapers its bid for the large caps after that first strong week, it
makes sense it would seek the small and midcaps, the more traditional
January buys. Thus, even if the large caps slow, the market can still rise
gratis bids moving to the smaller caps. We will see.
Definitely a strong start to the year and the old adages say that bodes well
for the year. Does not mean there are not fades, pullbacks, or even out and
out corrections. It is all a matter of when and what stocks.
For now the retail are a bit weaker after strong runs, but oil, FAANG,
manufacturing, tech are strong. Will chips continue gathering money their
way? Will others step up and move up, e.g. China, drugs, internet? The
market will need new sectors stepping up to keep the move rallying,
especially if SP500, DJ30 start to correct back after their extended moves
up from the 50 day MA.
We will continue playing the trend, watching how the leaders trade (e.g. any
reversals, stalls), and looking for and picking up good stocks in good
patterns that are not extended, taking what the market gives as the run
continues.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 1736.56
Resistance:
Support:
7,000 from mid-December
6914 is the late November all-time high
The 50 day EMA at 6842
6796 is the early November 2017
The 2016 trendline at 66.60
6641 is the October high
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
The 200 day SMA at 6394
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
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 2743.15
Resistance:
Support:
The 20 day EMA at 2682
2694 is the mid-December peak
The 50 day EMA at 2637
2597 is the November 2017 high
2549 is the upper channel line from the March 2009 uptrend channel
2491 is the August all-time high
The 200 day SMA at 2490
2480 the late August and early August highs
2453.46 is the June prior all-time closing high
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 May 2017 low
Dow: Closed at 25,295.87
Resistance:
Support:
24,835 is the mid-December consolidation range
The 20 day EMA at 24,688
24,312
The 50 day EMA at 24,118
23,602 is the early November 2017 high
23,608 is the early November high
22,420 is the September high
The 200 day SMA at 22,194
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
End part 1 of 3
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1153 Bergen Pkwy - Suite I #502 - Evergreen, CO 80439
1/6/2018 Investment House Daily
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MARKET ALERTS:
Targets hit: MSFT; SIFY; YY
Entry alerts: AAPL; FENG; GRUB; MMM; SQ
Trailing stops: ROKU; SRPT; ULTA
Stop alerts: ROKU
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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
- Stocks rally all week as the large caps, including NASDAQ, lead.
- Jobs Report misses on storm effects, but some very interesting internal
numbers.
- Small caps still looking for the January effect.
- Will the money stay in the market, and if so, will it stay with the large
caps or now move to smaller caps?
Quite the start to 2018, obviously upside and obviously has many stoked
about the stock market's prospects for 2018. Tax reform, a perception the
economy is picking even more speed, and a sense that the Fed cannot be that
aggressive given events such as the fairly large miss in December jobs.
Of course that is a lot of poppycock. The tax reform is definitely a help,
and indeed the economy is already improving on the reduction of regulations;
adding tax incentives will only help. As for the Fed, well, if the economy
really does take off, the Phillips Curve hugging FOMC will hike rates more
than the 3 times anticipated. They will panic as Volcker did in the early
1980's when Reagan's supply side economics were ready to pass. They cannot
help it; it is in their nature. The supposedly most learned economists in
the world cling to their Phillips Curve doctrine despite now decades of
history demonstrating it does not work, the most recent being the past 10
years. Married to ideology versus facts. A lot of that going around these
days.
Even so, one cannot discount the market gains. Impressively strong start to
the year. DJ30 crossed 25,000 while NASDAQ crossed 7,000. DJ30 +576.65
points (2.3%), NASDAQ +233.17 (3.3%). Of course, new highs all around once
again on Friday (less SOX). As with most of the week, however, it was the
large caps, both NYSE or NASDAQ, that led while the small caps brought up
the rear.
SP500 19.16, 0.70%
NASDAQ 58.65, 0.83%
DJ30 220.74, 0.88%
SP400 0.41%
RUTX 0.28%
SOX 0.64%
NASDAQ 100 1.04%
VOLUME: NYSE -14%, NASDAQ -3.5%. NYSE trade slipped back below average
Friday, able to mount above average volume only Thursday. NASDAQ trade fell
as well, but it remained above average as on Wednesday and Thursday. Better
accumulation strength on NASDAQ for the new year: they lagged at the very
end of 2017 and the past week saw some catchup in that regard.
