Sunday, January 14, 2018

The Daily, Part 1 of 3, 1-13-18

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1/13/2018 Investment House Daily
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Targets hit: AAP; BAC; DDS; IMGN; ROK
Entry alerts: C; ULTA; XON
Trailing stops: XNET
Stop alerts: LEDS

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

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

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

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If any market circumstances arise where we see additional plays we want to
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of the day of the week.


- 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

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%.

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.


NEW HIGHS: NYSE 396, NASDAQ 423. This is getting toward, but not at,

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

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 . . .

*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,

*'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

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

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

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

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.



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

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

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

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.


Stats: +228.46 points (+0.89%) to close at 25803.19

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)

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)


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


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

Gold: 1334.90, +12.40. Gold breaks higher from a 2 week lateral move.

End part 1 of 3
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