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3/24/2018 Investment House Daily
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- Stocks make the mistake of trying to rally early, pay for it with another
- DJ30 at the February lows, SP500 at the doorstep as the test is on.
- After all this selling there are stocks, very good stocks, still in
position to rally after a routine test if the indices can find bottom at the
Friday stocks sold again, not early as wanted as the Dow actually started
positive. Indeed, it rallied upside around 140 points. All that did was
give the sellers their shot and they took it. The Dow reversed 575 points
high to close.
SP500 -55.43, -2.10%
NASDAQ -174.01, -2.43%
DJ30 -424.69, -1.77%
NASDAQ 100 -2.61%
VOLUME: NYSE +11%, NASDAQ +1%. NYSE trade higher but still just barely
above average. NASDAQ trade above average for a second session and a bit
higher, really picking up Thursday and Friday.
ADVANCE/DECLINE: NYSE -4:1, NASDAQ -3.7:1. Solid again but still not
blowout that a -10:1 reading shows you.
Ugly move, panic was induced. Heard the afterhours financial stations
talking about the selling. We heard the phrase that pays: this is different
from the early February selling, a pundit explained, because the news was
different: tariffs, changes in the Trump administration that were more
confrontational, raising the risk of confrontation.
Ah, the old 'it's different this time' statement. When you hear it in
conjunction with ugly selling, it has meaning. Usually that means it is not
different this time. Whatever the cause, humans react the same way. Thus
the machines they program with their trading styles react the same way.
That means that patterns typically work and repeat the past.
Is there a pattern? We think so. There is the test of the prior low that
so often happens after some serious downside. There is also a pattern
setting up. There are also still stocks in quite good position despite the
2 weeks of selling and this week's gash lower.
Okay, so how about a closer look at the Dow. The 575 point high to low move
took the Dow below the February closing low and within 173 points of the
intraday low. That also takes DJ30 just over the 200 day SMA (23,357;
closed at 23,533). It also puts DJ30 at the October/November lateral
consolidation. Further, that has the Dow back near the 61% Fibonacci
retracement of the September 2017 to late January all-time high.
Meaning? You look for a test of the prior low at key levels. You look for
a pattern to establish. Key levels: 61% Fibonacci retracement, prior
February low, October/November consolidation, 200 day SMA. Pattern:
potential double bottom. Potential because the Dow is at the level, but it
is not showing signs of slowing the selling as of the Friday close. That
likely comes early next week with a reach lower that then recovers to a doji
near these support levels.
That is the outline.
SP500 is very similar as DJ30 and SP500 have moved rather lockstep though
DJ30 is the weaker. SP500 is spot on the February closing low and the 200
day SMA. It is also putting in its own potential double bottom just over
the 78% Fibonacci retracement of the September to January rally. Closed on
the low so no indication of a bounce yet, but lots of support at this level.
A dip lower, recovery to a doji or better is a good bottoming indication.
SP400 midcaps are near the 200 day SMA and the October/November 7 week
consolidation. Still well above the closing and intraday lows from
NASDAQ broke its December to March trendline and is 72 points from the
longer term trendline from early 2016. It is also closing in on the 50%
Fibonacci retracement of the September to January run. That trendline is
going to be important, particularly if DJ30 and SP500 fall early week and
reverse at the February lows. NASDAQ could then put in a higher low, albeit
not that much higher than the February closing low.
SOX broke the 50 day MA and the lower channel line Friday. It is still al
long way from the February low -- it was the market leader so it put in a
lot of upside. With DJ30, SP500 at the February lows already, if they
reverse SOX will be in position to lead again.
RUTX exploded lower Friday in a move made dramatic by how well it had held
up to then. Broke the October high, still holding over the early March low
hit on that dip/test of the initial move off the February low. Pretty
amazing drop, at some support, kind of problematic now after holding up so
Why the detailed index rundown right out of the gate? You have to start
looking for reversals after this kind of selling, and particularly when the
indices get near the prior selloff low. Different this time? It could be,
but we are not playing it as different.