ADVANCE/DECLINE: NYSE 1.5:1, NASDAQ 1.5:1. For a third session breadth
remained at 3:2, just a middle of the road advance. Again, with the small
caps lagging in favor of the fewer large caps, breadth obviously lagged.
With this kind of start, 2018 must be set for a barnburner year. Perhaps.
Mr. Tepper Thursday said that stocks heading into 2018 were 'as cheap' as
they were heading into 2017. Giddy up. You may recall, a few years ago Mr.
Tepper appeared on CNBC one morning and said he was 'concerned' about the
market as it had faded for several weeks and the Fed was being coy. We were
tracking a lot of stocks that set up very good patterns to that point, and
on that day, the day Tepper made that statement, the market bottomed and
those stocks broke higher. The pessimism of many big names turned the
market and we made a lot of money in the ensuing rally.
With all of this positive sentiment, surely the market will rally just as
steadily as it did in 2017, right? Who knows? But I will say that more and
more and more professionals, commentators, and everyday citizens are getting
converted to the idea the market is going to head higher. As discussed
Thursday (and if you didn't read it, do so!), that is always a dangerous
situation that leads to a correction, but the WHEN is the key. Big surges
inevitably revert. As long as leadership looks strong and the policy moves
are correct (as they are thus far), the upside, regardless of how extended,
can continue.
Thus, Friday, again, we were buying very good stocks moving higher, e.g.
AAPL, MMM, SQ, FENG, GRUB. We also took gains on some more positions that
hit targets: CNIT, MSFT, SIFY, YY. Some rally nice gain taken Friday. As
on Tuesday. And Wednesday. Some great gains and more in progress.
Even as we bought more positions as more quality stocks broke higher, we
could not help but thinking about the coming week and whether new money
would continue to push into the market. The first week of a year in an
uptrend of course has money pushed into it; indeed, this was a really strong
week as apparently a lot of the money that LEFT the market in November and
early December came right back in. Remember our discussion of the big names
that publicly announced they had pulled money from the market in August and
September would be forced to put it back in? They did. Same kind of thing
happening right now as that money taken out comes right back in.
After that first week, however, we will see if the money continues to come
in. FAANG took off to the upside again, chips found new buyers after their
selloffs. If the market continues producing new upside groups, the rally
continues. Right now it is doing that as energy has emerged a leader after
several false starts. Metals came around rather rapidly. More leaders
filling in behind those that surge higher keeps the rally going. That means
more money coming into the market, and of course, that takes you back to the
same question: will it continue coming in?
NEWS/ECONOMY
After a lot of buildup to the jobs report, goaded on by the Thursday ADP
report, jobs creation was 32K less than expected. It would appear the
storms had a bit more impact than anticipated. Okay, it was not that great,
but the market still liked it. Just right, I suppose.
Non-farm payrolls: 148K vs 180K exp vs 228K November. 204K/month in Q4
Unemployment rate: 4.1% vs 4.0 exp vs 4.1 Nov
Earnings: 0.3% as expected vs 0.2% prior. 2.5% year/year
Workweek: 34.5 as expected vs 34.5 prior
2017: 2.1M jobs created
Healthcare: 31K
Construction: 30K
Manufacturing: 25K (+196,000 in 2017, jobs that were supposedly never coming
back)
Food and Drink: 25K
Warehousing: 30K
Retail: -20K (-67K in 2017)
And this is said not to include any of the Amazon workers as they don't know
where to put them!
Participation: 62.7% flat for 3 months
U6: 8.1%
Black unemployment rate: 6.8%, -1% year/year, a record low.
Food Stamp recipients: -2 million
Trade balance, November: -$50.5B vs -47.9B expected vs -48.9B Oct.
A 6 month high on the deficit. Why? Imports surged. You will be told that
is horrible by everyone including Trump. But they are wrong. What this
tells you is that the US economy and consumer are going well. We always buy
more imports when the economy is working for us. When US consumers are
confident, they buy foreign goods, they buy domestic goods. Thus, a surge
in imports is a positive economic indication even if it detracts from
overall GDP.
Factory Orders, November: 1.3% versus 1.4% expected versus +0.4% Dec
(from -0.1)
Ex-Transports: +0.8%
Business investment: -0.2%. Disappointing, but consider: the tax reform
debate raged and looked to be on life support. No one was going to commit
big money until that was decided. It is. Expect more. With 100%
expensing, of course there will be more.
Tax reform effect: As of this week, 85 major companies now offering bonuses
or extra compensation to workers.
THE MARKET
CHARTS
The large cap indices launched almost straight up on the week as money
flowed into the big names. Something of an inverse January effect as the
small caps lagged.
NASDAQ: Went with NASDAQ to lead off though any of the big 3 large cap
indices would suffice. NASDAQ jumped off the 20 day EMA test Tuesday and
rallied on a solid expansion of volume back above average. Big names did
the leading as NASDAQ 100 shows even a stronger gain as FAANG jumped back in
on the upside.
SP500: Rocketing upside again after another 20 day EMA test. Volume was up
but less than impressive with only Thursday showing above average trade.
Extended off its 50 day EMA it left behind in early September, it should
correct, but the new money coming in was not about to let it. For now,
playing the move, watching for trouble such as good moves reversing sharply.
Not thus far.
DJ30: Nice surge, quite strong Friday after lagging NASDAQ on the week. As
extended as SP500 above its 50 and 200 day MA's, but its mix of large cap
industrial and tech is enjoying the new money.
SOX: Big moves early week then riding the wave, surpassing the early
November high and now looking at the late November recovery peak at 1342
(closed at 1325.71). A good surge with some good patterns moving higher
along with some not great patterns. New money was obviously pushing it and
that leaves me wondering if SOX can maintain the rebound.
RUTX: Big move Tuesday but after that the small caps followed versus led
the move. For January, that is a bit bass-ackward as the January effect is
where the funds buy smaller cap names as they present the greatest potential
for high percentage gains versus the mega cap stocks. Now, if the money
that chased the big names to start 2018 starts looking elsewhere, the small
caps are primed to move. Indeed, if there is a change next week that could
very well be the change.
SP400: Similar to RUTX, SP400's best gain was early week. New highs each
session but slowed as the week progressed. A bit stronger than RUTX, in the
middle of the large caps and smalls -- as midcaps I guess that is
appropriate.
LEADERSHIP
FAANG: In the lead again as AAPL joined in. FB new high. AMZN, GOOG, NFLX
all new highs. Big buying in these stocks and the latter 3 above are all
building very strong gains for us. Remember, these are not extended
vis- -vis the other large caps: they based all summer into fall and broke
out in late October. They are still relatively early in their moves.
Oil: This time showing staying power. Big names put in good moves and held
them, e.g. CVX, XOM, MRO, HAL, SLB. Kept waiting on HAL to test; it didn't.
Mid-size working as well, e.g. APC. Small also good, e.g. NOG, DNR, PTEN,
CRZO.
Semiconductors: A nice recovery with some good patterns really moving well,
while others rebounded but still have weak patterns. The good: XLNX, MRVL,
MCHP, NVDA. Questionable patterns: LRCX, AMAT, QRVI; SWKS. INTC is trying
to recover from its gap lower on the identified flaws in its chips; we will
see.
Software: CNIT surged but it is a small issue. FFIV was still solid. MSFT
hit our initial target. VMW up nicely on the week. CRM rallying well for
us. Working on it.
Retail: A week were most tested, some struggled after good moves. AAP
surged upside, ROST enjoyed a higher high. TGT testing, COST, TLRD and
others showing the same. Good moves some testing.
Financial: Up midweek, but as usual, it is a fight. C up but cannot seal
the deal on the new upside break. BAC did put in higher highs to end the
week. JPM did but faded back to the 10 day EMA Friday. Working higher but
back and forth day to day.
Machinery/Manufacturing: CAT, DE up again, TEX, CMI testing. Still strong
manufacturing. UTX, HON, EMR all breaking higher. Solid.
China: Some strength returning. YY surged to the initial target. BZUN up
all week for us. CNIT exploded higher through the target. BIDU broke
higher, tested well late. BABA broke upside, pushing for a new high. HTHT
making a nice test of its run; possibility for this week.