FAANG: AMZN and NFLX started showing cracks as the former broke the 20 day
EMA and is halfway to the 50 day MA on strong volume. NFLX broke the 20 day
but volume remained well below average. Testing, not breaking. FB sold hard
again; broken. AAPL is almost to the 200 day SMA; back to the drawing board
for it in its 5 month range. GOOG dove lower again and is near the 200 day
SMA. At least it is near a potential support level.
Chips: Not all candy and nuts with some big names breaking lower, e.g. MU,
AMAT. XLNX sold to the 50 day EMA in one move from the 20 day. LRCX is a
the 50 day EMA. INTC broke the 20 day MA though is not tanking. SMTC is
back to testing the 10 day EMA. ON at the 20 day. Many are starting to
sell harder and we will see if they find new bids to start the week.
Drugs/biotech: Smaller remains better, e.g. PTCT, IMGN, ARRY (nice 50 day
MA test). Some are not, e.g. INFI. The big names are terrible, e.g. AMGN,
Software: Cracking. CRM went on through the 50 day MA. RHT broke the 20
day MA; it was in need of a test. VMW is holding up relatively well. DATA
testing the 50 day MA.
Retail: Holding up better than most. DDS still holding a very nice test.
TJX did slip to the 50 day MA, but low volume. KSS is holding its pattern
while M fell to test the 50 day EMA in a not bad pullback. LULU not bad.
RL also holding at the 50 day MA in its consolidation.
China: Really struggling. ATHM is not bad, testing the 20 day on lighter
volume. QIWI not bad, testing a bit lower on light trade. YNDX sold Friday
to the bottom of the range but on very light trade. BABA sold hard a second
session, BIDU sold to the 200 day MA, BZUN
Transports: Very good relative strength. KSU holding well in its range.
SAIA in trucks at the 50 day. JBHT holding its pattern. Airlines cracked
Thursday and sold more Friday.
Oil: Paused after a solid Thursday move. APC surged but gave up most of
the move. MRO Testing its very nice Wednesday surge. DO testing its nice
break higher as well. Not bad.
Financial: Crushed. JPM, BAC. GS almost at the 200 day SMA already.
MISC: HLF still holding very well. GRUB holding the 20 day EMA. STX
cracked for a deeper test. SQ fell to the 20 day EMA.
Stats: -424.69 points (-1.77%) to close at 23533.20
Stats: -174.01 points (-2.43%) to close at 6992.67
Volume: 2.39B (+1.27%)
Up Volume: 425.8M (-79.16M)
Down Volume: 1.94B (+100M)
A/D and Hi/Lo: Decliners led 3.74 to 1
Previous Session: Decliners led 4.09 to 1
New Highs: 25 (-14)
New Lows: 109 (+47)
Stats: -55.43 points (-2.10%) to close at 2588.26
NYSE Volume: 1B (+11.11%)
A/D and Hi/Lo: Decliners led 3.97 to 1
Previous Session: Decliners led 4.23 to 1
New Highs: 16 (-9)
New Lows: 215 (+87)
VIX: 24.87; +1.53
VXN: 28.35; +1.72
VXO: 24.70; +2.59
Put/Call Ratio (CBOE): 1.54; +0.32
Bulls and Bears: Bulls rebounded, but bears saw a substantial rise in
pessimism. Bulls more bullish, bears more bearish. It would appear the
bears had the better take on it.
Bulls: 55.5 versus 54.9
Bears: 16.8 versus 15.7
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: 55.5 versus 54.9
54.9 versus 48.6 versus 48.1 versus 48.5 versus 41.9 versus 54.4 versus
66.00 versus 64.7 versus 66.7 versus 64.4 versus 61.9 versus 64.1 versus
64.2 versus 62.3 versus 61.5 versus 63.5 versus 64.4 versus 63.5 versus 62.3
versus 60.6 versus 60.4 versus 57.5 versus 54.3 versus 50.5 versus 47.1
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
Bears: 16.8 versus 15.7
15.7 versus 15.5 versus 14.4 versus 14.6 versus 14.4 versus 15.5 versus 12.6
versus 12.8 versus 12.7 versus 13.5 versus 15.2 versus 15.1 versus 15.2
versus 15.1 versus 15.1 versus 15.4 versus 15.4 versus 14.4 versus 14.4
versus 15.1 versus 15.2 versus 15.1 versus 17.0 versus 17.1 versus 19.0
Bonds: 2.813% versus 2.806%. Bonds up on the week, moving to the 50 day MA,
trying to reverse trend.
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.814%
versus 2.881% versus 2.90% versus 2.852% versus 2.826% versus 2.819% versus
2.844% versus 2.866% versus 2.896% versus 2.872% versus 2.879% versus 2.863%
versus 2.879% versus 2.868% versus 2.799% versus 2.875% versus 2.893% versus
2.864% versus 2.866% versus 2.934% versus 2.952% versus 2.893% versus 2.873%
versus 2.904% versus 2.913% versus 2.833% versus 2.857% versus 2.8577%
versus 2.844% versus 2.813% versus 2.805% versus 2.707% versus 2.841% versus
EUR/USD: 1.2351 versus 1.23301. Back and forth but still in the lateral
move over the 50 day EMA.
Historical: 1.23301 versus 1.23467 versus 1.22478 versus 1.2342 versus
1.2287 versus 1.2304 versus 1.23782 versus 1.2392 versus 1.23412 versus
1.2305 versus 1.2305 versus 1.24017 versus 1.2411 versus 1.2344 versus
1.23187 versus 1.22822 versus 1.21894 versus 1.21893 versus 1.23257 versus
1.2296 versus 1.2324 versus 1.22820 versus 1.23431 versus 1.2411 versus
1.25083 versus 1.2450 versus 1.23528 versus 1.22887 versus 1.22524 versus
1.2273 versus 1.2377 versus 1.24573 versus 1.2502 versus 1.2404 versus
1.2402 versus 1.23832 versus 1.24308 versus 1.24159 versus 1.24340 versus
1.23083 versus 1.22567
USD/JPY: 104.789 versus 104.829. Broke hard lower from the 20 day EMA
Wednesday to Thursday, then held the line Friday. Already weak.
Historical: 104.829 versus 105.892 versus 106.478 versus 105.945 versus
105.946 versus 106.344 versus 105.846 versus 106.42 versus 106.335 versus
106.77 versus 106.41 versus 106.105 versus 105.752 versus 106.359 versus
105.734 versus 106.03 versus 106.695 versus 107.381 versus 106.96 versus
106.886 versus 106.85 versus 107.581 versus 107.435 versus 106.294 versus
106.153 versus 106.782 versus 107.77 versus 108.669 versus 108.669
Oil: 65.88, +1.58. Surging upside and now putting the moves on the January
peak at 66.66.
Gold: 1339.90, +22.50. Big breakout Friday toward the January and February
Friday did not have that opening dive we were looking for followed by short
covering. Instead it rallied then had to reverse, and there were no bids
ready in the afternoon as they were used in the morning.
Monday we watch to see if the DJ30, SP500 February lows act as support and
work a reversal. The setup is there, the historical pattern is there,
enough leaders are still in decent enough patterns to put forth a serious
leadership effort if DJ30 and SP500 are close to reversal levels. Now, if
it is only not different this time.
If there is the reversal we will be looking at leadership quality stocks
that are still in decent enough patterns over support. LRCX, ON, SMTC,
MLNX, BZUN, MRO, DO, ARRY, PANW, NTNX -- testing but in very good position.
We would even add to others such as NFLX, some China stocks, etc.
If it is different this time, there will still be a rebound move, a relief
move. After this much selling you want to play the downside after a relief
move upside fails versus attempting to get on board after Thursday and
Have a great weekend!
End part 1 of 3
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