MARKET STATS
DJ30
Stats: +220.74 points (+0.88%) to close at 25295.87
Nasdaq
Stats: +58.64 points (+0.83%) to close at 7136.56
Volume: 2.02B (-3.35%)
Up Volume: 1.23B (-90M)
Down Volume: 747.68M (+9.11M)
A/D and Hi/Lo: Advancers led 1.47 to 1
Previous Session: Advancers led 1.5 to 1
New Highs: 269 (-7)
New Lows: 16 (-10)
S&P
Stats: +19.16 points (+0.70%) to close at 2743.15
NYSE Volume: 771.2M (-13.85%)
A/D and Hi/Lo: Advancers led 1.53 to 1
Previous Session: Advancers led 1.45 to 1
New Highs: 252 (-41)
New Lows: 22 (+2)
SENTIMENT INDICATORS
If you have not done so, please read the Thursday report discussion of
sentiment in the Market Summary.
VIX: 9.22; 0.00
VXN: 13.48; -0.49
VXO: 8.56; +0.24
Put/Call Ratio (CBOE): 0.92; +0.10
Bulls and Bears: Trading back and forth in a narrow range at the top what
is historically an extreme level for bulls.
Bulls: 61.9 versus 64.1
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 (1/2/18) versus 64.1
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 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 15.2 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 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: 2.476% versus 2.456%. Down early week. Lateral to end it, right in
the range of the past 3 months. The volatile range.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.456%
versus 2.463% versus 2.464% versus 2.405% versus 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: 1.20313 versus 1.20756. Another upside week for the euro though
it finished lower on Friday.
Historical: 1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus
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 1.15871
USD/JPY: 113.058 versus 112.749. Up on the week after testing near the 200
day MA. Range-trading right now.
Historical: 112.749 versus 112.677 versus 112.27 versus 112.690 versus
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: 61.44, -0.57. Down Friday, but a solid continuation of the break to a
higher high. Bumping at the mid-2015 highs, a key resistance point that
likely hems in oil prices or awhile.
Gold: 1322.30, +0.70. Up all week, continuing 4 week run off the lower low
from early December. A pause after that kind of move is normal.
MONDAY
Again, the big question is whether the money keeps coming in. It poured
into the large caps the past week. As noted in the discussion of the small
caps, it is January and typically the smaller issues get the money. IF
money tapers its bid for the large caps after that first strong week, it
makes sense it would seek the small and midcaps, the more traditional
January buys. Thus, even if the large caps slow, the market can still rise
gratis bids moving to the smaller caps. We will see.
Definitely a strong start to the year and the old adages say that bodes well
for the year. Does not mean there are not fades, pullbacks, or even out and
out corrections. It is all a matter of when and what stocks.
For now the retail are a bit weaker after strong runs, but oil, FAANG,
manufacturing, tech are strong. Will chips continue gathering money their
way? Will others step up and move up, e.g. China, drugs, internet? The
market will need new sectors stepping up to keep the move rallying,
especially if SP500, DJ30 start to correct back after their extended moves
up from the 50 day MA.
We will continue playing the trend, watching how the leaders trade (e.g. any
reversals, stalls), and looking for and picking up good stocks in good
patterns that are not extended, taking what the market gives as the run
continues.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 1736.56
Resistance:
Support:
7,000 from mid-December
6914 is the late November all-time high
The 50 day EMA at 6842
6796 is the early November 2017
The 2016 trendline at 66.60
6641 is the October high
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
The 200 day SMA at 6394
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
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 2743.15
Resistance:
Support:
The 20 day EMA at 2682
2694 is the mid-December peak
The 50 day EMA at 2637
2597 is the November 2017 high
2549 is the upper channel line from the March 2009 uptrend channel
2491 is the August all-time high
The 200 day SMA at 2490
2480 the late August and early August highs
2453.46 is the June prior all-time closing high
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 May 2017 low
Dow: Closed at 25,295.87
Resistance:
Support:
24,835 is the mid-December consolidation range
The 20 day EMA at 24,688
24,312
The 50 day EMA at 24,118
23,602 is the early November 2017 high
23,608 is the early November high
22,420 is the September high
The 200 day SMA at 22,194
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
End part 1 of 3
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